June 25, 2024

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Low Demand for COVID-19 Drugs Spells Trouble for BioNTech

Low Demand for COVID-19 Drugs Spells Trouble for BioNTech Following Pfizer’s Warning



Low Demand for COVID-19 Drugs Spells Trouble for BioNTech Following Pfizer’s Warning

Major pharmaceutical companies are slashing their revenue forecasts due to lackluster demand for COVID-19 related drugs.

The pharmaceutical giants that once raked in profits from COVID-19 related medications are now facing a sharp drop in income as the demand for these services dwindles.

On October 16, the biopharmaceutical giant BioNTech issued a statement indicating that their third-quarter earnings report might see a write-down of approximately $900 million, attributed to expenses related to the COVID-19 vaccine Comirnaty, which they developed in collaboration with Pfizer.

This amount represents half of the gross profits shared between BioNTech and Pfizer.

 

Given that a significant portion of BioNTech’s income is derived from profit-sharing arrangements with Pfizer concerning their vaccine, the company expects the write-down to affect their 2023 income.

BioNTech is set to release its third-quarter earnings report on November 6, with the initial estimate for COVID-19 vaccine revenue in 2023 at around €5 billion (approximately $5.3 billion). The company’s spokesperson has refrained from making comments regarding the 2023 performance outlook.

BioNTech’s European stock price dropped by 7% on Monday to reach a two-month low, and the pre-market trading for its U.S. shares showed a decrease of over 7%.

 

Low Demand for COVID-19 Drugs Spells Trouble for BioNTech Following Pfizer's Warning

 

Investors are concerned about the unpredictable demand for COVID-19 vaccines and lack confidence in how the company will utilize the substantial profits it generated over the past two years, contributing to BioNTech’s stock price falling by 70% since it reached its peak in August 2021.

 

Low Demand for COVID-19 Drugs Spells Trouble for BioNTech Following Pfizer's Warning

 

BioNTech explained that the write-down primarily relates to raw materials purchased during the height of the COVID-19 pandemic, particularly lipids associated with formulations and other COVID-19 vaccine inventory aimed at the non-XBB.1.5 variant. This write-down does not affect the COVID-19 vaccines modified for the XBB.1.5 variant by the two companies, which have received approval and are available in major regions.

Although BioNTech may face a substantial write-down of up to $900 million, this scale is still smaller compared to the write-downs experienced by its partner, Pfizer.

Before BioNTech’s statement, Pfizer had already revised down its expected revenue guidance for the COVID-19 oral drug Paxlovid and the vaccine Comirnaty. They reduced their full-year revenue guidance by over 10% and their annual EPS guidance by more than half.

Pfizer cited low demand, a significant drop in expected revenue for COVID-19 virus-related medications, and increased costs as the primary reasons for revising down their revenue guidance.

Pfizer lowered their revenue expectations for Paxlovid by about $7 billion this year, including a $4.2 billion reduction in non-cash revenue from 7.9 million treatment courses granted Emergency Use Authorization (EUA) by the U.S. government, as well as a revenue decrease due to the delayed commercialization from the second half of this year to January next year.

Due to lower-than-expected vaccination rates, Pfizer lowered their full-year revenue forecast for the COVID-19 vaccine Comirnaty by approximately $2 billion.

Pfizer also announced the initiation of a company-wide “cost-adjustment plan,” which aims to restructure costs based on long-term revenue expectations, with a target of saving at least $3.5 billion, including $1 billion this year and $2.5 billion next year.

Pfizer hinted at substantial workforce reductions as a crucial cost-saving measure, estimating that the new cost plan will generate one-time costs of approximately $3 billion, primarily encompassing severance pay and related implementation costs.

Pfizer stated that they will continue to refine their goals for cost savings and related costs for the remainder of the year and will incorporate these objectives into the guidance provided for the full year next year.

Following the announcement of revised performance guidance and indications of significant layoffs, Pfizer’s stock price fell by about 2.5% on the previous Friday. It briefly dropped below $30 in after-hours trading, reaching its lowest point since December 2014. After-hours losses initially reached 10% but later narrowed to within 4%.

 

Low Demand for COVID-19 Drugs Spells Trouble for BioNTech Following Pfizer's Warning

 


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

 

 

 

 

Low Demand for COVID-19 Drugs Spells Trouble for BioNTech Following Pfizer’s Warning

(source:internet, reference only)


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