As COVID sales crater, Pfizer takes $5.6B in inventory write-offs on Paxlovid, Comirnaty

For Pfizer, several years of pandemic megaprofits have soured as overstocked COVID-19 drugs and vaccines take a major toll on the drug behemoth’s financials.

In the third quarter of 2023, Pfizer recorded $5.6 billion in coronavirus-related inventory write-offs and other charges, plus a $4.2 billion revenue reversal tied to the planned return of some 7.9 million Paxlovid doses from the U.S. government.

Concerning the inventory write-offs, $4.7 billion of the sum is tied to Pfizer’s antiviral Paxlovid, with the remaining $900 million stemming from the company’s BioNTech-partnered mRNA vaccine Comirnaty, Pfizer said Tuesday.

The company wrote down the value of its inventory because the drug and vaccine supplies were expected to go unused or declined in value.

Both products “meaningfully underperformed” in the third quarter amid “already tempered expectations,” Third Bridge’s lead healthcare analyst Lee Brown wrote in a note to clients Tuesday.

The charges came as Pfizer reported $13.23 billion in revenues for the quarter, down 42% from $22.64 billion during the same period in 2022.

With the inventory write-offs in the mix, Pfizer expects cost of sales to account for 41% to 43% of its revenues this year, up significantly from a previous range of 28% to 30%.

COVID-related inventory write-offs have become somewhat common in the last year as the pandemic has eased—largely because of the industry's massive effort to scale up vaccine production before the decline in vaccine and antiviral demand.

Pfizer’s rough quarter was largely to be expected, continuing a downward trend for all COVID-19 pandemic players over the last few months. The company recently lowered its 2023 revenue projection by $9 billion.

To weather the sales storm, Pfizer earlier this month announced an “enterprise-wide cost realignment program,” which aims to slice $3.5 billion in annual costs by the end of 2024, including $1 billion expected this year.

Meanwhile, the COVID overstock wasn't Pfizer’s only manufacturing-related cost concern in the third quarter. In recent months, the company has been overseeing recovery efforts at its facility in Rocky Mount, North Carolina, after a devastating tornado struck the facility in July.

During the quarter, Pfizer logged additional adjustments to cost of sales of $216 million, which primarily included $209 million in inventory losses and overhead costs during the facility’s closure and incremental costs related to tornado damage.