3 Reasons to Buy Pfizer Stock

Many investors are having a hard time finding good reasons to invest in Pfizer (PFE 0.55%) right now, at least if we go by the company's performance in the stock market this year. Pfizer's shares are down by 29% since January -- an abysmal showing, especially considering that the broader market has largely recovered after last year's downturn.

Pfizer is suffering from the monumental decline in sales for its coronavirus portfolio and the uncertainty this industry will continue to face. But even with these headwinds, there are plenty of excellent reasons to invest in Pfizer. Let's consider just three of them.

1. Pfizer is on an impressive run of approvals 

For drugmakers, the key to remaining relevant and improving their businesses over time is pretty simple, at least in theory. They need to develop new medicines or vaccines to replace older ones that run out of patent exclusivity. However, doing so is costly and time-consuming, and even pharmaceutical giants may not launch many new products in a given year.

For Pfizer, the average is usually one or two, according to CEO Albert Bourla.But this year is different. The company has been on a roll, earning approval for four brand-new drugs and one vaccine already -- and there are still four months remaining in the year. 

Here's another way to contextualize Pfizer's achievement. There have been 35 brand-new drugs (not including vaccines) approved this year by the U.S. Food and Drug Administration (FDA), which means Pfizer alone is responsible for 11% of these all by itself.

The company is awaiting approval for more products. Etrasimod, a potential treatment for ulcerative colitis, could earn the green light by year-end, as could MenABCWY, a potential meningococcal vaccine.

Pfizer should continue delivering regulatory wins next year, too. The company is building an impressive portfolio of brand-new medicines and vaccines that will grow their sales for years without worrying about patent cliffs. That's excellent news for Pfizer and its shareholders. 

2. This acquisition could be a huge deal

On March 13, Pfizer announced it would acquire Seagen for $43 billion in cash. Seagen is a biotech company that focuses on developing cancer treatments. It has four approved products and is growing its sales at a good clip. In the second quarter, Seagen's total revenue of $603.8 million jumped by 21.4% compared to the year-ago period. 

But Pfizer is interested in something else, namely Seagen's innovative potential in oncology. Seagen's pipeline is impressive; it boasts about three-dozen programs, all across the oncology field. It is targeting treatments for various kinds of cancer, including colorectal, breast, and bladder.

Pfizer's oncology portfolio hasn't been performing well. In Q2, its sales dropped by 4% year over year to about $3 billion. The addition of Seagen should instantly help it move things in the right direction. And with the backing of Pfizer, Seagen should be able to push many of these pipeline programs over the finish line perhaps faster than it otherwise would have.

As Bourla said at the time of the announcement:

We are not buying the golden eggs. We are acquiring the goose that is laying the golden eggs. For us, what is extremely important, it is that we will maintain the Seagen capability to continue innovating and do ... way more if possible, than they were able to do it alone.

3. Pfizer's stock looks too cheap to ignore

Yes, Pfizer has its issues right now. COVID-related sales are dropping off a cliff, dragging down the rest of its revenue and profits. But comparisons to the pandemic years are deeply unfair to Pfizer. The company took a chance and partnered with BioNTech to develop a coronavirus vaccine. If things had not panned out, it wouldn't have been a significant loss for Pfizer, but the company hit the jackpot, and its decision to partner with BioNTech turned out to be a genius move.

And while Pfizer was never going to sustain the kind of revenue it generated in 2021 and 2022, the company substantially strengthened its business thanks to that windfall. That's the most important thing for long-term investors. The fact that Pfizer's shares are tanking represents an excellent opportunity to buy them on the dip. The company's forward price-to-earnings is just under 11, compared to 16.4 for the pharmaceutical industry.

At these levels, Pfizer looks like a solid stock to buy and hold.