Pfizer launches $1.5bn cost-cutting plan amid falling Covid-19 revenues

Pfizer has reported a significant reduction in sales for its Covid-19 products, Comirnaty and Paxlovid, with an 88% and 50% drop respectively in Q1 of this year, compared to the same period in 2022. As a response to the revenue decline, the pharmaceutical giant has introduced a new cost reduction program aimed at generating approximately $1.5 billion in savings by 2027.

The initiative, expected to span multiple years, will involve one-time expenditures, such as severance and implementation costs, estimated at around $1.7 billion. Most of these expenses are projected to appear in Pfizer's 2024 financial statements, though the company has advised that cash outflows could extend up until 2026. The details of the cost-cutting measures remain limited, but Pfizer has indicated that the program will focus on operational efficiencies, network structure changes, and improvements within its product portfolio.

Following the announcement of the cost-saving measures on May 22, Pfizer's stock rose by 3.9% by the market's close that day, bringing the company's market cap to $167.7 billion. The demand for Covid-19 related products has dwindled significantly over the past year, severely impacting Pfizer's bottom line, with a reported 42% drop in revenue in 2023 compared to the previous year.

In response to the declining sales of its Covid-19 products, Pfizer has been proactive in implementing cost-saving strategies. Last October, the company initiated measures to save $1 billion by the end of the year and aimed for an additional $2.5 billion in savings for 2024. By December, Pfizer had added a $500 million expense reduction plan to its overall cost-saving initiatives, targeting $4 billion in savings for the year.

To counterbalance the financial impact from the reduced sales of Comirnaty and Paxlovid, Pfizer has broadened its investment in expanding its pharmaceutical pipeline. The acquisition of Seagen, a specialist in antibody-drug conjugates, for $43 billion last year has effectively doubled Pfizer’s oncology pipeline. According to a press release dated February 29, Pfizer aims to develop eight or more "potential blockbuster" drugs by 2030. Additionally, the company expects significant revenue growth from biologics, projecting an increase in total oncology revenue from 6% in 2023 to 65% by 2030.

Pfizer is also exploring high-revenue potential therapies for weight loss. Despite the discontinuation of one of its glucagon-like peptide-1 receptor agonist (GLP-1-RA) candidates, lotiglipron, due to liver dysfunction concerns, Pfizer has seen positive results from its second GLP-1-RA candidate, danuglipron. A Phase II trial (NCT04707313) revealed that danuglipron met its primary endpoint, achieving weight reductions of between 8% and 13% after 32 weeks, and 5% and 9% after 26 weeks, compared to baseline.

In summary, Pfizer is taking comprehensive measures to mitigate the financial downturn caused by the declining sales of its Covid-19 products. By implementing extensive cost-saving programs and investing heavily in the expansion of its pharmaceutical pipeline, particularly in oncology and weight loss therapies, Pfizer aims to stabilize its financial performance and drive future growth.