Last year, pharmaceutical giant Pfizer(NYSE: PFE) reported the highest revenue it had ever had in a single calendar year. But in 2023, the drugmaker has substantially underperformed the market, and its shares are down by 41% year to date. These two facts aren't unrelated. Pfizer generated record-breaking sales in 2021 and 2022 thanks to its coronavirus portfolio, which has lost momentum since the COVID-19 pandemic has largely receded.
Even so, investors could be underestimating Pfizer's potential. Let's find out why the healthcare giant is still worth investing in, especially at current levels.
Pfizer's key moves
One of the best reasons to invest in a company is the team that leads it. In the case of Pfizer, it's essential to look beyond its recent poor performance and remember that, if not for some crucial moves management made over the past three years, the stock would have almost certainly performed substantially worse. Let's consider just two of those decisions.
The first was to give the business a makeover by spinning off first its consumer health business and then its off-patent drug unit, Upjohn. The former transaction closed in 2019, while the latter did in 2020. Pfizer wanted to focus its efforts on its innovative pharmaceutical business, and these other units were hurting top-line growth.
Then, Pfizer famously decided to partner with BioNTech to develop a coronavirus vaccine. While the latter originally created various candidates, Pfizer's help was instrumental in speeding up the process of testing them. Many companies were trying to dominate this market, but Pfizer beat them all to the punch by earning the first authorization for a COVID-19 vaccine in the U.S.
It was also the first time the U.S. Food and Drug Administration had authorized an mRNA-based product. Thanks to these efforts, Pfizer's revenue soared in 2021 and 2022, allowing it to invest those funds into its future. And by the looks of it, its investments have worked out nicely.
The payoff is just getting started
Pfizer has a lot to show for the investments it has made in recent years. The company has been on an impressive run of regulatory approvals in 2023. For instance, it launched Litfulo, a treatment for alopecia areata, in the U.S. and Europe. The company also earned approval for an RSV vaccine called Abrysvo.
In total, Pfizer has launched seven brand-new products -- vaccines or therapies -- this year. That's nearly four times as many as the two new products the company typically pumps out annually.
Thanks to these and the many label expansions it expects for existing products through next year, Pfizer estimates that it should earn between $70 billion and $84 billion in non-COVID-related revenue by the end of the decade, registering a compound annual growth rate between 6% and 10% between 2025 and 2030. And, of course, the company should continue generating revenue from its COVID products.
But that hardly tells the whole story. Earlier this year, Pfizer decided it would dish out $43 billion to acquire Seagen, an oncology-focused biotech. While Seagen has a rich portfolio of approved cancer medicines that should add about $10 billion in risk-adjusted revenue in 2030, Pfizer sought to acquire, as management said, "the goose that is laying the golden eggs."
The partnership between the larger and more cash-rich Pfizer and the smaller but highly innovative oncology specialist Seagen could lead to many more breakthroughs in the future.
A solid long-term option
Pfizer's financial results and stock-market performance might not look great this year, but those won't last forever. Beyond the acquisition of Seagen, Pfizer has a rich pipeline it built thanks partly to its amazing success in the coronavirus market. It currently has 83 candidates in development. With that rejuvenated pipeline, the drugmaker should be able to return to growth eventually.
There are other perks of investing in Pfizer. For instance, it's a solid dividend stock. Its yield is currently near 5.5%, and it has increased its payouts by nearly 58% in the past decade.
Investors shouldn't ignore Pfizer because of its beaten-down share price. In fact, now may be as good a time as any to invest in the stock.
10 stocks we like better than Pfizer
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Pfizer wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of November 20, 2023
Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer and Seagen. The Motley Fool recommends BioNTech Se. The Motley Fool has a disclosure policy.