Here's Why the Next 4 Months May Be Critical for Pfizer

Pfizer (PFE 0.55%) offered investors certainty in the earlier stages of the pandemic. People were clamoring for coronavirus vaccines and treatments, and Pfizer became a leader in both markets. Its Comirnaty vaccine and its antiviral treatment Paxlovid brought in billions of dollars in sales and helped Pfizer reach $100 billion in annual revenue -- a record high -- last year.

Since, though, the certainty of demand for those products has turned to uncertainty. As we head toward a post-pandemic situation, people aren't rushing out to get coronavirus vaccines and boosters at the same rate as before. It's still too early to feel comfortable about making estimates of the level of annual demand we'll see for those vaccines and treatments in the years to come.

We soon may understand a lot more about the future coronavirus market, though, and the next four months may be particularly critical for Pfizer.

Billion-dollar revenue from quarter to quarter

First, a bit of background about coronavirus vaccinations so far. Throughout the pandemic, governments placed massive orders of vaccine doses for their citizens, and as new case counts repeatedly surged, people regularly went out to get vaccines and updated boosters. This meant COVID-19 vaccine makers could count on billion-dollar revenue from quarter to quarter.

Today, vaccine makers and health officials predict the coronavirus is following in the footsteps of the flu. That means it's expected to become seasonal, with cases peaking in the fall and winter months each year.

In such a scenario, the big question is: How many people actually will go for a coronavirus vaccine booster every fall? Pfizer and rival Moderna both have suggested that here too, coronavirus may follow the flu. This would suggest that about half of Americans will go for a coronavirus jab, based on recent flu shot statistics.

That offers us a possible answer to the demand question. But a second point also will determine the amount of revenue Pfizer should expect from its vaccine in the coming years. This has to do with price. As mentioned, COVID-19 vaccine makers previously sold their inoculations to governments, but now, they're starting to sell directly to healthcare providers.

Charging more for the vaccine

So, the COVID-19 vaccine is transitioning to what's known as a private or commercial market. This means that manufacturers can charge more for their vaccines -- but they don't have the security of massive government orders. Pfizer hasn't said exactly how much it's charging commercial clients, but last year, it suggested it might price its vaccine at as much as $130 per dose. That's up from the $30 per dose governments have paid.

So why will the coming four months be critical for Pfizer? Because they will offer the company and investors a picture of what coronavirus vaccine and product revenues will look like in the coming years.

"We expect the vaccination and treatment rates from the upcoming respiratory disease season to be a reliable predictor of trends in subsequent years," CEO Albert Bourla said during the most recent earnings call.

Pfizer said uncertainties such as vaccination rates and, in the case of Paxlovid, infection rates, would be cleared up by the end of the year.

The next four months will be key because they will indicate whether we can count on sustained blockbuster revenue from Pfizer's coronavirus products. Management says that if it has overestimated the products' potential, the company is prepared to adjust its cost base to match the modified expectations for revenue levels.

Should you buy Pfizer?

What does this mean for investors? Should you wait until the end of the year before considering buying Pfizer shares? Not necessarily.

That's because whether coronavirus product sales beat or miss Pfizer's expectations, there still is a lot to like about the pharma giant. In fact, it may be heading into a new growth phase. The company has said it expects to launch 19 new products or indications over an 18-month period -- and it's more than halfway through that period right now. And recent acquisitions could add as much as $25 billion to 2030 revenue.

Meanwhile, Pfizer shares are trading for only 10 times forward earnings estimates after falling by around 30% this year. That valuation looks like a steal for a company that has such solid revenue potential -- with or without its coronavirus products.