Pfizer, Inc.

Good day, everyone, and welcome to Pfizer's second quarter 2023 earnings conference call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Chris Stevo, Senior Vice President and Chief Investor Relations Officer. Please go ahead, sir.

Thank you, Chelsea. Good morning. Welcome to Pfizer's second quarter earnings call. I'm joined today by Dr. Albert Borla, our Chairman and CEO, Dave Denton, our CFO, Dr. Michael Dolston, Chief Scientific Officer and President, Pfizer Research and Development. Joining for the Q&A session, we also have Angela Huang, Chief Commercial Officer and President, Global Biopharmaceuticals Business, Amir Malik, our Chief Business Innovation Officer, Dr. Chris Boshoff, our Chief Oncology Research and Development Officer, and Doug Lankler, our General Counsel. Before we begin the call, I want to remind you of some logistical items. The materials for this call and other earnings-related materials are on the investor relations section of Pfizer.com. And, of course, my favorite, our forward-looking statements. Please see our forward-looking statements disclaimer on slide three, and additional information regarding these statements and our non-GAAP financial measures is available on our earnings release. and in our SEC forms 10K and 10Q under risk factors and forward-looking information and factors that may affect future results. Forward-looking statements on the call are subject to substantial risks and uncertainties, speak only as of the call's original date, and we undertake no obligation to update or revise any of these statements. With that, I will turn the call over to Albrecht.

Thank you, Chris. Hello, everyone, and thank you for joining us today. Our second quarter financial results were solid and in line with our expectations. Non-COVID-19 revenues grew 5% operationally compared with the year-ago quarter. Total revenues declined 53% operationally, primarily due to the anticipated revenue declines in both PaxClobit and Comirnat. Even with these declines, our COVID-19 portfolio remained a significant contributor to the business with more than 1.6 billion in combined revenues during this quarter. Of course, our patient impact data are equally important because patients are the reason we exist. Through the first six months of the year, more than 356 million patients around the world were treated with our medicines and vaccines. We continue to make progress towards our goal of executing an unprecedented number of launches of new products or indications. In fact, Pfizer is more than halfway of its goal of launching 19 new products or indications in an 18-month span. In addition to the six approvals and five launches that occurred prior to 2023, we had six approvals and four launches in the first six months of 2023. For the second half of 2023, we expect six additional approvals and six additional launches, including the two launches that occurred in July. Then, in 2024, we expect one approval and four launches, which, if approved and recommended, would raise the total to 19 new launches in approximately 18 months. As you can see in this chart, for this year's launches, we expect the revenue contribution to occur largely in the second half of 2023, because the first half launches occurred late in the second quarter. And then in 2024, with the additional impact of next year's expected launches, we anticipate an even greater total contribution for our 19 launches. It is important to note that 18 of the 19 potential launches have been largely de-risked from a technical perspective at this point, with the only one remaining being our RNA flu candidate. Equally encouraging is that our pipeline is expected to continue generating breakthrough treatments and vaccines long after the 19 we have been discussing. We recently reported milestones from several exciting pipeline candidates with the potential to be significant future value drivers. These include phase 3 data from Mastasipa and novel antibody being studied for the treatment of haemophilia A and B. Regulatory filing acceptance of our haemophilia B gene therapy candidate The publication in the New England Journal of Medicine of Phase 2 results for our vaccine candidate for maternal immunization against group B, streptococcus, and first in human data from our pipeline of potential next-generation breast cancer treatments, including our novel CDK4, CDK2, and CART6 inhibitors. Now, I would like to provide some commentary on our COVID-19 portfolio. As you all know, during the pandemic, Pfizer demonstrated impressively the power of our research and manufacturing capabilities by bringing to the world the first and most widely used vaccine and oral treatment for COVID-19. These scientific breakthroughs have played a significant role in bringing the global health crisis under control, and we are very proud of our contributions. The profits that these products have generated today have enabled us to invest in acquiring Aruina, Reviral, Bioheaven, and Global Blood Therapeutics, which together we expect to contribute approximately 10 billion of revenues in year 2030. In fact, the acquisitions of BioHeaven and Global Bright Therapeutics are already contributing to our operational growth, while the acquisition of ARENA is expected to start generating revenues toward the end of this year. We also remain very excited about our planned acquisition of Seedzen, which, if approved, is expected to contribute more than 10 billion in 2030 revenues. As a result of the positive momentum of our non-COVID-19 revenues and, more importantly, the success of our COVID-19 portfolio, Pfizer's overall revenues have increased exponentially compared with our 2019 revenues pro forma for the divestitures of Amazon and our consumer business. This allowed us to increase investments in R&D and SINA to support this new revenue base and our expected new product launches. The increased investments we are making in R&D and SINA this year were sized based on certain revenue assumptions we made in January for both our COVID-19 and non-COVID-19 products. These assumptions also were incorporated in our 2023 financial guidance. Clearly, there is a higher level of uncertainty regarding the demand projections for our COVID-19 products than for the rest of our business. For example, in January, we set our expectation that approximately 100 million doses of COVID-19 would be administered in the U.S. this year, of which we estimated Pfizer to capture 60% market share. In the first six months of 2023, 12.4 million doses were administered in the US. While the 20.4 million doses are behind our earlier projections, our market share for COVID-19 is ahead of our previous expectations at 65%. However, the vast majority of respiratory vaccinations happened during the fall and winter respiratory disease season, which starts in September. and to expect COVID-19 vaccinations to follow this pattern going forward. The uncertainty of the exact timing of community commercialization was largely removed with the decision by the FDA and CDC to request a change in the composition of the vaccine to address the Omicron XB1.5 strains. We believe this will allow us to commercialize the vaccine in September. assuming the updated vaccines are approved and available by the end of August, of course. In the European Union, the uncertainty regarding the vaccine's revenue contributions for 23 and beyond was removed when we renegotiated successfully our long-term agreement. This agreement spreads the agreed volumes over four years. And while it puts pressure on this year's volumes, we believe it also provides longer-term revenue certainty in this important market. Similar to what we are experiencing with the vaccine, the second half of the year will play a bigger role in informing our expectations for the long-term demand of Pax Clovis. the utilization of which follows very closely the COVID-19 infection rates. We expect a new COVID-19 wave to start in the US this fall. And this expectation is supported by the increase in infection rates we are already seeing. Obviously, the severity of disease And people's desire for treatment also will be factors, as will the ongoing dialogue with the U.S. government regarding when we will transition to a commercial model for package clothing. These are the uncertainties. We are acutely aware that all these uncertainties are making it difficult to project the future revenues of Pfizer in this area, and at large at Pfizer, and also affecting our stock price as a result. The good news is we will have much more clarity and certainty regarding how our COVID-19 products will perform in a commercial market by the time we report our third quarter financial results. And we expect the uncertainties to be largely eliminated by the end of the year. This is because we expect the vaccination and treatment rates from the upcoming respiratory disease season to be a reliable predictor of trends in subsequent years, with some potential upside, of course, if a combination flu and COVID-19 vaccine is brought to market in the future. Additionally, by that point, the timing of transitioning to full commercialization of both Comirnaty and PaxCovid should become clear. Despite this uncertainty, we will continue to invest in our COVID-19 portfolio this year in advance of the upcoming respiratory disease season. This is very important. But given the uncertainty, we are also preparing to have the ability to adjust our 2024 total cost base to align with various future COVID-19 disease revenue scenarios. In fact, we have already identified specific areas where we can make adjustments primarily within our COVID-19 cost base if demand comes in lower than expected. Dave will provide more details during his remarks. Next, I wanted to share a few quick updates of our plan acquisition of Seedzen, which we believe will be a major driver of our future success. Seed and shareholders recently overwhelmingly approved the planned acquisition and we have already raised most of the external financing needed to fund the transaction. We also continue to work closely with regulators, including the Federal Trade Commission, the European Commission. In the meantime, our integration planning continues, which will allow us to keep the ground running following an anticipated close later in 2023 or early in 2024, subject to the satisfaction of customary closing conditions. Last week, we announced that Chris Bossoff has joined Pfizer's executive leadership team as chief oncology research and development officer and executive vice president, reporting directly to me. In this role, Chris will lead a new end-to-end oncology R&D organization and be the single point of accountability for the entire oncology pipeline, from discovery to early and late phase clinical development. This is similar to the structure we currently have in place for our vaccines R&D organization, which has proven to be very productive. Pfizer and Cesar share a common vision to deliver life-saving treatments for people living with cancer, which is why I'm so pleased. But after closing, Chris Oncology's leadership team will include talented, purpose-driven, and highly productive leaders from both companies. And we made already announcements about the people that are joining Chris's leadership team. We believe this new structure will help further accelerate the delivery of cancer therapies, which is critical because in the battle against cancer, time is life. As Pfizer's one of core business principles is the belief that trust is everything. I'm proud to share that in recent months we have received some wonderful accolades that speak to the trust we are building with external stakeholders. We were named one of the 23-24 best companies to work for by US News and World Report. We were listed in Newsweek's list of America's greatest workplaces 2023. For the third year in a row, Pfizer has earned a top 100 score in the 2023 Disability Equality Index. And our own Ray D. Johnson received the Disability in 23 Executive Sponsor of the Year Award at the National Conference in July. And lastly, our PGS site in Ascol, Italy, is being recognized by the United Nations for the Wellcome Award working for refugee integrates. These recognitions are very important because they strengthen the unprecedented brand equity that Pfizer built during the COVID-19 pandemic. Before now, I hand it over to Dave. I want to quickly comment on the situation at our facility in Rocky Mount, North Carolina. First, all of us at Pfizer were relieved that no colleagues were seriously injured when the tornado struck. That said, our facility sustained substantial damage, as did the neighborhoods where many of our colleagues live, unfortunately. The local leadership team has done an incredible job responding to this devastating event. And we are proceeding with both urgency and caution to determine the best way to get the site back online as quickly as possible, so as to minimize any impact on patients. Of course, we are also taking steps to ensure the continued safety of our colleagues and contractors, which remains our top priority. And with that, I will now turn it over to Dave. And after Dave, Michael will provide an update on our R&D pipeline. Dave.