The success of Pfizer’s Covid-19 vaccine resulted in a once-in-a-lifetime cash windfall for the company. Now it is putting the bounty to use.

The US drugmaker on Tuesday agreed to buy migraine treatment developer Biohaven Pharmaceuticals for $11.6bn in cash. At $148.5 a share, the offer represents a 79 per cent premium to Biohaven’s closing share price on Monday. That looks rich — until you remember Pfizer acquired a 2.6 per cent stake in the company last November at $173 a share.

Indeed, Pfizer’s profit surge comes at an opportune time for deals. Rising interest rates and inflation have sent investors scrambling out of risky growth stocks. The Nasdaq biotechnology index has shed nearly 27 per cent of its value this year. Prior to Tuesday’s deal announcement, Biohaven’s shares had fallen 40 per cent since January.

Pfizer is expected to turn in another blockbuster performance this year. It believes annual revenues could top $100bn — a new high and a 25 per cent jump from 2021. Covid-19 products will again drive the gains. Two — the Comirnaty vaccine and Paxlovid, an antiviral pill — are expected to generate $54bn in sales in 2022.

Yet Pfizer knows the pandemic sales boom will not last. Chief executive Albert Bourla is right to take advantage of the market sell-off to boost its pipeline.

Biohaven will be Pfizer’s biggest acquisition in five years. Best known for its migraine treatment Nurtec, Biohaven is expected to pull in $913mn in sales this year. This means Pfizer will be paying nearly 13 times sales for the business. Just last summer, Biohaven was trading on a multiple of more than 70 times forward revenues.

Pfizer will be tempted to strike more big deals, egged on by bankers. Excluding Biohaven, Pfizer has spent more than $211bn on acquisitions since 2000, according to Refinitiv data. Yet, thanks in part to divestments, its market cap — at $280bn — has increased by only $156bn during this period. All the more reason for the company to take its time to cherry-pick and avoid an M&A overdose.

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