Pfizer (PFE +0.45%) investors have been through a lot of ups and downs over the past few years. If you've been on the sidelines, now could be a great time to buy the stock.
Shares of Pfizer have been beaten severely in response to sinking sales of Comirnaty, its COVID-19 vaccine, and Paxlovid, an antiviral treatment. At its beaten-down price, it offers an eye-popping 5.9% dividend yield.
NYSE: PFE
Key Data Points
Pfizer has raised its dividend payout every year since 2009. The stock is down because COVID-19 product sales have been disappointing. Luckily, this company has enough products besides Comirnaty and Paxlovid to keep growing total sales over the long run.
Read on to see why income-seeking investors want to buy Pfizer now and hold on for the long run.
An oncology sales boom ahead
In late 2023, Pfizer acquired Seagen, which currently markets four commercial-stage cancer therapies. One of those therapies, Padcev, recently earned approval from the Food and Drug Administration (FDA) to treat newly diagnosed bladder cancer patients.
New cancer patients tend to stay on therapy much longer than folks who have failed to respond or relapsed following their first treatment. As a result, Padcev is expected to generate over $7 billion in annual sales at its peak.
Lorbrena is a lung cancer therapy Pfizer launched in 2018, and it racked up $539 million in sales last year. This figure is about to explode higher due to positive results from the Crown study.
On May 31, Pfizer announced the sort of clinical trial results that really get oncologists' attention. More than 60% of newly diagnosed patients with a genetically defined form of lung cancer who received Lorbrena remained alive without disease progression after five years. That was an 81% risk reduction compared to trial participants who were randomized to receive Xalkori, a standard treatment for this patient population.
Lorbrena and Padcev are poised for sales explosions, and there could be more oncology blockbusters from Pfizer further down the road. In the first quarter alone, the company began pivotal phase 3 trials with two still-experimental candidates, atirmociclib and sigvotatug vedotin.
More than just cancer drugs
Pfizer's oncology division could drive growth in the years ahead, but it's responsible for less than a quarter of total revenue today. Investors who buy Pfizer can rest a little easier knowing the company can likely maintain its dividend payout even if its oncology division suffers a wave of unexpected setbacks.
Pfizer's Abrysvo is one of three new respiratory syncytial virus (RSV) vaccines approved to prevent infections among adults 60 years of age and older. Last August, it became the first to earn approval for protecting newborn infants as a maternal vaccine.
Abrysvo sales rose to an annualized $580 million in the first quarter and could soar much further. In April, Pfizer showed us positive phase 3 results from a trial with adults aged 18 to 59 years old. This could allow it to become the first RSV vaccine available for adults over 18 long before competing vaccines from GSK and Moderna have a chance to entrench themselves.
A bargain now
If we exclude expected losses from Paxlovid and Comirnaty, Pfizer reported first-quarter sales that rose 11% year over year. Now that the heaviest COVID-19 product sales losses are over, a return to growth could be around the corner.
With a long list of new drugs to market, Pfizer could grow sales by a high-single-digit annual percentage in the decade ahead. Its recent price, though, suggests earnings will creep forward at a snail's pace. The stock has been trading for just 12.8 times the midpoint of management's earnings estimate for 2024.
Buying some shares of the pharma giant at this bargain price and holding them over the long run gives you a good chance to realize market-beating gains. At the same time, a high-yield dividend payment supported by drugs that millions of people can't live without limits risk. Put it together, and Pfizer looks like a smart buy now for most investors.
