Pfizer, Inc.

Good day, everyone, and welcome to Pfizer's third 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 third quarter 2019 performance and updated 2019 financial guidance. I'm joined today by our CEO, Albert Borlaug. Frank D'Amelio, our CFO, Michael Dolston, President of Worldwide Research and Development, Angela Wong, Group President, Pfizer Biopharmaceuticals Group, John Young, our Chief Business 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. 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 discuss our quarterly business performance, the latest updates from our pipeline, and our plans for Pfizer following the anticipated completion of the Abzon-Milan combinations. which we continue to expect to occur in mid-2020. During the quarter, we delivered a strong performance, highlighted by 9% operational revenue growth in our Pfizer biopharmaceuticals group, which will be the business that remains at Pfizer following the anticipated closing of the Abzone transaction. We also saw revenue impacted by two expected events, the July loss of exclusivity in the U.S. for Lyrica, and the July 31st completion of the consumer healthcare joint venture transaction with GSK. For biopharmaceuticals, once again, this group's outstanding growth was driven primarily by strong performance from our key growth drivers. These include Ibrans, Xtandi, Zelsans, Eliquis, and in light, as well as 15% operational growth in emerging markets, including 42% operational growth in China. Our biopharmaceutical business in China generated higher revenues this quarter than the up-zone business in the country. Our oncology business was particularly strong, up 30% operationally compared with the year-ago quarter. Global revenues for eye brands were up 27% operationally in the quarter to $1.3 billion. We saw strong revenue growth in both U.S. and international markets. We believe the continued growth in the U.S. is the result of our efforts to target specific physicians who had not been prescribing CDK inhibitors or had prescribed them to only a small share of patients. For Xtandi, the alliance revenues in the U.S. grew 25% to $225 million. In August, the FDA granted Xtandi a priority review designation for the treatment of men with metastatic hormone-sensitive prostate cancer with a PDUFA date in December. If approved, this represents yet another potential growth driver for the brand. In lighter revenues, increased 98% operationally, $239 million. This included 240% growth in the U.S., where Enlita has benefited from recent FDA approvals for the combination of Enlita plus Baventio and Enlita plus Keytruda in first-line treatment of advanced renal cell carcinoma patients. Beyond oncology, we had several other strong product performances. Global revenues for Zeltzans were up 40 percent operationally to $599 million. We saw continued volume growth in the rheumatoid arthritis indication, and the recent launches for psoriatic arthritis in the U.S. and for ulcerative colitis in both the U.S. and certain other developed markets also significantly contributed to the growth. Eliquis also continued to perform well. Global revenues were up 20% operationally to $1 billion. This growth was driven primarily by continued increased adoption in non-varvular atrial fibrillation, as well as oral anticoagulant market share gains. Looking at our rare diseases business, ventricle continues to ramp up nicely in the U.S., following the May 2019 approval and launch. Our early disease awareness efforts have helped drive the diagnosis rates to greater than 4 percent in the quarter, compared with 1 percent prior to launch. As of end of August, approximately 4,100 patients had been diagnosed, approximately 2,600 patients had received the prescription for ventricle, and approximately 1,300 patients had received the drug. This number does not include the early access program. If you include this, the number of patients receiving the drug increases to approximately 1,500. Regarding Prevnar 13, revenues were down slightly across the global franchise. ACIP's updated recommendation in the U.S. for the vaccine for adults 65 and older, which is not effective until the publication of the morbidity and mortality weekly report, reinforces that Prevenor 13 is considered safe and effective by both the FDA and ACIP. We look forward to successfully completing the phase three studies for our investigational 20-valent pneumococcal conjugate vaccine candidate. This candidate represents a potential significant advantage compared with a potential 15-valent by introducing all serotypes contained in PC15 plus five additional serotypes. In sterile injectables, we are seeing our focus on manufacturing recovery taking shape. Global revenues increased 3% operationally, and U.S. revenues increased 1% operationally. We continue to expect this business to be a solid growth contributor in the future. Now let me move it to AppZone. Revenues for our AppZone business were down 26% operationally in the quarter. The decline was driven primarily by the expected significant volume declines in Lyrica in the U.S., due to multi-source generic competition that began in July 2019. Excluding the Lyrica impact, the decline would have been only 6% operationally. Abjon's China revenues increased 2% operationally, despite the volume-based procurement program in the 11 cities. Given this, we now expect Abjon's full-year 2019 revenues in China to grow by mid to high single digits compared with full year 2018, instead of low to mid single digits that we had predicted in our previous earnings goal. Consumer health care. The third quarter, 2019, revenues totaled $377 million, down 54% operationally, reflecting the July 31st 2019 completion of the consumer healthcare joint venture transaction with GSK. Turning now to R&D, we continue to be excited with the progress we are making with our pipeline, both in terms of the breadth of opportunities and the depth of the science. Since our last earnings call on July 29th, we had seen some exciting milestones. In vaccines, We announced positive preliminary results from a proof-of-concept phase two study of our investigational 20-valent pneumococcal conjugate vaccine under investigation for the prevention of invasive disease and otitis media in healthy infants. Once data with the fourth dose are available, we intend to discuss phase three plans with regulators. We also have completed enrollment in our three phase three pivotal clinical trials, evaluating our investigational 20-valent vaccine for the prevention of invasive disease and pneumonia in adults 18 years and older. In rare diseases, we completed the transfer from Sangamo to Pfizer of the manufacturing processes for the investigational SB525 gene therapy for severe hemophilia A. This month, we have enrolled the first patient in the lead-in trial of the Phase III clinical program. We expect to begin dosing patients for that trial in the first half of 2020. On October 21st, Pfizer announced jointly with our partner, Opco, But the global phase 3 trial evaluating somatrogon dose once weekly in pre-pubertal children with growth hormone deficiency met its primary endpoint of non-inferiority to daily injectable genotropin. We are very pleased with the results because this potential once weekly solution may offer significant benefits to patients. We are looking forward to presenting detailed data in a scientific conference, and discussing them with the FDA and other regulators. In inflammation and immunology, we recently announced positive top-line results from JADEMONO2. This was the second Phase III pivotal study evaluating the efficacy and safety of our oral JAK1 inhibitor, abrocitinib. in patients with moderate to severe atopic dermatitis. These findings are in addition to the positive results for our first phase three study with abrocitinib in this indication, where the full data were presented earlier this month at a medical conference. In internal medicine, we recently entered into a worldwide exclusive licensing agreement with Axia Therapeutics, for AXIA, ANG, PTL3, LRX, and investigational antisense therapy being developed to treat patients with certain cardiovascular and metabolic diseases. The therapy is currently being evaluated in a phase 2 study in patients with type 2 diabetes, hypertriglyceridemia, and non-alcoholic fatty liver disease. We believe this novel therapy will complement our clinical mid-stage internal medicine pipeline and that our deep expertise in cardiovascular and metabolic diseases will help allow this program to reach its maximum potential for patients. Lastly, in oncology, from our recent acquisition of RA, we presented Interim analysis results from the Phase III BICON trial of BRAPTOVI, MECTOVI, and CETUXIMAB for the treatment of BRAFV600E mutant metastatic colorectal cancer. BRAFTOVI combinations showed statistically significant improvements in overall survival and objective response rates versus control. We recently submitted to the FDA a supplementary new drug application with this data. And as per our usual practice, we will announce a decision regarding acceptance for review. And I'm pleased to share that we now have US launch days for three of our biosimilars recently approved by the FDA. Xurabev is expected to launch on December 31st of this year, 2019. Ruxiens in January of 2020. And Trasimera on February 15th of 2020. So all in the near future. Of course, none of our breakthroughs will do patients any good if patients can't afford them. Pfizer remains committed to working with policymakers at both. the federal and state levels, and on both sides of the aisle on common sense solutions to improve patient affordability. We are making progress in certain areas. For example, our proposals regarding biosimilars have been well received, and bipartisan legislation on this issue is advancing. We also continue to work with policymakers and others in the health care system to find ways to reduce out-of-pocket costs at the pharmacy counter, especially for seniors. We are particularly encouraged that lawmakers recognize the need for an annual out-of-pocket cap in Medicare Part D. And we are aggressively pursuing value-based arrangements that tie reimbursement to the ability of our medicines to produce positive outcomes for patients. While there has been a lot of discussion around less constructive proposals, it's difficult to imagine Congress supporting policies that will explicitly stand in the way of lifesaving medicines being developed and made available to American patients. Therefore, we remain confident that common-sense solutions can be found that will drive continued innovation and benefit patients. In summary, we turn in another solid quarter and our pipeline continues to be a source of great hope and excitement for our company, our shareholders, and the patients who rely on our innovative medicines and vaccines. We also raised the midpoints for our 2019 revenue and adjusted diluted EPS guidance ranges to reflect our strong performance today, as well as our confidence in the business going forward. Frank will provide more details on this in a moment. Following the expected close of the Abjon Milan transaction next year, Pfizer will be a smaller, science-based company with a singular focus on innovative biopharma. All our current growth drivers and pipeline will remain with Pfizer for this reason. And we expect Pfizer's five-year revenue CAGR to be approximately 6% and for that growth to begin immediately upon the close of the transaction. Our biopharmaceuticals group is already growing at a similar pace. Starting in 2026, we will have a new set of LOEs, but we expect the new wave of compounds currently in the pipeline, along with the acquisitions of Theracon and Array Therapeutics, our equity interest in Vivet Therapeutics, and the unlicensed investigational therapy from Axia to help mitigate the impact of these LOEs. These agreements represent the types of targeted BD initiatives we will continue to pursue to help strengthen our substrate for the second half of the next decade. These are deliberate moves we are making because of the confidence we have in our science, in our ability to commercialize important new medicines and vaccines, and in our ability to continue to invest in growth while returning capital to investors. Now, let me turn it over to Frank, to provide details on the quarter and our outlook for the remainder of 2019. Fran.