Pfizer Inc. (NYSE:PFE) today announced that it has amended its supply agreement with the U.S. government for Paxlovid, the first oral antiviral pill approved by the U.S. Food and Drug Administration (FDA) and is updating its Full-Year 2023 Guidance.
Paxlovid Amended Agreement with U.S. Government Facilitates Commercialization
At the end of 2023, Pfizer will accept a non-cash return of any remaining Emergency Use Authorized (EUA)-labeled U.S. government inventory, estimated to be 7.9 million treatment courses, and in the fourth quarter, will reverse the associated revenues currently estimated to be approximately $4.2 billion.
The commercial transition will begin in November 2023, as the U.S. government begins to discontinue the distribution of EUA-labeled Paxlovid. Pfizer will ensure commercial readiness by providing NDA-labeled commercial supply to all channels by the end of 2023, however, EUA-labeled Paxlovid will remain available free-of-charge to all eligible patients until the end of the year, and therefore Pfizer expects only minimal uptake of NDA-labeled commercial product before January 1, 2024.
Any remaining EUA-labeled treatment courses previously purchased by the U.S. government will be converted to a volume-based credit. This credit will support continued access to Paxlovid through a patient assistance program (PAP) operated by Pfizer on behalf of the U.S. government. As part of the PAP, all federally insured patients (Medicare and Medicaid) and the uninsured will receive Paxlovid, free of charge, through 2024. Beginning in 2024, Pfizer will sell Paxlovid to privately insured patients (commercial) with prices to be negotiated with payers and offer a copay program through 2028. The PAP will continue to provide access to Paxlovid to eligible uninsured and underinsured patients through that same period.
Additionally, Pfizer will manage and supply 1.0 million treatment course U.S. Strategic National Stockpile (SNS) to enable future pandemic preparedness and refresh stock prior to expiry through 2028.
Pfizer will recognize revenues as product is delivered beginning in 2024.
Updates Outlook for COVID-19 Products
Pfizer also announced additional clarity on its full-year 2023 outlook for its COVID products - Comirnaty and Paxlovid. Clarity on the underlying vaccination and treatment rates will be observed by year end and will set a reliable base for the prediction of future product utilization.
As previously announced, the European Union (EU) contract for Comirnaty supply was renegotiated with amended purchasing obligations through 2026. The U.S. market for Comirnaty transitioned to commercially available product in September 2023. Due to the recent commencement of the fall vaccination period, the outlook for year-end vaccination rates and market shares requires more time for more determinable estimates.
As previously announced, Paxlovid also received full NDA approval from the FDA earlier this year. The global utilization rates for Paxlovid are currently trending slightly above last year's utilization but lower than our original expectations.
Launches Cost Realignment Program
In addition, in the fourth quarter of 2023, Pfizer announced that the company has launched a multi-year, enterprise-wide cost realignment program that will realign its costs with its longer-term revenue expectations. The program is expected to deliver targeted savings of at least $3.5 billion, of which $1.0 billion is expected to be realized in 2023 and an additional $2.5 billion is expected to be realized in 2024. The one-time costs to achieve the savings associated with the new cost realignment program are expected to be approximately $3.0 billion, of which the majority is expected to be cash. These costs will primarily include severance and implementation costs. Pfizer will continue to refine the estimated targeted savings and their associated costs over the remainder of the year and will incorporate them into its full-year guidance for 2024.
Updates Full-Year 2023 Revenue and Adjusted(2) Diluted EPS Guidance(1) Ranges
Pfizer also announced that it now anticipates full-year 2023 revenues to be in the range of $58.0 to $61.0 billion, versus its previous guidance range of $67.0 to $70.0 billion solely due to its COVID products. Full-year 2023 revenues for Paxlovid and Comirnaty are expected to be approximately $12.5 billion, a decline of $9.0 billion versus original expectations. The company is reducing its full-year 2023 revenue expectations for Paxlovid by approximately $7.0 billion which includes a non-cash $4.2 billion revenue reversal for the return of the 7.9 million treatment courses of EUA-labeled U.S. government inventory, as well as the delayed commercialization to January 2024 versus our previous expectation of commercialization in the second half of 2023. The company is also reducing its full-year 2023 revenue expectations for Comirnaty by approximately $2.0 billion due to lower-than-expected vaccination rates.
Pfizer's non-COVID products remain on track to achieve an expected 6% to 8% operational revenue growth year over year in 2023.
Due to lower-than-expected utilization for our COVID products, Pfizer recorded a non-cash charge of $5.5 billion to Cost of Goods Sold in the third quarter of 2023 primarily related to inventory write-offs for Paxlovid of $4.6 billion and to a lesser extent for inventory write-offs and other charges for Comirnaty of $0.9 billion.
The company expects to deliver approximately $1.0 billion in savings in 2023 through its cost realignment program.
Revised guidance also reflects anticipated improvement in our Effective Tax Rate on Adjusted(2) Income for 2023 from approximately 15% in our original guidance to approximately 12%.
Due to the aforementioned items, the company now expects full-year 2023 Adjusted(2) diluted EPS to be in the range of $1.45 to $1.65 versus its original guidance range of $3.25 to $3.45.
The Company's updated Revenues and Adjusted(2) diluted EPS guidance(1) is presented below.
2023 Previous Guidance(1) (August 1, 2023) |
One-Time Items(a) |
All Other Adjustments(b) |
2023 Revised Guidance(1) |
|||||
Revenues* |
$67.0 to $70.0 billion |
-$(4.2) billion |
~$(4.8) billion |
$58.0 to $61.0 billion |
||||
Non-cash Inventory Write-offs(a) |
$5.5 billion |
|||||||
Adjusted(2) Diluted EPS* |
$3.25 to $3.45 |
$(1.46) |
$(0.34) |
$1.45 to $1.65 |
(a) One-time items include approximately $4.2 billion of a non-cash revenue reversal related to the return of an estimated 7.9 treatment courses of U.S. government EUA-labeled Paxlovid and a non-cash $5.5 billion inventory write-off of COVID products.
(b) All other adjustments include approximately $4.8 billion reduction in COVID product revenue due to the delayed commercialization of Paxlovid to January 2024 versus our previous expectation of commercialization in second half of 2023 as well as lower-than-expected vaccination rates for Comirnaty partially offset by $1.0 billion in anticipated savings from the cost realignment program.
