You might already know the conventional wisdom about Pfizer (PFE 1.85%). It's quite gloomy. The company depends heavily on its COVID-19 vaccine Comirnaty and antiviral therapy Paxlovid. Sales for both products are expected to decline significantly this year. Pfizer also faces patent expirations for several of its other best-selling drugs over the next few years. The stock, therefore, must be one to avoid.
But while I think the conventional wisdom is correct about the challenges that Pfizer faces, the conclusion about the stock is wrong. There's much more to the story for the big drugmaker. Here's why Pfizer stock is looking increasingly attractive.
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A string of good news
Over the past five weeks, Pfizer has had an impressive string of good news. On Feb. 10, 2023, the company announced that the U.S. Food and Drug Administration (FDA) approved Cibinqo for treating adolescents between the ages of 12 and 18 with atopic dermatitis. The drug previously was approved only for treating people 18 and older. Cibinqo is a key part of Pfizer's growth strategy.
Six days later, the company reported positive results from a late-stage study evaluating a combination of Talzenna and Xtandi in treating metastatic castration-resistant prostate cancer. The combo achieved a 37% reduction in the risk of disease progression or death.
On Feb. 22, Pfizer announced that the FDA and European Medicines Agency (EMA) accepted its regulatory submissions for elranatamab in treating multiple myeloma. The drugmaker anticipates that FDA approval could be on the way later this year.
Less than a week later, an FDA advisory committee voted to recommend approval of Pfizer's respiratory syncytial virus (RSV) vaccine in older adults. The FDA's PDUFA date to make a decision on the RSV vaccine is scheduled for May 2023. Pfizer thinks it will have a major market opportunity in RSV.
Fast-forward to March 10. The FDA approved Zavzpret (zavegepant) for treating migraine. Pfizer picked up the drug with its acquisition of Biohaven last year.
Speaking of acquisitions, Pfizer announced plans earlier this week to buy Seagen for $43 billion. The news caused Seagen stock to soar. It also provided a nice bump to Pfizer stock, showing that investors like the deal. Pfizer will gain Seagen's four approved cancer therapies plus a promising pipeline of antibody-drug conjugates (ADCs) assuming the transaction doesn't run into any roadblocks. The big drugmaker thinks the acquisition will add another $10 billion in risk-adjusted revenue by 2030.
Underappreciated by investors
My main takeaway from this string of good news is that Pfizer is doing exactly what it has said it would do. The company expects new product launches to more than offset the losses from products with patent expirations. It thinks that business development deals will add around $25 billion in new revenue by 2030. Pfizer appears to be on its way to achieving these goals.
However, Pfizer remains underappreciated by investors. The stock received only a minor boost from all of its positive developments in recent weeks. Shares are still down close to 35% below the high set in late 2021.
Pfizer stock currently trades at only 12 times expected earnings. Its dividend has risen to 4.1%, the highest level since mid-2021.
Brighter days ahead
Investors appear to be fixated on Pfizer's COVID-19 headwinds. However, the company predicts brighter days are ahead even on that front.
For example, Pfizer projects around 65 million doses of Comirnaty will be administered this year. That's down from roughly 92 million doses administered in 2022. But the number is expected to rise to close to 98 million doses by 2026 with the anticipated launch of a combination COVID-flu vaccine.
Pfizer also forecasts that the demand for Paxlovid will increase steadily over the next few years even as its market share declines somewhat. And the company's estimates don't include the possibility of marketing the antiviral therapy in China.
Perhaps the current conventional wisdom about Pfizer will prove to be right. From what I see, though, the outlook for the pharma stock is better than many investors realize.
