With COVID sales in free-fall, Pfizer slashes revenue forecast by $9B and preps for major cost cuts

As the coronavirus outbreak has shifted to the endemic phase, drugmakers have warned of a drop in demand for COVID-19 products, with the impact coming into focus during the fall vaccination season.

Pfizer has stepped up to the plate with an update, and its effects are staggering as the company has slashed its 2023 revenue projection by $9 billion. Pfizer now expects sales to reach between $58 billion and $61 billion, down from a prior range of $67 billion to $70 billion.

In delivering its update late Friday afternoon, a time often reserved by companies to reveal bad news, Pfizer chalked up most of the decline to a $7 billion decrease in its projection for sales of oral antiviral Paxlovid. The company has also cut its forecast for sales of COVID vaccine Comirnaty by $2 billion.

Pfizer also sees earnings per share plummeting to between $1.45 and $1.65, down from its previous projection of $3.25 to $3.45.

Soon to follow will be layoffs as the company said it will launch an “enterprise-wide cost realignment program,” slicing $3.5 billion in annual costs by the end of 2024, with $1 billion coming this year.  

Two months ago, during its second-quarter earnings presentation, Pfizer said cost-cutting measures were in the offing because of the uncertainty of COVID product sales.

While Pfizer’s shares fell by 3.1% in premarket trading Monday, there were reverberations for other sellers of COVID products as Novavax's shares dropped by 4.5%. Meanwhile, Pfizer’s COVID vaccine partner BioNTech saw a 6.6% drop in its share price.

Moderna, which saw a 4.4% decline in the price of its shares, reacted by reiterating its 2023 revenue projection of between $6 billion and $8 billion from two months ago.

"Moderna believes it is still too early in the U.S. vaccination season to accurately project where vaccination rates will land for the full year," the company said in a release. 

The adjustments come after Pfizer became the first company in the history of the biopharma industry to top $100 billion in sales in 2022, powered by $38 billion in revenue from Comirnaty and $19 billion from Paxlovid. The drugmaker now expects sales of the two products to reach a combined $12.5 billion this year.

As an indication of the declining demand for Paxlovid, the U.S. government will return roughly 7.9 million courses of treatment to the company in a “non-cash transaction,” Pfizer said. In exchange, the U.S. will receive credit for future updated versions of Paxlovid, which will be provided free to Medicare and Medicaid patients and to the uninsured through an assistance program, the company added.

The move clears the way for Paxlovid to become available commercially on Jan. 1 of next year, Pfizer said.

In addition, Pfizer will record a $5.5 billion noncash charge for inventory write-offs in the third quarter due to “lower-than-expected demand,” the company said. Of these write-offs, $900 million are chalked up to Comirnaty.

In a Monday release, BioNTech said the write-offs for Comirnaty do not extend to the companies’ new vaccine adapted for the XBB.1.5 variant.