Pfizer (PFE) stock tumbled after its third-quarter beat stemmed almost entirely from an unpredictable source: its Covid treatment Paxlovid.
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How Novo Nordisk, Wegovy And Ozempic Are Changing The Weight-Loss Game For Patients And Investors
Sales of Covid treatments and vaccines are notoriously difficult to predict. During the September quarter, Paxlovid generated $2.7 billion in sales. That beat expectations by 387% and led Pfizer to hike its guidance for the year by $1.5 billion at the midpoint. The guidance boost includes $10.5 billion from Covid vaccine Comirnaty and Paxlovid, up $2 billion from its previous outlook.
Meanwhile, Pfizer is still facing off with activist investor Starboard Value, which has a roughly $1 billion stake in Pfizer stock. Starboard claims Pfizer hasn’t delivered on what its managers previously called the “best pipeline” in its history.
The company was late to the game in weight-loss treatment and experienced two high-profile failures. Now, it’s at bat with a potential once-daily pill in the hopes of taking on injections from Novo Nordisk (NVO) and Eli Lilly (LLY).
It has also tried rebuilding its pipeline with acquisitions, including the takeovers of Seagen, Arena Pharmaceuticals and Global Blood Therapeutics. But a piece of the $5.4 billion deal unraveled after Pfizer pulled its sickle cell drug, Oxbryta, from the market following patient deaths.
So, is Pfizer stock a sell today?
Pfizer Stock Fundamentals
In the September quarter, Pfizer earned an adjusted $1.06 per share on $17.7 billion in sales. Both beat the Street’s forecast. Earnings reversed from a year-earlier loss, while sales climbed 31%.
In addition to the strong Paxlovid sales, revenue from Comirnaty beat expectations by 34%, coming in at $1.42 billion. Pfizer developed Comirnaty with Germany’s BioNTech (BNTX). Excluding those two products, sales rose 14%.
Sales of heart disease treatment Vyndaqel, migraine drug Nurtec and cancer medicines Braftovi and Xtandi also beat projections. But revenue from Seagen-acquired Padcev, a cancer treatment, fell short at $409 million.
For the fourth quarter, analysts project 48 cents earnings per share and $17.44 billion in sales. Earnings would rocket 380%, as sales rise 32%.
This year, Pfizer expects adjusted earnings of $2.75 to $2.95 per share and $61 billion to $64 billion in sales. At the midpoints, earnings would jump 55% and sales would rise almost 7%.
Obesity Treatments In Focus
Investors have zeroed in on Pfizer’s efforts in obesity treatment. The company says it expects to have more results from dose expansion studies of its once-daily pill, danuglipron, in the upcoming first quarter. That drug mimics the action of GLP-1, a hormone tied to satiety and blood sugar markers.
Pfizer is also testing a second GLP-1 drug and, in its third-quarter earnings, outlined plans to study a drug that blocks the activity of the GIP receptor. This differs from Eli Lilly and Viking Therapeutics (VKTX), which have drugs that mimic both GLP-1 and GIP.
Amgen (AMGN) is the closest competitor with a drug that mimics GLP-1 and blocks GIP. But Amgen is testing a monthly shot, while Pfizer’s approach would be a daily pill.
The field for oral weight-loss drugs is becoming increasingly crowded. Roche (RHHBY), Viking, Structure Therapeutics (GPCR), AstraZeneca (AZN) and others are all in this space.
Pfizer Stock And The Starboard Fight
Starboard says Pfizer has lost between $20 billion and $60 billion in market value over the last five years.
The investor argues Pfizer’s research and development, as well as returns on that R&D, have contributed to its downfall. Starboard also says Pfizer has made poor capital allocation decisions and its forecasting/budgeting have left something to be desired.
Early in the battle, the investor said it reached out to Ian Read and Frank D’Amelio as part of its due diligence. Read is the former chief executive, while D’Amelio was the company’s chief financial officer.
Read and D’Amelio shared Starboard’s concerns, the investor said in a letter to the board on Oct. 10. But the duo have since flipped their stance, saying they are “fully supportive” of Albert Bourla, the sitting CEO. Read handpicked Bourla as his successor. Starboard, though, says it believes Pfizer pressured Read and D’Amelio into changing their tune on Pfizer’s trajectory.
Technical Analysis: PFE Stock Is Below Its 50-Day Line
Pfizer stock is now below its 50-day moving average and 200-day line. Shares are forming a flat base with a buy point at 31.54, MarketSurge shows.
(Related: Keep tabs on chart patterns by visiting IBD’s MarketSurge.)
Pfizer stock has an IBD Digital Composite Rating of 50 out of a best-possible 99. The CR is a measure of a stock’s fundamental and technical measures. Shares also have a Relative Strength Rating of 20, a measure of 12-month performance.
Is PFE Stock A Sell?
Based on savvy rules of investing, Pfizer stock isn’t a sell. But it also isn’t currently a buy. Shares are still forming a flat base and have yet to break out. Bearishly, shares are now sitting below two ceilings at their 50-day and 200-day lines.
Pfizer stock still has to prove its fundamental and technical merit. And it will have to do that while facing off with Starboard.
To find the best stocks to buy and watch, check out IBD Stock Lists. Make sure to also keep tabs on stocks to buy or sell.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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