Pfiz­er’s para­dox: Al­bert Bourla walks a fine line as he tries to turn around 2023's worst-per­form­ing big drug­mak­er

What hap­pened to Pfiz­er?

In 2022, the com­pa­ny made Big Phar­ma his­to­ry: break­ing $100 bil­lion in rev­enue, thanks to its Covid-19 block­busters. CEO Al­bert Bourla be­came the pub­lic face of the drug in­dus­try’s pan­dem­ic hero­ism, as he tout­ed plans to bring the “light­speed prin­ci­ples” from Covid to oth­er dis­eases.

A year lat­er, the pan­dem­ic shine is gone. Pfiz­er is the worst-per­form­ing large phar­ma stock $PFE of 2023, falling near­ly 50% and eras­ing near­ly $140 bil­lion in mar­ket val­ue. It has mis­man­aged Covid ex­pec­ta­tions, spent its pan­dem­ic wind­fall on deals that are eat­ing in­to its earn­ings but may not pay off for years, suf­fered a fail­ure for a much-an­tic­i­pat­ed obe­si­ty drug, and di­vest­ed — on the rel­a­tive cheap — an as­set that Roivant months lat­er turned in­to one of the best M&A flips of all time.

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“2023 was a year of strug­gle, missed fore­cast­ing, and frus­tra­tion for in­vestors,” Evan Seiger­man, an an­a­lyst at BMO Cap­i­tal Mar­kets, told End­points News. “The core ten­sion is peo­ple feel they have squan­dered their Covid for­tune and are now in a sit­u­a­tion that’s re­al­ly hard to get out.”

On Wednes­day, Bourla tried to hit the re­set but­ton and get any re­main­ing ug­ly stuff out of the way. The com­pa­ny an­nounced an­oth­er $500 mil­lion in cost cuts, and gave its next-year fi­nan­cial pro­jec­tions — is­sued ear­li­er than in the past — that were low­er than what the street was ex­pect­ing. The stock on Wednes­day af­ter­noon was down 7%, head­ed for what would be one of its worst one-day loss­es of all time. And the last ques­tion on the hour­long call may have been the most re­veal­ing about how Pfiz­er is per­ceived, just a year af­ter be­ing atop the in­dus­try:

“Why wouldn’t a div­i­dend cut be on the ta­ble?” Jef­feries an­a­lyst Akash Tewari asked the $149 bil­lion gi­ant.

David Den­ton

CFO David Den­ton was em­phat­ic that a cut wouldn’t hap­pen — “Let me be clear, a div­i­dend cut is not on the ta­ble,” he said — but it’s rare that cor­po­rate stal­warts like Pfiz­er even get asked. When Gen­er­al Mo­tors and Gen­er­al Elec­tric fell on hard times and cut their div­i­dends in decades pri­or, the stocks of both fell in­to deep col­lapse.

“There is a path, but it’s not go­ing to be easy,” Les Funt­ley­der, a health­care port­fo­lio man­ag­er at E Squared Cap­i­tal Man­age­ment, which is not in­vest­ed in Pfiz­er, told End­points News. “Many health­care in­vestors are say­ing, ‘I’m go­ing to find green­er pas­tures.’”

Pfiz­er de­clined to com­ment be­yond Wednes­day’s call, or to make an ex­ec­u­tive avail­able for an in­ter­view.

“As we close out 2023 and look ahead to 2024, we are very fo­cused on ad­dress­ing un­cer­tain­ty and pro­vid­ing clar­i­ty,” Bourla said on the call, adding Pfiz­er’s busi­ness is ro­bust and “ca­pa­ble of dri­ving strong rev­enue and an at­trac­tive pipeline.”

Chal­lenges be­yond Covid-19 un­cer­tain­ty 

The prob­lem starts, but doesn’t end, with its Covid-19 busi­ness, which in com­par­i­son to any­thing oth­er than 2022 would be one of the biggest block­buster fran­chis­es in the in­dus­try.

Af­ter bring­ing in $57 bil­lion last year, Pfiz­er in Oc­to­ber had to chop down its rev­enue ex­pec­ta­tions for its vac­cine and an­tivi­ral pill, from $21.5 bil­lion to $12.5 bil­lion for 2023. And on Wednes­day, it is­sued a fore­cast for 2024 of $8 bil­lion, sug­gest­ing a fur­ther de­cline of 36%, well be­low Wall Street’s ex­pec­ta­tions. Bourla de­scribed the 2024 Covid-19 fore­cast as “con­ser­v­a­tive” and “some­thing that we can eas­i­ly make.”

But that de­cline is hap­pen­ing as mul­ti­ple ma­jor drugs lose ex­clu­siv­i­ty. Five block­busters — Eliquis, Ibrance, Xtan­di, Xel­janz, and In­ly­ta — are ex­pect­ed to see key US patent ex­piries be­fore the end of the decade. Those five drugs ac­count­ed for more than $15 bil­lion in 2022 rev­enue.

Bourla has turned to deal­mak­ing to fill that gap. Most no­tably, Pfiz­er will close its $43 bil­lion buy­out of Seagen on Thurs­day. But the phar­ma still has to show that the checks it has writ­ten will pay off, af­ter pay­ing $6.7 bil­lion for Are­na Phar­ma­ceu­ti­cals, $5.4 bil­lion for Glob­al Blood Ther­a­peu­tics, and $11.6 bil­lion for Bio­haven.

“Peo­ple are re­al­iz­ing they buy all these things and they kind of fade away,” Seiger­man said.

He called out Are­na as an ex­am­ple, where there was tons of ex­cite­ment when the deal was an­nounced in 2021. But now, “no one is talk­ing about” it, he said, de­spite a key drug, Vel­sip­i­ty, re­cent­ly win­ning ap­proval.

On the oth­er hand, Seagen has grown rev­enues, de­liv­ered late-stage tri­al suc­cess­es, and seen phar­ma in­ter­est surge in an­ti­body-drug con­ju­gates over the past few months.

Ten­sion be­tween deal­mak­ing and debt, in­vest­ment and cut­backs

This week’s C-suite shake­up re­flects a new ur­gency to ex­e­cute. Chief com­mer­cial of­fi­cer An­gela Hwang is out. Her de­par­ture, af­ter near­ly 27 years at the com­pa­ny, sug­gests the com­mer­cial per­for­mance wasn’t where the board want­ed it to be, Seiger­man said.

Aamir Ma­lik

Bourla said he per­son­al­ly de­cid­ed on the three com­mer­cial lead­ers go­ing for­ward: Chris Boshoff, chief on­col­o­gy of­fi­cer; Aamir Ma­lik, chief US com­mer­cial of­fi­cer; and Alexan­dre de Ger­may, chief in­ter­na­tion­al com­mer­cial of­fi­cer. Bourla said he’s known those three lead­ers for years, and trusts them with the job.

But the road ahead isn’t much eas­i­er.

Pfiz­er still needs to do deals to bring in $5 bil­lion in year­ly rev­enues by 2030 through deal­mak­ing. But the com­pa­ny al­so needs to pay down its debt and pro­tect its div­i­dend — pay­ing off the debt from Seagen will take 40 cents off next year’s earn­ings per share, Pfiz­er said.

And the com­pa­ny will have to do so while cut­ting costs in some ar­eas, and ag­gres­sive­ly in­vest­ing in Seagen’s can­cer busi­ness and pipeline.

“We have a great rea­son to be op­ti­mistic about the pos­i­tive mo­men­tum in our busi­ness, the op­por­tu­ni­ty that the Seagen ac­qui­si­tion brings for­ward and Pfiz­er’s strong long-term growth po­ten­tial,” Bourla said.