Pfizer’s $43 bln deal is a pricey pipeline fix
Reuters · 14 Mar 589 Views

A woman receives a booster dose of Pfizer-BioNTech vaccine against the coronavirus disease (COVID-19), ahead of brace of an influx of Chinese tourists as COVID restriction are dismantled, at the Police hospital in Bangkok, Thailand, January 5, 2023.

NEW YORK, March 13 (Reuters Breakingviews) - Pfizer (PFE.N) has found a partial, costly replacement for waning sales of Covid-19 vaccines. The $225 billion pharmaceutical giant said Monday it had agreed to shell out $43 billion for oncology specialist Seagen (SGEN.O), inclusive of net debt. Snag is, Pfizer’s return will probably be low, and the deal may not even receive antitrust approval.

Seagen’s pre-tax profit should be around $500 million in 2025, according to analyst estimates from Refinitiv. Add estimated savings of $1 billion and the result is $1.2 billion of operating profit after tax, assuming the statutory corporate rate. That’s about a 3% return on the purchase price, similar to what Breakingviews estimated when news of talks leaked in February.

Pfizer Chief Executive Albert Bourla is betting that plugging acquired drugs into its worldwide sales machine, and growth past 2025 from new drugs, will eventually generate an acceptable return on capital. That is probably optimistic considering analysts already guessed Seagen would double sales by 2025.

There’s an earlier barrier to jump. Seagen’s stock traded 13% below the $229 per share price on Monday morning, implying investors don’t view antitrust approval as certain. With Pfizer on the hook for a $2.2 billion fee if the deal doesn’t go ahead, Bourla is risking a lot for potentially little reward. 

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