Summary
Pfizer Inc. discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas, including cardiovascular metabolic and women's health under the Premarin family and Eliquis brands; biologics, small molecules, immunotherapies, and biosimilars under the Ibrance, Xtandi, Sutent, Inlyta, Retacrit, Lorbrena, and Braftovi brands; and sterile injectable and anti-infective medicines, and oral COVID-19 treatment under the Sulperazon, Medrol, Zavicefta, Zithromax, Vfend, Panzyga, and Paxlovid brands. The company also provides medicines and vaccines in various therapeutic areas, such as pneumococcal disease, meningococcal disease, tick-borne encephalitis, and COVID-19 under the Comirnaty/BNT162b2, Nimenrix, FSME/IMMUN-TicoVac, Trumenba, and the Prevnar family brands; biosimilars for chronic immune and inflammatory diseases under the Xeljanz, Enbrel, Inflectra, Eucrisa/Staquis, and Cibinqo brands; and amyloidosis, hemophilia, and endocrine diseases under the Vyndaqel/Vyndamax, BeneFIX, and Genotropin brands. In addition, the company is involved in the contract manufacturing business. It serves wholesalers, retailers, hospitals, clinics, government agencies, pharmacies, and individual provider offices, as well as disease control and prevention centers. The company has collaboration agreements with Bristol-Myers Squibb Company; Astellas Pharma US, Inc.; Myovant Sciences Ltd.; Akcea Therapeutics, Inc; Merck KGaA; Valneva SE; BioNTech SE; and Arvinas, Inc. Pfizer Inc. was founded in 1849 and is headquartered in New York, New York.
Operations
Pfizer's operations are characterised by a global footprint and a strong focus on quality, safety, and compliance. The company operates numerous manufacturing facilities and research centers worldwide, ensuring efficient production and continuous advancement in scientific research. Pfizer's supply chain management is crucial in ensuring timely delivery of its products to healthcare providers and patients. The company emphasizes operational excellence and employs rigorous quality control measures to maintain the highest standards.
How did the idea of the company come about?
Pfizer is a pharmaceutical company that was founded in 1849 by Charles Pfizer and Charles Erhart. The idea for the company came about when Charles Pfizer, a chemist, and his cousin, Charles Erhart, a confectioner, recognized the potential of manufacturing and marketing chemicals for medical purposes. They started by producing and selling santonin, an antiparasitic medication, and quickly expanded their operations to include other pharmaceutical products.
Mission
The mission of Pfizer is to discover, develop, and provide innovative medicines and vaccines that improve the health and well-being of people around the world. Pfizer aims to be a leader in the biopharmaceutical industry by advancing scientific knowledge, investing in research and development, and delivering high-quality healthcare solutions.
Pfizer's mission encompasses several key elements:
1. Discovery and Development: Pfizer is committed to scientific discovery and the development of new medicines and vaccines. They invest in research to uncover breakthroughs, advance scientific knowledge, and explore potential treatment options for various diseases and conditions.
2. Innovation: Pfizer strives for innovation in its approach to healthcare. They seek to develop new and improved therapies, technologies, and solutions that address unmet medical needs and contribute to better health outcomes for patients.
3. Global Impact: Pfizer's mission extends to a global scale. They aim to make a positive impact on the health and well-being of people worldwide. This involves providing access to their medicines and vaccines, particularly in underserved populations, and collaborating with healthcare partners and organizations to address healthcare challenges globally.
4. Patient-Centered Approach: Pfizer is dedicated to putting patients at the center of everything they do. They aim to understand patient needs, provide effective treatments, and improve patient outcomes and quality of life.
By embracing these principles, Pfizer seeks to fulfill its mission of discovering, developing, and delivering innovative medicines and vaccines that contribute to the advancement of healthcare and the improvement of people's lives.
Products
Summary
Pfizer offers a wide range of products and services in the healthcare sector. Their main offerings include prescription medications, vaccines, and consumer healthcare products. They have developed and marketed numerous successful drugs across various therapeutic areas, including cardiovascular diseases, oncology, immunology, neurology, and rare diseases. Some well-known Pfizer products include Viagra, Lipitor, Lyrica, Prevnar, and Xeljanz. They also have a significant presence in the field of vaccines, with notable contributions like the COVID-19 vaccine developed in collaboration with BioNTech. Additionally, Pfizer offers over-the-counter healthcare products for consumers, such as pain relievers, vitamins, and personal care items.
Main Products
The main products of the company in terms of revenues are Comirnaty, Paxlovid, Elliquis, Prevnar family, Ibrance, Vyndagel family, Xeljanz, Xtandi, and Inlyta.
Comirnaty is an m-RNA based coronavirus vaccine, aiming to prevent COVID-19. It is developed in collaboration with BioNTech. Pfizer and BioNtech equally share the costs of development.
Paxlovid is a prescription treatment for moderate COVID-19 in adults who are at high risk of progression to severe COVID-19, including hospitalization or death.
Elliquis is a Novel Oral Anticoagulant which was developed to present an alternative option to warfarin. It was developed in collaboration with Bristol Myers Squibb.
Prevnar is a pneumococcal vaccine used for the protection of infants, young children and adults against the disease of Streptococcus pneumoniae (pneumococcus).
Ibrance is a prescription medicine used to treat HR+, HER2- breast cancer that has spread to other parts of the body.
Vyndaqel family is a product which treats a rare disease called transthyretin amyloidosis.
Xtandi is an androgen receptor inhibitor that blocks certain steps in the androgen receptor pathway within tumor cells. It is developed in collaboration with Astellas.
Inlyta is a medicine used to reduce the blood supply to a tumor and slow down the growth of cancer.
The revenue contribution as of December 2022 can be seen in the table below:
| Product | Revenues | % of Total Revenues |
|---|---|---|
| Comirnaty | $37,806 | 37.68% |
| Paxlovid | $18,933 | 18.87% |
| Eliquis | $6,480 | 6.46% |
| Prevnar family | $6,337 | 6.31% |
| Ibrance | $5,120 | 5.1% |
| Vyndagel family | $2,447 | 2.44% |
| Xeljanz | $1,796 | 1.79% |
| Inlyta | $1,003 | 0.01% |
Comirnaty and Paxlovid together accounted for 57% of 2022 total revenues, which shows a high concentration level in the company's revenue stream. Revenue generation of these two products will not be at similar levels moving forward since the pandemic is coming to an end.
Offering Categories
The main offerings of Pfizer can be categorized into three primary areas: prescription medications, vaccines, and consumer healthcare products. Here's an overview of each category:
1. Prescription Medications
Pfizer develops and markets a broad range of prescription drugs across various therapeutic areas. Some notable offerings include:
- Lipitor (atorvastatin): A medication used to lower cholesterol levels.
- Viagra (sildenafil): A medication for the treatment of erectile dysfunction.
- Lyrica (pregabalin): A drug prescribed for neuropathic pain, fibromyalgia, and certain types of seizures.
- Celebrex (celecoxib): A nonsteroidal anti-inflammatory drug (NSAID) used for pain relief and inflammation reduction.
- Xeljanz (tofacitinib): A medication for the treatment of rheumatoid arthritis and other autoimmune conditions.
2. Vaccines
Pfizer has a significant presence in the development and production of vaccines. Notable vaccine offerings include:
- COVID-19 Vaccine (developed in collaboration with BioNTech): A highly effective vaccine to prevent COVID-19.
- Prevnar 13 (pneumococcal 13-valent conjugate vaccine): A vaccine to protect against pneumococcal diseases, including pneumonia.
3. Consumer Healthcare Products
Pfizer also offers a range of over-the-counter healthcare products for consumers. These include:
- Advil (ibuprofen): An over-the-counter pain reliever and fever reducer.
- Centrum: A line of multivitamin and mineral supplements.
- Caltrate: A brand of calcium supplements for bone health.
- ChapStick: A popular lip balm product.
It's important to note that Pfizer's product portfolio may vary based on geographic regions and evolving market demands.
Research and Development:
R&D is at the center of what Pfizer does since it helps the company fulfill its purpose of changing patients' lives. The areas that the company focuses are inflammation and immunology, internal medicine, oncology, diseases, vaccines, and anti-infectives. As of January 31, 2023, Pfizer had the following numbers of projects in various stages of R&D:
| Phase 1 | Phase 2 | Phase 3 | Registration |
|---|---|---|---|
| 34 | 37 | 23 | 16 |
Phase 1 refers to experimental products tested for the first time in human clinical trials. Phase 2 refers to products with several trials conducted on product's effectiveness, ideal dosage and delivery method. During Phase 3, test results of earlier trials on larger populations are conducted and risks-benefit analysis is the main focus. Registration refers to applications filed with appropriate regulatory authorities.
Team Dynamics:
Pfizer boasts a diverse and talented team of researchers, scientists, clinicians, and professionals across various functions. Collaboration and cross-functional teamwork are emphasized, fostering a culture of innovation and knowledge sharing. Pfizer's team comprises individuals with diverse backgrounds, expertise, and perspectives, facilitating the development of groundbreaking solutions. The company promotes a supportive and inclusive work environment, enabling employees to thrive and contribute to Pfizer's success.
Executive Team:
Albert Bourla serves as the Chairman and CEO of Pfizer, leading the company in its mission to make breakthroughs that positively impact patients' lives by driving scientific and commercial innovation in healthcare. With over 30 years of experience at Pfizer, he has held senior positions across diverse markets and disciplines, gaining a global perspective on patient needs and healthcare systems. Albert has a strong commitment to ensuring equitable access to medicines and vaccines worldwide. Since becoming CEO in 2019, he has accelerated Pfizer's transformation into a science-driven and innovative company, increasing investment in R&D and digital innovation. Under his leadership, Pfizer has embodied its core values of courage, excellence, equity, and joy. Notably, during the COVID-19 pandemic, Albert led Pfizer's remarkable response, investing billions of dollars to develop a safe and effective vaccine in record time. The company also delivered the first FDA-authorized oral antiviral treatment for COVID-19. Albert has further strengthened Pfizer's commitment to Environmental, Social, and Governance (ESG) principles and has been recognized for his leadership and achievements in the healthcare industry. He holds a Doctor of Veterinary Medicine and a Ph.D. in the Biotechnology of Reproduction. Albert is actively involved in various organizations and serves on multiple boards, contributing to the advancement of global healthcare and business.
Sally Susman holds the position of Executive Vice President and Chief Corporate Affairs Officer at Pfizer. In her role, she is responsible for engaging with Pfizer's external stakeholders and overseeing various areas, including communications, corporate responsibility, global policy, government relations, investor relations, and patient advocacy. Sally also serves as the vice chair of the Pfizer Foundation and co-chair of Pfizer's Political Action Committee. Prior to joining Pfizer in 2007, Sally held senior positions in communications and government relations at Estée Lauder Companies and the American Express Company. She also has a background in government service, where she focused on international trade issues for eight years. Sally's involvement extends beyond Pfizer, as she serves on the board of UL Solutions, a global leader in applied safety science, and co-chairs the board of The International Rescue Committee. Additionally, she is a member of the Council on Foreign Relations.
Payal Sahni holds the role of Executive Vice President and Chief People Experience Officer at Pfizer, responsible for overseeing the global talent strategy, diversity and inclusion efforts, total rewards, and colleague experience. With a career spanning over two decades at Pfizer, she has held various HR leadership positions, including Senior Vice President of Human Resources for Pfizer Biopharmaceuticals Group, where she led HR strategy for multiple business units and corporate functions. Payal has played a vital role in managing HR strategy during mergers and acquisitions, spearheading transformations, and supporting Pfizer's evolving business structure. She holds a Bachelor of Arts in Psychology from Rider University and a Master of Arts in Psychology from Fairleigh Dickinson University.
William Pao, M.D., Ph.D., serves as the Chief Development Officer and Executive Vice President at Pfizer. In his role, he leads the Global Product Development organization, which is responsible for advancing Pfizer's pipeline of innovative medicines across various therapeutic areas, including inflammation and immunology, internal medicine, anti-infectives, oncology, and rare diseases. William has an impressive background in translational medicine, targeted cancer therapeutics, and personalized medicine. Prior to joining Pfizer, he held leadership positions at Roche, where he oversaw the discovery and early development of a diverse portfolio of therapeutic candidates. William's groundbreaking research has contributed to our understanding of lung cancer and other malignancies, and he has been recognized for his contributions to cancer genomics and personalized medicine. He has published extensively and served as an advisor to notable medical associations and research journals. William holds undergraduate and doctoral degrees from Harvard and Yale University, respectively, and has completed his medical training and oncology fellowship at New York-Presbyterian Hospital/Weill-Cornell Medical School and Memorial Sloan-Kettering Cancer Center.
Mike McDermott serves as the Chief Global Supply Officer and Executive Vice President at Pfizer. In his role, he leads the Pfizer Global Supply (PGS) team, responsible for overseeing the company's internal and external manufacturing and supply chain activities. Mike and his team ensure the continuous supply of Pfizer's extensive product portfolio, including medicines and vaccines distributed to over 185 countries worldwide. The PGS network consists of 36 global manufacturing sites and approximately 31,000 colleagues, working together with over 300 contract manufacturers to produce around 50 billion doses annually. With over 30 years of industry experience, Mike joined Pfizer in 1989 and has held various positions in divisions such as Consumer Healthcare, Biotechnology, Supply Chain, Finance, and Marketing. He became the President of PGS in 2018 and assumed his current role in 2022. In addition to his professional endeavors, Mike is a passionate advocate for Diversity, Equity, and Inclusion, implementing impactful changes within PGS and serving as the Executive Sponsor of Pfizer's Women's Resource Group. Mike holds Bachelor of Science and Master of Science degrees in Industrial Engineering from the New Jersey Institute of Technology. Mike serves on the Executive Committee of the National Association of Manufacturers and is a member of the Pharmaceutical Manufacturers Forum.
Aamir Malik holds the position of Executive Vice President and Chief Business Innovation Officer at Pfizer. In this role, he is responsible for shaping the company's strategy, business development, commercial development, portfolio management, pipeline prioritization, and the establishment of new business ventures. Before joining Pfizer, Aamir served as the Managing Partner of McKinsey & Company's United States operations and led the Global Pharmaceutical and Medical Products Practice at the firm. With 25 years of experience at McKinsey, Aamir has contributed to the development of innovative growth strategies, facilitated mergers and acquisitions, and implemented impactful programs to enhance patient outcomes and improve performance in the life science industry. He has advised numerous Boards, CEOs, and top management teams in the field. Aamir holds a Bachelor of Science degree in Finance from Indiana University and is an active advocate for improving the lives of individuals with food allergies.
Doug Lankler has been a part of Pfizer since 1999 and currently holds the position of general counsel. Before assuming this role, Doug served as Pfizer's chief compliance and risk officer starting in 2006. Prior to joining Pfizer, he worked at the United States Department of Justice as an Assistant U.S. Attorney in the Southern District of New York. Doug's exceptional service in this role earned him the United States Attorney General's Distinguished Service Award. He obtained his education from the State University of New York at Albany and Cornell Law School.
Rady Johnson holds the position of Executive Vice President and Chief Compliance, Quality, and Risk Officer at Pfizer. In this role, he has overall responsibility for the company's global compliance program, Regulatory Quality Assurance organization, global security efforts, and Office of the Ombuds. Since joining Pfizer in 1994, Rady has held various leadership positions, including leading the Regulatory Law practice group, Corporate Regulatory and Healthcare Law Audit functions, and establishing the Legal Division's Global Products Counsel practice group. He also served as Senior Vice President and Associate General Counsel for the innovative segments of Pfizer's Worldwide Biopharmaceuticals Business. Before joining Pfizer, Rady worked in private practice with the law firm of Hogan & Hartson, specializing in food and drug law. He previously worked as a Certified Public Accountant at Arthur Anderson, focusing on the healthcare and hospitality industries. Rady is a graduate of the University of Richmond and the Georgetown University Law Center.
Financials
Historic
Historic financials
| 12 Months Ending | 12/31/2006 | 12/31/2007 | 12/31/2008 | 12/31/2009 | 12/31/2010 | 12/31/2011 | 12/31/2012 | 12/31/2013 | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | 12/31/2022 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue, GAAP | 48,371.00 | 48,418.00 | 48,296.00 | 49,934.00 | 67,039.00 | 65,259.00 | 54,657.00 | 51,452.00 | 49,605.00 | 48,851.00 | 52,824.00 | 52,546.00 | 53,647.00 | 40,905.00 | 41,908.00 | 81,288.00 | 100,330.00 |
| Net Income, GAAP | 19,337.00 | 8,144.00 | 8,104.00 | 8,635.00 | 8,257.00 | 10,009.00 | 14,570.00 | 22,003.00 | 9,135.00 | 6,960.00 | 7,215.00 | 21,308.00 | 11,153.00 | 16,026.00 | 9,616.00 | 21,979.00 | 31,372.00 |
| Margin % | 40 | 16.8 | 16.8 | 23.2 | 17.7 | 19.7 | 22.3 | 23.5 | 23.1 | 21.4 | 24.4 | 23.7 | 25.2 | 17.4 | 23.9 | 27.7 | 35.4 |
| Total assets | 115,546.00 | 115,268.00 | 111,148.00 | 212,949.00 | 195,014.00 | 188,002.00 | 185,798.00 | 172,101.00 | 167,566.00 | 167,381.00 | 171,615.00 | 171,797.00 | 159,422.00 | 167,594.00 | 154,229.00 | 181,476.00 | 197,205.00 |
| EV/EBITDA | 8.43 | 7.08 | 5.12 | 10.66 | 7.09 | 7.46 | 8.2 | 9.28 | 10.48 | 12.68 | 12.48 | 12.03 | 13.38 | 12.46 | 17.56 | 13.63 | 7.48 |
| Average | 9.28 | 8.05 | 5.93 | 4.77 | 9.91 | 7.71 | 7.89 | 9.02 | 9.16 | 11.14 | 12.74 | 12.83 | 12.71 | 12.09 | 11.83 | 19.82 | 11.54 |
| High | 10.29 | 9.03 | 7.62 | 10.66 | 11.58 | 8.41 | 8.75 | 9.99 | 10.5 | 12.67 | 14.26 | 13.87 | 14.56 | 13.46 | 17.54 | 27.97 | 13.08 |
| Low | 8.09 | 6.78 | 4.27 | 3.27 | 7.09 | 6.7 | 7.26 | 8.33 | 8.34 | 10.17 | 11.32 | 11.99 | 11.22 | 10.43 | 9.65 | 13.61 | 7.48 |
| Price to Book Ratio | 2.59 | 2.37 | 2.08 | 1.63 | 1.6 | 2 | 2.25 | 2.57 | 2.75 | 3.08 | 3.31 | 3.04 | 3.94 | 3.43 | 3.24 | 4.3 | 3.01 |
| Return on Common Equity | 28.26 | 11.96 | 13.24 | 11.71 | 9.29 | 11.78 | 17.83 | 27.94 | 12.38 | 10.24 | 11.61 | 32.58 | 16.56 | 25.33 | 15.22 | 31.3 | 36.3 |
| Total Debt to Total Equity | 11.17 | 20.18 | 29.93 | 53.8 | 49.86 | 47.13 | 45.86 | 47.62 | 51.22 | 59.85 | 70.33 | 60.69 | 65.47 | 84.24 | 65.02 | 53.44 | 40.71 |
| Shares | |||||||||||||||||
| Last Price | 24.55 | 21.55 | 16.79 | 17.24 | 16.6 | 20.51 | 23.77 | 29.04 | 29.53 | 30.6 | 30.79 | 34.33 | 41.38 | 37.14 | 36.81 | 59.05 | 51.24 |
| Dividends per Share | 0.96 | 1.16 | 1.28 | 0.8 | 0.72 | 0.8 | 0.88 | 0.96 | 1.04 | 1.12 | 1.2 | 1.3 | 1.38 | 1.46 | 1.53 | 1.57 | 1.6 |
| Employes | 98,000.00 | 86,600.00 | 81,800.00 | 116,500.00 | 110,600.00 | 103,700.00 | 91,500.00 | 77,700.00 | 78,300.00 | 97,900.00 | 96,500.00 | 90,200.00 | 92,400.00 | 88,000.00 | 78,500.00 | 79,000.00 | 83,000.00 |
Projections
| 12 Months Ending (Millions USD) | 2016A | 2017A | 2018A | 2019A | 2020A | 2021A | 2022A | 2023P | 2024P | 2025P | 2026P | 2027P |
| Revenue | 52,824.00 | 52,546.00 | 40,825 | 41,172 | 41,908.00 | 81,288.00 | 100,330.00 | 70,231 | 56,185 | 56,185 | 61,803 | 67,984 |
| Cost of Revenue | 12,329 | 11,240 | 8,987 | 8,251 | 8,484.00 | 30,821 | 34,344 | 21,503 | 17,202 | 17,202 | 18,922 | 20,815 |
| Gross Profit | 40,495.00 | 41,306.00 | 31,838.00 | 32,921.00 | 33,424.00 | 50,467.00 | 65,986.00 | 48,728.19 | 38,982.55 | 38,982.55 | 42,880.81 | 47,168.89 |
| Reseach & Development | 7,872 | 7,657 | 7,760 | 8,394 | 11,597 | 10,360 | 11,428 | 12,606 | 13,906 | 15,339 | 16,920 | 18,665 |
| Selling, General & Administrative | 14,837 | 14,784 | 12,612 | 12,750 | 8,709 | 12,703 | 13,677 | 10,975 | 8,780 | 8,780 | 9,658 | 10,624 |
| Amortization of intangible assets | 4,056 | 4,758 | 4,736 | 4,462 | 3,436 | 3,700 | 3,609 | 3,552 | 3,552 | 3,552 | 3,552 | 3,552 |
| Restructuring charges and certain acquisition-related costs | 1,724 | 487 | 1,058 | 601 | 600 | 802 | 1,375 | 963 | 770 | 770 | 847 | 932 |
| Other (income)/deductions––net | 3,655 | 1,315 | 2,077 | 3,314 | 669 | -4,878 | 217 | 975 | 1,733 | 1,733 | 1,733 | 1,733 |
| Operating Income (EBITDA) | 8,351.00 | 12,305.00 | 3,595.00 | 3,400.00 | 8,413.00 | 27,780.00 | 35,680.00 | 19,657.15 | 10,241.49 | 8,807.97 | 10,169.92 | 11,663.18 |
| Provisions/(benefit) for taxes on income | 1,123 | -9,049 | -266 | 618 | 477 | 1,852 | 3,328 | 2,058 | 1,021 | 858 | 998 | 1,152 |
| Net income for common share holders | 7,228.00 | 21,354.00 | 3,861.00 | 2,782.00 | 7,936.00 | 25,928.00 | 32,352.00 | 17,599.30 | 9,220.41 | 7,950.32 | 9,171.65 | 10,510.79 |
Market
Total addressable market size:
Research shows that approximately 95% of the world has health issues or problems [1]. Currently, the world population is at 7.8 billion people. This means that 95% of 7.8 billion people is 7 billion, 410 and million is the addressable market size [2].
According to Statista, the global pharmaceutical industry had an annual revenue of $1.42 trillion in 2021 [3].
In terms of market share, Pfizer held 5% of the world's prescription drug market in 2019 [4].
Serviceable addressable market size:
The healthcare industry is worth $808 billion in the United States as of 2021 [5].
Serviceable Obtainable Market:
Here, the total addressable market size is the patient population that was treated with Pfizer vaccines and medicines. This is estimated to be about 1.3 billion patients around the world [6]
In 2022, the industry is expected to generate 1.14 trillion U.S. dollars in prescription drug revenue worldwide ([7].
Competition
Despite Pfizer being the leading company in the biotechnology and pharmaceutical industry, several other large, global drug manufacturers are in competition with Pfizer. These companies include Johnson and Johnson, Amgen, Novo Nordisk, Merck and Co, AbbVie Inc, and Eli Lilly and Co.
In FY 2022, Pfizer made $31.37 billion in net income out of $100.33 billion in annual revenue. The company's market capitalization was $227 billion as of market close on March 24, 2023 [8]. Market cap is used to determine a company's size and then evaluate the company's financial performance to other companies of various sizes. In investing, companies with larger market capitalizations are often safer investments as they represent more established companies with generally longer history in business carrying less risk than small-cap companies.
- Johnson and Johnson:
- Market cap: $423 billion
- FY 2022 Revenue: $95 billion
- FY 2022 Net income: $17.9 billion
- Top drug by revenue (FY 2022): Darzalex
- Revenue from top drug (FY 2022): $7.9 billion [9]
Johnson and Johnson is known for its health products, pharmaceuticals and medical devices.
2. Novo Nordisk A/S (NVO):
- Market cap: $349 billion [10]
- FY 2022 Revenue: $43.5 billion
- FY 2022 Net income: $16.9 billion
- Top drug by revenue (FY 2022): Ozempic
- Revenue from top drug (FY 2022): $5.7 billion [11]
Novo Nordisk is a Norweigan pharmaceutical company that focuses on treating diabetes, obesity and other serious chronic diseases and conditions. Ozempic was Novo Nordisk's top selling drug in 2022 which is an insulin therapy delivered by injection.
3. Eli Lilly and Co:
- Market cap: $440 billion [12]
- FY 2022 Revenue: $28.5 billion
- FY 2022 Net income: $6.2 billion
- Top drug by revenue (FY 2022): Trulicity
- Revenue from top drug (FY 2022): $5.7 billion [13]
Eli Lilly is a global drug manufacturing company which focuses on discovering, developing, manufacturing and marketing human pharmaceutical products. The company's top selling drug in FY 2022 was Trulicity which is used to treat type 2 diabetes.
4. Abbvie Inc.
- Market Cap: $242 billion [14]
- FY 2022 Revenue: $58.1 billion
- FY 2022 Net Income: $11.8 billion
- Top Drug by Revenue (FY 2022): Humira
- Revenue from Top Drug (FY 2022): $18.6 billion ([15]
AbbVie is a global biopharmaceutical company engaged in research and development, manufacturing, commercializing and selling innovation medicines and therapies. Its medical products span a range of healthcare-related areas such as immuology, oncology, neuroscience, etc.
5. Merck and Co. Inc
- Market Cap: $289 billion
- FY 2022 Revenue: $59.3 billion
- FY 2022 Net Income: $16.4 billion
- Top Drug by Revenue (FY 2022): Keytruda
- Revenue from Top Drug (FY 2022): $20.9 billion [16]
The company offers prescription medicines, vaccines, biologic therapies, and animal health products. Its two operating segments are pharmaceutical and animal health.
Overall, Pfizer's largest competitor is Johnson and Johnson. Johnson and Johnson may not generate the same amount of revenue from its products but its market cap and total revenue make it a strong competitor.
That being said, Pfizer is different from other companies because Pfizer continually emphasises innovation and its multi-billion dollar investment in R and D results in a strong and differentiated product pipeline. The organizational effectiveness of the company is constantly improving by continuously educating patients, physicians, payers and global health authorities on the benefits and risks of medicines and vaccines. Pfizer continues to evaluate, adapt and improve the organisation and business practice in order to meet customer and public needs. Pfizer establishes a "first-to-market" for biosimilar products to provide customers a lower-cost alternative immediately when available as well as providing the company with higher sales and profitability until other competititors enter the market. Pfizer's intellectual property and continuous medicine development are its competitive advantages over other companies [17].
Valuation
Three different methods were used for the valuation: discounted cash-flow analysis (DCF), comparable company analysis and the dividend discount model. Since Pfizer is a late-stage company which is mature, established and its dividends are relatively stable and predictable, DDM could help us produce the closest to reality results. The DDM assumes a constant or stable dividend growth rate, which aligns well with the characteristics of Pfizer.
Using this method, under our base case, we found a value per share of $36.67. Thus the company is trading at a premium of 0.49% (market value per share right now is $36.85) compared to its intrinsic value. The assumptions taken for this method were the following:
| Description | Value | Commentary |
|---|---|---|
| Stage 1 growth | 2.5% | This value was selected based on the growth rate of Pfizer's dividends over the last 3 years. |
| Stage 2 growth | 3% | Stage 2 growth rate represents the perpetual growth rate. It is usually between 2-3% since it ranges between historical inflation rate and global GDP growth rate. |
| Cost of equity | 7.46% | The cost of equity was calculated based on the CAPM. 10-year US Treasury, average market rate of return and beta of Pfizer were all used in order to come up with this number. |
Using the DCF valuation method, under our base case, we found a value per share of $28.64. Thus the company is trading at a premium of 22.3% (market value per share right now is $36.85) compared to its intrinsic value calculated using DCF. DCF is an assumption-based model and the accuracy of those assumptions can significantly impact the valuation results. The assumptions used are included in the following table:
| Description | Value | Commentary |
|---|---|---|
| Revenue growth (% change) | -30% for year 1, -20% for year 2, 0% for year 3, 10% for years 4 and 5 | The revenue growth is expected to fall by 30% for 2023, as highlighted by the company's published 10K annual report. We expect the revenue growth to continue falling by 20% for 2024 as demand for COVID-19 will keep decreasing and Pfizer's main source of revenue is coronavirus products (57% of total revenue for 2022). Then, for the following years we expect the company to develop new products and boost its revenue streams by 10%, as 119 products are in either clinical phases or registration. |
| Cost of sales (% of Revenue) | 31% | The historical average of COGS as a percentage of revenue was calculated. |
| SG&A (% of Revenue) | 16% | The historical median of SG&A as a percentage of revenue was preferred here, since there was a large difference between 2020 and 2022 results. |
| R&D expenses growth (% change) | 10% | From 2021 to 2022, the company raised its R&D expenses by 10%. Therefore, we expect the R&D expenses growth to increase by 10% each year, since Pfizer is focusing on creating new drugs and medication and R&D is at the center of what the company is doing. |
| Acquired in-process research and development expenses (% of revenue) | 2% | The historical average as a percentage of revenue was selected. |
| Amortization of intangible assets ($ millions) | $3,552 | The historical average in millions of dollars was selected. |
| Other (income)/deductions-net ($ millions) | $975 for the 1st year, and $1733 for the next 4 years | Pfizer issued $31 billion of debt on May 2023 and since it will need to pay around $1516 mil. more each year, we expect this element of the income statement to rise moving forward as it is dominated by interest expenses. |
| Restructuring charges and certain acquisition-related costs (% of revenue) | 1% | The historical average as a percentage of revenue was selected. |
| Tax(% of Income before provision) | 11.4% | As of Q1 2023, Pfizer's effective tax rate is 11.4%. |
| Capital Expenditures ($ millions) | $3736 mil. for year 1, $4236 mil. for year 2, $4736 mil. for year 3, $5236 mil. for year 4, $5736 for year 5 | Pfizer increased its Capex from 2020 to 2022 by $500 mil. each year, so we expect this trend to continue. |
| Accounts Receivable (Days) | 46 days | The historical average of Accounts Receivable (days) was used. Accounts receivable (days) is calculated as (Accounts Receivable/Revenues)*365. |
| Accounts Payable (Days) | 70 days | The historical average of Accounts Payable (days) was used. Accounts payable (days) is calculated as (Accounts Payable/COGS)*365. |
| Inventory (Days) | 102 days | The historical average of Inventory (days) was used. Inventory (days) is calculated as (Inventory/COGS)*365. |
| Discount rate | 7.01% | Discount rate was calculated using the WACC formula. Cost of equity was the same as before (DDM), whereas cost of debt was selected as the cost of borrowing the latest $31 billion (5% on average). Debt was calculated as short-term + long-term debt and for the equity part the current market capitalization was used. |
| Perpetual growth rate | 3% | In order to calculate the terminal value, a growth rate of 3% in perpetuity was used. |
Our last method for valuing Pfizer was comparable company analysis. Price/earnings and Enterprise Value/EBITDA ratios were used. Earnings of 2022 were multiplied by the median P/E ratio of the competitors (i.e. Merck, GSK, J&J, Abbvie, Amgen, Eli Lilly). The implied market cap was $631,442 million. This divided by shares outstanding resulted in an implied price per share of $112.38 which is significantly higher than the current one of $36.85. Thus the company seems undervalued when using this method. This may mean that investors may not be fully recognizing the company's earnings potential or growth prospects, leading to a lower valuation compared to its peers.
When using the second multiple, we multiplied EBITDA of 2022 by the median EV/EBITDA ratio of Pfizer's competitors. The implied enterprise value was $608,533 million. Next, net debt was subtracted and we arrived at a $573,120 million market capitalization. This divided by shares outstanding resulted in an implied price of $102, which is again significantly higher than the current market price.
Sensitivity Analysis
Sensitivity analysis provides valuable insights into the potential outcomes and risks associated with models which are based on a wide range of assumptions. As such, it is crucial to be implemented for models, such as DDM and DCF.
For the DDM model, stage 1 growth rate and cost of equity were selected for the sensitivity analysis table. As expected, when cost of equity increases, the intrinsic value per share decreases and when growth rate increases, intrinsic value per share increases.
Risks
Following risks or uncertainties include the following:
- Risks related to business, industry and operations
| Risk | |
|---|---|
| The outcome to meet anticipated pre-clinical and clinical endpoints, and to be able to meet regulatory approval with the possibility of potential unfavourable pre-clinical or clinical data. | |
| Able to address comments and concerns from regulatory authorities and to be able to obtain approval for new products. | |
| Claims and concerns in regards to the safety of efficiacy of products and product candidates. | |
| Competition from new product entrants, including but not limited to; generic products, private label products and biosimilars. | |
| Impact of public health outbreaks impacting on business, operations and financial conditions. | |
| Impact of increased presence of counterfeit medicines or vaccines in the pharmaceutical supply chain. | |
| Impact of increased presence of counterfeit medicines or vaccines in the pharmaceutical supply chain. |
2. Risks related to Government Regulation and Legal Proceedings
| Risks | |
|---|---|
| The impact of any U.S. healthcare reform involving cost controls affecting publicly funded health programs that may be implemented. | |
| Governmental regulations affecting operations. |
3. Risks involving Intellectual Property, Technology and Security
| Risks | |
|---|---|
| Business disruption, theft of information that result in an integrity comprimise resulting from a cyber-attack. | |
| Risks to products, patents and other IP including, claims of invalidity, patent infringemen and pressure or regulatory action by the government or large stakeholders. |