Pfizer (PFE) has been actively dealmaking and receiving FDA approvals for new products and new indications in the past couple of years, but that has all been overshadowed by its runaway success with COVID-19 products resulting in tens of billions of dollars in revenue in the past few years.
The company reported earnings Tuesday, with mixed results. While it beat on earnings per share, coming in at $1.08 compared to an expected loss of $0.18, the company missed revenue expectations of $14.4 billion, instead reporting $14.25 billion.
Now that surges in revenue from COVID products are in the rearview mirror, including $3.5 billion being returned to the US government for unused Paxlovid treatment courses, Wall Street is looking for the next big thing from the company.
“We do not see a clear path for shares to meaningfully re-rate with a lack of near-term catalysts, a pipeline that lacks a clear anchor asset,” wrote JPMorgan analysts in a note Tuesday.
Pfizer CEO Albert Bourla says the next big thing is already here, wrapped up in its $43 billion acquisition of Seagen — an oncology company that specializes in therapies using antibody drug conjugates, or ADCs.
ADCs are gaining popularity in oncology, as they serve as a less harmful way of treating cancer by delivering chemotherapy in a way that is less damaging to healthy cells.
“The ADC technology has become the hottest thing in M&A right now. Every company is trying to find an ADC” and only single products are available to add to the pipeline, Bourla told Yahoo Finance.
“I think Seagen is an anchor platform. With Seagen, we are able to get the whole platform for multiple products,” he added.
And it’s a platform Pfizer is already familiar with, having launched the first one, Mylotarg, in 2000. But Pfizer took it off the market in 2010 after study results showed the dosage being used was more toxic than chemotherapy. In 2017, Pfizer was able to bring back a lower dose of the drug for use in cancer patients.
The Seagen bet works in Pfizer’s favor in two ways, according to analysts: giving it a new potential blockbuster (or several) with a pipeline built on the buzzy ADC platform and also helping plug multiple holes in revenue from patent expirations in the second half of the decade.
It’s the reason why Pfizer has been furiously signaling all the moves, big and small, in both M&A as well as with approvals to Wall Street.
“I don’t think the Street is missing something. I think the Street is disappointed because we missed our initial expectations on our COVID revenue. It’s just waiting to see how we’re going to execute,” Bourla said.
But the stock isn’t reflecting investor optimism. It’s trading at about $27 per share, well below pre-pandemic levels, and is down more than 37% in the past year.
Investors are waiting to see if it comes to fruition, with Seagen’s drug Padcev slated to bring in $3.1 billion this year. More analysts recommend buying Pfizer for the first time in several quarters in response to the company’s earnings Tuesday. There are currently 12 Buys, nine Holds, and one Sell recommendation.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.