The S&P 500 is soaring as this bull market roars on, but some stocks, even those that have rebounded in recent times, still are trading at much lower levels than in the past. In fact, two stocks that have dropped in the double digits over the past few years are coronavirus vaccine giants Moderna (MRNA -2.00%) and Pfizer (PFE 0.65%).
The two companies have suffered as demand for the vaccine weakened and investors worried about their future prospects. But this doesn't mean you should avoid these healthcare players. Fool.com contributors Adria Cimino and Keith Speights discuss why Moderna and Pfizer, following their losses, represent promising long-term buys right now.
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Moderna's evolving situation
Adria Cimino (Moderna): Moderna entered the coronavirus vaccine market with a splash in early pandemic days, becoming a vaccine leader along with Pfizer. The vaccine, Moderna's only product at the time, brought in billions of dollars in revenue and net income for the biotech company. Moderna stock reflected this success, soaring 1,200% in just two years.
But as investors started worrying about Moderna's dependence on the vaccine -- and what that would mean for revenue in post-pandemic days -- stock performance suffered. Over the past three years, Moderna shares have lost 37%.
Moderna's situation is evolving, though, and in a positive direction. The company still sells its coronavirus vaccine and is getting ready for the next vaccine season with an updated version -- but this product no longer is Moderna's only one.
The company recently won approval for its respiratory syncytial virus (RSV) vaccine, allowing it to target a market worth $10 billion. On top of this, Moderna's RSV vaccine is the only one on the market available in prefilled syringe format. This saves healthcare providers time and reduces administration errors, so it could help Moderna carve out significant market share.
The biotech also has a full late-stage pipeline and has set a goal of potentially releasing 15 new products in the coming five years. One of these would be the company's personalized cancer vaccine, a candidate that recently showed promising results in a phase 2 trial as a combination treatment with Merck's Keytruda. The companies have started phase 3 trials of the combination in high-risk melanoma and non-small cell lung cancer.
Moderna expects all of these potential products to result in as much as $30 billion in annual sales a few years post-launch. This includes the respiratory vaccine franchise, as well as products in oncology and rare and latent diseases -- rapidly transforming Moderna into a company able to treat a wide range of illnesses and broadening the biotech's revenue stream. And to strengthen its presence in the coronavirus vaccine market, Moderna is advancing a combined flu/COVID candidate -- a vaccine that could appeal to those who go for annual flu vaccines.
Today, Moderna shares offer a great buying opportunity, considering the company's recent regulatory and clinical trial news -- and potential product launches down the road.
More than meets the eye
Keith Speights (Pfizer): The numbers don't lie: Pfizer has been in a downward spiral. The big pharma stock has fallen more than 25% over the last 12 months and is over 50% below its peak set in late 2021.
Pfizer's revenue tumbled 20% lower year over year in the first quarter. Its earnings plunged 44%. But there's more to Pfizer than meets the eye.
Those dismal numbers you just read are primarily the result of two factors. First, Pfizer's COVID-19 product sales have tanked. Second, several of the company's blockbuster drugs will lose patent exclusivity over the next few years, including Inlyta and Xeljanz in 2025, Eliquis in 2026, and Ibrance and Xtandi in 2027.
However, I don't think either factor should be overly worrisome to investors. Anyone who still received a COVID-19 shot in 2023 is likely to do so this year too, in my view. I look for 2024 to be the trough year for Pfizer's COVID-19 sales. The company's new combination COVID-flu vaccine could spark a sales rebound, perhaps as soon as next year.
I don't expect Pfizer to pull a rabbit out of a hat and avoid the looming patent cliff. However, the drugmaker has a solid strategy to address the financial impact of losing patent protection for several top drugs. Pfizer projects its new products and new indications for existing products could generate added annual revenue of $20 billion by 2030. It anticipates another $25 billion or so per year in new revenue by 2030 from mergers and acquisitions.
Many investors seem to have largely written off Pfizer's prospects. The stock trades at only 12 times forward earnings. One thing more attractive than its valuation, though, is the forward dividend yield of over 6%. With that ultra-high yield, Pfizer won't have to deliver much share price growth to give investors solid total returns over the coming years.
Time to buy?
Moderna and Pfizer still are in transition right now, but the long-term picture looks promising -- and this should sound like music to the ears of long-term investors. That's because due to the recent challenges, you can get in on these stocks at reasonable levels -- and potentially win over the long term as these companies' newer products spur a fresh era of growth.
