Pfizer Inc. (PFE) Earnings Call Transcript & Summary

Okay. Good morning. Thanks for joining us. I'm Tim Anderson, the large-cap pharma and large-cap biotech analyst at Wolfe Research. And for the next 45 minutes, we'll be talking with Pfizer's Angela Hwang, who is President of Pfizer's Biopharmaceutical business, which is basically the entire business now. She's been in this role for about the last 2 years, but she's been with Pfizer for 23 years working across lots of geographies and therapeutic areas and business functions. So thank you, Angela, for joining us.

We're going to just jump into questions here. I thought maybe we could start with the Upjohn separation. So it officially occurred just this week. Viatris began trading, I think it was yesterday. You ran that division at one point back when it was called Essential Health. Now it was called Upjohn, and now it's part of Viatris. What will finally splitting that out allow the remaining Pfizer to do differently? And just remind listeners why that decision was made to spin out Upjohn.

Thank you. Thank you, Tim, and thank you for having me here today. So great question on a very important week, as you say, signifying the spin-off of Upjohn. So the reason we did that was in order to enable us to focus, to enable us to focus on innovation, to be a -- and to pivot to a science-based company. As all of you know, Upjohn, or the division that I used to run, which was called Pfizer Essential Health, was a division that was really focused on multi -- often multi-sourced molecules, molecules that had lost its patent life but still continues to create a tremendous amount of value in the marketplace. And so there was real value in doing that. But when you brought that together and juxtapose that with an innovation-based business and a pipeline that needed to be funded and needed focus in a different way, it really led to the conclusion that more value can be created for that portfolio if it was in a different context, in a different company compared to within Pfizer. And so that was really the decision that led to us spinning and looking for partners for Upjohn or the previous PEH business. And it led to the creation of Biopharma group, which began around the end of 2017. And as you said, I've led it, I've been leading that since its inception. Our focus is purely on innovation-based molecules, first-in-class, best-in-class, and we know that the only way we can really fuel this kind of innovation is that if we can focus. So we're focused around just 6 business units. And we're focused about -- around making sure that both our inline as well as our pipeline can thrive in this environment. And so we've been operating pretty separately from Upjohn since, actually even when we were Pfizer Essential Health and Pfizer Innovative Health. Those were very separate units anyway with its own infrastructure, and that certainly has been the case through this transition with Upjohn. So in terms of the day to day and in terms of operational elements, nothing changes for Biopharma because we've been operating this way for the last couple of years anyway and we were built this way. But in terms of continued relationships with Upjohn, we have some transitional services that we're going to be providing over the course of the next several years to support the transition. And of course, we have also a couple of manufacturing contracts that we have with them to support them as well. But from a biopharma perspective, we have been operating as if we were a stand-alone pretty much since the inception of Biopharma a couple of years ago.

This is kind of a crystal ball question. Pfizer is not the only one to have had a collection of mature brands, but you are the only company that seems to have monetized it in a sizable way, all of a sudden, with one large part of the business essentially carving the company up into 2 pieces. Do you think Pfizer will be a one-off in this regard? Or do you think this is -- you're kind of the leading-edge and that other pharma companies will kind of do the same sort of thing?

Well, I think -- I mean, listen, we -- as Pfizer, we have existed in both forms, right? So you see the value in both. I think, really, it's a statement around what does the company want to be and where does it want to create value and how does it want to create value. And for us, having spent the last 10 years with Ian Read, our previous CEO, his mission to return us to an innovation-based company, we got to a point where it was just difficult to be both and to do both. And so I think my answer to that is you can exist in the previous world because we certainly did and we created a lot of value with different kinds of value and now we're becoming something else. And I think it really just depends on what is the company wanting to do and how does it want to create value for its shareholders and for its colleagues. And we made a very clear and purposeful decision that we wanted to be innovation-based. And so that's what led us to where it is -- where we are today. And I think that for those of you who participated in our R&D Day and saw the excitement that we have lined up in our pipeline, those things are only possible and we can only do more of that beyond -- and beyond if we're focused because that's what it takes to be science-based and innovation-based.

So I just want to bring it back around to that question. Do you think other companies will do what Pfizer is doing and kind of carving themselves up in a similar way? And I know it's anyone's guess, but at a high level at the organization, I'm sure you talk to high-level people in other peer companies, why don't we see this sort of thing happen more often? Because it makes sense, it shrinks your base and it kind of refocuses you on the innovative side. So I'm trying to figure out why Pfizer is the only one that is doing that.

I mean, I think it's -- Tim, it's back to you, what is it that you want to do with your company? For us, we want to make sure that we're focusing our investments, our profits on creating greater pipelines rather than having a diversified portfolio that could give you growth and opportunities in a wider array of products. So I think it's just -- it can work both ways. We just -- one just needs to decide who do you want to be.

Okay. Let's shift to something that's very timely, which is the COVID vaccine that you've codeveloped with BioNTech. I just want to say congratulations on that effort and that great data. It's obviously quite meaningful to the world. That must feel pretty special for Pfizer. So a handful of questions here. We have 2 data sets now. We have your data on your vaccine, and then we have the Moderna data, and they're highly efficacious product, both of them. Does that set, in your opinion, the necessary bar for efficacy and safety for other vaccines? I'm trying to figure out, if other vaccines come in with, I don't know, let's say, efficacy at 80%, are they going to be relevant at all? Or is that going to be a market that only the high-efficacy vaccines of...

Yes. So we are so pleased and so proud of our accomplishments and also congratulate Moderna on their accomplishments as well because, certainly, in a time like this pandemic, it takes all of us to be able to get to the other side of this. I think that this efficacy bar of 90-plus percent, 95% is a real one. And I think that when you have a product that is as efficacious as this and that this efficacy is important because this is what we need to create the herd immunity around the world so that we can end this pandemic, I do think it sets a bar that will raise questions around, what if you're not 90% or what if you're substantially less, what is the role that you can play? So it's really terrific that 2 companies with similar technologies have come out the gates so strong and set a very high bar for what the -- what humanity can anticipate and can receive. And I think that we all deserve this kind of efficacy because this is what it's going to take to end the pandemic.

Do you think the high efficacy you're seeing with your product and the Moderna product speak to the characteristic of the virus? Or do you think that speaks to the mRNA vaccine technology? Basically trying to ask you if you think other vaccines that maybe rely on viral vectors will show similar efficacy? So what's the thinking internally at Pfizer among all the vaccine experts there?

Well, it's the first time that we have created an mRNA vaccine in the world for us as well as Moderna, so I think that there's a lot to learn about this mechanism of action. But there are some things that are very specific about this mechanism of action that you won't see in other technologies. The first is that in the way that it is created, which is using a gene sequence, we're going to be able to replicate and to be able to remake it if the virus changes, right? So -- and because we're so early in the inception of this virus and what it really means, I think having the ability to be able to change and to make or remake a vaccine as the virus, the genetic sequence changes, if it changes, is a real benefit. And to be able to do that at speed, only an mRNA technology can do that. The second thing that is really beneficial about this technology is the ability to boost, right? So there's been lots of questions asked around the duration of this effect. How long will it be? When will we have to reinoculate if we have to? All of these things are still unknowns to us today because we're still also following patients in the trial and following the trends around this virus. So again, having a technology that will allow us to boost is critical in a time when there are so many uncertainties around what the virus looks like. So that's the second benefit that is unique to the mRNA technology, that it is boostable. And the third, which probably speaks most directly to your question, is that what we have seen with this mRNA vaccine is that it elicits T cell responses. And these T cell responses are critical because this is what gives us sort of the memory and the ability to drive the efficacy that we're seeing in the vaccine response. And that is also a unique feature of the mRNA technology. So I think all in all, there is a lot going for this particular technology that lends itself very well to the time that we're in and for this technology to be a real solution for this pandemic. And I think that a lot of these 3 attributes are unique to mRNA and are difficult to replicate in other kinds of technologies.

There's a lot of focus on the logistics or distribution, you can see it everywhere. You can see it in the lay press, trade publications, by companies, by analysts like me. How much of a concern is that? Do you think that's overblown or not? And then specific to these kind of cold chain requirements, there is a difference, of course, between Pfizer's product and Moderna's. In terms of Pfizer, you need to store it at minus 70. Moderna, you can store it at minus 4. Does that make a difference? I know I'm sure in places like emerging markets, that could make an important difference. In developed markets like the U.S. and let's say Europe, does that create a real logistical problem? And apart from cold chain, what are the other biggest logistical challenges that you see in terms of getting what's a very good product, it looks like, to the actual end user?

So another great question and a very topical one because I know that everywhere in the media, we are now pivoting from the excitement around the possibility of vaccines now, how we actually get out to the public and into the arms of people. So first and foremost, I'm going to say that we are not concerned at all about the cold storage and we're very confident about it, and so you may ask why. We have to date 152 sites around the world who are receiving this vaccine as part of our clinical trial. So we know that the distribution and the logistics system that we have created to date for our clinical trials work. And so we have proof-of-concept that the logistics and the distribution are not insurmountable. In fact, they're doable. We're doing it every day now. And our sites are everywhere around the world. Yes, many of them are here in the U.S., but they're also spread across the emerging markets, in Africa, in Latin America, everywhere in the developed and the emerging world. So we're getting a lot of practice already in terms of what does it take, and we have not experienced any issues at all. All of our sites have been able to conduct their trials effectively, on time and with no issues. So we already know that this works. But to more of your question around concerns and what does this mean then, the minus 80, I think the way to think about it and the practical way to think about it is that the minus 80 is important because of the lipid nanoparticle components that we chose compared to what Moderna chose. We just chose different things. And the stability of the lipid nanoparticle that we chose is one that requires the minus 80. But the onus of the minus 80, I think, falls a lot on -- more to us, because once we manufacture it, we need to be able to store it before we transport it and distribute it out to the various vaccination sites. And so that's why you've seen in the news, the freezer farms that we have created in our own facilities to be able to store them. But for the administrator of the vaccine or to the sites that will receive the vaccine, a minus 80 storage is not necessary, and that's because we have created the thermal shippers. So the thermal shippers that we have designed specifically are storage units onto themselves. And they are -- they leave our facilities with dry ice, and they arrive at other facilities or the points of vaccination, where, if one chooses, one can replenish those shippers with dry ice and continue to store the vaccine at minus 80. Alternatively, if the point of vaccination does not want to do that, they are able to store the vaccine in a regular refrigerator for 5 days. So I think there are a range of options that are available here for the -- for anyone at the points of vaccination and for the administrators and for them to choose which way they want to go. If they want to store the vaccine for longer, you certainly do not need a minus 80 freezer that gives you the option to store it for 6 months. But in the time when we're doing such large amounts of vaccinations, it's probably unlikely that anyone would need, other than us, to be storing it for 6 months, right? What you want is a very agile distribution and logistics network that allows you to get the product when you need it. And that's what we're really focused on. So really, practically at the site of vaccination, the shipper can be used as storage, and that's probably all you need depending on the volumes of people that you are vaccinating. And then in addition to that, you may not even need the shipper for all that long, if you're, again, vaccinating at high volumes where you can store the vaccine in the fridge for 5 days. So yes, lots of options. But I think the critical thing here is, where do we need this vaccine to go so that we can plan the best route so that it minimizes any kind of -- it minimizes the storage facilities or storage considerations that the sites of vaccination need to have. And that's what we're doing right now, working with each of the states to develop their vaccination plans and where it is that they want the vaccines to be administered. You may have seen that on October 16, a number of states provided their draft plans for what they believe to be their vaccination plan. And so Operation Warp Speed and the CDC are reviewing all of that. But in addition to that, you may have seen the press release that we made, where we're also conducting -- at least to date, we have pilots going on with 4 states to really support and partner with them to design these vaccination plans so that we can really minimize the logistics on the side of the receiver. So over the next several weeks, this is really the focus now, to really build out the distribution and the logistics plans. But we have excellent partners who are working with us from a transportation and a distribution and a delivery perspective. And I think that, coupled with thoughtful and careful planning at the site of the vaccination center, will allow us to get the right amount of doses to the right places at the right time, minimizing the need for any prolonged storage. And again, we are in a time of a pandemic where we expect for many, many people to be vaccinated, right, high volumes of vaccinations. And so any kind of prolonged storage really probably is not really going to be happening because you're going to be moving through it so fast.