Pfizer Lowers Annual Revenue Guidance Again: COVID-19 Products Fall Short

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Pfizer Lowers Annual Revenue Guidance Again: COVID-19 Products Fall Short, Potential Layoffs Loom

The pharmaceutical giant Pfizer, often dubbed the “cosmic pharmaceutical factory,” is facing challenging times as sales of its star COVID-19 products fall below expectations.

On October 13th, Pfizer (PFE.US) once again revised its annual revenue guidance to a range of $58-61 billion. Earlier this year, Pfizer had already lowered its annual revenue guidance from $67-71 billion, adjusting it to $67-70 billion, citing short-term adverse factors, including the impact of tornadoes on pharmaceutical facilities in July.

This latest adjustment, Pfizer states, is solely due to the underperformance of its COVID-19 products. Furthermore, the adjusted earnings per share (EPS) went from $3.25-$3.45 to a significant decrease at $1.45-$1.65.

Global demand for COVID-19-related products has been decreasing as the world emerges from the pandemic, and Pfizer’s two star products have shown a declining trend in recent financial reports. The modification of the agreement with the U.S. government concerning Paxlovid further impacts the product’s commercial performance. Pfizer revealed that this includes a non-cash transaction where the U.S. government will reimburse approximately 7.9 million courses of Paxlovid marked with Emergency Use Authorization (EUA) by the end of 2023, and provide credit for future courses marked with New Drug Application (NDA).

Pfizer Lowers Annual Revenue Guidance Again: COVID-19 Products Fall Short, Potential Layoffs Loom

The revised agreement also outlines that the credit will support a patient assistance program, offering Paxlovid to federal government-insured patients for free until 2024, and to uninsured/underinsured patients for free until 2028, with Pfizer recognizing revenue upon product delivery. Additionally, Pfizer will provide one million courses to the U.S. government for the national strategic stockpile.

Pfizer’s Paxlovid revenue guidance will be reduced by approximately $7 billion, including $4.2 billion in non-cash revenue related to the reimbursement. Pfizer also mentioned that due to lower-than-expected demand for COVID-19 drugs, they anticipate recording $5.5 billion in non-cash expenses in the third quarter of 2023.

While Paxlovid initially received Emergency Use Authorization in the United States during the peak of the pandemic, the usage trend for Paxlovid is currently slightly higher than last year but falls short of the company’s initial expectations, according to Pfizer’s October 13 press release.

Despite the short-term impact of these agreement adjustments on revenue, Pfizer’s CEO, Albert Bourla, maintains an optimistic perspective. He believes that the agreement with the U.S. government makes it easier for patients to access Paxlovid, ensures an ample supply for future use, and provides Pfizer with a clearer path for transitioning this critical treatment to the commercial market, thus reducing uncertainty about the outlook for the COVID-19 business.

It’s not only COVID-19 oral medications; COVID-19 vaccines are also affecting Pfizer’s revenue guidance. Pfizer states that due to lower-than-expected vaccination rates, the company is reducing its 2023 full-year revenue projection for the Comirnaty COVID-19 vaccine by about $2 billion. The combined revenue for Paxlovid and Comirnaty for 2023 is now expected to be around $12.5 billion, a reduction of $9 billion from the initial estimate.

Nonetheless, Pfizer emphasizes that the performance of its non-COVID products remains strong, and the data aligns with their original guidance of achieving 6% to 8% revenue growth in 2023.

Simultaneously with the revision of performance expectations, Pfizer announced the approval of its oral selective sphingosine-1-phosphate (S1P) receptor modulator, Velsipity, by the U.S. FDA for treating moderate to severe ulcerative colitis (UC) in adults.

Of note, alongside the performance revision, Pfizer disclosed a multi-year, company-wide cost-adjustment plan. This plan is expected to deliver at least $3.5 billion in savings, with approximately $1 billion expected to be achieved in 2023, and the remaining $2.5 billion anticipated in 2024. The one-time costs to implement this plan are estimated at around $3 billion, predominantly composed of severance and implementation expenses, which may be related to potential layoffs.

Pfizer states that they will continue to refine their targeted savings goals and related costs for the remainder of the year, incorporating them into the 2024 full-year guidance.

Possibly in response to this news, Pfizer’s stock price closed on October 13th with a 2.46% decline, reaching $32.11 per share, with a market capitalization of $181.29 billion. This represents a roughly 40% decrease from its peak of $53.70 at the end of 2022.