Pfizer (PFE, Financial) has seen its shares drop nearly 60% from early 2021 highs. However, the company argues that the negative sentiment may be excessive. Before the market opened, Pfizer reaffirmed its FY24 EPS and revenue forecast and provided FY25 guidance that aligns with expectations, despite anticipating a $1.0 billion impact from Medicare Part D changes due to the Inflation Reduction Act in 2025.
The company's positive outlook has alleviated worries about the potential impact of incoming Health Secretary Robert F. Kennedy, Jr. on Pfizer's vaccine business. Although Kennedy is a vocal critic of vaccines, Pfizer stated that it does not foresee significant changes to vaccine policies.
- Pfizer's robust guidance follows a strong Q3 earnings report, with revenue surging 31% to $17.7 billion, surpassing expectations. The recent COVID-19 wave boosted sales of Paxlovid to $2.7 billion, and Comirnaty sales grew by 9% year-over-year to $1.4 billion. Non-COVID products also performed well, increasing by 14%, driven by the oncology portfolio.
- Before the Q3 report, Pfizer experienced year-over-year revenue declines in five of the past six quarters, including drops of 54% in 2Q23 and 42% in 3Q23, due to reduced demand for Comirnaty and Paxlovid.
- Amid declining sales, Pfizer became a target for activist investment firm Starboard, which acquired a $1.0 billion stake in the company. Starboard CEO Jeff Smith has suggested replacing Pfizer CEO Albert Bourla, questioning the company's cash utilization after its pandemic windfall. In March 2023, Bourla approved a $43.0 billion acquisition of Seagen, an oncology drug maker. While it could transform Pfizer into a cancer and immunology leader, Seagen is expected to contribute only about $3.1 billion in revenue for FY24.
- To counter declining Comirnaty and Paxlovid sales, Pfizer has implemented cost-cutting measures to support earnings. The company announced it achieved $4.0 billion in operating expense savings through 2024 and plans to cut an additional $500 million in 2025.
Pfizer's reaffirmation of FY24 guidance and in-line FY25 outlook reassures investors and signals to Starboard that the business is stronger than perceived. However, upcoming patent expirations for key products like Xeljanz and Eliquis in 2025 and 2026, coupled with the volatile nature of COVID products, may lead to unpredictable financial performance in the future.
