Pfizer Stock Slides Despite Strong Q3 & Activist Push

• Stock price: PFE is currently at $28.53, and was down 1.39% as of October 29, 2024
• Market cap: $163.5 billion
• Earnings per share (EPS): $1.06 (beating $0.62 expected)
• Q3 2024 revenue: $17.7 billion 
• Key products: Paxlovid, Comirnaty, Ibrance
• Competitors: Johnson & Johnson (-0.93%), Merck (-0.48%), Eli Lilly (+0.89%)

Pfizer’s Q3 results were impressive, with revenue up 32% year-over-year, largely driven by strong sales of their COVID-19 treatment, Paxlovid. Paxlovid’s contribution of $2.7 billion exceeded expectations and was a significant improvement from the $202 million generated in the same quarter last year. However, the rest of Pfizer’s portfolio, excluding their COVID products, showed only modest growth of 14%, raising concerns about the company’s future growth prospects outside of their COVID-related treatments.

Despite beating both top-line and bottom-line expectations, Pfizer’s stock fell by about 1.4%. One major reason for the decline is the growing unease among investors about Pfizer’s long-term strategy, especially as activist investor Starboard Value has taken a $1 billion stake in the company and is pushing for significant changes.

What’s driving the decline?

Although Pfizer exceeded analysts’ expectations for revenue and earnings, investors are worried about their non-COVID portfolio. Sales for key products like cancer drug Ibrance fell by 13%, while anti-inflammatory drug Xeljanz dropped 36%, well below projections. This has amplified concerns about Pfizer’s ability to diversify their revenue streams as they face patent expirations for several blockbuster drugs in the coming years.

Additionally, Starboard Value’s push for changes at Pfizer has added pressure. The hedge fund has criticized Pfizer’s management for underperformance in areas such as capital allocation and acquisitions. CEO Albert Bourla, however, has defended the company’s strategy, arguing that recent deals, such as the acquisition of Seagen and their ongoing partnership with BioNTech, will generate long-term value for shareholders. Despite this, analysts like JPMorgan’s Chris Schott argue that Pfizer needs stronger performance from new product launches to drive meaningful stock growth.

Compared to other pharmaceutical giants like Merck and Johnson & Johnson, Pfizer’s stock has struggled more significantly. While companies like Eli Lilly continue to benefit from a robust product pipeline, Pfizer remains heavily reliant on their COVID portfolio, raising questions about their long-term outlook. For example, in the respiratory syncytial virus (RSV) vaccine market, Pfizer has faced stiff competition from GSK, despite Pfizer’s growing market share for their RSV vaccine, Abrysvo.

Insider sentiment and future outlook

Insiders remain divided on Pfizer’s future. While some analysts, like Cantor Fitzgerald’s Louise Chen, see value in the stock and anticipate future growth, others remain cautious. The company’s management will need to demonstrate that they can successfully navigate the challenges posed by patent expirations and competition in key markets.

On November 1, Pfizer is set to showcase their drug pipeline, including their next-generation treatments for pneumococcal diseases and potential blockbuster drugs like ponsegromab, a therapy for cancer cachexia. Investors will be watching closely for signs of how these products might fill the revenue gap left by declining sales of Pfizer’s older drugs.

For investors, Pfizer’s stock presents a mixed picture. While the company offers an attractive dividend yield of 5.90%, uncertainty looms over their future growth potential outside the COVID franchise. Investors looking for long-term growth may need to wait until Pfizer’s new product launches show clearer signs of success. Meanwhile, consumers can expect Pfizer to continue their dominance in COVID-related treatments, but the availability and pricing of other medications could be impacted as Pfizer navigates these challenges.

Ultimately, the upcoming product pipeline presentation could be a critical moment for Pfizer as they seek to reassure investors and shift the narrative surrounding their stock.