Pfizer (NYSE: PFE) shares have surged in value over the past four weeks. Since the first week of October, the stock has added 15%. By comparison, America’s leading stock market index, the S&P 500, has returned just 8% over the same time frame.
Over the past year, Pfizer shares have produced a total return of 41%, outpacing the S&P 500’s total return of around 26%.
Pfizer shares surge
Investor sentiment towards the pharmaceuticals group has been buoyed by its coronavirus treatments. Not only does the company jointly produce one of the world’s leading vaccinations for the virus, but it also recently published strong clinical data for its coronavirus antiviral treatment, Paxlovid.
In non-hospitalised coronavirus patients, this treatment substantially reduces the risk of hospitalisation by 89%. Some doctors and analysts have described it as a game-changing development in the world’s battle against this disease.
That is why shares in the company have performed so well recently. However, this is unlikely to be a substantial long-term revenue generator for the group.
Almost every single large pharmaceutical company in the world is working on different coronavirus treatments, so the competition is fierce. Pfizer’s offer may be one of the first out of the gate, but it certainly will not be the last.
But there is far more to the company than just its coronavirus drugs.
Sector giant
Pfizer is one of the world’s largest pharmaceutical corporations with a broad portfolio of products and treatments. The company recently said it is projecting total revenues of $81bn for the current financial year. Of this, $36bn will account for sales of its coronavirus vaccine.
Aside from this blockbuster treatment, the company has seven other flagship treatments in development and on the market. These include the blood thinner Eliquis and cardiovascular drugs Vyndaqel/Vyndamax. Sales for both of these drugs jumped by a double-digit percentage in the third quarter.
On top of these, the group has a further 94 drugs under development. Of these, 29 are in stage-three testing (the final step before submitting them to regulators for approval).
Of course, there is no guarantee these products will ever make it to market. If they do not, the company could struggle to replace revenues from its coronavirus vaccine over the next few years. This is probably the biggest challenge the group faces right now.
As I noted above, competition in the coronavirus treatment space is fierce, and while Pfizer may be benefitting from a revenue boost today, it is not clear how much longer that will last. Management is already projecting vaccine revenue will fall to $29bn in 2022.
Still, despite this risk, I think Pfizer shares look attractive considering the company’s valuation, treatment pipeline, and dividend potential. The stock is selling at a forward price-to-earnings (P/E) multiple of 11.6 and offers a 3.2% dividend yield.
As the firm continues to build on its successes over the past year, I would buy the stock for my portfolio today.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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