Is Pfizer Stock a Buy With a $17 Billion Revenue Hit on the Way?

You might think that investors would be excited about a company that just reported $22.6 billion in revenue and nearly $10.2 billion in profits in its latest quarter. But they're not.

Pfizer (PFE -0.19%) announced its third-quarter results on Tuesday. While its shares moved a little higher after posting impressive numbers, the pharma stock is still down close to 20% year to date.

CEO Albert Bourla knows exactly why investors aren't enthusiastic. He noted in the company's Q3 call that there are questions about Pfizer's long-term growth prospects, especially between 2025 and 2030. Bourla acknowledged that Pfizer projects a revenue impact of around -$17 billion related to the losses of exclusivity for several top-selling products during that period.

It's understandable why many are leery about the company's opportunities in the second half of this decade. But is Pfizer stock actually a buy, even with a $17 billion revenue hit on the way? 

Near-term launches

There's one really important thing to know about Pfizer's upcoming losses of exclusivity (LOEs): The company thinks it will more than offset the revenue impact. Indeed, Pfizer believes that it will be able to do so with the additional sales generated by products launched so far this year and over the next 18 months. The drugmaker estimates that these new products will add roughly $20 billion in revenue by 2030.

Bourla said in the Q3 call that Pfizer should have up to 19 new products or indications on the market over the next 18 months. He noted that more than two-thirds of these hold the potential to generate annual sales of at least $1 billion.

These products include Pfizer's respiratory syncytial virus (RSV) vaccine. The company recently announced positive results for this experimental vaccine in maternal immunization to protect infants from RSV. 

Wheeling and dealing

Pfizer anticipates an even bigger positive impact from its business development deals. The company projects at least $25 billion in additional risk-adjusted revenue by 2030 from acquisitions and other business development transactions.

Bourla stated that Pfizer's acquisitions of Arena, Biohaven, Global Blood Therapeutics, and ReViral could generate more than one-third of this revenue goal. With strong cash flow and a massive cash stockpile of over $33 billion as of June 30, the company shouldn't have any problems continuing to wheel and deal.

Two wild cards

There are also a couple of wild cards for Pfizer. The biggest one relates to the company's COVID-19 products. No one expects sales for COVID-19 vaccine Comirnaty and antiviral therapy Paxlovid to remain at current levels. The question, though, is just how much sales will decline in the future.

Pfizer thinks that its COVID-19 products will continue to generate billions of dollars in annual revenue for years to come. When asked by an analyst in the Q3 call if these products could still rake in $15 billion in combined sales in 2030, Bourla replied that it's "not unreasonable" to expect that level of sales.

The other wild card for Pfizer is the rest of its pipeline beyond the anticipated launches over the next 18 months. These programs include gene therapy candidates targeting hemophilia and Duchenne muscular dystrophy, a promising candidate for diabetes and obesity, and a combination COVID-flu vaccine. Pfizer hasn't publicly revealed its revenue expectations for these pipeline candidates. 

To buy or not to buy?

Back to our original question: Is Pfizer stock a buy with a -$17 billion revenue impact from LOEs on the way? I think there are two answers.

For income investors, my view is that Pfizer remains a great stock to buy. The dividend yield stands north of 3.4%. Pfizer will almost certainly continue to prioritize its dividend program. Investors should be able to count on reliable dividend income for a long time to come.

If you're not focused on income, I think the answer to our key question is a definite maybe. It's important to understand Pfizer's risks. The company's LOEs are sure things; its anticipated product launches and business development deals aren't. Pfizer might not deliver the growth that it's projecting. On the other hand, the big drugmaker could exceed expectations. 

In my opinion, Pfizer probably will more than offset the revenue impact of its upcoming LOEs. If the company delivers on its forecast, the stock should provide attractive total returns -- perhaps even enough to again get investors excited.