Pfizer

Pfizer reported 3% revenue growth in the second quarter and flat adjusted diluted EPS. Management raised the midpoint of revenue guidance for 2026 by $500 million to $61.5 billion and maintained adjusted diluted EPS guidance of $2.80-$3.00. Shares rose 2% intra-day on Aug. 4.

Why it matters: Near-term strength in US sales of cardiovascular drug Eliquis and solid double-digit growth for key newer launches are helping to counter minimal demand for covid vaccines and treatments. Migraine drug Nurtec (18% growth) and oncology drugs Lorbrena (37% growth) and Padcev (23% growth) stood out as growth drivers that also have a long road of growth ahead, in our opinion, with patents running to at least 2033.

The bottom line: We're maintaining our $32 fair value estimate for narrow-moat Pfizer, as our covid sales and cost of capital adjustments were countered by increased Eliquis and pipeline expectations as well as more cost-cutting. We think shares undervalue Pfizer's obesity and oncology pipeline opportunities. We're maintaining our Metsera-related revenue forecast at $5 billion in 2035, with phase 2 data for the amylin therapy expected later this year. We've also boosted our explicit assumption for prostate cancer drug mevrometostat (first phase 3 data expected by the end of 2026). Under our updated discount-rate framework, we've raised our Pfizer WACC estimate to 7.3% from 7.1%. Our beta of 0.6 reflects our view of both biopharma's defensive nature and Pfizer's own fundamentals and market returns.

Long view: We still need to see significant pipeline progress to gain confidence in Pfizer's goal of high-single-digit top-line growth in the 2028-2033 period, as we currently assume low-single-digit growth due to headwinds on cardiovascular drug Vyndamax during this time.

BLANK PAGEFor more information on Pfizer's portfolio and pipeline, please see our recent in-depth report, "Biopharma Product Pipelines Rise to Meet Steeper Patent Cliffs."

Our fair value estimate for Pfizer stands at $32 per share.

We expect covid product sales to decline as infections fall (lowering Paxlovid demand) and international competition increases (lowering Comirnaty sales). Beyond bigger declines through 2027, we model low-single-digit annual declines in covid revenue. In obesity, we assume $5 billion in Metsera-derived obesity pipeline revenue by 2035.

While we think Pfizer will struggle to grow the top and bottom lines in the midterm due to patent expirations, we still see its diversified portfolio providing relatively steady free cash flows that will support continued low-single-digit increases to the dividend in the long run.

On the top line, we expect low-single-digit declines in 2026 and 2027 to give way to mid-single-digit declines in 2028 and 2029 following key patent expirations before a return to growth in 2030. We expect $7.2 billion in projected annual cost savings by the end of 2027 should help the firm counter margin pressure from the loss of the Eliquis profit share and potential tax rate increases (with a shift toward more US manufacturing away from more tax-advantaged markets). We forecast an average 2.5% five-year sales decline and 9.4% adjusted EPS decline annually through 2030, with 2029 likely a trough year due to the timing of patent expirations.

We don't model unannounced acquisitions, but acquisitions could accelerate the company's growth rate. Over the long term, we believe the more diversified lineup of drugs should reduce earnings volatility.

Under our updated discount-rate framework, we've raised our Pfizer WACC estimate to 7.3% from 7.1%. Our beta of 0.6 reflects our view of both biopharma's defensive nature and Pfizer's own fundamentals and market returns. The change does not reflect a new view of the business, but a more granular expression of our existing risk assessment. We assume a long-term effective tax rate growing to 18%, due to increased investment in US manufacturing.

We assign Pfizer a narrow moat rating. We think the company is still more likely than not to see average returns on invested capital in excess of our estimated 7.3% cost of capital over the next 10 years. However, our high-single-digit return on invested capital projections through 2035 don’t provide a very large buffer against any potential threats of major value destruction, like additional US drug pricing policies or disappointing data for products from recent large acquisitions like Seagen and Metsera. We are encouraged by Pfizer's 2025 agreement with the Trump administration that isolates most-favored-nation pricing to Medicaid and future drug launches. However, uncertainty remains about how international launch and pricing strategies will evolve and whether these agreements will be codified in law (making them more permanent). In addition, pilot programs could still be implemented in Medicare, and this could have indirect effects on private market prices. Pfizer’s ROICs could dip more clearly below its cost of capital in such a scenario, unlike other large-cap biopharma firms that have bigger buffers against this outcome due to higher margins, stronger pipelines, and less invested capital.

Strong pricing power on innovative drugs protected by patents supports Pfizer’s economic moat, largely through intangible assets. Patents give companies 20 years of exclusivity to complete drug development and marketing while also developing the next generation of drugs before generic competition arises on marketed drugs. Regardless of payer consolidation and potential US policy changes, we think payers will continue to pay high prices for innovative therapies, supportive of the industry’s moat.

The US market represents close to half of global pharmaceutical sales and well more than 50% of profits, giving it increased importance in assessing moats. Pharmacy benefit managers, or PBMs, negotiate pricing with drug firms on behalf of most individuals in the US, whether they are covered by private insurance (typically through employers) or government programs (like Medicare and Medicaid). We think pricing power that drug firms can generate from their intangible assets has weakened, as PBMs have gradually consolidated over the past 20 years, with the top three PBMs now representing 80% of the market, giving them greater negotiating power for each contract. In addition, the 2022 Inflation Reduction Act made changes to Medicare (30% of the US market) that discourage price increases and allow Medicare to negotiate significant discounts on certain older drugs that still hold patent protection. However, individual company agreements with the Trump administration in 2025-26 traded MFN pricing for certain drugs covered by Medicaid (less than 10% of the US market) for a three-year reprieve from tariffs, which we think makes more widespread MFN pricing less likely.

Focusing in on Pfizer’s diversified portfolio, we think Pfizer has average exposure to patent expirations but a relatively weak growth trajectory for newer products and the pipeline. Pfizer’s amazing speed in developing a covid vaccine (Comirnaty) and treatment (Paxlovid) led to combined sales of over $90 billion across 2021-22, supporting a spike in ROICs. While sales have normalized after the drop in covid revenue, Pfizer faces significant patent losses over the next five years, led by oncology drugs Ibrance and Xtandi (2027) as well as cardiovascular drug Eliquis (2028). Vyndamax will likely be the next patent cliff in 2031. Pfizer expects to counter this pressure with a cost savings plan ($7.2 billion in annual cost savings by the end of 2027) and pipeline progress. Since Eliquis revenue is a profit share, the patent loss will have an amplified impact on Pfizer’s bottom line.

We expect Pfizer's revenue to decline over the next four years before returning to growth in 2030. Pfizer does benefit from the limited expected impact from patent expirations of vaccines (Prevnar, Comirnaty) and antibody-drug conjugates (from the Seagen acquisition), partly due to more complex manufacturing. We think Pfizer will rely on strong growth from bladder cancer drug Padcev (from Seagen) and potential sales of breast cancer drug candidate atirmociclib to help keep profits steady. The $43 billion acquisition of oncology-focused biotech Seagen in 2023 weighed down ROICs and also hurt Pfizer’s ability to acquire new assets in the near term, although Pfizer executed the $10 billion acquisition of Metsera in 2025. High-profile pipeline failures like obesity drug danuglipron and headwinds against vaccine makers from current leadership at the Department of Health and Human Services also weigh on our growth forecast.

Long-term ROICs could improve if covid revenue falls as a percentage of sales and oncology or obesity sales increase. The late-stage oncology pipeline includes Seagen-sourced potential first-in-class lung cancer programs like sigvotatug vedotin and a PDL1-targeting ADC as well as 3SBio's lung and colorectal cancer bispecific PF-4404, among others. However, ambitions have already been trimmed for Seagen’s pipeline, including a recent sigvotagug failure in second-line lung cancer and discontinuation of the PDL1 ADC’s development in head and neck cancer. In obesity, Pfizer has started several phase 3 trials in 2026 for berobenatide (GLP-1 agonist from the Metsera acquisition), although we think meeting its ambitious goals for strong efficacy, monthly dosing, and improved tolerability to current regimens is a high bar.

We think the company does face environmental, social, and governance risks, particularly related to potential US drug price-related policy reform to increase access by lowering drug prices. Ongoing product governance issues (including litigation related to side effects and patents) also weigh on the company. While we have factored these threats into our analysis, they are not material to our moat rating.

Pfizer's portfolio contains several blockbusters, including differentiated cardiovascular drug Vyndamax and oncology drug Padcev.

Pfizer's rapid success in developing both a covid vaccine and treatment yielded a massive cash windfall.

Pfizer's decision to divest its off-patent division (Upjohn) and consumer business (Haleon) should allow it to focus on its faster-growing, innovative drug business.

Aggressive cost-cutting in research and development could hurt Pfizer's long-term prospects, given the importance of continued investment in innovation.

Competition is increasing for Prevnar (especially from Merck's Capvaxive) and Ibrance (from Novartis' Kisqali).

Covid product sales are continuing to decline due to vaccine hesitancy and fewer infections, creating a persistent headwind.