Pharmaceutical giant Pfizer stunned investors on Friday by making drastic reductions to its 2023 earnings and revenue guidance, driven entirely by rapidly declining demand for its COVID-19 vaccine and treatment.
The company now expects full-year sales of $58-61 billion, far below its previous projection of $67-70 billion. Adjusted earnings per share were cut even more drastically, from an expected $3.25-3.45 down to just $1.45-1.65.
The huge forecast reduction was prompted by a projected $7 billion drop in sales of Pfizer’s COVID treatment Paxlovid and a $2 billion decline for its Comirnaty vaccine. This comes amidst clear signs of “COVID fatigue” as vaccination rates slow and cases become milder.
Pfizer’s update led to a sell-off of its stock on Friday. Rival vaccine maker Moderna’s shares also dropped on the news, reflecting similar downbeat trends for COVID products industrywide.
However, Pfizer regained some losses after executives held a call on Monday to outline plans for weathering the abrupt COVID revenue downturn. This includes a new cost-cutting program aiming to deliver $1 billion in savings this year and $2.5 billion by 2024.
The planned cuts will touch all business segments and regions, though details remain scarce. Pfizer says one-time costs to implement the reductions will be approximately $3 billion, including severance charges and other expenses.
This belt-tightening comes after Pfizer hinted in August it was prepared to trim expenses if COVID product sales continued to deteriorate. “We are in the middle of the COVID fatigue. Nobody wants to speak about COVID,” acknowledged CEO Albert Bourla.
Indeed, uptake for Pfizer’s updated Omicron booster has been lackluster since launching last month. Logistical hurdles and lack of awareness around eligibility have hampered rollout. Waning concern over infections has also lowered demand.
Paxlovid prescriptions have similarly collapsed as immunity from vaccines and prior disease leaves most cases mild. Bourla said this means the remaining demand is coming from the minority focused on prevention and protection.
Looking beyond COVID products, Pfizer still expects to complete its pending $12 billion acquisition of cancer detection leader Seagen on schedule. Executives said the belt-tightening and forecast revisions will not impact those plans.
Pfizer is not alone in adapting to new COVID realities. Moderna has delayed advancing new boosters and vaccines meant to target emerging variants. Merck has paused production of its Molnupiravir antiviral.
But Pfizer’s aggressive pandemic investments leave it most exposed to lasting changes in demand. The company marshaled its resources early on to supply over 3.5 billion vaccine doses worldwide, along with millions of Paxlovid courses.
Now, the record revenues these products delivered are evaporating almost overnight. And as the market leader, Pfizer’s woes signal a new chapter for the entire vaccine and antiviral space.
Of course, the pandemic is not over, and COVID will remain a threat demanding vaccines and treatments. But with most people vaccinated, reinfected, or both, demand and profits are inevitable casualties absent a dangerous new variant.
For pharmaceutical firms like Pfizer and Moderna, the cash windfall from COVID spending is clearly drawing to a close. With customers, cash flows and share prices dropping, a reckoning has arrived. Massive cost cuts offer one path forward, with layoffs and restructuring the vaccines’ unintended side effect.
