In this clip from "The Health & Fitness Show" on Motley Fool Live, recorded on Feb. 11, Motley Fool contributors Brian Orelli, Meilin Quinn, and Sanmeet Deo talk about Pfizer's (PFE 2.75%) potential to hit $100 billion in total revenue and discuss how sustainable its stream of revenue is from its COVID-19 vaccine and treatment.
Brian Orelli: So Pfizer doubled its revenue year-over-year, which was maybe not so surprising since it had sales of its vaccine for COVID-19 that basically that entire doubling was the COVID-19 vaccine. Sales, I think, were down 1% if you subtract those out, and I think that was mostly due to the fact that there were more days of sales in the year-ago quarter compared to the current quarter. Otherwise, it was basically flat. I think it was up like 5% for the year or something, and they've been shooting for a 6% year-over-year growth in revenue, not including the vaccines and the treatment. The treatment got approved like the 20-something of December. It only had a few days of sales, and so there wasn't that much in the fourth quarter. But, they're expecting quite a bit of sales of their drug and their drug to treat COVID-19 as well as their vaccine next year. And then, the only issue is that their guidance is not for what they actually think they are going to get, it's for what they've currently contracted with the governments. So, it came in a little bit light compared to what people were expecting, but that's because they're basically just not guiding for anything that they haven't actually locked down yet for this current year. So the stock was down, but probably didn't necessarily deserve to be down because I think that investors are expecting or that Pfizer is expecting that that number will go up. They did that last year too. They only booked as they were getting the bookings. That's when they started raising their guidance. The only issue is that we don't really know what the gross margins are going to be and I think that they are likely to come down for the vaccine because, basically, they are now selling to lower-income countries that are going to expect lower prices on their vaccine. I think the gross margins on their vaccine is likely to come down substantially. Now they'll make up for that somewhat with their pill because they didn't have basically any sales in 2021 for their pill. I think the improvement there is going to be substantial, but it's a little hard to know exactly how much sales of their pill they're going to end up doing because that's more dependent on whether we have waves of people that end up getting the disease. So if we don't have a big wave, then they are going to have less sales than if we do have another big wave beyond Omicron.
Meilin Quinn: You're talking about Paxlovid, right?
Orelli: Yes, that's the drug and Comirnaty I think is the name of the vaccine.
Quinn: Yeah, Comirnaty. I have no idea how to pronounce that.
Orelli: I heard that they used a name specialist or something. [laughs] Apparently, there's a branding specialist, I guess. It's supposed to be a mashup of community and mRNA and something else. I can't remember what the third thing is.
Quinn: Wow.
Sanmeet Deo: Yeah, so it was interesting. They are forecasting $22 billion for the COVID-19 treatment pill and I guess they're going to be doing, I think it was what, another 30, 32 in vaccines for 2022. We're talking about this on the Morning Show and I think it was like $54 billion in COVID revenue for them in the next year.
Orelli: Which is basically like half of what their total guidance is. So, they're basically going to double their sales again this year.
Deo: Wow. And what is their total revenue?
Orelli: I think the guidance for the total revenue is like $100 billion.
Deo: Wow. So these COVID vaccines and treatments are essentially going to be nearly half of their total revenue. I didn't realize or even expect that this would be this high percentage of their revenues.
Orelli: Yeah. I mean, I don't think that you can expect that to happen year-over-year. It's going to drop back down. So, the value to the company is only a year's worth of free cash flow versus valuing a company based on its continuation of sales for years to come.
Deo: Yeah. It will definitely drop off, but I'm curious to see how it progresses and what kind of recurring and steady stream of revenue they will generate. Because even, I think on their call, they said the scientists believe that it's unlikely that COVID will be fully eliminated in the near future. There will be mutations and reinfections.
Orelli: Yeah, but the flu vaccines don't make very much because there's a lot of them so they compete with each other for price. And then, people don't necessarily want to get a booster every year. So, there's a lot of people who don't get the flu vaccine. Then, the flu treatments are even smaller sales, I think, and hardly anybody goes and bothers. They just go through it with their having the flu and recover, and I think that's probably where a lot of people are going to be at after the third booster. I think most people are going to be at the point where they're not really going to get that sick. So, they're not going to end up even going to their doctor and getting a prescription for the drug. I think a lot of those sales right now are already baked in based on countries just committing to buying the drug. So they'll get those sales, but at some point, the country has got to stop buying the drugs and it's got to go back to the same system that we do for every other drug, which is just that the companies buy the drug, the middleman buys the drug, and then they sell it to the pharmacies, and then the pharmacies bill your insurance. When we get to that point, I think the sales will be on an individual basis and be substantially lower than the sales are right now.
