Pfizer (PFE) became a household name during the pandemic, and its stock rose along with its fame. However, three years later, the share price has plummeted and investors are left with a very different proposition. From a valuation perspective, Pfizer certainly doesn’t look overpriced. That said, the company’s future growth will be too reliant on new product launches in the coming years due to expiring patents and falling COVID-19 revenues. This is why I’m neutral on the stock.
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Pfizer’s Pipeline is Getting More Attention
Pfizer’s falling share price contrasts the positivity expressed by some analysts about its pipeline and growth prospects. Currently, the company’s pipeline comprises 113 therapies, with 33 candidates in Phase 3 clinical trials. This diverse portfolio across vaccines, immuno-inflammatory diseases, and oncology, complements several product launches in recent years.
In vaccines, Pfizer has made some progress in recent years. The company’s RSV vaccine Abrysvo has been approved and launched. It generated $56 million in Q2 2024 revenue. The U.S. firm also secured a contract with the UK government to supply five million doses of Abrysvo over two years, beating British peer GSK (GSK) to the contract.
For immuno-inflammatory diseases, Pfizer’s LITFULO (ritlecitinib) for severe alopecia areata received approval from the European Commission and the U.S. FDA (Food and Drug Administration) in 2023 and was recommended by the UK’s NICE in 2024. The company continues to develop treatments for diseases like atopic dermatitis and ulcerative colitis.
Focusing on oncology, the acquisition of Seagen in December 2023 has significantly bolstered Pfizer’s portfolio. In Q2 2024, Seagen’s drugs contributed substantially to Pfizer’s revenue, including $394 million from Padcev.
Additionally, Pfizer is optimizing its GLP-1 therapy, Danuglipron, for obesity and type-2 diabetes. Recent breakthroughs have seen the obesity market size surge.
Declining Sales of Pfizer’s COVID-19 Products
Despite these positive pipeline and product developments, I prefer to stay on the sidelines due to certain headwinds. The most prominent issue is the steep decline in revenue from Pfizer’s COVID-19 products.
Sales of Comirnaty (vaccine) and Paxlovid (antiviral) tanked from $57 billion in 2022 to $12.5 billion in 2023. As COVID-19 becomes less virulent, these sales are expected to fall further.
Pfizer expects COVID product revenues of $8.5 billion this year, including $5 billion for Comirnaty and $3.5 billion for Paxlovid.
Pfizer Faces Risk of Patent Expiration of Key Drugs
The falling COVID product sales leave will leave a hole in Pfizer’s balance sheet, and it’s a hole that will be exacerbated by looming patent expiration for key products. This is a key risk that supports my neutral stance on the stock.
For instance, Eliquis, a blood thinner that contributed $2 billion in Q1 2024 sales, faces generic competition in international markets and will lose U.S. exclusivity in April 2028. The drug represented 14% of Pfizer’s Q1 2024 revenue.
Moreover, in the short term, the Inflation Reduction Act’s Medicare Part D price negotiations, have resulted in a $231 negotiated price for Eliquis, down from the $521 list price. However, any downside here might already be priced into the share price.
Ongoing Headwinds Overshadow PFE’s Improved Valuation
Pfizer’s market cap has crashed since the pandemic. Investors, anticipating a decade-long tailwind, rushed into the vaccine giant only to see consistent downgrades to the earnings forecast as COVID became less virulent.
However, with the share price down more than 50% from the highs we saw during the pandemic, the valuation is starting to look more attractive, especially in light of recent positive revisions to the earnings forecast. Over the past 90 days, there have been 13 positive revisions and just three downward ones.
On a forward price-to-earnings (P/E) basis, the stock is now trading at 21.8x forward earnings, a 28.7% discount to the healthcare sector. The price-to-earnings-to-growth (PEG) ratio sits at 1.17, which is a 40.6% discount to the sector as a whole.
While these figures are certainly quite appealing, I am cautious about the stock due to the fading COVID-19 tailwinds and patent expiration of major drugs.
Is Pfizer Stock a Buy, According to Analysts?
On TipRanks, PFE comes in as a Moderate Buy based on seven Buys, 11 Holds, and zero Sell ratings assigned by analysts in the past three months. The average Pfizer stock price target is $32.77, implying 11.16% upside potential.
The Bottom Line on Pfizer Stock
Pfizer stock isn’t expensive and the PEG ratio points to a company that is potentially undervalued when adjusted for its growth potential. However, I’m unconvinced, noting headwinds in the form of expiring patents and falling COVID revenues. While some analysts are getting excited about pipeline potential and Pfizer’s recently launched products, the expiring Eliquis patent and slowing Comirnaty sales are a big hole to fill.
