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.

Thank you, Albert, and good morning to everyone. Over the past 24 months, Pfizer has made important investments to position it squarely on track to achieve profitable and sustainable growth particularly in the back half of this decade. We have strategically invested to expand our commercial portfolio and our late-stage pipeline, strengthen our market launch capabilities, and enhanced innovation through internal R&D and business development actions. These deliberate efforts continue to solidify Pfizer's ability to overcome upcoming LOEs and drive sustainable revenue growth, all while enhancing long-term shareholder value. To further support our long-term growth objectives, we are executing a capital allocation strategy designed to effectively deploy our cash. Our strategy is focused on three main pillars. First is reinvesting in our business. Second is growing our dividends over time. And finally, making value-enhancing share repurchases. In the first half of 2023 alone, we've invested $5.2 billion in internal R&D, returned $4.6 billion to shareholders via our quarterly dividend, and allocated approximately $43 billion towards the proposed acquisition of CGEN. During the second quarter, Pfizer successfully completed a $31 billion unsecured debt offering across eight tranches. The net proceeds of this debt offering will be used to substantially fund the CGEN acquisition. The new debt carries a weighted average yield of 4.93 percent and a weighted average maturity of 16.3 years, consistent with our expectations. On a four-year run rate basis, the annual financing costs associated with the acquisition is expected to be nearly $2 billion. With the completion now of this debt offering, the company is positioned to close the CGEN acquisition immediately upon post-regulatory approvals. While we plan to continue investing in our business, we expect to deliver our capital structure following the closing of CGEN transaction. As we deliver, it is our expectation to return to a more balanced capital allocation strategy, inclusive of share repurchases. Now with that, let me briefly cover a few highlights of our quarterly financial performance. As Albert said, our Q2 results were solid and in line with our expectations, from both a top and a bottom line perspective, albeit slightly better than EPS consensus. As expected in our guidance, our overall Q2 revenues declined 53% operationally. The contraction in revenue was driven by the anticipated decline in both Paxlovid and Comirity sales. We expect these products to transition to a commercial market in the second half of this year, Our operational revenue growth, excluding our COVID products, was in line with expectations at 5% versus Q2 of LY, with strong contributions from the inclusion of both NERTEC and ARCSPRIDA, as well as the continued growth from the Findacale family. During Q2, adjusted SIA expenses were $3.4 billion and grew 20% operationally versus LY. We continue to invest in support of our upcoming launches, and grow our recently acquired products. While it's clear that these near-term investments are dampening our current profitability levels, we are laser-focused on maximizing the longer-term performance of these products. Now, moving to the bottom line, reported diluted earnings per share this quarter declined by 77 percent to 41 cents, while adjusted diluted earnings per share of 67 cents declined 65 percent on an operational basis. Earnings compressed at a greater rate than revenues, primarily due to the steep and anticipated contraction, impact slow bid sales during the quarter. Once again, foreign exchange movements continue to unfavorably impact our results, reducing second quarter revenues by approximately $280 million, or 1%, and adjusted diluted earnings per share by 5 cents, or 2%, compared to last year. Now that we are at the halfway point of our 2023 financial plan, I'd like to take a moment to reflect on how we are executing across our business while navigating within an incredibly unique and dynamic environment. As a management team, we remain committed to transparency, ensuring our assessment of the evolving marketplace, given the magnitude of launches, the ongoing shifting nature of the COVID landscape, and the continued integration of acquired assets. Let me begin by elaborating on our full year 23 financial guidance. We are narrowing our expectations for revenues to between $67 and $70 billion and maintaining guidance for adjusted diluted earnings per share of $3.25 to $3.45 for the full year. For our more durable and predictable non-COVID revenues, we are updating our guidance range to 6% to 8% operational revenue growth. From a launch timing standpoint, I'll point out that the majority of our 2023 launches are anticipated to occur in the second half of 2023, and our commercialization schedule remains materially unchanged. As a company, we always strive to achieve the highest revenue level possible while maintaining a realistic view of the key inputs that inform our outlook. Regarding RSV for older adults, the shared decision-making recommendation by ACIP is likely to slow its near-term uptake in the U.S. In addition, the recent approval of Talzinia in the U.S. results in a more narrow patient population than originally planned. These factors coupled with the impact of the damaged Rocky Mountain manufacturing facility presents near-term revenue challenges. However, we expect positive revenue momentum as we exit 2023 and head into 2024. And importantly, the long-term outlook for our non-COVID business remains intact relative to our 2030 ambitions. Turning now to our less predictable and more variable COVID portfolio. Year to date, we have booked slightly over 40% of the $21.5 billion full-year revenue forecast for both Comirnaty and Paxlovid, with the important fall vaccination and respiratory infection season ahead of us. We are acutely aware that COVID demand depends on many evolving market variables making the range of potential revenue outcomes increasingly large and difficult to predict with certainty. These variables include the overall level of vaccination and infection rates, the speed of drawdown of government inventory levels, and the mutating nature of the virus itself, just to name a few. In the interest of public health and with the important fall season ahead of us, we are maintaining our COVID revenue outlook for the year while continuing to invest largely on a variable expense basis to support our COVID products in 2023. These variable investments are important to support our efforts to reach as many patients as possible, helping to ensure that the most at-risk individuals are both vaccinated and treated while maintaining our leading market share. We are proud of what we have achieved through the COVID portfolio, and this has allowed the company to invest in support of its growth agenda for the back half of this decade. Our visibility into future COVID revenues and demands should improve throughout the remainder of 2020. 2023 as we gain clarity on a more typical annual run rate. We are well aware that our 2023 profit outlook is currently being dampened by incremental cost in support of our launches as well as higher R&D investments aligned with the company's current revenue base. We remain committed to both defending and growing our overall level of profitability. As Albert mentioned earlier, we expect this fall's performance of our COVID-19 products to help us more effectively forecast future sales performance. To that end, if our COVID-19 revenues are less than what we have assumed, we are prepared to launch an enterprise-wide cost improvement program aligned with the longer-term revenue projections for our business. This program will be designed to support our objective of growing our operating profit margin and we'd expect to begin to yield results in 2024. And we look forward to sharing the specific details of this program in our upcoming earnings call. In closing, this is an extraordinary time for Pfizer. Our confidence and our commitment to our strategy and to achieving our 2030 goals is unwavering. We will continue to focus our efforts to drive growth while enhancing long-term shareholder value. And with that, let me now turn it over to Michael.

Thank you, Dave. Today, I will provide updates from a few different therapeutic focus areas, starting with breast cancer. We are working to deliver the next wave of innovative therapies for estrogen-receptive positive breast cancer. The pillars of this strategy are threefold. Establishing our investigational CDK4 inhibitor as a next-generation self-cycle therapy backbone. Establishing WebDecGestrant as a next-generation endocrine therapy backbone and establishing novel mechanisms like our investigational CDK2 inhibitor and CAT6 inhibitor candidates as next-gen combination partners to enhance efficacy. Our clinical strategy entails first developing assets for the metastatic setting in which IBRANS is currently the leader, and unmet needed survey, followed by an opportunity to expand to earlier stage breast cancer, including the CK46-naive population, and adjuvant or neoadjuvant settings. Data presented at ASCO from three key investigational medicines from our NextGen portfolio demonstrated anti-tumor activity in heavily pretreated populations of patients with breast cancer. As a reminder, the majority of hormone receptor-positive breast cancers express low CDK6, while CDK4 is likely to be a major cell cycle driver. We have seen that CDK4-6 inhibition can lead to neutropenia, which requires more frequent blood test monitoring. mostly driven by CDK6 inhibition. Across the CDK4-6 inhibitor class, approximately 30% to 60% of patients experience severe neutropenia. On the left, in a phase one dose escalation study in patients with hormone receptor positive HER2 negative breast cancer, all of whom had previously received a CDK4 inhibitor. Treatment with our CDK4 inhibitor in combination with endocrine therapy resulted in a confirmed objective response rate of 29%, clinical benefit response rate of 52%, and median progression-free survival of nearly 25 weeks. The combination was well tolerated, which may enable maximum CDK4 inhibition. We're actively planning the phase three randomized study. In addition, I'd like to highlight encouraging data from the phase one dose escalation study of our novel CDK2 inhibitor, which showed monotherapy activity, including confirmed partial responses in breast cancer patients who had previously received a CDK4 inhibitor. Also, Durable confirmed clinical responses were observed in a phase one trial of our novel cat6 inhibitor as a monotherapy and in combination with endocrine therapy in heavily pre-treated patients with breast cancer. Turning now to blood cancers, L-REXVO, also known as L-venetamol, subject to regulatory approval, is expected to be the anchor of an anticipated multi-billion dollar franchise. An FDA decision for the potential first indication in the triple-class relapsed or refractory multiple myeloma population is expected this year, and we continue to advance the magnetism clinical programs to expand into earlier lines of treatment. In addition, development of mapli-parcept, also known as TTI62, is underway, including in combination with L-rexfuel to support potential indications in myeloma and acute myeloid leukemia. Here, we show LREXVU data presented at EHA from the MAGNETISM M3 trial in patients with triple-class refractory multiple myeloma who had no prior exposure to BCMA direct therapy. On the left, we observed highly meaningful survival with LREXVU monotherapy with a 50-month overall survival of 57 patients. in patients who achieved a complete response 15 months survival was remarkably 93 percent underscoring the potential for deep and durable responses we can see evidence of broad activity in multiple on the right with the graph showing a single agent complete response rate of 35 percent which rises to 46 percent in the subsets of patients with two to three prior lines of therapy Our ongoing randomized trials are in less pre-treated to newly diagnosed populations. Subject to approval, LREX view may have key differentiators such as 50% lower hospitalization time during the step-up dosing period per protocol and an extended dosing interval that moves from once weekly to once every other week dosing beyond week 24. Turning out hemophilia A and B, the pivotal trial of Mastasemab met its primary endpoint. with statistically significant and clinically meaningful effect on annualized bleeding rate, or ABR. There was a 35% reduction in ABR compared to prophylactic factor replacement and 92% reduction in ABR versus on-demand factor replacement. Mastasimab offers a differentiated mechanism of action and dosing regimen compared to standard of care therapy. If approved, it has the potential to be the first once weekly subcute hemophilia B treatment for patients without inhibitors and the first hemophilia A or B treatment administered in a patient-friendly pen as a flat dose. Regulatory submission is expected in the second half of 2023. Next, Litfulo, also known as Riclicitinib, is the first medicine to receive FDA approval to treat severe alopecia areata in both adults and adolescents 12 years and older. It also recently received a positive opinion from the European Medicines Agency's CHMP recommending body, but is not yet approved. It has the potential to redefine the standard of care for alopecia areata. Litfulo is the first of its kind kinase inhibitor with a unique mechanism that inhibits both the TEC kinase family and transiently the X3 pulse rates that have been implicated in the LOPC areata pathophysiology. In addition, we're exploring how its unique mechanism of action could potentially be applied across immune disorders, including vitiligo, in which a Phase III study is ongoing, and other potential indications. Finally, we're making excellent progress on the milestones we had set out through the first half of 2024. As Albert noted, we recently received FDA approval for Kravna-20 in the pediatric population. We have robust strategies in place to potentially improve the protection provided by current pneumococcal vaccines. I look forward to share more about this in the coming quarters. In addition, we recently published Phase 2 data in the New England Journal of Medicine showing our group B streptococcus maternal vaccine candidate was generally well tolerated and generated robust antibody levels. The journal also published a natural history study, which was used to determine protective antibody levels at birth. These two studies indicated that the vaccine candidate may offer meaningful protection to infants born to immunized mothers. We were highly encouraged that Dr. Carol Baker, an infectious disease expert from the University of Texas Health Science Center, wrote an independent England editorial highlighting the important future prospects of our GBX vaccine candidate. The progress of the GBS vaccine candidate dovetails nicely with the positive results and anticipated upcoming regulatory decisions for our RSV vaccine at Bristol for administration to pregnant women. Abrisvo recently received a positive opinion from European Medicines Agency, CHMP, for both older adults and maternal immunization to help protect infants. Abrisvo is approved for older adults in the US and under regulatory review for the maternal immunization. In addition, we remain excited to see the phase 2 data from Danuglipron by end of 2023, which we expect will enable us to finalize our phase 3 plans. Finally, I'll pull out the phase 3 trial start of our anti-interferon beta candidate for the treatment of inflammatory muscle myopathies, which has received FAST-TRACK designation from FDA. Thank you. Let me turn it over to Chris to start the Q&A session.

Thank you, Michael. Kelsey, if you could please queue up the callers. We have at least 30 minutes for our Q&A session now.

Yes, sir. At this time, if you would like to ask a question, please press the star and one keys on your touchtone phone. You may remove yourself from the queue at any time by pressing star two. As a reminder, we do ask that you please pick up your handset for optimal sound quality. Our first question will come from Robin Karnowskis with Truist Securities. Your line is open. Hi.

Good morning. This is Nicole. I'm Robin. Just a quick question for us. Can you-on RFC, can you share what you expect the shared decision-making to slow the uptake in the U.S. would be and what we want to know if they can elaborate-if you guys can elaborate on why you think this is the case and if peak annual sales is lower than previously expected? And how do you think ex-U.S. sales might be impacted, if at all, given the ACIP decision?

Thank you very much. Maybe Angela can answer that. The question was, do you expect the third decision to have a big impact on RSV? And also, do we expect in the US? And also, do we expect any impact in the US?

So first of all, we're really excited about the approval for our RSV older adult vaccine. And the way I would see the shared clinical decision making is just that it is a step towards the full approval routine recommendation that we anticipate. So I think that the way to look at it is that it's a short-term effect. We do expect that with more data that will be emerging out of our clinical program that we'll have an additional opportunity to go back to the ACIP and actually get the routine recommendation that we hope for. So, you know, over the next year or so as we collect and finalize our data, that is really the anticipation of it. It doesn't change the full opportunity for this particular vaccine. It doesn't change the peak. It just means that it takes us a little bit longer to get to the peak because of the shared clinical decision-making, that extra step that we have to take right now.

And what about the ex-US?

Ex-U.S., actually, we had a different filing. We were able to get both maternal and older adult at the same time. So I think you see slightly different dynamics there in that here in the U.S., our maternal vaccine will be launching later. But in ex-U.S. and in Europe, they'll be launching at the same time. And those vaccine technical committees have not opined yet on those recommendations in particular in terms of the utilization requirements. And so we'll await that. But I think what you have that's different and that's really a great upside is the fact that we have both indications at once.

Thank you very much, Angela. I hope we gave you what you asked Robin. Operator, the next question, please.

Next, we have Umar Rafat with Evercore. Your line is open.

Hi, guys. Thanks for taking my question. I know I heard two different things on the cost cut just now. One was that it would be enterprise-wide. While Albert, I think, used the word within the COVID cost base, so I was just trying to reconcile the two. And also on Daniel Glipron, is it reasonable to expect that if it's below mid-teens weight loss, you wouldn't move forward? Thank you very much.

Let me clarify. Of course, it will be enterprise-wide, but what I said is that the COVID part is going to be the biggest part. Right now, you need to know that R&D and S&A cost of COVID is billions. It's not a small amount. So, there's a lot over there. Maito, can you speak a little bit about the prospects to move ahead at Danube?

Well, we really look forward to get the data. As you know, we have in parallel developed activities also for modified release. I think we really need to look at the totality of data, its performance on important metabolic parameters in diabetes, its ability to deliver weight loss, as you alluded to, and also, of course, its tolerability in general. These three implicate you know, how well their drug can perform. And I remain optimistic that oral drugs in this class can have a profound effect on weight loss. Of course, one needs to be maybe a little bit cautious to drive weight loss too far, as you have seen also some concerns in public media about side effects that may rise from that. So we will really integrate all of that data and make a decision. And we really look forward to that moment. Thank you, Michael.

May I have the next question, please?

Our next question will come from Evan Seegerman with BMO. Your line is open.

Hi, all. Thank you for taking my questions. And kind of a follow-up from Umar is I want to focus on the GLP-1 franchise. Can you talk about the competitive profile of Daniel Glipron in its current form? considering safety, twice-daily dosing, and efficacy, and maybe remind us on the timelines to potentially get more on a once-daily formulation of this asset. Thank you.

Michael? Yeah, you know, as I said in my prepared remark, we expect data at the later part of this year. We are absolutely excited. encourage and confident that it has a different profile when it comes to adverse events as the drug lotte glipron that we stopped. So we don't see that as an issue. And I have spoke to that we will put together the totality of data to, you know, pending readout, prepare a potential phase three program. And it's a very big sector, diabetes and obesity. We have considerable expertise in treating cardiometabolic patients. So really look forward to share more data and more plans with you as we move to further quarters. Thank you for your great interest in this important space.

Thank you very much, Michael. May we move to the next question, please?

Next, we have Terence Flynn with Morgan Stanley. Your line is open.

Great. Thanks so much for taking the questions. Maybe two for me. Dave, I was just wondering how we should think about steady state operating margin here. You know, looking back pre-COVID, the company was around mid to high 30% range. Is that how we should think about this? You gave us some of the parameters, but just maybe how to think about steady state. And then on the messenger RNA phase three seasonal flu vaccine program, it looks like that trial was upsized based on clinicaltrials.gov. So just wondering, Michael, if you can talk through timing of data and help frame expectations there. Thank you.

Thank you, Terrence. Let's start with Dave. Yeah, so great question. As we think about our operating margin long term, clearly our objective is to expand that over time. Clearly, it is our expectation to get back to, at a minimum, pre-COVID levels with one caveat, is that as we go forward, we do have... a different mix of products within our portfolio, particularly the vaccine related to COVID. As you know, the vaccine, given the cost share that we have or profit share that we have with our partner, does dilute that product from an operating margin perspective. So a mix adjusted, you should see us back to those levels over time. But obviously, as we cycle into 24, we'll give you a lot more clarity on all the puts and takes as we integrate Cgen, as we roll forward from a COVID franchise perspective, how that looks, as well as all the developments that we have coming out of the pipeline at this point in time.

Thank you, David. Michael, MRNA salute.

Yeah, first, the totality of experience we have with mRNA for flu makes me very encouraged that this will be a new modality as it was for COVID, but now for flu that engages two mechanisms, the B-cells and the T-cells that we should aspire for having better efficacy than what we have seen with the old flu. We are continuing with the study because we just wanted to have more events and particularly have addition of flu B type of events, which were scarce in the use part of the trial. And we look forward to update you, hopefully be able to conclude the study. later this year but we're also putting mitigations as adding immunicity studies that can be supplementary for getting a total good data package of activity against flu a and through b but as i said i remain very optimistic that the mni is going to be the next important platform to deal with flu thank you thank you very much may i have the next question please

Next, we have Chris Shibutani with Goldman Sachs. Your line is open.

Thank you. Two questions, if I may. On the potential enterprise-wide cost program, you would have some opportunity outside of the COVID programs to consider, can you help us with the relative weighting potentially of R&D versus SG&A or some other component of that? And I ask that in part because you've announced some changes, for instance, in kind of the structure at the top year of management of the R&D with the anticipation of the oncology and Seattle genetics. And then secondly, if I could, on the Lockheed Mountain facility, it's reassuring to hear in terms of your own staff, but I think folks are looking to get a sense for the scale of the damage And perhaps what potential gating factors for getting more information on timing? I know that you guys have communicated with some of your hospital-based customers, but any additional insights in terms of magnitude of impact and timing of a recovery and what that could look like from a progress standpoint would be helpful. Thank you.

Let me say a few words about the Rocky Mount and then I will ask David to answer the question about the cost adjustment program in case we have a significant reduction on our revenues because of the COVID. The Rocky Mount, it was severe, the damage of the hurricane, but the damage was mainly concentrated on the warehouse. which means that we lost a lot of inventory, but was about to be sent to the market. The facilities per se, the production facilities, were not impacted by the hurricane. So the buildings are standing there. However, because the utilities were discontinued, the facilities had to stop operating. And in this highly sensitive, sterile environment, when you are losing power, it's not easy to switch on and switch off. It takes time and a lot of processes so that you can start it. An additional challenge will be some of the inventories of materials that were also destroyed, particularly glass and other stuff that we need to make sure that we will replace in time. What I want to say is that we feel very confident that the whole thing will go back to life, but still we are assessing how long that will take and we are doing anything we can to make sure that we will minimize the shortages in the marketplace because of that. Now let's move to some more color on the cost adjustment program.

Yeah, so thank you for the question. Clearly, as we develop this program in the back half of 23, we look forward to sharing a lot more details as we cycle into 24 and give you a lot of, I'll say, milestones as you think about both our cost and investment structure going forward. Importantly, as you know, we're extremely excited about the seed acquisition that's upcoming here. Upon approval, this will allow the company to refocus its efforts and investments to make sure that we're squarely focused on battling cancer going forward. And we think there's a big opportunity as we align our resources against that franchise in that battle. to fight cancer and an opportunity for patients, and importantly, an opportunity long-term for Pfizer. Having said that, we will be informed in the back half of the year of our revenue performance, specifically as it relates to COVID. That will inform us the level of opportunity we have to expand our margins into 24 and 25 and beyond. That will allow us to step back and make sure that all of our costs and all our investments are aligned with those CGEN objectives, as well as aligned to maximizing the performance of our inline portfolio, as well as the launches that are occurring as we speak in the back half of this year. So, again, we look forward to sharing a lot more from this. This will be balanced, as you well know, between SINA and R&D, and we'll give you that specific breakdown and that specific information later this year and into next year. Thank you very much. Let's move to the next question, please.

Next, we have Louise Chen with Cantor. Your line is open. Hi, thanks for taking my questions here.

Wanted to ask you first on these COVID scenarios that you think could unfold in second half 23. Any way you could share some of the big ones that you anticipate could potentially happen? And then secondly, seeing a lot of headlines in the ATTRCM space, I'm just curious if you anticipate any potential competition or meaningful competition to Vinda called VindaMax. Thank you.

All right. So on the COVID, I will say a few words and then I will ask Angela to comment on both. Look, the COVID scenario depends. What are the uncertainties? I think I articulated. Let's start with the vaccine. The biggest uncertainty is vaccination rates. I think market share is pretty much, I think, well established. Vaccination rates is what we're going to see in the fall that is coming. So that would be a big uncertainty. Another uncertainty was the time of commercialization in the US because, of course, you go with new inventories, new sales to the market and with higher prices. That has been resolved. We know that it's very likely that we will launch in September because FDA and CDC, they asked us to change the inventories basically by creating a new vaccine. So that will happen. And also the other uncertainty that existed about the COVID vaccine was the European countries. that was a very long contract, very big contract, and now we have the certainty that has been negotiated. A little bit less for the year, because it spread over four years, but let's say renegotiated. So all of that are the key concerns. Of course, there is how much Japan, Latin America, and other countries will purchase. It's not the only ones, but let's say those are the fundamentals. We will know pretty much the trend in the third quarter, and we will know pretty much quite accurate what is the situation in the end of the year. That, I think, will be a very good predictor of what we should expect going forward with the only upside, if we have a combined vaccine with flu or with RSV, that that will increase the vaccination rates. On PaxClovid, A little bit more uncertainty because, of course, we are having the uncertainty of treatment rates and infection rates. And we don't know how that will behave. We don't have any benchmarks to see how that goes. We know that the treatment rates are falling very closely to infection rates. and the infection rates are rising right now. But it remains to be seen how that will go. Of course, also the sales of Paxlovid are rising as we see in the market. This creeps on a weekly basis, as always do when the infection rates are going up. But we have some more uncertainties over there, which is the timing of loans. which will depend on how we will agree for the interest of public health to transition this launch with the U.S. government. So all of that remains to be seen. And these are the scenarios that we see for COVID. And the key message is the uncertainty will go away at the end of the year. We will know what COVID will contribute on a stable basis in Pfizer's revenue, and we will go from there. Now, Angela, maybe if you want anything to add to that, and also about the next question, the other question.

Louise, I think when you talk about Vindamax or Vindacal, the biggest and our biggest differentiator that we're extremely confident about is just the totality of our data along four dimensions, and whether that's clinical data or real-world data. We have all-cause mortality and CV-related hospitalization data. Our data are also relevant in both hereditary and wild type ATTRCM, so that's unique. We've also demonstrated significant survival benefit at five years for our real-world data. So whichever way you look at it, and if you compare that with any competitor program, I think that we have a highly differentiated and an extremely valuable molecule that stacks up well against any competition.

Thank you, Angela. May we have the next question, please?

Next we have Mohit Benzal with Wells Fargo. Your line is open.

Great, thank you very much and maybe a follow up to this one a little bit. So thank you for all the transparency by the way. So is it fair to say that I mean COVID trend that you have seen so far at least sales trend that have been below your expectations and you want to see one more quarter before you adjust the expectations? I'm asking this because you know if I look at the it seems like you still expect 88 million or so vaccinations in the second half of the year in the U.S. and the number was actually By our calculation, 44 million or so in terms of administration, 111 million in terms of shipment. So just trying to understand, is it something where we could get better update in type water on the COVID numbers? Thank you.

Yes, I think, thank you for the question. I think the answer, yes, we should get a way better feeling. It's not that we just want to see another quarter. We want to see the big quarter of the respiratory season. COVID, we always said, and everybody, I think, thinks that that is a common sense, that will follow going forward the seasonality of the other respiratory vaccines. That's becoming more and more and more commonplace. clear, right? And the majority of these vaccinations are happening in the third and fourth quarter for the year. So it's not that we are just another quarter. We are waiting the main quarter. If COVID vaccinations go anywhere close to the flu vaccination rates, then we have a very big bit of what we expect to happen. If they are a small fraction of what will happen for flu, then of course we have a miss. So that's why we are going to see how that will evolve. So it's a very, very important quarter. Although for the first half of the year, we had quite significant contribution towards the total goal. So we don't need that much of inventory if we have the utilization over there to make sure that we know how big the COVID franchise will become. And as I said, in the EU, we have adjusted very well. We have high certainty. Paxlovid also. China is a very, very good market. We don't know how in the next wave the Paxlovid will be used. We have the rest of the world, but the inventories, they were also last year. So we are now expecting that products will start going other expiry or product will start more reordering from many more countries. So that's why the infection rates on the Paxlovid will be extremely, extremely important. And all of that are happening now. So once we know, then we can predict way more. Thank you very much. Let's go to the next question.

Next, we have Truong Nguyen with Credit Suisse. Your line is open.

Hi, guys. Thanks for taking my question. You commented the long-term outlook for your non-COVID business remains intact relative to the 2030 ambitions. How are you thinking about the mid-term 2025 guide? Because if you assume the midpoint of your ex-COVID-23 guide at 7%, in order to achieve the 6% 2020 to 2025 guidance ex-COVID, on our calculations, you need to do high single-digit growth for that base business for 24 and 25. That looks tough, especially as you'll have more LOEs. So do you remain confident in that mid-term guide?

Yes, thank you. The LOEs are coming basically from year 26, right? So all the way to 25, I think the impact will not be that high. Also, the guidance that we gave was 6%. So we'll continue. And we are at 6% right now. All these years, right? The year today. So, yeah, the non-COVID business, I think, clearly, the success of the launches is very important. So we'll see a lot of things coming ahead of us. But it is way better predictable. And I think we are there. So I don't think there will be any variability. Thank you for the question, by the way. Let's go to the next question.

Next, we have Colin Bristow with UBS. Your line is open.

Hey, good morning, and thanks for taking the questions. Another follow-up on Daniel Glipron. I don't think I heard the answer in terms of when we'll hear about the once-daily formulation, and I'd just like to understand your level of confidence here that you can make this a once-daily formulation without negatively impacting the AE profile, presumably given an increase in CMAX. And then more broadly, can you just talk more about how you're going to compete here, given I think it was previously referenced, you're behind the competition, the clinical differentiation, the potentially less convenient dosing, and essentially a therapeutic category in which you don't have a major presence. And then just maybe one other quick one on a pipeline item on BND gene therapy. This is a late-stage asset that doesn't seem to get much airtime. Is your enthusiasm waning on this program, or is it just that others are sort of a bigger priority? Thanks.

Yeah, thank you. So, Michael, again, clearly the obesity market and the size of it is creating a lot of interest in glipron. And so the question was about the one day formulation. And then also tell us a little bit about where we are with DMD.

You know, I hear your interest in our once-daily product and I would say I don't see any technical barrier for us in creating that. We have tremendous experience in modified release formulations and our early data, as we now have initiated a while ago, tells us we should be encouraged that when it relates to once a day modified release for danoglipron, I believe we will have such a formulation in a reasonable future in our hand. When could it come to the market if the drug continues and makes a great phase three Well, I think we can have it at launch or shortly after launch, so I wouldn't worry about that. But I agree with you that once daily modified release can sometimes actually improve the tollability profile by smooth and variability in exposure. which typically reduce GI side effects that have been seen as limiting with this drug class. So that's why I can see a potential twofold advantage of an MR, goes from twice a day to once a day, and may also help uniquely to create a tolerability profile within this drug class or a GLIPS. D&D gene therapy, I'm encouraged that the FDA took a very positive angle on that drug when it comes to its urgency to get into the market. Chris, you and I have worked very closely on that, and we expect to be able relatively soon to conclude the trial.

I'll also ask Chris to pitch in on it. Thank you, Michael. So the DMD program is obviously very important for us, not just for the importance of gene therapy, but for patients and families with this absolutely devastating disease. We do have an interim analysis later this year for the CIFIO trial. The CIFIO trial, all patients have now been enrolled in the study. The interim analysis will be based not on a surrogate biomarker endpoint, but on truly functional endpoints. So we believe that's the best way to measure the benefit of gene therapy in this disease is with a functional endpoint. That should come later this year, and we'll update you with a final analysis for the study then in 2024. That was terrific.

I just wanted to add that we have like you heard Sarepta, ample biomarker data that look very robust in our hand. But as Chris said, we want to provide patients with even more experience about the potential benefits.

Thank you both. May I have the next question, please?

Next, we have Carrie Holford with Barenburg. Your line is open.

Thank you. A couple of questions. Principal savings. It's clear that demand for your COVID assets will influence whether or not you go down this route. But given the potential you've highlighted previously for a COVID flu combination vaccine, I'm interested to understand whether... The upcoming phase three data from your mRNA flu vaccine trial will influence your decisions on that cost-saving program in any way. And then secondly, on haemophilia, your anti-TFTI, you say you're filing second half of the year. for non-inhibitor patients. Should we assume you would seek to launch in that patient group only next year or would you wait for the data in the inhibitor patient group before you proceed to market? And perhaps you can just discuss here how big an opportunity you see in that drug. Thank you.

Let me start with the COVID, and then Michael also can comment. But for example, we are very excited about the combinations, right? And the combinations will be flu and COVID, and then hopefully also flu, COVID, and RSV. And we are working on that. And we believe actually that the fact that if we have a combination with a non-mRNA included over there, we'll have likely that we expect to have the benefit of better safety profile, because you don't have to load three products RNA into a single injection, but we will be using only two, COVID and flu, and then we'll use a protein-based vaccine, which is a very benign profile in RSVs. All of that are working very well. Now, the question is, what will happen if the COVID market is seen to be very, as Manovela, as very, very low? I think that will play a key role in our decision about controlling the cost, because if it is very, very low, although we expect an upside in the combination, we will assume at this stage that the medical need for COVID is not that high. And as a result, we will reduce our investments in the area and also temper our expectations for sales. And then if the combinations come and we are way more successful, that's a different story. You want also... What's the second question? Ah, yes, about the muscashima. Michael.

You know, I'm very excited about Mastacinib. I've followed this project for a long time. And as you know, we reported out very encouraging data. We had 92% reduction in annual bleeding rate versus on demand. We had really no safety events as had been associated with other products, including Hemlibra. It's active against both team A and B. It's administrated with a pre-filled pen. I think it can be, from a medical point of view, a very large product, a single option for hemophilia A and B. Of course, when I think about how Hemlibra has been such a promise for EMA patients, and I see this profile that looks so good, I'm optimistic that it can do well in both segments.

Thank you very much. Let's move to the next question, please. And we are a little bit, the time is flying, so a lot of interest. So let's try to be more, one question, please.

Our next question will come from Jeff Meacham with Bank of America. Your line is open.

Morning, guys. Thanks so much for the question. Just had two real quick ones. Angela, on Trevnar, what does long-term growth look like? Clearly, you may have a tougher competitive environment Just if you lose share, what do you think the TAM growth could look like to offset that? And then, Michael, you talked a little bit about next-gen CDKs. I know it's super early in development, but is there a risk-benefit hurdle you have in mind? I'm just thinking about, you know, cost-benefit, post-iBrands, LOE, and also, you know, considering the competitive landscape. Thank you very much.

So, Angela, how concerned you are with the competitive environment? I know we respect all competitors, but we have some realities that maybe you want to discuss. And also, I will ask, actually, Chris Bossel to answer the question of CDK Thor, since we have him here in his new capacity. Angela.

Well, I mean, I want to begin by just saying how incredibly proud we are of the performance of the entire Prevnar franchise. If you look at the adult, the adult indication, you know, we have grown. Not only have we grown 23 percent since last year, this time we're doing all of this growth prior to the fall vaccination season, which is what you typically see. So the fact that we've been able to bring these vaccinations forward tell us a lot about the work that we've done in pneumococcal disease, how well appreciated it is. but also how well our machinery is working, not to mention the fact that we have 96% share of the adult indication. In PEDS also, of course, you know, being that we went from being 100% of the market, today we share some of that market share with PCV15. But I just want to remind everyone that that is to be expected and we are exactly where we thought we would be. And so from that perspective, we're also really proud of how Prevnar 13 has competed with Prevnar PCV 15. I think the important thing here to realize is that given the ACIP recommendation that we just got for Prevnar PEDS, what we are beginning to see now is a sort of reversal of that decline and the reclaiming of market share. And so we have the fact that we've seen some accounts purchasing PCV20 PEDS now. We've seen some accounts switching from PCV15 to our own Prevnar20. The fact that our federal contracts have added Prevnar20 to their register, which means that public vaccinations can begin. And then maybe the one thing I will mention about PrevnarPeds, which is unique compared to any other pneumococcal vaccine, which is that we were given the recommendation to vaccinate well, kids two to 18 immunocompromised. So that is a whole new population that we've never had before. So when you kind of bring all of this together and you factor that this quarter alone, Prevnar franchise generated $1.3 billion in revenue, just this one quarter. I think that order of magnitude gives you a sense of the scale and the competitiveness of our portfolio. And we're really excited about what Prevnar can do over the next coming quarters.

And that is under the competition of BCV15, which I think was around 150 million, if I'm not mistaken. Chris, can you please speak about the CDK4 and different sites in general over there?

Thank you for the question. So as you know, ER-positive breast cancer is the most common cancer globally for women. And we're very proud that we can build on our leadership in cell cycle inhibition with iBrands. with three first-in-class potential assets, CDK4-specific inhibitor, CDK2-specific inhibitor, and a CAT6-specific inhibitor, all three with significant potential to transform treatment in the future for ER-positive breast cancer. For CDK4, we have seen more complete and continuous CDK4 target coverage and potentially improved tolerability due to reduced CDK6 inhibition. And as Michael has pointed out, CDK6 leads to the hematological vulnerability. We know that epithelial cells specifically highly express CDK4, and that's why it's so important to specifically target CDK4. And what we've seen, as Michael pointed out, is grade 3 neutropenia of 15% with our CDK4 inhibitor, and that's versus 60% as expected with other CDK4-6 inhibitors. We've also not noted any grade 3 diarrhea. And again, that's very different from what you know from some of the other CDK4-6 inhibitors. We're accelerating our registration strategy with the first study in second line, post-CDK4-6, where we've recently shown 30% overall response rate in a heavy pre-treatment population. And we're also starting combinations with CDK4 plus CDK2, as well as CDK4 with our potential next-generation backbone, ARV471 or Feptecastran, which we are co-developing with Arvinas.

Thank you very much. Let's go to the next session, please.

All right, next we have Tim Anderson with Wolf Research. Your line is open.

Oh, thank you. If I could go back to the COVID guidance, investors have been cautious not only on the level of your prior guidance for 23, but also the shape of the future revenue curves beyond 23. So my question is on the latter, the shape of the future curve. Are you confident still in saying that 2023 should be the trough? And then you'll rebound to some higher level of sales in 2024 and beyond and see kind of continued growth from that. point forward or is that now more uncertain too? Thank you.

Thank you. Yes, I think that this year's utilization at the marketplace will form the basis that we can predict reliably for the next years. I don't think we'll be any much different because there will be no different categories in the marketplace. The vaccination rates will settle and then the treatment and infection rates also will be after a new year indicative of what we should expect periodically. Clearly, we will have to deal with some inventories movements, and this year was a transitioning year because we are going to new prices and we are going to absorption of inventories, etc. So that should be for the accurate number for 2024 and beyond, but should be the base. And likely should be higher than what we should see this year. But that provided that we have reasonable vaccination and treatment rates for Paxlovid. So that's why I say that let's wait to see what will be the actual in this year, and particularly what will be the utilization, as I said. Because next year, all these inventories and price adjustment things will be very clear what will be. So thank you very much for the question. Let's move to the next question, please.

Our next question will come from Carter Gould with Barclays. Your line is open.

Good morning and thank you for taking the question and for all the transparency on your thought process on the COVID side. Plenty of great questions asked this morning. I guess one I didn't get addressed is, you know, you out-licensed your TL1A late last year. Your partner then turns around and sells it for quite substantially more. I guess so to be a bit provocative, Albert, were Pfizer shareholders well-served by this course of events? Would love to give you the opportunity to address that publicly. Thank you.

Thank you, Carter, for giving us this opportunity. And also thank you for recognizing the transparency. I think that's very important, particularly when there's uncertainty. We should all know what the scenarios and the parameters are and what the actions that could be potentially triggered for different scenarios. Now, let's go to TL1A and let's see what is the situation, Amir. Have we served the shareholders? The best of our knowledge or not?

Thanks for the question, Carter. And obviously, I'm not going to comment on the rumors and speculation or the potential prices attached to different transactions. What I will say is we're very pleased with our TL1A Televent partnership with Roivant. And we do think shareholders will all serve. So as a reminder, why we entered this, we entered this as an R&D portfolio prioritization decision. So from time to time, we make decisions as part of our discipline process to our partner R&D programs where we think it is better to share the risk or the cost with a partner. And in this case, Teleband covers all of the R&D costs going forward, and that frees up significant R&D capacity for Pfizer to invest in high priority programs. But we still retain value in this program in three different ways. We had a 25% equity stake in Teleband. We have full ex-US and ex-Japan rights, and we earn royalties on the US and Japan sales. So taken together, this collaboration allows us to keep more than 50% of the total value of TL1A with zero incremental R&B spend. And for a phase two program, we feel this is a very sound move for Pfizer shareholders.

Yes, Michael, anything to add here? Amir said it so well, and I just wanted to punctuate among the very many options, we have a strong platform in bio-specific in many therapeutic areas, including in immunology and we do have a t1a q40 antibody that would be very interesting where we own even greater share we have triple specific that are going into atopic dermatitis so this just punctuates even in the very same therapeutic area we have so many things going on and near term we expect

uh soon um approval for a trasmode and another readout for chrome so a lot of stuff there thank you thank you michael don't keep competition too much about what we have in our pocket so let's go to the next question next we have steve scholar with cowan your line is open

oh thank you very much i just have an observation than a question but the observation is that it's still not clear what has changed in your long-term covet expectations versus when you first gave the 30 billion dollar guidance six months ago since in the prior six months nothing really has changed other than fda action which doesn't impact the long term so that's just an observation but my question is on vandaquil has Vanderquilt has become a very important franchise, yet its exclusivity is not long in either the U.S. or the EU. Are there any strategies to get around the LOEs, or is it simply similar to Eloquist, where post-LOEs Pfizer will move on to other products? Thank you.

Yes. So why don't you take the question, Andrew?

Well, it is, as you say, an incredibly important product, and we're just so proud of the fact that it's still growing 40-something percent this quarter. I think when it comes to Eloise, just from the perspective of how we see it, our composition of matter patent expires in 2024, but we have patent term extensions that get us to December of 2028. In the EU, it's 2026. In Japan, it goes right up to 2029. So actually, I feel like we still have a good runway as it pertains to this product, more diagnoses that we need to do and more patients that we can capture onto Vindicao, especially with the incredibly competitive and differentiated profile that we have. As you say, we're always working with Amir, looking at opportunities as to what might be good fits into what might fit well into this franchise and this portfolio. But I guess from my perspective, with or without it, we see an incredibly strong opportunity for us to continue to capture growth.

Thank you very much, Angela. May we go to the next question?

comes from David Reisinger with Lear Inc. Partners. Your line is open.

Yes, thanks very much. So my question is on Pfizer's mRNA flu vaccine candidate, please. And Sanofi had stated at its recent Vaccines Analyst Day that first-generation mRNAs against flu will not deliver sufficient strain B efficacy given mRNA technical issues in targeting strain B. So could you just comment on that and your expectations for your vaccine's southern hemisphere strain B efficacy results later this year? I know that, you know, there wasn't the emergence of strain B in the northern hemisphere, but I'm curious about your expectations for demonstrating that strain beat efficacy in the southern hemisphere. And then, in addition, if you could just comment on your expected reactogenicity profile for mRNA flu versus Comirnaty's reactogenicity profile. Thank you very much.

Thank you very much, David. Very good questions. Michael, so are the technical issues that Sanofi is having, are we experiencing them as well?

Well, I think there are, you know, difference between maybe the pioneering mRNA companies, Pfizer and, of course, there is Moderna that have worked in this technology many years. We have ourselves been five years into it and make ample improvement across the entire mRNA chain. And I think it just gives us a big leg up and all the experience we had with COVID vaccines. So I can't really comment on the issues that Sanofi are facing. I share a much more positive, I have a much more positive outlook that we have in our capability to design mRNA vaccines that will be powerful against flu A and also against flu B. And let's wait as we accumulate data and see, you know, the outcome. But I'm optimistic about that and realize it's a field that requires a lot of capability to enter. What about the reptogenicity? The flu reactinicity has actually been moderate, been really good. So that's not an issue at all at any of the doses that we have been testing in young or older patients.

Thank you for clarifying, Michael. Let's go to the next question, please.

Next, we have Andrew Baum with Citi. Your line is open.

Thank you. Could you talk about the impact of price negotiation under the IRA? Expressly, could you talk to whether you'll be able to collapse the rebate to PBMs in order to offset the impact of, let's say, eloquent price reduction following the price negotiations and therefore protect your earnings? Or do you think you'll have to still pay the PBMs their pound of flesh even though they're being able to buy the drug at a much reduced price? or fund the drug at a much reduced price. And then separately from Michael, given the recent acquisition of Segen, to what extent, or planned acquisition of Segen, to what extent do you believe that there is a potential to review your existing pipeline in order to make room and further optimize your R&D spend to put behind Segen's additional assets?

Yes. So why don't we go first to Angela about what IRA will mean in terms of changing the rebates, etc. It's quite a new situation, so we'll have to see how it plays. But if you want to speak a little bit about it, Angela.

Sure. So that's exactly right, Albert. I think there's just, you know, it's a... a new policy and lots to understand in terms of how it's going to play out. As you say, there will be price negotiations, but at the same time, I think that what we also have to remember, Andrew, is that there's a mitigating factor of the fact that more patients likely will be able to get on Eloquist because of the copay threshold and that sort of cap we're going to have as a function of IRA. And so I think it's a dynamic situation. There's lots for us to consider as it pertains to pricing, rebates, but also patient utilization of the drug. And, you know, all of this will play out. I guess as it pertains specifically also to Eloquist, just to remind everyone that though it's obviously one of our largest drugs, its LOE will be around that 26 timeframe. So whatever the impact is, you know, will not be, you know, long lasting on our portfolio because it's losing patent anyway around that time.

Thank you very much, Angela. It's an evolving environment, so we need to really see it. Also, Andrew, very quickly on the pipeline issue. We have made very clear that the seasonal acquisition will mean nothing to the pipeline assets. So no pipeline assets will be eliminated or reduced or increased as a result of... Actually, there will be increases because we'll do combinations, but there will not be any reductions on pipeline assets as a result of this acquisition. Can we have the next question, please?

Next, we have Chris Schott with J.P. Morgan. Your line is open.

Great. Thanks very much. Just a two-parter on Cominarty. Can you just help me a little bit in terms of, I guess, with the updated vaccine being commercialized in September, how much of your remaining COVID revenue should we think about in 3Q versus 4Q? I'm just trying to get my sense of when we get this 3Q update, will that be based on the sales we're seeing in the quarter or more your interpretation of the trend we're seeing for vaccinations as we're setting expectations? And the second part was on the EU contract renegotiation. Just any additional color you can provide on how different, I guess, the terms end up being for 2023 relative to what was reflected in the 2023 guidance. Thank you.

Thank you very much. I can take it very quickly. Look, if you see, we will have basically July, August, September in the third quarter. So the vaccinations with the new will start in September, hopefully. Of course, what we expected is that we will have approval by the end of the August. And we are ready with product. already now so we have so production will not be an issue so normally we should have also in q3 most of it in q4 but what really will uh clarify us at the end of q3 plus also the month that takes after q3 until we give our deal we present our our q3 results it is really the vaccination rates right that is what will inform and the net price right because everything after all we will know way better what the net price also very big part of this uncertainty for community will go away on the eu contract renegotiation and i don't know if you if you noticed we i did say that when we gave our guidance we were expecting that we will have incorporated assumptions that we will renegotiate the EU contract, and our assumptions were assuming that we would do over three years. Now, we did over four years, which that creates a pressure to our guidance, but then we had some contracts that we didn't expect, you know, guidance in Latin America particularly, that offset a very big part of that. So that's why there's no, that by itself is not a reason to change guidance one way or another. Really, as I said, vaccination rates, it is what will define what is the potential of these vaccines for the years to come. Thank you very much, Chris. And then let's go to the next question, please.

Next, we have Rajesh Kumar with HSBC. Your line is open.

Hi, good morning. Thanks for taking the question. Just one for me. You're doing a lot of acquisitions. You've done a large one recently. It's not completed. But as we look forward, How do you think the, you know, what are the sort of integration challenges you see both on, you know, the execution commercial side but also on the scientific side? What are the things that get you excited versus worried about?

For the citizen acquisition, right? Yes.

Let me start... But you've got multiple acquisitions before that as well. So just, you know, you've got multi-integrations going on, sort of. Exactly. Yes.

So let me start with what excites us with citizen. And I think it's the science behind this company. The ADCs are playing a key role right now, more and more. in our research and in our fight against cancer and Cigen has one of the two leading platforms and we believe it's actually a better one. So I think that excites me a lot. Also what excites me a lot is that Cigen was able to achieve all this greatness with limited resources relatively compared to what we are bringing on the table. And what we are bringing on the table on the research front, of course, is not only the capital, but also a significant expertise on designing the molecules. And particularly the small molecules, we are very, very, very good. So when it speaks about payloads, I think we can contribute significantly into that. Secondly, we are thinking that there is such a nice way of being able to commercialize those products of season that already in the market or will come because first of all, we have global presence that season is lacking. And also, in the US, we will almost triple our resources once the whole thing is integrated. So there is a lot of things to be excited. Now, as you rightly pointed out, things happen in integrations that you need to be well aware. And we have our fair share of things that we did wrong in the past, and we have our fair share of things that we did right in the past. So... i know what what is extremely extremely important is to make sure that first of all there will be no cultural class as we are putting together that organization to that end we are very very lucky because oncology companies tend to have very very similar cultures irrelevant they're smaller big they're oncology companies and that was evident in the chemistry of our scientists compared to the to citizen scientists. Actually, where it is really evident, it is how many of the great scientists of citizen raise their hand to join Chris's leadership team as we are going forward. And those scientists who have published this information, who will be coming from citizen, actually, many of them will lead the global oncology business. Not only the Pfizer one, but they will lead the global, not only the season one but the global which is season plus uh plus uh the second thing that we need to be very careful it is that we don't slow down things and we don't increase cost of things this is something that we have seen when big companies are acquiring small that many times cost goes double and the timelines those also happen so that's something that we must avoid And in order to avoid, we are doing tremendous pre-integration planning to make sure that innovation will be enhanced dramatically after we are putting the two together. And I have full trust on, of course, Chris, that is leading this integration and this planning for months now. And last but not least, many times when you have an integration, it could go wrong. And it's good if the CEO, which is the one who can resolve conflicts in a corporation and make decisions fast, has very high visibility in what is happening. So I went very fast. This is our biggest investment for many decades. That's clearly the biggest investment under my watch. And we take it very seriously as one of the most potential, exciting opportunities to grow. But also, we are very cognizant that we should make sure that nothing goes wrong. So I'm personally on it. And season is going to be one of our biggest bets, as you can see, going forward. So we are using all our experience and the best people. And I'm very, very pleased. And I'm very, very pleased because chemistry of the two teams is unbeatable right now. And they are working like one. And they are all coming to see the new season slash Pfizer oncology portfolio growing faster than when we were alone. And with that, we will move to our last question.

Our last question will come from Michelle Rivera with InThought Research. Your line is open.

Good morning. Thank you for taking my question. What's the status of the DMD gene therapy program? Have you finalized dosing patients? I read a statement at a recent conference that you finalized screening patients, so I wasn't sure whether that meant that the trial had been paused. Just some clarity around that and when we should expect data would be helpful. Thank you.

Chris, you were running DMD until recently. Now you, of course, provided to Michael the responsibility. So can you give us a little bit very quickly what is the status of DMD?

Yes, thank you. So as I mentioned earlier, the clinical trial has now completed enrollment. As you pointed out, we halt dosing for the last couple of patients due to a protocol amendment. that we're very confident that we'll go ahead and have the internal analysis later this year based on a functional endpoint which will be substituted also or which will be, yeah, with the biomarker data. So we'll have both functional data as well as biomarker data later this year. And then the final analysis for the full study in 2024. We've also fully enrolled now the earlier age group, patients between the ages of two and three years old, 10 patients enrolled in that trial. So yeah, we're looking forward to share the data later this year for you.

Thank you very much. In summary, I think we had a solid quarter. We continue to invest to support our unprecedented 19 potential launches in an 18-month period. These are doing very well. The plan is executed as per the timelines. In our pipeline and in value-creating, revenue-generating business development opportunities like season, which, as I articulated just in the question before that, it is clearly our big bet and our very, very big opportunity moving forward. Over the next three months, we look forward to moving beyond the current uncertainty related to our COVID-19-related travel. So we'll have better clarity. And by the end of the year, we'll have... certain will be removed almost at large. To that extent, but any adjustments are made to our cost base for 24 and beyond, we are ready to make. I want to emphasize that the biggest uncertainty in terms of the long term is vaccination rate. Some sort of uncertainty is like when commercialization will be. I think it's just a question of time. But the vaccination and treatment rates that we are going to see, I think will inform what we should expect for the years to come. with only upside if we had the combination of exchange. Putting all these factors together, we remain confident in our ability to deliver robust operational growth and deliver meaningful shareholder value through the end of the decade and beyond. And now we will bring our call to a close. Thank you for joining us and have a great rest of your day.

Thank you, ladies and gentlemen. This does conclude Pfizer's second quarter 2023 earnings conference call. We appreciate your participation and you may disconnect at any time.