Pfizer Inc. (PFE) Earnings Call Transcript & Summary

Great. Well, thanks, everyone, for joining us today. I'm Chris Schott and Alexandra. Thanks for joining us for a lot of different topics we can dig into here.

I thought I might just start the conversation bigger picture on Pfizer and then we'll dig into the international business. But -- the company obviously has gone through a period of significant change in the past few years. Portfolio has evolved beyond the COVID assets. The pipeline is maturing. -- you got new commercial structure. So can you just talk a little bit about your confidence in the overall Pfizer portfolio and pipeline today? -- and its ability to address some of the patent expirations and kind of grow over time. .

Sure. Thank you for having me. It's a great pleasure to be here. Yes, I mean in the past 3 years, we've been through major changes advisers probably just interesting to step back and remember, so we went out of our kind of saving the world moments with COVID and the incredible job that the team has done. And after that, very transformative moment, we needed to actually refocus on our portfolio pipeline and understand where we can win and redeploy the resources behind those territories and behind those products. That's when we started to refocus our new product. Because if you remember, back in 2024, we already had a vast majority of the new product, we just have finalized the acquisition of Segan, so we had the products. We have launched a bunch of new products and vaccines into the market. But we were fragmenting our resources and our ability to actually deploy those products and vaccines appropriately into the market. What we did is we cut some of our investments that were unproductive because we were spending too much in some area, so -- and they were in point of diminishing return. We reallocated those resources in our key countries. So in my world, the top 4 countries make 40% of my business. And so spreading the resources everywhere makes no sense. So we stop launches, we stopped organization commercial structure so that we can reallocate those things into the right part. And I mean, I did the same thing in this portfolio in the U.S., kind of reallocating the efforts behind the future growth. And the outcome is actually quite remarkable. If you think about -- in my world, the new product and newly acquired product, we're making $0.5 billion in 2023. Now they do EUR 4 billion. And at the same time, we cut OpEx quite significantly because we were spending inappropriately. We had a real problem of efficiency in commercial execution. So we were able to kind of really look at every dollar we spend. Where is it returning returns? Where is it not and reallocate. So we stop, as I said, some clinical study and in some small product, in some small countries, we allocate them those resources in key markets. and where we could grow. And so you see that those new launches product is now the platforms, the base for future growth. And the reason why I'm confident is because once you establish a commercial model that works, you build muscles in commercial effectiveness, and we will use those muscles for the pipeline because at the same time, of course, we've reduced our COVID franchise quite significantly during those periods. Just remember, 2024, we're making EUR 11 billion on COVID between the vaccines and the antivirals, 2025 we made about EUR 6.7 million 2026, we guide for EUR 4 billion. So at the same time where we were extracting the most potential and aero new product. We also reallocated out of our Cove franchise so that we could double down on our new product. So I feel like we have less exposure on COVID. We have a platform of new product and acquire a product that is going extremely well, and there is room there. It's not like we all depend on the pipeline. We know we are going into a phase of LOE product. But at the same time, we have built this platform. And of course, and at the same time, the pipeline is maturing. I mean if you think about we have 31 Phase III clinical study happening right now. And I often get the question of are you trying your business by actually making all those efficiency we are not because we were inefficient in the way we were deploying our capital. And by having more rigorous and more focused approach, you have a much better impact. If I just look at what we did in international, the productivity of our sales organization tripled in 3 years just by having this very focused deployment of resources in key markets and key products. And those key products are very different. When you are in Brazil, we had almost no vaccine business, which makes 0 sense. Vaccines Brazil is 1 of the most efficient in deploying vaccine and protecting their population. It's extremely impressive. We have no business, no Prevnar, no bravo. Now Prevnar 20 is in, and we have vaccination rate of 80% of those 2.5 million babies in Brazil. But of course, it's different when you are in China. I don't have the new generation of Nomacorc vaccine yet. But I have 1 million case of non-small cell lung cancer in China. So guess what, I mean the Librela has a huge potential because there is, unfortunately, a hypobeta. So picking the winner, deploying capital behind those winners solidifier base, and we have significantly improved our commercial model. And here in the U.S., that's the same thing, which is DTC and also with sales force deployment. So I am very confident we've rebuilt our excellence in commercial deployment. And now we are maturing our pipeline. And the pipeline is coming where we have the strength in oncology. We are very strong in oncology. It's coming in vaccine. It's coming in primary care with our internal medicine and Berbati. So we have the skills and the capabilities to actually optimize this portfolio. So I'm feeling good.

Great. When I think about the company returning to growth as we look out to 29 plus, how much of that is going to be driven by the pipeline, as you mentioned, versus commercial execution against products we're already seeing today? And maybe as part of that, when you look at how we are all sell-side modeling the business, are there any particular ag disconnects that you see versus how we're all thinking about the company? .

Yes, there is quite a bit .

Into practice.

So the first 1 is where the growth is coming. The growth is coming on the new baseline that we've discussed, right? So if you look earnings release, we showed that we were producing EUR 3.2 billion on the new acquirer at the global level, EUR 2.2 billion in the quarter. growing 18% after a 22% growth in the first quarter. If you just take that as a totality of new acquirer and new launch products, that's about EUR 13 billion right there, right? So that's a very strong foundation. It's not like we are done with this portfolio. If you -- I'm going to give you a couple of kind of an example. In vaccination, so we go back to a vaccine, for instance, in older adults, both on Prevnar and AbrIzVo, -- it was very striking to -- I was looking at the numbers before coming to London. The vaccination rate in France is 25% of the targeted population, 25%. So that means that you have significant room to increase, and that is 65 and above. So it's not like it's a very big a range of our 65 and above. Clearly, at this population, we only vaccinate to 25% of that population, 28% in Germany, 3% in Japan and you imagine the growth that you have there, right there, something in pediatric, something in Ambrell adult against RSV. So vaccine has used potential to grow. If you look at low-brainer in thoracic cancer -- in 2 years, we went from nowhere in first-line new patient start to 60%, 70%. In France, we have 77% market share in new patient start. But there is still -- remember, in the Crown semen we keep people alive, thank God to the gracality of this molecule 7 years. And we've lost only 2 patients between Crown and Crown -- so the duration of therapy could be significantly longer and you add all those new patients every year. So you just give you the sense, Lebrina this quarter, international, we did a 0.25 billion. So that means that this product is already $1 billion and can continue to grow significantly. So my point is this block of product is underestimated in the ability to actually continue to deliver growth. And that has nothing to do with adi because those products just got introduced very recently. Two is on our pipeline as I was just closing in the previous question, the fact that we are entering -- the pipeline is structured around the place where we can win. And I think that's a big shift that Chris Boshoff has done with his team the recent -- the last 3 years. The last few years is, if you look at, yes, okay, we have our thought disease area, category area. But more than that, -- now after that, in oncology, we pick the zone, the tumor type that has a big impact and where we have the capability to win. So tasse cancer, EUR 70 billion market. This is the most lethal cancer, first cause of death in cancer prognostic is still very low. And so the huge unmet medical needs, subjects projected to be EUR 70 billion by 2030, we go with 3 candidates in Phase III with the most promising platforms, right? We have 2 ADCs and with defined -- well-defined payloads effectiveness with vedotin and with 2 markets that are well documented. Those are the 2 ADCs, and we have our bispecific with a combination of VEGF and PD-1. So it's well established. We have proof point into the Phase II and we have the commercial and the medical capabilities in place. We have been discussing that close together. You don't enter into oncology tumor like this. I mean it takes decades, both internally to build the scientific knowledge to actually have the capability to pick the winner. And then in the connection with medical society in connection with hospital and university and treating physicians to actually pull through the medicines. We have that. We just -- I was discussing the Labra case. We have that in thoracic. We have that in breast cancer. We created the CDK4/6 class. Remember, with Ibrance. And now we have 2 assets in development in Phase III CDK4 and Cat 6 that are coming also there, and we have the infrastructure to host that. Same thing in the prostate cancer. So why I'm excited is that there is a complete coherence and I'm not sure the financial community is completely seeing this, is there is coherence between where we play and where we are currently winning and how our pipeline is actually being structured to leverage our knowledge inside R&D and in commercials and make a success out of those products. Now the second 1 is, of course, category is a high potential is, of course, chronic weight management and berobenotide in our GLP-1 and the following assets. As you know, Chris, we commercialized recently our first GLP-1 at Pfizer in China, ecnoblotide. And so it gives us actually it's -- we learned tons out of those introductions because it gives us a very good understanding of how the market is operating and how we see this evolving. The clear earnings is it's not 1 market, it's like tens of segments. And we know it's going to be between $120 million, $150 billion by 2030. But there's a very different profile between a patient that has a high body mass with concomitant disease, diabetes versus somebody that qualify for chronic weight management, but it's more like steady driven or more self-confidence driven because that person will need a very different type of product. The access to the product will be very different than that person, where it's more medically driven, more hospital management and so forth versus this one, which is more digital hospital, e-prescription, e-commerce and the follow-up and supporting elements that will surround utilization of GLP-1 for that person is going to be very, very different to this one. But -- that's why I feel Pfizer has a great opportunity here is because this is going to be an expensive category. You need to build, trade, you need to be good at physician management, you need to be good at the direct-to-consumer online platforms. You need to master all those different platforms that we have. With vaccines, we are very big in trade. In vaccine, we are very big in direct-to-consumer, not just in the U.S., but outside of the U.S. We have built up a digital companion to make sure that we provide the right support for that logitudinal utilizations of those treatments. So It's, of course, it's a question of product profile. And of course, the product profile for this person here is going to be very different for the product profile of that person. That's why it's a portfolio play. Because this person may be fine with an average efficiency so austerity is very, very good versus that person is willing to actually go for barite effect because the effectiveness of the medicines is really core things. But maybe this 1 is more looking for long-term therapy. So monthly is going to be more appropriate than this 1 where maybe overall or weekly is going to be. So that's why you will need to have monthly very effective monthly, weekly, workerated weekly with good efficacy, all roles and a combination of all those things and a combination of all those commercial levers to actually optimize otherwise, it's going to be too expensive to have 1 asset. So that's why I'm exciting. Those 2 examples of this portfolio is maturing, we have the play to win. We have the commercial elements in place and we have the expertise in the house pick the winner. So I'm still quite good.

Because I talk a little bit about most favored nation and drug pricing. Obviously, Pfizer kind of led the charge here last year. Can you talk a little bit about how you're thinking about your business, what you've seen from some of the other developed markets in response to MFM and generally how I was just thinking about this.

Yes. No, I think it's an important point. I think we had a breakthrough because 1 year ago, we were stuck with the tariff risk that could actually help expose the whole industry and in a way, we took the lead. Albert did a kind of leaders behavior and he went and actually framed the MFN agreement that everybody followed through, which allow us to remove the whole question of tariff threats. Now on the international side, what is the effect of that is is, of course, the willingness to align the priority of purchasing power, the price of the U.S. with international. And frankly, this is long-term due in a way because if you look at the real willingness of government to pay for the real -- the fair price of innovation, this has been undermined the past decade. And there are many ways by which governments were attacking this real fair market value of this innovation through clawback or annual price cuts and so forth. And I think what we're trying to say is there is an opportunity for us to actually go back and have those discussions with the governments to align those prices. Some governments have already made mood, right, in this country, in particular, remember, the government had an agreement between U.K. and the U.S. in terms of the quality of the NICE that have never taken into consideration inflation has been embedded immediately, reflecting 10 years of inflation; two, the clawback mechanism that exists in the U.K., which was brutal and very high has been reduced and there is a commitment to go to 0.6% of GDP for allocated innovative medicines. So there is clearly already movements from some of those countries. I was in Japan 2 weeks ago and had a discussion with the Ministry of Finance and different response leaders of the governing party, same kind of willingness. And it's not MFN that is triggering this. I believe what is triggering the change of behavior with innovative pricing is the fact that if you look -- if you step back in 2000, in 2000 innovation were coming from Europe, 10% were coming from Japan. You move forward 2022 and this year, 30% of innovation come from China. China kind of overpowered Europe and Japan like this. And now we all recognize that there is a -- it's not a question of brain power in Europe or in Japan because discovery is extremely good here. The problem is those researchers are creating those biotech in the U.S. because they know they have access to a fair pricing and recognizing innovation. So if we want government wants to kind of reignite the contribution of innovation from Europe and Japan. They need to do something on pricing. Because otherwise, there is no path forward for those -- for that innovation. And that's what I see is coming. The threat of China as work up those organizations, those countries to actually build up an environment that helped. And there are some good signing, also above market, right? The European package, the pharma package that passed 1 year ago, yes, but yes, 8 months ago. It was actually quite good in terms of patent protections and orphan drug status and the biotech act that is in development is also very good. The first track is actually also very positive with speed to approvals, willingness to open the centralized reviews and so forth. So it's going in the right direction. It's going to take time, but I'm confident it's -- we're going in the right direction.

Do you think about portfolio development any differently in light of maybe some of these global markets supporting a bit higher price than what we've seen historically? For the time being, we are not thinking popular development in a very different way because as I said, we hope that these notions of paying for innovation at the appropriate price is going to win and so we play for that. Let's see. You mentioned China and the rise of the biotech industry there. Can you talk a little bit about what you see that meaning for the broader biopharma landscape and the type of opportunities as well as risks that this may be entails for visa.

I mean the -- what is remarkable if you step back, is the is the scientific power that is emerging from China? Just to give a kind of a sense, China produced about 30 million thousand P&G in science and technology every year that are working in our industry. So of course, with this very incredible power of young talents and university centers that have built the level of capabilities that were equivalent to what we had in Europe and the U.S., we will see emerging science. And we start to see massive science. Just to give you a sense, the 2 big platforms, right, in oncology that I was describing, AGC and bispecific, I was looking at Phase I, Phase II, Phase III combined. 50% of every clinical study on the planet is run in China, 50% 5-0 on those 2 platforms, so bispecific -- that's massive. So of course, we will produce more science. And what it comes from China is the fact that the infrastructure allows the ability to run fast, clinical study, prepack study and fail fast because hospitals are very large hospital, right? You have neuroscience hospital for 2,000 beds. kind of a couple of months ago, I was in Shanghai, and I was visiting a hospital have 3,000 beds in ophthalmology. So I mean this is -- so you can you can rank clinical study very, very fast and turned the assets very, very fast to fail. And that's 1 of the scales of China is the ability to screen and test and fell. And because they have so many of those PhD. The combination of those 2 things in biology, in chemistry to design those new molecules and test them very quickly. That combination is magic. It doesn't mean that we can't do that outside, but we need to unlock a lot of red tape that exists between those different institutions and continue to unlock science. So for us, as we did, we did deals, we did invent deals recently. We did a 3SBio with 404 and other deals because we see an opportunity to actually untap this innovations that come from China because it's fast. But at the same time, we also are preparing ourselves because guess what, the Chinese company at some point, welcome to our markets and it's -- we need to be prepared for that. And that's why -- we also are building our commercial and our R&D organization to compete and so we -- 1 of the drivers of that, for instance, is by embedding AI capabilities into a division. So for instance, in the International division I have the ability to strategically, what are my top priority for AI? Is that improving segmentations, improving a district manager analytics of the most performing brick into his territory? Or is it in medical to accelerate study reports or whatever. So we have in our division, the ability to prioritize our resources test those tools and then roll and pull them through into our commercial. That has a big move that allow us to remove to increase productivity of our organization. Chris asked the same thing and so forth. So we are essentially preparing and remember, my biggest country outside of the U.S. is China. And I'm competing against the Chinese organization. Innovent is 1 of my top competitors in many categories. It doesn't mean that I'm losing against Lorena has 5 TKIs of the next generation today in the market where I have 2 in those countries in the world. I still have 50% first-line new patient start in China. So it's not like we will give up, absolutely not. We have the ability to win, but we just need to be better.

You mentioned AI. How I guess broadly, as Pfizer kind of embracing AI right now. I guess how much is that affecting your business in terms of efficiencies, et cetera? And I guess the question is like, are we at the early stages of this? Or on your part of the business? -- on the R&D side, it might be a bit different.