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Quick Look
- The health care sector has led the S&P 500 over the three months, but Pfizer has lagged of late, slipping 5% since the start of October.
- As the Big Pharma company continues to struggle to replace COVID-19 vaccine revenue, it is heavily learning into the semaglutide and GLP-1 weight loss drug trend.
- Last week, the company signed a $2.1 billion licensing agreement with a Chinese pharma company to develop its early-stage weight loss pill.
Health care stocks have been on a run lately, leading the S&P 500’s 11 sectors over the past three months with a gain of 11.55%. Unfortunately for some investors, that recent rally has not included all of the Big Pharma mainstays.
Pfizer (NYSE: PFE), the maker of Chantix, Eliquis and Paxlovid has seen its shares slide 5% since the start of October. By comparison, other mega-cap pharmaceutical companies such as Johnson & Johnson (NYSE: JNJ), Regeneron Pharmaceuticals (NASDAQ: REGN), and Eli Lilly (NYSE: LLY) are up nearly 14%, 24%, and 25%, respectively, over the same time frame.
And despite Pfizer making headlines on Nov. 13 after acquiring obesity biotech Metsera in a $10 billion deal, the stock has only mustered a 0.23% gain since then.
But the nearly 177-year-old biopharma company is once again looking to expand its role in the weight loss drug market, with its management team and shareholders alike hoping that doing so can help it recover lost revenue in the wake of waning demand for mRNA-based COVID-19 vaccines.
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Pfizer Looks to Gain Market Share After Enormous Deal With YaoPharma
On Tuesday, Dec. 9, Pfizer struck a $2.1 billion licensing deal with China’s YaoPharma to develop a GLP-1 weight loss pill that is in early-stage development. The drug works similarly to Wegovy, the game-changing weight loss injection from competitor Novo Nordisk (NYSE: NVO).
Of course, news of a yet-to-be-approved weight loss pill may not be enough to move the stock in the short term, it does reflect the company’s commitment and momentum in the obesity treatment market.
The details of the agreement include Pfizer paying a $150 million fee upfront to YaoPharma’s parent company, which has an $8.4 billion market cap, Shanghai Fosun Pharmaceutical.
Additionally, Pfizer could pay YaoPharma up to $1.94 billion in milestone payments if progress on the drug’s approval is demonstrated, as well as royalty payments on sales of the drug if and when it is approved.
Those milestone payments will be contingent upon YaoPharma successfully navigating the weight loss piss through phase one trials, with Pfizer taking control of later stage development.
Pfizer also plans to conduct combination studies, which are currently in mid-stage development, using the Chinese pharma’s pill and its own GIP gut hormone receptor—a practice Eli Lilly has adopted with its weight loss drug Zepbound and its diabetes drug Mounjaro, targeting both GLP-1 and GIP.
Pfizer Is Positioning Itself for the Future of the Weight Loss Drug Market
The deal is noteworthy as it demonstrates how eagerly the pharmaceutical firm’s executive team is pursuing a more prominent, long-term position in the GLP-1 and broader obesity treatment market.
Pfizer’s leadership has demonstrated that it is willing to invest approximately $10.1 billion over the past month to that end, as it eyes a massively growing industry.
Forecasts from market analysis firm Grand View Research suggest that the GLP-1 weight loss drug market is expected to grow at a compound annual growth rate (CAGR) of 18.54% from 2025 to 2030, from less than $14 billion at the start of this year to an estimated $48.84 billion through 2030.
Grand View Research found that North America accounts for the largest revenue share, with more than 75% of the GLP-1 agonists market. While other alternative obesity interventions exist, including lifestyle modifications and bariatric surgery, GLP-1 drugs remain the preferred option among physicians and patients.
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Patient Investors Can Enjoy PFE’s Sizable Dividend
Shareholders are hoping that Pfizer’s foray into the weight loss drug market proves fruitful, after the stock has punished loyal investors with a loss of more than 31% over the past five years. Much of this has been due to the decline in sales of COVID vaccines, which has led to a contraction in the company’s revenue growth from more than 95% at the end of 2021 to a decline of more than 41% by the end of 2023.
Last year, Pfizer rebounded marginally, registering a nearly 7% increase in revenue. At the same time, the stock’s yield has offset some investors’ concerns. Pfizer remains a strong dividend payer with a current yield of 6.65%—or $1.72 per share annually. That payout has increased for 16 consecutive years, making the stock a favorite among income investors despite its 100% dividend payout ratio raising some eyebrows.
For those unconcerned with immediate returns, while keeping a bullish eye on the near- and mid-term future of the prescription weight loss drug market, Pfizer will continue to provide income, serving as a speculative position in the GLP-1 industry.
However, growth-focused investors might not be able to endure another year of lackluster performance. Analysts’ average 12-month price target suggests a little more than 10% potential upside from the stock’s current price to go along with a consensus Hold rating.
Meanwhile, short interest has been steadily rising as the stock continues to attract Wall Street’s bears. Currently, $3.58 billion worth of the float is shorted—or nearly 84% more than PFE’s short position was at the end of January 2025.
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