CVS Health Corporation (CVS) Earnings Call Transcript & Summary

Good morning. My name is Lisa Gill, and I'm a health care services analyst with JPMorgan. It is with great pleasure this morning that I introduce CVS Health. With us this morning, we have Karen Lynch, incoming CEO; Larry Merlo, outgoing CEO; and CFO, Eva Boratto. Larry and Eva will join us for the Q&A session that we will begin right after Karen makes some opening comments. So welcome, Karen, and I'm going to hand it off to you.

Good morning, Lisa, it's nice to see you. Good morning, everyone. Larry, Eva and I are looking forward to today's discussion. But before we begin, I'd like to remind everyone that we're going to make some forward-looking statements today that are subject to risks and uncertainties. And I'll direct you to the full statement that we have included on your screen right now. At CVS Health, our transformation over the last decade has enabled us to become one of the country's leading diversified health services company. As one of the most trusted brands in America, we have built a company with unmatched scale, breadth of capabilities, consumer focus and presence in communities across the country with a highly engaged team of nearly 300,000 colleagues. I'm very proud of the CVS Health team, and all that we've achieved during this past year for our customers, for our communities and for our investors. In the first 9 months of 2020, our results exceeded our expectations, a testament to our strategy and our diversified business model. Our total revenue increased by approximately 5%. And we generated significant cash flow from operations of $12.3 billion, and we continue to make progress on deleveraging. We benefited from continued growth in our PBM and government services business, once again achieving above-market growth in Medicare Advantage. We completed acquisitions that enhanced our position, and we divested businesses that were not aligned to our strategy. We also advanced a number of our health management programs. And then to improve access to quality and holistic care, we opened up approximately 600 HealthHUBs locations in 2020, including many in underserved communities. It wouldn't be possible to talk about 2020 without highlighting our pandemic response. Our strong local presence and scale in communities across the country enabled us to play an indispensable role in the national response to COVID-19. This led us to accelerate many aspects of our strategy. And while ensuring the health and safety of our employees, our frontline colleagues continue to seamlessly support customers wherever they needed us: in our CVS locations, in their homes and virtually. As you all know, we've seen dramatic shift in the environment. The health care delivery system is being redefined on how people access care. Consumer behaviors and preferences are increasingly turning to solutions, characterized by greater convenience, simplicity, personalization and on-demand access across a broad range of categories. And we're all witnessing a significant shift towards digitalization. There's been a massive increase in telemedicine use with approximately 40x more people accessing virtual care compared to pre-COVID levels. Many of these changes will be permanent and establish a new normal. And we're encouraged by these trends as they prove to us that the market is finally ready for health care that is driven by and responsive to the needs of consumers. As we turn to our strategy, our strategy is centered on an orientation around the consumer. We believe that solving our health needs will create future economic value for CVS Health. We're accelerating the pace of progress with our strategic road map and prioritizing our actions to meet these emerging consumer needs. Later this year, you'll hear more about our -- evolution of our growth and our value creation strategy with clear objectives and annual milestones. You'll hear more about our new and differentiated products and services that will improve health and lower medical costs using technology, data and digital assets. And you'll hear more about our capital management strategy with a near-term focus on our continued deleveraging, investments to accelerate growth, maintaining our dividend and post deleveraging an opportunity for enhanced return to shareholders over time. We're confident about the growth opportunities available for CVS Health. I believe that we are well positioned to support individuals for every meaningful moment of health throughout their lifetime. Being consumer obsessed is truly at the heart of everything that we do and why we are uniquely positioned to exceed customer expectations. We have one of the strongest, most trusted consumer brands. We have a wide range of clinically oriented digital products and services. We have an expansive footprint in communities across the country. We have a subscription service with nearly 4 million members today and the ability to significantly expand that further. And we have a broad set of innovative consumer solutions that meet the holistic needs of individuals. We have the ability to engage with consumers across all digital and in-person touch points in a seamless way. We will create new value with simpler, more convenient and more personalized approaches using data and analytics that support an individual's health journey. We have more than 100 million existing loyal members across Caremark and Aetna. We will deepen these relationships by increasing the penetration of our health services to become a bigger part of the consumer's everyday health. This means that CVS Health will unlock the lifetime value for consumers, and we'll do this at scale. During the last year, we have expanded our customer base as a result of our response to COVID-19. We increased the number of consumers we interact with daily through our testing and soon to be our vaccine services. Approximately 40% of our return-ready clients are new to CVS Health. And over 6 million people who tested for COVID at a CVS location are not currently CVS Pharmacy customers. This provides a tremendous opportunity to expand our customer base as we engage with millions of new customers through testing and vaccinations. We are using these touch points to shape the health experience that demonstrates the value of CVS Health, and creates the opportunity to capture new loyal customers. And to drive the acceleration of our strategy, we have several experienced executives joining CVS Health. We just announced that Michelle Peluso will be joining CVS Health as our Chief Customer Officer later this month, a newly created leadership role that will focus on accelerating digital transformation and our brand. We recently welcomed a new Retail President, Neela Montgomery, who has extensive consumer behavior, digital and e-commerce experience to lead our CVS Health locations across the country. Dan Finke, a seasoned managed care executive, will become President of the Healthcare segment. Dan has a strong track record of driving growth and bringing consumer-driven innovations to the marketplace. And finally, Laurie Havanec, our new Chief People Officer, will be joining us in February and will be driving changes in culture, diversity and inclusion and the workforce of the future strategies. As I begin leading CVS Health effective February 1, my priorities include: achieving our long-term financial objectives; accelerating our strategy with a focus on digital transformation, integrated value and innovative consumer-oriented solutions; improving our medical cost management strategy; creating connected and seamless experiences across CVS Health assets for every meaningful moment of health in a consumer's lifetime; expanding our health services strategy; and advancing the state of health care in the United States. In February, Eva and I will share our 2021 guidance. I'm confident in the future and the opportunities ahead of us to reshape health care. Before I hand it over to Lisa, we'd like to show you the short clip on how CVS Health is supporting the national distribution of COVID vaccine. Can you roll the video, please? [Presentation]

Lisa, I'll kick it back to you.

Great. Thank you so much. [ Allison ], did you turn my video -- there we go. Hi, everybody. Thank you so much. Karen, no one is more excited for this vaccine than me. I haven't seen my father in over a year. He'll actually go to CVS and have his vaccine next Friday. So I'm very hopeful that at some point he's in Florida that I'm going to get to see him.

So let's talk about an update on this rollout. I mean the news organizations have not been kind to this rollout of the vaccine. They've obviously highlighted a number of people waiting in line, long lines. People that should have been part of the first group getting vaccines that haven't been vaccinated. So from your perspective, how has it gone versus your initial expectations?

Yes. So first of all, just let me acknowledge the tremendous work that was done by Pfizer and Moderna and the other companies that really brought this vaccine to end this pandemic. We have been -- Lisa, we've been working really closely, for the last several months, with Operation Warp Speed and the CDC. And we were selected with for -- to do vaccinations at long-term care facilities. So we were selected by over 40,000 long-term care facilities to do the vaccine. So if you think about what we're doing right now, we're actually -- it's a mass distribution. It's we're in every single long-term facility day in and day out, and sometimes we're actually going into the rooms and vaccinating the most vulnerable population. Today, we have done over 8,000 of these clinics in these facilities. And we have administered over 700,000 vaccines. So as of yesterday, it was about 10% of total vaccines that were administered were administered by CVS. Now the way the process works, Lisa, is that when they select us, the state actually has to determine where the vaccine is going. So they actually have to activate the long-term care facility. So some states started activating in late December. Some states are still activating now. But we started vaccinating at the end of December. By the end of January, we will have the first round of all of those facilities nearly complete. So we're making really good progress. We've completed it against the plan that we set forth. So I know that there's been a lot of questions around the data. But we are on track to do what we said we're going to do, and we've been now updating our website every night to show the progress that we're making, and we're working very closely with the governor to make sure that they're activating so that we can get into those long-term care facilities. The other thing I'd say, Lisa, is we are ready. We expect the federal program to open up shortly. And we are ready in our CVS pharmacies to administer the vaccine. We have over 90,000 clinicians, through our pharmacists, through our pharmacy test, through our nurses and our nurse practitioners to be able to administer the vaccine. And we do expect that we can administer 20 million to 25 million vaccines per month once the federal program opens up. So we're ready, and we're in a position to support people like your dad at getting the vaccine. And we are ready to go when the overall federal program opens up.

When -- go ahead, Larry.

I'd just like to amplify one of the points that Karen made because I really believe it's underappreciated in the media that the average number of residents in a long-term care facility is 80. And to Karen's point, we're going to that one facility at a time. And Karen talked about where we are at this point. This week, we will do over 10,000 clinics in long-term care facilities, and it will take that to administer about 1 million vaccines. If you think about what Karen was just talking about in terms of when we get into the retail phase, we'll do almost 1 million vaccines a day. So I think the media is confusing the need that exists in long-term care with -- being mass vaccination, and it's really not. It's one facility at a time. And to Karen's point, we are absolutely on schedule with the plan that has been put together, state by state.

Yes. And -- go ahead, Lisa.

No. No go ahead, Karen. So I was just going to ask about the financial impact.

I'll hand it over to Eva in a minute. But I would just remind everyone that when distribution, when we're distributing, it all depends on the availability of supply, the allocation decisions that are being made by the state, the consumer adoption. So we're doing a lot on education to make sure people understand the efficacy of the vaccination. And so people need to be educated around that. And then obviously, consumer selecting us, a CVS Health as a place they want to go. So thank you for your dad coming to CVS. And with that, I'll turn it over to Eva to talk about the economics of it.

Yes, Lisa, and Karen, I think that's a great entry point into the financials, right, because they are 4 of the key variables. But I hope what everyone has taken away is we anticipate playing a key role in this. Our market share, where we are to date, at 10%. We are bringing new customers into our stores through the COVID testing as well as the vaccination. So we see the opportunity not only for the vaccination but beyond as we keep these customers as longer-term customers. So it's difficult to pinpoint given the variable factors that Karen outlined. A couple of things I'd just remind folks from a financial perspective. When you think about how this will flow through our financials, we'll get an administrative fee. I would think about that as, on the commercial side, consistent with the fee for the first and second dose that CMS established we will incur additional costs in administering the vaccine. Karen articulated on the long-term care, particularly, we're going from facility to facility, more than one trip. We have storage. We have education. We have elevated clinicians in our retail stores. And the number of vaccinations were also there not only by the supply availability, but if there's a 1-dose vaccine that comes to market, that will also impact this. But I would say we're ready, and we expect to play a key role.

Eva, one of the ways that we looked at it, I know it's not a one-for-one, but to look at the flu vaccination. Clearly, here, you have no COGS, but you talked about the incremental costs that you have. Would that be a fair way to think about it being kind of a one-to-one flu vaccination versus COVID on perhaps an EBIT basis?

So what I'd say is, Lisa, it's similar to what we've seen with vaccinations more of like a health service, so a higher margin. And obviously, the more efficiency we can bring through the stores and throughput, the more improvements we can make there. So I would say the vaccines, the margin -- the EBIT contribution will be above that of a typical script.

And then would we -- I'm sorry, go ahead, Larry.

I was just going to say, think about the fact that you do have some added costs when you compare a COVID vaccine against a flu vaccine, okay, in terms of whether it's all of the handling or simply the fact that there's a 15-minute observation period before the individual leaves the premises. So there are additional staffing considerations when you compare COVID versus seasonal flu.

And then just a last question around the financial impact. You did give some preliminary numbers for 2021, right, some things to think about. Eva, was that included in your thoughts in November? Or have you not contemplated flu -- or I'm sorry, COVID in that way?

No, understood, Lisa. And as I said back in November on our earnings call, we took into account all of the information that we had at the time. And obviously, we did have some information related to the vaccine. So I would say it was a factor. But I would say it wasn't a dominant factor, right? We -- irrespective of the vaccine, there are many other dynamics in our business that gave us the confidence of the mid-single-digit growth off of what I call our adjusted baseline of $7.10. And we'll certainly provide more color on our earnings release as well as we progress throughout the vaccination rollout.

Great. So as we think about the enterprise, and clearly, we were all sitting together physically a year ago, nobody anticipated that we were going to be in a worldwide pandemic throughout 2020. But as you look back and you look at how quickly CVS was able to respond to all the things, Karen, that you talked about in the presentation that you just did, is there anything you take away from this pandemic that changes your long-term strategy in any way? Or even changes your near- or long-term investments in the company. I know you had to invest in people, right, so that you'll have the people to be able to administer this vaccine and people that are doing testing, et cetera. But what does this do to the enterprise strategy longer term and investment from an investment perspective?

Yes. So let me just talk about some of the strategic things, and then I'll let ask Eva to comment on investments. So first of all, Lisa, exactly accelerated parts of our strategy. But more importantly, it demonstrated the value of our company and the value of our strategy. It demonstrates the importance of being local and in the community, and reinforced the point that health care is local. It demonstrated the point around people will look for alternative sites of care when they're looking for their health needs. And it demonstrated our ability to walk alongside people during their health care journey, albeit when they needed testing or they -- we needed to be in the home with them or they needed a pharmacy script and we've delivered it to the home. So as you think about the components that accelerate our strategy and will continue going forward is really on this digital transformation. We were quickly able to develop digital capabilities for testing. We've actually developed a scheduling digital tool for vaccines, where when you log in to schedule your vaccination, we'll have a round-trip ticket, so to speak. So you'll get your second -- your second scheduled appointment. So -- and then we'll follow-up with you with tests and things like that and phone calls because I think that's a big thing relative to vaccines, making sure people get their second shot. We accelerated our home delivery. We changed our stores to make sure that we were bringing scripts to people because they couldn't come to the store. We advanced our [ quorum ] nurses to bring them home. A lot of the hospitals were trying to move people, patients out to do IV infusion therapy. So as you can see, the parts of our strategy, technology, digital, data and analytics all will be areas that we continue to invest in as we move forward to meet and service the needs of our consumers. As we talked about the changing demands on virtual care and telemedicine, we were able to quickly advance our e-clinic capabilities. We're working very closely on advancing our strategy around connecting virtual care to our HealthHUBs and to our homes. So we've got -- those are the places that we will invest and advance our strategy going forward. And I'll turn it to Eva to talk about investments.

Yes, that'd be great.

Lisa, were you going to say something? Or...

Yes. No, I was just going to ask you to talk about the financial impact. So as you think about the strategy around some of these things. And also when you think about the strategy you originally laid out, and the financial targets you set around integration synergies, modernization, transformation, did the pandemic change any of those either priorities or the synergies around that?

Yes. So let me take that question in a couple of pieces and the investment plays in. First, what I'm really pleased with is we've been able, during this pandemic, to continue to advance both our efforts on our synergy, our cost initiatives as well as our transformation. As Karen just articulated, underneath that areas we're emphasizing more versus previously have changed. So on the synergy front, we continue to expect to deliver our $9 million (sic) [ $900 million ] in run rate synergy goal. And our modernization effort continue. I would say on the modernization front, COVID has accelerated some areas and perhaps slowed down others. But net-net, we continue to feel good about where we are. And then on the transformation front, right, aspects of our strategy have accelerated. If we think about diagnostics, if you think about what Karen has talked about with digital and virtual. And as you think about our capital portfolio, we'll make sure we align those investments to support the growth. And so I apologize, if I -- I want to make sure the synergy run rate that I said, $900 million, not $9 million. So let me just correct myself there. So overall, I walk away, we're focused on the goals that we outlined back at our Investor Day as well as our deleverage goals of getting to low 3x in 2022.

Okay. And Karen, you highlighted in your presentation that the 600 HealthHUB locations. I think we get a lot of questions around this. Investors really want to better understand it. So can you maybe just walk us through the services that are provided today, the types of clients or consumers that you're servicing. And have you seen any benefit to your fully insureds? So on your Aetna side of your business, are you starting to see, whether it's MA or commercial lives that come through the HealthHUB?

Yes. So yes, we -- despite the pandemic, we were able to open up those 600 HealthHUBs. I would just comment that the HealthHUBs are one part but not the only part of our overall clinical strategy. So they're a key element but we also have to think about how we wrap around our clinical care programs in the home and digitally, and the HealthHUB is that in-person touch point. Relative to the services that we provide there, obviously, our MinuteClinic services, managing chronic conditions. If you think about individuals, they don't go to their PCP every single month. But we can close gaps in care along the way for individuals when they are in between office visits. So that's a core part of our strategy. We've been increasing our services through our pharmacy channel. And most recently, we introduced behavioral health support. So if you think about our HealthHUB, we're wrapping a clinical team around individuals so that we can help them navigate their care. So you have -- you have a nurse practitioner, you have a pharmacist, you have a care concierge, and you have now -- we've just rolled it out in January, the behavioral support in certain of our hubs. So think about that care management strategy in the hub. Now we'll marry that to any digital strategies that we have, any virtual strategies that we have. But what we all know is that health care is human, health care requires, at some point in time, for you to show up somewhere to have someone physically touch you or do something. And so we're -- those HealthHUBs are in those communities to provide that level of service. The other thing, Lisa, I would say is that they provide a lower site of care. And what we've been doing to drive that is we have been initiating new product designs in our fully insured. So I've talked about in the past having this 0 co-pay, no co-pay benefit design. And we now have 6 million people as of January that have this no co-pay, low co-pay. We put it in our Medicare Advantage product this year. So we have increased our reach largely for those 6 million members to support them through our MinuteClinic visits. And we're also -- think of -- we're also partnering with local providers, where local providers are working with us so that we can close gaps in care. When they have overcapacity, they're sending some of their patients to us. So again, that local presence. The other thing that we're doing in the HealthHUBs is we're creating new services. So this year, we rolled out our Medicare Resource Center. We are throughout open enrollment. We were a place where people could go and have -- be educated about Medicare Advantage. We're also able to talk to them about the services that they could visit when they came to a MinuteClinic regardless of whether or not they were an Aetna, Caremark member. And so it gave us another opportunity to explain to people what the HealthHUBs were and another way of engaging people in products and services. As I said, we rolled out our face-to-face behavioral support. And we're wrapping all these clinical services together. That gives you a pretty good sense of how our HealthHUBs kind of fit into our overall strategy and the progress that we've made relative to our benefit design. And the other thing, too, Lisa, is we rolled out an Aetna-connected product last year that has the benefit designed around the HealthHUB. But it also is designed to what I always call shop at the company store, and it has all the other assets that we have, and we'll be rolling that out throughout 2021.

So just a point of clarification. The 6 million members, are those all Medicare Advantage members that you talked about?

Commercial and Medicare. That's total.

And Medicare. Okay. 6 million in total. When we think about this financially, I can understand the aspect of whether it's Medicare Advantage or commercial to be able to lower overall cost, be able to manage these patients better. What are the other financial metrics of these mature locations? I mean, are you seeing incremental scripts? Are you seeing incremental basket size? What are some of the other metrics that we should be looking at?

Karen, do you want me to take that?

Yes, no go ahead. Yes.

So Lisa, I recognize, a, that the investment community is looking for these metrics, right? And during COVID, we've been hesitant given the amount of disruption. But I'll highlight a few things. One, I think what you heard from Karen is the HealthHUBs, we expect to drive value, not just inside the 4 walls, but more broadly, outside the 4 walls, as we say, whether it's medical cost, whether it's winning new lives, stronger retention, better connection, stickiness with our customers. A few things. In terms of the site of care that Karen mentioned, right, through our pharmacy panels, which are part of our HealthHUB strategy, we've seen a 12% reduction in unnecessary ER visits. We also, in our MinuteClinics and the HealthHUBs, saw an uptick in the usage for chronic services, achieving 16%. And if you think about it, that demonstrates a willingness of customers to use our clinics differently. Front-end pharmacy performance are outperforming the control group. And I think if you think about medical costs with some of the chronic areas, they're going to take more time to have proof points and data points as you evaluate that data longitudinally.

I've heard you talk a couple of times today about the virtual aspect of health care and tying that together. We understand that you have a relationship with Teladoc, which is one of the largest telehealth providers. Can you talk about that strategy? 2 things are really -- I want to understand a little bit better. And that's the progress of the rollout of the virtual care visits, for example, within MinuteClinic locations or tying those 2 together. And the question I think I've asked before and many investors have asked you around owning your own physicians. Do you feel the need to actually own your own network of physicians? So the first question is being around the rollout of virtual care and how you see that going forward? And the second round, do you need to own physicians?

Yes, Lisa, we have a number of relationships with on Teladoc. We sell Teladoc through our Aetna program as a [ buy up ] for virtual care. We also have a relationship and what we've been building out in our MinuteClinics is a double-pronged strategy. We've created e-clinic capabilities for our own nurse practitioners so that they can have face-to-face interactions with our customers. And then when they need a physician and when a physician is necessary, they have the ability to log in and get to a primary care. In our hubs today, in our MinuteClinics today, we have the nurse practitioners that can do about 80% of what a primary care physician can do. And if you think about what I just talked about, we now have the nurse practitioner. We have the pharmacist, we have behavioral health support. So we do have a clinical team in those HealthHUBs. But we are continually -- and we're continually working with our network of providers. Now we'll continually evaluate whether or not we need providers. That's something we'll look at. Right now, we're in the midst of piloting a virtual PCC relationship with one of our large national account customers where it's all virtual and then they -- everything that has to be seen goes to a MinuteClinic or a HealthHUB. And so that's a pilot that we're exploring. So -- but right now, we feel like we've got that coordinated care today that we'll continually evaluate and look at for the future.

Great. I know we only have a few minutes left here. And we haven't really talked about your PBM at all. Obviously, a big ruling with Rutledge versus the PCMA. Really surprising to someone like myself that's followed the industry for a long time because they're changing the fiduciary responsibilities, basically, right, with that ruling, saying that the fiduciary responsibility is not necessarily to the plan sponsor, which would be the employee or the health plan. Can you maybe just take a couple of minutes to talk about what are your customers saying around this. And do they have concerns, are there changes in contracts that are happening since this announcement? And I know that the timing is kind of strains, right, in that the court case came down, probably most of your contracts for 2021 were already signed. But I do understand that we are starting to think about the selling season for 2022. So I just want to understand what clients are saying and any anticipated changes you would expect. But also any expected changes that you would see on the retail side of the business, right? Now that they're saying this was really brought up by the independent pharmacies that were looking to be reimbursed fairly from the PBM industry.

Do you want to take that? Yes. Go ahead.

You want to take your turn? So Lisa, to your point, Lisa, it is early. And I'll just emphasize, it's a very narrow decision by the court around mandating a particular pricing methodology when reimbursing pharmacy. So think of it as cost regulation. And that decision does not impact or restrict the ability to offer different benefit designs. So on an apples-to-apples basis, at least I think where you were going, it will increase -- has the potential to increase cost for employers as one could speculate independent pharmacies would be paid more. So I mean I can see as this moves forward, if we're sitting across the table from each other and you're the decision-maker for the JPMorgan benefit design, and we're going to be talking about potential cost increases, and you're going to come back and say, well, how do we mitigate that. And one of the mitigation elements would likely result in further restriction of the network construct.

Right.

So I could see that happening as a byproduct just because today, once I mitigate it, it would end up being a pass-through for the plan sponsor.

Right. And so would that finally push us towards more narrow networks for pharmacy? I mean we see that in Medicare, but we've never seen that in commercial. So could this potentially to be impetus? And could it end up hurting the independent pharmacies at the end of the day, where they thought that they're looking for better reimbursement around this and only to be cut out from a network because it -- the cost is a pass-through to the plan sponsor?

Lisa, I do believe it has the potential for that as the ultimate outcome.

So we have only one minute left. And Karen, as incoming CEO, I ask this question every year, and Larry will remember that absolutely, we should have just thrown out the window last year with the pandemic because no one would have predicted that we were going to have a pandemic in 2020. But Karen, hopefully, we'll be sitting altogether in San Francisco in January of 2022. What are the few things that investors will really truly appreciate about CVS 12 months from now that they don't appreciate today?

I think 3 things. So the first is our path to continued growth is strong and solid. That we've built the company with unparalleled power of our reach and responsibility, and our relationships to meet the American health needs. And that they'll understand that we have unmatched scale and breadth of capabilities and presence in the community that create a unique opportunity for growth and differentiate CVS Health.

Great. Well, I'm looking forward to that over the next 12 months. Congratulations on, again, being named CEO. Larry, congratulations on your retirement, and for fostering these amazing women that are part of this leadership team. I think that -- you're on the forefront of doing away with tobacco. You're on the forefront of really fostering women in a large organization. So thank you for all that you've done. And I hope to keep in touch in your retirement.

Lisa, you bet. And let me emphasize, I couldn't be happier with the Board selection of Karen. And the company is in great hands with Karen and Eva at the helm.

Thank you, Lisa. It's nice to [indiscernible].

Great. Well with that, thanks very much, everybody.

Thank you.

All right. Good afternoon, everyone, and welcome to JPMorgan's 39th Annual Healthcare Conference. Sorry for the short delay getting started. My name is Cory Kasimov. I'm a senior biotech analyst here. And I'm joined by my colleague, Lisa Gill, our health care technology and distribution analyst; and Chris Schott, our U.S. pharmaceuticals analyst. And it's our pleasure to host this keynote on all things related to COVID-19 vaccines. We're very excited to have a really distinguished group of panelists today, including Dr. Moncef Slaoui, the Chief Adviser to Operation Warp Speed; Angela Hwang, Group President of Pfizer Biopharmaceuticals; Stéphane Bancel, the CEO of Moderna; Karen Lynch, the current President of Aetna and incoming CEO of CVS Health; and Brian Tyler, the CEO of McKesson. So thanks to you all for taking the time to join us today. And even more so, I think I should speak for everyone when I say upfront, thank you for all your efforts in fighting this pandemic. So our hope with this keynote is to cover all things, all aspects of COVID-19 vaccines, from development, production to distribution, logistics and to longer-term outlook for the pandemic. And so with that, Dr. Slaoui, perhaps you can take us a couple of minutes to set the stage for our discussion by providing some overarching perspective on where we are in addressing the pandemic and how you're thinking about the priorities at this point in time.

Thank you, Cory, and thanks for having -- putting together this panel. I look forward to a good conversation. Really, in a few minutes, I'd say to an extraordinary pandemic that hit us starting, say, in January of 2020, there has been an extraordinary response from the health care ecosystem globally and the biotech pharmaceutical ecosystem more specifically in that period of no more than 11 months that elapsed between identifying the sequence of the virus and having 2 vaccines approved and in use in the U.S. population. I think it's truly an exceptional achievement, thanks to the great efforts in the companies whether large biotechs or large pharma, great efforts, thanks to various U.S. government entities within the Human Health Services or the Department of Defense. And also, I think, thanks to a very, very aggressive strategy put forward to incentivize and support financially but also operationally the discovery, the development, the manufacturing and now the distribution of the vaccines. In May of 2020, there were, if my memory doesn't fail me, more than 120 different vaccine programs described in the world and there may still be close to 100 of them at different levels of activity. Within the U.S. Operation Warp Speed we're set up to try and accelerate the development of a number of vaccines. Without getting into the detail, 6 vaccines were selected. Fast forward today, 5 of these vaccines are in Phase III trials or have completed the Phase III trials. 2 are approved messenger RNA. And we have representative from Pfizer and Moderna, I think, that both spearheaded these programs to allow us to have vaccines approved and in use. 2 more have completed recruitment in their Phase III and are really accruing cases, one by Johnson & Johnson and should be coming to fruition very, very shortly by the end of this month or early next month, and one by AstraZeneca already approved elsewhere and completing Phase III trial here in the U.S., and potentially, getting an emergency use authorization in March. And then still a protein vaccine by Novavax is in Phase III trial. More than 8,000 subjects recruited and a Sanofi collaboration with GSK with a vaccine that's in Phase IIb trials. Great progress in terms of developing the vaccine clinically. Also great progress in terms of manufacturing the vaccines in parallel and at high risk, either within the companies as has been the case for Moderna and Pfizer or in manufacturing capabilities and facilities that have been accessed as part of the U.S. government contracting with contract manufacturers either for production of the vaccine. Drug substance are also critically for the finished activities are a major bottlenecks in same activities used for all vaccines. To date, as I said, 2 vaccines are approved, 40 million doses have been distributed already. Only 9 million people have been immunized. There is a need to accelerate the immunization. The distribution of the vaccine has been, I think, a remarkable also collaboration and partnership, which we -- McKesson, CVS, Walgreens, FedEx and UPS, and here, General Perna, my colleague in the operation and the DoD in general, I think what the companies have paid a critical role in delivering exactly on time as was described yesterday in over 14,000 different locations, the exact quantities of the vaccines on the date that were suggested. Where things need to improve is in the capacity of the health care system in general without getting into the politics of whether it should be at the states or the federal level [indiscernible] it is. And we need to improve the speed with which we are able to deliver these vaccines into the arms of people. That's our #1 key area going forward. I would say other areas that require absolute continuous focus are to continue to streamline and optimize the supply chain with the messenger RNA vaccine, but also with the other vaccine. I think it's vital that we have more variety of platform technologies underpinning vaccines for use in the population in general. It is, I think, very important in the context of a pandemic to be able to have a 1-dose vaccine. And it's a development that could take place, frankly, with the current messenger RNA vaccine given the performance observed over a short period of time with one dose. But that would be a new kind of challenge and development, but also vaccines that are being developed as one of those vaccines such as J&J vaccine. And finally, another area where we are very focused is identification of clinical correlates of protection. That's a really critical enabler for the future of older vaccines given that the availability of vaccines now, particularly in the U.S., is making it effectively impossible to recruit high-risk subjects into placebo-controlled clinical trial. It will be the pragmatic way to demonstrate the efficacy of yet more vaccines. We hope that the last vaccine that started Phase III, the Novavax vaccine, will not be derailed by the fact that subjects in the trial will leave the trial to get access to a known vaccine versus an unknown vaccine or a placebo, and therefore, through that, make the vaccine steady outcome highly improbable. So identification of immuno correlation protection, which will be available to all players may enable the development of a second-generation of vaccines that can support vaccinations here in the U.S. as well as on a worldwide basis. So all in all, I think this has been an opportunity for the industry as a whole to demonstrate to the world in general and to the U.S. population in particular its critical role in effectively saving the country and the world from a pandemic that has just brought our lives to a stop, stilled so many, affected so many, disrupted so many. And I think it's very important to highlight the level of collaboration of partnership, a focus of commitment, of selflessness that has characterized the work of the industry and the U.S. government in tackling this pandemic. I'll stop there. I just tried to refresh everybody's memory and mind on what has been done and the critical areas of focus going forward. And looking forward to the discussion with that.

Great. Thanks, Dr. Slaoui. Some great opening remarks. I thought I'd just kind of cut to the chase upfront here with a question for everybody. When do you expect the population at large to be vaccinated? And what do you see as the single kind of main gating factor to getting there? So maybe just -- we'll start with Angela, then go to Stéphane, then Karen and Brian with just that initial question.

Thanks, Chris. And thank you again for bringing us all together to have a very important conversation about a very important topic. I think that Moncef's introduction on sort of the state of where we are with the pandemic sheds a lot of light in terms of how we should think about where we are with the pandemic and how long it would take for us to vaccinate everyone. You've heard him talk about the complexities of this vaccination campaign globally. But we have billions of people that we have to be able to vaccinate because of the pandemic. And the ability for us to vaccinate at the speed that we need in order to gate -- to gain the herd immunity and to stop transmission is obviously of highest priority. So as I think about everyone coming together, and I think that this panel is a great example of this industry, private-public partnership that we all need because it truly needs all of us to be able to make the impact in the world. It's going to take time. There's a lot of people to vaccinate. Vaccinations are complex. And I think by virtue of that, I hope that in 2021, we will put a lot of this behind us. But I think that we should anticipate that there's going to be a lot of work to be done. And this focus on getting the rates of vaccinations up to be able to support the points of vaccination to increase the numbers of them, so that we can really increase the volume of people that can get through them, are going to be all important steps that will help us to achieve that.

Stéphane?

So Chris, thank you, and thank you for having us to on the panel. It's good to see everybody on this panel. First, I would have to really thank Moncef and congratulate him. I think, really, the U.S. has done an amazing job to build the portfolio of vaccines. I have a chance to talk to different regions in the world. And a lot of countries are scrambling because I think they didn't do it as well as what the U.S. did. So it goes to what the U.S. government has done and to the collaboration between all the agencies of the U.S. government, channel for OWS and industry. I mean, if you ask about the question about the U.S., Chris, but I think if it's a worldwide question or U.S. question, it's a very different answer. I think we've got a question about the U.S. and it is a question about people above 18 years of age. If you do the math at 70% vaccination rate, which would be wonderful, given some of the calls we are seeing daily, that's 150 million people. That's 200 million doses in arms of the boost. Of course, less if you assume a single dose. If you look at what, I think, Pfizer and Moderna have said, we will supply to the U.S. government by end of Q2. I cannot speak for Pfizer. Angela can. I can tell you for Moderna. We have said it. We will have, before the end of Q2, 200 million doses of the Moderna vaccine to the U.S. government. We are, so far, on track to the plan we have given them. And we confirm that almost daily with their team. So if you look at that number, I think if both companies can deliver a total of 400 million dose by the end of Q2, that will cover anybody above -- I mean, 70% of population above 18 years of age. So I think the U.S. will most probably be one of the first country of size to get its population protected. I think smaller countries like Israel, Switzerland and so on are going to go pretty fast given how much vaccine they have ordered and the size of population. I think Europe is going to be much later. We would not be surprised if it takes Europe potentially up to the end of the year to get a good immunization across the country and then where we can take them for other countries in the world. I will pass it over to you, Chris.

Karen, your thoughts on the topic.

Yes. So first of all, thank you for bringing this group together. I think it does demonstrate how we can collectively come together as an industry to address pandemic. And I think first of all, congratulations to Pfizer and Moderna for everything that they've been doing. I do think it is what Dr. Slaoui said. It's getting it into the arms of the individuals. And obviously, it all starts with the supply, and we know that people are working incredibly hard to get that supply. And then it's really, right now, it's the allocation decisions that are being made by the states to go after certain types of individuals, so that we get our frontline workers and we get the most vulnerable population. And then obviously, it's the education of people. There are certain people in the U.S. that are hesitant around the vaccine. And I think we all have a responsibility to educate around the efficacy and the importance of the vaccine. And then from a CVS health perspective, we have a large reach. We have 100 million people through our Caremark and our Aetna members that we have the opportunity to educate. We have 10,000 stores across the U.S. where 85% of the U.S. population lives within those 10,000 stores, so that the distribution and the access, we can play an integral part in working in the communities to get people vaccinated.

Brian, pull it.

Well, Chris, it's tough to go last after this esteemed panel. I do want to start though with my sincere appreciation for what the teams at Pfizer and Moderna have done, for their great partnership and also the great partnership with OWS and the U.S. government. I do think this really has been a partnership. And I certainly would echo the previous comments, right? It's going to take product. It's going to take patients, new kinds of patients. It's going to take physical people patients to get shots in arms and willing people to get shots in arms. And I think it's going to take a little bit patience in the early phases. I mean, this is a very new program. It's very complex. There's obviously a lot of passion and energy and some learning that is going to go on around this. And I think we'll continue to get better and better as we go through that. And I do echo Karen's comments that I think all of us, particularly as health care leaders and leaders of large organizations, have to do our part to convince people that it's not just safe to take this, but there's also an element of responsibility to yourself and your community that, inherently, this is a battle we're facing that we're in together. And it's not so much an individual as it is a community that will beat this back.

All right. So I have a question probably for Stéphane and Angela. One of the most discussed topics right now in this ever-changing environment is the emergence of mutations. So I'm curious how you're thinking about variance in the SARS-CoV-2 virus. And do you worry new strains could render the vaccines we have today less effective or even ineffective? Maybe Stéphane first?

Sure. So thanks, Cory. So first, the virus has been mutating since January. It's not something that happened in the last few weeks as reported by the media. The industry, again, with academia has been collaborating extremely well to document mutations for them, [ exchange ] sera and virus strength to help us assess things. I think it's important that people appreciate the difference between a monoclonal antibody and the vaccine, a vaccine when you vaccinate and remake [indiscernible] protein in your body. We're not going to make one antibody, but a super antibody is binding many epitopes for the virus. And so we are following very closely as we have the last 12 months. We, as we said, do not believe that the current strains in the U.K., South Africa, I know there's a new one being discussed from Brazil, cause a problem to the current version of the vaccine. As you know, one of the beauty of mRNA technology is how quickly you can go. I remind everybody, we went from sequence. We're shipping GMP product last year in 42 days. I believe we should be able to do even faster at this time, we will [indiscernible]. I think the question is not for the short term. I believe for those mutations, it's going to be fine. I think the question is going to be more midterm, which is you have a U.K. strain now, but you might have a new strain from U.K. strain and then another strain from [indiscernible] of it. So the question is, as you see the virus mutating over time is are we going to have in 6 months, in 9 months, in 2 years such a drift from, I would say, the original SARS-CoV-2 sequence that came out of 1 -- a year ago? Are you going to need to have a new vaccine and potentially combinations of vaccine? But is it a world that's going to evolve basically like what's happening with flu or what you see for example with a product like Prevnar where you keep adding -- Brian, I mean, the beauty of mRNA is you can combine several molecule in a vial. We currently have been going to Phase III of vaccine against CMV, cytomegalovirus with that 6 mRNA in Israel. We are demonstrative that we can get that done technically and as the regulator are comfortable just taking products from the get-go with combination. So I'm not worried for the short term, but we are watching that very closely. Because I think that we might evolve into a world where we need new strains of vaccines down the world, but not in the short term.

Angela, anything to add there?

Yes. No, likewise, Pfizer is closely monitoring and studying these new strains, these new variants and the mutations from these variants. Just last week, we published data that demonstrated that in vitro, the sera of those who are vaccinated with the Pfizer-BioNTech vaccine was able to neutralize the immunity against the particular strain of the SARS-CoV-2 variant. So we know that in this specific instance, it's working. Likewise and continued, we are looking at other mutations as well, and that's being studied. And actually, very shortly, we'll be publishing on that. So all to say that I think all of this coming together, we're bullish about what our vaccine is going to be able to do and its ability to respond to the various mutations and the variance. That being said, what we have to realize is that the virus could change. And that we may need a new vaccine altogether. So it is important that we continue to monitor that as well. And to stay on top of whether it's really a mutation and a small change or whether it actually moves to a place where we need a new vaccine. But again, as we've said, that's where the beauty of the mRNA technology comes in. With the sequence, we're going to be able to be able to make a new vaccine in very short order in as little as 6 weeks. And so that, together with working with regulatory agencies, to really understand what are the studies and maybe what are the data that they would need in order to create a regulatory pathway, authorization or approval. Pretty much what we've been doing for the last several months, we'll continue to do, but obviously, do it in a way that helps us to get ahead of it. But I think that we should anticipate that there's going to be changes, and we need to be ready for these changes, and we are.

Okay. Okay, great. And Dr. Slaoui, we obviously have representation here. The first 2 vaccines both based on this messenger RNA technology. Both have demonstrated pretty remarkable efficacy. I wanted to ask you, though, about your level of confidence in the non-mRNA approaches that are out there. And what do you think maybe the bar for efficacy is given what we've seen so far? So for example, what kind of role might the vaccine with efficacy on the order of 70% to 80%, not 95%, have in this market and the global fight against the virus?

So it's a very important question, and frankly, a very delicate and difficult one. Because I'm going to say having a 50%, just to change from 75%, and the regulators have put a bar at 50%, having a 50% vaccine is so much better than having no vaccine. It would allow with appropriate immunization throughout the population to save millions of life over the years. But of course, once the 95% benchmark has been set, the individual benefit dimension take somehow instinctively the frontline in people's minds versus the population benefit. So the answer -- the scientific answer to your question is the 70% or 80% vaccine can be highly effective in inducing herd immunity, particularly if the vaccine, for instance, has a very high efficacy against severe disease and decreases the -- I'm pretty sure studies are -- will define this, but I think it's a very reasonable thing to expect, that even a 70% or an 80% vaccine, effective vaccine, is actually going to substantially decrease virus with most people immunized, will induce herd immunity if 80% or 90% of the population is immunized. But you don't have the level of certainty that you have when you take -- when you have a 95% effective vaccine. Now my projection, as to the efficacy of the vaccine, I would say, is very high. I do remember in June and having said that I expect the vaccine to be 85% to 90% efficacious, and it was a shock, I remember. So it was very satisfying to see that efficacy was very high. And the number was not coming out of the blue. I actually believe that this virus -- fortunately, this virus is actually a somewhat slow virus from a pathogenesis standpoint. And if you are able to either have a low virus load inoculated or have immune responses able to control your virus load spread quickly, so that by the time the bulk of your destructive immune response against the virus is at its peak, not most of your lungs are infected, but only 5% of your lungs are infected, you are going to clear this virus out and most likely be asymptomatic or have very, very small cough, right, or, if your nerve in the -- olfactory nerve, that you may lose a little bit of smell. As is the case, in effect, in probably 85% to 95% of people that are naturally exposed to the virus, some have still no immunity. So the reason I went through that is just to say my expectation, frankly, is that most of that seems if they are immunogenic in -- particularly, in the elderly, will be effective at a high efficacy rate in the 70s or the 80%. I think some challenges observed with other vaccine may have other explanations than the intrinsic efficacy of the vaccine itself. My -- and this is one of the reasons why we felt that it was appropriate to select one of the vaccines and test it as a 1-dose vaccine. And as you know, the Johnson & Johnson vaccine is being tested both as a 1-dose and as a 2-dose vaccine in large Phase III trials. And the expectation is to have, I hope, 80%, 85% or maybe more efficacy. The -- what people need to realize is that in real life, a very large percentage of people immunized with the first dose will not get their second dose for various reasons. Maybe in a pandemic, at the height of the pandemic, this will not be so, but maybe in the month of May or April or June as the percentage of population becomes larger and larger, a substantial number of immunized people may not get their second dose. Having a 1-dose vaccine is, therefore, very important. And I believe that the Moderna vaccine and the Pfizer vaccine, if tested as 1-dose vaccine, are likely to also demonstrate very high efficacy. So my expectation is high efficacy. My expectation is that anything north of starting with an 8, I hope, will go through. I think a 70% or 65% vaccine that can be made into billions of doses very quickly can be transformative on a global basis. But I do think it will raise really in the North, South, Western world, developing world questions. But if you look at it, firstly, from a public health global health standpoint, any vaccine above 50%, 60% will make a huge difference if available very quickly.

Great. Maybe as we transition to discussion a little bit to logistics here. There seems to be something we're hearing from the media, almost on a daily basis, about the challenges of delivering some of these vaccines. So maybe just another quick comment from everybody about how much of a concern you see these logistic dynamics? Is there a short-term issue? Is this a longer-term issue? Maybe Brian, we'll open up with you for initial comments here, and then go to Karen, Angela and Stéphane.

Sure. Well, it's -- I think, top of everybody's mind for very obvious reasons, and not unexpected, getting a lot of scrutiny and commentary, I guess. I will say, we've had the chance. This is my Day 3 of the JPMorgan conference. I haven't had a lot of chances to talk about this over the course of the last few days. And one of the things that I've noticed is a little bit of confusion in the language between distribution and administration, and Dr. Slaoui actually referenced this. The distribution has actually gone quite well. And I think it's now that last inch, so to speak, of getting it from the provider site into people's arms. So just to maybe clarify the way the process works for everybody's benefit and to frame the conversation and the comments that will follow, the jurisdictions based on their local decisions on how they want to address this will filter up request, so to speak, to Operation Warp Speed and the CDC, who will then make allocation decisions based on a variety of factors, turn those allocation decisions into orders that are pushed down to McKesson. That's really when our role starts. We receive that order. We walk into the dedicated facilities that we built that are securely storing this vaccine. We do the pick, pack and ship, believe it or not, in a freezer to maintain the temperature controls around this virus, and we work with our partners, UPS and FedEx, to get those products out to the provider sites, usually within 24 hours. And I believe our accuracy rate right now is 99 -- in excess of 99.99%. So I'd say the distribution component has been remarkably well, and that's really kudos to the great coordination from all the companies on this call, Moderna, Pfizer, certainly Operation Warp Speed team. So we're proud of what we've been able to do. We just talked a little bit about the need to build the practice and refine the process to compress further the time to get that at the provider site, to get the administration, to catch up to the distribution.

Yes. And I'll pick it up from there. We've had a lot of experience with the long-term care facilities. We've obviously been working very closely with Operation Warp Speed and the launch and the CDC. How that process worked was that the nursing homes would select the pharmacy carrier that they wanted to administer the vaccines, over 40,000 selected CVS Health. Then what happens is the states need to determine the allocation to those facilities. So once the states turn on or activate those nursing homes, then we're able to go in with our pharmacy techs, our pharmacists and nurses, and put the shots in the arms of those in the individual nursing homes. So there's -- that's the way the process has been working. We're very hopeful that the federal program will open up soon. And then that will open up more of a direct distribution into pharmacies across the country. And then I think that will open up the ability for access of individuals to go to their community-based pharmacy so that we can have more people getting vaccinated. We -- I shared with Lisa yesterday, we have the capacity to do 20 million to 25 million of vaccinations a month throughout all of our retail locations. And what that means is we can do 1 million a day. And just to put that in context, we're just coming up to 1 million vaccines this week on all of our long-term care facilities, so we can open up the aperture to get more shots in the arms as soon as the federal program is fully in play.

Stéphane?

I mean just to add a quick word. I mean, we are not in charge of distribution of vaccination. So I will just speak from far away, saying that, first, the job that Brian and his team at McKesson have been doing has been fantastic in the coordination. And then I think you have some teething problem, I will characterize them as such. I don't think it's a good idea to bet against America. I think it was just because of very tight supply and mostly I can't talk about it. Because of very tight supply, the allocation was a big struggle. And in some places, I think people spend too much time thinking about allocation and staying in line versus shooting vaccine in arms. I think there's more and more supply available and as we use the enterprise like CVS and other pharmacy chains and stadiums and a lot of things just to get vaccination, then I think the numbers are going to go up pretty quickly over.

Angela?

Just to add more color to what was already discussed, just from a Pfizer perspective, to give you some numbers. To date, globally, we have distributed, so shipped out 30 million doses to about 10,000 different points of vaccinations, right? So this is through using logistics partners like UPS, FedEx, DHL, so on and so forth for us to take it from outside in Kalamazoo, Wisconsin or in Belgium to get it to the various sites. And I have to say that like everyone has been saying, consistent with what you've heard, it's gone remarkably well. All the doses have gotten to where they needed to get to exactly on time with almost negligible variances. And we had almost no product returns. We've had everything arrive on time at the right temperatures. The couple of boxes that -- where we had excursions, and literally, it was a couple, we've monitored, and we have tested those to realize that the product was still intact. So honestly, this has gone almost as perfect as it could possibly go. As you know, however, we've invested a lot in making sure that this works for us, right? We have our shippers that are temperature-monitored. We are tracking all of these boxes wherever they're going. And we've also provided a tremendous amount of training and support at the points of vaccination because we believe that our job ends when the vaccine is administered, not just where we drop off. So I think this entire infrastructure from beginning to end is what has helped us to really achieve the outcome that we had hoped for at the points of vaccination.

Great. I just really wanted to dig in a little bit, Brian, to what you talked about around this whole process and really maybe just better understand where the product is being delivered to the safeguards around that product. I think one of the things we hear about is concern around a potential counterfeit product. And then dealing with public health. So when you're delivering that, how does it determine that it's going to a hospital or to a CVS? And when we start to think about those logistics, how coordinated is that effort? Is that something that you're coordinating and if they just tell you here's the drop spot? Or is that something that McKesson has a more involved process when we think about dealing with public health?

Okay. There was a lot of questions. Let me kind of peel them back one at a time. You think you started with the safety and security. And I think one of the attractive features of the logistics design that was selected is there's very few points of handoffs. So -- and we're not handling the Pfizer vaccine. They're handling their own distribution. But with Moderna, we're picking it up right at Stéphane's factory on -- our controlled transportation vehicles bring it into our secured facility. The next place it arrives is at the provider site. So there are very little -- very few points of encouraging or opportunities for that chain of control, so to speak, to break down. When you asked about the -- where it end up going? I mean, remember, in the early phase, this is the 1a phase, the target for the program was really our frontline health care workers and the really elderly and sick, right? So Stéphane made a great comment about its teething pains and the administration in the sites, right -- well, we rolled out really literally in the middle of the holidays and the target audience was those who are most busy taking care of the sick patients. So maybe the teething pain should have been expected, and I do think we're continuing to see that get better and better. The way our program is designed and the reason another attractive feature to the model that OWS selected in our opinion is there is very little lost inventory filling up the supply chain. It literally goes from us to the provider site in 24 hours. And in early stages where supply is limited, that's really a critical feature. But McKesson has really no role in deciding who gets it. I mean, that's the role of Operation Warp Speed. So I think the local jurisdictions develop their local plan for -- I can tell you, I believe the state of Texas has 7,000 providers that, at some point, will be involved in this, but that's their decision. The allocations is the decision of the CDC. We view our job, and we built our facility and our infrastructure to simply take those orders and make sure we could get it out to hundreds of thousands of sites of care within 24 hours.

If I may add something there, just to complete what was said, which I completely agree. But it's important for people to understand that to realize -- to put into context the various discussions that happened in media. There are 70,000 locations that have been validated, and they had to meet certain criteria that were offered by the 63 or 64 jurisdiction in the country as potential recipients for the vaccine. Every single dose of vaccine that is shipped because there has been a pull, not a push. In other words, a state says I would like to have 257 doses of vaccine in address 255 blah, blah, blah ZIP code this, which is one of the 70,000 areas. And that's shifting to there. The assumption behind that is that whoever sat down, and we went and visited all the health departments of the various states and jurisdictions, the assumption is, when you decide I want to have X hundreds of doses in this particular location, is because you, at the same time, have organized to immunize those number of doses in the area. And this is, frankly, it is in that transition from deciding to ask for a number of doses in a given place and administering them that we need to optimize. Clearly, the holiday season wasn't a great thing. Clearly, the surge that's happening overwhelming the health care workers in the health care facilities and hospitals is a problem. And therefore, the decision to accelerate going to broader population, and as was said, open the aperture further is the right thing to do to decrease the pressure, continue working into the health care workers and hospitals, but also distribute elsewhere and immunize elsewhere.

Dr. Slaoui, I think most of us understand the different rankings by the CDC as far as when people should be vaccinated just at least the first 1A, 1B, et cetera. But can you reiterate that number one for people? And then I'd like to bring Karen into the discussion because one of the concerns that I think a lot of health care investors have is concerns about the underserved populations. And I think, Karen, you talked a little earlier about how you educate people around taking the vaccine, but less educated people have a tendency to not be vaccinated in the same way as educated people. And so how do you meet those underserved populations? So Dr. Slaoui, if you can start with just the understanding of who is getting vaccinated and then, Karen, if you can add to that, that would be great.

So very important questions, again. And very early on, we realized that it was going to be super important to have a well-thought through ethically defined approach to giving access to vaccine into the population, because, obviously, you're not going to have enough vaccines quickly to immunize and [ treat ] 30 million people, let alone the global world. And we actually involved the U.S. Academy of Medicine to have a discussion, that was at that time a conceptual discussion, to suggest how to go about it. And that there was the first reports that came, I believe, in the month of August or something like that, describing the health care workers, the elderly and frail, first-line workers as the first 3 areas in 1A, 1B, 1C, and then looking after the overall population, the first dose with comorbidities at higher age and then at lower age, et cetera. And then that was further refined once we had the vaccines by the CDC and its ACIP committee. I think the issue about the minority population and underserved population is a critical one. And as Stéphane can attest to, the starting point of paying attention to that problem, which to that challenge, which is a real problem that we must address overall, was at the level of the clinical trials. And enormous efforts have been put and continue to be put to make sure that there is appropriate representation of the minority population and underserved populations in the clinical trials and in that process to have engagement at the level of the community leaders from those underserved population to engage with the population, participate into the trial and have appropriate representation. All the companies have worked very hard to achieve those objectives and to have at least double-digit representation in percentage of African-American, of the Hispanic population and in generality underserved population. I think that was a critical starting point, but we cannot stop there. I mean, at this moment, the key is to continue the engagement into the communities at the very local level. I mean, one of the learnings we got from the clinical trials is that, frankly, it is irrelevant for somebody out in national level to stand up and say something. I mean it's interesting, but it's interesting for 3 or 4 people to do it. What really is meaningful is for a church leader or a sports leader or just a community leader to whatever process to be engaged and understand what the vaccine is, why vaccination is important, to get the vaccine themselves and engage with their neighbors and other members in their community to be vaccinated. There was a challenge in this -- the work that took place to have the vaccine. There was a real challenge to engage the population before we knew we had the vaccine, because it's really a double-edged sword to talk about what a vaccine can do when we don't know. And then once you know, you're going to have to change your methods, right? So for quite a period of time, it was very difficult to have a concrete conversation that is relevant to people that can understand it, feel it and sense it. I think once we had data on efficacy and safety and once discussions happened in the open at the FDA to through VRBPAC process, I think that opened the way for more engagement. We are talking to companies that are really experienced in simplifying, visualizing, translating into everyday's words complex medical or scientific messages in order to help, again, with the engagement process is critically important.

Yes. Lisa, I'll just echo Dr. Slaoui's comments. The -- I think it's an important responsibility and obligation of all of us to make sure that we are in the local communities, serving the underserved population. And it is all about working with community leaders about education. We've had a lot of experience during testing. When we were doing testing in the local communities, we've learned a lot about how to use the community leaders, how to work with the community leaders. And as Dr. Slaoui mentioned, it's about those local community touch points that people are familiar with. And as you think about -- even in our retail pharmacies, where the pharmacist is one of the most trusted clinicians in the local community, that is another avenue for people to think about how to get -- to use them to educate and coordinate the vaccines. But it is an important responsibility. I think as Dr. Slaoui said, for us to have that herd immunity, we need to make sure that everyone gets vaccinated. And it is a responsibility for all of us to make sure that we're local and in the communities and working with those community leaders to educate and ensure that vaccination process occurs.

Okay. So we don't have much time left. And we want to make sure that we get to another question we get all the time, and that's how long COVID-19 is going to persist as a significant public health concern? And I know it's kind of the unanswerable question, but we're going to ask it anyway, and kind of keep you -- we've been doing it. We're going go around [indiscernible] or at least what I see on my Zoom screen, maybe start with Stéphane, Karen, Brian, Angela, and then wrap it up with Dr. Slaoui. So Stéphane, on the duration here?

You should have started with the doctor before asking the business guy. So I mean, our thesis as a company is that SARS-CoV-2 is not going away. We are going to live with this virus, we think, forever, like flu and RSV and other vaccines. The key, I think, is going to be to stay really close to the mutation, as we talked before, and to be able to very quickly find a regulatory pathway to evolve our product so that we can keep protecting people. What I think is unknowable today is what's going to happen in terms of duration of vaccination. We just don't have enough data. As you know, the Phase III started in end of July. What -- we have a good sense now looking at neutralizing antibody, as well as what Moncef say, getting a surrogate is very important for all industry. But with the sense of the antibodies of at least our vaccine, I can speak that it'll go down slowly. So I think the nightmare scenario that was in the media in the spring like the vaccine might not even work 3 months, I think that scenario is on the table. But then a question of frequency of injection and what different strength you need of a vaccine to be able to protect people, I think it's on a different question moving forward.

Yes. Correct. I wish I had the answer to that, but I would agree that we'll have the virus for a long time. And it's important for us to remain vigilant. We're in the heat of it right now. And as a society, we need to remain vigilant about keeping social distancing and doing the things that we've been -- wearing masks and doing the things that we've been doing. But the most important part here, and that's what we've been talking about, is making sure that we get people vaccinated and that we continue to drive the education and work on getting people vaccinated all across the country, and quite frankly, the world. And that's my hope, that we can at least slow the pace that we're feeling right now. And I think the vaccine is our light at the end of the tunnel.

Brian?

I don't have any more informed opinion than my first 2 colleagues, other than to say I'm incredibly encouraged by what the industry has accomplished in a relatively short period of time to at least begin to arm us with the tools that we need to fight this back. Stéphane's comments about the science and its ability to adapt and I know our colleagues at Pfizer are tracking it closely are equally important. I mean the question for me becomes not -- will we ever live in a world where we're not battling some variant of this, what have you, but how do we get through this sort of crisis stage. And that is going to be as production comes online, and hopefully more vaccines get approved, as availability increases and then our ability to make sure that our teams and the people in our communities and around us are getting vaccinated and practicing the important social responsibility measures Karen just talked about, wash your hand, stay distanced, wear a mask, so -- because until that herd immunity comes, that's also very, very important. So I don't want us to get overconfident in the science and let go of these social behaviors, because I think we should be focused on those as well.

Okay. And Angela?

Likewise, I believe that this is something that is going to be with us for a long time. We know that it's a global pandemic. It spreads everywhere. We know that it's changing and whether it's changing a little or a lot, that is something that we're anticipating. So we may be in a place where we may need a new vaccine. And then we have to get so many people vaccinated. So I think that with all of this really generating the data that will help us to understand the course of disease is also important. And that's why, I think from -- at least from our perspective, the data that we have now in terms of where we are with our Phase III, but also the extension, right, following our patients for another 2 years and understanding that, is going to be important. The transmissibility, understanding the durability of response but also making sure that we are staying on top of the tracking so that if we do need to make a new vaccine, we can, like all of these things are going to add to the body of evidence that will give us the confidence to be able to manage this disease as it progresses. I think what's clear is that it won't be the crisis that we are in today forever. But what I think is also clear is that very rigorous surveillance and response is going to be absolutely important. And so I think from a business perspective, and from where we sit here at Pfizer, we see this as a durable business. And something that is -- and it's a business and a piece of research that we're going to have to continue to do for a long time.

Okay. And a final word from Dr. Slaoui.

Well, first, I completely agree that in the short term, social distancing, wearing mask, washing our hands, being aware and socially aware are critically important. I do want to remind us, however, that SARS-CoV-2 is only one of the very many viruses that are deadly viruses, which we have been living forever, that we need to also remember that without vaccines, to the many viruses -- pathogenic viruses that exist in the population, we would be living all our lives in a confined environment much more than we have experienced over the last 11 months. And therefore, this gives me optimism that as the vaccine gets more and more used, and, here, I'm talking about a global basis, not on a singular country basis, the circulation of this virus, the intensity of transmission will, by definition, decrease. And we will, little by little, get ourselves in a situation like we have with RSV, for instance, which is a virus for which we do not have a vaccine yet. Yet we live with this virus, and we have lived with this virus, and we continue to live with this virus. And people may not know, but the very frail elderly people for instance have significant morbidity and mortality associated to RSV infections. And a number of companies are working on an RSV virus, but did not slow the population. What's the difference? The difference is as we are born, we meet the RSV virus step by step. And as with SARS, when you're a baby, unless you're really a pretty -- very, very, very young baby, you are usually not ill with these viruses. You learn to live with them, you're primed. And once you're primed, usually, your protection from these viruses will last your life, long life, until you become frail or comorbidities interfere with your immune system, then it becomes susceptible. I do think that we will get to that stage with this virus. Thanks to the vaccination, we will get there quickly, which it will not be through birth cohorts, but we'll do it in a few 2 or 3 years. But what we absolutely must remember and -- how all the time, indeed, to avail this strain, this virus, new strains or other viruses, there is a very long list in the WHO of potential pandemic agents because they will come again. There will be more pandemics, impossible to predict when. We need to be even faster and better equipped for the next one than we have been for this one. So I'm optimistic we'll get this virus under control. It will not disappear, completely agree, but it will stop changing our life and turning it upside down. But we cannot forget. We forgot with Ebola, we forgot with Zika, which were orange lights. We got a huge red light here. We cannot forget. We should be ready.

Well, I want to -- on behalf of the JPMorgan Health Care team, I want to thank all of our panelists today. It was incredibly insightful. This is probably the most important topic going into 2021. And I'm really hopeful that we'll have the opportunity to see each other face-to-face in 2022, thanks to the great vaccines that are out in the marketplace. So with that, thanks again.

Thank you for having us.

Thank you.

Thank you.

Thank you.