Why This Pfizer, Regeneron Analyst Has Contrasting Recommendations For The COVID Stock Plays

An analyst at BofA Securities on Wednesday shared a pair trade idea in the large-cap pharma space.

The Biopharma Analyst: Geoff Meacham upgraded Pfizer, Inc. PFE shares from Neutral to Buy and increased the price target from $59 to $70.

The analyst downgraded Regeneron Pharmaceuticals, Inc. REGN shares from Neutral to Sell and reduced the price target from $675 to $575.

Pfizer's Narrative to Shift To Benefits Of COVID-19 Success: The bullishness on Pfizer hinges on expectations of a dramatic rollout of Paxlovid, the company's oral COVID-19 therapy, in 2022 and significant investments in the pipeline, Meacham said in a note.

In 2022, Pfizer's narrative will likely shift to the benefits of its COVID-19 success in the form of stepped-up pipeline/portfolio investments, the analyst said.

The Paxlovid rollout should provide more durable revenues and robust cash flow, with the latter expanding the menu of strategic options around the loss of exclusivity period, he said. 

On the COVID-19 vaccine front, periodic — i.e. every three years — and not annual boosters could become the norm, which supports lower long-term vaccine assumptions, Meacham said. 

BofA is bullish on the Paxlovid rollout, as it believes its forecast of over $20 billion revenues in 2022 is still conservative based on about 120 million courses.

Higher margins on Paxlovid vs. Comirnaty should provide good upside potential, the firm said.

Additionally, a number of internal pipeline readouts, including RSV, flu and Lyme disease vaccines, elranatamab in myeloma, IRAK4+ritlecitinib in rheumatoid arthritis and TL1A inhibitor in ulcerative colitis adds confidence in the portfolio, the analyst said. 

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Regeneron's Revenue Growth To Slow? Regeneron shares outperformed in 2021 thanks to a spike in COVID-19 antibody cocktail revenues that favorably impacted financials, Meacham said. Looking to 2022, however, the COVID-19 contribution should be minimal, potentially changing the narrative on shares, he added.

Eylea and Dupixent will likely continue to grow in 2022, but consensus expectations are not conservative with competitive headwinds on the horizon, Meacham said.

The impact from a high dose formulation of Eylea on life-cycle management is unclear, and new competitive threats in both atopic dermatitis and asthma could weigh on Dupixent demand as well, the analyst said.

Recent pipeline updates at the ASH meeting have shown early promise, the analyst noted. The oncology pipeline, however, is several years away from meaningfully adding to Regeneron's topline, with the Libtayo launch in non-small cell lung cancer underwhelming so far, he added.

BofA sees a challenging setup for Regeneron, with expectations for revenue growth set to slow in the near- to medium-term.

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