The operator introduces the Pfizer Fourth Quarter 2023 Earnings Conference Call and turns it over to Chief Investor Relations Officer, Francesca DeMartino. She welcomes everyone and introduces the speakers, including Pfizer's Chairman and CEO, CFO, and other executives. She reminds listeners of the forward-looking statements and non-GAAP financial measures that will be discussed. Albert Bourla, Pfizer's CEO, thanks everyone for joining and begins his remarks.

Despite missing internal and Street expectations due to COVID products, Pfizer still impacted the lives of over 620 million people in 2023. They also became the top pharmaceutical company in terms of revenue from non-COVID products, had a record year for FDA approvals, and successfully closed a large acquisition. This strong foundation has positioned them for success in 2024, which also marks their 175th anniversary.

Pfizer's strategy to build on its history of innovation and commercial success is supported by its global scale and footprint. The company has five key priorities for the year, including achieving world-class oncology leadership, delivering pipeline innovation, maximizing new product performance, realigning costs, and enhancing shareholder value. With the recent acquisition of Seagen, Pfizer is well positioned to become a leader in the fast-growing oncology market and potentially deliver eight blockbuster products by 2030.

Pfizer is excited about the potential of their oncology platform and has multiple key catalysts planned for 2024, including the launch of PADCEV and XTANDI for different types of cancer. They are also looking forward to data readouts from other treatments in their pipeline and plan to advance their late-stage pipeline with new clinical trials. Additionally, Pfizer is investing in R&D to continue to develop innovative treatments in other therapeutic areas.

The company is focused on cutting-edge science and using AI and digital tools to develop potential breakthroughs. They are working on a 4th-generation PCV vaccine and respiratory vaccine combinations, as well as a next-generation flu vaccine. They are also developing GBT-601, a potential best-in-class treatment for sickle cell disease, and have several early clinical development compounds for cardiometabolic programs. Additionally, they are working on Ponsegromab, a GDF15 neutralizing antibody for cancer cachexia.

Pfizer's third priority is to maximize the performance of their new products and core franchises by focusing on execution and leveraging data. They will do this by implementing a more efficient structure in their U.S. and international commercial organizations. They will also continue to focus on the potential of Nurtec for migraines, increasing access to Oxbryta for sickle cell disease, expanding the RSV market with Abrysvo, educating healthcare practitioners about Elrexfio, and ensuring patient access to Velsipity.

In 2024, the company is focused on accelerating the consideration of advanced treatments for alopecia areata and protecting their core franchises while exploring opportunities for innovative combination regimens. They plan to provide updates throughout the year and believe they are well positioned for growth. The company's priorities also include building a world-class oncology organization, maximizing new product performance, and right-sizing their cost base. The full-year and fourth quarter results showed 7% operational growth, and the company has a strong capital allocation strategy in place. They expect to drive growth potential in the latter half of the decade and are focused on achieving their 2024 guidance.

The decline in sales of COVID products, including a $3.5 billion revenue reversal for Paxlovid, was the main reason for a 41% decrease in overall operational revenue. The acquisition of Seagen is expected to contribute to growth in 2024, and the fourth quarter results included $120 million in Seagen product revenue. The full-year 2023 diluted EPS was $0.37, a 93% decline from the previous year, and adjusted diluted EPS was $1.84, a 72% decline. The decline was due to lower sales of Comirnaty and Paxlovid, the $3.5 billion revenue reversal for Paxlovid, and a non-cash inventory write-off and other charges. In the fourth quarter, operational revenue declined by 42%, primarily due to lower sales of Comirnaty and Paxlovid. Adjusted cost of sales also increased by 12 percentage points due to the revenue reversal and changes in sales mix.

The company's adjusted operating expenses decreased by 10% compared to the previous year. Adjusted SI&A expenses increased due to marketing and promotional activities for new products. R&D spending decreased by 24% as the company re-prioritizes investments. The reported diluted loss per share and adjusted diluted earnings per share were impacted by the reversal of $3.5 billion in Paxlovid revenue. Declines in sales of Comirnaty and Paxlovid also affected performance. Foreign exchange had a minimal impact. The company recorded a $1.4 billion intangible asset impairment charge for etrasimod and a $1 billion impairment for Prevnar 13. The company's capital allocation strategy focuses on growing dividends, reinvesting in the business, and making share repurchases after reducing debt.

In 2023, the company returned $9.2 billion to shareholders, invested $10.7 billion in R&D, and spent $44 billion on business development, mainly for the acquisition of Seagen. They plan to maintain and grow their dividend while reducing debt and preserving their credit rating. They expect to return to a more balanced capital allocation strategy, including share repurchases, after achieving their de-levering goals. The company has issued revenue and earnings guidance for 2024, expecting strong contributions from their product portfolio and operational revenue growth of 8%-10%. They also anticipate $4 billion in cost savings by the end of the year, which will lead to margin expansion and increased operational efficiency. Adjusted diluted EPS for 2024 is expected to be $2.05 to $2.25, including $0.40 of dilution from the Seagen acquisition. The company has made significant investments in their business for long-term growth and is confident in their ability to enhance long-term shareholder value.

The company is focused on driving performance in the near-term while also solidifying growth expectations for the future. The Q&A session will begin and the first question is about the company's guidance on margins for fiscal year 2024. The company's gross margin is expected to be around 70%, but there are factors such as the decline of COVID and in sourcing products that have compressed the margin rate. However, there are plans in place to improve the gross margin rate over time, especially with new launches coming in the second half of 2023 and into 2024.

The speaker discusses the company's performance and mentions that they have absorbed inflation in their costs but see opportunities for improvement. They then answer a finance question about R&D and reaffirm their financial guide. They also mention the Prevnar franchise and give some details about their fourth-generation PCV and Prevnar 20. They clarify that the Prevnar order timing issue was for the U.S. market.

The situation with Prevnar orders in the U.S. is difficult to predict due to the lumpiness of quarterly revenues and the impact of CDC orders. The pediatric business is showing growth momentum, but the adult business is facing a smaller patient population and increased competition. In international markets, the majority of business is driven by tenders, and there is still IP exclusivity in 130 markets.

In this paragraph, the speaker discusses the progress of the Prevnar vaccine in both pediatric and adult markets. They mention a positive opinion from the CHMP and the process of final approval and pricing in various markets. They also highlight the success of the adult franchise in over 30 markets and a recent recommendation from the Vaccine Technical Committee in Germany to use Prevnar 20 in older adults and at-risk populations. The fourth generation Prevnar has entered clinical studies and has a Fast Track designation from the FDA. The speaker concludes by emphasizing the unique capabilities of Pfizer's platform to address both invasive and non-invasive pneumococcal diseases.

The company has taken a $1.4 billion impairment charge associated with etrasimod, a product with potential peak sales of over $1 billion. The company expects growth in the pediatric market for Prevnar and plans to expand its exclusivity to 20 countries. The company is also working on a fourth generation polyvalent vaccine. In terms of other products, the company is seeing success with Abrysvo and expects to capture a similar market share to last year.

The speaker discusses the multiple indications attributed to a certain medication and the financial impact it had in the quarter. They also mention that there is still ongoing work to support the asset clinically. The focus then shifts to the launch of etrasimod (VELSIPITY) and its promising value proposition for patients with moderate to severe ulcerative colitis. They mention the need for an oral option and the strong benefit-risk profile of the medication. However, they acknowledge that it takes time to gain broad national access for immuno-inflammatory products. The speaker also briefly mentions the launch of Abrysvo, both for adults and in maternal care.

The speaker discusses the success of the adult vaccine market, stating that they are focused on improving their share in retail contracts and exploring opportunities in non-retail settings. They also mention the success of their maternal vaccine, which is the first to prevent infants from birth to six months. They are encouraged by the label and believe it will help grow this segment. In regards to Comirnaty sales, the speaker notes that it exceeded expectations and there were no one-time benefits. They also mention that Danuglipron was not mentioned in the PR or prepared remarks, but ask about the progress of the once-daily PK trial and the next steps.

The company has a program for Danuglipron with ongoing experiments and will only provide updates when data is available. The focus is now on Comirnaty outside the U.S., where there are restrictions on vaccination guidelines and contracts with various countries have been signed. The company expects a continuation of the current vaccination rates and potential growth through co-administration with flu vaccines. The self-pattern of Comirnaty is evolving towards a seasonal pattern, with a strong Q4 like flu vaccinations.

The speaker discusses the expectations for 2024 and mentions confusion in the financial community about higher Q1, Q2. They also address a question about Pfizer's potential bid for Cerevel and reaffirm their capital allocation strategy. Aamir is then asked a question about Eliquis being on the initial list of 10 drugs for IRA.

Aamir Malik, Pfizer's Chief Business Officer, is unable to comment on the ongoing price-setting process and negotiations for Eliquis in Part D that will begin in January 2026. He explains that the process is new and complicated, and the company is still understanding it. He also mentions that they will try to provide more details as soon as possible and practical. In response to a question about key products in Pfizer's commercial focus, Malik does not provide specific examples. Mikael Dolsten, Pfizer's Chief Scientific Officer, does not have any additional comments.

Aamir Malik discusses his role as the leader of commercial execution for Pfizer in the US and his focus on execution excellence. He mentions the strong brands in their portfolio such as VYNDA, Eliquis, and Prevnar, and their plan to defend and grow these brands. He also acknowledges the challenges of competing in highly competitive markets and emphasizes the importance of prioritizing actions to grow each brand. The main resources they will be using are their field force, advertising and promotion budget, and medical capabilities.

The management team is focused on opportunities for growth in core franchises and new launches, such as Abrysvo, Nurtec, Litfulo, Sabinko, and Oxbryta. The top four international markets, China, Japan, Germany, and France, will be a priority for growth with improved return on investment. The top 15 countries represent 70% of the total international market and plans are being made to target specific drivers of growth in each market, taking into account their unique dynamics. For example, in Japan, increasing the diagnosis rate for Vyndaqel is a priority.

The company is focused on executing their plan to increase diagnosis rates and sales for their products, particularly in Germany and China. They have identified a large opportunity in the Chinese market for their lung cancer drug LORBRENA and are developing a plan to quickly get it to patients who could benefit. In the US, the company's priority is continuity of business and flawless execution, with a focus on launching new products and improving access and awareness for existing ones.

The executives of Pfizer discussed the company's sales and future plans for its products. They mentioned the positive recommendation for PCB 20 in Europe and the potential for a new fourth generation of the product with improved coverage. They also discussed the importance of maintaining coverage for diseases like pneumonia and the uniqueness of Pfizer's platform compared to competitors. A question was then asked by a representative from Bank of America.

Geoff Meacham asks Pfizer CEO Albert Bourla about the company's oncology franchise and its potential for growth. Bourla mentions the $10 billion revenue target for the franchise by 2030 and the strength of Pfizer's pipeline in oncology. He also asks Chris Boshoff to comment on the company's R&D strategy in oncology, which includes small molecules, bispecifics, ADCs, and allogeneic CAR T cells.

The company is focusing on three modalities for potential combinations, including small molecules, ADCs, and bispecifics. The next question is about the trends in market share and pricing for Nurtec, the company's migraine medication. The company's CEO and a representative from the migraine franchise discuss the encouraging growth in Q4 for Nurtec, with a 30% increase in sales. Nurtec remains the number one prescribed CGRP and has a high pills per Rx rate. While there is still unmet need in the market, it is also a competitive category with other migraine medications. The company does not comment on specific pricing strategies of competitors.

The speaker discusses the company's focus on Nurtec, including improving patient engagement and activation, targeting relevant writers, and enhancing patient access and experience. They also mention ZAVZPRET as a potential complement to Nurtec. In response to a question about Danuglipron, the speaker declines to provide an update, citing the complexity of the ongoing experiments. They also decline to disclose the mechanism of action for a new weight loss agent.

The speaker apologizes for not being able to offer much information on competition at this time, and expects to have more information mid-year. The next speaker asks two questions, one about gross margin and one about a specific drug. The first speaker defers to the second speaker to answer the question about the drug, and then briefly discusses the expected gross margin for 2024, which is in the low 70s due to the decrease in fixed overhead costs as COVID cases decrease.

The company is in the process of in-sourcing products that were acquired in recent years, which has temporarily lowered gross margins but presents an opportunity for improvement in the future. New launches also initially have lower yields and performance, providing room for growth. The company has also absorbed inflation, which can be addressed in the coming years. The production of Comirnaty and Paxlovid, the company's major products, does not affect the margins of other products. The company is maintaining its production capacity despite a decrease in COVID-related revenues. The company's recent acquisitions did not have their own manufacturing facilities.

The company has outsourced many of its operations, which is more expensive than doing them in-house. It takes three years to bring manufacturing back in-house, but it will help reduce margins. The company has also taken on a lot of new loans to build infrastructure for new products, which will eventually lead to higher revenues and improved margins. The recovery of margins will be gradual, and the company's target is mid- to high 30% operating margins, with a slight adjustment for the shared gross margin of the vaccine program.

The speaker discusses the company's medium-term margin profile and growth aspirations. They state that the company has already invested heavily and now it is an execution and improvement story going forward. The higher the revenue, the better the margin performance. They also mention that their current focus is on executing their plan, supporting dividend growth, and deleveraging, with a priority on their investment in oncology.

The company plans to focus on investing in its oncology franchise and other areas such as vaccines, metabolic diseases, immuno-inflammation, and antivirals. They expect to announce the date for Abrysvo in the second quarter and are also starting Phase 3 trials for B6A in lung and CDK4 in breast. They are continuing to gather data on RSV and how the vaccine can be used.

The speaker discusses upcoming clinical trial results and expansion in traditional age groups. They mention several studies and their expected completion dates, as well as potential interim results. The next question asks about the company's previous goal of reaching $25 billion in revenues by 2030 through M&A, and the speaker's current wish list for potential business development opportunities. They also touch on the current state of the FTC and its impact on the industry.

Aamir Malik, Pfizer's CFO, responds to a question about the company's $25 billion goal for M&A deals by stating that the goal is for 2030 and there is still time to achieve it. He also mentions the company's focus on delivering value from their launches and current deals. He declines to comment on the FTC's actions but expresses confidence in Pfizer's relationship with regulators. He also addresses a question about the Prevnar franchise and discusses the impairment charge and the franchise's growth prospects.

Albert Bourla is asked about the expectations for investors regarding the competition from Merck and the shrinking of the U.S. pool. He defers to Aamir and states that they do not comment on the Street's expectations. He mentions that the adult market is not a big growth area for them and that the pediatric market is the bigger opportunity. The last question comes from Evan Seigerman who asks about the additional $25 billion in revenue by 2030 and Oxbryta's performance in sickle cell disease.

Pfizer CEO Albert Bourla discusses the company's acquisition of Seagen and their plans to speed up the distribution of a new drug to areas impacted by disease. He notes that the company expects to receive $10 billion from Seagen by 2030, and recent developments in the field have reinforced their confidence in this number. He also mentions that Seagen has made significant advances in their products, and Pfizer remains confident in their $10 billion target. Regarding Oxbryta, Pfizer's Aamir Malik states that they are pleased with its performance in the U.S. market.

The company is optimistic about their recent acquisition and the potential for growth in the U.S. and internationally. They have made investments in customer-facing teams and have seen solid prescription trends. They are also excited about the potential for GBT601 to bring additional value. The CEO also mentions improved confidence in their projections for 2030 due to new data on GBT601. Overall, the company is optimistic about the future and expects to see growth and success in the upcoming year.

In this paragraph, the speaker discusses the company's five key priorities for the year and emphasizes the importance of execution. They mention their successful execution of COVID strategies and plans to continue this level of excellence in other areas such as oncology and pipeline development. The speaker also mentions cost realignment and improving gross margin, as well as maximizing value for shareholders through smart capital allocation. They express confidence in their team and invite a follow-up meeting in three months to track progress. The call then concludes.

This summary was generated with AI and may contain some inaccuracies.