The Food and Drug Administration (FDA) just approved the updated Omicron-adapted COVID-19 booster shots from Moderna(NASDAQ: MRNA) and the COVID-19 booster that Pfizer(NYSE: PFE) and BioNTech(NASDAQ: BNTX) collaborated on. While the news will certainly help the pharmaceutical companies' bottom lines, it's important to look deeper to see if any of these three stocks make a solid investment today.
All three have seen their shares and revenue drop this year, thanks to falling COVID-related sales, but each has a strong cash position, giving them plenty of options.
How long will Pfizer fade?
At first glance, Pfizer's stock appears to be a screaming deal. The company has seen revenue rise for three consecutive years, and its stock is trading just below 10 times earnings, well below the average price-to-earnings ratio (P/E) of 39.9 for a pharmaceutical stock.
However, there are plenty of clouds affecting that rosy outlook. Much of the jump over the past few years has been due to the company's COVID-19-related sales. While they're not going away completely, they have been in decline. The stock is down more than 33% so far this year.
In the second quarter, the company reported revenue of $12.7 billion, down 54%, year over year, thanks mostly to reduced sales of COVID-19 vaccine Comirnaty and COVID-19 antiviral Paxlovid. Earnings per share (EPS) were listed as $0.41, down 77% over the same period last year. The company also narrowed its yearly revenue guidance to between $67 billion to $70 billion -- versus the $103.3 billion it reported last year.
Pfizer is also facing significant patent cliffs in the coming years, most notably for blood thinner Xeljanz, which brought in $1.76 billion in the second quarter. Other blockbusters that are facing patent cliffs in the coming years include prostate cancer therapy Xtandi and Vyndaquel, which is used to treat transthyretin amyloid cardiomyopathy.
To counter the effect that generic competition will bring, the company is focusing on new, homegrown launches as well as products it has purchased through mergers and acquisitions. This summer, the company has already managed five new FDA approvals.
In June, the company gained approval for oral tablet Litfulo to treat children 12 and older with severe alopecia. Also that month, the FDA approved Ngenla, to treat pediatric growth hormone deficiency, and Talzenna, a combination therapy with Xtandi to treat prostate cancer. And last month, it approved Elrexfio to treat relapsed or refractory multiple myeloma and gave the company an expanded indication for respiratory syncytial virus (RSV) vaccine to include infants.
While investors wait for Pfizer's financials to rebound, the company delivers a dividend with a yield of around 4.8%. The company increased its quarterly dividend by 2.5% this year to $0.41, the 14th consecutive year it's boosted its payout.
Moderna has quickly grown its pipeline
Moderna focuses on messenger RNA (mRNA) therapies for a wide number of diseases. Its stock is down more than 39% so far this year and is trading at a P/E of about 40, slightly above the industry average. While the recent decision to approve its COVID-19 booster shot is good news, the company is in a more difficult spot than Pfizer because so much of its business last year was COVID-19 related.
In the second quarter, Moderna reported revenue of $344 million, down 93% year over year. The company lost $1.38 billion, compared to net income of $2.19 billion in the same period last year.
Like Pfizer, Moderna is hoping that new launches will get it back to profitability. The beauty of the company's mRNA platform is it can quickly develop potential therapies. The company has 47 development programs in its pipeline, nearly double what it had three years ago, including six in phase 3. Key therapies to look out for include:
- mRNA1345, Moderna's RSV vaccine, currently awaiting approval
- mRNA1010, its seasonal flu vaccine, which is in phase 3 trials
- mRNA4157, its individualized Neoantigen Therapy (INT) to treat adjuvant melanoma and non-small cell lung cancer (NSCLC), which is in a phase 3 trial
BioNTech has the cash to bounce back
Germany-based BioNTech focuses on immune therapies to fight cancer and infectious diseases. Its stock is down more than 24% so far this year and its P/E has fallen to just above 6. Besides its COVID-19 booster that was just approved, the company has 36 programs in clinical trials, including two in phase 3 trials: BNT316 (ONC-392) to treat relapsed/refractory metastatic NSCLC and BNT161, its seasonal flu vaccine.
Like Moderna, BioNTech has seen its financials falter because so much of its business was connected to its COVID-19 vaccine. In the second quarter, the company reported revenue of 167.7 million euros (roughly $178.8 million), down 94.7%, year over year. EPS dropped from 6.47 euros (roughly $6.87) in the second quarter of 2022 to a loss of 0.79 euros (about $0.87).
The company reiterated that it expects 5 billion euros ($5.5 billion) from its COVID-19 vaccine this year.
Making a choice
BioNTech, thanks to the drop in its share price, may be the best bargain of the three stocks. Yes, its revenue will continue to show a COVID-19 hangover for a while, but the company has a strong pipeline and more than $15 billion in cash, plenty of money to develop its therapies or to find others through mergers and acquisitions.
Of the three stocks, Pfizer and BioNTech stand out the most. Pfizer has the broadest portfolio of the three companies and has been preparing for its patent cliff for a long time. Its generous dividend makes it easier for investors to be patient with the stock. BioNTech is definitely a gamble, but at its current price and with a few late-stage therapies likely to get approval in the next year, it has enough cash for the business to rebound.
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