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Bank of America analysts downgraded Pfizer (NYSE:PFE) stock to Neutral from Buy, citing long-term uncertainty.
The analysts flag two key concerns: 1) the magnitude of the revenue decline for Comirnaty/Paxlovid in 2023, and 2) the collective impact from launches to offset the approximate $17 billion LOE hole in 2025-2030 (guidance: $20B in new launch revenue by 2030).
“Our previous Buy thesis was centered on Comirnaty/Paxlovid driving robust cash flow earmarked for BD, but as total COVID-19 revenues erode, there is less available for BD and at a time where new product growth looks less certain… Overall, while we appreciate Pfizer’s ability to still carry out substantial BD, we suspect that a share re-rating (currently 11X 2023 estimates vs. peers: 18X) will be driven by upside from new product launches, which is not likely to materialize in 2023,” they explained in a downgrade note.
At the same time, the analysts upgraded Merck & Company Inc (NYSE:MRK) to Buy from Neutral and raised the price target to $130 from the prior $110 per share.
“We are upgrading MRK to Buy from Neutral based on continuation of strong growth trends seen last year (2023-25 revenue CAGR 6% vs. 1% Biopharma peers) and substantial progress diversifying the Keytruda LOE/concentration risk. Indeed, at a time where the macro backdrop could remain uncertain throughout most of 2023, Merck’s consistent revenue upside (1Q22: +$1.3B; 2Q22: +$751M; 3Q22: +$490M) should be highly valued, in our view,” the analysts wrote in a separate note.
Shares of Pfizer are down 1.7% in pre-market Wednesday while Merck stock is up about 1%.
