Pfizer (PFE) Valuation in Focus After EU Patent Lawsuit Threatens Paxlovid Revenue Streams

If you’ve been watching Pfizer (PFE) lately, the latest legal action from Enanta Pharmaceuticals may have caught your eye. Enanta has filed a patent infringement suit against Pfizer’s blockbuster COVID-19 antiviral, Paxlovid, across 18 EU countries. While this does not mean immediate disruption to Pfizer’s operations, the stakes in the European market and potential costs tied to a negative outcome are significant for investors, especially as the company faces ongoing revenue and patent pressures. Looking at the stock, Pfizer’s price momentum has been uneven this year. After sliding over the past 12 months, shares rebounded with a 10% gain in the past 3 months. This suggests investors may be warming to its recovery prospects despite persistent questions around the pipeline and patent expirations. Other recent milestones, such as positive clinical trial results for PADCEV in bladder cancer and steady dividend hikes, have helped counterbalance concerns and kept sentiment shifting. With all these moving parts and the stock now trading at a discount to its peers, investors are left to consider whether Pfizer is offering real value for patient holders or if the market is simply pricing in slower growth ahead.

Most Popular Narrative: 15.5% Undervalued

According to the narrative from Francisco, Pfizer's stock is currently considered undervalued by 15.5% relative to its estimated fair value. This perspective takes a forward-looking view and emphasizes the company's pipeline, acquisitions, and ability to maintain profitability in a challenging market.

I think that Pfizer has a strong pipeline. The acquisition of Seagen added many new oncology products that will continue to grow by 14%, partially offsetting the decline in sales of the covid-19 vaccines. This should keep revenue flat, possibly growing in low to mid single digits in an optimistic scenario. Also, I think they will continue to release many new products that are already in phase 3 of research.

Why does this valuation stand out? The explanation lies in projections that favor a balanced combination of oncology growth, margin discipline, and products poised for market entry. What is the driving factor behind this double-digit fair value premium? The complete analysis includes bold operating assumptions and a future profit profile that invite closer review.

Result: Fair Value of $30.62 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, high debt levels and the risk of a dividend cut remain concerns. These factors could quickly change sentiment around Pfizer’s long-term value story.

Find out about the key risks to this Pfizer narrative.

Another View: The DCF Model Perspective

On the other hand, the SWS DCF model takes a long-range look at Pfizer and also suggests undervaluation. This approach examines future cash flows and gives investors a different perspective on the company's true worth. But could both methods be identifying something that others are missing?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Pfizer for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Pfizer Narrative

If you think there is more to uncover, or want to dig into the numbers yourself, you can easily craft your own outlook in just a few minutes, so why not do it your way.

A great starting point for your Pfizer research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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