Since the stock prices of many vaccine makers have already risen significantly this year, investors may be concerned about buying at artificially high prices. But Pfizer (NYSE: PFE) remains quite undervalued given its potential successful vaccine candidate, which he is jointly researching with the German company BioNTech (NASDAQ: BNTX).
Let’s take a look at three reasons why long-term value investors should grab certain Pfizer stocks now to be part of its bright future.
1. Encouraging results of its vaccine candidate
In Phase 1 clinical trials, all participants who received the company’s vaccine against the company’s messenger RNA coronavirus, BNT162b2, developed neutralizing antibodies, which are small proteins that recognize certain components of a pathogen and the prevent healthy cells from invading.
Additionally, all participants also developed SARS-CoV-2 specific T cell responses after administration. T cells recognize cells infected with the virus and tell those cells to self-destruct, preventing the virus from spreading throughout the body. Unlike antibodies, which may disappear a few weeks after administration, T cells can form memories of pathogens for months or years.
The experimental vaccine showed effects just seven days after a second dose, with results applicable to adults aged 18 to 85. Side effects were mild, with less than 20% of participants developing mild to moderate fevers after administration. The vaccine candidate is currently in Phase 2/3 clinical trials, with data likely to be released in the next two months.
2. Government validation
Even before Pfizer’s vaccine candidate passed clinical trials, countries around the world already trusted its science. Currently, Pfizer has received orders from the UK, Japanese and US governments for 30 million, 120 million and 100 million doses of its investigational vaccine, respectively (subject to regulatory approval). The company will have the capacity to produce 1.3 billion doses of the vaccine in 2021.
For the US deal in particular, each dose of the vaccine is priced at $ 19.50, with the potential to get an additional 500 million doses. Keep in mind that each participant received two doses of the candidate vaccine in clinical trials where it was shown to be effective, which should greatly improve their market opportunity (think 600 million doses for 300 million people) . Pfizer and BioNTech will split the gross profits and expenses of the vaccine equally through their partnership agreement.
3. Strong finances
Pfizer expects to generate between $ 48.6 billion and $ 50.6 billion in revenue for the full year and between $ 2.85 and $ 2.95 in earnings per share. Although these are marginal declines from last year’s results, investors should note that Pfizer shares are already cheap, at around 4x the sell price and 13x the earnings price. Assuming the success of clinical trials, the launch of its coronavirus vaccine at the end of this year or early 2021 will create substantial growth in its results. The company’s biosimilars, anticancer and blood clot drugs also performed well, with revenues up more than 30% year-over-year in these segments.
The company will reinvest up to $ 9 billion of its revenues in research and development this year. And if that’s not enough, investors should note that Pfizer stock has an impressive 4% dividend yield, which is more than covered by the company’s cash flow for its 52% payout ratio.