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Why Pfizer's Future Looks Better in 2021

By Keith Speights - Jan 24, 2021 at 2:30PM

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Several factors should work in the big drugmaker's favor this year.

Despite the success of its COVID-19 vaccine program, Pfizer (PFE -1.96%) didn't impress investors with its stock performance last year. That could change going forward, though. In this Motley Fool Live video recorded on Jan. 13, 2021, healthcare and cannabis bureau chief Corinne Cardina and Fool.com writer Keith Speights discuss why Pfizer's future looks better in 2021.

Corrine Cardina: Let's talk about its stock, so the biggest difference between the ones we've talked about Moderna, BioNTech: Pfizer has a dividend. Its dividend yields 4.2 percent right now.

Keith, you actually wrote an article about Pfizer as an investment, I'm going to post it in the chat for everyone, but can you give us the highlights of why Pfizer was so flat in 2020, despite this huge exciting news and what you think about it for 2021?

Keith Speights: Yeah, like you said, Pfizer really just fizzled in 2020. The stock didn't go down a lot, but it didn't do much either.

The main reason behind that was Pfizer had a couple of disappointing clinical studies for Ibrance, their breast cancer drug. They had hoped to really expand Ibrance's opportunity in the early stage breast cancer market. The studies just didn't pan out.

Again, we talk about risk and even big companies like Pfizer run into these issues. So they were very disappointed and as a result, investors were very disappointed. That was the biggie there.

I think there was also some concern maybe that Moderna's vaccine could outperform Pfizer in the market because of some of the ultra-cold storage requirements that Pfizer's vaccine has. I think that was a lesser factor.

Then there was just the issue that Pfizer didn't turn in very good numbers throughout 2020, mainly because they were being dragged down by lower sales of Lyrica, which went off-patent not too long ago and sales were declining rapidly, and that just held them back.

But the reasons why I think this year could be better, first of all, is that like we just talked about, Pfizer spun-off it's Upjohn unit, which was home to Lyrica and quite a few other drugs that are seeing their sales decline. Pfizer spun that off, it's now part of a totally different company. Pfizer is left with all of those exciting blockbuster drugs we talked about in that exciting pipelines.

So they have a lot more reasons for them to grow now. The company is anticipating that they're going to deliver average annual earnings growth in the ballpark of 10 percent. Again, we get back to how precise is that, but they're still looking at potentially 10 percent earnings growth over the next several years. That is way better than what they've been doing.

They're looking at revenue growth in the ballpark of six percent, and these are risk-adjusted factors. It could be better than that if their pipeline candidates turned out even better than they're projecting, but then they've got the big money coming in from their COVID vaccine. We were talking about $14 billion on the low end, they'll get about half of that.

So they've got this other big blockbuster that is already on the market in the US and other countries. They've got a couple of big FDA decisions coming up, one for an osteoarthritis drug, tanezumab, which could easily be a blockbuster. They expect the FDA to make a decision in June on their new 20-valent pneumococcal vaccine that's the successor to Prevnar 13. It could be a blockbuster. Look, Pfizer has a lot of growth opportunities, this stock could be a buy now.

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Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$50.34 (-1.96%) $-1.00
Moderna, Inc. Stock Quote
Moderna, Inc.
MRNA
$137.45 (-3.40%) $-4.83
BioNTech SE Stock Quote
BioNTech SE
BNTX
$157.02 (-1.74%) $-2.78

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