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Better Recovery Story Buy: Pfizer vs Moderna

Motley Fool - Mon Apr 1, 4:05AM CDT

A few years ago, both Pfizer(NYSE: PFE) and Moderna(NASDAQ: MRNA) were flying high: from an earnings and share performance perspective. They each sold a leading coronavirus vaccine -- and Pfizer sold a COVID treatment too -- and these products generated billions of dollars in earnings for the companies.

Pfizer and Moderna still sell these top products, but demand for them has declined as we head toward a post-pandemic world. That's weighed on earnings, pushed the companies to cut costs to match infrastructure to demand, and hurt share price performance in recent times. Pfizer and Moderna shares each have lost about 30% over the past year.

But the tide may be about to turn for these struggling stocks, thanks to each company's focus on long-term growth. That makes them both compelling buys today. But if you could only get in on one of these recovery stories right now, which one should you go for? Let's find out.

An investor works at a laptop near a window.

Image source: Getty Images.

The case for Pfizer

Pfizer's coronavirus products helped it reach a record of more than $100 billion in sales back in 2022, so it's no surprise investors were disappointed when sales came in at about $58 billion last year. And Pfizer faces a second problem -- some of its blockbusters outside of the coronavirus program are set to lose exclusivity later this decade, representing lost sales of about $17 billion.

But Pfizer's made big moves to turn things around and spur future growth. The company is completing its biggest wave of product launches ever, with 19 in just 18 months. And the healthcare giant also made a string of acquisitions that should help add billions of dollars to revenue too. One that looks particularly promising is the purchase of oncology specialist Seagen. That came with four commercialized products with sales on the rise -- and a solid pipeline that could significantly boost Pfizer's position in cancer treatment.

Pfizer expects its new product launches to result in $20 billion in revenue by 2030, and its business development deals could add another $25 billion to revenue by that time. This, plus additional growth from pipeline programs may lead to revenue of as much as $84 billion in 2030. And this doesn't include coronavirus-related products. This represents 65% growth from pre-coronavirus days and shows that Pfizer may be down today, but it's definitely not out.

The case for Moderna

Like Pfizer, Moderna saw its coronavirus vaccine revenue drop drastically -- in this case from a peak of $18 billion in 2022 to $6.7 billion last year. What's made the situation even worse is the vaccine is Moderna's only product, and that's prompted investors to worry about the company's future growth.

But here's why there's more reason to be optimistic than pessimistic. Moderna has a solid pipeline, with many late-stage candidates that could help the company reach its goal of launching 15 new products over the coming five years. Even if Moderna only makes it part of the way, we still could be looking at a significant and diversified source of revenue moving forward.

The closest-to-market candidate is Moderna's respiratory syncytial virus (RSV) vaccine, one that regulators should decide on in the first half of this year. Strong trial data make me pretty confident about an approval, and the fact that it would be the only RSV vaccine to come in a pre-filled syringe could help it easily gain market share.

If Moderna meets its product commercialization goals later this decade, it expects to bring in as much as $30 billion in revenue a few years after the launches of all of these products. This includes a variety of new products, from respiratory vaccines to a personalized cancer treatment.

So, like Pfizer, Moderna may be heading for a whole new era of growth -- and this time, it won't depend on just one product.

The better buy?

The better buy depends on your investment style. If you like dividends and the safety of a big pharma player that already has a broad portfolio of commercialized drugs, now is a great time to get in on Pfizer. It's trading for only 12x forward earnings estimates, but valuation could move higher once the company's renewed portfolio starts to generate revenue growth.

If you're looking for stronger share performance potential though, you should opt for Moderna. Yes, the company has been in the doldrums for quite some time, but when things go right, biotech stocks tend to soar. That's because these players often are more growth oriented than big pharma companies.

And if all goes smoothly in late-stage clinical trials and through the regulatory process, Moderna is on target to deliver. So, for investors who can tolerate some risk in exchange for top growth potential, Moderna makes the better buy.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.

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