With the total return of Pfizer‘s (NYSE: PFE) shares rising by just 1.9% this year so far, investors may be yearning for some kind of catalyst that will stimulate its stock price to rise at a better pace.
They’re in luck. Three such catalysts are coming in the next couple of months (likely before 2025 starts) that could precipitate some market movement for the stock. Let’s take a look at each.
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As you’ve probably heard, the market for anti-obesity medicines is the hottest in biopharma right now. Pfizer’s most advanced candidate, a molecule called danuglipron, has had a rough go at it, with middling efficacy and several worse-than-anticipated clinical trial readouts. Still, an earlier-stage program recently concluded its phase 1 trials, and it could easily constitute a catalyst for the stock price.
Not much about the program has been disclosed as of yet. However, its mechanism of action appears to partially overlap with a candidate called MariTide that’s being developed by Amgen. That makes Pfizer’s program fairly unusual in the weight loss drug space, though that difference is no guarantee of success or of greater efficacy compared to the market’s leaders. The phase 2 clinical trial is expected to start before the close of 2024.
For now, be on the lookout for that phase 1 trial data. The company may not choose to publish it even if the results are favorable. But any new information could give investors a bit more confidence in the drug candidate’s ability to find market share if it’s eventually approved for sale, which would buoy the stock.
The chief scientific officer (CSO) is one of the most important C-suite roles in any biopharma organization. Pfizer’s CSO is stepping down after a 15-year tenure. Management says its executive search process is approaching culmination, and that it will make an announcement relatively soon.
Appointing a new CSO is likely to be a catalyst for the stock for several reasons. The biggest is that for a pharmaceutical business, nearly all strategic-level research and development (R&D) pipeline decisions are under the purview of the CSO. This executive has the most influence on selecting which disease areas to compete in, which physiological targets to pursue within those areas, and which technologies to use for optimal efficiency.
And if data are ambiguous, the CSO is the decider on whether it’s worth pursuing a program further. In other words, a good CSO can positively impact a company’s performance over many years in just a short period — or a bad one affect it negatively.
This is one case where it makes sense to pay attention to the market’s reaction to the appointment, rather than trying to evaluate the quality of the new CSO on your own. If the announcement leads to a boost, it’s a good sign that further upside could be awaiting over time as the leader starts to impact the company.
Clashes between shareholders and management are never a good sign, but putting such a disagreement to rest certainly is.
In October, the activist investor group Starboard Value took a $1 billion stake in Pfizer’s shares, with the goal of pushing management to improve the business’s performance — or, perhaps, to get the board of directors to pick a new CEO. So far, no major changes have been announced, despite meetings between Starboard and management. The situation is ongoing, and Starboard is unlikely to stay quiet if its demands are not met.
That opens the door for an ugly public spat to escalate and damage Pfizer’s reputation. It also could mean the announcement of a new strategy that tries to comprehensively address the activist group’s concerns. Threading the needle will likely take some time, and some discussion back and forth between management, the board, and the activist group. But if it occurs, it’ll be a positive catalyst for the stock, and it’s likely to have beneficial implications that last a while.
Management could extend one olive branch in particular that would also have an immediate beneficial impact on shareholders, but that wouldn’t mean a major departure from Pfizer’s strategy. Starboard faults the company’s budgeting and forecasting processes, suggesting that they commonly result in missed estimates for sales and earnings, as well as underperforming the consensus estimates generated by Wall Street analysts. Hiring an outside firm to renovate the financial business units relating to forecasting and making projections wouldn’t be too difficult or costly, and it might help to issue guidance updates that shareholders can rely on a bit more.
Bringing in new senior management may also be a positive catalyst. For now, just appreciate that this issue could break in a number of different ways, some of which are more beneficial for the stock than others.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.
