Is Pfizer Stock a Buy After This $1.25 Billion Investment?

Globe and Mail

27-05-2025

Pfizer (NYSE: PFE) made a fortune thanks to its work in the COVID-19 market. In 2022, it became the first company in the biopharmaceutical industry to generate $100 billion in annual sales.
However, the pandemic receded, and revenue in this area dropped off a cliff. The drugmaker has been looking for a way back ever since -- a product, or several, that can rack up billions in annual sales and help its top line move consistently in the right direction.
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It recently found a candidate for that position. Let's look deeper, and discuss whether the recent development makes Pfizer stock a buy.
Entering a promising market
On May. 19, Pfizer announced it was entering into a licensing agreement with 3SBio, a China-based biotech company. Per the terms of the deal, Pfizer will acquire the rights to develop and market SSGJ-707 -- an investigational cancer medicine -- worldwide, except in China. The pharmaceutical giant dished out an up-front payment of $1.25 billion, with potential clinical and regulatory milestones of up to $4.8 billion for 3SBio, not including royalties.
Why could this deal be significant? SSGJ-707 is a bispecific antibody, a class of drugs that's gaining prominence in the oncology market. Like monoclonal antibodies, bispecifics are lab-made proteins designed to mimic the action of natural antibodies by binding to and neutralizing antigens. However, whereas monoclonal antibodies target one specific antigen, bispecifics target two; in some cases, this can increase efficacy.
Merck 's cancer medicine Keytruda, the world's best-selling drug, is a monoclonal antibody. Recent developments suggest that ivonescimab, a bispecific being developed in the U.S. by Summit Therapeutics, could challenge Keytruda, especially in the vast non-small cell lung cancer (NSCLC) market.
Pfizer could also throw its hat into this ring with SSGJ-707. The medicine passed phase 2 studies and should start phase 3 clinical trials this year, albeit in China. SSGJ-707 is being developed to treat NSCLC, colorectal cancer, and gynecological tumors.
Another piece of the puzzle
Pfizer already has a deep oncology pipeline, particularly thanks to its $43 billion acquisition of the smaller cancer specialist Seagen. However, SSGJ-707 is a nice addition: It's a promising candidate in an equally promising niche of the oncology market. The drugmaker's prospects rely in large part on its pipeline, since its current crop of medicines isn't driving consistent top-line growth -- in the first quarter, revenue dropped by 8% year over year to $13.7 billion.
That's before we consider the fact that Pfizer will face patent cliffs by the end of the decade, including one for its anticoagulant Eliquis. Still, it's betting that its vast portfolio of investigational candidates will help it smooth out these losses and return to sales growth. SSGJ-707 fits well within this strategy, and in my view, Pfizer is well on its way to accomplishing that goal. In the past few years, it earned approval for several products. While none has been able to get close to blockbuster status yet, this deep pipeline should eventually lead to more significant clinical and regulatory wins.
Meanwhile, the company is also working on cutting its expenses. It's on track to deliver $4.5 billion in cost savings by year-end, with even more coming through 2027. Pfizer hopes to boost its bottom line and margins thanks to these optimization efforts. These might not immediately impact its stock performance, but together with its pipeline goals, they could eventually lead to much stronger returns.
Pfizer's decision to license SSGJ-707 doesn't make its stock a buy in and of itself. However, the drug candidate is another valuable asset that will be part of the company's plan to improve its business and financial results. Recently, Pfizer's shares have been trading at a dirt cheap forward price-to-earnings (P/E) ratio of around 8, half that of the average healthcare stock. I think the stock looks attractive at current levels.
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