UBS upgrades Pfizer, downgrades Merck in battle of Covid antiviral pill
Pfizer and Merck have both developed Covid antiviral pills, and UBS believes one company will come out on top. The firm upgraded shares of Pfizer to a buy rating and downgraded shares of Merck to neutral on Monday. UBS also raised its price target on Pfizer to $60 per share from $52, while cutting its projection on Merck to $76 per share from $98. The Pfizer target represents 13.7% upside from Friday's close, while the Merck target implies a 4.7% gain. "PFE is dominating COVID in prevention and treatment," UBS's Colin Bristow said in a note. Pfizer is submitting full data on its Covid treatment pill to the Food and Drug Administration soon, CEO Albert Bourla told CNBC on Wednesday . Interim data in November showed the oral antiviral, Paxlovid, reduces Covid hospitalization and death by 89%. An FDA panel in November narrowly endorsed Merck's Covid treatment pill . Merck originally said the drug was roughly 50% effective in preventing hospitalizations and death, but a fuller set of data presented to the FDA found the drug is just 30% effective. The drug needs final authorization from the FDA and Centers for Disease Control and Prevention before it's available to the public on an emergency basis. Regarding Merck's molnupiravir Covid antiviral pill, UBS said in a separate note, "we now see downside risk vs. consensus given what appears to be a less competitive profile vs. PFE's paxlovid." "We expect PFE to take majority share of this market and subsequent government purchases," Bristow said. UBS expects Pfizer's Paxlovid pill to generate at least $14 billion in sales next year, with "significant upside potential to these numbers." Plus, Pfizer's Covid vaccine and other treatments should provide long-term revenue for the company, the firm noted. "PFE's COVID-based revenues streams in totality likely deserve longer-duration credit than the street affords given the expected ongoing need for boosting (evidenced by boosted vaccine efficacy against omicron)," Bristow said. Meanwhile, UBS sees limited growth drivers for Merck given the updates regarding its molnupiravir Covid pill. Merck also recently paused enrollment in its islatravir HIV treatment. "On islatravir, the trial pauses/discontinuations due to treatment-related drops in lymphocyte counts significantly raise the risk profile of this asset, with incremental insight on its commercial viability not coming until late '22," Bristow said. Shares of Pfizer have outperformed in 2021, up 43.4% compared with the S & P 500's 25.5% gain. Merck shares have underperformed, down 6.9% this year. —CNBC's Michael Bloom contributed reporting.

Paxlovid, a Pfizer's coronavirus disease (COVID-19) pill, is seen manufactured in Ascoli, Italy, in this undated handout photo obtained by Reuters on November 16, 2021. Pfizer | Handout | via Reuters