The coronavirus pandemic has the world's drugmakers working together to deliver medical solutions and some companies are poised to contribute more than others. With a coronavirus vaccine candidate in late-stage clinical trials and a contract to help manufacture the only COVID-19 antiviral treatment available at the moment, Pfizer (PFE -1.10%) is contributing more than the vast majority of its big pharma peers.
Do Pfizer's contributions to the fight against the COVID-19 pandemic make it a good stock to buy right now? Let's weigh reasons to buy shares of the pharmaceutical giant against the risks.
After beginning the human testing stage of the BNT162 program with four related vaccine candidates, Pfizer and its clinical-stage collaboration partner BioNTech (BNTX -1.27%) selected one in July to test in a phase 2/3 study with up to 30,000 participants.
More recently, Pfizer signed a contract manufacturing deal with Gilead Sciences (GILD -1.43%) to help meet soaring demand for remdesivir, the only antiviral authorized by the FDA to treat COVID-19 patients at the moment.
So many healthy volunteers are lining up to take part in coronavirus vaccine trials that Pfizer thinks results, and a subsequent regulatory review could take place in October. If BNT162 can be shown to safely reduce the risk of infection by 50% or better at the first scheduled interim analysis, Pfizer will supply the U.S. government with up to 100 million doses by the end of 2020, and 1.3 billion doses globally by the end of 2021.
Pfizer is making itself a smaller company focused on developing and marketing innovative new drugs. To accomplish this, Pfizer will merge its Upjohn segment, which is full of products that have lost patent-protected market exclusivity, with Mylan (MYL) in an all-stock deal.
Brands that have been relegated to Upjohn's ranks include Viagra, Lipitor, and more recently the Lyrica. This popular pain reliever for patients with nerve damage lost market exclusivity last summer and in the first half of 2020, sales tumbled 70% year over year to $706 million.
The coronavirus pandemic has pushed the deal's expected closing date into the second half of 2020. Once completed, Pfizer shareholders will own 57% of the new company and the other 43% will belong to Mylan.
A lot of cash
Pfizer's highly profitable operations generated a whopping $12.6 billion in free cash flow over the past year. This gives the company a chance to in-license promising new drug candidates, or acquire entire companies for complete access. For example, in 2019 Pfizer shelled out $11.4 billion for Array Biopharma, a company with two approved cancer drugs and more in clinical trials at the time.
Pfizer also uses the cash flows its drugs generate to pay shareholders a quarterly dividend that has risen 111% over the past decade. At recent prices, the stock offers a juicy 3.9% dividend yield at recent prices and successful new growth drivers could allow it to rise even faster in the years ahead.
On the rise
While BNT162 could produce a great deal of revenue if successful, Pfizer will report strong profit growth for the next several years at least. In the first half of 2020, sales of the next-generation blood thinner, Eliquis rose 23% year over year to $2.6 billion and sales of the breast cancer treatment, Ibrance, rose 9% to $2.6 billion.
Pfizer also sports recently launched drugs that are already driving growth. For example, Vyndamax, a rare disease drug that earned approval in September 2019 to reduce progressive heart damage caused by transthyretin-mediated amyloidosis, is quickly gaining popularity. As the first available treatment for the vast majority of patients with this lethal disorder, Vyndamax sales rocketed up to $508 million in the first half of 2020.
Last year, Pfizer's nearly forgotten cancer therapy, Inlyta in combination with Keytruda, reduced the risk of death for newly diagnosed kidney cancer patients by 47% compared to standard care and earned approval to treat this group.
In the first half, Inlyta sales more than doubled year over year to reach $364 million and will probably pass $2 billion in annual sales a few short years from now.
A good pharma stock to buy now?
Thanks to Operation Warp Speed funding, Pfizer's getting a chance to develop a potential blockbuster vaccine with hardly any risk. Investors would do well to avoid stocks that depend entirely on success from a coronavirus vaccine candidate, or any drug with limited clinical trial data supporting its benefit to risk ratio.
As a pharmaceutical giant with strong profits now that can continue growing if BNT162 completely flops, there's a very good chance Pfizer shares will provide a market-beating return over the long run.