Pfizer, Inc.

Everyone and welcome to Pfizer's second quarter 2020 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.

Thank you, Operator. Good morning and thanks for joining us today to review Pfizer's second quarter 2020 financial results, our updated 2020 financial guidance, Pfizer's progress in helping find solutions for the COVID-19 pandemic, as well as other relevant business topics. I'm joined today, as usual, by our Chairman and CEO, Albert Bourla, 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 during 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'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. During my remarks, I will discuss our second quarter business performance, provide an update on our pipeline, and, of course, speak to the progress we are making to combat the global public health challenge posed by the COVID-19 pandemic. Our continued strong performance speaks to the resilience of our business, even during the most challenging times. The second quarter was the first full quarter impacted by COVID-19. Revenues in the quarter included an estimated net unfavorable impact of approximately 500 million or 4% due to COVID-19, primarily reflecting unfavorable disruption to wellness visits for pediatric and declines in adult patients in the U.S. and lower demand for certain products in China. These declines were partially offset by increased U.S. demand for certain sterile injectable products, increased adult demand for Prevnar 13 in certain international markets. Let me start with an update on our biopharmaceuticals group. For the quarter, our biopharma business grew 6% operationally, driven by strong performances from many of our key growth drivers, including VintaCal, Vintamax, Eliquis, Eyebrance, Enlighta, Xtendi, and our biosimilars portfolio. Our ecology business was particularly strong, up 20% operationally compared with a year ago quarter. Global iBranch revenues increased 9% operationally to $1.3 billion during the quarter. In the U.S., iBranch revenues grew 11% and iBranch continues to retain a strong leadership position within the CDK class. The international markets delivered strong 18% volume growth in the quarter. This volume growth was partially offset by price reductions in certain EU markets, which resulted in 3% operational revenue growth outside in the US. The price reductions occurred last year as a result of renegotiating long-term agreements and we expect their impact will continue through to the fourth quarter of 2020 when the price changes annualize. We were surprised and disappointed by the outcome of the PALAS trial. However, we remain confident in IBRAN's strong positioning and expected future performance within the currently labeled metastatic setting given the different treatment paradigms and clinical endpoints used in the setting as opposed to the adjuvant setting. For X10D, alliance revenues in the U.S. were up 32% for the quarter and when combined with our royalty income on ex-U.S. sales, totaled $374 million for a quarter. The strong growth in the U.S. was driven by continued strong demand in both the metastatic and non-metastatic castration-resistant prostate cancer indications. We now have a leading share of new patient starts in both indications, and in the non-metastatic indication, we are also seeing the benefit of a longer duration of therapy. Further strengthening Xtandis performance during the quarter was the metastatic castration-sensitive indications. driven by our ARCSIS study. Extended share on new patients starts increased by 24% this quarter, a strong early signal of the potential adoption by both oncologists and urologists. Global In-Lighter revenues increased 89% operationally, $295 million during the quarter. In the US, In-Lighter revenues more than doubled given by the strong uptake following last year's FDA approvals for two checkpoint inhibitors in combination with Enlighta for first-line treatment of patients with advanced renal cell carcinoma. The international markets also contributed to the performance of Enlighta with 48% operational growth. Looking outside of oncology, Eliquis has continued to deliver strong performance. Pfizer's share of the Global Alliance revenues, including direct sale markets, was up 19% operationally to $1.3 billion. I would also point out that the Bristol Mayor's Squibb-Pfizer Alliance has not yet received the decision from the U.S. District Court related to the patent litigation for two patents covering eloquence. The court has stated that it will issue its decision on or before August 7th. We remain confident in the value of our innovative science and the strength of our patents. Vindica and Vintamax continue to show strong U.S. performance. Our disease awareness efforts helped drive the estimated diagnosis rate to 15% in the second quarter. compared with only 1% to 2% prior to launch. At the end of the quarter, more than 15,000 patients have been diagnosed, more than 10,000 patients have received a prescription, and more than 6,200 patients have received the drug. For the quarter, we estimate the average number of patients in the U.S. taking Ventricle that was approximately 6,000 people. These numbers include patients who are receiving the drug at no cost through our patients' assistance programs. That said, as a result of stay-at-home orders, as expected, we did see a slowdown in new diagnoses in Q2, as fewer patients were visiting doctors' offices for consultations or scintigraphy tests. as health systems have recently begun to resume effective procedures, we are seeing a gradual increase in diagnosis rates and will continue to monitor. Global Zeldin's revenues were up 5% operationally in the quarter to $635 million. Revenues outside the U.S. were up 20% operationally, while U.S. revenues were flat. The underlying prescription demand in the U.S. grew 14% compared with the second quarter of 2019, and 16% compared with the first six months of 2019. However, higher rebate resulting in a lower net price has offset this volume growth. The higher rebating is a result of investments we have made in formulary excess. The excess is driving our volume growth, and we are pleased to have attained favorable excess with most major payers in the US. Our global biosimilars portfolio grew by 36% operationally to $289 million. This was driven mainly by oncology biosimilars, which increased 120% operationally to $139 million during the quarter. In the US, revenues from our oncology biosimilars portfolio grew up by 181%, driven by continued strong demand for our supportive care brands, especially Retacrit, and from early results from our three monoclonal antibody biosimilars, which launched earlier this year. The international markets also contributed with 61% operational growth, led by growth from Trasimera and our supportive care brands. Global Prevnar 13 revenues were down 2% operationally to $1.1 billion. Revenues outside the U.S. grew 18% operationally, driven primarily by significantly increased adult uptake, resulting from greater vaccine awareness due to the COVID-19 pandemic. Although we should note that Prevnar 13 is indicated for another type of pneumonia. as well as continued strong pediatric uptake in China. In the U.S., revenues were down 22%, primarily reflecting the expected impact that COVID-19 mobility restrictions had on wellness visits, particularly observed by the timing of CDC orders. Looking at our sterile injectables portfolio, Our global revenue from the injectables portfolio grew 4% operationally in the second quarter and 10% operationally in the first half. More than 95% of our injectables portfolio is in stock today. In response to the increased demand during the early stages of the COVID crisis, we provided significant incremental shipments of sterile injectables medicines and largely maintained supply continuity. Demand for most of these medicines has since normalized, but we continue to monitor the situation. Let me now briefly speak to some of the modifications we have made to our go-to-market approach that have allowed us to continue to effectively communicate with and serve healthcare providers and patients during the pandemic. We quickly adapted our promotional platform amplifying our existing digital capabilities to reach healthcare providers and customers, and provide critical educational information during this time. This included increasing the scale of our remote engagement. All our US sales representatives are digitally enabled, and we are currently conducting virtual detailing and remote sampling, which has proven to be an efficient way to interact with healthcare providers during this crisis. Overall, more than 75% markets have utilized virtual communication with about two-thirds of our sales reps using the platform. This enabled us to reach 70% of our healthcare providers during this time. Even after the pandemic is behind us, we anticipate digital will remain an important tool for our sales reps as they continue to tailor their approach to physicians and to help us communicate information on our medicines and vaccines when and how these healthcare providers want to receive it. As expected, we understandably saw a significant decrease in in-person patients' physician engagements during the second quarter. and we continue to believe that Q2, and specifically April, should be the low point in terms of physician engagement with their patients. We have begun to see a gradual recovery from the largest impact seen in April, and we anticipate healthcare activity to continue its gradual uptick, but we have not yet reached our pre-COVID trends. There are several factors playing out in real time, such as reopening and potentially reclosing efforts in certain states and countries, as well as timing for resuming effective elective surgeries. As we said last quarter, we see different business units and brands responding differently based on several factors, primarily including the medical necessity, reliance on new patients for growth, oral administration, and patient affordability. APGEN's second quarter revenue decline was, of course, driven by the impact of Lyrica generics in the US. This was our last full quarter of the Lyrica impact on the year-over-year comparisons. And excluding this impact, APGEN revenue declined 6% on an operational basis to $2 billion as compared with a 31% operational decline with the Lyrica Inter. I know from an Upjohn perspective, there is a lot of focus on China. And I was very pleased to see that Upjohn's China business delivered 17% operational growth during this quarter, compared with the second quarter of 2019. This growth was driven primarily by Lipitor and Norvasc. Milan shareholders have voted nearly unanimously to approve the combination of Abzon and Milan to create Viatris. Abzon also completed a successful debt offering, raising approximately $7.5 billion in U.S. dollar-denominated notes and 3.6 billion euros in euro-denominated notes. The proceeds will almost entirely fund the $12 billion dividend to be paid to Pfizer once AppZone is separated and the completion of the transaction. We are continuing to progress toward a successful close of the transaction, which is now expected in the fourth quarter of 2020. Now I will turn to our R&D pipeline, beginning with an update on our COVID-19 related efforts. Yesterday, Pfizer and our collaboration partner BioNTech announced the start of a global, except for China, Phase 2-3 safety and efficacy clinical study to evaluate a single candidate from our BNT162 mRNA-based vaccine program against SARS-CoV-2. After extensive review of preclinical and clinical data from approximately nearly 120 patients in B2 from Phase 1-2 clinical trials in the US and Germany, And in consultation with the FDA and other global health authorities, we have chosen to advance our B2 vaccine candidate into the Phase 2-3 study at the 30-microgram dose level in a two-dose regimen. Dosing began in the U.S. yesterday. Our B2, which recently received fast-track designation from the FDA, encodes an optimized SARS-CoV-2 full length spike glucoprotein, which is the target of virus neutralizing antibodies. During preclinical and clinical studies of four RNA vaccine candidates, both B1 and B2 emerged as strong candidates based on assessments of safety and immune response. Pfizer and BioNTech selected B2 as the candidate to progress to a Phase II-III study based on the totality of available data from our preclinical and clinical studies, including select immune response and tolerability parameters. In the preclinical studies, B1 and B2 candidates induced favorable viral androgen-specific CD4 and CD8 T cell responses. High cell high levels of neutralizing antibody in various animal species, and beneficial protective effects in a primate SARS-CoV-2 challenge model. Preliminary clinical phase 1 data from nearly 120 patients demonstrated a favorable overall tolerability profile for BNT162B2 from our B2 candidate as compared with our B1 candidate. with generally mild to moderate and transient systemic events, such as fever, fatigue, and chills, and no serious adverse events. I also want to specifically mention that the effect we have observed in our preliminary data of the second boosting dose is important, and we believe it reflects a strength of the RNA platform. The ability to boost is important. because it means that if immunity fades over time, it can potentially be restored by repeat immunizations. As we continue to evaluate the potential vaccine candidates, we look forward to gaining additional insights. Yesterday's announcement is an important and encouraging milestone in our collective efforts to find potential medical solutions to help combat the current global health crisis. It's the culmination of an extensive collaborative and unprecedented R&D program involving Pfizer, BioNTech, clinical investigators, and study participants who all have a singular focus, developing a safe and effective COVID RNA vaccine. We will continue to work closely with regulatory authorities, including the FDA, to advance our program while ensuring we maintain high standards of quality, safety, and compliance in our development process. We know the FDA and other regulatory bodies will continue to uphold their high standards as well. If the Phase 2-3 trial is successful, Pfizer and BioNTech expect to be ready to seek emergency use authorization or some form of regulatory approval as early as October 2020. If authorization or approval is obtained, our companies currently aim to supply globally up to 100 million doses by the end of 2020, and approximately 1.3 billion doses by the end of 2021. Last week, we announced two agreements that will help ensure people have access to this potentially breakthrough vaccine, assuming, of course, clinical success and regulatory approval. On July 20th, we announced an agreement with the United Kingdom to supply 30 million doses of our vaccine candidate, which we expect to be delivered in 2020 and 2021, assuming clinical success and regulatory approval or authorization. Then on July 22nd, we announced an agreement with the U.S. government for up to 600 million doses. Under the agreement, the U.S. will pay Pfizer and BioNTech a total of $1.95 billion upon the receipt of the first 100 million doses, following FDA authorization or approval. The U.S. also can acquire up to additional 500 million doses. Pfizer's unique combination of experience, resources, and manufacturing capabilities in vaccines is a competitive advantage for us. And one of the reasons I'm confident in the potential of our collaboration with BioNTech to be successful. We are also moving forward with the development of a potential novel antiviral, which we hope to have in the clinic by September. Now let's look at some highlights from the rest of the pipeline, which continues to be one of Pfizer's great strengths. In addition to our COVID-19 vaccine program, we recently started four I repeat, four phase three studies for vaccines that we hope will make meaningful contributions to the lives of people everywhere. These include two studies for the 20-valent pneumococcal conjugate vaccine candidate, evaluating a four-dose series in infants starting at two months of age. A study, a phase three study of our respiratory vaccines syncytial virus vaccine candidate, RSV-PREF-F. In pregnant women, to evaluate the safety and efficacy of the candidate in infants born to immunized pregnant women as compared with placebo. And a phase three study of the pentavalent meningococcal vaccine candidate, ABCWY. In adolescents, and young adults to assess the safety, tolerability, and immunogenicity of the vaccine candidate compared with licensed meningococcal vaccines. We also announced a collaboration with Valvina, excuse me, with Valneva to co-develop and commercialize Valneva's Lyme disease vaccine candidate, FLA-15. which is currently in phase two clinical studies. Our vaccine teams accomplished all of this while also working with a deep sense of urgency in partnership with BioNTech to develop a potential COVID-19 vaccine. Despite the disruption that the pandemic has brought to our world, they stayed true to the ambitious timelines for our existing programs. And I couldn't be prouder of their commitment. From our rare disease gene therapy portfolio, we had two important data results in the last quarter. We presented the data from our investigational mini-dystrophin gene therapy program for Duchenne muscular dystrophy at the American Society of Gene Cell Therapy annual meeting. The preliminary data from nine ambulatory boys with DMD aged 6 to 12 indicate that the intravenous administration of our program was well tolerated during the infusion period with encouraging efficacy and manageable safety events. Of interest, since those original nine boys for whom we served data were dosed, we have dosed an additional six boys at the high dose in compliance with our modified protocols. To date, we have not seen any serious AT events in any of the six new boys, five of whom have reached at least two weeks post-treatment, which is the time period in which all previous adverse events were experienced. We look forward to starting the pivotal trial for this potential therapy later this year. We also presented at the World Federation of Hemophilia 2020 World Congress Hemophilia A, data from , from our partnership with Sangamo Therapeutics. The data demonstrated that five subjects receiving the highest dose of the gene therapy have at between 30 and 61 weeks of follow-up sustained functional factor VIII activity levels without the need for additional factor replacement following an initial use of prophylactic factor. This shows the potential of our gene therapy to be differentiated from other Haemophilia A gene therapies being evaluated in the clinic. Pfizer is currently enrolling subject in a six-month Phase III lead-in study for the Haemophilia A gene therapy program, which will serve as the foundation of our Phase III registrational expected to start again later this year. In internal medicine, we recently presented at the American Diabetes Association Conference Phase 1 data from our oral GLP-1, which showed reduction of glucose level and body weight. Our aspiration is to develop the most efficacious oral therapy for type 2 diabetes and develop the first small molecule oral GLP-RA for both obesity and type 2 diabetes mellitus. We are also aware of the increasing evidence indicating that the GLP-1RA class may so promise for the treatment of NASH and are open to further exploration as we review the data. In inflammation and immunology, we are excited that Abracitinib has consistently shown meaningful efficacy across all of our four studies, from adolescents to adult patients, with moderate to severe atopic dermatitis. Results from our compare study showing superiority in each at week two for the 200 milligram dose. And that indicates that abracitinib can demonstrate a clinical benefit over dupixin. Our program has advanced at a rapid pace, and we intend to file with FDA this quarter. In oncology, building on our presence in genitourinary cancers, we are pleased by the FDA's recent approval of Bavenzio as a first-line maintenance treatment for patients with locally advanced or metastatic urophilia carcinoma. Bavenzio is the only FDA-approved immunotherapy with a demonstrated overall survival benefit in the first line setting in the UC. And we believe it has the potential to become a new standard of care based on its demonstrated ability to extend the lives of patients and address a significant unmet medical need. On July 16, the treatment was listed in the cancer treatment guidelines put out by the National Comprehensive Cancer Network. We look forward to providing further R&D pipeline updates during our upcoming Investor Day, which will be held over two days in a virtual format on September 14th and September 15th. Now, before I turn it over to Frank, I want to speak to the executive orders the President signed on Friday. Overall, I'm disappointed by these executive orders. They pose enormous destruction at a time where the industry needs to be completely focused on developing a potential COVID-19 vaccine or treatment. The international price index is radical. Not only is it imposing socialized medicine to America, it also will create uncertainty and could lead to job losses. We have plans to invest in both R&D and manufacturing in the United States. If finalized, these new executive orders could force us to rethink those plans, consider job reductions, and add to the economic and health anxiety already widely felt in our country. The one concept we agree with is the rebate rule because it will actually make the system work better by removing inefficiencies created by the middlemen. It will ensure our discounts make it to patients. The patients are the ones that drive the volume of our medicines and, in effect, earn the volume discounts we provide to middlemen. The problem has been that most of these discounts don't make it back to the patients. In summary, our results continue to support our thesis of having multiple growth drivers across different therapeutic areas driving the business. As we have said in the past, by design we are not overly dependent on any single growth driver, which gives us continued confidence in our ability to achieve our goal of at least 6% revenue CAGR through 2025, following the completion of the pending Abzon-Myelin combination. Following the expected separation of Abzon in the fourth quarter of this year, Pfizer will be a more focused, science-driven company that is even better positioned to deliver our innovative medicines and vaccines to patients around the world. And when patients win, we all win. Now I will turn it over to Frank.