Pfizer, the pharmaceutical giant, has announced a new multi-year cost-cutting program in an effort to rebound from the decline of its Covid business. This initiative comes on the heels of a previous $4 billion cost-cutting effort that was announced last year as demand for its Covid vaccine and oral drug Paxlovid decreased.
The first phase of the new program is focused on operational efficiencies and is expected to save the company about $1.5 billion by the end of 2027. However, there will be one-time costs related to the initial stage of cuts, estimated to be about $1.7 billion, including severance for an unspecified number of laid-off employees. The majority of these charges are expected to be recorded this year.
The program will also involve "product portfolio enhancements" and changes to the company's manufacturing and supply network. Pfizer stated that the program will focus on streamlining ways of working, reducing complexity, and increasing productivity in Pfizer Global Supply.
The company is aiming to shore up investor sentiment after its shares fell nearly 50% in 2023, making it the worst-performing pharmaceutical stock of the year. This decline erased over $100 billion in Pfizer's market value.
Despite the challenges faced by Pfizer, the company pleased investors earlier this month when it reported first-quarter revenue and adjusted profit that beat expectations and hiked its full-year earnings outlook. Pfizer CEO Albert Bourla expressed cautious optimism about the year ahead during an earnings call on May 1.
Following this positive news, Pfizer's stock closed 6% higher that day and has since risen nearly 14%. The pharmaceutical giant's new profit guidance reflects its confidence in its business and its ability to reduce costs, signaling a potential turnaround for the company.