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Here's why I'm bullish on Pfizer $PFE
Soon, Pfizer $PFE will close on its $43 billion acquisition of $SGEN, a leading producer of cancer drugs. This deal, while some see it performing like when Salesforce $CRM acquired Slack, others see it performing great like when Bristol Myers Squibb acquired Celgene (another notable cancer drug developer). I'm optimistic on the ROI that Pfizer will get from acquiring Seagen.

According to their latest slide deck, Pfizer notes that cancer is the second leading cause of death in the US and that 1 in 3 people will be diagnosed with it in their lifetime. Already, there is a huge market for Seagen to address. Pfizer does have some cancer drug products but Seagen has a deeper specialty in oncology drugs, making the acquisition fruitful for Pfizer.

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I believe the ROI for this acquisition will easily be positive. Let's assume:

  • Seagen revenue in 2024 is projected as $3.1 billion (pre-acquisition)
  • Pfizer has modeled over 20% annual revenue growth, reaching $10 billion by 2030
  • Operating margins expand from loss-making today to 25% by 2030 with Pfizer operation efficiency
  • Pfizer's cost of capital is roughly 8%

At $10 billion revenue and 25% operating margin = $2.5 billion operating profit by 2030. While the operating profits projection I've put may seem low, note that we are not accounting for any new drugs created under Pfizer using Seagen's technology. The operating margins could be higher as cancer drugs come with high pricing power.

Outside of the Seagen acquisition, Pfizer is executing its biggest streak of product launches ever right now -- with the goal of releasing 19 new products or indications in 18 months. According to a source, 13 launches have been completed so far. Outside of that, the company has 83 drugs in its pipeline, with:

  • 26 drugs in Phase 1
  • 30 drugs in Phase 2
  • 23 drugs in Phase 3
  • registered 4 drugs for clinical trials

There is so much fuel fuel for Pfizer's business to grow. Any bargain hunter would be excited to acquire Pfizer right now and lock in a 6% dividend yield.
New Drug Development Pipeline: Pfizer's Medicine, Vaccine Discovery | Pfizer

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