Pfizer (PFE 1.03%) continues to lag the market. Over the past few years, the company has generally reported declining revenue and profits, resulting in a substantial decline in market value. The drugmaker has been looking to turn things around, but so far, it's had little success.
Could this be the year Pfizer finally starts to bounce back? Although the pharmaceutical giant's shares haven't performed well this year, several factors make the stock look attractive right now. Let's consider three.
1. Pfizer's newest acquisition could be a hit
Pfizer has tried to launch newer drugs to boost top-line growth. Though it has earned approval for several medicines over the past few years, they aren't generating the kinds of sales it was looking for from its newer products, at least not yet. The drugmaker is still looking for its next gem, and it may have found it with its latest acquisition. Pfizer recently announced that it was acquiring Metsera (MTSR 0.39%), a smaller biotech company working on weight management medicines, for approximately $5 billion in cash.
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Some of Pfizer's internally developed candidates in this area have been unsuccessful, and the company had to abandon them. Yet the market for anti-obesity therapies is growing rapidly, and Pfizer wants a part of it. Could some of Metsera's candidates produce strong enough results in clinical trials to carve out a niche in this market?
On Sept. 29, Metsera announced that its leading candidate, MET-097i, performed well in two mid-stage studies. In one of them, the medicine resulted in a 14.1% weight loss over 28 weeks, without any observed plateau; that's a promising efficacy result. And on top of that, only 2.9% of participants dropped out of the trial. GLP-1 candidates in development have sometimes disappointed the market because of high rates of adverse reactions and patient dropouts. Metsera believes MET-097i has the potential to demonstrate class-leading tolerability.
What's more, it's a long-acting GLP-1 drug that could be administered once a month, whereas the current leaders are taken once weekly. Better tolerability and a friendlier dosing schedule, along with somewhat comparable efficacy, could attract a significant number of patients. Of course, results for MET-097i still need to be confirmed in phase 3 studies, which are expected to begin by the end of the year. But this is perhaps the most promising candidate Pfizer has had in a long time. It could, eventually, help it move past the challenges it's facing.
2. Striking a deal to avoid tariffs
Tariffs have been one of the biggest threats to many corporations on Wall Street this year. President Donald Trump's aggressive trade policies risk increasing costs and expenses for many companies, including those in the pharmaceutical industry. This might lead to lower profits and margins for drugmakers, potentially impacting their investment in research and development (R&D) and, over the long run, the volume of drugs they produce.
However, Pfizer recently penned a deal with the U.S. government that will help it avoid all that; the company will get a three-year exemption from tariffs. In exchange, it will sell certain drugs at lower costs in the U.S. and significantly expand its manufacturing footprint in the country. Even with lower revenue from some medicines as a result of this agreement, if this option were more costly than tariffs, Pfizer likely wouldn't have opted for it.
Notably, the drugmaker has also been working to reduce its expenses, aiming to boost the bottom line. It's on track to achieve net cost savings of $4.5 billion by the end of 2025, with additional savings expected through 2027.
3. The price is right
There is a lot more going on with Pfizer's stock. We have yet to see the fruits of several of the company's other moves, including its massive $43 billion acquisition of Seagen, a cancer specialist that was developing an impressive number of oncology drugs for a company of its size. Pfizer should continue launching newer products. And recent developments, from its acquisition of Metsera to its deal with the U.S. government, render the stock even more attractive.
Yet Pfizer was recently trading at just 8.8 times forward earnings, while the average forward price-to-earnings ratio for the healthcare industry tops 17.3.
Even though Pfizer has been struggling, given the trajectory of the company, its shares appear to be a bargain at current levels.
