Pfizer's (PFE) Q3 Loss Narrows, Sales Miss on COVID Slump
Pfizer PFE reported third-quarter 2023 adjusted loss per share of 17 cents, which was narrower than the Zacks Consensus Estimate of a loss of 32 cents per share. In the year-ago quarter, the company had recorded earnings of $1.78 per share.
In the third quarter, Pfizer recorded a non-cash charge of $5.5 billion for COVID-19 product inventory write-offs and other charges in the cost of goods sold line, which significantly hurt earnings growth.
Revenues came in at $13.23 billion, down 42% from the year-ago quarter on a reported basis, reflecting an operational decline of 41% and currency headwinds of 1%. Total revenues missed the Zacks Consensus Estimate of $13.77 billion.
The decline, as expected, was due to a steep drop in revenues from its COVID-19 products, Comirnaty and Paxlovid 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.
International revenues declined 37% to $5.43 billion. U.S. revenues declined 44% to $7.8 billion.
Adjusted selling, informational and administrative (SI&A) expenses declined 1% (operationally) in the quarter to $3.21 billion. Adjusted R&D expenses were flat at $2.68 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 60% operationally to $6.29 billion. The Specialty Care unit recorded sales of $3.76 billion, up 12%. Sales of Oncology declined 5% to $2.89 billion.
Primary Care
In Primary Care, direct sales and alliance revenues from BioNTech for Comirnaty were $1.31 billion in the quarter, down 70% year over year. Comirnaty sales declined 66% in the United States due to lower contracted deliveries to the U.S. government. Comirnaty sales declined 79% outside U.S. markets due to lower demand and contracted deliveries in anticipation of commercial transition. Comirnaty sales missed our estimate of $1.79 billion.
Paxlovid contributed $202 million to sales in the quarter, compared with $7.5 billion in the year-ago quarter. Paxlovid sales missed our estimate of $614.9 million. There were no Paxlovid sales in the United States in the third quarter in anticipation of commercial transition. Lower contractual deliveries in most international markets also hurt sales.
Alliance revenues and direct sales from Bristol-Myers’ BMY blood-thinning treatment Eliquis rose 3% to $1.5 billion. Alliance revenues from Bristol-Myers for Eliquis missed the Zacks Consensus Estimate of $1.52 billion but came in line with our model estimate.
Global Prevnar family revenues rose 15% to $1.85 billion. The Prevnar family includes revenues from Prevnar 13/Prevenar 13 (pediatric and adult) and Prevnar 20 (adult and pediatric). Prevnar revenues beat the Zacks Consensus Estimate of $1.69 billion as well as our model estimate of $1.71 billion.
Prevnar sales rose 20% in the United States, primarily driven by strong patient demand for Prevnar 20 for adults and the U.S. approval of Prevnar 20 for the pediatric patient population and associated stocking. Prevnar sales rose 5% in international markets, driven by growth of Prevenar 13 for pediatric patients in certain emerging markets.
Newly acquired product Nurtec ODT/Vydura contributed $253 million in the third quarter compared with $247 million in the previous quarter. Nurtec ODT/Vydura was added to Pfizer’s portfolio with the acquisition of most of Biohaven in 2022.
Among the new products, Pfizer RSV vaccine, Abrysvo, recorded sales of $375 million in the quarter. Abrysvo was approved to help protect older adults and infants through maternal immunization in the United States as well as EU in 2023.
Specialty Care
Rare disease drug, Vyndaqel/Vyndamax recorded sales of $892 million in the quarter, up 47% year over year. Vyndaqel/Vyndamax sales beat the Zacks Consensus Estimate of $815.0 million as well as our model estimate of $808.9 million.
Xeljanz sales rose 1% to $503 million. Xeljanz sales beat the Zacks Consensus Estimate of $423.3 million as well as our model estimate of $454.3 million.
Enbrel revenues declined 7% to $208 million due to continued biosimilar competition in key European markets and Japan.
The new product, Oxbryta, generated sales of $85 million in the third quarter of 2023 compared with $77 million in the previous quarter. Oxbryta was added with the October 2022 acquisition of Global Blood Therapeutics.
The new drug Cibinqo, approved last year, recorded revenues of $37 million in the third quarter compared with $38 million in the year-ago quarter.
Oncology
In Oncology, Ibrance revenues declined 3% year over year to $1.24 billion. Ibrance demand trends are being hurt globally due to competitive pressure. Ibrance revenues missed the Zacks Consensus Estimate as well as our estimate of $1.26 billion.
Xtandi recorded alliance revenues of $313 million in the quarter, down 2% year over year. Inlyta revenues were $252 million in the quarter, up 1%.
2023 Guidance
On Oct 13, Pfizer slashed its revenue guidance for 2023 due to lower-than-expected demand for Comirnaty and Paxlovid. The revenue guidance was lowered from $67.0 to $70.0 billion to $58.0 to $61.0 billion. Pfizer maintained this guidance along with the earnings release. The $58.0 to $61.0 billion guidance range indicates a year-over-year decline in the range of 39%-42% and an operational decline in the range of 38%-41%.
The guidance cut included a $7 billion drop in Paxlovid revenues and a $2 billion reduction in Comirnaty revenues. The earlier revenue guidance included approximately $13.5 billion in sales from Comirnaty and Paxlovid sales of approximately $8 billion. Full-year 2023 combined revenues for Paxlovid and Comirnaty are now expected to be approximately $12.5 billion (Comirnaty - $11.5 billion and Paxlovid $1 billion) compared with $21.5 billion expected previously.
Pfizer reduced its 2023 outlook for Paxlovid due to the $4.2 billion non-cash revenue reversal for the return of an estimated 7.9 million of U.S. government EUA-labeled treatment courses of Paxlovid at the end of 2023. The Comirnaty guidance was lowered due to lower-than-expected vaccination rates.
Excluding COVID-19 products, Pfizer continues to expect its revenues to rise 6% to 8% on an operational basis in 2023 as sales from non-COVID drugs remain strong.
As a result of the lower-than-expected COVID revenues and the inventory write-offs, the adjusted EPS guidance was lowered from the range of $3.25 to $3.45 to $1.45 to $1.65 earlier this month. The new guidance range was maintained at the time of the earnings release. This guidance range indicates a reported decline in the range of 75%-78% year over year and an operational decline in the range of 72%-75%.
Pfizer expects to launch both Comirnaty and Paxlovid in traditional commercial markets in the United States as government demand for the products declines. While the U.S. market for Comirnaty transitioned to commercially available products in September 2023, the commercial transition for Paxlovid is expected in November 2023.
With the demand for COVID products being lower than expected, Pfizer announced cost cuts, including layoffs, on Oct 13. The cost cuts are expected to deliver targeted savings of at least $3.5 billion, of which approximately $1.0 billion is expected to be realized in 2023 and at least $2.5 billion is expected to be realized in 2024.
Adjusted cost of sales, as a percentage of sales, is expected in the range of 41%-43% of total revenues (previously 28%-30%). Research and development expense is expected in the range of $11.9 to $12.9 billion (previously $12.4-$13.4 billion). SI&A spending is expected in the range of $13.3 to $14.3 billion (previously $13.8-$14.8 billion). Both SI&A and R&D guidance were lowered due to the cost savings program discussed above.
Acquired IPR&D expenses are expected to be approximately $0.1 billion. The adjusted tax rate is expected to be approximately 12% in 2023 (previously 15%).
Our Take
Pfizer’s third-quarter results were mixed as it beat estimates for earnings while missing the same for sales. The company reaffirmed its 2023 sales and earnings guidance provided on Oct 13, 2023.
While sales of COVID products are declining due to lower demand, some key non-COVID products like Vyndaqel/Vyndamax and Prevnar, newly acquired products like Nurtec ODT/Vydura and Oxbryta and new product launches are providing some top-line support. Revenues from Pfizer’s non-COVID products rose 10% operationally in the third quarter.
Pfizer’s shares were down slightly in pre-market trading. So far this year, Pfizer’s stock has declined 40.3% against an increase of 0.5% for the industry.
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Pfizer’s key new product approvals/launches are Abrysvo RSV vaccine, Velsipity (etrasimod), a once-daily pill for ulcerative colitis, Penbraya pentavalent meningococcal vaccine, Zavzpret nasal spray for migraine, Cibinqo for atopic dermatitis, Litfulo (ritlecitinib) for severe alopecia areata, Elrexfio (elranatamab) for relapsed/refractory multiple myeloma and Ngenla for pediatric growth hormone deficiency.
Pfizer expects better non-COVID operational revenue growth in future quarters, driven by its in-line products, new launches like the Abrysvo, Velsipity, Penbraya, Zavzpret as well as newly acquired products.
Pfizer believes the new product launches coupled with business development activities, including the proposed acquisition of Seagen SGEN position it 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. The Pfizer/Seagen transaction is expected to be closed in late 2023 or early 2024. The shareholders of Seagen have already approved the deal. Earlier this month, Pfizer received unconditional antitrust clearance from the European Commission for the proposed acquisition.
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 and Consensus
Pfizer Inc. price-consensus-chart | Pfizer Inc. Quote
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