Drugmaker expands cost-cutting program as it wraps up Seagen acquisition
Pfizer Inc.’s stock PFE, -6.72% was on pace Wednesday for its biggest percentage decline in nearly 15 years, after the drug company set 2024 guidance that fell short of analyst expectations.
The stock was down more than 8% Wednesday morning and was on track for its lowest closing level in a decade.
As it wrestles with reduced COVID sales expectations and acquires cancer-drug maker Seagen, Pfizer is expecting 2024 revenue to range from $58.5 billion to $61.5 billion, below the $62.6 billion FactSet consensus. The company expects adjusted earnings per share to range from $2.05 to $2.25, while the FactSet consensus is $3.17.
Products from the Seagen portfolio are expected to contribute $3.1 billion in 2024 revenues, Pfizer said. The company said earlier this week that it has received all regulatory approvals for the planned acquisition and expects to close the deal on Thursday.
Pfizer’s COVID-19 vaccine Comirnaty and its antiviral Paxlovid are expected to generate $8 billion in 2024 revenues, Pfizer said Wednesday, well below the FactSet consensus of $13.9 billion.
On a call with investors Wednesday, Pfizer executives emphasized a focus on providing more conservative and reliable COVID sales estimates. The company aims to avoid creating uncertainty, Pfizer CEO Albert Bourla said on the call, “which was the case, unfortunately, this year, when our estimates were way higher” than the actual results. Pfizer in October cut $9 billion from its full-year 2023 sales outlook as COVID revenues came in below expectations.
The revenue forecast also includes $1 billion stemming from the reclassification of royalty income, previously considered other income, into the revenue line, Pfizer said in a statement.
A sweeping cost-cutting program, which Pfizer first announced in October, is now expected to generate annual savings of at least $4 billion, the company said, up from $3.5 billion forecast previously. About 70% of the anticipated savings will come out of research and development, Pfizer chief financial officer Dave Denton said on the call with investors Wednesday.
Despite the cuts, Pfizer is still “among the highest investors in R&D in absolute dollars,” Bourla said on the call. The planned cost cuts won’t affect the Seagen business, he said. “Seagen will be very, very well supported,” Bourla said, adding, “It is our priority to create shareholder value by investing in that business.”
The additional cost cutting “puts us on a path to potentially regain our pre-pandemic operating margins,” Bourla said in a statement. It will likely take two to three years to reach that goal, Denton said on the call.
Pfizer has no plans to cut its dividend, which is “very important to Pfizer” and its shareholders, Denton said. “You have our commitment to maintain and grow the dividend over time.”
Pfizer’s update also hit shares of other COVID-vaccine makers Wednesday. Moderna Inc. shares MRNA, +0.72% fell 5%, while Novavax Inc.’s stock NVAX, +0.94% fell 1%. Pfizer’s 2024 COVID sales forecast “hammers another nail” in the outlook for Moderna’s COVID shot, Spikevax, Leerink Partners analysts said in a note Wednesday.
Pfizer’s stock has fallen 49% in the year to date, while the S&P 500 SPX has gained 21%.