Pfizer Further Cuts Full-Year Revenue Guidance Amid Underperformance of COVID-19 Products and Plans for Major Restructuring

Affected by the lower-than-expected sales of Pfizer's star COVID-19 product, "the universe's largest pharmaceutical factory"PfizerWe also need to tighten our belts.

On October 13 local time, Pfizer (PFE.US) once again lowered its full-year revenue guidance to a range of $58 billion to $61 billion. When announcing its Q2 earnings this year, Pfizer had already reduced its full-year revenue guidance from $67 billion to $71 billion down to $67 billion to $70 billion. At that time, the reasons cited for the adjustment were certain short-term adverse factors, including the impact of a tornado in the U.S. in July on its pharmaceutical plant. This latest reduction in full-year revenue guidance, Pfizer stated, is solely due to its COVID-19 products.

Moreover, the adjusted earnings per share (EPS) have been significantly reduced from the previous $3.25-$3.45 to $1.45-$1.65.

As the global COVID-19 emergency status comes to an end, the demand for related products is also declining. Two of Pfizer's star products have already shown a downward trend in previous financial reports. The recent revised agreement between Pfizer and the U.S. government regarding Paxlovid has further impacted the commercial performance of this product. According to Pfizer, the revisions include a non-cash transaction in which the U.S. government will return approximately 7.9 million courses of Paxlovid marked with Emergency Use Authorization (EUA) by the end of 2023, and accept credits for future courses of the drug marked with a New Drug Application (NDA).

The revised agreement also mentions that the credit will support a patient assistance program, providing Paxlovid free of charge to federally insured patients by 2024 and to uninsured/underinsured patients by 2028, with Pfizer recognizing revenue upon product delivery. Additionally, Pfizer will supply the U.S. government with 1 million treatment courses for the Strategic National Stockpile.

Pfizer Cuts Paxlovid Revenue Guidance by Approximately $7 Billion, Including $4.2 Billion in Non-Cash Revenue for the Above Refunds. Pfizer Also Mentioned That Due to Lower-Than-Expected Demand, the Impact on COVID-19 Drug Inventory Will Lead Pfizer to Record a $5.5 Billion Non-Cash Charge in the Third Quarter of 2023.

Paxlovid was initially granted an EUA in the United States during the COVID-19 pandemic. In May 2023, the FDA formally approved the drug for treating adult patients with mild to moderate COVID-19 who have a high risk of progressing to severe disease (including hospitalization or death). In a press release on October 13, Pfizer mentioned that the global usage rate of Paxlovid is currently slightly higher than last year but lower than the company's initial expectations.

Despite the potential short-term revenue impact from the revised agreement, Pfizer CEO Albert Bourla offered an optimistic interpretation of the situation. He stated that the agreement with the U.S. government makes Paxlovid more accessible to patients, ensures sufficient stockpiles for future use in the U.S., and provides Pfizer with clearer insights into the transition of this critical therapeutic drug to the commercial market. This helps reduce some uncertainties regarding expectations for the COVID-19 business.

Not only COVID-19 oral drugs but also COVID-19 vaccines are impacting Pfizer's revenue guidance. Pfizer stated that due to vaccination rates being lower than expected, the company has reduced its full-year 2023 revenue forecast for the COVID-19 vaccine Comirnaty by approximately $2 billion. The combined 2023 full-year revenue for Paxlovid and Comirnaty is expected to be about $12.5 billion, which is $9 billion less than initially anticipated.

However, Pfizer once again emphasized that the performance of its non-COVID-19 drugs remains strong, with relevant data still in line with the original guidance, which is to achieve revenue growth of 6% to 8% in 2023. At the same time as officially announcing the downgrade of its earnings forecast, Pfizer also announced the approval of a new drug: The U.S. FDA approved its oral selective sphingosine-1-phosphate (S1P) receptor modulator Velsipity for the treatment of adult patients with moderate to severe ulcerative colitis (UC).

Notably, along with the earnings forecast, a multi-year, company-wide cost adjustment plan was also announced. This plan is expected to achieve savings of at least $3.5 billion, with $1 billion anticipated in 2023 and another $2.5 billion in 2024. The one-time costs to implement this plan are estimated at approximately $3 billion, most of which are expected to be cash expenses, primarily including severance and execution fees. The term "severance" is also believed to be related to potential layoffs.

Pfizer stated that it will continue to refine the anticipated target savings and associated costs for the remainder of this year and incorporate them into the full-year guidance for 2024.

Possibly influenced by the aforementioned news, Pfizer closed at a 2.46% decline on the U.S. stock market on October 13, ending at $32.11 per share, with a market value of $181.29 billion. Compared to its peak price of $53.7 in late 2022, its stock price has fallen by about 40%.

Editor: Wang Yongsheng