Pfizer Inc (PFE) — Q1 2025 Earnings Call Transcript

I'm Francesca DeMartino, Chief Investor Relations Officer. On behalf of the Pfizer Inc. team, thank you for joining us. This call is being made available via audio webcast at Pfizer.com. Earlier this morning, we released our results for the first quarter of 2025 via a press release that is available on our website at Pfizer.com. I'm joined today by Dr. Albert Bourla, our Chairman and CEO, and Dave Denton, our CFO. Albert and Dave have some prepared remarks, and we will then open the call for questions. Members of our leadership team will also be available for the Q&A session. Before we get started, I want to remind you that we will be making forward-looking statements and discussing certain non-GAAP financial measures. I encourage you to read the disclaimers in our slide presentation, the press release we issued this morning, and the disclosures in our SEC filings, which are all available on the IR website on Pfizer.com. 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, Francesca. Good morning, everyone. Thank you for joining our call. We are very pleased with our performance in the first quarter as we continued to execute with focus and discipline on our strategic priorities. We are strengthening our R&D organization in our efforts to advance our pipeline and productivity. We are maximizing the value of key products in our commercial portfolio, and we are improving operating margins with our continued progress in making our company more efficient. In the current volatile external environment, the underlying strength of our business and strong relationships with government leaders across the world help us navigate with agility. While we continue to engage and plan for contingencies, we are focusing day-to-day on what we can do to move our business forward. I want to emphasize our continued confidence that we are well-positioned to enhance shareholder value. Now I will turn to our top strategic priority in 2025: improving R&D productivity as we advance our pipeline with sharpened focus. We are intensifying our rigorous commercial assessment and portfolio prioritization from early clinical development. This means we will be disciplined in managing our portfolio, directing investment and attention to potential blockbuster or mega-blockbuster, and scrutinizing the total number of assets under development. Our Daniel Gipron announcement earlier this month demonstrates our commitment to this approach. This continued the development of Daniel Bipro, one of our candidates in our Vista portfolio, although difficult, it was the right decision for the company. Going forward, we are committed to building our cardiometabolic pipeline, including obesity, by advancing internal programs such as our GIPER antagonist and pursuing external opportunities that could include partnerships or acquisitions. We will continue to be disciplined as we move through key decision points for our pipeline or our business development targets. We believe we have the potential to address significant patient needs with differentiated approaches that focus on supporting optimal weight management and related conditions...

Thank you, Albert, and good morning. I'll begin this morning by reinforcing the fact that our solid financial results demonstrate our strong executional focus. We continue to concentrate on driving positive patient outcomes and delivering on our financial commitments while navigating an ever-complex external environment. Our productivity improvement programs continue to drive a more efficient organization enhanced by our strong operating margins in the quarter. Going forward, we expect to improve our cash flows, reduce our debt leverage, and have more flexibility for three capital allocation pillars. Our focus remains on creating long-term shareholder value. We will continue to invest in our business for the long term while prudently returning capital to our shareholders. Now first, let me start with our first quarter results. For the first quarter of 2025, we recorded revenues of $13.7 billion, a decline of 6% operational. The decline was largely due to lower PAX load with revenues, in part due to last year's one-time tax lubid revenue credit recorded in Q1 of 2024. In addition, US revenues were tempered by changes in the IRA Medicare Part D redesign, which took effect in the first quarter. Partially offsetting the decline was growth in several in-line products in the US and overall growth internationally...

Great. Thanks so much for taking the questions. Maybe two if I could. So one, just appreciate your prepared remarks. We mentioned the dividend, your commitment to maintaining and growing the dividend over time. But I think we've just gotten started increasing questions about this from investors over the last few months. Especially with some of the tariff uncertainty and how that might impact cash flows and I'm talking about maybe getting more active on the business development side. So maybe just to reinforce that even one more time and nothing else, the level of commitment you have there even if there is an impact from the tariff side, you still feel comfortable in being able to maintain and grow that. And then my question is, Andrew.

Thank you very much. Dave will tell you about the dividend and then Amir and Alexandre about the company.

Yeah. Vamil, clearly consistent with my prepared remarks, the dividend remains a critical component and a key component of our capital allocation strategy. As you can tell, we've been very focused on improving the operating margin performance of our business, thus improving our cash flow yield over time. This is all in support of all of our capital allocation priorities with the dividend being a key component of that.

Thanks, Vamil. So you asked about Pexlovid. Pexlovid utilization trends very closely to infection rates. And we see a 50% treatment rate and close to an 80% fulfillment rate there's infection. We've set up a very good commercial model to do that. I think what you saw in Q1 was largely the function of the fact that we have a lower winter wave. But we still treated over 750,000 patients starting the year with about 100,000 a week and tapering off at around 35 to 40,000. And while these numbers are lower than the consensus numbers, they're very much in line with Rx expectations and what we track for the business. And what we've seen in multiple years now is that over the course of the year, you have two COVID waves, one in the summer and one in the winter. The peaks and valleys and the timing of those vary, but we have had consistently multiple waves...

As you know, international community is bigger than Pax COVID. Communetic, we beat consensus quite nicely with by $130 million, essentially driven by execution. As you know, in international, December is in the Q1 of 2025, so in December, we continued to execute our contract in the UK and in Europe. And in a competitive setup like in Japan, we maintain very strong leadership there until the end of the vaccination. Now as we move into Q2 and Q3, we will start actually shipping our vaccine into a thousand hemisphere countries where vaccination campaigns are going to start and in particular in Brazil where we won the two-year contract for adults, which is a very important vaccination country.

Hi, guys. Thank you so much for taking my question. And I didn't wanna touch on the reasons for the Daniel discontinuation, but I more want to look forward. You think about a potential obesity asset. What are some key aspects of the profile that you're looking for either from an internal perspective or potentially externally? Thank you so much.

Thanks very much. Thanks for the question. Yes. As Albert has stated, dane dauphin was the right decision for Pfizer Inc. based on the totality of data. And as we stated previously, a single asymptomatic participant in a dose optimization study with rapid dose titration experienced a potential drug-induced liver injury which recovered rapidly after treatment discontinuation. Although we're not 100% sure this is due to dolutelopron, the risk was high enough for us to discontinue the program while still being committed to obesity and employing our global resources for other opportunities. Cardiovascular metabolic is one of our core strategies within internal medicine, an area with significant remaining unmet need. And just a reminder, for obesity alone, up to 60% of patients discontinue current approved medicines after 24 months...

Yeah. I mean, I think Chris gave you a faithful answer. I would just underline that although you referenced obesity, the role of incretins and potentially other modalities or targets more broadly needs not to be underestimated. And obviously, this extends beyond cardiovascular medicine, and we're interested in all the potential opportunities that exist with these molecules. In terms of which assets or which portfolio of assets we're seeking to build, I think there's two axes. Number one, obviously, clinical differentiation, and Albert referenced some of the ways you can do that in terms of scheduling, tolerability, muscle preservation, but there are others too. But then separately, there's commercial differentiation, which really references the indications that we pursue. So I hope that gives you some idea of our direction of travel. And when we have something to say, you'll be the first to know.

Thank you. I have a question on tariffs. I figured if anyone's close to this, it's probably Pfizer Inc., Albert, seeing as you're chairman of pharma. If sector-specific tariffs come through, do you think that's likely to be through the 232 investigation route? But do you think it could still happen somehow through the IEPA route? I mean, it seems like it would be 232, but not everyone agrees. And your best sense of timing for when everyone might have more information from the administration. And then last question, is it an absolute pipe dream to think that sector-specific tariffs might really only be applied to countries that could, in fact, pose threats of national security like China? It's hard to see Ireland being an enemy of the country.

Thank you, Tim, and I would agree with the last comment that you made also. But let me tell you where we stand with tariffs. First of all, we had on April second executive order about basically placed tariffs across the board to everything we can see or feel or dream. Except two things, pharmaceuticals and semiconductors. So clearly, there is risk going forward, but it's a very, very different ball game if you are part of the tariffs and you hope to be excluded, than if you are not part and you try not to be included. Then on April fourteenth, the administration made even more clear what is their concern with the pharmaceutical sector investigation. And they made it clear by launching it through a 232. Which as you pointed out, it is an investigation, but it's connected with national security threats...

Thank you. And two questions. The first one is very similar to the one that Tim just asked, and that is Albert, given your unique insights into the thinking in Washington, do you think MFN legislation is only the most remote of possibilities or even simply not going to happen? And then secondly, what is the percent utilization of the US plants? It is you know, it's great to have this vast network. In the US, but if there's little or no excess capacity or flexibility, then it's a more limited advantage. Thank you.

No. Thank you. Thank you very much for both questions. Look, on the MSN, first of all, I can't speak about what the intentions of the government might be, but I can comment on what I have seen so far. And the president issued an executive order that was focusing on pharmaceuticals. That was very, very extensive. So covered a lot of topics over there. MFN was not mentioned over there. On the contrary, what was mentioned over there was the pill penalty. That he instructed so that we will find ways to resolve. What was mentioned over there was PBM reform. And transferring both rebates to the base. What was mentioned over there was 340B...

Hi, guys. Thanks for taking my question. I have two here, if I may. First, is on dividend, and second is a follow-up to something Albert mentioned. Perhaps first, on dividend, I know there's obviously LOEs coming up over the next three to four years with net income and free cash flow pressures. How much of that pressure could be offset by potential OpEx cuts that you're taking underway? I guess said differently, can you hold net income at or near current levels? That's part one of the question. And then also, if a tariff impact approaching, I don't know, 15 to 20% of the bottom line kicks in, can you still confirm your commitment to the dividend? And finally, Albert, you mentioned the distinction between friendly versus unfriendly countries. But in the initial tariff announcement, that didn't necessarily seem to hold true. So why should that apply in the case of pharma? Thank you very much.

Yeah. So, clearly in my prepared remarks and what we said very consistently is our objective is to improve our operating margin performance over time, and we've said that knowing quite well that we have LOEs approaching. Some of the improvements in productivity that we are making are designed to improve our operating margin in the face of those LOEs. At the same time, our business is actually evolving such that, particularly in the oncology space, where we're leaning into that business and those products actually yield a very high gross margin and operating margin performance. So the short answer is yes. We can withstand that. And secondly, we're very focused on improving our operating margin over time in the face of those LOEs...

Alright. Great. Thanks so much. Just a my first question on guidance. Pfizer Inc.'s gross margins for this year, are we should we still think about full-year gross margins in the mid-seventies range or has that changed at all following some of the upside with 1Q? And maybe just on a second part of that, I'm just interested in the level of conservatism that's baked into the guidance here. It seems like the year is off to a very strong start, particularly on the cost side. And just as we think about the progression the rest of the year, should we think about any offsets from the upside we saw this quarter? Thank you.

Yeah. Thanks, Chris. Dave here. Clearly, we're very confident in our outlook for 2025. As you noted, we finished Q1 in a position of strength both from a top-line and a bottom-line perspective. As I look at our operating plan, we've exceeded both top-line and bottom-line in Q1 based on our expectations internally. So we're off to a very solid start. Secondly, as I look forward, we're in Q1. We have three quarters left to go. I look at us maintaining our guidance range by giving you some color that our top of it, we're essentially derisking the balance of the year from a financial delivery perspective.

Thank you. So you don't have any conservatism in your guidance?

No.

Hey, guys. Good morning. Thanks for the question. Two quick ones. Albert or Andrew, just from a strategy perspective, what would you say ranks as a higher priority just with respect to how you tier, you know, what would be multiple BD options, you know, is it the TAM? Is it sales through LOE? Is it peak sales after? Wasn't sure how much that's evolved in the current macro backdrop.

Yes. On the start, maybe I make some comments and then I ask also Andrew. It is very clear that we are facing everybody knows LOEs. Those LOEs are starting in 2026, 2027, 2028, 2026, a smaller number, 2027 is a bigger number. 2028 is the biggest number... So to prepare for that, we had a significant number of new launches that they are growing, and we did significant business development. But it is growing because they were all early assets what we bought...

So just on I think Albert gave you a very, very clear answer. In answer, you know, just picking up on the explicit question that you asked, I think it's all of the above. TAM, LOE, as well as, obviously, is value. I think the other thing I would also add that perhaps you didn't mention is I'm very keen that we build sustainable franchises...

Hi, everyone. Thanks for taking the time for question today. A couple that we had, one clarification on tariffs and apologies if we missed it. But this was just kind of if you can provide any comments on inventory and kind of work that you're doing already to bring inventory into the US? And then the second question is just on the pipeline.

So thank you for the question. Just to a reminder, we've got a number of products that we're currently excited about that will read out later this year. For instance, Pat Sips, muscle invasive, triple I mean, if that's positive, it would triple the population. Our Rexville, Albert mentioned double class exposed, will double the population. So salsandumab, obviously, readout just now. Potentially up to 38,000 patients eligible in the US. And then a number of phase three programs, we're accelerating all that already started all start later this year.

And in general, our intention is to provide as much visibility on our data as possible without undermining publications, of course. So I think the flashes are making a very good job right now, and we can intensify also. How we do that so that we have smaller bytes of information.