Drugmaker Pfizer (PFE) will see out the most lucrative year in its history with fourth-quarter results due early Tuesday and hope its 2023 guidance isn't too much of a letdown amid diminished demand for COVID-19 vaccines.
The stock is down 14% this month versus a 2% decline for the S&P 500 Health Care Sector Index, primarily on concern about the likely sales declines for its two COVID blockbusters: the Comirnaty vaccine and Paxlovid retroviral treatment.
There's less suspense about the final quarter of 2022. Analysts tracked by Visible Alpha expect adjusted earnings of $1.07 per share on average, up from 79 cents per share a year earlier and just above the company's increased forecast in its third-quarter report. Fourth-quarter revenue may increase just 2% year-over-year based on the consensus estimate and Pfizer's guidance, but would be more than double sales two years earlier.
- Pfizer is expected to post adjusted fourth-quarter earnings of $1.07 per share early Tuesday.
- Investors will focus on guidance for 2023, with sales set for a sharp decline amid waning demand for COVID-19 vaccines and treatments.
- Three analysts previously bullish on the stock have downgraded it this month, citing the dimming outlook for its Comirnaty COVID vaccine and Paxlovid retroviral treatment.
Analysts already expect Pfizer's 2023 revenue to drop 26% amid signs demand for COVID-19 vaccines has faltered. The European Union is in talks with Pfizer about reducing or deferring deliveries accounting for roughly half of its 2021 order for 900 million doses, Reuters reported Friday. U.S. demand for COVID vaccines and booster shots has also slowed markedly, according to pharmacists and competitors. Rival Moderna (MRNA) recently said 2023 sales of Spikevax, its COVID-19 vaccine, could be as low as $5 billion, down from $18.4 billion in 2022.
Comirnaty's projected 2022 sales of $34 billion would represent about a third of Pfizer's revenue, and the $22 billion expected from Paxlovid would push the combined share of the two pandemic products to more than half of the total.
Three analysts previously bullish on the stock have downgraded it this month out of concern the Street's 2023 estimates are still too high given the drop in the demand for COVID-19 vaccines and treatments.
"COVID franchise (Paxlovid/Comirnaty) estimates need to come down and we lack conviction in the potential growth out of the ’23 COVID trough," UBS analysts wrote Thursday in downgrading Pfizer shares to neutral from buy.
Wells Fargo cut the stock to equal weight from overweight on Jan. 17, citing a similar rationale. "Pfizer needs a COVID reset before the stock could work again," the analysts said in the note.
On Jan. 4, Bank of America analysts called Pfizer a "show me" stock in downgrading it to neutral from buy. "Our previous buy thesis was centered on Comirnaty/Paxlovid driving robust cash flow earmarked for [acquisitions], but as total COVID-19 revenues erode there is less available, and at a time where new product growth looks less certain," they wrote.
Pfizer would likely prefer to focus on its product pipeline as well as recent and future acquisitions, which it's counting on to replace $17 billion in annual revenue from drugs set to lose patent protection by 2030, and to secure long-term revenue growth at a compounded annual rate of at least 6%. CEO Albert Bourla said at a recent investor conference the next 18 months will be the "most important 18 months in the history of Pfizer" as a result of 19 new products and indications.
Meanwhile, UBS analysts said those launches are already included in Street estimates, while longer-term development projects aren't expected to prove their worth this year. "While we see minimal downside from here, the lack of catalysts and potential for further downside to COVID estimates drives our move to the sidelines,” they wrote.
Pfizer's share price is down 17% over the past year compared with a 4% gain for the S&P 500 Health Care Sector Index. In the past year, Pfizer has paid dividends equal to 3% of its share price a year ago, while the index had a dividend yield of 1.6%.
PFE vs. S&P 500 Health Care Sector Index, Past Year
Pfizer Key Stats
Q4 FY 2022
|Q4 FY 2021||Q4 FY 2020|
|Adjusted Earnings Per Share ($)||1.07||0.79||0.42|
Source: Visible Alpha
Pfizer. "Pfizer Quarterly Corporate Performance – Third Quarter Press Release," Page 4.
Reuters. "Exclusive: EU May Pay More for Pfizer COVID Shots in Return for Lower Volume."
Spectrum News 1. "Pharmacists Say Demand for COVID-19 Vaccines Is Dwindling in Wisconsin."
NJ.com. "Johnson & Johnson Slashes Production of COVID Vaccine Amid Drop in Demand."
Fierce Pharma. "JPM23: Moderna Reaped $18.4B in COVID Vaccine Sales Last Year, Projects At Least $5B in 2023."
CNBC. "UBS Downgrades Pfizer, Cites Lower Covid Expectations and a Slow Pipeline."
Investors.com. "Pfizer Stock Dives as Analyst Calls for 'Covid Reset' and Downgrades Shares."
Pfizer. "JPMorgan Healthcare Conference Edited Transcript," Page 3.