As part of a sweeping cost-cutting initiative, Pfizer is looking to significantly reduce its manufacturing costs over the next three years. CEO Albert Bourla told analysts on Tuesday that the company is “already making progress” in realizing $1.5 billion in manufacturing reduction costs by the end of 2027.
Announced in May 2024, Pfizer’s Manufacturing Optimization Program is an effort aimed at reducing its cost of goods sold with the goal of improving gross margin performance.
While Bourla didn’t provide details on the program in Tuesday’s webcast with analysts, CFO Dave Denton said the company is continuing to “aggressively control” its costs and achieve operational efficiencies, with the first phase of the Manufacturing Optimization Program expected to deliver initial net cost savings in the latter part of 2025.
“You’re seeing a partial benefit in ’25. You’ll see more benefits as we wrap in ’26 and ’27,” Denton told analysts, while noting that “those savings get realized as we produce products into inventory and those savings become realized through the P&L [profit and loss] once we sell the inventory.”
Pfizer has weathered a steep decline in the sales of its COVID-19 products and expects to lose patent exclusivity for several medications over the next four years. In recent months, company management has been under pressure from activist investor Starboard Value for “dramatically” underperforming peers and the market.
However, with net cost savings of $4 billion through 2024, Truist Securities analyst Srikripa Devarakonda wrote in a Tuesday note to investors that Pfizer “continues to execute on cost-cutting initiatives which have positively impacted its bottom line.”
“We anticipate an additional $500M in cost-savings to be realized in 2025 and Pfizer is on track to realize $1.5B in [manufacturing] reduction costs by 2027,” according to Devarakonda.