Pfizer Inc (NYSE:PFE)
Pfizer (NYSE:PFE), a large pharmaceutical company, has been on a roll in terms of mergers and acquisitions (M&A) activity over the past couple of years. Pfizer has been using the windfalls it has received from its Covid-19 vaccine and therapeutic products in order to go on a spending binge.
In an interview that took place on Tuesday with Barron’s, the CEO and CFO of the company gave indications that the era in question is drawing to a close. It is now the appropriate time to increase dividends and engage in share repurchases.
David Denton, Chief Financial Officer of Pfizer, was quoted in Barron’s as saying, “What we believe is going to happen now that we start to harvest the investments that we made in business development transactions,” shortly after the company reported results for the first quarter that exceeded the expectations of Wall Street.
“We’ll be able to get more balanced into increasing our dividends, maybe more rapidly than we’ve had in the past,” Denton said. “We’re very excited about this.” “Shareholders prefer some level of share repurchase, and we’ll be able to do that as well,” said the chief executive officer of the company.
The price of Pfizer stock has dropped approximately 24% thus far in 2018 and 21% over the course of the previous year. During the course of the previous year, the company executed a number of multibillion-dollar deals, one of which was the $41.2 billion acquisition of the biotech company Seagen (SGEN), which was announced in March but has not yet been finalized.
Before that, there was the acquisition of Global Blood Therapeutics for $4.8 billion and the acquisition of Biohaven Pharmaceuticals for $11.1 billion, both of which were finalized toward the end of the previous year.
Pfizer’s decision to spend the cash it received from the sale of its Covid-19 vaccine on mergers and acquisitions stands in some contrast to that of its competitor Moderna, which spent $3.3 billion in 2022 on share repurchases. Pfizer has also engaged in the practice of repurchasing shares, but it hasn’t done so since March of 2022 when the company spent $2 billion on buybacks.
According to a report that was published in February by Barron’s, the company has been subjected to some pressure from investors to resume share repurchases. The company will need to pay off some debt before pursuing additional buybacks, according to Denton’s statement on Tuesday, but the company plans to do so quickly.
In order to promote growth, we made investments not only in Seagen but also in other business development agreements, according to Denton.
In 2022, Pfizer distributed dividends of $1.60 per share, and in the first quarter of 2023, the company distributed dividends of 41 cents per share. According to FactSet’s data, the dividend yield on the stock comes in at 4.2%.
Pfizer had determined that by the year 2030, it wanted to have achieved its goal of securing $25 billion in additional annual revenue through business development deals. At the end of this decade, it is anticipated that the company will run into a patent cliff, which, according to the company’s projections, will result in a loss of $17 billion in annual revenue.
According to Denton, the transactions that have already been finalized bring the company much closer to its target of $25 billion.
“We’re probably north of $20 billion,” he says.
During the first three months of the year, the company’s revenue from Nurtec ODT, a drug that was obtained through the Biohaven deal, fell short of expectations. Sales for the period came in at $167 million, which is significantly lower than the $208 million that analysts had anticipated they would be. Pfizer CEO Albert Bourla told Barron’s on Tuesday that analysts had misunderstood the seasonality of Nurtec revenues, which drop early in the year as patients pay down deductibles. Pfizer CEO Albert Bourla said that analysts had misunderstood the seasonality of Nurtec revenues. The manufacturer of the pharmaceutical product is under pressure to increase the amount of money it spends on a rebate program.
After having increased by 1% earlier in the day, Pfizer share prices dropped by 1.1% in the afternoon on Tuesday.
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