Why This Huge Dividend Stock Has Snoozed Through 2014

Pfizer's trailed behind fellow Dow members Johnson & Johnson and Merck year to date with meager gains in 2014, but can this tried-and-true big pharma giant turn things around?

Apr 25, 2014 at 2:30PM

Pfizer's (NYSE:PFE) one of big pharma's most recognizable names, and this Dow Jones member's recognized as one of the tried-and-true dividend giants among the market's blue-chip health-care stocks. Yet this company's had to fight back the patent cliff's withering effects on its sales in the recent past, with the loss of patent exclusivity on former top-selling drug Lipitor taking a bite out of Pfizer's finances.

That hasn't stopped this stock from gaining with the market's rally, but 2014's brought about a turn of fortune for the worse for Pfizer. Has this blue-chip big pharma stock stayed ahead of the Dow this year so far, and can Pfizer's shares keep up with its rival blue-chip drugmakers?

Sluggish shares
Pfizer's stock hasn't exactly lit the market on fire recently, with shares gaining only around 1% over the past year. The company's sales have yet to mount a serious bounce back from the loss of Lipitor's billions of dollars in annual revenue, even as Pfizer's rallied around its new top sellers, Lyrica and Enbrel. Lyrica's been the big winner for the company as of late, racking up 10.5% revenue growth last year en route to more than $4.5 billion in 2013 sales, but that hasn't been enough to excite investors since 2014 kicked off.

In fact, while Pfizer's managed to beat out a weak market since the year began, its stumbles have held it back far behind the gains made by its Dow Jones drugmaker peers.

PFE Chart

PFE data. Source: YCharts.

Johnson & Johnson (NYSE:JNJ) and Merck (NYSE:MRK) have done a good job of generating excitement around Wall Street that Pfizer's failed to replicate. J&J's been a drugmaking machine lately, as the health-care giant's pharmaceutical branch has emerged as the company's largest business by revenue behind reliable growth from blockbuster drug Remicade and the rise of up-and-coming blockbusters such as oncology therapy Zytiga, which pulled in more than $1.6 billion in revenue last year at 76% sales growth.

Merck's faced much more of the same patent cliff issues as Pfizer has, with the loss of patent protection around former star drug Singulair slamming its revenue. However, Merck investors have celebrated its recent pipeline optimism, as hopes have rallied behind promising cancer therapy MK-3475, which Merck submitted for approval for melanoma earlier this year and could one day see peak sales around or higher than $3 billion if it expands to other indications.

Pfizer's lack of enthusiasm
That kind of excitement's been lacking around Pfizer. The company boasts a sizable pipeline with 26 drug programs in phase 3 trials or later as of mid-November, but few have sparked investor hopes outside of ballyhooed breast cancer therapy palbociclib, which analysts project could one day see peak sales of $5 billion. Pfizer will need to bring around more blockbuster-potential drugs for the future if it wants to rally investors around its long-term outlook.

It hasn't helped the stock's lack of progress this year that Pfizer's two most recently approved blockbuster hopes, blood thinner Eliquis and immunology therapy Xeljanz, have gotten off to uninspiring starts on the market. Eliquis, which Pfizer developed alongside Bristol-Myers Squibb, found revenue of just $71 million in the fourth quarter. While Bristol and Pfizer expect that number to climb in 2014, investors won't be patient with more disappointment from a drug hyped with peak sales estimates around $4 billion.

Credit Pfizer for looking to make a huge splash in order to win investors over. The recent release of reports that Pfizer entered informal talks with rival big pharma AstraZeneca ==  over a possible $100 billion buyout of the British drugmaker show that Pfizer's not afraid of taking a significant gamble in order to ignite a spark in its future -- in this case, by capturing AstraZeneca's oncology pipeline, much of which is still years away from regulatory filing. As Pfizer as of last month had $69 billion in untaxed cash overseas according to Bloomberg, don't expect the company to sit on its mountain of wealth while antsy investors wait for signs of success.

That could certainly get Pfizer's stock moving -- but this company will need to make strong, smart moves for the long term if it wants shares headed in the right direction as 2014 rolls on.

Promise aplenty
While Pfizer's stock is stuck in the doldrums in 2014, there's plenty of potential for one of the top drugmakers on the market to turn things around. Anticipated growth from Xeljanz and Eliquis would delight investors and Wall Street and offer results for the hype around these blockbuster hopefuls. Continued growth from Lyrica, Enbrel, and the Prevnar vaccine series will solidify Pfizer's foundation for now, and if this company can make a forward-looking, attention-grabbing acquisition sometime in the near future, it'll go a long way to reinvigorating confidence in its outlook. Don't sleep on Pfizer through 2014, but for now, this stock's stuck looking up at the year-to-date gains of its Dow peers.

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Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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