Pfizer's Q3 Earnings Highlight Post-COVID Struggles as Teva Outperforms

What happened

Pfizer and Teva Pharmaceutical Industries reported third-quarter earnings, revealing a stark contrast with Teva crushing expectations while Pfizer's revenue declined 5.9% year-over-year to $16.654 billion. Pfizer continues to grapple with replacing lost COVID-19 vaccine and treatment sales, as highlighted in the DeepValue report, which notes revenue stabilization around $61-64 billion amid a pivot to oncology via the Seagen acquisition. The company's $7.7 billion cost-saving plan by 2027 and manufacturing optimizations aim to support margins, but execution risks remain high given volatile free cash flow and moderate leverage. Persistent headwinds include U.S. vaccine demand softness, a ~$1 billion IRA Part D headwind, and reduced growth optionality from GLP-1 pipeline setbacks, tempering near-term upside. Teva's strong performance underscores competitive pressures in the sector, emphasizing Pfizer's need to accelerate strategic initiatives while navigating ongoing operational challenges.

Implication

Pfizer's earnings report validates the DeepValue report's concerns about post-COVID revenue normalization, with declining sales highlighting insufficient offset from new growth drivers like oncology. Cost-saving targets of $7.7 billion by 2027 are essential for margin recovery, but any slippage could exacerbate financial strain given the stock's valuation above intrinsic value. Oncology growth via Seagen's ADC portfolio remains a critical catalyst, yet clinical setbacks or regulatory delays could undermine this pillar amid reduced obesity pipeline optionality. Teva's outperformance signals intense sector competition, pressuring Pfizer to deliver on operational efficiency and innovation to regain momentum. With U.S. vaccine softness and IRA impacts persisting, investors should maintain a cautious stance until clearer evidence of execution emerges from cost-savings run-rates and ADC milestones.

Thesis delta

The earnings report does not shift the core HOLD thesis but reinforces the urgency of Pfizer's execution on cost-savings and oncology growth amid ongoing revenue challenges. It validates the DeepValue report's identified headwinds, such as U.S. vaccine softness and IRA impacts, while highlighting competitive risks from peers like Teva. Investors should await progress on watch items—particularly cost-savings run-rate toward $4.5 billion by year-end and positive ADC clinical updates—before considering a rating change.