Last Update 24 Jan 26
Fair value Decreased 4.17%PFE: Loss Of Exclusivity And Obesity Deal Costs Will Pressure Shares
Analysts have reduced their fair value estimate for Pfizer from $24.00 to $23.00 per share, citing lower revenue and margin assumptions, a slightly higher discount rate, and cautious views on patent expiries, while still noting ongoing interest in its pipeline and licensing deals.
Analyst Commentary
Recent Street research around Pfizer has been mixed, with some firms highlighting long term opportunities in areas like obesity and licensing, while others are stressing near term execution and patent expiry risks. For you as an investor, the key tension is between potential from the pipeline and deals, and the pressure from looming loss of exclusivity on established products.
One recent initiation placed Pfizer in a group of large cap biopharma names rated positively, reflecting interest in companies that aim to treat and potentially cure serious diseases. Pfizer was included alongside several peers with an Outperform view, which signals confidence in the broader large cap drugmaker group and Pfizer's role within it, even as individual drug revenue trajectories remain uncertain.
Separately, Pfizer's licensing activity is still drawing attention. For example, a smaller company agreed to pay US$50m upfront plus milestones and royalties to license ervogastat from Pfizer, with plans to explore combination use in MASH through future studies. Deals like this can support Pfizer's monetization of its research and may create optionality if partnered assets gain traction over time.
At the same time, some research is more reserved on the stock, highlighting revenue visibility and patent expiry over the next several years as key overhangs. This split in views feeds into the range of fair value and price targets you are seeing on the name.
Bearish Takeaways
- Bearish analysts point to continued revenue uncertainty, with references to US$15b to US$20b of sales from key drugs expected to lose patent protection over roughly the next three years, which they see as a risk to earnings stability.
- Some are concerned that, despite interest in areas like obesity and other new deals, Pfizer may need additional steps to offset loss of exclusivity risk around 2028. They view this as a potential drag on longer term growth expectations.
- Where coverage is initiated or resumed with more cautious ratings such as Neutral, bearish analysts often frame this as a reflection of execution risk in replacing patent exposed revenue, rather than a clear call on broader sector conditions.
- The recent trimming of fair value estimates, alongside references to higher discount rates and more conservative revenue and margin assumptions, highlights how bearish analysts are embedding a wider range of outcomes into their models, which can weigh on valuation multiples.
What's in the News
- Pfizer is in a bidding contest with Novo Nordisk to acquire obesity drug developer Metsera, with reports of offers valuing the company at up to US$10b and references to FTC review questions around Novo Nordisk's bid structure. (Bloomberg, Financial Times, WSJ, Reuters, STAT, Endpoints)
- Pfizer is looking to sell its remaining stake in Covid-19 vaccine partner BioNTech via an overnight block trade worth about US$508m at the top of the indicated price range, while the two companies continue to work together on Covid-19 vaccines. (Bloomberg)
- Recent guidance updates outline revenue expectations of approximately US$62.0b for 2025 and a US$59.5b to US$62.5b range for 2026. This provides a sense of the scale management is planning around. (Company guidance)
- Pfizer and Astellas reported positive Phase 3 results and a U.S. FDA approval for PADCEV plus Keytruda in certain muscle invasive bladder cancer settings, along with additional positive trial data for PADCEV and BRAFTOVI combinations in other cancer indications. (Company announcements)
- Multiple AI and oncology collaborations, including work with Boltz, Cartography Biosciences, Flagship Pioneering and Adaptive Biotechnologies, are focused on drug discovery, tumor antigen identification, and use of immune receptor data, often with potential milestone and royalty structures attached. (Company announcements)
Valuation Changes
- Fair Value Estimate trimmed from US$24.00 to US$23.00 per share, reflecting slightly more cautious assumptions in the model.
- Discount Rate increased modestly from 6.78% to 6.96%, which tends to put a bit more weight on risk and can reduce present value estimates.
- Revenue Growth revised from a 4.21% decline to a 6.76% decline, indicating a more conservative view on top line trends over the forecast period.
- Net Profit Margin reduced from 21.01% to 17.63%, signaling lower expected profitability on each dollar of revenue.
- Future P/E raised from 14.23x to 18.01x, suggesting the updated framework is assigning a higher multiple to Pfizer's expected earnings despite the more conservative growth and margin inputs.
Key Takeaways
- Aggressive drug pricing negotiations, regulatory reforms, and patent expirations are constraining Pfizer's revenue growth and squeezing profit margins across key markets.
- Heavy reliance on new R&D assets to replace aging drugs poses significant risk, as declining exclusivity and increased competition may outpace innovative product launches.
- Advancing innovation, strategic acquisitions, operational efficiencies, global market expansion, and disciplined capital management are driving Pfizer's growth, profitability, and enhanced shareholder value.
Catalysts
About Pfizer- Pfizer Inc. discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products in the United States and internationally.
- Pfizer faces intensifying global pressure to contain healthcare costs, as governments and insurers negotiate aggressively for lower drug prices and plan to institute price caps; these changes will directly squeeze top-line revenue growth and compress net margins in Pfizer's largest markets.
- The company's revenue trajectory is threatened by the accelerating loss of market exclusivity on major drugs such as Eliquis and Ibrance, both of which are expected to lose patent protection by 2027, resulting in a dramatic revenue cliff as generic and biosimilar competitors erode market share and profitability.
- Regulatory scrutiny is rising sharply: reforms like Medicare Part D redesign, MFN pricing, IRA implementation, and growing 340B program costs are already beginning to restrict Pfizer's pricing flexibility in the US and could lead to further, unpredictable reductions in earnings and margins over the long term.
- While Pfizer has invested heavily in late-stage R&D and pipeline acquisitions, there remains a significant risk that pipeline assets will fail to offset declining revenues from aging blockbusters; challenges in bringing new therapies to market on time-combined with industry-wide R&D productivity issues-could undermine future revenue growth and delay margin recovery.
- The global demographic shift toward aging populations, combined with the proliferation of generic drugs and biosimilars, will not only reduce Pfizer's pricing power but also compel ever-increasing discounts and rebates, resulting in continued top-line sales erosion and persistent downward pressure on earnings through the decade.
Pfizer Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- This narrative explores a more pessimistic perspective on Pfizer compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
- The bearish analysts are assuming Pfizer's revenue will decrease by 4.2% annually over the next 3 years.
- The bearish analysts assume that profit margins will increase from 16.8% today to 21.0% in 3 years time.
- The bearish analysts expect earnings to reach $11.8 billion (and earnings per share of $2.04) by about August 2028, up from $10.7 billion today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 14.2x on those 2028 earnings, up from 13.0x today. This future PE is lower than the current PE for the US Pharmaceuticals industry at 18.4x.
- Analysts expect the number of shares outstanding to grow by 0.33% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.
Pfizer Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The company's deep and expanding pipeline in oncology, rare diseases, and vaccines is consistently advancing through positive Phase III studies and label expansions, which positions Pfizer to generate new blockbuster drugs and support robust top-line revenue growth in the coming years.
- Strategic business development and recent acquisitions like Seagen and the in-licensing of 3SBio assets are expected to diversify and strengthen Pfizer's innovative drug portfolio, accelerating earnings growth while improving operating margins through cost synergies.
- Ongoing productivity gains from investments in AI, automation, and a substantial $7.7 billion cost realignment and manufacturing optimization program are enabling higher operating efficiencies, driving improved net margins and long-term earnings potential.
- Pfizer's successful commercial execution-including strong performance and market share growth in key franchises such as Vyndaqel, Eliquis, XTANDI, Padcev, and new launches-along with expanding access in international and emerging markets, is supporting revenue growth and geographic diversification.
- The company's capital allocation discipline, improved cash flow, and commitment to an attractive, growing dividend enhance shareholder returns, while ongoing deleveraging provides increased financial flexibility to pursue future business development and maintain strong underlying earnings.
Valuation
How have all the factors above been brought together to estimate a fair value?- The assumed bearish price target for Pfizer is $24.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Pfizer's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
- However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $38.0, and the most bearish reporting a price target of just $24.0.
- In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $56.1 billion, earnings will come to $11.8 billion, and it would be trading on a PE ratio of 14.2x, assuming you use a discount rate of 6.8%.
- Given the current share price of $24.58, the bearish analyst price target of $24.0 is 2.4% lower. The relatively low difference between the current share price and the analyst bearish price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystLowTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystLowTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystLowTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
