Pfizer Inc (PFE) — Q3 2019 Earnings Call Transcript

Good morning, and thank you for joining us today to review Pfizer’s third quarter 2019 performance and updated 2019 financial guidance. I’m joined today by our CEO, Albert Bourla; Frank D’Amelio, our CFO; Mikael Dolsten, President of Worldwide Research and Development; Angela Hwang, Group President, Pfizer Biopharmaceuticals Group; John Young, our Chief Business Officer; and Doug Lankler, General Counsel.

Thank you, Chuck, and good morning, everyone. During my remarks, I will discuss our quarterly business performance, latest updates from our pipeline and our plans for Pfizer following the anticipated completion of the Upjohn-Mylan combination, which we continue to expect to occur in 2020. During the quarter, we delivered a strong performance highlighted by 9% operational revenue growth in our Pfizer Biopharmaceuticals Group, which will be the business that remains at Pfizer following the anticipated closing of the Upjohn transaction. We also saw revenue impacted by two expected events, the July loss of exclusivity in the U.S. for Lyrica and the July 31 completion of the Consumer Healthcare joint venture transaction with GSK. For biopharmaceuticals, once again, this group's outstanding growth was driven primarily by strong performance from our key growth drivers. This includes Ibrance, Xtandi, Xeljanz, Eliquis, Vyndaqel, and Inlyta, as well as 15% operational growth in emerging markets, including 42% operational growth in China. Our biopharmaceutical business in China generated higher revenues this quarter than the Upjohn business in the country. Our oncology business was particularly strong, up 30% operationally compared with the year-ago quarter. Global revenues for Ibrance were up 27% operationally in the quarter to $1.3 billion. We saw strong revenue growth in both U.S. and international markets. We believe the continued growth in the U.S. is the result of our efforts to target specific physicians who had not been prescribing CDK inhibitors or had prescribed them to only a small set of patients. For Xtandi, the alliance revenues in the U.S. grew 25% to $225 million. In August, the FDA granted Xtandi priority review designation for the treatment of men with metastatic hormone-sensitive prostate cancer with a PDUFA date in December. If approved, this represents another potential growth driver for the brand. Inlyta revenues increased 98% operationally to $139 million. This included 240% growth in the U.S., where Inlyta has benefited from recent FDA approvals for the combination of Inlyta plus BAVENCIO and Inlyta plus KEYTRUDA in first-line treatment of advanced renal cell carcinoma patients.

Thanks, Albert. Good day everyone. The charts I’m reviewing today are available on our website. Now moving on to business performance. Our Biopharmaceuticals Group business recorded 9% operational revenue growth in the third quarter of 2019 driven primarily by Ibrance globally, which recorded revenues of nearly $1.3 billion and operational increase of 27%. This was composed of 48% operational growth in international markets and 18% growth in the U.S. Xeljanz globally was up 40% operationally, primarily driven by 34% growth in the U.S. as well as 61% operational growth in international markets. Eliquis globally grew by 20% operationally, and the hospital business was up 9% operationally in emerging markets in the U.S., primarily driven by continued growth from anti-infective products in China and the November 2018 U.S. launch of Panzyga.

Thank you, Albert and Frank for the prepared comments. Operator, can we please move to the Q&A session.

Great, thanks very much for the questions. I guess just two here. First, I know you’re not giving 2020 guidance at this point, but relative to your initial 2020 comments made with Upjohn, maybe just give us any flavor in terms of business trends or any franchises that are performing ahead or behind maybe some of the initial expectations? And my second question was about kind of the next wave of pipeline opportunities. It seems to me, when I hear the enthusiasm you have about that pipeline, that there is a bit of a disconnect between Street expectations and Pfizer expectations on the pipeline. So when you look at that portfolio, are there assets in particular where you see a gap relative to what we’re thinking versus your expectations as we focus in on some of these updates over the next few years? Thanks so much.

Well, thank you, Chris. Let me try to speak a little bit about your question on guidance for next year, and then I will ask also Frank to help me on that, and then we’ll ask Mikael Dolsten to speak about the pipeline. Let me start with the 2020 guidance. We don’t give guidance before our Board approves our operating plan. This happens every year in the mid of December. And usually, we do it in the next earnings call that happens in January. This year, in the middle of the year, in July, because of the transaction, we had to provide some financial targets for Upjohn. As a result, we felt that it would be awkward if we did not give also some financial targets for the RemainCo in 2020. But of course, we did that with a lot of unknowns and with great distance from the year of 2020. So we were appropriately cautious, I would say. Since then, a lot of things happened, and we wanted to see how things could perform. For example, we were not certain how the ACIP recommendation for Prevnar would affect the adult business. We were not certain how the label for Xeljanz – with the black box warning that we received, how that would affect the prescription habits of physicians. We were not sure how our Ibrance effort that started at the beginning of this year to increase the market size rather than just focus on increasing our own market share, but we had good results in the second quarter. We’ll continue as we go into the third quarter. We were not certain how the newly approved Inlyta compared to BAVENCIO together with KEYTRUDA will transform into performance in the market. And we were not sure how Xtandi‘s new indications will perform, and also how the new product, our Vyndaqel for cardiomyopathy, would do. The fact of the matter is all six of them did much better than what we were expecting, and this is extremely positive, of course. While we are not going to provide guidance for next year now, things have improved compared to what we thought in the second quarter. Moving to Upjohn, again we have provided $7.5 billion to $8 billion for next year, and we’ve said that we have spent significantly lower than what Upjohn is doing now because we wanted to make sure that we incorporate the impact predominantly in China of the volume-based procurement system. For the same reasons, we said that the second half of this year will be lower, but we’ll try our growth in China to be low to single-digit growth for this portion of the Upjohn business. In fact, we are upgrading that now. We are saying that for this year, our growth will be mid to high single digits in the China portion of the Upjohn business. We are not providing guidance for 2020 for Upjohn, but we will do that together with the total company in mid-December after our Board approves. Again, we have updated the guidance for this year because of the very good results for the third quarter. Frank, anything to add to that, please?

I would just add two things. One, our current expectation is we would provide guidance for 2020, like we typically do on our fourth quarter earnings call. But the only other thing I would add is – but please understand that we intend to improve upon the 2020 numbers that we’ve previously issued, that we talked about being appropriately cautious for the reasons that Albert discussed.

Thank you. Now from the financials, let’s talk about the things driving the financials, which is our strength of our pipeline. So Mikael Dolsten, please go ahead.

Thank you, Albert. So let me say a few words. First, we have a large and strong pipeline with projects from Phase 1 through registration, and the uptick is a contribution from all of our five therapeutic areas. And it is driven by multiple science franchises and is not dependent on one or two vulnerable compounds. Number two, our R&D productivity has improved consistently over the last two years. Let me exemplify this with our Phase 2 success rates that have now been exceeding 40% for a number of years, well above the benchmark. We estimate that between 2018 and 2022, 25 to 30 approvals will occur from 2018 to year-to-date, and we’re already at 11. Within that approval wave, let me exemplify our focus on the 15 in five strategy to deliver blockbuster approvals. And within that cohort as you have seen, we have had significant progress. Both Phase 2 and Phase 3 success rates are high and robust in this most valuable compound. Now I wanted to conclude and give you more near-term opportunities for our pipeline. So between now and 2020, you may want to remember the metrics: 15 plus 10 plus 5 plus 5. 15 relates to 15 POC readouts, up to 15 POC readouts; 10 to 10 Phase 3 starts; and then 5 for 5 Phase 3 readout and 5 key approvals. Let me give you a few examples of the POCs that you can keep an eye on. We have five different POC – up to five different POC readouts in our JAK franchise, including indications across topical dermatitis, psoriasis, vitiligo, and psoriatic arthritis for an oral drug. We have strong momentum in our gene therapy platform. Albert mentioned in his introduction our factor-18 therapy where we are expecting soon a POC readout and have started to enroll for baseline characteristics in Phase 3. We are progressing well with our DMD gene therapy, and we have reached proof of concept for our tissue factor pathway inhibitor monoclonal antibody. We’re also going to strengthen our hemophilia plans for Phase 3. In internal medicine, I want to punctuate the angiopoietin-L3 deal pending close that we expect to have a POC readout early next year. Our vaccine franchise also has a number of intriguing data sets to be shared. Obviously, the pediatrics RSV maternal Phase 2 data next year followed by Phase 3 start pending data. And also, in our meningococcal pentavalent vaccine, we have actually reached very promising Phase 2 readouts and are reviewing them to be shared for a potential Phase 3 start. Finally, in our Oncology franchise, we have the readout next year expected for our ENCORE BRAF/MEK fast line. We have data coming from our next-generation CDKs and from a HER2 breast cancer ADC. So as you can see, I exemplified some of the many POC readouts coming from now to next year and just punctuated that, of course, late-stage pipeline to which you are more familiar with, major interesting things in 2020. High on everyone’s agenda is the Ibrance early breast cancer, which we strongly look forward to, and I feel encouraged and optimistic about the Xeljanz, ankylosing spondylitis, and JAK1 in the comparator atopic dermatitis studies that are the final data set for them, moving to potential submission. And of course, the P&G adult program. And I’m sorry for – it’s somewhat lengthy, but it reflected the many exciting things to happen from now until the end of 2020.

Thank you, Mikael.

Great, thank you. Can we move to the next question, please, operator?

Hi, thanks so much for taking my questions and congrats on a quarter. I want to touch upon three things today, if I may. First, Albert, there have been a lot of investor questions on whether Pfizer could potentially be interested in M&A to recover the EPS dilution due to Upjohn. I just wanted to ask where you shake out on that. The first one. Secondly, on Upjohn, I noticed there was an S-4 filed yesterday where Pfizer’s internal forecast was that Upjohn stays at $7.8 billion to $8 billion post-2020, even though there would have been a Lyrica patent expiry worth $800 million in Japan, and even though China’s volume-based procurement would have intensified. So my question is what's driving this potential $1.5 billion to $2 billion worth of revenue shortfall to keep Upjohn stable at close to $8 billion post-2020? And finally, on tafamidis. It’s very encouraging to see you’re already at 4,800 patients. And my question is, is it inconceivable that Pfizer could hit more than 40,000 patients diagnosed at peak? Thank you very much.

Excellent questions, Umer. So let me start with the M&A and then Frank can cover the Upjohn forecast. And then, of course, Angela will speak about tafamidis. On the M&A strategy, since July of 2018, when I was Chief Operating Officer at that time, I think I related this strategy going forward on several items including M&A strategy. We are very consistent. Right now, we are poised for organic growth. Our organic growth, we forecast to be, on a five-year CAGR, 6%. I know the average expectation is even higher. This number, even this 6%, compared to analysts expectations will position us – it’s not likely, it’s positioning us compared to the data and our peer set to be the second largest in terms of growth, with a 6% rate. There are a lot of this in terms of producing growth. Any efforts that we do, I’m not going to jeopardize that. So we are not – the name of the game for us, I can say this many times, is top-line growth. M&A of scale tends to be very difficult to find someone that will not be accretive given that we are the second-fastest in our growth. And secondly, it is operationally very instructive. We can always do a large M&A, but we have a very clear window of opportunity now to get it right with our pipeline, to get it right with our launches. As you can see, we are doing very well. I don’t want to put that at risk. Our business development strategy will continue to be bolt-on with a focus on R&D. And when I speak about R&D, I want to be very clear. We are looking for Phase 2 assets, ready Phase 2 and Phase 3 assets that will provide revenues post-2026, when we start filling again some of the LOEs. We want to make sure that the 6% growth is sustainable over the decade, rather than only for the first six or seven years of this decade. This is our strategy, and we are not looking for a large M&A right now. Frank, can you speak to the Upjohn projections and what we had in our Board presentation, which I think aligns with what we provided as guidance?

Yes. For Upjohn, the 2020 revenue number that we put out there was $7.5 billion to $8 billion. By the way, that number reflected the Lyrica LOE and it reflected the China VBP. In fact, we anticipated the expansion of the China VBP in that number in terms of expansion going from 11 cities, 12 provinces, 50% share to 70% share; this range anticipated the impact of VBP in China. A couple of comments on how do we get to the rhythm of the numbers that you alluded to. First, think about this quarter. Upjohn in China this quarter-to-quarter grew 2%. How did it grow 2%? It essentially was able to mitigate the impact of the procurement program with geographic expansion within the country. We believe that’s an opportunity that continues going forward. We also believe that there are opportunities for that business in Emerging Markets outside of China, and continuing opportunities for that business and the rest of the world, given the breadth of the portfolio and the pipeline that the new company has going forward.

And then, Angela, please, about tafamidis.

Thanks for the question. Certainly, we are extremely pleased with the diagnosis rates of ATTR-CM that we have seen to date, which is about 4% to 5%. But even with that, it’s important to remember that it is still a severely underdiagnosed disease, and we have a long way to go in terms of achieving what we believe and our patients deserve. There are two aspects of this diagnosis. The first is suspicion or suspecting the disease, and the second is the ability to detect the disease. As you know, because we’ve spoken about this over the last several quarters, we have been intensely focused on our educational efforts to help physicians suspect the disease. This has been helped by the recently published red flag symptoms, which make it easier for physicians to see the possible clinical symptoms of ATTR-CM and help them to drive suspicion of this disease. From there, we have been educating around the use of scintigraphy as a non-invasive means to diagnose ATTR-CM. We’re pleased to see that to date, about 90% of our diagnoses are driven through scintigraphy. Scintigraphy, as you know, is a well-established imaging technique, and it’s widely available across the U.S. in cardiology practices. We estimate that about 15,000 of these machines are available in cardiology practices throughout the country. We’re seeing the willingness and the readiness of physicians to adopt ATTR-CM diagnosis through this mechanism. Benchmarks that we have quoted in the past show that a diagnosis rate of about 30% to 50% is what most rare diseases have achieved, and that is what drove our peak estimate. However, we are learning a tremendous amount every single day about this particular disease and about what it takes to diagnose it. We are focused on making sure that we can do better than that for our patients.

Great.

Thank you, Angela. Next question, please.

Yes. Thanks very much. I have two questions. First, could you just update us on the timing of the Ibrance adjuvant interim efficacy look? And second, I was hoping you could speak to the gross margin upside in the quarter in a little bit more detail and comment on the sustainability of strong gross margins. Thank you.

Thank you. Very interesting questions, David. I think, again, Mikael can provide an update on the timing of Ibrance. And of course, for margins, the master of margins improvements, Mr. Frank D’Amelio. Mikael?

Yes. As we tell in general, we don’t provide specifics about interim analysis in any programs. We expect the program to run to completion in 2020. There is an interim analysis a little bit earlier in 2020, but most likely, it will run to completion. We remain optimistic about the outcome of the study based on Ibrance’s very strong performance, recently supported by real-world evidence data that was very favorable towards different aspects of progression-free survival and also robust on overall survival, actually having a hazard ratio of less than 0.6, which probably is the strongest hazard ratio provided so far. We will update that hazard ratio as the study matures. Thank you very much.

Thank you, Mikael.

So Dave, I’ll answer the gross margin question. I think I’ll also just add in even though you didn’t ask a little bit about operating margins, too. On gross margins, let’s do it based on cost of sales. If you look at our cost of sales year-over-year, Q3 2018 was 20.1%; Q3 2019 is at 19.4%. So directionally correct, right? Down on a year-over-year basis. What drove the improvement? Really a couple of things. One is some cost improvements that we were able to implement in our global supply chain organization, including our manufacturing plants and the like. Secondly, we had some very favorable product mix. If you look at where our revenue growth was, alliance revenues were up 18% year-over-year. Ibrance grew, so – and then Vyndaqel. We had some very favorable product mix. If you look at our operating margin for the quarter, it was in the high 30s, approximately 30%. If you look at the trending, and think about going forward, one key to that operating margin rhythm will be revenue growth. We’re projecting a 6% operational revenue growth going forward, that will clearly help our operating margins on a going-forward basis. I mentioned earlier that our intent is to improve upon the numbers we provided previously that we were cautiously optimistic about. So, net-net, we believe we can improve upon the numbers that we provided, and we’ll give you an update on that when we provide our 2020 guidance.

Thanks, Frank. Next question please, operator.

Thank you. A couple of questions. On your revenue guidance of a five-year CAGR of 6%, consensus is not at that level, and I’m wondering if there are big areas that jump out at you specifically as being mis-modeled by the analyst community in as much as you’ve looked at that sort of thing. Then on abrocitinib, your JAK inhibitor, you’re running a trial called JADE compare head-to-head versus Dupixent, always bold to take on a product head-to-head. It looks like this trial should be reading out in December of this year, so coming up. I’m wondering, what we should realistically expect from that, both in terms of efficacy and safety? It seems that at least on safety and tolerability, it almost can't look as good as Dupixent because it’s a small molecule JAK inhibitor, but maybe you can kind of tell us what you expect that trial will show.

Yes. Again, the R&D question, I think, will go to Mikael. Just a brief comment. Look, we speak about our numbers, right? The 6% that we are projecting for our numbers, we are very, very comfortable with this number. We want to ensure that we say what we do and we do what we say. I have seen a lot of reports by analysts that have higher numbers than that. That’s why I referred to that. I will check what the consensus is on that. But as I said, I don’t want to comment on anyone else's estimates. You are going to do your job, and we are doing ours. We feel very comfortable with the 6%. Mikael?

Thank you very much for shedding light on the compare study. We are very excited about that study as it concludes our potential filing material, including then aggregate safety data. It is a head-to-head against Dupixent, and we felt that it is an important trial in the sense we expect both drugs to show favorable tolerability and safety. We expect abrocitinib, based on current historical comparison, to do very well on efficacy on clearance of skin. We have a specific endpoint on itch relief, pruritus reduction, which is one of the critical, most patient-friendly, centered endpoints. We expect, and I believe that abrocitinib would outperform Dupixent in a clinically meaningful manner as it has a strong, fast onset. Data available, although not head-to-head, showed that the JAK1 class not just performed better clinically so far, and head-to-head is the reason we wanted to document that hypothesis. There is also science behind it. It inhibits Interleukin-31, which is a major itch mediator not covered by Dupixent. So I hope that gave you some insight into our integers.

And Tim, it’s Frank. I just wanted to add to what Albert said. Remember, when the new company is formed between our Upjohn business and Mylan, RemainCo, our new Pfizer, is our Pfizer biopharma business. Our biopharma business this quarter grew 9%, the last couple of quarters grew 6%, 7%. So the approximately 6% that Albert gave, we’ve been printing now literally for the last few quarters. Remember, when NewCo was formed new Pfizer, RemainCo, keeps all the growth drivers we currently talk about on this call. So that portfolio’s momentum carries into the new Pfizer.

Very good points, Frank.

Thank you. We move to our next question, please.

Thank you. I have a couple. First, for Mikael, the press release says that after three doses in infants, the safety of the 20-valent pneumococcal vaccine is similar to Prevnar 13, but you don’t say the efficacy is similar after three doses in terms of immune response due to 13 valents that they have in common. Can you comment on that point and the response to the additional seven valents? I know Prevnar 13 is a four-dose regimen, but you must have data after three doses. So that’s the first question. Second question for Frank. Should something drastic come out of Washington that overnight cut revenue by 10%, a 20% reduction in operating expenses would appear required to protect the bottom line. Could a 20% reduction in operating expenses be delivered? And if yes, would it take 6 months, 12 months, or would it take much longer? Thank you.

Mikael?

Yes. We shared data on three immunizations. It was a descriptive study, not powered for efficacy, but my take on this was, as in the press release, we had a very robust rise in immune titer against all 20 serotypes. At this stage, they look very similar to the PCV13 when you look at the totality of data. The immune titers are supplemented by functional antibody responses that we’re now obtaining that look very robust for the PCV20 across all serotypes. I wanted also to say that increasingly available epidemiology data strengthens the notion that the PCV20 has a very broad coverage, far exceeding PCV15 developed by a competitor, whether you look at the infant population, the adult population, U.S. or major European countries and whether you look at IPD and CAP. We’re very pleased with emerging data and increased insights into epidemiology that indicate this vaccine has the potential to provide the broadest-ever coverage for pneumococcal disease.

And then, Steve, if there was some drastic action that resulted in a 10% impact on our revenue, which is a big number, then clearly we would have to revisit our cost structure. I mean, how could we not? In terms of how much we could reduce and how quickly we would do it, quite frankly, we’d have to determine that. But the short answer is we would clearly review our cost structure, every element of the cost structure, by the way, which we do all the time anyway, and then see what we have to do to address what the business model is going forward. A 10% decline in our revenues is a change in our business model. We’d have to look at that in terms of how we run our business.

Thanks, Frank. Next question, please.

Hi. Two questions if I may. Number one on Hospira, as you have stabilized that business in the manufacturing capabilities there, wondering if you could help us understand to what extent there have been lost revenues over the last two years that you may have been able to have if Hospira had been at full capacity and basically, what I’m asking is, how much do you think you can recover going forward for Hospira and how quickly could that growth be achieved? And then on the C. difficile vaccine, I think the Phase 3 was supposed to read out in 2020, but I think you just went through an interim analysis in the DSMB or the monitoring board suggested to expand that study; wondering when the readout for that Phase 3 will be now? Thank you very much.

Right. I think Angela can answer the Hospira questions for that. The manufacturing issues and the supply for Hospira created, I would say, a lot of trust with our customer. This is for me the most important. That’s why we took it very seriously, we were very transparent with them and we created also a hospital business unit because this is mostly hospital products, so we can be very customer-focused only on the hospitals. I have to say that we were very successful and what the customers appreciated the most was across products. Obviously, there is business that we lost and we hope that we will recover most of it. Angela, what do you think?

Sure. I think the way I would think about the future growth of the hospital business unit and Hospira would be in the following way. I think there is a portion of the revenue that was lost as a result of the supply issues that we would recover. There is a portion that we wouldn’t recover, but that isn’t – I guess that’s not the only source of growth. I think the way to think about growth also is what we’re doing to continue to diversify that portfolio and to bring in new launches. You hear Frank talk about Panzyga as one of those in our pipeline and in our portfolio today. Our continuous launches, both from a presentation and a device perspective, as well as from the molecule perspective. I think the other element of the hospital business unit that we also need to consider is the strong anti-infective portfolio that is part of that business unit. Those are sterile injectables, and in that portion of the business are a number of new launches that began a couple of years ago and are now launching globally. That’s how I would think about growth in that portfolio: it’s not dependent purely on the replacement or the regaining of business. A portion of it is, but much more of it is dependent on new ventures and new spaces that we are entering.

Yes, Michael.

On the C. diff, yes, we were pleased with the aspect that safety and tolerability with regard was favorable at the interim analysis, and clearly, the futility analysis indicated that the study should continue. While we tried to target the high-risk patients for C. diff infection by looking at increased risk for contact with the healthcare community or recent use of antibiotics, we are, of course, pioneers in this area of developing a vaccine for this urgent need for preventing what can be fatal C. diff infections. We will use all our insights to learn today to make sure that we can continue and expand enrollment to follow the advice from the monitoring committee to ensure we conclude this study as soon as possible. There is an urgency with 450,000 C. diff infections every year in the U.S. and close to 30,000 deaths. We will do everything possible to accelerate the readout of the study and get the events. We clearly do accumulate events, although somewhat slower than we initially hoped, but rest assured that we will do everything we can to make sure the readout is coming as soon as possible, and we will later update you with more concrete details on that.

Thanks, Mikael. Next question please, operator.

Thank you. Your portfolio is heavily exposed to high list prices and heavily Part B exposed drugs. I’m obviously thinking about Ibrance, Inlyta, Xtandi, and so on and so forth. You mentioned – you welcomed the proposal to cap out-of-pocket spending under Medicare Part B, but within the same finance committee proposal, there is also an obligation for you to fund catastrophic coverage to the tune of 20% and even larger contributions from the plan sponsor. So my question is, what is your comfort level with that part of the proposal and to what extent do you think, particularly in crowded classes like the CDK 4/6, the obligation on the plan providers to fund catastrophic coverage is going to further increase price competition in the segment? And then the second question, if I may, historically, you’ve been criticized against some of your competitors for basically holding Xeljanz into very treatment refractory settings. Given sufficient rebate power, I’m thinking particularly of Humira, what’s your confidence level that you’re going to be able to secure favorable market positions with JAKs, given drugs like Dupixent will be generating significant rebates for the PBMs in the commercial book of business by the time you hit the market? Many thanks.

Thank you very much. Let me try to answer your question about out-of-pocket costs and the reforms in Medicare that have been proposed. Then I will ask Angela to speak about Xeljanz. When it comes to price reforms, there are things that we agree with and things that we do not agree with. But I will tell you that we are firmly in favor of reducing out-of-pocket costs for patients. Right now, the fundamental issue driving this polarization in the political environment around healthcare is a real problem: Americans pay for their medicines even when they have insurance, and when they go to collect them from the counter of the pharmacy. This is not happening in hospitals, diagnostics, or other medical interventions to the same degree as with medicines, and this is why drug pricing is such a high-profile debate, even though they represent only 10% to 12% of total healthcare costs. That needs to be addressed. The way that the Senate is proposing aggressive reforms, including a higher contribution from pharmaceutical companies to assist patients, is beneficial. However, what hurts us is that many other proposed measures could negatively impact us further. They are not moving the savings to patients, which is the fundamental issue society faces. Our efforts should address this effectively. I believe that reducing out-of-pocket expenses, either through rebate reform or implementing a cap, is of paramount importance, even if we have to pay for it. Angela, regarding Xeljanz.

It is true that when we look back, Xeljanz access has been challenging over time, but we have worked hard over the last several years with our payers and PBMs, amassing strong scientific evidence and patient experiences to create momentum for this product. As evidenced by last year, we have now gained 32 million more incremental lives in Medicare and commercial channels that have gained unrestricted access, specifically gaining an additional 8 million lives just this past May. I think this evidence shows how we are working with our payers and PBMs to bring the totality of our data and experience to bear, delivering real solutions in this area of great unmet need.

Great. Thanks, Angela. Next question please.

Hi, thanks for taking the questions. Albert, you mentioned a few of your upcoming biosimilar launches, just wondering if you can help frame for us the potential size of the opportunity as you think about the long-term there and maybe walk through some of the remaining hurdles in terms of establishing a robust biosimilars market in the U.S. Then Angela, just wondering if you could provide any more color on the extended dynamics in terms of either share among the different segments or maybe the mix of the prescriber base? Thank you.

Let me speak a little bit about biosimilars, and then I will ask Angela to answer the second question and also specifics on the biosimilars potential of what we are going through. I think in the U.S., unlike other countries, there is a problem with the system; the fundamental issue is that there is a rebate trough, yet payers overall do see the benefit of using biosimilars. Physicians want to prescribe them, and the FDA states that they have similar efficacy and safety and are much cheaper. Although they want to do that, they are trapped and can’t because they will lose the benefits from the rebates the originator offers. Unless we resolve this major issue, we will never see tremendous progress with biosimilars. This is something I believe the political world is beginning to understand. We are very vocal about this and discuss it frequently with payers, who want to transition to new solutions but cannot due to this rebate system. I see positive momentum regarding this issue, but to witness transformational change in biosimilars' penetration, we need a solution to the rebate system. All biosimilars are not the same. Markets also vary; for example, in closed systems like Kaiser, biosimilar penetration is significant because they realize the benefits. In contrast, I&I, which involve long therapy durations, differ from oncology, where new patients come in more frequently. Angela, please add to that and respond to the second question.

Sure. Albert has outlined much of it, but what I can add is that within the context of the U.S. dynamics being very different from the European dynamics, we have seen nice growth with our supportive care biosimilar, Retacrit. To date, it has a 16% market share, which is the highest we’ve seen of any biosimilar in the U.S. This gives us the opportunity to learn about what it will take to launch oncology biosimilars as well as our expectations in this area. With three biosimilars launching December, January, and February this year, we look forward to driving growth in this portfolio that addresses high unmet patient needs. Regarding Xtandi, we did experience tremendous growth this quarter, growing 25% year-over-year. This shows the great confidence that prescribers, both neurologists and medical oncologists, have in Xtandi. Our market share stands at 37% in a growing class, with the addition of 3 points from last quarter. When we examine the sources of patients for Xtandi, they come in two forms. First, it’s the non-metastatic castrate-resistant prostate cancer, where we see increases in both total and new patient starts since the PROSPER approval. Urologists largely prescribefor earlier disease stages, with urology prescribing growing at 44%. We continue to see significant growth in our business from PROSPER. In metastatic CRPC, we also see our new patient share expanding in a similar manner. Here, we maintain the number one share of voice with oncologists, further reflected in a significant growth of medical oncology prescriptions this quarter at 21%. Combining all of this information with positive Phase 3 data from Ezimet and submissions for additional non-metastatic and hormone-sensitive indications leads me to believe Xtandi is uniquely positioned to treat a wide range of indications.

Excellent, thanks Angela. Next question please.

Hi, thanks for taking my questions. My first question is that in consensus there is a meaningful step up in Ibrance sales through 2023. Do you think you can grow Ibrance double digits without an adjuvant or neoadjuvant approval? And then the second question I had is on abrocitinib. Based on the safety data that you’ve seen thus far, is there a chance that you will not get a black box warning like other JAKs in the industry? Lastly, if you could give an update on your DMD program, where you stand today, and the competitiveness of your program versus some of the others out there based on the data that you’ve seen thus far? Thank you.

Yes. A quick answer on Ibrance, then I think abrocitinib and DMD will be covered by Mikael. In the spirit that I don’t want to comment on analysts' expectations, I know what they are, and they are our projections. We project that we will grow Ibrance to double digits, and therefore also expect that we will receive positive PALACE study data, which is the main study that drives prescriptions. Everything is risk-adjusted in our projections; some will be positive, and some will be negative. However, we are comfortable that we will not suffer due to this, as other successes will cushion revenue. Mikael?

Yes. Thank you for your question on abrocitinib. It’s a good question, and each JAK inhibitor is different. We designed ours for optimal use depending on the condition, and while it’s hard for me to express a strong view on whether there will be a black box warning, that ultimately depends on the FDA’s decision. I can only say that we have seen a robust safety profile thus far and have not observed any cardiovascular signals with this drug. The data in our reported trials has demonstrated efficacy, which we will finalize alongside the JADE compare data that will provide additional context for abrocitinib as a competitor to Dupixent. Regarding the DMD program, we are continuing to dose patients and previously reported that we had transduced more than 70% of the muscle fibers and expressed mean dystrophin at 30% of normal, which we think is in the beneficial range. We also mentioned at the PPMD Conference that we had two patients showing performance improvement as measured by the North Star Ambulatory Activity Scale. These patients were older than reported by other companies in the field, and older patients are more difficult to show benefit due to their natural history leanings towards decline. We are concluding all preparations and hope to start Phase 3 next year. I hope this therapy transforms the lives of these patients.

Thanks, Mikael. Operator, can we take our last question please?

Good morning, guys, thanks for the question. Just had a few. Angela, for Vyndaqel, I just want to get a little bit more detail on the rollout in the U.S. Obviously, I know it’s early, but from the field, how would you characterize reimbursement and access and other commercial lessons to be learned from the EU? And then, Albert, just to put a finer point on your comments for long-term growth and deals. I mean, when you look at the LOE starting in 2026, you mentioned pipeline readouts as a clear offset; can that or smaller tuck-in deals be enough to still get you to growth over the course of the decade? Thank you.

Angela?

Great. From a reimbursement perspective, we are seeing things pan out as we anticipated. The majority of our patients will be Medicare because of age and the prevalence of the disease. Currently, about 80% of our patients are in the Medicare bucket, 12% in the commercial lives bucket, and the remainder in Medicaid and other categories. We anticipated that this would be how the patient mix would look, so we developed various programs to support the reimbursement of Vyndaqel at launch. For example, we have a co-pay card, a co-pay assistance program for commercial patients, and for all patients, we have a bridge program to ensure they can access Vyndaqel while they wait for reimbursement decisions. For Medicare patients, we are exploring some ways to help lower co-payment costs in collaboration with payers through innovative contracting. Of course, there’s a portion of patients on our free drug program. Overall, what we are learning from the early days in the market is that the solutions we have support our patients in the needed manner. We also benefit from Pfizer’s patient hub and several specialty pharmacies and hospitals that provide support in clearing prior authorizations. All of this has been extremely helpful in ensuring that patients can get on drug quickly.

Geoff, to your question about whether this growth will be sustainable during the post-2025, 2026 period, the answer is yes. It is normal for companies that experience LOEs, and it’s abnormal not to. We will revert to normality, starting not even in 2026, as that year has a small number of LOEs. We will come to normality beginning in 2027, so we feel confident that we will have enough time and a diversified pipeline. We have a strategy focusing only on developing products that deliver results. By the time the company is back to normality, we’ll keep growing at the current rate for the entirety of this decade.

So this is the end, right? Unfortunately, we have exceeded our time. I want to thank you all for joining us today. I enjoyed this call a lot. There were fewer questions on financials because they were stellar, of course. Most of the time was devoted to the pipeline, which is exactly what we want to do, and to the growth drivers of the business, which is exactly what an earnings call of a successful pharmaceuticals company should focus on. As we move toward the expected close of the Upjohn-Mylan transaction next year, I expect that both businesses will be significantly strengthened. We expect Pfizer to remain positioned to deliver top and bottom line growth, maintaining leadership among industry peers. You know us; we want to be leaders, so we will aim for that. By bringing Mylan’s growth products together with Upjohn’s growth markets, we are creating the leading off-patent drug company with a strong financial profile and true global reach. For these reasons, it is an exciting time for our company, and we will remain highly focused on executing these strategies. Thank you very much. Have a great rest of the day.