Should Investors Buy Pfizer Stock for Its Coronavirus Vaccine?

In this video from Motley Fool Live, recorded on Nov. 23, Corinne Cardina, bureau chief of healthcare and cannabis, and Brian Orelli, Fool.com contributor, discuss the pros and cons of investing in Pfizer (PFE 2.40%) for its coronavirus vaccine. Beyond the potential upside from the vaccine, investors should look at the pharmaceutical giant's overall strategy. The company's spinoffs of its generic drugs and consumer health units could have a greater impact on the company's growth potential than its coronavirus vaccine, especially since it has to share those revenue with its partner BioNTech (BNTX 0.74%)

Corinne Cardina: So Pfizer is of course, huge. It's $203 billion market cap. Moderna (MRNA -0.58%) is much smaller, $38 billion market cap. I think the other obvious difference is that Pfizer has a lot of blockbuster drugs on the market, Moderna does not yet have anything on the market. Brian, what would you say to someone considering investing in one or both of these stocks?

Brian Orelli: Yeah, I mean, I think if you're investing in Pfizer, you're probably not investing specifically for the coronavirus vaccine. If you're invested in Moderna or BioNTech, which is Pfizer's biotech partner, then you're definitely investing in both for the coronavirus vaccine, and also for the mRNA technology because they're going to use it to develop other vaccines and you can use it to create cancer vaccines, I think Moderna has one of those. So I think that's really the big key difference in the two. I think Pfizer is an interesting value play right now, but I don't think you'll necessarily be buying it for the coronavirus vaccine.

Cardina: Sure thing. So let's talk a little bit more about Pfizer's strategy. So last week it spun-off, it's Upjohn unit to combine it with Mylan to form a new company called Viatris (VTRS 1.17%), and it's also doing another spin-off. Is that right, Brian?

Orelli: Yeah. So they also have their Consumer Healthcare business. So this is actually the second time. So they had one and they sold it to Johnson & Johnson (JNJ 1.49%), that was like 2006 time frame, and then they got new products when they acquired Wyeth, they had more like Advil, those sort of things. So they created a joint venture, maybe last year or the year before, with GlaxoSmithKline (GSK 1.22%), ticker name is GSK, and the Glaxo's Healthcare business was bigger than Pfizer's. So they are a minority owner in that joint venture. So it just shows up, they don't book any of the revenue from those things anymore. It just shows up there is profits in the other incomes section. When they set it up, Glaxo and Pfizer spoke, said they were interested in spinning it out as a public company. The timing is still up in the air, and it's that weird. Glaxo has the choice there because they are the majority owner, but Pfizer has an option if Glaxo doesn't do it within a few years and they can call in their option to spin out the joint venture and do it for the company. But I would look for a couple of years. I think that the idea there is they're trying to, once they integrate the two together, they're trying to get some cost synergies so that the company is more attractive and then they want to spin it out of that one.

Cardina: Excellent. So what will the new Pfizer look like? What are their focus areas? Whether it's what they have on the market or what's in their pipeline, once they conduct these spin-offs?

Orelli: Yeah, I mean, I think they'll be mostly into high growth areas, so oncology, vaccines, I think they have some partnerships with gene therapy. So I think it's mostly going to be big indications in high growth areas. So it will be a much more attractive company than the healthcare. Consumer Healthcare is obviously slow growing and the generic drugs that you mentioned earlier that got spun out with Mylan, that's also slow-growing, so I think it'll be a much faster growing company than it is right now.

Cardina: Right. Pfizer's stock has not outperformed the S&P 500 this year. It's actually down two percent year-to-date compared to the S&P's increase of almost 11 percent. Ideally, once it has streamlined into these high-growth areas, we could see a return to growth. That will be something to watch.