Pfizer Inc (PFE) — Q2 2019 Earnings Call Transcript

Good morning and thank you for joining us today to review Pfizer's second quarter 2019 performance and our updated 2019 financial guidance. We appreciate your flexibility today. I know it's been a busy morning for everyone.

Thank you, Chuck, and good morning, everyone. During my remarks, I will discuss the progress we are making in the business, the latest advancements within our R&D pipeline, and our ongoing work to advocate for policies that support affordable access for patients. But before I address these topics, I would like to make a few comments regarding our recent activities to reshape our company, including the agreement we announced this morning. We have been very busy. We recently completed the Therachon acquisition. We expect to close the Array acquisition very soon. We are about to create the joint venture with GSK for our consumer business and we just announced the proposed agreement with Mylan for our Upjohn business. When all these actions are complete, Pfizer will be a smaller, more focused, science-based company with a singular focus on innovative pharma. We believe we will be in a position where our pipeline will be able to move the needle even more dramatically in terms of our long-term growth prospects. In fact, we see our growth profile improving in three ways. We expect our five-year revenue CAGR to be higher than it otherwise would have been. We see the growth starting earlier because the Lyrica LOE cliff will go away. And given our smaller size, we believe the growth will be more sustainable. We also will still have the financial flexibility to continue to invest in growth while returning capital to our investors. These are deliberate steps we are taking to make Pfizer a very different company and one that is even better equipped to fulfill our purpose; breakthroughs that change patients' lives.

Thanks, Albert. Good day, everyone. The charts I'm reviewing today are available on our website. Now moving on to the financials. Second quarter 2019 revenues were approximately $13.3 billion, which reflects operational revenue growth of $324 million or 2% and the unfavorable impact of foreign exchange of $527 million or 4%. Our Biopharmaceuticals Group business recorded 6% operational revenue growth in the second quarter 2019, driven primarily by Ibrance, Eliquis, and Xeljanz globally and by 12% operational growth in emerging markets, led by 26% operational growth in China; partially offset primarily by Enbrel internationally, primarily due to biosimilar competition in developed Europe, and the unfavorable impact of timing of purchases made by governments in certain emerging markets, and Prevnar 13 in the U.S., primarily reflecting lower government purchases for pediatric indication and continued revenue decline for the adult indication due to a declining catch-up opportunity, compared to the prior year quarter; and the hospital business in developed markets, primarily due to expected negative impact of generic competition and product supply shortages.

Okay, folks, I think we're back. We had some technical difficulties. Apologies for that. I think at this point, we'll have Frank pick up just before where he left off.

I will start by connecting the dots. As Albert mentioned earlier, Upjohn's revenues in China rose by 13% operationally in the first half of 2019, and we expect growth in the low to mid-single digits operationally for the full year. The 9% decline for Upjohn in the U.S. is mainly due to reduced revenues from Viagra because of increased generic competition and from Lyrica, which experienced volume declines as wholesalers destocked ahead of the expected multi-source generic competition that was anticipated to start on July 1 but actually began on July 19. Our Consumer Healthcare business saw a 1% operational revenue increase, driven by 4% growth in international markets, offset by a 2% decline in the U.S. In the second quarter, we reported GAAP earnings per share of $0.89, a $0.24 increase from the same quarter last year, largely thanks to the favorable impact of lower income tax from an IRS audit settlement, higher operational revenues, reduced acquisition-related costs, and fewer shares outstanding, though this was partially offset by lower net gains in equity securities and foreign exchange. Adjusted diluted EPS for the second quarter was $0.80 compared to $0.77 in the year-ago quarter, primarily resulting from increased operational revenues, lower cost of sales, and a reduced number of outstanding shares, although this was partially offset by negative foreign exchange impacts and decreased other income. Additionally, the diluted weighted average shares outstanding decreased by about 280 million shares to 5.67 billion compared to the year-ago quarter, chiefly due to Pfizer's ongoing share repurchase program, reflecting the effects of share buybacks during 2018 and the first quarter of 2019, which was somewhat offset by dilution from employee compensation programs. As previously mentioned, foreign exchange negatively impacted second-quarter revenues by about $527 million but positively affected adjusted cost of sales, adjusted selling, informational and administrative expenses, and adjusted R&D expenses altogether by $310 million. Consequently, foreign exchange had a $0.03 per share negative effect on adjusted diluted EPS compared to the same quarter last year. Moving to our 2019 financial guidance, we have revised certain aspects primarily to account for the expected formation of the Consumer Healthcare joint venture with GSK on August 1, 2019, and the pending Array acquisition. Our updated guidance now includes revenues and expenses related to the Consumer Healthcare business through July 31, 2019, but excludes those from August 1 to the end of the year. It also accounts for Pfizer's proportional share of the consumer joint venture's expected earnings, which will be recorded quarterly in other income/deducts with a one-quarter lag. Therefore, guidance for adjusted other income/deducts and adjusted diluted EPS reflects Pfizer's share of just two months of earnings from the joint venture for the third quarter, which will be included in the fourth quarter of 2019. This means that the consumer joint venture is anticipated to negatively impact adjusted diluted EPS by $0.03 for the rest of the year, reflecting the lost earnings contribution from August until year-end, partially offset by two months of equity income from the joint venture. Our guidance update also takes into consideration the expected effects from the near-term conclusion of the Array acquisition, and to a lesser extent, the Therachon acquisition which was finalized earlier this month. These transactions are projected to slightly increase our adjusted R&D expense and heighten our net interest expense, resulting in an anticipated $0.04 negative impact on adjusted diluted EPS. Importantly, our guidance update incorporates the projected net impact of several other factors, some of which will positively influence our financial results while others could dampen our 2019 outlook. On the positive side, we now foresee higher contributions from specific biopharma products, mainly within our Oncology and internal medicine divisions than we previously expected. Our Upjohn business also benefitted from the delayed entry of generic competition for Lyrica in the U.S. which was anticipated to start on July 1 but did not begin until July 19. However, we believe this operational advantage may be offset by foreign exchange effects and recent product developments for Prevnar and Xeljanz. As for foreign exchange, we initially predicted in January that it would have an unfavorable impact on revenue of about $900 million and a $0.06 effect on adjusted diluted EPS compared to 2018 exchange rates. We now expect foreign exchange to negatively impact revenue by $1.2 billion and adjusted diluted EPS by $0.08 for the year, based on actual exchange rates observed in the first half of the year and mid-July rates for the rest of 2019. This indicates an additional negative impact of approximately $350 million on revenue and $0.02 on EPS compared to our January guidance. Operationally, the ACIP's provisional recommendations regarding pneumococcal vaccination guidelines for Prevnar 13 in U.S. adults, along with the recent changes to the prescribing information for Xeljanz, have dampened our outlook for both products for the remainder of 2019. In summary, our guidance update reflects upcoming business development activities and considers the various operational fluctuations we've encountered this year, as well as the added negative impact of foreign exchange. Lastly, as a reminder, our financial guidance for adjusted diluted EPS accounts for $8.9 billion in share repurchases completed in the first quarter, which we expect to be partially offset by dilution related to employee compensation programs. Key takeaways from the second quarter include solid financial results with 2% operational revenue growth, 4% adjusted diluted EPS growth, and 6% operational revenue growth in our Biopharmaceuticals Group compared to the same quarter last year. This positions us well to achieve strong financial performance in 2019. We have updated our 2019 financial guidance based on the expected near-term completions of the Consumer Healthcare joint venture with GSK and the Array BioPharma acquisition, alongside the completed Therachon acquisition. We have reached multiple product and pipeline milestones since our last quarterly update and have returned $12.9 billion to shareholders in the first half of 2019 through share repurchases and dividends. We remain dedicated to providing attractive shareholder returns in 2019 and beyond. Now, I’ll hand it back to Chuck.

Good. Thank you, Frank and Albert. And sorry about the technical glitch. Evidently, we didn't have unlimited talk time on our calling plan, I would guess. But with that, let's turn it to start the Q&A.

Thank you. I have two. It looks like 2020 pro forma EPS for Pfizer alone could be about $2.10. Is that a reasonable estimate at this juncture? So that's the first question. Second Albert, you had been steadfast that a major transaction was unlikely while Pfizer was in the midst of several important launches. I'm just wondering, what changed and what does this tell us about the outlook for the new products – thank you – meaning the Upjohn transaction? Thank you.

All right. Let me cover this one, and then I will ask Frank to comment on the EPS. And frankly, nothing has changed – we always said that the internal separation of Upjohn was a significant theme in the value creation thesis when we announced its creation. I mean, Upjohn has a significant business model. They remain in Pfizer. The substantial autonomy was essential for its success. That was always the thesis. And we said that we will not explore options before we spin off this business, because we want to focus right now on spinning up this business. But I have to tell you that we substantially completed the internal Upjohn organization separation earlier this month. That involves multiple things including legal entities. We have a new organization but it is already operational worldwide. It is fully staffed. The Shanghai headquarters is already up and running. And the business has performed according to our expectations, actually a little bit better. So we always look, of course, to maximize value of the business. When we assessed the potential of combining these two companies, we quickly saw the potential to create value for shareholders in excess of what could be created if the businesses remained as such. Now, that doesn't create any disruption to our main biopharmaceutical business because it's already a separate business but continues to operate as a separate business as it does. It's going to have a little bit of disruption in Upjohn as we integrate but all of that we took into consideration when we saw how much bigger value we can create for our shareholders by combining those two businesses. Frank, on the EPS?

So Steve, we provided some preliminary financial numbers for 2020. We discussed revenue, EBT as a percentage of revenue, and operating cash flow, and I also mentioned the dividend. We did this to be helpful. Regarding specific EPS numbers, we will provide EPS guidance for 2020 on our fourth quarter earnings call as we have in previous years.

Thank you, Frank. Next question, please.

Thank you. If I could just go back to split. So splitting up was first contemplated in early 2011, then in 2017 you called it off. And one of the reasons for that was the valuation and spec pharma went down. That was kind of viewed as the comp for established products. And I think on a sum of the parts basis you guys were worried you wouldn't unlock value. Second question is just the emerging markets part of Upjohn I think is about $4 billion or 40% of total Upjohn revenues. Does this disrupt the corporate footprint in emerging markets that was a pretty sizable business that's a scale business as well? And was there any contemplation on keeping the emerging market part within the parent Pfizer company?

Thank you, Tim. As you mentioned, the idea of splitting the company was previously discussed but ultimately discarded. This approach was mainly aimed at leveraging financial opportunities at the time, but it did not prove effective and will not be pursued at Pfizer. Instead, we have focused on creating operational value by consolidating similar functions. Our initial step was establishing Upjohn, which was formed due to its distinct characteristics compared to our previous products. It consisted of strategically chosen assets designed to capitalize on favorable demographic trends in Asia, particularly China, with regard to volume growth. We believed that allowing Upjohn to operate independently, like a company within a company, would generate value. Upon evaluating the synergies between Upjohn and Mylan, we realized that combining them would result in a significantly larger and more valuable entity. Hence, we decided to merge Upjohn with Mylan, which will provide greater value than keeping it separate. Now, regarding our operations in emerging markets, specifically China, Upjohn has a robust pipeline that we previously lacked, allowing us to utilize our strong commercial framework in China to drive growth. Pfizer's remaining presence in China represents nearly half of the $5 billion we currently have there. The growth potential in this area is impressive, as evidenced by a 26% increase in the second quarter. We are particularly optimistic about the future of this business. We are maintaining all our research and development and commercial capabilities in China, which are currently operated independently. Moreover, we anticipate filing up to 19 new products in China over the next few years, which is quite significant. As for the broader emerging markets, they currently make up about 20% of our Biopharmaceutical businesses. The growth trajectory of this sector is nearly three times that of the overall Biopharmaceutical business. Therefore, with this merger, we are not diminishing the scale or growth potential of Pfizer in emerging markets.

Great. Thank you, Albert, for that. Move to our next question please, operator.

Hi. Thanks for taking the question. Maybe for the Biopharma business you guided to a five-year growth rate at the high end of mid-single digits. So just wondering any meaningful differences there in your projections versus consensus? And then Albert would welcome any additional perspective on the proposed Senate drug pricing legislation and maybe your Part D exposure on a pro forma basis? Thanks.

Yes. Thank you very much and very good questions. First of all, on the first we never comment on other people's projections. I know that this is your job to do projections, but we have our internal. So Frank, you want to make a comment?

Sure.

Sure. I can provide insight on the revenue. To build on Albert's earlier point, I will share our numbers. From my perspective, the revenue growth over the next five years is expected to enhance. Previously, we indicated mid-single digits, and now we anticipate high mid-single digits. We expect to see faster growth because, immediately after the close, Lyrica will be going to Upjohn, so we won't be impacted by that. We believe the growth will be more sustainable as it comes from a smaller base. Most importantly, we will continue to utilize that growth to improve our bottom line as we consistently do. That's our outlook on revenue. Yes. So let me make some comments about the Senate. As you know, last week there was a markup in the Senate Finance Committee. We cannot support this bill as written and it's not only us but in general the pharma has expressed their frustration. Obviously, there are some provisions of the proposed bill that we do support and we believe will help lower spending on prescription drugs. Such as instituting out-of-pocket caps for patients or improving incentives for biosimilars utilization. These are very positive things in the bill. However, we believe that none of these – for none of these the bill goes far enough. We would expect that they would do much more to incentivize biosimilars and we would expect that they could do much more to create relief for patients. Also the bill while it generates savings for the healthcare system, it does it with punitive measures for the industry and does not distribute the savings to patients. And thus does very little to fix the issue as a result of high out-of-pocket costs for them. This is the fundamental issue right now in the political life and this is the fundamental issue of the pharmaceuticals business. More there – on that needs to be addressed. Now we are working very productively with the administration and we are working very productively with senators and we plan to do it with also – to continue to make it with Senator Grassley and Wyland and Senate members from both sides of the aisle to see how we can improve this proposal. And also we noted that in the Senate bill there was almost unanimous support to introduce comprehensive rebate reform into this bill. This is very, very positive and I believe that will be one of the very meaningful tools that the Senate Committee has in their hands to reduce out-of-pocket costs. Now as regards what will be the size of the impact it's very early to calculate because our experience is that typically these things change dramatically between markup and then what comes to the floor and then eventually what becomes a bill. So I would rather stay on the basic principles that the bill is punitive for the pharma, but more importantly doesn't distribute all of the savings that are created for the patients.

Right. Thanks for the perspective, Albert. Next question, please.

Hi. Sorry about that. Thanks for taking my question. I wanted to touch upon a couple of things, if I may. First, as we think about the China pricing concerns, the question that I've been toying with is Lipitor and Norvasc were down 27% or so this quarter. We've seen some evidence online that the tenders in China could be as high as 70% price drop. So, is the price drop done on Lipitor and Norvasc or are we expecting more? And then, the same theme over to the antibiotics business as well, because presumably the 7 plus 4 initiative could expand to antibiotics, and your thoughts on the China business as it relates to antibiotics? Thank you very much.

Yes. Michael provided a solid overview of the situation in China during a previous call, but I can summarize here as well. Currently, volume-based procurement is set to expand from 11 cities to more, which will influence pricing. Therefore, I anticipate that prices will decrease. At the same time, there's significant potential for volume growth. As a result, we believe that our business will eventually reach close to 31 cities, while there will be ongoing growth for high-quality branded products. The Chinese healthcare system, including both physicians and patients, highly values the brand equity of these drugs. This factor has been integrated into our calculations for China, as noted in the previous presentation, and that trend will persist. Additionally, our antibiotics are categorized separately from Upjohn and are part of Sterling injectables, so they remain unaffected by recent developments. Regarding our business trajectory in China, we expect that, due to the volume increases following the price adjustments, we will continue to see growth in revenue.

Thank you, Albert. Next question please, operator.

Thank you very much. Regarding margins, as we forecast high to mid-single-digit growth for the Pfizer Biopharma business, could you explain what that means for margin expansion and pre-tax growth over time? Are there still areas where further investment is needed in the core innovative business, or can we expect most of the top-line growth in the coming years to significantly impact the bottom line? My second question is about Tafamidis and the launch dynamics for that product. Can you provide any insights on how you anticipate the upcoming quarters will unfold and what kind of ramp-up we should expect as that product is introduced? Thank you.

Frank, would you like to comment on how we see margins evolving in the joint company?

Sure. Chris, in my prepared remarks, I mentioned that we expect IBT margins to be in the mid-30s. This is due to our strategy of shifting income from above the line to below the line, particularly with the consumer joint venture, moving certain income from above other income to other income. We will use IBT as a benchmark going forward as a percentage of revenues, which we anticipate will be in the mid-30s. As our revenues grow, we expect to leverage that growth to positively impact the bottom line. We believe we have shown this capability over the years, and we plan to continue doing so. Therefore, as revenues increase, we anticipate margin expansion will benefit not just IBT, but also our EPS as well.

Sure, Chris, to clarify, IBT stands for income before tax. I'm not certain how widely that term is recognized, but for us, it represents operating income plus other income, which is what Frank has been discussing.

Thanks, Chuck.

Thank you, Frank. Angela, why don't you give some color on Tafamidis please?

Great, thanks. And thanks for the question, Chris. So let me share with you what we're seeing, on our side in terms of the performance of Tafamidis. We are releasing some nice positive leading indicators for this launch. And let me walk you through sort of the funnel of patients and how we're seeing things play out. First of all, we have approximately 3,000 ATTR-CM patients that we've already diagnosed. And these are patients outside of the 900 that you heard Albert talk about in his opening comments, that were part of an early access program as well as clinical trial supply. So of these 3,000, about 1,400 of them have been prescribed Vyndaqel. And of those 1,400, 500 have actually received the medicine. And so what we have here now are about 900 patients that are in the process of clearing the access and reimbursement sort of logistics via prior authorizations that will then ultimately enable them to get the prescription. And so I also would maybe like to mention that, so far, we're seeing the prior authorization process improve pretty much on a daily basis. And only 16 patients, 1-6, have received some sort of rejection. And even those rejections could simply be just due to documentation purposes. So hopefully that lays out for you, where the patient flow is coming from and how we're seeing patients get onto the drug. But also say that, we're very pleased with what we've seen so far and what we're seeing both in terms of diagnosis as well as the process for patients to actually get their drug.

Great, thank you, Angela. Next question please?

Thank you. A couple of questions please. First, we are living in a very active M&A environment thinking of AbbVie, Bristol, Takeda and so on and so forth. Your new structure will leave you a smaller company, but you will have the $12 billion additional cash from the Mylan transaction. How are you thinking about deploying your balance sheet? And whether there is a need to reconfigure the recent historic stance of shying away from larger-scale M&A? So that's the first question. And then the second, more of a housekeeping question. Inlyta is an increasingly important drug as you called out in relation to the renal cell approvals. Do you have a crystal line patent which would take you out until 2030? You list the basic patents in your annual report which is 25. What is your confidence that, in the fact you may be able to derive cash flows in the U.S. all the way out to 2030 using that second patent? Thank you.

Thank you very much, Andrew. Let me make a comment on BT, and then, I will ask Frank to comment on the capital structure of the new company. And then Angela you will answer the Inlyta. So as I said before, nothing is changing with this deal in the way that we see business development for Pfizer going forward. You will see Pfizer to be active in BD continues to be active in BD. And as we have said, preferably that will be on bolt-on opportunities, that would be on early to mid-stage opportunities, where maybe there is higher risk as you know, but the value creation is further greater. And the risk of operational disruption is perhaps lower. So we have this philosophy before and will continue having it. Regarding large-scale M&A, as we said, we'll never say never and – but right now the opportunity we have to advance our pipeline is unique. And I still do not see the need to do a large deal right now, because that can only create disruptions. With that, I would like to ask Frank to give a more general overview on the capital structure.

Sure, Andrew. You mentioned the $12 billion in cash we expect from the transaction. We plan to use that cash to reduce our debt, which will strengthen our already solid balance sheet. We anticipate maintaining a strong credit rating. Additionally, as you noted, we expect to generate between $11 billion and $12 billion in operating cash flow after the close. From that, we will pay our dividend, and we are committed to ensuring our shareholders are taken care of regarding dividends. We understand their significance. Naturally, we'll also allocate funds for capital expenditures in the business, and the remaining amount will be considered for share repurchases and business developments.

Angela, do you want to comment on the patent?

Sure, just quickly. Our main composition of matter patent takes us up to 2025. But of course, because of the value of the product we will continue to pursue other patents. And so, we'll see and to be determined where that takes us.

Okay. Thank you. Next question please?

Hi. Good morning. Thank you for taking my questions. Regarding the top line growth target of high mid-single-digits, could you explain your assumptions? Does that consider the clinical success of Ibrance adjuvant as well as the current situation in the pneumococcal vaccine area? Additionally, concerning Vyndaqel and the 3,000 patients, I believe that's around 1,400 more patients compared to those who were diagnosed and on dexlinosol. Are you already observing the impact of cardiologists testing and diagnosing TTR cardiomyopathy? I’m trying to understand what is contributing to the increase in the diagnosed and treated patient population.

Thank you, Jason. Let me first clear the question about what's included in our projections of high end of mid-single-digit growth. And the way we always do it, it is with risk adjustment. There is nothing that is fully baked in. We have a very big pipeline. And we have particularly a very big Phase III portfolio. And all of them are appropriately risk-adjusted, so there's nothing that it is assumed a success over there or failure per se. The fact that we have the risks spread in many, many assets. Because, as you know, we have submitted everything in time, this is what gives us a lot of confidence that the risk adjustments are accurate. With that, I will ask Angela to comment.

On the diagnosis front, we are observing positive trends. Firstly, there is a significant use of PYP scintigraphy, a non-invasive technique for identifying and diagnosing ATTR-CM. We are also seeing a balanced distribution of diagnoses between centers of excellence, specialty cardiology, and general cardiology. Our ongoing educational initiatives regarding the signs and symptoms of ATTR-CM have increased awareness and suspicion in various cardiology settings, from academic institutions to community practices. This contributes to the positive leading indicators we have for this launch, and everything is progressing as planned.

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

Hi. Thanks for taking my question. My first question is as you trim down to these core assets that higher end of the mid-single-digit range, is that organic growth or does that include M&A? And then I wanted to ask you also on Array. The Anchor CRC and the Adjuvant setting how do you think about those opportunities in light of the BEACON data that you've seen so far? And then my last question is on your DMD product. Do some of the safety issues that came up in your Phase 1 study change your view about the market opportunity? What doses of the hospitalizations occur and was it due to promoter or AAV9? Thank you.

Thank you very, very much, Louise. Let me first take out of the way the first one which is an easy. We do not include any M&A in our projections. When we speak about high end of mid single-digit growth, we mean organically. Now Mikael, can you please comment on Array and DMD?

Yeah. So on Array, we are very excited about the overall opportunity for the team. And as you know, recently in May, there was communicated both very convincing updated data from the Columbus melanoma trial. The data from the second and third-line BEACON trial, which was received I think extremely well about the strong data including survival response rate of the triplet. As you know, the Array also has a large number of partner programs that will continue to advance in development and grow as products that provide a third leg of future opportunity, plus R&D engine that will be added to our pipeline pending the close of the deal. On the DMD, we presented at the Parent Project Muscular Dystrophy conference recently an update of our trial. And we continue to be optimistic about the field in general and as well looking at our aggregator safety data as well as data on muscle fiber distribution mini-dystrophin concentration and the early data we reported on NorthStar Ambulatory Assessment and creatine kinase as a muscle health marker. We think the integrated data set is sufficiently encouraging to support the continued development of the investigational therapy. And as Albert alluded to in his introductory remarks, our manufacturing including large-scale 2,000-liter bioprocessors are on track as we continue the trial to support a potential pivotal study in June next year.

Great. Thank you so much, Mikael. Next question please.

Yes. Thanks very much. I have a couple questions. First, could you please comment on the innovative business in China excluding Upjohn? What is your revenue run rate in China excluding Upjohn? Second, with respect to Ibrance adjuvant readouts, could you please update us on the timing? And then third, with respect to U.S. biosimilars, could you update us on the expected launches in coming months? And if you have any specific timing that would be helpful. Thank you.

Thank you very much. I will cover the innovative business in China, and then I will ask Angela to cover biosimilars and the question about Ibrance. Our innovative business in China, it is approximately in the first half of the year half the size of the business. So it is in the north of $2 billion I think for the full year. If you extrapolate it is around $5 billion. The business is extremely healthy. It's growing right now 26% in this quarter and the growth we expect to maintain or accelerate. We are maintaining the capabilities of the innovative business compared to the capabilities of the Upjohn that have been already segregated at once. There's very little connectivity, which is mainly in enabling function systems, et cetera, but in terms of marketing, management, research and development, manufacturing all of that are already separated. The Biopharmaceutical business has many more resources than the Upjohn because it's a much more demanding business, and we plan to maintain them all. And you need to know that we have a very strong research organization in China, but also we plan to maintain and enhance. As regards to the outlook of this business in China, we plan to launch approximately 19 new products in the next few years. So, let me take it back to Angela and also Angela if you want to make some comments about the innovative business in China, feel free, but also cover the biosimilars and the Ibrance question.

Sure. Following what Albert mentioned, we have a robust lineup of innovative products in China. In 2018, we observed significant oncology products being listed on the NRDL. In 2019, we aim to continue our growth by adding notable products like Ibrance and Xeljanz. This showcases the types of launch activities we’re excited about and identifies key growth drivers. Regarding your question about Ibrance adjuvant, we are looking forward to the results of the two trials, PENELOPE and PALLAS, which focus on high-risk early breast cancer patients. If both trials are successful, we can double the number of patients using Ibrance. These are event-driven trials, and we anticipate providing updates once patient recruitment is finalized, likely around the middle of next year. As for your final question concerning biosimilars, all three of our monoclonal antibody biosimilars have received FDA approval, which is a significant regulatory achievement. We are eager for the launches, which will occur soon. While I can’t provide exact dates due to numerous factors impacting the launch timeline, we are excited about the upcoming opportunities resulting from these approvals.

Great. Thanks, Angela. Next question please.

Hi, just a simple one. The opioid litigation, can you give us an update on whether or not the opioid products are going with the Upjohn business or are they remaining with Pfizer? Thank you.

Yes, it's Doug Lankler. Thank you for the question. Upjohn has no opioid liabilities, and Pfizer has only a very small amount. Therefore, Upjohn will not be involved in the opioid area for the new business.

Okay. Great. Thanks Doug. Next question, please.

Thank you for taking my question. I wanted to explore tafamidis in more detail and I have a follow-up after that. You mentioned 500 commercial patients and 900 in compassionate use during the clinical trial, which suggests there are an additional 1,600 patients outside of those two categories to reach the 3,000 diagnoses you've indicated. My question is about the breakdown of that population. From the 500 commercial patients, how many, if any, come from the EAP? If none of the EAP patients are included in the 500 commercial count, do all 400 EAP patients from December 2018 fall within the 900 you disclosed today? If all 400 are indeed part of the 900, when will they transition to commercial patients that generate revenue? Additionally, for the other 1,600 diagnosed patients who are not included in either category, can we discuss the timeline...

I think we lost Mani.

Before we do that, I know we lost Mani, but let me ask Angela to answer at least the part of the question that we were able to listen to.

Okay, to clarify the numbers, the 1,400 commercial patients I mentioned who have been prescribed tafamidis are not part of the early access program, which has 700 patients. Out of those 700, 25 have already transitioned to commercial status, but I am not including them in the 500 total. The 500 represents newly diagnosed commercial patients who are starting Vyndaqel for the first time. The 700 patients from the early access program are on a different track for commercialization. As I mentioned, there are 25 patients in that group, and transitioning them involves a different process aligned with our clinical trial size. We expect all these patients will be moved over in the coming months.

Great. Thank you, Angela.

Thank you, Angela. Next question? If we can take our last question please, operator.

Hi, this is Navin from UBS. Thank you for taking my question. Regarding tafamidis, could you provide any details on the usage in the pure cardiomyopathy market compared to the mixed phenotype market? Also, concerning Xeljanz, with the recent label change, how are you approaching the UC market opportunity? Any insights on the peak outlook would be appreciated. Thank you.

Sure. So as you can tell, we have 500 patients that have received drug even though we've diagnosed a great deal more. So at this point it's a little difficult because we don't have enough numbers to be able to be exact with you in terms of how many are the hereditary type and how many are the wild type. But just order of magnitude of all the ATTR-CM patients that exist, 90% of them are going to be wild type, meaning very little are hereditary. So I would anticipate that as we are diagnosing these patients that that distribution would apply. But I don't have definitive numbers on that quite yet. In terms of UC, so here how we're looking at it, which is that if we look at how our UC scripts are being generated today, most of them are coming from second line use, a second line after anti-TNF. So where the new label is going is in fact where that's in fact how our business is operating today. A large majority of our patients are our second line after anti-TNF. So I think that this is one where we're going to have to monitor. I think as you can imagine that there is just an incredible and significant education effort that needs to go on now with our physicians. And I think as a result of that education method we'll get a better feel of how they are looking at UC second line. But certainly this is very much aligned with how we're doing business today anyway.

Thank you very much, Angela. I would like to make some final comments to highlight our business and what our shareholders can expect. First, our shareholders will receive 57% of a newly created company, which will be stronger, larger, more diversified, and better focused with a solid capital structure. We believe that Mylan's equity is currently significantly undervalued. Five months ago, their stock was $32, which is considerably more than the close of $73 on Friday. We have conducted extensive due diligence for our shareholders and feel confident with what we've found. We do not think the concerns are tied to the company's underlying business or the undervaluation of their stock. In fact, we've seen that they have managed their pipeline well and diversified their business effectively. They have also implemented solid cost control measures. Any issues appear to stem from uncertainties regarding strategic direction, governance, and shareholder engagement. We are confident that this transaction addresses all those concerns. This will result in a company with significantly less leverage and robust cash flows, which supports an attractive dividend. The company will be redomiciled back to the U.S. in the most shareholder-friendly state, Delaware, with no significant tax dissynergies. Additionally, we will maintain strong governance. Our shareholders will also benefit from the synergies of this combination and will receive $12 billion in cash. More importantly for our shareholders, the remaining Pfizer will be entirely focused on innovative biopharmaceuticals, with valuable growth assets and a strong pipeline. Our product portfolio and pipeline will drive more significant growth due to the smaller size, ensuring that growth is sustainable. We expect the remaining Pfizer's revenue compound annual growth rate to improve into the high end of mid-single digits on a five-year basis starting the moment we close the transaction. We also believe the growth will be more sustainable as we retain all growth assets and R&D within the main company, while continuing to uphold a strong balance sheet and credit rating. In the context of our recent transactions, including the Therachon acquisition and the forthcoming Array acquisition and joint venture formation, this creates a new Pfizer that will lead in growth and profitability. Thank you for your questions and have a nice afternoon.

Thank you everybody. This will conclude our call.