In the past month, Pfizer (PFE -5.12%) stock is up over 20% on the enthusiasm that it will be the first company in the world to bring a scientifically validated coronavirus vaccine to market. Aside from helping put an end to the devastating COVID-19 pandemic, the company's commercialization efforts will also generate tens of billions of dollars in potential revenue.
With shares gaining momentum, many investors wonder if they can get rich off of Pfizer stock with a tiny investment. Today, let's see if that can manifest into reality or become a scenario that skeptics are warning about while staying on the sidelines.
A fantastic business
Last month, Pfizer and BioNTech's (BNTX -1.01%) messenger RNA (mRNA) coronavirus vaccine, BNT162b2, achieved 95% efficacy in late-stage, placebo-controlled clinical studies. The vaccine has started being administered to patients in the U.K. and is awaiting EUA by the U.S. Food and Drug Administration (FDA) and approval by the European Medical Agency. This is the first-ever coronavirus vaccine to enter commercialization.
By the end of 2020, Pfizer expects to produce 50 million doses of BNT162b2 and scale that number to 1.3 billion by the end of 2021. At a price tag of $19.50 per dose, there's quite a lot of revenue potential. This growth catalyst aside, Pfizer's core operations have also been performing handsomely.
On Nov. 16, Pfizer completed the spinoff of its generic drug business Upjohn to form Viatris. This was a smart move by Pfizer, as Upjohn has been hampering the company's bottom line for quite some time. In Q3 2020, Upjohn's revenue fell by 18% year over year as the FDA approved a record number of generics as part of its initiative to crack down on high drug pricing.
Currently, Pfizer's core business consists of brand name oncological drugs, cardiovascular treatments, anti-infectious disease treatments, and biosimilars. During Q3 2020, its biopharma sales grew by 4% compared to Q3 2019, to $10.2 billion. For the full year, the new Pfizer expects to bring in $42.4 billion in sales and $2.38 in earnings per share.
From now through 2025, the company projects it can grow its revenue by more than 6% per year. That is excluding the potential revenue from BNT162b2.
What are the skeptics saying?
Just because Pfizer has the first-mover advantage with its vaccine does not guarantee that it will do well. Unfortunately, Pfizer's vaccine must be stored at temperatures as low as -94 degrees Fahrenheit and diluted before administration. Logistical difficulties result in half of the world's vaccines going to waste. Once Pfizer's competitors' vaccines come out en masse, governments worldwide are likely to favor those instead, due to their easier means of delivery while providing the same efficacy.
Additionally, Pfizer is only entitled to half of BNT162b2's gross profits due to a 50-50 partnership on income and expense sharing with BioNTech. Furthermore, the world's vaccine market is already heavily saturated, with more than 5.7 billion preorders. All of these factors combined make it possible that BNT162b2 could deliver a little more than a one-year boost to Pfizer's revenue. Although some analysts are projecting the vaccine to deliver up to $40 billion in sales over the next few years.
What's the verdict?
Without a doubt, Pfizer achieved remarkable success in advancing a coronavirus vaccine and spinning off its business segments to devote its attention to its core biopharma operations. There is definitely some money to be made with Pfizer stock, especially given its 3.81% annual dividend yield on top of its growth catalyst.
However, its shares won't be turning small investments into million-dollar holdings anytime soon. Right now, the coronavirus vaccine sector is just too saturated, and Pfizer's cash flow from BNT162b2 will likely decline sharply after 2022. As more coronavirus vaccines receive approval, and more of the world's population receives them, that market will shrink considerably.
Pfizer is definitely a strong pick for investors looking for an excellent pharmaceutical stock to hold for the long term. However, for those who want to get rich in the short term off of coronavirus vaccine developers, I suggest checking out BioNTech instead.