On October 13th, Pfizer released a notice titled "Pfizer Revises US Government Paxlovid Supply Agreement and Updates 2023 Performance Guidelines", stating that due to the transition of Paxlovid (Nematovir Tablets/Litonavir Tablets) from emergency government supply to commercial market supply, the government will refund a large amount of doses already distributed across the country, with a total of approximately 7.9 million treatment courses expected to be refunded. Due to these returns and refunds, Paxlovid's sales this year will be $7 billion lower than the company's previous forecast. In addition, with the decline of sales of COVID-19 vaccines and drugs produced by the company, Pfizer will launch cost reduction plans throughout the company this year and next.
Both COVID-19 drugs and vaccines have declined
Affected by COVID-19 products, Pfizer lowered its performance expectations again. On October 13th, Pfizer announced that the company predicted full year revenue of $58-61 billion for 2023, with adjusted earnings per share of $1.45-165. Previously, the company had expected full year revenue of $67-70 billion.
Pfizer and the US government revised the terms of the supply agreement for COVID-19 Paxlovid. According to the announcement, in a non cash transaction, the US government will return approximately 7.9 million packages of Nematovir/Litonavir tablets marked with an EUA (Emergency Use Authorization) by the end of 2023, and the way to obtain the drug will shift from emergency government operations to commercial market operations.
By revising the supply agreement, future Paxlovid drug treatment courses marked with New Drug Application (NDA) will receive credit. The credit will support the patient assistance program by providing free packaging of Nematovir/Litonavir combination tablets to federal government insured patients by 2024, and free packaging of Nematovir/Litonavir combination tablets to uninsured/underinsured patients by 2028. Pfizer will recognize revenue upon product delivery. Pfizer will commercialize the combination packaging of Nematovir tablets and Ritonavir tablets for the treatment of privately insured patients, with prices to be negotiated with policyholders. Additionally, Pfizer will provide 1 million treatment courses to the US government for national strategic reserves.
Pfizer has lowered its revenue forecast for Paxlovid this year by approximately $7 billion, including the return of 7.9 million treatment courses for emergency use authorization (EUA) purposes by the US government, which will reduce non cash revenue by $4.2 billion. In addition, because the vaccination rate was lower than expected, Pfizer adjusted the annual expected revenue of COVID-19 Vaccine Comirnaty by about US $2 billion.
The revenue of Comirnaty and Paxlovid has long shown signs of decline. In the 2022 financial report disclosed in January of this year, Pfizer predicted that its revenue for the entire year of 2023 would drop by at least 30%, with Comirnaty's revenue decreasing by 64% year-on-year to $13.5 billion; The revenue of COVID-19 Paxlovid dropped 58% year on year to $8 billion.
According to the latest announcement, Paxlovid and Comirnaty are expected to have annual revenue of approximately $12.5 billion in 2023, a decrease of $9 billion from initial expectations.
Initiate cost adjustment plan
Pfizer also announced that it has launched a "cost adjustment plan" that will adjust costs based on its long-term revenue expectations. The plan is expected to save at least $3.5 billion, of which $1 billion is expected to be achieved in 2023 and an additional $2.5 billion is expected to be achieved in 2024.
Without providing further details, Pfizer stated that these costs will "mainly include severance pay and implementation costs". Pfizer stated that it will continue to improve its expected target savings and related costs for the remainder of this year and include them in the full year guidance for 2024.
The 'severance pay' has also sparked speculation about layoffs. On October 10th, industry media Endpoints News reported that Pfizer's research institution in Boulder, Colorado was undergoing layoffs. The company spokesperson declined to provide further information on the number of layoffs and the affected units. The spokesperson stated that as part of the restructuring, some research projects will be transferred to other factories. Pfizer will continue to focus on the field of differentiated capabilities, aiming to further shorten cycle time by optimizing end-to-end R&D business.
In the opinion of insiders, the performance growth brought by COVID-19's prevention and control is sporadic, and there is a risk of unsustainable future performance growth. Although COVID-19's business is expected to decline significantly, Pfizer said that the company's non COVID-19 product revenue is still expected to achieve 6% -8% growth in 2023.
In September of this year, Pfizer China's organizational structure also underwent adjustments. According to media reports in the pharmaceutical industry, Pfizer's China Vaccine Division has established North China, South China, and market platforms, respectively led by Hao Yikai, Shi Yinli, and Jin Xinqing. Among them, Hao Yikai will be fully responsible for the sales management of vaccines in 20 provinces and municipalities in the northern region of China. Shi Yinli is fully responsible for the sales management of vaccines in 9 provinces and municipalities in the southern region of China. Jin Xinqing will be responsible for building an innovation market platform, creating a vaccine ecosystem, promoting innovative market models, and improving business efficiency.