Pfizer To Buy Baxter's Vaccines For $635 Million: The Positives and Negatives

On July 30, Pfizer PFE announced that it had entered into a definitive agreement to acquire Baxter International's BAX portfolio of marketed vaccines in a deal that is reportedly worth $635 million.

The portfolio of vaccines consists of NeisVac-C and FSME-IMMUN/TicoVac.

The terms of the deal have include that Pfizer will also acquire a portion of Baxter's Orth, Austria facility, where these vaccines are produced. Pfizer expects the deal to be completed by the end of the year.

In the meantime, though, here's what this deal could mean for Pfizer:

The Positives

• While Pfizer's Prevnar 13 is the world's best-selling vaccine, a number of companies that make more money selling vaccine than it. Therefore, the first positive about this deal is that it finally makes Pfizer a force to reckon with in the vaccine market, as it increases its revenue sources in this industry. This competitiveness was one of the things that the company hoped to achieve with its unsuccessful bid for AstraZeneca earlier in the year. And the facts on ground suggest that Pfizer has chosen a good company to work with.
• Baxter says it expects its 2014 vaccines revenues to be in the region of $300 million. That would represent a 2.7 percent increase from the $292 million that its vaccines franchise raked in 2013. And it might be worth it to note that the vaccine franchise has been the fastest-growing commercial franchise for Baxter in recent years. Factor in the bigger stature of Pfizer in the healthcare industry, and it is safe to say that Pfizer would take the sales of these vaccines to a higher level. At the very least, the marketing of this product would improve with Pfizer.

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• Another positive from this deal is that it positions Pfizer to have a share of the “impending growth” in the meningococcal vaccines market through NeisVac-C. A study from Transparency Market Research titled, “Meningococcal Vaccines Market (Polysaccharide, Conjugate, and Combination Vaccines, along with Pipeline Analysis) - Global Industry Analysis, Size, Share, Growth, Trends and Forecast, 2013 – 2019” said that the meningococcal vaccines market is positioned to reach a global sales of $3.76 Billion by 2019.
• The opportunity gets even bigger when you consider that the said growth is predicted to be led by the conjugate vaccines segment of the market – the segment to which NeisVac-C belongs. Moreover, with Pfizer's Bivalent rLP2086, which is another pipeline candidate in for this market, having received the breakthrough therapy designation from the FDA, Pfizer might be able to challenge likes of Sanofi SNY and GlaxoSmithKline GSK.
• As for Baxter, the only positive is that this deal allows it to focus more on its core expertise. It is yet to be seen, but this could mean more effectiveness going into the future, as it means all of its effort would be directed towards what it knows best.

The Negatives

• As good as this deal is for Pfizer, it doesn't appear to be a deal that promises a significant jump in revenues – at least not on paper. For instance, the demand for FSME-IMMUN might prove to be volatile from time to time. Baxter's previous filings have shown that, at times, the sales of this vaccine could offset growths. So this isn't the deal that would make Pfizer the top vaccine-selling company.
• As for Baxter, the deal means that it is losing two sources of revenues. This would surely affect both its top-line and bottom-line in the near term. It also makes the risk of investing in the company higher, as this deal means that it would be less diversified.

On the long-term, though, the deal could prove to be a win-win for both parties.