Pfizer Faces Modest Pressures in Q3
The wide-moat drug manufacturer plans to release key data on COVID-19 vaccine shortly.
Pfizer PFE reported third-quarter results that were slightly below our expectations and largely in line with consensus S&P CapIQ estimates, and we don’t expect any major changes to our fair value estimate. We continue to view the company as undervalued, with the market not likely fully appreciating Pfizer's emerging immunology pipeline and strong entrenchment in vaccines, which also supports the firm’s wide moat.
In the quarter, total sales fell 4% year over year as generic pressures and pandemic-related treatment delays weighed on the top line, but we expect an acceleration of growth in 2021 as European Ibrance (breast cancer drug) pricing stabilizes and COVID-19 vaccine sales emerge. Despite over 25% volume growth for Ibrance internationally, the region's sales were up only 1% operationally, largely due to discounting in Europe that should annualize in late 2020, setting up strong growth in 2021 in the metastatic patient group.
Pfizer continues to make excellent strides in developing a vaccine for COVID-19, with efficacy and safety data expected in late October to November, setting up potential emergency use authorization by the end of the year. We project $7.5 billion in vaccine sales for Pfizer in 2021 based on a 60% probability of success, but close to half of these profits will go to partner BioNTech BNTX. We expect heavy COVID-19 vaccine competition to emerge in 2021, leading to a rapid decline in sales by late 2022. Nevertheless, the strong bolus of sales in 2021 should help Pfizer financially and engender goodwill with the U.S. government that could be used to moderate any new potential drug pricing policies.
Other pipeline advancements include the strong data for the next generation Prevnar vaccine and the submission of immunology drug abrocitinib. While we expect the improved Prevnar vaccine will likely largely defend the current franchise, abrocitinib looks poised to develop into a major blockbuster based on strong efficacy and convenient dosing.
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