It may give the company and the stock a needed lift over the next while but Pfizer’s (Pfizer Stock Quote, Chart, News NYSE:PFE) COVID-19 vaccine shouldn’t be attracting your investment dollars for the long haul, says portfolio manager Jamie Murray, who has another, higher-growth pharma stock in mind.
Pfizer last week announced that a Phase 3 trial of its coronavirus vaccine has proven 95-per-cent effective in preventing infections, with no serious safety concerns, an announcement that came just a week after an initial look at the data showed the vaccine to better-than 90-per-cent effective.
“Efficacy was consistent across age, race and ethnicity demographics. The observed efficacy in adults over 65 years of age was over 94 per cent,” said Pfizer and its German partner BioNTech said in a statement.
The news shot up Pfizer’s share price momentarily, but that was enough for Murray, who promptly sold Pfizer and moved on to AstraZeneca (AstraZeneca Stock Quote, Chart, News NASDAQ:AZN), another company in the hunt for a COVID-19 vaccine.
“We actually sold our Pfizer shares that we held our global growth fund about two weeks ago on the day that they put up the vaccine news,” said Murray, head of research for the Murray Wealth Group, who spoke to BNN Bloomberg on Monday. “It was a name that we wee already looking at trimming or selling and then when we got that the vaccine news and saw the shares were up 15 per cent we decided to exit the position.”
Murray says Pfizer’s growth prospects aren’t looking as good as they should right now to attract investors.
“They’re going through the spin-off of their generic business called Upjohn into a company with Mylan so there are a lot of things going on with Pfizer that we’re looking at, but we don’t think the vaccine is going to be a long-term profit driver. It’s more of a short-term effect on their financials — it’ll be a nice little boost for the next two years and then really go away.”
“But the big reason why we moved on from Pfizer was they had a big miss with their oncology program back in June that really impacted the long-term growth rate of the company going forward, so we were looking for that time to move on and we actually redeployed the funds into another drug company called AstraZeneca.”
Pfizer, whose share price has headed lower over the past couple of years and is currently down seven per cent for 2020, delivered mixed results in its latest quarter at the end of October, with revenues down four per cent year-over-year to $12.13 billion and adjusted diluted EPS down three per cent to $0.72 per share. Analysts had been expecting $12.32 billion and $0.71 per share, respectively. (All figures in US dollars.)
The company remained upbeat on its prospects, pointing to gains of three per cent year-over-year over the third quarter in its Biopharma segment, along with Pfizer’s efforts on the COVID vaccine front.
“In the first nine months of the year, our Biopharma business grew seven per cent operationally, despite a COVID-19-related negative impact of approximately two per cent, driven by the strong performance of many of our key brands,” said CFO Frank D’Amelio in a press release. “This performance adds to our confidence in our ability to achieve our expectation of at least a six per cent compound annual revenue growth rate through 2025 for New Pfizer.”
AstraZeneca announced on Monday that its late-stage COVID vaccine trials in conjunction with Oxford University have so far proven up to 90-per-cent effective in preventing the disease, making it three drug companies — along with Pfizer and Moderna — to announce trial results in the past two weeks.
On AstraZeneca’s promise, Murray said, “AstraZeneca has got a little bit higher growth rate growing revenue about ten per cent a year for the next few years. And it has a really nice pipeline of new drugs as well, so that’s where we’d be looking to put new money.”
“We’ve seen [Pfizer’s] stock really rally from the $32-$33 range up to $37, $38 on the vaccine news,” Murray said. “Pfizer is a $225-billion company so there’s lots of the vaccine news that has been priced into shares.”
Filling out the picture on Pfizer, analyst Louise Chen of Cantor Fitzgerald delivered a report to clients on November 2, saying that a successful coronavirus vaccine, once deployed worldwide, could represent a recurring revenue stream for Pfizer worth about $5 per share. From a less rosy perspective, Chen said if the vaccine is more of a one-time product for Pfizer, it would be worth $2 per share and, if the vaccine doesn’t make it to market at all, that would be a downside of about $4 per share.
“This is because the FactSet consensus already has $1.4 billion of sales for PFE’s COVID-19 vaccine in 2020, $8.7 billion in 2021 and ~$2.1 billion annually, thereafter,” Chen said. The analyst gave a rating of “Overweight” to PFE with a target price of $53 per share, which at press time represented a projected 12-month return of 49 per cent.