Pfizer (PFE 0.79%) brought in enormous levels of revenue over the past couple of years thanks to its coronavirus vaccine and treatment. The company also continues to benefit from sales of blockbusters including blood thinner Eliquis and oncology drug Ibrance. But the next few years may not be as easy for the big pharma player.
Coronavirus products face a significant drop in demand as we head toward a post-pandemic world. And some of Pfizer's best-selling drugs, including Eliquis and Ibrance, face losses of exclusivity. In fact, Pfizer expects patent losses alone to lead to $17 billion in lost revenue from 2025 through 2030. In spite of these upcoming obstacles, is Pfizer still a buy?
The coronavirus transition
Before we get to the patent problem, let's talk about the COVID-19 situation. Last year, Pfizer generated more than $55 billion in revenue, combined, for its vaccine Comirnaty and treatment Paxlovid. But the market is shifting; demand is on the decline.
And companies are transitioning from selling products to governments to selling products directly to healthcare providers. Pfizer plans on charging a significantly higher price for its vaccine -- as much as $130 a dose, up from about $30 -- but this probably won't compensate for lower demand.
Still, revenue isn't exactly disappearing. Pfizer expects the coronavirus vaccine market to follow that of the influenza vaccine. If we use recent flu seasons as a guide, that implies annual vaccination for about half of Americans. We're looking at recurrent revenue, which is important. And Pfizer says it expects to generate multibillion-dollar revenue from its coronavirus portfolio for the "foreseeable future."
So, while Pfizer won't carry on at pandemic revenue levels forever, the coronavirus portfolio still remains a valuable asset -- one that can contribute to the overall growth picture.
Moving along to the rest of the portfolio brings us to the subject of patents. Yes, loss of exclusivity is a big challenge for Pfizer. But the good news is that the company is approaching this proactively: Pfizer has moved many new candidates through the pipeline. And the pharma giant went on a shopping spree to acquire companies with interesting products to further boost revenue.
This strategy means Pfizer's growth probably won't slow for very long. Right now, the company is pushing a record number of potential products toward the finish line. Within a period of 18 months, it expects to launch 19 new products or indications for existing products. The company predicts these will generate about $20 billion in revenue in 2030.
Acquisitions set to pay off big
Pfizer's acquisitions also may pay off handsomely. The company says products from these deals should bring in about $25 billion in 2030. Since last year, Pfizer has invested a whopping $70 billion in acquisitions, including its recent bid for oncology company Seagen. The biotech's strengths in antibody-drug conjugates -- which use antibodies to deliver drugs to a tumor -- could supercharge Pfizer's oncology program.
Now, let's get back to our question: Is Pfizer still a buy? Its shares may not take off overnight. After all, the company expects revenue to drop from last year's record $100 billion (thanks to coronavirus products) to a range of $67 billion to $71 billion (considering the decline in coronavirus products) this year. But Pfizer is putting into place elements that should spur a whole new wave of growth.
Today, the stock trades for 11 times forward earnings estimates. This seems very reasonable considering Pfizer's long-term prospects. The company also is committed to growing its dividend -- which it's raised for the past 14 years.
So, yes, Pfizer is a buy right now. Even if its shares don't take off right away, you can pick them up for a good price and collect passive income -- and Pfizer's moves today should lead to more rewards for you down the road.
