Last month I took an initial look at Pfizer, the company and the stock.

In that post, I go through the process I typically do when looking at a stock with fresh eyes. I checked out the charts to get a handle for the recent price action, did a little reading, and browsed the company’s fundamentals.

The basic story seemed to be of a stock that flew high through COVID due to the large amount of money their vaccine and related drugs were bringing in. The demand for those vaccines is falling, revenues are dropping, and now the stock has dropped to basically value status… trading at revenue and earnings multiples below the market average. TBD if the company deserves it.

In that post I cited a quote about the Pfizer CEO, Albert Bourla:

Instead, since becoming chief executive in 2019, Albert Bourla, has sought to transform the company from a diversified pharmaceutical conglomerate into a nimbler, science-led business.

Pfizer pins hopes on record pipeline to recover from post-Covid hangover by Jamie Smyth.

I ended my post saying:

I’ll hope to find out more about what that really means and if that’s just PR speak or something that is really driving Bourla and the company.

This post is getting long, so I’m going to cut it off here. I also need some time to listen to those earnings calls and parse what I find there. I’ll look to get this series finished well before the Jan 30 earnings call.

Digging into Pfizer, Part 1

So is Albert Bourla seeking to transform the company into a nimbler, science-led business? What does that even mean? Is it just PR speak?

I watched this interview below with Bourla and I came away with a positive view of him and Pfizer. His replies feel earnest. I believe him when he talks about Pfizer as a mission driven business.

One bit from the interview I like is how Pfizer supplies drugs “at cost” to the developing world (or they use some kind of poverty index). I believe other drug companies have similar programs, but this sounds unique to me. It jives with how I try to benefit the little guy in my own business. Pfizer committed to the program for 10 years after a country develops out of poverty, but during that time they would help the country build infrastructure to make and distribute the drugs.

Okay that’s nice, but we invest in stocks to make money. I think it’s a good long term play. I mean… basically like drug dealers, they are getting these countries hooked on Pfizer versions of drugs and then as the countries develop, they can turn them into profitable segments of the business. Assuming geopolitics doesn’t mess things up, technology and globalization should help a lot of these poorer countries develop faster than in the past and Pfizer can make bank in the future selling them blood pressure medicine.

But again, am I just drinking the Kool-Aid from a charismatic CEO? Maybe.

This brings up an issue with me personally investing in pharmaceutical products. I have no frame of reference. Contrast this with the tech space where my day job, daily life, and personal interests mean that I have a better understanding of what tech companies are up to. So with AI for example, I have a good idea if a particular tech company has the potential to profit from advances in AI or if they are just throwing buzzwords out during the conference call. I don’t have to seek out CEO interviews as much, I’ve already been watching interviews with the engineers and teach leads who are actually getting the work done. I use their products every day, as an end user, but also as a developer and partner.

When it comes to Pfizer and other pharmaceuticals, I have no idea. I can guess based on interviews I’ve listened to about biology science that gene therapies are likely to come to market a bit slower than anticipated, that mRNA is promising for more than just COVID vaccines, people are working on “growing” computer chips, and there is a real possibility of universal cancer treatments coming out of new directions in cellular biology research… but I can’t tell you which of the big or small pharma companies are the most likely to benefit.

So I’m learning a lesson about staying in my lane. I’ve been through waves of wanting to diversify to wanting to consolidate my investments. Over time, I feel I’ve figured out that sweet spot for me… which includes holding mostly tech stocks and a relatively large amount of crypto… investments that I feel I have an edge with.

But back to Pfizer for now. Is it a good investment? It seems like a well run company that has a chance to benefit from a wave of incoming health tech. It’s undervalued for a mature company, but it’s unclear how much market cap they deserve to lose as revenue from their COVID related vaccines and drugs dry up some.

The COVID boom and bust is important, but it’s not the whole story here and could be an investment opportunity. While I tend to focus on “what’s the biggest challenge facing this company”, I’m also optimistic at heart. Folks are focused (perhaps rightfully so) on the loss of revenue as their COVID drugs lose sales, but on the flip side I’m like “holy shit, they were able to create and distribute $100B worth of a new drug in 2 years”, meaning they could do it again.

It will be interesting to watch earnings. Since the part 1 post, Pfizer reported Q4 2023 numbers. There was a slight revenue miss, but a nice beat on earnings in line with recent quarters. This tells a story of a company reigning in costs despite lowered revenue, which lines up with Bourla’s “get nimble” goals. Q1 2024 earnings are expected May 7, 2024. If instead we saw EPS dropping along with revenue, that would indicate a poorly run company that got too used to high revenue that they should have known was temporary. It seem Pfizer will be able to weather things over the next few quarters.

Is Pfizer the best pharma or health tech company to invest in? I don’t know. Is it better to focus on the short term boost semaglutide-based weight loss drugs are bring to their parent companies? I don’t know. I don’t know enough to have the conviction to bet heavy on this company, but I would expect it to outperform, if only for the fact that the PE is below market levels and it seems like revenue losses should bottom out soon. You can expect a nice bump the first time Pfizer reports a quarterly YoY revenue increase and then the first time they report a annual YoY revenue increase.

I’m planning to just hold a small stake, enough to give me an excuse to keep tabs on this company. If I come up with anything around Pfizer, related stocks, or any stock really, I’ll be sure to share on the blog here.

Good luck out there.

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