Pfizer to Invest $200 Million in China-based CStone Pharmaceuticals; Target Price $42

Pfizer Inc, an American multinational pharmaceutical corporation, agreed to acquire a 9.9% stake for $200 million in CStone Pharmaceuticals, sending the Hong Kong-listed biopharmaceutical shares up about 40% on Wednesday.

The world’s second-largest pharmaceutical company, Pfizer is to license CStone’s late-stage oncology asset sugemalimab, CS1001, PD-L1 antibody, in mainland China. The Chinese biopharmaceutical company will receive up to $280 million in milestone payments for sugemalimab, and additional royalties. CStone and Pfizer will develop and commercialize additional late-stage oncology therapies in Greater China, the company said in the statement.

Pfizer has agreed to acquire 115.93 million CStone shares at a price of US$1.725 per share.

The Hong Kong-listed CStone Pharmaceuticals’ shares surged as high as 40% to HKD 12.98, highest since October last year, on Wednesday. On the other hand, Pfizer shares closed 0.60% lower at $36.17 on Tuesday; the stock is still down about 8% so far this year.

Pfizer stock forecast

Eleven analysts forecast the average price in 12 months at $42.66 with a high forecast of $55.00 and a low forecast of $35.00. The average price target represents a 17.94% increase from the last price of $36.17. From those 11 equity analysts, four analysts rated ‘Buy’, seven rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $42 with a high of $48 under a bull scenario and $31 under the worst-case scenario. Berenberg starts with hold rating; price target $38; Independent Research lowered their target price to $37 from $40; rating hold. Pfizer has been given a $43 target price by research analysts at Royal Bank of Canada. The firm currently has a “buy” rating on the biopharmaceutical company’s stock.

Several other brokerages have also issued reports on PFE. Mizuho reiterated a “buy” rating and set a $38 price target. Piper Sandler raised their price target to $24 from $18.50. UBS Group upped their target price to $39 from $37 and gave the stock a “neutral” rating. At last, JP Morgan lowered their target price to $36 from $37 and set a “neutral” rating.

Analyst views

“We project solid growth prospects, and the company’s COVID vaccine candidate offers optionality. Pfizer’s financials and dividend are set to adjust in 4Q20 when it completes the Viatris transaction. Pipeline execution will be key to investor perception, given late-decade patent expiration exposure,” said David Risinger, equity analyst at Morgan Stanley.

“Pfizer projects 2025 sales of $55.7 billion, which reflects 6%+ 5-yr CAGR ’20-’25. Pfizer has strong growth potential in both existing and pipeline products – it forecasts $8 billion in incremental sales from each in 2025. Non-risk adjusted pipeline revenue is projected to be $15 billion+ by 2025, including $6 billion from Vaccines, $3 billion from Inflammation & Immunology, $3 billion from Rare Disease, and $3 billion from Oncology; risk-adjusted revenue is $8 billion. Prevnar 20V is not included as part of 2025 vaccine pipeline sales because it will cannibalize the existing 13V,” Risinger added.

Upside and Downside Risks

Upside: COVID vaccine success, better COVID vaccine data than competitors, core business financial upside, positive pipeline developments, and encouraging strategic action, highlighted by Morgan Stanley.

Downside: COVID vaccine failure, COVID vaccine underperforms competitors, financial shortfalls, pipeline disappointments, disappointing strategic action, and negative US drug pricing developments.