Analysis: Pfizer met expectations: +20% in 17 days
Based on the report results for the third quarter of the multinational pharmaceutical corporation Pfizer (PFE), against the background of a good fundamental and technical picture, we offered to consider the company’s securities for purchase and made a trading plan.
Open positions at $43.80. The short-term target was a range around $48-50, at which it is necessary to study fundamental and technical indicators again and, with a clear picture, to hold a position with a medium-term goal around $52-53. As a result, in the medium-term plan, in 17 days, the maximum profit was 20%.
During this time, the S&P 500 index has grown by 1.5%. On the other hand, the sector index, using the example of the SPDR Select Sector Fund Healthcare (XLV) ETF, decreased by 1%.
The main drivers of growth
- • The corporation’s statement on the successful trial of the oral drug from Covid-19 Paxlovid. The effectiveness in the second of the three stages of the study is 89%.
- * The U.S. government plans to purchase about 10 million courses of the new drug. The proceeds from the sale may amount to about $5.29 billion. Other countries, such as the U.K. and Germany, are also planning purchases. The corporation said it was considering distributing the drug under a licensing agreement that would allow qualified third parties to produce and distribute the drug.
- Approved vaccine boosters in the United States for the population over 18 years of age and vaccines for children aged 5-11 years.
- We increased the size of preliminary contracts for the supply of vaccines in 2022.
Is there any potential left? The revenue from the sale of vaccines and the anticoagulant Eliquis will certainly remain over the next year. The question is that the possible sizes are most likely already taken into account in the current quotes.
In 2022, the corporation plans to produce 4 billion vaccines — almost twice as many as this years. The number of contracts for the next year concluded before mid-October already amounts to $29 billion. As for the new oral drug Paxlovid, the market has already included part of the future revenue in the price, but as regulators in different countries approve and add volumes, quotations may respond with growth.
In the medium term, I admit that the price may continue to rise to the level of $ 54-56; correction is likely. However, the long-term fundamental picture is favorable. At the end of 2021, the corporation again raised its forecast of total revenue in the region of $81 billion. According to analysts, the gain from the sale of the Paxlovid drug next year may amount to $ 15-22 billion, which will show an increase in YoY indicators.
There are nine new drugs in the registration process. If one of them is approved, for example, the JAK1 inhibitor Abrocitinib alone, sales could reach $3 billion. There are 29 drugs in the third phase of the trial. R&D expenses in the third quarter amounted to about $2 billion. With a high probability, the corporation will continue to direct the proceeds from vaccines and drugs from Covid-19 to R&D and acquire promising biotechs.
Recommend adding shares to the list for tracking and, while maintaining a clear fundamental picture and forming technical signals, consider Pfizer shares again for purchases.
The long-term effects of the use of vaccines and the new drug Paxlovid are not known. As a result, a group of more than 30 professors and scientists from Yale, Harvard, the University of California, Los Angeles, and Brown University filed a lawsuit in the U.S. District Court for the Northern District of Texas about the publication by the FDA of data on the Pfizer vaccine against COVID-19.
However, the FDA said it would take 55 years to publish all of these documents fully. Therefore, long-term investors should consider that from 2026 the corporation will lose exclusive rights to some patents – potentially, this could lead to a loss of $18-20 billion in revenue.
The corporation’s position in the future will depend on how successful the introduction of new drugs into the portfolio will be. The consensus forecast of Refinitiv analysts for Pfizer shares is at $49 per share, which is 4% higher than the current price.
