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Pfizer lost more than 28% – dropping from $39 at the beginning of the year to around $28 in late March – then spiked 78% to over $50 now (through Aug 17). That means it is well above the pre-pandemic levels.
Why? While the Covid-19 outbreak and associated lockdowns resulted in an uncertain outlook for the broader markets, the multi-billion-dollar Fed stimulus announced in late March 2020 helped the markets stage a strong recovery. Investors are now expecting a quicker economic rebound with economies opening up gradually and vaccination programs underway, which will bode well for pharmaceutical companies, such as Pfizer.
Pfizer in particular has also benefited from its vaccine for Covid-19. In fact, we estimate it to garner over $35 billion in sales in 2021, significantly bolstering the company's earnings growth. This has aided its stock price appreciation.
Pfizer and its German partner BioNTech currently produce one of the most sought-after Covid-19 vaccines. Pfizer CEO Albert Bourla has said that people who receive Covid-19 vaccines will likely require booster shots within a year and potentially require an annual shot thereafter, much like seasonal flu shots, to protect against the virus as it evolves. This should be positive for Covid vaccine makers as they could likely see some level of recurring revenues from what initially appeared like a one-off vaccine product.
Pfizer is also looking to expand its vaccine business following the pandemic, extending its use of the gene-based mRNA technology which has proved highly effective in the Covid-19 vaccines.
The European Union is also looking to secure more doses from Pfizer/BioNTech. The AstraZeneca and J&J vaccines are being investigated for extremely rare, but potentially deadly side effects of blood clots. The E.U. has orders for 600 million doses from Pfizer/BioNTech for this year and the European Commission is in talks to buy up to 1.8 billion vaccine doses from the companies in the coming years.
Pfizer has stated that it now expects $34 billion in Covid-19 vaccine sales in 2021. While the Covid-19 vaccine revenue is expected to drop in 2022, it will still remain very high, given that it will take more than a year to vaccinate a majority of the global population.
Pfizer's top line grew a solid 86% y-o-y to $19.0 billion, primarily due to a very high demand for its Covid-19 vaccine. Pfizer’s adjusted net income of $6.1 billion in Q2 2021 reflected a 75% rise from its $3.5 billion figure in the prior-year quarter, due to higher revenues. For the full year 2021, the company raised its outlook, and it now expects revenue to be $79 billion and earnings to be $4.00 at mid-point of its range.
Previously, Food & Drug Administration Authority (FDA) did not have a process to grant approvals for biosimilars. However, recent approval of biosimilars in Europe and the FDA approvals of biosimilars in the U.S., are likely to pave the way for further drugs. Pfizer has received FDA approvals for multiple biosimilars, including ones for blockbuster drugs, Humira, Rituxan, Avastin, and Herceptin, among others. This will likely result in strong sales growth over the coming years.
Pfizer has announced that it plans to merge its established pharmaceuticals business, also known as Upjohn, with that of Mylan's, in a reverse Morris trust transaction. The combined entity could generate sales of over $20 billion by 2020, and Pfizer will hold a 57% stake in the new company, with Mylan holding the rest.
GlaxoSmithKline and Pfizer have merged their consumer healthcare divisions in a joint venture. Pfizer owns 32% stake in the new entity. The deal was closed in 2019, and the new entity will command a share of over 7% in the over-the-counter market.
Key drivers of Pfizer's value that present opportunities for upside or downside to the current Trefis price estimate for Pfizer:
Pfizer is the world's biggest pharmaceutical company in terms of revenues. It was founded in 1849 and went public in 2004. In October, 2009, Pfizer completed the acquisition of pharmaceutical giant Wyeth for $68 billion and went on to acquire Hospira in 2015 which positions it strongly in sterile injectibles and biosimilars market.
The company reports its results primarily in the following segments: 1. Vaccines, 2. Oncology, 3. Internal Medicine, 4. Hospital, 5. Inflammation & Immunology, and 6. Rare Diseases & Others
The biggest contribution to the value of the stock comes from the Oncology segment, accounting for over a quarter of Pfizer's value, in our view.
The oncology revenue for Pfizer stood at $10.9 billion in 2020 accounting for nearly 26% of Pfizer's overall revenues. This can be attributed to the company's fast-growing Ibrance sales in the breast cancer market.
The current coronavirus crisis has impacted pharmaceutical companies on two fronts, 1. supply chain disruptions, and 2. direct sales, due to postponement of minor health related issues and surgeries. While Pfizer is seeing strong demand for its Covid-19 vaccine, the sales of its other pharmaceutical drugs have been impacted in 2020.
GlaxoSmithKline and Pfizer have merged their consumer healthcare divisions in a joint venture. Pfizer owns 32% stake in the new entity. The deal closed in H2 2019, and the new entity commands a share of over 7% in the over-the-counter market.
In the last few years, several blockbuster drugs have lost patent exclusivity which includes Lipitor. This has not only impacted Pfizer, but the pharmaceutical industry as a whole. As a result, Pfizer and other firms will need to focus on growing areas of immunology and oncology.
The fast growing pharma market in emerging economies or referred to as the 'Pharmerging' economies have the capability and technical prowess to manufacture generic versions of blockbuster drugs. These generic drugs are often sold at prices that substantially cheaper then their branded counterparts, thereby severely affecting big pharma's ability to generate profits in the long run.
Previously, Food & Drug Administration Authority (FDA) did not have a process to grant approvals for Biosimilars. However, recent approval of biosimilars in Europe and the FDA approval of first biosimilar in U.S. are likely to pave way for further approvals. Pfizer is focusing on developing biosimilars and its acquisition of Hospira will bolster that effort.
Governments around the world are trying to rein in fiscal spending in order to manage their budget deficits. Since healthcare costs are one the biggest components of any national budget, it is obvious that increased healthcare legislation and reforms around the world will hurt revenues for the entire pharmaceutical sector.