Big-pharma Pfizer (PFE -0.97%) has been around for more than 170 years. But the company only got its big moment in the spotlight recently, with the sales of its coronavirus vaccine and treatment. These products brought in about $55 billion in revenue for the company last year.
Heading toward a post-pandemic world, demand for coronavirus vaccines and treatments is on the decline. But the Pfizer story is far from over. Should you buy or avoid Pfizer at this point? Before deciding, let's consider three things about the drugmaker that smart investors know.
1. 2023 is a transition year
As I mentioned above, demand for coronavirus products won't return to levels we saw in the earlier days of the pandemic. A health crisis is a unique situation. But that doesn't mean the revenue opportunity is over.
Pfizer expects its vaccine Comirnaty and treatment Paxlovid to continue generating multibillion-dollar revenue for "the foreseeable future." Even if levels don't match those of early pandemic times, they still can be significant.
How will this happen? Pfizer aims to increase the price of its vaccine to as much as $130 from about $30 today. The company and rival Moderna predict the market will follow that of the flu, so as much as half the U.S. population may go for an annual booster.
It's important to keep in mind that this won't happen overnight. This year will be a time of transition. We'll see coronavirus product revenue fall and won't have a complete idea of future demand.
By next year, though, the picture should become clearer. Next-year's coronavirus product revenue could serve as a new basis of comparison for the years to come.
2. Pfizer faces a patent cliff
Now let's look beyond the coronavirus business. Pfizer sells a variety of drugs across indications, and the big-pharma company is facing a patent cliff. Some of its top drugs are set to lose exclusivity. Therefore, Pfizer will see a drop in those products' revenue over the next few years.
Two big ones on the list are blood thinner Eliquis and cancer drug Ibrance. Wall Street analysts forecast a 77% drop in revenue for each of those drugs by 2030, Fierce Pharma reported a while back.
Pfizer recently predicted that all of the upcoming losses of exclusivity will result in $17 billion of lost revenue between 2025 and 2030. So the next few years may be bumpy for the company.
3. Pfizer's investments are set to pay off
At the same time, Pfizer isn't sitting around waiting for revenue to drop. The company has been making moves in recent years that should ignite a whole new phase of growth. This is through investment in its own pipeline and through acquisitions.
In fact, Pfizer right now is in the middle of an 18-month period that should result in 19 new product launches. This is a record for the big-pharma company. Pfizer expects 15 of these potential products to more than compensate for the patent cliff and predicts they will deliver $20 billion in revenue in 2030.
Pfizer's goal is to report $25 billion in 2030 revenue from acquired programs. It already has some of the building blocks in place. Four recent acquisitions should result in revenue of more than $10 billion at that time, the company says.
Pfizer's revenue compound annual growth rate without the new products should be about 6% from 2025 through 2030 -- and if new products launch successfully, that number could top 10%.
What does this mean for investors?
You'll surely see a decline in coronavirus product sales this year. And over the next couple of years, the loss of exclusivity could hurt earnings, too. All of this may weigh on Pfizer shares.
But that's a short-term problem. Pfizer's coronavirus portfolio probably won't generate pandemic-level revenue in the future but is still likely to bring in significant revenue. And the new potential products on the horizon are set to more than compensate for patent losses.
All of this means Pfizer is gearing up for growth. And with shares trading at only 12 times forward earnings estimates, today looks like the perfect time to hop on-board.
