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Pfizer (PFE) Down 1.1% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Pfizer (PFE). Shares have lost about 1.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Pfizer due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Q1 Earnings Beat, COVID Jab Sales Down as Expected

Pfizer’s first-quarter results were better than expected as it beat estimates for both earnings and sales.

Pfizer reported first-quarter 2023 adjusted earnings per share of $1.23, which beat the Zacks Consensus Estimate of $1.00 per share as well as our estimate of $1.05 per share. Earnings declined 24% year over year.

Revenues came in at $18.28 billion, down 29% from the year-ago quarter on a reported basis, reflecting an operational decline of 26% and currency headwinds of 3%. The decline, as expected, in direct sales and alliance revenues from BioNTech for Comirnaty hurt total revenues in the quarter. One fewer selling day in international markets also hurt the top line in the quarter.

However total revenues beat the Zacks Consensus Estimate of $16.96 billion.

Excluding revenues from COVID products, Comirnaty and Paxlovid, sales rose 5% operationally. Higher sales of key brands like Vyndaqel/Vyndamax globally and Eliquis in the United States were partially offset by weaker sales of Xeljanz and Ibrance globally. Newly acquired products like Nurtec ODT/Vydura and Oxbrytaa and higher revenues of anti-infective Sulperazon in China also contributed to the top line.

International revenues declined 37% to $9.78 billion. U.S. revenues declined 5% to $8.51 billion.

Adjusted selling, informational and administrative (SI&A) expenses rose 37% (operationally) in the quarter to $3.35 billion due to increased spending for Paxlovid, new products and recently acquired products. Adjusted R&D expenses rose 10% to $2.49 billion due to costs to develop recently acquired programs and some vaccine candidates.

Segment Discussion

Pfizer reports its revenues under three broad sub-segments of its Biopharma operating segment, Primary Care, Specialty Care and Oncology. Sales in the Primary Care segment declined 37% operationally to $11.51 billion. The Specialty Care unit recorded sales of $3.6 billion, up 8%. Sales of Oncology declined 1% to $2.86 billion.

Primary Care

In Primary Care, direct sales and alliance revenues from BioNTech for Comirnaty were $3.06 billion in the quarter, down 75% year over year. Comirnaty sales declined 86% in the United States due to lower contracted deliveries to the U.S. government. Comirnaty sales declined 73% outside U.S. markets due to lower demand and contracted deliveries. Comirnaty sales missed our estimate of $3.51 billion.

Paxlovid contributed $4.07 billion to sales in the first quarter, compared with $1.47 billion in the year-ago quarter. Paxlovid sales beat our estimate of $2.57 billion. The favorable timing of final deliveries to the U.S. government, strong demand in China due to increased COVID-19 infections and some international launches boosted Paxlovid’s sales.

Alliance revenues from Bristol-Myers (for Eliquis) and direct sales rose 7% to $1.87 billion. Continued oral anti-coagulant adoption and market share gains in non-valvular atrial fibrillation benefited alliance revenues from Eliquis sales in the United States and some European markets. However, generic competition in some international markets hurt sales. Alliance revenues for Eliquis missed the Zacks Consensus Estimate of $1.93 billion

Global Prevnar family revenues rose 4% to $1.59 billion. The Prevnar family includes revenues from Prevnar 13/Prevenar 13 (pediatric and adult) and Prevnar 20 (adult). Prevnar revenues beat the Zacks Consensus Estimate of $1.45 billion.

Prevnar sales rose 6% in the United States. Prevnar revenues were flat in international markets.

Newly acquired product Nurtec ODT/Vydura contributed $167 million in the first quarter compared with $211 million in the previous quarter. Sales were lower sequentially due to seasonality impact of annual copay reset dynamics. Nurtec ODT/Vydura was added to Pfizer’s portfolio with the acquisition of Biohaven in 2022.

Specialty Care

Rare disease drug, Vyndaqel/Vyndamax recorded sales of $686 million in the quarter, up 16% year over year but missed the Zacks Consensus Estimate of $711 million.

Xeljanz sales declined 33% to $237 million due to lower prices and prescription volumes as doctors’ prescribing patterns shifted away from JAK inhibitors following label warnings.

Enbrel revenues declined 22% to $199 million due to continued biosimilar competition in key European markets and Japan.

New product, Oxbryta generated sales of $71 million in the first quarter of 2023 compared with $73 million in the fourth quarter of 2022.

Oncology

In Oncology, Ibrance revenues declined 5% year over year to $1.14 billion due to planned price decreases in some international developed markets and lower clinical trial purchases. Sales missed the Zacks Consensus Estimate of $1.20 billion.

Xtandi recorded alliance revenues of $258 million in the quarter, down 4% year over year. Inlyta revenues were $259 million in the quarter, up 14%.

2023 Guidance

Pfizer maintained its previously issued financial guidance for 2023.

Revenues are expected in the range of $67.0 to $71.0 billion, indicating an operational decline of 29 from the 2022 level. The Zacks Consensus Estimate for revenues is pegged $68.41 billion.

The revenue guidance includes approximately $13.5 billion in sales from Comirnaty, down 64% from the 2022 level, and Paxlovid sales of approximately $8 billion, down 58%.

Pfizer expects to launch both products in traditional commercial markets in the United States in the second half of 2023 as the company transitions away from the government market due to lower demand.

Pfizer expects significantly lower sales from its COVID products in the second quarter versus the first quarter. More substantial deliveries are expected to start in late third quarter in the United States and beginning of the fourth quarter in international markets.

Excluding COVID-19 products, Pfizer expects its revenues to rise 7% to 9% on an operational basis in 2023, with the growth mostly expected to occur in the second half of the year due to the timing of new product launches.

Pfizer has the largest number of new product and indication launches planned for 2023, most of which are expected to occur in the second half of the year. Dr. Albert Bourla, chairman and chief executive officer, said that the new product launches coupled with business development activities, including the proposed acquisition of Seagen, positions Pfizer strongly for operational growth in 2025 and beyond.

Pfizer’s new products Nurtec ODT and Oxbryta revenues declined sequentially in the first quarter due to seasonality impact. However, the new drugs are seeing strong demand trends and better sales are anticipated in the latter quarters.

Adjusted earnings per share are expected to be in the range of $3.25 to $3.45, implying an operational decline of 47 from the 2022 level.

The expected decline in adjusted earnings is due to lower revenues from COVID products coupled with higher spending for near-term launches and late-stage pipeline candidates.

Adjusted cost of sales, as a percentage of sales, is expected in the range of 28 of total revenues. Research and development expense is expected in the range of $12.4-$13.4 billion. SI&A spending is expected in the range of $13.8-$14.8 billion. Both SI&A and R&D expenses are expected to be significantly higher in 2023 versus 2022 to support the launch of potential new products as well as recently acquired assets.

Acquired IPR&D expenses are expected to be approximately $0.1 billion. The adjusted tax rate is expected to be approximately 15% in 2023. Adjusted other (income)/deductions are expected to be approximately $1.5 billion of income.

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How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -6.46% due to these changes.

VGM Scores

Currently, Pfizer has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Pfizer has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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