Pfizer (PFE +3.14%) celebrates its 175th anniversary this year, so the pharma giant has a long history. But the drugmaker actually jumped into the global spotlight not long ago when it launched its blockbuster coronavirus vaccine, Comirnaty, followed by top-selling COVID treatment Paxlovid. These two products helped Pfizer reach a record $100 billion in annual revenue in 2022.
The past year, though, has been a difficult one for the big pharma company. Demand for coronavirus products has been on the decline, weighing significantly on earnings. That and losses of exclusivity concerning certain big non-COVID products later this decade have hurt investors' appetite for Pfizer stock. The shares dropped 43% in 2023, a year that even CEO Albert Bourla says "was not a good year for us."
The company reported earnings for the fourth quarter and full-year 2023 this week, and though things remain difficult, Pfizer has offered investors some reasons to be optimistic about the future. Is the worst over for Pfizer? Let's find out.
Paxlovid's revenue reversal
The pharmaceutical giant started preparing shareholders for its 2023 results late last year, cutting guidance for Comirnaty and Paxlovid revenue. As part of this, Pfizer predicted a $4.2 billion noncash revenue reversal for the return of unused Paxlovid doses from the U.S. government.
As it turns out, the company delivered some positive news on the subject during its earnings report. The revenue reversal in the quarter was lower, at $3.5 billion, and Pfizer told CNBC that indicates more use of Paxlovid than expected.
Still, Pfizer's fourth-quarter earnings reflect its recent and ongoing challenges. As you can see in the chart, revenue tumbled more than 41% to $14.2 billion, and the company reported a net loss of $3.4 billion. On a brighter note, while restructuring and acquisition costs ballooned 222%, the company made progress lowering total expenses.
And Pfizer said it's on track to deliver $4 billion in annual net cost savings by the end of this year as part of its cost realignment plan -- this is up from the original goal of $3.5 billion. Pfizer set the plan in motion to match its cost base with its long-term revenue opportunities.
Now let's consider our question about whether the worst is over for Pfizer. The company's coronavirus products aren't likely to deliver growth in the near future because vaccine uptake isn't particularly high. This season, about 15% of the U.S. population went for a COVID shot.
The good news is that Pfizer is studying a combined COVID/flu vaccine candidate in clinical trials, and this sort of product could attract those who generally go for an annual flu shot -- that's nearly half of the U.S. population. If all goes well, such a product could launch around 2026.
NYSE: PFE
Key Data Points
Pfizer's biggest blockbusters
As mentioned, some of Pfizer's biggest blockbusters -- like blood thinner Eliquis and cancer drug Ibrance -- are set to lose exclusivity later this decade. Pfizer expects losses of exclusivity to represent $17 billion in lost revenue from 2025 to 2030. But the good news is Pfizer's biggest streak of new drug launches ever should compensate and eventually lead to growth -- and business deals should be another growth driver too.
Pfizer predicts new drugs may deliver $20 billion in revenue by 2030, and business deals could bring in $25 billion in revenue by that time.
It's clear recent drug launches -- and big business deals like the recent acquisition of oncology specialist Seagen -- won't change the game for Pfizer overnight. But all of these moves today, along with the cost realignment plan, may be seen as the stepping stones to growth.
And to answer our original question, yes, the worst might be over for Pfizer. The company's cost realignment plan should bear fruit, and new drugs will start to contribute to sales, as will products gained through the Seagen purchase. And Pfizer just reaffirmed its 2024 guidance, which indicates revenue may grow as much as 5% from this year's level.
That means right now, with shares trading at only 12x forward earnings estimates, is a great time to get in on Pfizer -- and hold on for the long term to benefit from the potential growth that lies ahead.
