Pfizer Inc.’s buyout of ReViral Ltd has helped the drugmaker recoup its losses after a slump in stock market prices.
As per Bloomberg News, the drug company’s share prices rose 4.3 % on Thursday, bucking the overall market decline after it announced that it was acquiring ReViral Ltd, a lung-focused biotech company, for $525 million.
Despite the gains, the shares of Pfizer are still down by 7% in 2022, leading to an erosion of market capitalization of around $32 billion. Investors’ concerns about the expiry of drug patents may lead to revenue loss and the uncertainty of the booster dose as the Covid-19 winds down.
The developments have left Pfizer shares trading at a discount to peers in the healthcare industry. Others have been seeing record highs with investors looking for safe bets amid an uncertain economic outlook caused by geopolitical turmoil.
Wall Street is looking forward to Pfizer using its $150 billion reserves as Bank of Montreal estimates for acquisitions and setting its act together for more growth. The acquisition deal on Thursday for ReViral Ltd, a drug developer that is closely held, will not make much difference to the pharmaceutical company’s outlook.
Evan David Seigerman, an analyst with BMO, wrote that while they encouraged mergers and acquisitions in BioPharma, the buyout deal of ReViral Ltd was not precisely the kind of deal that they had hoped for.
Downward spiral
Large U.S Biotech companies have been looking for big deals with buyouts of smaller pharmaceutical companies or strategic partnerships with them. This helped increase the merger activity, which was the slowest in the first quarter compared to the activities immediately after the pandemic in 2020.
JPMorgan Chase & Co analyst Chriss Scott said that Pfizer was the most controversial name among the large-cap pharmaceuticals companies. Bulls have been looking at its Covid vaccines and ability to deploy huge funds for anything, whereas bears feel that apart from its coronavirus vaccines, the core business market valuation is still too high.
Scott sees that after excluding Covid-19 anti-viral and vaccine sales, the compounded annual sales and earnings till 2025 are negative, with Pfizer facing losses due to the expiry of patents prevalent in the industry.
With the stock going up, investors appear to support the acquisition of ReViral, which will build on the partnership done in January for gene therapy. Robyn Karnauskas of Trust’s Financial said that this deal could signal a revival of M&A in an environment where companies face difficulties going public.
