Pfizer Just Locked In Its Next 5 Years of Growth -- Here's How

Anyone keeping tabs on Pfizer (NYSE: PFE) probably knows it still hasn't rekindled its glory days early in the COVID-19 pandemic. In 2022, it reported record-breaking revenue of just over $100 billion, largely thanks to sales of its COVID vaccine and treatment. Yet, last year's top line was a stagnant $63 billion.

On the other hand, anyone keeping a relatively close eye on this pharmaceutical giant also likely knows it's been rebuilding its pipeline and portfolio, mostly through acquisitions like 2023's $43 billion purchase of Seagen, which brought in the smaller company's impressive oncology lineup.

Still, there's a problem. True, Pfizer has several potential blockbuster drugs in development that could generate billions of dollars' worth of annual revenue by 2030. But these investments won't begin meaningfully paying off until 2028, with the anticipated launch of Pfizer's own GLP-1 weight loss drug. That's a long time for investors to wait on performance that isn't exactly guaranteed.

However, there's an underestimated stopgap now in place, which would make Pfizer stock much easier to own between now and then.

Vyndamax's extended patent protection is no small matter

All drugs eventually lose patent protection. Pfizer's Vyndamax -- used to treat a rare type of cardiomyopathy (heart disease that makes it difficult for the heart to pump enough blood) called transthyretin-mediated amyloidosis, or ATTR-CM -- is no exception.Its core patent protection in the United States was originally set to expire in 2028. With three other drugmakers ready to bring their own generic versions of the drug to the market shortly thereafter, Pfizer itself has been warning shareholders that a "significant decline" in its domestic sales is inevitable.

And such a setback would take a measurable toll on the company's top and bottom lines. The drugmaker sold $3.8 billion worth of Vyndamax last year in the United States alone, up 8% year over year, and accounting for more than 10% of Pfizer's total domestic revenue and 6% of companywide sales. That's not a massive piece of its total business, but for a business that isn't growing at all, it's too much.

Image source: Getty Images.

Now, however, this drug has a few more years' worth of patent protection left to leverage. Late last month, Pfizer announced it had worked out deals with three would-be competitors (Dexcel Pharma, Hikma Pharmaceuticals, and Cipla) that will keep their competing generic versions of Vyndamax off the market until mid-2031.

The details of the agreement weren't disclosed, although presumably the dealmaking came at a cost that at least made net fiscal sense, given the drug's current and near-term revenue potential. Another five years of exclusivity is enough time to allow Pfizer's 32 phase 3 trials underway to be completed. Ten of those are tests of entirely new drugs -- including a handful of new cancer treatments. Just a little more cash flow driven by Vyndamax will help get all of these trials to their finish lines.

Investors may still be underestimating the net impact of the news, though. As Pfizer's CEO, Albert Bourla, commented during the recent Q1 earnings conference call: "Our recent settlement agreements resolving infringement of patents related to Vyndamax have the potential to change the growth profile of the company significantly post-2028. This gives us greater confidence that starting in 2029, we will enter a five-year period of high-single-digit revenue CAGR [compound annual growth rate]."

Don't underestimate this stock

To be clear, there are other patent expirations coming up in the meantime that Pfizer can do little about. For instance, cancer-fighting Ibrance (which makes up 6% of the pharmaceutical company's revenue) will lose its exclusivity next year, while blood thinner Eliquis is going to gradually lose its patent protection over the course of the next several months.

Prevnar, Xtandi, and Xeljanz are all also set to suffer expired patents before Pfizer can get most of its newly developed products onto the market. Indeed, analysts still expect the company's top line to dwindle this year and next -- along with earnings -- before a turnaround starts taking hold in 2028.

The transition from an aging drug portfolio to a new one over the next five years, however, may end up being less challenging and more fruitful than most of the market currently expects -- specifically because of the latest development regarding Vyndamax. Bourla's comment suggests there's more growth in store than the stock's recent pricing implies. That makes it an interesting, if somewhat speculative, prospect.

The current forward-looking dividend yield of 6.7%, of course, makes it even easier to take that swing.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.