Stock of the week - Pfizer (23.12.2021)

New variant of coronavirus - Omicron - remains a source of uncertainty on the markets. Initial reports were grim, pointing to a higher transmissibility of Omicron than Delta and more severe symptoms. While those reports were partially dismissed, pharmaceutical companies rushed to develop new vaccines and treatments. Pfizer (PFE.US), a company who co-developed the first Covid-19 vaccine, has scored a win this week.

Omicron - not so scary?

After the Omicron variant first emerged, initial reports from scientists were not too optimistic - highly transmissible and more severe than Delta. However, new research papers on Omicron surface almost on a daily basis now and the most recent one from the United Kingdom paints a bright outlook. Scientists from the United Kingdom found that those infected with Omicron are less likely to be hospitalized than those infected with Delta. Moreover, symptoms of Omicron infections were also found to be less severe than in case of Delta-infection. This is obviously positive news and what makes it even more positive is the fact that Omicron starts to oust Delta as a dominant variant.

FDA approves Pfizer Covid pill

The US Food and Drug Agency (FDA) issued an emergency approval for Paxlovid pill - a Covid-19 treatment developed by Pfizer (PFE.US). While this is not the first coronavirus treatment available, this one is special as it can be administered by the patient at home, without a need for medical supervision or assistance. Pill is advised in treatment of mild-to-moderate symptoms in patients with high risk of hospitalization or death. Pfizer signed an agreement with the United States to develop 10 million courses of treatment in 2022 back in November (conditional on FDA approval) and has recently boosted its projections to 80-120 million courses by the end of 2022. The fact that Omicron is becoming a dominant variant and carries lower risk of hospitalization is potentially positive news for sales of a new Pfizer drug.

Need for more boosters

Developing coronavirus treatment that can be administered at home is a huge step forward towards "return to normal". This will also provide another source of Covid-related revenue stream for Pfizer apart from vaccine revenue. Speaking of vaccines, there is also some positive news for the company. A third shot of the vaccine - a booster - is becoming a widely accepted method of prolonging vaccine protection. However, it may not end there. Israel, a country that is among Covid vaccination leaders, said that a fourth shot may be needed for some, especially the elderly. From a business point of view this is good for Pfizer as it hints that vaccines may become a significant and recurrent source of revenue.

Vaccines accounted for 10-15% of Pfizer's quarterly revenue ahead of Covid-19 pandemic. However, the development of a highly successful vaccine turned out to be a jackpot for the company. Vaccines are now the main drivers of the company's sales, accounting for over 60% of total revenue. Source: Bloomberg, XTB

A look at the chart

Taking a look at how Pfizer's shares performed recently, we can see that the stock moved lower at the end of last week. However, stock managed to halt correction ahead of the lower limit of a market geometry in the $56.50 area. A recovery move was launched and the stock retested the $60 area on Wednesday. In case recovery fails and shares resume drop, the aforementioned $65.60 area will be a key support to watch. Should we see a break below it, 65-period EMA at H4 interval (blue line) will become the next target for sellers. This moving average saw numerous price reactions in the past two months. All-time high in the $61.70 area is a key short-term target for bulls.

Source: xStation5