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Pfizer: Brace for Impact as the COVID Gravy Train Derails

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Pfizer: Brace for Impact as the COVID Gravy Train Derails

In a shocking turn of events, Pfizer (PFE) has delivered a hard blow to investors. The biopharmaceutical giant, which has reaped immense benefits from COVID vaccine and treatment sales, is now experiencing the repercussions of declining demand. While my neutral investment stance on Pfizer remains intact, it’s clear that the stock won’t experience a significant rally as the shadow of COVID continues to haunt the company.

FDA To Allow Pharmacists To Prescribe COVID-19 Treatment Paxlovid

COVID Cliff: Pfizer’s Alarming Warning

In a surprising move, Pfizer announced a major setback after the market closed on Friday. The biopharma modified its supply agreement with the U.S. government, agreeing to return 7.9 million courses of the oral antiviral COVID treatment, Paxlovid, by the end of 2023. As a result, Pfizer has slashed its revenue targets for the year by a staggering $9 billion due to lower-than-expected sales of Paxlovid and Comirnaty.

Finviz Chart

Long-Term Impacts: Cutting Costs to Compensate

Pfizer is not taking these cuts lightly. The company plans to implement a cost reduction program aimed at achieving at least $3.5 billion in annual savings. For 2023, Pfizer expects to realize approximately $1.0 billion in savings, with an additional $2.5 billion anticipated in 2024. Despite these efforts, the adjusted EPS target for 2023 is now a mere $1.55, down from the previous estimate of around $3.35.

Pfizer’s decision to focus on the commercial transition of Paxlovid in November 2023 raises doubts about its benefits for shareholders. If the company expected revenues to bounce back after the transition, there would be no need for such drastic cost-cutting measures to sustain depressed annual revenues.

Furthermore, Pfizer originally projected COVID revenues of $21.5 billion for 2023. Now, the company forecasts a $9 billion revenue hit in the second half of the year, solely attributable to COVID-related factors. With sales for the full year estimated to fall just below $60 billion, Pfizer is grappling with a significant drop compared to its pre-pandemic annual sales of slightly under $50 billion.

Analysts hope that Pfizer’s upcoming conference call will shed light on the outlook for 2024 revenues. However, indications thus far suggest that sales will continue to decline, considering the decreasing demand for Comirnaty and Paxlovid as COVID treatment needs wane. Annual sales in the $7.4 billion range may no longer be attainable.

Covid revenue targets

Path Ahead: Navigating Uncertain Times

As Pfizer’s stock hovers in the $30+ range, investors must carefully observe the company’s trajectory. The coming quarters will likely be volatile for Pfizer as it grapples with the aftermath of COVID. While further significant declines are unlikely, a substantial rally is equally improbable due to numerous uncertainties surrounding the company’s future prospects.

It’s worth noting that Pfizer still holds potential for revenue growth, thanks to its drug pipeline and business development deals. However, for the time being, the company’s stock is likely to remain range-bound as the market processes this disappointment and the necessary cost reductions to restore earnings per share to their pre-pandemic levels.

Non-Covid targets

The Bottom Line: Proceed with Caution

In conclusion, it’s prudent for investors to adopt a wait-and-see approach with Pfizer. The biopharmaceutical giant faces a volatile road ahead as it navigates the challenges brought on by the ongoing pandemic. While the stock is unlikely to experience significant further declines, a substantial rally remains doubtful due to the many uncertainties surrounding Pfizer’s future prospects.