Should You Buy Pfizer Shares After the Great COVID-19 Pill News? – Community News
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Should You Buy Pfizer Shares After the Great COVID-19 Pill News?

Pfizer (NYSE:PFE) could make a pretty good argument that it has had the biggest impact in the fight against COVID-19 of any company. Comirnaty, developed by Pfizer and BioNTech (NASDAQ:BNTX), is the best-selling COVID-19 vaccine. And now Pfizer looks poised to dominate another part of the COVID-19 market.

The drugmaker announced overwhelmingly positive results from a clinical trial of its COVID-19 pill Paxlovid last week. Those results were so good that Pfizer shares were up 8.5% Friday, a huge one-day move for a large pharmaceutical stock. But should you buy Pfizer stock now after the company’s stellar results?

A scientist holding a pill with a gloved hand.

Image source: Getty Images.

A game changer

Pretty much everyone thought that Merck (NYSE:MRK) and its partner, Ridgeback Biotherapeutics, set the bar very high with late-stage results for their COVID-19 pill, molnupiravir. On October 1, the companies announced that molnupiravir reduced the risk of hospitalization or death in COVID-19 patients by approximately 50%.

But Pfizer passed that bar easily. The company reported last Friday that Paxlovid reduced the risk of hospitalization by 89% compared to a placebo in COVID-19 patients treated within three days of the onset of symptoms. None of the patients with COVID-19, who were at high risk of developing serious disease, died in the group that received Pfizer’s oral therapy.

Pfizer CEO Albert Bourla said those results were “a real game-changer in the global effort to halt the devastation of this pandemic.” He’s probably right.

If Paxlovid gets approval (which seems very likely), the pill could be prescribed to adults who have been diagnosed with COVID-19. Pfizer is also conducting a late-stage study to evaluate oral therapy in adults who have been exposed to SARS-CoV-2 but have not yet been diagnosed with COVID-19.

A great market opportunity

What is the market opportunity for Paxlovid anyway? After Merck announced positive results for molnupiravir, the company estimated it could earn between $5 billion and $7 billion by the end of 2022.

The number of COVID-19 cases could decline in the future, thanks in large part to higher vaccination rates. However, Bernstein analyst Ronny Gal thinks the market for COVID-19 pills could still be in the margins of $6 billion a year after 2022.

Gal initially thought Merck could capture about half of this market. But his estimate came before Pfizer reported its great results for Paxlovid. It’s probably fair to say that Paxlovid’s much higher efficacy compared to molnupiravir could allow Pfizer to claim a significantly greater market share than Merck.

However, market dynamics can change over time. Atea Pharmaceuticals and Roche are still hopeful that their experimental COVID-19 pill AT-527 could be successful. The candidate did not meet the primary endpoint in a Phase 2 study, but Atea and Roche plan to move forward with a Phase 3 study with possible protocol adjustments.

Buy Pfizer shares?

Investors looking to jump aboard the Pfizer train to take advantage of the COVID-19 pill may be getting a little late to the party. The big gain for the stock on Friday accounts for much of the opportunity for Paxlovid in Pfizer’s stock price.

However, there are other reasons to love the stock. For starters, Pfizer’s valuation remains attractive. The shares are trading at just 11.7 times expected earnings. There’s also the drug maker’s dividend yield of 3.2% that income-seeking investors will no doubt appreciate.

Pfizer expects Comirnaty to bring in about $36 billion in sales next year. Gross profits are to be split with BioNTech, but Pfizer will still cash in on a hefty amount. With the potential for Paxlovid to also become a mega-blockbuster, Pfizer’s cash supply should continue to grow by leaps and bounds.

COVID-19 is not Pfizer’s sole focus. But its success in fighting the pandemic should give the company even more flexibility to make acquisitions and other business development deals that fuel growth. My view is that Pfizer was a smart choice before the good news for its COVID-19 pill and is still a solid stock to buy for many investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium consulting service from Motley Fool. We are fur! Questioning an investment thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.


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Rakesh

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