Pfizer (PFE 2.40%) could make a pretty good argument that it has made the greatest impact in the fight against COVID-19 of any company. Comirnaty, developed by Pfizer and BioNTech (BNTX 0.74%), is the best-selling COVID-19 vaccine. And now Pfizer seems poised to dominate another part of the COVID-19 market.
The drugmaker announced overwhelmingly positive results last week from a clinical study of its COVID-19 pill Paxlovid. Those results were so good that Pfizer's shares jumped 8.5% on Friday, a massive one-day move for a big pharma stock. But should you buy Pfizer stock now after the company's fantastic results?
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A game-changer
Pretty much everyone thought that Merck (MRK 0.44%) and its partner, Ridgeback Biotherapeutics, set a really high bar with the late-stage results for their COVID-19 pill, molnupiravir. On Oct. 1, the companies announced that molnupiravir reduced the risk of hospitalization or death in COVID-19 patients by around 50%.
But Pfizer easily cleared that bar. The company reported last Friday that Paxlovid reduced the risk of hospitalization by 89% compared with a placebo in COVID-19 patients who were treated within three days of symptom onset. None of the patients with COVID-19, who were at high risk of developing severe disease, died in the group that received Pfizer's oral therapy.
Pfizer CEO Albert Bourla said that those results were "a real game-changer in the global efforts to halt the devastation of this pandemic." He's probably right.
If Paxlovid wins authorization (which seems highly likely), the pill could be prescribed to adults who are diagnosed with COVID-19. Pfizer is also conducting another late-stage study to evaluate the oral therapy in adults who were exposed to SARS-CoV-2 but not yet diagnosed with COVID-19.
A big market opportunity
Just how big is the market opportunity for Paxlovid? After Merck announced positive results for molnupiravir, the company estimated that it could make between $5 billion and $7 billion by the end of 2022.
The number of COVID-19 cases could decline in the future thanks in large part to increased vaccination rates. However, Bernstein analyst Ronny Gal thinks that the COVID-19 pill market could still be in the ballpark of $6 billion annually beyond 2022.
Gal initially figured that Merck could grab around half of this market. But his estimate came before Pfizer reported its great results for Paxlovid. It's probably fair to say that the much higher efficacy for Paxlovid compared to molnupiravir could enable Pfizer to claim a significantly greater market share than Merck will.
The market dynamics could change down the road, though. Atea Pharmaceuticals and Roche still have hopes that their experimental COVID-19 pill AT-527 could be successful. The candidate didn't meet the primary endpoint in a phase 2 study, but Atea and Roche plan to move forward with a phase 3 study with potential protocol modifications.
Buy Pfizer stock?
Investors seeking to jump aboard the Pfizer train to profit from its COVID-19 pill might be a little late to the party. The big gain for the stock on Friday largely bakes the opportunity for Paxlovid into Pfizer's share price.
However, there are other reasons to like the stock. For one thing, Pfizer's valuation remains attractive. Its shares trade at only 11.7 times expected earnings. There's also the drugmaker's dividend yield of 3.2% that income-seeking investors will no doubt like.
Pfizer expects Comirnaty will rake in around $36 billion in sales next year. Gross profits must be split with BioNTech, but Pfizer will still pocket a hefty amount. With the potential for Paxlovid to be a megablockbuster as well, Pfizer's cash stockpile should continue to grow by leaps and bounds.
COVID-19 isn't Pfizer's only focus. But its success in fighting the pandemic should give the company even more flexibility to make acquisitions and other business development deals that fuel growth. My view is that Pfizer was a smart pick before the great news for its COVID-19 pill and still is a solid stock to buy for many investors.
