Pfizer Inc (PFE) — Q1 2023 Earnings Call Transcript

Thank you, Chelsea. Good morning, everyone. Welcome to Pfizer's first quarter earnings call. I'm joined today by Dr. Albert Bourla, our Chairman and CEO; Dave Denton, our CFO; and Dr. Mikael Dolsten, President of Worldwide Research and Development and Medical. Joining for the Q&A session, we also have Angela Hwang, Chief Commercial Officer and President, Global Biopharmaceuticals Business; Aamir Malik, our Chief Business Innovation Officer; Dr. William Pao, our Chief Development Officer; and Doug Lankler, our General Counsel. Before we begin the call, I wanted to remind you of some logistical items. Materials for this call and other earnings-related materials are on the Investor Relations section of pfizer.com. You see our forward-looking statements disclaimer on Slide 3. Additional information regarding these statements and our non-GAAP financial measures is available on the earnings release and our SEC forms 10-K and 10-Q under Risk Factors and Forward-Looking Information and factors that may affect future results. Forward-looking statements on the call are subject to substantial risks and uncertainties, speak only as of the call's original date, and we undertake no obligation to update or revise any of the statements. With that, I will turn the call over to Albert.

Thank you, Chris. Hello, everyone, and thank you for joining us today. The first quarter was a solid foundational quarter in what we anticipate will be an exciting year for Pfizer and our patients. Our financial results came in as expected. Our non-COVID revenues increased by 5% operationally compared to the same quarter last year, while overall revenues dropped by 26% operationally, mainly due to the anticipated decrease in Comirnaty revenues. Despite the decline in Comirnaty, our COVID franchises remained significant contributors to our business, generating a combined $7.1 billion in revenues during this quarter. This growth was primarily fueled by our newly acquired products, including Nurtec for migraine, Oxbryta for sickle cell disease, our anti-infective Sulperazon, Eliquis for non-valvular atrial fibrillation in the U.S., and our Vyndaqel family of products for treating transthyretin amyloid cardiomyopathy. We are also proud of our impact on patients; during the first quarter, over 250 million patients received our medicines and vaccines. With this strong start, we remain on track to grow our non-COVID revenues by 7% to 9% operationally in 2023. This is largely due to the expectation that most of our potential near-term product launches will take place in the second half of the year after we secure regulatory approvals. Consequently, we expect our non-COVID revenues to grow at a faster rate in the latter half of the year compared to the first. Overall, we are in an 18-month period where we anticipate launching up to 19 new products and indications. In the first four months of this year, we have made excellent progress towards that goal, receiving approvals for Zavzpret, an expanded indication for Cibinqo for adolescents, and last week's approval of Prevnar 20 for pediatric use, all in the U.S. We have also received regulatory filing acceptances for elranatamab, for Braftovi and Mektovi for non-small cell lung cancer, and our RSV maternal vaccine candidate, which, if approved, would become the first vaccine intended for pregnant individuals to help protect against RSV disease complications in infants from birth to six months. Additionally, the U.S. FDA has granted priority review, and the European Medicines Agency has accepted our MAA filing for Talzenna for use in conjunction with Xtandi for patients with newly diagnosed metastatic castration-resistant prostate cancer, based on the TALAPRO2 results. Regarding our COVID-19 franchises, we continue to consider 2023 a transitional year as the virus evolves and we shift from advance government purchases to traditional supply arrangements for both Comirnaty and Paxlovid in the U.S. As previously mentioned, we anticipate that vaccine usage will decline in 2023 and 2024 compared to 2022. However, beginning in 2025 and extending into 2026 and beyond, we expect an increase in COVID-19 vaccination rates, assuming we successfully develop and approve various COVID combination vaccines. We foresee these general trends being similar outside the U.S., albeit with some country-specific variations. For Paxlovid, we expect government inventories built up last year to be fully utilized by the end of this year. Following this, we anticipate that the courses sold will align more closely with the courses used starting in 2024 and beyond. With its robust efficacy, consistent safety profile, and potential to alleviate the burden of COVID-19 on patients, families, health systems, and society, Paxlovid is emerging as a vital tool complementary to vaccination strategies for the estimated 40% of the global adult population at high risk for severe disease. Now let's discuss Pfizer's next significant opportunity in the fight against cancer. Oncology continues to be a core focus for Pfizer, and we believe the proposed acquisition of Seagen will strengthen our position in this critical area. Integration planning is already underway, and we expect the deal to close in late 2023 or early 2024, pending customary closing conditions. By leveraging Seagen's leading antibody-drug conjugate technology alongside Pfizer's scale and expertise, we believe we can accelerate breakthroughs in cancer treatments and provide new solutions to patients globally. The potential combined commercial infrastructure for Pfizer and Seagen will be significantly larger than Seagen alone, being three times the size in the U.S. and four to five times larger globally. Therefore, we project that acquiring Seagen could yield more than $10 billion in risk-adjusted revenues by 2030, with substantial growth potential thereafter. Even with the acquisition, our strong balance sheet and cash flows afford us the flexibility to pursue further opportunities to create value for our shareholders. Dave will elaborate more on this during his presentation. A major focus for Pfizer in 2023 is to continue building trust, a vital asset for any biopharmaceutical company. Since the start of the year, we've received two accolades proving our commitment to this goal. In February, Pfizer ranked in the Top 10 of Fortune's Most Admired Companies List for the second consecutive year. Additionally, in March, Ethisphere recognized Pfizer as one of the world's most ethical companies for the second straight year. Trust is everything to us at Pfizer; it enables us to operate, attract top talent, and deliver breakthroughs that enhance patients' lives. With that, I will hand it over to Dave. Following Dave, Mikael will provide an update on our R&D pipeline. Dave?

Thank you, Albert, and good morning, everyone. I want to begin with Pfizer's capital allocation strategy before we dive into additional commentary about our quarterly performance and outlook for the remainder of 2023. As you know, our strategy includes three pillars: reinvesting in the business; growing and paying dividends; and repurchasing our shares. In the first three months of 2023, we have invested $2.5 billion in internal R&D and returned $2.3 billion to shareholders via our quarterly dividend, and importantly, allocated approximately $43 billion for the proposed Seagen acquisition. Over the last few years, we have reinvested heavily into our business to drive long-term growth and enhance long-term shareholder value. We have invested in Pfizer's own science while acquiring the best external science to supplement our pipeline. Since 2022, we've invested approximately $70 billion, including Seagen, in business development. In addition, we have continued to grow our dividend. For the past 14 years, we have raised our dividend annually. Since 2010, our quarterly cash dividend grew from $0.16 a share to $0.41 a share in 2023. Looking ahead, as we exit this unprecedented period of anticipated launches, we would expect to achieve margin improvement over time. As we begin to de-lever our capital structure after the closing of the Seagen transaction, we expect to return to a more balanced capital allocation mix between our three pillars. While we will continue to invest in our business, we do expect more balance between that priority and returning value to our shareholders via increased dividends and value-enhancing share repurchases. Our capital allocation strategy is squarely focused on driving shareholder value while at the same time remaining committed to a high investment grade Tier 1 commercial paper rating. Now turning to the quarter, as Albert said, our results were in line with our expectations, albeit slightly better than consensus. As expected, overall revenues declined 26% operationally, primarily driven by the anticipated decline in Comirnaty, which was partially offset by strong Paxlovid sales. I want to point out that our COVID-19 products produced $7.1 billion in revenues in the first quarter alone. Our non-COVID operational revenue growth was solid at 5% year-over-year. Primarily driving this growth was the inclusion of Nurtec ODT and Oxbryta, and an increase in Sulperazon revenues in China. Revenues for Eliquis in the U.S. and the Vyndaqel family globally also contributed to this growth. Now, I want to remind you of the seasonality of some of our products. In the first quarter, Nurtec ODT and Oxbryta typically have lower sales quarter-on-quarter due to annual copay reset dynamics, with higher sales anticipated in later quarters. Most importantly, both products continue to experience strong growth in demand. Sulperazon revenues increased more than $100 million year-over-year, due to higher demand in China during the quarter, which we do not expect to be sustained going forward. The demand was due to increased bacterial infections from more patients being hospitalized for COVID. To help ensure the success of the expected launches of our large number of new and acquired products and indications, we increased our investments in selling, general and administrative expenses. These investments are squarely focused on Pfizer's 2025 to 2030 growth aspirations. Moving to the bottom line, reported diluted EPS this quarter declined by 29% to $0.97, while adjusted diluted earnings per share of $1.23 declined 20% on an operational basis during the quarter. Once again, this quarter, foreign exchange movements significantly impacted our results, reducing first quarter revenues by $730 million, or 3%, and adjusted diluted earnings per share by $0.07, or 4%, compared to last year. Now turning to the full year financial outlook for the Company, our full year 2023 guidance remains unchanged. On a total company basis, we continue to expect revenues of $67 billion to $71 billion, reflecting an operational decline of 31% at the midpoint. With 5% operational growth in our non-COVID revenues this quarter, we are on track to achieve our non-COVID revenue guidance of 7% to 9% operational growth for the full year. Given that a large number of launches are expected to occur in the third and fourth quarters of 2023, we anticipate our quarterly revenues will not be linear this year and that our non-COVID revenues will grow more quickly in the back half of the year versus the first half of 2023. In terms of our COVID products, Comirnaty and Paxlovid, we expect sales to trend more seasonally this year. Given these dynamics, we expect significantly lower sales contributions from our COVID products in the second quarter versus the first quarter. In fact, given the anticipated timing of approvals for a fall vaccine with strain change, we would expect more substantial vaccine deliveries to start in September, which is late in the U.S. third quarter and the beginning of our international fourth quarter. With respect to Paxlovid, we continue to expect 2023 to be a transitional year as we anticipate shifting to a commercial market in the second half of this year. We are reaffirming our adjusted diluted EPS guidance range of $3.25 to $3.45 per share. On a full year basis, we expect that foreign exchange will have an unfavorable impact compared with full year 2022 of approximately $0.13, on adjusted diluted earnings per share. We are also reaffirming the remaining components of our full year 2023 guidance, which you can find in the Appendix of the Q1 2023 earnings presentation. So in closing, this is an exciting period for Pfizer as we continue to invest to drive long-term growth and importantly enhance long-term shareholder value. With that, now let me turn it over to Mikael.

Thank you, Dave. Today, I’d like to start off with one of the four pillars of our oncology portfolio, which are breast, urogenital, blood cancers, and precision medicine. Within urogenital, prostate cancer is an area in which we have strong momentum. Recent positive study results further strengthen our franchise, building upon the global standard of care set by XTANDI, and underscoring our long-standing commitment to the pursuit of breakthroughs that define new standards of care in prostate cancer. I’ll highlight data from two Phase 3 studies, EMBARK and TALAPRO-2, as well as early, but promising signals from our EZH2 inhibitor, each of which has the potential to reach broader patient populations across the treatment continuum in prostate cancer. Final analysis from TALAPRO-2, evaluating our potential blockbuster PARP inhibitor TALZENNA in combination with XTANDI were presented at ASCO GU. Results showed significant and clinically meaningful improvement across the all-comers population in radiographic progression free survival, or rPFS, in men with metastatic castration-resistant prostate cancer, with or without homologous recombination repair or HRR gene mutations. There was a 37% reduction in risk of disease progression. Median rPFS in patients treated with TALZENNA and XTANDI was not reached at the time of analysis versus 21.9 months for placebo plus XTANDI. A trend in overall survival favoring TALZENNA plus XTANDI was also observed, though these data are immature. The final OS data will be reported once the predefined number of survival events has been reached. Treatment with TALZENNA and XTANDI resulted in statistically significant improvement in overall response rates, which suggest a potential cooperative effect between the two treatments. The U.S. FDA has granted Priority Review for our sNDA for TALZENNA in combination with XTANDI for metastatic castration-resistant prostate cancer, with a decision expected in 2023. The ongoing TALAPRO-3 study, if successful, may further expand the reach of this potential blockbuster into the HRR-deficient metastatic castration-sensitive population. We recently presented data from our Phase 3 EMBARK study evaluating XTANDI plus leuprolide in men with non-metastatic hormone-sensitive prostate cancer with high-risk biochemical recurrence at the American Urological Association's 2023 Annual Meeting. The study met its primary endpoint with statistically significant and clinically meaningful improvement in metastasis-free survival, with a 58% reduction in risk for radiographic progression or death. Key secondary endpoints were met including time to PSA progression. These results suggest XTANDI, the only novel hormone therapy approved for three disease states of prostate cancer in the U.S., has the potential, if approved, to expand to patients in the hormone-sensitive or castration-sensitive setting for the first time. Next, I'd like to share early data from one of our next-wave candidates, a potential first-in-class and best-in-class EZH2 inhibitor, which we shorthand as 1497. EZH2 is an epigenetic transcriptional repressor that is frequently overexpressed in prostate cancer. We believe that inhibition of EZH2 may provide synergistic effects in combination with XTANDI, with the potential to address unmet needs of patients with androgen-sensitive and resistant disease. Here are data from our ongoing Phase 1/2 study evaluating ‘1497 in second line mCRPC patients with prior abiraterone and/or XTANDI, and up to one line of chemotherapy. On the left are updated data from a Phase 1 dose escalation study shared at ESMO last year. These encouraging results show durable anti-tumor activity in both XTANDI-naïve and experienced patients, with all XTANDI-naïve patients having received prior abiraterone. Importantly, this suggests that the addition of our EZH2 inhibitor has the potential to sensitize XTANDI resistant tumors, which is an increasing clinical unmet need. The early rPFS data are also highly encouraging, reaching 8.7 months in the XTANDI experienced patients and 17.1 months in XTANDI-naïve both of which are notably longer than historical controls. For example, in the control arm of the CARD study, rPFS for XTANDI alone was 4.8 months in XTANDI-naïve patients. And although cross-trial comparisons cannot be made, these results, in combination with the emerging objective response rate and PSA50 response, are supportive of the contribution of our EZH2 inhibitor candidate in driving these responses. From a safety perspective, the combination was generally well tolerated, with mostly Grade 1 and 2 events. The randomized Phase 2 study in second line mCRPC is ongoing, with data expected in early 2024. Now, we turn to the potential for near-term growth across our respiratory vaccine franchise. Prevnar 20, our 20-valent pneumococcal conjugate vaccine, is now approved for children aged 6 weeks through 17 years. We are confident in our ability to maintain leadership in the pneumococcal vaccine space with Prevnar 20, which offers the broadest serotype coverage of any pediatric pneumococcal conjugate vaccine, helping to protect against the 20 serotypes in the vaccine. We have strong momentum with our RSV vaccine candidate, having received a positive VRBPAC Committee vote supporting potential approval to help combat RSV in older adults and PDUFA dates for our Older Adult and Maternal indications in quick succession in the coming months. Just last month, the New England Journal of Medicine published results from the two positive Phase 3 studies. Emerging data from the middle of the second RSV season in the Northern Hemisphere in the Phase 3 Older Adult study support meaningful durable vaccine efficacy; we will share the data once complete. In the coming months, we plan to start a Phase 3 study of the RSV vaccine candidate in 18 to 60-year-olds at high risk for RSV and in immunocompromised adults 18 and over, and a Phase 1 study in 2 to 18-year-olds at high risk, with the potential to broaden the reach of our vaccine candidate both to those aged 18 to 60 with high-risk conditions and to pediatrics and adolescents. Our RSV-Flu co-administration study met its primary endpoint, demonstrating non-inferiority for all four flu strains and RSV A and B strains. This suggests the RSV vaccine candidate, if approved, could be co-administered with flu vaccinations and add an important component of seasonal protection against respiratory pathogens. Finally, the FDA recently updated the EUA for our Omicron BA.4/5 bivalent COVID-19 vaccine to enable those at higher risk of severe COVID-19 illness, including the elderly and the immunocompromised, to partner with their healthcare providers to be proactive in helping protect themselves against COVID-19. We anticipate another update from the FDA in June that will provide guidance on COVID-19 vaccine strains and vaccination timing for the 2023 fall and winter seasons. Beyond vaccines, antivirals are an important component of our strategy in respiratory viruses. Here we share data for the first time from our second-generation oral COVID-19 antiviral candidate, a potent and selective SARS-CoV-2 Mpro inhibitor that is currently in Phase 1. We designed this candidate to achieve clinical exposures that would have similar anti-viral activity to PAXLOVID, but without the need for ritonavir boosting and with the potential for reduced drug interactions. Early results from Phase 1 dose escalation are encouraging, with no dose-limiting safety or tolerability findings. Dosing achieved concentrations many-fold over in vitro EC90 and is therefore expected to have similar antiviral activity to PAXLOVID. On the right are preliminary results from a Phase 1 pharmacokinetic study of midazolam drug interaction, which is a well-known standard for indicating CYP3A4-mediated drug-drug interactions. These data show there is a lack of such drug-drug interactions, suggesting there may be no related restrictions of co-dosing with drugs metabolized by CYP enzymes. Based on these encouraging data, we are planning to advance to a Phase 2 dose-ranging study in the first half of 2023. In addition to the assets I spoke about today, we continue to make progress on the pipeline with more than 25 milestones recently achieved or anticipated through the first half of 2024. In inflammation and immunology, the FDA has approved our sNDA for CIBINQO, enabling a label expansion for adolescents with moderate-to-severe atopic dermatitis. In internal medicine, ZAVZPRET migraine nasal spray has received FDA approval, expanding our migraine portfolio. Recently, the FDA Advisory Committee voted in support of PAXLOVID’s favorable benefit-risk profile, with a soon PDUFA date in May. In closing, we are very excited about the potentially transformative catalysts expressed across the pipeline as we work with continued urgency to bring breakthroughs to patients. Thank you. Let me turn it over to Chris to start the Q&A session.

Thank you, Mikael. All right, Chelsea, please queue up the list for Q&A. We have at least 30 minutes for Q&A.

I have two questions. First, can you share your expectations regarding the system eligible in the EV-302 trial, especially considering its significance to the acquisition you are tracking? Secondly, based on my…

Umer, can you repeat the question, I'm not sure we understood it.

Sure. Regarding the Seagen trial on Pfizer EV-302, there has been a significant focus on cohort K, which currently has ineligibles. My question is, this ongoing trial also includes eligible participants, which comprise two-thirds of the target population. What are your expectations regarding that? It seemed intentional that no data was disclosed from the eligible part A. Additionally, for the full-year guidance, I noticed there might be around $1 billion in contributions from new launches. I’m trying to understand this in light of the fact that these will be launches in the fall of this year. I recognize the importance of data like RSV and route maps, but is it reasonable to expect around a billion dollars from those launches? Thank you.

Thank you very much. Angela, let's address the second question regarding the guidance on the estimated $1 billion in sales from the last quarter.

So from a launch perspective, I think the two big ones to look out for this year are Prevnar 20 EPS, and RSV adults. And as you know, it goes through the typical ACIP process or recommendation, and then launches can really only happen or commercialization after the publication of the MWR. So if you consider all of that, that puts us into fourth quarter, which is when Prevnar 20, as well as when RSV older adults will actually be commercialized, and revenue being generated. And so yes, we are anticipating that there's going to be a big bolus of revenue because, first of all, if you think about Prevnar 20 Peds, that is going to be a conversion from Prevnar 20 Peds and Prevnar 13 today has a significant market share, right, in the pediatric pneumococcal, is 80% margin share. So, we are going to be converting those accounts, the physicians, the inventory, all of that from 13 over to 20. And so if you look at, I guess a good analog for that would be our Prevnar 20 adult launch, which was the conversion of the Prevnar 20 adult launch, and there it went really well. Today, we have what, over 95 market share. And then of course the second one is the RSV adult, and there, it plugs into an already established commercial infrastructure that we have built around COVID, around the Prevnar franchise, the adult franchise. It comes at a great time during the fall and the winter when vaccinations for respiratory vaccines actually increases. So, there are a lot of reasons to believe why their fourth quarter and it'll be a really big quarter for both Prevnar Peds as well as RSV adults.

Thank you, Angela. On the question about the season asset, although should be very careful because we can't comment on that. But maybe you can make William, a quick comment, generally speaking.

Yes, we are very excited about the recent approval for the first-line treatment in the Seagen ineligible population, which includes about 8,000 to 9,000 patients in the U.S. We look forward to seeing additional data from the first-line Seagen eligible EV-302 study, which compares Peds plus Prevnar with platinum gemcitabine. We cannot provide further comments regarding Seagen. If results are positive, this could expand the eligible population by another 10,000 to 12,000.

No doubt, the population that excites us, but of course, we can't comment on the Seagen products. Next question please.

Terrific. Thanks for taking our call. This is Keith on for Evan. Maybe just shifting to M&A execution, thinking about your recent acquisitions with Nurtec and Oxbryta, you've done a great job describing the plans to add value to drive commercial and clinical synergies. We are seeing the outcomes on our end. Could you comment on how this is going from your end? And then could you talk about specifics for operationalizing the same for Seagen integration and how this would differ from recent examples? That would be great. Thank you.

Again, Angela, back to you.

Sure. Yes. So we are incredibly proud of the work that we have done with Nurtec since the acquisition. As you know, in July of 2022, we had already begun and co-promote with Biohaven to ensure that we were co-promoting the product early. And I think that has really paid off. If you really look at what has happened from it, just leading indicators as well as actuals. Today, Nurtec is the leading product in the oral CGRP class with over 47.5% market share. It is also the leading product when it comes to new to brand prescription share at a high of 46%. It also has the highest number of prescribers at over 110,000 prescribers and 80% of new CGRP prescribers choose Nurtec. So, I think we've demonstrated in the time that we've had it, that we are able to drive performance and drive excellent education and awareness of the product. And we're seeing that consistent great metrics as it pertains to Nurtec. And of course, the opportunity is huge, right because we have so pan Japan launching later this year. And we also know that, as a whole, there are over 1 billion migraine sufferers and only 18% of them are using CRPS today. So, we have a great opportunity to expand the class of CGRP with specifically Nurtec.

I have two questions. First, regarding the European negotiations, there was some news this week. Can you share any comments on that? You provided guidance at the beginning of the year, anticipating some outcomes, but has the negotiation reached a point where it aligns with that guidance? My second question is about your demand chart for Paxlovid and vaccinations. It seems like you expect both Paxlovid and vaccination utilization to increase into the 2024 timeframe. Is the expectation that demand will rise for both, or do you foresee a scenario where, as vaccination rates decrease, the demand for Paxlovid will increase? How should we interpret this?

I can address those questions. The EU negotiations are still happening, so we cannot provide any comments on that. We have incorporated our estimates regarding the outcome of these negotiations into our guidance, but we are not close enough to make any comments. It wouldn't be appropriate to discuss that further. In terms of demand for Paxlovid and vaccines, we anticipate that the demand for vaccines will decline. We estimate it will drop to around 24% of the population in the U.S., with similar trends in other countries, as the underlying demand for boosters is progressing toward that figure. Most of this will likely occur after the summer, during the traditional flu vaccination period. Currently, the demand for Paxlovid closely tracks infection rates. We monitor this weekly, and there is almost a direct correlation between the percentage of infections and Paxlovid cases. We expect this trend to continue, as compliance with vaccination recommendations is low worldwide due to pandemic fatigue. We anticipate fewer people will get vaccinated this year compared to last year, which means overall immune protection will decrease. Consequently, we expect an increase in infections, leading to greater use of Paxlovid. However, this is based on our logical models, and we will have to see how things unfold in reality. Thank you for your question. We can move on to the next one, please.

Just two big picture ones. Just first on the vaccine franchise, as we think about the competitive landscape. A couple of things, what do you think is going to be the most important differentiation for you versus the competition that will drive the most uptake as people have different options? And have you developed any new LNP technology that might reduce the biggest pushback with vaccines as people still stick still when they got them for some of your products? And then lastly…

I didn’t hear which product you spoke about?

I was just talking about the vaccine franchise for RSV and flu and COVID. Thinking big picture, how you are differentiated? And what do you think is going to be key because you're all competing to determine who's going to be the winner? And the second question is there's the big proposal at a Europe for new legislation for drugs. And since you're launching new products in Europe, just want to get your thoughts on whether or not you think that legislation may hold or what kind of impact that might have?

Thank you. And maybe I can give you a very general answer. And then if Angela wants to chime in, please. On the COVID, we are right now, all right, we have the big markets there. And then we plan to maintain that. So, I think we are then. When it comes to RSV, we are the only ones but we have both or we have positive data on both, on adults and on maternal. And we have already approved for the adults and then we are expecting approval for the maternal. So, that the strength of our data with efficacy and safety profile that we think is differentiated, will provide us with what we hope also to be the winners in that one. As flu on mRNA technology still the results, we are very optimistic with the totality of the data that we are having from our flu vaccine, and we will wait to see of course how that will continue. And then of course, the winners, there will be also those that they will be able to build from the maze of all of that. So, the fact that we have all three of them or we have a good chance to have all three of them, if the studies are successful and if the products are approved or of course also provides a good differentiation. In addition to all of that, I think the trust to the Pfizer brand name, which has been very, very strong I think also plays a key differentiator. Now as regards the EU legislation what we haven't just seen in recent days, we are noticing the positive things of EU trying to be more competitive in attracting reserves and creating the regulatory framework for more rapid approvals. Clearly, we are also concerned at the same time with provisions that would like to reduce the exclusivity of data and other provisions. So, we hope that there will be an open dialogue with the EU so we can create a framework, but really will enhance innovation. Angela, anything that you want to add to all of that?

Maybe just to add to your question specifically about the adult portfolio, I really do believe that this plays into our sweet spot. Through the last several years, both from or the Prevnar franchise for vaccinating adults throughout our work in COVID, we have learned that, the clinical profile is one thing, but you really need reliable supply, you need a commercial infrastructure, you need a great ability to educate, raise awareness and drive people to vaccination. And I think on all of those counts, Pfizer is a winner. And so, we look forward to having a growing and a very robust respiratory portfolio that really leverages off of this incredible commercial machinery.

Thank you. Next question, please.

Hi. Thank you for taking my question. So, I want to ask you about margin improvement. You talked about that in your opening remarks. I'm curious, when we might start to see that and does that include the Seagen acquisition in your comments? And second question I had for you is, what are some of the key steps that you have taken already to transition Comirnaty and Paxlovid to the commercial markets? And when will you know how the season will shape up? Thank you.

Thank you very much, Louise. Dave, do you want to take the margin improvements and then Angela, a combination of products.

Yes, thank you for your question. It is our expectation that, as we integrate Seagen in either late '23 or '24, early '24, we will begin to see margin improvement, and that will happen as we continue to improve our performance from a top-line perspective. At the same time, we are going to be very efficient and really work to minimize our selling, general and administrative investments going forward. So I think we should start to see that post the integration and the closing of the Seagen transactions.

Thank you, David. And, Angela, how are we preparing to transition commercial commitment?

So, Louise, as you know, both of these products, both Comirnaty and Paxlovid, are products that are very familiar to us. They fit very well in the existing portfolio of products that we have. So the ability for us to move from an EUA into a full launch or into its business as usual for us, right? So, the typical things that we would always do which is awareness building with physicians and with patients that has begun and is well on the way. The things that you would do as regards to our discussions with payers to demonstrate value and to create your value arguments for reimbursement and access that has begun. We have done a tremendous amount of work, as it pertains to retailers and making sure that we have our distribution and our supply chain well-oiled and the ability to be able to supply and to vaccinate, to administer these products at both at a physical site like a retailer or even in the case of Paxlovid getting telehealth and sort of remote health capabilities set up. So all of these capabilities, many of them, in fact, have been underway throughout the entire time of the pandemic. So I think we are in a very, very good position to seamlessly transition into commercialization.

Thank you, Angela. Next question, please.

Can you talk about your next gen CDK4 program? You'll have first in-human data in ASCO. What does your team believe just hitting CDK4 allows you to improve on hyper-intense efficacy? And are there any plans to combine that drug with our venous cert given the DDI that's been shown up with IBRANCE? And then on your next gen Paxlovid program, can you confirm that it can achieve multiple-old over the EC91 adjusted for plasma protein binding? And is that for timelines on that product? Is the earliest possible commercial entry 2026, or is there a path for expedited approval?

Mikael, I think both questions can go to you.

We are very excited about the next gen CDK4 inhibitor. It's looking really good in two aspects. You can dose and get the activity of the patient's Pal CDK4/6 because you deal with higher inhibition of this mechanism, and you have better tolerability with much less neutropenia, less risk for infections. We expect media to report out and we have an aspirational target to start Phase 3, late this year posted earlier. At the same time, as you asked, we are now running combination study CDK4 with CAT6, another inhibitor that has nice single agent activity and seems to combine well. We have a second combination with CDK2 and we think this would allow us next year to pick one or two combinations to advance up the lines with more potent treatment than what's available today. Similarly, we're looking at combination with 471, as you alluded to in order to benefit from Arvinas' collaboration. Next gen Paxlovid, yes, as alluded to in my introductory remarks, we have manifold above EC90. And as you know, for Paxlovid what's unique with that drug is that the many-fold exposure above EC90 will lead to no detectable meaningful emergence or mutations, which is always what you fear in antiviral single-agent therapy. And this has been unique for Paxlovid versus other agents that have been used for whether antibodies or antivirals. And this is exactly the profile for the next gen, but without the DDIs that will allow us to improve and also to move into other supplementary segments. We're planning soon to start a Phase 2. And pending data, possibly move quickly to Phase 3. And of course, we would like to see that agent introduced as soon as possible, I think we can hope to move swiftly pending event rates of COVID that will happen in the fall and further on that influence enrollment. So I think you said '26 and I would certainly hope we'd be ahead of that.

Maybe two for me because I'm not sure you'll be able to answer one of them. I guess any would love your latest thoughts on your seasonal flu mRNA vaccine. Just in light of some of the Moderna data on the B antigen side just how should we think about your profile there? And then there's been some focus on this etc., searches Opdivo, first-line Hodgkins lymphoma data that's going to be presented at ASCO. Just wondering if you can offer your high-level perspective on how you see that frontline landscape evolving? Thank you.

Thank you. Mikael, why don't you take the flu question and then the oncology question, we'll go to William.

You know, we are very pleased with what we see so far in the totality of the data of our flu mRNA. As you know, we have reported out very high antibody titers to A, similar or possibly lower to the B antigens versus standard flu vaccines. But in contrast to standard flu vaccines, we have very nice T cell activity. And I think we are the only mRNA platform that has those CD4 and CD8 T cells of significance. We do think that could offer a unique profile for flu and the tolerability with our dose is very encouraging. So, the trial is in the last leg for readout. Hopefully, we'll be late to this for to share an update. And we are very encouraged and we are in parallel at least investing in combination opportunities with this and COVID and RSV in various combinations as Albert early alluded to.

Thank you, Mikael, and William on the oncology front.

Yes, sure. So again, this is a molecule for Seagen and such as, which is the CD30 ADC. It's already been approved in Hodgkin's lymphoma, post-transplant, and then previously untreated Hodgkin's lymphoma now with chemotherapy with cisplatin, vinblastine and dacarbazine. And we anticipate, actually later this year that label will be updated for overall survival. Now the data you're talking about is from the SWOG S1826 study with Nivo AVD versus Adcetris AVD, and I believe there'll be presenting PFS data. But this is a curable disease. And we believe that the OS update with the Adcetris label will show that Adcetris is the favorite product at this time.

Thank you. Next question please.

Two questions on the RSV vaccine. The only older adult vaccine on Slide 22, you know emerging mid-second season data supporting durable vaccine efficacy. I wonder if you can elaborate a little more here. What data do you have in hunt today and you want to act against that second phase of data in front of the FDA approval? Assuming you see protection into that second season? How might that influence your pricing in the U.S.? And secondly, on the maternal vaccine, you have thought scheduled in Q4 on Slide 6, implies that that may not happen till the first quarter of next year. So could you just provide more clarity on when you could launch that maternal vaccine?

Yes, Mikael was about the RSV vaccine.

Yes, we were very pleased to get our first data chunk from second season mid-season data for older adults. And it clearly shows that robust data that we shared, for example, we shared high 80% reduction in lower respiratory tract infections with three symptoms. We see also on this and similar results in other endpoints, a very robust, very meaningful protection also in the second season. Now, as you know, at the same time, we are preparing for the future combination vaccines. And we think in general that you will see an evolution in the adult market with simplified vaccination schedule, and your re-vaccination of COVID flu RSV. For those that for some reason, these are vaccination, we think the second season data will be very good. On the maternal, we are preparing for an advisory committee, we think we have great data, we are the only one that have been able to conclude the maternal vaccination, we're the only one that we're able to construct an RSV vaccine without using an adjuvant. And we think it's a differentiated product, and I assume will be sooner after a potential approval in opportunity for Angela to launch to very eagerly awaiting community of increasingly attentive pregnant women and maternal clinics to protect the newborn.

Thank you, Mikael. As we said, in our slide, we expect to be approved in this year in the last quarter. So good launch, we expect the publication of the MMWR likely to happen beginning of the next year. So that plays also a key role in the uptake with the vaccine. But keep in mind the launch of vaccines starts before the approval, right? We have done a lot of educational efforts and there are a lot of investments that we are doing in that field. So in that aspect, the launch already has started from our side at least.

I guess, first on the decision to establish a new operating segment and specifically launched this Pfizer IGNITE offering. Can you talk about what drove that? And if there's sort of like an aspirational target, and how meaningful have a driver that could be? And then secondly, sort of on the decision to divest Bavencio, did that reflect the sort of a signal you got from FTC or a proactive move in your mind or are there other factors we should think about? And the fact that we haven't seen other divestments to that sort of reinforce our confidence that you think that the deal can go through without other issues? Thank you.

Thank you very much. On the Bavencio question, the discussions to return the rights for royalties, in exchange for royalties, it started well before Seagen, so it has nothing to do with the acquisition of Seagen. It was something that was ongoing between us and Serrano for the benefit of the product and for simplicity reasons. It just was completed after we announced the deal shortly after, but it had started way, way before. Amir, would you like also to explain the IGNITE business?

Yes, Carter, thanks for the question. I think you have seen us collaborate with the biotech ecosystem in lots of different ways, and Pfizer IGNITE is another way in which we can effectively do that. Frankly, there is a lot of interest and demand on the part of particularly Biotech for working with us to access some of our distinctive research and clinical development capabilities. And we think IGNITE gives us a platform to do that, to work with these companies, get closer to the science, which over time also then improves our ability to access that science and make determinations about what we would like to bring in-house. So, we think this is an excellent way for us to continue to collaborate with the Biotech ecosystem and add to our growing and compelling pipeline over time.

Thank you. Next question please.

Thank you. On Paxlovid, the U.S. commercial opportunity, can you update us on any framing of what you are thinking in terms of pricing, and when we will know that? And in particular with the commercial availability, are you anticipating much in the way of sort of payer engagements in terms of thinking about how that process will unfold utilization management wise? And then on the business development front, if we go to the $30 billion that you had outlined for a while now, and think about what is remaining from that unadjusted target in terms of 2030 revenues. Let's say, approximately $5 billion is left. As we are thinking about how you guys are contemplating what areas to go into in terms of verticals or therapeutic areas or modalities? Would it be fair to expect that at this stage a consideration might be to minimize the then that you would have to rebuild or sort of refurbish on the selling, general, and administrative front given your margin objectives longer term?

Thank you, Angela, on Paxlovid commercialization.

Sure. Hi, Chris. Yes. We are preparing for launch now. But as we have said, we have shared before the date of launch and exactly how that's going to happen is still very much subject to our discussions with the U.S. Government. So, we are going to align with guidance from them in terms of how that's going to happen. Of course, in the meantime, we are preparing for the commercialization of Paxlovid and payer discussions around the world is critical. So, those have begun. Obviously, it's too early for me to share the price of Paxlovid. But suffice to say that, the price ranges that we have brought to our payers together with the value arguments that we have been able to develop through robust real-world evidence from the number of hospitalizations, the number of deaths that we have been able to avert through the treatment with Paxlovid is very much supportive of the pricing ranges that we are talking about. So, I think very soon we will be able to share more.

Yes. Chris, as you mentioned, we have a goal of $25 billion in risk-adjusted revenues by 2030, and I should remind everyone that is a 2030 goal. We, with the deals that we have done, have a remaining balance of less than $5 billion against that goal. And I think our strategy to pursue that is going to be consistent with what we have employed to date. First and foremost, it's going to be about compelling science that we can add value to. That's also going to contribute growth in the 2025 to 2030 period and take lots of things into consideration, including the impact on the P&L profile. So, that will continue to be our focus and will continue to be disciplined in the opportunities that we look for. And as Dave mentioned earlier, our priority right now is ensuring that we close out and successfully integrate the Seagen transaction as well as drive value from the other deals that we've done and will continue to actively look for opportunities.

Thank you, and we are a bit out of time, so last question, please.

A couple of questions. The first is, how much of your future COVID vaccine revenue forecast are tied to the ability to have a combination product, if something like mRNA flu ends up not being viable, and a knockout of flu COVID combo, would that impact your anticipated uptake in 2025 and beyond? Or can you get to those longer-term guidance levels regardless of whether you have any combos or not? And then last question, Albert, I'm guessing, there's some frustration among management with what the stock's been doing, a tough 2023, 2022 wasn't a great year. This is despite Pfizer helping lead the world out of the pandemic, which was a remarkable accomplishment. Even today, the consensus stock is down a little bit. So as you talk to analysts and investors, what are you hearing are the biggest concerns that you think could explain this? And what do you think analysts and investors are missing or misunderstanding?

Let me start with the first one. We do expect that if there are successful combinations with flu, that will drive the fluctuation of the corporate vaccine much higher, as you know, in our estimations, we expect, for example, in the U.S. around 24%, 25%, in the next few years of COVID vaccine. The flu right now utilization is around 50%. So, there is a big gap. So, that's why we believe that the combination between flu and COVID will arise also to the COVID. And eventually, we can call the way up to the same utilization like flu, particularly given that there are no copays in approved and recommended vaccines. Now as regards to the frustration for the 2023, clearly, I believe that the stock price right now does not reflect the value that Pfizer has. The fact that we are so proud because of our contribution in saving the world, I don't think, but we expect the stock price increases because of that. We did it because it was the right thing to do. And I think we are very, very proud of that. But we expect to see stock price increases as we are executing our plan, which is to create sustainable top line revenue growth that will allow us to leverage the bottom line that will grow faster than the top line. And I think we articulated the plan about that and that plan was to invest in acquiring good scientific substrate that will allow us to launch products that will give us $25 billion revenues by year 2030, and we have done tremendous progress on that by having already, according to our calculation, $20 billion. We are also invested in R&D in the last in the past few years, and we have now an unprecedented launch of new products. And I think the street is expected to see how those launches will evolve. Clearly, I think there is an overhang over the COVID revenues. There is uncertainty about if those COVID revenues will materialize, we don't have any precedents to show that we know how to predict it well. So our predictions are based on epidemiological science and based on trends that we have been testing with market people. So I think that from my perspective, what I said was that we are very committed to creating value for the shareholders. We know that everything we do, we do it with their money it's not our money. And we want to be very good stewards of that. So, it's not enough to save the world. I think also, we need to increase their surprise and are highly committed to do that by explaining better the strategy more importantly, executing on it. So with that, I think, gave me also team a good segue to close. In summary, we believe that was a solid quarter we deliver on our commitments, we exceeded actual expectations, we know from history. And we will continue doing so with a compass that we will create serious value for patients and that we are certain will translate into value for shareholders. We are executing our plan and we will remain very committed to doing that. Thank you very much to all and have a nice day.