Pfizer (PFE -3.85%) faces an uncertain future as many of its top drugs are losing patent protection, and that will mean billions in lost revenue toward the latter half of the decade.
As early as next year, there may be a significant drop in revenue from COVID-19 vaccinations, boosters, and pills. The company's COVID products will contribute an estimated $56 billion in revenue for the business this year, and there could be a significant hole to fill in 2023 as concerns relating to the pandemic's decline.
But there is one opportunity for the company that could have the potential to bring in significant revenue, and that's through the treatment of long COVID. These are symptoms that people deal with after an initial bout with the disease. And it's something the U.S. government is starting to take a closer look at now.
Testing Paxlovid's effectiveness against long COVID
The U.S. National Institutes of Health is going to conduct a study next year that involves 1,700 people who are 18 years of age and older to see if Pfizer's COVID pill, Paxlovid, can be effective in treating long COVID. The pill is currently used to help prevent high-risk patients from serious cases of the disease.
Treating long COVID could be a significant opportunity for Pfizer because it is so broad; it can last for years, and there are numerous symptoms related to it. According to the Household Pulse Survey, which the U.S. Census Bureau and other federal agencies launched, roughly one in five U.S. adults who had a COVID infection reported that they had symptoms of long COVID afterward.
And with 100 million cases of COVID-19 in the U.S. alone, it's easy to see how this could be another significant market opportunity for Pfizer to penetrate if Paxlovid proves to be effective.
Predicting Paxlovid's revenue will be difficult
The government has been paying Pfizer $530 for a five-day course of the treatment. But with COVID treatments transitioning to the commercial markets next year, that could result in a much higher price for Paxlovid. That could potentially offset a decline in demand should it happen. This year, the company anticipates $22 billion in revenue from Paxlovid.
However, with many variables to account for next year (e.g., how much demand there will be for the treatment, its price tag, whether it will be approved for long COVID), it's still a big question mark as to how much revenue Pfizer will generate from Paxlovid in 2023 and beyond.
Is Pfizer's stock a buy?
Since the start of the year, shares of Pfizer have declined close to 20%, which is in line with the S&P 500. But with the stock now trading at less than 10 times earnings, investors are significantly discounting the healthcare stock as the industry averages a multiple of 21.
Concerns of a drop in revenue are worrisome for the business, but Pfizer has been busy with acquisitions this year, and if Paxlovid does get a green light to treat long COVID, there could be plenty of reasons to be optimistic that sales and profits won't nosedive as badly as investors and analysts are expecting them to now.
At such a steep discount in valuation, Pfizer could be a good contrarian stock to buy right today. There's a good margin of safety built into the stock's current valuation, and with many growth opportunities still out there for the business, Pfizer still looks like it can be a great long-term buy.
