Pfizer: The Next Chapter After COVID-19 Success

Pfizer is one of the world’s largest pharmaceutical companies, with a portfolio that spans cancer treatments, vaccines, cardiology, and rare diseases. Known for blockbuster drugs like Eliquis, Prevnar, and its COVID-19 portfolio, the company combines global reach with deep R&D capabilities. Recent efforts to streamline operations, invest in high-potential therapies, and reshape its drug pipeline reflect a business in transition. The key question is whether Pfizer’s evolving strategy and long-term growth prospects make it a compelling addition to your portfolio.

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in Pfizer at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Pfizer, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Pfizer is a global biopharmaceutical company focused on the discovery, development, manufacturing, and commercialization of innovative medicines and vaccines. After spinning off its off-patent drugs unit Upjohn in 2020 and separating its consumer health business in 2019, Pfizer has concentrated its efforts on high-value therapeutics in areas such as oncology, internal medicine, vaccines, inflammation and immunology, and rare diseases. Its portfolio includes widely used products such as the pneumococcal vaccine Prevnar, the anticoagulant Eliquis (in partnership with Bristol Myers Squibb), the breast cancer drug Ibrance, the prostate cancer therapy Xtandi, and the rare disease treatment Vyndaqel. The COVID-19 pandemic brought global attention to Pfizer through its vaccine Comirnaty and antiviral Paxlovid, which together generated record revenues in 2021 and 2022. Today, the company is shifting its focus back to long-term growth driven by new product launches and pipeline innovation. Pfizer operates in over 200 countries and generates approximately half of its revenue from international markets. It maintains a significant presence in both developed and emerging economies, leveraging the rise of urbanization and the expanding middle class to support future demand for its products. Following the acquisition of Seagen in 2023, Pfizer has significantly expanded its oncology portfolio and capabilities, particularly in the field of antibody-drug conjugates - targeted cancer therapies that use antibodies to deliver chemotherapy directly to cancer cells while sparing healthy tissue. The company’s competitive moat lies in its global scale, extensive commercial infrastructure, and strong brand recognition. It has one of the largest and most productive R&D engines in the industry, investing over 10 billion dollars annually to support a broad and diverse pipeline. This internal innovation is supplemented by a consistent strategy of business development and external partnerships. Pfizer has a long track record of successful collaborations, such as those with BioNTech on Comirnaty and with Astellas on Xtandi and Padcev, which allow it to share development risks, accelerate innovation, and expand access to advanced therapies. Pfizer’s established product base, including mature but resilient drugs like Prevnar and Eliquis, generates steady cash flows that help fund R&D and acquisitions. Its large team of sales and medical representatives, strong commercial presence in the U.S., and wide distribution network enable the company to bring therapies to market efficiently and at scale. These advantages allow Pfizer to pursue opportunities that may be out of reach for smaller firms, reinforcing its position as a leader in the global biopharmaceutical landscape.

Management

Albert Bourla serves as the CEO of Pfizer, a role he assumed in 2019 after more than 25 years with the company. He first joined Pfizer in 1993 and has held senior roles across a wide range of functions and geographies, including leadership positions in animal health, vaccines, oncology, and emerging markets. Born and raised in Greece, Albert Bourla is educated as a veterinarian and holds a Ph.D. in Reproductive Biotechnology. Throughout his career at Pfizer, he has built a reputation as a results-driven executive who combines scientific understanding with strong commercial acumen. As CEO, he has played a central role in transforming Pfizer from a diversified pharmaceutical conglomerate into a focused, science-led innovation company. One of his most significant strategic moves was the spin-off of Pfizer’s off-patent generics unit, Upjohn, which merged with Mylan to form Viatris. This move reflected his long-term vision of concentrating Pfizer’s resources on high-value, science-driven biopharma innovation. Albert Bourla led Pfizer through the global COVID-19 crisis, overseeing the development and rapid rollout of the world’s first approved mRNA vaccine in collaboration with BioNTech. His leadership during the pandemic was widely praised and positioned Pfizer at the forefront of global healthcare innovation. Despite delivering historic financial results during this period, Albert Bourla has expressed frustration that the company’s long-term value is not fully reflected in its share price. His goal is to achieve a 6 percent compound annual growth rate, with an emphasis on pipeline productivity, new launches, and margin expansion. He has been outspoken about the alignment between shareholder interests and patient outcomes. As he has put it, “The biggest misconception about the pharmaceutical business model is that what benefits shareholders is detrimental to patients. In fact, the opposite is true.” Albert Bourla’s leadership style is often described as purpose-driven and deeply committed to science, innovation, and access to healthcare. As an investor in the pharmaceutical industry, I personally appreciate his clear strategic direction and his belief that sustained value creation depends on scientific excellence, long-term thinking, and trust. Given his track record and vision, I believe Albert Bourla is well-positioned to guide Pfizer through its next phase of growth and innovation.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Pfizer has had a mixed decade, as it has only achieved a ROIC above 10% in four out of the past ten years. The high ROIC in 2021 and 2022 was driven by the pandemic, during which Pfizer benefitted significantly. There are several reasons why Pfizer has historically recorded a lower ROIC. One of the main factors is heavy R&D spending with long payback periods. Developing a new drug typically takes over a decade and costs billions, with a high degree of uncertainty. This long timeline delays returns and creates a gap between when investments are made and when they start generating profits. Pfizer has also made several large acquisitions over the years, including Warner-Lambert, Wyeth, Hospira, Medivation, and most recently Seagen. When a company acquires another, it often pays more than the book value. That extra amount - essentially what is paid for the brand, reputation, or future potential - is recorded as goodwill or intangible assets on the balance sheet. These are included in the invested capital but do not directly produce income, which can lower ROIC, especially right after the acquisition. Another issue is the loss of patent protection for blockbuster drugs like Lipitor and Lyrica. When these drugs go off-patent, sales can fall sharply due to competition from cheaper generics. However, the original investment in developing the drug remains on the books. So even as revenue drops, the capital base stays high, putting downward pressure on ROIC. In the past, Pfizer also placed less emphasis on return metrics. Prior to Albert Bourla’s leadership, the company was often seen as a diversified pharmaceutical conglomerate. The spin-off of Upjohn was part of a broader effort to focus more on innovation and to pursue businesses with higher return potential. Pfizer’s ROIC improved in 2024 thanks to a combination of stronger product performance and greater efficiency. Several of the company’s core medicines, including treatments for heart conditions, cancer, and migraines, delivered solid growth. At the same time, the Seagen acquisition began contributing meaningfully to Pfizer’s oncology business. In parallel, the company made progress on a cost-saving program that helped reduce expenses and improve profitability. Altogether, these improvements led to a healthier operating profit margin, which in turn supported a higher ROIC. Hopefully, this is a trend that will continue.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Pfizer has had years with equity growth and years where equity has decreased. It's unsurprising that Pfizer's equity peaked during the pandemic in 2022, driven by substantial revenues from COVID-19 products like Comirnaty and Paxlovid. However, equity has decreased in both 2023 and 2024, and several factors contribute to this decline. As the pandemic subsided, demand for COVID-19 vaccines and treatments dropped significantly, which led to a sharp fall in revenue. This lower income affects retained earnings, a key part of shareholder equity. Pfizer also acquired Seagen, a cancer drug company, in December 2023 for a large sum. To finance the deal, the company used a combination of cash and debt, which reduced its financial cushion and contributed to the decline in equity. In addition, Pfizer had to lower the value of certain assets on its balance sheet, such as drug patents and R&D projects, because they were no longer expected to perform as well as previously thought. These write-downs don’t involve actual cash outflows but still reduce the reported value of assets, and therefore, equity. However, it’s worth noting that despite these declines, equity still reached its third-highest level in 2024. The slight decrease is not a major concern, especially considering the company’s long-term strategy.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins offer a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. It is not surprising that Pfizer reached its highest free cash flow during the pandemic, as the company benefitted greatly from its COVID portfolio in 2021 and 2022. This was mainly because demand for its COVID-19 products, like the vaccine Comirnaty and the treatment Paxlovid, was exceptionally strong during that period. These products had brought in a lot of extra cash, and that boost disappeared in 2023. What is especially important to understand is that even though Pfizer did not have COVID-related products before the pandemic, its free cash flow in 2023 was still lower than it was back then. That is because in 2023, the company had not only lost the temporary boost from COVID products, but also faced higher spending on research, new drug development, and business integration costs, especially from large acquisitions like Seagen. So the drop in free cash flow reflects not just lower revenue, but also higher investments and a heavier cost structure compared to the pre-pandemic period. In 2024, Pfizer saw stronger performance from its core business, which supported a rebound in free cash flow. Key products outside of COVID-19, such as Eliquis for heart conditions, the Vyndaqel family for rare diseases, Xtandi for cancer, and Nurtec for migraines, delivered solid growth and helped drive higher earnings. At the same time, the Seagen acquisition, which was a major expense in 2023, began contributing meaningfully to Pfizer’s oncology portfolio and overall revenue. In addition, the company made progress on its cost-saving efforts, which improved operating efficiency and boosted profit margins. As this trend continues, we should see higher free cash flow and improved levered free cash flow margins moving forward. And as free cash flow increases, shareholders can expect a higher dividend, as the company has a strategy focused on maintaining and growing its dividend over time. The free cash flow yield is not as high as in previous years, but it still suggests that the shares are trading at an attractive valuation. However, we will revisit valuation later in the analysis.

Debt

Another important aspect to consider is the level of debt. It is crucial to determine whether a business has manageable debt that can be repaid within a period of three years. We do this by dividing the total long term debt by earnings. After reviewing Pfizer's financials, I found that the company currently has 7,23 years of earnings in debt, which significantly exceeds the three-year threshold. This high figure is partly the result of a challenging 2024, as reflected in the earnings numbers discussed earlier. And while the debt is higher than I would ideally like to see, it is worth noting that Pfizer has aggressively paid down debt over the past two years. The company has also stated that reducing debt will remain a priority. As earnings recover and the company continues to lower its debt load, I expect the debt to earnings ratio to decline in the coming years. Therefore, while the current figure is above my preferred range, it does not necessarily keep me from considering Pfizer as an investment.

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Risks

The loss of patent protection is a risk for Pfizer. Patents play a crucial role in protecting a company’s ability to sell a drug without direct competition. During the patent period, Pfizer can charge premium prices and generate high margins. But once a patent expires or is successfully challenged, competitors are free to launch generic or biosimilar alternatives, often at significantly lower prices. This typically leads to a sharp decline in sales of the original product in a short period of time. Pfizer is especially exposed to this risk in the coming years. Some of its best-selling drugs are approaching the end of their patent protection. This includes Eliquis, one of Pfizer’s most important products, which is expected to lose exclusivity in the United States in 2026. Ibrance, a key drug for breast cancer, will face patent expiry in 2027. Vyndaqel and Vyndamax, used to treat a rare heart condition, are expected to lose protection as early as 2025. While Prevnar 20 still has patent life remaining, its predecessor, Prevnar 13, has already begun to see erosion from newer competition. These products contribute meaningfully to Pfizer’s earnings and cash flow, and losing exclusivity will be difficult to offset unless newer drugs ramp up quickly. This risk is compounded by the legal and regulatory challenges that often accompany patent expiration. Generic manufacturers may attempt to enter the market early by challenging the validity of Pfizer’s patents or launching at risk before court decisions are final. Pfizer is regularly involved in litigation to defend its patents, which can be costly and unpredictable. The company also faces the added complexity of international markets, where enforcement practices vary and where some governments adopt policies that weaken intellectual property protection.

Concentration is a risk for Pfizer because a large portion of its revenue depends on a relatively small number of products. In 2024, just eleven products accounted for 66 percent of total revenue. When a company is this reliant on a handful of key products, any disruption - whether due to patent expiry, declining demand, regulatory action, or competitive pressure - can have an outsized impact on financial performance. A good example of this dynamic is what happened after the pandemic. During 2021 and 2022, Pfizer experienced record revenue growth driven by Comirnaty and Paxlovid, its COVID-19 vaccine and antiviral treatment. These two products quickly became Pfizer’s largest contributors to revenue. However, as the pandemic shifted into an endemic phase and public demand for vaccinations and treatments fell, revenue from these products dropped sharply. This exposed how much of Pfizer’s top line was concentrated in just two products, and how quickly that can change. The result was a steep decline in both revenue and free cash flow in 2023, even though Pfizer had other products performing well. In effect, the company had become financially dependent on its COVID-19 portfolio and when that portfolio cooled off, the business felt the impact immediately. Looking ahead, this same risk applies to other key products such as Eliquis, Ibrance, and Vyndaqel, which each represent a meaningful slice of Pfizer’s revenue and are nearing patent expiration. If Pfizer does not successfully launch and scale new products to fill the gap, the loss of exclusivity on just a few blockbuster drugs could once again weigh heavily on its overall financial results.

Laws and regulations represent a significant risk for Pfizer because the pharmaceutical industry is one of the most heavily regulated in the world. In the United States, where Pfizer earns a large portion of its revenue, the company must follow strict rules that cover every part of its business - how it develops drugs, tests them, prices them, promotes them, and delivers them to patients. These rules are enforced by government agencies, as well as state authorities. One of the most pressing challenges Pfizer faces today is growing political and legislative pressure to lower drug prices. In recent years, the U.S. government passed the Inflation Reduction Act, which gives regulators the power to negotiate the price of certain high-cost drugs under Medicare. Pfizer’s best-selling blood thinner Eliquis was among the first drugs selected for price negotiation, and other major products like Ibrance and Xtandi will follow. Lower negotiated prices directly reduce revenue and may also lead to smaller profits on these important drugs. In addition to these federal changes, individual states have started passing their own laws related to drug pricing and transparency. These laws can create more compliance work, restrict how Pfizer markets its drugs, or force changes in how prices are set. Combined with growing pressure from health insurers and pharmacy benefit managers, this can lead to tighter reimbursement, more required discounts, and less predictable revenue. Outside the U.S., many other countries also control drug pricing. Governments in Europe, China, and elsewhere often act as the main buyer of medicines, and they regularly demand price cuts. In China, for example, Pfizer has had to reduce prices to win access to national drug lists. Europe is also moving forward with the biggest overhaul of its pharmaceutical laws in two decades, which could reduce the period of regulatory exclusivity and add new hurdles for launching and selling drugs. In short, as governments and regulators push for more cost control and stricter compliance, Pfizer faces higher operational costs, greater uncertainty, and lower pricing power. All of this can weigh on profitability and make long-term planning more difficult.

Reasons to invest

The strength of its product portfolio is a reason to invest in Pfizer. The company is not reliant on a single blockbuster but generates revenue from a wide range of treatments across cancer, vaccines, heart disease, migraines, and rare conditions. In oncology, Pfizer is making clear progress. Padcev combined with pembrolizumab is already the most prescribed first-line treatment for advanced bladder cancer in the U.S. If ongoing studies are successful, its use could be expanded to three times as many patients. Other oncology treatments are also gaining traction. Lorbrena, used to treat a specific type of lung cancer, has shown such impressive long-term results that it is quickly emerging as a new standard of care. Elrexfio, which targets an aggressive form of multiple myeloma, is already generating over $130 million in revenue despite treating a very niche group of patients. As it moves into broader treatment settings, it could become a major product for Pfizer. Braftovi and Mektovi also continue to show strong growth in cancers with BRAF mutations, which are often difficult to treat. Outside of oncology, Pfizer has a number of well-known and growing products. Eliquis, a blood thinner used by millions, remains a core revenue driver. Nurtec, used to treat and prevent migraines, holds nearly half of its market and continues to grow. Vyndaqel, which treats a rare heart condition, is expanding rapidly with 90% growth in the U.S. in 2024 alone. The company is also a global leader in vaccines. Prevnar 20, its latest pneumococcal vaccine, has achieved over 87% market share in the U.S. and is expanding strongly in international markets. Abrysvo, a vaccine for respiratory syncytial virus (RSV), has also secured a leadership position. It performed well in both older adults and maternal vaccination, with usage nearly tripling among pregnant women compared to the previous year. Although COVID-19-related revenues have declined, Pfizer’s COVID portfolio, including Paxlovid and Comirnaty, still contributes meaningfully to the business. Demand now follows a more seasonal and predictable pattern. Multi-year contracts with international governments help support ongoing stability from these products.

The strength of Pfizer’s research and development is another important reason to consider investing in the company. In recent years, Pfizer has shifted its R&D strategy to become more focused and agile, and early signs suggest the new approach is starting to pay off. In 2024, Pfizer reorganized its R&D structure into four specialized units - oncology, vaccines, internal medicine, and inflammation and immunology. Each unit now operates more like a focused biotech company, while still benefiting from Pfizer’s broader resources and technologies. This structure allows for faster decision-making, better coordination between early and late-stage research, and sharper prioritization of which drugs to advance. Under this new setup, Pfizer achieved over a dozen approvals in 2024 alone and is targeting multiple major milestones in 2025, including at least four regulatory decisions and up to nine important late-stage clinical trial results. The goal is not just to invent new drugs, but to focus on those that have a clear path to market success and can deliver strong value both for patients and for shareholders. The pipeline already includes several promising examples. One is atirmociclib, an experimental cancer drug for breast cancer that may outperform existing treatments by being more selective and better tolerated. Another is an innovative cancer treatment that combines a targeted antibody with a cancer-fighting drug. This approach aims to deliver the treatment directly to cancer cells while minimizing damage to healthy cells. It is being studied in aggressive cancers like lung cancer and head and neck cancer, where better treatment options are badly needed. Pfizer is also advancing its position in vaccines. It is developing a next-generation pneumonia vaccine called PCV-25, designed to protect against more strains of the disease. Early studies show it may offer improved protection, especially for older adults. A fifth-generation version is also in development. These efforts build on Pfizer’s leading position in pneumonia vaccines and could help it maintain that dominance for years to come. What makes this R&D strategy especially promising is the sharper focus on commercial potential. In the past, Pfizer brought many innovative drugs to market, but not all became strong sellers. The new strategy is aiming to change that by focusing not just on scientific breakthroughs, but also on whether those drugs will meet major medical needs and become financially successful.

Operational improvements are a reason to invest in Pfizer. After growing rapidly during the pandemic, the company is now undergoing a significant transformation to become a more focused and efficient organization. This shift is not just about cutting costs but about building a stronger foundation for long-term profitability and competitiveness. Pfizer has taken meaningful steps to reduce expenses across its business, including through a company-wide cost realignment program and efforts to simplify its global operations. These initiatives are already beginning to improve profit margins, as the company becomes more disciplined in how it allocates resources and manages day-to-day operations. Importantly, Pfizer is also working to make its manufacturing network more efficient, with plans to optimize production and supply chains in ways that will lower costs in the coming years. Pfizer’s approach is not just about cutting costs in the short term. At the same time as it works to improve profitability, the company is still investing in important areas like research, new drug development, and the teams that bring products to market. By becoming more efficient in how it runs its business, such as reducing unnecessary spending and making better use of resources, Pfizer can continue to develop new medicines without adding financial strain. This balance between saving money and continuing to invest is important, because it makes the company stronger and more stable over the long run. Operational improvements like these are especially important at a time when Pfizer is moving past the temporary surge in pandemic-related revenue. As the company enters a new phase, its ability to run leaner and more efficiently will be critical to driving earnings growth from its core business and pipeline.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 1,41, which is from the year 2024. I have selected a projected future EPS growth rate of 10%. Finbox expects EPS to grow by 10% in the next five years. Additionally, I have selected a projected future P/E ratio of 20, which is double the growth rate. This decision is based on Pfizer's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be $18,08. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Pfizer at a price of $9,04 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 12.744, and capital expenditures were 2.909. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 2.036 in our calculations. The tax provision was -28. We have 5.667 outstanding shares. Hence, the calculation will be as follows: (12.744 – 2.036 - 28) / 5.667 x 10 = $18,85 in Ten Cap price.

The final calculation is referred to as the Payback Time price. It is a calculation based on the free cash flow per share. With Pfizer's free cash flow per share at $1,74 and a growth rate of 10%, if you want to recoup your investment in 8 years, the Payback Time price is $21,89.

Conclusion

I believe that Pfizer is an interesting company with good management. The company has built a moat through its global scale, extensive commercial infrastructure, and strong brand recognition. Outside of the pandemic, Pfizer has historically achieved a low return on invested capital, but there have been improvements in 2024 and ROIC is expected to increase moving forward. Free cash flow and levered free cash flow yield are below previous levels, but the company is focused on improving both metrics. It made progress in 2024, which bodes well for the future. Pfizer has high debt, but management has made it a priority to reduce this burden. The loss of patent protection is a major risk because it allows competitors to introduce cheaper alternatives, often leading to sharp declines in sales of key drugs. With several of Pfizer’s top-selling products approaching patent expiry in the next few years, the company faces significant pressure to replace lost revenue through new product launches. Concentration is also a risk because a large share of revenue comes from a small number of drugs. If one or two of these face reduced demand, tougher competition, or loss of exclusivity, the financial impact can be severe - as seen when sales of its COVID-19 treatments dropped after the pandemic. Laws and regulations present another challenge. Governments around the world closely control how drugs are developed, priced, and sold. In the United States and other key markets, new rules aimed at reducing drug costs and increasing oversight could lower Pfizer’s revenue and make long-term planning more difficult. On the positive side, the strength of Pfizer’s product portfolio is a reason to invest. The company generates revenue from a wide range of treatments in cancer, vaccines, and chronic conditions rather than relying on a single blockbuster. Several newer drugs are growing quickly and expanding into broader use, while established products like Eliquis, Prevnar, and Nurtec continue to perform well and provide earnings stability. Pfizer’s research and development is another bright spot. The company has recently reshaped its R&D approach to be more focused, faster, and more commercially driven. With dedicated teams for oncology, vaccines, internal medicine, and inflammation and immunology, Pfizer is advancing a pipeline of promising treatments that could support long-term growth. Operational improvements are also a reason to invest. After its rapid expansion during the pandemic, Pfizer is becoming more efficient and disciplined. By reducing unnecessary spending and simplifying operations, the company is laying the foundation for stronger profitability and long-term resilience. While there are many things to like about Pfizer, I believe there are better opportunities elsewhere in the sector. Therefore, I will not be investing in Pfizer at this time.

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