A bargain in pharmaceuticals

Big pharma titan Pfizer (NYSE: PFE) has had a dismal year. The company’s shares were recently down more than 35 percent, reaching a five-year low. Apart from the coronavirus-induced sell-off, Pfizer’s shares have also suffered from a lack of confidence among investors. Possible government price controls are one worry, but there’s also Pfizer’s plan to spin off its generic drug business Upjohn, pairing it with Mylan and forming a new entity called Viatris. As this move will significantly shrink the company’s annual revenue, investors appear to be concerned about the sustainability of Pfizer’s top-notch dividend, along with its prospects as a growth-oriented branded drug company. These concerns are likely way overblown. First, the combined yield of Pfizer and Viatris should at least equal — and possibly exceed — the company’s current annualized payout. Also, Pfizer’s five core growth products — Vyndaqel, Ibrance, Xeljanz, Eliquis and Prevnar — should deliver top-line growth of at least 6 percent for the next five years. Once the pandemic fades, Pfizer should come roaring back.