Pfizer (PFE -0.43%) has been around for 175 years, but the company’s revenue soared to its highest ever only in more recent times. Thanks to its coronavirus treatment and vaccine, the pharma giant reported more than $100 billion in revenue in 2022 at the peak of its pandemic success. Since that time, though, demand for these products has declined, and that’s resulted in lower revenue and a drop in the Pfizer share price.
Right now, as an investor, you may be wondering if you should take advantage of the stock’s lower valuation and dive in or avoid this struggling stock. Before making any decisions, it’s important to take a look at Pfizer’s strategy and the company’s prospects over time. Here are three things you need to know if you buy Pfizer today.
Image source: Getty Images.
1. Coronavirus product growth shouldn’t be a point of reference
Pfizer’s revenue soared to a record level earlier in the pandemic, thanks to the company’s market-leading vaccine and treatment. Those products continue to contribute to revenue, bringing in more than $5 billion each last year, for example. Though coronavirus products should continue to add to annual revenue, especially during flu season quarters later in the year, it’s not realistic to expect the coronavirus products to deliver revenue today at the same levels as in earlier pandemic days.
All of this means that, when considering Pfizer’s growth potential, the peak years of coronavirus sales shouldn’t be the point of reference. Instead, it’s a better idea to look at Pfizer’s pre-pandemic sales and consider how the company could progress from that point in the years to come.
We can refer to full-year 2019 revenue of about $51 billion and the company’s comments about potential revenue of more than $80 billion in non-COVID revenue by 2030. This represents an increase of about 55%. If Pfizer attains this goal, the stock could advance significantly over time.
2. Pfizer is losing exclusivity on some major products — but has planned for this moment
A decline in coronavirus product revenue isn’t Pfizer’s only problem right now. The company also is set to lose exclusivity on certain blockbuster non-COVID-19 products, such as blood thinner Eliquis and breast cancer drug Ibrance. Pfizer even says this patent cliff represents $17 billion in lost sales from 2025 through 2030.
However, Pfizer has been preparing for this headwind and aims to compensate and grow through the launch of new products and a recent move to reinforce its oncology business — the purchase of cancer specialist Seagen. Pfizer’s biggest launch period ever — with 19 product releases over 18 months — has set the stage for a new wave of growth. The company recently said one of its 2025 goals is to focus on research and development productivity and expects several catalysts this year, including at least four regulatory decisions and possibly nine phase 3 trial readouts.
Meanwhile, the addition of Seagen’s four commercialized drugs has significantly added to growth, with each product increasing revenue year over year. Also important to note, the company’s Padcev, combined with antibody pembrolizumab, is the No. 1 prescribed first-line treatment in the U.S. for locally advanced/metastatic bladder cancer. Late-stage studies could lead to an additional approval that would almost triple the potential U.S. patient group.
Though Pfizer is set to lose on certain older products in the near term, the strategy to reinforce its pipeline and selection of commercialized drugs could help it score a win over the long term.
3. The transformation won’t happen overnight
The above two points are positive but will take time to fully boost Pfizer’s growth. The pharma giant is still in the phase of realigning its costs following the declines in coronavirus product demand. Pfizer says it’s on track to generate cost savings of $4.5 billion by the end of this year as part of this ongoing plan.
The transformation may not happen overnight, and that means it may take Pfizer’s stock a while to take off, too. Does this mean you should wait to buy Pfizer shares?
Not necessarily. It’s very difficult to time the market and get in on a stock at its very lowest price. That means it’s important to buy when its valuation looks interesting, considering a company’s future prospects. And today, trading at 8x forward earnings estimates (around its lowest in a year), Pfizer looks like a bargain buy for patient investors.
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.
