Pfizer Earnings: COVID-19 Sales Decline Pressures Results, but Business Is Solid

Key Morningstar Metrics for Pfizer

• Fair Value Estimate: $48.00
• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Pfizer’s Earnings

Pfizer PFE reported third-quarter earnings largely in line with our expectations, and we are not making any changes to our fair value estimate. Results largely tracked the company’s recently updated 2023 guidance, which includes a major step down in sales for its COVID-19 vaccine (Comirnaty) and treatment (Paxlovid). With the stock’s pullback from the peak of the pandemic, we believe the market is underappreciating the tail potential of Pfizer’s COVID-19 sales and next-generation drugs.

In the quarter, total sales fell 41%, largely due to decreased demand for COVID-19 products, but we expect growth will rebound in 2024. We believe COVID-19 product sales will rebound as inventory is cleared in 2023 and pricing more than doubles for Paxlovid as the drug transitions to commercial plans. We project Pfizer’s COVID-19 sales to normalize at close to $15 billion annually.

Outside COVID-19, Pfizer’s core business is performing well, up 10% operationally, but we expect these sales to slow over the next few years as competition increases. Pfizer’s top-selling product Prevnar (pneumococcal vaccine) increased 15% as the new 20-valent formulation helped drive sales. However, Merck’s next-generation pneumococcal vaccine V116 (potential approval in 2024) looks competitive in the adult setting. Pfizer’s next-largest product, Eliquis (atrial fibrillation), gained 3%, and it should continue to post slight gains until likely patent losses begin internationally in 2026. Cancer drug Ibrance (down 3%) is holding up well, but increasing competition from Eli Lilly LLY and Novartis NVS will likely weigh on it.

Pfizer is making strides on its pipeline, reinforcing its wide moat. The recently launched RSV vaccine Abrysvo posted $375 million in its first quarter on the market, and we expect peak annual sales close to $2 billion. We also expect phase 2 danuglipron obesity data by year-end, setting up a potential major new blockbuster. Pfizer’s next-generation Prevnar could also help against growing competition.