Source: PaxForex Premium Analytics Portal, Fundamental Insight
As we know, the pandemic poses many health problems, ranging from hospitals trying to treat patients with the disease to patients who have refused the necessary care. But it also highlights how important and vital health care companies and drug manufacturers are now. And one of the biggest names in the industry is Pfizer.
Pfizer's business is undergoing many changes, and in a year, it may look very different. The company is also working on a potential vaccine for COVID-19. Many dynamic aspects make it difficult to assess the current state of the company as well as where the company will be tomorrow. But we will still try to analyze these aspects.
In its second-quarter report released on July 28, the New York-based company reported revenue of $11.8bn, a 9% decline from the previous year. The biopharmaceutical segment is still doing well, with sales up 4%. It was the generic business of Pfizer, Upjohn, that slowed the results as revenues there fell by 32% - mainly because it lost exclusivity on the seizure of Lyrica drugs in 2019. Pfizer is preparing to get rid of Upjohn, which will join Mylan in a deal it expects to close in the fourth quarter.
Despite the drop in revenue, the company still reported profits of $3.4 billion during the quarter. That's 32% less than a year ago when Pfizer's net profit exceeded $5 billion.
However, the company's management is optimistic that the second half of the year will be better, as COVID-19 restrictions are now less severe than a few months ago. Management expects more patients to see doctors and that more elective surgeries will be performed over the year.
And so management has slightly increased its forecast for the year to $48.6 - $50.6 billion. Earlier, Pfizer expected its top line to be in the slightly lower range of $48.5 billion and $50.5 billion. In 2019, Pfizer's revenue was $51.8 billion, compared to $53.6 billion the previous year.
The main question is how the company will manage next year, without Upjohn, and with all this transition. Although sales in this segment have declined, Upjohn currently accounts for about 17% of Pfizer's top list. Thus, while the company's overall growth rate may improve, its total revenue is likely to decline.
There is a lot of excitement about a possible COVID-19 vaccine, and this is the wild-card that could potentially make Pfizer incredibly attractive to investors, despite doubts about its future growth.
If the vaccine is successful, Pfizer can deliver significant growth in sales over an indefinite period. It is due to the uncertainty about how long the vaccine could be effective in preventing human infections. Annual vaccination may be required to ensure safety. It could lead to multiple Pfizer earnings.
It is always difficult to invest in a company with large numbers of unknowns or a company in transition. It is most likely part of the reason why Pfizer shares are not performing very well this year. But for the farsighted investors, it creates an opportunity to buy this temporary loss-making share, while its price remains low, as it has great potential for takeoff shortly.
If the company's vaccine is successful and Pfizer gets the green light to start building up production, the stock will get some growth. And the new Pfizer company will be more focused on innovation, which could mean stronger sales growth in the future.
Pfizer is a major healthcare company that will not be too risky for traders in the long run. If its new business model is successful after the transition period - or if it can produce a successful vaccine with BioNTech - the benefit to investors can be significant. That is why buying Pfizer shares today is a calculated risk worth taking.