Staying Positive in Obesity Market After Setbacks: What's Next for Pfizer's Future?

Moomoo News Global wrote a column · Jan 12, 2024 19:07

Compared to the success of $Eli Lilly and Co (LLY.US)$ and $NOVO NORDISK A/S (NONOF.US)$, $Pfizer (PFE.US)$ had a rocky start in launching its weight-loss pill. Last December, Pfizer announced that it would discontinue the development of a twice-daily iteration of its weight loss medication danuglipron, due to its unacceptable side effect profile as revealed by a Phase 2b trial. Before that, Pfizer gave up an oral drug in the summer, lotiglipron, due to elevated liver enzymes in patients who took the drug in midstage clinical studies.

Despite these setbacks, Pfizer remains committed to entering the $100 billion obesity market. On Monday, CEO Albert Bourla had expressed his determination, stating, "Obesity is going to be a big market. Pfizer will participate in the market. Metabolic disease has always been a major strength of Pfizer."

How was Pfizer's Business Performance Last Year?

Pfizer experienced a tough year in 2023. Pfizer's revenue in Q3 FY2023 was $13.2 billion, which decreased operationally by 41%. Bourla explained that the miss was predominantly in COVID, but also, the commercial performance of the other products didn't impress very much. Nevertheless, the non-COVID products of Pfizer witnessed an operational growth of 10% in the same quarter. As a result, Pfizer's stock price decreased by 41% in 2023.

Source: Bloomberg

Staying Positive in Obesity Market After Setbacks: What's Next for Pfizer's Future?

What Are the Bright Spots for Pfizer's Future Development?

New Products and Business Expansion

Pfizer has introduced a number of new products, such as Abrysvo, an RSV vaccine, and Elrexfio, a drug for multiple myeloma, which are expected to play a critical role in its success. Bourla told to Christopher Thomas Schott, a senior analyst from JPMorgan, "It is that 2023 was a record year for FDA approvals for Pfizer. We had 9 approvals of 9 new molecular entities. We have numerous more approvals because we had a lot of new claims in already approved products, but 9 new molecular entities, which is 3x the size of the second one. And that's a very productive research year for Pfizer."

Additionally, Pfizer has been actively engaged in business expansion efforts, such as the acquisition of $Biohaven (BHVN.US)$, Global Blood Therapeutics and Arena Pharmaceuticals in 2022, and Seagen in 2023.

Cost Realignment Program

Pfizer unveiled a cost-cutting plan in last October that included a $3.5 billion reduction, with an estimated implementation of approximately $1.0 billion in 2023 and an additional $2.5 billion in savings by 2024. At the start of this year, they revised those projections upward, with the cost-cutting plan now expected to result in $4 billion in reductions.

Long-Term Strategy

Pfizer is strategically positioning itself for long-term success. By 2030, the company anticipates generating approximately $20 billion in annual revenue from existing products and novel applications for current products. According to management, another $25 billion in supplementary annual revenue will result from business growth agreements.

Safety Margin

Pfizer's current PE ratio stands at 15.5x, which is lower than that of its peers and the overall market. Meanwhile, A high dividend yield of 5.8%, hitting a decade-long high, combined with CEO Albert Bourla's commitment to grow dividends, creates a significant safety margin for the company's stock price.