Declining demand for Pfizer’s Covid-19 vaccine and antiviral drug is leading the company to implement a cost-cutting plan projected to save billions of dollars while slashing an unspecified number of jobs.

The corporate shakeup comes as the company revised downward its revenue expectations for the year. Outside of Covid-19, Pfizer still projects 6% to 8% operational revenue growth. But the days of rapid revenue growth from Covid-19 products are over. Lower vaccination rates have dampened demand for the Pfizer vaccine, Comirnaty, but the main reason for the change in revenue expectations is due to the antiviral drug, Paxlovid.

Pfizer was already expecting lower demand for its Paxlovid. The U.S. government became the biggest buyer and distributor of the drug after it received its emergency use authorization in late 2021. But Paxlovid’s FDA approval this past  May put the product on track to transition to commercial sales channels. This transition will begin in November, Pfizer announced on Friday.

With Paxlovid becoming a commercial product, Pfizer said the U.S. government has amended its supply agreement for the drug and is returning an estimated 7.9 million courses of treatment labeled for emergency use authorization. Emergency use-labeled Paxlovid will remain available for free to eligible patients until the end of the year, but that means Pfizer expects minimal uptake of commercial sales of the drug until January. That’s a change from a prior expectation that commercial Paxlovid would start recording revenue in the second half of this year. Pfizer said the price of commercially available Paxlovid will be negotiated with insurance companies.

Globally, use of Paxlovid is trending slightly above last year’s rates, but is still lower than original expectations, Pfizer said. The lower-than-expected use of its Covid-19 products led Pfizer to record a non-cash charge of $5.5 billion in the third quarter of this year. That breaks down to a write-off of $4.6 billion for Paxlovid and $900 million for Comirnaty. For the full year, Pfizer projects revenue for both products will be about $12.5 billion, down $9 billion from previous projections. For context, the two Covid-19 products together accounted for $56.7 billion in revenue last year.

“We expect additional clarification on global vaccination and treatment rates by the end of the year, which we expect will be a good predictor of utilization in future years,” Pfizer CEO Albert Bourla said in a prepared statement.

Pfizer said it will cut costs to align with longer-term revenue expectations. The multi-year, companywide plan is projected to save at least $3.5 billion, starting with $1 billion savings in 2023. Pfizer said estimates it will record about $3 billion in one-time costs, attributed mainly to severance and implementation costs.

BioNTech, the partner in the development and commercialization of Comirnaty, said Monday that Pfizer informed it that most of the write-offs are related to raw materials for the vaccine purchased during the pandemic as well as vaccine doses produced at risk. Those doses were produced for variants other than the XBB.1.5 variant, which is covered by the updated version of Comirnaty that won FDA approval last month. BioNTech said it expects the writeoffs and other charges of up to €900 million (about $949 million) related to Comirnaty will be recognized in the third quarter of this year. That figure represents BioNTech’s half of the gross profit-sharing agreement with Pfizer.

Moderna issued a statement on Monday projecting full year 2023 revenue of $6 billion to $8 billion for Spikevax, the only other FDA-approved Covid-19 vaccine. The company added that this projection reflects the uncertainty of U.S. vaccination rates. The U.S. Covid-19 vaccination market is projected to be between 50 million administered costs and 100 million administered doses, but a more specific figure will depend on vaccination rates.

“Moderna believes it is still too early in the U.S. vaccination season to accurately project where vaccination rates will land for the full year,” the company said.

Photo: Chris Sweda/Chicago Tribune/Tribune News Service, via Getty Images