Buy Pfizer stock but not just for COVID vaccines, Stan Wong says

Even after a huge year in 2021 Scotia Wealth advisor Stan Wong sees more upside in the year to come from pharma giant Pfizer (Pfizer Stock Quote, Charts, News, Analysts, Financials NYSE:PFE), a stock that has a lot more going for it than just its COVID-related business.

“It’s one of the world’s largest biopharmaceutical companies with revenue expected to be about $97 billion dollars this year,” said Stan Wong, portfolio manager at Scotia Wealth Management, who nominated Pfizer as one of his Top Picks on a BNN Bloomberg segment on Wednesday. “I like Pfizer not because of the COVID-19 vaccines and antiviral drugs but their pipeline is really rapidly improving with several recent drug launches that have been very successful.”

“In particular, their cardiovascular drug seems to be very promising — it can add to revenue and earnings going forward in a major way,” Wong said.

This week, Pfizer announced that its Omicron-targeting COVID-19 vaccine co-developed with BioNTech SE could be ready for launch by March, a potential game-changer in a pandemic that has stretched into its third year and has delivered a new variant in Omicron which has hobbled healthcare systems worldwide.

Pfizer CEO Albert Bourla said on Monday that while it’s unclear whether a fourth dose of COVID vaccine will be recommended by health authorities, Pfizer will have a version of its mRNA COVID-19 vaccine that’s very effective for earlier variants plus Omicron by March.

“We are working on a new version of the vaccine, a version that will be effective against Omicron as well,” said Bourla, speaking on CNBC on Monday. “And the hope is that we will achieve something that will have way better protection particularly against infections because the protection against the hospitalizations and severe disease is reasonable right now with the current vaccines as long as you are having the third dose. this vaccine will be ready in March.”

“I don’t know if we will need it. I don’t know if and how it will be used but it will be read and, in fact, we already starting manufacturing some of these quantities,” he said.

Pfizer raised its full-year COVID vaccine sales forecast in its most recent quarterly release, the company’s 2021 third quarter financial report, delivered in early November. The company forecasted $36 billion in sales, with the vaccine producing Q3 sales alone of $13 billion. (All figures in US dollars.)

The third quarter numbers showed how influential COVID has been on the drug maker, with total Q3 revenue of $24.094 billion, $14.6 billion of which came from its Vaccines segment. For the rest, Oncology generated $3.1 billion in revenue, Internal Medicine brought in $2.1 billion, Hospital $2.4 billion, Inflammation & Immunology $1.1 billion and Rare Disease $869 million.

Net income for Pfizer’s Q3 was $8.146 billion and $1.34 per share, which was above analysts’ consensus forecast at $1.09 per share.

“While we are proud of our third quarter financial performance, we are even more proud of what these financial results represent in terms of the positive impact we are having on human lives around the world,” Bourla said in a press release.

“Our ultimate goal is to help bring this pandemic to an end as quickly as possible, but also to apply the lessons we have learned through our work on the vaccine to all of our therapeutic areas. We look forward to providing future updates on these efforts,” he said.

After a number of years with little growth, Pfizer’s share price rose a full 60 per cent for 2021, hitting a high of $61.25 in mid-December. The stock has pulled back a bit since to about $56, but Wong likes the look of Pfizer going forward, particularly with a majority of the world’s population still to be vaccinated against COVID.

“Of course. Pfizer’s very successful COVID-19 vaccines and the upcoming antiviral treatments that should be distributed later this year will continue to yield massive cash flow windfalls over the near term,” Wong said. “I think it’s safe to assume that more shots are going to be needed for all of us, and they’re going to be needed for sustained protection against te virus beyond the current third dose booster shot.”

“Also, of course, the antiviral pill will be in high demand going forward this year. And you have to remember that although we’re 78 to 80 per cent vaccinated in Canada and a little bit less in the US, a lot of developing countries that are not even close to 25 or 30 per cent,” he said. “So, there’s still a lot of runway for growth in the vaccine department and the antiviral pill department.”

“Pfizer trades at 10x forward earnings, so a pretty decent valuation. If earnings continue to be boosted up because of more and more vaccines coming through and more booster shots, this valuation looks even better,” he said. “We’re looking at about a 2.8 per cent dividend yield which is expected to grow over the next few years.”