Pfizer’s $9 Billion Covid Outlook Cut Shows Depth Of Decline

(Bloomberg) -- Plummeting demand for Covid shots and pills caused Pfizer Inc. to cut $9 billion from its total annual sales guidance as the drug giant grapples with a stark decline for what had been marquee products.

Some analysts saw the move as an opportunity to reset investor expectations, including Jefferies's Akash Tewari who raised the stock to a buy from hold. After declining on Friday after market close, the company's shares rose 4.8% to $33.64 as of 10:16 a.m. on Monday. 

The company had already slashed per-share adjusted earnings expectations to $1.45 a share to $1.65 a share on Friday evening after reaching an agreement with the US government to take back nearly 8 million doses of Paxlovid this year. 

Pfizer's actions allow the company to move its inventory into the private US health system where the drugmaker is likely to make more money off of the product. But the severity of the guidance cut - Pfizer's biggest in at least a decade - raised questions about the management's ability to forecast. 

“We think this guidance realignment was desperately needed, but may not be enough for management to regain credibility,” said Evan Seigerman at BMO. “We want to hear from management a clear strategy to fix sentiment, demonstrate growth, and significantly improve investor confidence. This is a pivotal moment in the post-Covid Pfizer narrative; management must seize it.”

Reassure Investors

Pfizer CEO Albert Bourla sought to reassure investors in a call Monday. “A lot of the uncertainties that were surrounding the Covid business are resolved or about to be resolved soon and final elements will become clear and everybody could predict the business with reasonably safety for 2024 and years to come,” Bourla said.

Bourla took over as CEO in 2019 and led the company through the pandemic, which was a period of explosive growth for Pfizer. Total company sales hit $100 billion in 2022 thanks to its Covid shot and pill, double where sales were when he started. But the speed at which demand for those products would fall off caught management off guard. Last quarter, after sales of its Covid pill missed analysts' expectations by some $700 million, the company shaved $1 billion off of the top end of its annual sales forecast yet kept its per-share earnings outlook of $3.25 to $3.45 in tact. 

Robyn Karnauskas, an analyst at Truist Securities, said that longer term, sales of Paxlovid could improve now that the inventory is no longer being held by the US government.

Pfizer's management had said they expect 24% of the US population to get Covid boosters, which is higher than the level of uptake with the last booster. On Monday, Pfizer's management revised that number too and said they now expect just 17% of people to get those shots.

For its part, rival Covid shotmaker Moderna Inc. reaffirmed its guidance of between $6 billion to $8 billion in sales from its Covid-19 vaccine for 2023. The company said it will have better visibility about the total size of the US market after seeing trends through October.

--With assistance from Brad Skillman and Gerry Smith.

(Updates with details throughout.)

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