In an effort to bounce back from the sharp decline in its Covid-related business, Pfizer has announced the launch of a new multi-year program for reducing costs. This initiative comes in addition to the $4 billion cost-cutting effort previously announced by the pharmaceutical giant last year, which was triggered by the slump in demand for its Covid vaccine and oral drug Paxlovid.

According to a securities filing, Pfizer's new program will be implemented in phases, with the initial focus on operational efficiencies. The company expects this phase to deliver approximately $1.5 billion in savings by the end of 2027. However, it should be noted that there will be one-time costs associated with the initial stage of the cuts, estimated at around $1.7 billion. These costs include severance packages for an unspecified number of employees who will be laid off as part of the program.

Pfizer foresees that the majority of these charges will be recorded within the current year. The cost reduction program will not solely rely on operational changes but will also involve "network structure changes" and "product portfolio enhancements," as stated in the company's filing. Due to the complexities of the manufacturing process and the longer lead times required for implementing changes, Pfizer anticipates that this program will be carried out over multiple phases.

The pharmaceutical giant's decision to implement these cost-saving measures follows a turbulent year for Pfizer's stocks. In 2023, the company's shares witnessed a nearly 50% decline, making Pfizer the worst-performing pharmaceutical stock of the year and wiping out over $100 billion from its market value.

Last year, Pfizer faced disappointment from Wall Street due to the underwhelming launch of a new RSV shot, a twice-daily weight loss pill that fell short in clinical trials, and an initial 2024 forecast that failed to meet expectations. However, the company's performance in the first quarter of this year has managed to please investors, with reported revenue and adjusted profit surpassing expectations. Pfizer also raised its full-year earnings outlook, generating confidence among investors.

Pfizer CEO Albert Bourla, during an earnings call, expressed cautious optimism about the year ahead. This sentiment resonated with investors, resulting in a 6% increase in Pfizer's stock on that particular day. Since then, the company's shares have risen by nearly 14%.

Pfizer's new cost reduction program is aimed at bolstering investor sentiment and further strengthening the company's financial position in the wake of the challenges posed by the decline in the Covid business. With a comprehensive strategy in place, Pfizer aims to navigate the complexities of the pharmaceutical industry and position itself for success in the years to come.