Some say that the Chinese word for "crisis" is made up of two characters, one for "danger" and the other for "opportunity." That's actually not true. However, the sentiment is often on target. While many crises do present danger, they also frequently present opportunities.
We're certainly seeing that happen with COVID-19. More than 5 million people worldwide have died from the viral disease so far. At the same time, many companies have made a lot of money during the pandemic by selling personal protective equipment, tests, therapies, and vaccines.
None of them has been a bigger financial winner than Pfizer (PFE -0.61%). The company reported $13 billion in sales of its COVID-19 vaccine Comirnaty in the third quarter alone. SVB Leerink analyst Geoffrey Porges estimates that Pfizer is set to make a stunning $131 billion in COVID-19 sales by the end of 2022. But is the pharmaceutical stock a buy?
Crunching the numbers
Let's first look at how Pfizer could make $160 billion from COVID-19 within the next two years. We first need to include the company's projected revenue of $36 billion in 2021 from Comirnaty.
Porges thinks that sales of the vaccine this year will actually be much higher. He expects that the approvals and authorizations in many countries for booster doses and for children could increase the total global sales of Comirnaty to $59 billion in 2021.
The Wall Street analyst looks for sales of the vaccine to decline next year to around $48 billion. This would put Pfizer's revenue from Comirnaty at $107 billion by the end of 2022.
But Comirnaty probably won't be Pfizer's only COVID-19 moneymaker. The company hopes to soon win Emergency Use Authorizations and approvals for oral antiviral drug Paxlovid in the U.S. and other countries.
Porges anticipates that Pfizer's COVID-19 pill could generate sales of around $95 million this year and $24 billion next year. Adding all of this up brings Pfizer's total COVID-19 revenue to roughly $131 billion over a two-year period.
Is there a catch?
Pfizer splits profits for Comirnaty with its partner BioNTech. While the company's revenue will be enormous, its profits won't be as great from the vaccine.
COVID-19 vaccine sales will also probably be lower in 2023. Porges, though, projects that Paxlovid's sales will increase to $33 billion in 2023. However, the picture becomes much murkier beyond 2023.
Many investors are assuming that COVID-19 will be like the flu, requiring annual vaccines. But it's too soon to know if that will be the case. If not, Pfizer's revenue will taper off markedly within the next few years.
Looking farther into the future, Pfizer faces a patent cliff beginning in 2026. Several of its current top-selling drugs will lose patent exclusivity in the second half of this decade.
The case for buying Pfizer
Despite these potential gotchas, I think there are three reasons why Pfizer is a stock to buy.
I'll start with the most tangible on the list -- the dividend. Pfizer's dividend currently yields a little under 3%. With the cash flow the company will generate, there's a great chance that dividend increases are on the way.
My prediction is that Pfizer will also put its surging cash stockpile to use by making business-development deals. Look for the company to license more promising pipeline candidates developed by other drugmakers. I also fully expect that Pfizer will pull off a major acquisition in the not-too-distant future. The right deals could largely offset the impact of the patent cliff that's on the way in a few years.
Finally, there's still a possibility that sales of Comirnaty (or its successors) and Paxlovid could remain strong for a long time to come. COVID-19 could become endemic and make Pfizer much more money over the next decade than anyone anticipates.
The dangers of this crisis might not disappear. And the opportunities for Pfizer might not, either.