Pfizer stock took a hit on Tuesday, falling over 3% in pre-market trading after the pharmaceutical giant announced its predictions for earnings and revenue. The company’s forecasts fell below market expectations, a reflection of the slowing demand for its COVID-19 vaccine and antiviral products.
Fourth Quarter Results Fall Short of Expectations
In the fourth quarter of 2022, Pfizer’s adjusted earnings per share (EPS) were $1.14, slightly ahead of market consensus by 5%. However, the company’s revenue growth was only 2% YoY, totaling $24.29 billion, which was a slowdown from previous quarters.
Earnings and Revenue Forecast Falls Below Consensus
Pfizer predicts that its adjusted earnings per share will fall to a range of $3.25-$3.45, well below the market consensus of around $4.44. For revenue, the company expects a range around a midpoint of $69 billion, which represents a significant shortfall compared to the forecasted $74.3 billion.
Diverging Assumptions About COVID-19 Sales in China
The discrepancies in Pfizer’s earnings and revenue predictions seem to be partly caused by conflicting expectations regarding COVID-19 related sales in China. Previously, analysts believed that demand for Pfizer’s antiviral medication, Paxlovid, would remain robust, given China’s recent easing of quarantine and mobility restrictions resulting in a quicker spread of COVID-19.
However, starting in March, Paxlovid will no longer be included in the list of drugs that the government will reimburse for purchases. Despite this, Pfizer CEO Albert Bourla has expressed confidence in the availability of the drug outside of state healthcare systems beginning April 1. Regrettably, Pfizer has not made provisions for any Paxlovid sales in China beyond March.
Sharp Decline in Vaccine Sales
Pfizer’s COVID-19 vaccine, Comirnaty, received approval from the majority of global health regulators early on during the pandemic, leading to skyrocketing sales for both Comirnaty and Paxlovid. These two products have come to dominate Pfizer’s business, far surpassing demand for its other offerings. However, with the pandemic subsiding and the rise of natural immunity to COVID-19 globally, Pfizer is forecasting a significant decline in sales. The company predicts that revenue from Comirnaty will decrease by nearly two-thirds, reaching approximately $13.5 billion, while revenue from Paxlovid is expected to decline by 58% to approximately $8 billion.
No Share Repurchases in 2023
Pfizer’s strong sales of Comirnaty and Paxlovid last year enabled the company to distribute $11 billion in dividends and stock buybacks. However, the company’s earnings guidance for 2023 does not include any plans for share repurchases.
Pfizer recently announced its earnings guidance for 2023, which has caused the company’s stock value to decrease. The projection of a lower profit and revenue along with differing outlooks on COVID-19 related sales in China and the decrease in demand for its COVID-19 vaccine has caused investor unease. Despite substantial dividends and stock buybacks in the past, Pfizer stated that it does not plan on any share repurchases this year. It remains to be seen how Pfizer will adjust to these developments and what the future holds for the company.