Terrible News for Pfizer Stock Investors

The past three years have been challenging for Pfizer (NYSE: PFE). Revenue and earnings have moved in the wrong direction, as has the company's share price. The stock is down by 56% since 2022. Although Pfizer has made some efforts to turn things around, they have been insufficient. And recent regulatory developments in the U.S. somewhat complicate things for the drugmaker.

Here's what investors need to know.

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Regulators restrict access to the vaccine

Pfizer's poor performance since 2022 is largely due to its coronavirus portfolio. After producing record revenue thanks to its work in this area, once the pandemic started receding, sales from Comirnaty, its COVID-19 vaccine, and Paxlovid, its therapy for the disease, started dropping off a cliff. However, Pfizer's coronavirus franchise has remained critical to its overall financial results. In 2024, the company's combined revenue from Paxlovid and Comirnaty was $11.1 billion.

Pfizer's total top line came in at $63.6 billion, increasing 7% compared to the year-ago period. When excluding contributions from its coronavirus products, Pfizer's revenue grew more quickly -- by 12% year over year. The company's sales were down compared to 2023 but still accounted for about 17.5% of its top line. That's a meaningful amount. Pfizer would be in a lot more trouble without Paxlovid and Comirnaty.

Image source: Getty Images.

Here's the problem: Recent regulatory changes in the U.S. will make it more challenging for Pfizer to consistently generate solid revenue from Comirnaty. The U.S. Food and Drug Administration (FDA) has decided that instead of recommending COVID-19 vaccines for healthy adults and children above a certain age, it will do so only for seniors aged 65 and older and those with certain medical conditions that put them at risk of severe disease outcomes. The agency is requiring additional clinical trials before it can recommend annual booster shots for healthy adults.

Healthy children and pregnant women are also no longer on the list of those who should take the vaccine. These changes will take effect in the fall, peak vaccination season for COVID-19. In other words, the U.S. coronavirus vaccine market just became smaller. What does this mean for investors?

Looking at the bigger picture

Pfizer's coronavirus franchise might weaken somewhat as a result of these changes, but perhaps not significantly. The FDA's guidance is largely irrelevant to Paxlovid. We could even speculate that lower vaccination rates may actually lead to higher infection rates and more prescriptions for the medicine. Although Comirnaty's U.S. sales will be affected, the company reported just $2.004 billion in revenue from the U.S. coronavirus vaccine market last year, which accounts for about 37% of the total revenue Comirnaty generated. The U.S. market is the single most important for Pfizer.

Overall, these new developments won't have a significant impact on its financial results. Even so, Pfizer continues to encounter headwinds, and this is yet another one. It might not be a big deal in a vacuum, but given Pfizer's trajectory since 2022, it's not exactly what investors want to see. Truth be told: Pfizer needs every single dollar it can collect in sales. Even slightly lower revenue than it expects from any medicine or vaccine is terrible news for a company whose midpoint revenue guidance of $62.5 billion for the year implies a slight decrease compared to 2024.

In light of all this, it's fair for investors to look at the company's performance over the past few years and wonder whether it can bounce back. If it does, it will unlikely be because of its work in the coronavirus vaccine market.

Pfizer has made significant strides in recent years to strengthen its pipeline. One of its latest moves was to expand its already robust portfolio of oncology candidates with the licensing of a promising cancer medicine, called SSGJ-707, originally developed by China-based 3S Bio. Pfizer dished out an upfront payment of $1.25 billion for this mid-stage asset, with potential milestone payments of up to $4.8 billion on top of royalties.

Pfizer's comeback story will almost certainly include at least one, if not several, significant regulatory wins in oncology. Given its massive pipeline in the field and vast experience in developing drugs in this area, the drugmaker should be well-positioned to achieve this goal. Pfizer is working on numerous therapies in other fields as well and is enhancing its business in various ways. The healthcare company has decreased expenses and costs and plans to continue doing so until 2027.

In my view, thanks to its equally massive success in the coronavirus market earlier this decade, we have yet to see the results of the massive investments Pfizer made in its pipeline, It's not time to give up on the stock just yet, even with the recent regulatory changes in the U.S. Pfizer could still generate excellent returns for patient investors.

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Prosper Junior Bakiny 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.