Pfizer (PFE 0.55%) sells a wide variety of medicines across treatment areas such as autoimmune diseases and oncology. But it probably is most known for its leading coronavirus vaccine, which helped the company reach a record of more than $100 billion in annual revenue last year. That didn't help Pfizer's share performance this year, though. The stock has slipped about 35%.
Why the share price declines after such strong revenue? Investors are worried about Pfizer's vaccine sales as we head toward a post-pandemic world, especially considering that vaccine demand has already started to decline. And Pfizer also faces patent expiration on other important products, representing additional lost revenue. But the big pharma company isn't resting on its laurels, and it may actually be transitioning into a new phase of growth. So, is the stock a buy now? Let's find out.
Coronavirus product demand
First, let's take a look at the risks today and down the road. The company sells COVID vaccine Comirnaty and COVID treatment Paxlovid, and demand for both products is on the decline. In fact, Pfizer predicts about $13.5 billion in Comirnaty revenue and $8 billion in Paxlovid revenue this year -- double-digit declines from last year's levels.
These estimates are based not only on secured government contracts, but also on the idea of sales into a commercial market. This means selling doses directly to healthcare providers. Governments are shifting away from buying vaccine doses, so vaccine makers may deal almost exclusively with pharmacies, healthcare organizations, and other commercial buyers. This represents some risk, because these customers won't sign big supply deals years in advance as governments have done.
Meanwhile, Pfizer also faces the loss of exclusivity of some of its other blockbusters this decade, such as blood thinner Eliquis and cancer drug Ibrance. Pfizer has said upcoming patent expirations could result in $17 billion in lost revenue from 2025 through 2030.
The positive news
Considering all this, it's no surprise some investors have shied away from buying Pfizer shares. But it's important to consider some of Pfizer's positive news today, and see if it just might outweigh these negative points.
We'll start with Pfizer's coronavirus products. Though sales surely won't mimic those of earlier stages of the pandemic, it's possible Comirnaty and Paxlovid could become a steady source of lower, but satisfactory, recurrent revenue.
Pfizer and rival Moderna have both suggested that the coronavirus market may follow in the footsteps of the flu shot, meaning about half of Americans would go for annual vaccines. This could result in billion-dollar revenue for Pfizer, especially since it's the market leader with 65% share in the first six months of this year.
Earnings from its vaccine and coronavirus treatment have also helped Pfizer fund additional programs and acquisitions that should help it grow over the long term. For example, Pfizer acquired four companies last year -- Arena Pharmaceuticals, ReViral, Biohaven, and Global Blood Therapeutics -- that should add more than $10 billion to revenue in 2030. And if Pfizer successfully closes the planned addition of oncology specialist Seagen, we're looking at an additional $10 billion in revenue in 2030.
Compensating for the patent cliff
This brings me to the subject of compensating for the patent cliff ahead. Clearly, these acquisitions could do the job, but Pfizer isn't stopping there. The pharma giant also expects to generate $20 billion in 2030 from new product launches happening right now. Pfizer is about halfway along in its biggest ever streak of releases, with the goal of 19 in an 18-month period. The company expects to start seeing these contributions in the second half of this year.
In fact, Pfizer says business deals, this new wave of product launches, and a few more potential launches from its internal pipeline could result in total non-coronavirus revenue of as much as $84 billion in 2030.
Now, let's return to our question: Is Pfizer a buy right now? In my view, the positive points above well outweigh the negative. Pfizer is prepared to compensate for potential lost revenue and grow in the coming years. The 2030 revenue picture looks bright without even considering coronavirus product sales. And coronavirus vaccine sales may add a solid recurrent component to the picture -- the current vaccination season should offer us some clues regarding vaccine uptake.
Meanwhile, Pfizer shares are trading for about 10 times forward earnings estimates, which seems incredibly cheap in light of the points above. So, Pfizer looks like a buy right now, even if the company is at a bit of a transition point. The shares may not take off immediately, but that's OK. Investors who get in at today's price may benefit from dividends in the near term -- Pfizer has said rewarding shareholders is a priority -- and potentially a new era of share price performance down the road.
