Shares of Pfizer (NYSE:PFE) have been on the move since the company announced promising clinical trial results for BNT162b2, a coronavirus vaccine candidate the company is developing in partnership with BioNTech (NASDAQ:BNTX).
It looks like the significant investment Pfizer made to address the COVID-19 pandemic was a well-placed bet. Following the first interim analysis of a huge phase 3 trial, BNT162b2 appears 90% effective at preventing healthy people from developing COVID-19.
Let's look at what's in store for Pfizer and its coronavirus candidate to see if it's a good stock to buy right now.
A well-placed bet
This April, Pfizer agreed to give BioNTech $185 million upfront, plus up to $563 million in potential milestone payments to co-develop and co-commercialize BioNTech's experimental coronavirus vaccine program, BNT162. The upfront consideration included a $113 million equity investment that worked out to roughly 1% of BioNTech's market cap at the time. Shares of BioNTech have gained 686% since the partners announced the deal.
Pfizer and BioNTech have already enrolled 43,538 volunteers into a phase 3 study with BNT162b2, an experimental vaccine that uses messenger RNA (mRNA) to coax cells into producing harmless components of the virus responsible for COVID-19 so immune systems exposed to the real thing can recognize it immediately.
Pfizer conducted the first interim analysis once 94 trial volunteers tested positive for COVID-19 at least seven days after receiving their second and final injection of either BNT162b2 or a placebo. The balance of cases among the different groups suggests the vaccine is at least 90% effective at preventing COVID-19, but the data will remain blinded until there have been 164 confirmed COVID-19 cases.
The Food and Drug Administration wants to see at least two months of safety data from a majority of volunteers, which means Pfizer won't be able to submit a request for emergency use authorization (EUA) of BNT162b2 until the third week of November at the earliest.
Not the windfall you might be expecting
Biopharmaceutical industry analysts are expecting several billion in sales from BNT162b2 in 2021, but it's important to remember that this vaccine revenue probably won't last very long. While BNT162b2 will probably become the first coronavirus vaccine to earn EUA, Moderna (NASDAQ:MRNA) is hot on Pfizer's heels with a similar vaccine candidate that could be ready for EUA by the end of the year.
In 2021, dozens of experimental vaccines backed by battle-tested development methods and new technology could quickly earn EUAs as well. Despite the high efficacy bar BNT162b2 may have set, the FDA could be willing to consider competing vaccines because mRNA-based drugs are tough to distribute. BNT162b2 needs to be held in storage at -94 degrees Fahrenheit and can only last a day or two in a standard freezer.
Lots of well-placed bets
In recent years, Pfizer has acquired and collaborated with a long list of clinical-stage companies like BioNTech. Sales from its patent-protected line of products are expected to reach between $40.8 billion and $42.4 billion in 2020. Investors can look forward to strong growth driven by new approvals in 2021 and beyond.
They can't all be zingers, but Pfizer's oncology team alone forecasts up to 14 approvals by 2025 that will greatly expand addressable patient populations for its cancer treatments. Pfizer's oncology drugs generated $9.9 billion in revenue over the past year. The company expects new approvals to boost this figure at a 32% annual growth rate over the next five years.
Sales of Vyndamax, a treatment introduced in 2019 for a rare cause of progressive heart damage, reached an annualized $1.4 billion in the third quarter of 2020. New rare disease blockbusters could be on their way. Pfizer will finish this year with six potential new treatments for rare conditions like Duchenne muscular dystrophy and hemophilia.
A two-for-one deal
On Nov. 13, 2020, Pfizer will spin off its operating segment that sells off-patent drugs, UpJohn, and merge it with Mylan (NASDAQ:MYL) to form a company to be called Viatris. While Viatris isn't going to produce any fireworks, it will produce steady profits to fuel rising quarterly dividend payments.
At the moment, shares of Pfizer offer a 3.9% yield that will be split between remaining shares of Pfizer and Viatris. With a large slice of profits heading straight into your brokerage account in the form of dividends from Pfizer and Viatris, patient investors who buy this stock now have a very strong chance to outperform the market over the long run.