Pfizer Earnings: In-Line Quarter Despite Covid Product Weakness as Metsera Drama Intensifies

Key Morningstar Metrics for Pfizer

• Fair Value Estimate: $36.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

What We Thought of Pfizer’s Earnings

Pfizer’s PFE third-quarter revenue fell 6%, as acquisition charges outweighed cost efficiencies and pushed adjusted diluted EPS down 18%. In the battle for Metsera’s obesity pipeline, Pfizer announced two lawsuits in the past week against challenger Novo Nordisk, and offered a revised bid on Nov. 4.

Why it matters: Excluding Pfizer’s covid portfolio, particularly the $1.5 billion decline in sales of Paxlovid, the firm’s top line is growing due to solid demand across a wide portfolio. However, attention has turned to whether Pfizer will be able to close the Metsera acquisition as expected on Nov. 13.

• Cardiovascular therapy Vyndaqel, migraine drug Nurtec, and oncology drug Padcev all helped counter pressure on covid-related sales, due to narrowed vaccine recommendations and fewer cases to treat.
• Pfizer and Novo have revised their bids for Metsera, with Novo’s $10 billion total deal value still ahead of Pfizer’s $8.1 billion offer. Novo is offering $62.20 per share at signing, slightly ahead of Pfizer’s $60.00 per share at close, and Novo has a more enticing contingent payout.

The bottom line: We’re maintaining our $36 fair value estimate for narrow-moat Pfizer, and we continue to embed the Metsera pipeline in our model. We expect Pfizer could raise its offer to maintain the deal, although we don’t expect enough of an increase to change our valuation.

• We think Pfizer is making progress with advancing promising pipeline programs into phase 3, and while we need more data to determine whether Pfizer will grow through upcoming patent cliffs, we think investors are overly bearish on Pfizer’s long-term prospects.
• Metsera expects another Pfizer offer by close of business on Nov. 5 to prevent termination of their deal. A flurry of court hearings and lawsuits are likely to determine how quickly this bidding war plays out, but we expect Pfizer to raise its offer to lock in a deal and avoid prolonged litigation.