Pfizer (PFE 0.55%) last year brought in record sales of more than $100 billion thanks to its dominance in the coronavirus prevention and treatment markets. The company sells the top vaccine, Comirnaty, and treatment, Paxlovid. Pfizer's portfolio extends well beyond coronavirus products, with blockbuster drugs in oncology, immunology, and other specialties.
Still, investors' focus has been on the company's coronavirus products over the past few years. That was good for Pfizer earlier in the pandemic, but these days it's weighed on the stock. It's heading for a 39% drop this year. Demand for vaccines and treatments is on the decline. And most recently, Pfizer even lowered its earnings forecast and announced a cost realignment plan following this drop in demand. Should you flee Pfizer stock right now -- or is the company actually a bad news buy? Let's find out.
Lowering vaccine revenue forecasts
Let's start with the bad news first. Pfizer has been closely monitoring vaccine rollout during the current vaccination season, and according to what the company has observed so far, it predicts about 17% of the U.S. population will go for a coronavirus vaccine. And that's prompted Pfizer to lower its forecasts for Comirnaty revenue by $2 billion. The company earlier forecast Comirnaty would generate $13.5 billion this year.
Meanwhile, Pfizer lowered its revenue guidance for treatment Paxlovid by $7 billion -- this includes a noncash revenue reversal of about $4 billion that covers the U.S. government's return to Pfizer of unused treatment courses labeled for emergency use. The government now has a credit to replace those treatment courses with fresh ones, bearing the "fully approved" label.
On a brighter note, Pfizer will begin selling Paxlovid into the commercial market as of January and will negotiate prices directly with payers. The company sold five-day treatment courses for slightly over $500 to the government, but in a commercial market, now plans on setting a $1,390 list price, according to The Wall Street Journal. This shouldn't weigh on demand for Paxlovid since insurers will cover all or most of the cost.
Still, trends in the coronavirus market prompted Pfizer to lower its full-year revenue guidance to the range of $58 billion to $61 billion -- that's down from a minimum of $67 billion. And Pfizer cut its diluted earnings-per-share forecast to between $1.45 and $1.65 -- down from at least $3.25. And, as mentioned above, the company is launching a plan to realign costs to match the revenue opportunity moving forward.
Treating a pandemic situation
So, how bad is all of this for Pfizer? It's important to remember the record levels of vaccine and treatment revenue came in at the height of a pandemic situation, so it's normal these products are selling less as we head toward a post-pandemic environment.
This fall's vaccine market may indicate potential annual sales levels for the vaccine into the future. If it falls short of initial expectations, which may be the case, it's a negative point -- but, on its own, this wouldn't prompt me to avoid the stock. Here's why. First of all, Comirnaty and Paxlovid sales aren't dropping to zero. They still could remain significant contributors to recurrent revenue, and Pfizer's move to adjust costs to match the program's revenue opportunity is a wise idea.
Pfizer's portfolio and valuation
Next, it's important to look at the big picture, meaning the potential of Pfizer's entire portfolio and pipeline and the company's valuation in relation to that. Today, Pfizer faces near-term challenges such as the coronavirus program declines and patent expiries of certain top products later this decade. At the same time, the company is in the middle of one of its biggest strings of product launches ever. In a period of 18 months, it aims to launch 19.
These, along with recent business deals, should more than compensate for patent losses. For example, Pfizer expects loss of exclusivity will cut revenue by $17 billion from 2025 through 2030. But new non-coronavirus products and business deals may bring in revenue of at least $40 billion in 2030.
Today, Pfizer shares trade for 19 times forward earnings estimates, which, though higher than its valuation a few months ago, still remains reasonable when you look at the company through a long-term lens. And that's why, right now, this big pharma company is a bad news buy.
