Pfizer's Valuation After FDA Approval of Next-Gen COVID Vaccine

Pfizer's share price has risen 5% in the past month and 6% in the past 3 months, but is still down 9% year to date and 9% over five years. The FDA has approved Pfizer and BioNTech's updated COVID-19 vaccine for older adults and high-risk individuals, potentially boosting vaccine revenues. The most popular narrative suggests Pfizer shares are undervalued, with upside left from current price levels, and our DCF model also points to Pfizer being undervalued. However, high debt levels and the potential for a dividend cut remain critical headwinds.

Pfizer Inc. (PFE) has seen its share price rise by 5% in the past month and 6% over the past three months, despite a 9% year-to-date decline and a 9% decrease over the past five years. The company's latest milestone, the FDA approval of its LP.8.1-adapted monovalent COVID-19 vaccine for older adults and high-risk individuals, has sparked optimism among investors. The vaccine, targeting specific SARS-CoV-2 sublineages, is expected to bolster vaccine revenues and align with FDA guidance on circulating strains.

The FDA approval comes on the heels of Pfizer and BioNTech's commitment to studying and improving their vaccine's performance against multiple circulating variants. Since their initial vaccine rollout, the companies have distributed 5 billion doses globally, emphasizing their leadership in vaccine development [1]. The new vaccine formulation generates improved immune responses against various circulating sublineages, potentially enhancing its effectiveness against COVID-19 variants [2].

However, the approval also highlights potential risks associated with the vaccine, including severe allergic reactions, myocarditis, and pericarditis occurrences. These risks could raise public concerns and impact uptake rates, necessitating ongoing careful monitoring and adverse reaction management [1]. Additionally, Pfizer's reliance on FDA guidance for sublineage adaptation may limit its ability to independently predict or respond to emerging variants, potentially impacting the vaccine's efficacy and commercial success [1].

Despite these challenges, Pfizer continues to demonstrate growth and resilience in the pharmaceutical sector. The company offers a 6.65% dividend yield, reflecting its commitment to shareholder returns [1]. However, analysts have issued mixed ratings and price targets for Pfizer, reflecting the complex interplay between the company's performance and broader market dynamics [2].

In conclusion, Pfizer's share price rebound is driven by the FDA approval of its updated COVID-19 vaccine for high-risk populations. While the approval offers potential upside, investors should remain mindful of the risks associated with the vaccine and the company's high debt levels. The latest developments underscore the need for a balanced perspective when evaluating Pfizer's investment potential.

References:
[1] https://www.quiverquant.com/news/Pfizer+and+BioNTech+Receive+FDA+Approval+for+LP.8.1-Adapted+COVID-19+Vaccine%2C+Shipping+to+Begin+Immediately
[2] https://finance.yahoo.com/news/pfizer-pfe-announces-fda-approval-041037875.html