Source: PaxForex Premium Analytics Portal, Fundamental Insight
Pfizer (NYSE: PFE) has significantly underperformed the S&P 500 index, which in itself is not very good. It also lagged behind the S&P 500 in 2019. If you look at the last three years, five years or 10 years, Pfizer is not keeping up with the market as a whole.
Pfizer has not been a winner for a long time. So, is it worth shorting the company's shares right now or should we wait?
Investors were not happy after the last clinical failure of Pfizer. Earlier this month, a pharmaceutical manufacturer announced that an independent data monitoring committee for a Phase 3 PALLAS study evaluating Ibrance as an adjunctive treatment for early breast cancer had determined that the study was unlikely to show statistically significant improvement.
That was a painful kick to Pfizer since Ibrance is a fundamental part of Pfizer's increase plan. The Breast Cancer Medication brought in nearly $5 billion in 2019. Previously, Pfizer has openly declared that initial adjuvant opportunities could increase the number of Ibrance patients.
Albert Bourla, the CEO, said the corporation is still "very confident" that once the merger of its Upjohn and Mylan businesses is complete, it will still be able to generate revenue growth of 6% annually until 2025. Nevertheless, the firm has not presented any information on how it will be able to achieve this goal through a profitable breast cancer adjuvant market, which does not seem to be currently under discussion.
Are there any positive points for Pfizer?
Yes, there are plenty.
The expected Upjohn-Mylan deal is number one to mention. One of the principal reasons for Pfizer's unsatisfactory performance last several years has been its "old" medications, which have been decreasing in sales. By getting rid of Upjohn and merging with Mylan, the company will abolish all these legacy drugs from the Pfizer portfolio.
This clears the way for the company's faster-growing drugs. For example, in the first quarter of 2020, the share of sales of Eliquis, a blood thinner that Pfizer sells with Bristol Myers Squibb
(NYSE: BMY), soared by almost 29 percent year on year. Sales of Xtandi, a prostate cancer treatment product, jumped 24% in the first quarter.Pfizer's portfolio includes several rising stars
with incredible potential. In the first quarter, Vyndaquel can be brought to the top, with sales of the medicine for rare diseases more than quadrupling in a year. Sales of Inlyta kidney cancer medicine more than doubled in the first quarter of the year. Melanomials Braftovi and Mektovi are also gaining momentum.
At the same time, Pfizer is confidently becoming a major player in the biosimilar market. Remicade, sold under the Inflectra brand name, is already enjoying commercial success. The company recently obtained regulatory approvals in the USA for its Neulasta and in Europe for its Rituxan.
And the Pfizer pipeline is loaded. The large pharmaceutical company has more than 90 clinical trial programs, of which 21 are at the late stage of research, and six are awaiting approval. PF-06482077 pneumococcal conjugate vaccine and Tanezumab osteoarthritis painkiller are particularly promising.
Besides, the partnership between Pfizer and the German biotechnology company BioNTech should be closely monitored. Both companies are conducting the first phase of COVID-19 vaccine clinical trials. This vaccine was short-listed among five candidates selected by the White House for federal support.
It's quite understandable why investors and traders may be disappointed in Pfizer.
But the best solution would be to wait and see. Albert Burla is likely right that the company can deliver at least 6% profit growth until 2025. If we add Pfizer's dividend yield (which should remain at 4% even after the Upjohn-Mylan deal is closed), the stock should be able to generate attractive total returns.
