Pfizer Inc. (NYSE: PFE) released the results of a peer review study that sent shares up more than 5%. The study evaluated the company’s GLP-1 receptor agonist, danuglipron. The compound aimed to treat obesity and was shown to significantly impact patients at two different dosages over the same period.

The compound could rival Novo Nordisk’s obesity treatment, Wegovy. Wegovy sales topped $900 million in 2022, and is on the way to becoming a blockbuster drug. Wegovy commands roughly 95% of the obesity drug market. A new compound offers an opportunity for Pfizer, also reflected through Pfizer stock technical analysis. 

Can Pfizer Dodge a Patent Cliff?

Pfizer is heading toward a well-known patent cliff. It faces one of the steepest declines in the industry as patents on roughly a dozen blockbuster or near-blockbuster drugs run out. Patent expirations could shave $17 billion off Pfizer’s top line. Cancer drug Ibrance and blood thinner Eliquis could see revenue fall as much as 80%. 

Danuglipron will not recoup that loss, but it's a step in the right direction. Not only is there a chance to take share from Novo Nordisk, but the obesity drug market should grow nearly 100% by 2030. In that light, danuglipron and its derivatives could be worth a significant chunk of the $17 billion Pfizer stands to lose. The company needs only a few more winners to maintain growth. 

That’s why Cantor Fitzgerald analyst Louise Chen came out supporting the stock. In her view, the blockbuster potential of danuglipron is not priced into the market. Specifically, she thinks the consensus estimates published by Factset don’t reflect drug sales, which could top $1 billion by the second year. No price target was given but it maintained an "overweight" rating. 

MarketBeat's average analyst rating has been "hold." This has been firm over the last year, but the price target has decreased. The price target factors in the patent cliff but has yet to price in recovery efforts. Pfizer’s pipeline includes 101 candidates, with 12 in registration and 23 in Phase 1 trials. This should result in several marketable treatments, and any could reach blockbuster status. 

Pfizer Experiences Robust Institutional Activity

The institutional tide has turned for Pfizer. The institutions started buying the stock the second quarter of 2022. This activity has ownership up to 67% and growing for two reasons:

• The stock trades near long-term lows and at a deep value despite the looming patent cliff.
• The stock pays a high 4% yield which is more than attractive given the general S&P 500 growth outlook. The payout is relatively safe at 26% of earnings; growth is expected. 

The Technical Outlook: Pfizer at the Bottom 

Shares of Pfizer have hit bottom. The news and upgrade have the stock up more than 10% off the lows and confirm support at a critical level. The news may not spark a rally but should consolidate the market. Assuming this is what happens, the stock should trend sideways from here. The next rally will start as the pipeline for new blockbusters becomes clearer or not. In that scenario, Pfizer could remain range bound at current levels for a prolonged time.