Pfizer Inc. (NYSE:PFE) is a prime example of a company working a sweat but never actually getting anywhere. The spread between the highs and lows for PFE stock this year is nearly 18%, which suggests some direction. Yet since January’s opening bell up to the May 29 session, shares are exactly at parity.
Pfizer is perhaps best known for developing Viagra, which I can appropriately describe as a “performance enhancer.” And one can presume that several men have “friends” that have enjoyed the drug’s potent benefits. Indeed, The Guardian last summer reported an explosion of young men using Viagra for personal reasons as social stigma fades.
The irony, of course, is that Viagra improved several lives, yet it can no longer boost PFE stock. No matter how you cut it, Pfizer is falling flat in the markets. So what gives?
In April, I wrote that a great storyline theoretically backs PFE stock; yet in actuality, nothing’s working quite right. After a decent showing last year, investors were hoping that Pfizer can make good on its potential.
The biggest problem is the usual curse for successful drug makers: losing patent exclusivity. Last December, Viagra took the inevitable hit. More ominously, Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) and Mylan NV (NASDAQ:MYL) were looking to pounce with generics.
To mitigate the damage, Pfizer introduced its own generic version. As I said previously, I like the out-of-the-box thinking. But investment markets don’t necessarily reward basis points for creativity. The strategy has to gain traction.
In this case, Pfizer really doesn’t have an answer to the patent-exclusivity loss. As a result, PFE stock remains spinning its wheels.
Without Key Drugs, PFE Stock Is Rudderless
For a large-capitalization pharmaceutical like Pfizer, no one drug will make or break the organization. Even with Viagra, its sales last year represented only 2.3% of total corporate revenue.
Still, losing Viagra is not something that the company can easily ignore. In 2012, sales of the blue pill hit just over $2 billion. Between 2003 through 2017, Viagra sales averaged $1.8 billion.
However, the blue pill’s revenue sharply eroded since 2014, slipping from nearly $1.7 billion down to $1.2 billion last year. Coincidentally, growth in the average price of PFE stock noticeably slowed over the same time frame. In 2014, PFE averaged $26.25 a pop. In 2017, it averaged $32.86. That’s a mere 25% growth rate covering a four-year time span.
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Moreover, Viagra is losing both its patent exclusivity and its overall market presence at an inopportune time.
As previously mentioned, young men are increasingly seeking performance enhancers. That just wasn’t the case back when Viagra was first introduced to the market. At that time, the blue pill was marketed toward the usual suspects: older gentlemen seeking to rekindle the fire.
But just as the social stigma was fading, patent loss was beckoning. Furthermore, other enhancement drugs started pouring into the sector, and Viagra lost its footprint. I’m not so sure that Pfizer producing its own generics will solve the issue, and several investors agree; hence, PFE stock continues to wade aimlessly.
And yes, I’m just referring to one drug, but it’s also a microcosm of a greater problem at Pfizer. Last year, its total revenue haul was $52.5 billion. In 2014, it was $49.6 billion. Over those four years, the company generated only 6% growth.
Investors need to see more out of PFE stock, but they’re just not getting it.
Market Competition Is One of the Bigger Risks
Despite my overall bearishness toward PFE stock, it’s not without its benefits. Pfizer is obviously one of the most stable names in the pharmaceutical industry. Thus, its generous 3.81% dividend yield is a prime reason why long-term shareholders keep the faith.
But for those seeking some decent capital gains, PFE stock isn’t working. Even its large-cap competitors are performing noticeably better than Pfizer. For instance, Merck & Co., Inc. (NYSE:MRK) is up 4% year-to-date. GlaxoSmithKline plc (NYSE:GSK) has done remarkably well, up 13.6%.
Which is to say that PFE stock is good if you want an ultra-conservative company in your portfolio. But if you want something that performs both “personally” and in the markets, Pfizer comes up short.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
