So far this year, Pfizer (NYSE:PFE) is badly underperforming the S&P 500 index, which isn't doing that great itself. It lagged behind the S&P 500 in 2019 also. Whether you look at the last three years, five years, or 10 years, Pfizer hasn't kept up with the overall market.

There's an old investing adage: "Cut your losses short and let your winners run." Pfizer certainly hasn't been a winner in quite awhile. Should you sell the stock now? 

Businessman pointing to "sell" icon next to "buy" and "hold" icons

Image source: Getty Images.

A big setback

Investors weren't happy campers after Pfizer's latest clinical setback. The drugmaker announced earlier this month that the independent data-monitoring committee for its PALLAS phase 3 study evaluating Ibrance as adjuvant therapy in treating early-stage breast cancer determined that the trial wasn't likely to show statistically significant improvement.

This was a major blow for Pfizer. Ibrance is a key component of the company's growth strategy. The breast cancer drug raked in close to $5 billion in 2019. Pfizer has publicly stated in the past that the early-stage adjuvant opportunity could double Ibrance's addressable patient population.

CEO Albert Bourla said that the company remains "highly confident" that it will still be able to deliver revenue growth of 6% annually through 2025 after the close of the merger of its Upjohn business with Mylan. However, the company hasn't provided any details on how it will be able to hit that target with the lucrative adjuvant breast cancer market now seemingly off the table.

Great opportunities 

Are there any bright spots for Pfizer? Yes, plenty of them.

The pending Upjohn-Mylan deal ranks near the top of the list. One of the main reasons behind Pfizer's underperformance in recent years has been its older drugs for which sales are declining. Spinning off Upjohn and merging it with Mylan removes all of these legacy drugs from Pfizer's product lineup.

That clears the way for the company's faster-growing drugs to shine. For example, Pfizer's portion of sales for blood thinner Eliquis, which it co-markets with Bristol Myers Squibb (NYSE:BMY), jumped nearly 29% year over year in the first quarter of 2020. Sales for prostate cancer drug Xtandi rose 24% in Q1.

Pfizer's portfolio includes several rising stars with blockbuster potential. You can put Vyndaquel at the top of the list, with sales for the rare-disease drug more than quadrupling year over year in the first quarter. Sales for kidney cancer drug Inlyta more than doubled year over year in Q1. Melanoma drugs Braftovi and Mektovi are also picking up strong momentum.

Meanwhile, Pfizer is steadily becoming a major player in the biosimilar market. Its biosimilar to Remicade, marketed under the brand name Inflectra, is already a commercial success. The company picked up regulatory approvals recently in the U.S. for its Neulasta biosimilar and in Europe for its Rituxan biosimilar.

And Pfizer's pipeline is loaded. The big pharma company has over 90 programs in clinical testing, with 21 of them in late-stage studies and six awaiting approval. Pneumococcal conjugate vaccine PF-06482077 and osteoarthritis pain drug tanezumab look especially promising.

Also, keep a close watch on Pfizer's partnership with German biotech BioNTech. The two companies are evaluating a COVID-19 vaccine in phase 1 clinical studies. This vaccine made the short list of five candidates that the White House handpicked to receive federal support.

Wait and see

I completely understand why investors might be frustrated with Pfizer and be at the point of throwing in the towel on the pharma stock. After the recent Ibrance setback, I had to seriously reconsider whether or not to keep the stock in my own portfolio.

But my decision was to take a wait-and-see approach. I think that it's possible that Albert Bourla is right that the company can deliver revenue growth of at least 6% through 2025. If you add in Pfizer's dividend yield (which should still be in the ballpark of 4% even after the Upjohn-Mylan deal closes), the stock should be able to generate attractive total returns.

But if these assumptions prove to be incorrect, I won't hesitate to sell my Pfizer shares. My view is to give Pfizer until late next year to prove that it can be a winner instead of a loser.