As at 8 May 2026

Executive Summary

Key highlights

In this report, we review the 1Q26 results released in May 2026:

Financial results at a glance:

• Group revenue increased by 5% from $13.7 billion in 1Q25 to $14.5 billion in 1Q26. Covid-related sales (Comirnaty and Paxlovid) continue to drag on overall sales, but revenue growth is driven by the oncology portfolio (Padcev, Eliquis and other products). Vyndaqel family grew by 4% operationally, with the Vyndamax patent settlement stabilising expected US revenues from 2028 through to mid-2031. Excluding Covid-related sales, revenue was boosted by 7% compared to 1Q25.

• Cost of sales increased as a share of revenue, compressing gross margin to roughly 76% in 1Q26 (from ~81% in 1Q25), primarily due to the non-recurrence of the prior year’s favourable royalty accrual, alongside changes in product mix and adverse foreign-exchange movements.

• Total operating costs were further impacted by a 12% increase in R&D spending, valued at $2.5 billion for the quarter. This increase reflects intensified investment in oncology and obesity products.

• A net income of $2.69 billion beat expectations but still declined by 18% from $2.97 billion in 1Q25 – influenced by the higher cost base from Seagen and Metsera integration. EPS of $0.75 per share beat the consensus of $0.72 but remains lower than the $0.92 posted in 1Q25.

• Pipeline: Padcev and Keytruda phase three MIBC data indicates that muscle-invasive bladder cancer is showing a nearly 50% reduction in risk of recurrence or death. Upon FDA approval, this could push Padcev's valuation from $2 billion to $3.5 billion. Metsera plans to initiate 10 phase three studies for PF’3944 in 2026, ahead of the original timelines. The start of phase three trials for the GLP-1 and Amylin combination will also trigger the first CVR milestone payment.

• The total quarterly dividend declared was $0.43 per share ($1.72 annualised).

Analyst thesis

Our recommendation is based on:

• Pfizer’s (PFE) oncology division, expanded by the US$43 billion Seagen acquisition in 2023, accounts for a third of group sales. Its lead drug, Padcev (an antibody-drug conjugate (ADC)-targeting bladder cancer), is tracking a $2.4 billion annualised sales run rate, with muscle-invasive bladder cancer (MIBC) label expansion underway. The ADC platform generates successive oncology drugs, each cheaper to develop than the previous. The base case projects a 50% uplift, valuing Seagen’s oncology revenue at $8–10 billion by 2030.

• The patent cliff downside case is improving: Vyndamax exclusivity has been extended to June 2031, and a favourable Belgian court ruling on Comirnaty contracts has reduced near-term risk on Covid vaccine revenues. Management has indicated that a high single-digit five-year revenue CAGR is possible post-2028.

• Optionality is effectively priced at zero: the Metsera’s obesity programme (10 phase‑2/3 assets with earliest approvals around 2028–2029), Atirmociclib as a credible Ibrance successor, and the early radiopharmaceuticals pipeline all sit outside our base‑case valuation. This is attractive because as the obesity market draws in more competitors, Pfizer is one of the few new entrants with the scale, leverage and commercial infrastructure to win a share of the market from incumbents that already trade on higher multiples and must defend their positions. Radiopharmaceuticals specifically are excluded from the valuation, as it remains in early‑stage clinical development with no near‑term revenue visibility.

• A dividend yield of more than 6% provides a valuation floor, underpinned by strong FCF generation and investment-grade balance sheet that supports maintaining the dividend through the deleveraging cycle.