Pfizer Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended April 2, 2023. For subsidiaries outside the U.S., the quarter ended February 26, 2023; the comparable 2022 periods ended April 3 and February 27, respectively. Amounts below are U.S. dollars.
Business context and results
Pfizer is a global biopharmaceutical company. Biopharma is its only reportable segment; Business Innovation was established as an operating segment in Q1 2023. Results were dominated by lower Comirnaty sales, partly offset by Paxlovid growth.
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $18.282 billion | $25.661 billion |
| Income before income taxes | $6.270 billion | $9.050 billion |
| Net income attributable to Pfizer shareholders | $5.543 billion | $7.864 billion |
| Diluted GAAP EPS | $0.97 | $1.37 |
| Diluted adjusted EPS (non-GAAP) | $1.23 | $1.62 |
| Cash from operating activities | $1.212 billion | $6.541 billion |
| Capital expenditures | $1.139 billion | $643 million |
Financial position and liquidity
- At April 2, 2023, cash and cash equivalents were $2.166 billion and short-term investments were $17.806 billion, compared with $416 million and $22.316 billion, respectively, at year-end 2022.
- Total assets were $195.617 billion; total liabilities were $94.381 billion; total equity was $101.236 billion.
- Short-term borrowings, including current maturities, were $4.188 billion; long-term debt was $31.704 billion. Combined debt was approximately $35.9 billion.
- Operating cash flow fell sharply year over year. Management cited lower adjusted net income, timing of ordinary-course receipts and payments (including payments to BioNTech), reduced advance payments for Comirnaty and Paxlovid, and lower dividends received from equity-method investments.
- Pfizer said operating cash flow, financial assets, capital-market access and credit facilities support its expected liquidity needs. Its $7 billion committed U.S. revolving credit facility was essentially unused.
Material changes versus the prior period
- Revenue declined 29% (26% operationally, excluding foreign exchange). Comirnaty revenue fell to $3.064 billion from $13.227 billion; Paxlovid revenue rose to $4.069 billion from $1.470 billion.
- Excluding Comirnaty and Paxlovid, revenue increased 5% operationally, with contributions from acquired products and growth in Eliquis and the Vyndaqel family, among other products.
- Revenue declined across all reported geographic areas: U.S. 5%, developed Europe 54%, developed rest of world 25%, and emerging markets 39%.
- Cost of sales fell 51%, mainly reflecting lower Comirnaty sales; cost of sales was 26.7% of revenue versus 38.9%. Selling, informational and administrative expenses rose 32%, and R&D expenses rose 9%.
- Current assets were $50.078 billion and current liabilities $36.562 billion at quarter-end, versus $51.259 billion and $42.138 billion at December 31, 2022.
Outlook, management commentary and key risks
- As of May 2, 2023, Pfizer forecast 2023 revenue of $67 billion to $71 billion, with the midpoint implying an operational decline of 31% from 2022. It expected COVID-19 product sales to decline, partly offset by non-COVID portfolio growth, launches and acquired products.
- 2023 forecasts were approximately $13.5 billion for Comirnaty and $8 billion for Paxlovid. Pfizer expected U.S. commercial-market transitions for both products in the second half of 2023; the forecasts depend on uncertain demand, variant severity, deliveries, market share and transition timing.
- Pfizer agreed to acquire Seagen for $229 per share, with an enterprise value of approximately $43 billion. The deal was expected to close in late 2023 or early 2024, subject to approvals and other conditions; financing was expected to include approximately $31 billion of new long-term debt. Moody’s moved its long-term debt outlook to Negative after the announcement, and S&P lowered its short-term rating.
- The Seagen agreement carries a potential reverse termination fee of approximately $2.22 billion in specified circumstances. Pfizer warned that failure to close, financing, integration and realization of expected benefits are risks.
- Pfizer reported $264 million of certain asset impairment charges and $451 million of net losses on equity securities in other income/deductions. Its effective tax rate was 11.4%, versus 12.9%, primarily due to a favorable jurisdictional mix of earnings.
- Risks include patent challenges and generic competition, pricing and reimbursement pressure, clinical and regulatory uncertainty, product supply or recall issues, foreign exchange exposure, and litigation and government investigations. Pfizer said it did not believe pending legal matters would materially harm its financial position, but could not estimate reasonably possible losses above accrued amounts.
- The company expected ongoing restructuring and productivity work, including R&D optimization; activities under its multi-year program were expected to be substantially completed by the end of 2023, with certain savings initiatives extending beyond that date.
Important facts for investors to verify
- Progress against the $67 billion to $71 billion 2023 revenue outlook, particularly COVID-19 demand, contracted deliveries and commercial-market transitions.
- Whether operating cash flow improves from Q1 and how much is affected by working-capital and customer-payment timing.
- Seagen closing conditions, financing terms, resulting leverage and credit-rating developments.
- Growth, launch and regulatory progress for non-COVID products and pipeline candidates, alongside upcoming patent expirations and generic competition.
- Developments in significant product, patent and government matters, including Comirnaty-related patent litigation and the Seagen-related regulatory process.