Pfizer | Fundamental Analysis | LONG SETUP | MUST READ 🔔Some people say that the Chinese word for "crisis" is composed of two characters, one meaning "danger" and the other meaning "opportunity. In fact, this is not the case. Nevertheless, the word often hits the mark. While many crises carry danger, they also often present opportunities.
In the case of COVID-19, we can certainly see this happening. To date, more than 5 million people worldwide have died from this viral infection. At the same time, numerous businesses made a lot of money during the pandemic by selling personal protective equipment, tests, therapies, and vaccines.
None of them benefited more financially than Pfizer. In the third quarter alone, the company reported $13 billion in sales of its COVID-19 Comirnaty vaccine. SVB Leerink analyst Jeffrey Porges estimates that Pfizer expects to make a staggering $131 billion on sales of the COVID-19 vaccine by the end of next year. But is this pharmaceutical company stock worth buying?
Let's first look at how Pfizer could make $160 billion on coronavirus over the next two years. First, we need to consider the company's projected revenue of $36 billion in 2021 from Comirnaty.
Porges believes that sales of the vaccine will actually be much higher this year. He expects that approvals and authorizations in many countries for booster doses and for children could boost Comirnaty's total worldwide sales to $59 billion in 2021.
The Wall Street analyst expects vaccine sales to drop to about $48 billion next year. So by the end of 2022, Pfizer's revenue from Comirnaty sales will be $107 billion.
But Comirnaty probably won't be Pfizer's only source of revenue from COVID-19. The company hopes to soon get emergency approval and approval for the oral antiviral drug Paxlovid in the U.S. and other countries.
Purges predicts that sales of Pfizer's COVID-19 pills could be about $95 million this year and $24 billion next year. If you add it all up, Pfizer's total revenue from COVID-19 sales would be about $131 billion over two years.
Pfizer shares the profits from the sale of Comirnaty with its partner BioNTech. Although the company's revenue will be huge, its profits from the vaccine will not be as large.
Sales of the COVID-19 vaccine are also likely to be lower in 2023. Porges, however, predicts that Paxlovid sales will grow to $33 billion in 2023. After 2023, though, the picture becomes less cheerful.
Many investors speculate that COVID-19 will be like the flu, requiring annual vaccinations. But it is too early to judge whether this will actually be the case. If not, Pfizer's revenues will fall markedly over the next few years.
Looking ahead, Pfizer faces a patent cliff beginning in 2026. Several of the company's currently best-selling drugs will lose patent exclusivity in the second half of this decade.
Despite these potential problems, it should be noted that there are three reasons why Pfizer stock is still worth buying.
Let's start with the most compelling one on the list, the dividend. Currently, Pfizer's dividend yields just under 3%. Given the cash flow the company will generate, there is a good chance that the dividend will increase.
Pfizer is also predicted to use its growing cash reserves to make business development deals. The company is expected to license more promising drugs developed by other drugmakers. In addition, many believe that Pfizer will make a major acquisition in the not-too-distant future. The right deals could go a long way toward offsetting the impact of the patent cliff, which is looming in a few years.
Finally, there is the possibility that sales of Comirnaty (or its successors) and Paxlovid will remain strong for a long time to come. COVID-19 could become endemic and bring Pfizer much more money over the next decade than anyone expects.
Given that Pfizer made $13 billion on sales of its coronavirus vaccine in the third quarter alone, it's understandable why investors are wary of the rapidly evolving threat posed by the new variant, dubbed Omicron. If Omicron proves to be as insidious as early reports suggest, it could well become a serious problem for vaccinated people and vaccine manufacturers worldwide.
But the fear of Pfizer's defeat of Omicron is quite premature. In fact, there is probably no company in a better position to solve such a problem as a new option, as an opportunity to rise to the next level.
The dangers of this crisis may not go away. And the opportunities for Pfizer may not disappear either.
