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Major challenges for healthcare giants Pfizer (PFE -0.18%) will replace the COVID-19 vaccine revenue from this year onwards. The company recognizes that while it has a strong pipeline that could help grow its business in the long term, it is not enough.
One way to accelerate growth is to look for acquisitions that can quickly enhance your bottom line. The company has already been involved in multiple acquisitions over the past few years, but it’s reportedly eyeing the ones that are big and could be game-changers for its business.
Pfizer reportedly in talks to buy Siegen
According to a report from wall street journalPfizer in talks to buy biotech firm Siegen (SGEN -0.59%) Over $30 billion. last year, Merck was considering buying Seagen, which at the time was expected to be valued at around $40 billion. But the stock market decline is putting pressure on valuations across the board.
As with the Merck deal, Pfizer’s negotiations are reportedly in the “early stages,” so there’s no guarantee this one will also go through. However, if successful, Seagen has multiple anti-cancer drugs that will bring in $1.7 billion in revenue for him in 2022, adding to Pfizer’s oncology portfolio. And the company is still in its early growth stages. The cervical cancer drug Tivdak just received accelerated approval from the Food and Drug Administration (FDA) in September 2021. This year, Seagen predicts its product revenue could exceed his $2 billion.
Why This Is Good News For Pfizer Investors
The big problem with Pfizer shares right now is that the company’s business isn’t as diverse, given how important its COVID-19 pills and vaccine have been to its business. For the fourth quarter, Pfizer’s oncology business had sales of just over $3 billion, representing 12% of total revenues. By comparison, primary care, including COVID-19 products, generated $17.3 billion in sales, accounting for 71% of revenue.
Image Source: Company filings. Chart by author.
A closer look at revenue by product shows how important COVID-19 treatments were to the business last quarter. Together, Comirnaty and Paxlovid account for more than half of the company’s total revenue.
Image Source: Company filings. Chart by author.
Whether Pfizer buys Seagen or another company, the important thing for investors is that the company is serious about making big moves to improve its growth prospects. is. Investors are currently cutting prices heavily due to their reliance on COVID-19 products, so if that happens, the stock could go higher. At just 7x price/earnings, it’s well below the healthcare average of 22x.
Should you buy Pfizer?
Pfizer is a hugely undervalued stock, and even considering analyst forecasts, that number could fall as COVID-19 sales plunge this year, but the stock is still in line with expectations. It trades at a fairly low multiple of 12x its future earnings. There is potentially good value here, especially for businesses that have the resources to make big acquisitions. As of the end of 2022, the company had more than $22 billion in cash and short-term investments.
For long-term investors, Pfizer could be a good stock to load up on now. That pipeline is not bare. There is a vaccine for respiratory syncytial virus that the Food and Drug Administration will approve as early as May. And it’s still looking to acquire. It may only be a matter of time before stock prices start to rise.
David Jagielski has no positions in any of the mentioned stocks. The Motley Fool has positions in and recommends Merck, Pfizer and Siegen. The Motley Fool’s U.S. headquarters has a disclosure policy.
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