Can Pfizer's Cost Cuts and New Drugs Offset Upcoming Headwinds?

Pfizer PFE is likely to encounter several headwinds in the next couple of years that can hurt its sales and profits, the first being its upcoming loss of exclusivity (“LOE”) cliff.

Though Pfizer expects a moderate negative impact on revenues from the LOE in 2025, the impact is expected to be significant in the 2026-2030 period as several of its key products, including Eliquis, Vyndaqel, Ibrance, Xeljanz and Xtandi, will face patent expirations.

In addition, Pfizer expects an unfavorable impact of approximately $1 billion from the Medicare Part D redesign under the IRA, which took effect in the first quarter of 2025 and hurt Pfizer’s revenues in the first half. Higher-priced drugs, including Vyndaqel, Ibrance, Xtandi and Xeljanz, are most affected by the IRA.

The third key headwind is the uncertainty in sales of its COVID products, Comirnaty and Paxlovid. Though sales of Paxlovid and Comirnaty have stabilized in 2025 after declining significantly in the past two years, their sales are usually weighted toward the second half of the year and are difficult to estimate as they depend on infection rates. There is an element of uncertainty related to COVID sales, and they may decline further in future years.

Lastly, uncertainty around tariffs and trade production measures has muted economic growth. President Trump has once again threatened to impose heavy tariffs, as high as 250%, on pharmaceutical imports. Trump’s repeated threats to impose tariffs on pharmaceutical imports are aimed at pushing American pharma companies to shift pharmaceutical production back to the United States, primarily from European and Asian countries. Trump has said that drugmakers have about one to one and a half years to bring production back to the United States before the new tariffs are imposed.

However, despite all the headwinds, we believe Pfizer’s key drugs like Vyndaqel, Padcev and Eliquis and new and newly acquired products should continue to drive top-line growth. Pfizer’s significant cost reduction and efforts to improve R&D productivity measures should drive profits. Though Pfizer does not expect strong top-line growth over the next three years due to the LOEs, it expects EPS growth.

Medicare Part D Changes to Hurt Other Drugmakers’ Sales

In 2022, in the United States, Congress passed the IRA, which made significant changes to how drugs are covered and paid for under Medicare, including penalties for significant increases in the prices of drugs.

Among other measures, the IRA requires the U.S. Department of Health and Human Services to effectively set prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D.

Similar to Pfizer, some other drugmakers like J&J JNJ, Amgen, Merck MRK and Eli Lilly LLY also expect an unfavorable impact of the Medicare Part D redesign on their top line. J&J expects a negative impact of approximately $2 billion in sales due to the Medicare Part D redesign in 2025. The Part D redesign is mainly hurting sales of J&J’s drugs like Stelara, Tremfya, Erleada and pulmonary hypertension drugs. Merck and Lilly expect the government price setting to hurt sales of their diabetes drugs, Januvia/Janumet and Jardiance, respectively, from 2026. Amgen’s Enbrel and Otezla have been selected for Medicare price setting beginning in 2026 and 2027, respectively.

PFE’s Price Performance, Valuation and Estimates

Pfizer’s stock has declined 0.4% so far this year against an increase of 1.3% for the industry. 

From a valuation standpoint, Pfizer appears attractive relative to the industry and is trading below its 5-year mean. Going by the price/earnings ratio, Pfizer’s shares currently trade at 8.08 forward earnings, significantly lower than 14.79 for the industry as well as the stock’s 5-year mean of 10.76.

The Zacks Consensus Estimate for earnings has risen from $3.07 per share to $3.13 per share for 2025, while that for 2026 has increased from $3.06 per share to $3.09 per share over the past 30 days.

Pfizer has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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