One of the biggest risks facing pharmaceutical companies is the precipice of patents. Once drugmakers lose patent exclusivity for an in-house developed drug, cheaper generics typically enter the market, leading to lower sales of these products.
At the end of this decade, the pharmaceutical giant Pfizer (PFE -0.34%) it will have to deal with the loss of patents on some of its key products, including the cancer drug Ibrance and the blood thinner Eliquis. These two therapies could lose patent protection as of 2027.
However, Pfizer faces a much more immediate problem. Its COVID-19 products, the Comirnaty vaccine and the drug Paxlovid, will almost certainly see sales drop from next year. To invest in Pfizer, one has to address both the immediate threat of coronavirus-related sales declines and longer-term concerns about patent cliffs facing the company.
Fortunately, Pfizer has a plan to stay competitive. Let’s take a closer look.
10 possible releases in 2023
The best way for drugmakers like Pfizer to keep their revenues and profits afloat after patent cliffs is to develop new drugs. To that end, the company recently went through a wave of acquisitions which allowed him to expand his channeling. Even before these transactions, it already had a decent portfolio of exciting programs.
But Pfizer is looking to bring it all together starting next year. Chief Executive Officer Albert Bourla predicts the company could launch at least 10 new drugs by 2023. To put that number in context, Pfizer typically manages one or two new launches each year. The company’s new product lineup next year will include five new vaccines and several drugs in oncology and immunology.
One of them will undoubtedly be ritlecitinib, a potential therapy for alopecia areata, a condition that causes hair loss. In September, Pfizer announced regulatory acceptance of its application for ritlecitinib as a treatment for alopecia in the US and Europe.
Pfizer’s new products will have a challenging task. Replacing the company’s coronavirus lineup won’t be easy, even with the $25 billion in risk-adjusted revenue these new launches will generate by 2030, according to Bourla. After all, Pfizer expects $32 billion in revenue from Comirnaty this year and $22 billion from Paxlovid. However, the good news is that Paxlovid and Comirnaty are likely to continue to generate sales even after the pandemic is officially over. COVID-19 is here to stay, and people will continue to vaccinate and brace themselves against it.
If Pfizer’s goal of launching 10 new products next year is met, its revenue and profit could return to growth in 2024 after falling next year.
Two additional reasons to consider Pfizer
Pfizer shares have underperformed the broader market this year, in part due to the perceived end of its coronavirus-related tailwind. But its long-term prospects remain intact thanks to its large and growing portfolio of projects.
And arguably the company’s share price doesn’t reflect its potential. Pfizer trades at a forward P/E ratio of just 7.1; on the contrary, the S&P 500The PER stands at 17.1, while the pharmaceutical industryThe average of ‘s is 12.7. Pfizer’s levels appear to be more than reasonable at the moment, which is just one more reason to consider buying the stock.
Here’s another one: a strong dividend profile. Pfizer offers a current yield of 3.56%, well above the 1.82% for the S&P 500. Its 31% cash payout ratio leaves plenty of room for dividend increases. The drugmaker has increased its payments by 25% in the last five years, a period of time that includes the worst years of the pandemic.
In short, Pfizer is a solid choice for both value and dividend investors. And while revenue and profit growth likely won’t happen next year, the drugmaker has a solid plan to turn that around for the long haul. Pfizer has plenty of tools to please long-term-focused investors.