Pfizer’s R&D organization has been in flux for almost two years now, since the $43 billion acquisition of ADC specialist Seagen. The new cuts were revealed in the company’s Q1 earnings report.
Pfizer is continuing its cost savings program and cutting $1.7 billion via an R&D reorganization and slashed administrative expenses.
The New York pharma already had a cost realignment program underway that was on track to save $4.5 billion by the end of this year. In its first quarter earnings report issued Tuesday morning, additional cuts were revealed that will run through 2027.
The newly announced cuts will bring the total cost alignment program to $7.7 billion, CEO Albert Bourla said in his prepared earnings remarks. The end goal is to bring Pfizer back to pre-pandemic operating margins, he added.
BMO Capital Markets, in a note to investors Tuesday morning, said Pfizer’s first quarter earnings of $13.7 billion represented a top-line miss of about 1%, but thanks to “more robust expense management” than expected, the results were a “bottom line beat” of 37%.
Pfizer said the savings would come through “digital enablement,” which includes automation and using AI in unspecified ways, as well as process simplification. The largest savings would be $1.2 billion achieved via cuts to selling, informational and administrative expenses.
An additional $500 million would be saved through a reorganization of R&D to be completed by the end of 2026. Pfizer will reinvest those savings back into the pipeline, according to an earnings press release.
“We continued to execute with focus and discipline against our strategic priorities, including strengthening our R&D organization and driving improved productivity,” Bourla said in the release. “With the underlying strength of our business, we believe we can be agile in navigating an uncertain and volatile external environment.”
Pfizer has been rejigging its R&D organization for almost two years now, with Chris Boshoff taking over the organization from Mikael Dolston, who left the company at the end of 2024. Bourla, in announcing Boshoff’s promotion from his perch as chief of the oncology program in November 2024, signaled that changes were ahead with the new appointment.
The first major changes to the R&D unit came after Pfizer bought Seagen for $43 billion in 2023.
Thanks to the cuts, CFO Dave Denton said Pfizer is “currently trending towards the upper end” of its expected adjusted diluted earnings per share (EPS) guidance of $2.80 to $3.
Pfizer is also realizing savings through a manufacturing optimization program, which is on track to achieve $1.5 billion in net cost reductions by the end of 2027. The company said initial savings are expected later this year.
Meanwhile, Pfizer is deploying its available capital into R&D programs, with $2.2 billion spent in the first quarter, plus $90 million invested in business development transactions. Shareholders also received $2.4 billion in dividends in this time period.
