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Pfizer CEO Albert Bourla.
Sakis Mitrolidis/Getty Images
The big pharma company
Pfizer
has been on an M&A hot streak over the past couple of years, digging into its Covid-19 vaccine and therapeutic windfalls to go on a big-ticket buying spree.
That era is coming to an end, the company’s CEO and CFO signaled in an interview with Barron’s on Tuesday. Now it’s time for share buybacks and dividend increases.
“What we believe is going to happen now that we start to harvest the investments that we made in business development transactions,”
Pfizer
Chief Financial Officer David Denton told Barron’s, speaking shortly after the company reported first-quarter results that beat Wall Street expectations.
“We’ll be able to get more balanced into increasing our dividends, maybe more rapidly than we’ve had in the past,” Denton said. “Shareholders prefer some level of share repurchase, and we’ll be able to do that as well.”
Pfizer stock has fallen about 24% so far this year and 21% over the past 12 months. The company has signed a number of multibillion-dollar deals over the past year, including the $41.2 billion acquisition of the biotech
Seagen
(SGEN), announced in March, which hasn’t yet closed.
Before that came the $4.8 billion acquisition of Global Blood Therapeutics and the $11.1 billion acquisition of
Biohaven
Pharmaceuticals, which both closed late last year.
Pfizer’s decision to spend its Covid-19 vaccine cash on M&A stands somewhat in contrast to its peer
Moderna
(MRNA), which spent $3.3 billion on share repurchases in 2022. Pfizer has repurchased shares, too, though not since March of 2022, when it spent $2 billion on buybacks.
The company has faced some pressure from investors to restart share repurchases, as Barron’s reported in February. Denton said Tuesday that the company will need to pay down some debt first, but plans to move toward more buybacks soon.
“We invested not only in
Seagen
,
but other business development deals to drive growth,” Denton says. “And ultimately, that growth yields improved performance from an operating income perspective and a cash flow perspective.”
Pfizer paid dividends of $1.60 a share in 2022, and 41 cents a share in the first quarter of 2023. The stock has a dividend yield of 4.2%, according to FactSet.
Pfizer had set out a goal to secure $25 billion in new annual revenue through business development deals by 2030. The company is expected to hit a patent cliff at the end of the decade that the company projects will pull away $17 billion in annual revenue.
The deals completed so far get the company most of the way toward that $25 billion goal, Denton says.
“We’re probably north of $20 billion,” he says. “So we have a little left to do. But that needs to be accomplished by 2030.”
Revenue from Nurtec ODT, a drug secured through the Biohaven deal, fell short of expectations in the first quarter. Analysts had expected sales of $208 million for the period; instead, they came in at $167 million. Pfizer CEO Albert Bourla told Barron’s Tuesday that analysts had misunderstood the seasonality of Nurtec revenues, which drop early in the year as patients pay down deductibles. The drugmaker is forced to spend more on a rebate program that helps cover out of pocket expenses.
“If you step back and really look at the non-COVID business, we produced a 5% growth rate,” Denton said. “While we had some products do maybe a little better, some products did a little worse, the net effect of that is…we’re off to a really start good for the year.”
Pfizer shares were down 1.1% on Tuesday afternoon, after climbing 1% earlier in the day.
Write to Josh Nathan-Kazis at [email protected]
Source: https://www.barrons.com/articles/pfizer-stock-dividends-buybacks-earnings-1ddb89b?siteid=yhoof2&yptr=yahoo