Why Pfizer Could Prove to Be an Underrated GLP-1 Stock

Although its growth rate has been cause for concern for investors in recent years, Pfizer (NYSE: PFE) is a stock that I don't think you should count out right now. The company is in the midst of a transition. It's been acquiring companies that it believes will position it for strong growth in the future.

One opportunity that the company isn't passing up on is the anti-obesity market. It added Metsera into the fold last year, which could prove to be a key acquisition that pays off for the business in the long haul. Although Pfizer doesn't have an approved GLP-1 weight loss drug in its portfolio just yet, here's why it could end up being a big player in that market.

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The company aims to be a leader in obesity therapies

Late last year, Pfizer completed the acquisition of Metsera, valuing the enterprise at about $7 billion. By Pfizer's standards, that's not a terribly large acquisition. In 2023, it acquired oncology company Seagen for a whopping $43 billion. Both areas of healthcare, however, could be key to the company's long-term growth.

GLP-1 may be more underrated. That's because Metsera doesn't have any approved products in its portfolio today. However, Pfizer is optimistic that down the road, it could be a key player in the space. CEO Albert Bourla outlined the company's vision in the broader obesity space on the company's earnings call back in May:

We are also executing with focus to maximize the value of our Metsera acquisition. This underpins the strategy intended to position Pfizer as a leader in the next generation of obesity therapies. We intend to advance 10 phase 3 studies this year. We are targeting a first approval in 2028 from a portfolio that includes ultra-long-acting peptides with the potential, if successful, developed and approved for competitive efficacy and tolerability with a differentiated monthly maintenance dosing schedule.

Not only does Pfizer have many late-stage trials in the works, but focusing on monthly dosing could help it secure an advantage in the market, and it may be an attractive alternative to daily pills and currently approved injectables taken once per week. While Pfizer still has a long way to go and approval isn't guaranteed, the company has shown that it's serious in not missing out on the lucrative GLP-1 market.

Buying Pfizer's stock can be a safer way to invest in GLP-1

There are loads of potential in GLP-1 stocks out there, but if you invest in a small company that doesn't have any approved products, it can involve taking on a lot of risk. With Pfizer, however, you'd be investing in a healthcare giant that's already large and established, and for which GLP-1 is just part of a broader growth strategy. It's a safer investment from that point of view, in that it's not as risky as a pre-revenue pharma stock.

Pfizer's success isn't a guarantee, but with the stock trading at only eight times its estimated future earnings (based on analyst expectations), you're buying it at a discount, effectively baking in some of that uncertainty and risky into the valuation. That's why I like Pfizer as a possible GLP-1 play: it has some exciting upside but may not have nearly as much downside risk as other, smaller stocks.

David Jagielski, CPA 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.