Pfizer, Inc.

Good day everyone and welcome to Pfizer's fourth 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.

Morning and thank you for joining us today to review Pfizer's fourth quarter and full year 2019 performance and 2020 financial guidance. I'm joined today by our CEO and Chairman Albert Borla, Frank DiMilio, 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. This morning I will speak about our performance for the year, the continued advancement of our pipeline and the steps you are taking to position Pfizer for accelerated growth following the expected separation of Abjohn from Pfizer later this year. Frank will then provide details regarding our fourth quarter performance and our 2020 financial guidance. 2019 was a productive and transformational year for Pfizer which we generated solid full year financial results. These results were highlighted by exceptional 8% operational revenue growth for the year and 9% in the fourth quarter for our biopharma business which will become the new Pfizer following the expected separation of Abjohn. Once again our biopharmaceutical group outstanding growth was driven primarily by the continued strong performance from all our key growth drivers. This includes Ibrans, Xtandi, Eloquiz, Zeldzins, Vintaquil among others. Biopharma also generated 14% operational growth in emerging markets in 2019. I would point out that biopharma's 2019 growth came from volume increases, not pricing. In fact pricing had a negative 2% impact in biopharma's results. For full year 2019 global Ibrans revenues increased 23% operationally to become a nearly $5 billion a year product. In the US Ibrans realized robust growth and retained its strong leadership position in the Cdk8 class with a nearly 90% share. Ibrans performance outside of the US was also very strong and we still see significant opportunities in countries where the use of Cdk inhibitors has not yet reached the level seen in the US. Overall Ibrans is approved in more than 90 countries, is the number one prescribed Cdk4-6 inhibitor globally and has reached more than 250,000 patients. For Xtandi, Alliance revenues in the US were up 20% for the full year and when combined with our royalty income on ex-US sales totaled nearly $1.2 billion in 2019. Xtandi is the leading branded novel hormone therapy in an increasingly competitive but growing class with 37% market share in total prescriptions. The robust year over year growth was due to continued uptake of the non-metastatic castration resistant prostate cancer indication as well as prescribed confidence and recognition of Xtandi's strong data across CRPC. With the recent launch of our extended indication of metastatic castration sensitive prostate cancer in the US, Xtandi is now the first and only oral treatment approved by the FDA in three distinct types of prostate cancer. Eloquiz continued to perform well. Pfizer share in the global revenues was up 26% operationally to $4.2 billion. This growth was driven primarily by continued increased adoption in non-valvular atrial fibrillation as well as oral anticoagulant market share gains. Eloquiz is now the oral anticoagulant leader in 12 markets across the globe. Zeldzins had a strong performance with global revenues increasing 29% operationally to $2.2 billion. We are very pleased with the continued positive uptake across all indications, rheumatoid arthritis, psoriatic arthritis and ulcerative colitis and we continue to launch psoriatic arthritis and ulcerative colitis in new markets. Looking at our rare disease business, Vintaco continues to ramp up nicely in the US following the May 2019 approval and launch for the treatment of ATTR cardiomyopathy. Overall, this first of its kind medicine contributed $473 million in revenue and was the first revenue in 2019. Our disease awareness efforts helped drive the diagnosis rate to 9% by the end of the fourth quarter compared with 1% prior to launch. As of the end of 2019, more than 9,000 patients have been diagnosed, more than 5,500 patients had received a prescription for Vintaco and more than 3,000 patients had received the drug. These numbers do not include approximately 100 patients who are still in the early access program. Global Prevna 13 revenues were up 3% operationally to $5.8 billion. The US CDC also published its updated recommendation for immunocompetent adults aged 65 and older to cert clinical decision making in the November Morbidity and Mortality Weekly Report. Highlighting that a patient can share the decision to vaccinate with PCV 13 with a physician, physician's assistant, nurse practitioner or pharmacist. Looking at our sterile injectables portfolio, our focus on manufacturing recovery is taking shape and beginning to have a positive impact on the top line in the US. We have made solid progress with remediation and modernization and expect continued improvement throughout 2020. Of note, while global revenue from our sterile injectables portfolio declined 1% operationally for the full year, it increased 5% operationally during the fourth quarter. Additionally, more than 80% of our injectables portfolio is in stock today and we anticipate this percentage will continue to increase in 2020. Our global biosimilars portfolio grew 22% operationally to $911 million for the full year. This was driven largely by 70% growth in the US thanks to the launch of Retacrit and a gradual uptake of Inflectra. The growth in the US was partially offset by decline in international markets driven mainly by Inflectra. We expect an additional contribution from biosimilars in 2020 with the launch of free oncology monoclonal antibody biosimilars. Last week we announced the launches of Xerabev and Ruxions in the US market and next month we expect to launch Trasimera. All free products will be available at a substantially discounted price compared with their originator products. Full year revenues for our upzone business were down 16% operationally to $10.2 billion. The key headwind during the year was the advent of generic competition on Lyrica in the US, which has partially offset by 7% operational growth in China. The growth in China was driven primarily by Viagra and Celebrix, as well as Lipitor in non-reimbursed channels, which constitute significant market share in China. We are making good progress with the pre-integration planning for Abzons proposed combination with Mylan, which remains on track for mid-2020. In December we announced that former Pfizer chairman Ian Reed and current Pfizer director James Kiltz will join the Viatris Board of Directors upon completion of the transaction. We are also working closely with our counterparts of Mylan on the CFO selection process. We expect to announce the appointments of both the CFO and the third director by the end of this quarter. We have great confidence in Viatris, which will combine Abzons strong commercial capabilities and iconic brands with Mylan's terrific pipeline. Turning now to R&D, we remain very pleased with the progress we are making with our pipeline. We are expecting key clinical readouts in 2020, several of which have the potential to make this an exciting year for patients hoping for new treatment options. We anticipate sharing data from up to 15 -of-concept readouts with contributions from all our therapeutic areas, as well as up to 10 pivotal study starts and 5 key pivotal study readouts. I will now highlight some of those expected events. We continue to expect our two event-driven IBRAN's early breast cancer programs, an LOPB and PALAS, to read out in late 2020 and early 2021 respectively. If successful and following regulatory approval, these programs could double the number of patients eligible to benefit from IBRAN's. The Phase II open-label single-arm ANCOR CRC study, evaluating the efficacy and safety of the combination of Braftov and Mektovi and cetaximab in patients with previously untreated Braft V600E mutant metastatic colorectal cancer, is currently ongoing. Results from the study will be submitted for presentation at a medical congress in the second half of 2020. For abracitinib, our investigational ZAK1 inhibitor for the treatment of moderate to severe atopic dermatitis, we look forward to sharing top-line findings from the Phase III Jade Compare trial in the coming months. Pending successful conclusion of the core Phase III studies, regulatory submission in the U.S. is projected for the third quarter of 2020, with subsequent markets following later in the year. This study is designed to assess the efficacy and safety of abracitinib or dupiluma placebo in adults on background medicated topical therapy, with moderate to severe atopic dermatitis. The study also has a key secondary endpoint, but it is designed to assess the effect on each severity of abracitinib compared with dupiluma in adults with moderate to severe atopic dermatitis on background topical therapy. There are up to five -of-concept readouts expected in 2020 from our industry-leading immunokinase pipeline. Our hope is to advance several of these into Phase III trials. These include TIC2 ZAK1 with potential POC readouts for psoriatic arthritis and for topical formulation for psoriasis and atopic dermatitis, as well as an oral ZAK3-TEC for vitiligo and oral TIC2 for psoriasis. This is a great example of our unique strategy to purposefully match a molecule to a disease where we think it has the potential to make the most difference, as well as the formulation that we believe has the potential to treat milder forms of disease. Our gene therapy platform is advancing with promising Phase I-II hemophilia A data that is expected to support a Phase III start this year. This would be our second gene therapy pivotal study following the ongoing hemophilia B Phase III study. In addition, our DMD gene therapy program is gathering additional robust patient data building on the progress we shared at the Parent Project Muscular Dystrophy Conference last June. We are preparing for an expected POC in the first half of 2020 and the Phase III pivotal study start in the second half of this year. We look forward to successfully completing the Phase III studies for our investigational 20-valent pneumococcal conjugate vaccine candidate in adults and remain on track to submit the biologics license application to the FDA by the end of this year. Pfizer's candidate represents a potential significant advancement compared with a potential 15-valent. If successful in Phase III and approved, the five additional serotypes may provide coverage against approximately 33% more strains that cause invasive pneumococcal disease in adults and 42% more strains causing the disease in infants in the United States. For our maternal vaccine for respiratory syngitial virus, RSV, we are preparing for an expected POC in the second quarter of 2020 followed by potentially swift progression to Phase III. We look forward to sharing more updates on our pipeline during our upcoming investor day on March 31. In summary, we finished 2019 with strong momentum and we look forward to continuing that momentum in 2020. During the year, we generated a solid financial performance, further advanced our strong R&D pipeline and took bold actions to reshape Pfizer into an innovation powerhouse that will build on our legacy of delivering breakthroughs that change patients' lives. Now I will turn it over to Frank to provide details on the quarter and our outlook for the remainder of 2020. Frank. Thanks

Albert, good day everyone. Now moving on to the financials. Fourth quarter 2019 revenues were $12.7 billion, down 8% operationally versus the year ago quarter. Excluding the impact of the consumer health care business, revenue was down 1% operationally. Our biopharmaceuticals group business revenues were $10.5 billion, up 9% operationally versus the year ago quarter, with strong operational growth in eyebrows, eliquids, cell jams and vindical and a second straight quarter of operational growth for our hospital business including our sterile injectables. Revenues for our Upjohn business in the fourth quarter decreased 32% operationally to $2.2 billion with the primary -over-year impact again being generic competition for Lyrica in the U.S. that began in July of 2019. Excluding the unfavorable impact of Lyrica in the U.S. and other recent product losses of exclusivity, fourth quarter 2019 revenues for Upjohn declined 6% operationally. I know Upjohn's business in China has been an area of focus and fourth quarter revenues for Upjohn declined 1% operationally. We saw the expected revenue declines for Lipitor and Norvask in provinces where the volume based procurement program has been implemented and these declines were mostly offset by operational growth from products not impacted by the VPP program including Celebrex and Viagra. Adjusted cost of sales as a percentage of revenue was favorably impacted by the July completion of the consumer health care joint venture transaction with GSK, partially offset by the negative impact of foreign exchange and the Lyrica loss of exclusivity. In the fourth quarter we recorded a six cents loss per share on a gap basis which primarily due to a 2.6 billion asset impairment charge for Eukrisa and restructuring purchase accounting and legal charges. Adjusted diluted EPS for the fourth quarter was 55 cents versus 63 cents in the year ago quarter. The decrease was primarily due to lower revenues again mainly due to the Lyrica LOE in the U.S. and higher operating expenses. I want to point out that diluted weighted average shares outstanding declined by 281 million shares compared to the year ago quarter reflecting the impact of shares we purchased during 2018 and 2019 and partially offset by dilution related to share based employee compensation programs. Finally, foreign exchange had a negative impact of 158 million or 1% on fourth quarter 2019 revenues and a three cents negative impact on adjusted diluted EPS compared to the year ago quarter. As you can see on the chart our 9% operational growth in the biopharma business was driven by strong performance by Ibrans, Eloquist, Celjans, Xtandi, Vindiquil and Inlighto. Moving on to 2019 financial guidance, as you can see on the chart we met or exceeded all components of our 2019 financial guidance. Now I want to highlight how our 2020 guidance compares to 2019 revenue and adjusted diluted EPS. Starting on the left side of the slide, our 2019 results reflect partial year contributions from the consumer health care business segment which we deconsolidated in the third quarter of 2019. Excluding 2.1 billion in revenues generated from the consumer health care business segment, total company 2019 revenues were 49.7 billion and 2019 adjusted diluted EPS is $2.95. For 2020 the adjusted diluted EPS guidance range reflects Pfizer's share of the consumer health care joint ventures earnings that were generated in fourth quarter 2019 and will be reported in first quarter 2020 along with Pfizer's share of the JV's anticipated earnings for the first three quarters of 2020. As you can see, the midpoint of our 2020 guidance range for revenues implies comparable performance to 2019 revenues after excluding the partial year contribution from consumer health care as well as an anticipated 200 million favorable impact from foreign exchange based on mid-January 2020 rates compared to last year. Despite an anticipated 2.4 billion in LOE headwinds in 2020, we expect the midpoint of the revenue range to remain flat operationally excluding consumer health care. Now let's go through the full details of our 2020 financial guidance for total company. As we've said, we are expecting the close of the transaction between our Epjon business and Mylan to be completed in mid-2020. So we are providing three sets of guidance. First, total company which reflects our current construct of the Bio Pharma and Epjon businesses and excludes any impact from the pending Epjon combination with Mylan. Second, new Pfizer which is a full year pro forma view that reflects the impact of the pending Vietras transaction by removing Epjon and including 12 billion in cash proceeds from Epjon to new Pfizer and other transaction related factors such as transitional service agreement revenue and third, Epjon is a standalone business. All of these scenarios are based on a full year of revenues and expenses in 2020. Beginning with total company, 2020 revenue guidance of 48.5 to 50.5 billion reflects anticipated continued strong momentum in our Bio Pharma business. Primarily offset by the continued negative impact of product losses of exclusivity and our Epjon business, primarily Lyrica in the US. Moving on to other elements of our 2020 financial guidance for total company, compared with 2019 actual results, the mid points of these ranges imply higher adjusted cost of sales as percentage of revenues due to the continued impact from the Lyrica LOE, higher adjusted R&D expenses and higher adjusted other income which reflects earnings from the consumer health care joint venture and lower adjusted SIA expenses and adjusted diluted EPS. In 2020, financial guidance for adjusted EPS assumes no new share repurchases and we will focus instead on increasing the dividend and investing in the business during this period of growth. As a result, our guidance for adjusted diluted EPS assumes diluted weighted average shares outstanding of approximately 5.65 billion shares which is approximately the same as 2019. Moving on to financial guidance for new Pfizer for the full year 2020, we now anticipate full year 2020 revenues between 40.7 and 42.3 billion. With the midpoint of the guidance range representing 8% operational growth as compared to 2019 by Ophama revenues excluding Meridian and Mylan Japan and an improvement from our initial July targets. This guidance range excludes 600 million of contributions from Meridian, Pfizer subsidiary and manufacturer of EpiPen and other order injector products as well as from the strategic collaboration with Mylan in Japan for the development, manufacturing and marketing of generic medicines. Due to an organization realignment, both of these assets have shifted to upjohn effective at the start of 2020. Both Meridian and Mylan Japan will be reported in Pfizer's upjohn business beginning in first quarter 2020. We now anticipate full year 2020 adjusted IBT, its percentage of revenue of approximately 37%, also an improvement from July. We anticipate the midpoint of the guidance range for adjusted diluted EPS to be 230. The operating cash flow guidance range remains approximately 11 to 12 billion dollars. This EPS guidance reflects the 12 billion cash that Pfizer will receive upon the close of the combination of upjohn and Mylan which will be used to pay down debt during 2020. As you can see, the midpoints for new Pfizer's 2020 revenue and adjusted IBT margin guidance have improved materially since our preliminary 2020 projections were projected in July in conjunction with the announcement of the proposed Mylan and upjohn combination. We have provided a bridge from our initial July targets to this current guidance on the bottom of the chart for clarity. Upon the close of the Mylan-Upjohn combination and once we become new Pfizer, you can expect the same level of detail in our 2020 guidance that we provided today for total company. Moving on to 2020 financial guidance for upjohn for the full year 2020, we anticipate revenues of 8 to 8.5 billion, reflecting the continued negative impact of losses of exclusivity for products such as Lyrica in the U.S. which began facing multi-source generic competition in July 2019 and the expansion of the volume-based procurement program in China and reflecting the inclusion of revenues and expenses associated with Meridian and Mylan, Japan. We anticipate full year 2020 adjusted EBITDA for the upjohn business of 3.8 to 4.2 billion. Other than the inclusion of revenues and expenses associated with Meridian and Mylan, Japan, there are no operational changes to upjohn's 2020 financial guidance compared with preliminary financial targets provided in July of 2019. Again, we have provided a bridge from our initial July targets to this current guidance at the bottom of the chart. Moving on to key takeaways regarding 2019, we delivered a strong fourth quarter with our Bio Pharma business growing 9% operationally, which represents our go-forward business after the pending combination of upjohn and Mylan. We provided 2020 guidance ranges for Total Company, New Pfizer, and Upjohn. Importantly, we are projecting strong organic revenue growth for New Pfizer in 2020. We accomplished key product and pipeline milestones since our previous quarterly update. And we returned $16.9 billion to shareholders in 2019 through a combination of dividends and share repurchases. Looking ahead, we remain committed to delivering attractive shareholder returns in 2020 and beyond. Now I'll turn it back to Chuck.

Thanks, Frank and Albert, for those remarks. At this time, operator, can we please poll for questions?

Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. Your first question comes from Randall Stenicki from RBC Capital Market.

Great. Thanks, guys, for the questions. I have two, one for Albert and one for Angela. Albert, a couple of weeks ago, you called out $4.5 billion in enabling costs for the SINA with an opportunity to simplify. So how do we think about the cost savings opportunity after you close up, John, in terms of number one, how much incremental cost savings do you see beyond what is built into the 37% margin? And then number two, how much of that could hit back half 2020 versus 2021? And then I have a follow up after that for Angela.

OK, I think you should. How can he ask the question to Angela? I can get back. He can get back. So indeed, we have this year, approximately 14.3 billion of SINAs. I will ask Frank to run the numbers in more details. And as I said, four and a half approximately of that is what we call enabling functions. These are functions like finance, legal, HR, facilities that they are facilitating and enabling the core functions of our business to perform. Core functions, I mean, R&D that is discovering the products, manufacturing that is making them happen, and commercial that it is making them available to the patients. We do believe that these four and a half billion and actually approximately 10,000 people can be improved. And we have plans to do so. In the current guidance, and I will ask Frank to comment, there is a part, a small part of that, cost opportunity saving already incorporated. And in 2021, will be a much bigger part. So Frank.

So Randall, just let me run the numbers, which is if you look at 2019 actual SINA, for example, we spent about 14 billion as a company. Obviously that four and a half billion that Albert alluded to in that 14 billion. If you look at our 2020 guidance for SINA, the range is 12 to 13 billion. Midpoint 12.5. 12.5 from 14 billion is a decline of 1.5 billion. Now roughly half of that is consumer because we went from consolidating consumer to equity accounting on consumer once the deal closed in July 31st of 2019. The remaining half is really operational savings across the company, including part of the four point, including some of the 4.5 billion that Albert alluded to. And that obviously helped contribute to the IBT as a percentage of revenue improving from 35 from the mid 30s to 37%. And then to Albert's point, obviously what we're doing now is working on further improvements that would obviously positively impact the SINA and that would flow to the bottom line.

Great. Thanks, Albert and Frank. Next question, please.

Our next question comes from Chris Schott from JP Morgan.

Great. Thanks very much for the questions. Just had three quick product ones. The first was on Bindakell. Seems like a nice step up in all your patient metrics. Seems like all those basically doubled or tripled from 3Q. Do you help bridge those figures with the sequential sales ramp we saw, which wasn't quite as dramatic? The second question I had was on IBRANT. Just elaboration there in terms of what drove the revised timelines for PALAS. And have you taken another interim look at the data at this point? And then finally on Tenusumab. Just an update in terms of what the status and outlook is for that product at this point. Thanks so much. Very good.

Thank you very much. I will ask Angela to address the Bindakell and Tenusumab questions. And then I will say a few words about IBRANT and maybe I will ask Michael to tell me, please. Yeah.

So thanks for the question. And certainly we are pleased with the increased diagnosis, prescription, as well as the numbers of patients that are receiving Bindakell. As you said, our diagnosis now is up to about 9%. The ability for patients to receive prescriptions is up to about 64% of those that are diagnosed. And those that are receiving medications are at around 35% of those that are diagnosed. And every quarter since we've been reporting this, we've been seeing some nice increases. So we're certainly pleased with that. I think in terms of just the commensurate alignment with the actual net sales numbers, I think that there are obviously every single day this is a dynamic situation. And the number and the proportion of patients, whether they are Medicare and commercial lives, those are changing. And so the growth to nets of those are going to affect. I think what you see on a net sales basis. So I think that we are watching and really focused on driving diagnosis and ensuring that as many patients can get on these drugs as possible. And we're starting to see some really nice pickup. But I think that is still a very dynamic situation because we're really relatively new in this process. We'll continue to monitor and should expect to see some quarter to quarter changes in terms of net sales.

And obviously the new patients that are contributing disproportionately because they are in fewer months of treatment in terms of sales.

Right. And then your second question was on Tenazimab. So we're really pleased that in December of 2019, we completed our U.S. submission of Tenazimab. And we're also pursuing regulatory submissions in the EU and in Japan. This submission was done in close collaboration with the FDA, and it includes the 2.5 milligrams in moderate to severe osteoarthritis patients. So at this moment in time, we're awaiting acceptance of this filing. But we see significant potential of Tenazimab and osteoarthritis. So we're really excited about this filing. And particularly because we're in a time where non-opioid solutions are very, very much needed for these patients. If you look at the market potential, today there are about 27 million Americans that suffer from osteoarthritis. And 11 million of those have moderate to severe OA. 80% of those 11 million people have tried and failed three or more analgesics. So that tells us that there is just a huge amount of unmet need in this patient population. Patients are cycling through a number of pain medications. And there just is an incredible need for new options. And this is where we think Tenazimab can really fill an unmet need. It has the potential to become the first in class non-opioid treatment for these patients. And we eagerly await the acceptance of this file from the FDA.

Thank you. Now let me address the question on eyebrows. The expected completion of the study slept a little bit, a few weeks actually. It was at the end of the 19, excuse me, the end of 20. And now it's moved in the very beginning of 21. The only reason of this is that the events are not coming at the pace that we had forecasted and expected. So that means people are not progressing into their disease. I don't think we can draw any conclusions if that means good news or bad news. I think it's just facts of the data. We don't know if the people are progressing equally in the two arms or if they are progressing in the treatment arm. That remains to be seen when we unblind the data. As regards your question, if there was an interim analysis, there was not an interim analysis. So we haven't seen an interim analysis. There will be an interim analysis. But we do not expect that the most likely scenario is that the study will continue when this interim analysis comes. The study was designed to come to full completion. And the criteria that we have set to stop for efficacy in the interim study are very, very high. So it's not impossible that this will happen. But most likely scenario, it is that as we had planned, that the study will come to completion at the end of it, this is what will happen. We still remain very, very encouraged and optimistic about high branch. Of course, it's a phase three. You never know what will be. But all the science behind it is supporting that we could have a positive outcome. I will ask actually Michael to make a few comments on the science and what does this mean.

I'll just punctuate a few things that Albert described so well. For aspect of why we are very excited and optimistic about the science and clinical data to predict a potential positive outcome for the DISCUSS PALLAS study. As you know, first of all, that the CDK4-6 inhibited iBrands with estrogen receptor drugs to stop cancer cells or breast cancer cells to divide. We have shown that in the Paloma 2 and 3 studies. And more recently, we reported that we could reproduce data direction in real world evidence based on real world data from Flatiron and other databases. And this noteworthy including also overall survival data. Again, showing in medical practice the importance of these drugs. Three, the Pallet study that looked at the ability of Palbocyclic iBrands to stop dividing of estrogen receptor positive breast cancer cells showed that this mechanism was very well operating in a powerful way. And finally, let me remind you that other agents that act on estrogen receptor positive breast cancers and converge with the Palbocyclic, such as Tamoxifen and aromatizing inhibitors, all were initially developed in metastatic cancer and did very well in adjuvant treatment in early breast cancer. So these four observations and others makes us continue to be excited and very optimistic. And as Albert alluded to, a relatively small change in projected trial is based on a trial that actually started four and a half years ago. And it is quite common that in the final 12 months or so, minor changes in enrollment rate and process planning for study reports can affect the trial. But with all of this, you can hear we remain encouraged, enthusiastic about what iBrands can offer for adjuvant treatment of breast cancer.

MR. Thanks for the helpful context, Michael. Next question, please.

Your next question comes from Terrence Flynn from Goldman Sachs.

Hi. Thanks for taking the questions. Maybe just two product ones for me. I was wondering if you can talk about iBrands' rest of world dynamics, any specific headwinds this quarter, and how to think about the trajectory into this year. And then for Zell Jans, I was wondering if you can give us a split of sales by indication, and if you're seeing any impact in RA from the launch of AvVis RINVAC on either share or price. Thank you.

Thank you very, very much. So Anne Zellman?

Sure. So first of all, in iBrands, we continue to see good growth and strong growth XUS, but probably two factors that are tempering the net sales, as you saw in Q4. The first is pricing, and that continues to be something that we work hard at, especially in the EU, to gain access for our products in Europe. And the second is class growth. So if you look at the class growth of the CDK class through the quarters, that has increased, but over the last quarter, it has tempered. And it's sort of sitting at around a 35% CDK class growth right now, class share. But within that, the iBrands still has a very, very high product share in the 80s. So I think it's pointing out to us the fact that there's still opportunity for us to grow, and that growing the CDK class is going to be an area of tremendous focus for us XUS in 2020 and beyond. Your second question was around ZellJans. And so on ZellJans, again, we continue to see excellent growth in ZellJans. In fact, despite the fact that you only see the sort of 1% net sales growth in Q4, I'll point out that globally, full year, we had 29% growth of ZellJans, which is one of the highest of all of our core brands here at Pfizer in our entire portfolio. Q4, we saw 23% prescription growth. And this prescription growth was driven by extremely strong performance in rheumatoid arthritis, which really was not impacted by the label changes. And we still continue to see strong growth in ulcerative colitis, even though here was the biggest label change. And so physicians did have to adjust the way that they were prescribing ZellJans. But we expect this growth to continue because we have excellent momentum and confidence in prescribing from our physicians. We have significant unmet need, and we have greatly improved access. And this access is, in fact, what drove the 1% net sales in Q4. There was a... In Q4 of 18, we saw an inventory build at the end of the year, which didn't happen in Q4 of 19. So that was one of the reasons that affected our Q4 performance in 19. And then also, and more importantly, throughout the course of 2019, we gained significant access. In fact, we added 59 million incremental lives through contracting. And it's because of the timing of when these contracts were signed or renewed that drove the subsequent impact of rebates. And this sort of came to a head and sort of disproportionately affected us in Q4 of 19. So I think stepping back, we're really pleased with the access that we do have in ZellJans. And since it was launched eight years ago, this is the most favorable access situation that we've ever had, which is very important when it comes to our ability to compete with Rennbach. You asked a question around Rennbach, just to sort of put into perspective, I think that we are excited about having another competitor help drive the growth of the Jack class in all of our indications. And that being said, ZellJans still enjoys a lion, a leading market share, especially in RA, where we have more than 15% of the market share of the entire class.

Great. Thank you very much, Angela. Next question, please.

Your next question comes from Uma Rafat from Evercore.

Hi. Thanks so much for taking my question. First, Albert, if I may, what are you hearing on a possible upcoming rule on IPI? There's a lot of press that companies have been notified by White House. I was curious what you know about it and if it's something we should be very concerned about. Michael, one quick one for you on the DMD gene therapy for a minute. You mentioned there's a proof of concept coming. My question is, have there been additional protocol-driven pauses in enrollment? And I ask because recall when the first SAE on acute kidney injury happened, the trial was paused, and I'm curious, has anything like that happened again? And then finally, Frank, maybe just quickly on SINA line, I know it's a little higher than consensus, but technically, year over year versus 4Q18, it wasn't that much higher, but I also realized 4Q18 had some consumer. Maybe you could just tell us about your holiday party. Thank you very much.

All right. So let me start with the IPI. We have not received any notification on that, so there's no news from our side other than what we read on the newspaper. So Michael? Yeah.

Just to remind you, we shared at the PBMD conference in the middle of last year update on six patients dosed with our DMD gene therapy that showed encouraging data on expression in muscle fibers, amount of microdystrophin, and on some of the patients, we had also an opportunity to report encouraging trends on functional outcomes. We have dosed additional patients since then, and we continue to gather experience on efficacy, safety, and clinical management that are incorporated in the procedures how we manage these patients going forward. We plan to conclude phase two this spring, and based on current data and insights, we are planning to start phase three, of course, pending regulatory dialogues later this year as indicated in Albert's opening remarks. All right, Fran, maybe you want to tell us about the holiday

party. I was not invited. Sure, yes. I wasn't invited either, so maybe Uber was at

the party. Let me run the numbers, and then I'll explain what happened. So for the quarter, SINA All-in was about $4.1 billion. It was up about 4% operationally, $100 million give or take from the prior year quarter. What really drove that was increased investment behind some of our brands, some of our oncology products, some of our launch products like Vindiquil, and some increased investment in emerging markets. But it was really investment in terms of supporting our brands.

Thank you, Michael. And just to make a comment, we are very, very diligent in the way that you allocate capital. And when we have opportunities to put in promotional money so we can have a very strong start, we do it. And we take those money usually by being very diligent in the way that we control the indirect expense. I have been very clear that direct with indirect is a very clear distinction in our mind. So when it comes to things that are overheads and things that they are not affecting directly, the business results, we are very, very tough. And when it comes to areas that the investments can affect business results, we are creative and generous. So that's what you saw here.

And these are clearly direct expense. And these are all direct

expense. And the same, by the way, although you didn't ask, comes to R&D. Right now we are increasing R&D investments, but we are increasing R&D investments only for programs, only for projects. We are not increasing infrastructure, we are not increasing research centers. At large, we maintain a very strong presence there and we keep that very strong. But what is driving the increase R&D, it is more phase three or phase two studies. It's very clear. Great. Thank you. Next question, please, operator.

Our next question comes from David Rice Singer from Morgan Stanley.

Yes, thanks very much. So I have three questions, please. First, Albert, could you discuss why the advisor decided not to repurchase shares in 2020? And then maybe, Frank, you can comment on how we should think about the EPS implications when we consider your guidance relative to consensus, which had assumed some share repurchase. Second, regarding the opportunity to rationalize the $4.5 billion in costs, could you just give us a sense for what percentage reduction is reasonable to assume a few years out? I was guessing maybe 20 percent, but I just don't know what's reasonable. And then third, regarding the transfer of $600 million in revenue to UpJohn, does that change the economics that FISA will receive as part of the exit to Milan? Thank you.

Yes, and I think basically all questions can be answered by Frank. I would just make some introductory comments. The reason why in our fractal allocation we are allocating right now money to increase the dividend and also to invest in our business, or the OPEX to modernize our facility, or the CAPEX to modernize our facilities, the reason why we don't do right now share repurchases is because we want to make sure that we maintain very strong, hard power to invest in the business. The past was a very different FISA. The past of the last decade had to deal with declining of revenues, constant declining of revenues. And we had to do what we had to do, even if that was financial engineering, with purchasing back ourselves. We couldn't invest them and create higher value. Now it's a very different situation. We are a very different company. The company is going to have -in-class, top-line growth, revenue story, starting from now from the separation of UpJohn in the middle of the year, from the expected separation of UpJohn in the middle of the year. And we do not need, we can organically grow EPS. As you can see, all our projections on EPS this year are organically, no special repurchases. But we can use the capital to invest in good phase two, phase three assets that will build our pipeline. So this is the strategy behind it. Now let me ask Frank to run the numbers.

So David, now all I'll do is I don't want to duplicate anything Albert said. I'll just add a couple of things on the share repurchases. One, we also announced a dividend increase in December. So obviously we continue to deploy capital in the area of dividends, which we think is important to our investment thesis. And that's something, obviously, as we go forward, we'll continue to look at. And then obviously our 2020 guidance assumes no repurchases. So when you look at the improvement, which is material in terms of the midpoint, versus what we did back in July, none of that is coming from share repurchases. Let me ask you your other couple of questions. On the 600 million transfer to UpJohn, does that change any economics? Let me give some context on this, which is one, nothing's been decided yet. We are still in negotiations with Mylan on those two businesses and whether or not they will transfer the vitris upon close. By the way, if we don't come to an agreement, those businesses would remain with New Pfizer. And so we're still in negotiations. And so in terms of the economics, I'd say more to come still to be determined. And if and when we complete that, obviously, I'll be in a better position to answer that. On the 4.5 billion of indirect spend, and directionally, what do we think we can do there? I don't want to give a specific percentage because we're still working our way through the process. But I think I alluded to this earlier, which is we've already made some nice headway. I think we can make additional headway. That additional headway would show up in SINA. And obviously our intent would be for that to show up in the IBT as percentage of revenue line. So that's what we're going to do. Our intent is to improve upon those numbers. And as we work our way through the process and as we have more to report, we'll make sure we do so.

Thank you, Frank. And also a comment on the reasons why we transfer those business to Abzon. Both of those businesses, first of all, they fit more under Abzon in terms of the dynamics that they have. So they can be managed much better. And secondly, I think they fit very nicely with Milan because one, it is the epitome, predominant business that Milan is, that right now is shared between Milan. We are providing for them. And the second, it is a partnership that we have with Milan that was established years back and with generics in Japan. So both of them fit much better in Beatrice. And that's the reason why we separated. And also that will allow you to have in case that this happens a much more cleaner view of the growth trajectory of the company because now you know exactly what would be the P&L of the remaining company. Thank you. Next question, please, operator.

Your next question comes from Louise Chen from Cantor.

Hi, thanks for taking my questions here. So I had a few. My first question is, is the 6% or approximately 6% five-year sales CAGR for standalone Pfizer, the new Pfizer still hold? Second question I had is, how much of a priority is M&A for you under the new Pfizer? And what kind of size of deals or types of deals are you most interested in? And last question I have is on the PCV data set that's coming through. You and a competitor also have a whole set of PCV data. I'm just curious how you see that landscape evolving over time. Thank you.

Thank you very, very much, Louise. Let me start with the 6% CAGR if it still holds. Absolutely, it still holds. Actually, as you can see, if anything else, this business that we are projecting five years CAGR, all the way to 25 actually CAGR of 6%. This year performed at 8%, 9% for the quarter and we are projecting 8% for 2020. So definitely we are on good, let's say, the way to achieve that. As regards the M&A, yes, the M&A is a very important part of our strategy and as I just alluded before, this is why also we are not diluting our file power with stock purchases right now because we do believe that we can create significant value with the right strategic moves. Now, we never say never to anything, but strategically we have made very clear that we are not interested for a big M&A that will have cost synergies as value driver because first of all, that will be likely diluted in our top line growth. I don't think there are many companies that they can have this type of growth trajectory that we have in the next few years. Secondly, it could be destructive because having a big M&A means that the thousands of people will have to work on integrations rather than supporting all these products that we just saw that are growing in 20s and 30s and also all this pipeline that is coming up. So we never say never, but this is not our strategy. Our strategy for M&A, it is to be able to have phase two, phase three programs ready, phase two, phase three, which could become potential medicines in the period 25, 26, 27, 28, so that we can augment our internal pipeline and be able that maintain the 6% growth for the long term, actually for the very, very long term because it's right now five years, I would say it's a long term. And the other thing that I want to emphasize it is that the 6% CAGR, it is risk adjusted. I repeat, it is risk adjusted. That means that in our projections, we are adjusting all the non-RED studies right now appropriately. Now, if all the phase three goes in the right way and they are all successful, it's not going to be 6%. It's going to be double this. It will be 12%, 13%, 14%, 15%. Now, if everything fails, also it will not be 6%, it will be very low. But if statistics works and the studies, let's say at 50% more or less, are successful, that means that we will achieve 6%. That's why I want to emphasize that there is no binary event in our projections. Binary event would be if the 6% was dependent or two or three major redoubles, that if they could go one way or another, it could affect. Right now they are dependent on 15, 16, 17 blockbusters and then many others, but they are much smaller. So then, Frank, maybe something to add on that before I ask Michael to comment on PCV data.

And Luis, the only thing I wanted to add, just to punctuate everything Albert said is, and why are we focusing on phase 2B, phase 3? It's because the LOEs really start to kick in in 2027. So if you think about we are in January of 2020, we literally have eight years to work our way through this problem. And by the way, given that kind of a time frame, given the breadth and strength of our pipeline, given our balance sheet, our capacity, obviously we feel confident we will be able to solve

it. Michael? Yeah, I'm pleased that you asked about our PNUMO next generation. As you know, we have adult and pediatric studies ongoing. The adult study has been given breakthrough designation in 2018 September based on our encoding phase 2 data. And we expect very soon to report phase 3 outcome of the adult PCV 20 trial. And obviously we are optimistic about that outcome based on the phase 2 and the breakthrough designation. On the pediatric, we have now accumulated further post-4th dose data of the PCV 20 phase 2 study. These data from the 4th dose further substantiate the positive data reported in the press release of the CIRDOS. And we expect initiation of phase 3 soon for the infant vaccine pending discussions with regulators. The full data set will be presented at the major vaccine related conference likely mid of this year. Now Albert commented also in his introduction very nicely on the improved relative coverage of the PCV 20 from us versus a potential competitor 15-valent. And he mentioned 33% better coverage for adults and 42% better coverage in the U.S. for infants. Obviously very important, significant better coverage. I just wanted to punctuate when you look in the top European market, similar to improved coverage in adults is actually 60 to 100% in infants, 80 to 200%. This is all for invasive pneumococcal disease. Also in the U.S. we have analyzed for community acquired pneumonia where we see substantial better coverage for the 20 versus a potential 15-valent. So all in all, we look forward to data sets advancing the program and think it would be the premier 20-valent and premier pneumococcal vaccine for patients. Thank you.

Next question

please,

operator.

Your next question comes from Steve Scala from Cowen.

Thank you. I have a few questions. An increase in the dividend was mentioned twice, but it sounds as though Upjohn will be spun, not split, in which case the dividend will be reduced. So I'm wondering if you could clarify the dividend comment. And I assume the 2020 EPS guidance implies a spin, not a split. Secondly, on the Ebrocytinib versus Dupixent study, given the fact that it is completed, Michael, I'm wondering if the data met the very positive portrayal you provided on the Q3 call, which included superior itch relief to Dupixent. And then lastly, will the proof of concept DMD data be presented at the March 31st meeting? Thank you very much.

No, thank you very much, Steve. Very good question. So Frank, why don't you clarify once more the dividend? Sure.

So Steve, in terms of the guidance, you're right, it assumes a spin, not a split. And then in terms of the dividend, you said, I think you said in your question, it'd be a reduction. I don't see it that way. What we've said is the sum of the VHRES dividend and our dividend would equal the current dividend that a Pfizer shareholder receives today. So I don't see a reduction in the dividend. The dividend income will be kept whole. And I think we've been very clear about that all along.

And we'll continue growing, maybe not at the same pace of what we do right now, it's two cents per quarter, but we'll continue growing.

Right. And you know, Steve, I can quickly run the numbers for you if you'd like. So if you think, what VHRES has said is their first full year of about $4 billion of free cash flow, they'd pay about 25% of that in the dividend. So that's a billion. Total VHRES will have about 1.2 billion shares. You put the 1 billion over 1.2 billion shares, it's about 83 cents. The exchange ratio is .12. You put 100 shares of Pfizer, you get 12 shares of VHRES, assuming a spin, that's roughly $10 a share. We would reduce our dividend on an annual basis by that $10, but the sum of our dividend plus that $10, that 10 cents, I'm sorry, thank you, would equal what a Pfizer share only gets today. In my opinion, it's $10. $10, not 10 cents.

Okay. Abrasitinib. Yeah, so thank you for your interest in Abrasitinib. And you know, we believe that it's going to be new drug class for such a prevalent disease that affects tens of millions of Americans, atopic dermatitis, and where an oral alternative seems to be a real patient and physician preference. We will soon report out the data from the important compare study. So I haven't actually seen the data, so I can only puncture it a little bit what we discussed at earlier investor meetings, that the historical comparison between Abrasitinib and Depixent suggests that we should expect to see a similar or better impact on clearing skin. And particularly as Albert alluded to in his introduction, there is an important key secondary endpoint looking at each relief, starting with a readout already of two weeks and then following the study through the 12 to 16 weeks. And, you know, historical data suggests that we should be very optimistic about Abrasitinib outperforming biological such as Depixent on each relief at earlier time points and provide a potential benefit of early onset of relief for disease. Now, we have to wait for the data to be able to obviously be absolutely confident in that outcome, but this is what I believe and look forward very much to see the data come shortly. And on the DMD question? Yeah, we are finalizing, I think, the program for the R&D day, so I can't be absolutely promise you, but I think it's likely that such an interesting program as the DMD gene therapy will be one of the potential agenda items, and obviously we would like to then share updates from increased number patients over a longer time period. So please welcome and take a front-row seat.

Thank you very much to both. And by the way, Frank Wallace, as always, was right, is $10 for 20 shares of

my life. All right, we'll move on to our next question, please.

Your next question comes from Jeff Mincham from Bank of America.

Morning, guys. Thanks so much for the question. Just have a couple. Michael, on the gene therapy platform with the advancement of hemophilia A and B, as well as DMD, and into phase three, what's the capacity to add additional indications to the portfolio? I mean, you guys have been successful partnering, but at this point, it does seem like you could expand the platform organically in a material way. And then for Angela on Xtandi, I just wanted to get your perspective on the inroads you've made in M0 prostate patients, and what do you think could represent a tipping point commercially, especially given the generic Cytiga available in the US? Thank you.

Michael? Yes. So Jeff, we are a share your enthusiasm for the gene therapy platform. And what is particularly, I think, a strategic advantage for us is the -to-end capability from discovery, clinical manufacturing. And of course, that capability is also linked to important external partners that gives us capacity to advance increasing number of internal, as well as partner programs. And we have an option for the Vivette Wilson disease program that could, in a relatively near-term future, be available for clinical studies. And we expect from internal and external initiative to aspire to about bringing one new gene therapy into the clinic every year or so for the next period to come. And we think that should build up a very comprehensive gene therapy portfolio. The three programs you alluded to are, of course, the frontier for us. With Factor IX, that we hope to be the first company bringing that over the finish line in phase three now and to start additional two phase threes for EMA, where we think we have a -in-class profile so far. And then we already spoke about DMD.

Thank you very much. Angela?

So in terms of the M0, the non-metastatic CRPC, I mean, what we're seeing here is just tremendous growth and tremendous performance. Just broadly speaking, in terms of Xtandi, we had a great quarter, right? We grew 29%. And this was driven by two things. One was actually a demand across both metastatic as well as non-metastatic, but also what we saw was the continued expansion of the actual class, the novel hormone therapies. And in this class, Xtandi has the lion's share. We have about 35% share right now. So first of all, to answer your question -a-vis generic Zytiga, we really don't see a competition from a generic versus brand in this instance. I think the competition with Zytiga is really amongst generic Zytiga versus branded Zytiga, whereas what we're seeing here is a clear uptick in Xtandi and specifically from the PROSPER trial in this M0 population, as you say. We are continuing to see, as I've talked about in all the previous quarters, really, really significant and very confident uptick in neurology prescribing. And we do believe that this is underpinning the growth of our non-metastatic population. And the fact that these are patients also earlier in their disease is helpful in driving our growth in this population. I'll also mention that just from a market share perspective, though the non-metastatic, the M0 population has Xtandi or LIDA as well as Nubeca, Xtandi by far and away has the leading market share in this segment and has been from the time that it was launched.

Great. Thank you, Angela. Next question, please, operator.

Our next question comes from Tim Anderson from Wolf Research.

Thank you. A couple of questions. One is on Prevnar in China. So sales have been ramping up there, but the regulatory authorities recently approved a domestically produced 13-valent product. And the CEO of that company suggests they have capacity that's in the tens of millions of doses, and who knows if that's true or not. But I'm wondering if you can give some perspective on how you see competitive dynamics in a situation like this going forward, not only in China where a domestic producer could potentially benefit from favoritism, but also if that company were to take their product into other markets outside of China at a different price point. I think a lot of investors assume vaccines are durable forever, but I'm wondering if this sort of thing could be disruptive in how you take this sort of potential competition into your forecast. Second question is on M&A. So any M&A that you may engage with in 2020, should we assume at least during this first six-month window, while you still have up, John, that that is probably put on hold? And then last question on Vindicale. Might there be a low-hanging fruit phenomenon where we see initial nice uptake, but then it kind of flattens out suddenly, or do you expect this will be continued strong linear growth?

Thank you very much. I will give a quick answer to your M&A question, Tim, and then Angela can deal with Prevenor China and the Vindicale. On M&A, no, the answer is no, absolutely not. We are very actively looking to invest capital on value creation opportunities, and then I assume that we will have several of them in the first half of 2020 before the close of the deal. Again, across the lines that I have described, you know exactly what we are doing. We want to make sure that we sustain the growth beyond 2027, when the yellows will have some impact. Angela, what about Prevenor China?

Sure. So we acknowledge that there is a new competitor in the form of Wolvax in PCV13. However, I want to recognize that there are some differences here. Though it is a 13-valent vaccine, Wolvax's vaccine is made with a different conjugate, and this conjugate technology being an older technology, so quite different from what we see in PCV13. That being said, it is a competitor. However, if you sort of step back and look at the opportunity that we have in pneumococcal vaccinations, there are approximately 14 million new births every year in China, and today only over maybe 1% of those infants are being vaccinated. So regardless of the volumes that Wolvax might have available, I think the opportunity between us is just much larger than that, and we have a tremendous amount of untapped potential in the marketplace, and we are confident that with the quality, the reliability, as well as the tremendous experience that Pfizer has had globally with PCV13, but also the tremendous success that we've had in China specifically for PCV13, that our growth will continue, and this is what we expect. We have a very robust footprint. As you know, the vaccines, and it will be the same for Wolvax's PCV13. This is an -of-pocket market, and it will be the same for the both of us. So this is where we'll be competing, which is why having a robust promotional engine and having a footprint of representatives that can really be available to support patients and caregivers at the points of vaccinations is really important, and I think in this regard we have demonstrated great expertise and ability to grow this market. So that's how we see it. We acknowledge the competition, but we continue to see tremendous potential.

What about Vindical?

All right. So in terms of Vindical, so yes, of course in the year of launch, one might expect to see a little bit of a bolus, a number of patients who have been identified and are awaiting diagnosis and treatment. That being said, we are confident of what we're confident about what we've learned in the marketplace in our first year of launch. We are confident that we have the right set of tools for helping physicians to suspect the patients that might have ATTRCM. We have mobilized education around using non-invasive methods like centigraphy to diagnose patients, and we've also mobilized a patient support hub to help patients receive their medications. So I think doing more of that, as well as continuing to think about new methods to help diagnose and treat patients such as using artificial intelligence and increased number of tools, all of that will continue to support our ability to drive the important and rapid diagnosis of patients as well as their treatment.

Great. Thank you. Next question, please.

Your next question comes from Andrew Vowm from Citi.

Thank you. A couple of questions, please. Firstly, on your pending oncology bar similars rollout in the U.S., given the challenges historically with bar simular penetration, could you talk to your expectations, particularly with these two drugs? There should be an economic incentive for payers given the pass-through, but yet those issues in patients already on an established innovative bar simular, an innovative brand to switch to bar simular. So if you could give us some kind of sense of how much penetration can quickly, you may expect that would be super helpful. And then second, in terms of the fan of this, Angela, you kindly gave some penetration figures at the beginning, which I was struggling to keep up with and write down, but just more broadly, could you outline how large you think the untapped patient population really is here and how far Pfizer is along in establishing that market? Many thanks.

Angela, a lot of questions for you today. Please go ahead.

Sure. All right. So I think firstly, we see the dynamics in oncology bar simulars being very different from that of what we saw for inflammation in the form of inflectra. So do you point about you know, how will the dynamics change here and how quickly can payers as well as providers capture their savings? It's going to be much quicker. This is the use of oncology bar simulars are much more rapid, right? You see more patients cycling through, treatment times are much shorter. So that's going to enable payers and providers to capture savings much more quickly, which is a very dynamic that you see in inflectra where, you know, it's a chronic treatment and patients are on their treatment for a very long time. So I think that's one big difference. The second is that there is already a some, we already have some precedents. We saw this with a rhetoric where after a year of being in the market, though I know it's a supportive care in oncology, we already have 20% market share. This is still far cry from what we see in Europe where there's much more rapid uptake, but I think that's a signal and an indicator of the differences you see in the various bar simular markets. And we also have some early signals from competitor bar simulars that have already some good market share in oncology bar simulars. So I think that we have some good indicators that this is going to be different. I think the benefit that we see here is that we have a portfolio of three oncology bar simulars all coming out around the similar time, like around now. And I think what we have, we have a robust pricing strategy discount to the whack of the originator, as well as I think strong relationships and networks built with both providers and payers that give us confidence that this will be an area of high growth for Pfizer.

Thank you, Anzala.

And then your question was around tefamidus. Sorry, can you just repeat that again?

The on top, the on top population. The large on top population. Gotcha.

So as we have said in previous calls, we do believe that this is a rare disease and that in the U.S. there will be about a hundred thousand patients in total, globally 500, but in the U.S. 100. To date, we have diagnosed 9,000 patients. So that leads us to 9% of the population that we have diagnosed. So while this may feel like very significant progress from the time that we have launched, and it is, I think you can also see that we have a long, long way to go to finding all 100,000 of these patients. And what I spoke earlier about in terms of the education, in terms of how do you expect the disease, how you diagnose the disease, and then very quickly gaining access so our patients can benefit from treatment of the disease. These are all three levers that we are intensely focused on.

Great. Thank you. Next question, please.

Your next question comes from Naveen Jacob from UBS.

Hello. Thanks for taking my questions. A couple, if I may, just on biosimilars, following up with Angela, your comment about strong growth continuing on for the biosimilars. So wondering if you could give any color around how we should think about the trajectory of the next couple of years. Is this a doubling or tripling of that now almost billion-dollar business? And then also, would love to understand how you're thinking about the tail of each of individual assets. Should we be thinking of this as a ramp that goes up for a few years and then eventually starts tailing off like other generics, or do you see the stabilizing and having a sustainable tail? And then just on ventricle, you received a positive CHIP opinion in the EU in December. Given that ventricle is already approved in the polyneuropathy indication, wondering how we should be thinking about the price with the addition of the cardiomyopathy indication. Is there any chance for moving that around? And then how we think about the ramp in the EU relative to the US. Thank you so much.

Sure. So I'll start with the last one first. So you're right, we just received EU approval for ventricle. And as you know, there's quite a time lag between approval and then reimbursement in each of the countries. So all I can say is right now, we are in active negotiations with the countries in terms of determining the price of ventricle as well as its reimbursement. You refer to the fact that we already have the 20 milligram approval polyneuropathy in Europe. And we recognize that. That being said, we have, first of all, ATTRCM is a completely different indication. The trials that were conducted as well as the significant mortality benefits that were demonstrated in our clinical trials at ATTRCM are completely different. And we have the clinical data to demonstrate the great patient benefit that we have in ATTRCM. And so that's the basis about discussions with each of the countries in Europe for reimbursement. Your second question was around ventricle growth and sort of the pace of it. I think the way to think about it is the following. We have through analogs seen that only 30 to 50 percent of all rare diseases are ever diagnosed. But of course, we believe that based on the mortality data that we have and the patient benefit that can be derived, that it is critical that we meet that or at least beat that. And so that's what we're intensely focused on. We have 10 percent of our patients, or 9 percent in the U.S. that are diagnosed today. We have a long way to go. And that's what we need to do. Your last question was the

rhythm on the biosimilars. We've had strong growth, 22 percent this year for the year. What can we expect going forward?

That's right. So I think in terms of the biosimilars, again, this is an area of growth that we can anticipate. We have three biosimilars now in oncology plus the two that we have in supportive care. And so we look forward to just being a significant growth contributor to oncology portfolio, not just from a growth percentage perspective, but also from a revenue-based perspective.

Right. I just wanted to add that Vindakul Kodimapati has a positive EU recommendation. So we expect approval to come soon. And you know, that links very nicely to the really helpful outline you did, Angela.

Thanks,

Michael.

All right. And if we could take our last question, please, operator.

Your final question comes from the line of Mani Farahar from SDB. Hey,

guys. Thanks for taking my question. A couple little ones on the rare disease side. In terms of tefamidus, we saw pretty attractive growth, OUS, including some markets that don't necessarily have the cardiomyopathy indication yet. Is there some follow-on benefit in polyneuropathy from the increased promotional efforts in cardiomyopathy in Europe and elsewhere? As a second question, given the expansion of patient opportunity into polyneuropathy in the U.S., you know, how do you think about the opportunity to pursue a supplemental NDA or similar strategy in the U.S. based on the real-world evidence guidelines laid out previously by the FDA, or would that require a separate study? And then finally, on the gene therapy side, obviously pretty interesting data on hemophilia at ASH moving forward into a couple phase 3s now. How do you think about that market in a universe where you have multiple therapies with an curative intent in gene therapy alongside a number of fairly robust chronic therapies? Who are the patients who should receive an irreversible intervention in terms of gene therapy? And who do you think are more appropriate for chronic therapy such as your own benefits? Thank you.

Yeah, I think I will ask Michael to start with the gene therapy and the NAS and all of these great portfolios that we have and how they fit together. Michael?

Yeah, thank you very much. You know, what I think is unique in our hemophilia portfolio, first of course we have a legacy being one of the pioneers for intravenous delivery of factor 8 and factor 9. So we have a platform and experience on the business and on the side. And as you so nicely alluded to, we also shared with our partner Sangamo some very much best in class data recently on the factor 8 gene therapy. Our current portfolio has factor 8 and factor 9 gene therapy plus our TFPI antibody that has, like Hemlibra, an opportunity to provide a subcute alternative, but actually TFPI can be applicable for both factor 8 and factor 9 deficiency. So the way we see it develop is that, you know, I think physicians will look at gene therapies that have durability and good tolerability. And that has really been the hallmark for the strategies when we developed factor 8 and factor 9 best in class profile. Because there are alternatives for these patients, so once they see the data for drugs, treatments that are approved that have durability and really good outcomes, which I think has been so far what we have seen with our gene therapies, those will be the one that can be adopted because there are alternatives that have less convenience but will at least until strong data is available be used. You know, for patients that are early in their disease diagnosed at earlier age, I think this would be a very important treatment as it saves them from, you know, the bleeding, breakthrough bleeding that occur on lifelong treatment with infusion factor. And particularly for patients that are at early age that are very physically active, it is important to have solution for cure. So I think this will be a tremendous important patient populations. But the availability of subcutaneous agents will supplement them and also allow for patients that may have antibodies to gene therapies to use them until a sufficient number of gene therapies available that there is always one for each patient. And finally, as bringing it together, I think what's unique with us is the entire portfolio that can address these patients. And we look really much forward to the era around 2021 and 2022 when we see this portfolio coming into registration phase. I think that was the main piece here.

Yeah, and then Angela, maybe on Vintakl, we have seen some uptick in markets that cardiomyopathy was not approved. What's going on there and about supplement and filing on polyneuropathy?

Yeah, in terms of polyneuropathy in the US, this is something that we're continuing to explore with the FDA. So, you know, no decisions have been

made yet, but we are in discussion.

That's right. Exactly. And then, you know, in terms of the upticks in polyneuropathy, I mean, you know, I'm not sure that it's a cardiomyopathy effect. As you know, we are approved. It's an approved indication for us, XUS. So we continue to actively promote it. And it's probably as a result of those activities.

Yeah, we will have, as we said, approval for that indication. And this is when I will think we will see material impact on Vintakl in cardiomyopathy in these patients. We are not right now. We are just promoting, of course, the indications that we have registered over there. So we don't do anything outside that. All right. I think this concludes more or less our call. Just I wanted to make some comments because really I feel that you are at an exciting point in Pfizer's history. And if you take a big picture of you, over the last decade, we have changed and refocused our approach to R&D. We have improved dramatically its productivity, and we have developed the best pipeline we ever had and one of the best, I believe, in the industry. If you've seen 2019, it was a year that we took deliberate and thoughtful steps to strengthen each one of our businesses and eventually shred the current Pfizer into a new, smaller, -growth-profile enterprise that will remain powerhouse in marketing but also has been converted to the powerhouse of science. Following the expected close of the Abzon and Mylan transaction, of course, we will be a very different company, and we will focus on continuing to execute our strategy. This includes we will continue the commercial momentum and preparing our new product launches. You have all asked a lot of questions about those products that keep surprising with their growth profile, and also you've seen we are taking seriously and we are investing in new launches. We are continuing advancing our internal pipeline and will augment it with mid-stage R&D programs through targeted bolt-on business development opportunities. As I referenced before, we should continue seeing this type of activities in the first and second half of this year. Of course, we are working very intensively to set up Abzon to be in a strong position when it combines with Mylan to become Beatrice and create a formidable company. And of course, we will continue leading the conversation in Washington as we work to address the affordability challenge facing patients. These are the areas that we are focusing for next year. Once again, we look forward to sharing more pipeline updates during our investor day on March 31st. Have a great rest of your day.

Ladies and gentlemen, this concludes Visor's fourth quarter 2019 earnings conference call. Thank you for your participation. You may now disconnect.