Pfizer Q3 Results Review - Revenue Performance Weaker Than Expectations: Systematix

Systematix Research Report

Pfizer Ltd.'s Q3 FY24 revenue was lower 13% YoY as against our expectation of a 7% YoY decline. The steep decline was not anticipated, as the base quarter last year included the adverse impact of portfolio divestment to Upjohn and the adverse impact owing to patent expiry of Eliquis.

We estimate that supply disruption of antibiotic portfolio, our estimate 2022 led price cuts and vale erosion owing to Zavicefta patent expiry cumulatively have knocked off low double digit percentage sales from the base numbers.

The base business growth adjusted for these events seems to have been flat on a YoY basis. The gross margin for the quarter stood at 66.2% and was up 180 bps QoQ and 110 bps improvement YoY. However, the Ebitda margins came in softer despite gross margin improvement owing to softer sales and other expenses expanding 18% QoQ and 5% YoY.

We revised our forecasts and roll-over our price target to FY26E EPS. In our FY26E we partially bake in contribution from new launches like abrocitinib, Prevenar 20, aztreonam avibactam and etrasimod.

We assign a 30 times multiple to arrive at target price of Rs 5,036 and have a buy rating at current market price. We expect Pfizer revenue / Ebitda / net earnings to grow at a compound annual growth rate of 6% / 5.5% / 7.2% over FY23-26E.

The key catalysts for the stock price should be-

1. ramp up in recently launched product abrocitinib for atopic dermatitis,

2. Relaunch of their antibiotic portfolio, where supplies have been disrupted,

3. regulatory approval for novel products like Prevenar 20, aztreonam plus avibactam and etrasimod, and

4. a potential special dividend payout as the company is sitting on a large cash position.

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