Will Trump’s Return Crush Pfizer (PFE)?
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Donald Trump’s election victory sent shockwaves through the pharmaceutical industry. While many sectors rallied, healthcare was notably absent. It might have something to do with Trump’s commitment to appoint vaccine skeptic Robert Kennedy Jr. to review national health matters. This particularly rattled Pfizer (PFE) investors with the stock falling sharply after the election. According to our TrackStar data, Pfizer trails only Eli Lilly (LLY) in search interest among pharmaceutical companies as investors try to assess the implications. The question isn’t just whether Pfizer can navigate its post-COVID transformation, but whether it can survive a potentially hostile regulatory environment. Here’s what we think. Pfizer’s Business With roots dating back to 1849, Pfizer has grown into one of the world’s largest biopharmaceutical companies by discovering, developing, manufacturing and delivering innovative medicines and vaccines. Operating in more than 175 countries, Pfizer serves millions of patients with a diverse portfolio spanning oncology, immunology, rare diseases, vaccines and many other therapeutic areas. The company maintains an extensive global manufacturing network and invests heavily in research and development to drive medical breakthroughs. Pfizer segments its business into the following areas:
In its latest quarter, Pfizer reported revenues of $17.7 billion and adjusted earnings per share of $1.06, driven by 32% operational growth. The company is executing two major cost reduction initiatives – a $4 billion cost realignment program and a manufacturing optimization program targeting $1.5 billion in savings by 2027. |
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Pfizer’s $43 billion acquisition of Seagen aims to establish leadership in oncology, with a target of $1 billion in annual synergies by 2026. The company is also focusing on maximizing new product launches while advancing its pipeline, particularly in oncology where it sees significant growth potential. Additionally, Pfizer is monetizing non-core assets, having reduced its Haleon stake from 32% to approximately 23% through a $3.5 billion share sale in March 2024. Financials
Source: Stock Analysis Pfizer’s financial position shows both the hangover from its COVID windfall and vulnerability to potential political headwinds. Revenue declined 14.3% year-over-year as COVID-related sales normalized, but the real concern is what happens to the base business under a potentially hostile administration. Gross margins have compressed to 67.6% from historical levels above 75%. While management targets improvement through cost initiatives, any regulatory pressure on pricing could further squeeze margins. Operating margins of 6.5% reflect not just the revenue decline but also massive R&D investments of $10.6 billion annually. These investments could become riskier if the regulatory approval process faces increased scrutiny under Kennedy’s oversight. The company’s $58 billion in long-term debt, while manageable with current cash flows, could become more burdensome if policy changes impact pricing power or reimbursement. That said, $8.2 billion in trailing free cash flow provides solid 1.8x coverage of the dividend for now. Valuation
Source: Seeking Alpha Pfizer trades at just 10.2x forward earnings versus Eli Lilly’s 80.5x and Novo Nordisk’s (NVO) 34.9x. This dramatic discount reflects not just near-term growth challenges but also the market’s concern about political risk. Notably, companies like Eli Lilly and Novo Nordisk, with their focus on diabetes and obesity drugs, face less immediate political scrutiny than Pfizer’s vaccine and broader pharmaceutical portfolio. Their premium valuations suggest investors are seeking safer havens within healthcare. Growth
Source: Seeking Alpha The growth disparity between Pfizer and its peers tells a story about both execution and positioning. While Pfizer’s revenue declined 14.3%, Eli Lilly grew 27.4% and Novo Nordisk 26.2%. This isn’t just about COVID revenues normalizing. Pfizer’s negative 3-year revenue CAGR of -4.8% contrasts sharply with Lilly’s +13.8% and Novo’s +26.2%, suggesting deeper challenges in pivoting to new growth drivers like weight loss and diabetes drugs. These challenges could compound under an administration skeptical of traditional pharmaceutical industry practices. Profitability
Source: Seeking Alpha Profitability metrics reveal Pfizer’s vulnerability to potential policy changes. Net income margins of 7.2% significantly trail Lilly’s 20.5% and Novo’s 35.0%, leaving less buffer against potential pricing pressures. Return on equity of 4.5% versus Lilly’s 65.3% and Novo’s 88.7% suggests Pfizer needs to radically improve capital allocation. The pending strain of integrating Seagen while potentially facing new regulatory hurdles makes this even more challenging.
Our Opinion 6/10 Pfizer faces a perfect storm of challenges: post-COVID revenue normalization, margin pressures, high debt, and now potentially hostile political oversight. However, at 10x earnings, much of this risk appears priced in. The company’s broad portfolio, strong cash flows, and ongoing cost initiatives provide some cushion against political headwinds. While we wouldn’t bet the farm, the current valuation offers an attractive entry point for investors willing to weather near-term volatility. Just keep position sizes moderate until the impact of the new administration becomes clearer. |
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Proprietary Data Insights Financial Pros’ Top Pharma Stock Searches in the Last Month
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