The operator welcomes everyone to Pfizer's First Quarter 2024 Earnings Conference Call and introduces the Chief Investor Relations Officer, Francesca DeMartino. She thanks everyone for joining and introduces the CEO, CFO, and other executives who will be speaking. She reminds listeners of the forward-looking statements and non-GAAP financial measures that will be discussed. The CEO, Albert Bourla, thanks everyone for joining and begins his remarks.

The first quarter of the year was a strong start for Pfizer, with a focus on patients and delivering a solid performance in their non-COVID product portfolio. They are proud of their global impact and will continue to prioritize their five strategic priorities, including achieving oncology leadership and maximizing pipeline innovation. They have made notable progress in each area, including a successful Oncology Innovation Day in February.

The newly combined team of Pfizer and Seagen has a strong mix of experienced and talented oncology leaders. In the first quarter of 2024, their oncology revenues grew 19% driven by the acquisition of four in-line products and strong launches of Padcev, Xtandi, and Lorbrena. Tivdak was also recently approved by the FDA for the treatment of recurrent or metastatic cervical cancer. The company is guided by a strategy to make a difference for cancer patients and has set goals to double the number of patients treated with their medicines, increase the number of blockbuster medicines, and drive an anticipated tenfold increase in revenue from biologics by 2030.

In this paragraph, the company discusses their progress in delivering new pipeline innovation, specifically in the field of Oncology. They mention three pivotal Phase 3 study starts and upcoming presentations at a major conference. They also mention their focus on key value drivers in respiratory and hematology portfolios, with updates on their RSV vaccine for adults. The company believes this vaccine has the potential to be the first and only one for adults 18 years and older.

Pfizer's hematology division is a top priority and they have made significant progress, including receiving FDA approval for a gene therapy for hemophilia B and starting a Phase 3 study for a potential breakthrough treatment for sickle cell disease. They are also focused on maximizing the performance of their new products, with a strong emphasis on their oncology products. They have several potential growth drivers for the coming years, including a differentiated product for RSV and opportunities for market growth and increased market share.

The company is enthusiastic about the potential of Nurtec to help people with migraine and will focus on reducing access barriers and educating healthcare professionals and patients. They will also continue to educate about the importance of proactive treatment for sickle cell disease and ensure patient access for Velsipity and Litfulo. The company is also working on protecting and growing their core brands and key blockbusters. They are making progress in executing their five strategic priorities and are cautiously optimistic about the year ahead. They have raised their outlook for 2024 adjusted earnings per share and have confidence in their company.

The speaker, Dave, discusses the company's financial performance in the first quarter, highlighting a solid start despite the challenges of a post-COVID environment. Revenues were $14.9 billion, with a decline of 19% due to the impact of COVID products. However, the company expects these products to continue contributing to revenues and cashflows in the future. Dave also mentions the company's focus on improving shareholder returns and outlines their 2024 financial guidance and priorities for the rest of the year.

The company's performance in the first quarter was positively impacted by a renewed focus on key products and markets, as well as better allocation of resources. The acquisition of Seagen products and strong sales of in-line products also contributed to growth. However, lower demand for Ibrance and Sulperazon in China dampened overall growth. Adjusted gross margin improved due to favorable sales mix, a product return adjustment, and cost management. The company remains focused on improving gross margin. Adjusted operating expenses increased slightly, but the company is on track to meet its cost savings target. Marketing expenses for new products increased, while expenses for Paxlovid and Comirnaty decreased. R&D spending was prioritized to support growth and enhance returns.

In the first quarter, the company saw a slight decline in spending due to cost realignment and decreased spending on certain programs, but also increased investments for assets acquired from Seagen. Diluted earnings per share were $0.55, but adjusted EPS was $0.82 due to favorable gross margin performance and cost management. The company recorded a favorable adjustment to revenues of $771 million for Paxlovid, contributing $0.11 to EPS. The company's capital allocation strategy includes maintaining and growing dividends, reinvesting in the business, and making value-enhancing share repurchases. $2.4 billion was returned to shareholders through dividends, $2.5 billion was invested in R&D, and minimal business development activity was completed in the quarter. The company is committed to de-levering its capital structure and paid down $1.25 billion in maturing debt during the quarter, with plans to pay down another $1 billion in May.

During the quarter, the company reduced its equity stake in Haleon through a $3.5 billion sale. The company expects lower operating cash flows in the next few quarters but plans to return to a balanced capital allocation strategy. The company has modestly updated its earnings outlook for the year, raising the adjusted diluted earnings per share guidance range by $0.10. Revenues are expected to be between $58.5 billion to $61.5 billion, with the majority of Comirnaty sales occurring in the second half of the year. The company is also on track to achieve $4 billion in net savings from its cost-realignment program by the end of the year.

The company is focused on improving its cost base to increase margins and improve financial returns. They have made significant investments for growth in the future and are encouraged by the long-term outlook. 2024 is a year of focus and execution to deliver on financial commitments. The company is committed to enhancing shareholder value and will begin a Q&A session. The RSV vaccine sales had a downtick in the first quarter, possibly due to seasonal trends, but the company's performance was in line with expectations. The market for older adults has been declining steadily since January. The company is also registering and approving the product in international markets.

The company is well positioned for the fall season due to progress in retail contracting and strength in the non-retail channel. The company's share in non-retail has doubled and they have a new presentation of Aptivil and potential label expansion for Abrysvo. On the international front, the company has made progress with Abrysvo, receiving recommendations in several markets.

Pfizer has made good progress in terms of regulatory approvals for its vaccines for older adults and maternal immunization in Japan and Saudi Arabia. This progress may not immediately translate to financial gains, but there is a significant opportunity to address medical needs in the international market, such as reducing hospitalizations for respiratory infections in infants. The company sees great potential for its Abrizo vaccine, which is the only maternal vaccine that can protect infants from RSV infections from birth to six months. There is no new update on Danuglipron, and Pfizer will make decisions about its future plans after analyzing data from mid-year. There is no news on the potential impact of the Part D redesign in 2025, and Pfizer will provide updates on its plans for obesity treatment when there is more information available.

Aamir Malik from Pfizer discusses the potential impact of Part D redesign on their business, including positive changes such as no cost sharing on vaccines and better access for patients. However, they are not offering specific guidance on the direct impact on their business in 2025 due to ongoing changes and implementation. The next question is about the patent life of tafamidis and the possibility of Seagen becoming accretive to Pfizer earnings next year.

During the conference call, the executives discussed the financial performance of the Seagen portfolio and their expectations for its future growth. David Denton stated that they are cautiously optimistic about the business and are committed to their established financial metrics. Chris Boshoff added that they have seen significant growth in the Padcev product and have received important endorsements. Doug Lankler mentioned that they have pending patent term extensions for Vyndaqel and Vyndamax in the US and that their patents will expire in 2026 in major European markets.

The speaker discusses patent and regulatory exclusivity for a product in Japan, and then a question is asked about the company's gross margin. The company responds that they are always looking to improve their gross margin and that their cost control has been strong. They also mention that the mix of their products will change in the back half of the year, putting pressure on their gross margin. Another question is asked about two newer growth drivers, NURTEC and Comirnaty, and the company responds that NURTEC came in a bit lighter than expected due to gross to net impact in the first quarter.

The speaker is responding to a question about the performance of Nurtec and the decision to remove Orexo from the list of key growth drivers. They mention that Nurtec had strong demand and market leadership within its class, but the performance in the quarter was impacted by gross to net issues. They explain that this is a common trend in the first quarter and was also affected by payer mix. They also mention taking steps to accelerate the momentum of Nurtec.

In the first quarter, there was an unfavorable adjustment to the company's GTNs. However, for the rest of the year, they expect continued growth for NURTEC due to strong fundamentals and changes in commercial execution. Although not listed as an immediate growth driver, Orexo is expected to become a major driver for oncology in the future with promising efficacy data and ongoing studies. The company remains optimistic about its current and future indications for Orexo.

The paragraph discusses the progress and potential of Orexo, a product recently approved in various international markets. The company has gained favorable positions on reimbursement pathways and has seen early access in some markets due to the exceptional clinical profile of the product. The company is now focused on reimbursement discussions and introducing the product later in the year. There is a gap between approval and access in most markets, but Orexo has seen early access due to its unique profile. The company is optimistic about the product's potential based on positive opinions from key opinion leaders.

During a conference call, Dave Risinger asked two questions. The first was about Pfizer's cost structure and if it had bottomed out in the first quarter or if there were more cost reductions planned. The second was about Vyndaqel, specifically the potential for patent term extensions in the US and EU. Dave Denton answered the first question, stating that the cost changes in the US were largely complete and there would be some changes in the ex-US market. Albert Bourla added that cost reduction is a constant focus for the company. Doug clarified that the patent term extension could potentially extend the US date beyond December 28 and the EU date beyond November 26.

The company is expecting to receive a patent term extension for Vyndaqel and Vyndamax, which would extend their patent until December 2028. They may also file additional extensions to take it out to the same date. The next question was about the upcoming ACIP meeting and the company's expectations for the 50 to 59 population recommendation. They clarified that they are not changing their $3 billion guide for PAX sales, but they did not expect the final adjustment that was made. They are cautiously optimistic about the utilization of Paxlovid and their products for the full year.

The speaker discusses the impact of infection rates on product trends and expresses optimism for achieving their objectives. They also mention positive data for their RSV vaccine and the upcoming FDA filing. They note that ACIP typically waits for FDA approval before making recommendations, but they are open to sharing data that could be helpful for ACIP's decision-making process. The speaker concludes by stating that they cannot speak for ACIP and that they hope to present data in June.

The speaker explains that the company has prepared marketing and commercial plans in the U.S. and other countries to maximize approvals and recommendations for their products. They are cautiously optimistic about revenues, margins, and EPS, but also acknowledge the need for caution due to the misalignment of expectations and actual results from the previous year. They prioritize achieving their projections over making bold statements. The next question is about gross margin and the speaker clarifies that recent acquisitions and new launches were a drag on gross margin in 1Q, but the full year margin may be higher than the guidance of 70%. The second question is about one-offs that may have affected the 1Q margin, and the speaker asks for clarification from both the speaker and Albert.

David Denton, speaking on behalf of Pfizer, addressed two questions in the paragraph. The first question was whether there is potential for significant monetization of excess manufacturing capacity from over the years, and Denton explained that they are focused on improving gross margin performance and that in-sourcing and new product launches are expected to positively impact this. However, the ramp up of Comirnaty sales in the back half of the year will likely dampen gross margin performance. The second question was about Pfizer's capital allocation and Denton reiterated that their top priority is supporting and growing their dividend, but they are also looking at ways to capitalize on their assets, including potentially monetizing some of them. Pfizer CEO Albert Bourla thanked Denton for his response.

The speaker reiterates the importance of the dividend and assures that the company's focus on maximizing return on capital does not conflict with their commitment to the dividend. They will explore opportunities to support the business, but not at the expense of the dividend. The question then shifts to the potential impact of the Seagen integration and the company's priorities for capital allocation.

The company had been planning for months to ensure a smooth integration of Pfizer and Seagen. They completed cross-training for their commercial teams in January and have seen positive results in breast cancer and hematology. There has been good retention of colleagues and enthusiasm from healthcare providers and patients due to groundbreaking data. The company is confident in the continued growth of Padcev and is starting new Phase 3 studies. The CEO is closely monitoring the progress and is impressed with the positive impact on both Pfizer and Seagen. There is also progress in earlier stages with a lot of new clinical trials.

The paragraph discusses the progress made by Pfizer in their commercial and integration efforts. There has been stabilization for Ibrance and high growth of Seagen assets. Challenges are expected during the integration process, but the company has a strong team and is off to a good start. The first priority for capital allocation is to support the dividend and delever the balance sheet. In terms of the breast cancer franchise, the company has pivotal data expected later this year and will make decisions based on these data for potential Phase 3 trials.

The speaker highlights the success of Ibrance and the potential of two new programs, Vebdegastrand and Atirmociclib. They plan to conduct additional studies and are encouraged by the safety profile and response rates. They are confident in accelerating CDK4 into registration strategy. When asked about the impact of IRA on 2025, they mention ongoing contracting discussions and the multiyear process of improving operating margin, but do not provide a timeline for when they will have more information.

During a Q&A session, Albert Bourla, CEO of Pfizer, and Aamir Malik, CFO of Pfizer, addressed questions about the impact of the IRA (Inflationary Rebase Adjustment) on their business in 2025. They stated that they will have more clarity on the situation later this year and will share updates in September. They also mentioned that their alliance partner, BMS, is currently negotiating the impact of the IRA on Eliquis. David Denton, CFO of Pfizer, added that they are working on offsetting any potential negative effects through improving their cost structure. Bourla also mentioned that there will be pressure on pricing due to contributions to the pharmaceutical industry and changes in out-of-pocket dynamics.

The speaker believes that the new law will lead to increased work uptake for everyone, as high out-of-pocket costs at the pharmacy level often lead to abandonment of medication. They are not concerned about the industry contributing to out-of-pocket payments as long as patients are paying less. However, they are concerned about mandatory cost reductions for biologics and small molecules, but are fortunate to have exposure to vaccines which are not affected by cost sharing. Only one of their products was selected for mandatory cost reduction in 2026, but they are unsure of the impact it will have. They are also worried about the potential inclusion of other products in the future, such as Ibrance and XTANDI, which are approaching their LOE.

The speaker explains that the MPV risk in the IRA is not significant and will only impact prices for a short period of time. They acknowledge that this is not ideal for the industry and will do their best to defend against it. The next question is about gross margin and the speaker clarifies that it will be closer to 70% instead of the previously expected 80%, but it is unlikely to drop below 70% in any quarter. The mix of sales, specifically in the vaccine portfolio, will affect the gross margin rate, and the lower sales volume of Comirnaty in Q1 compared to last year's Q1 had a significant impact on the gross margin.

The speaker discusses the impact of Paxlovid on the gross margin rate in Q1 and emphasizes the strong demand for the product. They also highlight the successful execution of the new go-to-market approach for Paxlovid and the smooth transition to commercial plans with low co-payments. They mention the difference in price levels for Medicare and commercial plans, and how this will change next year. In response to a question, they also mention their thoughts on the pneumococcal vaccine market, particularly for adult and pediatric vaccines, and the competition in these categories.

Aamir Malik, in response to a question about Pfizer's performance and competition, discussed the adult market contraction and the company's strong growth in the pediatric market. He also mentioned the upcoming competitor V116 and stated that Pfizer will not speculate on the regulatory outcomes or recommendations for this product.

The company has strategies in place to protect their business in the adult segment, including a portfolio approach to contracting and focusing on growth in pediatrics. They also prioritize engaging and activating consumers, such as through the VaxAssist program. In international markets, they have achieved key milestones for their Prevnar 20 and 30 franchises.

Pfizer's exclusive NIP status in 130 markets will allow them to build on their success. They are still in the process of getting VTC recommendation in most European markets, but have seen a nice pickup in Germany and France due to extended population coverage for Prevnar 20. They anticipate similar success in the adult market as well. When asked about the cadence of margin improvement, Dave stated that it is a multiyear journey and will not have a significant impact on 2024, but more so on 2025 and 2026.

The speaker, Aamir Malik, provides updates on the progress of Abrysvo and Vyndaqel. He mentions that they are still in the process of contracting and will share more details later. Vyndaqel had a strong quarter with a 96% increase in sales compared to last year and a 41% increase compared to last quarter. This was due to a combination of factors, including purchasing patterns and efforts to ensure a smooth re-enrollment process for patients. The fundamentals of the drug, such as diagnosis rates and demand, are also strong.

In paragraph 37, the Pfizer executives discuss the company's strong performance with their drug Vyndaqel and their plans to continue commercial efforts to identify more patients. They also mention the potential for growth in international markets. The next question asks about upcoming pipeline readouts that excite the executives, to which they mention the potential approval for Marstacimab for hemophilia A and B as a key opportunity for growth in their hematology franchise.

The DMD gene has received Breakthrough Designation RMAT and there are upcoming readouts for the COVID/flu combination vaccine, Ponsegromab cachexia, and Lorbrenla. There are also two other important readouts for Breakwater and VERATEC-2. There is interest in obesity at Pfizer, but the outlook for danuglipron is not good and there are no current plans for bolt-ons. However, there are indications that something is moving forward in obesity at Pfizer.

Albert Bourla discusses the company's strength in the area of metabolic research and their plans to continue investing in obesity treatments. They currently have three agents in the clinic and multiple pre-clinical treatments in progress. Mikael Dolsten adds that they have a robust data for their first-generation flu mRNA vaccine and are also working on a COVID/flu combo vaccine for 18-59-year-olds. They are also developing a second-generation vaccine for those 65 and older.

The speaker concludes the call by thanking everyone for their interest and stating that they are pleased with the start of 2024. They express cautious optimism for the year ahead and confidence in executing their priorities. The speaker thanks participants and the operator and ends the call.

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