Since developing its globally best-selling coronavirus vaccine, Comirnaty, which was worth an estimated $36.7 billion in 2021, Pfizer (PFE +1.92%) has been hard at work to make another billion-dollar coronavirus medicine. In late December of 2021, the Food and Drug Administration (FDA) gave its antiviral pill Paxlovid an Emergency Use Authorization (EUA), and commercialization is already in full swing. The company plans to make as many as 120 million courses of treatment this year.
But how much will sales of the pills be worth, and how much will that lift the stock price? The answer to both of these questions is "probably quite a lot." Here's why.
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Here's how much Pfizer's stock could surge
Let's do some quick math to determine how big of an impact sales of Paxlovid could have this year.
The SVB Leerink analyst Geoffrey Porges estimates that Paxlovid could bring in $24.2 billion, which he figures could leave Pfizer with around $101 billion of revenue in total for 2022. In 2023, the drug could be worth even more, potentially clocking in at $33 billion. But he expects that sales will taper off promptly after that, perhaps as a result of the pandemic ebbing or competing therapies becoming more widely available.
Right now, Pfizer's trailing-12-month revenue is $81.3 billion and its trailing price-to-sales ratio is near 4.3. The company's current market cap is nearly $300 billion. If the stock's valuation doesn't change, the revenue from the new antiviral in 2022 would put the company's market cap at around $438 billion, implying growth of 46% from its current level.
As a result, Pfizer's stock price could be in the ballpark of $75 per share instead of where it is now, near $51.
For a behemoth of a pharma stock, growth like that in the span of a year is nearly impossible to come by. In my view, it's something that shareholders should be getting excited about. But there's reason to believe that things are a bit more complicated than this simple model might predict.
It'll take a while for the full story to come out
Before investors rush to buy shares, they should understand that it's highly unlikely that the stock will actually grow by 46% immediately, as its fourth-quarter earnings report issued on Feb. 8 doesn't even contain a full quarter of Paxlovid sales data.
And even if it did, right now it's unclear whether investors can expect the antiviral to be a major driver of recurring revenue as Comirnaty has been so far.
While it's highly likely that Pfizer's shares will grow by quite a bit as a result of Paxlovid, it's important to recognize that the business might not be able to sustain a $100 billion level of revenue indefinitely.
The pandemic won't be around forever, and its end would doubtlessly crater the need for Paxlovid. Of course, the same issue faces Comirnaty, which has the added issue of potentially facing a threat to its market share from newer vaccines as more are developed.
Likewise, competing therapies could crimp the pill's market share. In particular, Merck's new antiviral will surely be competing for the same slice of the market. And there's always the risk that more effective antiviral medicines will be developed and commercialized rapidly over the next few years.
So don't be too surprised that the market's reaction to the first set of sales data isn't to send the stock skyward.
Management's performance guidance for this year will help to shed some light on potential profits from the Paxlovid rollout in the short term. In the meantime, it's definitely worth considering whether this stock is right for your portfolio, as its coming year should be tremendously profitable.
