Can Pfizer’s dividend avoid the patent cliff? This $10.5 billion cancer bet may provide answers.

If you keep a regular eye on pharmaceutical giants Pfizer (Pfe +1.34%)So you know it has not yet restored the revenue lost due to the end of the COVID-19 pandemic; The world doesn’t need its vaccine (Comirnaty) or its infection treatment (Paxlovid) as much as it did in 2022, when the company’s revenues are projected to exceed $100 billion. Last year’s reported revenue was only $62.6 billion.

You may also know that Pfizer’s best-selling drugs, such as the blood thinner Eliquis and cancer treatment Ibrance and Xtandi will lose their patent protection next year, while the patent for its pneumonia vaccine Prevnar 13 is also nearing its end. These three drugs alone could contribute more than $20 billion in revenues by 2025.

Connect the Dots: Investors worried that Pfizer might not be able to continue paying its dividend aren’t unreasonable in their concern. The shares have performed accordingly.

Recently a deal was signed with a China-based biopharma organization Innovent Biologics (ivbxf 1.43%)However, this should at least ease this concern to some extent. And if this partnership serves as a model for the future, it should ease most of investors’ earnings concerns.

taking clear steps

For the record, it’s not like Pfizer is ignoring its march toward a major patent cliff. Its Went acting. In November 2025, the drugmaker completed the acquisition of Metsera, earning anti-obesity drug candidate. In 2023, it spent $43 billion for Cigene, which has led to some promising cancer drugs. The 2022 purchases of Global Blood Therapeutics, Biohaven Pharmaceutical Holding and Reviral begin the recent refill of the company’s pipeline and portfolio.

And there is confidence in these acquisitions. With plans to start around 20 important drug trials this year, CEO Albert Bourla commented Last month’s first quarter earnings conference call: “Our recent settlement agreement Resolving patent infringement related to VindaMax (for the treatment of transthyretin-mediated amyloid cardiomyopathy) has the potential to significantly transform the company’s growth profile after 2028. “This gives us greater confidence that starting in 2029, we will enter a five-year period of high-single-digit revenue CAGR (compound annual growth rate).”

However, the deal with Innovent Biologics is different from any of the company’s recent acquisitions as it is not a full acquisition at all. This is a partnership that will reward the shared success of the two participants, without risking punishing the lover for spending too much on a disappointing drug lineup.

different forces

The collaboration ultimately includes 12 different promising cancer drugs, eight of which have been developed by Innovent, and four of which will come from Pfizer. The two companies will co-develop and co-market any of these drugs that eventually win approval here and/or overseas. Importantly, Innovent Biologics has access to the China market that Pfizer cannot get, while Pfizer has strong access in most other parts of the world that Innovent may not be able to break into on its own.

Image Source: Getty Images.

It’s the dollar amount of the partnership that’s so encouraging, or more specifically, the way the potential future payments are structured. Although it is being billed as a $10.5 billion deal, Pfizer only owes Innovent $650 million. The other $9.85 billion will be paid only if – and if – developmental, regulatory and commercialization milestones are met. In other words, both pharmaceutical companies They are encouraged to continue doing their best work.

This is in contrast to Pfizer’s expensive acquisition of Cigene or the $10 billion deal it struck for Metsera. Both purchases drew some criticism over their hefty prices as well as the relatively early development stages of each target company’s drugs. In fact, Pfizer recently responded to these criticisms by ending early-stage trials of CGen’s SGN-BB228 (PF-08046049) and antibody-drug conjugate PF-08046045.

The bigger the dividend, the bigger the risk

This kind of (roughly) 50-50 developmental dealmaking with Innovent Biologics is not unheard of in the drug development sector, although it is less common. However, the question remains: How does Pfizer’s agreement with Innovent boost its ability to continue paying its dividend?

Although the exact fiscal specifics are still unknown at this point, the intuitive answer is also correct: this partnership is a win for Pfizer (And For Innovent), because it gives both partners the opportunity for future cash flow, without being forced to spend a lot of money to directly own a drug portfolio that may not provide an adequate payout on its price tag. It would not be wrong to understand it this way rescue.

Just don’t lose perspective. To offset its $60.5 billion long-term debt, which is causing $670 million in interest expenses every quarter — debt that has nearly doubled since the end of 2022, even as revenue has fallen 40% during this time — Pfizer will need to make at least a few more similar deals to really strengthen its ability to finance the dividend, while not undermining its ability to grow its business. It’s struggling to do both right now.

PFE EPS Diluted (Quarterly) by data YCharts.

yes, pfizer And Its dividend may avoid a patent cliff on the horizon. But the “five-year period of high-single-digit revenue CAGR” that Bourla mentions cannot get the job done efficiently on its own, as phased spending (including clinical trials and marketing) is also likely to be required to drive the majority of this revenue.

Partnerships like Innovent Biologics can help Pfizer generate much-needed low-cost revenue growth. It just needs more of them. Only time will tell if we get them, however, which makes Pfizer stock a somewhat riskier income prospect than some investors may prefer.

Of course, with a forward-looking dividend yield of 6.7%, at least they are being well compensated for taking on a little more risk.