Pfizer: Lowered COVID-19 Product Sales Guidance Offset by Cost Reduction Program

Key Morningstar Metrics for Pfizer

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

We are maintaining our $48 fair value estimate for Pfizer PFE following the company’s reduced 2023 guidance for COVID-19 product sales and its announced cost-cutting plans.

While the updated COVID-19 outlook is lower than our projections, we had already projected them to be below management’s previous guidance. Pfizer also announced a plan to lower its annual operating expenses by $3.5 billion, which helps to mitigate those lower sales projections. We believe the market was already expecting lower COVID-19 sales guidance, but the magnitude of the cost reduction program is a positive surprise. Pfizer’s ability to cut costs and adapt to demand while supporting strong margins helps reinforce its wide moat.

We still expect the COVID-19 vaccine Comirnaty and the treatment Paxlovid to remain two of Pfizer’s largest products over the next several years. For Comirnaty, we project a long-term run rate of close to $11 billion annually, supported by strong post-pandemic pricing and solid utilization by older and immune-compromised people. Comirnaty looks likely to gain slightly more market share than Moderna in key developed markets, which would continue the approximate split between the vaccines during the pandemic period.

Paxlovid’s efficacy remains best in class, and the drug should gain most of the non-hospitalized treatment market. Following the return of heavy drug inventory in the channels from the pandemic period, we expect annual Paxlovid sales to stabilize at close to $4.5 billion by 2024. A key factor is pricing in the U.S. commercial market, which should be set over the next couple of months. We expect U.S. commercial pricing at close to a 50% increase over pandemic-era prices.