Pfizer Inc. (PFE) Earnings Call Transcript & Summary

Great. Good morning, everybody, and thank you for participating in the final day of our SVB Global Healthcare Conference. My name is Dave Risinger. I cover diversified biopharmaceuticals, and it's very much my pleasure to welcome leaders from the Pfizer leadership team. So with us this morning, we have Andy Schmeltz. He's Senior Vice President of Commercial Strategy and Innovation; and Navin Katyal, who is U.S. commercial and global business lead for the mRNA portfolio. So we're fortunate to have them both here with us today, and just wanted to extend my thanks to you both for taking the time to join us.

I thought we'd start off with a high-level question for you, Andy. I know that you obviously kicked off a very helpful discussion on Pfizer's innovation initiatives at your analyst meeting in early December. But it would be helpful for you to just sort of summarize that, highlight your vision for strategy and innovation, how you see your mandate and your role and the time line to execute on the M&A agenda that you've outlined for the investment community?

Thanks, David, and very pleased to be here with you and have the opportunity to engage in this dialogue. My organization, commercial strategy and innovation is accountable for the mid- to long-term strategy for the company, including the investments that we make in our pipeline as well as external substrate business development opportunities, really to maximize the impact we can have for patients, for society, of course, for our shareholders. And really, Pfizer's at the inflection point today. We have an industry-leading R&D productivity that we've worked really hard to improve over the past 5 to 7 years. We have a robust pipeline of innovative assets. We have one of the highest, if not the highest, R&D budget in the industry. And as we articulated in our Investor Day in December, we have up to 19 launches expected over the next 18 months, the most ever for the company. Our goal that we've stated now consistently is to add $25 billion in risk-adjusted revenue by 2030 from external innovation, so from business development, sourcing externally. And we've made meaningful progress towards that goal. We believe we're more than $10 billion on the way there for revenue in 2030, about 40% of our goal. But our plan going forward is to complete that goal. And we're looking for opportunities across our core therapeutic areas and across phases of development, and we're agnostic to size. Over the past few years, we've achieved bolt-on acquisitions, like Global Blood Therapeutics, Biohaven, ReViral, Arena and Trillium. We've engaged in development collaborations with partners, like Arvinas, Myovant and Valneva. And in also strategic collaborations, including our efforts to unlock the full potential of mRNA with BioNTech and Beam. The bottom line, we're looking to create value and to add value, and we're looking for breakthrough opportunities that can have an impact for patients and add and create substantial value as well. So that's really the approach. We're confident that we can get there, and we're happy to go in any more detail, that would be helpful.

That's a great way to kick off, thank you. So with respect to that $25 billion target by 2030, could you just put into context the actual 2030 revenues relative to the hypothetical peak sales that you're targeting? Because obviously, for some of the BD, products will be growing beyond 2030.

Absolutely. We're very mindful, especially as the clock is ticking, that there's some opportunities that could truly generate near-term value over the next couple of years and peak around 2030. There are other opportunities, probably a lot more substrate out there now than in 2023, where the launches could come between 2025 and 2030, and the peak will be realized afterwards. I think just to recap why did we pick 2030. It's because we know that between now and then that there's a lot of change in our portfolio that we're going to experience loss of exclusivity in a number of key medicines. I think we've stated that's about $17 billion between '25 and '30 in some key medicines, Ibrance, Eliquis, XTANDI, et cetera. But then we have this BD opportunity that we've stated to kind of source about $25 billion in peak revenue. That will more than mitigate those LOEs. These 19 launches over the next 18 months, we believe, in totality, will generate $20 billion in revenue by 2030. And that includes exciting catalysts in 2023 with elranatamab, with talazoparib for prostate cancer, with our etrasimod from Arena, the launch, and there's 3 other inflammation immunology medicines that are coming. And then, of course, continued enhancements with mRNA, and Navin will speak to with our flu program also that's on track for 2024. So that's the kind of the second component. And then what we tried to do in detail at our Investor Day in December was additional pipeline that we're very, very excited about that's coming before 2030, and that includes our GLP-1 -- oral GLP-1, that includes our interferon beta, that includes TTI-622 from our Trillium acquisition as well as more. So hopefully, that kind of characterized it. We're certainly not providing guidance for 2030, but we're trying to articulate that there's a lot that we have going for ourselves that puts Pfizer in a strong position, and we believe it's very achievable over that '25 to '30 time frame.

Excellent. Okay. Great. And then with respect to pursuing additional M&A, obviously, Pfizer is doing some internal pruning, so 2 questions on that. First, could you explain the rare disease, reorg and agenda going forward? And second, should we expect additional pruning since you'll be pursuing additional M&A?

Happy to address that. So with our improvements in R&D productivity over the past several years, we have a lot more demand for our R&D resource than ever before, well above the levels that we identified in our guidance. So it's forcing us to be very, very purposeful in the prioritization of our pipeline. And there are many medicines that are promising, promising science and can have an impact on patients. And so we're looking for ways to make sure we're investing our scarce R&D dollars in the best possible way for our shareholders and for society. But we're enabling those other medicines to also be advanced. And so that's where partnerships or externalization comes into play. Specifically, for rare disease, we're kind of rethinking our approach to early discovery and development. And rather than having a dedicated research unit in rare disease, we're taking the programs that align with our other therapeutic areas and aligning them within those research units. So benign hematology, we have a significant hematology presence in our oncology arena. Obviously, with our Global Blood Therapeutics acquisition, we will continue to be focused in benign hematology. But for areas that don't fit, we feel that they could be promising, but probably others are better positioned going forward to advance those. And so, that's why we're -- have initiated this process to seek externalization of those components of our early rare disease portfolio.

So just to -- so could you just restate that? So you're seeking to externalize explicitly which components?

Well, the components that don't fit with our other therapeutic areas where we have the capabilities where we think we're in a better position than others to advance them. So for programs that don't fit, that don't connect to benign hematology or -- whether it's aligned with inflammation immunology, you could say that our interferon beta kind of presence, rare areas like that. Rare cardiology could be relevant. We have cardiology capabilities and our internal medicine research unit. But where there's areas -- gene editing also is an area that continues to be very interesting to us. But we had a bunch of other programs, rare neurology, et cetera, that might not -- that might be better suited somewhere else. And those are the ones that we're looking to find partners for.

Got it. Okay. That's very helpful. Great. Well, why don't we pivot to Navin? So first of all, we appreciate you being here with us. It's a nice opportunity to dialogue with you. So could you start with a framework for your vision for Pfizer mRNA? And also, as you discuss that vision, just remind us which technologies and programs are wholly owned versus partnered with other companies?

Sure. So first of all, David, thanks again for having us. Great to be here. So I think just first, let me just start by saying we are very proud of all the progress that we've made in this still nascent space. And that gives us a lot of confidence as we move forward with our capabilities and our programs. I think we've sort of demonstrated, I think, great leadership just right out of the gate, right? The world's leading COVID-19 vaccine, the first out of the gate with the primary series and boosting for a variety of groups, and also the first to deliver a bivalent vaccine in record time. So again, tremendous confidence as we progress forward. Our strategy is sort of fourfold as we continue to advance the sort of the capability in our platform. The first is, of course, we want to continue to invest to ensure that we continue to keep our leadership with our COVID-19 vaccine program, so continue to advance for booster strategies, really continue to address emerging variants because the virus continues to mutate and then continue our programs run our next gen for our COVID-19 vaccines. But then, of course, we want to continue to advance and expand the vaccines portfolio. So other infectious diseases, flu, shingles, respiratory combo, et cetera. And then, of course, finally, the R&D into new therapeutic areas. So our mRNA and gene editing and rare disease, for example, is another area that we think holds a lot of opportunity for success on top of just the overall investments that we continue to make in terms of our design delivery and manufacturing platform for mRNA, where we've continued to be a leader. So I'd say those are sort of the 4 pillars, right, as we move forward. And then regarding your question about where we're sort of advancing on our own. For now, our COVID-19 program remains, and we'll continue to be partnered with BioNTech. They've been a fantastic partner, and we'll continue to work with them moving forward. And that's why we're also planning to partner with BioNTech moving forward on other programs, including shingles and then also in the respiratory combo space, particularly in the flu and COVID-19 space. And then we have our influenza program, which we're very, very excited by. And that is a different setup. Our agreement looks different for flu where we will royalty bear, but we are moving forward on our influenza stand-alone ourselves. So that's sort of the framework. And again, we're very, very excited and continue to, I think, be bullish given the leadership that we've had thus far.

Great. And could you just add a little bit more color on the flu programs' different setup and how that will integrate with a combo of COVID-19 flu offering down the line?

Sure. Yes, absolutely. So maybe I'll just start with flu particularly, and then I can get into the combination. So I think, look, the flu space is a very, very large market, but we know it's commoditized. And it's dominated by traditional technologies that have been around forever, right? 70 years, I think, is when the first technologies were developed. So we have egg-based vaccines that sort of dominate the market. Efficacy is very variable, right, year-over-year, anywhere from 20% to max 60% year-over-year for a variety of reasons. And we've had some new technologies, but I think there's still a tremendous opportunity for improvement. And so, I think if we think about our mRNA technology, right, number one, we believe elicited T cell response on top of antibody response could potentially confer an efficacy benefit, vis-à-vis, what's on the market today. I think no surprise, right, our mRNA technology, it is the fastest vaccine technology by far. So that rapid manufacturing and that agility could really help in terms of agility on strain match. And then we've seen the space marked with supply disruptions in various years. And so, the ability for a company, like Pfizer with the scope and scale that we have from a manufacturing perspective, just like we've demonstrated the last couple of years, I think all of those things combined confer tremendous opportunity to disrupt the market and, frankly, become a leader relatively quickly. And then as far as the combo is concerned, I'm super excited about that. There is a tremendous desire when we talk to providers, when we talk to HCPs, and we also do consumer research for convenience, right? And we know that the vaccine market will get even more crowded from -- particularly in the adult space. So having a combination could be incredibly powerful. And as we outlined, I think, in our -- some of our prior discussions, there's an opportunity, I think, to also continue to drive COVID uptake as we launch the combo in the years to come. So all to all, we're very excited about the portfolio.

Excellent. And with respect to flu, could you compare and contrast the agreement with BioNTech versus with -- on Comirnaty, please?

Sure. So I think with the Comirnaty stand-alone agreement that we have, we have a gross profit split with Comirnaty. On flu, we have the exclusive right to carry out the developments and the commercialization of the flu candidate. And upon approval, BioNTech would essentially receive a royalty on our sales. That's basically the delta between the two.

And then if you do develop a combo, what happens then?

Yes. So I think we would not -- you should not expect that we would have an arrangement that looks like the stand-alone Comirnaty, net gross profit split. But we're still partnering with BioNTech to finalize those terms, and those are confidential at this time.

Okay. Got it. Very helpful. Excellent. And then I was hoping that you could talk about, I guess, a few things that you mentioned in a little bit more detail. So let's maybe just touch on shingles, for example. What is the profile that you're looking for? So what is the target product profile to take market share? And then why is it partnered with BioNTech? And what are the economics on that, please?

Sure. I think in terms of the why BioNTech, they've been a tremendous partner to us. So first and foremost, we just like working with them, right? So I think it's as simple as that. In terms of the profile and how we see ourselves entering the market, certainly, Shingrix is a great vaccine. No doubt about it. I think a couple of things. One is the market is very large. There's still a lot of unmet need. And you do see that there's an opportunity to improve on the tolerability profile. And so, the sort of optimism we have with our platform is that we will be able to potentially make inroads in addressing tolerability. And then when you combine that with, I'll just say, the commercial capabilities that we have here at Pfizer, the prowess that we have in terms of contracting, engaging with HCPs, educating consumers, I think that, plus a profile that we're aiming for, could make a big opportunity for us as we move forward. So that's how we're thinking about shingles.

Great. And have you disclosed the economics there between the 2 companies?

I do not recall if we disclose that, so I can follow up off-line.

Okay. And then just one more. So what is your expectation for the durability of protection against shingles? And how will you demonstrate that?

Yes. So I won't profess to be the expert on the clinical nuances here, but I would just say that we aim to have very similar, if not better, but at least, from an efficacy perspective, similar and then versus what we're saying earlier, kind of the tolerability we aim to make an improvement because I think there's a big opportunity and unlock in the marketplace if we can do that.

Great. And then one more on flu. So obviously, you're going head to head. Could you talk about that trial, the timing? And then what you're expecting for tolerability head-to-head?

Yes. So I think -- so for the flu, it's a high-priority program. It's a light speed program, just like our Comirnaty program, has been and will continue to be. So we're bullish. We're in the midst of our Phase III. We'll look forward to seeing results of that, both on immediacy, but particularly on the efficacy side because if we do see a profile that confers some superiority, I think there's a real market opportunity, first and foremost. And then, of course, that sort of blazes the trail for a combination, which will be really, really important in the marketplace as I was saying earlier. So that's sort of how we're thinking about the program. We hope to have results as I said later this year, and then we'll talk about that. I think, David, you might have asked a second question in there, and I'm just not recalling what the second one was.

Yes, just on tolerability since many patients complain about the first 24 hours after their Comirnaty shots.

Yes. Yes. I think it's really -- first and foremost, it's really hard to compare, right, between the two. There's many, many dynamics at play that you sort of need to keep in mind as we think about this. So I would say, first and foremost, we're focused on making sure that the profile that we have has a really strong balance, right? So we're aiming for strong efficacy profile, and then we have to balance that with safety and tolerability. But I do think our goal is to find that right balance. And whatever ultimately leads to that right balance is what we'll move forward with. But I do think it's hard to sort of make comparisons. It's just still very early. And I think if we do get that sort of profile that we're aiming for, then I think that we don't see that being a limiter in terms of uptake, and frankly, allows us to potentially take a leadership position. So that's the way we're thinking about it.

Excellent. All right. Great. So maybe we'll pivot back to Andy. So Pfizer's biggest pipeline opportunity is oral GLP-1. So it would be great to start there. And you've talked about potentially a $90 billion GLP-1 or incretin market in 10 years and potentially $10 billion for your orals. So can you break down how you're thinking about that $10 billion figure? Actually, if you can remind us, is that $10 billion for 2030 or $10 billion in 10 years? And then how you're thinking about ex-U.S. versus U.S. just because the current market players can barely launch ex-U.S. since they have manufacturing constraints and will probably not be able to serve the world with injectable products?

We're happy to speak about our exciting GLP-1 programs. We have 2 programs, right, danuglipron and then PF-1532, which we now refer to as lotiglipron. So we believe that it's going to be a $90 billion market opportunity set in 10 years, so a little bit beyond 2030 across type 2 diabetes and obesity. We believe that oral GLP-1s will take 30% of this opportunity in a Pfizer oral GLP-1, either danuglipron or lotiglipron could garner about 1/3 of that oral segment. So the math calculation here is 30% share of $90 billion and then 1/3 of that $27 billion, that gets you to about $9 billion in the U.S. And internationally, today, 90% of sales -- or globally, today, 90% of sales of GLP-1s occur in the U.S. given price realization and market access. So we expect about 10% for international, assuming nothing changes in that dynamic. And that's how we get to our $10 billion global opportunity for Pfizer oral GLP-1. That said, we believe the international opportunity could be substantial. Price realization and access are both the key. Obesity, particularly is still viewed as a lifestyle condition by many, and coverage from national payers is generally very limited to the small subset of the obese population. So of course, over the coming years, we're going to work with key stakeholders help understand and make progress on the medical necessity of addressing obesity just this progress has been made in the U.S. So we think that, that's going to help. And then, of course, there's always the private market internationally as well. So hopefully, that gives you some color on how we're thinking about this.

Yes. That's very helpful. And then how are you thinking about pricing for orals versus the injectables?

So we're obviously aware that we're not the only player out here, so we're not going to be setting the price paradigm. And so, we have time between now and when we would anticipate launching to kind of observe the dynamics, both in the injectable space as well as there already is an oral GLP-1 out there. We'll look at the contracting approach and be mindful of both what a list price and then what a net price realization likely would be, and depending ultimately on how our profile stacks up relative to the other competitors out there will make our final decision. So not too dissimilar from the way we think about setting price in other therapeutic areas.

That's very helpful. And just one other question on it. So regarding 1531, the once daily, could you comment on full agonism versus partial agonism since Lilly has said it prefers partial agonism? And then with respect to additional potential disclosures in 2023, should we expect detailed Phase II data for 1531 soon?

Yes. So I think it's 1532 -- we're calling it now. So the Phase II studies are ongoing. And as soon as we get results, then we'll be disclosing them in a timely manner. I don't want to commit to 2023, more likely '24, but don't hold me on that. In terms of agonism, right, Pfizer's molecules, both lotiglipron, PF-1532 and danuglipron are full agonist of the GLP-1 receptor just as all the currently approved injectable peptide-based GLP-1 receptor agonists are. Full agonism is a measure of the molecule's ability to activate the receptor, which is believed to be tied directly to efficacy. Full agonists have been shown to produce a robust response even when less than 100% of the receptors are occupied. So we believe that the full agonist nature of our oral small molecule candidates are responsible for the dose-dependent responses that we've seen in rate reduction in the clinical study so far. And we expect to see that as we explore higher doses, which is that we're doing in the studies right now. We believe that full agonism may be required for oral therapies to achieve the same efficacy over time as currently approved injectable GLP-1s. So I don't want to comment on views of others here, but that kind of reinforces what we have and why we believe it's the right approach.

Great. Yes. And I'm sorry, I have misspoken. So with regard to 1532, yes, you've conveyed to expect results from your Phase II early next year. But I actually meant to ask, should we expect any additional Phase I disclosures this year?

Let me get back to the check on that. There might be in some scientific conferences later this year, more disclosures about 1532, but it won't be the Phase II data.

Okay. Yes. Got it. Okay. Perfect. Great. Well, we're actually starting to run out of time here. And let me just pivot to another question. I've got so many, I don't even know what to choose from here. Maybe, Navin, since we have you, I'd love to hear a little bit more about your longer-term vision for mRNA. And -- so, for example, can you comment on self-amplifying mRNA and how you see that potentially playing out in coming years? And also other therapeutic areas that you're pursuing in terms of your mRNA R&D investments?

Sure. So I think with regard to self-amplifying, we are still in a Phase I status, right? So we're -- it's -- I would say it's early days. But we are definitely very bullish on sort of the technology and the platform. It's part -- first and foremost, in the short term, it's part of our broader influenza vaccine program and goals. Our goal is to really do what we're doing in the sort of mod RNA space, right, which is develop a quad vaccine with potentially game-changing protection against influenza. So similar, I would just say, overall objective, as we think about our first saRNA efforts. And again, we would want to try to get to something that's not just game changing in terms of protection, but ideally also, leveraging the sa platform, the ability to get to even more favorable tolerability, right? So that's sort of like, I would say, the bull's eye. And potentially with saRNA, because of the benefit, right, of having lower amounts of mRNA, perhaps there's opportunities to go beyond the quad model and platform and potentially include additional antigens, right, as we think about driving even more impact, I think is sort of how we're sort of thinking about that. And then just in terms of the study itself, looking at multiple dosing, so we have basically, I think, a variety of dosing, including a single microgram, 2.5-microgram, 10-microgram as part of that program. So I think we're excited about it. Still very early and we'll look forward to sharing more. And I think just our overall manufacturing platform also provides all of the differentiation that we've seen it confer to the mod platform. Most of that infrastructure is very fungible. And so we can leverage that same agility that we've had with mod to the saRNA platform as well. And then just -- I know we're running out of time, but I think your other question was about other areas that we're excited by. Just in the 30 seconds, I thought we have, we just -- we're very excited about the other therapeutic areas. You've heard about our Beam Therapeutics' arrangements in vivo-based editing -- for multiple targets in rare diseases. So that's where we're very excited and progressing there, and then, of course, looking at other applications across other therapeutic areas. And the leadership, again, that we've seen, I think, provides us with a competitive advantage in whatever therapeutic area that we decide to enter. So look forward to sharing more as we have it.

Phenomenal. That's great. Well, I appreciate you covering a lot of ground and thanks so much, again, for being with us here today. Thanks for bearing with me as I was typing away and hope you have a great rest of the week.

Thank you.

Thank you.

Thanks again.