Pfizer and BioNTech’s combined strike missed the mark. Is it time to sell?

Pfizer (NYSE: PFE) and BioNTech (NASDAQ: BNTX) have recently fallen behind in their race with Modern (NASDAQ: MRNA) to develop new combined photos that could be worth billions in annual sales. The peak results of an experimental vaccination to protect against the flu and COVID-19 weren’t a complete disaster, but there isn’t much room for error when it comes to vaccine development.

A setback in late-stage clinical trials is bad news, but that doesn’t necessarily mean it’s a good idea to sell any shares of Pfizer or BioNTech right now. Here’s what shareholders of both companies need to know before making bad decisions based on a clinical trial result.

Pfizer and BioNTech miss the flu

Pfizer and BioNTech have enrolled more than 8,000 healthy adults in a Phase 3 trial of an mRNA vaccine candidate designed to protect against influenza and COVID-19. The combined filing contains the partners’ COVID-19 vaccine, which has already been administered to millions of people, plus Pfizer’s experimental mRNA influenza vaccine.

As expected, people who received the combination injection showed immune responses as good as or better than their partners’ COVID-19 vaccine. The experimental combination shot performed well even against an approved flu vaccine in influenza A infections. However, when it came to protecting against influenza B strains, it failed to demonstrate non-inferiority.

Pfizer is not the first mRNA vaccine developer to run into trouble with influenza B. In April, CureVac and his partner GSK reported that immune responses to their candidate were lower than those of an approved vaccine.

Moderna also hit a flu B stumbling block in 2023 with its seasonal flu vaccine candidate. Unfortunately for Pfizer and BioNTech, Moderna has already made its move and reported a successful Phase 3 non-inferiority trial with its combination flu and COVID-19 vaccine in June.

What’s next for Pfizer and BioNTech

Pfizer reported second-quarter sales of Comirnaty, its partner-approved COVID-19 vaccine, that fell 87% year-over-year to just $195 million. This wasn’t such a big deal for Pfizer, which reinvested past profits into an industry-leading line of new products. Excluding losses due to foreign exchange rates, Comirnaty and Pfizer’s antiviral treatment for COVID-19, second-quarter sales rose 14% year-over-year.

Pfizer stock offers a whopping 5.9% dividend yield at recent prices, and likely much more in the coming years. Last December, the company raised its quarterly payout for the 15th consecutive year.

The story continues

Pfizer expects adjusted earnings to reach a range of $2.45 to $2.65 per share this year. That’s more than it needs to cover its dividend commitment, currently set at $1.68 per share annually, and raise it further.

Both partners hoped that adding Pfizer’s flu vaccine to Comirnaty could boost weak demand for the COVID-19 vaccine. However, this is much more important for BioNTech, which still relies on the vaccine for 56% of its total revenue. The rest of BioNTech’s revenue comes from a pandemic preparedness contract with the German government.

BioNTech has only one vaccine in the commercial stage — but it also has a long runway to launch its next products. The company ended June with $11.4 billion in cash after losing $891 million in the second quarter.

It’s not time to sell

BioNTech is using its giant cash balance to develop an ambitious pipeline of experimental cancer therapies. It already has three cancer vaccine candidates in phase 2 clinical trials. We’ve seen too many disappointing cancer vaccines in late-stage trials to get excited about these programs, but a successful outcome could send the stock higher.

In addition to its cancer vaccine candidates, BioNTech is developing bispecific antibodies and an antibody-drug conjugate as cancer therapies. Both methods have produced successful therapies in the past, and there’s a chance that a successful outcome of a trial could boost shares of this stock long before spending flattens its cash cushion.

For Pfizer shareholders, the recent failure of the Phase 3 vaccine convoy is just a small setback. Lots of recently launched products with growing sales make owning Big Pharma stocks (and probably buying a little more) seem like the right move.

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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends BioNTech Se, GSK and Moderna. The Motley Fool has a disclosure policy.

Pfizer and BioNTech’s combined strike missed the mark. Is it time to sell? was originally published by The Motley Fool