Why is everyone talking about Pfizer?
If you follow stock market news, chances are you’ve come across a lot of stories on Pfizer (NYSE: PFE) in the past three months. Pfizer is one of many companies fighting to develop a safe and effective vaccine against COVID-19, the novel coronavirus that has claimed the lives of more than 780,000 people worldwide, including more than 170,000 Americans. Among the thirty companies competing, Pfizer is widely regarded as one of the leaders of the peloton.
Pfizer’s investors have seen volatile developments recently, especially since the company launched its COVID-19 efforts. Shares of the $ 213 billion market-capitalized company are down about 2% compared to a 5.08% increase for the S&P 500 year to date. That said, Pfizer has a lot to do in addition to its new coronavirus programs. Let’s take a closer look at the different aspects of Pfizer’s business and see if the company is a good buy with or without the success of its vaccine candidate.
A promising COVID-19 program
Pfizer partners with German biotechnology BioNTech (NASDAQ: BNTX) develop a vaccine against the new coronavirus. The partners began phase 1/2 clinical trials for at least four candidates in April. Two of these experimental vaccines, BNT162b1 and BNT162b2, appeared to be the most promising of the lot, and the United States Food and Drug Administration (FDA) has granted both a accelerated designation in July.
Pfizer and BioNTech elected to only move BNT162b2 into phase 2/3 trials on July 27. The companies chose BNT162b2 over BNT162b1 because the former elicited a T cell immune response, while the latter produced only an antibody response. T cells are white blood cells that bind to cells infected with the virus and order them to self-destruct. A T cell immune response provides longer lasting immunity than an antibody response alone, which means vaccine recipients may require fewer doses over time to protect against COVID-19. BNT162b2 also demonstrated a favorable overall safety profile compared to BNT162b1. Patients who received the BNT162b2 option had fewer negative side effects over a relatively short period of one to two days.
This phase 2/3 study will recruit up to 30,000 participants aged 18 to 65. The trial has two main endpoints: to prevent patients who have not yet been infected with the SARS-CoV-2 virus from contracting the disease and to prevent the contraction of COVID-19, whether participants have already been infected. by virus or not. Pfizer’s plan is to have up to 100 million doses of the vaccine ready by the end of this year and 1.3 billion by the end of 2021. Its entry into the market depends on regulatory approval. , but company management is confident in its current path to obtaining Emergency Use Clearance from the FDA. It could happen as early as October.
In July, Pfizer and BioNTech signed an agreement with the US government to deliver 100 million doses of its vaccine for $ 1.95 billion with the possibility of adding an additional 500 million doses. The companies have signed similar agreements with the governments of the United Kingdom, Canada and Japan. If their candidate proves to be safe and effective in the final stages, these bulk sales could be very lucrative for Pfizer and BioNTech.
Make room for new pharmaceutical products
In the second quarter which ended on June 28, Pfizer’s revenue declined 9% to $ 11.8 billion from the second quarter of 2019. Pfizer’s net profit also fell 32% to 3.4 billions of dollars. However, these results are less frightening than they appear for two major reasons.
First, Pfizer moved its consumer healthcare segment, which offered over-the-counter (OTC) products such as pain relievers and vitamins, into a joint venture with GlaxoSmithKline (NYSE: GSK) in August 2019. This new entity is called GSK Consumer Healthcare, in which Pfizer has a 32% stake and GlaxoSmithKline has a 68% majority. With the largest market share in the United States and the second largest market share in China – the two largest OTC markets in the world – GSK Consumer Healthcare is now the largest OTC company in the world. Without the negative impact of this deal on revenue, Pfizer’s sales in the second quarter would have declined by only 3%.
Second, Pfizer is in the process of divesting its off-patent drug unit, Upjohn, to Mylan (NASDAQ: MYL), a pharmaceutical company based in the Netherlands. This move away from the manufacturing and distribution of generic drugs will also allow Pfizer to focus on its more profitable biopharmaceutical businesses. Pfizer’s biopharmaceutical segment reported second quarter revenue of $ 9.8 billion, a 4% year-over-year increase. Meanwhile, sales of its Upjohn division fell 31% to $ 2 billion. Pfizer plans to complete the merger, initially delayed due to the coronavirus pandemic, by the end of the year.
Several Pfizer products performed well in the second quarter. Eliquis anticoagulant sales increased 17% year-on-year to $ 1.3 billion. Revenue from the cancer drug Ibrance rose 7% to $ 1.3 billion. Eliquis and Ibrance are Pfizer’s best-selling products, helping the company’s biopharmaceutical revenues stay afloat despite the downturn in some other drugs. Pfizer has dozens of ongoing clinical trials, including 23 Phase 3 studies of potential therapies for a range of oncological, immunological and rare diseases. Pfizer will be able to add more revenue streams to its biopharmaceutical business if they receive the appropriate regulatory approvals for these applicants.
Why should you consider buying
Pfizer is one of the pioneers in the search for a vaccine against COVID-19, and if its efforts are successful, the company will benefit greatly. In addition to its new vaccine candidate, Pfizer boasts successful drugs like Ibrance and Eliquis and is developing pipeline candidates that should replenish its lineup on the road. Pfizer began to focus its business on biopharmaceuticals by eliminating its Upjohn unit, which negatively impacted results, and transforming its consumer health segment into a top new business with GlaxoSmithKline of the Year last.
With a clear focus on its biopharmaceutical business and the proven success of drugs like Eliquis and Ibrance, the company should be able to grow its revenue and profits at a decent rate whether or not it benefits from the vaccination efforts. against COVID-19. As an added bonus, Pfizer currently offers a 3.9% dividend yield – compared to an average of 1.8% for the S&P 500 – and a reasonable cash payout ratio of 65.2%. The pharmaceutical company has increased its dividends by 35.7% over the past five years, making it a good option for investors looking for extra income. For all these reasons, I think Pfizer is a pharmaceutical actions worth buying today and keeping it for the long haul.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.