Pfizer Inc (PFE) — Q4 2019 Earnings Call Transcript

Good morning, and thank you for joining us today to review Pfizer's fourth quarter and full year 2019 performance and 2020 financial guidance. I'm joined today by our CEO and Chairman 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, our General Counsel.

Thank you, Chuck, and good morning, everyone. This morning I will speak about our performance for the year, the continued advancement of our pipeline and the steps we're taking to position Pfizer for accelerated growth following the expected separation of Upjohn from Pfizer later this year. Frank will then provide details regarding our fourth quarter performance and our 2020 financial guidance. 2019 was a productive and transformational year for Pfizer, during which we generated solid full year financial results. These results were highlighted by exceptional 8% operational revenue growth for the year and 9% in the fourth quarter for our Biopharma business, which will become the new Pfizer following the expected separation of Upjohn. Once again, our Biopharmaceutical group, outstanding growth was driven primarily by the continued strong performance from all our key growth drivers. This includes Ibrance, Xtandi, Eliquis, Xeljanz, Vyndaqel, among others. Biopharma also generated 14% operational growth in emerging markets in 2019. I would point out that Biopharma's 2019 growth came from volume increases, not pricing. In fact, pricing had a negative 2% impact on Biopharma's results. For the full year 2019, global Ibrance revenues increased 23% operationally to become a nearly $5 billion a year product. In the US, Ibrance realized robust growth and retained its strong leadership position in the syndicate class with a nearly 90% share. Ibrance performance outside of the US was also very strong, and we still see significant opportunities in countries where the use of CDK inhibitors has not yet reached the levels seen in the US. Overall, Ibrance is approved in more than 90 countries, is the number one prescribed CDK 4/6 inhibitor globally and has reached more than 250,000 patients. For Xtandi, alliance revenues in the US were up 20% for the full year, and when combined with our royalty income on ex-US sales, totaled nearly $1.2 billion in 2019. Xtandi is the leading brand in novel hormone therapy in an increasingly competitive but growing class with 37% market share in total prescriptions. The vast year-over-year growth was due to continued uptake of the non-metastatic castration-resistant prostate cancer indication as well as prescriber confidence and recognition of Xtandi's strong data gross CRTC.

Thanks, Albert. Good day everyone. Now moving on to the financials. Fourth quarter 2019 revenues were $12.7 billion down 8% operationally versus the year-ago quarter. Excluding the impact of the Consumer Healthcare business, revenue was down 1% operationally. Our Biopharmaceuticals Group business revenues were $10.5 billion, up 9% operationally versus the year-ago quarter with strong operational growth in Ibrance, Eliquis, Xeljanz, and Vyndaqel and a second straight quarter of operational growth for our hospital business, including our sterile injectables. Revenues for our Upjohn business in the fourth quarter decreased 32% operationally to $2.2 billion, with the primary year-over-year impact again being generic competition for Lyrica in the US that began in July of 2019. Excluding the unfavorable impact of Lyrica in the US and other recent product losses of exclusivity, fourth quarter 2019 revenues for Upjohn declined 6% operationally. I know Upjohn's business in China has been an area of focus, and fourth quarter revenues for Upjohn declined 1% operationally. We saw the expected revenue declines for Lipitor and Norvasc in provinces where the volume-based procurement program has been implemented, and these declines were mostly offset by operational growth from products not impacted by the VBP program, including Celebrex and Viagra. Adjusted cost of sales as a percentage of revenue was favorably impacted by the July completion of the Consumer Healthcare joint venture transaction with GSK, partially offset by the negative impact of foreign exchange and the Lyrica loss of exclusivity. In the fourth quarter, we recorded a $0.06 loss per share on a GAAP basis, which was primarily due to a $2.6 billion asset impairment charge for Eucrisa and restructuring purchase accounting and legal charges. Adjusted diluted EPS for the fourth quarter was $0.55 versus $0.63 in the year-ago quarter. The decrease was primarily due to lower revenues again, mainly due to the Lyrica LOE in the US and higher operating expenses.

Thanks Frank and Albert for those remarks. At this time operator, can we please poll for questions.

Great. Thanks, guys, for the questions. I have two, one for Albert and one for Angela. Albert, a couple of weeks ago, you called out $4.5 billion in enabling cost within SI&A with an opportunity to simplify. So how do we think about the cost savings opportunity after you close Upjohn in terms of number one, how much incremental cost savings do you see beyond what was built into the 37% margin? And then number two, how much of that could hit back half 2020 versus 2021? And then I have a follow-up after that for Angela.

Okay. I think you should, - how can he ask a question to Angela? She can get back, okay. So indeed we have this year approximately $14.3 billion of SI&A, and front we were on the number in more details. And as I said, approximately $4.5 billion is what we call enabling funds. So these are functions like finance, legal, facilities that we are facilitating and enabling the core functions of our business to perform. Core functions, I mean, are discovering the products, manufacturing, which is making them happen, and commercial which is making them available to the patients. We do believe that this $4.5 billion actually have approximately 10,000 people can be improved. And we have plans to dissolve. In the current guidance and to comment there is a part, a small part of that, cost opportunity saving already incorporated, and in 2021 will be about to get back, so Frank.

So Randall just let me run the numbers, which is if you look at 2019 actual SI&A, for example, we spent about $14 billion as a company. Obviously that $4.5 billion that Albert alluded to is embedded in that $14 billion. If you look at our 2020 guidance for SI&A, the range is $12 billion to $13 billion, midpoints $12.5 billion. $12.5 billion from $14 billion is a decline of $1.5 billion. Roughly half of that is consumer, because we went from consolidating consumer to equity accounting on consumer once the deal closed on July 31, 2019. The remaining half is really operational savings across the company, including part of the - including some of the $4.5 billion that Albert alluded to. And that obviously helps contribute to the IBT as a percentage of revenue improving from mid-30s to 37%. And then to Albert's point, obviously, what we're doing now is working on further improvements that would obviously positively impact the SI&A, and that would flow to the bottom line.

Great, thanks Albert and Frank. Next question, please.

Great, thanks very much for the question. Just had three quick product ones. The first was on Vyndaqel. Seems like a nice step up in all your patient metrics seems like, although it's basically doubled or tripled from 3Q. Can you help bridge those figures with the sequential sales ramp we saw which wasn't quite as dramatic? The second question was on Ibrance. Just elaboration there in terms of what drove the revised timelines for PALACE. And have you taken another interim look at the data at this point? And then finally on tanezumab. Just an update in terms of what the status and outlook is for that product at this point? Thanks so much.

Very good. Thank you very much. I will ask Angela to address the Vyndaqel and tanezumab questions. And then I will say a few words about Ibrance. And maybe I will ask Mikael to chime in, please.

So thanks for the question. And certainly we are pleased with the increased diagnosis prescription as well as the number of patients that are receiving Vyndaqel. As you said, our diagnosis is now up to about 9%. The ability for patients to receive prescriptions is up to about 64% of those that are diagnosed, and those that are receiving medications are around 35% of those that are diagnosed. So every quarter since we've been reporting this, we've been seeing some nice increases. So, we are certainly pleased with that. I think in terms just the sort of the commensurate alignment with the actual net sales numbers, I think that there are obviously every single day there is a dynamic situation. And the number and the proportion of patients, whether they are Medicare or commercial lives, those are changing. And so the gross to net of those are going to affect, I think, what you see on a net sales basis. So, I think that we are watching and really focused on driving diagnosis and ensuring that as many patients can get on these drugs as possible. And we're starting to see some really nice pickup. But I think that is still a very dynamic situation because we're really relatively new in this process. So we'll continue to monitor and should expect to see some quarter to quarter changes in terms of net sales.

And obviously the new patients are contributing disproportionately because they are in fewer months of treatment in terms of sales.

Right. And then your second question was on tanezumab. So we're really pleased that in December of 2019, we completed our U.S. submission of tanezumab. And we are also pursuing regulatory submissions in the EU and in Japan. This submission was done in close collaboration with the FDA and it includes the 2.5 milligrams in moderate to severe osteoarthritis patients. So at this moment in time we're waiting acceptance of this filing, but we see significant potential of tanezumab and osteoarthritis. So we're really excited about this filing, and particularly because we're in a time where non-opioid solutions are very, very much needed for these patients. If you look at the market potential today, there are about 27 million Americans that suffer from osteoarthritis and 11 million of those have moderate to severe OA. 80% of those 11 million people have tried and failed three or more analgesics. So that tells us that there is just a huge amount of unmet need in this patient population. Patients are cycling through a number of pain medications. And there just is an incredible need for new options. And this is where we think tanezumab can really fill an unmet need. It has the potential to become the first in class non-opioid treatment for these patients. And we eagerly await the acceptance of this file from the FDA.

Thank you. Now let me address the question on Ibrance. The expected completion of the study slipped a little bit; a few weeks actually. It was at the end of 2019, excuse me, the end of 2020 and now it's moved into the very beginning of 2021. The only reason for this is that the events are not coming at the pace that we had forecasted; we didn't expect it. So, now that means people are not progressing into their disease. I don't think we can draw any conclusions if that means good news or bad news, I think it's just facts of the data. We don't know if the people aren't progressing equally in the two arms or they're progressing in the treatment. That remains to be seen when we unblind the data. As regards your question, if there was an interim analysis, there was not an interim analysis. So we haven't seen any interim analysis. There will be an interim analysis, but we do not expect that the most likely scenario is that the study will continue when this interim analysis comes. The study was designed to come to full completion. And the criteria that we have set to stop for efficacy in the interim study are very, very high. So it's not impossible, but this will happen. But most likely scenario, it is that as we had planned that the study will come to completion. At the end of it, this is what will happen. But we are very - we still remain very, very encouraged and optimistic about Ibrance. Of course, it's a Phase 3, you never know what will be. But all the signs behind it are supporting that we could have a positive outcome. And I will ask actually Mikael to make a few comments on the science and to what does this mean?

I guess punctuate a few things that Albert described so well. Four aspects of why we are very excited and optimistic about the science and clinical data to predict a potential positive outcome for the PALACE study. As you know, first of all, the CDK 4/6 inhibitor Ibrance combined with estrogen receptor drugs to stop cancer cells, or breast cancer cells from dividing. We've shown that in the two and three studies, and more recently we reported that we could reproduce a data direction in real-world evidence based on real world data from several databases. And this is noteworthy including also overall survival data, again, showing in medical practice importance of these drugs. Three, the pilot study that looked at the ability of Ibrance to stop the dividing of estrogen receptor positive breast cancer showed that this mechanism was very well operating in a powerful way. And finally, let me remind you that other agents that act on estrogen receptor positive breast cancers and combine with the power cycling such as tamoxifen and aromatase inhibitors, all were initially developed in metastatic cancer and did very well in early breast cancer. So these four observations, in total, make us continue to be excited and very optimistic. And as Albert alluded to, the relatively small change in projected trial is based on a trial that actually started 4.5 years ago. And it is quite common that in the final 12 months or so, minor changes in enrollment rate and process planning for study reports can affect trials. But we all obviously, and you can hear, we remain encouraged and enthusiastic about what Ibrance can offer for early treatment of breast cancer.

Right. Thanks for the helpful context, Mikael. Next question, please.

Hi. Thanks for taking the questions. Maybe just two product ones for me; I was wondering if you can talk about Ibrance rest of world dynamics, any specific headwinds this quarter? And how to think about the trajectory into this year? And then for Xeljanz, I was wondering if you can give us a split of sales by indication and if you're seeing any impact in RA from the launch of AbbVie's RINVOQ on either share price? Thank you.

Thank you very, very much. So, Angela?

Sure. So, first of all, Ibrance. We continue to see good growth and strong growth ex-U.S., but probably two factors that are tempering the net sales, as you saw in Q4. The first is pricing, and that continues to be something that we work hard at especially in the EU to gain access for our products in Europe. And the second is class growth. So you look at the class growth of the CDK class through the quarters that has increased but over the last quarter it has tempered. And it's sort of sitting at around a 35% as CDK class growth right now, cross-share. But within that, Ibrance still has a very, very high product share in the 80's. So I think it's pointing out to us the fact that there is still opportunity for us to grow, and growing the CDK class is going to be an area of tremendous focus for us ex US in 2020 and beyond. Your second question was around Xeljanz. And so Xeljanz again, we continue to see excellent growth in Xeljanz. In fact, despite the fact that you only see this sort of 1% net sales growth in Q4, I will point out that globally for the full year we had 29% growth of Xeljanz, which is one of the highest of all of our core brands here at Pfizer across our entire portfolio. Q4 we saw 23% prescription growth, and this prescription growth was driven by extremely strong performance in rheumatoid arthritis, which really was not impacted by the label changes. And we still continue to see strong growth in ulcerative colitis even though there was the biggest label change, and so physicians did have to adjust the way that they were prescribing Xeljanz. But we expect this growth to continue because we have excellent momentum and confidence in prescribing from our physicians. We have significant unmet need and we have greatly improved access. And this access is in fact what drove the 1% net sales in Q4. There was - in Q4 of '18 we saw an inventory build at the end of the year which didn't happen in Q4 of '19. So that was one of the reasons that affected our Q4 performance in '19. And then also more importantly, throughout the course of 2019 we gained significant access. In fact, we added 59 million incremental lives through contracting. And it's because of the timing of when these contracts were signed or renewed that drove the subsequent impact of rebates. And this sort of came to a head and disproportionately affected us in Q4 of '19. So I think stepping back we're really pleased with the access that we do have in Xeljanz. And since it was launched eight years ago this is the most favorable access situation that we ever had, which is very important when it comes to the ability to compete with RINVOQ. You asked the question around RINVOQ, just to sort of put into perspective, I think that we're excited about having another competitor help drive the growth of the Jack class in all of our indications. That being said, Xeljanz still enjoys a lion's leading market share especially in RA where we have more than 15% of the market share of the entire class.

Great, thank you very much, Angela. Next question please.

Hi. Thanks so much for taking my question. First, Albert, what are you hearing on a possible upcoming rule on IPI? There is a lot of press that companies have been notified by the White House. I was curious what you know about it, and is there something we should be very concerned about? Mikael one quick one for you on the DMD gene therapy for a minute; you mentioned there is a proof of concept coming. My question is have there been additional protocol-driven positive enrollment? And I asked because recall when the first SA when the kidney injury happened the trial was paused and I'm curious if anything like that happened again. And then finally, Frank maybe just quickly on the SI&A line. I know it's a little higher than consensus but technically year-over-year versus 4Q18 it was not much higher, but I also realized Q418 had some consumer, maybe you could tell us about your holiday party. Thank you very much.

Alright, so let me start with the IPI. We have not received any notification on that. So there is no news from our side other than what we read; we don't know with respect.

Yeah. Just to remind you, we shared at the PPMD conference meet of last year an update on six patients dosed with our DMD gene therapy that showed encouraging data on expression of muscle fibers amounting to micro dystrophin. And on some of the patients we had also an opportunity to report the encouraging trends on functional outcomes. We have dosed additional patients since then. And we continue to get experience on efficacy and safety and clinical management that are incorporated in the procedures how we manage these patients going forward. We plan to conclude Phase 2 this spring. And based on current data and insights, we are planning to start Phase 3, of course, pending regulatory dialogues later this year, as indicated in Albert's opening remarks.

Alright, Frank, maybe you want to tell us about the holiday party; I was not being aware.

Sure. Yes, I wasn't invited either. Some of you were in the party. Let me run the numbers, and I'll explain what happened. So for the quarter, SI&A was about $4.1 billion, it was up about 4% operationally, $100 million give or take from the prior year quarter. What really drove that was increased investment behind some of our brands, some of our oncology products, some of our launch products like Vyndaqel, and some increased investment in emerging markets. But it was really investment in terms of being part of supporting our brands.

Yeah, thank you, Mikael. And just to make a comment, we are very, very diligent in the way we allocate capital. And we are - when we have opportunities to put in promotional money so we can have a very strong stock, we do it. And we take that money usually by being very diligent in the way we control indirect expenses. I have been very clear about indirect; it is a very clear distinction in our mind. So when it comes to things, that there are overheads and things that are not affecting directly, the business results, we are very, very tough. And when it comes to areas that the investments can affect business results, we are creative and generous. So that's what you saw here.

And these are clearly direct expenses.

And these are all direct expenses. The same, by the way, although you didn't ask comes to R&D. Right now, we are increasing R&D investments. But we are increasing R&D investments only for programs that only for projects, we are not increasing infrastructure, not increasing the research centers. At large we maintain a very strong presence there and we keep that very strong. But what is driving the increase in R&D it is more Phase 3 or Phase 2 studies, it is very clear.

Right. Thank you. Next question, please, operator.

Yes, thanks very much. So, I have three questions, please. First, Albert, could you discuss why Pfizer decided not to repurchase shares in 2020? And then maybe Frank, you can comment about how we should think about the EPS implications when we consider your guidance relative to consensus, which had assumed some share repurchase? Second, regarding the opportunity to rationalize the $4.5 billion in costs, can you just give us a sense for what percentage reduction is reasonable to assume a few years out, I was guessing maybe 20%, but I just don't know what's reasonable? And then third, regarding the transfer of $600 million in revenue to Upjohn, does that change the economics that Pfizer will receive as part of the exit to Mylan? Thanks.

Yes. And I think basically all questions can be answered by Frank. I will just make some introductory comments. The reason why capital allocation, we are allocating right now money to increase the dividend and also to invest in our business or the OpEx to modernize our facility or the CapEx to modernize our facilities. The reason why we don't do right now share repurchases is because we want to make sure that we maintain a very strong cash power to invest in the business. The past was a very different Pfizer; the past of the last decade had to deal with a constant decline of revenues. And we had to do what you had to do, even if it was financial engineering, by purchasing back ourselves. We couldn't invest them and create higher value. Now is a very different situation. We are a very different company; the company is going to have best-in-class top-line growth revenue story, starting from nothing, the separation of Upjohn in the middle of the year. And we do not need, we can organically grow EPS, as you can see all our predictions on EPS this year are organically, no share repurchases. But you can use the capital to invest in goods Phase 2, Phase 3 assets that could build our pipeline. So this is the strategy behind it. Now let me ask Frank to run the numbers.

So David, all I'll do is I don't want to duplicate anything Albert said. I'll just add a couple of things on the share repurchases. One, we also announced the dividend increase in December. So obviously, we continue to deploy capital in the area of dividends, which we think is important to our investment thesis. And that's something obviously as we go forward, we'll continue to look at. And then obviously, our 2020 guidance assumes no repurchases. So when you look at the improvement, which was material in terms of the midpoint versus what we did back in July, none of that is coming from share repurchases. Let me ask you another couple of questions, on the $600 million transfer to Upjohn and does that change any economics? Let me give some context on this, which is one, nothing's been decided yet. We are still in negotiations with Mylan on those two businesses and whether or not they will transfer to Upjohn upon close. If we don't come to an agreement, those businesses would remain with new Pfizer. And so we're still in negotiations. And so in terms of the economics, I'd say more to come still to be determined. And if and when we complete that, obviously, I'll be in a better position to answer that. On the $4.5 billion of indirect spend, and directionally, what do we think we can do there? I don't want to give a specific percentage because we're still working our way through the process. But I think I alluded to this earlier, which is we've already made some nice headway. I think we can make additional headway; that additional headway would show up in SI&A. And obviously our intent would be for that to show up in the IBT's percentage of revenue line. So that's what we're going to do. Our intent is to improve upon those numbers. And as we work our way through the process and as we have more to report, we'll make sure we do so.

Thank you, Frank. And just a comment on the reasons why we transfer those businesses to Upjohn. Both of these businesses, first of all, they fit more under Upjohn in terms of the dynamics that they have. So they can be managed much better. And secondly, I think they fit very nicely with Mylan. Because one it is the EpiPen predominant business that Mylan is - but right now is set between Mylan. We are providing for them. And the second it is the partnership that we have with Mylan that was established years back and with generics in Japan. So both of them fit much better in that manner. And that's the reason why we separated. And also that will allow you to have in case that this happened a much cleaner view of the growth trajectory of the company. Because now you know exactly what would be the P&L of the remaining company.

Thank you. Next question, please, operator.

Hi, thanks for taking my questions here. So I had a few. My first question is a 6%, approximately 6% five years sales CAGR for standalone Pfizer, the new Pfizer still hold? Second question I had is how much of a priority is M&A for you under the new Pfizer? And what kind of size of deals or types of deals are you most interested in? And last question I have is on the PCV data set that's coming through. You and a competitor also have a whole set of PCV data. I'm just curious how you see that landscape evolving over time. Thank you.

Yeah, thank you very much, Louise. Let me start with the 6% CAGR. If it still holds up, some of them still holds. So it's actually, as you can see, if anything else, this business was projecting five years. All the words 25 actually CAGR also 6%. This year performed 8%, 9% for the quarter and we are projecting 8% for 2020. So definitely, we are on track to achieve that. As regards the M&A. Yes, M&A is a very important part of our strategy. And as I just alluded before, this is why also we are not diluting our firepower with stock purchases right now. Because we do believe that we can create significant value with the right strategic moves. Now, we never say never to anything, but strategically we have made it very clear that we are not interested in a big M&A that will have cost synergies as value drivers. Because first of all, that would be like diluted in our top-line growth. I don't think there are many companies that can have this type of growth trajectory that we have in the next few years. Secondly, it could be destructive because having a big M&A means that thousands of people will have to work on integrations rather than supporting all these products that we just saw that are growing 20s and 30s, and also all this pipeline that is coming up. So we never say never, but this is not our strategy. Our strategy for M&A is to be able to have Phase 2 and Phase 3 programs, priority Phase 2 and Phase 3, which could become potential medicines in the period '25, '26, '27, '28 so that we can augment our internal pipeline and be able to maintain the 6% growth for the long term, actually, for the very, very long term because it's right now five years; I would say it's so long term. And the other thing that I want to emphasize is that the 6% CAGR is risk-adjusted. I repeat, it is risk-adjusted. That means that in our projections, we are adjusting all the non-read studies right now appropriately. Now, if all the Phase 3 goals and the right way and they are all successful, it's not going to be 6%; it is going to be double this, it will be 12%, 13%, 14%, 15%. Now, if everything fails, also it will not be 6%; it will be very low. But if statistics work and the studies, let's say at 50% more or less are successful, that means that we will achieve 6%. That's why I want to emphasize that there is no binary event in our projections. A binary event would be if that 6% was dependent on two or three major regards that if they could go one way or another could affect. Right now, they are dependent on 15, 16, 17 blockbusters and many others but they're much smaller. So, then Frank, may be something to add to that before I ask Mikael to comment on the PCV data.

Louise, the only thing I wanted to add just to punctuate everything Albert said is and why are we focusing on Phase 2b and Phase 3 is because the Eloise really starts to kick in in 2027. So if you think about it, we're in January of 2020; we literally have eight years to work our way through this problem. And by the way, given that kind of a timeframe, given the breadth and strength of our pipeline, given our balance sheet, our capacity, obviously we feel confident we will be able to solve.

Yeah. I'm pleased that you asked about our pluripena next generation. So as you know, we have adult and pediatric studies ongoing. The adult study has been given breakthrough designation in September 2018 based on our incredible Phase 2 data, and we expect very soon to report Phase 3 outcomes of the adult piece of the 20 trial. And obviously, we are optimistic about that outcome based on the Phase 2 and the breakthrough designation. On the pediatric, we have now accumulated further positive data from those data from the PCV 20 Phase 2 study. These data from the first dose further substantiate the positive data reported in the press release of two those adults. And we expect the initiation of Phase 2 Phase 3 soon for the infant vaccine, pending discussions with regulators. The full dataset will be presented at the major vaccine-related conference likely mid of this year. Now, Albert commented also in his introduction very nicely on the improved relative coverage of the PCV 20 from us versus a potential competitor. And he mentioned 33% better coverage for adults and 42% better coverage in the US for infants. Obviously, very important, significant better coverage. I just want you to punctuate when you look at the top European market, similar that improved coverage in adults is actually 60% to 100%; in infants, 80% to 200%. This is all for invasive pneumococcal disease. Also in the US we have analyzed for community-acquired pneumonia, where we see substantial better coverage for the 20 versus a potential 50 inhibitor. So all in all, you can see we look forward to data sets advancing the program and think it would be the premier 20 valence and premier pneumococcal vaccine for patients. Thank you.

Next question, please.

Thank you. I have a few questions. An increase in the dividend was mentioned twice. But it sounds as though Upjohn will be spun not split, in which case the dividend will be reduced. So I'm wondering if you could clarify the dividend comment. And I assume the 2020 EPS guidance implies a spin not a split. Secondly, on the ever abrocitinib versus Dupixent study, given the fact that it is completed, Mikael, I'm wondering if the data met the very positive portrayal you provided on the Q3 call, which included superiority to Dupixent. And then lastly, will the proof of concept DMD data be presented at the March 31 meeting? Thank you very much.

Now, thank you very much, Steve, very good question. So, Frank, why don't you clarify once more the dividend?

Sure. So Steve, in terms of the guidance, you're right; it assumes a spin not a split. And then in terms of the dividend, you said, I think you said in your question, it would be a reduction. I don't see it that way. What we've said is the sum of dividend and our dividend would equal the current dividend that a Pfizer should receive today. So I don't see a reduction in the dividend. The dividend income will be kept hold. I think we've been very clear about that all along?

And we will continue growing? Maybe not at the same pace which we do right now with $0.02 per quarter, but we continue growing.

And Steve, I can quickly run the numbers for you if you'd like. Just so you think what has been said is their first full year of about $4 billion of free cash flow, they pay about 25% of that in the dividend. So that's a billion. Total will have about 1.2 billion shares; you put the 1 billion over 1.2 billion shares, it's about $0.8. The exchange ratio is 1.2 billion. You put 100 shares of Pfizer, you get 12 shares of Mylan assuming a spin. That's roughly $10 a share. We would reduce our dividend on an annual basis by that $10 but the sum of our dividend plus that $10 and - that $0.10, I'm sorry - thank you. Would equal what the Pfizer you all gets today. In my thing, it's $10 - not 10 cents.

Abrocitinib?

Yeah. So, thank you for your interest in abrocitinib. And we believe that it's going to be a new drug class for such a prevalent disease that affects tens of millions of Americans with atopic dermatitis. And where an oral alternative seems to be a real patient and physician preference. We will soon report out the data from the important comparative study. So I haven't actually seen the data. So I can only punctuate a little bit what we discussed at earlier investor meetings that the historical comparison between abrocitinib and Dupixent suggests that we should expect to see a similar or better impact and clear skin. And particularly as Albert alluded to in his introduction, there is an important key secondary endpoint looking at each itch relief starting with a readout already of two weeks and then following the study through the 12 to 16 weeks. And historical data suggests that we should be very optimistic about abrocitinib outperforming biologicals, such as Dupixent on itch relief at earlier time points and provide the potential benefit of early onset of relief for disease. Now, we have to wait for the data to be able to, obviously be absolutely confident in that outcome. But this is what I believe and look forward very much to see the data come shortly.

And on the DMD question?

Yeah, we are finalizing I think the program for the R&D day. So I can't be absolutely promise you, but I think it's likely that such an interesting program as the DMD gene therapy will be one of the potential agenda items. And obviously, we would like to then share updates from increased number of patients over a longer time period. So please welcome and take a front row seat.

Thank you very much to both. And by the way, Frank, as always was right. It's $10 for 12 shares for Mylan.

Alright. So we'll move on to our next question, please.

Good morning, guys. Thanks so much for the question. Just have a couple; Mikael, on the gene therapy platform with the advancement of hemophilia A and B, as well as DMD into Phase 3. What's the capacity to add additional indications to the portfolio? I mean, you guys have been successful partnering, but at this point, it does seem like you could expand the platform organically in a material way. And then for Angela on Xtandi, I just wanted to get your perspective on the inroads you've made in M0 prostate patients. And what you think could represent a tipping point commercially, especially given that generic XYTIGA is available in the U.S.? Thank you.

Yes. So Geoff, we are enthusiastic for the gene therapy platform. And what is particularly, I think, a strategic advantage for us is the end-to-end capability from discovery to clinical manufacturing. And of course, that capability is also linked to important external partners. That gives us capacity to advance an increasing number of internal as well as partner programs. And we have an option for the Wilson disease program that could, in a relatively near-term future, be available for clinical studies. And we expect from internal and external initiatives to aspire to about bringing one new gene therapy into the clinic every year or so for the next period to come. And we think that should build up a very comprehensive gene therapy portfolio. There are the three programs you alluded to, of course, the frontier for us, with Factor 9 that we hope to be the first company bringing that over the finish line in Phase 3 now and to start the additional two Phase 3s for we may, what we think we have a best-in-class profile so far. And then we already spoke about DMD.

Thank you very much, Angela.

Sure. So in terms of the M0, the non-metastatic CRPC, I mean, what we're seeing here is, just tremendous growth and tremendous performance. Just broadly speaking, in terms of Xtandi, we had a great quarter. We grew 29%, and this was driven by two things. One was actually a demand across both metastatic as well as non-metastatic, but also what we saw was the continued expansion of the actual class, the novel hormone therapies, and in this class, Xtandi has the lion's share. We have about 35% share right now. So first of all, to answer your question vis-à-vis generic XYTIGA, we really don't see competition from a generic versus brand in this instance. I think the competition XYTIGA is really amongst generics XYTIGA versus branded XYTIGA, whereas what we're seeing here is a clear uptick in Xtandi, and specifically from the PROSPER trial in this M0 population, as you say, we are continuing to see it, as I've talked about in all the previous quarters, really, really significant and very confident uptake in urology prescribing. And we do believe that this is underpinned by the growth of our non-metastatic population, and the fact that these are patients also earlier in their disease is helpful in driving our growth in this population. I'll also mention that just from a market share perspective, though the non-metastatic M0 population has Xtandi or leader as well as new Becca. Xtandi by far in a way has the leading market share in this segment and has been from the time that it was launched.

Right. Thank you, Angela. Next question, please.

Thank you, a couple of questions. One is on Prevnar in China. So sales have been ramping up there. But the regulatory authorities recently approved a domestically produced 13-valent product. And the CEO of that company has claimed they have capacity that's on the tens of millions of doses and who knows if that's true or not. But I'm wondering if you can give some perspective on how you see competitive dynamics in a situation like this going forward, not only in China where our domestic producer could potentially benefit from favoritism, but also if that company were to take their product into other markets outside of China at a different price point. I think a lot of investors assume vaccines are durable forever. But I'm wondering if this sort of thing could be disruptive and how you take the potential competition into your forecast. Second question is on M&A. So any M&A that you may engage with in 2020? Should we assume at least during this first six-month window while you still have Upjohn that is probably put on hold? And the last question on Vyndaqel, might there be a low-hanging fruit phenomenon where we see an initial nice uptake, but then it kind of flattens out suddenly, or do you expect this will be continued strong linear growth?

Thank you very much. I will give a quick answer to your M&A question Tim, and then Angela can deal with revenue timing and that growth. Well, I mean, I know the answer is no, absolutely not. We are very actively looking to invest capital on value creation opportunities. And I assume that we will have several of them in the first half of 2020 before the close of the deal. Again, across the lines that I have described, exactly what we're doing, we want to make sure that we sustain the growth beyond 2027 when the potential loss of exclusivity will have some impact. Angela, what about Prevnar in China?

Sure. So, we acknowledge that there is a new competitor in the form of a domestically produced PCV 13. However, I want to recognize that there are some differences here, though it is a 13-valent vaccine. This vaccine is made with a different conjugate, and this conjugate technology is an older technology, so quite different from what we see in PCV 13. That being said, it is a competitor. However, if you sort of step back and look at the opportunity that we have in pneumococcal vaccinations, there are approximately 14 million new births every year in China. And today, only over maybe 1% of those infants are being vaccinated. So regardless of the volumes that the domestic producer might have available, I think the opportunity between us is just much larger than that. And we have a tremendous amount of untapped potential in the marketplace. And we are confident that with the quality, reliability, as well as the tremendous experience that Pfizer has had globally with PCV 13, but also the tremendous success that we've had in China specifically for PCV 13 that our growth will continue, and this is what we expect. We have a very robust footprint. You know - as you know, the vaccines, and it will be the same for PCV 13. This is an out-of-pocket market, and it will be the same for both of us. So this is where we'll be competing, which is why having a robust promotional engine and having a footprint of representatives that can really be available to support patients and caregivers at the points of vaccinations is really important. And I think in this regard, we have demonstrated great expertise and ability to grow this market. So that's how we see it; we acknowledge the competition, but we can continue to see tremendous potential.

What about Vyndaqel?

Alright. So in terms of Vyndaqel, yes, of course, in the year of launch, one might expect to see a little bit of a bolus, a number of patients who have been identified and are awaiting diagnosis and treatment. That being said, we are confident of what we've learned in the marketplace in our first year of launch. We are confident that we have the right set of tools for helping physicians to suspect the patients that might have ATTR CM. We have mobilized education around using noninvasive methods like scintigraphy to diagnose patients. And we've also mobilized a patient support hub to help patients receive their medications. So I think doing more of that, as well as continuing to think about new methods to help diagnose and treat patients such as using artificial intelligence and increased number of tools. All of that will continue to support our ability to drive the important and rapid diagnosis of patients as well as their treatment.

Right. Thank you. Next question please.

Thank you. Couple of questions, please. Firstly, on your pending oncology vaccines rollouts in the US, given the challenges, it starts with vascular penetration. Could you talk to your expectations, particularly with these two drugs? There should be an economic incentive for payers given the posture. But yet, there are issues in patients who already own an established inhibitor biosimilar to switch from an inhibitor brand to switch to biosimilar. So if you could give some kind of sense of how much penetration and how quickly you make expect, that would be super helpful. And then, second, in terms of tafamidis, Angela, you kindly gave some penetration figures at the beginning, which I was struggling to keep up with and write down, but just more broadly, could you outline how large you think the untapped patient population really is here, and how far Pfizer is along in establishing that market? Many thanks.

Thank you very much. I will give a quick answer to your M&A question, Tim, and then Angela can deal with revenue timing and that growth. Well, I mean, I know the answer is no, absolutely not. We are very actively looking to invest capital on value creation opportunities. And I assume that we will have several of them in the first half of 2020 before the close of the deal. Again, across the lines that I have described, exactly what we're doing, we want to make sure that we sustain the growth beyond 2027 when the potential loss of exclusivity will have some impact. Angela, what about tafamidis?

Yeah. In terms of tafamidis, we saw pretty attractive growth OUS, including some markets that don't necessarily have the cardiomyopathy indication yet. Is that some follow-on benefit in polyneuropathy from the increased promotional efforts in cardiomyopathy in Europe and elsewhere? As a second question, given the expansion of patient opportunity in the polyneuropathy in the US, how do you think about the opportunity to pursue a supplemental NDA or similar strategy in the US based on the real-world evidence guidelines laid out previously by the FDA or would that require a separate study? And then finally, on the gene therapy side, obviously pretty interesting data in hemophilia at ASH moving forward in a couple of Phase 3s now, how do you think about that market in a universe where you have multiple therapies with curative intent in gene therapy alongside a number of robust chronic therapies? Who are the patients who should receive an irreversible intervention in terms of gene therapy? And who do you think deserves more appropriate for chronic therapy such as your own benefits? Thank you.

Yeah, I think I will ask Mikael to start with gene therapy and then I shall go with this great polyneuropathy that we have and how they fit together. Mikael?

Yeah, thank you very much. What I think is unique in our hemophilia portfolio. First, of course, we have a legacy of being one of the pioneers for intravenous delivery of Factor VIII and Factor IX, so we have a platform and experience on the business in R&D side. And as you so nicely alluded to, we also shared with our partners Sangamo some very much best-in-class data recently on the Factor VIII gene therapy. Our current portfolio has Factor VIII and Factor IX gene therapies plus our TFPI antibody that has the potential to become applicable for both Factor VIII and Factor IX deficiency. So the way we see it develop is that I think physicians will look at gene therapies that have durability and good tolerability. And that has really been the hallmark for the strategies when we developed Factor VIII and Factor IX with a best-in-class profile, because there are alternatives for these patients. So once they see the data for drugs, the treatments that are approved, that have durability and really good outcomes, which I think has been so far what we have seen with our gene therapies, those will be the ones that can be adopted because there are alternatives that have less convenience. But will, at least until strong data is available, be used. You know, for patients that are early in their disease diagnosed at an earlier age, I think this would be a very important treatment as it saves them from the bleedings, breakthrough bleedings that appear on lifelong treatment with infused factor. And particularly for patients that are at an early age that are physically active, it is important to have a solution for sure. So I think these would be tremendously important patient populations. But the availability of subcutaneous agents will also allow for patients that may have antibodies to the gene therapies to use them until sufficient number of gene therapies are available that there is always one for each patient. And finally, let's bring it together. I think what's unique with us is the entire portfolio that can address these patients, and we look really much forward to the year around 2021 and '22 when we see this portfolio coming into the registration phase. I think that was the main piece here.

Yeah, and then Angela may be on Vyndaqel have seen some uptick in markets, that cardiomyopathy was not approved. What's going on there?

Yes, of course, as we've said in previous calls, we do believe that this is a rare disease and that in the U.S., there will be about 100,000 patients in total and globally, 500 but in the US, a 100. To date, we have diagnosed 9,000 patients, so that leads us to 9% of the population that we have diagnosed. So while this may feel like very significant progress on the time that we have launched, and it is I think you can also see that we have a long, long way to go to finding all 100,000 of these patients. And what I spoke early about in terms of the education, in terms of how we suspect the disease, how you diagnose the disease, and then very quickly gaining access of our patients and the benefit from treatment of the disease, these are all three levers that we are intensely focused on.

Great. Thank you, next question please.

Hello. Thanks for taking my questions, couple if I may. Just on biosimilars following up with Angela, your comment about strong growth continuing on for the biosimilars. So I'm wondering if you could give any color around how we should think about the trajectory over the next couple of years. Is this a doubling or tripling of that now almost billion dollar business? And also would love to understand how you're thinking about the tale of each of the individual assets. Are you seeing - should we be thinking of this as a ramp that goes up for a few years and then eventually starts tailing off like other generics or do you see the stabilizing and having a sustainable tail? And then just on Vyndaqel, you received a positive CHMP opinion in the EU in December. Given that Vyndaqel is already approved in the polyneuropathy indication, wondering how we should be thinking about the price with the addition of the cardiomyopathy indication, is there any chance for moving that around? And then how we think about the ramp in the EU relative to the US? Thank you so much.

Sure. I will start with the last one first. So you're right, we just received EU approval for Vyndaqel. And as you know, there is a time lag between approval and then reimbursement in each of the countries. So all I can say is right now we are in active negotiations with the countries in terms of determining the price of Vyndaqel as well as its reimbursement. You referred to the fact that we already have the 20-milligram approval polyneuropathy in Europe, and we recognized that. That being said, we have, first of all, ATTR CM is a completely different indication; the trials that were conducted, as well as the significant mortality benefits that would be demonstrated in our clinical trials, at ATTR CM are completely different. And we have the clinical data to demonstrate the great patient benefit that we have in ATTR CM. And so that's the basis about discussions with each of the countries in Europe for reimbursement.

Your second question was around Vyndaqel growth and sort of the pace of it. I think the way to think about it is the following. We have through analogues seen that only 30% to 50% of all rare diseases are ever diagnosed. But of course, we believe that based on the mortality data that we have and the patient benefit that can be derived, that it is critical that we beat that or at least meet that. And so that's what we're intensely focused on. We have 9% of our patients diagnosed today; we have a long way to go. And that's what we need to do. Your last question…?

What's the rhythm on the biosimilars? You know, we've had strong growth 22% this year for the year, what can we expect going forward? That's right. So I think in terms of the biosimilars again, this is an area of growth that we can anticipate. We have three biosimilars now in oncology plus the two that we had in supportive care. And so we look forward to this being a significant growth contributor to the oncology portfolio not just from a growth percentage perspective but also from a revenue-based perspective.

Yeah. I just wanted to add that Vyndaqel cardiomyopathy has a positive EU recommendation. So we expect the approval to come soon, and that links very nicely to the really helpful outline you did, Angela.

Thanks, Mikael.

Right. Thank you. Next question please.

Hey, guys, thanks for taking my question. A couple of small ones on the rare disease side; in terms of tafamidis, we saw pretty attractive growth OUS, including some markets that don't necessarily have the cardiomyopathy indication yet. Is that some follow-on benefit in polyneuropathy from the increased promotional efforts in cardiomyopathy in Europe and elsewhere? As a second question, given the expansion of patient opportunity in the polyneuropathy in the US, how do you think about the opportunity to pursue a supplemental NDA or similar strategy in the US based on the real-world evidence guidelines laid out previously by the FDA or would that require a separate study? And then finally, on the gene therapy side, obviously pretty interesting data in hemophilia at ASH moving forward in a couple of Phase 3s now, how do you think about that market in a universe where you have multiple therapies within curative intent in gene therapy, alongside a number of fairly robust chronic therapies? Who are the patients who should receive an irreversible intervention in terms of gene therapy? And who do you think deserves more appropriate for chronic therapy such as your own benefits? Thank you.

Yeah, I think I will ask Mikael to start with gene therapy and then I shall go with this great polyneuropathy that we have and how they fit together. Mikael?

Yeah, thank you very much. What I think is unique in our hemophilia portfolio. First, of course, we have a legacy of being one of the pioneers for intravenous delivery of Factor VIII and Factor IX, so we have a platform and experience on the business in R&D side. And as you so nicely alluded to, we also shared with our partners Sangamo some very much best-in-class data recently on the Factor VIII gene therapy. Our current portfolio has Factor VIII and Factor IX gene therapies plus our TFPI antibody that has the potential to become applicable for both Factor VIII and Factor IX deficiency. So the way we see it develop is that I think physicians will look at gene therapies that have durability and good tolerability. And that has really been the hallmark for the strategies when we developed Factor VIII and Factor IX with a best-in-class profile, because there are alternatives for these patients. So once they see the data for drugs, the treatments that are approved, that have durability and really good outcomes, which I think has been so far what we have seen with our gene therapies, those will be the ones that can be adopted because there are alternatives that have less convenience. But will, at least until strong data is available, be used. You know, for patients that are early in their disease diagnosed at an earlier age, I think this would be a very important treatment as it saves them from the bleedings, breakthrough bleedings that appear on lifelong treatment with infused factor. And particularly for patients that are at an early age that are physically active, it is important to have a solution for sure. So I think these would be tremendously important patient populations. But the availability of subcutaneous agents will also allow for patients that may have antibodies to the gene therapies to use them until sufficient number of gene therapies are available that there is always one for each patient. And finally, let's bring it together. I think what's unique with us is the entire portfolio that can address these patients, and we look really much forward to the year around 2021 and '22 when we see this portfolio coming into the registration phase. I think that was the main piece here.

Alright, I think this concludes more or less our call. Just I wanted to make some comments because really, I feel that an exciting point in Pfizer's history. And if you take a big picture view, over the last decade we have changed and refocused our approach to R&D, we have improved dramatically its productivity. And we have developed the best pipeline we ever had. And one of the best I believe in the industry. If you've seen 2019, it was a year, but we took deliberate and thoughtful steps to strengthen each one of our businesses and eventually spread the current Pfizer into a new smaller, high growth profile enterprise that will remain a powerhouse in marketing but also has been converted to the powerhouse of science. Following the expected close of the Upjohn and Mylan transaction later this year, of course we will be a very different company. And we will focus on continuing to execute our strategy. This includes, we will continue the commercial momentum and preparing our new product launches. You have all asked a lot of questions about those products that are keeping surprising with our growth profile. And also, you've seen what we are taking seriously and we are investing in new launches. We are continuing to advance our internal pipeline, and will augment it with mid-stage R&D programs through targeted bolt-on business development opportunities. As I referenced before, we should continue seeing these types of activities in the first and second half of this year. Of course, we are working very intensively to set up Upjohn to be in a strong position when it combines with Mylan to become Viatris and create a formidable company. And of course, we will continue leading the conversation in Washington as we work to address the affordability challenge facing patients. These are the areas that we are focusing on for next year. Once again, we look forward to sharing more pipeline updates during our Investor Day on March 31. Have a great rest of your day.