There are many criteria for evaluating a pharmaceutical stock, but one of the easiest to start with is the drug pipeline. You can do so by looking at quarterly reports or listening to earnings calls, as companies tend to spotlight their most promising developments. It's a worthwhile exercise, as a strong pipeline can be the difference between a pharmaceutical company being a leader or a laggard, shaping the future of your investment.
Today, using Pfizer (PFE +0.33%) as an example, we'll see why it's so important to always have a potential flagship drug lined up.
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Staying ready for what's next
When Pfizer launched its COVID-19 vaccine, it was a game-changer for the company. Revenue nearly doubled from $41.6 billion in 2020 to $81.2 billion in 2021. It climbed even further in 2022, reaching roughly $100 billion.
As demand for the vaccine peaked, the story was different in 2023, with sales slumping to around $58 billion. Granted, revenue has still been higher over the past few years than it was before COVID-19, but the stock price is also down about 29% over the last five years as demand for Pfizer's vaccine dropped.
NYSE: PFE
Key Data Points
In an attempt to find its next hit, Pfizer acquired Metsera, which doesn't have any drugs on the market now but has weight-loss drug candidates in trials. Pfizer also acquired Seagen in 2023 to bolster its oncology business.
Through Pfizer, we've seen a case study for why having that strong pipeline is so critical. If companies are caught flatfooted when patents expire or drug demand wanes, shareholders may pay the price.
