$Pfizer(PFE)$ $NASDAQ(.IXIC)$  $DJIA(.DJI)$  

Pfizer is an American-based pharmaceutical company well-known for its vaccine franchise due to COVID-19. The company operates in 4 segments by FY23 revenue: (1) Primary Care (52%); (2) Specialty Care (26%); (3) Oncology (20%); (4) CDMO (2%). The company focuses on the US (46% of FY23 sales) and Europe (20% of FY23 sales).

Investment Overview

COVID-19 vaccine sales drop off mostly priced into share price. The company’s competitive edge is its vaccine business. In 2020, Pfizer’s stock price surged c.100% due to the famous COVID-19 vaccine Comirnaty. As the first approved mRNA vaccine, Comirnaty demonstrated superior efficacy of up to 95%, generating USD154m (0.4% of sales) in FY20, growing exponentially to USD38bn (38% of sales) in FY22, but falling off to USD11.2bn (19% of sales) in FY23 following the gradual end of the COVID-19 pandemic. The COVID-19 product sales drop off in FY23 caused total sales and profit to fall 40% y/y and 90% y/y respectively, resulting in its share price falling 44% in FY23.

Share price driver ahead 1: Clinical readout of oral GLP-1 Danuglipron for diabetes and weight loss. Globally, c. 800m adults are deemed overweight or obese. In 1H23, Pfizer announced results from its phase 2 clinical trials on Danuglipron, a glucagon-like peptide-1 (GLP-1) for treatment of diabetes and obesity. Danuglipron’s efficacy proved comparable to the already-launched oral GLP-1 Rybelsus by Novo Nordisk (1.2% blood sugar reduction in 16 weeks vs. 1.3% blood sugar reduction in 26 weeks), albeit Pfizer’s drug having a twice daily regimen compared to a once daily regimen from its peer. In 2H24, Pfizer announced it optimised its drug to be a once daily regimen, and we expect them to announce initiation of phase 3 clinical trials in 1H25.

Share price driver ahead 2: ADC demand to drive sales of acquired Seagen business and growth in CDMO business. Antibody-drug conjugates (ADC) have gained popularity among oncology drug makers due to their high efficacy and low adverse events. In 2H23, Pfizer bought ADC leader Seagen for US$43bn, and is expected to benefit greatly as Seagen has launched the most ADCs in the market among all ADC drug makers. Moreover, with the gradual shift away from Chinese Contract Drug Manufacturing Organisations (CDMOs) due to the likely implementation of the Biosecure Act, many drug makers are expected to shift production to Pfizer’s CDMO.

Key risks:

Disappointing results from its oral GLP-1 drug phase 3 clinical trial would result in massive downwards earnings revisions as investor sentiment is already cautious towards this name.

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DYODD