Please ensure Javascript is enabled for purposes of website accessibility

Should You Sell Your Pfizer Stock Now?

By Keith Speights – Jun 27, 2020 at 6:07AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's certainly tempting. But there are reasons to hold off.

So far this year, Pfizer (PFE -1.10%) 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 (BMY -0.81%), 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. 

Keith Speights owns shares of Bristol Myers Squibb and Pfizer. The Motley Fool owns shares of and recommends Bristol Myers Squibb. The Motley Fool recommends Mylan. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$44.08 (-1.10%) $0.49
Viatris Inc. Stock Quote
Viatris Inc.
MYL
Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
BMY
$70.71 (-0.81%) $0.58
BioNTech SE Stock Quote
BioNTech SE
BNTX
$128.35 (-1.27%) $-1.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.