By Michael Erman and Bhanvi Satija
(Reuters) -Pfizer CEO Albert Bourla, under pressure from activist hedge fund Starboard Value, made his case to Wall Street on Tuesday that the drugmaker’s turnaround is succeeding after it reported a higher-than-expected profit due to strong sales of COVID-19 treatment Paxlovid.
Still, investors said the company had work to do to show it can improve its prospects, and Pfizer (NYSE:PFE) shares were off 2.4% at $28.18.
Bourla made his first public comments on Starboard’s criticism of management on a conference call to discuss the financial results.
He said Pfizer has been taking steps for some time to cut costs and has made changes to its corporate structure, including top management of its commercial operations and a new chief strategic officer. The company plans to name a new head of research and development soon, the CEO added.
Activist hedge fund Starboard Value has argued that Pfizer’s board needs to hold management accountable for the company’s underperformance, particularly questioning its record for producing profitable new drugs from internal research and development or acquisition.
Starboard declined to comment on the quarterly results.
“We plan to engage with shareholders, including Starboard, and consider any good ideas to create long-term shareholder value. But I don’t think that the statement ‘Something needs to change,’ is really pragmatic, because it’s coming 15 months late,” Bourla said.
The New York-based drugmaker has struggled with a sharp fall in sales of its COVID vaccine and antiviral Paxlovid from pandemic highs, prompting it to launch a cost-cutting program last year and focus on deals to bolster its business.
On Tuesday, the company said the better-than-expected rise in Paxlovid sales reflected higher infection rates during the quarter and strong commercial execution.
The company also raised its annual profit and sales forecast.
Pfizer shares are trading at roughly half of their pandemic peaks. Investors and analysts have said they want to see improved profitability from the cost cuts as well as revenue growth powered by its recent deals.
‘STILL SO MUCH TO DO’
Pfizer said it was on track to deliver at least $4 billion in savings from its cost cut program this year.
“It’s a first step across the start line of a marathon for them,” said Dave Wagner, portfolio manager at Aptus Capital Advisors, which owns about 260,000 Pfizer shares.
Wagner said he would like Pfizer to streamline its portfolio and cut costs further, especially in the supply chain.
“It’s not gonna de-escalate the pressure from Starboard whatsoever because there’s still so much to do,” he said.
Paxlovid sales of $2.7 billion in the quarter blew past analysts’ expectations of $456.40 million. The U.S. experienced a late summer spike in COVID-19 cases this year.
COVID vaccine Comirnaty, which Pfizer makes with German partner BioNTech (NASDAQ:BNTX), brought in sales of $1.42 billion, compared with expectations of $870 million, according to estimates compiled by LSEG.
The third-quarter results encouraged Pfizer to bump up its annual revenue expectations for Comirnaty and Paxlovid to $10.5 billion, from its previous forecast of $8.5 billion. Analysts expect combined sales of about $9 billion from the COVID products this year.
Pfizer raised both ends of its 2024 profit forecast range by 30 cents and now expects to earn $2.75 to $2.95 per share.
On an adjusted basis, Pfizer earned $1.06 per share in the third quarter, topping analysts’ estimates by 44 cents.
Total revenue of $17.70 billion handily beat estimates of $14.96 billion.
Pfizer in recent quarters has been beset with disappointing data for a closely watched experimental obesity drug, a weak launch of its respiratory syncytial virus (RSV) vaccine, and pulling its sickle cell disease treatment Oxbryta due to deaths in clinical trials.
The company said it continues to advance two other potential obesity treatments in its pipeline as it looks for a piece of a market some analysts say could reach $150 billion a year in the next decade.
