Top COVID-19 vaccine companies Pfizer (PFE) and Moderna (MRNA) fell under a bit of pressure in response to U.S. President Joe Biden’s support of a proposed COVID-19 vaccine IP (intellectual property) waiver. Pfizer stock was quick to move on from the shocker, with shares consolidating back at the $40 levels, near its 2021 highs.
Pfizer CEO Alberta Bourla expressed some concern over vaccine waivers, citing the safety, security, and manufacturing risks that waivers could engender. Bourla noted that such a waiver had the potential to “disrupt the flow of raw materials.” In addition, he cited a long-term risk that IP waivers could pose to medical research, in that it would “disincentivize anyone else from taking a big risk.”
Bourla makes excellent points, especially when it comes to the potential disincentivization of risk-taking for pharma firms looking for a big payout. The amount of R&D that goes into the development of blockbuster drugs, vaccines and treatments is considerable. Of course, not every COVID-19 vaccine maker will meet with the great success Pfizer has enjoyed. (See Pfizer stock analysis on TipRanks)
Pitfalls of Medical R&D
While Pfizer and BioNTech (BNTX) may have walked away as some of the biggest winners amid this pandemic, some other firms are coming away from COVID-19 developments efforts as major losers. Their research efforts failed to yield a vaccine that reached the high safety and efficacy bar set by Pfizer and Moderna.
Consider AstraZeneca (AZN), which, according to the Wall Street Journal, lost money in the development of its COVID-19 vaccine amid production issues and overblown concerns over rare incidents of blood clots.
In Canada, the AstraZeneca vaccine was briefly put on pause, while the U.S. FDA (Food and Drug Administration) delayed its review process. All the while, other more successful vaccine makers, most notably Pfizer, BioNTech and Moderna, made significant strides, with their COVID-19 jabs ordered up and placed into arms across the globe.
For every Pfizer that’s made a good profit from its COVID-19 endeavors, there are likely to be many more AstraZenecas that end up losing money.
Moreover, given that Pfizer would not stand to make as much as it could from its COVID-19 vaccine, Bourla’s IP waiver concerns seem more than warranted.
The risk/reward may be tough for prospective vaccine makers, and the implementation of proposed IP waivers could very well curb the amount of large risks that firms would be willing to shoulder in future pandemics.
In any case, vaccine waivers are unlikely to deliver a significant blow to Pfizer stock, which has remained somewhat muted since it first revealed its COVID-19 breakthrough back in November 2020. The Biden administration is likely to conduct many months’ worth of analysis of the risks and rewards brought forth by any proposed vaccine IP waivers.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, PFE stock comes in as a Hold. Out of 11 analyst ratings, there are 1 Buy and 10 Hold recommendations.
As for price targets, the average analyst price target is $43.09, with an 8.7% upside. Analyst price targets range from a low of $39.00 per share to a high of $53.00 per share.
Looking Beyond Proposed IP Waivers
In the meantime, Pfizer will continue to fire on all cylinders in its battle against COVID-19, with boosters and vaccines to combat new variants of concern. In addition, Pfizer has some fascinating innovations in its pipeline, including a game-changing antiviral pill that could stop a COVID-19 infection in its tracks.
Given the likelihood that coronavirus isn’t going away anytime soon, and the probability that people will need to get their seasonal COVID-19 boosters to avoid contracting any insidious variants, Pfizer stock remains a great buy. Regardless of the outcome of the proposed vaccine IP waiver discussion, Pfizer is in a good position.
For now, investors can collect PFE’s bountiful near-4% yield at a pretty reasonable 12.2x forward price-to-earnings (P/E) earnings multiple.
Disclosure: Joey Frenette owned shares of Pfizer at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
