Pfizer/coronavirus: no one-hit wonder
This is shaping up to be a great couple of years for Pfizer. The US pharmaceutical company, along with German partner BioNTech, was the first to secure US emergency use authorisation for a coronavirus vaccine late last year.
Now it is reaping the benefits. The vaccine generated $3.5bn in sales for the company during the first three months of this year as the vaccination campaign in the US got under way. Pfizer expects the shot to bring in $26bn in sales this year — up from its previous forecast of $15bn. Pfizer now expects group revenues to increase by more than half to over $70bn.
Pfizer’s share price barely budged on Tuesday. But the stock has risen nearly 50 per cent from its March 2020 lows, lifting the company’s market value to $222bn. Investors are anxious about how long the vaccine halo can last.
These concerns are premature. Covid-19 is likely to linger well for years. Booster shots, or even annual shots similar to a flu vaccine, will be required.
This means that Pfizer’s Covid-19 vaccine is not just a one-hit wonder. It has the potential to become a lucrative long-term business. The company is seeking approval to use the jab on children. It wants to develop new versions of the vaccine that can be stored more easily and can fight variants of the virus.
Pfizer does not disclose profits from its vaccine. But margins should be in the “high 20 per cent range.” Assume 28 per cent and that translates into over $7.2bn in pre-tax profit for 2021, a big boost to the group total
Even without vaccines, Pfizer is in good shape. Sales at its oncology, internal medicine and hospital divisions all posted double-digit sales growth in the first quarter.
At 13 times forward earnings, the stock is trading at a fair valuation. Moderna, maker of the other widely used Covid-19 vaccine, is on 11 times, but is less diversified. Pfizer has a good shot at outperforming.
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