By Bhanvi Satija and Michael Erman
(Reuters) -Pfizer said on Tuesday it would generate $1.7 billion more in savings from cost-cutting to its manufacturing and research operations and reported lower first-quarter revenue due to declining sales of its Paxlovid COVID-19 treatment.
The company reaffirmed its full-year forecast and announced measures to mitigate the impact of potential tariffs on pharmaceuticals by the Trump administration, including possibly shifting some production to the United States.
While the rates and timing of tariffs on the pharma sector are unclear, analysts expect that companies will have to absorb any near-term costs if they are imposed. Washington has launched an investigation into the industry, laying the groundwork for possible levies.
Last month, Pfizer (NYSE: PFE ) CEO Albert Bourla said the company has the capability to move overseas manufacturing to its existing U.S. plants "if something happens." Pfizer has 10 manufacturing sites and two distribution centers in the United States, employing nearly 10,000 people.
"While we continue to engage and plan for contingencies, we’re focusing day-to-day on what we can do to move our business forward," Bourla said in prepared remarks on Tuesday.
Shares of the U.S. drugmaker, which have fallen 13.1% so far this year, were trading marginally higher at $23.22 in early trading.
"The cost savings are real, it does help drive better bottom line performance," said Brian Mulberry, portfolio manager at Zacks Investment Management, which owned 2.44 million Pfizer shares at the end of 2024. "We just want to know where that top-line growth is going to come from."
Not from COVID antiviral Paxlovid, apparently. Sales of the two-drug treatment were $491 million, well short of analysts’ already diminished expectations of $794.3 million, according to LSEG data. Analysts significantly cut their Paxlovid sales expectations in recent weeks due to a relatively small winter wave of COVID-19 in the U.S.
The company provided an update on its cost-cutting programs, saying it now expects about $7.7 billion in savings by the end of 2027.
That includes an additional $500 million in R&D savings, which at least two investors said could reflect Pfizer’s recent decision to stop development of its experimental weight-loss pill danuglipron.
’LEANING ON COST MANAGEMENT’
On an adjusted basis, Pfizer earned 92 cents per share in the first quarter, topping analysts’ expectations by 26 cents, helped by cost cuts and a lower tax rate.
"Pfizer is clearly leaning on cost management as the main lever to drive performance going forward given recent failures in its R&D efforts," said Daniel Barasa, portfolio manager at Gabelli Funds.
Despite the earnings beat, Pfizer is still forecasting a full-year adjusted profit of $2.80 to $3.00 per share on revenue of $61 billion to $64 billion.
CFO David Denton said Pfizer was "currently trending toward the upper end" of its profit forecast.
Revenue in the quarter fell 8% from a year ago to $13.72 billion and missed analysts’ expectations of $13.91 billion.
Potential tariffs could add to existing pressure for Pfizer. Investors have been pushing the company to bring new drugs to market that could make up for revenue likely to be lost from some top-selling medicines nearing the end of patent protection.
Zacks’ Mulberry said the company has done well at becoming more productive on the manufacturing side. "That’s where they’re finding a bulk of the savings at this point," he said, "but I don’t see the next kind of really big pop in revenue."
Even the drugs that outperformed Wall Street expectations in the first quarter face headwinds.
Sales of its heart disease drug, sold under the brand names Vyndaqel and Vyndamax, were $1.49 billion, above estimates of $1.29 billion. But the company said it is already seeing the impact of new competition, which it expects to continue through the year.
Pfizer’s vaccine business could also face greater regulatory scrutiny under the new Health Secretary Robert F. Kennedy Jr., a longtime vaccine skeptic.
COVID vaccine Comirnaty, which Pfizer makes with German partner BioNTech (NASDAQ: BNTX ), brought in sales of $565 million. Analysts were expecting $331.7 million for the shot in the first quarter.