The past three years have been significant for pharma giant Pfizer (PFE 1.42%) and its shareholders. The drugmaker's achievements in the COVID-19 vaccine and medicine market have been particularly noteworthy. But that success could start waning this year -- and it's a key reason why some investors aren't so sure about Pfizer's near-term prospects.
But there are some arguments on the other side, too. For instance, Pfizer's shares remain reasonably valued. The drugmaker's forward price-to-earnings ratio currently sits at a respectable 10.4, compared to the S&P 500's 18.8 and the pharmaceutical industry's 14.8. There are more reasons to buy Pfizer's shares, especially at current levels. Let's consider some of them.
Expect plenty of pipeline progress this year
Pfizer could see its revenue drop substantially in 2023 as sales of its coronavirus lineup decrease. Elsewhere, the company's immunology medicine Xeljanz is also having trouble due to safety-related issues. So the drugmaker will have to look elsewhere for growth, and the company's current portfolio of medicines is limited.
It is true that it is still performing well on some fronts. Blood thinner Eliquis is still going strong. Its sales increased by 9% year over year in the third quarter to $1.5 billion. Pfizer's family of Prevnar vaccines, which prevent various infections including pneumonia, reported $1.6 billion in revenue during the period, 11% higher than the year-ago quarter.
NYSE: PFE
Key Data Points
Still, Pfizer's lineup needs new products to pick up the slack for some medicines that are encountering problems (like Xeljanz) and for its COVID lineup that will contribute less to its top line moving forward. Thankfully, Pfizer planned in advance. The company should see solid pipeline progress and regulatory approvals this year.
Let's start with the former. Pfizer has 27 programs in its late-stage pipeline, including several brand-new clinical compounds. In September, it started a phase 3 clinical trial for a potential mRNA-based influenza vaccine. The company is seeking to develop a product that will improve on the current flu vaccines, which are typically only 40% to 60% effective.
And that's just one of the many candidates in the company's late-stage pipeline. Pfizer should have important data readouts throughout the year. As for approvals, the company's CEO, Albert Bourla, said last year that it could launch more than 10 brand-new drugs in 2023; for reference, the company's usual number is one or two.
Let's highlight a couple of Pfizer's candidates that are currently under regulatory review. First, there is RSVpreF, a potential vaccine for the respiratory syncytial virus (RSV) for adults aged 60 and older. RSV infects patients' respiratory tracts and can sometimes be severe, especially in young children or older adults with chronic illnesses.
There are no approved vaccines for RSV, so Pfizer's candidate could be the first. The U.S. Food and Drug Administration (FDA) should make a decision on whether to approve RSVpreF by May.
Then there is Pfizer's potential alopecia areata treatment, ritlecitinib. Alopecia areata is an autoimmune disorder that causes hair loss. In September, regulatory authorities in the U.S. and Europe accepted regulatory submissions for ritlecitinib. The FDA should decide in the second quarter, while the parallel agency in Europe should do so in the fourth quarter. These and other products will help beef up Pfizer's pipeline.
Look beyond pandemic-related dynamics
Will Pfizer outperform in 2023? It's hard to say. The market may perceive a weakness in the company's financial results, since it will face difficult year-over-year comparisons. But none of that should matter to long-term investors. The more important question is whether the company has the tools to perform well over the next five years and more. And the answer to that question seems to be a resounding yes.
Developing new drugs is crucial for pharmaceutical companies. So pumping out 10 brand-new approvals during a calendar year is pretty impressive, even for a company the size of Pfizer. With a rejuvenated lineup, Pfizer will be able to grow its revenue and earnings at a good clip after this year once comparisons to the pandemic years end. In other words, this value stock offers solid growth prospects too.
But Pfizer is also a strong dividend player. The company currently offers a yield of 3.2%, and a payout ratio of about 30%, leaving plenty of room for dividend increases. With so much to offer -- and at a reasonable level -- investors shouldn't ignore Pfizer's stock, no matter what happens this year.
