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Still reeling from a dramatic post-pandemic fall from grace that's seen its shares plummet by nearly 60% from the early 2021 highs, Pfizer (PFE) is making a case that the extreme bearish sentiment weighing on its stock may be overdone. Before the open, the company reaffirmed its FY24 EPS and revenue forecast and issued in line FY25 EPS and revenue guidance, despite the fact that it expects Medicare Part D coverage changes related to the Inflation Reduction Act to negatively impact its top line by $1.0 bln in 2025.

The encouraging outlook helped ease concerns that incoming Health Secretary Robert F. Kennedy, Jr. poses a major threat to PFE's vaccine business. Mr. Kennedy has been an outspoken critic of vaccines due to his concerns about their safety, but PFE stated during today's conference call that the company doesn't expect significant changes to vaccine policies.

• PFE's solid guidance also comes on the heels of a strong beat-and-raise Q3 earnings report on October 29 that featured a 31% jump in revenue to $17.7 bln -- which crushed expectations. A recent COVID-19 wave boosted sales of COVID-19 treatment Paxlovid to $2.7 bln, and COVID-19 vaccine Comirnaty saw sales grow by 9% yr/yr to $1.4 bln. Non-COVID products were also strong, up 14%, led by the oncology portfolio.
• Prior to the Q3 report, PFE had experienced yr/yr revenue declines in five of the past six quarters, including plunges of 54% in 2Q23 and 42% in 3Q23. The steep drop-off in sales was fueled by waning demand for Comirnaty and Paxlovid.
• In the wake of its crashing sales, PFE also became a target of activist investment firm Starboard, which has accumulated a $1.0 bln stake in the company. In recent months, Starboard CEO Jeff Smith has called for the possible replacement of PFE CEO Albert Bourla, questioning PFE's use of cash following the windfall it generated during the pandemic. On that note, in March of 2023, Mr. Bourla green-lighted a huge $43.0 bln acquisition of oncology drug maker Seagen. While the addition could ultimately transform PFE into a cancer and immunology powerhouse, Seagan was only expected to contribute about $3.1 bln in revenue for FY24.
• With little in place to fill the void of declining Comirnaty and Paxlovid sales, PFE has turned to cost-cutting actions to support its earnings. PFE had some good news to share in this regard today, stating that it has delivered on its goal of achieving $4.0 bln in operating expense savings through 2024, while also announcing plans to cut costs by an additional $500 mln in 2025. 

PFE's reaffirm of FY24 guidance and in line outlook for FY25 provides a sense of relief for investors, while also sending a message to Starboard that business is stronger than the activist investment firm is giving it credit for. However, with key products facing patent expirations in 2025 and 2026, such as Xeljanz and Eliquis, and with the volatile nature of PFE's COVID products, the company's financial performance may still be bumpy moving forward.