VALUATION HIGHLIGHTS
- Primary Care constitutes 44% of the Trefis price estimate for Pfizer's stock.
- Oncology constitutes 37% of the Trefis price estimate for Pfizer's stock.
- Specialty Care constitutes 17% of the Trefis price estimate for Pfizer's stock.
WHAT HAS CHANGED?
PFE Stock Performance In Recent Years
The changes in PFE stock over the recent years have been far from consistent. Returns for the stock were 67% in 2021, -10% in 2022, -41% in 2023, and -2% in 2024.
In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 — indicating that PFE underperformed the S&P in 2023 and 2024.
Q4 2024 Performance
Pfizer's top line grew 21% y-o-y to $17.8 billion, led by $2.7 billion contribution from Paxlovid sales. Excluding Covid-19 products, total sales were up 11%.
Pfizer's adjusted net profit of $3.6 billion in Q4 2024 reflected a significant improvement from $593 million in the prior-year quarter. For the full year 2025, the company expects revenue to be in the range of $61 billion and $64 billion, and its adjusted earnings per share to be in the range of $2.80 and $3.00.
Pfizer Acquires Seagen
Pfizer, on March 13, 2023, announced that it will acquire Seagen for $43 billion ($229 per share), reflecting a premium of 32% at the closing price of $173 on Friday, March 10, 2023. This acquisition was completed in December 2023. This appears to be a great move for Pfizer, given that it is seeing a significant drop in sales from its Covid-19 products. Also, some of its drugs will lose market exclusivity over the coming years. Seagen's revenues are expected to top $3 billion in 2024, and it has a promising deep oncology pipeline. Seagen's sales are estimated to top $10 billion by 2030.
Pfizer's Covid-19 Oral Pill
Pfizer's Covid-19 pill cuts the risk of hospitalization or death by 89% in high-risk adults who've been exposed to the Covid-19 virus. The company secured regulatory approvals for this pill, and it garnered $19 billion in sales in 2022. The sales for this drug have declined since then.
Pfizer's Covid-19 Vaccine
Pfizer garnered over $36 billion in Covid-19 vaccine sales in 2021 and $38 billion in 2022, but with the pandemic now behind us, the vaccine sales have plunged to $5 billion in 2024.
Pfizer and its German partner BioNTech currently produce one of the most sought-after Covid-19 vaccines. Pfizer CEO Albert Bourla has said that people who receive Covid-19 vaccines will likely require booster shots within a year and potentially require an annual shot thereafter, much like seasonal flu shots, to protect against the virus as it evolves. However, it doesn't appear to be the case, given a very low demand for the Covid-19 vaccine sales even in the recent quarters.
Pfizer is looking to expand its vaccine business following the pandemic, extending its use of the gene-based mRNA technology, which has proved highly effective in the Covid-19 vaccines.
Biosimilars Growth
The recent approval of biosimilars in Europe and the FDA approvals of biosimilars in the U.S. is likely to pave the way for further drugs. Pfizer has received FDA approvals for multiple biosimilars, including ones for blockbuster drugs, Humira, Rituxan, Avastin, and Herceptin, among others. This will likely bolster the company's overall sales growth over the coming years.
Consumer Healthcare Business Merger
GlaxoSmithKline and Pfizer have merged their consumer healthcare divisions in a joint venture. Pfizer owns a 32% stake in the new entity. The deal was closed in 2019, and the new entity commands a share of over 7% in the over-the-counter market.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Key drivers of Pfizer's value that present opportunities for upside or downside to the current Trefis price estimate for Pfizer:
Pfizer's Gross Profit Margin
- Pfizer's Gross Profit Margin: Pfizer's gross profit margin has declined from 80% in 2019 to 74% in 2024. We expect this metric to remain around the 74% by mark in the coming years. However, with cost-cutting initiatives, if the margins were to rebound to levels of over 80%, it will result in an upside of 10% to the Trefis price estimate for Pfizer.
Solid Phase 3 Pipeline
Pfizer's pipeline is reasonably strong. The phase 3 pipeline has several new drugs with a combined peak sales estimate of over $20 billion. Our valuation reflects probability-adjusted revenues, assuming a 50% probability of phase 3 drugs reaching the commercial launch stage. However, if all phase 3 drugs are approved within the next 3 years, it could imply over a 15% upside to our price estimate.
BUSINESS SUMMARY
Pfizer is one of the world's biggest pharmaceutical companies in terms of revenue. The company reports its results primarily in the following segments: 1. Primary Care, 2. Specialty Care, 3. Oncology, and 4. Pfizer CentreOne.
SOURCES OF VALUE
The biggest contribution to the value of the stock comes from the Oncology segment, accounting for over 60% of Pfizer's value, in our view.
KEY TRENDS
Coronavirus Impact
The 2020 coronavirus crisis impacted pharmaceutical companies on two fronts, 1. supply chain disruptions and 2. direct sales due to the postponement of minor health-related issues and surgeries. While Pfizer saw strong demand for its Covid-19 vaccine, the sales of its other pharmaceutical drugs were impacted in 2020. The Covid-19 products sales also started to decline since 2023.
Loss of Patents Impacting Sales
In the last few years, several drugs have lost patent exclusivity. This has impacted not only Pfizer, but the pharmaceutical industry as a whole. As a result, Pfizer and other firms will need to focus on growing areas of immunology and oncology.
Growing Threat of Generic Products
The fast-growing pharma market in emerging economies, referred to as the 'Pharmerging' economies, has the capability and technical prowess to manufacture generic versions of blockbuster drugs. These generic drugs are often sold at prices that are substantially cheaper than their branded counterparts, thereby severely affecting big pharma's ability to generate profits in the long run.
Globalization of Healthcare Reforms
Governments around the world are trying to rein in fiscal spending in order to manage their budget deficits. Since healthcare costs are one of the biggest components of any national budget, it is obvious that increased healthcare legislation and reforms around the world will hurt revenues for the entire pharmaceutical sector.
