Operator:

Good day, everyone, and welcome to Pfizer's Second Quarter 2024 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Francesca DeMartino, Chief Investor Relations Officer and Senior Vice President. Please go ahead, ma'am.

Albert Bourla:

Thank you, Francesca. Good morning everyone. We are pleased to report that we’ve had a strong first half of the year and our business is performing well. We drove progress in the second quarter with solid execution as we continue making a difference in the lives of patients around the world. Through the first six months of 2024, we reached more than 192 million patients with our medicines and vaccines. Today, I’ll provide updates about how we continued advancing our key strategic priorities in the second quarter. I will also mention examples from just the past few weeks when we have achieved a series of regulatory approvals, pipeline advances and other positive developments that we expect to fuel our progress through the rest of the year. We are pleased with the strong financial results coming from our disciplined execution. In the second quarter, for example, we achieved year-over-year revenue growth for the first time since the fourth quarter of 2022 when our COVID revenues had reached peaked. Dave will talk about this and additional aspects of our financial performance, as well of course our outlook. And then, we will take questions. Before we go further, I will touch on some recent announcements about our leadership team and Board of Directors. I'll start with Mikael Dolsten’s coming departure. It’s hard to find words that do justice to the substantial impact Mikael has had during his 15-year tenure at Pfizer. Mikael transformed our R&D engine, ultimately delivering 35 approvals that have been meaningful for millions of patients globally. I thank my colleague, and my friend, for these tremendous contributions to human health. I look forward to working closely with him over the coming months as we search for his successor. Until then, Mikael will continue to lead as our Chief Scientific Officer and President of Pfizer Research & Development. I want to welcome Andrew Baum, our new Chief Strategy and Innovation Officer. Andrew brings deep clinical, scientific and biopharmaceutical sector expertise, and we are fortunate to have him to help shape and guide our strategy. While Andrew is not able to join us today because he is relocating with his family to the United States, he will be with us for future quarterly calls. I also want to mention the recent addition of Cyrus Taraporevala to our Board. We are committed to strong governance supported by directors with a breadth of unique experiences and skills, exactly like Cyrus. Cyrus was President and CEO at State Street Global Advisors until he retired, two years ago, and he brings vast experience in investment management and financial markets. We are thrilled to have him joining our board. Now, l'll turn to our performance. The five strategic priorities we shared at the beginning of the year remain unchanged. With our focus on the most important opportunities for advancing and strengthening our company, we are confident we remain on track in 2024. In the second quarter, our colleagues moved our business forward in each key strategic area. As a reminder, they are

Albert Bourla:

Yes. Thank you, Dave. Let’s start the Q&A session. Operator, please assemble the queue.

Louise Chen:

Hi, thanks for taking my questions. So I wanted to ask you on danuglipron, when do you expect to see the actual efficacy data and if this product moves forward as anticipated, how hard would it be for you to manufacture?

Mikael Dolsten:

Yes. We are, as Albert said in the oral remarks, doing the dose optimization for PK and formulation to select potential doses for pending data progression to Phase 3 and we expect to share that first quarter.

Operator:

Our next question comes from Mohit Bansal with Wells Fargo.

Albert Bourla:

Perfect question for Dave.

Albert Bourla:

Thank you, Dave. Operator, the next question, please.

Terence Flynn:

Great. Thanks for taking the question. Was just wondering, had two on the new product cycle side, how are you guys thinking about this upcoming RSV season? As we think about patients coming back in for a booster, as well as maybe an existing new group of patients coming in. And then on Elrexfio and myeloma, can you give us any color on the launch, either sales or market share there? And if you're still confident in that $4 billion opportunity, thank you.

Aamir Malik:

Hey, Terence, it's Aamir. For Abrysvo, I think we are very well positioned going into the fall season in the U.S. for three main reasons. One is contracting. So we've significantly strengthened our contracting position. Many of those decisions were confirmed shortly after the June ACIP and are set to take effect in August, commensurate with the beginning of the season. The second is the ACIP guidance itself, with a recommendation for a single dose for all adults over 75 and those 60 to 74 that are at increased risk. We think that is just clear and strengthens the directive for those who are eligible for a vaccine. And then thirdly, is just Abrysvo itself. We've got great data, including two seasons of durable efficacy data. As Albert alluded to earlier, we have both our current needle free reconstitution kit that is never required to be frozen or thawed, as well as our new active biosystem, which offers many advantages and including 80% storage efficiency, so there's good options for customers. And I will also remind you that there's many healthcare providers and pharmacies that prefer simplifying their vaccine management by having one vaccine for both older adults and maternal, which only a Abrysvo can offer. So the combination of contracting, the ACIP guidance and the value proposition of Abrysvo positions as well in the U.S.

Alexandre de Germay:

Yes, Terence, good question on Abrysvo. We are making great progress as well on the international fronts following the approval, remember, in the second half of 2023 in Europe and in the UK. We already are progressing nicely with vaccine technical committee recommending positively Abrysvo. So we got positive recommendation in the UK, in France, in Canada, in Australia and several other markets and in Saudi Arabia as well. So we are moving very nicely. Delighted that actually UK authority have selected Abrysvo for RSV prevention in older adults as well as in maternal immunization for pediatric for the next two years with an option of additional two years. And we also were selected in Canada specifically also for adult vaccination.

Chris Boshoff:

Thank you for the question on Elrexfio. As you saw, we recently demonstrated the updated median overall survival data for Elrexfio in the intent to treat 123 patient population in the late-line disease, where we see an overall survival of 24.3 months, which we believe is differentiated. Elrexfio also have a differentiated profile in terms of the safety profile as well as other factors including subcutaneous administration, flat non-weight-based dosing and a flexible dosing regimen overall. We've now launched in 16 countries and in fact in Japan, we were the first to launch and it's early days. We've also recently got approval in the EU and UK. In the U.S., total demand is plus 40% growth sequentially quarter-over-quarter and early next year or during 2025, you'll see the readouts for the bigger opportunities, which is MagnetisMM-5 in the double-class exposed population and then later in the year, potentially MagnetisMM-32, which is post-CD38. So overall, we remain confident that we've got a very differentiated molecule that could become a backbone across the continuum of care for multiple myeloma.

Operator:

The next question comes from Alex Hammond with Bank of America.

Albert Bourla:

Thank you. Great questions. Aamir and then Alexandre.

Albert Bourla:

Thank you. Alexandre?

Albert Bourla:

And I believe, Alexandre, that this year, we got almost 55 countries registered Nurtec in international markets, 55 markets on [indiscernible] 15 received already reimbursement, and we are waiting for the remaining 40 to receive reimbursement. Let's move to the next question.

Akash Tewari:

Hey, thanks so much. On next-gen Prevnar, your team has been fairly quiet on its profile. Let's say that the next-gen product only hits 27 serotypes and not 31 like some of your peers. Why should we feel confident that Pfizer can retain a lion's share position in this market? And you mentioned the next-gen product actually having the largest serotype coverage. Does that imply greater than 31 serotypes of coverage?

Mikael Dolsten:

Thank you. As you know, we have worked over several decades in optimizing how to expand the number of serotypes while maintaining strong immune responses for as many as possible. We have not disclosed yet how many serotypes we have. We have recently pursued expansion of that next-gen into Phase 2 of both pediatric and adult and look forward to adult data to come quite soon, which will allow us to move swiftly in that indication. We have made significant improvement on existing and new serotypes through new technologies. And that is a deep capability. So it's not just about having the highest number of serotypes. It's really to show the consistency and the data before you can draw any conclusion. So we remain very confident in our ability to defend our leadership position and continue to expand it through these new technology tool bots.

Operator:

We'll take our next question from Chris Shibutani with Goldman Sachs.

Albert Bourla:

Thanks, Chris. I will ask Aamir to speak a little bit about the Eliquis specifically. And then, Dave, can you cover the general impact of IRA?

Dave Denton:

Yes. And then I would just add to that, as we look at IRA across our platform, first, I think we were very fortunate Pfizer that we had one product selected. And secondly, if you look at the remaining products that are likely to be – that could potentially be selected, they are nearing the end of their patent protection life. So if you think about it from a net present value perspective, the impact on Pfizer is somewhat muted as you think about it economically. I will say this is a piece of legislation that clearly is harmful for supporting research and development in the sector. So we're hopeful that this could be changed in the future, but we will continue to actively manage our way through this.

Operator:

[Operator Instructions] We'll take our next question from Dave Risinger with Leerink Partners.

Albert Bourla:

Yes. Mikael, why don't you give a little bit on the obesity candidates other than danu?

Albert Bourla:

And what about the cost reduction?

Albert Bourla:

Thank you. Operator, next question please.

Kripa Devarakonda:

Hey guys, thank you so much for taking my question. I have a question on the RSV in maternal market. How has – have you gained traction in the maternal market? Are you seeing any sort of setbacks? Just wondering if Pfizer needs to educate, build out or do some groundwork before the market really breaks open. And then a follow-up question on PADCEV, there are other radioligands and ADCs that are targeting Nectin-4. Are there – how do you see the competitive landscape shaping up? Thank you.

Aamir Malik:

Sure, Kripa. So thanks for the question. I think let me start by just underscoring the interest that we see on maternal vaccination. So when you talk to OB/GYNs, there's a clear preference that they have to vaccinate during pregnancy. And similarly, you hear the same from pregnant mothers. Greater than 60% prefer vaccination versus vaccinating the baby, maternal vaccination. So our launch on maternal did exceed our expectations. So we saw uptake rates through the end of January with about 11% of eligible mothers taking the vaccine. And that is significantly higher than other maternal immunization at the same point in the life cycle. I think key Tdap was less than 2% at the same time. So the other thing I will note is it does require education, as you know. And last year's maternal ACIP recommendation occurred just after the RSV maternal vaccination season began. So this season, we have the benefit of using the first half of the year to invest in that education of both HCPs as well as pregnant women, and we look forward to the season ahead.

Alexandre de Germay:

Yes, very, very few points. Just to say that following the approval, we also have great progress on the vaccine technical committee on vaccination in maternal in the UK we receive positive recommendation as well as in France, in Australia, Belgium, Austria, Argentina, so many other, including an interesting one, which is the power for Latin America. And now we are progressing into access – final access into those markets.

Chris Boshoff:

Thank you for the question. We’re very pleased that in this quarter, as you’ve seen, we printed just shy of $400 million for Padcev with sequential quarter-over-quarter growth of 15%. Based on the claims data through the end of May, we are seeing U.S. first-line share increasing into the low 50% range. And as you know, the next opportunity is obviously in muscle invasive bladder cancer with two ongoing studies being conducted by Merck, which can expand the population to an additional 28,000 addressable patients. So overall, we are seeing that Padcev with pembrolizumab is becoming entrenched in the first-line setting as the standard of care and future studies, including future nectin-targeted medicines, radioligands or ADCs will likely have to do studies against Padcev plus pembrolizumab in the first-line setting, which could be challenging.

Operator:

Our next question comes from Trung Huynh with UBS.

Albert Bourla:

Aamir, what about this, the stocking?

Albert Bourla:

And in the international market?

Albert Bourla:

Thank you. And Chris?

Albert Bourla:

Thank you. We are very excited about it. Next question, please.

Carter Gould:

Good morning. Thank you for taking the question. I guess first one, just a clarification. I guess when we think about the PK danuglipron data, the top line, on a month ago, are we going to see any of that data prior to the dose optimization data reading out early next year? And then as we think about timelines for danuglipron, some of your European peers have talked about potentially moving faster. And I think some of the timelines that are generally thrown out there, including potentially reaching market as early as 2028. Did Pfizer have sort of similar plans or think such plans would be feasible for danuglipron? Any color on that front would be helpful. Thank you.

Mikael Dolsten:

Yes, for your questions, we’ll likely present a comprehensive data set on PK after collecting all the data from the two studies, but we are looking into what’s the best way to sharing it timely. We have some of the most aggressive timelines when we agree a protocol with regulatory agency and pending data. And as Albert has said, if that becomes the case that we move forward pending data, you can bet that like every Pfizer program, it will be very fast.

Operator:

The next question comes from Chris Schott with JPMorgan.

Dave Denton:

Chris. Given that, for the interest of time let me tell you about Daniel. We have said it multiple times that is going to be PK data right now. We have done with Daniel 1,400 pace, so we feel very comfortable about the profile, we know the product. Right now the question is if we have a formulation that will allow us to take this product into Phase 3 registration enabling studies. We made an announcement because we feel that what we saw from the first round of testing multiple formulations, we felt encouraged that we have several that can deliver and one, but it was the preferred one and it is the one, but because it was the best of all, and now we are going to test it. Also we can speculate if tolerability will be better or not because of once a day compares to twice a day because we don't have the data. But as whis [ph], I said in my prepared remarks for DANUBE, the profile that the DANUBE right now has based on the 1400 patients that we have seen is very competitive both on tolerability and efficacy. With whatever we have seen from others in the oral space so far. And in terms of timing, right now with everything we know we are the only one with 2b data on an oral GLP-1 after, of course, Lilly. So right now for everything we know, we should be the second after Lilly if DANUBE progressed into registration enabling studies. Now let's go to RSV, Aamir.

Albert Bourla:

Thank you. Operator, next question.

Tim Anderson:

Thank you. Going back to IRA, so CMS is bound to make the disclosure of negotiated prices on this first list of ten drugs a very big production, it will claim it's a major win over the industry. Of course, it depends on how those prices compare to net prices, not list. My understanding is it's possible we get this news from CMS earlier than September 1st, possibly this week ahead of the congressional recess in early August. Do you agree it's possible we might get this news early? Thank you.

Operator:

Our next question comes from Steve Scala with TD Cowen.

Albert Bourla:

Aamir, why don't you take the first one?

Albert Bourla:

Thank you. And again, in the interest of time, Steve, for the RSV, when we provided $2 billion was in the frame of a pipeline asset. What is the key potential annually? We don't give once the products are registered, typically projections not even for the next year, not for the peak years, but what I would say if everything – if anything, things have become more promising since the time that we gave this $2 billions, because we were all surprised how much the medical community and the recommended authorities are putting emphasis on the disease. So that's my comment. Sorry I couldn't be more specific to you. Next question, please.

Vamil Divan:

Great. Thanks for taking my questions. Maybe a couple I could. One, you talked about the aggressive timeline that obesity. I assume for PCV next-gen, it's similarly aggressive. Maybe you just comment on sort of the time you think it would take to get that product to market, given you're now in Phase 2, and then the second one is more related to Paxlovid. In the first quarter, you had the big adjustment and you came in well above expectation, but to not raise the guidance now this quarter, you are raising the guidance. I'm curious if you can comment on anything you're seeing, sort of in the channels or what driving the confidence to raise the guidance now and then so tied to that, is that the main driver of, sort of the increased gross margin? So expectations. And is that just the product mix and cost management sort of combination, but just seeing if you can maybe parse out some of the main drivers of that impact. Thank you.

Aamir Malik:

Yes. So for Pax in the U.S., you pointed to the momentum in Q1, which I'll remind you was a combination of both the true-up as well as ongoing utilization that was very high given the wave of COVID infection. What happened then is in the first half of Q2 infections were low. And the very clear trend that we see with Paxlovid is when there is a COVID infection wave, we have healthy Paxlovid utilization. So starting in May, all the way through June, there was increased COVID infection waves and our Paxlovid utilization followed. So we had about 35,000 treatment courses a week in April and May, peaking to about 100,000 in June. So we have seen continued utilization. Now it is trickier for the wholesalers and end customers to manage utilization around the disease. That's a little bit unpredictable. So we did enter Q2 with higher than normal inventory levels, but the wave of utilization that we've seen in Q2 has helped normalize those inventory levels. And all of this dynamic combined with the fact that we've built a commercial model to successfully get Paxlovid to those who need it, including very healthy coverage with commercial payers, 90% of pharmacies across the U.S. already participating in our USG PAP program, and a simplified model for delivering that PAP program to patients when there is a COVID infection wave. We're confident about Paxlovid utilization.

Dave Denton:

And just real quickly, as you think about the guidance, I think your question was, was this, what was driving our improvement and guidance? This was one of many factors because our core business in general is doing quite well and our cost management programs are really taking hold. So this is one of multiple factors that drove that $0.30 raise.

Operator:

We'll take our final question from Evan Seigerman with BMO Capital Markets.

Albert Bourla:

Aamir?

Albert Bourla:

Yes. And when it comes to, IP right now, it's very difficult, once the product is getting generic, to be able to fight with a new molecule unless you have substantial differentiation. And, VYNDAQEL has tremendous efficacy. So we do not expect that the market will continue being as big, particularly for us, after we see generics entering into it. So thank you for the question. So I want to make some just closing remarks that we had a very strong first half of the year, and we are confident that we will deliver on our full year financial commitments in 2024. We are driving progress with solid execution as we continue to serve patients and grow our business, execution makes the difference. Thank you for your interest in Pfizer, and we hope you have a wonderful.

Operator:

Good day, everyone, and welcome to Pfizer's First Quarter 2024 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Francesca DeMartino, Chief Investor Relations Officer and Senior Vice President. Please go ahead, ma'am.

In the first quarter of 2024, our oncology revenues grew 19% operationally over the same quarter a year ago, driven in part by:

the acquisition of the 4 in-line products from legacy Seagen—, —and then particularly, the strong ongoing launch of PADCEV in front-line locally advanced/metastatic urothelial cancer, regardless of cisplatin eligibility, following FDA approval based on the groundbreaking EV-302 data.

David Denton:

Thank you, Albert, and good morning. As we continue to navigate a challenging post-COVID environment, I’'m pleased to share that this year is off to a solid start. We are protecting and growing our core brands while investing in building a more effective organization. Our relentless focus on execution is positioning Pfizer to improve shareholder returns.

Operator:

[Operator Instructions] We'll take our first question from Louise Chen with Cantor.

Albert Bourla:

I think, Aamir, that's a question for you, then maybe Alexandre also, you can add because now we started already to register and approve the product in international markets. Aamir?

Alexandre de Germay:

Yes. So Louise, thanks for the questions. On the international front, we actually made great progress on ABRYSVO. As you know, we got approval in the second half of 2023 in Europe and in the U.K. And since then, we've been working with the health authority and the experts to provide medical evidence and health care system benefits associated with the protection against lower respiratory tract infection, as with RSV, and through immunizations of maternal after the immunization of all the others. So we're making good progress.

Albert Bourla:

Thank you, Alexandre.

Terence Flynn:

Maybe just a 2 part from me. Just wondering if you can comment at all about potential impact in 2025 from the Part D redesign. We've heard a couple of other companies already comment here. And then one on the pipeline. Can you give us any update on danuglipron and your plans more broadly in obesity?

Aamir Malik:

Sure. Terence, thanks for the question. And as you can imagine, there's many moving parts to Part D redesign. I think relevant to our business, I think it's important to first note that as part of what already went into place with the redesign, there is no cost sharing imposed on vaccines. So that, given our significant vaccines portfolio, is a positive. And then, obviously, over the course of '24 and '25, there's other dynamics with out-of-pocket cost caps, which create better access for patients, and that is helpful to volumes, and we're starting to see that in '24 in some parts of our business, including on VYNDA.

Operator:

We'll take our next question from Akash Tewari with Jefferies.

Albert Bourla:

That's very good questions. Why don't we go first to you, Dave, to speak a little bit about is doing very well. If you expect that can become accretive earlier. Also, I would like to hear some comments from Chris about the progress of the portfolio, and then Doug can comment on the IP situation, our customers.

Albert Bourla:

You want to make some comments also, Chris, about the performance of the Seagen business?

Albert Bourla:

Thank you very much, Chris. Doug, what about the situation with the IP disputes?

Albert Bourla:

Thank you, Doug. Thank you, Akash.

Evan Seigerman:

I want to touch on gross margin. Obviously, a nice improvement in this quarter. And I believe, back in December, you had said, for the full year, it would be around 70%. Do you expect that we could actually see a better gross margin for the full year, given kind of the benefit we've seen? Or are there some other puts and takes that we should be aware of?

Operator:

We'll take our next question from Vamil Divan with Guggenheim Securities.

Aamir Malik:

Thanks for the question, Vamil. So I'm happy to talk a little bit about NURTEC. We'd like to accelerate the momentum of NURTEC, and we're taking several steps to do that. For the quarter itself, what we're encouraged by is the demand and the volumes that we saw. And then on the flip side, as you already alluded to, the performance in the quarter was impacted by gross to net.

Chris Boshoff:

Thank you, Albert. So the reason Albert didn't list ELREXFIO as a major growth driver, just to remind, so he pointed out LORBRENA, XTANDI and PADCEV as the immediate biggest growth drivers for Oncology. But we're absolutely confident that ELREXFIO will become, over the next couple of months and years, a major driver for Oncology.

Alexandre de Germay:

Yes. On ELREXFIO, we actually have -- it's progressing very nicely because, as you know, we got approval in Europe in December of 2023 and in the U.K. in January, and in Japan in March 2024. So we are now moving into reimbursement, ABRYSVO. And we've got early access, considering the clinical profile, the exceptional clinical profile of the product. So that's why we got, in some market, early access, and that's why we started sales in the first quarter.

Albert Bourla:

Yes. Overall, in most international markets, there is a gap between the approval and the access round. But because of the profile of the product, we saw early access, which is basically something that happens on an exceptional base if the product is unique. But some countries, before they approve the price, they are allowing you to have access to your own price and that they may be adjusted. So -- but there's a very good signs for this product. We are really feeling very bullish when we see the clinical profile and the opinions of the key opinion leaders.

Operator:

We'll take our next question from Dave Risinger with Leerink Partners.

Albert Bourla:

You, Dave, you don't have a limit.

David Denton:

Yes. First, as you well know, rightsizing our cost structure is incredibly important for us from -- as we think of forward for margin expansion and improving our financial returns. As we look through Q1 and through the balance of the year, keep in mind that the cost changes that we've made in the U.S. are largely complete. Obviously, in ex U.S., some of those changes lag, but you will see changes in the cost structure ex U.S. for the balance of the year.

Albert Bourla:

Thank you, Dave. And Doug, can you please clarify a few things about VYNDAQEL to Dave Risinger's question?

Albert Bourla:

Thank you for clarifying that.

Trung Huynh:

Trung Huynh from UBS. One on the ACIP meeting coming up and just a clarification on the guide, if I may. So on ACIP in June, what's your expectation on the recommendation for the 50 to 59 population? Could this be a shared clinical decision like the 60-plus? Would you think this is going to be risk-based? Is there any chance you can get the 18 to 59 data on the agenda for this meeting?

David Denton:

Well, maybe I'll take that first. From a guide perspective, I would not -- we obviously did not expect this final adjustment. It was an estimate that we did at the end of the year. We're now finalizing the adjustment based on the returns that we've seen, and it is now complete. I would say that, as we look forward for the full year, both for PAXLOVID and for the full year of all of our products, we're cautiously optimistic about where we are.

Albert Bourla:

Thank you, David. And Mikael, on the ACIP meetings and the June-October recommendations, et cetera.

Operator:

We'll take our next question from Umer Raffat with Evercore ISI.

David Denton:

Yes. On the gross margin side, as I said, there is a couple of things that impacted favorably our performance in Q1. The items that you listed of both new product launches and in-sourcing, the in-sourcing is probably a longer-term implication to us because those don't happen in an immediate quarter. So as you think about Seagen, it's probably a multiyear phenomenon that we have here. But I don't think that was an outsized impact to that.

Albert Bourla:

Thank you, David. And although your answer was very complete, I will just reiterate something that you said because it seems like that some people, they want to hear it again. The dividend is a sacred cow for us. Dividend, it is secured, and we will continue our policy on dividend as we have promised repeating. And we don't have to monetize things to be able to see that. The reason why we are looking at all our assets is because we want to maximize return on the capital.

Operator:

We'll take our next question from Geoff Meacham with Bank of America.

Albert Bourla:

Yes. Let's go to Chris to understand the commercial impact on Seagen and how that will take time.

David Denton:

So as it relates to your question regarding capital allocation, clearly, our first priority, our #1 priority is supporting both the dividend as well as delevering our balance sheet. So that is job 1 from my perspective. As it relates to bolt-on acquisitions, in the near term, you would not expect us to do much there. We are -- that is a lower priority in the near term until we get ourselves. I hope that helps.

Operator:

We'll take our next question from Srikripa Devarakonda with Truist.

Albert Bourla:

Thank you very much. Chris?

Albert Bourla:

Thank you, Chris.

Carter L. Gould:

I wanted to ask a follow-up as I think it's important, and I fully respect the focus on '24 and Albert's commentary on conservatism around guidance. But to come back to the IRA impact for thinking about '25. When do you think you'll be in a better position to comment a little bit on you're contracting discussions are underway pretty late in the earnings season here, and most of your peers have already made comments and your Part D exposure isn't exactly a surprise. So any color there on time line would be helpful. And I guess for David, you talked about the operating margin improvement being sort of a multiyear process. Is there a risk that the IRA sort of presents a little bit of a hiccup to that in '25?

Aamir Malik:

Sure. So Carter, I think you heard us describe the dynamics. And later this year, we will have more clarity on what that means. And so we can certainly share that. I think there's also a specific question that comes up often about Eliquis, so let me just address that now because we are clearly in a live negotiation on that.

David Denton:

Yes. And I guess, as it relates to 2025 and the impact of the IRA from a margin expansion perspective, I would say, without giving any specifics on that is, as we look forward, we obviously run multiple scenarios around how our business might perform. And in those scenarios, we would model different impacts to the IRA because it's still unclear because it's still a lot of moving parts, specifically as we just spoke about. Under those scenarios, we will work hard to offset any implication we might have through improving our cost structure.

Operator:

We'll take our next question from Rajesh Kumar with HSBC.

David Denton:

Okay. Great. So yes, I think we just gave some color around gross margin being closer to 70% versus closer to 80% when we entered 2024. We are maintaining that color at this point in time. I would say that it's unlikely for our gross margin rate to fall below 70% in any given quarter. But I want to just emphasize the gross margin rate will fluctuate a bit, primarily given the mix of sales, specifically within the vaccine portfolio, which carries a lower gross margin, number one.

Albert Bourla:

And as I want to emphasize that on PAXLOVID, what really makes me pleased it is the underlying demand of the product, right? So it was approximately in the first quarter and in the U.S., 2 million scripts, right? So that's significant. And keep in mind that this was the quarter that we moved from a previous way of go-to-market approach to a commercial model, right? But I had a lot of mines in execution, but we didn't step into any of them. So it was Again, I'm very pleased how Aamir and the U.S. team executed on that. executive. So we have a very small transition with very low [indiscernible] commercial plans.

Operator:

We'll take our next question from Chris Shibutani with Goldman Sachs.

Aamir Malik:

Okay. Chris, thanks for the question. So on Prevnar, you alluded to the commentary we provided around dimensionalizing the market, and I think it's worthwhile just reiterating that. So the adult market continues to contract and that's for 2 reasons. There are increasingly fewer eligible 65-plus adults. And then the 19 to 64 underlying medical conditions, population is obviously more difficult to activate. So that is a dynamic that is true for our business, but it's also true for any competitor that's going to come into the adult vaccine market. So I think that's important to note.

Alexandre de Germay:

Yes. No, we had a great quarter. As you know, we grew by 8% operationally. But more importantly, we also have achieved some key milestones. So we got the European approval of pediatric Prevnar 20 in Europe. We also got it approved in Japan, which are very important market in Australia and many others. So this is great because then we want to build on the very successful [ pre nup ] franchise around the world. As you know, we have exclusive NIP standards in [ 130 ] market, and now we're going to be able to build on that.

Albert Bourla:

It's a very nice cadence of approval and recommendation.

Mohit Bansal:

Maybe a question for Dave. Just wanted to understand the cadence of margin improvement as you are embarking on the cost management journey throughout the year because I mean, you had a really high EPS because of the onetime item, but if you think about margin profile over the year, how should we think about it? I understand fourth quarter could be impacted with COMIRNATY revenues. And then when we get into 2025, should we think about better leverage or do you think there could be more opportunity to [indiscernible] expenses in '25 as well?

Operator:

We'll take our next question from Chris Schott with JPMorgan.

Aamir Malik:

Thanks, Chris. So on Abrysvo, as I said, we're progressing our contracting conversations so we'll have more to share on that as we do later. And in terms of your question on VYNDA, VYNDA had a really strong quarter. We were up 96% year-over-year, but importantly, also 41% over last quarter. When you look at the drivers, I think there's a few things. Some of that is temporal. So there were some purchasing patterns with wholesaler and specialty pharmacies.

Alexandre de Germay:

Yes, very quickly. On the international front, we also had a very strong quarter because we saw a 28% operational growth but a 43% volume growth, which is comparable to what we see in the U.S. Exactly as Aamir said, there is still opportunity because we basically have established VYNDAQEL as the standard of care. And we've worked with the health care professional to establish robust infrastructure so that we can screen, diagnose, and treat faster.

Albert Bourla:

Thank you very much. Next question. We'll take 2 more questions because we are running out of time.

Timothy Anderson:

So it's a busy pipeline readout year. I'm wondering, Mikael, can you just point to perhaps the 1 or 2 bigger upcoming readouts that excite you the most, where your confidence is high as that could be value creating? So I'm not looking for a description of everything reading out. Just maybe 1 or 2 that excites you the most.

Mikael Dolsten:

Yes, yes. I'm excited about the potential approval for mastozimab for both hemophilia A and B to continue to grow our hematology franchise momentum. [indiscernible] in therapy, we actually today got the equivalent of Breakthrough Designation RMAT based on the early clinical data available, so we are super excited about that. And relatively near term, the readout is coming. COVID/flu combination vaccine, [ 859 ] readout Phase III. And then [indiscernible] pipeline onsegrimab which I think pending readout has really a breakthrough mechanism.

Chris Boshoff:

Perhaps just to mention again the potential unprecedented new 5-year data for Lorbrenla, which will be presented at ASCO. We could define the growth of Lorbrenla over the next decade. There's 2 other upcoming readouts.

Chris Boshoff:

And there's 2 other readouts that's important to us, the 1 is Breakwater, which is the first-line opportunity in BRAF-positive colorectal cancer. A reminder that, that's up to 12% of colorectal cancer. Particularly poor prognosis so we're looking forward to that readout, Breakwater and then also, as mentioned earlier, VERATEC 2 in second-line ER-positive breast cancer, which can define also the to define the future path for.

Operator:

Our last question will come from Steve Scala with TD Cowen.

Albert Bourla:

Yes. On the obesity and Mikael also can comment, of course, together with the mRNA flu vaccine. But I said multiple times that first of all, metabolic is an area that traditionally very big strength in terms of And this is an area that we have the right to win. So we are strong and to keep investing in the whole area because we have the infrastructure. And obesity is a very big part of it, even the of the market. So we will be very active in the obesity with current mechanism of actions and new mechanisms of actions.

Mikael Dolsten:

I think you said it so well on obesity. I'll focus on mRNA vaccine and just say that we did share that we had a very robust data for 18 to 59 in the outcome event trial on the first generation flu mRNA platform. We actually further refined that product in order to expand activity against these serotypes although the disease is dominated by A, we saw an opportunity to do that. And that technology is now with the COVID/flu combo vaccine running for 18 to 59 years old and relatively soon, we'll have a readout. We think that's really the near-term opportunity to bring both of the viruses under 1 simple administration approach. For the 65-plus, what you referred to was an early trial with the first generation. We have now moved focus to the second generation and are in preparation of subsequent clinical studies from them.

Operator:

This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.

Operator:

Good day, everyone, and welcome to Pfizer's Fourth Quarter 2023 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Francesca DeMartino, Chief Investor Relations Officer and Senior Vice President. Please go ahead, ma'am.

Albert Bourla:

Thank you, Francesca. Good morning, everyone and thank you for joining us. I'm pleased to discuss some of the highlights from the fourth quarter and full-year 2023, and of course, a compelling year we have ahead. I’d like to begin with a few reflections on 2023. As you know, we missed our initial internal projections and Street expectations predominantly related to our COVID products, which affected our stock price performance. Despite however this challenging year, there were a few great things that happened in 2023 that may have gotten lost amidst the mixed expectations. First, in 2023, Pfizer impacted the lives of more than 620 million people approximately around the world. We believe there is no other company that can reach as many people and patients as Pfizer. If you multiply this with our brand equity and awareness, it creates a connection with consumers that can be a very strong asset for us. Second, despite the decline in revenue from our COVID products, as of the reported results for the first nine months of 2023, we were the number 1 pharmaceutical company in terms of revenues from pharma-only products, a marked improvement from our fourth position in 2019. Next, 2023 was a record year for FDA approvals with nine new molecular entity approvals on Pfizer and many more approvals for new indications in already approved products, marking a very productive year of pipeline execution for Pfizer. Finally, we closed the Seagen acquisition. In the current regulatory environment, being able to close such a large acquisition demonstrates our ability to successfully engage with regulatory bodies. Our deliberate and strategic efforts throughout 2023 created a strong foundation to support us. We are now focused on maximizing the opportunities that have positioned us for success and our team is driving confidently as we start 2024. From the advent of penicillin to the development of the COVID-19 vaccine, Pfizer has been at the forefront of medical and pharmaceutical breakthroughs for the past 175 years. This year is our 175th anniversary. That can not only change patient lives but has changed history. Our strategy to continue to build on our proud history of innovation and commercial excellence is supported by the power and strength of our unmatched global scale and footprint, spanning commercial, financial, medical, regulatory, manufacturing and government relations. We have a clear view on how we will deliver operational, commercial and financial success across our business. Our confidence stems from the opportunity we have to bring additional focus to our business by executing five strategic priorities. We will get into each in more detail but the five key priorities for Pfizer this year is here are

Albert Bourla:

Thank you. With that, let's start the Q&A session. Operator, please assemble the queue.

Robyn Karnauskas:

So maybe I'm stupid on this question, but if I'm doing your math for your guidance of margins in low-70s for fiscal year '24. By my math, the margins for other biopharma would have to drop to about 60% in order to balance out the other margins. Can you just help me understand your guidance and triangulate that with your top-line and bottom-line guidance and triangulating that with your margin guidance?

Operator:

Next, we have Carter Gould with Barclays.

David Denton:

Sure. Probably not much to read into that. Obviously, R&D came in a little favorable than our expectations previously. Part of this is the fact that we are very focused on our -- realigning our cost base so consistent with the program. And then secondly, there probably is some timing that's dampening R&D in the fourth quarter that will slide into 2024 and into 2025. So there is some timing implications to that performance level. But I think importantly, back to my prepared remarks is our focus is on delivering net savings of $4 billion. And if you look through the end of 2023, about half of that we've achieved already. We're now focused on achieving the additional $2 billion or so as we cycle into 2024, and all eyes are on that objective.

Operator:

Our next question will come from Louise Chen with Cantor.

Albert Bourla:

Aamir, why don't you take the Prevnar question? And then maybe Alexandre, you can add a little bit color on the situation in the U.S. So what is the situation in Prevnar with the orders?

Albert Bourla :

Thank you. Alexandre, how was the Prevnar situation in the last quarter or in the year in international markets?

Albert Bourla:

And Mikael, to conclude what about the fourth-generation Prevnar?

Albert Bourla:

Thank you, Mikael. So to summarize the Prevnar, which I know it is in the minds of all, let's start with the commercial front. In the U.S., clearly, the adult opportunity, we have taken the cream basically of the catch-up opportunity. This is happening once you are getting a recommendation from CDC for a catch-up. This market, the pool of patients has been largely exhausted. We have already 96% market share of that. So this is not a market, the adult now that we expect that will continuously grow in the U.S. Pediatric, very different story because our market share is now growing, and we have indications that we'll continue growing very strongly. So we expect in the U.S., the Prevnar situation to be a strong growth story in pediatrics. International, both, we expect to see growth because the products have just been launched, and then the recommendations are following. So there is a delay in international higher than usually there is in the U.S. So we expect to see growth in adult and pediatrics. I want to reemphasize that we have basically exclusivity of Prevnar 13 in more than 100 countries, 113 countries in of tenders. And we plan to convert that now to 20. And then on the fourth generation, we are moving full speed. We think that our expertise will allow us to build a polyvalent vaccine that will really compete very, very nicely as a fourth generation and will do that successfully and fast. So that's the story and let's move to the next question, please.

Trung Huynh:

Trung from UBS. Two, please. So in your prepared remarks, you noted you took a $1.4 billion impairment charge associated with etrasimod. Can you add more color here? What prompted that reevaluation? And any feedback of how that launch has gone? Secondly, on Abrysvo, so can you give us some color on how your contracting has evolved in '24 versus '23? And based on that, what's your market share do you think you can capture this year versus the 35% last year?

David Denton:

Yes. So on etrasimod, keep in mind that this product, we still anticipate to be over $1 billion in peak sales. As you know, there are multiple indications attributed to this medicine. And financially, as you look at that medication, there were additional indications that met the financial criteria for an impairment of which we took in the quarter. Clinically, obviously, clinically, there's still some work that will be ongoing in support of the asset. So with that...

Aamir Malik:

Sure. So I'll start with etrasimod or VELSIPITY as we call it. So just in terms of the product value proposition, we think this is a very promising oral option for moderate to severe UC patients. It's got strong efficacy that patients and physicians we've exposed this to. They want to start transitioning from conventional therapy to advanced therapy. And it gives them an option also to maintain once-a-day oral routine, which many are already on instead of beginning with an injection or infusion. So about 80% of those patients that haven't progressed to an advanced therapy prefer an oral option, but only about 10% of those patients actually get one. So there's a very clear need here that VELSIPITY can help us fit. And the benefit risk profile for VELSIPITY is also very, very strong. So we approved -- we received approval at the end of last year. And so we've invested efforts in building HCP and patient awareness on the label and on the value proposition. But I just want to remind you that with any immuno-inflammatory product, it takes time to get broad national access. And that is where our focus is right now is ensuring that we secure VELSIPITY access as a first-line advanced therapy oral option, and that's going to take some time to put in place. And when we have that in place, we see upside momentum from the launch.

Aamir Malik:

On Abrysvo, I'll comment briefly on the adult and then on the maternal. On the adult vaccine, I think the market was clearly ahead of everyone's expectations and not limited by shared clinical decision-making versus a routine recommendation. We would like to do better than the 30-some percent share that you referred to as well. So we're very focused going forward on retail contracting for the '24, '25 season. But I will also mention that we are doing that with real thoughtfulness on ensuring that we secure a profitable share in those contracts and also differentiating using our maternal indication. We also see opportunities in the non-retail setting, where for example, with the system and with IDNs, we have strong share. And we're going to also focus on new opportunities that we're currently studying with Abrysvo, adults aged 18 and older with underlying medical conditions as well as a new packing presentation to better fit our customer needs. So we see momentum there. And on the maternal side, we're only a few months in, but we're encouraged by what we're seeing as the first maternal vaccine to prevent infants from birth to six months when they are the most vulnerable. More than 65% of women prefer to get the maternal vaccine versus having their infant immunized with a monoclonal antibody. And we think that the label provides us opportunity to grow that segment as well.

Terence Flynn :

Two for me. I guess the first one is just Comirnaty rest of world was ahead of consensus expectations this quarter. Just wondering if there were any one-time benefits in that number, if that's a fair go-forward sales level to think about through 2026, given the existing EU contract? And then the second one is, I noticed that Danuglipron wasn't mentioned in the PR or the prepared remarks. Just wondering if that once-daily PK trial completed yet and what the next steps are there?

Alexandre de Germay:

That's why there are several elements playing out on the Comirnaty franchise. First, what we see is restrictions on vaccination guidelines, right? So versus the previous years, we see that the guidelines are really focusing on the older population as well as the at-risk population. But we have, as you know, already signed several contracts with the European Commission, Canada, UK and Australia. And following the approval in August last year, we started to execute on our contract with the European countries. As a matter of fact, some countries have decided to advance some of their order in 2024 into 2023 so that they can execute their activation campaign properly. The other trend that we see is that actually, we don't see major vaccination uptakes in the future year. We think that what we have seen in 2023, 2024 campaign is really the type of acceleration we will see, and that will be carried on the next few years. The only area where there is a potential future growth in terms of vaccination uptake is, if we can increase our co-administration with the flu vaccines where in all our key markets, the rate of vaccination in flu is actually higher than it is for Comirnaty. So we believe that there is potentially here an opportunity. The last point that I want to say is, as you see that the Comirnaty self-pattern is evolving towards a seasonal pattern. So you saw you have a very strong Q4, like you expect in flu vaccination type of markets. And that’s what we see also to be expected in 2024. And actually, as I was reading some of your models in the financial community, I think there is some confusion that we will have higher Q1, Q2, which I believe will be more towards the second part of the year, but of course, in line with the guidance.

Umer Raffat:

I was looking at SEC filings from Cerevel and they disclosed that Pfizer was open to putting out a bid on Cerevel after Phase 3 data, which would have been in 2024. Meaning I also noticed that you were saying you're not open to a buyback in 2024 and deleveraging remains a top priority. So I just want to balance those two, especially also in the context of where the stock stands.

David Denton:

You said it well. You are correct.

Operator:

Next, we have Tim Anderson with Wolfe Research.

Albert Bourla:

So Aamir, are you planning to give light to more? Give us.

Albert Bourla:

Yes, it’s very difficult to comment on these things because they are ongoing. So it’s very inappropriate and absolutely could complicate things. I understand that there is a need for people to understand because that’s an important product. And we will try as soon as possible and practical to be able to provide the level of details that we are looking at everybody is looking so that we can model it appropriately.

Andrew Baum:

A couple of questions, please. First to Aamir, under your new leadership and commercial focus, what key products would you guide us to of recent launches that we should look for in terms of acceleration of rollout trajectory? And it doesn't have to be recently launched, established ones as well. And then second to Mikael. Could you just share a little bit more information about your next-generation PCV vaccine, specifically how many serotypes? And I'm assuming that given it's a new technology, you will lose the ability to grandfather the pneumonia claim from the CAPiTA trial into the profile as it matures. If you could confirm, that would be great.

Aamir Malik:

Yes. So Andrew, I'll take a step back and let me start by saying, I've been very excited about this role and this opportunity. And also to do it with the team that we've built, which is a mix of both seasoned Pfizer leaders as well as experienced leaders from outside of Pfizer. I mean, my focus and we can talk about specific products, we've touched on many of them already. But my focus overall is on execution excellence, right? So in our primary care and specialty care portfolio, we have a lot of great brands. We have some really enduring franchises, VYNDA, Eliquis, Prevnar. I spent quite a bit of time talking about that. Our focus there is to defend and grow where we can and we do see some opportunities. And we also have to acknowledge that we have some brands that have great value propositions, but they happen to be in highly competitive categories with some very, very well entrenched competitors. So in a situation like that, my focus is principally, let's really prioritize the actions that can grow each of the brands and we can talk about the individual launches. There's a lot of operational focus on blocking and tackling, including contracting. And then when we look at our main resources, we have our field force, our advertising and promotion dollars and our medical capabilities just prioritizing exactly where we put those. That is what I'm focused on with me and my management team. And as I mentioned, we see opportunities in some of the core franchises and defending and growing our share but then also in a number of our launches. And Albert mentioned in his opening remarks what we hope and expect to do with Abrysvo, with Nurtec, with Litfulo, with Sabinko. Those are all brands that we're going to continue to focus on, including some of our recent acquisitions like Oxbryta as well.

Alexandre de Germay:

Thanks for the question, Albert, and the opportunity to share my priorities. My main focus is really to focus on the area where we can generate material growth with improved return on investment. This is my mantra. How are we going to do that? My top four markets in the order, China, Japan, Germany, and France represents 40% of our international divisions. So it's quite concentrated. Those four markets will report directly to me so that we can have the resources and support the country to execute on their plan at best and to generate the most growth. Our top 15 country represents 70% of our total international. So it's, again, quite concentrated. What I'm actually doing currently is in each of those markets, we are selecting drivers of growth. What are the key in-line and the key new products where we can have material impact with improved return investment? So I give you an example, of course, is going to be different from one country to the other because the archetype and the dynamic of those markets are different. So last week, I was in Japan. And so for instance, Vyndaqel, diagnosis rate is half the diagnosis rate that we have in the U.S. and in France. So we reviewed last week the plan to go and catch those increased diagnosis rate. And we're going to continue to, of course, track on execution. In Germany, Eliquis has a very strong Eliquis franchise. We believe we have got untapped opportunity. And I'm next week in Germany to actually review the plan on the Eliquis precisely. And we'll do the same thing on the new product. And it's going to be, for instance, LORBRENA in China. As you know, lung cancer in China is unfortunately affecting a large proportion of the population. And as a matter of fact, the proportion of the lung cancer that can benefit from LORBRENA in the worldwide community is about 1.7%. In China, it's actually 7%. So we believe we have a huge opportunity. What are we doing is actually developing a plan, last week when I was visiting China, to quickly get LORBRENA to those patients that could benefit from the clinical outcome. So this is really what I'm doing in each of our top 15 countries. Then frankly, the rest of the year will be simply tracking our execution, tracking all the metrics both from activities, medical activities and KPIs for each of our key products.

Chris Boshoff:

Thank you, Andrew, Albert. Our biggest priority right now is obviously continuity of the business. We've done a lot of work during the last nine months during integration planning. And we don't want to miss a peak and it's now moving towards flawless execution with immediate priorities, obviously, the PADCEV launch for advanced/metastatic bladder cancer from the EV-302 study, the launch of XTANDI in non-metastatic castration-sensitive prostate cancer from the EMBARK trial, the early launch, and also focus on access and awareness during 2024 for Abrysvo in late-line multiple myeloma. And for TALZENNA where up to 25% of patients with metastatic castration-resistant prostate cancer would be eligible in the U.S. for the -- from the indication.

Mikael Dolsten:

Yes. I think we have a very strong position with good momentum in the PCB conjugate. And I think Alexandre, you mentioned just the positive recommendation we got for PCB 20 in Europe. Now we're building on that unique platform. And as Andrew did say here, we are able, what you call, grandfather in unique claims for the higher segment for penumococcal pneumonia. It's really the major burden with 150,000 U.S. hospitalizations. And to the best of our knowledge, the Pfizer platform with a new fourth generation, as was with the third generation, will be the only one that can that claim based on, as you said, the original CAPiTA studies. Now the new generation will contain more serotypes, has applicability for adults and possibly pediatric as we have done with all of ours. And it also will include improvement on existing serotypes to, all together, get a very good increased coverage versus the PCV20. And I do think we are the one that really can continue this expansion of more serotypes, but you need communication chemistry to carry some reformulations. And I am cautious to abandon Neseritide where you work on infant and adults as the characterization what caused disease, for example, pneumonia is not very well described, so maintaining the coverage as we have uniquely and it's not really happening with the other product is a unique differentiation. So I feel very good about the fourth generation.

Operator:

Our next question will come from Geoff Meacham with Bank of America.

Albert Bourla:

Yes. Very general, then I will ask Chris to comment a little bit on the technologies that we are having here. I can't say how much oncology will contribute. But clearly, we have given expectations about Seagen, and we say that we expect it to be at $10 billion by year 2030 from $3.1 billion we gave guidance in 2024. And actually, we feel very good about the $10 billion. The more data coming, when we gave the $10 billion, we were not aware of some of the readouts that follow that projection. So we feel very, very good about that. Now, I have to say that the Pfizer pipeline in oncology, I think was also among the strongest in our therapeutic areas. So I think the combination, in general, is giving us, let's say, a lot of strength. But Chris, why don't you comment a little bit about how you see the R&D evolution of oncology, the platforms you are going to base your strategies?

Operator:

Our next question comes from Mohit Bansal with Wells Fargo.

Albert Bourla:

Thank you, Mohit, very much. Aamir, about Nurtec and in general, the migraine franchise.

Operator:

Our next question comes from Steve Scala with TD Cowen.

Albert Bourla:

Yes. Steve, I'm going to disappoint you because you are asking things that we have said we are not willing to disclose at this stage for multiple reasons. Clearly, on Danu, we have more information than is very normal with everything that we are doing because we're having a very complicated, as I said, multiple experiments plan right now. But because we don't have new data, we're not going to comment on that. And on the new weight loss molecule also, we said that unfortunately, we are not going to disclose the mechanism of action. The reason is because, first of all, it's too early. We don't want to keep competition, nothing strange about that. So I'm sorry to disappoint you but there is not much to offer at this stage. Hopefully, as we said, mid-year is where we expect to have more information on that.

David Risinger :

Thanks for all the updates. So I have two questions, please. First is for Dave. Could you please discuss the '24 gross margin [indiscernible] some detail. I think on the last call, you had discussed potentially a low 70% gross margin. But if you can comment on that in more detail, that would be helpful. And the second question is for Mikael. If Danuglipron once-daily does have a profile that you're looking for, would the company then conduct a Phase 2A dose ranging study to assess the efficacy and tolerability in order to design a dose to advance Phase 2B or Phase 3?

Mikael Dolsten:

Yes, you heard Albert say that we are running a number of clinical experiments to garner insight in that molecule, and we have a second lift. Pfizer has always been open to consider different types of clinical study design. And in general, we tend to move into directly whenever data is supportive, if there is a large safety database into Phase 3 with a lead-in phase. But we have to look at each program by program. So when we have all the data, we will be able to share with you.

David Denton:

So David, this is Dave, and I'll be very brief here. Obviously, we've indicated our '24 gross margin expectations are in the low 70s as we discussed previously. As you know, as we cycle into '24, there's a few things that are happening, as I indicated earlier. One is, as COVID comes down, we're kind of deleveraging as COVID had absorbed a lot of fixed overhead. So that's compressing gross margins. Secondly, we're in the process of in-sourcing many of the acquired products over the last couple of years. And as we in-source, the short-term effect of that is dampening on gross margin, which gives us an opportunity to improve gross margins as yields improve over time. And then finally -- or two things finally here is new launches have that same characteristic, as we launch a new product, yields and performance in -- are not at peak performance. That will be an opportunity for us going forward. And then finally, we have absorbed some inflation over time that is an opportunity for us to take out over the next several periods. So again, an opportunity for us to enhance performance over time. But again, we're in this roughly low 70s for 2024 is our expectation.

Operator:

Our next question comes from Chris Schott with JPMorgan.

David Denton:

No, I think you're absolutely correct. Mid- to high 30s is a reasonable target for us, with a slight caveat in the sense that the vaccine program, Comirnaty, has a shared, as you know, gross margin level with our partner. And so that’s dampening to gross margins and operating profit. So I’ll say, slightly mix adjusted for that product. And then from a progression standpoint, yes, you can think about this as a gradual steady improvement story over the next several periods.

Rajesh Kumar:

Just on the medium-term margin profile. Thank you for the color you've provided. If you think about the growth aspirations you have, does that require you sacrificing some of the margins? So if you were to say, at the top end of your growth profile would we be looking at mid-30s gross margin or lower? Or what is the balance there? And the second one, you briefly touched on your capital allocation priorities earlier. Obviously, cost cutting and deleveraging is a priority for 2024. In the medium term, which are the therapy areas where you would deploy more capital after 2024 deleveraging exercise done?

David Denton:

Yes. So maybe on the margin discussion, obviously, what we've said is we have invested pretty substantially in our business over the past couple of years. So largely, the investment phase at least from a business development standpoint is behind us. We have work to invest to improve performance going forward, but the big dollars are already invested now. It's an execution story and a continued improvement story. So you should expect that to occur over the next several periods. Obviously, the higher the revenue, the better performance because you get to leverage your fixed costs. So clearly, the higher those revenue targets and achievements happen, the better improvement from a margin perspective you should expect from us. And then from a capital allocation perspective, I think you said it right. We are, at the moment, focused on executing our plan, focused on supporting our dividend growth over time, but importantly, beginning to delever as we cycle into an integration of assets. And then from a priority standpoint, clearly, we've made a significant investment in oncology. You should expect us to put the investment thesis behind that franchise going forward. Clearly, that's number one at this point.

Operator:

Next, we have Kerry Holford with Berenberg.

Albert Bourla:

I'm not sure -- what was your question on RSV?

Albert Bourla:

Yes. Yes, I got it. Thank you. Why don't you take that, Mikael, on the Abrysvo? And then, Chris.

Albert Bourla:

Thank you, Mikael. And then, Chris?

Operator:

Our next question comes from Chris Shibutani with Goldman Sachs.

Albert Bourla:

Thank you very much. Aamir, why don't you take the question? By the way, let me clarify that Aamir's responsibility includes COVID revenue. So go ahead, Aamir.

Operator:

Next, we have Akash Tewari with Jefferies.

Albert Bourla:

Look, Aamir, why don’t you take the -- is it the Prevnar expectations? We don’t comment on what the expectations of the Street are, right? So are we -- and I think we gave a very good, let’s say, high-level trajectory how we see this market. In the U.S., the adult opportunity, it is mainly as always in with the adult, a catch-up opportunity. So where you come, you have a pool of all the people that are eligible, but some of them would choose to make the vaccine. Usually, that happens in the first year and maybe a little bit then on the second year. We have exhausted, I think, this opportunity with a 96% market share. So right now, I don’t think that we will see in the U.S. in the adult huge opportunity. Merck competition is coming into that. So this is not a very big growth area for us because, as I said, this is not where we plan to do it. It’s huge when you launch them very quickly, goes down because then it is just the people that we are really graduate, they are going into this cohort in terms of age. The big opportunity is pediatric because it is four doses, it's not one. And because it is a huge cohort every year, way bigger the cohort of newborns than people that are becoming 65. So that’s how we should see it. So there is nothing much to add into that.

Evan Seigerman:

Two questions from me. One, when you think about the additional $25 billion revenues by 2030, now that Seagen's part of this business, where are we in getting to that metric? And then my second question is really on Oxbryta on sickle cell disease. When you bought the asset, you really -- you noted that you plan to speed up the distribution of the drug to parts of the world most impacted by the disease. We haven't really seen much OUS, given recent competitive approvals of in the Middle East. How do you think about the OUS opportunity in context of the competitive updates there? So Seagen and then thinking about some Oxbryta comments.

Aamir Malik:

Yes. So Evan, with regards to Oxbryta and then I'll comment on the acquisition as well since you referred to that. We're pleased with the U.S. performance. Q4 was up 30% over the prior year and 14% over the prior quarter. The prescription trends are very solid. We've made a lot of investments in customer-facing teams since we made that acquisition. So we like the momentum that we're seeing in the U.S., and we expect to see more. Right now, the rest of the world is a very small part of Oxbryta revenue and that is something that will take time to develop and we'll obviously look at that appropriately. And as you think about the GBT acquisition, it's important to look at Oxbryta, but I also would remind you that we're also very excited about GBT601, which we expect can bring a lot of value in addition to Oxbryta. Some of it will -- if it's successful from a clinical and regulatory perspective, some sales will be cannibalized, but there will also be room for Oxbryta in the market to continue to grow. So when you look at the combination of the momentum in the U.S., an opportunity that's yet to be developed outside the U.S. and 601, where we presented great data at ASH in December, we think that there's a lot of value to be gained from this acquisition.

Operator:

Thank you, ladies and gentlemen. This does conclude today's Pfizer's Fourth Quarter 2023 Earnings Conference Call. We appreciate your participation, and you may disconnect at this time.

Operator:

Good day, everyone, and welcome to Pfizer's Third Quarter 2023 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Francesca DeMartino, Chief Investor Relations Officer and Senior Vice President. Please go ahead, ma'am.

Albert Bourla:

Thank you, Francesca. Hello, everyone. And thank you for joining us today. Pfizer continues to have a far-reaching and positive impact on human health. Through the first nine months of the year, more than 457 million patients around the world were treated with our medicines and vaccines. Compared with the first nine months of 2022, we have reached more patients in several key therapeutic areas, including oncology, cardiovascular disease and anti-infectives. Patients will always be our North Star, and these figures serve as a testament to our leadership in innovation and our commitment to understanding and serving patients' needs. During the third quarter, we were encouraged by the continued strong performance of Pfizer's non-COVID products, with revenue from these products growing 10% operationally compared with the year-ago quarter. We saw significant contributions from new launches and robust year-over-year growth for several key in-line brands. Our recently launched respiratory syncytial virus, the RSV, vaccine – it's called ABRYSVO – contributed $375 million in US revenues. With the recent approval of the maternal indication, Pfizer is the only company with an RSV vaccine approved for preventing RSV in older adults and in infants via maternal immunization. We believe ABRYSVO will be a significant and growing contributor to revenue as many customers have indicated to us that protecting both populations with one vaccine is desirable and a competitive advantage for ABRYSVO. In the US alone, there are approximately 80 million adults over age 60 who are eligible for RSV vaccination, and an estimated 1.5 million pregnant women are eligible for maternal immunization with our RSV vaccine between September 2023 and January 2024. Nurtec, Vydura and Oxbryta, which were acquired in the fourth quarter of 2022, contributed $233 million and $85 million in global revenues, respectively. For Nurtec, in the US, oral CGRPs represent about 17% of the migraine market, and the unmet need is high. We believe oral CGRPs can ultimately be the first-line therapy for migraine and could eventually account for as much as 40% of the overall migraine market. Primary care is a clear source of potential growth in the migraine marketplace. Year to date, primary care healthcare providers wrote more than 6.1 million prescriptions for Triptans compared with approximately 1 million for oral CGRPs, which highlights a significant potential opportunity for growth. Regarding Oxbryta, there is significant burden of illness and unmet need for patients suffering from sickle cell disease. An estimated 12 million people around the world have SCD, sickle cell disease, with the highest prevalence in countries with the lowest resources. While in the US, 95% of children survive to adulthood, 99% of children in other regions will die before they reach their 5th birthday, many without ever being diagnosed. Our Vyndaqel family of products, including Vyndaqel, Vyndamax and Vynmac, recorded 47% operational growth globally compared with the third quarter of 2022. This growth was driven largely by continued strong uptake of the transthyretin amyloid cardiomyopathy indication, primarily in the US and developed Europe. We estimate there are between 120,000 and 150,000 people suffering from ATTR cardiomyopathy, with the majority still not yet diagnosed. The largest unmet need continues to be the lack of general understanding and ability to diagnose this deadly disease, which is why we are focused on educational activities to expedite diagnosis and get appropriate patients on to treatment with the product as the proven standard of care. Such efforts significantly contributed to this quarter's revenue increase in the US. And our Prevnar family of products, Prevnar 13 and Prevnar 20, saw global revenue rise 15% operationally compared with the year-ago quarter. This increase was driven primarily by strong patient demand for Prevnar 20 Adult in the US, the US approval of Prevnar 20 Pediatric and associated stocking, and growth of Prevenar 13 Pediatric in certain emerging markets. These were partially offset by anticipated lower market share in the US for Prevnar Pediatric due to competitive entry. Of note, Prevnar 20 Adult remains the category-leading pneumococcal vaccine for adults in the US with a 95% market share in the third quarter. Year-to-date, revenues for our non-COVID products have grown 7% operationally, and we remain on track to deliver 6% to 8% operational revenue growth for these products for the full year. We continue to progress toward our goal of executing an unprecedented number of launches of new products or indications. Recent milestones include US and EU approvals and launch of ABRYSVO in pregnant individuals; US approval and launch of Elrexfio in relapsed refractory multiple myeloma; US approval of our Braftovi+Mektovi combination in BRAF-mutated metastatic non-small cell lung cancer; US approval of VELSIPITY for moderate to severe ulcerative colitis; EC approval of Litfulo for severe alopecia areata; and US approval of PENBRAYA, the first and only pentavalent vaccine that provides coverage against the five most common serogroups causing meningococcal disease in adolescents and young adults 10 through 25 years of age. To date, we have now executed 13 of the 19 originally identified potential launches, with four other products approved and preparations being made for their launch. In fact, five of the six remaining potential launches have been largely de-risked from a technical perspective. The only one remaining would be our mRNA flu candidate. Given our recent positive results from our next-generation mRNA flu/COVID combination candidate and pending results for our 65-and-older first-generation Phase 3 standalone mRNA flu study, timing for our standalone mRNA flu is now expected after 2024. If successful, our next-generation mRNA flu/COVID combination candidate is expected to market in 2025. Mikael will share more about these programs shortly. We remain excited about our proposed acquisition of Seagen and the dramatic impact we think this combination can have on human health. One in three people will be diagnosed with cancer in their lifetime. So, conquering cancer would have an almost unimaginable impact on humanity. We recently gained unconditional antitrust clearance from the EC, and we continue to expect the transaction to close in late 2023 or early 2024, subject to customary closing conditions, including clearance by the US FTC. We have raised $31 billion in acquisition financing so far and continue to expect incremental 2030 risk-adjusted revenues in excess of $10 billion and expected cost efficiencies of $1 billion to be realized by the end of year three post-closing without impacting any R&D programs. With that, I will turn it over to Dave. After Dave, Mikael will provide an update on our R&D pipeline. So Dave?

Mikael Dolsten :

Thank you, Dave. Today, I will share important updates from our robust respiratory vaccine portfolio. Our respiratory vaccines are built upon three cutting-edge platforms that enable us to bring the right science to the right pathogen. These include our mRNA platform in partnership with BioNTech targeting highly variant viruses, our subunit platform targeting viruses that remain relatively consistent season to season, and our conjugate vaccine platform designed to help prevent bacterial infections. We have achieved FDA approvals of vaccines derived from each platform within the last year and aim to further expand our leadership with additional vaccine candidates in development. Today, I will provide information on our standalone flu vaccine candidate, flu-COVID combination vaccine candidates and next gen pneumococcal vaccine candidate. We are pleased to announce that we achieved both primary endpoints in the 18 to 64-year-old cohort of our ongoing Phase 3 flu trial. In the trial, our first-gen mRNA flu vaccine candidate demonstrated non-inferiority and superiority to a licensed flu vaccine at the time of the primary analysis. This represents the first and only demonstration of efficacy and superiority for an mRNA-based flu vaccine candidate. In this age cohort, efficacy was maintained through the trial's end of season analysis, with our candidate remaining non-inferior to the licensed comparator. Safety was similar to standard flu vaccine. The primary and end of season efficacy analyses considered both influenza A and B cases collectively. The vast majority of cases recorded in our trial, and during the 2022/2023 flu season overall, were flu A cases. Immunogenicity data showed robust antibody responses against influenza A compared to licensed flu vaccine. Humoral responses against influenza B were lower than those achieved with the comparator. Recall that our standalone flu vaccine Phase 3 study also includes a 65 and older cohort that we previously shared encouraging T cell data for all four strains from the Phase 2 study in this cohort. Our belief is that the ability of the vaccine candidate to induce T cell responses may contribute to the improved efficacy over current seasonal flu vaccines, particularly in those 65 and older. We expect a readout from this age group later this year. To address the lower B responses seen with our first-gen standalone flu candidate, Pfizer created next-generation reformulations. These were incorporated into our mRNA flu candidates in combination with the Pfizer-BioNTech COVID-19 vaccine, which I will review now. In positive Phase 1/2 topline data announced last week, we observed that reformulation of the lead flu candidates resulted in improved immunogenicity against influenza B, allowing us to meet all criteria for advancement to Phase 3. In the trial, our lead candidate formulations induced robust immune responses, with point estimates for Geometric Mean Titer ratios that were consistent with criteria applied to approved vaccines for all matched flu and SARS-CoV-2 strains. Notably, point estimates for Geometric Mean Titer ratios with selected candidate formulations were greater than one relative to the licensed comparator for all matched flu vaccine strains. The safety profiles of evaluated candidates were consistent with Pfizer and BioNTech's COVID-19 vaccine. Following these positive immunogenicity data, we plan to initiate a Phase 3 study in the coming months. Successfully developing a broad seasonal vaccine franchise anchored around a modFlu mRNA vaccine is a key priority, as it may allow us to tap into the nearly 50% annual flu vaccination rate in US adults. We are taking a differentiated approach in pursuit of this goal, leveraging both mRNA and protein subunit technologies. Our development program includes double and triple combination vaccines to potentially help protect against flu, COVID-19, and RSV. Now, turning to PREVNAR, I'll start by reminding you that this is the only PCV business with an FDA indication for pneumonia in adults. Providing protection specifically against pneumococcal pneumonia is critical. It's the most common form of pneumococcal disease in adults, leading to 150,000 US hospitalizations each year. The prevalence of nonbacteremic pneumococcal pneumonia is more than 15-fold greater than that of invasive pneumococcal disease in US adults 50 and older. PREVNAR's pneumonia indication is supported by the CAPiTA trial, which was enabled by a pneumococcal vaccine-naïve population and proprietary assay. These innovative characteristics make it challenging for others to conduct a similar study, given the high level of pneumococcal vaccine coverage that exists today. CAPiTA's innovative design and landmark results helped establish our leading and differentiated position in the PCV space. To solidify this position, we are committed to pursuing continued innovation. Our goal is to potentially maximize valency and improve immunogenicity while maintaining coverage of the serotypes clinically demonstrated to protect against pneumonia. In line with this commitment, we have been developing a fourth-generation PCV candidate that builds on the PREVNAR business' 20-year-plus of innovation. Our next-generation technology leverages cutting-edge conjugation chemistry, carriers, and reformulations. Using these new proprietary vaccine technologies, we observed a several fold improvement in select serotype immunogenicity in a monovalent Phase 1 study. Based on these data, we are confident that when we move this technology into our multivalent 4th generation candidate, we have the potential to achieve increased valency with improved serotype immunogenicity. We are now advancing our fourth-generation candidate into a first-in-human trial, which is expected to begin in the fourth quarter of 2023. Finally, I will leave you with our list of milestones and call out the recent approvals of VELSIPITY for ulcerative colitis and PENBRAYA, the first pentavalent meningococcal vaccine. Pfizer has delivered more than a dozen regulatory approvals this year alone. I'll also note the recent launches of ABRYSVO for maternal immunization and ELREXFIO in multiple myeloma. Thank you. Let me turn it over to Francesca to start the Q&A session. Francesca DeMartino Thanks, Michael. With that, let's start the Q&A session. We will answer as many questions as time permits. And I will be available after the call to answer any follow-up questions. Operator, please assemble the queue.

Robyn Karnauskas:

I think I have a big picture question on your new launches, which is extremely important for your growth. Are you seeing any impact given, I think, vaccine fatigue that we've seen with COVID impacting RSV and pneumococcal vaccines? And how do you think about that impact as you think about 2023 and 2024? Do you think that will dissipate?

Operator:

Our next question will come from Huynh Trung with UBS.

Albert Bourla:

On the flu comparator, I can confirm that it is the low dose on the younger population because that's the only one that's allowed. So on the older population, we are having studies now with a very low dose, but we will do also with the higher dose. So we have both. On danu, it's not much to say. We need to wait to see the data. Clearly, when you are moving ahead with a program like that, you need to see the totality of the data and we are working now intensively to be able to have those data presented before year-end.

Umer Raffat:

I wanted to continue on the oral obesity theme for a second. I noticed there's a new molecule, 522, that you moved into Phase 1. And my question is, is the chemical structure and the chemical series akin to the danu GLP-1 programs? And also, Albert, you mentioned you want to wait to see the danu GLP-1 Phase 2 data, but I realized the trial has been wrapped up for a few weeks now. Have you not seen it yet?

Mikael Dolsten:

We are building a platform around the GLP-1 area and also obesity in general with multiple different mechanisms and compounds. We remain focused on the danuglipron readout, as Albert mentioned, as our main opportunity here for getting data to review for obesity and Type 2 diabetes. But there are many indications where GLP may play a role outside the typical metabolic. So this one gives us just more options to explore and have interesting data. And you will see more new mechanism also coming from Pfizer. We have a pretty strong effort here.

Terence Flynn:

Maybe two for me. I was just wondering, on your RSV launch, how we should think about the potential for revaccination in 2024. And then, on your DMD gene therapy program, I think you've previously talked about having interim data by year-end. Is that still the case and does the recent competitor data make you more or less optimistic in your program?

Mikael Dolsten:

[indiscernible] we also always said and when someone fails a study. We are very encouraged about getting to the readout. You are right, there is an opportunity for an interim analysis around year-end with final analysis second half of next year. And overall, I think our interim read for DMD have shown a very consistent effect across biomarkers and functional endpoint. And what has been differentiated it so far is that when you look at the functional data we have reported, it has been giving encouraging signals in both the younger and the slightly older boys. And that has not been seen with the other company you referred to. So, in a way, I remain, as earlier, very positive about looking forward to the readout and let the data tell the story. But of course, this makes our gene therapy, in a way, the main game to us.

Angela Hwang:

Well, as you heard, during the HCIP discussions, our recommendation for ABRYSVO today is really one around shared clinical decision making. But we also were – we were asked to bring additional data when they are ready. And so, just to confirm that we will have additional data in vaccine effectiveness in broader populations, we will have safety data also in broader populations, we will also have immunogenicity data in younger populations. All of this will be, I think, available in the next year when we plan to bring this back to the CDC. In addition to that, actually omitted to mention that we'll also have second season efficacy data. So, we'll be able to bring this totality of data together to determine whether the recommendations will change, but also what the vaccination schedule will be. So that's to come in 2024.

Steve Scala:

As was just noted a couple of minutes ago, the danu data has reached its primary completion. It was a while ago. Albert, when you were asked, you stressed the words totality of the data, implying that you could have seen some part of the data. Mikael, when you were asked, you talked about different indications. These are not confidence building statements. So, I'm curious, what have you seen? And, Mikael, you've said in the past, you were absolutely encouraged and confident in the profile of danu? Are you still absolutely encouraged and confident? So that's the first question. Secondly, a competitor spoke to potentially COVID derived decrease in diagnosis of inflammatory diseases, such as UC, and I'm wondering if you've seen any of that.

Mikael Dolsten:

Yeah, I can just echo what you said so well, Albert. We and I remain very enthusiastic to look forward, to see the data. We have not seen the final top line report coming out. So today, the study is still ongoing but will be available before year-end. Danuglipron has shown, as you know, some really interesting profile as a full agonist and it's our main opportunity and effort for obesity and Type 2 diabetes. We got earlier today a question about new molecules that are coming in. And that's when I mentioned that our additional indications to pursue for such new molecules and we'll also have new mechanisms that are validated that's coming in in oral version. So it just punctuates our big effort we have around both these class and obesity and other disorders.

Operator:

Next, we have Louise Chen with Cantor.

Albert Bourla:

Monadelphous, you want to take the PCV question and danu, but also, Angela, very quickly, ABRYSVO is available at the pharmacy.

Mikael Dolsten:

On the PCV fourth generation, I hope you looked at today's data. And what you could see is that we are really the first company that have been able to put in place a whole set of new technology that can bring immune responses to a higher level than have been seen and that allow us to go with even more comprehensive coverage than the current 20. I'm not going to give your curiosity an answer how many serotype. I can just tell you it's considerable more than the 20. On danu, we look upon danuglipron as the once-a-day QD molecule because of the reformulation technologies that were put in place and already generated some clinical data on and are now concluding. So that's really how we look upon danuglipron and we'll have final data on the best formulation option early next year. But as Albert said, we're enthusiastic to look forward to the efficacy data later this year. So very exciting time.

David Risinger:

I have another question on danuglipron since it appears to be the company's number one pipeline candidate based upon your forecasts. So regarding the Phase 2b results that are expected soon, how should we expect Pfizer to share those results? And then, with regard to the once daily formulation that you just mentioned, Mikael, will that be ready for the Phase 3 start assuming that the company moves to start Phase 3 shortly after the Phase 2b results are generated?

Mikael Dolsten:

Yeah, I can first echo what Albert and I said, we look forward with enthusiasm to get the danuglipron obesity data later this year. And of course, as Albert said, pending totality of reviewing everything we have, we have made a lot of progress and been able to accelerate the QD danu. Now, we're waiting for some more clinical data early next year, but I think it's within our reach. If we decide to do, to start the pivotal study next year to do it with an once a day molecule.

Chris Schott:

Just two for me here. First, can you just comment a little bit more on what we're seeing with Nurtec and the ramp relative to your expectations? And maybe just as part of that, just any color on pricing we're seeing within the market today and how we should think about that going forward. And then my second question was on 2024. I know you're not giving guidance today. But as you look at where consensus has kind of shaken out post the COVID and cost restructuring updates, and if the earnings are in kind of low $3 range at this point, I guess just are there any directional kind of pushes or pulls in the numbers that you feel the Street isn't capturing properly and should be kind of thinking about before we get your kind of formal guidance as we look to early next year?

Mark Southey:

And then, Angela, about Nurtec launch – not launch, about the Nurtec performance in the marketplace, including the price.

Operator:

Next we have Mohit Bansal with Wells Fargo.

Mikael Dolsten:

I'm happy to start on it. I think we have a very robust label for etrasimod. It's the only S1P in this drug class [indiscernible] that have a simple flat dosing and immediate start without any prior need for, let's say, cardiac rhythm exams, like the other prog in this class. All S1P have various eye exams to monitor. And I think our label similarly has a recommendation to do that. So it's really nothing new. And our efficacy data, and you see, has been very favorable. So we are very optimistic that this can be a true best-in-class ulcerative colitis.

Operator:

Next, we have Geoff Meacham with Bank of America.

Albert Bourla:

Chris, do you want to take a question about the Seagen and the pipeline?

Mikael Dolsten:

I think you asked about how could a new oral GLP in obesity be positioned for maximal attractiveness and using danu as one example, pending, of course, our excitement to see the data. Well, clearly, as obesity and Type 2 diabetes with overweight are moving from being treated from an endocrinologist and metabolic physicians increasingly now to primary care, particularly with the impressive effects of this drug class on obesity and bodyweight. Oral agents in general are preferred. So I think, once a day drugs such as the new reformulated potential danuglipron would have an interesting role there. I think there is also a growing discussion among opinion leaders in the field that the patients regain weight when they stop the injectable. And in general, they are only available for maybe a year. So an oral agent that could be taken for a longer period could also play a really interesting role to maintain body weight at a low level. And finally, you're absolute right, the new data for this drug class suggests that patients could benefit from both cardiac and renal protection. And oral agents allow you to build combination with drugs that already are used in this population, such as the 52, to protect the heart etc. So I think that's why there is such a big interest in drugs in this class.

Tim Anderson:

I have a couple of questions on danuglipron. Early dataset showed a QTc signal. Do you think that was a red herring that won't show up in later data? To me, when I just think about drug classes and seeing QTc signals, seems like it often persists in later datasets. Second question on mRNA flu. You mentioned that safety is the same as licensed vaccines. Does that mean tolerability was as well? I usually think of safety and tolerability as technically being different from each other.

Mikael Dolsten:

We have, I think, more than 1,400 patients on danuglipron and it's a very safe drug. It's a very safe drug. And we look forward to the readout on efficacy, as we have said. before year-end. So that's very straightforward. mRNA flu, you had a very good comment, particularly in initial studies, tolerability is really what we focus on. And tolerability was similar to standard of care available vaccines, or the other mRNA vaccines experienced from Pfizer. And we haven't really had any concerns about safety. So on both tolerability and safety, the statement stands that it looks like previous versions of our vaccines.

Chris Shibutani:

Two questions, if I may. On the cost savings program, you've been outlining what the plan is for 2024. But if we look at the pattern of the spending for R&D and SI&A, in the quarter you just reported, I would observe that the magnitude of reduction in the R&D spend was greater than expected relative to SI&A, how should we be interpreting this numbers or anything to read across in terms of the relative amount of cost reductions coming from SI&A versus R&D on the forward? And then a question on ABRYSVO. First quarter sales were solid. Can you just elaborate how much may have been attributable to, for instance, inventory stocking versus actual demand? And if we look at prescription data, looks like from the retail setting, there was about a 30% market share. Is this similar to what you're observing in the broader market? And how is this conferring with your expectations?

Dave Denton:

Chris, on the cost program, I would not read into the allocation of savings in 2023 as it relates to 2024. Obviously, we have a fairly robust program up and running today. We're working aggressively on those programs and beginning to implement those programs. As we cycle into 2024, we'll give you and the markets specific color on how to think about those cost savings as we wrap into next year.

Angela Hwang:

We're really pleased with our performance on ABRYSVO. It has exceeded our expectations. You first asked whether this is all about stocking. And I can say that it isn't. Of course, there was stocking effect in the beginning because this was a new vaccine. But we're also closely tracking vaccination rates and uptake. And what you see is that there is very fast uptake that really benefit from the fact that this was approved and in market prior to the vaccination season actually happening. So it was able to ride off the coattails of flu vaccinations, which you know are very high. Right? September, October. We have about a 70% co-administration rate. The performance we're seeing on ABRYSVO is truly driven by vaccinations. To your comment about market share, yes, we are seeing a similar market share to what you have just said. That is because, right now, the retail setting is driving a lot of the vaccinations. But don't forget that that's not where all vaccinations are taking place. We also have non-retail settings such as health systems, doctors' offices, those are also being engaged. And those particular settings, Pfizer actually has a leading preference. They are smaller in proportion, but still. So I think we have to look at all channels of the market. Finally, I think that, just from a momentum perspective, we expect things to continue. The vaccinations really are happening throughout this time now – October, November, December are big vaccination months. From where we are right now, RSV is only 5% of the entire vaccination rate of the eligible populations. So I think that the conclusion is we're very early in the innings of this launch. It's doing better than we thought. But where we are going to be, I think, is a place where there's tremendous opportunity for driving uptake in older adults, but also maternal, which, as you know, we just got the approval for.

Carter Gould:

Maybe if you go back to oral danu, when we do get the Phase 2 data, what should our expectation be around communicating plans for Phase 3, which I guess is just a quicker way of saying, what's a reasonable expectation for how quickly you could turn around the Phase 2 and start a Phase 3 and how much work Pfizer has already done on that front? And then, maybe just coming out of ESMO, on the back of the EV-302 data and the response with Pfizer saying that reaffirms their expectations or represents upside to their expectations when the deal was originally announced.

Chris Boshoff:

Thank you for raising 301. It's a truly monumental data for the field of bladder cancer, and urothelial cancer. And as you pointed out, with overall survival and median –progression-free survival nearly double, moving median overall survival for this population now nearly towards three years, we expect the final data to be above – longer than 31.5 months. So this just reaffirms our belief that antibody drug conjugates could become a standard of care across the treatment paradigm for many, many different tumor types.

Ivy Wang:

This is Ivy on for Akash. Our question is also on danuglipron. So, [indiscernible] release version, is there any possibility to do a bridging study for QD formulation? And also, for danu, I think as we've heard a lot of times on the call that the trial [indiscernible] completed in October. I know you haven't seen the top line data. So at this point, are we waiting for data from this lower four week titration cohort? So would it be fair to say that you will have to continue the program already if there were any clinically significant theories, issues with danu?

Mark Southey:

And there was a second part I think, or not. There was a second part on danu?

Kerry Holford:

Two questions on vaccines for me, please. First on RSV, in August, GSK filed a lawsuit against Pfizer alleging patent infringement. So I wonder if you could just talk to the next steps here. Perhaps a timeline that you anticipate for this? And should we think that this could ultimately result in some form of royalty payments from Pfizer to GSK? And then, on PENBRAYA, how does the recent ACIP recommendation set against your expectations for the sales ramp and peak potential for this vaccine? If the vaccine is effectively only used for dose two of three, does that significantly reduce the commercial opportunity you had anticipated for the vaccine?

Angela Hwang:

We continue to feel confident about the peak sales. The reason is that, right now, we have the first set of recommendations, but the ACIP has also told us that we will have the opportunity again to come back next year when we have additional data, which is when we will have the opportunity to look at the schedule or how [indiscernible] are being – the schedule that they're being delivered today. And we'll have an opportunity again to take a look at the benefit of PENBRAYA in this population. So I feel like it's great that we have an opportunity to get out now and to begin vaccinating our teenagers. We'll have a second bite at the apple, which will allow us to achieve our peak sales.

Andrew Baum:

A couple of questions. Would you comment on your stake in RVT-3101, the TL1A, pending the approval of the licensing of the asset to Roche? Will you hang on to it? Or is that subject to divestment? Second question for Chris. Just looking at the recent EV-302 data and with – you seem to have the Seagen portfolio, when you think about the combination of ADCs with pembro or with a PD-1, do you believe the efficacy that you're seeing is associated with that hedging or do you think it's true synergy through an immunologic mechanism of increased cell death?

Chris Boshoff:

That's a very good question. As you know, Seagen pioneered the MMAE auristatin-based payloads, and we see this potential synergy in combination with a PD-1 with [indiscernible]. Although Seagen does have the next generation of ADCs with topo 1 that will enter the clinic this year – next year, we don't know yet if the topo 1s are going to show the similar type of immunogenicity as what appears to happen with the MMAE auristatin based payloads. So I think we're very confident that Seagen has both topo 1 as well as auristatin based payloads in case with topo 1s we do not see what appears [indiscernible].

Evan Seigerman:

I have one on danu and then a bigger picture one. So, a point of clarification on danuglipron. Mikael, is the ultimate goal to develop the fixed dose combination with, say, an SGLT2, other anti-diabetes drugs. You kind of mentioned that in your commentary. And taking a big step back, how should we think about how you risk adjusted your long term revenue guidance? Did you plan on updating this figure as you have clinical or regulatory successes or failures, for example, with the approval of etrasimod?

Albert Bourla:

And also about your question, if we are going to change the $20 billions or the $25 billions that we have declared, first of all, the $25 billion is billions that we're going to acquire revenue in 2030. According to our estimates, we have acquired, pending Seagen acquisition, $20 billion so far. If you see the analyst expectations for this acquisitions, at the end of 2030, are very, very close to what we have right now. And I think this is trending very nice. When you see the internal pipe, the launches that we are having from our internal pipeline, which we declared $20 billions, there is a gap between what we believe and what the analysts believe. And this is where we are focusing our attention right now. It's very early with the launches. Some of them are doing better than what we thought. Some of them are doing worse than what we thought. And if we realize that the totality of $20 billion is not anymore what we think will be, of course, we will update.

Albert Bourla:

Okay, thank you very much. I would like just to say that if you walk away from today's call with just one takeaway, it should be that I think Pfizer's future remains bright. We have rebased our COVID expectations, and now I think it's very easy for everyone to be able to model what I think will be stable COVID revenues going forward. And with the recent – particularly with the recent amended Paxlovid supply agreement. And of course, we are having very strong performance of our [indiscernible] and new products portfolio excluding COVID. It's 10% growth this quarter. And that position us to be able to have growing things going forward. So I will now bring this call to an end. Thank you for joining us and have a great rest of your day.

Operator:

Good day, everyone, and welcome to Pfizer’s Second Quarter 2023 Earnings Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to Mr. Chris Stevo, Senior Vice President and Chief Investor Relations Officer. Please go ahead, sir.

Dr. Albert Bourla:

Thank you, Chris. Hello, everyone, and thank you for joining us today. Our second quarter financial results were solid and in line with our expectations. Non-COVID-19 revenues grew 5% operationally compared with the year-ago quarter. Total revenues declined 53% operationally, primarily due to the anticipated revenue declines in both Paxlovid and Comirnaty. Even with these declines, our COVID-19 portfolio remained a significant contributor to the business with more than $1.6 billion in combined revenues during this quarter. Of course, our patient impact data are equally important because patients are the reason we exist. Through the first six months of the year, more than 356 million patients around the world were treated with our medicines and vaccines. We continue to make progress towards our goal of executing an unprecedented number of launches of new products or indications. In fact, Pfizer is more than halfway of its goal of launching 19 new products or indications in an 18-month span. In addition to the six approvals and five launches that occurred prior to 2023, we had six approvals and four launches in the first six months of 2023. For the second half of 2023, we expect six additional approvals and six additional launches, including the two launches that occurred in July. Then in 2024, we expect one approval and four launches, which, if approved and recommended, would raise the total to 19 new launches in approximately 18 months. As you can see in this chart, for this year’s launches, we expect the revenue contribution to occur largely in the second half of 2023 because the first-half launches occurred late in the second quarter. And then in 2024, with the additional impact of next year’s expected launches, we anticipate an even greater total contribution for our 19 launches. It’s important to note that 18 of the 19 potential launches have been largely derisked from a technical perspective at this point, with the only one remaining being our RNA flu candidate. Equally encouraging is that our pipeline is expected to continue generating breakthrough treatments and vaccines long after the 19 we have been discussing. We recently reported milestones from several exciting pipeline candidates with the potential to be significant future value drivers. These include

Dr. Mikael Dolsten:

Thank you, Dave. Today, I will provide updates from a few different therapeutic focus areas, starting with breast cancer. We are working to deliver the next wave of innovative therapies for estrogen receptor-positive breast cancer. The pillars of this strategy are three-fold

Operator:

Yes, sir. [Operator Instructions] Our first question will come from Robyn Karnauskas with Truist Securities.

Dr. Albert Bourla:

Maybe Angela can answer that. The question was, do you expect the share decision to have a big impact on RSV and also do we expect in the U.S. and also do we expect any impact, excluding the U.S.?

Dr. Albert Bourla:

And what about the ex-U.S.?

Dr. Albert Bourla:

Thank you very much, Angela. I hope we gave what you asked, Robyn. Operator, the next question please.

Umer Raffat:

I know I heard two different things on the cost cut just now. One was that it would be enterprise-wide, while Albert, I think, used the word within the COVID cost base. So I was just trying to reconcile the two. And also on danuglipron, is it reasonable to expect that if it’s below mid-teens weight loss, you wouldn’t move forward?

Dr. Mikael Dolsten:

Well, we really look forward to get the data. And as you know, we have in parallel developed activities also for modified leads. I think we really need to look at the totality of data, its performance on important metabolic parameters in diabetes, its ability to deliver weight loss as you alluded to, and also, of course, its tolerability in general. These three implicate how well the drug can perform. And I remain optimistic that oral drugs in this class can have a profound effect on weight loss. Of course, one needs to be maybe a little bit caution to drive weight loss too far, as you have seen also some concerns in public media about side effects that may arise from that. So we will really integrate all of that data and make a decision, and we really look forward to that moment.

Evan Seigerman:

Kind of a follow-up from Umer’s, I want to focus on the GLP-1 franchise. Can you talk about the competitive profile of danuglipron in its current form, considering safety, twice-daily dosing and efficacy? And maybe remind us on the time lines to potentially get more on a once-daily formulation of this asset?

Dr. Mikael Dolsten:

Yes. As I said in my prepared remarks, we expect data at the later part of this year. We are absolutely encouraged and confident that it has a different profile when it comes to adverse events as the danuglipron that we sold. So we don’t see that as an issue. And I spoke to that we will put together the totality of data to pending readout, prepare a potential Phase 3 program. And it’s a very big sector, diabetes and obesity. We have considerable expertise in treating cardiometabolic patients. So, we look forward to share more data and more plans with you as we move to further quarter. Thank you for your great interest in this important space.

Terence Flynn:

Maybe two for me. Dave, I was just wondering how we should think about steady-state operating margin here. Looking back pre-COVID, the Company was around mid- to high-30% range. So, is that how we should think about this when you gave us some of the parameters but just maybe how to think about steady state? And then, on the messenger RNA Phase 3 seasonal flu vaccine program, it looks like that trial was upsized based on clinicaltrials.gov. So just wondering, Mikael, if you can talk through timing of data and help frame expectations there. Thank you.

Dave Denton:

Yes. So, great question. As we think about our operating margin long term, clearly, our objective is to expand that over time. Clearly, it is our expectation to get back to, at a minimum, pre-COVID levels with one caveat is that we -- as we go forward, we do have a different mix of products within our portfolio, particularly the vaccine related to COVID. As you know that the vaccine, given the cost share that we have or profit share that we have with our partner, does dilute that product from an operating margin perspective. So a mix adjusted, you should see us back to those levels over time. But obviously, as we cycle into ‘24, we’ll give you a lot more clarity on all the puts and takes as we integrate Seagen, as we roll forward from a COVID franchise perspective, how that looks as well as all the developments that we have coming out the pipeline at this point in time.

Dr. Mikael Dolsten:

Yes. First, the totality of experience we have with mRNA for flu makes me very encouraged that this will be new modality as it was for COVID but now for flu, that engages two mechanisms, the B-cells and the T-cell that we should aspire for, having better efficacy than what we have seen with the old flu. We are continuing with the study because we just wanted to have more events and particularly have additional flu B type of events, which were scarce in the U.S. part of the trial. And we look forward to update you, hopefully, be able to conclude the study later this year. But we also are putting mitigations as adding immunogenicity studies that can be supplementary for getting a total good data package of activity against flu A and flu B. But as I said, I remain very optimistic that the mRNA is going to be the next important platform to deal with flu.

Chris Shibutani:

Two questions, if I may. On the potential enterprise-wide cost program, you would have some opportunity outside of the COVID programs to consider. Can you help us with the relative weighting potentially of R&D versus SG&A or some other component of that? And I ask that in part because you’ve announced some changes, for instance, in kind of the structure at the top tier of management of the R&D with the anticipation of the oncology in Seattle Genetics. And then secondly, if I could, on the Rocky Mount facility, it’s reassuring to hear in terms of your own staff. But I think folks are looking to get a sense for the scale of the damage and perhaps what potential gating factors for getting more information on the timing? I know that you guys have communicated with some of your hospital-based customers, but any additional insights in terms of magnitude of the impact and timing of the recovery, and what that could look like from a progress standpoint would be helpful.

Dave Denton:

Yes. So, thank you for the question. Clearly, as we develop this program in the back half of ‘23, we look forward to sharing a lot more details as we cycle into ‘24 and give you a lot of, I’ll say, milestones as you think about both our cost and investment structure going forward. Importantly, as you know, we’re extremely excited about the Seagen acquisition that’s upcoming here. Upon approval, this will allow the Company to refocus its efforts and its investments to make sure that we’re squarely focused on battling cancer going forward. And we think there’s a big opportunity as we align our resources against that franchise in that battle to fight cancer and an opportunity for patients and importantly, an opportunity long term for Pfizer. Having said that, we will be informed in the back half of the year of our revenue performance, specifically as it relates to COVID. That will inform us the level of opportunity we have to expand our margins into ‘24 and ‘25 and beyond. That will allow us to step back and make sure that all of our costs, all our investments are aligned with those Seagen objectives as well as aligned to maximizing the performance of our in-line portfolio as well as the launches that are occurring as we speak in the back half of this year. So, again, we look forward to sharing a lot more to this from this. This will be balanced, as you well know between SI&A and R&D, and we’ll give you that specific breakdown and that specific information later this year and into next year.

Louise Chen:

I wanted to ask you first on these COVID scenarios that you think could unfold in the second half ‘23. Any way you could share some of the big ones that you anticipate could potentially happen? And then, secondly, seeing a lot of headlines in the ATTR-CM space. I’m just curious if you anticipate any potential competition or meaningful competition to Vyndaqel and Vyndamax.

Angela Hwang:

Louise, I think when you talk about Vyndamax or Vyndaqel, the biggest and our biggest differentiator that we’re extremely confident about is just the totality of our data really along four dimensions. And whether that’s clinical data or real-world data, we have all-cause mortality and CV-related hospitalization data. Our data is also relevant in both hereditary and wild-type ATTR-CM, so that’s unique. We’ve also demonstrated significant survival benefit at five years through our real-world data. So whichever way you look at it and you compare that with any competitor program, I think that we have a highly differentiated and an extremely valuable molecule that stacks up well against any competition.

Mohit Bansal:

Maybe a follow-up to this one a little bit. So, thank you for all the transparency by the way. So, is it fair to say that in COVID trends that you have seen so far, at least sales trend that has been below your expectations, and you want to see one more quarter before you adjust expectations. I’m asking this because if I look at the -- it seems like you still expect 88 million or so vaccinations in the second half of the year in the U.S. and the number was actually, by our calculation, 44 million or so in terms of administration, 111 million in terms of shipments. So, just trying to understand, is it like -- is it something where you are -- where we could get better update in third quarter on the COVID numbers? Thank you.

Operator:

Next, we have Trung Huynh with Credit Suisse.

Dr. Albert Bourla:

Yes. Thank you. The LOEs are coming basically from year ‘26, right? So, all the way to ‘25, I think the impact will not be that high. Also, the guidance that we gave was 6%, yes, we feel quite confident that we will be there. So, we’ll continue and we are at 6% right now all these years, right, year-to-date. So yes, the non-COVID business, I think, clearly, the success of the launches is very important. So we’ll see a lot of things coming ahead of us. But it is a way better predictable. And I think we are there. So, I don’t think there will be any variability.

Colin Bristow:

Another follow-up on danuglipron. I don’t think I heard the answer in terms of when we’ll hear about the once-daily formulation. And I’d just like to understand your level of confidence here that you can make this a once-daily formulation without negatively impacting the AE profile, presumably given an increase in Cmax? And then more broadly, can you just talk more about how you’re going to compete here, given I think it was previously referenced you’re behind the competition, the clinical differentiation, the potentially less convenient dosing and essentially a therapeutic category in which you don’t have a major presence. And then just maybe one other quick one on the pipeline item on DMD gene therapy, it’s a late-stage asset that doesn’t seem to get much air time. Is your enthusiasm waning on this program or is it just that others are sort of a bigger priority?

Dr. Mikael Dolsten:

I hear your interest in a once-daily product, and I would say I don’t see any technical barrier for us in creating that. We have tremendous experience in modified release formulations. And our early data, as we now have initiated a while ago, tells us we should be encouraged that when it relates to once-a-day modified release for danuglipron, I believe we will have such a formulation in a reasonable future in our hands. When could it come to the market if the drug continues and makes a great Phase 3? Well, I think we can have it at launch or shortly after launch. So I wouldn’t worry about that. But I agree with you that once-daily modified release can sometimes actually improve the tolerability profile by a slew than the variability and exposure, which typically reduce GI side effects that have been seen as limiting this drug. So that’s why I can see a potential twofold advantage of MR goes from twice a day to once a day and may also help uniquely to create a tolerability profile within the structure of GLPs. [Ph] DMD gene therapy, I’m encouraged that FDA took a very positive angle on that drug when it comes to its urgency to get into the market. Chris, you and I have worked very closely on that, and we expect today we’ll look relatively soon to conclude the trial. I’ll also ask Chris to pitch in on it.

Dr. Albert Bourla:

That was terrific. I just wanted to add that we have, like you heard Sarepta, ample biomarker that look very robust in our hand. But as Chris said, we want to provide patients with even more experience about the potential benefit.

Kerry Holford:

A couple of questions [Technical Difficulty] savings. It’s clear that demand for your COVID assets will influence whether or not you go down this route. But given the potential you’ve highlighted previously for a COVID flu combination vaccine, I’m interested to understand whether the upcoming Phase 3 data from your mRNA flu vaccine trial will influence your decisions on that cost saving program in any way. And then, secondly, on hemophilia, your anti-TFPI filing second half of the year for non-inhibitor patients. Should we assume you would seek to launch in that patient group only next year, or would you wait for the data in the inhibitor patient group before you proceed to market? And perhaps you can just discuss how big an opportunity you see in that drug.

Dr. Mikael Dolsten:

I’m very excited about marstacimab. I followed this projects for a long time. And as you know, we reported our very encouraging data. We had 92% reduction in annual bleeding rate versus on demand. We had really no safety events as had been associated with other products, including Hemlibra. It’s active against both in A and B. It’s administrated with a pre-fill pen. I think it can be, from a medical point of view, a very large product, a single option for hemophilia A and B. Of course, when I think about how Hemlibra has been such a promise for in A patient and I see this profile that it’s so good, I’m optimistic that it can do well in both segments.

Operator:

Our next question will come from Geoff Meacham with Bank of America.

Dr. Albert Bourla:

So Angela, how concerned you are with the competitive environment? I know with respect to our competitors, but we have some realities that maybe you want to discuss. And also, I would like actually Chris Boshoff to answer the question of CDK4 since we have him here in his new capacity. Angela?

Dr. Albert Bourla:

And that is under the competition of PCV15, which I think was around 150 million, if I’m not mistaken. Chris, can you please speak about the CDK4 and the franchise in general over there?

Operator:

Next, we have Tim Anderson with Wolfe Research.

Dr. Albert Bourla:

Yes. I think that this year’s utilization at the marketplace will form the basis that we can predict reliably for the next years. I don’t think it will be any much different because there will be no different categories in the marketplace. Vaccination rates will settle and then the treatment and infection rates also would be, after a new year, indicate what we should expect periodically. Clearly, we will have to deal with some inventories movements, and this year was a transition year because we are going to give prices, and we are going to absorb some of inventories, et cetera. So that should be for the accurate number for ‘24 and beyond, but should be the base and likely should be higher than what you should see this year. But that -- provided that we have a reasonable vaccination and treatment range of Paxlovid. So that’s why I say that let’s wait to see what would be the actual in this year and clearly, what will be the utilization, as I said. Because next year, all these inventories and price adjustment things will be very clear what it will be. So thank you very much for the question. Let’s move to the next question, please.

Carter Gould:

Good morning. And thank you for taking the question and for all the transparency on your thought process on the COVID side. Plenty of good -- great questions asked this morning. I guess, one I want -- didn’t get addressed is you out-licensed TL1A late last year, your partner, then turns around and sells it for quite substantially more. I guess, so to be a bit provocative, Albert, were Pfizer shareholders well served by this course of events? I would love to give you the opportunity to address that publicly. Thank you.

Aamir Malik:

Thanks for the question, Carter. And obviously, I’m not going to comment on the rumors and speculation or the potential prices attached to different transactions. What I will say is we’re very pleased with our TL1A Telavant partnership with Roivant and we do think shareholders were well served. So, as a reminder, why we entered this? We entered this as an R&D portfolio prioritization decision. So from time to time, we make decisions as part of our disciplined process to our partner R&D programs, where we think it is better to share the risk or the cost with a partner. And in this case, Telavant covers all of the R&D costs going forward. And that frees up significant R&D capacity for Pfizer to invest in high priority programs. But we still retained value in this program in three different ways. We had a 25% equity stake in Telavant. We have full ex U.S. and ex Japan rights and we earned royalties on the U.S. and Japan sales. So, taken together, this collaboration allows us to keep more than 50% of the total value of TL1A with zero incremental R&D spend. And for a Phase 2 program, we feel this is a very sound move for Pfizer shareholders.

Dr. Mikael Dolsten:

Aamir, said it well. And I just wanted to punctuate among the very many options, we have a strong platform in bispecific in many therapeutic, including in immunology and we do have TL1A antibody. That would be very interesting, where we own an even greater share. We have triple specifics that are going into atopic dermatitis. So it just punctuates. Even in the very same therapeutic area, we have so many things going on. And near term, we expect soon approval for etrasimod and another readout [indiscernible]. So a lot to start there.

Operator:

Next, we have Steve Scala with Cowen.

Dr. Albert Bourla:

Yes. So, why don’t you take the question, Angela?

Operator:

Next question comes from David Risinger with Leerink Partners.

Dr. Albert Bourla:

Thank you very much, David. Very good questions. Mikael, so are technical issues that Sanofi is having, are we experiencing as well.

Dr. Albert Bourla:

What about the reactogenicity?

Operator:

Next, we have Andrew Baum with Citi.

Dr. Albert Bourla:

Yes. So, why don’t we go first to answer about what IRA will mean in terms of changing the rebates, et cetera, which it’s quite a new situation. So, we have to see how it plays. But if you want to speak a little bit about it, Angela?

Dr. Albert Bourla:

Thank you very much, Angela. It’s an evolving environment, so we need to really see. Also, Andrew, very quickly on the pipeline issue, we have made very clear about the Seagen acquisition will mean nothing to the pipeline assets. So, no pipeline assets will be eliminated or reduced or increased as a result of -- actually, would be increased because of the combination but will not be any reductions on pipeline assets as a result of this acquisition.

Chris Schott:

Just a two-parter on Comirnaty. Can you just help me a little bit in terms of, I guess, with the updated vaccine being commercialized in September, how much of your remaining COVID revenue should we think about in 3Q versus 4Q? And I’m just trying to get my sense of when we get this 3Q update, will that be based on the sales we’re seeing in the quarter or more your interpretation of the trend we’re seeing for vaccinations, so just setting expectations? And the second part was on the EU contract renegotiation. Just any additional color you can provide on how different, I guess, the terms end up being for 2023 relative to what was reflected in the 2023 guidance?

Operator:

Next, we have Rajesh Kumar with HSBC.

Dr. Albert Bourla:

For the Seagen acquisition, right? Yes. Let me start…

Dr. Albert Bourla:

Yes. So let me start with what excites us with Seagen. And I think there’s the science behind this company. The ADCs are playing a key role right now, more and more in our research and in our fight against cancer. And Seagen has one of the two leading platforms and we believe it’s actually a better one. So, I think that excites me a lot. Also what excites me a lot is that Seagen was able to achieve all this greatness with limited resources relatively compared to what we are bringing on the table. And what we are bringing on the table on the research front, of course, is not only the capital but also a significant expertise in designing the molecules. And particularly in the small molecules, we are very, very, very good. So when it speaks about payloads, I think we can contribute significantly into that. Secondly, we are thinking that there is such a nice way of being able to commercialize those products of Seagen that are already in the market or we can because as we look at global presence, that Seagen is lucky. And also in the U.S., we will almost triple our resources, once the whole thing is integrated. So, there is a lot of things to be excited. Now, as you rightly pointed out, things happen in integration but you need to be very aware. And not only we -- I do have our fair share of things that we did wrong in the past and we have our fair share of things that we did right in the past. So, I know what is extremely, extremely important is to make sure that, first of all, there will be no cultural clash as we are putting together the two organizations. To that end, we are very, very lucky because oncology companies tend to have very, very similar cultures, irrelevant they are small or big, they’re oncology companies. And that was evident in the chemistry of our scientists compared to the Seagen scientists. Actually, where it is really evident, it is how many of the great scientists of Seagen raised their hand to join Chris’s leadership team as we’re going forward. And those scientists we have published this information, who will be coming from Seagen. Actually, many of them will lead the global oncology business, not only – acquisition, not only the Pfizer one but they will lead the global -- not only the Seagen one but the global, which is Seagen plus global. The second thing that we need to be very careful is that we don’t slow down things, and we don’t increase cost of things. This is something that we have seen when big companies are acquiring small that many times cost goes double and the time lines goes also double. So that’s something that we must avoid. And in order to avoid, we are doing tremendous pre-integration planning to make sure that innovation will be enhanced dramatically after we are putting the two together. And I have full trust on, of course, Chris, that is leading this integration on this planning for months now. And last but not least, many times, when you have an integration, it could go wrong and it’s good if the CEO, which is the one who can resolve conflicts in a corporation and make decisions fast, has very high visibility in what was happening. So I went very fast. This is our biggest investment for many decades. That’s clearly the biggest investment under my watch. And we take it very seriously as one of the most potential exciting opportunities to grow but also, we are very cognizant that we should make sure that nothing goes wrong. So I’m personally on it and Seagen is going to be one of our biggest bets as you can see going forward. So we are using all our experience and the best people and are very, very pleased. I’m very, very pleased because chemistry of the two teams is unbeatable right now. And they are working like one and they are all coming to see the new Seagen/Pfizer oncology portfolio growing faster than when we were alone. And with that, we will move to our last question.

Michelle Rivera:

What’s the status of the DMD gene therapy program? Have you finalized dosing patients? I read a statement at a recent conference that you finalized screening patients. So, I was not sure whether that meant that the trial had been paused. Just some clarity around that and when we should expect data would be helpful. Thank you.

Dr. Chris Boshoff:

Yes. Thank you. So the -- as I mentioned earlier, the cynical trial has now completed enrollment. And as you pointed out, we halt dosing for the last couple of patients due to a protocol amendment, but we’re very confident that we will go ahead and have the interim analysis later this year based on the functional end point which will be substituted also or which will be -- yes, with the biomarker data, so we’ll have both functional data as well as biomarker data later this year, and then the final analysis for the full study in 2024. We’ve also fully enrolled now the earlier age group patients between the ages of 2 and 3 years old, 10 patients enrolled in that trial. So yes, we’re looking forward to share the data later this year for you.

Operator:

Thank you, ladies and gentlemen. This does conclude Pfizer’s second quarter 2023 earnings conference call. We appreciate your participation, and you may disconnect at any time.

Operator:

Good day, everyone, and welcome to Pfizer's First Quarter 2023 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Chris Stevo, Senior Vice President and Chief Investor Relations Officer. Please go ahead, sir.

Dr. Albert Bourla:

Thank you, Chris. Hello, everyone, and thank you for joining us today. Q1 was a solid, foundational quarter in what we expect to be an exciting year for Pfizer and patients. Our financial results were as we anticipated. Our non-COVID revenues grew 5% operationally compared with the year-ago quarter, while overall revenues declined 26% operationally, primarily due to a previously communicated and expected decline in Comirnaty revenues. Even with Comirnaty's decline, our COVID franchises remained significant contributors to the business with a combined $7.1 billion in revenues during the quarter. This growth was driven primarily by recently acquired products, Nurtec for migraine and Oxbryta for sickle cell disease, our anti-infective Sulperazon, Eliquis, in the non-valvular atrial fibrillation indication in the U.S., and our Vyndaqel family of products for the treatment of transthyretin amyloid cardiomyopathy ATTR-CM. We also continue to be proud of our patient impact. During the first quarter, more than 250 million patients were treated with our medicines and vaccines. With this solid start to the year, we remain on track to grow our non-COVID revenues by 7% to 9% operationally in 2023. That's because the majority of our potential near-term product launches, as you can see mapped out on this slide, are expected to occur in the second half of the year, following regulatory approvals where not yet secured. As such, we expect our non-COVID revenues to grow at a faster rate in the second half of the year than in the first. Overall, we are in the midst of an 18-month period in which we expect to launch up to 19 potential new products and indications. Over the first four months of the year, we have made excellent progress toward this goal with the approval of Zavzpret, an expanded indication for Cibinqo to include adolescents, and last week's approval of Prevnar 20 for pediatric use, all in the U.S. We also have secured regulatory filing acceptances for elranatamab, for Braftovi and Mektovi for non-small cell lung cancer, and for our RSV maternal vaccine candidate, which if approved would be the first vaccine for administration to pregnant individuals to help protect against the complications of RSV disease in infants from birth through six months. In addition, the U.S. Food & Drug Administration has granted priority review and the European Medicines Agency has accepted our MAA filing for review of Talzenna for use in combination with Xtandi for patients with newly diagnosed metastatic castration-resistant prostate cancer, based on the TALAPRO2 results. Regarding our COVID-19 franchises, we continue to expect 2023 to be a transition year as the virus continues to mutate and we move from advance purchases under government contracts to more traditional supply arrangements in a commercial model for both Comirnaty and Paxlovid in the U.S. As previously discussed, in 2023 and 2024 we expect vaccine utilization to decline compared with 2022. Then starting in 2025 and continuing in 2026 and beyond, we expect to see an increase in COVID-19 vaccination rates, assuming the successful development and approval of various COVID combination vaccines. Outside the U.S., we expect these general trends to be similar -- with some variations from country-to-country. Regarding Paxlovid, we continue to expect the government inventory that was built around the world last year to be absorbed by the end of this year. We then expect that in years 2024 and beyond, the courses sold and courses used will more closely align. With its robust efficacy, consistent safety profile, and potential to help mitigate the burden of COVID-19 on patients and their families, health systems and society, Paxlovid is proving to be an important and durable complementary tool to vaccination strategies for the estimated 40% of the global adult population at high risk for progressing to severe disease. Now let's take a look at Pfizer's next potential moonshot

Dr. Mikael Dolsten:

Thank you, Dave. Today I’d like to start off with one of the four pillars of our oncology portfolio, which are breast, urogenital, blood cancers and precision medicine. Within urogenital, prostate cancer is an area in which we have strong momentum. Recent positive study results further strengthen our franchise, building upon the global standard of care set by XTANDI, and underscoring our long-standing commitment to the pursuit of breakthroughs that define new standards of care in prostate cancer. I’ll highlight data from two Phase 3 studies, EMBARK and TALAPRO-2, as well as early, but promising signals from our EZH2 inhibitor, each of which has the potential to reach broader patient populations across the treatment continuum in prostate cancer. Final analysis from TALAPRO-2, evaluating our potential blockbuster PARP inhibitor TALZENNA in combination with XTANDI were presented at ASCO GU. Results showed significant and clinically meaningful improvement across the all-comers population in radiographic progression free survival, or rPFS, in men with metastatic castration resistant prostate cancer, with or without homologous recombination repair or HRR gene mutations. There was a 37% reduction in risk of disease progression. Median rPFS in patients treated with TALZENNA and XTANDI was not reached at the time of analysis versus 21.9 months for placebo plus XTANDI. A trend in overall survival favoring TALZENNA plus XTANDI was also observed, though these data are immature. The final OS data will be reported once the predefined number of survival events has been reached. Treatment with TALZENNA and XTANDI resulted in statistically significant improvement in overall response rates, which suggest a potential cooperative effect between the two treatments. The U.S. FDA has granted Priority Review for our sNDA for TALZENNA in combination with XTANDI for metastatic castration resistant prostate cancer, with a decision expected in 2023. The ongoing TALAPRO-3 study, if successful, may further expand the reach of this potential blockbuster into the HRR-deficient metastatic castration sensitive population. We recently presented data from our Phase 3 EMBARK study evaluating XTANDI plus leuprolide in men with non-metastatic hormone-sensitive prostate cancer with high-risk biochemical recurrence at the American Urological Association's 2023 Annual Meeting. The study met its primary endpoint with statistically significant and clinically meaningful improvement in metastasis-free survival, with a 58% reduction in risk for radiographic progression or death. Key secondary endpoints were met including time to PSA progression. These results suggest XTANDI, the only novel hormone therapy approved for three disease states of prostate cancer in the U.S., has the potential if approved to expand to patients in the hormone-sensitive, or castration sensitive setting, for the first time. Next, I'd like to share early data from one of our next-wave candidates, a potential first-in-class and best-in-class EZH2 inhibitor, which we shorthand as 1497. EZH2 is an epigenetic transcriptional repressor that is frequently over expressed in prostate cancer. We believe that inhibition of EZH2 may provide synergistic effects in combination with XTANDI, with the potential to address unmet needs of patients with androgen-sensitive and resistant disease. Here are data from our ongoing Phase 1/2 study evaluating ‘1497 in second line mCRPC patients with prior abiraterone and/or XTANDI, and up to one line of chemotherapy. On the left are updated data from a Phase 1 dose escalation study shared at ESMO last year. These encouraging results show durable anti-tumor activity in both XTANDI-naïve and experienced patients, with all XTANDI-naïve patients having received prior abiraterone. Importantly, this suggests that the addition of our EZH2 inhibitor has the potential to sensitize XTANDI resistant tumors, which is an increasing clinical unmet need. The early rPFS data are also highly encouraging, reaching 8.7 months in the XTANDI experienced patients. and 17.1 months in XTANDI-naïve both of which are notably longer than historical controls. For example, in the control arm of the CARD study, rPFS for XTANDI alone was 4.8 months in XTANDI-naïve patients. And although cross-trial comparisons cannot be made, these results, in combination with the emerging objective response rate and PSA50 response, are supportive of the contribution of our EZH2 inhibitor candidate in driving these responses. From a safety perspective, the combination was generally well tolerated, with mostly Grade 1 and 2 events. The randomized Phase 2 study in second line mCRPC is ongoing, with data expected in early 2024. Now, we turn to the potential for near-term growth across our respiratory vaccine franchise. Prevnar 20, our 20-valent pneumococcal conjugate vaccine, is now approved for children aged 6 weeks through 17 years. We are confident in our ability to maintain leadership in the pneumococcal vaccine space with Prevnar 20, which offers the broadest serotype coverage of any pediatric pneumococcal conjugate vaccine, helping to protect against the 20 serotypes in the vaccine. We have strong momentum with our RSV vaccine candidate, having received a positive VRBPAC Committee vote supporting potential approval to help combat RSV in older adults and PDUFA dates for our Older Adult and Maternal indications in quick succession in the coming months. Just last month, the New England Journal of Medicine published results from the two positive Phase 3 studies. Emerging data from the middle of the second RSV season in the Northern Hemisphere in the Phase 3 Older Adult study support meaningful durable vaccine efficacy; we will share the data once complete. In the coming months, we plan to start a Phase 3 study of the RSV vaccine candidate in 18- to 60-year-olds at high risk for RSV and in immunocompromised adults 18 and over, and a Phase 1 study in 2 to 18-year-olds at high risk, with the potential to broadly expand the reach of our vaccine candidate both to those aged 18 to 60 with high-risk conditions as well as to pediatrics and adolescents. Our RSV-Flu co-administration study met its primary endpoint, demonstrating non-inferiority for all four flu strains and RSV A and B strains. This suggests the RSV vaccine candidate, if approved, could be co-administered with flu vaccinations and add an important component of seasonal protection against respiratory pathogens. Finally, the FDA recently updated the EUA for our Omicron BA.4/5 bivalent COVID-19 vaccine to enable those at higher risk of severe COVID-19 illness, including the elderly and the immunocompromised, to partner with their healthcare providers to be proactive in helping protect themselves against COVID-19. We anticipate another update from FDA in June that will provide guidance on COVID-19 vaccine strains and vaccination timing for the 2023 fall and winter seasons. Beyond vaccines, anti-virals are an important component of our strategy in respiratory viruses. Here we share data for the first time from our second generation oral COVID-19 antiviral candidate, a potent and selective SARS-CoV-2 Mpro inhibitor that is currently in Phase 1. We designed this candidate to achieve clinical exposures that would have similar anti-viral activity to PAXLOVID, but without the need for ritonavir boosting and with the potential for reduced drug interactions. Early results from Phase 1 dose escalation are encouraging, with no dose limiting safety or tolerability findings. Dosing achieved concentrations many-fold over in vitro EC90 and is therefore expected to have similar antiviral activity to PAXLOVID. On the right are preliminary results from a Phase 1 pharmacokinetic study of midazolam drug interaction, which is a well-known standard for indicating CYP3A4-mediated drug-drug interactions. These data show there is a lack of such drug-drug interactions, suggesting there may be no related restrictions of co-dosing with drugs metabolized by CYP enzymes. Based on these encouraging data, we are planning to advance to a Phase 2 dose ranging study in the first half of 2023. In addition to the assets I spoke about today, we continue to make progress on the pipeline with more than 25 milestones recently achieved or anticipated through the first half of 2024. In inflammation & immunology, the FDA has approved our sNDA for CIBINQO, enabling a label expansion for adolescents with moderate-to-severe atopic dermatitis. In internal medicine, ZAVZPRET migraine nasal spray has received FDA approval, expanding our migraine portfolio. Recently, the FDA Advisory Committee voted in support of PAXLOVID’s favorable benefit-risk profile, with a soon PDUFA date in May. In closing, we are very excited about the potentially transformative catalysts expressed across the pipeline as we work with continued urgency to bring breakthroughs to patients. Thank you. Let me turn it over to Chris to start the Q&A session.

Operator:

[Operator Instructions] And our first question will come from Umer Raffat with Evercore ISI. Your line is open. Umer, your line is open.

Dr. Albert Bourla:

Umer, can you repeat the question, I'm not sure we understood it.

Dr. Albert Bourla:

Yes, thank you very much. Angela, why don't we take the second question about the guidance --p about the 1 billion estimated sales in the last quarter.

Dr. Albert Bourla:

Thank you, Angela. On the question about the season asset although should be very careful, because we can't comment on that. But maybe you can make William, quick comment, general speaking.

Dr. Albert Bourla:

No doubt, the population that excites us, but of course, we can comment on the Seagen products. Next question please.

Unidentified Analyst:

Terrific. Thanks for taking our call. This is Keith on for Evan. Maybe just shifting to M&A execution, thinking about your recent acquisitions with Nurtec and Oxbryta, you've done a great job describing the plans to add value to drive commercial and clinical synergies. We are seeing the outcomes on our end. Could you comment on how this is going from your end? And then could you talk about specifics for operationalizing the same for Seagen integration and how this would differ from recent examples? That would be great. Thank you.

Angela Hwang:

Sure. Yes. So we are incredibly proud of the work that we have done with Nurtec since the acquisition. As you know, in July of 2022, we had already begun and copromote with Biohaven to ensure that we were copromoting the product early. And I think that has really paid off. If you really look at what has happened from it, just leading indicators as well as actuals. Today, Nurtec is the leading product in the oral CGRP class with over 47.5% market share. It is also the leading product when it comes to new to brand prescription share at a high of 46%. It also has the highest number of prescribers at over 110,000 prescribers and 80% of new CGRP prescribers choose Nurtec. So, I think we've demonstrated in the time that we've had it, that we are able to drive performance and drive excellent education and awareness of the product. And we're seeing that consistent great metrics as it pertains to Nurtec. And of course, the opportunity is huge, right because we have so pan Japan launching later this year. And we also know that, as a whole, there are over 1 billion migraine sufferers and only 18% of them are using CRPS today. So, we have a great opportunity to expand the class of CGRP with specifically Nurtec.

Mohit Bansal:

If I may ask two questions here. On European negotiation, just one -- because there was some news this week, just how much can you comment on that? And the real question there is that I know you when you provide guidance in the beginning of the year. You anticipated some of that, but so far as the negotiating reach to the guidance as a negotiation that finalized in that? And the other question I have is more about your demand chart for Paxlovid and vaccinations both, it seems like you are assuming both Paxlovid and vaccination, utilization going up into time 24 plus timeframe? Would it be both demand going demands going up? Or you think it will be either or as vaccinations come down, probably the demand for Paxlovid will would go up? How do you how should we think about that?

Operator:

Next, we have Robyn Karnauskas with Truist Securities. Your line is open.

Dr. Albert Bourla:

I didn’t hear which product you spoke about?

Dr. Albert Bourla:

Thank you. And maybe I can give you a very general answer. And then if Angela wants to chime in, please. On the COVID, we are right now, all right, we have the big markets there. And then we plan to maintain that. So, I think we are then. When it comes to RSV, we are the only ones but we have both or we have positive data on both, on adults and on maternal. And we have already approved for the adults and then we are expecting approval for the maternal. So, that the strength of our data with efficacy and safety profile that we think is differentiated, will provide us with what we hope also to be the winners in that one. As flu on mRNA technology still the results, we are very optimistic with the totality of the data that we are having from our flu vaccine, and we will wait to see of course how that will continue. And then of course, the winners, there will be also those that they will be able to build from the maze of all of that. So, the fact that we have all three of them or we have a good chance to have all three of them, if the studies are successful and if the products are approved or of course also provides a good differentiation. In addition to all of that, I think the trust to the Pfizer brand name, which has been very, very strong I think also play a key differentiator. Now as regards the EU legislation what we haven't just seen in recent days, we are noticing the positive things of EU trying to be more competitive in attracting reserves and creating the regulatory framework for more rapid approvals. Clearly, we are also concerned at the same time with provisions that would like to reduce the exclusivity of data and other provisions. So, we hope that there will be an open dialogue with the EU so we can create a framework, but really will enhance innovation. Angela anything that you want to add to all of that?

Dr. Albert Bourla:

Thank you. Next question, please.

Louise Chen:

Hi. Thank you for taking my question. So, I want to ask you about margin improvement. You talked about that in your opening remarks. I'm curious, when we might start to see that and does that include the Seagen acquisition in your comments? And second question I had for you is. What are some of the key steps that you have taken already to transition Comirnaty and Paxlovid to the commercial markets? And when will you know how the season will shape up? Thank you.

Dave Denton:

Yes, thank you for your question. It is our expectation that, as we integrate Seagen in either late '23 or '24, early '24, we will begin to see margin improvement, and that will happen as we continue to improve our performance from a top-line perspective. At the same time, we are going to be very efficient and really work to minimize our SI&A investments going forward. So I think we should start to see that post the integration and the closing of the Seagen transactions.

Angela Hwang:

So, Louise, as you know, both of these products, both Comirnaty and Paxlovid, our products are very familiar to us. They fit very well in the the existing portfolio of products that we have. So the ability for us to move from an EUA into a full launch or into its business as usual for us, right? So, the typical things that we would always do which is awareness building with physicians and with patients that has begun and is well on the way. The things that you would do as a regard to our discussions with payers to demonstrate value and to create your value arguments for reimbursement and access that has begun. We have done a tremendous amount of work, as it pertains to retailers and making sure that, we have our distribution and our supply chain, well-oiled and the ability to be able to supply and to vaccinate to administer these products at both at a physical site, like a retailer or even in the case of Paxlovid getting telehealth and sort of remote health capabilities set up. So all of these capabilities, many of them, in fact, have been underway throughout the entire time of the pandemic. So I think we are in a very, very good position to seamlessly transition into commercialization.

Operator:

Our next question will come from Akash Tewari with Jefferies. Your line is open.

Dr. Albert Bourla:

Mikael, I think both questions can go to you.

Operator:

Next we have Terence Flynn with Morgan Stanley. Your line is open.

Dr. Albert Bourla:

Thank you. Mikael, why don't you take the flu question and then the oncology question, we'll go to William.

Dr. Albert Bourla:

Thank you, Mikael, and William on the oncology front.

Dr. Albert Bourla:

Thank you. Next question please.

Colin Bristow:

Maybe first of all, [indiscernible] in the upcoming data. Could you just walk us through what are the key efficacy and safety thresholds you're looking to meet to move this forward. And sort of with regards to the threshold, how you think about them in light of it that this is big dosing and how does that potentially impact the sort of commercial opportunities? And then just second, a quick call on your DMD Phase 3 CIFFREO trial, you've guided to completion of recruitment in April of this year just could you give us a quick update here? And then how you view the opportunity and positioning in light of the fact that there's a potential competitor approval at the end of this month? Thank you.

Dr. Mikael Dolsten:

Yes, we are very excited about our two oral GLP, the 1532 and Danuglipron 1530 called Lotiglipron, and we're looking for a differentiated profile that will be a combination of rapid onset, high control of HbA1C bringing it down, and bodyweight loss at various doses to be very competitive, and a more easily tight treble drag that can optimize a preferred profile versus injectable when it comes to nausea and other well known effects. So, we look forward very much to data. Maybe later this year or possibly early next year and cherry pick the winner here. You also asked about the DMD, well if there is approval, it is based just on surrogate markers and in this area, I think it's very important to report out data, when it comes to real patient benefit. And we expect possibly already late this year, alternatively next year to have data from the first randomized study that if positive could show favorable benefit for patients doing better according to the North Star scale. So we feel really positive about our own DMD program and I think the entry will be competitive with the real data that patients need.

Operator:

Our next question will come from Geoff Meacham with Bank of America. Your line is open.

Dr. Albert Bourla:

Let me answer the COVID question and then Angela will answer the I&I landscape. We expect to have commercialization in the U.S. I think likely the U.S. Government will stop purchasing outside the normal sandals products. We do not expect that to be the case in most of the countries international. We think that most of the countries will continue having governmental practices. And most of them, we have already long-term contracts. So, I don't think there will be much fluctuation over there in the price given the longevity of the product and the contracts expire prices option will be adjusted. Now let's move to the question about I&I and Angela, please.

Operator:

Our next question comes from Trung Huynh with Credit Suisse. Your line is open.

Dr. Albert Bourla:

William, would you like to take TALAPRO part question?

Dr. Albert Bourla:

Thank you, William. And Mikael, about RSV and flu.

Dr. Albert Bourla:

Thank you Mikael. Next question please.

Andrew Baum:

Just coming back to the, your oral GLP-1 portfolio. Lily has called out an anticipated weight loss that first two weeks from memory of around 14%, 15%. They hesitate to give baseline. Given the competitive nature of the field, you're late to market and the cost of running CVOT trials in this setting. Where does the relative weight loss need to be from your Phase 2 for you to advance given the benchmark that Lily seems to be setting?

Dr. Mikael Dolsten:

Yes. No, we agree completely with you that we should have an ambitious profile. And we have certainly seen patients up to 15% weight loss, depending on different dose regimens. So for obesity, that's a really good ambition to have up to 15%. And for diabetes patients, of course, it's about having a very strong HbA1c lowering maybe 2% or even more. So, we think it's feasible with all roles. And we think that will open up a very large place. And we think that pending data readout that we may have a differentiated profile for our full agonists.

Operator:

Next, we have Chris Schott with JPMorgan. Your line is open.

Dr. Albert Bourla:

Good questions, Chris. Dave, capital allocation.

Dr. Albert Bourla:

Thank you there. Angela, what about RSV and the educational efforts that the market would need?

Dr. Albert Bourla:

Thank you. Next question, please.

David Risinger:

Yes. Thanks very much. First, could you discuss the Paxlovid private market sales potential in China, after March 31st that isn't included in your Paxlovid guidance for the year? And also could you comment on the late stage competitive threats from Sanofi's 21-Valent Pneumococcal Conjugate vaccine in adults and infants and Merck's 21-Valent in adults? Thank you.

Angela Hwang:

Sure. So, after April, we continue to have Paxlovid available and but it will be assessed through an out of pocket payment mechanism. So if you are a private patient, you can get it. If you're a public patient, you can get it, you just need to be able to pay up pocket for it. And we intend to continue to work with the public and with the Chinese Government to ensure its access.

Dr. Mikael Dolsten:

Yes. I mean, we are extremely excited about the PCV20 recent pediatric approval with a Stellar label reflecting the strengths of our data. We monitor carefully competitor activity, as you alluded to, and are planning ourselves to enter next year further expanded PCV vaccines, followed by additional expansion a few years later, including optimization of the conjugation procedures, including different carriers, and possibly for the adult also had adjuvant that we think could be useful. So this is a market where we have been the leaders were having a unique platform, and we monitor and feel very confident that we are going to have a bright future, although you mentioned competitor, which is a nature of markets that are becoming of course more saturated like the adult market, but there will also hope to benefit from our broader portfolio of respiratory vaccines from COVID flu RSV, that cannot be much harder at the moment.

Operator:

Our next question will come from Steve Scala with Cowen. Your line is open.

Dr. Albert Bourla:

Thank you. Mikael, what is the secret ingredient?

Dr. Albert Bourla:

And William again on the Opdivo study.

Operator:

Our next question will come from Kerry Holford with Berenberg. Your line is open.

Dr. Albert Bourla:

Yes, Mikael was about the RSV vaccine.

Dr. Albert Bourla:

Thank you, Mike. As we said, in our slide, we expect to be approved in this year in the last quarter. So good launch, we expect the publication of the MMWR likely to happen beginning of the next year. So that plays also a key role in the uptake with the vaccine. But keep in mind the launch of vaccines starts before the approval, right? We have done a lot of educational efforts and there are a lot of investments that we are doing in that field. So in that aspect, the launch already has started from our side at least.

Carter Gould:

I guess, first on the decision to establish a new operating segment and specifically launched this Pfizer IGNITE offering. Can you talk about what drove that? And if there's sort of like an aspirational target, and how meaningful have a driver that could be? And then secondly, sort of on the decision to divest Bavencio, did that reflect the sort of a signal you got from FTC or a proactive move in your mind or are there other factors we should think about? And the fact that we haven't seen other divestments to that sort of reinforce our confidence that you think that the deal can go through without other issues? Thank you.

Aamir Malik:

Yes, Carter, thanks for the question. I think you have seen us collaborate with the biotech ecosystem lots of different ways, and Pfizer IGNITE is another way in which we can effectively do that. Frankly, there is a lot of interest and demand on the part of particularly Biotec for working with us to access some of our distinctive research and clinical development capabilities. And we think IGNITE gives us a platform to do that, to work with these companies, get closer to the science, which over time also then improves our ability to access that science and make determinations about what we would like to bring in-house. So, we think this is a excellent way for us to continue to collaborate with the Biotec ecosystem and add to our growing and compelling pipeline overtime.

Operator:

Our next question will come from Chris Shibutani with Goldman Sachs. Your line is open.

Dr. Albert Bourla:

Thank you. Angela, on Paxlovid commercialization.

Dr. Albert Bourla:

And Amir about what is the profile of [indiscernible] BDA activities.

Dr. Albert Bourla:

Thank you, and we are a bit out of time, so last question, please.

Tim Anderson:

A couple of questions. The first is, how much of your future COVID vaccine revenue forecast are tied to the ability to have a combination product, if something like mRNA flu ends up not being viable, and a knockout of flu COVID combo, would that impact your anticipated uptake in 2025 and beyond? Or can you get to those longer term guidance levels regardless of whether you have any combos or not? And then last question, Albert, I'm guessing, there's some frustration among management with what the stock's been doing, a tough 2023, 2022 wasn't a great year. This is despite Pfizer helping lead the world out of the pandemic, which was a remarkable accomplishment. Even today, the consensus stock is down a little bit. So as you talk to analysts and investors, what are you hearing are the biggest concerns that you think could explain this? And what do you think analysts and investors are missing or misunderstanding?

Operator:

Thank you, ladies and gentlemen. This does conclude today's teleconference and we appreciate your participation. You may disconnect at any time and have a wander day.

Operator:

Good day, everyone, and welcome to Pfizer’s Fourth Quarter 2022 Earnings Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to Mr. Chris Stevo, Senior Vice President and Chief Investor Relations Officer. Please go ahead, sir.

Dr. Albert Bourla:

Thank you, Chris. Hello, everyone, and thank you for joining us today. During this morning’s call, I will touch on some of our highlights from 2022, and share some thoughts regarding Pfizer’s exciting near and long-term growth plans. 2022 was an outstanding year for Pfizer on multiple fronts. We exceeded $100 billion in revenues for the first time in our 174-year history. We maintained our industry-leading clinical success rates and further improved our cycle times, which already were among the industry’s best. We were named to 10 different “best employer” lists, including those published by Forbes, LinkedIn, Glassdoor and others. And most important, more than 1.3 billion patients around the world were treated with our medicines and vaccines. A truly humbling achievement. Our key growth drivers for the full year 2022 included

Dr. Mikael Dolsten:

Thank you, Dave. Today, I want to set the stage for an anticipated catalyst-rich 18 months. As Albert mentioned, we are in a position of unprecedented strength in our history and I’m excited to share a high-level overview of an evolved strategy for Pfizer R&D to focus our resources on transformative programs which could be most impactful for patients, drive improved return on R&D investment and create the most value. We will leverage and continue to innovate our powerhouse capabilities in medicine design, and continue to innovate light-speed drug development to further improve our industry-leading success rates and cycle times. We have rethought our approach to rare disease and will move from having a standalone research unit to aligning key programs with other therapeutic areas. We plan to externally advance rare disease programs that do not fit into a core therapeutic area of focus. At the same time, we plan to tap into the expanding external innovation ecosystem by actively pursuing biotech innovation and emerging innovation that fits strategically and accessing external assets that are differentiated. Taken together we believe these actions will help position us to lead the industry in reaching more patients with the most impactful near-term blockbuster breakthroughs while driving forward the next wave of innovations. I’m pleased to share some examples with you today. We are pursuing potentially transformative efficacy in our inflammation & immunology franchise, with the potential launches of etrasimod in ulcerative colitis and ritlecitinib in alopecia areata, which both have the potential to be blockbusters, and a planned Phase 3 study start of anti-interferon Beta in dermatomyositis and other idiopathic inflammatory myopathies. Our next wave of innovation includes two monoclonal antibody candidates for atopic dermatitis which exemplify our multispecific platform and in-house biomedicine design expertise. Two assets currently in Phase 1 clinical trials each target three cytokines in a single therapeutic, so we refer to them as trispecifics. On the right are Phase 1 pharmacokinetic profiles of the average plasma concentration. For both molecules, the profiles suggest that once-a-month, or even less frequent, subcutaneous dosing may be supported. There is potential for improved efficacy with more potent interleukin 4 and interleukin 13 neutralization plus an expanded breadth of efficacy by blocking Thymic Stromal Lymphopoietin to potentially cover more endotypes, or by blocking interleukin 33 (sic) [interleukin 33] to potentially enhance itch reduction. The Phase 1 studies continue. We aim to bolster our 30-year experience in hematology with a strong pipeline that complements our in-line portfolio and collectively has blockbuster potential. I will talk more about elranatamab and GBT-601 in a moment, so will highlight here that we expect multiple data readouts for TTI-622 in hematological malignancies, two Phase 3 readouts for inclacumab in sickle cell disease in the second half of 2024 and a Phase 3 readout for marstacimab in patients with hemophilia A or B in the second quarter of 2023. Marstacimab has FDA Fast Track designation for both, hemophilia A and B with inhibitors. If successful, we project submitting for the non-inhibitor indication in both A and B hemophilia in the third quarter of 2023. We recently announced positive top-line results from a Phase 3 study of our hemophilia B gene therapy candidate and expect a pivotal readout for our hemophilia A gene therapy in the first half of 2024. We recently presented strong updated Phase 2 data on elranatamab, our investigational B-cell maturation antigen, or BCMA, CD3-targeted bispecific antibody, for relapsed or refractory multiple myeloma in heavily pre-treated patients who had received at least three classes of prior therapies. This candidate, which has the potential to be a leader in the BCMA bi-specific class, demonstrated a high objective response rate of 61% in patients with no prior BCMA-targeted treatment, early and deep responses, and a manageable safety profile. Given factors currently limiting the availability of novel therapies in the triple-class exposed setting, elranatamab has the potential to reach a broader and greater number of patients as an off-the-shelf option with reduced dosing frequency that is administered subcutaneously, offering more convenience than intravenous administration. With FDA Breakthrough Therapy Designation granted last year, elranatamab could potentially be approved this year. As there is blockbuster potential and patient value beyond the triple-class refractory population, our clinical strategy aims to move to earlier lines of therapy and combination approaches with the potential, if successful, for multiple approvals to expand eligibility and duration of therapy. Now, to our next generation oral, once-daily, hemoglobin S polymerization inhibitor candidate that’s in a unique class and has the potential to expand the prophylactic treatment of people with sickle cell disease. Standard-of-care treatment rates have typically been low due to side effects, poor efficacy, or both. While Oxbryta made substantial progress in preventing hemoglobin polymerization, or sickling, GBT-601 is a potentially best-in-class candidate which may improve both hemolysis and frequency of vaso-occlusive crises. The most recent data from our Phase 1 multiple ascending dose study showed improvements in hematocrit and hemoglobin levels over time, mean hemoglobin occupancy of more than 32% for the 100 milligram maintenance dose and more than 41% for the 150 milligram maintenance dose, and improvements in red blood cell health with the higher maintenance doses. The maintenance doses were well tolerated. We believe these results may be transformative for patients, with a potential to achieve 35% to 45% hemoglobin occupancy, which is considered optimal for both hemoglobin oxygen affinity and preventing sickling, and approaches levels seen with gene therapies. This asset is also being studied in an ongoing Phase 2 study with a seamless Phase 2/3 design. We plan to start the Phase 3 part in the second half of 2023. Next, we aim to expand our leadership in breast cancer with a pipeline of complementary next-wave candidates. Our CDK4 inhibitor targets improving on CDK4/6 inhibition standard of care by maximizing CDK4 coverage. We are studying it in Phase 1 in hormone receptor positive/HER2 negative metastatic breast cancer as a single agent and in combination with endocrine therapy. The majority of hormone receptor positive breast cancers express low CDK6, while CDK4 is likely to be a major cell cycle driver. We have seen that CDK4/6 inhibition can lead to neutropenia that requires more frequent blood test monitoring, mostly driven by CDK6 inhibition, and that complete CDK4 inhibition by CDK4/6 inhibitors is challenging due to dose-limiting hematological adverse events. In the Phase 1 combination study, the confirmed objective response rate in combination with fulvestrant or letrozole reached nearly 30% and the clinical benefit rate was approximately 50% in 21 patients with measurable disease. The median progression-free survival was more than 24 weeks in 26 patients including 5 without measurable disease. All participants were heavily pre-treated with a median of four lines of prior treatment. All patients received prior CDK4/6 inhibitor treatment and 67% received prior fulvestrant. The asset was well tolerated with CDK4 drug showing only 15% Grade 3 neutropenia and no Grade 4. Here, we show a scan of a patient who achieved partial response and was on treatment for 47 weeks. She had received six lines of prior treatment, including CDK4/6 inhibition and fulvestrant. We are currently engaged in dose optimization, enrolling CDK4/6-naïve cohorts, and planning to start a randomized study in second-line treatment of estrogen receptor positive/HER2 negative metastatic breast cancer this year. Additional data readouts from our next wave of breast cancer candidates are anticipated in the first half of 2023. In addition to the assets I spoke about today, we anticipate multiple milestones over the next 18 months. We expect a pivotal IBRANCE readout in hormone receptor positive/HER2 positive metastatic breast cancer, a pivotal study start for ARV-471 and a Phase 2 readout for our KAT6 inhibitor. We have achieved incredible advancement in our vaccines portfolio, including candidates that harness our leadership in mRNA, with an unprecedented number of milestones expected. In addition to the expected launches shown here, we expect a Phase 3 data readout from our modRNA flu candidate vaccine, and a potential respiratory combination vaccine study start. A Phase 1/2 study of our shingles candidate, the first mRNA-based shingles vaccine program, began last week. In inflammation & immunology as well as internal medicine, key catalysts include potential launches of potential blockbusters, a planned pivotal study start with anti-interferon Beta and data readouts in metabolic disease. We’re also making good progress in our anti-infectives portfolio, including anticipating full approval for Paxlovid, and planned study starts for both our second-generation COVID-19 antiviral candidate, which may have no or limited drug-drug interactions, and our RSV antiviral candidate. In closing, we are very optimistic about the many transformative catalysts emerging from the pipeline. Pfizer scientists are working with urgency and commitment to help the most patients as quickly as we can. Thank you. Let me turn it over to Chris to start the Q&A session.