Pfizer said Wednesday that the company has launched a new multi-year plan to reduce costs.
Zhitong Finance learned that Pfizer (PFE.US) said on Wednesday that the company has launched a new multi-year plan to reduce costs while trying to recover from the rapid decline in the COVID-19 business. In a securities filing, the pharmaceutical giant said the first phase of its new plan focuses on improving operational efficiency and is expected to save the company around $1.5 billion by the end of 2027. The one-time costs associated with the initial layoffs are estimated to be around $1.7 billion, including severance payments for an unknown number of laid-off workers. The company expects to record most of these expenses this year.
Pfizer announced another $4 billion cost reduction plan last year as demand for its COVID-19 vaccine and oral drug Paxlovid dropped sharply.
A Pfizer spokesperson said the plan would also involve “product portfolio enhancements” and changes to the company's manufacturing and supply networks. “The program will focus on streamlining the way we work, reducing complexity, and increasing the productivity of Pfizer's global supply,” the spokesperson said in a statement.
Pfizer added in the document: “Given the complexity of manufacturing and the long delivery times required to make changes, the plan will be a multi-phase effort.”
Pfizer's stock price fell nearly 50% in 2023, making it the worst-performing pharmaceutical stock last year. Currently, the company is trying to boost investor sentiment. This drop in stock prices erased Pfizer's market capitalization of more than $100 billion. As demand for COVID-19 products dropped sharply last year, Pfizer also disappointed Wall Street by introducing a new RSV vaccine, a diet pill taken twice a day. It did not perform as well as expected in clinical trials, and the initial 2024 forecast did not meet expectations.
However, Pfizer's first-quarter revenue and adjusted profit announced earlier this month exceeded expectations and raised full-year profit expectations, which made investors happy. The pharmaceutical giant said its new profit guidance explains its “confidence” in the business and its ability to cut costs.
“We are cautiously optimistic about this year,” the Pfizer CEO said during the May 1 earnings call. The company's stock price closed up 6% on the day. Since then, Pfizer's stock has risen nearly 14%.