PFE's New & Acquired Drugs Hold Key to Revenue Growth Amid Headwinds

Pfizer's non-COVID revenue is increasing, offsetting declining COVID product sales, driven by key in-line products, new drug approvals (nine in 2023), and the acquisition of Seagen which added four antibody-drug conjugates (ADCs) to its oncology portfolio. The Seagen acquisition has contributed meaningfully to revenues in 2024 and early 2025. Despite challenges including Medicare Part D headwinds, Pfizer's stock appears undervalued, trading at a forward P/E of 7.97 compared to the industry average of 15.54, and analysts' earnings estimates for 2025 and 2026 have risen.

Analysis

Pfizer is strategically pivoting from declining COVID-19 product revenues by bolstering its non-COVID portfolio, which demonstrated improved operational revenue in 2024 and early 2025. This growth is driven by established products like Vyndaqel and Eliquis, a record nine new drug approvals in 2023, and recent 2024 approvals including two gene therapies. The December 2023 acquisition of Seagen has been pivotal, significantly enhancing Pfizer's oncology presence with four antibody-drug conjugates (ADCs) that have already contributed meaningfully to 2024 and Q1 2025 revenues, and Seagen's pipeline offers further next-generation ADC candidates. Despite these strengths, Pfizer confronts challenges such as U.S. Medicare Part D headwinds, an upcoming loss of exclusivity cliff, tariff uncertainties, and macroeconomic volatility. The stock has underperformed its industry year-to-date, declining 4.4% versus the industry's 3.1% increase. However, Pfizer's valuation appears attractive, with a forward P/E ratio of 7.97, well below the industry average of 15.54 and its 5-year mean of 10.91. This is supported by upward revisions in the Zacks Consensus Estimate for 2025 earnings (from $2.98 to $3.06 per share) and 2026 earnings (from $3.00 to $3.09 per share) over the past 60 days. The competitive oncology landscape includes strong players like AstraZeneca, whose oncology sales constitute 41% of its total revenues and grew 13% in Q1 2025, and Merck, for whom Keytruda alone accounts for approximately 50% of pharmaceutical sales.

Key Decisions for Investors

• Given Pfizer's forward P/E of 7.97, substantially below industry and historical averages, and upwardly revised earnings estimates for 2025 and 2026, investors could view the current valuation as a compelling opportunity, particularly considering the growth potential from its expanded oncology portfolio and new drug approvals.
• Investors should closely track the sales trajectory of non-COVID products, especially those from the Seagen acquisition and recent launches, to gauge their ability to offset declining COVID-19 revenues and mitigate identified headwinds such as Medicare Part D impacts and future patent cliffs.
• Continuous monitoring of Pfizer's competitive positioning in the oncology space against major players like AstraZeneca, Merck, and Bristol-Myers is crucial, focusing on market share gains and the performance of its newly acquired antibody-drug conjugates.