Can Seagen Acquisition Help Pfizer (PFE) Turn Around Its Decline To Date?

Their top-line numbers in the first quarter of 2024 will include revenues from the acquisition of Seagen, which closed in mid-December 2023. The acquisition added Seagen’s antibody-drug conjugates or ADCs — Adcetris, Padcev, Tukysa and Tivdak — to Pfizer’s cancer portfolio.

Pfizer’s revenues are expected to have declined in the first quarter of 2024 due to steep declines in revenues from its COVID-19 products on lower demand, this is excluding Seagen revenues. Pfizer records direct sales and alliance revenues from its partner, BioNTech BNTX, for the COVID-19 vaccine, Comirnaty, and product revenues from its oral antiviral pill for COVID, Paxlovid.

The drug line acquired from Seagen are expected to have boosted the top line in the first quarter, but the sales of COVID products are declining due to lower demand. This explains why Pfizer’s stock has declined 35.2% in the past year against an increase of 16% for the industry.

If we looked at how Pfizer have performed against the S&P 500 Pharmaceuticals Industry Index, the correlation is inverse, and Pfizer might faced further decline in future.

Pfizer would need more than Seagen to improve its earnings. But I think this might be a good time to acquire Pfizer for dividend yield.

The impact from weakening demand for Covid-19 therapies and the competition from similar Biopharma doing weight loss will continue to persist, this is because the trend now is changing, and Big Pharma would faced similar significant sales downturn.

But if we look at the pharma industry, they have been able to weather through storm and show resilience through strategic measures aimed at mitigating the consequences of this impending sales decline. One of the good example would be shift toward alternative medications, pipeline diversification and sustained investment in the R&D of innovative therapies.

Another important factor we need to consider which shape the sentiment toward the pharmaceutical sector is the unfolding political landscape in the U.S. With the presidential election and the progression of various legal challenges to the Inflation Reduction Act, investors would be monitor these two events in this forthcoming year.

If we looked at Pfizer historically favorable performance, providing higher dividend yield, this might give us opportunity to prepare ourselves in the event of interest rates cut. When interest rates are elevated, the market has investors redirecting their investment toward Treasury investments, but what would happen when interest rates cut were to happen later this year, this should have investors coming back to pharma sector because of the higher-yield presented.

Pfizer dividend payout of 6.6% is considered to be well into the high range, and if interest rate were to be cut, it would be much sensible to place money in this stock than in the usual capital investment. But for now, investors might be on the sideline.

If we look at how Pfizer have been trading before its earning, it looks like market is indecisive whether this stock would report a less-than-expected earnings, because Pfizer does have a strategy which will continue to boost its top lines.

Questions remain whether the lowering of demand of COVID related drug would be covered by the new drugs from Seagen, but we might not see a significant improvement as we are talking of less than six months since the acquisition.

What we need to watch out is the selling or sell-off happen, as seen in KDJ, we need this to go into buying, for a reversal to happen, MACD signal is showing convergence, so this is still a 50% of either way move.

I would think we can consider Pfizer to take advantage of the lower stock price and higher dividend yield.

I think it is important to look at how Pfizer strategy for the rest of 2024 looks like, as it is almost confirmed that the demand for COVID related drugs would continue to decline.

If Pfizer could focus its effect on boosting the Seagen line of products, maybe we would see a much significant earnings in the next quarter, or guidance for outlook would give us a glimpse?

Appreciate if you could share your thoughts in the comment section whether you think Pfizer would recover from its decline with help from Seagen?

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.