Pfizer Inc. ($PFE)

Okay. Terrific. Good morning, everyone. Welcome to our 47th Annual Global Healthcare Conference here in sunny Miami. Hopefully, it stays that way. My name is Asad Haider. I'm the Co-Head of the Healthcare Research business unit at Goldman Sachs. I'm most of the U.S. pharma analysts. I'm very pleased to open the conference with Dr. Albert Bourla, CEO of Pfizer, he kicks off our conference every year as you've been doing, Albert, very kindly over the past few years. Thank you very much for being with us. We have a lot to get through, but maybe before I get into some of my specific questions, Albert, any high-level opening remarks from your end?

I think I'm quite pleased with the way that we are executing in a strategy that I think is very solid right now. Since the changes that we did in our commercial model in the post COVID, I think the word that stands out, it is consistency in delivery, consistency in delivering. If you see 2024, 2025 and the first quarter of 2026, we beat the expectations of revenues or EPS. And in most cases, we beat on both. And that we did in despite the fact that we were reducing cost dramatically, and we were able to do to reduce cost dramatically, because we employed AI and very targeted transformational things of changing the business. The other thing that I will point out is that we were able to deliver these results in the face of a radically declining COVID business. COVID business in '24 was $12 billion, actually, $11 billion. Then it went to $6.5 billion. And this year, we gave guidance by derisking it at $5 billion, right? So despite that, we are doing well, and we are doing that well because the other parts of the business are performing very well. So that's on the financial front. But the thing that excites me the most, it is, of course, the progress that we had in the pipeline that, you've noticed also in a lot of your reports. I will start very quickly with oncology, which is the crown jewel of our R&D business right now. We had with thoracic cancer with lornatinib, the new standard of care. I think it is probably the first thing that we see something like converting metastatic lung cancer into a chronic disease. We have 7 years, and there is no medium survival risk yet, and there are people, but there are many people that I have seen in the 10 years plus. We had with -- in urothelial with both Padcev, 56% improvement. We have with talazoparib, 56% improvement. We had in breast cancer with the new data that we presented for the CDK4 and they can go on and on with a multiple myeloma on the oncology. On the vaccines front, also, we had two significant successes. One is a readout of Lyme disease at 70-plus percent efficacy. We are optimistic that we will get registration with this product and that will become the first and only -- actually, there was one, not the first, but we'll be the only of the new generation of Lyme diseases over there, but also there was a significant success with pediatric in Prevnar 25 that we are launching. And then we announced that we are going for Prevnar 35. We are hot of obesity ADA. I'm sure we will have a lot of discussions. But the highlight for me is that we presented data that support our positioning that we will have a product in 2 years that, it is as good in efficacy as the current leading product better than the current lagging product. It will be excellent tolerability and will be monthly. And then, of course, in immuno-inflammation, we presented data on the trispecific. So with that, I will turn it to you.

So certainly a lot going on in terms of the rhythm of the business and the rhythm of the pipeline. But I guess maybe starting with a high-level question, and you sort of alluded to this. You've led this very significant structural transformation as you pivot from pandemic reliance on COVID-19 towards a more diversified portfolio focused on oncology and obesity and I&I, et cetera, right? You've done about $70 billion of M&A over the last few years. You've done sizable cost reduction programs, overhaul the R&D structure. So maybe just talk to us about where we are in this arc, right? Is the substrate in place, so from here, it's going to now be about commercial and clinical execution? Or is there potentially more to do in terms of potential transformational moves at an enterprise level?

There were three things that needed to be restored after COVID when we had the very big shock that we lost half of our revenues. One was the commercial model, that I think it is up and running, and I feel very, very comfortable that this commercial superpower that Pfizer traditionally had in the marketplace globally, not only in the U.S., but all over the world, it's restored, and it's like a well-oiled machine. The second was on cost of goods in manufacturing that with COVID, we had to do dramatic high investments that we're planning for -- to absorb over many, many years. That, of course, changed because COVID business reduced dramatically. So we had to take significant drops. So if you see the margins now are going up. And the third, which is the most important was R&D. What was this R&D the concern? With R&D, the concern was never productivity in terms of technical merit. I challenge you and everyone else to go and see the data. Right now, if you compare dollars in of Pfizer R&D in the last 5 years and products out, how many approvals we had, we are top-top-top quartile. When I say we are in the top end of the top quartile. If you see a success rate in Phase II, Phase III, we are top quartile. But if you see dollars in dollars out, we are a mediocre. And that was what I needed to fix. It was a wrong choice of products. that we brought to the market, either because we've chosen wrong or sometimes we were unlucky with what competition did. But I think it is our responsibility to do that better. The good news is that if it was a question for me to fix capabilities of R&D, that will be a long-term journey years. If it is just to fix the focus or where we put -- where we turn the cannons, I think it's much, much -- which is simpler and faster, which is what we have done.

And part of that journey has been based on your BD strategy and the deals that you've done. I think just maybe high level on capital allocation. You've got about $7 billion in M&A capacity that's left. That -- by the way, after the [ Henry ] deal? Is that still the number?

Yes.

Okay. So -- and that suggests about earlier stage deals potentially from here. So as you think about scenario planning, are there circumstances in which you think you might need to do something bigger. And if those circumstances were to arise, you have levers, what levers do you have that you could shift around in terms of capital allocation priorities?

Of, let me say that we can do something bigger if we want because we have a very big balance sheet. So it's not -- the $7 billion, it is if we want without diluting our stock position to do deals. That -- already, we did $70 billion of capital deployment. That we did, as you said, three of the -- actually eight. Three of the deals represent 80% of the capital that we deployed. That was Seagen is performing extremely well in terms of the in-line product. Just to remind you, this quarter, we had 20% growth in the Seagen portfolio years after we did the acquisition. The second was Biohaven which was the migraine product. That I remind you this quarter was 42% growth. And the third was Metsera, where we presented data and we are starting what we have already initiated a very big part of 10 pivotal studies, and we plan to compete very well. So I think that is doing very well. So right now, what we need is to execute on that and then complement it not with bigger things, but with pipeline, bolt-ons that will help us enhance our position, which is what you saw with the Innovent deal that we did in China. You saw it with VEGF PD-L1, and you will see a lot of these things coming forward.

Maybe, Albert, just if we could talk a little bit about the external environment, the external operating environment for the industry. You have the midterm elections coming up. You've got attempts to codify MFN. You've got some regulatory uncertainty as it relates to an FDA leadership vacuum. So I guess from your seat, what are you paying the most closest attention to in terms of just external forces? And I think you made some comments last week about drug pricing remaining an existential threat potentially to the industry. So I guess, what did you mean by that? I mean I thought maybe with MFN, we were sort of done with that? Is there something in your line of vision that would suggest this could become a nettlesome kind of variable for us to all think about again.

What I said, and I truly believe it is that, it was an existential threat in 2025. And that was not only the price adjustments, a radical price adjustment in the U.S., but also was the tariffs. That's why most of my time in '25 was allocated trying to resolve that for Pfizer and as a result for the industry. I think we did very, very well. I think the deal that we signed with the Trump administration, put an end to both the tariffs, threat because we have until the end of the term holiday of any tariffs and on the MFN, which is prospective only for the new products with Medicaid. That deal was excellent. Everyone did the exact same deal, and I'm very pleased and proud that we led the way. Now in addition to this, which is the -- by the way. I think always, we had challenges in '25, I mean, with the FDA, with CDC, et cetera, I see tremendous steps towards the right direction. Things are going well, I would say there. I think changes that we had in FDA are very positive. Changes that we had in CDC are very positive. The new director is an excellent scientist that brings confidence to all that science will prevail. So I think over there, I don't worry much. There are two things that I think are shaping this industry faster than what we thought. One is AI. AI will change dramatically, the whole value chain generation. And as a result, will create because of the disruption that will bring new winners and losers. So it's not something trivial. The ranking will change and people that are on top to go down and people that are on the bottom can go up if they get it right or get it wrong. The second thing that is happening, it is the emergence of China as a scientific superpower. This is changing completely the equation. The geographies and the way that the medical innovation is produced is radically different. And everyone needs to have a strategy how to tap in, in this innovation, but also how to compete in 5 years with the, Chinese companies. But as I see it, my competitor will not be Lilly or AstraZeneca, but will be Chinese mega players to that time.

And that's a great segue into my next two high-level questions, which are exactly that. I think you made some comments a couple of weeks ago saying that AI and China are the last things you think about before you go to bed. So maybe just double-click on your vision for AI as it relates to the transformation of the organization. You've highlighted it as a key strategic priority. But I guess the question that we often get from equity investors, Albert is what are we going to see tangible benefits in terms of quantifiable metrics on how AI is helping the pharma industry. So how would you respond to that?

First of all, I have to say that when it comes to Pfizer investors have seen some tangible benefits from the deployment of AI because all this cost reduction without touching the top line, it is because exactly we didn't just cut but we transform productivity to the next level with -- by employing AI. But still, it is scratching the surface right now. I think when -- in our planning, if things goes well, we will start seeing the benefits in year '28 in a big way because we have right now in the second half of '26 scaling up big time, a lot of really scaling up and making decisions towards the end of this year for things that we will do in and things we will not do. All the plans are in place. If things work, I think by the end of '27, we will have a very different Pfizer organization that will be an AI native to the degree that it can, and that should provide the benefits in '28.

Maybe just then going from...

Ready for the growth period that starts post '28.

On the cost line, do you think on?

Actually, that's the efficiency and the cost reduction because of AI, it is the least valuable thing. It's going to be significant, but it's the least valuable thing. I think the commercial model is changing dramatically with AI. So you can gain significant market share if you know how to deal with the big models. Physicians are getting all their information from LLMs. So things will change dramatically. So if you get it right, you can have significant wins in the top line as well.

Let's talk a little bit more about China. It obviously is a big theme in the sector. You talked a little bit about it already. It remains a very fertile and dynamic source of innovation in your words, Albert they're doing things at half the cost at 3x the speed. You've been active there. You've done a number of deals, most recently with Innovent, as you mentioned. So just update us on the developments you're seeing from a broad industry perspective and balancing this tension between doing these partnerships and deals versus what you said China's emergence as a superpower in clinical development that could be your competitors in [ 2026 ].

That has consequences. Right now, it is positive consequences. It's opportunity. Right now, there is a lot of new science that is generated, and you can tap into it and develop it. They can't do global development yet. So they need you. And there is an ample offering of excellent science right now. So the first part of our strategy, it is how to tap into that opportunity and maximize. But there's a second thing on the consequences, which is negative, which is they will emerge eventually as a global competitor. They will start developing global capabilities. And we have seen that playbook with batteries. We have seen that with EVs. So it's no doubt in my mind. So that's why I said that they will come as our main competitors in end of the decade by year 2030. Now what does this mean for us? They are introducing a different league of competition. If you compare Lilly and AstraZeneca and Merck and us someone is better here, someone is better there, but we are all within a margin and the same league. The same category, some year, someone wins, COVID we won, Lilly won now in obesity. So that will keep changing, right? They come with a different league, half the cost 3, 4x the speed is the new norm that they will introduce in this competition. So if you want to be able to compete. You need to do exactly that. You need to be able, one, to half your cost; secondly, to improve dramatically your speed; and third, to be able to invest significant amounts in innovation. Those are the three things that you need to do. And that's where Pfizer is going. When I say the last thing I think is AI and China, when I go to bed, and the first thing, when I wake up in the morning because I dream about it. while I'm sleeping. It is how to deploy AI transform the company into an AI native company that will triple our speed and half our cost.

I'm going to...

Triple our speed, I mean in producing innovation, right? So way more innovation much faster.

I'm going to move to zoom in on some business-specific aspects. But before I do that, I just want to see if there are any questions, big picture at a high level from the audience? Okay. Albert, let's maybe start double-clicking on just the business. Just in terms of current business trends, just a word maybe just given the revenue beat in the first quarter that you saw commentary from Dave on the earnings call, suggesting upside pressure to 2026 guidance. I think the words that we used is that, the philosophy is not to raise guidance in the first quarter, but the levers seem to be in place. So just level set us on the current trends.

Look, I think the quarter was very strong. We never raised guidance in the first quarter because it's first quarter and I was tempted this time because it was very strong. But the -- if you ask me, do I think that we have a significant upside probably in the non-COVID business. Yes, because this is the part of the business that did extremely well, not the COVID, right? But -- and do I think that we have derisked of COVID? I hope, because from $6.5 billion, which was the lowest ever we gave guidance of $5 billion. But still I keep the reservation. I want to see how COVID will evolve. COVID has two components, the vaccine and the treatment. The vaccine, I don't think will be very variable. I think will come as we predicted it. because people vaccinations are at the lower level. This is what we calculated it, and I don't think that will change much. However, the treatment, it is highly correlated with the level of infection, not that much the vaccine. But the treatment is absolutely correlated with the level of infections. So if we don't have COVID wave infections, then perhaps will go lower than last year. If we have a high wave in September of August, September of COVID, then we'll have much higher than last year. So there is this uncertainty there. But the other part of the business is doing very, very well.

And then maybe just on the long-term guidance, your increased confidence that starting in 2029, Pfizer is going to enter a period of a 5-year period of high single digit revenue CAGR. So maybe just walk us through how you get there. There still seems to be a more to come of investors around that.

I'm highly convinced about that. And this is not a vision statement. I want to do that. It is a bottom up and how we do that. It is. We have the in-line products that were easier to predict. I remind you that our new launches and business development, business grew 22% this quarter at $3 billion, right? So that's already $12 billion annualized business that is growing exponentially. So we have that piece. And then, of course, we have the in-line products. Hen we have the LOEs, that they are also easy to predict and certain. We know how the products to respond with archetypes. So we know exactly how that will go. And then we have the pipeline. In the pipeline, there are multiple products, and they are all risk-adjusted when you do the bottom up. If it was five products, it is -- you can say that you can be lucky or you can be unlucky. But if it is [ 15% ], then the statistics should work. So the probability of success, some will fail, some will succeed, but should come to these numbers. So when we see that number, I have high certainty, but starting in '29 we will have high single-digit growth on the top line.

So let's -- that's a great segue then to maybe start talking a little bit more about the pipeline. Maybe just most recent developments coming off of ADA, Pfizer had a notable presence with detailed data for berobenatide, showing efficacy that's on par with the currently marketed GLP-1s, manageable tolerability, no new safety signals in the context of low investor expectations that was an incremental positive. And you're moving this program into 10 Phase III trials. So just -- and you're sort of highlighting the convenience of monthly dosing. So help us understand how you're thinking about the commercial opportunity where you're going to come to the market with the weekly first as a sort of a bridge into the monthly that comes later. And by the time you -- at that time, there's also potentially going to be more competition, maybe Amgen's MariTide, maybe higher efficacy agents. So just maybe help frame those dynamics for us.

Yes. How I see it. We come with the weekly, but the monthly will follow very fast. So it's not that it's going to come after 2 years, right? It's going to come in months after the week. Then the second one, it is that we will start by trying to get new patients that they want to start into this GLP-1 class and they would prefer us because they can get the same benefits, but they will get it with a monthly injection. So that's something that we will try to compete, and I understand is against the very entrenched let's say, a competitor, which is Lilly, but also I emphasize multiple times that when it comes to commercial capabilities, Pfizer is not Novo Nordisk. So we really got it a little bit easy with them in the competition. Now on a very big opportunity, it is the switch studies that we are doing. When you reach your plateau with the GLP-1, we know that people either are getting off and most of them are getting significant weight back or they don't like that they have to do constantly weekly injections for the rest of their lives. The switch studies, we have just to prove not that we are better. We just have to prove that we are not inferior when they switch so that people will not gain weight because now we are talking at a plateau situation. And when they switch to hour, they compare to if they continue to the Lilly or any other weekly option that exists over there. And I think we will achieve significant number of switches just because of this convenience. So that's in the beginning,'28, we are launching, and this is how we see it commercially. I remind all that we have two major innovations. One of them certainly we will present this year. One, it is the amylin, amylin monotherapy and amylin combination that we expect to achieve very high levels of weight reduction. We are still haven't seen the whole game of the data. But what you will see this year probably will be 24, 28 weeks of weight loss, both in monotherapy and in combination. And that will be our answer to the high level of -- to the high level of weight loss or to using lower doses to achieve the same, but with very, very benign profile. So -- and then the third innovation that is coming, it is -- we are having seen already data because we are working on every quarter, injection of GLP-1 that. So far, it looks promising, early days, but the pharmaco, it's in the clinic and the pharmacokinetics that we see are very positive.

So I guess just on the amylin combo, do you feel like that is the added efficacy that you could potentially see with that is needed to drive meaningful market share?

You need options because the market is having different segments. So the very high weight loss, it is for those that only need, which is the very high BMI is not for the masses, right? For the masses, they want something that is comparable to 15% to 20%, 20%, 20 plus, which is the current offerings from semaglutide to tirzepatide, but we believe that they want it in a convenient way, which is coming now. Also, you spoke a little bit about the competition from AbbVie that also could come as the monthly. Because when it comes to monthly, Lilly or Novo, I haven't seen anything, but they have...

Amgen you mean.

Amgen, not AbbVie, I'm sorry, Lilly or Novo, they don't have anything on the monthly. So it is only Amgen has something in the monthly. I haven't seen data, months from the Amgen but -- so it's not fair to make general statements. But what I have -- from what I have seen, the two weaknesses, it is once the dose that they need to use. It's very high. Don't forget that our injection, even in the high dose, the 9.6 milligram is half a ml subcutaneous. When you try to put the dose from Amgen, you need 2.5 at least. So it's very inconvenient, I think, an injection of 2.5 subcutaneously. The second is they need to fix their tolerability profile was very big. So maybe they will fix both of and then they will compete with us. But so far, I feel very confident that we have the better product.

What can you tell us, Albert, on how you're thinking about pricing dynamics evolving in that area, just particularly with berobenatide significant COGS and API advantage that provides a significant scalability advantage over competitors. So how should we help us sort of frame that for us?

Yes. One, it is the scalability that you said. When you are a factor of 10 to 14 or 15 in terms of syringes that you need and in terms of API that you need you understand that the very high level of investments that we see at Novo or Lilly are doing in manufacturing capacity are not really needed from us. Actually, all are planning for very high volumes of these products with marginal improvements in our current manufacturing network, which is very, very big in the U.S. we should be able to do it. So the CapEx that we need to invest in order to make that happen is not as high as with everybody else. Now the pricing of the product I think we saw prices going down in the U.S. That was in line when we did the Metsera deal with what we were expecting. What came as a positive on that was that we had the Medicare volumes that we didn't expect when we did the deal. But the big surprise for all of us was international markets. In international markets, the obesity is taking off very rapidly. It's completely out of pocket the business. There is nowhere almost or very little reimbursement of this market. There's a huge difference when you launch a product in Europe, usually after the approval, you need from 6 months to the first country, a year plus most countries and then 2 years, the laggards to get approval. So reimbursement, you have approval, but you don't have reimbursement. When it is cash market, it is the next day. But you go and you sell. So that's one. Also, the prices that we have seen in Germany, in France, they are high prices, but they are in -- of the market. So with all of that in mind, there were some -- I think we will continue with the pricing like that. And clearly, as you said, we have the cost of goods advantage.

We agree on the international market. We just took our TAM forecast higher for that market.

And keep in mind that Pfizer is probably among all the players the strongest commercial machine internationally, yes. There is no one that has international commercial infrastructure like Pfizer has in every single country basically.

Let's maybe Albert pivot to oncology. Sigvotatug specifically, that is a readout that's getting a lot of attention, given its imminence and the importance of this readout Phase III second-line non-small cell lung cancer. So maybe just level set us on your expectations both for this trial and the first line trial that's going to read out after this one, given that many investors are seeing this as highly consequential for broader sentiment.

Yes. And they are right. This is -- if it is positive, could be a very, very big opportunity because it comes to the lung cancer, which is the #1 killer in terms of cancers, and it is the largest market right now. There are two studies, as you said. One is second line and the other is first line. The potential of the first line is bigger than the potential of the second line, of course. The second line is now, first line is in a year. Second line, it is monotherapy. First line, it is combination therapy. Probability of success in monotherapy is lower than probability of success in combination therapy. I think combination therapy has pretty much derisked through the Padcev, and we see how the vedotin operates in conjunction with PD-1. And we feel very, very good about the probability of that success. When it comes to second line, which is monotherapy against monotherapy no ADC so far was able to be successful. So the bar is much higher. And we will wait to see the results.

And the second-line trial is still on track for a midyear readout?

Yes.

Okay. Do you think the protocol amendment derisks that trial at all?

The protocol amendment was just because we wanted to provide more alpha power to the overall survival. So basically, it gives a little bit of a push to have a successful study. Because that is really what instead of betting if we miss overall survival, you can get progression-free survival. We said, let's go all in for overall survival, and we moved all the alpha there.

Okay. Maybe just sticking with oncology. Another big picture theme coming out of ASCO was just PD-1 VEGF bispecifics. We saw new OS data from SUMMIT and Akezo of ivonescimab as well as Phase II data from your own 4404 program. So I guess, high level, how does Pfizer view the ivonescimab read-through to the class broadly speaking and your own program? And then anything you want to highlight regarding 4404?

Absolutely. For us, it's a very, very big program with, again, eight Phase III studies, and it is high promising opportunity. It's the first time that you have a class that is challenging the dominance of the previous king, which was the PD-1s, the KEYTRUDA is going to go. So we didn't have anything that could come better or close to KEYTRUDA and now we have. Now in our case, we have presented a small number of patients data, right? So it's not that we have an extensive. But the data that we have seen are best-in-class. I will give you a comparison. First of all, we all know you can do cross-trial comparisons, but it is important to understand the magnitude, if the whole thing holds, right? But we had in the enriched PD-L1 population. I'm taking the maximum of the efficacy of all three. We had 77% response rate in our own, KEYTRUDA has demonstrated 45%, right, in this enriched 50% population. And that's their highest, right? Also our highest. And Summit demonstrated 60%. So 45%, 60%, 75%. And the same superiority we have seen in the overall survival of the duration. So I'm very optimistic that the class could do well, and we can be first in class. Now for us, this class has also a strategic advantage. Because it's not only that we go for the monotherapies of the PD-1 VEGF, but we go for the combination therapies with our Seagen ADC line. As you know, and I spoke about it, we have high synergistic effects when we use the vedotin, which is the payload of the Seagen ADCs. It is the same in Padcev. It is the same in SV in combination with PD-1s. So the studies that we are doing right now will be in combination with PD-1 with VEGF and the ADCs. So we see the synergistic effect. So we go all-in in this group.

Certainly looking forward to hearing more about that progress. Albert, thank you very much for your time. We're right at about the hour. I really appreciate all your candid conversation, and thank you for being with us.

Thank you very much.