Even gigantic multinational pharmaceutical companies face strong headwinds every once in a while, and it's looking like it's Pfizer's (PFE +1.25%) turn. Despite its impressive work in bringing a pair of multibillion-dollar coronavirus-related products to the market in record time, some challenges face the company right now.
In particular, there are two big red flags that may hamper the stock's growth over the next couple of years. But there's also a small green flag that could help to ameliorate the situation. Let's take a look at what's going on.
NYSE: PFE
Key Data Points
New questions about Paxlovid
The first potential problem for Pfizer is that its antiviral pill for coronavirus infections, Paxlovid, may not be performing as well as one might hope. Per a study conducted in Israel and published Aug. 24 in the highly prestigious New England Journal of Medicine, the pill doesn't do much to reduce the chances of hospitalization in people younger than age 65.
For infected people between 40 and 64 who were at high risk of developing severe COVID-19 and who were treated with Paxlovid, researchers found a hospitalization rate of 15.2 cases per 100,000 person-days. In contrast, among untreated patients, there were 15.8 cases per 100,000 person-days. That's hardly much of a difference in terms of outcomes, though the study also confirmed that the drug is highly effective at reducing hospitalizations for people 65 and over.
While these findings still need confirmation from third-party researchers before they can be considered as ironclad facts, it's hard to overstate the possible significance of these results for Pfizer. In the second quarter, it reported $8.1 billion in revenue on an operational basis from sales of the pill. By the time the year is done, it expects to make a total of $22 billion. That's a hearty proportion of the $98 billion to $102 billion in sales that management is banking on for the company's entire year across all its products.
What's more, the company still has a bevy of ongoing clinical trials investigating Paxlovid's efficacy in different groups, like pregnant patients, people with long COVID, and immuno-compromised people. Again, it's just one study -- and more research will likely be done -- but if it does turn out that Paxlovid isn't performing well in younger people, it's hard to imagine physicians continuing to prescribe it to them to treat COVID. And that has a very real potential to put a huge dent in its top line, even if it might take a few quarters to become apparent.
Suit by a major competitor
Another red flag is that Moderna is suing Pfizer and its collaborator BioNTech, alleging that the duo's coronavirus vaccine, Comirnaty, is based on messenger RNA (mRNA) technology made using methods patented by Moderna between 2010 and 2016. Specifically, Moderna claims that Pfizer and BioNTech copied an efficiency and safety-improving chemical modification to its vaccine's active ingredient.
The company also alleges that the two collaborators copied its method for making the lipid nanoparticle and spike protein formulation for its Middle East Respiratory Syndrome (MERS) jab. The MERS shot never made it to market, but the techniques pioneered during its development likely aided Moderna's rapid coronavirus vaccine program.
In reply, Pfizer and BioNTech stated that they have "not yet fully reviewed the complaint but we are surprised by the litigation given the Pfizer/BioNTech COVID-19 vaccine was based on BioNTech’s proprietary mRNA technology and developed by both BioNTech and Pfizer."
There's no way to tell exactly how the proceedings will play out in court, but Moderna is only asking for a share of the income from sales of Comirnaty after March 2022 rather than seeking damages. Still, that could be significant considering that Pfizer anticipates bringing in $32 billion from sales of the jab this year.
Updated jabs could stir new demand
However, Pfizer also has a silver lining to look forward to, and quite soon. The first version of Comirnaty wasn't designed to combat viral variants, so Pfizer developed an updated version of the jab intended to be effective against newer variants of concern like omicron BA.4 and BA.5.
On Aug. 22, it requested an Emergency Use Authorization (EUA) from the Food and Drug Administration (FDA) so that its updated vaccine could start being deployed in the U.S. If everything goes according to plan, the new doses will start rolling out sometime around the start of September.
It's pretty unlikely that the new version of Comirnaty will spur governments or other major purchasers into buying anywhere near as many doses as they did in the last couple of years. Still, healthcare systems are apt to prefer them to the older vaccines, which aren't retaining much of their effectiveness against newer variants.
Therefore, getting the new jabs out the door will be a small green flag, though it's more of a consolation prize given the near-certainty of the company's top line contracting significantly on lower demand next year.
