Early this year, Pfizer told investors it expected to sell $21.5 billion worth of its Covid-19 products in 2023. No one believed it.
Shares of Pfizer (ticker: PFE) fell 37.3% between the start of the year and the market close on Friday, even as the company announced a $43 billion acquisition and a sizable list of major new product launches. Good news for Pfizer came and went, but investors just kept on selling, fixated on the decline of the company’s massive Covid-19 revenue.
Then on Friday, after the market closed, Pfizer ratcheted down its guidance for this year, to a combined $12.5 billion from its Covid-19 vaccine and therapeutic. The announcement was a major acknowledgment Wall Street had been right, and the company wrong, about the future of the Covid-19 franchise.
While questions remain about how the Covid-19 products will perform next year, and in the years that follow, Pfizer’s acknowledgment of what many investors had already expected is good news for the stock. It could clear the way for Pfizer to get credit for work it has done over the past two years preparing for upcoming patent losses on a number of key products.
“It gives an opening for a broadening of the dialogue and the narrative on Pfizer,” Goldman Sachs analyst Chris Shibutani told Barron’s.
Pfizer also announced a cost-saving program, previewed over the summer, that it said would eventually save $3.5 billion a year.
Investors were already buying on Monday morning. Shares of Pfizer were up 4.3%. The company’s Covid-19 vaccine peer Moderna (MRNA), meanwhile, which has suffered from the same investor uncertainties as Pfizer, was down 5.6%.
Pfizer’s guidance cuts were dramatic. The company now expects to lose money in the second half of this year, with adjusted diluted 2023 earnings of between $1.45 and $1.65 per share. Adjusted diluted earnings were $1.90 in the first half of the year.
Most of the guidance cuts come from the company’s virtual elimination of 2023 revenue from its antiviral Paxlovid. Pfizer’s expectations for Paxlovid sales have dropped from $8 billion to $1 billion, a figure that takes into account the U.S. government decision to return roughly a third of the Paxlovid doses it has bought from the company, receiving credit for future supply.
On Monday, Pfizer CEO Albert Bourla said he expected U.S. uptake of this year’s Covid-19 booster shots to be 17% of the population, or around 56 million doses. That is well below the expectation Pfizer laid out in January, when it said it expected 24% of the population, or around 80 million people to get the shots. CFO David Denton had reiterated that guidance as recently as last month.
The question Pfizer left unanswered Monday is what the guidance cuts mean for sales of the Covid-19 products in 2024 and beyond. Late last year, the company laid out detailed, optimistic expectations for utilization of its vaccine and its antiviral through 2026. Among other things, it said it expected global demand for treatment courses of Paxlovid to climb from 17 million in 2023 to 21 million in 2026.
“I suspect that debate in the investment community, in particular, is going to continue to hold for whether or not what Pfizer has said before holds true for ’24, ’25 and beyond,” Shibutani said.
Bourla wasn’t clear on the investor call about whether he still thinks Covid-19 product demand to climb from here.
“We have come through the period of fear that defined the early days of COVID, where everybody wanted to be vaccinated very quick,” he said. “We are right now in the middle of COVID fatigue, where everyone wants to forget about the disease. And we are experiencing a peak of anti-vaccination rhetoric.”
Asked by one analyst, however, how he knows that anti-vaccination rhetoric had peaked, Bourla backed off slightly. “We are assuming that things will be the same in the years to come, COVID fatigue and the vaccination rates,” he said. “So the people that did it this year will continue doing it next year, I think it is quite a safe assumption.”
For investors, the Friday and Monday disclosures by Pfizer could mark a bottom in sentiment around the stock, as the company takes painful steps to come in line with what Wall Street was already thinking. Already on Monday attitudes among some analysts appeared to be shifting. In a note on Monday, Jefferies analyst Akash Tewari upgraded Pfizer to a Buy from a Hold, setting a target price of $38.
“In our view, PFE has one of the most intriguing catalyst paths over the next [year] in large-cap pharma and trades 15% below where it traded at the start of the COVID pandemic,” Tewari wrote.