In some ways, January 2020 seems like a lifetime ago.

That’s when I first recommended Pfizer (NYSE: PFE) to my High-Yield Investing premium readers. The term “Coronavirus” was starting to circulate back then, but we had no idea just yet what was in store. It would be another two months before the World Health Organization (WHO) officially declared a pandemic.

Pfizer was undergoing a massive corporate reorganization back then, spinning off its generic, off-patent, and over-the-counter brands. The more focused, research-driven core had just upped its earnings outlook on the strength of arthritis treatment Xeljanz, along with continued contributions from blockbusters such as pain reliever Lyrica, cholesterol drug Lipitor, and pneumococcal vaccine Prevnar.

Covid Treatments Were A Game-Changer For PFE

Pfizer was already improving the lives of 784 million in 125 countries and raking in $50+ billion in annual sales. But when the company teamed up with BioNTech to develop a Covid vaccine, all bets were off.

Founded in 2008, BioNTech is a German biotech firm. At the time, it had a promising pipeline of therapies to treat cancer and infectious diseases. But when it comes to developing a vaccine to battle a global pandemic, it was clearly going to need some help. A company like Pfizer had the money and manufacturing capabilities that just couldn’t be matched.

The fight against Covid brought even bigger financial rewards than many could have expected. Pfizer generated an estimated $33 billion in Covid vaccine revenues last year, while Paxlovid (an oral antiviral treatment) took in $22 billion.

This catalyst has essentially doubled the revenue base. But it was never meant to last.

As the pandemic eases, investors (and analysts) are already questioning the future and weighing the impact of looming patent expirations over the next five years. Revenues lost to generic competition aren’t always easy to replace.

What’s Next For PFE?

To be sure, Pfizer has a deep pipeline of 100 drug compounds, dozens of which have already advanced to Phase 3 clinical trials. Many of these promising candidates will eventually bolster the firm’s oncology, immunology, and heart disease franchises. Pfizer is also developing novel therapies for sickle cell, neuromuscular disorders, and other rare diseases. It’s even working on a vaccine to help eradicate respiratory syncytial virus (RSV) — a condition that can be especially tough on younger children and older adults.

Pfizer has been plowing about 15% of its sales into research and development in recent years — to great success. There is also the recent $11 billion acquisition of Biohaven Pharma.

We don’t need to understand all of the science behind these breakthroughs. Pfizer’s track record speaks for itself. Still, skepticism abounds that the company will be able to meet its ambitious long-term revenue guidance. Tighter drug pricing provisions in the new Inflation Reduction Act are another concern.

Action To Take

None of this means that Pfizer can’t continue to reward shareholders over the next few years. But with the stock trading near fair value, additional near-term upside may be limited.

Over at High-Yield Investing, PFE gave us a healthy 40%+ return. But the stock may stall out here. The march from $38 to $50 has also driven the dividend yield down to 3.3%.

That’s why I recently told my readers that we would pocket our gains and move on. If you own the stock, you may want to consider doing the same. In the meantime, if you want to know about my absolute favorite high-yield picks, you need to check out my latest report…

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