Shares of Pfizer (PFE 0.19%) have been in an endless tailspin this year -- now down more than 40%. The top drugmaker can't seem to catch a break. Revenue from its COVID-19 products is down big, and investors are concerned about looming patent cliffs for the business in the years ahead.
And recently, the company had another setback, giving investors yet another reason to be bearish on the stock. Let's look at what happened -- and Pfizer's prospects for overcoming this latest challenge.
Discontinuing a promising weight-loss treatment
Last week, Pfizer announced that it would discontinue yet another weight-loss drug. Weight-loss drugs have been incredibly popular with investors this year, and they have been key catalysts behind the surging valuations of Eli Lilly and Novo Nordisk. Pfizer is hoping to get in on the hype as well, but it doesn't have an asset like Zepbound or Wegovy that can rally investors.
One drug that does have potential is danuglipron. But the company says it's going to stop development of a twice-daily version of the pill, as patients experienced too many adverse side effects. Earlier this year, it also discontinued lotiglipron, which was a once-daily drug for obesity and diabetes; the concern with that drug was that it may damage patients' livers.
Pfizer isn't giving up on a weight-loss treatment, however. While it's discontinuing the twice-daily version of danuglipron, it believes that a once-daily option may result in fewer side effects. Data from that treatment option won't be available until next year.
In an earlier study, data did suggest that danuglipron was as effective as Ozempic for weight loss. Although Ozempic is approved for diabetes and not weight loss, people have been using it off-label as a weight-loss treatment. But efficacy is just one part of the equation. Side effects are especially important when it comes to weight-loss drugs, because patients need to remain on them -- potentially for life -- or risk gaining the weight back.
NYSE: PFE
Key Data Points
The stock hits a new low
This month, shares of Pfizer reached a new 52-week low; the news relating to danuglipron hasn't inspired any bullishness. Not only is Pfizer trading around its lows for the year, but it hasn't traded at these levels since the market crash of 2020, when fears relating to COVID-19 sank the markets.
Pfizer has effectively gone from being a promising growth stock with a coronavirus vaccine in high demand to being a business whose future looks hazy. The apprehension is visible in the stock's price; investors are valuing it at a forward price-to-earnings ratio of just 9 while the S&P 500 average is 20.
Investors are getting a potential deal with the healthcare stock, provided that they believe the company can turn things around and get back to growing. This year, Pfizer expects its revenue to be no higher than $61 billion, which is a far cry from the more than $100 billion it generated last year.
Turning to acquisitions to grow its business
One way the company has been making up for its concerning growth prospects, and the future losses of patent protection, is through acquisitions. While Pfizer expects to lose as much as $18 billion by the end of the decade due to key drugs losing patent protection, the company has been investing in both its pipeline and acquisitions.
Pfizer expects to add $25 billion in new revenue by 2030 to help offset declining revenue from its existing drugs. A key acquisition that could be crucial in its long-term growth is its $43 billion deal to acquire oncology company Seagen, which may close next year.
Is Pfizer a bad-news buy?
At a beaten-down valuation, Pfizer makes for a potentially attractive contrarian buy for investors who are willing to take a chance on the business. While there's some risk with the stock, its low valuation does provide a good margin of safety in the event that the business stumbles further.
The company does appear to have a solid plan for growing its business in the long run. If you're willing to be patient with the stock, Pfizer can be a good investment to add to your portfolio today.
