Pfizer announced on Wednesday the launch of a new multiyear program aimed at reducing costs as the company seeks to recover from the rapid decline of its Covid-related business. This new initiative comes in addition to a previously announced $4 billion cost-cutting effort, which was introduced last year in response to decreasing demand for its Covid vaccine and oral antiviral drug, Paxlovid.

In a securities filing, the pharmaceutical giant revealed that the first phase of this new program will focus on operational efficiencies, with an expected savings of approximately $1.5 billion by the end of 2027. The one-time costs associated with the initial stage of these cuts are projected to be around $1.7 billion, which includes severance packages for an unspecified number of laid-off employees. Pfizer anticipates that the majority of these charges will be recorded this year.

Pfizer also mentioned that the program will likely involve “product portfolio enhancements” and adjustments to the company’s manufacturing and supply network. A spokesperson for Pfizer told CNBC, “The program will focus on streamlining our ways of working, reducing complexity and increasing productivity in Pfizer Global Supply.” The spokesperson further explained that due to the complexity of manufacturing and the longer lead times required to implement changes, this program will be carried out in multiple phases.

This strategic move is part of Pfizer's effort to bolster investor confidence after a challenging year in 2023, during which its shares plummeted nearly 50%, making it the worst-performing pharmaceutical stock of the year. This significant share drop wiped out over $100 billion from Pfizer’s market value.

The decline in demand for Covid products last year coincided with several other setbacks for Pfizer, including the lackluster launch of a new RSV shot, a twice-daily weight loss pill that did not meet expectations in clinical trials, and an initial 2024 forecast that fell short of market expectations.

Despite these challenges, Pfizer managed to boost investor sentiment earlier this month by reporting first-quarter revenue and adjusted profits that exceeded expectations. The company also raised its full-year earnings outlook, citing confidence in its business prospects and its ability to reduce costs effectively.

“We are cautiously optimistic about the year,” said Pfizer CEO Albert Bourla during an earnings call on May 1. Following this positive announcement, shares of Pfizer closed 6% higher on that day, and the stock has since risen nearly 14%.