Fundamental analysis for pharmaceutical companies
Pharmaceutical stocks offer Indian investors access to the world's most innovative healthcare companies. However, evaluating them requires specialised knowledge of drug pipelines, patent cliffs, and FDA processes. Unlike typical manufacturing companies, pharma valuations depend heavily on future pipeline potential, patent protection timelines, and regulatory outcomes.
The US pharmaceutical industry generates over $600 billion in annual revenue across major players such as Pfizer, Eli Lilly, Merck, and AbbVie. Companies like Eli Lilly have seen their market cap surge past $1 trillion largely on pipeline strength, particularly their GLP-1 drugs Mounjaro and Zepbound. This guide provides the essential framework for pharma stock analysis with current 2024-2025 data and actionable insights.
Mastering fundamental analysis tools for Indian investors provides the foundation for understanding these specialised pharmaceutical metrics.
Understanding the drug pipeline: where future value lives
A drug pipeline represents the portfolio of drug candidates a company has under development from early discovery through regulatory approval. For investors, the pipeline signifies future revenue. Today's pipeline drugs become tomorrow's blockbusters. Approximately 90% of biotech valuations derive from pipeline assets rather than current products.
Every drug must progress through specific stages of development before reaching patients. The preclinical stage spans 3-6 years with laboratory and animal testing. Only about 1 in 1,000 compounds advances to human trials. Phase 1 involves first-in-human testing with 20-100 healthy volunteers and focuses on safety and dosage. Phase 2 begins efficacy testing with 100-500 patients who have the target condition. This phase is often referred to as the "valley of death" because it has the lowest success rate. Phase 3 conducts large-scale confirmatory trials with 1,000-5,000 patients and confirms efficacy while monitoring side effects. This phase averages $36.58 million per trial in 2024, representing a 30% increase from 2018.
Clinical trial success rates reveal the challenges of development. Phase 1 to Phase 2 succeeds 47% of the time. The transition from Phase 2 to Phase 3 is met in only 28% of cases, making it the lowest hurdle. Phase 3 to NDA filing succeeds 55% of the time. NDA to approval succeeds 92% of the time. Overall probability from Phase 1 to approvalist 6.7%. Success rates vary dramatically by therapeutic area. Vaccines lead at 33.4% while oncology trails at just 3.4-5% despite having the largest number of pipeline drugs.
FDA approval process: timelines that shape investment decisions
The complete journey from drug discovery to FDA approval typically takes 10-15 years and costs $1.3-2.8 billion per approved drug. Understanding this process helps investors anticipate catalysts and risks.
FDA offers several review pathways with different timelines. Standard review takes 10 months and serves as the default pathway for most drugs. Priority review takes 6 months and applies to drugs offering significant improvement over existing treatments. Breakthrough therapy designation provides expedited development through intensive FDA guidance and a high probability of approval. Fast track allows rolling submissions for serious conditions with unmet need. Accelerated approval enables earlier approval based on surrogate endpoints but requires confirmatory studies.
The FDA met the 94% PDUFA goal in 2024. Once drugs reach NDA or BLA submission, they have a 92% approval rate. Recent approval trends indicate 55 novel drug approvals in 2023, 50 in 2024 (48% first-in-class), and 46 in 2025, including Vertex's Journavx as the first non-opioid painkiller.
PDUFA dates are major catalysts of volatility for pharmaceutical stocks. These are deadlines by which the FDA must respond to drug applications. Stocks can move 20-50% or more in either direction around these dates. Stocks often experience run-ups approaching PDUFA dates when approval is expected. Missing or delaying PDUFA dates typically causes significant drops. Complete Response Letters indicate that the FDA cannot approve the application in its current form and often cause immediate 10-30% price declines for smaller companies.
Patent cliff risks: the pharma investor's greatest concern
A patent cliff refers to the sharp revenue decline that occurs when patents on blockbuster drugs expire, allowing generic competitors to enter at significantly lower prices. This phenomenon has the most pronounced financial impact on pharmaceutical investing.
Small-molecule drugs typically lose 80-90% of revenue to generic competition after loss of exclusivity. Biologics face slower erosion with 30-70% market share loss in the first year due to biosimilar competition. Generic versions are typically priced 70-95% lower than original branded drugs. If a product approaching patent expiration accounts for more than 30% of the company's revenue, it represents a critical concentration risk.
Major upcoming patent expirations will reshape the industry through 2029. Keytruda from Merck expires in 2028 with over $29 billion at risk. Eliquis from Bristol-Myers Squibb and Pfizer expires between 2026 and 2028, with $13.3 billion at risk. Opdivo from Bristol-Myers Squibb expires in 2028 with $9.3 billion at risk. Stelara from Johnson & Johnson expires in 2025 with $10.4 billion at risk. Total revenue at risk through 2030 ranges from $230 to $ 400 billion.
Pfizer's Lipitor remains the definitive example of the patent cliff. Peak sales reached $12.9 billion in 2006, representing 27% of Pfizer's revenue. After patent expiration in November 2011, revenue dropped from $10.8 billion in 2010 to under $3 billion within a few years. Generic pricing fell 90-95% lower than branded Lipitor. Pfizer's net income decreased 50% in Q4 2011 versus Q4 2010.
AbbVie successfully navigated the Humira patent cliff. Humira was the best-selling drug in history with over $200 billion in cumulative global sales. When biosimilar competition began in January 2023, revenue fell from $21.24 billion in 2022 to $14.04 billion in 2023 to $8.99 billion in 2024. AbbVie positioned Skyrizi at $11.72 billion, with 51% growth, and Rinvoq at $5.97 billion, with 50% growth, as replacements. Combined, these drugs accounted for $17.69 billion in 2024 and are projected to exceed $31 billion by 2027.
Generic vs branded drugs: understanding competitive dynamics
Branded drugs require an average development cost of $2.6 billion, whereas generics require only minimal investment for bioequivalence. Branded drugs enjoy gross margins of 80-90% while generics operate at 40-60% margins. Branded drugs maintain high pricing power during monopoly periods while generics face low pricing in competitive markets. Branded drugs receive 5+ years of market exclusivity while the first generic filer receives 180 days of exclusivity.
The global generic drug market reached $487-513 billion in 2024 and is projected to grow to $817-927 billion by 2034 at a 5.3-6.55% CAGR. In the US, generic drugs account for over 90% of prescriptions but only 18% of drug spending. Major generic companies include Sandoz, with $10.4 billion in revenue in 2024, up 9% year-over-year; Teva Pharmaceutical, the world's second-largest generics company, with $16.5 billion in revenue; Viatris, with $14.7 billion in revenue; and Dr Reddy's Laboratories, which has 79 generic filings pending FDA approval and a Keytruda biosimilar in development for a 2028 launch.
ANDA filings: tracking generic competition before it arrives
The Abbreviated New Drug Application provides the FDA pathway for generic drug approval, allowing approval without repeating clinical trials if bioequivalence is demonstrated. A Paragraph IV certification represents a formal patent challenge where generic manufacturers assert the branded drug's patent is invalid or will not be infringed. This is the key signal for investors.
ANDA with Paragraph IV can be filed 4 years after the brand's NDA approval. The patent holder has 45 days to file an infringement lawsuit. If sued, a 30-month stay on FDA approval triggers. Litigation outcomes predict the timing of generic entry.
The first ANDA applicant to file a Paragraph IV certification may receive 180 days of marketing exclusivity worth potentially several hundred million dollars. All ANDAs filed on the same day share this exclusivity. New generic drugs capture approximately 66% of the market in their first year, substantially faster than biosimilars, which capture only 2% in their first year.
US FDA compliance: critical for pharma investments
FDA conducts several inspection types. Pre-approval inspections are conducted before application approval, with companies typically receiving 60 days' advance notice. Surveillance inspections are standard inspections conducted every 1-3 years based on the facility's risk profile. For-cause inspections are triggered by complaints, adverse events, or whistleblower reports and are often unannounced, with serious consequences.
Form 483 observations list conditions that may constitute violations. Companies must respond within 15 business days. The most common 2024 observations include quality system failures as the most-cited issue; CGMP violations involving contamination and sterilisation failures; data integrity issues involving falsified records and deleted files; inadequate corrective and preventive action systems; and investigation failures, which increased by 171% in 2024.
FDA issued 190 warning letters to drug and biologics manufacturers in FY2024, double the 94 issued in FY2023. Drug manufacturers received 62% of all warning letters. Consequences include withholding approval of new applications, issuance of import alerts, product seizures, and potential criminal prosecution.
Indian pharma companies face ongoing compliance challenges. Sun Pharma received a June 2024 warning letter for its Dadra facility, with multiple sites under import alert. Dr Reddy's received a 2022 Form 483 at its FTO 11 formulations facility. Cipla received a warning letter in November 2023 regarding its Indore SEZ facility, citing data integrity deficiencies. However, OAI cases dropped from 20 in 2024 to 11 in 2025, suggesting improved compliance.
Pharma valuation metrics: beyond traditional ratios
Key financial ratios and benchmarks differ for pharma companies. P/E ratio benchmarks at 15-20x for mature pharma, often compressed versus tech due to patent cliff risk.
Understanding how to analyse US stocks through traditional valuation ratios provides the baseline for these pharma-specific adjustments.
EV/EBITDA benchmarks at 12-16x with a global median of around 14.9x. Price/Sales benchmarks at 4-6x with high-growth biotechs at 8-10x. R&D spending as a percentage of revenue benchmarks at 15-25% for branded pharma versus approximately 6% for generics. Gross margin for branded drugs runs 70-85% while generic drugs run 40-55%.
Risk-adjusted NPV represents the industry-standard approach for pipeline valuation. It adjusts future cash flows based on the probability of success at each development stage. Typical discount rates run 40-50% for early-stage assets, approximately 27% for mid-stage Phase 2 assets, approximately 20% for late-stage Phase 3 assets, and 10-12% post-approval. Traditional DCF assumes certainty and wildly overvalues biotech. Risk-adjusted NPV explicitly models binary risk and updates as drugs progress through development.
The revenue concentration formula equals the top drug's revenue divided by total company revenue, then multiplied by 100. A single drug accounting for more than 30% of total revenue constitutes a dangerous concentration. Current concentration rankings show Johnson & Johnson with Darzalex at 13% representing low risk, AbbVie with Skyrizi at 21% representing low risk, Pfizer with Eliquis at 12% representing low risk, Eli Lilly with Mounjaro and Zepbound at 37% representing moderate risk given the growing market, Bristol-Myers Squibb with Eliquis at 28% representing high risk, Gilead with Biktarvy at 47% representing very high risk, and Merck with Keytruda at 46% representing the highest risk.
Major US pharma company profiles for 2024-2025
Eli Lilly reported 2024 revenue of $45.04 billion, representing 32% year-over-year growth, and 2025 guidance of $63- $ 63.5 billion. The company became the first pharmaceutical company to reach a $1 trillion market capitalisation. Mounjaro reached approximately $11.54 billion with 109% growth, while Zepbound achieved approximately $4.93 billion in its first full year. Combined Q3 2025 GLP-1 revenue hit $10.1 billion with 54% year-over-year growth. Lilly now holds approximately 57% of the GLP-1 market. The company trades at approximately 70x trailing P/E and approximately 45x forward P/E, supported by revenue growth of more than 32%, driven by a 62% increase in volume.
Merck achieved 2024 revenue of $64.17 billion with 7% year-over-year growth and 2025 guidance of $64-65.6 billion. Keytruda generated $29.5 billion in 2024 revenue, representing approximately 46% of total sales, the highest concentration among major pharma companies. The 2028 patent expiration looms large. Merck approved the subcutaneous formulation Keytruda Qlex in September 2025, targeting a 30-40% patient transition by 2027. The CEO calls it more of a hill than a cliff. Beyond Keytruda, the company has Gardasil at $8.58 billion and newly launched Winrevair for PAH at $419 million since its March 2024 launch.
Pfizer achieved 2024 revenue of $63.6 billion with 7% year-over-year operational growth and 2025 guidance of $61-64 billion. Key products include Eliquis at $7.37 billion, with 9% growth; the Prevnar family at $6.41 billion; Paxlovid at $5.72 billion; and the Vyndaqel family at $5.45 billion, with 60% growth. The $43 billion Seagen acquisition brought ADC technology and 4 commercial oncology drugs with a 2024 portfolio revenue of $3.4 billion. The pipeline contains 108 candidates total. Pfizer offers the highest dividend yield among major pharma at approximately 6%.
Red flags every pharma investor should monitor
Heavy patent cliff exposure signals risk when a single drug accounts for more than 30% of revenue, with expiration less than 5 years away. Declining R&D productivity is evident in multiple consecutive Phase 2/3 failures and low Phase 3-to-approval conversion rates. FDA compliance issues include warning letters within the past 24 months, multiple Form 483s with repeat observations, and import alert listings. High revenue concentration indicates a dangerous dependence on a single product without a clear replacement strategy. Excessive acquisition debt creates overleveraged balance sheets post-acquisition, thereby limiting flexibility. A weak late-stage pipeline shows less than 20% in Phase 3+ and lacks replacement drugs for expiring blockbusters.
For Indian investors, understanding these dynamics is particularly valuable when evaluating both US big pharma investments and Indian generic companies positioned to benefit from the $230-400 billion in revenue at risk from upcoming patent expirations through 2030. Companies such as Dr Reddy's, developing Keytruda biosimilars, and Sandoz, leading Humira biosimilar adoption, represent the other side of patent cliff opportunities. The keys to successful pharma investing include tracking PDUFA dates for volatility catalysts, monitoring revenue concentration above the 30% danger threshold, using risk-adjusted NPV for pipeline valuation, monitoring FDA compliance signals for manufacturing quality, and leveraging free resources such as SEC EDGAR, ClinicalTrials.gov, and FDA databases to conduct thorough due diligence.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
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Table of Contents
Pharmaceutical stocks offer Indian investors access to the world's most innovative healthcare companies. However, evaluating them requires specialised knowledge of drug pipelines, patent cliffs, and FDA processes. Unlike typical manufacturing companies, pharma valuations depend heavily on future pipeline potential, patent protection timelines, and regulatory outcomes.
The US pharmaceutical industry generates over $600 billion in annual revenue across major players such as Pfizer, Eli Lilly, Merck, and AbbVie. Companies like Eli Lilly have seen their market cap surge past $1 trillion largely on pipeline strength, particularly their GLP-1 drugs Mounjaro and Zepbound. This guide provides the essential framework for pharma stock analysis with current 2024-2025 data and actionable insights.
Mastering fundamental analysis tools for Indian investors provides the foundation for understanding these specialised pharmaceutical metrics.
Understanding the drug pipeline: where future value lives
A drug pipeline represents the portfolio of drug candidates a company has under development from early discovery through regulatory approval. For investors, the pipeline signifies future revenue. Today's pipeline drugs become tomorrow's blockbusters. Approximately 90% of biotech valuations derive from pipeline assets rather than current products.
Every drug must progress through specific stages of development before reaching patients. The preclinical stage spans 3-6 years with laboratory and animal testing. Only about 1 in 1,000 compounds advances to human trials. Phase 1 involves first-in-human testing with 20-100 healthy volunteers and focuses on safety and dosage. Phase 2 begins efficacy testing with 100-500 patients who have the target condition. This phase is often referred to as the "valley of death" because it has the lowest success rate. Phase 3 conducts large-scale confirmatory trials with 1,000-5,000 patients and confirms efficacy while monitoring side effects. This phase averages $36.58 million per trial in 2024, representing a 30% increase from 2018.
Clinical trial success rates reveal the challenges of development. Phase 1 to Phase 2 succeeds 47% of the time. The transition from Phase 2 to Phase 3 is met in only 28% of cases, making it the lowest hurdle. Phase 3 to NDA filing succeeds 55% of the time. NDA to approval succeeds 92% of the time. Overall probability from Phase 1 to approvalist 6.7%. Success rates vary dramatically by therapeutic area. Vaccines lead at 33.4% while oncology trails at just 3.4-5% despite having the largest number of pipeline drugs.
FDA approval process: timelines that shape investment decisions
The complete journey from drug discovery to FDA approval typically takes 10-15 years and costs $1.3-2.8 billion per approved drug. Understanding this process helps investors anticipate catalysts and risks.
FDA offers several review pathways with different timelines. Standard review takes 10 months and serves as the default pathway for most drugs. Priority review takes 6 months and applies to drugs offering significant improvement over existing treatments. Breakthrough therapy designation provides expedited development through intensive FDA guidance and a high probability of approval. Fast track allows rolling submissions for serious conditions with unmet need. Accelerated approval enables earlier approval based on surrogate endpoints but requires confirmatory studies.
The FDA met the 94% PDUFA goal in 2024. Once drugs reach NDA or BLA submission, they have a 92% approval rate. Recent approval trends indicate 55 novel drug approvals in 2023, 50 in 2024 (48% first-in-class), and 46 in 2025, including Vertex's Journavx as the first non-opioid painkiller.
PDUFA dates are major catalysts of volatility for pharmaceutical stocks. These are deadlines by which the FDA must respond to drug applications. Stocks can move 20-50% or more in either direction around these dates. Stocks often experience run-ups approaching PDUFA dates when approval is expected. Missing or delaying PDUFA dates typically causes significant drops. Complete Response Letters indicate that the FDA cannot approve the application in its current form and often cause immediate 10-30% price declines for smaller companies.
Patent cliff risks: the pharma investor's greatest concern
A patent cliff refers to the sharp revenue decline that occurs when patents on blockbuster drugs expire, allowing generic competitors to enter at significantly lower prices. This phenomenon has the most pronounced financial impact on pharmaceutical investing.
Small-molecule drugs typically lose 80-90% of revenue to generic competition after loss of exclusivity. Biologics face slower erosion with 30-70% market share loss in the first year due to biosimilar competition. Generic versions are typically priced 70-95% lower than original branded drugs. If a product approaching patent expiration accounts for more than 30% of the company's revenue, it represents a critical concentration risk.
Major upcoming patent expirations will reshape the industry through 2029. Keytruda from Merck expires in 2028 with over $29 billion at risk. Eliquis from Bristol-Myers Squibb and Pfizer expires between 2026 and 2028, with $13.3 billion at risk. Opdivo from Bristol-Myers Squibb expires in 2028 with $9.3 billion at risk. Stelara from Johnson & Johnson expires in 2025 with $10.4 billion at risk. Total revenue at risk through 2030 ranges from $230 to $ 400 billion.
Pfizer's Lipitor remains the definitive example of the patent cliff. Peak sales reached $12.9 billion in 2006, representing 27% of Pfizer's revenue. After patent expiration in November 2011, revenue dropped from $10.8 billion in 2010 to under $3 billion within a few years. Generic pricing fell 90-95% lower than branded Lipitor. Pfizer's net income decreased 50% in Q4 2011 versus Q4 2010.
AbbVie successfully navigated the Humira patent cliff. Humira was the best-selling drug in history with over $200 billion in cumulative global sales. When biosimilar competition began in January 2023, revenue fell from $21.24 billion in 2022 to $14.04 billion in 2023 to $8.99 billion in 2024. AbbVie positioned Skyrizi at $11.72 billion, with 51% growth, and Rinvoq at $5.97 billion, with 50% growth, as replacements. Combined, these drugs accounted for $17.69 billion in 2024 and are projected to exceed $31 billion by 2027.
Generic vs branded drugs: understanding competitive dynamics
Branded drugs require an average development cost of $2.6 billion, whereas generics require only minimal investment for bioequivalence. Branded drugs enjoy gross margins of 80-90% while generics operate at 40-60% margins. Branded drugs maintain high pricing power during monopoly periods while generics face low pricing in competitive markets. Branded drugs receive 5+ years of market exclusivity while the first generic filer receives 180 days of exclusivity.
The global generic drug market reached $487-513 billion in 2024 and is projected to grow to $817-927 billion by 2034 at a 5.3-6.55% CAGR. In the US, generic drugs account for over 90% of prescriptions but only 18% of drug spending. Major generic companies include Sandoz, with $10.4 billion in revenue in 2024, up 9% year-over-year; Teva Pharmaceutical, the world's second-largest generics company, with $16.5 billion in revenue; Viatris, with $14.7 billion in revenue; and Dr Reddy's Laboratories, which has 79 generic filings pending FDA approval and a Keytruda biosimilar in development for a 2028 launch.
ANDA filings: tracking generic competition before it arrives
The Abbreviated New Drug Application provides the FDA pathway for generic drug approval, allowing approval without repeating clinical trials if bioequivalence is demonstrated. A Paragraph IV certification represents a formal patent challenge where generic manufacturers assert the branded drug's patent is invalid or will not be infringed. This is the key signal for investors.
ANDA with Paragraph IV can be filed 4 years after the brand's NDA approval. The patent holder has 45 days to file an infringement lawsuit. If sued, a 30-month stay on FDA approval triggers. Litigation outcomes predict the timing of generic entry.
The first ANDA applicant to file a Paragraph IV certification may receive 180 days of marketing exclusivity worth potentially several hundred million dollars. All ANDAs filed on the same day share this exclusivity. New generic drugs capture approximately 66% of the market in their first year, substantially faster than biosimilars, which capture only 2% in their first year.
US FDA compliance: critical for pharma investments
FDA conducts several inspection types. Pre-approval inspections are conducted before application approval, with companies typically receiving 60 days' advance notice. Surveillance inspections are standard inspections conducted every 1-3 years based on the facility's risk profile. For-cause inspections are triggered by complaints, adverse events, or whistleblower reports and are often unannounced, with serious consequences.
Form 483 observations list conditions that may constitute violations. Companies must respond within 15 business days. The most common 2024 observations include quality system failures as the most-cited issue; CGMP violations involving contamination and sterilisation failures; data integrity issues involving falsified records and deleted files; inadequate corrective and preventive action systems; and investigation failures, which increased by 171% in 2024.
FDA issued 190 warning letters to drug and biologics manufacturers in FY2024, double the 94 issued in FY2023. Drug manufacturers received 62% of all warning letters. Consequences include withholding approval of new applications, issuance of import alerts, product seizures, and potential criminal prosecution.
Indian pharma companies face ongoing compliance challenges. Sun Pharma received a June 2024 warning letter for its Dadra facility, with multiple sites under import alert. Dr Reddy's received a 2022 Form 483 at its FTO 11 formulations facility. Cipla received a warning letter in November 2023 regarding its Indore SEZ facility, citing data integrity deficiencies. However, OAI cases dropped from 20 in 2024 to 11 in 2025, suggesting improved compliance.
Pharma valuation metrics: beyond traditional ratios
Key financial ratios and benchmarks differ for pharma companies. P/E ratio benchmarks at 15-20x for mature pharma, often compressed versus tech due to patent cliff risk.
Understanding how to analyse US stocks through traditional valuation ratios provides the baseline for these pharma-specific adjustments.
EV/EBITDA benchmarks at 12-16x with a global median of around 14.9x. Price/Sales benchmarks at 4-6x with high-growth biotechs at 8-10x. R&D spending as a percentage of revenue benchmarks at 15-25% for branded pharma versus approximately 6% for generics. Gross margin for branded drugs runs 70-85% while generic drugs run 40-55%.
Risk-adjusted NPV represents the industry-standard approach for pipeline valuation. It adjusts future cash flows based on the probability of success at each development stage. Typical discount rates run 40-50% for early-stage assets, approximately 27% for mid-stage Phase 2 assets, approximately 20% for late-stage Phase 3 assets, and 10-12% post-approval. Traditional DCF assumes certainty and wildly overvalues biotech. Risk-adjusted NPV explicitly models binary risk and updates as drugs progress through development.
The revenue concentration formula equals the top drug's revenue divided by total company revenue, then multiplied by 100. A single drug accounting for more than 30% of total revenue constitutes a dangerous concentration. Current concentration rankings show Johnson & Johnson with Darzalex at 13% representing low risk, AbbVie with Skyrizi at 21% representing low risk, Pfizer with Eliquis at 12% representing low risk, Eli Lilly with Mounjaro and Zepbound at 37% representing moderate risk given the growing market, Bristol-Myers Squibb with Eliquis at 28% representing high risk, Gilead with Biktarvy at 47% representing very high risk, and Merck with Keytruda at 46% representing the highest risk.
Major US pharma company profiles for 2024-2025
Eli Lilly reported 2024 revenue of $45.04 billion, representing 32% year-over-year growth, and 2025 guidance of $63- $ 63.5 billion. The company became the first pharmaceutical company to reach a $1 trillion market capitalisation. Mounjaro reached approximately $11.54 billion with 109% growth, while Zepbound achieved approximately $4.93 billion in its first full year. Combined Q3 2025 GLP-1 revenue hit $10.1 billion with 54% year-over-year growth. Lilly now holds approximately 57% of the GLP-1 market. The company trades at approximately 70x trailing P/E and approximately 45x forward P/E, supported by revenue growth of more than 32%, driven by a 62% increase in volume.
Merck achieved 2024 revenue of $64.17 billion with 7% year-over-year growth and 2025 guidance of $64-65.6 billion. Keytruda generated $29.5 billion in 2024 revenue, representing approximately 46% of total sales, the highest concentration among major pharma companies. The 2028 patent expiration looms large. Merck approved the subcutaneous formulation Keytruda Qlex in September 2025, targeting a 30-40% patient transition by 2027. The CEO calls it more of a hill than a cliff. Beyond Keytruda, the company has Gardasil at $8.58 billion and newly launched Winrevair for PAH at $419 million since its March 2024 launch.
Pfizer achieved 2024 revenue of $63.6 billion with 7% year-over-year operational growth and 2025 guidance of $61-64 billion. Key products include Eliquis at $7.37 billion, with 9% growth; the Prevnar family at $6.41 billion; Paxlovid at $5.72 billion; and the Vyndaqel family at $5.45 billion, with 60% growth. The $43 billion Seagen acquisition brought ADC technology and 4 commercial oncology drugs with a 2024 portfolio revenue of $3.4 billion. The pipeline contains 108 candidates total. Pfizer offers the highest dividend yield among major pharma at approximately 6%.
Red flags every pharma investor should monitor
Heavy patent cliff exposure signals risk when a single drug accounts for more than 30% of revenue, with expiration less than 5 years away. Declining R&D productivity is evident in multiple consecutive Phase 2/3 failures and low Phase 3-to-approval conversion rates. FDA compliance issues include warning letters within the past 24 months, multiple Form 483s with repeat observations, and import alert listings. High revenue concentration indicates a dangerous dependence on a single product without a clear replacement strategy. Excessive acquisition debt creates overleveraged balance sheets post-acquisition, thereby limiting flexibility. A weak late-stage pipeline shows less than 20% in Phase 3+ and lacks replacement drugs for expiring blockbusters.
For Indian investors, understanding these dynamics is particularly valuable when evaluating both US big pharma investments and Indian generic companies positioned to benefit from the $230-400 billion in revenue at risk from upcoming patent expirations through 2030. Companies such as Dr Reddy's, developing Keytruda biosimilars, and Sandoz, leading Humira biosimilar adoption, represent the other side of patent cliff opportunities. The keys to successful pharma investing include tracking PDUFA dates for volatility catalysts, monitoring revenue concentration above the 30% danger threshold, using risk-adjusted NPV for pipeline valuation, monitoring FDA compliance signals for manufacturing quality, and leveraging free resources such as SEC EDGAR, ClinicalTrials.gov, and FDA databases to conduct thorough due diligence.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
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