Pfizer Posts Strong Q2, Led by COVID-19 Vaccine Sales

Pfizer PFE reported strong second-quarter results ahead of our expectations, buoyed by exceptionally strong COVID-19 vaccine sales as well as solid growth from the core portfolio. We expect to slightly raise Pfizer’s fair value estimate based on the strong growth, but we view the stock as largely fairly valued, with the market appropriately valuing Pfizer’s current products and pipeline drugs, both of which look well positioned to support Pfizer’s wide moat.

In the quarter, total sales increased 86% operationally (up 10% excluding the COVID-19 vaccine sales). However, we expect total sales growth will slow over the next 12 months as COVID-19 vaccine demand shifts toward emerging markets where pricing is lower. Longer term, we expect a tail of COVID-19 vaccine sales of close to $2 billion annually based on booster shots for the elderly and immuno-compromised. Potential upside exists if larger demand for boosters emerges or new vaccines are developed for variants. Pfizer is exploring a new vaccine for the delta variant despite the strong protection already offered by its current vaccine.

The remaining portfolio is performing well, led by cardiovascular drug Eliquis and rare disease drug Vyndamax. We expect Eliquis to continue to take share from the less effective warfarin, and Vyndamax is still early in its launch trajectory. Also, the recent approval of Prevnar 20 should enable continuation of this important franchise, as the new vaccine provides almost one third more coverage than Merck’s competitive vaccine.

Pfizer continues to make strides with pipeline drugs. While the JAK inhibitor class is facing increased scrutiny by the FDA, we still expect approval for immunology drug abrocitinib by the end of the year based on a strong safety profile. Over the next 12 months, we expect positive pivotal data for new blockbusters in gene therapies (Duchenne muscular dystrophy and hemophilia A and B) and for a respiratory syncytial virus vaccine based on strong early-stage data.

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