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Pfizer is about to release a vaccine — Is the Stock a Buy?

Pfizer is one of the biggest pharmaceutical companies in terms of market valuation. And Pfizer stock could soon experience an upswing after inking an agreement with BioNTech to develop a coronavirus vaccine.as massive companies are moving their entire operations

The two companies penned a deal on March 17 to partner on a coronavirus vaccine, targeting Covid-19. The respiratory illness was discovered last year in China. Under the terms of the deal, Pfizer and BioNTech will work together on the drug outside of China.

Further, merger news for Pfizer has been plentiful in recent history. Last summer, the Dow Jones component acquired Array Biopharma for $11.4 billion. It’s also planning to merge its generic and off-patent drugs unit, known as Upjohn, with Mylan (MYL) in 2020.

In May 2019, the pharmaceutical company also gained the Food and Drug Administration’s blessing to sell a rare heart-disease drug. But, more recently, overall first-quarter earnings and sales dipped in April 2020.

So, is Pfizer stock a buy right now?

Pfizer Stock Fundamentals: Earnings Hit The Skids

As one of the biggest pharmaceutical companies, Pfizer is well diversified. But Pfizer sales are sliding. In the first quarter, sales dipped 8% to $12.03 billion, continuing a four-quarter trend of declines. Earnings also slid 6% to 80 cents a share, falling for the third straight quarter.

In the first quarter ended March 29, Pfizer reported $231 million in sales of Vyndaqel and Vyndamax, a pair of treatments for a condition in which an abnormal protein builds up on the heart. That was in line with estimates for $233 million, according to one analyst.

But overall sales and earnings declines paint a dim picture. Big institutional investors, who account for up to 70% of all market trades, tend to look for stocks with accelerating earnings and sales growth.

Further, the pharmaceutical company isn’t meshing with CAN SLIM rules for investing, which tell investors to seek stocks with year-over-year earnings-per-share increases of at least 25%. Investors should also keep an eye out for stocks with 20%-25% sales growth in the most recent quarter.

In the second quarter, analysts polled by Zacks Investment Research call for Pfizer’s adjusted profit to decline 25% to 60 cents a share. Other estimates call for adjusted income of 68 cents a share in the quarter, a smaller dip of 15%. Pfizer sales are expected to dip 12% to $11.67 billion.

Pfizer 2019: Pharmaceutical Company’s Annual Metrics

In 2019, Pfizer generated $51.75 billion in total sales, declining 4% year over year.

Over the past nine years, Pfizer has posted annual sales growth in just two years. In both years — 2016 and 2018 — sales growth remained in the single-digit percentage range.

Last year, Pfizer had eight drugs that each brought in at least $1 billion in sales, known as blockbusters. The top sellers were a pneumonia vaccine, a cancer treatment and a blood thinner that it produced in partnership with Bristol-Myers Squibb (BMY). The three drugs generated 29% of total revenue.

All three top sellers posted year-over-year gains. Sales of pneumonia vaccine Prevnar 13 inched up 1% to $5.85 billion. Revenue from anticoagulant Eliquis popped 23% to $4.22 billion. Cancer treatment Ibrance generated $4.96 billion in sales, up 20%.

Revenue from older medicines struggled in 2019. The Upjohn unit contains Pfizer’s established brands and drugs facing generic competition. Sales of those medicines plunged 18% to $10.23 billion in 2019. Pfizer is soon to combine its Upjohn unit with Mylan to establish a new pharma company called Viatris.

Fibromyalgia treatment Lyrica and erectile dysfunction drug Viagra took the biggest hits. Lyrica sales tumbled 33% to $3.32 billion. Revenue from Viagra slipped 22% to $497 million. Both are now facing competition from generic knockoffs.

Pfizer Had Overall Decline In Sales

Across all products, Pfizer sales toppled 4% in 2019. That followed a 2% climb in 2018. The last year of strong gains for Pfizer was in 2010 when total revenue jumped 34%. After 2012, sales have either fallen or risen by a single-digit percentage.

In 2020, analysts surveyed by Zacks call for Pfizer to earn $2.81 per share, minus some items. On a year-over-year basis, earnings would decline 4.7%. Sales are expected to fall 12.7% to $45.15 billion. It’s important to note that the Upjohn merger with Mylan helps account for smaller sales.

Chief Executive Albert Bourla expects the Upjohn-Mylan combination to help Pfizer return to earnings and sales growth.

“2020 is expected to be an exciting year for Pfizer with the close of the Upjohn-Mylan transaction anticipated by midyear, leaving new Pfizer positioned to deliver revenue and adjusted, diluted (per-share earnings) growth that is expected to be among the industry leaders,” he said in a written statement.

Pfizer News: Acquisitions Impact Stock

Last August, Pfizer closed its joint venture with GlaxoSmithKline (GSK) for a consumer health care business comprised of their over-the-counter products. Under terms of the deal, Pfizer owns a 32% stake in the joint venture, and GSK owns 68%.

Now, GlaxoSmithKline is planning to spin off that combined consumer health care business.

Also last summer, Pfizer unveiled the plan to merge its Upjohn unit with Mylan. Upjohn previously belonged to a global pharmaceutical company named Pharmacia & Upjohn before its acquisition by Pfizer in 2003. Now, the Upjohn business includes Pfizer’s off-patent branded and generic drugs.

Upjohn and Mylan will merge to form the new pharmaceutical company called Viatris. At the time of the announcement, the companies expected to generate $19 billion to $20 billion in sales in 2020. The deal could help Mylan contend with struggling generic-drug sales in North America.

In the fourth-quarter earnings release, Pfizer said it expects the deal to close by midyear. But, in late March, the pharmaceutical company pushed the close out to the second half of 2020. Due to the coronavirus pandemic, Mylan delayed its shareholder meeting to approve the transaction to June 30.

In late July 2019, Pfizer completed its acquisition of Array, a biotech company testing cancer drugs. The takeover was Pfizer’s biggest acquisition since the Dow Jones component bought out biotech company Medivation for $14 billion in 2016.

In May 2019, Pfizer announced its $810 million plan to buy Therachon Holdings. The privately held biotech was working on several rare-disease treatments. Drugs from Therachon were added to Pfizer’s pipeline of rare-disease drugs when the takeover wrapped in July.

Pfizer Stock Rises On Coronavirus Vaccine

On March 17, Pfizer stock popped nearly 7% after the pharmaceutical company said it would codevelop a coronavirus vaccine with BioNTech. The deal focuses on territories outside of China where BioNTech is already partnered with Shanghai Fosun Pharmaceutical Group.

The coronavirus vaccine would prevent SARS-CoV-2 infection. It relies on a natural substance in the body called messenger RNA. Messenger RNA carries the genetic code for making proteins. Moderna (MRNA) is also testing a coronavirus vaccine using the same technology.

On May 5, Pfizer and BioNTech dosed the first participants in a study of their coronavirus vaccine.

Further, sales of rare-disease drugs from Pfizer popped in the first quarter, rising 36% to $639 million. As a whole, that segment accounted for just 5.3% of Pfizer’s total revenue.

Pfizer added to that portfolio last May when it gained approval for Vyndaqel and Vyndamax. Both are varying doses of the same drug — a treatment for a rare disease in which an unusual protein called amyloid builds up in the heart. In the first quarter, they brought in $231 million in sales.

Vyndaqel and Vyndamax could rival drugs from Alnylam Pharmaceuticals (ALNY) and Ionis Pharmaceuticals (IONS). The biotechs’ drugs treat the nerve component of the same disease. But there’s some overlap in patients who have nerve and heart complications.

In mid-February, the European Commission also approved Vyndaqel.

Technical Analysis: Pfizer Stock Eyes A Buy Point

Pfizer stock is currently forming a cup base with a buy point at 41.07. That base is forming within a longer consolidation.

Shares were well above their 50-day moving average and 200-day line in midday trading on May 22. But the pharmaceutical company’s relative strength line largely trended down in 2019. The RS Line compares a stock’s price action with that of the S&P 500.

(Related: Keep tabs on chart patterns by visiting IBD’s MarketSmith.com.)

On a longer-term basis, Pfizer stock has lagged the S&P 500 since 2000. For two decades investors in Pfizer would have been better off buying an S&P 500 mutual fund or exchange traded fund.

Shares of Pfizer have a Composite Rating of 75. The 1-99 measure pits a stock’s key growth measures against all other stocks. This means Pfizer stock is outperforming three-quarters of all stocks. Leading stocks tend to have CRs of 95 or better, according to IBD Digital.

Pfizer stock has a matching Relative Strength Rating of 77 out of a best-possible 99. The RS Rating measures a stock’s 12-month running performance against all other stocks. That RS Rating means Pfizer stock tops 77% of all stocks in terms of performance.

The pharmaceutical company’s EPS Rating, a measure of profitability, is a 63 out of a best-possible 99. The EPS Rating compares a stock’s recent and longer-term earnings growth against all other stocks.

So, Is Pfizer Stock A Buy Right Now?

Based on CAN SLIM rules of investing, Pfizer stock is not a buy right now. The pharmaceutical company isn’t demonstrating the metrics that big stock winners show ahead of major runs. Further, shares haven’t topped a new buy point.

The pharmaceutical company is growing through acquisitions, but sales and earnings growth are slowing and don’t meet CAN SLIM rules of investing. Further, the Street expects Pfizer earnings and sales to decline again in the second quarter.

Investors should look for stocks that continually beat quarterly expectations on growing metrics.

It will also be important to keep tabs on how Pfizer stock performs as it codevelops a coronavirus vaccine with BioNTech. The coronavirus vaccine just began a clinical study in the U.S.

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By Maximilian Feld

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Hobby Trader, working in the finance sector.
Happy to share my analysis with you!

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