The past five years have been a roller-coaster ride for Pfizer (PFE +0.09%). The pharmaceutical giant shook up its business -- for instance, by getting rid of its off-patent drug unit -- and made a small fortune thanks to its work in the coronavirus market, but saw that tailwind come to a screeching halt, leading to a terrible financial performance and a sinking stock price over the past three years.
However, recent developments suggest that Pfizer might be turning over a new leaf. Let's see what's in store for what could be a new era for this drugmaker.
The hunt for a "Keytruda killer"
Pfizer has been making a push in oncology over the past few years. The company already has several cancer medicines that generate decent sales. For instance, Xtandi (which treats prostate cancer) generated third-quarter revenue that increased by 3% year over year to $578 million.
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However, Pfizer is joining the race to find medicines that can challenge Keytruda's dominance. This cancer drug, marketed by Merck, has earned dozens of indications and was, until recently, the world's best-selling medicine. There is a lot at stake for therapies that can prove as effective -- or more so -- than Keytruda. Pfizer's own attempt is through a candidate called PF-4404, which it acquired through a licensing deal worth $1.25 billion (excluding potential milestone payments) from 3SBio, a China-based drugmaker.
Here's why there are new drugs ready to target the best-selling cancer medicine in the world. Keytruda is a checkpoint inhibitor that works by blocking the action of a protein called PD-1, which plays a role in cancer development. PF-4404 is a PD-1 and VEGF bispecific antibody, which, in addition to blocking the action of the PD-1 protein, also inhibits the activity of the VEGF protein that helps cancer cells grow through the formation of new blood vessels. Bispecific antibodies like PF-4404 could demonstrate higher efficacy due to their two-pronged approach to combating cancer.
As management recently said, PF-4404 has a "potential transformative mechanism of action that may enable it to be a foundational therapy across multiple cancers." Pfizer expects to initiate seven new clinical trials for PF-4404 soon. Of course, Pfizer isn't the only company developing a bispecific, potential Keytruda killer. However, the company could see significant success with this promising therapy that could help it overcome recent challenges.
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Jumping into the weight loss market
Pfizer is also going after another lucrative market: weight management. Oncology remains the leader in total sales, but anti-obesity medicines are experiencing significant traction due to breakthroughs in the field. Pfizer wants a piece of it. The company tried, and failed, to develop weight management therapies in-house. Now it has one of the more promising mid-stage assets in the industry thanks to its $7 billion acquisition of Metsera, a smaller drugmaker.
Although it had to compete with Novo Nordisk to close this acquisition, it may have been worth the effort: Metsera's MET-097i looks incredibly promising. In a phase 2 study, the medicine showed strong efficacy, with a mean weight loss of up to 14.1% in just 28 weeks. MET-097i could have two other significant advantages, though. First, the medicine could be administered once a month without sacrificing efficacy. Current leaders in this area are given subcutaneously once weekly.
Even with slightly lower efficacy, many patients will welcome the easier dosing schedule. Second, MET-097i demonstrated excellent tolerability compared to other GLP-1 candidates, which often cause relatively high rates of gastrointestinal side effects. Notably, the anti-obesity market is projected to grow to $150 million by 2035, up from $15 billion in 2024. If MET-097i pans out, Pfizer could carve out a decent niche in this space.
The dividend is safe
Pfizer may be facing some issues, but the company has taken significant steps to get back on track. It has a deep pipeline, especially in oncology, even beyond PF-4404. The company has also made other moves, including a cost-cutting initiative that is helping to boost the bottom line and a deal with the White House that will exempt it from tariffs for three years.
Pfizer should eventually address its inconsistent top-line growth as it launches newer products and the impact of older ones on its financial results wanes. That's why the stock still appears to be an attractive long-term investment, particularly for income seekers, given its 7% forward yield.
