Pfizer’s M&A Strategy Sketches Roadmap for Pharma to Rebuild Pipelines, Overcome Patent Cliffs

Pfizer’s acquisition of Seagen, which is the largest biopharma deal since 2019, comes as products received in previous deals begin to bear fruit. Pfizer is not alone in reviving M&A activity among big pharma firms, but it has been the most active at a very favorable moment, considering biotech valuations have remained subdued for some time now. This strategy can provide a roadmap for other cash-rich pharma firms to follow as they prepare to navigate a major set of patent cliffs throughout the rest of the decade.

Meanwhile, startups and small to mid-cap biopharma firms continue to come under greater financial pressure. The IPO window remains relatively dry while lucrative fundraising is proving scant and expensive. The failure of Silicon Valley Bank will only complicate matters, given its involvement in banking and IPOs with VC-backed life science and healthcare firms.

Related ETF: VanEck Pharmaceutical ETF (PPH)

Yesterday, Pfizer Inc. announced that they would be acquiring massive biotech firm Seagen Inc. for $229 per share in cash, a 33% premium on Seagen’s share price at close on Friday. That price point pushed total value of the deal to $43 billion, slightly higher than the $40 billion price tag Merck was reportedly pursuing last summer before talks between the two companies fell apart. The Pfizer acquisition is the largest biopharma deal since June 2019, when AbbVie acquired Allergan for $63 billion.

This was just Pfizer’s latest multi-billion dollar deal, following several last year. As MRP has previously noted, Pfizer executives are among a consortium of biopharma heads that have recently spoken about a desire to increase their dealmaking  with outside companies. Pfizer has set a goal of adding $25 billion in revenue by 2030 from business-development moves including acquisitions. The moves could help the company offset an estimated drop of roughly $17 billion in sales from patent expirations. Bloomberg notes that Pfizer thinks that sales of Seagen’s four FDA-approved oncology products will exceed $10 billion, about $2 billion more than analysts’ estimates.

Pfizer’s aggressive M&A strategy is already beginning to pay dividends. Just last week, the Food and Drug Administration (FDA) approved Zavzpret, a new migraine medicine the company acquired in 2022 as part of a $12 billion bet the company made on the drug’s original developer, Biohaven Pharmaceuticals. BiopharmaDive reports that…