2 Incredibly Cheap Big Pharma Stocks to Buy Now

If you want to get a good value when you invest in big pharma, it's necessary to take a look at quality companies that are going through a rough patch. Given the long product development times in the industry, with most drugs taking seven years or more to launch after entering clinical trials, periods of uncertainty can potentially last a good while.

But good things tend to come to those who can wait. With that in mind, let's examine two pharma stocks that are incredibly cheap and which are worth buying right now, assuming you are willing to patiently let their long-term strategic plans unfold over the coming years.

1. Pfizer

Pfizer (NYSE: PFE) is a pharmaceutical stock that needs no introduction -- or perhaps it's more accurate to say that it needed no introduction during its recent heyday of selling coronavirus vaccines and antivirals, which is over.

In 2022, it brought in more than $100 billion in revenue from sales of those anti-coronavirus medicines. Today, Pfizer looks like it's struggling, even though its extensive pipeline with 33 late-stage clinical programs, recent major acquisitions, and ambitious plans for expanding through 2030 are potentially powerful drivers of its future growth. Total returns from its stock has fallen 20% over the last three years. Last year, it marked a couple of quarters where it reported operating losses instead of profits, while its trailing-12-month revenue fell to $55 billion.

There are a couple of valuation factors supporting the idea that Pfizer's stock is undervalued, starting with its price-to-sales (P/S) ratio of 3. Its price-to-free-cash-flow (P/FCF) ratio is 34, which compares favorably to other big pharma players like Novo Nordisk that are starting to look a little bit frothy, with P/FCF multiples near 55.

Brighter days are ahead for Pfizer, which supports the idea of buying its stock at its current valuation.

It's implementing a manufacturing cost reduction campaign to save as much as $1.5 billion in expenses by the start of 2028, on top of another initiative aiming to reduce expenses by $4 billion by the end of this year. Management is signaling that in the near future, it'll be hitting the gas on both reinvestment in internal research and development (R&D) activities as well as returning capital to shareholders.

And that'll likely occur around the same time as its newly acquired oncology drug business is launching and starting to drive growth, which could be a potent cocktail for the value of its stock to say the least.

2. Merck

Much like Pfizer, Merck (NYSE: MRK) has had a couple of unprofitable quarters on an operational basis recently, though it also has more than 30 programs in phase 3 clinical trials, at least some of which will yield it more revenue over the next few years.