Pfizer CEO Talks About Covid Vaccines and What Comes Next: ‘I Think We Are Undervalued.’

Last weekend, Barron’s argued in a magazine feature that the dual successes of Pfizer’s Covid-19 vaccine and its Covid-19 oral antiviral show that Bourla was right to slim down the company two years ago, shedding businesses to focus on developing new drugs. Investors have been slow to come along, and Pfizer (ticker: PFE) still trades at a discount to its big pharma peers.

Still, in recent days, the stock has surged, closing above $50 on Wednesday for only the third time in at least 15 years. Barron’s spoke with Bourla on Wednesday. This interview has been condensed and edited for clarity.

Barron’s: The White House is rolling out a plan to expand Covid-19 vaccine manufacturing in the U.S. What do you think of this idea, and what will Pfizer’s role be?

Albert Bourla: I’m waiting to see the needs of the U.S. government. Conceptually, I think it’s a very good initiative. Yes, of course, we will play a key role. I’m just waiting to see the details.

 It seems as though the White House plan is to give manufacturers money to expand manufacturing in the U.S. Is capital the limiting factor on your vaccine production right now?

No. We have infrastructure in the U.S. that is making way more than a billion doses. We may discuss how to make sure that we maintain it hot over the time, so that if the demand is going down that we don’t scale down. Those I think are things that should be discussed, but I don’t think we need to build more infrastructure.

The bottleneck right now in the world are raw materials. The reason why our capacity is going up and up and up is not that we are bringing more buildings or equipment, it’s that we have an ability to source more raw materials.

You said to Barron’s earlier this month that the reason more of the doses of your vaccine have gone to poor countries is that those countries have been slow to place orders with you. Bloomberg recently reported that Pfizer is the top supplier of Covid-19 vaccines to wealthy countries. Does Pfizer have a responsibility to ensure its vaccine is being distributed fairly?

Absolutely, I think it is part of our responsibilities, and it is anyway part of our culture to have equity in particular when it comes to healthcare.

The reason why in the beginning of the year we had way more going to high income countries, and why we are giving in the second part of the year more to the poorest countries, was that when we were seeking orders, only the high-income countries placed.

I saw that, at that moment, and I got very concerned. Because everything that we had produced or forecast to produce was going all exclusively to the high-income countries that were placing orders. I wrote letters to heads of state, I asked them to place orders. They decided to go different ways. And I don’t blame them. Nobody knew at the time that mRNA would be the solution.

When the situation became more clear that we have way higher efficacy and the production of other solutions was not as real as it was promised, this was when they came back to us and asked us for more. And the solution we found was to increase dramatically our production.

We argued in a feature over the weekend that the Covid-19 pill and the vaccine together have proven the power of your R&D operation. It seems as though investors still need some convincing, and your stock trades at a steep discount to Eli Lilly (LLY), for example. I wonder what you think it will take to bring these investors along.

Clearly, after we made some changes to the portfolio of our businesses in the beginning of 2019, the investor base started to change. Some of the value investors started thinking that a company that is focusing on science would be maybe not what they want in a portfolio, so maybe we had some exits of those at that time.

You go faster than you are coming into something new. So the growth investors, they were taking their time.

I think we are undervalued. We are not even close to the multiple of Lilly or AstraZeneca (AZN). But I think that there is a tremendous opportunity, and those that need more proof points, they will get them, but then the stock will be more expensive for them.

Your Covid-19 vaccine has brought a windfall of cash for the company. What will you do with the cash? Do you have M&A plans?

 The successes of the company during the pandemic, both scientific and financial, they do not change the strategy we set before. If anything, they reinforce the belief and the conviction that we were on the right path, which was to bet the company on science.

We may have higher flexibility now with capital, but I don’t think we had a lack of capital before. Our strategy, when it comes to capital allocation, is we want to maintain a growing dividend. This is something that is a big part of our investment thesis. Our priority is to in-license or acquire scientific technologies or projects that are at Phase 2-ready, Phase 3-ready. Once they come into our machine of clinical development, they will progress rapidly into medicines that can save lives, and as a result have a good financial return for the company.

The patent cliff Pfizer is approaching at the end of the decade is obviously a major concern for investors. How are you now preparing for that moment?

We are not preparing for anything that is unusual. This is the normal course of business.

Investors used to, 10, 20 years ago, assign to pharma companies very, very high multiples. Now they’re assigning the lowest multiple in the industry. That’s a mistake. It’s completely against the investment dynamics I see ahead of me. What I see is demographics that are extremely favorable for a business like ours. People are getting older. This not only creates higher usage of medicines, but creates mainly the need for new medicines, because new diseases are coming up.

You announced a deal this week to allow generic drugmakers to manufacture your Covid-19 pill and sell it in middle-income and low-income countries. You won’t receive a royalty on these sales during the pandemic. How much will this cost Pfizer?

It is covering 53% of the population, and clearly it’s not going to be 53% of expected revenues, but it’s a significant part of the world, and includes many countries where we do business. I didn’t make a calculation, because that was not the point. We needed to have some institutional principles here.

Why not do the same with the vaccine?

It’s a very different story. This is a small molecule. A small molecule, there are many qualified generic manufacturers that can make it. The vaccine is the highest, most challenging technology to manufacture in the world right now; making lipid nanoparticles and storing them in minus seventy degrees. I don’t think in three years someone would be able to make it.

Thanks, Albert.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com