Summary
- Pfizer Inc. is a global biopharma giant with a 3.5% dividend yield and a broad portfolio of therapies and consumer healthcare products.
- Pfizer has invested in R&D and made acquisitions to build a robust drug pipeline.
- The company has risks related to patent expiration and regulatory approvals.
- Pfizer's blockbuster drug, Lyrica, with over $5B in 2018 sales, will come off-patent in 2019-2020.
- The stock is overvalued at the current price.
Thesis
As far as big pharma stocks go, Pfizer Inc. (PFE) is one that is usually considered a safe and conservative one to own. In fact, I used to own Pfizer until the Great Recession when the company cut its dividend. However, the current yield of ~3.5% and nine years of dividend growth led me to reevaluate the stock.
Pfizer released solid Q1 2019 earnings. Company-wide revenues increased 2% to $13,118M on a year-over-year basis. Diluted earnings per share (GAAP) increased 9% to $0.68 in Q1 2019 from $0.59 in Q1 2018. Furthermore, the pipeline has improved with numerous therapies in Phase II trials and Phase III clinical trials. However, the company also has risk in that Lyrica is coming off-patent protection and some of these new drugs may not succeed. An examination of the stock accounting for the loss of revenue indicates that it is fairly valued. Hence, investors should probably wait for a better entry point of ~$35-36 per share or about 10% less than the current price.
