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Stock Analyst Update

Pfizer Posts Strong Q2 Growth, but Slightly Below Our Expectations

COVID-19 treatments drove strong results; no major changes to Pfizer stock fair value estimate.

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Driven by COVID-19 vaccine Comirnaty and treatment Paxlovid, Pfizer (PFE) posted exceptionally strong growth in second-quarter results (sales up 53%) but still slightly below our expectations. The shortfall, in our view, was largely from Comirnaty and Paxlovid sales that will likely be deferred to later in the year, so we do not expect any major changes to our Pfizer fair value estimate. The combination of the non-COVID-19 business tracking fine and the redeployment of the COVID-19 treatment windfalls into building next-generation drugs continues to support Pfizer’s wide moat.

We expect total sales will fall substantially in 2023, following the likely slowing demand for COVID-19 products. We expect close to $60 billion for Comirnaty and Paxlovid in 2022, slightly above management’s guidance of $54 billion. While a tail of close to $10 billion for these products is likely over the longer term, we expect a major drop off in sales as the pandemic falls in magnitude and new vaccine utilization slows. New COVID-19 variant-adapted vaccines (BA.1 and BA.4/BA.5) should help with the tail of vaccine sales, but we believe many already vaccinated, lower-risk people may not see enough benefit to take the new vaccines.

Outside of the COVID-19 products, Pfizer is largely tracking fine overall with sales up 1%, and we expect this to improve to 6% annual growth over the next five years. Cardiovascular drug Eliquis, pneumococcal vaccine Prevnar, and rare disease drug Vyndamax are all posting solid gains and appear well positioned to maintain their best-in-class status. We are concerned about breast cancer drug Ibrance, which has not shown as strong overall survival data or adjuvant data as competitors, which could create headwinds for this important drug.

Near-term pipeline assets should help increase growth. We are most bullish on atopic dermatitis drug Cibinqo (U.S. approval in January), RSV vaccine (pivotal data later in 2022), and Prevnar 20 in infants (pivotal data later in 2022).

Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.