Pfizer has not moved past the pandemic yet

Pfizer‘s

PFE 3.14%

stock has gone from being a star in 2021 to a pharma laggard this year. Much of that has to do with the trajectory of the pandemic.

Like no other large company in the United States, Pfizer’s history has become uniquely linked to Covid-19. Its two top products, the Covid-19 vaccine and the antiviral pill Paxlovid, are now expected to generate $56 billion in sales this year, Pfizer said on Tuesday, raising the outlook for the vaccine by $2 billion. That represents about half of total sales, which the company on Tuesday forecast would come in the range of $99.5 billion to $102 billion. The strong performance of the Covid-19 business helped send shares 3.1% higher on Tuesday.

But Pfizer’s reliance on the Covid-19 franchise has become a double-edged sword. Of course, profiting from a pandemic is not as reliable as profiting from more common areas of medicine such as heart disease and cancer. As hospitalizations and deaths from Covid-19 thankfully decline, demand for booster shots and pills will follow. Pfizer’s Covid-19 vaccine sales are expected to fall from more than $32 billion this year to about $10 billion in 2024, analysts surveyed by Visible Alpha predict.

This puts pressure on the stock. While shares rose today on the earnings beat, they are down 18.8% this year, far worse than the 2.8% drop in the NYSE Arca Pharmaceutical Index. That’s a turnaround from last year, when Pfizer was one of the top performers, up 60%, compared with a 20% rise in the pharmaceutical index.

The rest of Pfizer’s business is also under pressure. About $17 billion in annual revenue is at risk due to expected patent losses later this decade for key drugs such as blood thinner Eliquis and breast cancer drug Ibrance. The question on many investors’ minds now is: Can Pfizer’s pipeline — as well as the acquisitions the company promises to make — not only offset the overall decline in sales, but also help drive growth?

In an interview Tuesday, Pfizer Chief Financial Officer David Denton argued that the company is well on its way to doing so and that investors should have confidence in its pipeline beyond the Covid-19 franchise. The company will launch more products in the next 18 months, which are expected to deliver $20 billion in annual sales by 2030, he said. What’s more, the company’s strengthened balance sheet means it can continue its wave of deals even in a rising interest rate environment, he said.

“The Covid discussion just took a lot of the oxygen out of the room for about two years, and so what we’re trying to tell the investment community now, and really to the patients we serve around the world, is that you have to be excited about the future of Pfizer,” Mr. Denton said.

Pfizer has pledged to achieve $25 billion in risk-adjusted annual revenue through acquisitions by 2030, and CEO Albert Bourla said on a call Tuesday that the recent acquisitions of Arena, Biohaven, Global Blood Therapeutics and ReViral could bring the company to one-third of the way there.

That leaves the question of whether Pfizer needs a bigger, transformative deal to deliver on the other two-thirds, something Mr. Denton rejected, arguing that Pfizer can get there without a “massive megadeal.”

“You’ve seen us do deals anywhere from $10 billion or $12 billion down to a billion or two, and I think you’re going to see us do a portfolio approach,” he added.

While there’s no arguing with Pfizer’s eagerness to make deals, it does mean some of these numbers remain hopeful.

However, investors may end up being surprised. For starters, there’s plenty to like in Pfizer’s existing pipeline, including a new respiratory syncytial virus (RSV) vaccine and a new migraine franchise. And finally, Covid-19 sales may prove more durable than Wall Street gives Pfizer credit for.

Asked on the call whether it’s realistic that the Covid-19 franchise could generate $15 billion in sales by 2030, Mr. Bourla left the door open, saying “it’s not unreasonable.” The idea is that at that time, Covid vaccines could be taken annually by many, just like flu shots.

The focus on Covid when it comes to Pfizer may not go away any time soon.

Write to David Wainer at david.wainer@wsj.com

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