In 2021, Pfizer Inc. (PFE, Financial) succeeded with its coronavirus vaccine, leading to a substantial boost in revenue and profits. Due to the massive success of its Covid-19 vaccine, it has maintained a high level of profitability. However, market trends indicate a slowdown, which will hamper its results. Pfizer is investing its resources in smaller companies to diversify its offerings to combat this situation. At the very least, this should partially offset a decline in revenue.
In addition, Pfizer had a great earnings report for the most recent quarter and raised its guidance for the full year. This is good news for investors as it indicates the company is on track to achieve its financial goals. The raised guidance also gives Pfizer a positive outlook for the future.
Regarding Pfizer's recent success, no one can deny its fortunes became heavily intertwined with the BNT162b2 vaccine. But credit where credit is due: management deserves a lot of praise for diversifying revenue streams and finding new ways patients can be helped - something many other companies have failed at doing so far. The fears around Pfizer's future are, therefore, overblown.
Pfizer is a multinational pharmaceutical company with a wide range of well-respected products, allowing it to weather economic downturns and still maintain profitability. The company's strong financial position allows it to invest in new products and continue to grow its business. This is good news for shareholders as the company continues to grow and thrive.
Pfizer is not overly reliant on its Covid business
The company was at the forefront of the development of a Covid-19 vaccine. As one of the earlier pharmaceuticals companies to offer a shot, it profited. Due to the scale of the pandemic, Pfizer's operations became heavily skewed in favor of the vaccine business. For the time being, it looks like this will not change anytime soon. According to analysts at Cantor Fitzgerald, the vaccine business could peak at generating combined sales of between $50 billion and $60 billion. In addition, Louise Chen of Cantor Fitzgerald forecasts Pfizer's Covid-19 vaccine sales will help generate revenue of $25 billion in 2027. As a result, the company can expect to keep relying on current vaccine sales for at least the next several years.
Pfizer bears fear that moving forward, the company's Covid-19 vaccine revenue will decrease, causing a tailspin for investors. The bearish argument is based on the fact the company has already made most of the potential revenue on the vaccine and that demand is decreasing as the pandemic subsides.
On the other hand, Pfizer bulls argue the company's long-term prospects remain strong and that the company is well positioned to benefit from continued demand for its vaccines. For example, the new oral pill for treating and preventing the coronavirus will save lives, cut hospitalizations and is likely to be used for many years.
But the point is well taken that Pfizer should spend time on different ways of generating more revenue.
The biotechnology company is well aware it needs to diversify its offerings. The main drivers for Pfizer have been Paxlovid, Eliquis and Vyndamax over the last few quarters, which shows how much importance clients place on these medications
In the second quarter, Pfizer recorded a significant 23% year-over-year jump in sales for its blood thinner Eliquis. Sales for heart disease drug Vyndaqel /Vyndamax increased 18% year over year during the latest quarter. Paxel's sales have grown immensely as well, reaching over $8 billion. In addition, the U.S. Food and Drug Administration has authorized pharmacists to prescribe Pfizer's Paxel Covid-19 therapy, substantially increasing the U.S.'s sales numbers.
So, the second half is gearing up to be great.
Strategic acquisitions will help bolster key growth areas
In recent months, Pfizer has used its increased cash position to acquire some smaller pharmaceutical companies. The company is a cash-rich and smart investor, utilizing its funds effectively by investing in other companies or facilities with high returns for the money spent.
In May, to purchase migraine drugmaker Biohaven Pharmaceutical Holding, Pfizer doled out $11.6 billion. The multinational pharmaceutical company also completed the purchase of Arena Pharmaceuticals for $6.7 billion. Arena has small molecule drugs in development for possible clinical utility, with an eye toward expanding into other areas of the health care industry.
In light of decreasing cases of Covid-19, Pfizer has announced a $5.4 billion deal to acquire Global Blood Therapeutics to strengthen its rare disease treatment business with Oxbryta - and make it even more competitive.
Investors have been receptive of the acquisitions as Pfizer's stock price seen several strong spikes year to date. The company is betting that its new products will help drive growth in the future. Only time will tell if its gamble will pay off, however.
Uncertainty is the reason why the stock is not doing well
Pfizer is down by double digits this year despite the positive trends in favor of the pharmaceutical giant. The reason for that boils down to uncertainty regarding the company's future.
Investors worry when pharmaceutical companies face patent expirations because it could be a sign they will no longer make money off their main drugs. However, this is not something that affects just one company. Pfizer, despite its size and scale, is also suffering because of this.
Pfizer's upcoming expirations have created a lot of investor concern, which is understandable. However, the pharmaceutical giant is working toward alleviating these concerns. The company believes it will win up to 15 approvals and reveal results from up to 14 studies in the next 18 months, reaching these milestones on its path to launching 25 products by 2025.
Takeaway
Pfizer has a strong track record of research and development and provides innovative and life-saving drugs for people around the world.
The biotechnology company has a strong balance sheet with plenty of cash to fund future acquisitions and research projects. The company also pays a dividend, which provides income for investors. In addition, it has an active share repurchase program, which has helped to boost shareholder returns.
Overall, Pfizer could be a great investment for those seeking exposure to the pharmaceutical sector.
