Pfizer, Inc.

Good day, everyone, and welcome to Pfizer's fourth 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, everyone, and thanks for joining us today to review Pfizer's fourth quarter and full year 2020 financial results. our 2021 financial guidance, as well as other relevant business topics. I'm joined today as usual by our Chairman and CEO, Dr. Albert Borla, Frank D'Amelio, our CFO, Michael Dolson, President of Worldwide Research, Development and Medical, Angela Wong, Group President, Biopharmaceuticals Group, John Young, our Chief Business Officer, and Doug Langler, 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.

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You'll see here on slide three our disclaimer regarding forward-looking statements we will make during this call regarding, among other topics, our anticipated future operating and financial performance, business plans and prospects, and expectations for our product pipeline. and inline products, which of course are subject to risks and uncertainties. In addition, we'll be using non-GAAP financial information. Additional information regarding forward-looking statements and our non-GAAP financial measures is available in our earnings release, including under the disclosure notice section and under risk factors in our SEC forms 10-K and 10-Q. The forward-looking statements on this call speak only as of the original date of this call, and we undertake no obligation to update or revise any of the statements. 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. 2020 was a year like none other in Pfizer's history. With the separation of Absinthe complete, we saw the culmination of Pfizer's decade-long conversion into a pure play, science innovation focused company. Through our collaboration with BioNTech, we delivered the world's first breakthrough COVID-19 vaccine in less than a year. And by harnessing the power of a variety of digital capabilities, we made sure that despite the lockdowns and travel restrictions, we continue to serve patients around the world who rely on our medicines and vaccines. Despite this challenging environment and the incredible amount of resources we devoted to develop a safe and effective COVID-19 vaccine, we generated 8% operational revenue growth for the year from our core biopharmaceutical product portfolio, excluding the revenue impact from consumer healthcare and excluding $154 million in sales of the Pfizer-BioNTech COVID-19 vaccine that were recorded in the first quarter. Keep in mind that this 8% operation growth includes a negative 2% impact due to the slowdown in macroeconomic and healthcare activity resulting from the pandemic. This operational growth was driven primarily by continued strong performances from Vintagel, Vintamax, Eliquix, Oncology by Similars, Eyebrands, Prevnar 13 outside the US, Enlighta, Zelzans, and Xtend. So basically, all the growth drivers contribute significantly.

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Full-year adjusted diluted EPS was 2.22, up to 80% operationally from 2019. I would like to point out that revenues and expenses associated with the Abzon business have been recategorized as discontinued operations and excluded from our adjusted results. So overall, we had a strong year, which positions us well as we begin to operate as one global focused biopharmaceutical company, which I have envisioned for the past several years. Let me start with a discussion of some of our key growth drivers. Vindical and Vindamax generated revenues of $1.3 billion in 2020, up 170% operationally. Our disease education efforts continue to support appropriate diagnosis, increasing diagnosis rate to move the 21% at the end of the fourth quarter, as compared with approximately 2% before we launch, from 2 to 21. As of December 31st, More than 20,500 patients have been diagnosed, more than 40,500 patients have received prescription, and more than 8,500 patients have received the drug, including patients who received the drug at no cost through our patient assistance programs. We continue to see a recovery in new diagnosis since Q3, and the gradual rebound in new patients starts. With the current resurgence of COVID-19, however, we are seeing varying levels of regional lockdowns that could impact this recovery. Eliquis delivered another strong performance in 2020, with revenues up 18% operationally to $4.9 billion for the year. In the U.S., strong volume growth was partially offset by a lower net price due to an increased number of lives in the Medicare coverage gap and the expansion of that gap. as well as unfavorable channel mix. Revenues from our global biosimilars product portfolio grew 68% operationally and totaled approximately $1.5 billion for the full year 2020, making them a meaningful contributor to our growth. This was driven primarily by our oncology biosimilars, which grew 203% operationally, generating revenue of $866 million. Global I-Branch revenues increased 9% operationally to $5.4 billion in 2020. I-Branch continues to be a leader in the CDK4-6 inhibitor class for metastatic breast cancer. In fact, 8 out of 10 first-line HR-positive, HER2-negative metastatic breast cancer patients in the U.S. who are prescribed a CDK4-6 inhibitor, receive IBRAMs. This is a testament to the continued benefit IBRAM delivers to patients with its compelling safety and efficacy profile. Based on the continued strong prescribing patterns, IBRAM's compelling safety and efficacy profile, and more than five years of using everyday clinical practice with continued positive patients and physician experiences, we remain confident in its future performance of the metastatic setting. Global Prevnar 13 revenues were up 1% operationally to $5.9 billion in 2020. Revenues outside the US grew 13% operationally in 2020, driven primarily by increased adult uptake in certain international markets, resulting from greater vaccine awareness arising from the COVID-19 pandemic, although I should note that Prevnar-13 is indicated for the prevention of pneumonia resulting from pneumococcal bacteria, not SARS-CoV-2, strong pediatric uptake in China also contributed to this growth. In Libra, had a strong 2020 performance, growing revenues 66% operationally. For the full year 2020, global Zeldan's revenue grew 9% operationally to $2.4 billion. The underlying prescription demand in the U.S. grew 12% in 2020 compared with 2019, outpacing the advanced therapy market by 9%. We have invested in formulary access in the U.S., which played a vital role in enabling this volume growth. Last week, we reported top-line data from a post-marketing safety study which did not meet the non-inferiority criteria for the co-primary endpoint of MACE and magneticness, excluding non-melanoma skin cancer, versus TNFI. We are continuing to analyze the secondary endpoints of the study, and we'll discuss the full data set, as well as the potential implications to labeling, with regulatory agencies. At this point, it is premature to make an assessment as to what impact this data may have on Zeldens, but of course, patient safety remains our priority.

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For Xtandy, Alliance revenues for the U.S. were up 22% for the year. And when combined with our royalty income from X-U.S. sales, totaled 1.4 billion dollars. Extending new patient starts grew 12%, bolstered by the successful launch of the metastatic castration-sensitive indication, which is helping patients earlier in their disease who will benefit from a longer duration of therapy. Of course, the biggest story of 2020 for Pfizer was our work with BioNTech to develop and deliver the world's first COVID-19 vaccine authorized for use in developed markets. It took us just 248 days to get from the day we announced our plans to collaborate with BioNTech to the day we submitted to the FDA for emergency use authorization. And I couldn't be more proud of how our colleagues stepped up when the world needed us the most. Our ability to move at such extraordinary speed while always maintaining our focus on quality and safety was the first powerful display of what the new Pfizer is capable of. While we never imagined a pandemic of this magnitude, every action we have taken over the past several years has been to transform Pfizer into an agile scientific powerhouse capable of addressing the world's most devastating diseases like the one that happened now. The manufacturing and distribution of our COVID-19 vaccine have gone very well as well. Not only did we achieve our commitment for 2020, but as of January 31st, we had supplied 65 million doses globally, of which 29 million doses were supplied to the U.S. government. We are continuing to work closely with the U.S. government on our production, release, and shipping schedules to help states ensure Americans receive their first and second doses to the vaccine on time. We have provided the government with a specific forward-looking schedule so they can plan accordingly. We foresee no issues with delivering the commitments we have made and expect to deliver 200 million doses to the US by end of May, two months earlier than our contractual obligation. Because of the dire need to vaccinate more people we have explored innovative plans to increase the number of doses we are able to produce globally by the end of 2021. As a result, we now believe that we can potentially deliver at least 2 billion doses in total by the end of 2021. This is based on the updated six-dose label, continuous progress improvements and expansion at our current facilities and adding more suppliers as well as contract manufacturers. We are now approaching a year since the beginning of the pandemic. Based on what we have seen so far, we believe it is increasingly likely that a durable COVID-19 vaccine revenue stream, like is happening in flu, is a potential outcome for a couple of reasons. First, there likely will be a need to boost regularly to maintain high levels of vaccine-elicited immune response. Second, and maybe more important, we may need to boost to counter the threat of the emerging mutant strains we have seen with variations in the spike receptor binding domain site. Genetic mutations occur naturally during virus replication and spread. We recently announced results of in vitro studies that saw that sera from people who have received our COVID-19 vaccine effectively neutralize the virus bearing the SARS-CoV-2 UK variant spike, and also neutralize and engineer SARS-CoV-2s with key mutations from South Africa variant and UK variant spikes. We are encouraged by these early in vitro study findings and will continue to monitor our vaccine's effectiveness in preventing COVID-19 caused by the virus strains in circulation. We are awaiting data on neutralization of an engineered SARS-CoV-2 with a full set of mutations from the spike of the South African variant. That said, there is an increasingly probable scenario when it could become necessary within the next few years to boost COVID-19 vaccinated patients with a vaccine encoding a spike variant. One of the reasons Pfizer and BioNTech chose to utilize an mRNA platform is because of the potential for the flexibility of the technology in comparison to traditional vaccine technologies. This flexibility includes the ability to alter the RNA sequence in the vaccine to potentially address new strains of the virus if one ever were to emerge, but it is not covered by the current vaccine. Of course, this requires additional development work and regulatory submissions and approvals. Pfizer and BioNTech are preparing for such a possible scenario by working closely with regulatory agencies as well as relevant scientific bodies to enable vaccine technical committees to review data and make appropriate updates to recommendations. Regarding other applications of the mRNA platform, we are advancing plans to deploy this technology for flu vaccines and may explore other opportunities to work on other viral diseases and other therapeutic applications outside infectious diseases. Turning now to our 2021 guidance, I want to share just a few posts as Frank will go into more detail. The midpoint of our 2020 revenue guidance ranks reflects 6% operational growth compared to 2020 if you exclude completely the impact of our COVID-19 vaccine. While there are signs that COVID-19 may be here for some time, which could result, as I said, in a more recurring revenue stream, we are carving out the COVID-19 vaccine's revenue for now. Frank will provide some context on both our anticipated COVID-19 revenue and margins in his remarks. While the COVID-19 vaccine has created a new cash flow stream, there is no change in our capital allocation priorities. We remain focused on growth initiative and the growing dividend, though at a slower rate. Now let's turn to the pipeline, which is the engine for the new Pfizer and continues to be one of our great strengths. As discussed during last September's investor day meetings, we still see unappreciated potential in our pipeline, particularly in our disease, vaccine, and internal medicines R&D portfolios. I would like to start with highlighting the incredible improvements we have driven in our clinical success rates and how they compare with industry benchmarks. Between 2015 and 2020, our phase two success rates on a five-year rolling average more than tripled from 15 to 52%, which is almost double the 2019 industry benchmark of 29%. Significantly, most of these successes are either first-in-class assets of innovations built on established mechanisms with novel scientific designs. Our phase three success rate on a five-year rolling average improved from 70 to 85%, 13 points higher than the 2019 industry benchmark of 72%. And our end-to-end success rate more than quadrupled from 5% to 21%, almost triple the 2019 industry benchmark of 8%. I would also point out that while our phase one success rates on a three-year rolling average stayed flat at 48%, This is eight points higher than the 2019 industry benchmark. We believe these metrics demonstrate that through our science, we are selecting assets to move through the research and development process that have the best chance of benefiting patients. This did not happen by accident, but was a result of a purposeful R&D turnaround strategy that we began in 2011. We aim to sustain these success rates, which we believe clearly demonstrate the value of our pipeline. In rare diseases, we achieved two phase three study starts since our last earnings call. On November 23rd, we announced the third participant has been dosed in the phase three basis study of masticimab. an anti-tissue factor pathway inhibitor being evaluated for the treatment of people with severe hemophilia A or B. On January 7th, we announced we had closed, we had dosed the first participant in our phase three Duchenne muscular dystrophy gene therapy program. The CIFREA trial is expected to enroll 99 ambulatory male patients ages four through seven across 55 clinical trial sites in 15 countries. Our DMD program is the first gene therapy to start the phase three trial with a potential first and best in-class profile. In inflammation, our unique ritlacitinib, the JAK3-TEK selective, oral small molecule, has reported positive top-line results in two Phase II studies, one for vitiligo and one demonstrating strong clinical remission rates in ulcerative colitis. Data from both studies will be presented in scientific congresses later this year. Last October, we announced FDA and EMA filing acceptance of our applications for abracitinib, in patients with moderate to severe atopic dermatitis with a priority review PDUVA day for the FDA in April. There is a large unmet medical need here. Many of the 60 million patients are not well controlled on current therapy or are simply untreated. And we see an attractive opportunity to capture many of these patients. In other words, we are not just looking to convert existing patients from other therapies. In vaccines, the FDA had accepted for priority review the biologic license application for our investigational 20-valent pneumococcal conjugate vaccine for adults 18 years of age and older, with a PDUVA date expected in June. If approved, we believe the vaccine could provide the most comprehensive coverage against pneumococcal disease in adults compared with the standard of care and other pneumococcal conjugate vaccines in late stage clinical development. In internal medicine, we are progressing potentially novel treatments that address underlying causes of metabolic diseases and cardiovascular risk. We initiated a phase two B clinical trial to evaluate buprenorphine, for the potential to reduce cardiovascular risk and treat severe hypertriglyceremia. Our phase two diabetes trial for our oral DLT1 trial is enrolling rapidly, and we expect to initiate a phase two trial for obesity shortly. We expect a proof of concept readout in the third quarter of this year, which will inform the next step, the potential pivotal phase 3 program. In oncology, we recorded robust response rates for BRAFTOVI in the phase 2 ANCOR first-line colorectal cancer study and have initiated a phase 3 pivotal trial. We also achieved a positive readout for talazoparid in DDR plus metastatic prostate-resistant prostate cancer in the phase 2 TALA-PRO1 trial, which gives us increased confidence for a potential positive outcome of the Pivotal Phase III TalaPro2 trial, which has an expected readout for all comers in 2021 and subsequently for the DDR Plus subset of patients. We are very excited about Elranatanab, our investigation BCMA CD3-targeted bispecific antibody for the treatment of multiple myeloma. In December, we presented encouraging data from our ongoing phase one trial that demonstrated high response rates and manageable safety in patients with relapsed or refractory multiple myeloma, including a few patients who relapsed on or progressed after prior BCMA targeted therapy. In late January, Elranathamab received fast-track designation for treatment of patients with multiple myeloma who are refractory to at least one proteasome inhibitor, one immunomodulatory drug, and one anti-CD38 antibody. We recently initiated the potential registration-enabling phase 2 trial of Erlanatamab monotherapy. in triple-class refractory multiple myeloma, and we anticipate the first patient to be dosed this month. As you can see, tremendous, tremendous activity. Before I close, I want to say a few words about affordability. As we have said, our breakthrough medicines and vaccines won't do anyone any good if people can't affordably access them. We believe that industry has generated a great deal of goodwill with Congress and public opinion through our COVID-19 treatment and vaccine efforts. And we hope we can build on this goodwill by working together on a solution, including making a contribution as an industry through legislation or executive action that results in lower out-of-pocket costs to patients. The status quo simply won't cut it, and we look forward to working with the Biden administration and members of Congress from both sides of the aisle to help ensure our breakthroughs are accessible to all. In summary, 2020 was a transformational and very successful year for our companies. and we look forward to sustaining this momentum in 2021 and beyond. We remain focused on being nimble and investing in our R&D organization so we can build on the strong improvement in key metrics we have seen over the past five years. We continue to expect a revenue CAGR of at least 6% on a risk-adjusted basis. Through the end of 2025, and double digit growth on the bottom line. I would note that these projections do not include any potential impact from our COVID-19 vaccine. We remain very confident in our ability to achieve these growth rates because of the strength of both our current product portfolio and our R&D pipeline. At the same time, we will continue to pursue business development opportunities with the potential to enhance our long-term growth prospects post 2025. We will focus mainly on smaller deals that fit within our current therapeutic areas. And as always, we are focused on value generations for Pfizer shareholders, not those of potential acquisition targets. Now I will turn it over to Frank to provide details on the quarter and our outlook for the remainder of 2021.

Thanks, Albert. Good day, everyone. I know you've seen our release, so let me provide a few highlights regarding the financials. We again saw very solid revenue growth for the business in the quarter and the year, which continues to support our projected 6% plus revenue CAGR through the end of 2025. As a reminder, this growth projection excludes any contribution from the COVID vaccine. In terms of the price and volume mix for the year, if I go off of the 8% operational growth we posted, excluding consumer health care and the COVID vaccine, our underlying biopharmaceuticals portfolio generated 10% volume growth, offset by a negative 2% price impact, so continued very strong volume overall. Foreign exchange had a slightly positive impact on revenue in the quarter, with a 1% benefit for the full year, while for the full year, we saw an overall negative impact of 1%. So 1% positive for the quarter, 1% negative for the full year. Now, moving down the income statement. Adjusted gross margins were lower in the quarter, mainly due to the negative impact of foreign exchange, product mix, and unfavorable year-over-year impact of cash flow hedging on inventory and COVID-related expenses. However, it's important to note that on an annual basis, adjusted gross margin for 2020 was within 90 basis points of 2019 at around 80%. Adjusted SINA expenses in the quarter were lowered by 2%, on an operational basis and lower by 10% on an annual basis, there remain two main factors that drive the decrease for the year. The exclusion of consumer health and lower selling expenses due to COVID. And to a lesser extent, the early implementation of a planned reduction in spending associated with our corporate enabling functions. Adjusted R&D expenses grew 24% in the quarter and 15% for the year on an operational basis. This growth was primarily driven by our investment in developing the COVID-19 vaccine. Reported diluted EPS for the quarter was up significantly compared to the prior year quarter, mainly driven by lower asset impairment charges compared to the year-ago quarter. For the year, reported earnings were lower, mainly due to the non-recurrence of the gain on the consumer joint venture formation in 2019. And adjusted diluted EPS grew 17% for the quarter and 20% for the year on an operational basis. I'd add that our full year adjusted diluted EPS was $2.22, which is below the range of 228 to 238 we had given in terms of new FISA financials on a full year basis. I just want to remind you that we had indicated on last quarter's earnings call that our actual reported numbers would be lower than the guidance, because the guidance assumed a full year of operating without Upjohn, as well as assuming a full year benefit of transitional service agreement recoveries and lower interest expenses from the deployment of the $12 billion in proceeds to pay down debt. So with the deal not closing until November, we only had a small benefit from these factors in our reported 2020 financials. Now let's move to our 2021 guidance. We provided total company guidance, which includes the COVID vaccine, and then we provided some additional sub-ledger detail on our assumptions regarding the projected COVID vaccine contribution So you can also get a read on the business . In terms of revenue, we are projecting a range of $59.4 to $61.4 billion, which includes a foreign exchange benefit of approximately $1.4 billion. And at the guidance range, midpoint represents operational growth of 41% from 2020. For adjusted cost of goods, the range is 32 to 33% as a percentage of revenue, which incorporates the COVID vaccine gross profit share payment to BioNTech, as well as some other related items I will speak to in a moment. On SINA, what we see is the impact of increased sales and marketing expense behind key growth brands, as well as for expected product launches by our enabling function cost savings. In addition, we see growth in R&D, which follows along with our pipeline development cadence. And I note, given our clinical trial success metrics Albert referenced, who are confident about making sound R&D investments. Adjusted other income and deductions is projected at just over $2 billion of income. In addition to the usual items included here, we remind you, for modeling purpose, that three larger items in terms of income are our GSK consumer healthcare joint venture equity income, VIV dividend income, and transition service agreement recoveries, primarily related to VITRAS. Working this through with our projected 15% tax rate yields an adjusted diluted EPS range of 310 to 320, or 38% operational growth at the midpoint. This range is a bit higher than what we discussed three weeks ago and was driven mainly by an increase in our COVID vaccine sales projections since then. Let me offer some assumptions in context on the projected COVID vaccine financial contribution and our collaboration agreement. The Pfizer-BioNTech vaccine collaboration construct is a 50-50 gross profit split. Pfizer will book the vast majority of the global collaboration revenue, except for Germany and Turkey, and we do not participate in China. We continue to expect that we can manufacture up to 2 billion doses in 2021. However, given it is still early in the year, we are not projecting that we will sell all those doses. Ultimately, we may contract for all the doses, but for the purposes for our initial guidance, we've primarily included doses that are covered by strong supply agreements with various governments. On this, we currently forecast approximately $15 billion in COVID vaccine revenue, which is what you see here. Given we remain in negotiations for additional contracts, we are not providing the number of doses behind the revenue estimate. Our cost of sales for the COVID vaccine revenue will include manufacturing and distribution costs, a royalty payment allowance, as well as a payment to BioNTech representing the 50% gross profit split. All in, this yields an anticipated income before TAP's COVID vaccine in the high 20% range. Let me add that if we contract for the delivery of additional doses during the year, we will provide a guidance update in our subsequent earnings releases. If we remove the projected COVID vaccine contribution and related impacts on revenue, that results in our business having 2021 projected annual revenue between 44.4% $46.6 billion. So 6% operational revenue growth at the midpoint and about 8% if we include the current favorable impact of foreign exchange compared to last year. In terms of adjusted cost of goods, net of the COVID vaccine, we see a range between 21 and 22% as a percentage of revenues. For adjusted diluted EPS, we see a range of 250 to 260, which represents 11% operational growth at the midpoint. These growth rates are all consistent with how we've been publicly positioning the business subsequent to the Upjohn separation. In terms of reporting our quarterly earnings, we are not going to report two sets of financials, one with COVID and one without, but I think the context in terms of the vaccine margins will be helpful in calculating a good estimate of the adjusted diluted EPS impact based on the COVID vaccine revenue we will report in future earnings releases. Let me speak for a moment about our dividend going forward and how it will initially be linked to the Vietris dividend once it is declared. To make it simple, let's start with Pfizer's current annualized dividend rate of $1.56 per share. A Pfizer shareholder owning 100 shares just prior to the spinoff would now still own their 100 shares of Pfizer and also 12 shares of Vietris, assuming they have continued to hold the Vietris shares. The 100 shares of Pfizer would generate $156 in annual dividend income and currently the 12 shares of Vietris do not generate any dividend income. This $156 in annual dividend income is what we will preserve. Once Vietris declares its dividend, we will calculate the annual income generated by the 12 shares of Vietris and then adjust the FISA dividend so the combined annual income generated from the 100 shares of FISA and 12 shares of Vietris totals at least at $156 in 2021. For the foreseeable future, We expect our board to continue to support annual dividend increases at approximately this year's level. Obviously, we have no say as to what Beatrice does with its future dividend. I hope this example is helpful. In summary, we had a strong 2020. The separation of Upjohn is behind us. The business is on track for solid top and bottom line growth, and we are highly focused on advancing our pipeline, supporting in-market brands, and looking to deploy capital responsibly with a focus on initiatives that can solidify our long-term revenue earnings growth. With that, I'll turn it back to Chuck.

Great. Thank you, Frank and Albert, for the prepared remarks. Operator, at this point, can we please poll for questions? Thank you.

Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypads. Your first question comes from the line of David Reisinger from Morgan Stanley.

Thanks very much. So... First of all, congrats on the phenomenal vaccine progress and the benefits that Pfizer is driving for society. That's much appreciated by everyone on this call and beyond. My two questions relate to vaccine prospects and Zeldjian. So first, could you speak to how you are projecting vaccine sales for 2020?

David, unfortunately you are cutting off and I couldn't hear you. Can you repeat the question of the vaccine from the beginning?

The question is, with respect to the vaccine,

Unfortunately, the line is not good, David. We can't hear you.

Maybe, Dave, you can come back in. Operator, can we move to the next question?

Your next question comes from the line of Steve Scala from CalWeb.

Thank you. I have two questions. In what scenarios would you not sell all 2 billion doses of COVID vaccine Pfizer can manufacture in 2021? Some competitors haven't exactly exceeded expectations and only a small fraction of global demand has been satisfied to date. So it seems as though you'll sell every dose you make in that the current guidance is going to be way low. Second question is on the Zell Jan CV study, should we assume DVT tracked similarly to MACE? And given that Pfizer has other jacks in development, What do you believe are the long-term implications for the Jack class overall, given this recent Zelle-Jan CV study?

Thank you, Steve. Let me take the COVID one, and then I will ask Michael to comment on the Zelle-Jan first part, and then Angela on the implications on commercial. Steve, we try not to give a low expectation. We try to give a responsible expectation. If you are asking if there is a scenario that we will sell everything, yes, there is. Also, I would tell you that if that was an open market, which means that the physicians and citizens, they have the ability to choose which vaccine they will receive, I would feel very comfortable that we will have the lion market, sir, because we are first and we are best, as you have clearly indicated, and we have great operations in basically every country in the world. But this is not an open market, at least for this year. This year, it is a market that it is controlled by governments appropriately because I think we are in a crisis, as you know. And also it is a market that creates a lot of political pressure. So not always the decisions are sound, solid and avoiding panic. So with that in mind, we have a formula that we try to implement in a responsible way that takes into consideration the contracts that we have, the potential for future contracts, but also takes into consideration the strength of the contracts, takes into consideration the potential for other vaccines to present data. And in fact, the reason why we changed our revenue projections, which resulted in 10 cents improvement in our bottom line, it is because we did have more news from the AstraZeneca registration and the way that it is perceived in Europe. We had the news from the J&J that reported data. We have much better visibility now in the last two weeks on their manufacturing capabilities. All of that resulted in us increasing our projections. Clearly, there are a lot. This is a multidimensional and, let's say, challenge to have accurate projections, and clearly, we are having dynamic changes, which we will follow and we will update our estimates as time comes. But in all honesty, I couldn't responsibly just say right out, we are going to sell everything we can make, the two billions, when we have all this dynamic situation that it is evolving. Now, why don't we move to Michael to talk a little bit about the maze on Zeldans and then Angela on the revenues expectations.

Yeah, thank you Albert and Steve for the question. As you know, the 1133 study for Zellians was a rather unique population with increased CV risk. Now, Zellians has been studied in numerous clinical trials and in the market where a large population have used it in a more general RA population or in ulcerative colitis. And in those populations, it has had a very robust efficacy to safety profile. I think RA by itself has more CV liabilities than standard RA patients. And this was a very specific subset. Now going to other JAK inhibitors, the next generation of JAK inhibitors, such as Abucitinib in registration for atopic dermatitis, or as Albert reported, Ritlecitinib, which is a unique JAK3 tech inhibitor. Each JAK inhibitor differ by itself, and we think both of these two that I mentioned have very encouraging benefits to risk profile. And while regulatory agencies have, in some instances, inferred a general class label across JECs, I think the experience will tell that abucitinib for atopic dermatitis has a very compelling efficacy and risk profile, and riblicitinib for alopecia that's reading out later this year or for vitiligo and ulcerative colitis, where we have very encouraging phase II data, again, has a unique profile. So I don't think that we should extend 1133 to other JAKs, and I think we also need to look at cellulose having a very robust profile in populations that was not the smaller version of the 1133 study. Thank you very much.

Thanks, Michael. And then just building off of what Michael has said, as you know, we have a very robust data set that has been built around ZelleJans for over seven years, 50 different clinical trials, 260,000 patients that are currently on ZelleJans, and of course, a very robust real-world real-world data set that goes along with these 260,000 patients. So I think based on all of this, and together with the fact that we are still so early on in our understanding of the 1133 data as it pertains to Zell Jams, that we feel confident that Zell Jams will remain an important part of the treatment paradigm for RA patients and for patients with PSA and UC as well. and that it has an appropriate and favorable benefit-risk profile for this sort of patient population type. And so of course, we will share the data with you as we continue to learn more about the study. But for now, that's how we see it. And then I think you had one more question in terms of how do we think about this in terms of impact on our other JACs. And as Michael said, scientifically, Each one of these molecules are very different, and they're all being designed with a different benefit-risk profile to match the different disease conditions as well as the different patient types. I think as a result, we continue to be very confident about our JASP portfolio and the investments that we're making in each one of these. And we think that what we will be able to deliver are differentiated profiles that will be appropriate and fit for purpose for that condition and for that patient type. Thank you.

Great. Thanks for the responses. Next question, please, operator.

Your next question comes from the line of Greg Gilbert from Truist Securities.

Thank you. Albert, it seems pretty clear that Pfizer, the stock anyway, is not getting a whole lot of credit for the COVID-19 vaccine. And whether or not you agree that that's fair, I'm curious how you expect to leverage the expertise you've built in this area into areas that investors might view as contributing more to long-term franchise value, regardless of what happens to the COVID-19 part of the story. And then a second vaccine-related question, perhaps for Angela. There's been a lot of focus on your vaccine and others about logistics and supply and coverage of variants. But it seems to me that at some point a key metric, if not the most important metric, will be how many people want to get a vaccine. So curious what your work tells you on that front and whether you plan to get involved as a company in helping drive awareness and demand at some point, or is that not really Pfizer's role to play? Thank you.

Greg, thank you very much. I fully agree with you that I don't think we're receiving a lot of credit, not for the vaccines right now when you see the stock price, but mainly for our basic business and pipeline. This is a business that is growing 6% and double digit, the bottom line excluding any COVID and clearly deserves much, much higher multiple in this industry. The same comes even more when you speak about the COVID-19 vaccine that I think clearly people should see much more into that. So to your question, how do we plan to use strategically this platform? I believe that the RNA technology has been proven in a glorious way that will have an impact in treating diseases, in preventing diseases in multiple applications. And I believe Pfizer has accumulated expertise and knowledge of a decade into one year. And also Pfizer has completed infrastructure investments that will take five years, again, into one year. Clearly, we plan to use this expertise so that we will be able to benefit more and more patients. I made some comments that within the COVID vaccine, I believe that the dynamics in the COVID more and more indicate the potential that we will have a clearly repeated business. The reasons for that are multiple. Let me start by saying in the beginning, we were waiting to see if the immunity will be durable. Now, we still don't have data about the immunity of all vaccines because it is early, but we do see that the people that have the disease, more and more publications indicate that after several months, their immune response goes down, so there is a need to boost. Also, there are a lot of papers that have been published that indicate even for the new variants that if you have very high level of immune responses, you are protecting against those variants in much higher level than if you have lower levels of these antibodies. So that indicates that the need to boost so that you maintain much higher levels, it's there. And last but not least, it is clear that the scenario the variants will develop in such a way that they may be escaping very effective protection from the current vaccine, which is not the case right now for us. Then we will clearly prepare ourselves so that we will produce in a very speedy time. I made publicly a statement that that needs to be done end-to-end in less than 100 days. to provide new booster vaccines that will protect against the new variant. So in scenarios like that, and even in scenarios that the COVID will move from a pandemic into more of a normal type of vaccination business, it is very clear that Pfizer will have a key advantage, not only because of the strength of the data, but also because we have developed significant brand equity and trust with the people when it comes to their choice, we have infrastructure and expertise that will help us. RNA is not going to provide only COVID-19 vaccines. We are accelerating our work for flu right now, and we are clearly investigating multiple other applications in other vaccines for this RNA technology or therapeutic areas. So I believe that our business excluding COVID is very robust, with robust pipeline, but I think COVID has a very good chance that could completely transform the revenue and earnings trajectory of this business starting from now. And with that, I will ask Angela to comment on the question about, again, the COVID vaccine. Angela.

Thanks for the question. And I think, you know, what you're talking about is vaccine confidence, which clearly has been a big topic since the vaccine was introduced. And I'm actually really encouraged by data that we're receiving, you know, on a routine basis that is demonstrating that vaccine confidence is indeed building. And that compared to where we were even a month ago, we've had a significant rise in interest and willingness of the public to get vaccinated. And I think a lot of this is driven, obviously, by, you know, real-world experience by many people who are now getting the vaccine and having good experiences with them. So, I think that this will continue. To your question about, you know, what is it that we're doing to drive awareness and demand, I think, first of all, we have to understand that right now we are in a period where we are operating under an EUA, the emergency approval. So there's guardrails as it pertains to that and what it is that we can do. For sure, we have worked very diligently with many, many, many medical and public health societies and institutions to ensure that we are supporting education across the entire country. There recently was even a public service announcement that was launched where it had our support in conjunction with a number of patient advocacy groups to really educate and to create confidence for the public around this vaccine. In addition to that, at a more specific level, Pfizer uniquely has really supported the healthcare professional community in its vaccinations by providing A lot of training, a lot of support to ensure that confidence is gained at the vaccinator site. And actually just to share that over 30,000 HCPs have been trained by Pfizer alone in the recent month or so to be able to confidently vaccinate people. And I think that that's also helping to create confidence. But of course, where we can get most involved and we'll be able to do even more is once we receive our BLA. And so we're working towards that, and we will build on the education initiative that we already have in place, but we'll be able to amplify that even more once we have a full label. Thank you.

Thanks, Angela, and good point on the BLA opening up more opportunities. Next question, please, operator.

Your next question comes from the line of Terence Flynn with Goldman Sachs.

Great. Thanks so much for taking that question. And thank you for all the work you're doing again on the COVID vaccine. I was just wondering, is there an integrated system that's being set up by either the government or governments or Pfizer to monitor instances of vaccine breakthroughs and conduct sequencing? And then what factors and who will ultimately dictate when a change in the potential of vaccine is needed to cover an emerging variant? How does a consensus emerge on that question? Thank you.

Michael, would you like to take this question, please?

There are different organized at the government level efforts in the U.S. The position of sequences, both to track new strains like in South Africa and Brazil, as well among unvaccinated and vaccinated or deposited in certain databases there is one initiative in uk and then of course pfizer has a unique collaboration in real world evidence with the israeli ministers of health which will allow us to track first real world evidence for our vaccine in the population and as you may know we are the number one to have such data that shows 92 to 95 percent in real world evidence vaccine efficacy primarily seen initially in an older population that's harder normally to get this stunning data and it also showed a very low 0.25 about for both the 24 and 26 for first and second injection of adverse events so really well performing in a large population of millions of individuals and of course they will also expect if there are breakthrough Now, in general, I think it has been claimed that the South African and Brazil variants are more difficult to treat, and vaccines that have lower antibody levels will have much more breakthroughs, given that the mRNA vaccines have very high antibody levels. And that was, I think, implied in Albert's answer. We expect them to be much more resistant to breakthroughs for longer time. And I think data from several labs shows that if you maintain with mRNA vaccines, high antibody levels, you will actually protect very well even against those variants. And that suggests, and we are just embarking on such studies that you could boost with the current vaccine a further time and avoid some of these breakthrough infections that were reported recently in some vaccine studies That would be our aspiration to demonstrate that by keeping individuals with very high titers, you can really impact, and that can be recorded, as you asked, in various systems that are now in place in many countries. And that could be a very important way to transit into a more sustained protection, sustained business model, where the monitoring allow you to plan when the next boost should happen.

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

Your next question comes from the line of Louise Chen from Kantor. Hi, thanks for taking my questions. So my first question is, if the COVID vaccine becomes routine, how do you think governments and physicians will choose amongst these different vaccines that have received emergency use authorization? And then how do you think about that 95% efficacy rate in light of mutations? And the last question is on your PCV20. If it's approved, what do you expect the ACIP recommendation to be or what would you ideally like it to be? And do you think there will be any upgrade for those 65 plus to the additional serotypes? Thank you.

Thank you. Why don't we start with PCV20 and Angela and then we can come back to COVID. Angela?

Sure. So in terms of PCV20, I mean, what we believe our value there is the additional serotypes. And that in the adult, these additional serotypes are meaningful because it will give us 33% more protection against strains causing IPD in adults and 42% more protection against strains causing IPD for pediatrics. So we feel that this is very value creating and provides us the opportunity to really bring an important option into the market that is an upgrade compared to what it is that we have today. And then to your question about ACIP, of course we're working closely with the FDA for approval and with the CDC at the right moments in time to get the right recommendation. We believe that the recommendation will be will be positive as it pertains to PCV20, and we look forward to working with them to achieve that.

Thank you. Now, as regards how people could choose or physicians could choose if that is a routine, I believe that if this is a routine, the decision will come as with all other vaccines and medicines, the strength of the data. I think that this is why I made before the comments that given that we are first, which means that we are vaccinating a lot of people right now with the first doses, given that we have such a strong safety and efficacy database in an open choice situation, we will get the vast majority of the share of choices. But that I think will come a reality likely after in 2022, when the governments do their whole vaccination scheme. And also in that year, there will be, I believe, a capacity. So volume will not be a case, even if everyone wants to get one vaccine, I think will be enough to make this one vaccine. What about the 95% efficacy in terms of variants? I think we answered that, but Michael, maybe you want to reiterate once more why the higher the efficacy, the better is not only for the current, but also for the variants.

Yeah, very brief. It's clear from convalescent plasma studies that now the last couple of weeks been out and also from plasma from vaccine recipient, higher antibody levels seems to protect from variants in the preclinical studies from patients. So I think it will project into The vaccines with high antibody levels and T cell immunity, which are an additional protection mechanism, will do very well against variants and keep boosting them, will keep the variants off the population for a longer time before there's any need to shift to a variant selective. So I think the data we have with mRNA vaccine put them really in a unique category, having strong immune response, the ability to boost, and the ability to, if needed, reconfigure.

Great. Thanks, Michael. Next question, please, operator.

Your next question comes from the line of Umar Rafat from Evacor.

Hi, guys. Thanks so much for taking my question. I want to hit up on two different topics. One, as we think about possible new vaccine for the new variants, Do you guys have plans in place? Are you working on it right now? Should we anticipate some sort of phase one data by some point this early summer? And has there been a consideration to allocate some of this $2 billion in doses capacity to a new version of the vaccine? And separately, going back to the phase three you reported, it's been a few weeks. And one of the questions I've had is, of the patients that tested positive on the vaccine post dose two, what did we learn about What mutations those patients had on deep sequencing? What did we learn about their nab titers and T cells? And I wonder if there's anything we can draw on correlative protection. Thank you.

Yes. Umar, very, very good. Excellent questions. Michael, do you want to take the last one and also the first one? And then I can speak later on the manufacturing piece.

yeah you know with variants we are embarking on a study which will give a boost after six months and possibly also compared with a 12-month boost we'll compare the wild type the current vaccine with a variant vaccine likely based on the 484 amino acid from brazil and south africa i think that given the data are so strong with our vaccine as we alluded to it may very well be that The third boost at the proper time point is sufficient, and you continue to monitor variants, but we will be prepared if needed with data, as you said, around early summer. Quality protection is something we're working with a lot of scientists, not just looking at data in our trial, but in public consortium with NIH, looking at data across many trials. and we will see the outcome. I expect, again, high antibody level plus T cell immunity will provide the best durability. And that makes us very optimistic about the unique profile of mRNA vaccines.

Thank you, Michael. And the 2 billion doses that we're speaking about, it is clearly for this current vaccine. And clearly also we are working to see if we can improve that even further. But right now we are at our commitment of 2 billion doses. But the reason why we had selected mRNA in the first place was because it simplifies tremendously this type of process. Our ability with this technology to build a new construct of the same vaccine by just changing the RNA messenger RNA within this vaccine, it is really a very, very simple process in terms of manufacturing and in terms of actually developing it. Nothing is simple in biology when you speak about high complicated processes. But relatively to any other technology, this is very simple. So I wouldn't say that I would anticipate a major, if we have to go to a new vaccine, that we will have a major shake up in our manufacturing capacity. I think overall two billion doses could be maybe a little bit less if we start producing new vaccine, replace altogether the new variants. altogether cumulative than you, and if there is a need to do, than you.

All right. Thanks, Albert. We'll take our next question, please.

Your next question comes from the line of Jeffrey Porges from SVB Lorinc.

Thank you. Thank you very much. And unfortunately, we'll continue a little bit on this thing. Michael, could you give us a sense of whether you think the so-called South African and Brazilian variants that have similar mutations represent terminal or near-terminal adaptations of the virus, or do you think that we will see sort of almost recurring and infinite adaptations that we may have to contemplate adapting vaccines to? And then secondly, have you contemplated giving a single dose of vaccine to those who have previously been infected, given what's probably 20 to 25 percent antibody positivity in the U.S. population? And lastly, could your next-gen variant vaccine be refrigerator-stable?

Michael? Yeah, thank you. Yeah, you know, the first strains, like the UK strain, was mainly selected for transmissibility, to spread quickly. As there were previously infected people in South Africa and Brazil, the new strains have been selected for immune escape, which is the 484 amino acid is the most important. High antibody titers, as alluded to before, from our vaccine seems still to be able to react quite nicely with that strain, although it's somewhat more moderate reduction. And we think keeping high titer up in patients will be a very good straightforward approach until there is need for a strain change. Now, with that concept, keep up high antibody titers, you should immunize whether you have had infection or not twice. That gives you maximum titer and allow you to fight off variant strains for as long time as possible before you may need a boost or after some time that there may be any reason to a variant vaccine as Albert alluded to. And we are currently initiating study to understand when a third immunization would be helpful for participants and we will be starting six to 12 months as initial assumption. And of course, we continue to make efforts to make refrigerate the base vaccine that includes lyophilization or possible liquid with a stabilized product. And we think end of this year or early next year, we'll have such a product.

Excellent. Next question, please, operator.

Your next question is from Vamil Devon from Azuho.

Great. Thanks so much for taking the questions. Maybe I'll just shift gears a little bit off the vaccine. I guess somewhat tied to the vaccine. I just did a little different angle here. In terms of capital allocation, I think, Albert, I think you were mentioning that no change to your strategy, but the vaccine obviously is going to give you a boost to your sales and cash flow, at least in the near term here. So I'm just wondering, should we expect Pfizer to be maybe more active and complete more transactions in the coming months is to try and boost your pipeline than you otherwise might have been. Or if not, I guess just any of you sort of comment on your kind of thoughts around this added cash flow and what you might look to do there. And then my second question is on Vindamax, where it looks like you are having pretty good traction there, maybe better than we thought given the pandemic. And I'm just wondering if you can maybe comment. So where this product is now, relative to where maybe you would have expected a year ago, sort of pre-pandemic. I'm trying to get a sense, you know, is there a real sort of bolus of patients or that you could maybe make more traction with as the pandemic eases, or are you already doing quite well in terms of gaining penetration into those patients now? So we should sort of expect the same sort of state of uptake going forward. So any thoughts would be helpful. Thank you.

Thank you, Van Miel, and thank you also for asking something outside COVID that at least makes it very interesting. So you're right, the capital allocation, it is the result of a strategy. And if anything, the COVID-19 has proven our strategy correct. It is, I think, a demonstration that we do have research machine that has the resources of a big biopharma and the agility of a small biotech. I don't think that many people would bet that Pfizer would be the first one to complete something like that, but this is what we are building in the last few years and this is the demonstration that we are there. So our capital allocation, we never say never, but right now the dividend will be maintained. Frank was very clear about it, a growing dividend. It is an important thing, part of our investment thesis. And we will continue in very intensive rhythms to try to bring in phase two, phase three, predominantly programs that through our R&D machine very quickly and very successfully can become medicines and vaccines that could generate revenues that will fill the gap from the 6%, so we can sustain the 6% beyond 2025. Nothing changes also. We do have higher flexibility in terms of cash with COVID, clearly, but it is not that we were lacking cash before and we couldn't do basically the things that we wanted to do. And now that makes it even more comfortable to do that. Still, I don't think because you have this comfort level, we will do things that do not respect the fact that these are shareholders' money. So we will invest them very prudently. We are not going to spend them. But we are clearly ready to take risks when needed and also clearly ready to pay a full price for things that we really want. And as I said before, we never say never. So Angela, how do you see Vindamax evolving? Was there a bonus? Is it something that you continue growing? What is your views on that?

So we have been really pleased with what we've seen with Vindacal, Vindamax, and the patients that we have been able to diagnose. And I think this has gone better than we thought, actually, even with the pandemic. Currently, this last quarter, we were able to diagnose 21%. of the population with ATTR-CM. And so this increase that we're seeing quarter over quarter gives us a lot of confidence that our ability to diagnose and the imaging techniques that are being used, the non-invasive techniques, are working really well. I would say the bolus is gone. That was something that was maybe in the first half of the year when we launched. And I think where we are now is in a pretty good cadence of using our suspect and detect techniques as well as the ability to refer to imaging centers to get the diagnosis. And I think that our success rate in diagnosis is evidence of this. And so I think we'll continue to see cadence like this. But of course, there's still massive opportunity, 80% more patients still to be diagnosed. And so we're really focused now on using technologies and different techniques to heighten and to look and to screen more effectively for patients. Because once we know that once we can find them, they can get diagnosed. So that's where our focus is going to continue to be in 2021. Thank you.

Thank you, Angela and Albert, for those responses. Let's move to the next question, please.

Your next question comes from Tim Anderson from Wolf Research.

Thank you. A couple of questions. On the mRNA platform, you talk about leveraging that technology in areas outside of a COVID vaccine. And I think you mentioned something like seasonal flu. I'm guessing timelines for any of those types of opportunities would be more normal. And I'm hoping you can kind of give us some idea, just a rough timeline on when Pfizer and BioNTech might launch a non-COVID mRNA vaccine product know totally unrelated to covet 19. i'm guessing that would be something like five years away at a minimum but maybe you can shed some light on that and then second question just on guidance for 2021 and the other income line a big number 2.2 billion very much above the normal run rate for that line item you mentioned the consumer jv and vive and viatras all going into that only brand new piece there is viatras so Can you just give us more details why that number goes so high in 2021? And importantly, what's the run rate for that line item beyond 2021?

Thank you very much, Tim. Obviously, Frank will answer the second one and Michael the first one. Let me also just make an introductory comment before I ask Michael to speak about flu. I believe the COVID thing has created a new normal. I don't think I will... We are aspiring here in Pfizer to go back in the old normal of developing timelines, even if we were, as you saw before, at the top of the industry, benchmark. So if COVID went not with cancer, if COVID went not with flu. And I think that clearly with COVID, there was the collaboration of regulators that made that also possible. But it was a lot of other things that we have tested, and we did differently than before. So our aspiration is that these learnings will be clearly applied to everything in our portfolio and in our pipeline. Now with that, Michael, tell us a little bit how you see the timelines. Where are we with the flow?

Yeah, thank you, Albert. And I think you said it well that the type of light speed approaches with the M1A platform should of course be projected into other areas as well as flu. So Tim, you mentioned 2025. I think that it would be more conservative and traditionally realistic goal. And we are looking at ways to bring it as a potential product for approval earlier than 2025. Of course, it depends on whether there are good flu seasons with cases coming along or not. And I think as life continues with vaccinated folks, flu will take up new momentum. So our aim is ahead of 2025. Terrific.

And Albert, I'll answer on the other income question.

Oh, sorry, other income.

Which is... So, Tim, let me run the numbers first, and then I'll answer the question. So, you know, you talked about the absolute size of the number in 2021 guidance. Remember, in 2020, our other income was about $1.5 billion in adjusted results. So it's going from about $1.5 billion to the guidance we gave, which was about $2.2 billion. You know, the major elements in the increase are really transition service agreement recoveries, and that's primarily now as a result of closing the VHS transaction, higher joint venture income, And then we had some pension expense benefits as well. Those are the pieces that really get us from the, call it billion and a half in 2020 to the $2.2 billion of guidance in 2021. And then you asked about beyond 21. I think the way to think about beyond 21, just in terms of the cadence or the rhythm of that number, is the watch item for us will be what happens with the consumer joint venture relative to what GSK decides to do with their portion of that venture. Remember, we own 32% of that venture. So we'll have to see what GSK does. And obviously, depending on what they do, that could impact our other income number going forward beyond that. So that's kind of a call to watch item for us in that line item.

All right. Thanks, Frank. Next question, please.

Your next question comes from the line of Jeff Meacham from Bank of America.

Good morning, everyone. This is Jason on for Jeff. Real quickly, sorry to move back to COVID, but Frank, if you could talk a little bit about the vaccine, at least to the high level, about how the marginal contributions will change over time as manufacturing scales. Just want to get a better sense of the intermediate to longer term if COVID does ultimately transition to more of an endemic versus the pandemic. And then secondly, we wanted to ask about next steps for Zeldan. after the recent safety data is the assumption here that the label will include these new data. Thanks so much.

Thank you very much, Frank.

So let me Jason, let me do it this way. Let me talk about kind of how the current margins work, and then I'll pivot to how they can work going forward. So in terms of the current margins, I always start with we're in a pandemic pricing environment. So, you know, the one price that we published is the price with the US of 1950 per dose. Obviously, that's not a normal price like we typically get for a vaccine, you know, $150, $175 per dose. So pandemic pricing. Then what are the takeaways from that? Obviously, there's the direct material, the labor, the factory overhead, shipping, distribution. Then obviously, royalty assumptions, we've made it in the 50% gross profit payment that we pay to our partner, BioNTech. Then you layer in on top of that some marketing and sales expense, some medical expense, some R&D expense, and you come out with the high 20s in terms of that as a percentage of revenue, what we got into. That's kind of the existing financials for the vaccine. Now, let's go beyond a pandemic pricing environment or the environment we're currently in. Obviously, we're going to get more on price. And clearly, to your point, the more volume we put through our factories, the lower unit cost will become. So clearly, there's a significant opportunity for those margins to improve once we get beyond the pandemic environment that we're in.

Thank you very much, Frank. And then Angela, would you like to take also the ZELJANs?

Sure. So as it pertains to the label for ZELJANs, this is something that we don't have any sense of yet. This was a big study. 1133 was a big study. Five years, you know. 4,500 people. We only have the co-primaries endpoints that we've shared with you. We still have a lot of work to do in terms of secondary endpoints, subpopulations, and bringing all of this together to discuss this with regulators. So I think we're still a ways off in terms of really understanding what impact there will be to our label, and certainly we'll keep you posted.

Great. Thank you very much. Thanks, Angela. Operator, let's take another question, please.

Your next question comes from the line of Ronnie Gow from Bernstein.

Good morning, everybody. Congratulations on the very impressive progress in COVID. And I got two questions, and they're both of the things that you haven't done. The first one is development of JACs for RA. Obviously, you've got a really versatile platform for developing JACs. And especially with an eye to the health and safety issue, it seems interesting. It should be interesting for you to consider a second-generation JAC in that core largest I&I market. So any thoughts about development there and if there is, what will be the requirements for you? The second one is about PD-1 approaches. You are participating in that market somewhat tangentially, if I have to put it that way. We've seen a couple of the other large pharma companies like Lilly and Novartis bringing in PD-1 simply as a base platform for combinations or maybe as a low-cost alternative in the current market. Have you considered that approach, and where do you come out of this issue?

I think Michael and John could provide some insights here. So, Michael, why don't you start a little bit with more scientific information, and then, John, you can summarize our strategy for JAX and PD-1 as low cost alternatives.

Yeah, thank you. Our ritlacitinib, which is a completely unique Jax-Ritek inhibitor, actually in a phase 2 RA did deliver a really interesting profile. We have a study ongoing with a phase 2 ritlacitinib by itself and combined with a second molecule, IRAC4, to see if we can use a step change improvement in RA. Please recall also that we just communicated that ritlacitinib had really strong data in ulcerative colitis. So that product could grow very strongly in IBD as an option, but will continue in RA. I'll say just something on our own PD-1, and maybe John can add to additional things we do globally there. We have a very nice kind of best-in-class PD-1 platform, Salsanlimab, that was developed in Pfizer that is subcutaneous and have delivered very nice response rates across multiple solid tumors. And we're actually starting a phase three with that one bladder cancer combining with BCG in order to improve outcomes for those patients. Thank you.

Thank you very much for the question, Ronnie. I think Michael sort of touched on the key points, and I think we'd really just sort of highlight that obviously we have our existing partnership on BVENTI or PTL1. I think you saw in our release that we confirmed recent approval in Europe for a really interesting indication that could be very valuable for patients. And as Michael just said, additionally to that, with our own internal program, which is a PD1, not a PDL1, it's a PD1 Sasanilamab. In December, in fact, we initiated the study that Michael just mentioned. And I think the thing that we are very excited about in terms of its potential for Sasanilamab is that it's a subcutaneous PD1. We think the marketplace for more convenient PD1s is actually, you know, still to be developed. Plainly, PD1s, given their efficacy data across a whole range of tumors, have enormous potential to be a backbone for the long term. So we think that as that market evolves, the opportunity for a PD-1 that has effectiveness, which has been proven across multiple other compounds, but also combines significant convenience enhancements is actually very significant. So we're very excited about Sasan Lamab, and we will keep you updated with progress as that program develops.

All right, thanks, John. Next question, please.

Your next question comes from the line of Naveen Jacob from UBS.

Hi, thanks so much for taking the questions and squeezing me in here, but a couple questions for Frank and one for Michael, if I may. Frank, just wondering if there was any change in inventory in the U.S. between Q3, Q4 of 2020, and how does that compare to the change in inventory in the U.S. between Q3 and Q4 in 2019. And then separately, Frank, the high 20% margins for the COVID vaccine suggests, you know, at 100% economics, closer to 50 to, somewhere between 50 to 60% up margin. But wondering, you know, because I know obviously you're investing a ton into R&D, you know, moving forward into 2022, could we, how much could we see that operating margin increase? over time as R&D spend lowers. And then for Michael, Michael, obviously a key question that everyone has is durability of efficacy, which is in part affected by new variants. But how exactly is the agency measuring durability of efficacy or requiring manufacturers or developers to measure durability of efficacy? What specific trials and or endpoints or How is that characterized, please? Any color would be helpful. Frank?

So thanks for the question, Gavin. So on the inventory, it's approximately three weeks on hand, and roughly the same as it was last year at the end of the year. And in terms of Q3 to Q4, no major change in the rhythm of the inventory. Roughly approximately three weeks on hand. And then in terms of the high 20s percentage, It's interesting how you framed the question, because the way I think about it is the R&D spend is not the big driver of what's getting us to that high 20s, which is kind of how I heard the question. It's really the COGS. And it's like I said, because primarily it's the pandemic pricing, and then the different layers of the COGS that I answered earlier on in the Q&A, that's really what's driving the lower IPT as a percentage of margin. So I think you mentioned 50%. Based on all the current financials, we're lower, significantly lower than 50% on the gross margin. Then when you layer in the expenses, you get into the high 20s. Now, to your question beyond that, once again, I think the big factor in it will be the pricing. We'll continue to take the unit cost down as volumes improve. The royalty is what the royalty is. The profit share is the profit share is. Obviously, we're spending R&D, but we'll continue to manage the R&D spend. To me, the big ticket item there will be what we can do on pricing, and then obviously the more volume we generate, the lower it will take the unit cost, and those items will clearly drop to the bottom line.

Right. Thanks, Frank. And Operator, if we could take our last question at this time.

Your final question comes from the line of Chris Schott from J.P. Morgan.

Great. Thanks so much for the question. Just two quick ones here. Maybe on the BCMA by specific, can you just talk a little bit about how you see these agents fitting in the treatment paradigm, and maybe as importantly, how you're seeing the competitive landscape shaping up. So basically, what differentiation do you see with your program versus others? And maybe just then a follow-up on capital allocation priorities post-Upjohn. ShareRepo, the company's been historically pretty active on that front. Should we think about less or a less relevant role for ShareRepo in the paradigm going forward as we think about Maybe a little bit higher dividend pay ratio and then some of these priorities to bring in additional assets ahead of the 26 through 28 LOE cycles. Just would love to kind of hear how you see that fitting in the mix.

Thanks so much. Thank you.

Sorry, I was muted. Michael, would you like to take the first question?

Yeah, BCMA or L-reinatamab, we're very excited about that drug. And it had at a high dose, 1,000 microgram per kilogram, 83% response rate in a heavy pre-treated population. And it has shown a significant number of stringent or complete responses. And it's given subcutaneous. It has a very nice solubility profile. So although it's... with several entrants, I think we have an opportunity to aim for being absolutely in the first wave here and with a really nice best-in-class profile. We're moving with the first opportunity we see for accelerated approval in triple refractory patients that either have seen no prior BCMA-based treatment or have seen prior BCMA treatment such as ADC or CAR-T. So we are excited planning such cohorts to start soon with a potential for registration. And we're moving into second and third line in combination with classical image and other combination that are used in order to come to first and second line opportunity, particularly with image. Thank you very much.

Thank you. And Chris, as regards the stock repurchases, we never say never to anything right we don't want to to leave any weapons that we will say we'll never use but clearly the share repurchases falls at the bottom of the priorities right now the dividend is a clear commitment that we of course you will honor and we believe there are tremendous opportunities right now to invest in the business as frankly says we have already an authorization from the board that we could exercise at any point to to buy back shares, and we could at any moment ask for a renewal, but this is not the priority right now. The priority, it is to make sure that we keep investing through business development and through infrastructure. So, for example, our COVID franchise will thrive over time, and our R&D machine will get many more programs from the external world that can run through it. Thank you very much.

Albert, did you have some closing remarks?

So, wow, time flies, 11.30, my God. So thank you very much for joining us today and for your continued engagement with Pfizer. The new Pfizer is all about two things, science and patients. I think it's the culmination of a bold, decade-long transformation from a diversified enterprise to a more focused and innovative biopharma company. By uniting transformational technology and cutting-edge science, we are pioneering biopharmaceutical innovations to do more than just treat difficult diseases. I think we are curing and preventing them. We believe our success in developing COVID-19 was just the beginning. Thanks to the incredible transformation we have executed over the last 10 years, Pfizer is now advancing one of the strongest pipelines in our company's history. We have 95 potential new therapies or indications in six therapeutic areas with nine programs in registration, 24 in phase three clinical trials. This means 95 potential opportunities to change the lives of patients around the world. And when patients win, we all win. Have a great rest of your day.