Pfizer (PFE 1.01%) has been a losing play for investors over the past 12 months. To wit: The drugmaker's stock has fallen by a whopping 28.8% over this period. Part of that decline has been driven by the anticipated drops in sales for its COVID-19 vaccine Comirnaty and the antiviral treatment Paxlovid. However, an underappreciated issue is that investors haven't been viewing Pfizer as a so-called "oasis stock."
Since the start of 2023, investors have shown a magnetic attraction to a select group of companies such as Eli Lilly (LLY 1.44%), Crispr Therapeutics, Microsoft, and Nvidia, causing their shares to dramatically outperform the broader market. The unifying theme across these high-performance stocks has been a connection to some form of exciting new technology like artificial intelligence, gene editing, or weight-loss treatments.
Pfizer may soon join this group. Here's why.
An overlooked pipeline asset
Though the company has gone on a $70 billion business development spending spree over the last few years, Pfizer has of late failed to impress Wall Street. Underscoring this point, the drugmaker's stock presently trades at an eye-popping forward-looking earnings yield of 9.2%. That's significantly undervalued relative to big pharma stocks as a class (average earnings yield of 7%), as well as to a risk-free asset such as the 10-year U.S. Treasury bond (current yield: 3.73%).
The long and short of it is that investors simply haven't bought into Pfizer's deep value proposition, which is centered around the possibility of the company becoming a juggernaut in immunology, rare blood disorders, and cancer treatment by decade's end. However, one set of clinical assets may change this situation soon by getting the market's attention: the oral glucagon-like peptide-1 receptor (GLP-1) agonists danuglipron and lotiglipron.
Danuglipron recently posted stellar results in a mid-stage trial as a dual treatment for blood sugar control and weight loss in type 2 diabetics. However, the pharma giant is patiently waiting on lotiglipron's forthcoming mid-stage trial data before deciding which candidate to advance into phase 3 testing.
What's the big deal? Shares of Eli Lilly and Novo Nordisk have been on multiyear bull runs thanks largely to their GLP-1 drugs -- tirzepatide and semaglutide, respectively. These two groundbreaking medications are expected to eventually haul in close to $100 billion a year in sales as a result of the ever-rising rates of both diabetes and obesity around the globe.
Pfizer, for its part, is coming a bit late to the GLP-1 game. But its oral offerings might be able to compete effectively against tirzepatide and semaglutide -- both of which are administered via injection -- once everything is said and done.
What is Pfizer's upside potential?
Immediately after Pfizer published danuglipron's impressive mid-stage trial data, financial services firm Cantor Fitzgerald reaffirmed its $75 a share price target on the drugmaker's stock. That target is approximately 94% higher than the stock's current price.
Meanwhile, most of the other firms covering Pfizer demurred on the issue, often citing the need to see phase 3 data from one of these GLP-1 candidates before revising their fair value estimates. This conservative take isn't unwarranted given that mid-stage data frequently don't predict late-stage trial results, not to mention the fact that tirzepatide and semaglutide may become entrenched competitors by the time Pfizer is ready to enter the GLP-1 market.
What does this all mean? Pfizer potentially sports a pipeline asset for type 2 diabetes/weight loss that is wholly underappreciated by the market. In all likelihood, the drugmaker will have late-stage trial data on either danuglipron or lotiglipron ready to present by 2025, putting its candidate on track for a commercial launch in 2026.
The bottom line is that if Pfizer is able to develop a clinically superior GLP-1 asset relative to either of the current market share leaders, it could have one of the best-selling drugs of all time on its hands. In that case, Cantor Fitzgerald's Street-high price target -- while perhaps premature -- might not look so outlandish in, say, three years. Aggressive investors might want to take a flier on this top big pharma stock soon.
