Pfizer Faces Investor Scrutiny Ahead of Q3 Report
Pfizer Inc. (NYSE:PFE) is preparing to announce its third-quarter financial results on Tuesday, while the company and its CEO face increased scrutiny from activist hedge fund Starboard Value. Investors and analysts are looking for signs of improvement in profitability following the comprehensive cost-cutting measures implemented last year by the pharmaceutical manufacturer. Additionally, they are focusing on the revenue increases from cancer drugs acquired during the company's acquisition wave from 2021 to 2023.
Pfizer's management team is expected to lay the groundwork for accelerated growth by 2025. Jeff Jonas, a portfolio manager from Gabelli Funds who holds Pfizer shares, predicts a significant improvement in earnings next year due to increased sales and a stronger balance sheet. This could potentially sustain the company’s approximately 6% dividend yield.
Pfizer's stock has suffered due to a decline in pandemic concerns and falling sales from COVID-19 vaccines and treatments, with shares trading at nearly half the pandemic-era peak. The company, worth approximately $162 billion, witnessed investors pulling away during this decline.
Starboard Value criticized Pfizer's board for not holding management accountable for the company's underperformance. Starboard's CEO, Jeff Smith, suggested that a leadership change could be beneficial, although he did not explicitly call for the resignation of Pfizer CEO Albert Bourla.
Beyond the decline in COVID-19 revenues, Pfizer has faced challenges, including disappointing results for an experimental obesity drug, a weak launch of an RSV vaccine, and the withdrawal of its sickle cell disease treatment, Oxbryta, due to deaths in clinical trials.
Analysts expect third-quarter revenue to reach $14.95 billion, indicating a 13% increase year-over-year. The second quarter of 2023 had been a low point for the company as it revised down its sales forecasts for COVID vaccines and treatments. Guggenheim analyst Vamil Divan noted that the rise in COVID cases in the U.S. during late summer could lead to better-than-expected performance for Pfizer in this area during the quarter.
However, Divan emphasized that strong quarterly results alone would not alleviate investor concerns. Pfizer executives need to demonstrate their commitment to future growth in both cost management and portfolio enhancement.
Investors are particularly interested in the performance of cancer drugs Padcev and Adcetris, which Pfizer acquired through its $43 billion purchase of Seagen last year. William Couchman, an executive at Birmingham Capital Management, expects better results from the Seagen drugs as Pfizer continues to integrate the acquired company. According to LSEG data, Birmingham Capital Management continued to buy Pfizer shares, holding approximately $5 million worth as of June.
Pfizer shares closed slightly lower at $28.45 last Friday. Couchman expressed confidence that the stock price would reflect this success when Pfizer demonstrates the value of its acquisitions and gains momentum with its other products.