Image source: Pfizer. 

The broader market may have struggled to break free of the flatline for much of the year, but shareholders of pharmaceutical giant Pfizer (NYSE:PFE) can take solace in the fact that their stock outperformed the market in 2015. Through Dec. 30, Pfizer shares were up a hair over 5% for the year, which isn't a bad return at all considering that the company also sports a 3.7% dividend yield.

Why Pfizer outperformed in 2015
What fueled Pfizer's share price in 2015? Look no further than its active merger and acquisition strategy, as well as its earnings reports.

In February, Pfizer announced the buyout of Hospira in what amounted to a $17 billion deal. Purchasing Hospira bolstered Pfizer's generic offerings and should help buoy Pfizer's ailing global established products portfolio.  

Image source: Pfizer.

Then, in November, Pfizer announced that it and Allergan (NYSE:AGN) would be merging. Although the deal is observed in such a way as Pfizer is buying Allergan for $160 billion, it's actually structured the other way around. With Allergan shareholders accepting 11.3 Pfizer shares for the deal, and Allergan shareholders owning approximately 44% of the new company, Pfizer will be able to move its headquarters to Ireland, where Allergan is based, and where corporate taxes are substantially lower than in the United States. The deal could wind up saving Pfizer $2 billion annually, and it's expected to lead to double-digit EPS growth by 2020. 

Earnings reports were another source of strength for Pfizer. Pfizer broke its streak of operational revenue declines, which began in 2010, just prior to the patent exclusivity loss of top-selling cholesterol-fighting drug Lipitor. Although Pfizer's operational growth was in the low single-digit percentage for all three quarters of 2015, it was a genuine improvement and shareholders took notice.

Will 2016 be Pfizer's best year yet?
But, the big question is whether or not this Big Pharma is on pace for its best year yet. While Wall Street and investors should expect improvement in a number of key areas on an operational basis, 2016 is going to be far from a banner year for Pfizer.

Why might Pfizer struggle in the year ahead? The big concern is the ongoing integration of Hospira and the closing of the Allergan transaction in the second-half of 2016. Pfizer noted in the press release announcing the merger with Allergan that the transaction would be "neutral to its adjusted EPS in 2017," which is another way of saying that it's expected to weigh on Pfizer's bottom-line in 2016. Don't get me wrong, Pfizer's lowered effective tax rate and the synergies created by eliminating overlapping divisions should result in substantial EPS growth. However, the initial integration of these businesses, and the one-time charges associated with possible layoffs, are expected to drag Pfizer's EPS down by a mid-single-digit percentage in 2016.  

Image source: Flickr user Nguyen Hung Vu.

Additionally, despite the addition of Hospira and its leading portfolio of injectable drugs, the loss of exclusivity on previously key drugs in its global established products portfolio will likely weigh on Pfizer's top-line. For example, worldwide sales of anti-inflammatory drug Celebrex have tumbled 67% in 2015 from $2.15 billion to just $640 million, bacterial infection drug Zyvox is on pace to lose its blockbuster status as sales have fallen 23% to $696 million through nine months globally, and its GEP alliance revenue dropped 69% to just $48 million worldwide through nine months. Though Pfizer does have novel drug sales ramping up, it simply may not be enough to cancel out the ongoing decline in GEP portfolio sales.

What Pfizer shareholders should be watching
As we enter 2016, there are two drugs in particular that hold a lot of weight and should be closely monitored by Wall Street and investors.

First, investors will want to keep a close eye on the ramp-up of Ibrance, which has been approved by the Food and Drug Administration to treat HER2-negative, estrogen-receptor positive metastatic breast cancer. In the clinical studies that led to its approval, Ibrance essentially doubled progression-free survival for patients taking the drug compared to the placebo, and overall survival improvements of more than four months were observed in the Ibrance cohort relative to the placebo cohort.

Image source: Pfizer.

In spite of only spending two full quarters on pharmacy shelves, Ibrance delivered $230 million in sales during the third quarter. This works out to $920 million in sales on an extrapolated basis, and that assumes stagnant growth, which seems unlikely. Ibrance is fully expected to become a billion-dollar blockbuster in 2016, and investors should pay close attention to how quickly sales ramp up.

The second drug worth watching is Pfizer's and Merck KGaA's (NASDAQOTH:MKGAY) experimental cancer immunotherapy avelumab. Immunotherapies work by assisting your immune system to more efficiently and effectively locate cancer cells so they can be destroyed. Successful early immunotherapy entrants have blockbuster sales potential, and Pfizer/Merck KGaA hope to be a part of the early success stories.

What's most interesting about avelumab is that Pfizer and Merck KGaA decided to bypass metastatic melanoma, which has been something of a foot-in-the-door indication that immunotherapy developers have targeted. Instead, the duo is targeting a number of solid tumor indications. Avelumab is currently being studied in a late-stage advanced non-small cell lung cancer study, and it has a handful of early stage solid tumor trials for gastric cancer, bladder cancer, renal cancer, and ovarian cancer, just to name a few. Expect a slew of data to emerge on avelumab in 2016.

Does Pfizer belong in your portfolio?
You may also be wondering whether or not Pfizer deserves a spot in your portfolio. To that end I'd suggest that you take a good look at your investing goals and timeframe to answer that question.

Pfizer certainly has attractive long-trail growth opportunities, and its cash flow is nothing to sneeze at. While waiting for Pfizer to reinvigorate its growth, shareholders will likely receive a far above-market average dividend yield, and Pfizer probably will remain steadfast in its approach of repurchasing its common stock. There are definite shareholder incentives for the long-term investors who wants minimal volatility and reliable income -- but there will be hiccups along the way.

If you're the type of investor that has the time to stick around for what appears to be an inevitable turn in Pfizer's fortunes, and you loathe volatility, then Pfizer could be a great addition to your investment or retirement portfolio.