Summary
- Pfizer's vaccine for COVID looks promising and should boost revenues substantially.
- The company is trading at an inexpensive valuation and offers an above-average dividend yield.
- For those seeking exposure to the pharma industry, Pfizer seems worthy of a closer look.
- Looking for a helping hand in the market? Members of Cash Flow Kingdom get exclusive ideas and guidance to navigate any climate. Get started today »
Article Thesis
Pfizer (PFE) has delivered strong results through its COVID vaccine trials, and it seems likely that the vaccine rollout over the coming quarters will boost its revenues considerably. Apart from that near-term tailwind, Pfizer continues to trade at an inexpensive valuation, while its results remain solid during this crisis so far. To top things off, shareholders still get a 4%+ dividend yield from the stock.
COVID Vaccine
Most will already know that Pfizer, together with BioNTech (BNTX), has reported strong results from its phase III trial that evaluated the viability and the effectiveness of its COVID vaccine candidate BNT162b2. After completing the review of all relevant data, Pfizer and BioNTech have stated that the candidate is 95% effective, which means that it will be able to reduce infection rates to one out of twenty in a fully vaccinated population, compared to no vaccination. This is an astonishingly strong result, as most experts had not expected effectiveness to be this high. In fact, the FDA had previously set the bar at just 50%. Moderna's (MRNA) vaccine candidate, at 94.5%, is almost as effective as that of Pfizer and BioNTech.
Both candidates, which use mRNA technology, seem to be way ahead of the University of Oxford/AstraZeneca (AZN) candidate in terms of effectiveness, as the latter prevents roughly 70% of infections (although some study subgroups showed higher effectiveness). Just looking at the difference between a 95% effectiveness and a 70% effectiveness showcases that the vaccine candidates play in two very different leagues: A 95% effectiveness means that the relative risk for infection is reduced to 5%, whereas it is reduced to 30% when using a vaccine with an effectiveness of 70%. In other words, a person's infection risk following vaccination with the Pfizer candidate may be just one-sixth of the risk the person has when using the AstraZeneca vaccine candidate.
Effectiveness is, of course, not the only relevant factor. Cost per vaccination, usability, safety, etc. have to be considered as well. The AstraZeneca vaccine will likely be sold at a significantly lower price than the Pfizer vaccine, but it seems unlikely that this will make the AstraZeneca vaccine the candidate of choice in wealthy countries such as the US. Hypothetically speaking, saving $10 per vaccination on 200 million vaccinations in the US would equate to saving $2 billion. Considering the unprecedented scale of stimulus spending in the US - trillions of dollars - $2 billion in additional costs do not really matter all that much when one can get a more effective, and thus better-working vaccine. Cost may still be an argument for lower-wealth markets, however, where AstraZeneca could be able to win out thanks to its lower-cost vaccination option.
