Pfizer (PFE)

A Portfolio Rebuilt by Deals

Pfizer is rebuilding its portfolio through acquisitions after the pandemic revenue windfall reversed. FY2025 revenue was $62,579M. Eliquis, a blood thinner and the largest product, earned $7,961M (12.7%), the lowest single-drug share of the six large drugmakers covered here.

Low concentration does not mean low patent risk. Pfizer expects to lose ~$1.5B of revenue in 2026, about 2.4% of FY2025 revenue, as drugs lose exclusivity (LOE) and face generic copies. The losses are spread across several products: the arthritis drug Xeljanz in 2026, the breast-cancer drug Ibrance in 2027 and Eliquis generics from 1 April 2028. Each needs its own forecast (see the LOE guide). Eliquis sits below the 25-30% line for elevated concentration (see the concentration map), so Pfizer's risk is a calendar of mid-sized events plus integrating what it bought.

R&D, Margin and Payout

R&D was $10,437M, 16.7% of sales, below the 20.9% average in the survey by PhRMA, the US drug industry body, and at the low end of the ~15-25% large-drugmaker range; Merck spent 24.3%. Integration of Seagen, the cancer-drug developer Pfizer bought in 2023, and pipeline pruning both show up here.

Pfizer, like Merck, does not print an operating income line. Computed from filed components, operating income was $14,244M, a 22.8% margin.

The dividend was $1.72 per share. Dividends paid were $9,771M against GAAP net income of $7,771M, a ~126% GAAP payout: the case the GAAP payout trap guide was written for. Amortisation of acquired intangibles ($4,874M) and asset impairments ($4,940M) cut net income without using cash in the year. Operating cash flow was $11,704M, so dividends took about 83% of it.

Valuation Framework

Pfizer needs a product-by-product forecast of LOE losses for 2026 to 2028. The acquired cancer drugs still in trials are valued with risk-adjusted NPV (rNPV), weighting revenue by the BIO phase rates (7.9% cumulative from Phase I) at an ordinary cost of capital. The Seagen programmes are what has to replace Eliquis sales from 2028. GAAP EPS is the wrong measure of dividend capacity here.

What to Watch in the Financials

The 2026 LOE estimate (~$1.5B). Management's figure is the filed anchor for the near-term forecast. Track product revenue against it each quarter.

GAAP payout (~126%). While amortisation and write-downs run at FY2025 levels, the GAAP payout stays above 100%. Operating cash flow is the better measure of cover.

Eliquis ahead of April 2028. At 12.7% of revenue it is modest, yet it is the largest single loss of sales in the disclosed calendar.

COVID products. Pfizer's 2026 revenue guidance still assumes about $5 billion from its COVID vaccine and treatment (Q4 2025 release), so that line remains a swing factor in the margin.

Key Risks

A staggered LOE calendar. Xeljanz, Ibrance and Eliquis stack up through 2028. None is ~49% of sales like Merck's Keytruda, but the drag is cumulative.

Delivery on acquired programmes. The acquired drugs in trials have to reach approval at roughly the rates the valuation assumes for the rebuild to work.