Pfizer, Moderna Take Different Paths as Vaccine Boom Ends

Text size

Pfizer
’s
$5.4 billion deal to acquire the biotech Global Blood Therapeutics continued a year-long $26.4 billion buying spree, as the company puts its Covid-19 windfall to work shoring up its long-term revenue picture.

The M&A campaign undertaken by

Pfizer

(ticker: PFE) stands in contrast to the strategy of its rival

Moderna

(MRNA), which has done no M&A so far, instead spending its Covid-19 cash on its own pipeline and stock buybacks.

So far, investors seem more comforted by Pfizer’s approach. Pfizer shares are up 11.3% over the past 12 months, while

Moderna

shares are down 62.2%. The

S&P 500
is down 5.2% over that time.

Pfizer’s strategy might seem more prudent. But if Moderna’s works, the payoff could be substantial.

Both companies face declining Covid-19 vaccine revenue. Analysts expect Covid-19 vaccine sales to roughly halve for both companies between 2022 and 2023. Demand already seems to be dropping: On Tuesday, Covid-19 vaccine maker

Novavax

(NVAX) dramatically cut its 2022 revenue guidance.

Beyond the drop in Covid-19 vaccine sales, however, Pfizer and Moderna face different pressures.

Moderna still needs to prove out the thesis that it has pitched since its founding in 2010: That its mRNA platform can quickly produce a range of medicines. So far the platform has only produced a single medicine; one of the bestselling medicines in history, to be sure, but one whose future is uncertain.

Pfizer, meanwhile, is facing a damaging series of patent expirations at the end of the decade. The company has been working for years to reassure investors that it can continue to boost revenue despite those looming losses of exclusivity; those worries kept the stock relatively earthbound even as sales of its Covid-19 vaccine skyrocketed in 2021.

Key to that reassurance is Pfizer’s M&A strategy, which it says is aimed at adding $25 billion to its 2030 revenue.

Pfizer is counting toward that goal beginning with a $525 million deal, completed in June, to acquire a private biotech called ReViral. Also counted toward that goal are an $11.6 billion deal to acquire

Biohaven Pharmaceutical Holding

(BHVN), which makes the migraine drug Nurtec ODT, and the

Global Blood Therapeutics

(

GBT

) deal.

Pfizer estimates that those three acquisitions could bring a combined $10.5 billion in annual sales, which leaves another $14.5 billion to go toward its goal. Simple arithmetic suggests it could spend another $24.2 billion before the buying spree is done.

Even before the ReViral deal, Pfizer had been spending its Covid-19 windfall, first on the $2.2 billion acquisition of the cancer biotech Trillium Therapeutics, completed in November of 2021, and then on the $6.7 billion acquisition of Arena Pharmaceuticals.

Pfizer still managed to build a hoard of $23.9 billion in cash and short-term investments as of April 3. And it has paid out $4.5 billion in dividends and bought back $2 billion in shares in the first half of the year. It spent $5.1 billion in internal research and development over the same period.

Amid all of Pfizer’s M&A, Moderna has sat on its hands. “Investors don’t want us to do something crazy,” Moderna CEO Stéphane Bancel told Barron’s last week.

Moderna said last week that it had $18.1 billion in cash and cash equivalents as of the end of June. It spent $1.3 billion on share buybacks in the second quarter, launched a new $3 billion share buyback program, and has $1 billion remaining in share buyback capacity from an earlier-authorized program. Meanwhile, the company says it spent $1.3 billion on research and development in the first half of the year.

“They want us to create value,” Bancel told Barron’s. “So we are very happy when we tell them look, we’re returning cash to shareholders, because in the last quarter we didn’t find anything to do. We don’t want to do a big deal for the sake of doing a big deal.”

Bancel says that he wants the company to stay focused on its extensive pipeline, which currently includes four programs in Phase 3 trials and three more in Phase 2 trials. “Why would we, at this stage in the game, want to do something else that looks shiny, when we’re so close to our potentially amazing assets,” Bancel told Barron’s.

Bancel’s confidence in his pipeline still needs to be borne out by the company’s ongoing trials, but this summer, investors have shown some sign of sharing Bancel’s faith. Though the stock still trades well below its highs of last year, it’s up 22% since the start of June.

Write to Josh Nathan-Kazis at [email protected]