Pfizer, Inc.

Good day everyone and welcome to Pfizer's fourth quarter 2018 earnings conference call. Today's call is being recorded. At this time I would like to turn the call over to Mr. Chuck Triano, Senior Vice President of Investor Relations. Please go ahead, sir.

Good morning and thank you for joining us today to review Pfizer's fourth quarter and full year 2018 performance and 2019 financial guidance and business outlook. I'm joined today by our CEO, Albert Bourla, Frank D'Amelio, our CFO, Michael Dolston, President of Worldwide Research and Development, Angela Huang, Group President, Pfizer Biopharmaceuticals Group, John Young, our Chief Business Officer, and Doug Lankler, General Counsel. Slides that will be presented on this call can be viewed on our website, pfizer.com forward slash investors. You'll see here, that slide three covers our legal disclosures. Albert and Frank will now make prepared remarks, and then we will move to a question and answer session. With that, I'll now turn the call over to Albert Borla.

Albert? Thank you, Chuck, and good morning, everyone. During my remarks, I will speak about our performance for the year, the continued advancement of our pipeline, and the strategy we have put in place to return Pfizer to a period of sustained growth, following the impact of the Lyric LOE that will negatively impact our growth in both 2019 and 2020. Frank will then provide details regarding the fourth quarter and our 2019 financial guidance. Pfizer had another solid year in 2018. Revenues for the year were up 2% operationally. We saw continued growth in several of our biggest selling medicines and vaccines in emerging markets and in biosimilars. These increases were partially offset by the 1.7 billion in alloy impacts. as well as decreases in the legacy established product portfolio in developed markets, and in our sterile injectables portfolio, primarily due to continued legacy HOSPIRA product shortages in the U.S. I will begin with a few words regarding the performance of each of our businesses, starting with Pfizer Innovative Health. this business had another strong year, growing its top line 6% operationally, thanks to the continued strength of several key brands, including Ibrons, Eliquis, and Zeldons globally, and Provenor 13, primarily in emerging markets. I would also remind you that Viagra, transferred from PIH to PEH at the beginning of 2018. So if you exclude Viagra from the calculation, the growth would have been 9% operationally. For full year 2018, Ibram's revenues were $4.1 billion. which represented an increase of 32% operationally. While approximately 50% of eligible US patients are getting a CDK inhibitor in combination with endocrine therapy, many are still receiving endocrine monotherapy or chemotherapy. We continue to educate the oncology community about the benefits of IBRAN's therapy. We remain confident in IBRAN's leadership in the class, based on the strength of our data, significant first mover advantage, and most importantly, the continued positive patient experience with more than 200,000 patients prescribed the medicine worldwide since its launch. Our current growth driver for Iberans remains outside of the US, particularly in developed Europe and Japan. And we had another quarter of solid growth here. Iberans has achieved reimbursement in the majority of international developed markets, and despite increasing competition, has maintained greater than 90% of total CDK class volume in these key markets. For extending, alliance revenues in the U.S. were up 18%. percent for the full year. And when combined with our royalty income on ex-US sales, totaled nearly $1 billion in 2018. We are continuing to see an increased number of urologists prescribing Xtandi. And our launch of the expanded indication in non-metastatic prostate cancer in the U.S. following the July approval, made it the first and only FDA-approved oral medication for both non-metastatic and metastatic castration-resistant prostate cancer. We continued to see growth in Xtandi throughout this year. and we remain focused on demonstrating the value of moving Xtandi into earlier treatment settings. In December, along with our alliance partner, Astellas, we announced that the phase three ARCHES trial evaluating Xtandi plus ADT in men with metastatic hormone-sensitive prostate cancer met its primary endpoint, significantly improving radiographic progression-free survival versus ADT alone. These data further differentiate Xtendi from the competition, both branded and generic. We are engaging global health authorities in discussions regarding the potential of an expanded indication for Xtandi. And we remain confident that Xtandi will be one of the pillars of our currency portfolio for years to come. For this year, Zelzans had a tremendous performance, with revenues increasing 33% operationally to $1.8 billion. Our fourth quarter results continued a pattern of extremely strong performance for zelzins, with scripts up 35% compared with the prior year quarter. This was driven by continued growth in rheumatoid arthritis prescriptions, as well as increased contributions from the drugs recent expansion into psoriatic arthritis and ulcerative colitis. We look forward to these new indications becoming even more meaningful contributors in 2019, particularly in ulcerative colitis. Eliquis had another strong year with alliance revenue and direct sales growing 35% operationally to $3.4 billion. Lastly, our consumer healthcare business grew 3% operationally for the year with revenues totaling $3.6 billion. In December, we entered into a definitive agreement with GSK under which we have agreed create a new consumer healthcare joint venture. We expect the transaction to close in the second half of 2019, subject, of course, to customary closing conditions, including GSK shareholder approval and required regulatory approvals. Turning now to Pfizer Essential Health. While revenues for the year declined, we once again saw strong operational growth both in emerging markets and in our biosimilars portfolio. Emerging markets revenue for the business grew 11% operationally for the year to $7.8 billion. Some of the biggest growth drivers in emerging markets were Lipitor, Up, 19% operationally. Norvasc, up also 19% operationally. And sterile injectables, up 13% operationally. Our biosimilars business grew 41% operationally in 2018 to approximately $10 billion. We received FDA approvals for two biosimilars in 2018, and we see the potential for up to four additional approvals in 2019. PEA's growth in emerging markets and biosimilars was more than offset by lower revenues for our legacy established products portfolio in developed markets. product supply shortages in the sterile injectable business. In the U.S. sterile injectable business, manufacturing supply constraints continue to impact our top line. We expect these issues to be significantly improved by the end of 2019 and continue to expect this business to be a solid growth contributors in the future. As you are aware, as of the start of our 2019 fiscal year, Pfizer is now organized into three businesses. Pfizer Biopharmaceuticals Group, a science-based innovative medicines business led by Angela Wang. an off-patent branded and generic medicines business headquartered in China and led by Michael Gettler that is bringing 20 of our most iconic brands to more than 100 markets around the world. And our consumer healthcare business led by Chris Slager, which is preparing to become part of the joint venture I mentioned earlier. Now let me turn my attention to our R&D pipeline. This year, we saw a wave of new approvals from our pipeline, including four targeted cancer agents over the last four months of 2018. In total, we received seven key approvals in 2018, spanning both new molecular entities and line extensions, which will allow us to serve a broader patient population. In terms of the recent news, let me touch on some of the key milestones we have achieved since our third quarter call. In rare disease, NDA accepted our NDA filing for Tafamidis for the treatment of ATTR cardiomyopathy with a PDUFA date in July. As a reminder, we estimate less than 1% of ATTR cardiomyopathy patients have been diagnosed. And currently, there are no approved treatments for this disease, making it an incredibly underserved market. In oncology, we have several promising developments. We received FDA approvals for lobrina, a third-generation ALK inhibitor for lung cancer, and for durismo, for acute myeloid leukemia. In the oncology biosimilar space, we received a positive CHMP opinion for Zirabev, a potential biosimilar to Avastin. We had initiated clinical studies for a second cancer vaccine applicable in major solid tumor types. And we advanced a second CDK inhibitor or high branch resistant cancer into clinical studies. In vaccines, we started the phase three trial for our next generation, 20-valent pneumococcal conjugate vaccine for adults 18 and older. In inflammation and immunology, our ZAK3 inhibitor for moderate to severe alopecia areata, started a pivotal phase 2b3 trial. In internal medicine, Pfizer and our partner, Eli Lilly, announced this morning positive top-line results from a phase 3 study evaluating tanezumab to 2.5 milligrams or five milligram in patients with moderate to severe osteoarthritis pain. Looking ahead, we see the potential in 2019 for several inflection points that will further advance our pipeline. These include potential U.S. approvals for the combination of Bavencio and Enlyta, for first-line renal cell carcinoma, as well as for up to four biosimilars, rastuzumab, bevacizumab, rituximab, and adalimumab, which, when taken together, represent a potential blockbuster opportunity for Pfizer. We also expect Phase III readouts for Riva Pencil in single-cell disease and for our Jack Ulan in atopic dermatitis, as well as further Phase III data readouts for Tanizumab, which has the potential to address the serious unmet needs of the more than 27 million Americans living with osteoarthritis and the more than 33 million suffering chronic low back pain. Thanks to these achievements and expected milestones, we believe we are extremely well positioned for what we expect to become an era of sustained top-line growth, with leverage to the bottom-line growth rate, following the impact of the Lyrica-Eloi We view this as a significant opportunity because three very positive trends are intersecting at the same time. First, macro trends, such as an aging population and the rising middle class in emerging markets, increasing the number of people seeking access to both innovative and established medicines. Second, the continued advancement of what we believe is the best pipeline in our history, with good breadth and strong innovation. And finally, after Lyrica, we expect to enjoy the benefits of a dramatic abatement in Eloise until the second half of the next decade. Our job now is to stay the course. Take the steps necessary to pivot to growth. Our strategy for doing so can be summed up in three words. Innovating for growth. This means we must advance both scientific innovation that significantly improves current standards of care and commercial innovation that addresses patient access and affordability issues. To deliver these innovations, we have to have taken steps to ensure we have the right organizational structure in place and that our resources are focused in the right areas. To improve operational effectiveness and create capacity for value creating work, we have reorganized our operations to simplify them. We are initiating an enterprise-wide digital effort to speed up drug development, enhance patient and physician experiences and access, and leverage technology and robotics to simplify and automate our processes. And we are significantly reallocating capital across the enterprise by investing more aggressively in profitable growth drivers and reducing resources in areas of lower strategic importance. This includes significant planned reductions in indirect SNA spending, much of which will be reallocated to R&D. And within R&D, the entire increase in spending will be project related, with overhead costs actually anticipated to come down. In addition, of course, to all of this, we have the financial flexibility to continue to undertake additional shareholder-friendly capital allocation initiatives. We see a growing dividend as an important part of our investment thesis. We also have the ability to deploy capital as appropriate in other areas, whether that be share repurchases or business development initiatives. where at the current time we are focused on smaller, tuck-in type acquisitions and licensing opportunities for mid-state compounds. Of course, our business isn't without its challenges. Most significantly, we need to ensure that our innovation and risk-taking is rewarded in the marketplace. while doing all we can to ensure affordable access for patients. At this end, we continue to work with governments, policymakers, payers, and other players in the healthcare ecosystem to advocate for pro-innovation policies that benefit patients, our company, and our industry as a whole. All the steps we are taking are designed to enable us to achieve our purpose of delivering breakthroughs that change patients' lives. In summary, we see our improved growth profile coming more clearly into focus, and we believe we remain well positioned to deliver new medicines for patients prepare the company for accelerated growth in the future, and create enhanced shareholder value. I will now turn it over to Frank to provide details on the quarter and our outlook for 2019. Frank.