Pfizer's Quest for GLP-1 Dominance: A Potential Game-ChangerOver the past year, investors have been disappointed with Pfizer as the company's stock experienced a significant decline of 28.8%. This decline can be attributed, in part, to the anticipated drop in sales for Pfizer's COVID-19 vaccine, Comirnaty, and its antiviral treatment, Paxlovid. However, there is an overlooked aspect that investors have failed to recognize: Pfizer's potential as a promising "oasis stock."
In contrast, certain companies such as Eli Lilly, Crispr Therapeutics, Microsoft, and Nvidia have garnered significant investor interest since the beginning of 2023, leading to their shares outperforming the broader market. These companies share a common thread of being associated with cutting-edge technologies like artificial intelligence, gene editing, or weight-loss treatments, which have captured the attention of investors.
Despite Pfizer's extensive $70 billion spending spree on business development in recent years, the company has struggled to impress Wall Street as of late. This sentiment is reinforced by the fact that Pfizer's stock currently trades at a remarkably undervalued forward-looking earnings yield of 9.2%. This valuation is considerably lower compared to other major pharmaceutical stocks, which have an average earnings yield of 7%, as well as the 10-year U.S. Treasury bond, which yields 3.73%.
Fundamentally, investors have not fully embraced Pfizer's compelling value proposition, which revolves around the potential for the company to become a powerhouse in areas such as immunology, rare blood disorders, and cancer treatment by the end of the decade. However, a specific set of clinical assets may soon captivate the market's attention and potentially alter this situation: the oral glucagon-like peptide-1 receptor (GLP-1) agonists, danuglipron and lotiglipron.
Danuglipron has recently displayed outstanding results in a mid-stage trial, showing promise as a dual treatment for controlling blood sugar and promoting weight loss in individuals with type 2 diabetes. Pfizer, the pharmaceutical giant, is patiently awaiting the forthcoming mid-stage trial data for lotiglipron before determining which candidate to advance into phase 3 testing.
The significance of this lies in the fact that shares of Eli Lilly and Novo Nordisk have experienced substantial upward trends over multiple years, primarily driven by their GLP-1 drugs, tirzepatide and semaglutide, respectively. These innovative medications are expected to generate annual sales of nearly $100 billion due to the increasing prevalence of diabetes and obesity worldwide.
While Pfizer is entering the GLP-1 market relatively later, its oral offerings have the potential to effectively compete against injectable drugs like tirzepatide and semaglutide in the long run.
Following the release of danuglipron's impressive mid-stage trial data, Cantor Fitzgerald, a financial services firm, has reiterated its price target of $75 per share for Pfizer's stock. This target represents a potential increase of approximately 94% compared to the current stock price.
In contrast, most other firms covering Pfizer have adopted a more cautious approach, choosing to wait for phase 3 data from one of the GLP-1 candidates before revising their fair value estimates. This cautious stance is understandable, as mid-stage data often do not reliably predict the outcomes of late-stage trials. Additionally, by the time Pfizer enters the GLP-1 market, tirzepatide and semaglutide may have already established themselves as strong competitors.
What does this mean? It suggests that Pfizer possesses a pipeline asset for type 2 diabetes and weight loss that is not fully recognized by the market. It is likely that the pharmaceutical company will have late-stage trial data on either danuglipron or lotiglipron ready for presentation by 2025, paving the way for a commercial launch in 2026.
The bottom line is that if Pfizer can develop a GLP-1 asset that surpasses the clinical performance of the current market leaders, it has the potential to create one of the best-selling drugs in history. In such a scenario, Cantor Fitzgerald's ambitious price target, though premature at the moment, may not seem far-fetched in about three years. For investors who are willing to take a more aggressive stance, considering Pfizer as a leading big pharma stock in the near future could prove worthwhile.
It's worth noting that the success of Pfizer's GLP-1 assets hinges on the outcome of late-stage trials and their ability to compete effectively with established competitors like tirzepatide and semaglutide. Market dynamics, regulatory approvals, and other factors can also impact the commercial viability of these drugs. Therefore, investors should exercise caution and conduct thorough research before making any investment decisions.
Overall, while Pfizer has faced challenges and a decline in stock performance, its potential in the GLP-1 market and other therapeutic areas cannot be overlooked. The company's long-term prospects, driven by innovative treatments and strategic investments, could lead to significant growth and value creation in the coming years.
