Biotech Values

[DewDiligence]

Addendum to PFE-SGEN opinion in #msg-171432326:

As a PFE shareholder I would have preferred that PFE buy back its own (undervalued) stock rather than spend $43B on an acquisition.

While a large share buyback may have been the optimal deployment of capital given’s PFE’s low valuation, a large buyback was precluded by PFE’s commitment to the investment community (first presented at the Dec 2022 Investor Day) to grow sales strongly during the 2025-2030 period in spite of the loss of patent exclusivity on such big-selling drugs as Ibrance and Eliquis—see slide #5 at https://investors.pfizer.com/files/doc_presentation/2022/12/B/Pfizer-Near-Term-Launches-High-Value-Pipeline-Day-Presentation_1245pm_v2.pdf .

After making such a commitment to the investment community, a share buyback by PFE would have been viewed as a tacit admission of defeat in executing the Investor Day plan, and analysts would have downgraded the stock, claiming that PFE was unable to find anything promising to invest in.

Such is the tradeoff in making an overarching commitment to Wall Street: it may help to support the share price, but it reduces capital-deployment flexibility to a material degree.