Why Pfizer Stock Is Riskier Than AbbVie

What in the world are investors thinking? AbbVie's (ABBV -1.03%) share price has soared more than 20% in 2022. But in a matter of weeks, the company's top-selling drug, Humira, faces competition from biosimilars in the U.S. market.

Meanwhile, Pfizer (PFE -0.19%) stock is down year to date, even though the drugmaker is on track to generate close to $100 billion in revenue this year -- more than any other biopharmaceutical company has ever made.

However, there's a simple answer to the initial question: Investors are thinking about risk. Here's why Pfizer stock is riskier than AbbVie.

Big challenges on the way

Yes, AbbVie will feel the pain from Humira losing U.S. exclusivity. The autoimmune-disease drug is on track to generate around $20 billion in sales this year. That amount represents roughly 34% of AbbVie's total projected revenue. The company expects U.S. sales to decline between 35% and 55% in 2023.

But AbbVie already has two successors to Humira already on the market. The company thinks that Rinvoq and Skyrizi together will generate sales of more than $15 billion by 2025.

Now consider Pfizer's challenges. The following table shows the major U.S. losses of exclusivity (LOEs) that the company faces through the end of this decade:

Data source: Pfizer 10-K. *Pending a patent term extension. 

These products generated combined sales of more than $23 billion for Pfizer in 2021. 

The company's newest pneumococcal vaccine, Prevnar 20, should make up for most of the lost sales due to Prevnar 13 losing exclusivity. However, Pfizer doesn't have new drugs on the market ready to take the baton from the others on the list.

Pfizer's COVID conundrum

These looming LOEs aren't Pfizer's only problems. The company also has what you might call a COVID conundrum.

COVID-19 vaccine Comirnaty generated nearly 35% of Pfizer's total revenue in the first three quarters of 2022. Paxlovid, an oral antiviral therapy that treats COVID-19, contributed another 22% of total revenue during the period. 

However, it's difficult (to say the least) to project how much these products will rake in over the next few years. No one knows what the ongoing demand for COVID-19 vaccines and therapies will be.

Pfizer CFO Dave Denton recently stated that the company expects its messenger RNA vaccines to make between $10 billion and $15 billion in annual sales by 2030. But this estimated range is a lot lower than the $34 billion sales expected for Comirnaty this year. It also includes other mRNA vaccines that aren't on the market yet -- a flu vaccine, a combination COVID-flu vaccine, and a shingles vaccine. 

Meanwhile, Paxlovid seems likely to face increasing competition. It's possible and perhaps even probable that sales for the antiviral therapy could plunge after 2023. 

Worth taking the risk?

The reality is that Pfizer has a lot more revenue at risk in the coming years than AbbVie does. Are these big pharma stocks still attractive despite their risks? 

My view is that AbbVie should be a smart contrarian pick in 2023, even with Humira losing market share to biosimilars. The company has multiple long-term growth drivers, notably including Rinvoq and Skyrizi. AbbVie's dividend also remains a big plus for the stock.

Pfizer's dividend yield of 3% isn't too shabby, either. The drugmaker also has a promising pipeline and the financial flexibility to make additional business-development deals to fuel growth. I think that Pfizer's low valuation adequately reflects its risks.