New York City-based pharmaceutical heavyweight, Pfizer (PFE +1.94%), has recently been known for its COVID-19 vaccine, Comirnaty. But, while the vaccine continues to bring in tens of billions of dollars for the $265 billion mega-cap drugmaker, is it enough to reward shareholders?
Bull: billions of dollars in revenue
Adria Cimino: Pfizer has wowed investors over the past year with its coronavirus vaccine program. It's reported billions of dollars in vaccine revenue each quarter. And that's not about to stop. The company recently increased its forecast for 2021 vaccine revenue to $36 billion. That's up from an earlier forecast of about $33 billion. Of course, Pfizer splits profits with biotech partner BioNTech -- but that still leaves the pharmaceutical giant with a significant profit driver.
Image source: Getty Images.
And the story is far from over. Pfizer has orders that total $29 billion in vaccine revenue for next year. The number could move higher since 2022 order discussions aren't over. And booster shots are likely to keep vaccine revenue flowing well into the future. After all, experts predict the coronavirus is here to stay. Now, we already know Pfizer is the leader in coronavirus prevention. But the company also may soon become a leader in treatment. The company recently reported positive data from its clinical trial of an investigational coronavirus pill. Pfizer plans to submit the results to the U.S. Food and Drug Administration as soon as possible. This could give it another coronavirus blockbuster.
Moving forward, Pfizer has plenty of potential beyond the coronavirus program. That's because the company has an overflowing pipeline -- and one with many late-stage programs. Of the 94 programs in Pfizer's pipeline, 29 of them are in phase 3 trials. This equals many opportunities to compensate as older drugs lose sales to competitors down the road. So how much do we have to pay for this growth and growth potential? Actually, very little. The stock is trading at about 12 times forward earnings estimates. That's a bargain today for a stock that's likely to reward investors with earnings and share price growth over the long term.
Bear: I'll take the vaccine, not the stock
Patrick Bafuma: Pfizer may have wowed the medical community over the past year with its swift COVID-19 vaccination program, but it certainly didn't impress Wall Street. Despite being a major factor in curbing the pandemic, it appears someone forgot to tell the market as shares of the industry giant are up only 48% versus the S&P 500's 88% since April 2020. What's going to happen when all that vaccine revenue slows down?
In the coronavirus arena, Pfizer still has stiff competition -- Moderna has been clear that it has aspirations of a combination flu-RSV-coronavirus vaccine. The first to develop an annual "one and done" jab will likely seize the market, and there is no guarantee it will be Pfizer. And its oral antiviral for COVID-19, Paxlovid, has not yet been submitted for Emergency Use Authorization (EUA) in the U.S., yet the titan is already playing catch-up. Having $2.2 billion committed to purchase from Uncle Sam between the time of EUA and early 2022, Merck and Ridgeback Biotherapeutics' oral antiviral, molnupiravir, seems to have a healthy head start.
While past performance certainly is not indicative of future returns, Pfizer has historically underperformed the S&P 500. The giant is up only 158% versus 267% for the past 10 years and a paltry 53% compared with 116% in the past five years. This makes sense when you take into account that the company has not exactly delivered financially. Ten years ago, in the third quarter of 2011, Pfizer guided for 2011 full-year revenue of $66.2 billion to $67.2 billion. In the most recent quarter, the behemoth guided for full-year 2021 revenue of $81 billion to $82 billion, which includes $36 billion for the SARS-CoV-2 jab. With less than a 25% boost in revenue over a decade -- not to mention a decrease in revenue if you take out hitting the jackpot with its vaccine -- I'll pass on Pfizer.
Unfortunately, the vaccine maker has struggled to grow revenue over the past decade outside of COVID-19, and its share price has reflected this. But today's valuation is attractive, and as Adria correctly points out, Pfizer does have an overflowing pipeline. So if its future drugs can deliver and the drugmaker can continue its coronavirus windfall from the vaccine and possibly its oral antiviral, the pharma titan might be able to deliver market-beating returns for shareholders finally.
