Analyst Note| Damien Conover, CFA |
After a deep dive on several of Pfizer’s pipeline drugs combined with continued strong data for COVID-19 treatment Paxlovid, we have increased our projections for several key drugs leading to a fair value estimate increase to $48 from $45.50. The strong pipeline increasingly supports our wide moat rating for the firm. However, we believe the uncertainty around the duration of sales from Pfizer’s COVID-19 vaccine Comirnaty and COVID-19 treatment Paxlovid is increasing. We still believe the majority of these product sales will occur in the near term, followed by a sharp decline by 2024. However, we recognize the growing uncertainty around how long the COVID-19 pandemic will last, especially with the continual rise of variants. As a result, we are increasing Pfizer’s uncertainty rating to medium from low. We believe a medium uncertainty better reflects the potential outcomes surrounding the massive cash flows Pfizer is generating with COVID-19 products. While we believe the market is likely factoring in too long of a tail for sales from COVID-19 products, we believe there is a 25% chance of a bull case that these products will be in demand for a longer duration that we assume in our base case.