As one of the world’s largest biopharma companies, we think: Pfizer (PFE) is well positioned to outperform its competitors; the stock has our highest recommendation of 5-STARS, or Strong Buy, analyst claims Sel Hardy in CFRA Research’s flagship newsletter, The prospects.
Pfizer’s drug portfolio is, in our view, one of the most diverse in the global drug market, with eight separate brands accounting for more than $1 billion in annual sales and none contributing more than 14% of total sales.
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The Covid-19 vaccine is, in our view, the biggest near-term catalyst for PFE. We believe PFE is well positioned to largely benefit from the massive demand for Covid-19 vaccines in 2021 and beyond.
Following strong sales of Covid-19 vaccines in the second quarter, we have raised our 2021 revenue forecast from $73.8 billion previously to $78.3 billion, now indicating 64% year-over-year growth. We now expect PFE to generate more than $35 billion in Covid-19 vaccine revenue in 2021, an expected contribution of approximately 45% to revenue, as PFE continues to sign new contracts with governments worldwide.
Full approval of the Covid-19 vaccine, we believe, will further expand the market opportunities for Pfizer-BioNTech as the first and only approved mRNA-based Covid-19 vaccine and may enable higher vaccination rates in parts of the population that were hesitant to to be vaccinated.
We also think that with the emergence of more dangerous Covid-19 variants, there is an increasing likelihood that repeated vaccinations to increase efficacy will be needed for the wider population, and PFE is well placed to accommodate this demand.
The US FDA approved the third dose of the Covid-19 vaccine in August for certain groups of immunocompromised people. We also expect faster regulatory approval for the vaccine for children ages five to 11 because of the rapidly spreading Delta variant at the start of a new school year.
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Following the spin-off of Upjohn in October 2020 (PFE’s non-proprietary branded drug business, 20% of sales in 2020), we believe PFE improved its short- and long-term growth prospects as it became a more concentrated biopharmaceutical company focused on innovation .
We think this has been a good move for PFE as it frees itself from a shrinking business that has put a brake on top line growth. In addition, PFE received $12 billion and shareholders received a 57% stake in the newly formed Viatris company. The company’s growth is also bolstered by frequent strategic acquisitions.
In August, Pfizer announced the acquisition of Trillium Therapeutics, an innovative clinical-stage immuno-oncology company involved in the development of cancer therapies, for $2.3 billion. Trillium is working on promising next-generation immunotherapies that target blood cancers.
Our 12-month target price is $57.15.8x our 2023 EPS, a premium to PFE’s historic P/E average, justified by the changed growth outlook. Our price target offers upside potential of over 17% relative to PFE’s current share price.
We believe PFE is attractively valued compared to competitors in the pharmaceutical subsector, which are currently trading at 19.1x on average. Risks from our recommendation and target price include new increases in Covid-19 infections, triggering hospital visits and new patients, pipeline setbacks, new competition for the Covid-19 vaccine and unexpected generic patent challenges.
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