How did Pfizer allow investor expectations to run so far ahead of reality? The group nearly doubled sales in 2021 thanks to its Covid products, and is expecting to bring in $100bn next year – but shareholders, apparently looking for higher profit guidance, sent its stock down 3% yesterday.
It is undeniable that the Covid sales are astounding, and the table below shows how Comirnaty and Paxlovid stack up against some of the other big beasts of biopharma, both past and present. But Pfizer’s base business is distinctly lacklustre and has been marred by several recent setbacks. The company needs to do deals, and gave some clues about its thinking during yesterday's fourth-quarter earnings call.
Pfizer is not ruling out big buys, but plans to shy away from acquisitions driven by cost synergies, echoing comments it made two years ago, pre-Covid (New Pfizer, same problem, January 29, 2020).
However, deal bankers should not get too excited just yet. Pfizer execs also noted more than once than some of the group’s “best successes” have come from fairly inexpensive tie-ups.
In general, Pfizer is looking for projects with the “potential to be real breakthroughs”, be they late or early stage. Its preference is for assets in areas where it already has a presence and can add value, including oncology, inflammation/immunology, rare diseases, vaccines and internal medicine, which includes cardiovascular and metabolic diseases.
Covid booster
It could take a while for any future deals to make an impact. In the meantime, Pfizer at least has its monster Covid sales to fall back on.
The mRNA vaccine Comirnaty made $36.8bn last year – easily the biggest one-year total ever seen in biopharma, and above even future forecasts for Merck & Co’s cancer juggernaut Keytruda. And Pfizer is now saying the Covid vaccine will bring in $32bn in 2022, up from previous guidance of $29bn.
| Hitting the big time: biopharma's record annual sales |
|---|
| Product | Company | Peak annual sales in $bn (year) | Note |
| Comirnaty | Pfizer | 36.8 (2021) | Potential for 2022 to be higher; current guidance $32bn |
| Keytruda | Merck & Co | 29.2 (2028) | Key patent expires in 2028 |
| Paxlovid | Pfizer | 22.0 (2022) | Current guidance; potential for further upgrades |
| Humira | Abbvie | 20.7 (2021) | Peak achieved |
| Spikevax | Moderna | 18.5 (2022) | Current guidance; potential for further upgrades |
| Opdivo | Bristol Myers/Ono | 14.3 (2028) | Key patent expires 2028 |
| Eliquis | Bristol Myers Squibb | 14.0 (2025) | Key patent expires 2026 |
| Harvoni | Gilead Sciences | 13.9 (2015) | Peak achieved |
| Lipitor | Pfizer | 13.8 (2006)* | Peak achieved |
| Revlimid | Bristol Myers Squibb | 12.8 (2021) | Peak achieved |
| *Includes sales booked by global partners. Source: Evaluate Pharma. |
As for the oral antiviral Paxlovid, which gained emergency use authorisation at the end of December, Pfizer expects $22bn this year. This disappointed some investors, who had hoped for $30bn-plus. However, the numbers for both Comirnaty and Paxlovid look certain to rise, as projections are based on contracts signed or committed to by late January.
When questioned about Pfizer’s conservatism over Paxlovid the group’s chief executive, Albert Bourla, said the forecast represented “only a very small fraction” of the 120 million Paxlovid doses it plans to manufacture this year.
Profitability could also be weighing on investors’ minds. Shareholders had been expecting 2022 earnings guidance of around $10 per share, but this came in at $6.35-6.55. One problem, according to Evercore ISI’s Umer Raffat, is that Comirnaty is becoming less profitable as Pfizer signs more contracts outside the US. He estimated that Comirnaty’s profit margin has dipped to around 35%, from around 40% throughout 2021.
If Paxlovid sales do substantially beat the current forecast this should help make up for the shortfall, since margins for this product are much higher – so the pressure is on the oral antiviral.
Oral versus injectable
Paxlovid’s performance could also have a direct impact on the fortunes of Glaxosmithkline, whose Vir-partnered Covid antibody Xevudy (sotrovimab) was a rare bright spot in that group’s fourth-quarter earnings today.
Xevudy sold £958m ($1.3bn) last year, mostly in the fourth quarter as it benefitted from its efficacy against the Omicron variant, where Regeneron’s and Lily’s antibodies have fallen down.
In 2022 Glaxo is guiding for Xevudy sales of $1.4bn, based on contracts signed so far. But on a media call today the group’s chief executive, Emma Walmsley, gave a nod to Paxlovid, admitting that there was a “significant oral medicine market coming through”.
As the year goes on it should become apparent how the market will shake out – and how long these Covid cash cows can be relied on. As the pandemic fades the pressure to do deals will only intensify.
https://www.evaluate.com/vantage/articles/news/corporate-strategy/pfizers-100bn-question
