Why Pfizer Is Formidable
Morningstar's analyst says there's much more to Pfizer's products than COVID-19 vaccines and treatments.
Pfizer’s (PFE) foundation remains solid, based on strong cash flows generated from a basket of diverse drugs. The company’s large size confers significant competitive advantages in developing new drugs. This unmatched heft, combined with a broad portfolio of patent-protected drugs, has helped Pfizer build a wide economic moat around its business.
Pfizer’s size establishes one of the largest economies of scale in the pharmaceutical industry. In a business where drug development needs a lot of shots on goal to be successful, Pfizer has the financial resources and established research power to support the development of more new drugs. Also, after many years of struggling to bring out important new drugs, Pfizer is now launching several potential blockbusters in cancer, heart disease, and immunology.
Pfizer’s vast financial resources support a leading salesforce. The commitment to postapproval studies provides the company’s salespeople with an armamentarium of data for their marketing campaigns. Further, Pfizer’s leading salesforces in emerging countries position the company to benefit from the dramatically increasing wealth in nations such as Brazil, Russia, India, China, and Turkey.
Pfizer’s recent divestment of off-patent division Upjohn to create a new company, Viatris, in combination with Mylan should drive accelerating growth at the remaining innovative business at Pfizer. With limited patent losses and fewer older drugs, Pfizer is poised for steady growth.
Further, we believe Pfizer’s operations can withstand eventual generic competition; its diverse portfolio of drugs helps insulate the company from any one particular patent loss. Following the merger with Wyeth several years ago, Pfizer has a much stronger position in the vaccine industry with pneumococcal vaccine Prevnar. Vaccines tend to be more resistant to generic competition because of the manufacturing complexity and relatively lower prices.
Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.