Pfizer (PFE.US) ushered in the dawn of recovery! New drug revenue soars 18%, but the patent cliff is still the biggest test

The Zhitong Finance App learned that after revenue from COVID-19 products continued to decline, PFE.US (PFE.US) began to show signs of more steady growth. The pharmaceutical giant announced revenue for the second quarter of fiscal year 2026 of $15 billion, an increase of 1% year over year in terms of operating caliber; after excluding Comirnaty and Paxlovid, revenue increased 5% year over year in terms of operating caliber.

At the same time, the company also raised the median value of its full-year revenue guidance. Based on the higher-than-expected performance of non-COVID-19 products, Pfizer raised its 2026 full-year revenue guidance from $59.5 billion to US$62.5 billion to US$60.5 billion to US$62.5 billion. The median value of the new guidelines was raised by US$500 million compared to the previous one. The company also reiterated that the adjusted earnings per share guide for the full year was $2.80 to $3.00, which is basically in line with market expectations of $2.95.

However, Pfizer's recovery is still facing a major test — can new product growth and cost cuts offset the impact of the upcoming patent expiration for many of its established drugs.

Reasons to be bullish

Investors are optimistic that Pfizer's reliance on unpredictable COVID-related sales is decreasing as its non-COVID product portfolio drives growth. Newly launched and acquired drugs achieved revenue of US$3.2 billion during the quarter, an increase of 18% in terms of operating caliber. The company also lowered its 2026 COVID-19-related revenue forecast to approximately $4 billion, mainly due to weak demand for Paxlovid.

The company's growth is also becoming more diversified. Padcev's market share in bladder cancer continues to increase, while Vyndaqel continues to benefit from increased diagnosis rates and increased international market demand. Padcev's revenue grew 23% in terms of operating caliber to reach US$667 million; Vyndaqel series products achieved revenue of US$1.76 billion, an increase of 8% in terms of operating caliber. This is significant because companies need multiple products to support post-pandemic recovery rather than just one major drug.

Pfizer has also expanded its cost savings target and is still moving forward as planned, and is expected to achieve net savings of approximately $5.7 billion by the end of 2026. The company expects the total cumulative net savings achieved through cost reduction measures to reach $6.7 billion by 2029, thereby offsetting the decline in COVID-related revenue and resuming sustainable growth. These savings are expected to support profit margins and free up more resources for oncology and obesity investments, even if revenue growth remains moderate.

Reasons to be bearish

From an operational perspective, Pfizer's revenue increased by only 1%, and exchange rate changes also contributed to growth during the reporting period. This is significant because the company's reversal has yet to lead to strong endogenous growth covering the entire company. Pfizer also reported losses before GAAP taxes from continuing operations due in part to impairment, laws, restructuring, and acquisition-related expenses. As a result, the company's reported profitability is still affected by restructuring and costs associated with the business portfolio.

Another key issue investors need to pay attention to is the expiration of the company's patents. Pfizer expects that between 2026 and 2030, the expiration of multiple patents will put significant pressure on revenue. Among them, the main products facing competition include Eliquis, Ibrance, and Xtandi.

According to the company's financial guidance for the full year 2026, as some products have recently lost or are about to lose patents or regulatory protection, and are facing or are expected to face competition from generic drugs and biosimilar drugs, recent and anticipated related competition is expected to have an adverse impact on revenue of about US$1.1 billion.

Although Padcev and Vyndaqel are growing, investors still lack firm evidence that Pfizer's new product portfolio can replace the combined revenue contributed by mature products that are about to face loss of revenue due to patent expiration.

What do hedge funds think?

Hedge fund sentiment provides another perspective on Pfizer's future prospects. According to Insider Monkey's database of 1,022 hedge funds, the number of hedge funds holding Pfizer shares increased slightly from 81 in the fourth quarter of 2025 to 83 in the first quarter of 2026. Although this increase is too small to indicate a decisive shift in institutional investors' confidence, it shows that as Pfizer continues to push to reverse the situation, interest in hedge funds has generally remained stable and slightly positive.

Conclusions

As Pfizer continues to expand its non-COVID product portfolio, products such as Padcev and Vyndaqel achieve growth, and management continues to reduce the company's cost base, Pfizer's reversal of the situation is becoming more and more credible. However, this recovery is still unfinished. The company's revenue growth in terms of operating caliber is still moderate, and the upcoming patent expiration may put tremendous pressure on its many mature product franchise businesses. Pfizer's lower cost structure provides the company with some breathing room, but its long-term investment logic ultimately still depends on a key question: whether the company's new drugs can grow large enough to replace the portion of revenue the company is preparing to lose soon.