Pfizer earning details analysis and thoughts

Pharmaceutical giant Pfizer Inc. reported its first quarter 2023 results before the market on Tuesday, May 2, reporting revenue of $18.28 billion for the quarter, still beating previous estimates, despite a sharp decline in revenue related to new crowns.

I. Company Profile

Pfizer is an international pharmaceutical giant dedicated to the development of healthcare products, with specific businesses in pharmaceuticals, vaccines and consumer health.

Second, financial analysis: the period of epidemic windfall passed, revenue and net profit dropped sharply, but better than expected

On the revenue side, Pfizer's revenue for the first quarter was $18.28 billion, down 28.8% year-over-year, exceeding previous estimates of $16.6 billion. Pfizer's current revenue composition can be divided into three main covers, including primary care, skilled nursing and oncology, according to specific businesses, while the business innovation division was added this quarter. Based on the revenue composition, primary care revenue, which primarily includes the New Crown Vaccines and New Crown Specialties divisions, declined significantly. According to the chart, the segment's revenue was $11.505 billion in the first quarter, compared to $18.851 billion a year earlier, a 39% decline year-over-year. After all, as the New Crown epidemic draws to a close, revenue growth from New Crown Vaccine and Special Drugs is ultimately unsustainable and the overall downward trend is difficult to reverse.

Pfizer's net income for the quarter was $5.543 billion, down 29% year-over-year, with diluted earnings per share of $0.97. Adjusted net income was $7.036 billion, down 25% year-over-year, with adjusted earnings per share of $1.23, higher than the expected $0.97. Net income declined by the same margin as revenue declined sharply, but was also better than expected, mainly due to higher-than-expected demand for specialty drugs from the full-blown domestic outbreak in late '22 to early '23.

Operational Analysis: Despite the significant decline in new crown revenue, Pfizer continued to advance product development in accordance with its established plan, and its full-year 2023 earnings guidance was again higher than market expectations

1. The painful period of downward demand for new crown

In these years of the new crown epidemic, Pfizer can be said to have made a lot of money, with annual revenue jumping from $40-50 billion before 2020 to $81.3 billion in 2021 and $100.3 billion in 2022. In this regard, Pfizer's new crown vaccines and special drugs are to blame, to know that in the first quarter of 2022, these two alone together contributed close to $15 billion, accounting for more than half of the single quarter revenue, revenue in the first quarter of 2022 was $25.66 billion.

Just as the news of the new crown epidemic is getting better internationally, the few years of dividends brought by new crown are also going to be phased out, with only $7 billion in revenue from new crown vaccines and potent drugs in the first quarter of 2023, down more than 50% year-over-year. Interestingly, while vaccine revenue fell from $13.2 billion to $3.06 billion, revenue for potent drugs rose from $1.47 billion to $4.07 billion, mainly from the contribution of emerging markets, and mainly from the rise in our domestic demand, after all, but when the epidemic is in full swing, news of various high-priced potent drugs can be seen all the time.

Although the official table of Pfizer said 23 years in addition to the new crown products operating income can continue to grow 7%-9%, but this for the new crown products to reduce the part of the hole to fill seems to be still far away.

2. R&D progressing well

Pfizer spends a lot of money on R&D each year, and in the quarter it spent $2.51 billion on R&D, up 8.9% year-over-year and accounting for 13.7% of total revenue. The quarter saw good progress on important products, such as Prevnar 20, which was approved by the U.S. Food and Drug Administration to prevent invasive disease and pneumonia caused by 20 Streptococcus pneumoniae (pneumococcal) serotypes in the vaccine, including the seven serotypes that cause 40% of pneumococcal disease cases and deaths in the U.S. The future market in the U.S. is promising.

In addition, positive results have been achieved in the development of mRNA candidates for rsvPref (respiratory syncytial virus (RSV) bivalent vaccine candidate), and herpes zoster (varicella zoster virus or VZV).

3. Performance guidance remains under pressure

After a significant decline in the first quarter, Pfizer remains committed to forecasting a full-year revenue range of $67 billion to $71 billion, with a median of $69 billion, slightly higher than analysts' expectations of $68.54 billion; however, profits are weak, with full-year adjusted earnings per share ranging from $3.25 to $3.45, below analysts' expectations of $3.46.

Excluding COVID-19 products, Pfizer expects operating revenue to grow 7% to 9% in 2023, but that doesn't convince investors, after all, when the stock rises, the new crown products can make a big difference.

In addition, for the new crown product side of the guidance, Pfizer gives the new crown vaccine revenue of about $ 13.5 billion, down 64% year-on-year. Revenues from New Crown's specialty drugs were about $8 billion, down 58% year-over-year. From this decline, we can see that the rate of decline in the first quarter has slowed down quite a bit.

Fourth, the news analysis

In March, Pfizer announced the acquisition of Seagen for $229 per share, which is an important part of Pfizer's further investment in the field of oncology to fight against its old rival, Merck Sharp & Dohme, and it is believed that this move can help Pfizer make more breakthroughs in oncology-related products.

V. Technical Analysis

After the end of the uptrend brought by the new crown epidemic plus, Pfizer shares have retraced from a high of nearly 60 to the upper 40s. After a long offensive in the first few days, it managed to break above the 5-day SMA, but then fell back after the earnings release. In the short term, the short side is dominant and support is weak, so watch for the support level of $38.6 to hold.

Six, personal summary

1. compared to competitors in the new crown after a period of weakness, Pfizer due to the new crown halo greater in these years, the tide receded to bring a more violent decline, which also reacted early on the stock price, after all, Pfizer shares have fallen for a long time. The impact of the weakness of the new crown has not disappeared in the short term, and the road ahead is still the need to hunker down.

2. In the long run, after taking off some of the revenue from New Crown, Pfizer has a high probability of being able to continue to grow according to the established revenue growth plan. And Pfizer's R&D spending continues to grow in real terms, also in terms of blood transfusion for product matrix optimization and market position consolidation. A long-term focus on Pfizer is indeed a matter of persistence.

3. the first quarter of the new crown product revenue decline is relatively slow, mainly driven by the domestic market demand. But after the domestic epidemic is basically over, Pfizer's second quarter will encounter greater challenges.

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