Pfizer's (PFE) Q2 Earnings Beat, Sales Miss, Stock Declines
Pfizer PFE reported second-quarter 2023 adjusted earnings per share of 67 cents, which beat the Zacks Consensus Estimate of 56 cents per share. Earnings declined 67% year over year.
Revenues came in at $12.73 billion, down 54% from the year-ago quarter on a reported basis, reflecting an operational decline of 53% and currency headwinds of 1%. Total revenues also missed the Zacks Consensus Estimate of $13.17 billion.
The decline, as expected, was due to a steep drop in revenues from its COVID-19 products on lower demand.
Pfizer records direct sales and alliance revenues from its partner, BioNTech BNTX, for the COVID-19 vaccine, Comirnaty, and product revenues from its oral antiviral pill for COVID, Paxlovid.
Excluding revenues from COVID products, Comirnaty and Paxlovid, sales rose 5% operationally.
International revenues declined 59% to $6.55 billion. U.S. revenues declined 45% to $6.2 billion.
Adjusted selling, informational and administrative (SI&A) expenses rose 20% (operationally) in the quarter to $3.42 billion due to increased spending for new products and recently acquired products. Adjusted R&D expenses declined 6% to $2.63 billion.
Segment Discussion
Pfizer reports its revenues under three broad sub-segments of its Biopharma operating segment, Primary Care, Specialty Care and Oncology. Sales of the Primary Care segment declined 72% operationally to $5.81 billion. The Specialty Care unit recorded sales of $3.65 billion, up 12%. Sales of Oncology declined 3% to $2.96 billion.
Primary Care
In Primary Care, direct sales and alliance revenues from BioNTech for Comirnaty were $1.49 billion in the quarter, down 82% year over year. Comirnaty sales declined 98% in the United States due to lower contracted deliveries to the U.S. government. Comirnaty sales declined 80% outside U.S. markets due to lower demand and contracted deliveries. Comirnaty sales beat our estimate of $1.23 billion.
Paxlovid contributed $143 million to sales in the quarter, compared with $8.1 billion in the year-ago quarter. Paxlovid sales missed our estimate of $610 million. There were no Paxlovid sales in the United States in the second quarter while contracted deliveries were significantly low in most international markets.
Alliance revenues and direct sales from Bristol-Myers’ BMY blood-thinning treatment Eliquis rose 2% to $1.76 billion. Alliance revenues from Bristol-Myers for Eliquis missed the Zacks Consensus Estimate of $1.86 billion as well as our model estimate of $2.0 billion.
Global Prevnar family revenues declined 1% to $1.39 billion. The Prevnar family includes revenues from Prevnar 13/Prevenar 13 (pediatric and adult) and Prevnar 20 (adult). Prevnar revenues missed the Zacks Consensus Estimate of $1.50 billion as well as our model estimate of $1.47 billion.
Prevnar sales declined 9% in the United States. Prevnar revenues rose 12% in international markets.
Newly acquired product Nurtec ODT/Vydura contributed $247 million in the second quarter compared with $167 million in the previous quarter. Nurtec ODT/Vydura was added to Pfizer’s portfolio with the acquisition of most of Biohaven in 2022.
Specialty Care
Rare disease drug, Vyndaqel/Vyndamax recorded sales of $782 million in the quarter, up 43% year over year. Vyndaqel/Vyndamax sales beat the Zacks Consensus Estimate of $722 million as well as our model estimate of $682 million.
Xeljanz sales rose 11% to $469 million. Xeljanz sales beat the Zacks Consensus Estimate of $341 million as well as our model estimate of $357.4 million.
Enbrel revenues declined 11% to $219 million due to continued biosimilar competition in key European markets and Japan.
New product, Oxbryta generated sales of $77 million in the second quarter of 2023 compared with $71 million in the previous quarter. Oxbryta was added with the October 2022 acquisition of Global Blood Therapeutics.
Oncology
In Oncology, Ibrance revenues declined 4% year over year to $1.25 billion. Ibrance sales were hurt due to competitive pressure, which hurt demand trends globally, planned price decreases in certain international developed markets and lower clinical trial purchases.
Ibrance revenues missed the Zacks Consensus Estimate of $1.29 billion as well as our model estimate of $1.32 billion.
Xtandi recorded alliance revenues of $305 million in the quarter, up 5% year over year. Inlyta revenues were $262 million in the quarter, down 3%.
2023 Guidance
Pfizer narrowed its previously issued revenue guidance for 2023 while maintaining its adjusted earnings guidance range.
Revenues are expected in the range of $67.0 to $70.0 billion compared with $67.0 to $71.0 billion expected previously, indicating an operational decline of 31% from the 2022 level, at the midpoint. The Zacks Consensus Estimate for revenues is pegged at $67.6 billion.
The revenue guidance includes approximately $13.5 billion in sales from Comirnaty, down 64% from the 2022 level, and Paxlovid sales of approximately $8 billion, down 58%.
Excluding COVID-19 products, Pfizer expects its revenues to rise 6% to 8% on an operational basis in 2023, compared with 7% to 9% previously.
Pfizer maintained all other components of its 2023 financial guidance. The adjusted earnings per share guidance was maintained in the range of $3.25 to $3.45, implying an operational decline of 47%, at the midpoint, from the 2022 level.
The expected decline in adjusted earnings is due to lower revenues from COVID products coupled with higher spending for near-term launches and late-stage pipeline candidates.
Adjusted cost of sales, as a percentage of sales, is expected in the range of 28%-30% of total revenues. Research and development expense is expected in the range of $12.4-$13.4 billion. SI&A spending is expected in the range of $13.8-$14.8 billion. Both SI&A and R&D expenses are expected to be significantly higher in 2023 versus 2022 to support the launch of potential new products as well as recently acquired assets.
Acquired IPR&D expenses are expected to be approximately $0.1 billion. The adjusted tax rate is expected to be approximately 15% in 2023.
Our Take
Pfizer’s second-quarter results were mixed as it beat estimates for earnings but missed the same for sales. Though the decline in sales of COVID products was expected, sales of several other key medicines like Prevnar, alliance revenues from Eliquis and Ibrance missed expectations. Pfizer said that some near-term individual product challenges hurt its sales performance in the quarter.
Nonetheless, some key products like Vyndaqel/Vyndamax and newly acquired products like Nurtec ODT/Vydura for migraine and Oxbryta for sickle cell disease provided some top-line support.
The fact that Pfizer narrowed its 2023 revenue guidance as well as its non-COVID operational revenue growth expectations also hurt investor sentiments, pushing the stock down more than 1% in pre-market trading.
This year so far, Pfizer’s stock has declined 29.7% against an increase of 2.5% for the industry.
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Pfizer expects better non-COVID operational revenue growth in the second half to be driven by its in-line products, new launches like the respiratory syncytial virus (RSV) vaccine for older adults and Zavzpret for migraine as well as newly acquired products like Nurtec and Oxbryta.
The FDA approved Abrysvo, Pfizer’s RSV vaccine for older adults, in May. Zavzpret (zavegepant nasal spray), Pfizer’s CGRP receptor antagonist for the acute treatment of migraine, was approved in March 2023.
In June, the FDA approved Litfulo (ritlecitinib), its JAK3 inhibitor for treating severe alopecia areata in adults and adolescents. The FDA also approved Ngenla, a long-acting once-weekly treatment for pediatric growth hormone deficiency, in the same month.
Pfizer has the largest number of new product and indication launches planned for 2023, most of which are expected to occur in the second half of the year. Pfizer believes the new product launches coupled with business development activities, including the proposed acquisition of Seagen SGEN position Pfizer strongly for operational growth in 2025 and beyond.
Pfizer offered to buy cancer drugmaker Seagen for $229 per share in cash or a total enterprise value of approximately $43 billion in March
Seagen’s acquisition is expected to strengthen Pfizer’s portfolio of cancer drugs by adding a class of antibody-drug conjugates. Seagen currently markets four cancer drugs — Adcetris, Padcev, Tukysa and Tivdak. The Pfizer/Seagen transaction is expected to be closed in late 2023 or early 2024. The shareholders of Seagen have already approved the deal.
Pfizer currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Pfizer Inc. Price, Consensus and EPS Surprise
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