Pfizer shows that its R&D is strong. This makes his action a good long-term bet.

Two years ago, Pfizer (ticker: PFE) CEO Albert Bourla asked investors to place a big bet on the research and development operation that Dolsten rebuilt over more than a decade. This bet seems smarter than ever.

Bourla got rid of Pfizer’s off-patent drugs division and the last of its consumer health products, leaving behind an outright biopharmaceutical company that will live or die thanks to Dolsten’s science.

In a cover story in November 2019, Barron argued that Bourla and Dolsten could be successful.

New antiviral data reaffirms Pfizer case that Barron made two years ago. Continuing to profit from the pandemic, however, comes with new risks, as criticism grows over global inequality in vaccine distribution. Low-income countries account for less than 1% of the more than seven billion doses administered worldwide. If the distribution of Pfizer’s antiviral continues to favor rich countries, the company’s shares could ultimately suffer.

Pfizer shares jumped 10.9% on the day the data was released, their best daily performance in at least 20 years. Yet with the stock now changing hands at around $ 50, investors continue to undervalue the company. Investors value Pfizer at 12 times expected next year’s earnings, cheaper than peers like

Johnson & johnson

(JNJ) and

Eli lilly

(THERE IS).

The Pfizer rebate can be attributed to concerns over the patent cliff the drugmaker faced at the end of the decade. The company risks losing exclusivity on a handful of drugs that bring in billions of dollars in annual revenue.

The concerns are legitimate, but Pfizer’s science coup should give investors confidence that the company’s science can safely take them over that cliff. Catching up with the market may take time, but for long-term investors, this is a promising opportunity.

The success of the antiviral is the best illustration to date of Pfizer’s scientific prowess.

As Pfizer’s Covid-19 vaccine rolled out of German biotech laboratories

BioNTech

(BNTX), the new Covid-19 antiviral was created by what Dolsten called a ‘dream team’ of scientists at Pfizer’s own labs in the northeastern United States

In the early days of the pandemic, Pfizer split its efforts between its collaboration with BioNTech on the vaccine and its quest for a Covid-19 pill. The vaccination effort worked on a huge scale; Dolsten called it a “mega team” that crossed the Atlantic.

The antiviral project was a much smaller operation – a group of Pfizer experts operating with the remaining resources from the vaccination campaign.

“The small molecule looked more like an agile, laser-focused, high-end team with rather moderate resources,” Dolsten said.

Dolsten brought together some of Pfizer’s most senior scientists to work on the antiviral project, including its head of drug design, Charlotte Allerton. Scientists started with work Pfizer did years ago on one type of antiviral called a protease inhibitor.

The protease inhibitors from the Pfizer library, however, had been administered intravenously and did not work well when given orally. The team had to figure out how to adapt the drugs for oral administration, a huge undertaking.

“They must have really created a lot of new chemistry,” Dolsten said. Scientists created 600 compounds to find the right medicine, a process that can normally take years and that they accomplished in a matter of months. “Four years has turned into four months here,” he said.

Pfizer began testing the pill in humans in March. He is currently conducting a number of Phase 2/3 trials of the drug, including one for high-risk patients, one for low-risk patients, and one prophylactically for patients who have been exposed to the virus but not. are not. yet ill. In the first reading, the drug appeared to be significantly more effective than the Covid treatment pill from

Merck

(MRK).

“It certainly helps to prove that [Pfizer’s] Pharmaceutical R&D is better than people thought, ”said Louise Chen, analyst at Cantor Fitzgerald, who has an overweight rating and a price target of $ 61 on the stock.

Chen says she doesn’t expect investors to adopt her way of thinking until there is more clarity on the sustainability of sales of Covid-19 vaccines and pills, and the rest pipeline is proven.

“I think there isn’t a single event that will trigger a reassessment of the action to the next level,” she said. “Until these things play out, I don’t think they will necessarily be.”

This makes a bet on Pfizer a long-term game. Meanwhile, the experience of

Modern

(MRNA) in recent weeks highlights the possibility that vaccine manufacturers may come under scrutiny due to the uneven distribution of vaccines.

Biden administration officials are growing frustrated with Moderna, calling on the company to ramp up production so it can offer more doses at nonprofit prices to low-income countries, with a senior official calling on the company to “step up”.

Moderna shares have fallen more than 40% in the past three months.

As the pandemic continues, Pfizer risks eroding the enormous goodwill it gained about a year ago when it introduced its Covid-19 vaccine. Earlier this month, Pfizer CEO Bourla blamed low-income countries for unfair vaccine distribution, saying Barron that it was their fault they hadn’t placed orders. Pfizer has sold one billion doses of the vaccine in the United States at a non-profit price to donate to poor countries, and says at least two billion doses will be delivered to low- and middle-income countries by end of next year.

When it comes to antivirals, Pfizer has only said it will offer tiered prices for poorer countries, the same approach it took with its vaccine.

This is in stark contrast to Merck’s plan to make its own Covid-19 pill available to poor countries. Merck has signed an agreement with a United Nations-backed group that will allow its pill to be licensed globally, with no royalties paid to Merck.

Dolsten said Pfizer plans to authorize its pill through a mechanism similar to Merck’s. “We will look at these options,” he said. “We in no way said we would do anything different. We just want to make sure that whoever is involved is given the guidance and skills to do so. “

Such a step could not come soon enough. At the end of last month, activists protested outside Bourla’s home, calling on Pfizer to share its vaccine manufacturing technology and fulfill orders from low-income countries before those from rich countries.

An aggressive plan to share its antiviral would help stave off such criticism, keeping Pfizer in relative good graces with Washington and allowing its awe-inspiring science to continue to push the title up.

Write to Josh Nathan-Kazis at [email protected]