Pfizer, Inc.

Good day, everyone, and welcome to Pfizer's first quarter 2019 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 first quarter 2019 performance and 2019 financial guidance. I'm joined today by our CEO, Albert Borla, Frank D'Amelio, our CFO, Michael Dolston, President of Worldwide Research and Development, Angela Long, Group President, Pfizer Biopharmaceuticals Group, John Young, our Chief Commercial Officer, and Doug Lankler, General Counsel. The slides that will be presented on this call were posted to our website earlier this morning and are available at Pfizer.com forward slash investors. We'll see here that slide three covers our legal disclosures. Albert and Frank will now make prepared remarks, and then we'll 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. It's been a busy and productive first few months as CEO. I've had the pleasure of meeting with many of you to discuss Pfizer's long-term growth prospects. I have also met with thousands of colleagues from around the world, all of whom are committed to driving sustainable growth through scientific and commercial innovation. Value-creating capital allocation and a renewed focus on our purpose. Breakthroughs that change patients' lives. I'm pleased to report that we began the year with a strong first quarter. Revenues were up 5% operationally, company-wide. This was driven by 8% volume growth, offset by a net pricing decline of 3%. If we look at our biopharmaceuticals group, which represented 70% of our revenue base this quarter, we generated a strong 11% volume growth and realized a net pricing decline of 3%. We saw volume growth in several key brands, emerging markets, and biosimilars, and we got our AppZone business up and running. Let's begin with the results from the biopharmaceuticals group. This business grew its top line 7% operationally, due primarily to the continued strength of several key brands, including Eliquis, Ibrans, Provenor 13, and Zeltzins. Eliquis had a strong start to the year, growing its revenues by 36% operationally in the quarter. Eliquis continues to extend its leadership in many major geographies around the world, and in the U.S., we achieved an all-time high prescription share for the brand this quarter. We remain pleased with the performance of iBrands. Global revenues in the first quarter increased 25% operationally to $1.1 billion. As you know, the eye branch growth story is now predominantly in international markets, where we saw 107% operational growth in the quarter. This was driven by continued strong uptake in developed Europe, Japan, and certain emerging markets. In the U.S., we saw 2% growth, which reflected continued moderating volumes in approved metastatic breast cancer indications. Prevenor 13 revenues increased 10% operationally. We saw 31% operational growth in emerging markets, due primarily to favorable overall impact and increased volume associated with government purchases. These gains were partially offset by the non-recurrence of volumes associated with an adult national immunization program in the first quarter of 2018. We saw 6% growth in the U.S., driven by increased government purchases for the pediatric indication, partially offset by lower sales of the adult indication. Regarding the upcoming ACIP meeting in the U.S., we continue to believe that maintaining the current AIDS-based recommendation for adults would prevent numerous cases of pneumococcal pneumonia, as well as the related hospitalizations and outpatient treatments. Zeldens continues to perform well. Revenues in the quarter increased 34 percent operationally to $423 million. Volume growth in the U.S. was strong, aided by the recent addition of new indications. we are in the early days for both launches, 6% of the 38% volume growth in the U.S. came from psoriatic arthritis, and 7% came from ulcerative colitis. So 30% of the total volume growth came from new indications. We look forward to these new indications potentially becoming even more meaningful contributors in the future. For extending Alliance revenues in the U.S. grew 6% operationally to $168 million. We believe our broad labeled indication, as well as the potential for new indications, represent a major opportunity to make a significant impact on patients' lives and change the standard of care in prostate cancer. Revenues from our biosimilars portfolio grew 7% operationally in the quarter. We received regulatory approvals during the quarter for two oncology biosimilars, and we see the potential for additional approvals in key markets later this year. In sterile injectables, manufacturing supply constraints continue to impact our top line in the U.S., We have made some progress towards fixing these issues, particularly since Frank D'Amelio assumed responsibility for our global supply organization on November 1, 2018. We expect these issues to be significantly improved by the end of 2019 and continue to expect this business to be a solid growth contributor in the future. our up-to-business revenues grew 1% operational in the quarter. Emerging markets were the primary driver, including strong, volume-driven operational growth in China for such branches as Lipitor, Norvasc, and Celebrex. These gains were partially offset by lower revenues for Viagra and Pfizer's authorized generic for Viagra in the U.S., and for Greenstone, Abzone's authorized generic subsidiary, primarily due to continued industry-wide pricing challenges in the U.S. generic space. With its streamlined operating structure, relative autonomy, and its leadership located in China, we believe Abzone will help us seize the tremendous opportunity we see in emerging markets. As the global middle class continues to rapidly expand, and as awareness and diagnosis and treatment options continue to improve, we believe the pharmaceutical segment will continue to enjoy significant expansion in greater China and other emerging markets. Pfizer's consumer healthcare revenues were down 2% operationally in the quarter, This reflected an 8% decline in the U.S., due in part to a milder-than-expected cold and cough season. This decline was partially offset by 4% operational growth in international markets. Turning now to R&D, today we released our latest pipeline update, which you can see on this slide. We are very encouraged by our pipelines. both in terms of the breadth of opportunities and the science. And while we have said that we expect our 2019 adjusted EPS to be essentially flat operationally compared with last year due to the Lyrica LOE, we believe a look at our pipeline will help bring our expected post-Lyrica growth drivers into clearer focus. Since the beginning of 2019, we have already received five approvals. EU approvals for Zirabev, a biosimilar to Avastin, for treatment of multiple forms of advanced or metastatic cancer. And for Vizimpro, for locally advanced or metastatic non-small cell lung cancer in adults. In the US, we received FDA approval for Trasimera, a biosimilar to Herceptin, for the treatment of certain forms of breast and gastric cancer. And for Ibrans, for the previously underserved male breast cancer population. The Ibrans line extension marks the first time a Pfizer medicine has received an expanded indication based on real-world evidence. And in Japan, we received approval for Tafamidis for the treatment of ATTR cardiomyopathy. As you can see in this next slide, we have a diverse range of assets spanning from Phase II through registration, and they cut across each of our areas of focus. Overall, We are thrilled with the depth and breadth of our pipeline, as we are not overly reliant on a single pipeline opportunity. As you know, we announced our up to 15 in 5 cohort almost two years ago. I'm pleased to share that we are making good progress, despite experiencing some attrition, which is to be expected. Let me touch on just a few of the recent and upcoming milestones. I'll start with oncology. Data from our Javelin renal 101 trial showed that the combination of Baventio and Enlyta significantly extended median PFS by more than five months compared with SUTENT as a first-line treatment for patients with advanced renal cell carcinoma. We have filed this data with the FDA with a PDUFA date in June. With K-truda plus Enlita having been approved earlier this month, Bavencio will become the second Enlita combination available to patients with advanced RCC. We are preparing to submit our extended ARCHES data in hormone-sensitive prostate cancer in the coming months. And in 2020, we expect to have data from a Phase III EMBARQ trial studying Xtandi for high-risk hormone-sensitive prostate cancer, as well as from two Phase III trials evaluating IBRANS in early-stage breast cancer. We recently presented data from Phase 2 study of our 20-valent pneumococcal conjugate vaccine candidate for adults aged 18 years and older. We are now in Phase 3, and if the data is supportive, we expect to file by the end of 2020. We also expect Phase 2 data from the infant studies later this year. Our Phase III C. difficile vaccine study is now fully enrolled, with pivotal data expected next year. In inflammation and immunology, we expect our first Phase III data redoubts in May for our JAK1 inhibitor in atopic dermatitis, as well as additional redoubts in the second half of the year. Our JAK3 inhibitor for moderate to severe alopecia areata, which started a phase 2b3 trial in December, have also received breakthrough therapy designation, and the pivotal redoubt is expected in the second half of 2021. In internal medicine, on April 18, we announced the results of the long-term osteoarthritis study for tenizumab. As we stated in the press release, we are analyzing these findings in the context of the recent phase three results as we assess potential next steps for this medicine. We plan to review the totality of data from our clinical development program for Tanizumab with regulatory authorities. While we are very focused on continuing to advance our Up to 15 in 5 cohort, I also want to provide an update on some of the exciting areas in earlier stages of development that we are pursuing. These areas combine novel science and significant unmet medical needs. You can see several areas on the chart, but today I will highlight three from the rare diseases space. Earlier this month, along with our partner Sangamo Therapeutics, Pfizer announced interim data from a Phase I-II study indicating that SB525 was generally well-related and demonstrated a dose-dependent increase in factor VIII levels across the four dosage cohorts, in hemophilia A patients. Based on these results, the safety monitoring committee recommended cohort expansion at the high dose. In March, Pfizer acquired a 15% equity interest in Vivet Therapeutics, a privately held company dedicated to developing gene therapy treatments for inherited liver disorders. Pfizer and Vivet will collaborate on the development of VTX801, Vivet's proprietary candidate for the treatment of Wilson disease. At the upcoming PPMD annual conference in June, we expect to report data on our investigational mini-dystrophin gene therapy candidate for Ducene muscular dystrophy. We will continue to explore both internal and external opportunities for the next generation of breakthroughs. At Pfizer, we are keenly aware that the breakthroughs coming out of our pipeline won't mean anything if people can't afford them. That's why we continue to work with policymakers, payers, providers, and other participants in the healthcare system to find solutions to patients' unfortability. If you haven't already seen it, I would encourage you to read my testimony from the February 26th Senate Finance Committee hearing on affordable access to medicines. It outlines four proposals that we believe will drive meaningful reductions in costs for patients. In summary, Pfizer is off to a very good start in 2019. We deliver strong financial performance while reaching millions of people around the world with our medicines and vaccines. Our new commercial structure is designed to maximize today's revenue growth opportunities while transitioning the company to a period post-2020 where we expect a higher and more sustained revenue growth profile. We remain focused on executing on our commercial strategies, managing expenses, advancing our pipeline, and prudently allocating our capital to position Pfizer for sustainable success. And now, I will turn it over to Frank to provide details on the quarter and our outlook for 2019.