Pfizer (PFE -1.74%) expects to generate revenue of more than $60 billion this year. That's over 40% higher than the giant drugmaker's revenue in 2020. You might think that with that kind of growth on the way, Pfizer's shares would be on fire right now, but they're not. The stock is actually down a little year to date.
Probably the main reason that's the case is that investors don't know whether or not to expect similar revenue for Pfizer in 2022 and beyond. It's uncertain if the company's COVID-19 vaccine BNT162b2 will be able to rake in robust recurring revenue after the pandemic ends.
However, Pfizer seems to think that it will. The company's CFO recently uttered 15 words that could translate to billions of dollars of additional sales for its COVID vaccine.
15 critical words
Pfizer CFO and executive vice president of global supply Frank D'Amelio participated in Barclay's virtual investor conference on March 11. Early in the discussion with Barclay analyst Carter Gould, D'Amelio made the following statement: "We believe it's becoming increasingly likely that an annual revaccination is going to take place."
Has Pfizer seen something in the data from participants in its phase 3 study of BNT162b2 that has caused the company to form this opinion? Not so far. The clinical trial started on July 27, 2020. It's only been around seven months since the first participants in that study were fully vaccinated. Pfizer hasn't announced any information that would suggest the protection against infection has waned for these participants.
Instead, D'Amelio stated that Pfizer's view is based more on the emergence of new coronavirus variants. There are three major variants already on the scene. The company believes there's a good chance for more variants to be discovered in the future.
As a result of these variants, D'Amelio said that Pfizer doesn't think COVID-19 vaccinations will be only a "one-time event." The big drugmaker thinks that it's "something that's going to continue for the foreseeable future."
How much can Pfizer count on?
In early February, Pfizer estimated that BNT162b2 would generate sales of around $15 billion in 2021. However, that was before the company won additional supply deals with the U.S. and European Union. Those deals are likely to push sales of the vaccine well above $20 billion this year.
So can Pfizer count on $20 billion per year from BNT162b2 going forward? Almost certainly not. D'Amelio said at the Barclay investor conference that annual vaccinations will probably involve a single dose. Current vaccinations of BNT162b2 require two doses.
However, simply halving that amount to predict sales of $10 billion annually is also too simplistic. D'Amelio was asked if Pfizer could increase the prices for BNT162b2 in the future. He indicated that the company sees an opportunity for adjusting prices in a post-pandemic market. It's quite possible that a single dose of BNT162b2 could cost more in the coming years than half the cost of the current two-dose regimen.
On the other hand, market dynamics could change in a way that causes vaccine prices to fall. There's a real chance that a supply glut of COVID-19 vaccines is on the way. When supply greatly exceeds the demand for any product, prices tend to drop.
Remember, too, that Pfizer doesn't get to keep all of the sales from BNT162b2. It splits profits equally with BioNTech, the German biotech that originally developed the vaccine.
The bottom line is that there's still some uncertainty about how much Pfizer will be able to make from BNT162b2 after 2021. Until that uncertainty is resolved, the big pharma stock could remain in the doldrums. However, it's quite possible that Pfizer will be able to generate recurring revenue of $10 billion per year with its COVID-19 vaccine. If it can, the stock arguably deserves a higher valuation.