Pfizer Inc

Pfizer Inc (NYSE: PFE) is one of the world's leading pharmaceutical firms. It spends a significant amount on research and development. PFE is primarily into the sale of prescription drugs and vaccines besides healthcare products and chemicals. The company's major products include vaccine Prevnar 13, cancer drug Ibrance, cardiovascular treatment Eliquis, and immunology drug Xeljanz. Pfizer has a presence across the globe, with its international sales accounts for 50% of total revenue.

Key Highlights

• Successful Phase 3 Serene Test: On April 12, Myovant Sciences and Pfizer Inc. announced the successful evaluation of Phase 3 SERENE study. The study was done to analyse the contraceptive efficacy of relugolix combination tablet (relugolix 40 mg, estradiol 1.0 mg, and norethindrone acetate 0.5 mg) in healthy women ages 18-35 years who are at risk for pregnancy. The Phase 3 SERENE study identified the ability of relugolix combination tablet to prevent pregnancy and the success of relugolix combination therapy as a potential treatment for uterine fibroids and endometriosis.

• Extension of a new drug- Abrocitinib: On April 7, Pfizer announced an extension of the review period for the New Drug Application (NDA) "Abrocitinib". The drug is used to treat moderate to severe atopic dermatitis. The review date has been extended for three months to early Q3 2021 as per the Prescription Drug User Fee Act (PDUFA). Additionally, the review period for the Supplemental New Drug Applications (NDA) for XELJANZ / XELJANZ XR (tofacitinib), drugs used for the treatment of ankylosing spondylitis (AS) in adults, extended by three months, with a goal date in early Q3 2021.

• Positive Results for Pivotal Covid-19 Vaccine: On March 31, Pfizer Inc. and BioNTech SE announced the phase 3 trial result of Pfizer-BioNTech COVID-19 vaccine, "BNT162b2". It demonstrated 100% efficacy and robust antibody responses against SARS-CoV-2 infection in adolescents 12 to 15 years of age, exceeding those recorded earlier in vaccinated participants aged 16 to 25 years old. These are topline results from a pivotal Phase 3 trial in 2,260 adolescents.

• Declared second quarter 2021 dividend: On April 22, Pfizer announced a 39 cent second-quarter 2021 dividend on the company's common stock, payable on June 4, 2021, to the Common Stockholders at the close of business on May 7, 2021. 

Financial overview of FY 2020 (In millions of U.S. dollars)

Source: Company 

• In FY 2020, the company reported a slight increase in revenue by 1.8% to USD 41,908 million as compared to USD 41,172 million in the previous corresponding period. The increase in revenue was primarily due to US demand for injectable products and increased uptake for Prevenar 13 in international markets due to vaccine awareness from respiratory illness partly offset by lower demand from China.

• Total Cost of sales recorded at USD 8,692 million, higher than USD 8,251 million in the previous year. Moreover, the period was marked by higher Research & development expenses (USD 9,405 million v/s USD 8,394 million in FY19) partly offset by lower SGA expense (USD 11,615 million v/s USD 12,750 million in the previous year).

• EBIT stood at USD 7,497 million in FY 2020, against USD 11,485 million in the previous corresponding period. EBIT declined mainly due to lesser gain recorded from the healthcare JV transaction (USD 6 million v/s USD 8,086 million) as compared to previous year.

• The company posted net income of USD 9,616 million in FY 2020, against USD 16,273 million in FY 2019. 

Risks associated with investments

Expectations from product pipeline, success of in-line products and product candidates prevailing in the market, delay in approval of clinical test trials would negatively impact the company’s business. Additionally, any change in regulatory body, legislative or regulatory action would further dampen the business of the company. 

Stock recommendation 

The successful launch of Relugolix combination tablet and accelerated use of XELJANZ for the treatment of adults provide an enormous opportunity for the Company. The Pharmaceutical market is one of the fastest-growing markets globally. It is projected to grow further over the years, which would generate plenty of opportunity for the Company. Furthermore, the group reported positive result from the phase 3 trial of the Pivotal COVID-19 Vaccine. Moreover, the group is quite optimistic regarding its 2021, which reflects in the financial guidance where revenue is expected to be in the range of ~44.4 to ~46.4 billion, while adjusted diluted EPS anticipated in the range of ~USD 2.5 to USD 2.6. Pfizer also outperformed profitability margins of the industry, whereas during FY 20 the Gross Margin for the Industry was 71.22% while PFE recorded gross margins of 79.54%. Also, the Operating margins recorded was 19.74% for PFE versus 7.31% for Industry. On the Valuation front, the stock is trading at a forward EV/Sales of 4.0x as compared to Industry average of 6.8x. Hence, considering the aforementioned facts, we recommend a “Hold” rating at the closing price of USD 38.64 on April 22, 2021.

1-Year Price Chart (as on April 22, 2021). Source: Refinitiv (Thomson Reuters)

Fisker Inc.

Fisker Inc. (NYSE: FSR) is engaged in the design and manufacturing of eco-friendly electric vehicles (EV).

Key Updates:

• Absence of Revenue Generation likely to continue in FY21: The company provided its FY21 guidance, wherein it expects total operating expense within the range of USD 210-240 million, significantly higher than USD 43.324 million in FY20. Moreover, the company expects its capital expenditure for FY21 within the range of USD 210-240 million.

 Source: Company Report

• Green Memorandum agreement with Crédit Agricole Consumer Finance: Recently, the company signed a Memorandum of Understanding with Crédit Agricole Consumer Finance, a leading Bank in Europe, wherein the latter would purchase Fisker Ocean SUVs for its eligible employees and selected private banking clients after January 2023.

Q4FY20 Financial Highlights:

• FSR announced its quarterly result, wherein the company posted total operating costs and expenses of USD 31.306 million, significantly higher from USD 2.763 million in the previous corresponding period (pcp).
• Loss from operations widened to USD 31.306 million, as compared to USD 2.763 million in Q4FY19.
• The quarter was marked by higher interest expense (USD 0.284 million v/s USD 0.158 million in pcp) and gain in fair value - convertible equity security & embedded derivative (USD 19.356 million v/s a loss of USD 0.071 million in pcp).
• The company reported a net loss of USD 12.037 million, stood higher than USD 3.017 million in pcp.
• Cash and cash equivalents were recorded at USD 991.158 million, while total assets were recorded at USD 1,063.892 million.

Q4FY20 Income Statement Highlights (Source: Company Report)

Risks: The company is expecting a surge in its input and operational costs for FY21 while expects its capital expenditure of USD 210-240 million. Hence, due to the absence of a revenue component, the company might witness a liquidity crunch, which may result in a delay in project execution.

Stock Recommendation:

The company provides outsourcing of electric vehicle manufacturing, and its first production is expected in the latter half of FY22. The outlook of the EV Vehicle industry remains very attractive, and companies with a higher capital base which has scale of operations, are likely to take the opportunity arising from the sector. The company is yet to record an income from its operations, which remains a key concern. The stock of FSR corrected ~28% in the last one month and closed below its 50-days, 100-days, and 200-days simple moving average, indicating a bearish trend. Hence, considering the above facts, we suggest an ‘Avoid’ rating on the stock at the last closing price of USD 13.78 on April 22, 2021.

One-Year Price Chart (as on April 22, 2021). Source: Refinitiv (Thomson Reuters)

Altimmune Inc

Altimmune Inc (NASDAQ: ALT) is a United States-based clinical-stage immunotherapeutic biotechnology company involved in developing products that engage, stimulate, and improve immune responses for the prevention and treatment of liver diseases.

Key highlights 

• Proprietary intranasal vaccine platform: The company is working rigorously on its intranasal vaccine platform ideally suited for rapid response to pandemic situations, including COVID-19. Under this, the group has three products under different phases. One of its products is being funded by U.S. Army Medical Research & Development. We believe nasal mucosal immunity can provide adequate protection at the site of viral entry and early replication and may block transmission by shed virus. 

• Strong development pipeline: The company is holding a solid and diverse pipeline including proprietary intranasal vaccines for COVID-19 (AdCOVID), anthrax (NasoShield) and influenza (NasoVAX); an intranasal immune modulating therapeutic for COVID-19 (T-COVID); and next-generation peptide therapeutics for non-alcoholic steatohepatitis (“NASH”) (ALT-801) and chronic hepatitis B (HepTcell). The first half of FY2021 is crucial for the company as data regarding AdCOVID, T-COVID and ALT-801 is expected to publish.

Source: Company 

• Increased liquidity: The company had cash, cash equivalents and short-term investments of USD 216.0 million on December 31, 2020, compared to USD 37.3 million on December 31, 2019. The increase was primarily due to net receipts of public offering in 2020. The management believes that their existing cash would be sufficient to fund its projected operating expenses and capital expenditure requirements.

Source: Company 

Financial overview of FY 2020

Source: Company

• In FY2020, the company reported revenue of USD 8.2 million compared to USD 5.8 million in the previous corresponding period. The change in revenue was primarily due to an increase in revenue under the Company’s U.S. government contracts due to the timing of manufacturing and clinical trials for the NasoShield and T-COVID programs.
• The company posted an operating loss of USD 54.7 million compared to USD 21.4 million in 2019 on the back of higher R&D expenses, which increased due to higher costs related to the development of AdCOVID, T-COVID and ALT-801 and higher G&A expenses.
• The company’s net loss in the reported period increased to USD 49.0 million, against USD 20.5 million in pcp. The loss was primarily attributable to higher research and development expenses and general and administrative expenses, offset by higher revenue and increased income tax benefit.

Risks associated with investment

The company is heavily dependent on the success of its leading product candidates, AdCOVID and ALT-801. In case, it fails to attain regulatory approval for commercialization of AdCOVID, ALT-801, or any other product candidate, company’s business would be substantially harmed.

Valuation Methodology (Illustrative): EV to Sales 

Note: All forecasted figures and peers have been taken from Thomson Reuters

Stock recommendation

The year has been transformative for the Company as it has made substantial progress in each of its portfolio programs. During the year, the Company initiated multiple clinical trials for several product candidates (T-COVID™, ALT-801 and HepTcell™) and completed preparations to begin a Phase 1 clinical trial of AdCOVID, which has begun enrolling volunteers. These achievements have set the stage for a busy and exciting year ahead. The Company enjoys a strong cash balance with no debt on books, along with healthy pipeline, data for which would be revealed in near time. Therefore, based on the above rationale and valuation, we recommend a “Speculative Buy” rating at the closing price of USD 12.68 as on April 22, 2021. We have considered Inovio Pharmaceuticals Inc, CureVac NV, Novavax Inc. as the peer group for the comparison.

1-Year Price Chart (as on April 22, 2021). Source: Refinitiv (Thomson Reuters)

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