As one of the world's largest biopharmaceutical companies, we think Pfizer (PFE) is well-positioned to outperform its peers; the stock carries our highest recommendation of 5-STARS, or Strong Buy, asserts analyst Sel Hardy in CFRA Research's flagship newsletter, The Outlook.
Pfizer's drug portfolio is among the most diverse in the global drug market, in our view, with eight separate brands accounting for more than $1 billion in annual sales and none contributing more than 14% to total revenue.
The Covid-19 vaccine is the biggest near-term catalyst for PFE, in our view. We think PFE is well placed to largely benefit from the massive Covid-19 vaccine demand throughout 2021 and beyond.
Following strong Q2 Covid-19 vaccine sales, we raised our top-line revenue forecast for 2021 to $78.3 billion from $73.8 billion earlier, now pointing to 64% Y/Y growth. We now expect PFE to generate more than $35 billion in Covid-19 vaccine revenue in 2021, a roughly 45% expected contribution to top-line sales, as PFE continues to sign new contracts globally with governments.
The full approval of the Covid-19 vaccine will further increase the market opportunity for Pfizer-BioNTech, in our opinion, as the first and only approved mRNA-based Covid-19 vaccine and may enable higher vaccination rates among parts of the population that have been hesitant to get inoculated.
Also, we think with the emergence of more dangerous Covid-19 variants, there is an increasing chance that repeat vaccinations to boost efficacy will be necessary for the broader population, and PFE is well-placed to absorb this demand.
The U.S. FDA gave approval for the Covid-19 vaccine's third dose for certain groups of immunocompromised people in August. We also expect to see faster regulatory approval for the vaccine for children aged five to 11 due to the rapidly spreading Delta variant amid the start of a new school year.
Following the spin-off of Upjohn in October 2020 (PFE’s off-patent branded drug business, 20% of 2020 sales), we think PFE has improved near and long-term growth prospects, as it became a more concentrated biopharma company focused on innovation.
We think this has been a good move for PFE, as it rids itself of a declining business that has been a drag on sales growth. And, in the process, PFE received $12 billion and shareholders got a 57% stake in the newly formed company, Viatris. The company's growth is also augmented by frequent strategic acquisitions.
In August, Pfizer announced the acquisition of Trillium Therapeutics, an innovative clinical-stage immuno-oncology company involved in the development of cancer therapies, for a $2.3 billion consideration. Trillium is working on promising next-generation immunotherapies targeting blood cancer.
Our 12-month target price is $57, 15.8x our 2023 EPS, a premium to PFE's historical forward P/E average, justified by its changed growth prospects. Our target price offers more than 17% upside potential to PFE's current share price.
We think PFE is attractively valued compared to peers in the pharmaceutical sub-industry, which are currently trading at 19.1x on average. Risks our recommendation and target price include new surges of Covid-19 infections reducing hospital visits and new patient starts, pipeline setbacks, new competition for the Covid-19 vaccine, and unexpected generic patent challenges.
