Pfizer (NYSE: PFE), its stock price has fallen 16% over the past six months as the company’s COVID-19 vaccine sales are expected to decline. Investors, however, are ignoring Paxlovid earnings, which I’m estimating will be more than $12 billion in the second Additionally, my analysis shows that Pfizer’s healthy financial position allows it to remain profitable even with lower COVID-19 vaccine sales in the second half of 2022. I’m bullish on Pfizer stock.
Highlights of the second quarter of 2022
In its second-quarter 2022 financial results, Pfizer reported revenue of $28 billion compared to revenue of $19 billion in the second quarter of 2021, up 47%, driven by strong contributions from Paxlovid and Comirnaty. In the second quarter of 2022, Pfizer reported the highest quarterly revenue in its history. The company’s net income increased 78% year-on-year from $5.6 billion in Q2 2021 to $9.9 billion in Q2 2022. Pfizer reported adjusted earnings for Q2 2022 of 11 Announced $.7 billion or $2.04 per diluted share compared to adjusted earnings of $6.0 billion in Q2 2021. or $1.06 per diluted share. The company’s cost of sales increased to $8.7 billion in Q2 2022 from $7.0 billion in Q2 2021. Pfizer also increased its R&D spending from $2.2 billion in Q2 2022. Q2 2021 to $2.8 billion in Q2 2022 Includes bivalent mRNA COVID-19 vaccine, boosted mRNA COVID-19 vaccine, Paxlovid, modRNA, influenza vaccine, once-daily oral GLP-1 Receptor agonist and anti-interferon-β,” the company announced. For the first time in the industry, Pfizer launched an initiative to distribute its medicines and vaccines to 1.2 billion people in 45 low-income countries at charitable prices. “As we launch these initiatives in support of a healthier and fairer world, we remain equally committed to strong financial execution on behalf of our shareholders,” said the CEO.
The market prospects
Corresponding ourworldindata.org, 68% of the world’s population has received at least one dose of a COVID-19 vaccine. More than 4 million doses of COVID-19 vaccines are administered every day. In addition, more than 75% of people in low-income countries have not received at least one dose of the COVID-19 vaccine. Figure 1 shows that the number of Pfizer/BioNTech COVID-19 vaccine doses administered in the United States increased from 331 million on March 31, 2022 to 352 million on June 30, 2022, or 231,000 doses per day during the period. From June 30, 2022 to September 14, 2022, Pfizer/BioNTech COVID-19 vaccine doses administered in the United States increased to 363 million, or 145,000 doses per day for the period. Also shown in Figure 2, Pfizer/BioNTech COVID-19 vaccine doses administered in the European Union increased from 606 million on March 31, 2022 to 620 million on June 30, 2022, or 154,000 doses per day during the period. From June 30, 2022 to September 18, 2022, Pfizer/BioNTech COVID-19 vaccine doses administered in the European Union increased to 631 million or 138,000 doses per day for the period. My calculations show that the proportion of Pfizer/BioNTech vaccine doses administered worldwide decreased from 64.05% in Q1 2022 to 63.96% in Q2 2022 and increased to 65.14% in Q3 2022 (As of September 19, 2022). However, Pfizer/BioNTech vaccine doses administered worldwide decreased from 858,000 per day in Q2 2022 to 566,000 per day in Q3 2022 (as of September 19, 2022). Therefore, despite the increased share of Pfizer/BioNTech’s COVID-19 vaccine in Q3 2022, I expect Pfizer’s revenue from its COVID-19 vaccine to decline in Q3 2022.
On the other hand, I expect the company’s revenue from sales of Paxlovid to increase in the third quarter of 2022. In June 2022, Pfizer announced the filing of an NDA with the FDA for approval of Paxlovid for the treatment of COVID-19 in both vaccinated and unvaccinated individuals who are at high risk of progression to serious illness from COVID-19. On July 6, the FDA revised the EUA to authorize state-licensed pharmacists to prescribe Paxlovid under certain conditions. According to the CDC, Paxlovid is one of the top two antiviral drugs of choice for those at high risk of progression to severe COVID-19. CDC says that 50-60% of the US population ages 12 and older have one or more risk factors for progression to severe COVID-19 disease. Pfizer has confirmed Paxlovid’s 2022 sales guidance of $22 billion. In the second quarter of 2022, Pfizer’s Paxlovid sales were $8.1 billion. In the first half of 2022, the company’s Paxlovid revenue was $9.6 billion. As of July 15, there were more than 41,000 locations with Paxlovid coverage in the United States. Figure 3 shows that Paxlovid usage increased significantly in the first month of Q3 2022. Aldo, from June 24, 2022 to July 15, 2022, Paxlovid usage increased by 116% in the international developed world. As such, I expect the company to generate $12 billion in Paxlovid revenue in H2 2022.
Figure 1 – COVID-19 vaccine doses administered in the United States (by manufacturer)
Figure 2 – COVID-19 vaccine doses administered in the European Union (by manufacturer)
Figure 3 – Paxlovid is growing in popularity in the United States
Pfizer performance outlook
In the following section, I’ve provided a detailed analysis of Pfizer’s capital structure for those readers who want to scratch beneath the surface. In the second quarter of 2022, Pfizer reported an impressive 39% increase in cash of $33.3 billion from the previous result of $23.9 billion in the first quarter of 2022. Despite an increase in the company’s overall debt, its net debt decreased by 42 % return. and was $7.17 billion in the second quarter of 2022. This was because of its cash growth, which outstripped its debt increase. It’s also worth noting that Pfizer’s equity has increased at a staggering rate throughout 2022 compared to where it was at the same time in the second quarter of 2021. In the second quarter of 2022, total capital increased to $87.46 billion from its level of $70.3 billion in the second quarter of 2021 (see Figure 4). ).
Figure 4 – PFE Capital Structure (in millions)
A more detailed analysis by analyzing the company’s operating conditions shows that Pfizer’s operating cash flow increased to $8.1 billion in the second quarter of 2022 from $6.54 billion in the first quarter. Although lower cash operations in the second quarter of 2022 compared to the same point in 2021, the Company’s current projects are expected to yield more operating cash as 2022 progresses. In addition, Pfizer’s capital expenditures increased to $751 million in the second quarter of 2022 from $643 million in the first quarter. Finally, the company’s free cash flow was $7.4 billion at the end of the second quarter, up 25% above the $5.9 billion level at the end of the first quarter of 2022. Thus, Pfizer’s cash structure illustrates a healthy and strong operating position for a brighter future (see Figure 5).
Figure 5 – PFE Liquidity Structure (in millions)
From the perspective of the company’s liquidity and performance conditions, I examined Pfizer’s operating cash flow and CFO-to-sales ratio. PFE’s operating cash flow ratio gradually increased throughout 2022, coming in at 17.2% most recently, although it’s still well below the 31% seen in Q2 2021. This metric shows how well the company is able to pay its current liabilities and the cash flow generated from its operations. To shed some light, at the end of the second quarter, Pfizer was able to cover its short-term debt by a factor of 17.2. Additionally, PFE’s CFO-to-sales ratio increased 396 basis points to 29.45% from 25.49% in the first quarter of 2022. Overall, a decrease in the company’s liquidity conditions compared to the same period last year is largely attributable to the decline of COVID-19 vaccine sales, but the current situation is good enough to bring further benefits in the future (see Figure 6).
Figure 6 – PFE financials
The Current Ratio has been fairly stable over the past year: Pfizer’s Current Ratio was 1.42x in the second quarter of 2022, compared to 1.39x at the end of last quarter. On the other hand, the liquidity ratio shows an increase back to 0.7x in Q2 2022 from 0.61x in Q1 2022 after a decline of 0.73x at the end of 2021 (see Figure 7).
Figure 7 – PFE’s liquidity ratios
In short, after a more detailed analysis of Pfizer’s liquidity and capital structure and analysis of some financial metrics, it can be concluded that the company has performed well and is in reasonable financial shape. Also, Pfizer’s Paxlovid revenue is expected to be strong in the second half of 2022, despite lower sales of COVID-19 vaccines in subsequent quarters. In short, based on the recent financial outlook, I believe that Pfizer stock has a bright future and is a Buy.