Demand for COVID-19 vaccines and drugs has been fading for a while now. And that has put a big dent in Pfizer's (PFE 0.81%) sales and profit numbers. On top of that, the stock is also facing headwinds due to losses in exclusivity for multiple drugs, which threaten to wipe off billions of dollars in revenue from its top line this decade.
Recently, however, Pfizer reported some encouraging quarterly numbers. Also, the growth rate of many drugs was in double digits. The performance was good enough for the company to justify raising its guidance for the year. Is this a sign that perhaps Pfizer isn't in as bad a shape as investors may have been worrying?
Could now be a good time to add the healthcare stock to your portfolio?
NYSE: PFE
Key Data Points
Revenue grew 3% despite declining COVID revenue
Last month, Pfizer posted its quarterly results for the second quarter, which ended in June. Revenue totaled $13.3 billion, which operationally increased at a rate of 3% year over year. When excluding the impact of its key COVID products, Comirnaty and Paxlovid, the growth rate was even higher at 14%.
What was more promising is that Pfizer generated some encouraging growth in its oncology business, where sales rose by 27%. The company has been investing heavily in oncology drugs, most notably with its massive $43 billion acquisition of Seagen last year. And in specialty care drugs, its growth rate was a bit more modest but still decent at 14%.
Pfizer boosted its guidance for the year by $1 billion; it now expects a range of $59.5 billion to $62.5 billion in sales for the year. That would only be slightly higher than the $58.5 billion it posted last year, and nowhere near the $100.3 billion it generated in 2022 when its COVID business was booming.
The company could have multiple catalysts ahead
It's easy to be bearish on Pfizer today, given the challenges it faces in growing its operations. But the company has been working on strengthening its prospects for the future, through both acquisitions and in-house drug development.
One underrated opportunity could be in weight loss, with the company moving forward with a once-daily pill, danuglipron, which has been generating some encouraging numbers in early-stage trials. Given that the market for GLP-1 drugs could top $100 billion, even just securing a small market share in this area could mean billions in additional revenue for Pfizer down the road.
It's already starting to rack up approvals in other areas as well. Last year, the Food and Drug Administration (FDA) approved Velsipity for treating adults with moderate to severe ulcerative colitis. It's a potential blockbuster drug and could generate more than $2 billion in sales for the company at its peak. The FDA also granted accelerated approval for Pfizer's blood cancer therapy Elrexfio last year, and that could generate $4 billion in revenue at its peak.
These are just a few examples, but Pfizer could obtain approval for many more products in the future, as it's still investing heavily in growth. In the meantime, the company is also working on cutting costs. Earlier this year, it announced that it's looking to trim $1.5 billion in spending by 2027, which is on top of another plan to cut $4 billion in costs.
In the short term, Pfizer has incurred some hefty restructuring charges which have resulted in some very low profit numbers -- last quarter's net income was just $41 million, versus a profit of $2.3 billion in the prior-year period. But as the company achieves greater efficiencies in its operations and reduces unnecessary expenses, its bottom line may look much stronger.
Should you buy Pfizer stock?
Shares of Pfizer are down more than 30% in three years. The stock isn't attracting many growth investors anymore, due to the uncertainty which lies ahead for its operations. But management has been working on growing operations. And by also cutting expenses, there may be multiple ways for its financials to improve significantly. This isn't as risky a stock as it may appear to be.
As long as you're patient with it, Pfizer's stock has the potential to make for an excellent long-term investment in the years to come.
