Pfizer (PFE) beat earnings in the first quarter of 2024, giving its stock a much-needed 7% rise on Wednesday.
The company reported revenue of $14.9 billion, down 19% year over year. That beat Wall Street estimates of $13.9 billion by 6.9%. Excluding its COVID products, the company grew 11% with revenue of $12.5 billion.
Despite the profit, investor enthusiasm for Pfizer has waned in recent months. In addition to declining sales of COVID products, the company lacks a potential near-term blockbuster – making it a safe but unexciting bet.
Pfizer shares are trading near their 52-week low of $25 and have fallen 30% over the past year, much lower than their pandemic peak of $58 per share in late 2021.
CEO Albert Bourla has made several moves to strengthen the pipeline, including the $43 billion acquisition of Seagen, and continues to announce new product launches – but they will take time to come to fruition.
For this reason, investors are cautious despite the stock’s uptick.
“We expect PFE shares to continue to remain range-bound in the near term…” [and] We don’t think the COVID uptick alone is enough to drive stocks higher in the near term. Rather, we believe that stronger performance in new launches and/or further pipeline progress will be necessary to change the current view of the stock,” JPMorgan analyst Chris Schott wrote in a note to clients on Wednesday.
Pfizer also faces expiration of patents on some of its biggest drugs, including breast cancer drug Ibrance in 2027 and its vaccine Prevnar 13 in 2026, and one drug, Eliquis, is under pressure from Medicare price negotiations.
Lee Brown, global sector head for healthcare at research firm Third Bridge, said in a statement that the Medicare negotiations, part of the Inflation Reduction Act, are a concern.
“Our focus remains on Eliquis, whose revenue increased 9% year over year to just over $2.0 billion, beating consensus by 4.5%. Eliquis represents nearly 14% of Pfizer’s Q1 sales, and we recognize the uncertainty associated with Medicare’s Inflation Reduction Act.” “Part D of the pricing negotiations,” Brown said.
“The maximum fair price will be published on September 1st and could significantly impact Eliquis’ prospects. We also note that Eliquis faces generic competition in several international markets and faces loss of exclusivity in the U.S. in April 2028,” he said.
But beyond the product pipeline, the company’s value to shareholders remained a question last year.
“The dividend is a sacred cow for us”
Adding to pipeline concerns, investors had been waiting for their chance to get a share of the pandemic windfall, either through higher dividends or through company share buybacks. But that didn’t work.
The company said it would maintain its dividend and had no plans to cut it, which had worried some investors before the announcement as profits fell following the pandemic.
Geoff Meacham, Bank of America managing director and senior healthcare analyst, told Yahoo Finance that most companies would cut their dividend if they were in the same position as Pfizer and had muted growth prospects.
“It’s a diversified, large company, so it won’t be the end of the world. But the growth is just going to look pretty ugly,” he said.
Pfizer has paid a dividend for 340 consecutive quarters and is focused on increasing shareholder value, executives said in its earnings release on Wednesday.
CFO David Denton told investors that the company is prioritizing maintaining and increasing its dividend and paid out $2.4 billion to shareholders in the first quarter. In addition, Pfizer plans to reduce its acquisitions and other debt and invest $2.5 billion in internal research and development.
“Our top priority from a capital allocation perspective is to both support our dividend and grow it over time – and that is not at risk,” Denton said.
While Pfizer’s yield isn’t considered low at more than 6% per year, its quarterly dividend is just $0.42. And investors fear the company will have to cut the dividend as its revenues reach the right size in the coming months due to both the impact of the pandemic and patent cliffs.
However, CEO Bourla emphasized that this was not the case.
“The dividend is a sacred cow for us. The dividend – it is safe and we will continue our policy.” [the] Dividend, as we have repeatedly promised,” he said on the conference call.
Bourla has also taken bold personal steps to support the company’s prospects, including investing his entire pension in Pfizer shares earlier this year.
The company has no plans to buy back shares this year, which is another reason investors are no longer excited.
Anjalee Khemlani is the senior healthcare reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and healthcare politics and policy. Follow Anjalee on all social media platforms @AnjKhem.
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