Analyst Note| Damien Conover |
Pfizer reported solid third-quarter results ahead of our expectations, but we don’t expect any major changes to our fair value estimate, as part of the strength stemmed from better-than-expected COVID-19 vaccine (Comirnaty) sales that will likely fade quickly in 2023. Nevertheless, the massive bolus of COVID-19-related sales (Comirnaty and COVID-19 treatment Paxlovid) generated almost $12 billion in the quarter, enabling Pfizer to redeploy capital toward the pipeline and acquisitions targeting innovative drugs (Biohaven and Global Blood Therapeutics), which should help support the firm’s wide moat. While we expect a major decline in COVID-19 sales due to the pandemic receding (even with the U.S. price increase on Comirnaty as the vaccine shifts to private payer markets from government pay), the recent increase in pipeline investments should help mitigate Pfizer’s expected patent headwinds that increase in 2028.
Excluding COVID-19 products, Pfizer’s sales increased 2% operationally, below our 5% sales growth projected over the next four years. Mixed performance of Pfizer’s leading products slightly weighed on the growth. The new Prevnar 20 launch in the U.S. is bolstering this entrenched franchise. Also, rare cardiovascular drug Vyndaqel continues to gain share with leading efficacy data. However, cancer drug Ibrance is struggling as competing drugs have show better efficacy data, setting up a flatter outlook.
On the pipeline front, Pfizer is making strides with two important launches in 2023. We are most bullish on the firm’s vaccine for respiratory syncytial virus as the data looks the most comprehensive in covering maternal and elderly patients. However, the competitive landscape is tough, with GSK’s competing RSV vaccine potentially showing slightly better efficacy, but the discontinuation of the GSK vaccine in the maternal setting could give Pfizer an edge. Also, strong data for ulcerative colitis drug etrasimod likely sets up another blockbuster.