Pfizer faces challenging years on fading COVID sales, margin pressure

By Puyaan Singh and Michael Erman

Dec 16 (Reuters) - Pfizer PFE.N said on Tuesday the next few years will be bumpy, beginning with 2026, due to lower sales of its COVID vaccine and treatment, price cuts promised to the U.S. government, and the expiration of patents on key drugs.

The stock fell 5.2% on Tuesday. Pfizer shares have dropped more than 50% since early 2023 as demand for COVID vaccines and treatments waned, leaving the company trailing peers in performance.

The drugmaker does not expect to return to revenue growth until 2029, as it works to develop new blockbuster drugs, including the obesity treatments it picked up in recent deals.

Its pipeline has not produced a game-changing drug since it helped to develop the COVID vaccine Comirnaty and produced COVID treatment Paxlovid early in the decade. The company's goal is to save more than $7 billion annually through 2027 as it tries to control costs.

"This stock is unlikely to break out of its current mid-20s price range until investors are convinced of a growth trajectory," said Bernstein analyst Courtney Breen.

PFIZER FORECASTS MISS WALL STREET TARGETS

The drugmaker expects 2026 adjusted profit per share to be between $2.80 and $3, below analysts' average estimate of $3.05 per share, according to data compiled by LSEG.

It expects revenue for next year in the range of $59.5 billion to $62.5 billion, compared with estimates of $61.59 billion.

The projection includes a drop in revenue from its COVID-19 products of about $1.5 billion from this year. The company also expects a revenue hit of about $1.5 billion due to certain products losing exclusivity in 2026.

The company said it exceeded its expectations for cost reductions in 2025 and is on track to deliver most of the savings next year. It expects 4% operational revenue growth, which excludes COVID products and those that are set to lose patents.

"This core guidance is slightly above our expectations ... we would not be surprised to see modest EPS upside through the year on better cost management/the company’s ongoing restructuring efforts," said JPMorgan analyst Chris Schott in a research note.

ACQUISITIONS TO FUEL GROWTH

Pfizer, which expects to return to growth in 2029-2030, sees the growth being underpinned by its acquisitions and drug pipeline, its finance chief Dave Denton said.

The drugmaker has pursued several deals in recent years to refill its pipeline, including last month's $10 billion acquisition of Metsera MTSR.O to gain a foothold in the fast-growing obesity market and a $43 billion deal for Seagen in 2023, among other licensing deals.

The company expects full-year 2026 adjusted R&D expenses to be in the range of $10.5 billion to $11.5 billion - $500 million higher at either end than the 2025 estimate - due to development of an antibody in-licensed from 3SBio as well as multiple clinical programs from Metsera.

TRUMP DEAL SQUEEZES PRESCRIPTION DRUG MARGINS

Pfizer was the first major pharmaceutical company to sign a deal with the Trump administration to lower the price of its prescription drugs in the Medicaid program in exchange for three years of tariff relief.

The company said the Medicaid discounts would result in price and margin compression next year.

U.S. vaccines have been under pressure since vaccine-skeptic Robert F. Kennedy Jr. became health secretary and has worked to reduce the country's reliance on the interventions. Chief Executive Albert Bourla called the government's vaccine position "clearly an anomaly" and said it will continue investing in vaccines.

HOSPITAL AND BIOSIMILARS DIVISION CREATED

Pfizer also said it will create a new hospital and biosimilars unit. Bernstein's Breen called the move "the first signs of disposing of the hospital and biosimilar business."

Pfizer revised its revenue forecast for 2025 to about $62 billion from the previous range of $61 to $64 billion. It maintained its adjusted profit outlook for the year.