Pfizer (PFE) Q2 2021 Earnings Call Transcript

Sylvia: (00:01)
Good day, everyone. And welcome to Pfizer’s second quarter 2021 earnings conference call. Today’s call is being recorded. At this time, I would like to turn the call over to Mr. Chris Steve-O senior vice president and chief investment relations officer. Please go ahead, sir.

Chris Steve-O: (00:21)
Thank you Sylvia. Good morning. It’s my pleasure to be welcoming you to Pfizer’s second quarter earnings call for the first time as the head of investor relations at Pfizer. I’m joined today by Dr. Albert Bourla, our chairman and CEO. Frank D’Amelio, our CFO. Mikael Dolsten, president of worldwide research and development and medical. Angela Huang, group president Pfizer bio-pharmaceuticals group. John Young, our chief business officer and Doug Linkler general counsel. We’ll begin the call with remarks by Albert followed by a pipeline update from Michael and Frank will then give you his thoughts on the numbers and our updated [inaudible 00:01:01] before we open up the call for Q and A. Finally, Albert will come back for concluding comments. We expect this call to last 90 minutes.

Chris Steve-O: (01:10)
The materials for this call, as well as all the other earnings related materials have been posted to the investor relations section of pfizer.com. As you can see on slide three, we will be making forward-looking statements during the call regarding amongst other topics, our anticipated future operating and financial performance, business plans and prospects and expectations for our product pipeline and marketed products, which are subject to risks and uncertainties, as well as the use of non-gap financial information. Additional information regarding forward looking statements and our non-gap financial measures is available in our earnings release, including under the disclosure notice section and under risk factors in our STC forms, 10K and 10Q. Forward looking statements on the call speak only [crosstalk 00:01:59] original date, and we undertake no obligation to update or revise any of the statements. With that, I will turn over the call to Dr. Bourla. Albert, please go ahead.

Albert: (02:11)
Thank you, Chris. And I think there was a problem with your line at the last seconds if you can have a look on that. Welcome to your first Pfizer earnings call as our new chief investor relations officer. Hello everyone. I’m proud to say that Pfizer delivered an outstanding second quarter and most notably, we deliver extremely strong financial results, even excluding direct sales and alliance revenue provided by our COVID-19 vaccine. We’ve generated 10% operational revenue growth compared to the prior year quarter. And I would note that the year ago quarter was also very strong, delivering 6% operational growth for the comparable business. At the same time, we continue to accelerate the production and delivery of the Pfizer BioNTech COVID-19 vaccine. And in collaboration with BioNTech, they’ve now shipped more than 1 billion doses since last December. This is truly remarkable, especially when you consider that prior to the pandemic, Pfizer produced approximately 200 million doses annually across our entire vaccines portfolio.

Albert: (03:24)
Let me start with the commentary on some of our biggest growth drivers in the quarter. The Pfizer BioNTech COVID-19 vaccine contributed 7.8 billion in global revenues during the second quarter. And we continue to sign agreements with governments around the world. Just last week, we announced that the US government has purchased an additional $200 million doses of the vaccine, bringing the total number of doses to be supplied to the US government under its existing supply agreement to 500 million. This is in addition to the 500 million doses that we agreed to provide to the US government at non-for-profit price, to be donated to the poorest countries in the world. We anticipate that the significant amount of the remaining 2021 vaccine manufacturing capacity will be delivered to middle and low income countries where we price in line with income levels or at a non-for-profit price. In fact, we are on track to deliver on our commitment to provide this year more than $1 billion doses or approximately 40% of our total production to middle and low income countries.

Albert: (04:36)
And another 1 billion in 2022. Vyndaquel and the Vyndamax revenues were up 77% operationally to 501 million globally. Our disease educational efforts in the US continue to support the increases in appropriate diagnosis, while the main driver of growth in Japan has been the successful establishment of several referral networks in select areas resulting in new patient spots. We anticipate these efforts will continue to support a strong trajectory for the franchise. Eliquis continued its strong performance with revenues up 13% operationally to $1.5 billion. This was led by growth in the US and emerging markets driven primarily by strength of the clinical profile, ease of use for both patients and clinicians, continued increased adoption in nonvalvular atrial fibrillation and overall oral anticoagulant market set gains. Prevnar 13 in the US was up 34% of growth to 642 million. This growth was due primarily to higher levels of healthcare activity and wellness visits compared with the year quarter, which was heavily impacted by COVID-19 related mobility restrictions and limitations. Growth in the pediatric indication was also due to year over year government purchasing patterns.

Albert: (06:11)
And was partially offset by lower year over year birth rates. Growth in the adult indication was partially offset by the continued impact of the lower remaining eligible and un-vaccinated population. During the quarter, the US food and drug administration approved Prevnar 20 for adults ages 18 and over for the prevention of both invasive disease and pneumonia caused by the 20 pneumococcal serotypes in the vaccine. I would note that a 15 valent vaccine also recently received FDA approval in adults, however that approval did not include the pneumonia indication. We believe the only way to add that indication to the 15 valent vaccine in the US will be to conduct a post license or efficacy effectiveness trial, which we believe means that for the foreseeable future, Prevnar 20 likely will be the only vaccine with an indication against vaccine type pneumonia or the 20 serotypes.

Albert: (07:18)
For Ibrance. We continue to be pleased by the double digit growth in international markets and that encouraged by science of recovery in several key markets. In the US Ibrance continues to be the leading CDK4/6 inhibitor, with 83% total patient surge and 73% surge of first line of a static new patient spots. While total prescription volume was stable in the second quarter, paid demand for Ibrance was down due to increased enrollment in our patient assistant program, which we referenced last quarter. This resulted in a second quarter revenue decline in the US of 7% compared with a year ago quarter. Inyta’s global revenues were up 29% operationally, to 257 million. Primarily reflecting increased adoption in the US and developed Europe of combinations of several immune checkpoint inhibitors and [inly 00:08:21]. Xtandi in the US was up 14% to 303 million driven by strong demand across all approved indications.

Albert: (08:29)
Our global biosimilars revenue grew 88% operationally to 559 million, driven by several recent oncology biosimilar launches. As you can see biosimilars could become a meaningful part of our business while delivering lower cost patient care options that can help reduce overall healthcare spending [inaudible 00:08:50]. Now let me share two brief updates from our JAK inhibitor portfolio. We continue to remain confident in the importance of the JAK inhibitor class for appropriate patients with inflammatory diseases given the role of JAK pathways in inflammatory processes. In addition, we have taken a targeted approach to developing selective JAK inhibitors based upon our extensive knowledge of JAK biology, coupled with our medical chemistry capabilities that suggest the best targets for a specific indication. We believe this approach may optimize the benefit risk profile. Of course, patient safety is of utmost importance and we continue to monitor all compounds in our portfolio to identify signals both in development, as well as after regulatory approval.

Albert: (09:43)
Global Xeljanz revenue were down 9% operationally in the quarter to 286 million, driven primarily by a 15% decline in the US. While prescription volume increased 2%. This revenue decline reflects an unfavorable change in channel mix toward lower price channels and continued investments to improve formulary positioning and unlock access to additional patients lives. Also a negative impact on new patient starts resulting from an ongoing review by the FDA of safety data from a post marketing oral surveillance study of Xeljanz in subjects with rheumatoid arthritis who are 50 years of age or older and had at least one additional cardiovascular risk factor. International developed markets achieved 11% operational growth in the same quarter. The FDA recently notified Pfizer that it would not meet the prescription drug user fee act that the due for goal date for the supplemental new drug application for Xeljanz, Xeljanz XR for the treatment of adults with active ankylosing spondylitis. No revised due for goal date has been set for this supplementary NDA.

Albert: (11:09)
The FDA also recently notified Pfizer that it would not meet the due for goal date for the new drug application or a proceeding for the treatment of adults and adolescents with moderate to severe atopic dermatitis. The FDA sited it’s ongoing review for Pfizer’s post marketing safety study, oral surveillance, evaluating Tofacitinib in patients with rheumatoid arthritis as a factor in the expense. No revised due for goal has been set for this NDA. Now we’re going to touch on the [bider 00:11:48] administration’s recent executive order on promoting competition. While I believe there may be better alternatives that some of its policies put forward in the executive order, we can agree that fostering competition and lowering costs for patients should be the focus of any regulatory or legislative action. We continue to support more affordable options for patients like biosimilars, improving the Medicare program to come out of pocket costs and also lower cost setting for seniors and making insurance work by requiring that patients share in prebate savings at the pharmacy counter. We believe these meaningful solutions would have an immediate impact for patients without sacrificing future innovation.

Albert: (12:40)
Overall, I believe the second quarter was a clear and powerful demonstration of the capabilities of the new Pfizer. Looking forward we intend to build upon these successes by continuing to follow the science, trusting our people and remain focused on delivering breakthroughs for the patients we serve. As such we continue to expect a revenue CAGR of at least 6% on a risk adjusted basis, through the end of 2025 and double digit growth on the bottom line. I would know that these projections do not include any potential impact from our COVID-19 vaccine, the recent or subsequent business development activities or potential future MRNA programs. We remain very confident in our ability to achieve these growth right because of the strength of both our current product portfolio and our R and D pipeline. At the same time, we will continue to pursue business development opportunities with the potential to further enhance our long-term growth prospect.

Albert: (13:45)
Just last week, we announced a global collaboration with Arvinas to develop and commercialize the ARV 471, an investigational oral product, estrogen receptor protein degrader. The estrogen receptor is the well-known disease driver in most breast cancers. And we are excited to work with Arvinas on the first potential product for breast cancer, which with it’s encouraging early clinical data has the potential to become a novel hormonal therapy backbone for HR positive breast cancer. Now I will turn it over to Mike, speak more about our R and D efforts. And then of course, France will provide financial details on the quarter and our [inaudible 00:14:35] for the remainder of 2021. Michael.

Michael: (14:40)
Thank you, Albert. I’m delighted to share some highlights from Pisces OD pipeline, which continues to be one of our greatest strengths. Today, I would share updates on eight select programs in which we are pursuing first-in-class breakthrough science and which have estimated approvals before 2030 and the potential to have profound impact on millions of patients. Last week, we announced a global collaboration with Arvinas to develop and commercialize ARV-471, potentially the first PROTAC or PROteolysis TArgeting Chimera, estrogen receptor protein degrader. 471 represents breakthrough drug design technology. PROTAC protein degraders efficiently eliminate rather than inhibit disease causing proteins. To our knowledge 471, which was designed to be an oral high potency estrogen receptor degrader with a favorable safety profile is the only ER, targeting PROTAC degrader in clinical development and has a distinct mechanism action from the many search in development.

Michael: (15:53)
In the future. Novel acids like 471 have the potential to be the new endocrine therapy backbone, either alone or in combination with CDK inhibitors such as Ibrance, other targeted therapies and or therapies with novel mechanism action. Early clinical data show 471 has the potential to be an endocrine therapy of choice across treatment settings in breast cancer. 471 is being evaluated as a treatment for metastatic breast cancer in a phase one dose escalation study, a phase one B combination study with Ibrance, and a phase two monotherapy dose expansion study. Starting in 2022, we expect to initiate phase three studies across lines of therapy in metastatic breast cancer, including in combination with Ibrance followed by pivotal studies in the early breast cancer setting. Let me share some of the preclinical data that has us excited. The short on the left shows 471 demonstrated impressive anti tumor activity in combination with Ibrance palbociclib in preclinical studies. In the phase one interim analysis with 21 patients, 471 demonstrated a compelling efficacy signal in heavily pretreated patients.

Michael: (17:20)
The majority with prior galveston treatments and all with prior CDK4/6 in addition treatment. The images on the right, show one patient on 471 monotherapy who had a confirmed partial response of the four cycles with a 51% reduction in target lesion sites, as indicated by the arrows. Two patients had unconfirmed partial responses and one patient demonstrated stable disease with more than 50% target lesion shrinkage. Five paired tumor biopsies demonstrated ER degradation up to 90% with an average of 62%. The next program is Robo2, details of which we have not shared previously. No disease-specific treatment are currently available for focal segmental glomerulosclerosis or FSGS for short. We have developed in collaboration with Boston university and Boston medical center, a potentially novel and first in class disease modifying biological therapy, comprising a Slit2 ligand antibody Fc trap that lowers activation of the Robo2 receptor for treating FSGS as well as adjacent renal glomerulopathy’s. Preliminary result for an interim analysis of our ongoing case to a study in adult patients with steroid resistance FSGS, demonstrated promising data with a statistically significant and clinical and meaningful reduction in urine protein to Creatinine ratio or UPCR.

Michael: (19:06)
We are advancing the program to potentially demonstrate proof of concept in 22 and preparing for pivotal study. This shot chose to change in UPCR a marker of renal function from baseline in steroid treatment resistant patients in the phase 2 study. There was a fable reduction proteinuria at 13 weeks based on data from approximately half of the first dose cohort of the study. Please note, after stopping the treatment as per study protocol, the UPCR deteriorated indicating the need for continuous therapy. Treatment every two weeks was well tolerated with no significant safety signals to date. Next, let’s turn to our gene therapy programs in hemophilia a and B and Duchenne muscular dystrophy. Pfizer continues to advance the broadest late stage gene therapy portfolio of potentially transformational treatment.

Michael: (20:15)
We expect phase three interim analysis for all three programs in 22. In our phase one 2 hemophilia A study, we have seen durable expression of practor A through 78 weeks with an annual bleed rate in the first 52 weeks of zero. In our phase one 2 hemophilia B study, we have seen sustained expression of Denine activity into year four of the phase one 2 long-term follow-up study with an annual bleed rate of less than one. In our phase one B Duchenne muscular dystrophy study, statistically significant expression of mini dystrophy and a 3.5 point increase in the north star ambulatory assessment score have been observed. Now we’ve turned to our Lyme disease vaccine, the only active Lyme vaccine candidate in clinical development today being co-developed with the Valneva. The ongoing phase two study, which completed recruitment of adults and pediatric participants last week, will evaluate the optimal vaccination schedule to using phase three.

Michael: (21:29)
We expect potential proof of concept in January 22 and the phase three study in the first half of 22. These shot, shows that more than 90% of subjects, CRO converted to all six serotypes with a Swede dose vaccination schedule at zero, two and six months in the phase two B study demonstrating a favorable immune response. Our respiratory [inaudible 00:21:58] virus vaccine is the most advanced by valence protein-based vaccine with the phase two data published, showing high neutralization typist against both OC a and B subtypes, which has not been demonstrated in clinical development by a Moana valence pre future asset team. We have been advancing this asset for both adults through direct vaccination and infants through maternal immunization. Today, I will focus on adults. In 2020, we initiated a phase two A study to evaluate the safety, immunogenicity and efficacy of the recombinant RSV profusion vaccine in a virus challenge model in healthy adults, 18 to 50 years of age, I will show a date on the next slide, which we plan to submit for peer reviewed publication soon. Results from our phase two Shalon study of 62 subjects showed the vaccine was a hundred percent effective against mild to moderate symptomatic infection.

Michael: (23:05)
And most participants in the study experienced minimal to no side effects. That’s the performance benchmark, the 80 26 RSB pre-F vaccine showed 52% observed efficacy in the same human challenge model. In this slide, we show very stable, protective changes of the vaccine on viral load, left side and in reducing drastically RSV disease severity right side. Based on these overwhelmingly positive data, we will accelerate the development of our RSV vaccine in adults. We plan to initiate a global phase three trial in the third quarter and hope to conclude the study swiftly in part due to the recent spike in RSV infections reported by CDC. The swift delivery of the world’s first imuni-

Michael: (24:03)
The swift delivery of the world’s first MNA-based vaccine made a scientific opportunity of mRNA technology clear. Our strategy to advance and unlock the full potential of mRNA is focused in three core areas. We’re strengthening the core COVID-19 vaccine franchise, growing an infectious disease vaccine pipeline, and exploring therapeutic areas like rare disease in oncology with the strongest potential. Let’s start with the mRNA flu vaccine, which we began working on with BioNTech in 2018. Having a flu vaccine with much better efficacy, better T-cell and innate immune responses, and more timely manufacture soon after strains unknown could dramatically change trajectory of disease. We are projected to start first in human trials for a modified RNA or mod RNA flu vaccine in the third quarter, subject to regulatory approval. Pre-clinical studies were performed with a first-generation modified mRNA test [surveillance 00:25:09] flu vaccine.

Michael: (25:10)
And the data were compared to data from a marketed flu add vaccine. Immunoicity might, for a first-generation mod RNA flu candidate across the 2018, ’19 Northern hemisphere strain were higher or as high as the trivalent adjuvanted subunit vaccine. We are encouraged by these data, and look forward to progressing these program. We now turn to our COVID-19 vaccine program in collaboration with BioNTech. the Delta variant, which is the most transmissible we have yet seen, is expanding rapidly worldwide. And now represent approximately 83% of sequence cases in the US. We continue to believe it is likely that the [inaudible 00:25:58] booster may be needed within six to 12 months after full vaccination to maintain the highest level of protection. And studies are underway to evaluate the safety and [immunoicity 00:26:10] of a third dose. We are in ongoing discussion with regulatory agencies regarding a potential third dose booster current vaccine, and assume positive results, anticipate an emergency use authorization submission, SLS orders.

Michael: (26:29)
Pending regulatory approval, we also plan to start an immunoicity safety study in August to evaluate an updated version of our vaccine, specifically designed to target the Delta variant. Here we show initial data from a small number of patients receiving a third dose of existing vaccine. We observed a significant boost in utilizing antibodies following a third dose of the current vaccine for both wild type and the beta variant. At eight months post those two, antibody levels start to decline from earlier peak. In our initial analysis, a third dose given more than six months after the second dose, elicited neutralizing antibodies which are more than five times higher than the wild type, and more than 10 times higher against the beta variant, than of the two primary doses. The third dose elevate the neutralizing antibodies in our laboratory studies up to 100 times higher levels post to three compared to pre dose three.

Michael: (27:39)
Just as we saw in the analysis of neutralizing antibodies from those in the original phase three trials, the levels in the older population were comparable to the younger population. Here we show new breaking data from a small number of participants, that the third dose boost with a current vaccine elicited neutralizing titers. That when tested against the Delta variant where more than five fold post those two in younger people, and more than 11 fold post those two in older people. Receiving a third dose more than six months after vaccination, when protection may be beginning to wane, was estimated to potentially boost the neutralizing antibody titers in participants in this study to up to 100 times higher post those three, compared to pre those three. These preliminary data are very encouraging as Delta continues to spread.

Michael: (28:39)
Finally, let’s turn to our potentially first in class COVID-19 antiviral protease inhibitor. If successful, our protease inhibitor has the potential to provide patients effected with COVID-19 with a new oral therapy that could be prescribed for a five day treatment course at the first sign of infection before patients are hospitalized or in critical care. For patients who are in close contact with someone who contracts COVID-19, we will start the both five and 10 day post exposure prophylaxis courses. The goal is to reduce SARS-CoV-2 viral load, thereby hopefully decreasing or preventing symptoms of COVID-19, and minimizing the risk of hospitalization. In July, we initiated a phase two, three [inaudible 00:29:34] to evaluate efficacy, safety, and tolerability of the orally administrated protease inhibitors in participants with COVID-19. If successful, we project the potential US emergency use authorization submission in the fourth quarter. Our protease inhibitor exceeded potent selective in vitro antiviral activity against SARS-CoV-2 and other Corona viruses, and potentially all currently known COVID-19 variants.

Michael: (30:09)
It also has demonstrated a robust preclinical antiviral effect on SARS and in SARS-CoV-2 infected animals enabled by selectivity that is more than 100 times higher for coronavirus [inaudible 00:30:25] cases than human [inaudible 00:30:27] cases. The shot on the left shows robust dose dependent reductions in disease microscopical scores in mice. In phase one human studies today, we have seen desirable drug exposure, good tolerability, and no safety findings up to a dose of 500 milligrams twice a day over 10 days in healthy volunteers. The shot on the right of the phase one pharmacokinetic study shows high drug exposure over the entire treatment period, exceeding greater than five times the exposure predicted to inhibit SARS-CoV-2 viral replication. This concludes our review of eight selected breakthrough programs among many more to come this decade. Now let me turn it over to Frank.

Frank: (31:22)
Thanks, Michael. I know you’ve seen our release, so let me provide a few highlights regarding the financials. The COVID-19 vaccine, again, had a dramatic, positive impact on our quarterly results. And Albert has already addressed the key points on the COVID-19 landscape. Looking at the income statement, revenue and adjusted cost of sales was significantly impacted by COVID-19 vaccine sales and the associated 50% gross profit split with BioNTech, which we recognize on the cost of sales line. Revenue increased 86% operationally in the second quarter of 2021, driven by COVID-19 vaccine sales and solid performance from a number of our other key growth drivers. And looking at the revenue growth, excluding the COVID-19 vaccine contribution from direct sales and Alliance revenues, I want to reiterate what Albert said in that we saw a continuation of solid performance from the business again this quarter. Delivering 10% operational growth, despite a negative 4% impact from price.

Frank: (32:23)
This nicely supports our projected revenue CAGR of at least 6% through the end of 2025. Of course, there will be some variability in quarterly growth rates due to a variety of factors, but we continue to expect at least 6% through 2025. There was no impact from the number of selling days in the quarter as compared to the year ago period, like we saw on our first quarter where we had more selling days compared to the year ago period. I’d remind you that the offset to this imbalance will be seen in the fourth quarter results where we have fewer selling days as compared to the year ago quarter. To the full year this results in essentially the same number of selling days in 2021 as 2020. The adjusted cost of sales increase shown here reduced this quarter’s gross margin by 19 percentage points, compared to the second quarter of 2020, which primarily reflects the impact of the COVID-19 vaccine gross profit split and applicable royalty expenses in addition to much smaller impacts from foreign exchange product mix.

Frank: (33:22)
Adjusted SIA expenses increased only to a more normalized level of promotional and sales force activity along with some impact from foreign exchange. The increase in adjusted R&D expense this quarter was driven by increased investments in the COVID-19 vaccine and antiviral programs, as well as other programs within our pipeline. Given the tax effect of increased COVID-19 vaccine revenue, our tax rate… Which will impact our guidance, which I will speak to in a minute. Reported diluted EPS for the quarter was up 58% compared to the year ago quarter, while adjusted diluted EPS grew 73% for the quarter. Foreign exchange movements resulted in a 6% benefit to revenue, as well as a 6% benefit, or three cents, to adjusted diluted EPS. Now let’s move to our revised 2021 guidance.

Frank: (34:17)
We’ve again provided total company guidance, which includes the business with the COVID-19 vaccine. And then we’ve provided some additional sub-ledger detail on our assumptions regarding the projected COVID-19 vaccine contribution, so you can also see our projection for the business without the COVID-19 vaccine. Our revenue projection has increased, and we now expect it to be in a range of 78 to 80 billion, with the COVID-19 vaccine’s revenue for the year being projected to be approximately 33.5 billion based on contracts signed through mid-July. I note that this projection does not include the doses, [inaudible 00:34:54] our contract with the US government announced last week. For adjusted cost of sales, the range has increased it to between 39 to 40%, which incorporates the incremental anticipated COVID-19 vaccine revenue, which has a significantly higher cost of sales due to the gross profit split with BioNTech as compared to the rest of the business.

Frank: (35:15)
The projected COVID-19 vaccine revenue as a percentage of total company revenue at the mid points has increased to 42% as compared to 36% and our previous 2021 guidance. On adjusted SI&A we have made a small increase to the projection, now expect 11.5 to 12.5 billion. In addition, we increased our adjusted R&D guidance range to 10 to 10.5 billion to incorporate anticipated spending on incremental COVID-19 related programs and other mRNA-based projects that are not part of the BioNTech collaboration. Given the tax effect of increased COVID-19 vaccine revenues, we are increasing our projected tax rate for the full year to approximately 16%. This yields an increased adjustability EPS range of $3.95 to $4.05, or 77% growth at the mid point compared to 2020, including an expected 4% benefit from foreign exchange.

Frank: (36:14)
Let me quickly remind you of some assumptions and context onto projected COVID-19 vaccine contribution and our collaboration agreement. As discussed earlier, the Pfizer BioNTech COVID-19 vaccine collaboration construct is a 50/50 gross profit split. Pfizer books the vast majority of the global collaboration revenue, except for Germany and Turkey, where we receive a profit share from BioNTech. And we do not participate in the China region. We now expect that we can manufacture up to three billion doses in 2021, subject to continuous process improvements, expansion of current facilities, and any new suppliers and contract manufacturers.

Frank: (36:53)
As of mid-July, we have contracted for approximately 2.1 billion vaccine doses for delivery in 2021, which drove our projection of approximately 33.5 billion in revenue for the year. Our cost of sales for the COVID-19 vaccine revenue continues to include manufacturing and distribution cost, applicable royalty expense, as well as a payment to BioNTech representing the 50% gross profit split. We continue to expect that the adjusted income before tax margin to the COVID-19 vaccine contribution to be in the high 20s as a percentage of revenue. This margin level also includes the anticipated spending on additional mRNA programs. Let me add that if we contract with delivery of additional doses during the year, we will provide a guidance update in our subsequent earning releases.

Frank: (37:42)
If we remove the projected COVID-19 vaccine contribution from both periods, you will see that we slightly increased the 2021 revenue range to 45 to 47 billion, representing approximately 7% operational revenue growth at the midpoint. In terms of adjusted diluted EPS, without the contribution from the COVID-19 vaccine we have increased the range to be between 255 and 265 for the year, which represents approximately 11% operational growth at the midpoint. These growth rates are all consistent with how we’ve been publicly positioning the business post the Upjohn separation. And going forward, we will continue to maintain a prudent stance toward our capital allocation activities with the opportunities for deployment shown here on this slide. In summary, a strong quarter and first half of the year, and we have increased our revenue in EPS guidance for the remainder of the year. In addition, we’ve had pipeline advances and just completed a very promising business development agreement with Arvinas. I’ll now turn it over to Chris to start the Q&A session.

Chris: (38:50)
Thank you, Frank. Operator, if we could have the first question, please.

Operator: (38:56)
Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. Your first question comes from the line of Kerry Holford from Berenberg.

Kerry Holford: (39:09)
Thank you. A few questions on the COVID vaccine, please. [inaudible 00:39:12] me a point of clarification. Can I just check the upgraded 2021 sales guidance in the vaccine reflects only the doses you expect to deliver this year and not for those contracted to delivery in 2022? As you stand today, could you talk directionally about how you see 2022 COVID vaccine sales relative to this new figure for 2021? Do the more recent dose orders you’ve secured require delivery of the new updated version of the vaccine you referenced that covers the Delta variant? And then finally, can we assume the price per dose in the most recent order from the US government is equivalent to prior US orders? And how does that pricing compare in the XUS contracts that you’ve more recently signed? Thank you.

Albert: (40:07)
Thank you very much, Kerry. Maybe I can give you an answer to that. As Frank said, in his remarks in 2021, we provided guidance for approximately $2.1 billion. These are confirmed orders, contacts signed. I would have said repeatedly we’re to expect to have three billion doses manufacturing this year. And we are of course discussing about those doses, and most of them are in very advanced discussions. I believe that we will eventually allocate those doses. Now keep in mine that in the second half, as we said, the very big number of doses will go to middle income countries where the price is very, very different. Almost half. And to low income countries and low middle level countries where we provide the doses on a non-for-profit basis. So you need to take that into consideration. The second thing that you need to take into consideration it is that our financial calendar is not the exact like the political calendar. Which means that December sales will not be going to 2021 if it is international.

Albert: (41:31)
Is going to go to 2022, this is how our finance, our calendar works. Only the US sales of December will be accounted in this year. And will be significant number of doses that will be allocated in December as part of the $3 billion. COVID 2022 looks like it’s very early to speak. We have multiple countries that they have already accomplished agreements for 2022 and 2023. Like Europe, for example, Israel. Canada actually, they go all the way to 2024. US just bought an additional 200 million doses. And virtually every country in the world right now is discussing with us for additional doses. Our total expected capacity for 2022, it is four billion doses. And I believe given the needs that likely will be allocated to the entire world. Then you ask a question about the Delta variant, and maybe I will ask Michael to provide a view on that.

Michael: (42:47)
Thank you, Albert. As he noted in the presentation, all data right now point to that the current vaccine is highly effective against Delta variant. There may be waning over time, as often is seen with a vaccine. And that’s why we shared today, that if you do give a third dose boost of the current vaccine, you seem to regain very high utilizing antibody against Delta. We are also producing a Delta variant unspecific vaccine, mainly to make sure we cover all options of the future. But we remain highly competent in that the current vaccine, when used appropriately, will be effective against Delta. And we are in dialogue with regulatory agencies about these potential of a third dose of a vaccine pending epidemiology of the vaccinated over time. Thank you.

Albert: (43:55)
Thank you very much, Michael. And Kerry, also on the price per dose, we do not discuss prices with each individual country. But those are given our overall policy, which says that the high-income countries, they have compatible prices, but they vary only based on… We give discounts to this price based on the volume [inaudible 00:44:17] committed. Middle income countries, they have approximately half of that price. And for the lower middle and low income countries, we are providing our vaccines at a non-for-profit basis. Thank you.

Chris: (44:34)
Thank you, Albert. Next [crosstalk 00:44:36] question, please, operator. Oh, sorry.

Operator: (44:39)
[crosstalk 00:44:39] Your next question comes from Matthew Harrison from Morgan Stanley.

Matthew Harrison: (44:48)
Great, good morning. Thanks for taking the questions. A few, if I may. First, on the regulatory outlook for the JAK. Do you have any idea on how long the FDA may continue to review the file, or when we might expect to see some response on next steps there? And then second, on the mRNA flu vaccine. Can you comment on the potential regulatory picture there? Do you think you may be able to get that approved just based on titers, or do you think you’ll have to actually run a head-to-head study versus the existing flu vaccines? Thanks very much.

Albert: (45:25)
Michael, I think you could take those two questions. And then if Angela wants to add something on the [inaudible 00:45:29].

Michael: (45:28)
Yeah, thank you. Well, as you know, FDA and other agencies are reviewing both existing and new JAKs. In FDA, we are waiting for them to conclude final assessment of the Xeljanz study. And during that period they have passed PDUFA timeline for both us and other that developed new JAK. We’re certain to hope as the workload from COVID may attenuate, that agency will have soon been able to review all available data. And as we do consider that JAKs have a really meaningful and important role in management of RA, hopefully used in the right patients. And also the new indications what are fewer alternatives such as atopic dermatitis, alopecia, vitiligo, and so on. So we cannot give any firm timelines, but we certainly hope it will be relatively soon.

Michael: (46:43)
For the mRNA flu vaccines, we plan to start our first in human studies shortly based on some of the encouraging data we showed from preclinical studies. We will both run immunogenicity study as well as head-to-head study. Given the high potency of the mRNA, we are optimistic and we believe there is a good opportunity that one can create a premier vaccine with superior efficacy versus existing flu vaccine. That’s why we think not only to demonstrate high titers, but also demonstrate superior efficacy would be very valuable. And we are gearing up using all our experience to run trial [phase 00:47:38] to look at the time schedule for both immunoicity and head-to-head event trial.

Albert: (47:51)
Angela, do you have anything to add?

Angela: (47:55)
I think Michael covered all the key points. Just to reassure everyone that we are in constant communication with the FDA.

Angela: (48:02)
… that we are in constant communication with the FDA. And they’re just doing their risk benefit analysis, like as they would with any and all molecules. And so we’re very confident that there is a role that our jabs do play and we are waiting eagerly for the response from the FDA. So thank you.

Chris: (48:26)
Operator go ahead with the next question, please.

Silvia: (48:28)
Your next question comes from Daniel Busby from RBC Capital.

Daniel Busby: (48:34)
Thanks for the questions. I’ve got two. First, on the COVID-19 vaccine. I think it’s fair to say that Pfizer has been a bit more outspoken about the likely need for recurring booster doses then the CDC and FDA, at least at this point in time. Can you provide any additional color about why that’s the case?

Daniel Busby: (48:53)
Is this simply a matter of letting the data catch up to what you view as a likely eventuality, or is it a function of Pfizer and regulatory agencies interpreting the data that we have today perhaps differently?

Daniel Busby: (49:06)
And second, with respect to PREVNAR 20, can you talk a little bit about your expectations for October’s ACIP meeting and what you would characterize as a good outcome for the adult use available?

Albert: (49:20)
Maybe I can give you the answer to the COVID and then Angela can take the PREVNAR 20. I don’t think that there is different interpretation of data between us and the regulatory authorities around the world. Actually, there is extremely good collaboration and the same interpretation.

Albert: (49:38)
I think what we have said is not new. For months I’m saying that we believe based on the data we’re seeing, holistic [inaudible 00:49:47] data, we will need a booster 8 to 12 months from the second dose. And we’ve seen that with the Delta, that might be needed a little bit earlier, particularly for some parts of the population.

Albert: (50:02)
But we haven’t submitted anything yet, So I don’t think the FDA or CDC can speak because they have very different authority when they speak. And it’s extremely… They have very different courses of action. So we will submit those data by Aug 16.

Albert: (50:18)
They are aware of them and the FDA needs to review them and then provide, or not, their approval. And then once it is approved, the second dose booster, then CDC needs to understand the situation in the country [inaudible 00:50:39] and they will have to make a recommendation about the booster.

Albert: (50:43)
So the same happens in different countries, and depends on what percentage of the population have been vaccinated earlier in the year or later in the year. They may have very different sense of urgency. Here, the accounting is that a big percentage of their population in the January-February timeframe, they have very different urgency. Because the clock is ticking. And with that I will go to Angela about the PREVNAR 20 and ACIP.

Angela: (51:18)
Yep. Thanks Albert. You heard Albert talk about the very differentiated label that we do have with PREVNAR 20 in his opening comments. And, just to reinforce that the 20 serotypes and the broad coverage that provides, but also the fact that our label contains indication for both IPD as well as pneumonia, is really unique. And I think that this pneumonia indication is the true strength of the PREVNAR family. Being that we’re the only company that had the 80,000 CAPiTA trial where this pneumonia indication was based.

Angela: (52:01)
And so with this, what we anticipate coming up in October are policy questions that will be addressed for both PCV20, as well as the Merck 15. And we have an early read into this already because at the last ACIP meeting, different policy questions were posed for both products.

Angela: (52:21)
For PREVNAR 20, there’s a question around vaccinations of 65+ plus as well 50+, in addition to the 18 to 49 or 18 to 59 immunocompromised. For Merck 15, the age range and the policy question posed there with was for 65+. So when you look at what’s different, only PREVNAR 20 was being looked at for the 50+. So we’ll have to see how all this ends up and we’re looking forward to having a robust discussion at the October ACIP. But I think that the setup of these policy questions give us a good view into what the discussions will look like and what the outcomes might be. So thanks for the question.

Chris: (53:16)
Thank you, Angela. Next question please, operator?

Silvia: (53:19)
Your next question comes from Chris Shaw from JP Morgan.

Chris Shaw: (53:23)
Great. Thanks so much for the questions. Just coming back to the COVID 19 booster. Would you envision this as an annual booster or would these levels of antibody titers, would you envision that third dose could give more sustained protection against COVID, just think about how the market evolves over time?

Chris Shaw: (53:43)
And then my second question was just coming back to the JAKs, Just two more detailed questions. First, any change in thinking, as we think about abrocitinib, the 100 milligram versus the 100 and 200 milligram approvals, I don’t think there’s anything you’ve learned with regulatory interactions, etc. that’s changed your view there.

Chris Shaw: (54:01)
And then maybe second question on the jabs, is just with, with XELJANZ, what would an EMEA like label revision mean for XELJANZ as we think about the US commercial opportunity? Thanks so much.

Albert: (54:15)
Yes. Michael, I think that you can take the booster, in terms of is there a third dose and done you think, or is going to be an annual revaccinations? And then Angela, we moved to you for JAKs and XELJANZ.

Michael: (54:30)
Thank you. Well, Albert spoke earlier to the importance of both following vaccine efficacy in different regions of the world and any new strain. Right now, we have a surge in the Delta strain. It’s the most infectious strain we’ve ever seen, and it puts pressure on vaccinated individuals.

Michael: (54:54)
The data we showed today indicate at six to eight months, we can boost up to 100 fold the antibody titer after the dose compared to pre dose. At the same time we hear reports from various parts of the world, real world evidence, that they do see some breakthrough cases of the Delta variant in vaccinated.

Michael: (55:18)
So these type of data is a typical package we will put together, in this case for August submission as Albert alluded to, for a third dose. We will continue to monitor and generate data on the impact of a third dose, which we do have ongoing in our Phase 3, and possibly soon also in real world evidence.

Michael: (55:44)
We expect the third dose to be potent and somewhat may be more long lasting than the second, but we also recognize that the virus constantly evolves and you will start to note this about Delta+ variants.

Michael: (56:01)
Hence, while I cannot predict with certainty the future, I would not be surprised if similar to flu that we would need with intervals to boost our vaccine against COVID. Whether this will be on an annual or based on simple diagnostic that allow us to re-boost at the right time before your risk for impacting aside, we’d need to monitor.

Michael: (56:32)
But all in all we believe that, similar to a flu business, it may be likely for the COVID business. But we are gathering data to validate and we’ll constantly work with key opinion leaders and regulators in interpreting the data.

Albert: (56:59)
Angela?

Angela: (57:02)
Great. I’ll start with Abro. The conversations and the discussions that we’re having with the FDA as it pertains to Abro have been consistent. And at this point, as we’ve discussed earlier, we’re just waiting to hear from them as to their points of view.

Angela: (57:25)
But both doses are still in discussion. And, I think ultimately where you might be going with your question is sort of what happens if we only get one or the other? And I just wanted to reinforce that we are very confident in the potential of Abro whether it’s for both doses or for one. And the reason is that we come back to just the size of the market.

Angela: (57:51)
We’ve discussed this before, but there is a very, very large market with a huge unmet need. There’s 60 patients, 12 and up with atopic dermatitis. Only 4 million of those are being treated today with any systemic therapy. And because this is such a heterogeneous disease, patients really need different options.

Angela: (58:12)
So, we’re really looking forward to hearing back from the FDA. But we believe that the risk benefit profile of Abrocitinib is going to have a role in the treatment of atopic dermatitis patients. And it will be a welcomed addition and an additional option that patients really need.

Angela: (58:33)
And then coming back to XELJANZ, you had a question around our EU label. So actually the changes to the EU label were posted in June, although we’re still waiting for the final SMPC. And there, the label is really looking at a cautionary note for those who are 65+ who are smokers or have malignancy risk. And the caution there is for physicians to consider alternative therapies prior to using XELJANZ.

Angela: (59:07)
And so I think this is pretty consistent with how XELJANZ is being used today. If you look at where the utilization is, more than half of our business is in third line treatment, which is after the utilization of other treatments like biologics. So again, I think we’ll wait to see how this plays out, but the fact that it is being recommended for third line is very consistent with how it’s being used today. [crosstalk 00:59:39]

Chris: (59:40)
Silvia, next question please?

Silvia: (59:42)
Your next question comes from Ronny Gal from Bernstein.

Ronny Gal: (59:47)
Good morning, and thank you for taking my questions. The first one will also be on the boosters. I fully understand this point around the third dose increasing antibody titer significantly. The counterpoint that has been raised is that the third dose is not needed because while antibodies wane, immunity against severe disease is not, or at least is not so far waning over time. Can you discuss a little bit how you see the waning of immunity in the large public and the elderly as you’re seeing it for your vaccine, even if antibody does comes down?

Ronny Gal: (01:00:28)
And the second question is around by a similar business, this is something you highlighted. We’re not really seeing a lot in the pipeline, the clinically available pipeline, for your biosimilar business beyond the Humira biosimilars. Can you discuss your plans for that business? Is this still an emphasis for Pfizer, or are you be de-emphasizing that?

Albert: (01:00:48)
Thank you. Michael again, I think I will ask you to make comments on if we see waning of immunity also in the severe disease or in hospitalizations. And we have seen data about that. Michael?

Michael: (01:01:06)
Yeah. Thank you, Albert. It’s very good question. So first, we do see in more of the six to eight months more rapid waning concerning infections and mild to moderate symptoms. Those are likely entirely or to a large degree dependent on antibodies. And to drop in titer, that you alluded to, if you raise it you may have a good probability to reverse that waning.

Michael: (01:01:39)
Fortunately, the protection against severe disease, hospitalization and papal outcomes remains pretty high. But we do see some lowering, particularly in real world evidence studies from Israel, we see some lowering in that protection in risk groups such as older adults, immunocompromised.

Michael: (01:02:08)
That’s likely because, in addition to antibodies, T-cells help out in keeping up strong defense against severe disease, which is later in the infection process. And particularly when antibodies have waned. But the slow, but still noticeable gradual decline in protection also against severe disease is something that’s on our eyes and certainly we believe that by boosting you may strengthen antibodies and T-cells.

Michael: (01:02:49)
And you have an early warning signals whether to do that with some modest waning in hospitalization, given it’s a risk of severe outcome, or wait in your interpretation of that. All in all, I think a third dose would strongly improve protection against infection, mild-moderate disease, and reduce the spread of the virus, but also give you some extra muscle and reverse the slower decline against severe disease. So this is how we’re looking at it from multiple angles in order to describe the full opportunity with boost.

Albert: (01:03:38)
Thank you Michael. Angela?

Angela: (01:03:43)
Thanks for the question on the bio-sims. And certainly we’ve been so pleased with the tremendous growth that we’ve seen in this area and the deep utilization of our bio-sims. I will say that for our biosimilar portfolio and where we see it today, since we’ve made this pivot to a pure place as innovation focused in our pipeline, we are really now looking at that biosimilar portfolio, vis a vis, the other investments in breakthrough therapies that we have to make.

Angela: (01:04:18)
So of course we will continue to look for opportunities, but I would say at this point, it’s going to be more opportunistic. And that we’re really looking at our investments in our development program to be competitive, and to make sure that we have the ability to focus on breakthrough therapies. So I’d say that going forward, it will be more opportunistic because we’re just weighing and trading off so many incredible programs on the innovative side that we could also be doing.

Albert: (01:04:50)
Thank you, Angela. And also you need to take into consideration that we have right now so much substrate in our R&D pipeline and so much opportunity to invest. But right now we are clearly focusing on first-in-class in particularly best-in-class, first-in-class, and there are so many. So that’s why our R&D budget is increasing. So thank you very much. Back to you Chris.

Chris: (01:05:18)
Thank you, Albert. Operator, next question, please?

Silvia: (01:05:18)
Your next question comes from Geoff Meacham from Bank of America.

Geoff Meacham: (01:05:26)
Good morning, guys. Thanks for the question. Just have two. For Michael, on COVID boosters. When you look at the new cases of the Delta variant, the protection varies quite a bit in vaccinate individuals really depending on geographies around the world. So are there common themes that you’ve identified that could explain this? And what can you say about the T-cell dynamics from vaccine over time?

Geoff Meacham: (01:05:51)
And then second question for Albert or for Frank, you’ve just given the guidance hike from the COVID vaccine. Does this change Pfizer’s urgency or size of your capital allocation decisions? I would think that this would give you maybe more deal capacity to get over the LOE period at the end of the decade? Thank you.

Albert: (01:06:11)
Thank you very much. Let me start with [inaudible 01:06:17] the second one. We always have [inaudible 01:06:20] and this extra [inaudible 01:06:23] flows do not change neither our strategic direction, nor material or our ability to perform this year. [inaudible 01:06:30] It will give us better flexibility. And we plan to allocate capital to develop the business with a very big central [inaudible 01:06:40].

Albert: (01:06:42)
Now on the COVID boosters and your question about why you see differences around the geography, in fact actually as Michael will explain in a moment, the data from all geographies are consistent if you take into consideration the time element. But Michael, please take it.

Michael: (01:07:03)
Yeah, you said it very well, Albert. We first get the glimpse from real world evidence in Israel, giving their very rapid, massive vaccination they did over basically January to March. And January started with older adults and those most vulnerable. They are now six to eight months and they have a large number of them, so that’s why they see the vaccine waning. And that’s why they also communicate about our consideration for a third dose.

Michael: (01:07:37)
Other countries that started later and amping up their roll-out slower will and are starting to see similar trends representing what Israel saw in June. And we are getting those reports, which tells us we are increasingly certain that what we have learned from Israel is likely to be a similar direction in many other places. Of course, we need to get all of that data in order to be fully clear about this, but the trends look similar.

Michael: (01:08:16)
Finally, there is also an element that some countries, particularly UK, extended the interval between dose one and two to a longer interval. Likely, they will get a bit more long lasting protection and their data may come a few months later.

Michael: (01:08:38)
Their disadvantage of extending the range between dose one and two is that you expose after dose one many individuals to a high risk of reinfection, but you do gain likely a somewhat extended protection.

Michael: (01:08:54)
So, these are two examples. When you started to vaccinate, the time difference between doses one and two, and finally there may be of course some difference in care of these type of diseases in different countries. But all in all, we expect it to look somewhat similar in its direction.

Albert: (01:09:20)
And just to clarify, when Michael says extended because the spread, the first between the second, is not that they will get more after the second. Because, their real protection starts later from the second dose. And then this is the case that most of the data, and in the UK for example, are one to three months.

Albert: (01:09:41)
And most of the data in Israel where we see it is in three to six months in most of the cases happening there. And we have also visibility to other data, including some data about our home here in the US.

Albert: (01:09:53)
But the trend is the same, it’s going in the same direction. But you have very good protection in the beginning. Then there is a waning when you come closer to six months, which is even more profound with Delta. And the waning, is more profound for mild cases, but there is a clear waning for hospitalizations and severe diseases. What used to be 100% in the first months, now it’s coming to the low 90s and the in cases will be 80s.

Albert: (01:10:25)
So, that’s the difference between the different geographies. With the time element, you will see very actually impressive consistence. Okay, Chris, back to you.

Chris: (01:10:40)
Thank you, Albert. Sylvia, next question, please?

Silvia: (01:10:43)
Your next question comes from Andrew Baum from Citi.

Frank: (01:10:48)
Many thanks. Firstly, in relation to PREVNAR 20, could you talk to how you expect ACIP to address the current recommendation for PNEUMOVAX. Has that dropped given the serotypes, which you are not addressing with PREVNAR 20?

Frank: (01:11:05)
Second, you commented on the number of the other vaccines. You didn’t comment on your [inaudible 01:11:11] candidates where the primary endpoint is rapidly approaching. Could you just comment on your relative degree of optimism or not, for that vaccine?

Frank: (01:11:21)
And then finally, in relation to the patient assistant program for IBRANCE, just looking at the script trends for Verzenio versus IBRANCE, there’s clearly a disconnect there. It could be due to their patient assistance programs, but it would be helpful to know the magnitude of which the PAP contributes and how that has changed over the last six months or so? Many thanks.

Albert: (01:11:46)
Thank you. Michael, do you want to take first this question you didn’t speak about… I think it was [inaudible 01:11:53] you were referring to?

Michael: (01:11:56)
Yeah.

Albert: (01:11:58)
[inaudible 01:11:58] why you did that?

Michael: (01:11:58)
Well, we had such a rich pipeline-

Michael: (01:12:02)
Well, we had such a rich pipeline and we thought that we wanted to allow you to have question, too, and not speak too much ourselves. So we selected eight assets where we thought… We wanted you to hear some updates. [inaudible 01:12:18], we continue with the trial, we passed one review that had 30 cases and we’re coming now to case numbers that are more sizeable that you would expect to be able to relatively soon have an opportunity to determine if vaccine efficacy is robust and you will be able to have a readout. We are expecting this fall to have another readout in the trial pending events, but certainly I continue to believe it’s a very well-designed vaccine. There is precedent with antibodies if you neutralize those toxins. So I continue to say be patient, we continue to mature the study and I do hope it will have an encouraging readout, but like in any clinical study, you can never be fully sucked in about the outcome, but I remain very encouraged and optimistic myself.

Albert: (01:13:32)
So thank you, Michael and Andrew, and just to clarify, no, it’s not that there was something behind it. It is that we had to select a few options that we could present new data. Angela, please take the question about the Pneumovax. If what do you think ACIP will do and the program of Ibrance, the [inaudible 01:13:53].

Angela: (01:13:54)
Sure. Well, the question of Pneumovax is something that we can refer to in the ACIP discussion that was had recently. Again, it comes back to the policy questions that were posed and clearly there, just to reinforce what I said earlier, which was that there were different policy questions posed for both PCV 20, as well as MERV-15. The question of whether 50 plus would be vaccinated with post only for PCV 20 and specifically, your question about Pneumovax, that is being evaluated only with MERV-15, not with PCV 20 or with any PCV. So again, different policy questions and very specific to each pneumococcal vaccine. And then going to your question about the pap usage, we are seeing this clearly as a trend that is very much aligned with the economic hardships that we’re seeing as a result of COVID and the pandemic. The Ibrance patient is a younger population and so, and because they’re on commercial insurance, their economic status is very much then aligned to employment.

Angela: (01:15:15)
And what we’ve seen throughout the pandemic are two things. One is they slowed down in new patient start, which actually is one of the reasons for the negative growth that you saw in Ibrance in the US and the second and more prominent one this quarter is the pap. So I think what you’re seeing is very consistent with what we’re seeing in the environment, generally, as it pertains to economic hardships and so that is definitely one explanation and then the other explanation would be a slowdown in the new patients starts that we’ve been seeing as well.

Albert: (01:15:54)
Thank you, Angela.

Speaker 1: (01:15:54)
Sylvia, next question, please.

Sylvia: (01:15:59)
Your next question comes from Carter Gould from Barclays.

Carter Gould: (01:16:03)
Good morning, thanks for taking all the questions and I appreciate all the color on the pipeline from Michael. A couple from us. First, you gave us a pretty comprehensive set of updates, but in terms of expectations on timing from the pediatric study, I don’t believe I saw that referenced and just wanted to confirm that the recent asks from FDA haven’t pushed timelines back there. And then as we think about the oral proteasome inhibitor, clearly you’ve moved very fast there. Can you comment just around your ability to supply the market in bulk, sort of out the out of the gates, assuming the timelines are tracking kind of how your messaging. And then apologies if you guys addressed this already, but it seems like one of the things you guys do control is on the JAK side is the potential presentation of the JAK ORAL Surveillance data. Any color on when we might see that presented at a medical meeting? Thank you.

Albert: (01:16:54)
Yes. Let me take quickly the first two and then for the JAK, Michael, maybe you can answer. The pediatric study, we are, as you said or Andrew have said, we are projecting into September contract or immediately after [inaudible 01:17:12] would be due, but FDA has asked some requirements and we are looking at them, but our intention is to try to even if we do this, regardless to try to come at the same time frame. So we are not changing right now our expectations as to when the study can recruit, we just, if we need to do more in less time, we will try to accommodate that, so that’s the first one. On the ORAL supply, on the ORAL and the supply, as you know, this is not a compound that we have seen clinical efficacy data yet. So the risk is clearly higher than anything else, but of course the disease is moving.

Albert: (01:17:56)
So I have authorized our team to invest in manufacturing, at least significant quantities of the ORAL so that If we are successful, we will have quantities for the world as much as possible. That’s a significant investment that we are doing. At least it could go all the way to a billion, including some of the research work with this company. So, but I think it is the right thing to do and I gave them the green light. They should not be thinking about cost right now. They should be thinking about the success of the ORAL program. And then for the JAK, Michael, do you know when the study will be published or the result?

Michael: (01:18:48)
We have focused to share all the data of the study obtained this fall with regulators. And as you know, conclusions have already been posted about the data from both European, the Prague committee and US. So while there isn’t a date yet when the study will be published, regulators have had access to it and have made updates. So I think the most critical element is for the US, European regulators to finalize things and like Angela spoke too, that will give clarity to the class of JAK and to XELJANZ and which patients, which treatment lines that benefit most. And as you know, in addition to the study, we have years, 10 years of surveillance and we continue to share all of that data as the study was mainly in a subset of patients with increased age and cardiovascular risks. Well, of course, our surveillance carries all XELJANZ patients and we have continued to share those robust data.

Albert: (01:20:12)
Thank you.

Chris: (01:20:15)
Thank you, Albert. Operator, next question, please.

Sylvia: (01:20:19)
Your next question, Geoffrey Porges from SVB Leerink.

Geoffrey Porges: (01:20:26)
Thank you very much for taking the question. Michael, one for you. You mentioned the Delta plus variant, which of course has picked up the K417N mutation. How concerned are you about Delta plus? And then is there the possibility that of course it’ll pick up E484CO and then be even more resistant to vaccine in the Jewish community and relative to that, do you have a view yet as to whether the best booster strategy is the original Wuhan strain, the Beta strain, the Delta strain, Delta plus strain? and then lastly, have you contemplated heterologous boosting with your vaccine after, for example, the [inaudible 01:21:11] vaccine or vice versa? Is that something you’re studying?

Albert: (01:21:15)
Michael?

Michael: (01:21:17)
Yeah. Starting with Delta plus. So right now, Delta is a very fit virus and continue to infect and dominate. It’s too early to know where the end of the current Delta plus will have transmission sufficiently to out-compete Delta. So when we say plus, it means you just continue to monitor into the future at some time point, whether six to 12 months, they’re all likely going to be strains that pick up additional mutation, but stay also fit. Meanwhile, what we have seen with a wild type vaccine is that we see for each dose, not just a higher magnitude of antibodies, but breadth. The repertoire of different cells producing antibodies, grows and grows, so you seem to cover with increasing dose, more variant. If you go back and look at the slides, we use the Beta variant as an example, there was somewhat of a difference of the dose two harder to neutralize the Beta variant.

Michael: (01:22:31)
After does three, easier to neutralize the Beta variant. So why we this far find the wild type who is very useful for existing and new variants. Now, as Albert has said before, we always want to be prepared for the unexpected and we continue to prepare Delta and Delta plus strains, but right now we do think that the wild type vaccine is going to be very efficient, but we always want to be ahead of the curve. I think the way to win this game is to keep up high immunity, reduce the amount of virus and that’s why we do both.

Michael: (01:23:19)
We will study boost with existing and are prepared, if ever needed, to have an updated if the virus can be fit and breakthrough immunity. Finally, and on the [inaudible 01:23:31] boost, there are trials coming out perform, for example, in UK, that showed favorable outcome for those that vaccinated with AstraZeneca on getting an mRNA boost, such as with the Pfizer BioNTech, which they use. Those are data that you should review and I’m sure patients and physician will draw their own conclusion. I know there is in US a similar study to benefit from that mRNA vaccines can be given repeatedly, while adenovirus delivered vaccine has limitation for repeat use.

Albert: (01:24:12)
Thank you, Michael. And again, I want to emphasize that our strategy, when it comes to it, we take no chances here. This is too serious to risk. So when we have a very visible concern, always we make immediately at least a vaccine to try. The first time we had that with Beta. That seemed very aggressive. So we start doing the vaccine and we have a vaccine right now. We are going to submit it to the FDA. Eventually, we don’t need it. It was clear because after we did that, we got data for the initiative, but also we got the South Africans study, the 100% efficacy in the better or smaller numbers, but 100% Africa. So we know we don’t need it, but we try. The same we do now with Delta.

Albert: (01:24:59)
It looks like we will not need it with everything that we see so far, but we are developing one in the back stage. So in case something goes wrong because biology is sometimes unpredictable, we will not have to wait three months because this is our time right now from the day we assign a variant as a variant of concern in our own interpretation, we take 95 days to be able to have a vaccine. So that’s why we always tried to be ahead of the curve. That’s too serious of an issue to take risks. Back to you, Chris.

Chris: (01:25:37)
Thank you, Albert. Sylvia, next question, please.

Sylvia: (01:25:41)
Your next question comes from Louise Chin from Cantore.

Louise Chin: (01:25:46)
Hi, thanks for taking my questions. So first question I have for you is do you think a full BLA approval would actually increase vaccination rates and do you think you might see that as early as this year? And then secondly, how receptive do you think US regulators are to a booster shot? We see a lot of conflicting headlines, so just curious what your discussions have sounded like there. And then lastly, your RSV vaccine, you showed 100% efficacy rate, so just curious if you could elaborate more on that market opportunity for you and how big that market is in terms of sales and other metrics. Thank you.

Albert: (01:26:19)
Yes. On the vaccination rates, Louise, from what I see and what we see, a little bit different polls from people that they are reluctant, it seems like this will play a role. Some people will change their reluctancy to willingness to get vaccinated if the vaccine gets full approval. And in terms of the timelines, again, I leave it to FDA. I know that they consider [inaudible 01:26:46] a priority. The second one, how receptive regulators are on a third dose. I think regulators are receptive or not to data and they need to see the full packets of data. Once they see data, to speak, so I don’t want to make comments about that. And RSV, which is clearly a very, very large opportunity, but it’s growing even more because of the… We see that the epidemiology of the disease is getting more and more hot. I will ask Michael to give us some color here.

Michael: (01:27:27)
Yeah. We are very excited about the data and opportunity for an RSV adult vaccine. There are a hundred thousands of cases and per year in the US and they are particular of course, difficult for in older adults, above 60 or adults that have underlying conditions, whether chronic lung diseases or immune compromise. Now, there are actually up to 15,000 deaths just in the US annually, so it’s not just about a difficult disease or fatal outcome. So we think there is a very large opportunity. Now, with our vaccine to the best of our knowledge, it’s the only vaccine in late clinical trials that targets RSV A and B subgroups. Please recall that the A and B subgroups variants are likely of similar quantities circulating. Some years, one is larger than the other, some years they are equal. So we cover all of the available RSV protection by valence vaccine, if shown successful in the final studies.

Michael: (01:28:48)
Also, I wanted to make it clear that when you look at the data in our [inaudible 01:28:56] study of the very prominent 100% protection, there are benchmarks published and please have a look, from the adenovirus that is also now in advanced clinical trials, which showed in the very same model pursued by the very same UK Institute, half of the response, around 50%. So we think we have a potent vaccine, we have a well tolerated and the unique aspect of covering both strains. You have some cross-reactivity between the strains, but not as [crosstalk 01:29:30] protection, unless you have both parts for the A and B strain. Angela, anything you want to shed light on how you commercially see this?

Angela: (01:29:40)
Yeah. No, thanks, Michael. And maybe just to reinforce what Michael said, which is that there are hundreds of thousands of older adults that are hospitalized and tens of thousands of deaths each year. In fact, this is the second leading cause of a respiratory illness following flu. So we think that we have a great opportunity to in fact, develop this market because it is quite underdiagnosed today and under-reported, and frankly, it’s really in the sweet spot of what we do with adult vaccinations and also seasonal vaccinations, which go well with our Previnar franchise. So all in all a tremendous and exciting commercial opportunity,

Albert: (01:30:23)
Thank you to both. As you can see, there’s lots of excitement to both Angela and Michael and I said the same both for the size of the unmet medical need right now, but also for the capabilities of what looks like a very effective vaccine remains to be proven with a phase three study, but we are going to execute with the same speed as we are doing lately, our vaccine starts. Back to you Chris.

Chris: (01:30:54)
Thank you, Albert. Sylvia. We’re just over time, but maybe we could do one very brief question, please.

Sylvia: (01:31:01)
Your next question comes from the line of Karen Flynn from Goldman Sachs.

Karen Flynn: (01:31:05)
Hi, thanks for taking the question. Maybe, I just had a two-parter. First, just wondering if you can provide the latest point estimate on your vaccine efficacy from the phase three trial. I think you gave us that number back in April, it was around 91%, and just wondering if there have been any severe cases in the vaccinated cohort. And then on Previnar 20, how are you thinking about that in the context of your longterm guidance? Can that actually grow your Prevnar franchise significantly and any more detail you can provide there? Thank you so much.

Albert: (01:31:37)
Michael, it was I think 92%. Can you comment on the latest estimate and if you have seen any breakthroughs?

Michael: (01:31:43)
Yeah. This is the phase three trial that will be very soon published on medRxiv and it will appear in a top peer reviewed journal. Please check in on medRxiv to get details. It may be up any day this week. It’s covered up to six months. First two months, 96% protection, then above 90s between month two and four, and then about 83 to 84% months four to six. We have retained during that period, very high protection against severe disease and hospitalization.

Albert: (01:32:28)
Thank you, Angela and Michael, and excuse me, Angela, about the Prevnar, you think you can grow it? I’m asking you to do it, but what do you think?

Angela: (01:32:38)
Well, I think, again, it comes back to the policy questions that have been posed already by the ACIP, which will be discussed in October. As we’ve said today, there are really two questions being posed that are different to what we have with Prevnar 13 today, which is number one, should we or should we not be vaccinating those that are 50 plus? And then secondly, those that are immunocompromised, 18 to 49 or 18 to 59, both of those populations are different to what we have with 13. So we are engaging and we will be engaging at the ACIP of course, discussing our data with the relevant decision makers and stakeholders and sharing our information and we hope to have a positive outcome at the end of ACIP, but honestly, this is all to be discussed and I think a little too early to speculate what could happen, but we need to have a robust scientific discussion to really understand what these opportunities are.

Albert: (01:33:45)
Okay, Angela, we will give you some time to grow it. So with that, I think we’ve come to the end. Thank you for joining us today, for your continued engagement with Pfizer, who we really appreciate and we learn a lot from this engagement. Our experience with the COVID-19 vaccines that taught us a great deal about what is possible and what is impossible and most things are possible. So most notably, it has taught us that we can drive step changes with Pfizer [inaudible 01:34:14] incremental change, right? To keep you updated on the progress we are making in R&D, we will host our next focused investor update later this year, that date will be announced soon. For this event that Pfizer vaccines team will provide an update on our vaccine pipeline progress, including our plans to continue advancing our cutting edge science in such areas as in mRNA programs for COVID-19 and flu, as well as the RSV research program for both maternal and adult indications and other mRNA vaccines that we are working on.

Albert: (01:34:47)
Before we close, I want to once again thank Tak [inaudible 01:34:51] for his many contributions to Pfizer and for successfully elevating our investor relations function with best-in-class. Tak, you are growth pro and on behalf of all Pfizer colleagues, I wish you and your family all the best in the next chapter of your life. Tak is leaving behind some big shoes to fill, which is why we are thrilled that Chris Stivo has decided to join the Pfizer team. Chris joins us from the Alexion pharmaceuticals in Boston, where he was vice president and head of investor relations. He brings a wealth of experience as a buy- side analyst and portfolio manager, as well as a strong network of relationships across the investment community. His deep knowledge of the health care industry will be a great asset as we continue to advance our innovative pipeline to deliver breakthrough therapies and vaccines to patients and long-term value to shareholders. With that, I will our call to a close. Thank you for joining us. Have a great rest of your day.