Arguably, in the past few years, no big pharma stocks have had as significant an impact as Eli Lilly (LLY 0.35%) and Pfizer (PFE 0.96%). When the COVID-19 pandemic struck in 2020, Pfizer swiftly emerged as the frontrunner in the race to develop a vaccine. It reaped billions of dollars in sales from the first approved COVID-19 vaccine. Additionally, Pfizer made a fortune with its oral COVID-19 therapy, Paxlovid. Currently, Eli Lilly holds the title of the largest drugmaker in the world based on market cap. Its remarkable ascent is largely attributed to the success of its type 2 diabetes and obesity drugs, Mounjaro and Zepbound.
Unraveling the Fortunes of Eli Lilly and Pfizer in the Pharma Realm
COVID-19's Impact on Pfizer
During the initial stages of the COVID-19 pandemic, Pfizer played a crucial role. It quickly developed and brought to market an effective vaccine, which led to substantial sales. This success catapulted Pfizer to the forefront of the pharmaceutical industry. However, recent months have not been as kind to Pfizer. In September, the company voluntarily withdrew its sickle cell disease therapy, Oxbryta, from all markets due to safety concerns. In August, Pfizer and its partner, BioNTech, reported disappointing results from a phase 3 study evaluating their combination COVID/flu vaccine. These setbacks have had an impact on Pfizer's stock performance.Even with these challenges, Pfizer still has potential. Analysts expect the company to continue to innovate and develop new drugs. Its extensive research and development capabilities give it an edge in the highly competitive pharma market. Despite the recent setbacks, Pfizer remains a major player in the industry.Eli Lilly's Ascent and Recent Challenges
Eli Lilly's rise to becoming the largest drugmaker in the world is a remarkable story. Its type 2 diabetes and obesity drugs, Mounjaro and Zepbound, have been highly successful. These drugs have not only brought significant revenue to the company but have also established Eli Lilly as a leader in the treatment of these conditions.However, recent weeks have not been favorable for Eli Lilly. In October, the company's third-quarter update showed that its revenue and earnings missed Wall Street estimates. Additionally, Lilly significantly lowered its earnings guidance and the upper end of its revenue guidance range for the full year. This news had a negative impact on the company's stock price.Furthermore, in November, Eli Lilly sued the Health Resources and Services Administration (HRSA) over its cash replenishment model for the 340B Drug Pricing Program. This federal program provides prescription medications at lower costs to eligible healthcare organizations serving vulnerable populations. The lawsuit has added another layer of uncertainty to Eli Lilly's future.Despite these challenges, Eli Lilly's long-term prospects remain bright. The company's focus on research and development and its ability to bring innovative drugs to market give it a competitive advantage. With the continued growth of its existing drugs and the potential for new product launches, Eli Lilly is well-positioned for the future.Valuation Differences and Growth Prospects
One of the key differences between Eli Lilly and Pfizer is their valuations. Eli Lilly's shares trade at 32 times forward earnings, while Pfizer's forward earnings multiple is only 8.3. This stark contrast in valuations reflects the different growth prospects of the two companies.Analysts expect Eli Lilly's sales to soar over the next decade as Mounjaro and Zepbound, along with other products like Alzheimer's disease drug Kisunla, gain momentum. On the other hand, Pfizer will lose patent exclusivity for multiple top-selling drugs in the coming years. This will likely lead to a decline in its sales.However, Pfizer also has new growth drivers. The company is investing heavily in research and development to bring new drugs to market. It is also exploring partnerships and collaborations to expand its product portfolio. These efforts could help offset the anticipated revenue declines from the loss of patent exclusivity.In conclusion, while both Eli Lilly and Pfizer are facing challenges, their long-term prospects remain positive. As long-term investors, it may not be the right time to sell either stock. Both companies have a proven track record of navigating through difficult times and are well-positioned to continue to grow in the future.