Pfizer’s Post-Pandemic Fizzle

Plus: Tesla has sold millions of cars in the US. It's recalling nearly all of them. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

December 14, 2023

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Good morning.

Forty million dollars is a lot even for the CEO of the eighth-largest oil company in the world.

London-based BP said Wednesday that its former CEO, Bernard Looney, stands to lose that much in compensation following his sudden resignation in September over past relationships with colleagues. At the time, Looney admitted that his past disclosures to the board dating back to 2022 hadn't been "fully transparent." Turns out he wasn't being fully transparent when he apologized for not being fully transparent, with subsequent allegations leading the board to conclude they were "knowingly misled." Like everything else, the price of office indiscretions is rising.

HEALTHCARE

Pfizer Built a Covid Empire, But the World Has Moved On

Two years ago, Pfizer was hailed as a hero, keeping us safe from Covid with its groundbreaking technology. But the world's moved on from the pandemic, and nobody loves you when you're down.

Pfizer's stock slumped nearly 7% on Wednesday to its lowest level in more than 10 years after the company said 2024 profit and revenue would fall well below Wall Street's expectations. The weak outlook dovetails with the rough state the biotech industry has found itself in since the pandemic began winding down — unless your company has a weight-loss drug.

Masks Down, Gloves Off

Alongside its partner BioNTech, Pfizer was pharma's biggest name at the pandemic's height. Its vaccine, and similar ones produced by Moderna and Johnson & Johnson, were miracle drugs that allowed families to spend holidays with each other again and put workers back in offices without the fear of catching or spreading the virus. Thanks to high sales of its vaccine and post-infection Paxlovid treatment, Pfizer generated more than $100 billion in revenue in 2022 for the first time in company history.

Fast-forward one year, however, and demand isn't the same. The Centers for Disease Control says that roughly 70% of Americans received the first two doses of a vaccine, but less than 20% got a booster. More than a few factors are at play here, including the falloff in public service announcements, political polarization, and the reality that covid isn't a death sentence for most people who aren't elderly.

Pfizer still expects as much as $61.5 billion in revenue in 2024, which is still a lot of money, but not when the Street was expecting at least another billion on the top line:

In October, Pfizer said it planned to cut $3.5 billion in costs by the end of 2024. The measures include closing down a New Jersey facility, shuttering two operations in North Carolina, and laying off hundreds of employees. On Wednesday, the company bumped the cost-cut target up to $4 billion.
To diversify its revenue streams, Pfizer is acquiring Seagen, a biotech company that develops antibody-based therapies for cancer treatments, for $43 billion.

Out of the Woods?: Though the writing has been on the wall for biotech for the past year, The Wall Street Journal reminds readers it's a marathon, not a sprint. Promising industry advancements are being made in oncology, gene editing, and psychiatric treatment, but the real draw for investors might be those rate cuts everyone is praying for in 2024. It often takes years for biotech companies to bring a product to market, so lower borrowing costs should lift all biotech boats not in the weight-loss ocean.

Written by Griffin Kelly

Hands at Ten and Two

The road to fully autonomous vehicles has been a bumpy one. Tesla's recall — which covers nearly all models X, Y, S, and 3s sold since October 2012 — comes after a roughly two-year investigation by the NHTSA into a series of crashes involving the Autopilot systems, some of which were deadly.

Autopilot can steer, brake and accelerate, but it cannot, despite its name, fully drive the car itself. A driver-monitoring system requires hands be kept on the steering wheel when Autopilot is engaged. But the system is easy to fool, and the NHTSA found that it wasn't keeping drivers engaged and aware. A new software update for the models is supposed to make them safer:

The update will limit where Autopilot's Autosteer feature can be used (it's more for freeways than city streets) and simplify how it's turned on and off. Additionally, some newer models will add more visual and audible alerts for when the system requires driver assistance.
Following the update, some drivers could even be suspended from using the Autosteer feature if they too often fail "to demonstrate continuous and sustained driving responsibility," according to recall documents.

Eyes on the Driver: Still, some safety advocates say the software update isn't enough. "The compromise is disappointing because it does not fix the problem that the older cars do not have adequate hardware for driver monitoring," Philip Koopman, electrical and computer engineering professor at Carnegie Mellon University, told the AP. Other automakers have implemented camera systems to monitor driver engagement with similar driver-assist systems. Tesla's update also fails to address its cars' unfortunate habit of crashing into emergency response vehicles. The only thing worse than getting T-boned by a self-driving Tesla is getting T-boned again in the ambulance on the way to the hospital.

Written by Brian Boyle

BIG TECH

Apple Faces EU Punishment for App Store 'Bullying'

Photo by Andy Wang via Unsplash

DJ Khaled's "All I Do Is Win" is in heavy rotation over at Spotify.

Four years after the Sweden-based company lodged a complaint that Apple unfairly disadvantaged music-streaming competitors, the European Union is preparing to levy a hefty fine against the company and ban some of its App Store practices, sources told Bloomberg. The hammer is dropping just days after Google lost a similar US antitrust fight against Epic Games. Rage Against the Machine is trending on both sides of the Atlantic.

Please Don't Stop the Music

The dispute grew out of the 30% commission Apple takes from all App Store sales, plus the "anti-steering" tactics it uses to prevent people from seeking other, often cheaper, options by signing up via a company's website rather than the App Store. Spotify says it was forced to raise subscription prices to cover the costs of the alleged App Store bullying — while cheaper options remained available for those who subscribe directly with Spotify.

Apple says it's no longer an issue. Earlier this year, it eased its anti-steering policies, allowing Spotify and others to direct users to exit the app for cheaper options on the web. But at a private hearing in June with the European Commission, the EU's antitrust body, Spotify said Apple's change of heart was merely "just for show," sources told Bloomberg.

Now, it appears Spotify has convinced regulators:

The European Commission is putting "the finishing touches" on its final decision, which sources told Bloomberg will formally bar Apple from using anti-steering practices against Spotify and other competitors.
Apple may also face a fine as high as 10% of its annual EU revenue. Apple reported sales of roughly $94 billion in the EU in fiscal 2023.

Unhappy New Year: The final decision is expected early next year, which could neatly coincide with the Digital Markets Act, the EU's comprehensive reforms targeting Big Tech that will take effect in March. Among the DMA's rules are bans on Big Tech platforms favoring their own services, combining personal data across different services (like Facebook, Instagram, and Threads), and using data collected from third parties to compete against those third parties. Call it a major antitrust software update.

Written by Brian Boyle

Extra Upside

No pause on pausing: The Fed holds interest rates steady for third straight time.

Strange things happening: Netflix finally reveals its viewership data.
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