Pfizer Q4 2023 Earnings Report

Pfizer EPS Results

• Actual EPS: $0.10
• Consensus EPS: -$0.19
• Beat/Miss: Beat by +$0.29
• One Year Ago EPS: $1.14

Pfizer Revenue Results

• Actual Revenue: $14.25 billion
• Expected Revenue: $14.37 billion
• Beat/Miss: Missed by -$120.22 million
• YoY Revenue Growth: -41.30%

Pfizer Announcement Details

• Quarter: Q4 2023
• Date: 1/30/2024
• Time: Before Market Opens
• Conference Call Date: Tuesday, January 30, 2024
• Conference Call Time: 10:00AM ET

Pfizer (NYSE:PFE) (NYSE:PFE) is a global biopharmaceutical company that discovers, develops, manufactures and commercializes prescription medicines and vaccines. Its research and commercial activities focus on areas including oncology, inflammation and immunology, internal medicine, hospital care and vaccines.

The company’s portfolio includes widely used products such as the Prevnar family of pneumococcal vaccines, Ibrance for certain breast cancers, Eliquis for preventing blood clots, Xeljanz for inflammatory conditions, and Vyndaqel for transthyretin amyloidosis. Pfizer also developed Comirnaty, an mRNA COVID-19 vaccine, in partnership with BioNTech, and Paxlovid, an oral antiviral treatment for COVID-19.

Pfizer was founded in 1849 by Charles Pfizer and Charles Erhart in Brooklyn, New York. The company has expanded through internal research, licensing agreements and acquisitions, and serves patients and healthcare providers in markets around the world. Its operations include research and development, manufacturing and commercial activities across North America, Europe, emerging markets and other international regions.

Albert Bourla has served as Pfizer’s chief executive officer since 2019 and as chairman since 2020. The company continues to invest in its pipeline of medicines and vaccines, with research programs spanning oncology, rare diseases, infectious diseases and other areas of significant unmet medical need.

Pfizer Q4 2023 Earnings Call Transcript

Key Takeaways

• 2024 Guidance: Pfizer expects revenues of $58.5–$61.5 billion with 8–10% operational growth ex-COVID and adjusted EPS of $2.05–$2.25.
• Strategic priorities: Pfizer is focusing on five key pillars in 2024: achieving world-class oncology leadership, advancing pipeline innovation, maximizing new product performance, expanding margins, and allocating capital to enhance shareholder value.
• Oncology expansion: The Seagen acquisition doubles Pfizer’s oncology resources, with Padcev in bladder cancer and Xtandi in nmCSPC launches and a goal of ~$10 billion in oncology sales by 2030.
• Cost realignment: Pfizer aims to deliver $4 billion in net savings by end-2024 through margin improvement and right-sizing the cost base.
• 2023 financials: Full-year revenues were $58.5 billion (7% operational growth) but down 41% year-over-year as COVID product sales slid, leading to adjusted EPS of $1.84, down 72%.

Presentation

[Operator]

Good day, everyone, and welcome to Pfizer's fourth quarter 2023 earnings conference call. Today's call is being recorded. At this time, I would like to turn the call over to Francesca DeMartino, Chief Investor Relations Officer and Senior Vice President. Please go ahead, ma'am.

[Francesca DeMartino, SVP and Chief Investor Relations Officer at Pfizer]

Good morning, and welcome to Pfizer's earnings call. I'm Francesca DeMartino, Chief Investor Relations Officer. On behalf of the Pfizer 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 fourth quarter and full year 2023 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. Joining for the Q&A session, we also have Dr. Chris Boshoff, EVP and Chief Oncology Officer, Alexandre de Germay, EVP and Chief International Commercial Officer, Dr. Mikael Dolsten, Chief Scientific Officer and President of R&D, Doug Lankler, EVP and General Counsel, and Aamir Malik, EVP and Chief US Commercial Officer.

[Francesca DeMartino, SVP and Chief Investor Relations Officer at Pfizer]

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 these statements. With that, I will turn the call over to Albert.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you, Francesca. Good morning, everyone, and thank you for joining us. I'm pleased to discuss some of the highlights from the fourth quarter and full year 2023, and of course, the compelling year we had ahead. I would like to begin with a few reflections on 2023. As you know, we missed our initial internal projections and street expectations, predominantly related to our COVID products, which affected our stock price performance. Despite, however, this challenging year, there were a few great things that happened in 2023 that may have gotten lost amidst the missed expectations. First, in 2023, Pfizer impacted the lives of more than 162 million people, approximately, around the world. We believe there is no other company that can reach as many people as patients as Pfizer.

[Albert Bourla, Chairman and CEO at Pfizer]

If you multiply this with our brand equity and awareness, it creates a connection with consumers that can be a very strong asset for us. Second, despite the decline in revenue from our COVID products, as of the reported results of the first 9 months of 2023, we were the number one pharmaceutical company in terms of revenues from pharma-only products, a marked improvement from our fourth position in 2019. Next, 2023 was a record year for FDA approvals, with 9 new molecular entity approvals from Pfizer and many more approvals for new indications in already approved products, marking a very productive year of pipeline execution for Pfizer. Finally, we closed the Seagen acquisition. In the current regulatory environment, being able to close such a large acquisition demonstrates our ability to successfully engage with regulatory bodies.

[Albert Bourla, Chairman and CEO at Pfizer]

Our deliberate and strategic efforts throughout 2023 created a strong foundation to support us. We are now focused on maximizing the opportunities that have positioned us for success, and our team is driving confidently as we start 2024. From the advent of penicillin to the development of the COVID-19 vaccine, Pfizer has been at the forefront of medical and pharmaceutical breakthroughs for the past 175 years. This year is our 175th anniversary, that have not only changed patients' lives, but have changed history. Our strategy to continue to build on our proud history of innovation and commercial excellence is supported by the power and strength of our unmatched global scale and footprint, spanning commercial, financial, medical, regulatory, manufacturing, and government relations. We have a clear view on how we will deliver operational, commercial, and financial success across our business.

[Albert Bourla, Chairman and CEO at Pfizer]

Our confidence stems from the opportunity we have to bring additional focus to our business by executing five strategic priorities. We will get into each in more detail, but the five key priorities for Pfizer this year are, first of all, to achieve a world-class oncology leadership, to deliver the next wave of pipeline innovation, to maximize the performance of our new products, expand margins by realigning our cost base, allocate capital to enhance shareholder value. I'm confident that Pfizer will is well positioned to execute, and that we can deliver meaningful value for our patients and our shareholders. Let's start with our first priority, which is to achieve a world-class oncology leadership, which I believe we are in a strong position to do. As a reminder, one in three people will be diagnosed with cancer in their lifetime.

[Albert Bourla, Chairman and CEO at Pfizer]

Oncology represents one of the largest and fastest growing therapeutic areas. Completing the acquisition of Seagen doubled our oncology research and resources overnight and meaningfully expanded the reach and medical impact of our U.S. commercial and medical footprint, with a range of portfolio expansion opportunities boosted by Seagen's broad and deep pipeline. Seagen's in-line medicines are expected to immediately enhance Pfizer's top line growth, and our combined portfolio provides the opportunity to lead genitourinary cancers and be a leader in breast cancer, and deliver at least eight potential blockbuster products by 2023. We look forward to providing more information about our oncology platform at our Pfizer Oncology Innovation Day on February 29. As we build our leadership position, we have multiple potential key oncology catalysts in 2024, that we are acutely focused on.

[Albert Bourla, Chairman and CEO at Pfizer]

On the commercial side, the PADCEV launch in locally advanced metastatic bladder cancer in combination with pembrolizumab and XTANDI launch in non-metastatic castration-sensitive prostate cancer. We are excited by the strength of our PADCEV EV-302 data and recent FDA approval, as it represents an opportunity to broaden the reach of this potentially practice-changing platinum-free regimen to even more patients in the frontline metastatic urothelial cancer setting. Essentially, the recent approval doubles the addressable population, which had already doubled this patient stream. We are also looking forward to Phase III data readouts from vepdegestrant in second-line, HR-positive metastatic breast cancer and Braftovi in first-line BRAF colorectal cancer. We also plan to advance our late-stage pipeline with Phase III start of CDK4 in post CDK4/6 metastatic breast cancer and B6A in non-small cell lung cancer.

[Albert Bourla, Chairman and CEO at Pfizer]

Building on Pfizer's potential medicines, the pipeline across breast cancer, genitourinary cancer, hematology, and CRC, our CDK4 inhibitor could be a compelling follow-on to Ibrance. And finally, in the early-stage pipeline, we look forward to initiating first-in-human studies of four new ADC candidates this year, where we believe we have acquired the expertise to be a leader. Our second priority is to deliver the next wave of pipeline innovation with discovery and development across our therapeutic areas outside of oncology, in vaccines, anti-infectives, internal medicine, metabolic diseases, and inflammation immunology. In 2024, we plan to continue to make meaningful investments in R&D. In fact, Pfizer's R&D budget is one of the highest in the industry and supports our robust pipeline. We are pursuing cutting-edge science across modalities and platforms to deliver the next generation of potential breakthroughs.

[Albert Bourla, Chairman and CEO at Pfizer]

We are also leveraging AI and other digital tools across the value chain to increase speed and success rates. Starting first with our fourth-generation PCV vaccine candidate, which recently entered the clinic and received FDA Fast Track designation. Building on our deep heritage with Prevnar, we aim to solidify our leadership in the pneumococcal vaccine space by increasing valency and serotype immunogenicity while maintaining our unique FDA label, which includes both IPD and pneumococcal pneumonia in adults. Respiratory vaccine combinations are another area where we are poised to lead, building upon our successful COVID vaccine. With the first-generation standalone mRNA flu vaccine data demonstrated relative efficacy versus a recommended flu vaccine in 18- to 64-year-olds, but did not meet success criteria for immunogenicity for the B strains.

[Albert Bourla, Chairman and CEO at Pfizer]

Our second-generation flu vaccine was tested in a Phase II COVID flu combination study for 18- to 64-year-olds and has shown encouraging results in both A and the B strains. This new construct has now moved already into a Phase III COVID flu combination trial. Moving next to GBT601, our next-generation and potentially best-in-class HbS polymerization inhibitor, represents a potential stepwise evolution over Oxbryta for sickle cell disease. Recent data presented at ASH 2023 demonstrated multiple blood parameters approaching normal ranges with treatment, suggesting GBT601 may have the potential to deliver strong efficacy with the convenience of a once-daily pill. We have reaffirmed our commitment to our emerging cardiometabolic programs with several early clinical development compounds.

[Albert Bourla, Chairman and CEO at Pfizer]

On the other end of the weight management spectrum, we have cosibelimab, our GDF-15 neutralizing antibody for cancer cachexia, with Phase II data expected later this year. Cosibelimab has the potential to be first-in-class and the first FDA-approved treatment for cancer cachexia, which accounts for 20%-30% of all cancer deaths. A significant statistic. Our third priority is, of course, to maximize the performance of our new products and core franchises through a relentless focus on execution to continue growing our top line. To do this, we are prioritizing and focusing while leveraging data to make changes quickly and adapt. Our Pfizer U.S. commercial and our Pfizer international commercial organizations will leverage a more focused, efficient structure to drive executional excellence in their respective markets and expand reach to drive growth over the next several years.

[Albert Bourla, Chairman and CEO at Pfizer]

To discuss a few examples, we continue to be very enthusiastic about the potential of Nurtec to help the more than 1 billion people living with migraines worldwide. As access and prescriptions in the U.S. and globally continue to increase, we will continue to focus on direct-to-consumer marketing and reducing barriers to access and affordability for healthcare practitioners and patients. With Oxbryta, we will continue to educate healthcare practitioners and patients on the importance of proactively treating the underlying cause of sickle cell disease by reframing treatment goals to chronic proactive treatment. With Abrysvo, we are focused on increasing overall RSV market growth and market share by establishing RSV vaccination as a year-round discussion and expanding our retail contracting and offerings. With ELREXFIO, we are focused on educating healthcare practitioners in both academic institutions and in the community, awareness building and new patient trialists.

[Albert Bourla, Chairman and CEO at Pfizer]

Coming off the initial launch of Velsipity, we are focused on helping ensure patient access to Velsipity as a first-line advanced therapy oral option. With Litfulo, we continue to accelerate the consideration of advanced systemic treatments for appropriate alopecia areata patients and further unlock access to Litfulo. In addition, of course, we continue to protect and grow our core franchises and key blockbusters, including Prevnar, Vyndaqel, and Eliquis, while exploring further opportunities to advance a number of innovative combination regimens. We believe we are well positioned to bring our global commercial manufacturing and supply capabilities to accelerate current and future marketed products. We believe all these components support our growth potential through 2024 and drive growth potential into 2025.

[Albert Bourla, Chairman and CEO at Pfizer]

We plan to provide updates throughout the year on how we are advancing these strategic priorities, and with that, I will turn the call over to Dave, who will discuss our financial performance, our initiative to realign our cost base, and our capital allocation strategy to enhance shareholder value. Dave?

[Dave Denton, EVP and CFO at Pfizer]

Thank you, Albert, and good morning, everyone. As we enter 2024, we are clearly focused on a small number of critical priorities. These priorities include building a world-class oncology organization, ensuring the next wave of pipeline innovations, maximizing our new product portfolio performance with a more efficient commercial structure, and finally, right-sizing our cost base. With that said, I'll start this morning with our full year and our fourth quarter results, then I'll touch upon our capital allocation priorities. I'll finish this morning with a few comments on our 2024 guidance and the near-term expectations that set this year as a foundational year to drive our growth potential in the latter half of the decade.

[Dave Denton, EVP and CFO at Pfizer]

For the full year 2023, we recorded revenues of $58.5 billion, achieving 7% operational growth, solidly in line with our expectations when excluding contributions from both Comirnaty and Paxlovid. The significant sales decline in our COVID products, including a $3.5 billion revenue reversal for Paxlovid, were the primary driver of an overall 41% operational decrease year-over-year. With the expectation that Seagen will be a substantial growth contributor in 2024 and beyond, our full year and fourth quarter results include approximately $120 million in Seagen product revenue after the close of the acquisition on December fourteenth.

[Dave Denton, EVP and CFO at Pfizer]

On the bottom line, we reported full year 2023 diluted EPS of $0.37 per share, a 93% year-over-year decline, and adjusted diluted earnings per share of $1.84, down 72% versus LY. This decline is primarily due to a significant decrease in sales for both Comirnaty and Paxlovid. The impact of the $3.5 billion reversal for Paxlovid revenues in the fourth quarter related to an expected return of an estimated 6.5 million unused EUA labeled treatment courses from the U.S. government. And finally, a non-cash inventory write-off and other charges of $5.6 billion recorded in the third quarter for Paxlovid, and to a lesser extent, Comirnaty. Now, turning to the quarter, I'd like to highlight that we delivered a solid 8% year-over-year operational revenue growth, again, excluding Comirnaty and Paxlovid.

[Dave Denton, EVP and CFO at Pfizer]

Contributing to the strong performance were our newly approved RSV vaccine, as well as VYNDAQEL and Eliquis, partly offset by lower revenues from Ibrance and the Prevnar family. However, our Q4 results, both top and bottom line, continued to be significantly and negatively impacted by our COVID products on a year-on-year basis. Revenues declined 42% operationally, the results of a significant decrease in both Comirnaty and Paxlovid sales. Adjusted cost of sales as a percentage of revenues increased by 12 percentage points, driven primarily by the $3.5 billion non-cash PAXLOVID revenue reversal, and to a much lesser, lesser extent, unfavorable changes in sales mix. Overall, our adjusted operating expenses declined 10% compared to Q4 of last year.

[Dave Denton, EVP and CFO at Pfizer]

Adjusted SI&A expenses increased 1% operationally in the quarter, primarily driven by the timing of marketing and promotional activities, including those related to recently launched and acquired products. Consistent with our strategy, we have been focused on reprioritizing our R&D spending to enhance overall returns. Adjusted R&D expenses decreased 24% operationally, driven primarily by lower spending across both vaccine programs and certain acquired assets, as well as lower compensation-related expenses. Both our reported diluted loss per share of $0.60 and our adjusted diluted earnings per share of $0.10 for the quarter were negatively impacted by the $3.5 billion PAXLOVID revenue reversal, which dampened EPS by approximately $0.54. Continued declines in both Comirnaty and PAXLOVID sales also negatively affected our performance in the quarter. Foreign exchange movements had an immaterial impact compared to last year's fourth quarter.

[Dave Denton, EVP and CFO at Pfizer]

As we are increasingly focused on prioritizing our investments to drive forward-looking growth, our GAAP results include a $1.4 billion intangible asset impairment charge associated with etrasimod, based on changes in the development plans for additional indications and overall revenue expectations. But I will point out that this product is still projected to contribute over $1 billion in peak annual sales. Additionally, we recorded a nearly $1 billion intangible asset impairment for Prevnar 13, reflecting a transition to vaccines with higher serotypes coverage. As discussed in prior quarters, our capital allocation strategy is designed to enhance shareholder value and is based on three core pillars. First is growing our dividend, second is reinvesting in the business, and finally, is making share repurchases after delivering our balance sheet. For 2023, we returned $9.2 billion to shareholders via our quarterly dividend.

[Dave Denton, EVP and CFO at Pfizer]

We've invested $10.7 billion in internal R&D, and finally, we've invested approximately $44 billion in completed business development transactions, net of acquired cash, essentially for the acquisition of Seagen. Our expectation is to maintain and grow our dividend while delevering our capital structure, with a gross leverage target of 3.25x, and a goal to preserve our credit rating and access to Tier One commercial paper. Upon achieving our delevering goals, we anticipate returning to a more balanced capital allocation strategy, inclusive of share repurchases. Now, given that we issued our full-year 2024 revenue and adjusted diluted earnings per share guidance on December 13th, let me just hit a few of the highlights.

[Dave Denton, EVP and CFO at Pfizer]

We expect total company full year 2024 revenues to be in the range of $58.5 billion-$61.5 billion, which reflects our expectation of strong contributions across our product portfolio. Importantly, excluding Comirnaty and Paxlovid, we anticipate operational revenue growth of 8%-10%. We remain confident on delivering at least $4 billion of net savings from our cost realignment program by the end of this year. We believe rightsizing the cost base will put us on a strong footing towards margin expansion and increased operational efficiency moving forward. With it, we expect adjusted diluted earnings per share to be in the range of $2.05-$2.25 a share for the full year of 2024.

[Dave Denton, EVP and CFO at Pfizer]

As a reminder, this range is inclusive of an anticipated $0.40 of earnings dilution from the Seagen acquisition. Again, with the vast majority of this dilution resulting from the financing costs associated with the deal. Cycling into 2024, we have significantly invested in our business to fuel our long-term growth, and the foundation is set to deliver on our commitments to enhance long-term shareholder value. We are acutely focused on driving near-term performance while solidifying our growth expectations for the back half of this decade. With that, I'd like to turn it back over to Albert to begin our Q&A session.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you. With that, let's start the Q&A session. Operator, please assemble the queue.

[Operator]

At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. Our first question comes from Robyn Karnauskas with Truist Securities.

[Robyn Karnauskas, Managing Director and Senior Biotech Analyst at Truist Securities]

Thank you, guys, for taking my question. So maybe I'm, I'm stupid on this question, but if I'm doing your math for your guidance of margins in low 70s% for fiscal year 2024, by my math, the margins for other biopharma would have to drop about 60% to about 60% in order to balance out the other margins. Just help me understand your guidance and triangulate that with your top line and bottom line guidance, and triangulate that with your margin guidance. Thank you.

[Dave Denton, EVP and CFO at Pfizer]

... Yeah, so maybe this is Dave. Correct, our guidance for gross margin, although we don't provide it specifically, we've given some color around the fact that it's approximately 70%. Obviously, our focus going forward is to improve our margin rate and, more importantly, improve our operating margin rate to the bottom line. As we look here at 2024, there's a few things that have compressed our margin rate. First is, as COVID has declined year over year, that has served to, I'll say, delever, if you will, the P&L as COVID takes up less and covers some fixed overhead. But importantly, what's happening is we are insourcing products that we've recently acquired.

[Dave Denton, EVP and CFO at Pfizer]

That insourcing requires time before we get up to peak yield and performance, so that in the short term dampens gross margin rate, but has a trajectory to improve gross margin rate over time. And then secondly, we have new launches that are coming online late in Q3 or late in the second half of 2023 and moving into 2024. Again, those are not at peak performance yet. That will ultimately improve gross margin rate as we cycle into later years. And then finally, I will say that over the last several years, we have absorbed some amount of inflation within our cost of goods sold. That is an area of opportunity for us as we think about improving performance longer term. So I hope that gives you some color.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you, Dave. Operator, next question, please.

[Operator]

Next, we have Carter Gould with Barclays.

[Carter Gould, Senior Analyst, U.S. Biopharma Equity Research at Barclays]

Good morning. Thanks for taking the questions. Maybe another kind of, you know, finance question here. Certainly, R&D in 4Q was meaningfully below kind of where you guys had set the guide there. How should we think about that? Does it just reflect sort of faster cost cutting? Was it just the more of an artifact of the later integration of Seagen? And clearly, you're reaffirming your guide, but just maybe if you just, you know, sort of check that box for us, that would be helpful. Thank you.

[Dave Denton, EVP and CFO at Pfizer]

Sure. Probably not much to read into that. Obviously, R&D came in a little favorable than our expectations previously. A part of this is the fact that we are very focused on our realigning our cost base, so consistent with the program. And then secondly, there probably is some timing that's dampening R&D in the fourth quarter that will slide into 2024 and into 2025. So there is some timing implications to that performance level. But I think importantly, back to my prepared remarks, is our focus is on delivering net savings of $4 billion. And if you look through the end of 2023, about half of that we've achieved already. We're now focused on achieving the additional $2 billion or so as we cycle into 2024, and all eyes are on that objective.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you, Dave. We have high confidence on the number that we gave. Let's move to the next question, please.

[Operator]

Our next question will come from Louise Chen with Cantor. Louise, please make sure that you're unmuted.

[Louise Chen, Senior Research Analyst and Managing Director, Specialty Pharmaceuticals at Cantor Fitzgerald]

Hi, sorry, I was muted. So thanks for taking my question here. I wanted to ask you on your Prevnar franchise, first of all, for the fourth generation PCV, could you give more color on how it compares and contrasts with Prevnar 20? And then just on the Prevnar order timing issue, was that U.S. or ex-U.S.? Thank you.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you. Amin, why don't you take the Prevnar question, and then maybe, Alexandre, you can add a little bit color on the, on the, the situation in the U.S.? So what is the situation in, Prevnar with the orders?

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

Yeah. So, Louise, with regards to Prevnar, with the pediatric business, we often see some lumpiness in quarterly revenues given the timing and impact of CDC orders, so it's difficult to kind of map that all out quarter by quarter. So you should expect that on the pediatric business. But the pediatric business, otherwise, we're very happy with how our launch is progressing and the growth momentum that we see there. On the adult business, I think it's different in the sense that we have a 96% market share that we closed the adult business with at the end of the year. But it's really important to keep in mind that we are operating in a market where the patient pool is steadily decreasing.

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

There was a big catch-up opportunity versus the prior recommendation, and we've worked through that catch-up opportunity already. So the remaining patients are generally those that are aging into the 65+ population, as well as those with underlying medical conditions, and those are harder to activate patients. So we expect that business to continue to face that smaller patient population going forward, and we also expect competition with V116 emerging that will make the adult market more competitive. But we see a lot of growth potential in the pediatric market.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you. Alexandre, how was the Prevnar situation in the last quarter, or in the year in international markets?

[Alexandre de Germay, EVP and Chief International Commercial Officer at Pfizer]

Yes, Louise, good question. The, as you know, the majority of our ex-U.S. business is driven by tender. And of course, we book the sales when we ship the product, which doesn't reflect utilization. And then the government schedule their campaign in their respective markets. The reality is that we continue to have an IP exclusivity in 130 markets around the world, and at the same time, we continue to progress both on the pediatric, as you saw last week, the CHMP positive opinion, and now we're gonna go into the final approval and then, vaccine technical committees and pricing in all those markets. So that will take a bit of time.

[Alexandre de Germay, EVP and Chief International Commercial Officer at Pfizer]

But at the same time, we see some positive traction on the adults franchise, where we have launched in over 30 markets, and we see some very good development with the recommendation of the Vaccine Technical Committee. To give you an example, we used to have very limited access on our Prevnar 13 in countries like Germany or France and U.K., and we just received the recommendations from the VTC in Germany that actually recommended usage of Prevnar 20 in all adults over 60, as well as the at-risk population from 18 to 59, which we believe we have a significant growth opportunity in increasing vaccination in the adult population, ex-U.S.

[Albert Bourla, Chairman and CEO at Pfizer]

Michael, to conclude, what about the fourth generation Prevnar?

[Mikael Dolsten, Chief Scientific Officer and President of R&D at Pfizer]

... Yeah, I'm very pleased that the fourth generation has entered clinical studies. It has a fast-track designation from U.S. FDA, indicating a unique product offering, and it includes some of the new technology we have developed that gives us a really cutting-edge toolbox, whether it's chemistry, carriers, or reformulations. And of course, it relies on the unique Pfizer platform to have potential prevention of both invasive disease, which is the smaller disease burden, and pneumococcal disease, which causes more than 150,000 hospitalizations and to the best of my knowledge, we are the only one that can address both of them. So we feel very good about that entry.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you, Mikael. To summarize, the Prevnar, which I know it is in the minds of all, let's start with the commercial front. In the U.S., clearly the adult opportunity, we have taken the cream, basically, of the catch-up opportunity. This is happening once you are getting a recommendation from CDC for a catch-up. This market, the pool of patients, has been largely exhausted. We have already 96% market share of that, so this is not the market, the adult Prevnar, what we expect that will continuously grow in the U.S. Pediatric, very different story because our market share is now growing, and we have indications that will continue growing very strongly. So we expect in the U.S., the Prevnar situation to be a strong growth story in pediatric.

[Albert Bourla, Chairman and CEO at Pfizer]

International, both, we expect to see growth because the products have just been launched, and then the recommendations are following. So there is a delay in international, higher than usually there is in the U.S. So we expect to see growth in the adult and in the pediatric. I want to reemphasize that, we have basically exclusivity of Prevnar 13 in more than 100 countries, 113 countries in NI of tenders, and we plan to convert that now to 20. And then on the fourth generation, we are moving full speed. We think that our expertise will allow us to build a polyvalent vaccine that will really compete very, very nicely as a fourth generation, and we'll do that successfully and fast. So that's the story, and let's move to the next question, please.

[Operator]

Next, we have a question from Trung Huynh with UBS.

[Trung Huynh, Analyst, Healthcare at UBS]

Hi, guys. Thanks for taking my question. Trung from UBS. Two, please. So in your prepared remarks, you noted you took a $1.4 billion impairment charge associated with etrasimod. Can you add more color here? What prompted that reevaluation, and any feedback on how that launch has gone? Secondly, on Abrysvo, so can you give us some color on how your contracting has evolved in 2024 versus 2023? And based on that, what's your market share do you think you can capture this year versus the 35% last year? Thank you.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you very much. Why don't you take, Dave, the impairment question, and then I will move to commercial guys.

[Dave Denton, EVP and CFO at Pfizer]

Yes. So, on etrasimod, keep in mind that, this product we still anticipate to be over $1 billion in peak sales. As you know, there are multiple indications, attributed to this, medicine. And financially, as you look at that medication, there was, there were additional indications that met the cri-- financial criteria for an impairment, of which we took in the quarter. Clinically, obviously, clinically, there's still some work, that will, be ongoing in support of the asset. So with that-

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you very much. So, Aamir, maybe about etrasimod commercially, how the launch is doing, and Abrysvo?

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

Sure. So I'll start with etrasimod or VELSIPITY, as we call it. So, you know, just in terms of the product's value proposition, we think this is a very promising oral option for moderate to severe UC patients. It's got strong efficacy that patients and physicians that we've exposed this to, they want to start transitioning from conventional therapy to advanced therapy, and it gives them an option also to maintain once-a-day oral routine, which many are already on, instead of beginning with an injection or infusion. So about 80% of those patients that haven't progressed to an advanced therapy prefer an oral option, but only about 10% of those patients actually get one. So there's a very clear need here that VELSIPITY can help us fit, and the benefit-risk profile for VELSIPITY is also very, very strong.

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

So we approved, we received approval at the end of last year, and so we invested efforts in building HCP and patient awareness on the label and on the value proposition. But I just want to remind you that with any immunoinflammatory product, it takes time to get broad national access. And that is where our focus is right now, is ensuring that we secure VELSIPITY access as a first-line advanced therapy oral option, and that's going to take some time to put in place. And when we have that in place, we see upside momentum from the launch.

[Albert Bourla, Chairman and CEO at Pfizer]

What about Abrysvo?

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

On Abrysvo, I'll comment briefly on the adult, and then on the maternal. On the adult vaccine, I think, you know, the market was clearly ahead of everyone's expectations and not limited by shared clinical decision-making versus a routine recommendation. You know, we would like to do better than the 30-some% share that you referred to as well. So we're very focused going forward on retail contracting for the 2024-2025 season. But I will also mention that we are doing that with real thoughtfulness on ensuring that we secure profitable share in those contracts, and also differentiating using our maternal indication. We also see opportunities in the non-retail setting, where, for example, with the VA system and with IDNs, we have strong share.

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

And we're going to also focus on new opportunities that we're currently studying with the Abrysvo, adults age 18 and older with underlying medical conditions, as well as a new packing presentation to better fit our customer needs. So we see momentum there. And on the maternal side, we're only a few months in, but we're encouraged by what we're seeing, as the first maternal vaccine to prevent infants from birth to six months when they are the most vulnerable. You know, more than 65% of women prefer to get the maternal vaccine versus having their infant immunized with a monoclonal antibody. And we think that the label provides this opportunity to grow that segment as well.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you, Aamir. Next question, please.

[Operator]

Our next question comes from Terence Flynn with Morgan Stanley.

[Terence Flynn, Managing Director, Senior U.S. Pharma and Biotech Analyst at Morgan Stanley]

Great, thanks for taking the questions, two for me. I guess the first one is just, Comirnaty, rest of world, was ahead of consensus expectations this quarter. Just wondering if there were any one-time benefits in that number, if that's a fair go-forward sales level to think about, through 2026, given the, existing EU contract. And then the second one is, I noticed that danuglipron wasn't mentioned in the, the PR or the, the prepared remarks. Just wondering if that, once-daily PK trial completed yet, and what the next steps are there? Thank you.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you very much. Maybe very quickly on the time, we didn't mention because we don't have anything to say more. So that's the only thing. There is a program which is composed with a lot of experiments that we are doing now in terms of moving it to once daily, and, you know, we will speak only when we have data. We don't want to become now the focus again of another earnings call. But that being said, I'm moving it to Alexandre to discuss about Comirnaty in the rest of the world, outside the U.S. What are the dynamics over there then?

[Alexandre de Germay, EVP and Chief International Commercial Officer at Pfizer]

That's right. Several elements playing out on the Comirnaty franchise. First, what we see is restriction on vaccination guidelines, right? So versus the previous years, we see that the guidelines are really focusing on the older population as well as the at-risk population. But we have, as you know, already signed several contracts with the European Commission, Canada, U.K., and Australia. And following the approval in August last year, we started to execute on a contract with the European countries. As a matter of fact, some countries have decided to advance some of their order in 2024 into 2023, so that they can execute their vaccination campaign properly. The other trend that we see is that actually we don't see major vaccination upticks in the future year.

[Alexandre de Germay, EVP and Chief International Commercial Officer at Pfizer]

We think that's what we have seen in 2023, 2024 campaign is really the type of vaccination we will see, and that will be carry on the next few years. The only area where there is a potential future growth in terms of vaccination uptake is if we can increase our co-administration with the flu vaccines, where in all our key markets, the rate of vaccination in flu is actually higher than it is for Comirnaty. So we believe that there is potentially here an opportunity. The last point that I want to say is, as you see, that the Comirnaty sales pattern is evolving towards a seasonal pattern.

[Alexandre de Germay, EVP and Chief International Commercial Officer at Pfizer]

So you saw you have a very strong Q4, like you expect in flu vaccination type of markets, and that's what we see also to be expected in 2024. And actually, as I was reading some of your models in the financial community, I think there is some confusion that we will have higher Q1, Q2, which I believe will be more towards the second part of the year, but of course, in line with the guidance.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you very much, Alexandre. Next question, please.

[Operator]

Our next question will come from Umer Raffat with Evercore ISI.

[Umer Raffat, Senior Managing Director at Evercore ISI]

Thanks for taking my question. Albert, so I was looking at SEC filings from Cerevel, and they disclosed that Pfizer was open to putting out a bid on Cerevel after Phase III data, which would have been in 2024. Meaning, but I also noticed that you were saying you're not open to a buyback in 2024, and deleveraging remains a top priority. So I just want to balance those two, especially also in the context of where the stock stands.

[Albert Bourla, Chairman and CEO at Pfizer]

Well, look, I will ask Dave to speak about it, but the fact that we are looking everything, and we are engaging in everything, doesn't mean that that's our obligation. We are doing all the, all the work. It doesn't mean that our intention is to deviate from the capital allocation strategy that we have just articulated, and that is, number 1 priority is our dividend and the growing dividend. Then it's a year of execution. We try to deleverage, as David said, and then once we bring our deleverage to the levels that we are aspiring, we will start also moving into share buybacks and of course M&A. Which means that for 2024, we will see everything in existence because we never say never to business development opportunities could come.

[Albert Bourla, Chairman and CEO at Pfizer]

But our strategy, it is that you will not see anything major in business development in terms of dollars. David, did I say it well, as you instructed me?

[Dave Denton, EVP and CFO at Pfizer]

You said it well. You're correct.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you very much. You are a good teacher. Thank you. And the other question from there? I think that was it, right? Yes. Thank you, Umar. Thank you very much. Let's go to the next question, please.

[Operator]

Next, we have Tim Anderson with Wolfe Research.

[Tim Anderson, Managing Director, Senior Equity Research Analyst, Pharmaceuticals and Biotechnology at Wolfe Research]

Thank you. Maybe for Aamir. So Eliquis is the biggest drug on the initial list of 10 drugs for IRA. CMS has until February first to provide you the initial proposed negotiated price, so that's 2 days away. So two questions here: Can you confirm you haven't already received that initial proposal yet?

[Tim Anderson, Managing Director, Senior Equity Research Analyst, Pharmaceuticals and Biotechnology at Wolfe Research]

... Second question, can we expect that at some point between now and September first, which is the deadline, that they have to make the final price public, that you'll give some investors some sort of directional information on how those discussions are going, or are we going to be kind of in the dark until September first?

[Albert Bourla, Chairman and CEO at Pfizer]

So, Aamir, are you planning to give light to team, or give us?

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

So Tim, as you can appreciate, this whole price setting authority in Medicare, this is new, and pharma companies are obviously beginning to understand this process with the federal government. The rules are complicated, so we're wrapping our mind around it. Our alliance partner, BMS, is taking the lead in engaging with CMS in an official process to determine the price for Eliquis in Part D. That'll begin in January 1, 2026. And also, as I'm sure you can appreciate, we're not going to comment on an ongoing price-setting process and negotiation.

[Albert Bourla, Chairman and CEO at Pfizer]

Yeah, it's very difficult, Tim, to comment on these things because they are ongoing, so it's very inappropriate and absolutely could complicate things. I understand, but there is a need for people to understand because that's an important product, and we will try as soon as possible and practical, to be able to provide the level of details that you are looking at, everybody's looking so that they can model it appropriately. Thank you very much. Let's move to the next question, please.

[Operator]

Our next question will come from Andrew Baum, Wolfe.

[Andrew Baum, Global Head of Healthcare Research at Citi]

Many thanks. A couple of questions, please. First to Amir. Under your new leadership and commercial focus, what key products would you guide us to of recent launches that we should look for in terms of acceleration of rollout trajectory? And it doesn't have to be recently launched, established ones as well. And then second, to Michael, could you just share a little bit more information about your next generation PCV vaccine, specifically, how many serotypes? And I'm assuming that given it's a new technology, you will lose the ability to grandfather the pneumonia claim from the CAPiTA trial into the product profile as it matures. If you could confirm, that would be great.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you very much, Andrew. Your assumption, I don't think it is correct, but Michael will answer to that. But, let's first go to Aamir to basically give us your, how you see in 2024 the priorities of the commercial execution in the U.S.

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

Yeah. So, Andrew, I'll take a step back and, you know, let me start by saying I'm, I've been very excited by this role and this opportunity, and also to do it with the team that we've built, which is, a mix of both seasoned Pfizer leaders as well as experienced leaders from outside of Pfizer. I mean, my focus, and we can talk about specific products, we've touched on many of them already, but my focus overall is on execution excellence. So in our primary care and specialty care portfolio, we have a lot of great brands. We have some really enduring franchises, Vyndaqel, Eliquis, Prevnar. I've spent quite a bit of time talking about that. You know, our focus there is to defend and grow where we can, and we do see some opportunities.

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

And we also have to acknowledge that we have some brands that have great value propositions, but they happen to be in highly competitive categories with some very, very well-entrenched competitors. So in a situation like that, you know, my focus is principally, you know, let's really prioritize the actions that can grow each of the brands, and we can talk about the individual launches. There's a lot of operational focus on blocking and tackling, including contracting. And then when we look at our main resources, we have our field force, our advertising and promotion dollars, and our medical capabilities, just prioritizing exactly where we put those. That is what I'm focused on with me and my management team.

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

You know, as I mentioned, we see opportunities in some of the core franchises in defending and growing our share, but then also in a number of our launches. You know, Albert mentioned in his opening remarks what we hope and expect to do with Abrysvo, with Nurtec, with Litfulo, Zavzpret. Those are all brands that we're going to continue to focus on, including some of our recent acquisitions, like Oxbryta as well.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you, Aamir. Andrew, let me take the liberty to ask also the other commercial leaders to comment a little bit on their priorities, because that will give you a better sense of the whole picture. Alexandre, in international, as you're taking over, what are your key priorities?

[Andrew Baum, Global Head of Healthcare Research at Citi]

Thanks for the question, Albert, and the opportunity to share my priorities. My main focus is really to focus on the area where we can generate material growth with improved return on investment. This is my mantra. How are we going to do that? My top four markets in the order, China, Japan, Germany, and France, represent 40% of our international division, so it's quite concentrated. Those four markets will report directly to me so that we can have the resources and support the country to execute on their plan at best and to generate the most growth. Our top fifteen countries represent 70% of our total international, so it's again, quite concentrated. What I'm actually doing currently is in each of those markets, we are selecting our drivers of growth.

[Andrew Baum, Global Head of Healthcare Research at Citi]

What are the key in-line and the key new products where we can have material impact with improved return on investment? So, to give you an example, of course, it's going to be different from one country to the other because the archetype and the dynamic of this market are different. So last week I was in Japan, and so for instance, VYNDAQEL diagnosis rate is half the diagnosis rate that we have in the U.S. and in France. So we reviewed last week the plan to go and catch those increased diagnosis rates, and we're going to continue to, of course, track on the execution. In Germany, Eliquis has a very strong Eliquis franchise. We believe we have growth to untapped opportunity, and I'm next week in Germany to actually review the plan on the Eliquis precisely.

[Andrew Baum, Global Head of Healthcare Research at Citi]

We'll do the same thing on the new product, and it's going to be, for instance, Lorbrena in China. As you know, lung cancer in China is unfortunately affecting a large proportion of the population, and as a matter of fact, the proportion of the lung cancer that can benefit from Lorbrena in the worldwide community is about 1.7%. In China, it's actually 7%, so we believe we have a huge opportunity. What we're doing is actually developing a plan last week when I was visiting China, to quickly get Lorbrena to those patients that could benefit from the clinical outcome. So this is really what I'm doing in each of our top 15 countries.

[Andrew Baum, Global Head of Healthcare Research at Citi]

Then frankly, the rest of the year will be simply tracking our execution, tracking all the metrics, both from activities, medical activities, and KPIs for each of our key products.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you. Then maybe Chris, also on the commercial front, how do you think of the oncology in the U.S. evolving?

[Chris Boshoff, EVP and Chief Oncology Officer at Pfizer]

Thank you, Andrew, Albert. Our biggest priority right now is obviously continuity of the business. We've done a lot of work during the last nine months during integration planning, and we don't want to miss a beat and is now moving towards flawless execution. With immediate priorities, obviously, the PADCEV launch for advanced metastatic bladder cancer from the EV-302 study. The launch of XTANDI in non-metastatic castration-sensitive prostate cancer from the EMBARK trial, the early launch, and also focus on access and awareness during 2024 for ELREXFIO in late-line multiple myeloma. For Talzenna, where up to 25% of patients with metastatic castration-resistant prostate cancer would be eligible in the U.S. for the from the TALAPRO-2 indication.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you, Chris. Then let's go to Mikael Dolsten. If you can make some comments on the next generation, as much as you can share about the stage.

[Mikael Dolsten, Chief Scientific Officer and President of R&D at Pfizer]

Yeah, I think we have a very strong position with good momentum in the PCV conjugate. And I, I think, Alexandre, you mentioned just the positive recommendation we got for PCV 20 in Europe. Now, we're building on that unique platform, and as, Andrew did say here, we are able, what you call, grandfather in unique claims for the adult segment for pneumococcal pneumonia. It's really the major burden of with 150,000 U.S. hospitalizations, and to the best of our knowledge, that Pfizer platform with the new fourth generation, as was with the third generation, will be the only one that can carry that claim based on, as you said, the original CAPITA studies. Now, the new generation will contain more serotypes, has applicability for adult and possibly pediatric, as we have done with all of ours.

[Mikael Dolsten, Chief Scientific Officer and President of R&D at Pfizer]

It also will include improvement on existing serotypes to altogether get a very good increased coverage versus the PCV 20. And I do think we are the one that really can continue this expansion of more serotypes by unique conjugation chemistry, carriers, and reformulations. And I am cautious to abandon any serotypes where you work on infant and adults, as the characterization what caused disease, for example, pneumonia, is not very well described. So maintaining the coverage as we have uniquely, and it's not really happening with the other product, is a unique differentiation. So I feel very good about the fourth generation.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you, Michael. Let's go to the next question, please.

[Operator]

Our next question will come from Jeff Meacham with Bank of America.

[Geoff Meacham, Managing Director, Equity Research, Biotechnology and Major Pharmaceuticals at Bank of America]

Morning, everyone. Thanks so much for the question. Albert, the oncology franchise following Seagen, I suspect, will probably be one of your bigger growth drivers for Pfizer going forward. The question is: Is there an intermediate or long-term target as a % of revenue that you're looking to achieve for this segment? And then are there technologies beyond ADC that you think could be additive to the pipeline? Thank you.

[Albert Bourla, Chairman and CEO at Pfizer]

Yes. At a very general, and then I will ask, Chris to comment a little bit on the technologies that, we are having here. I can't say how much, oncology will contribute, but clearly, we have given expectations about Seagen, and we say that, we expect it to be at $10 billion, by 2030, from $3.1 billion that we gave guidance in 2024. And actually, we feel very good about the $10 billion. The more data coming. When we gave the $10 billion, we were not aware of some of the results, but followed that projection. So we feel very, very good about that. Now, I have to say that, the Pfizer pipeline in oncology, I think was also among the strongest in our therapeutic area.

[Albert Bourla, Chairman and CEO at Pfizer]

So I think the combination in general is giving us, let's say, a lot of strength. But Chris, why don't you comment a little bit about how you see the R&D evolution of oncology, the platforms we are going to base your strategies?

[Chris Boshoff, EVP and Chief Oncology Officer at Pfizer]

Thank you. So the modalities we wanna focus on for now are those where we see we have significant strength and capabilities, including with medicinal chemistry, our protein engineering, as well as our strength in cancer biology. We therefore want to focus on small molecules, especially from our La Jolla site, bispecific, both La Jolla and the new Seattle site, and ADCs in Seattle. So small molecules, biologics. As you know, we do have an interest also in allogeneic CAR T cells with the formation of Allogene, the company we still follow and have a significant interest in. But for now, focusing on those three modalities, where we see significant opportunity also for combinations, for example, between small molecules, ADCs, but also potentially in the future between ADCs and bispecific.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you. Thank you, Chris. Next question, please.

[Operator]

Our next question comes from Mohit Bansal with Wells Fargo.

[Mohit Bansal, Managing Director, Biopharma Equity Research at Wells Fargo]

... Great. Thank you very much for taking my question. Maybe a question on NURTEC, the trends in market share as well as pricing. Just wanted to make sure that is there a significant price delta between NURTEC price versus the competitor price? I mean, the discounts that they are offering, given that your competitor has multiple offerings in the headache market. And if there is a delta, do you expect this to grow or decline over 2024 on pricing? Thank you.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you, Mohit, very much. Aamir, about Nurtec and in general, the migraine front side.

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

Yeah. So Mohit, thanks for the question. So, you know, we were encouraged by Q4 for Nurtec, and I'll also include some comments on Zavzpret as part of my response. You know, we were up more than 30% versus the prior year and over 20% versus the prior quarter. And there's a few things that are encouraging. You know, Nurtec continues to be the number one prescribed CGRP, so we have leading TRX volume and share. Interestingly, more than 90% of new prescribers in the category, many of whom were primary care physicians, are prescribing Nurtec. And our pills per Rx has also, over the last several quarters, been steadily rising. So we continue to see opportunity, and you know, there, there's a few things to keep in mind.

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

One is that there's still a lot of unmet need. Albert referred to it in his written remarks, but there's a lot of patients undiagnosed, very few get an Rx therapy. Oral CGRPs are still only less than 20% of the Rx market. But as you point out, this is also a very competitive category with Qulipta and Ubrelvy, and, you know, I won't comment specifically on their pricing strategies versus ours, and GTNs play a role in all of it. But our focus for Nurtec, one, I think we want to be sharper and more competitive in our patient engagement and activation. Two, we have an opportunity with our field force to focus on both the most relevant CGRP writers and, as I said, PCPs. PCPs write two-thirds of triptans, but only about a little over a third of CGRP.

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

So there's an opportunity there. And then patient access and experience, you know, there's an opportunity to really reduce the friction there. And I will also mention Zavzpret, because with an intranasal, we think we can have a very nice complement to an oral for either rapid pain relief, and there's also unmet need for patients that have nausea and vomiting from the use of an oral. So we want to continue to invest in growing our Nurtec and Zavzpret franchise.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you, Aamir. The next question, please.

[Operator]

Our next question comes from Steve Scala with TD Cowen.

[Steve Scala, Managing Director, Health Care – Major Pharmaceuticals Research Analyst at TD Cowen]

Thank you. Two questions. First, on, on danuglipron. I know Pfizer doesn't want to provide an update, but clearly the company has greater insight than we do into how the once-daily version is performing in the Phase I PK trial. So I'd like to ask, how would you characterize that performance so far? In the absence of any visibility, it's kind of hard for us to be confident in the outlook for this program. Second question is, a new weight loss agent was added to Phase I, designated 6016. Can you tell us what the mechanism is, please? Thank you very much.

[Albert Bourla, Chairman and CEO at Pfizer]

Yes. Steve, I'm going to disappoint you because you are asking things that we have said we are not willing to disclose at this stage for multiple reasons. On, clearly on Danu, we have more information than others. It's very normal with everything that we are doing, because we're having a very complicated, as I said, multiple experiments planned right now. But because we don't have new data, we're not going to comment on that. And on the new weight loss molecule also, we said that unfortunately, we are not to disclose the mechanism of action. The reason is because, first of all, it's too early, and we don't want to tip competitions. Nothing strange about that. So I'm sorry to disappoint you, but there is not much to offer at this stage.

[Albert Bourla, Chairman and CEO at Pfizer]

Hopefully, as we said, mid-year is where I expect to have more information on that. Let's go to the next question, please.

[Operator]

Next, we have David Risinger with Leerink Partners.

[David Risinger, Senior Managing Director and Senior Research Analyst at Leerink Partners]

Thanks very much, and thanks for all the updates. So I have two questions, please. First, is for Dave. Could you please discuss the 2024 gross margin prospects in some detail? I think on the last call, you had discussed, potentially a low 70% gross margin, but if, if you can comment on that in more detail, that would be helpful. And the second question is for Michael. If, danuglipron once daily does have, a profile that you're looking for, would the company then conduct a Phase IIa dose ranging study to assess the efficacy and tolerability in order to, decide on a dose, to advance, Phase IIb or Phase III? Thank you.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you, Dave. Very quickly, Michael, resolve, Danu, which... And then we'll go to Dave.

[Mikael Dolsten, Chief Scientific Officer and President of R&D at Pfizer]

Yeah. You, you heard Albert say that we are running a number of clinical experiments to gather insight in that molecule, and we have a second lip. You know, Pfizer have always been open to consider different types of clinical study design, and in general, in general, we tend to move into directly whenever data is supportive, if there is a large safety database, into Phase III with a lead-in phase. But, you know, we have to look at each program by program, so when we have all the data, we will be able to share with you.

[Albert Bourla, Chairman and CEO at Pfizer]

... Yes. Let's go to the gross margin where we can share a little bit more information.

[Dave Denton, EVP and CFO at Pfizer]

So David, this is Dave Denton. I'll be very brief here. Obviously, as indicated, our 2024 gross margin expectations are in the low 70s%, as we discussed previously. As you know, as we cycle into 2024, there's a few things that are happening, as I indicated earlier. One is as COVID comes down, we're kind of deleveraging now, as COVID had absorbed a lot of fixed overhead, so that's compressing gross margins. Secondly, we're in the process of insourcing many of the acquired products over the last couple of years, and as we insource, the short-term effect of that is dampening on gross margin, but gives us an opportunity to improve gross margins as yields improve over time.

[Dave Denton, EVP and CFO at Pfizer]

Then finally, two things finally here: new launches have that same characteristic as we launch a new product. Yields and performance are not at peak performance. That will be an opportunity for us going forward. Then finally, we have absorbed some inflation over time. That is an opportunity for us to take out over the next several periods. So again, an opportunity for us to enhance performance over time, but again, we're in this roughly low 70s for 2024 is our expectation.

[Albert Bourla, Chairman and CEO at Pfizer]

And David, let me add a little bit more color here about the Comirnaty and Paxlovid are big products, but they are manufactured in the same facilities, but they are separate facilities, so they are not affecting the margins of the other products. So the margins were really absorbing in those facilities when you had such a huge volume production and volume production, of course, the margins were seriously—those products were seriously taking a lot of the overhead. Now, as we are reducing our expectations for COVID into very realistic, we think, targets, this doesn't mean that we have eliminated our capacity to produce more if the demand is there, because that would be not responsible, first of all, from public health perspective, but also from our investors' money perspective.

[Albert Bourla, Chairman and CEO at Pfizer]

So that's why, so far, we maintain all this capacity, although the revenues are down, so there's a significant bit. The second thing that David said, keep in mind, all basically our new acquisitions that brought so many new products, they were from smaller relative companies, that they didn't really have their own manufacturing. So these were all outsourced, and outsource, of course, is way more expensive than when you are able to bring it. There are plans for everything in source, but in manufacturing, that takes three years, right? To be able to, to do, to reduce the margin. And the last but not least, we have this proportional amount of new launches, and those new launches are coming with a very big cost when you build infrastructure for something new to be developed. But of course, you, you build it for your peak revenues.

[Albert Bourla, Chairman and CEO at Pfizer]

But of course, you start with very low revenues, and then those are going up. So as the infrastructure is there, but then higher revenues for these new products are coming, is always the case with new products, but margins are expected. So, it's, it's not something that gross margins, you can't see it in months, you see it in years, the improvement, but clearly, this is an area that we know why it's happening, what's happening, and how we can improve it. So let's go to the next question.

[Operator]

Our next question comes from Chris Schott with JPMorgan.

[Chris Schott, Managing Director, Major and Specialty Pharmaceuticals Senior Analyst at JPMorgan]

Great. Thanks so much for the question. And maybe just for Dave and Albert, just kind of building on maybe the longer-term margin piece of the equation. It sounds like we should think about margin recovery as a gradual process versus a snapback. Is that fair? And I guess kind of the bigger picture question I was asking is just: How do we think about reasonable longer-term margins? Maybe not giving specific timelines, but can we think about kind of like mid- to high-30% operating margins is still a reasonable target for Pfizer? Or just kind of factoring in some of the dynamics we're seeing now, do we need to kind of rethink where margins can go over time? Thank you.

[Dave Denton, EVP and CFO at Pfizer]

No, I think you're absolutely correct. Mid to high thirties is a reasonable target for us, with a slight caveat in the sense that the vaccine program Comirnaty, it has a shared, as you know, gross margin level with our partner, and so that's dampening to gross margins and operating profits. So I'll say slightly mix adjusted for that product. And then from a progression standpoint, yes, you could think about this as a gradual, steady improvement story over the next several periods.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you. Next question, please.

[Operator]

Our next question comes from Rajesh Kumar with HSBC.

[Rajesh Kumar, Head of Life Sciences and Healthcare Equity Research at HSBC]

Hi there. Good afternoon. Just on the medium-term margin profile, thank you for the color you've provided. If you think about the, you know, growth aspirations you have, you know, does that require you sacrificing some of the margins? So if, if you were to, say, hit the top end of your growth profile, would we be looking at mid-thirties growth margin or lower, or what is the balance there? And the second one, you briefly touched on your capital allocation priorities earlier. Obviously, cost cutting and deleveraging is a priority for 2024. In the medium term, which are the therapy areas where you would deploy more capital after 2024 deleveraging exercise is done?

[Rajesh Kumar, Head of Life Sciences and Healthcare Equity Research at HSBC]

... Thank you.

[Albert Bourla, Chairman and CEO at Pfizer]

David, why don't you take?

[Dave Denton, EVP and CFO at Pfizer]

Yeah, so maybe on the margin discussion is, you know, obviously what we've said is have invested pretty substantially in our business over the past couple of years. So largely the investment phase, at least from a business development standpoint, is behind us. You know, we have work to invest to improve performance going forward, but the big dollars are already invested. Now it's an execution story and a continued improvement story. So you should expect that to occur over the next several periods. Obviously, the higher the revenue, the better performance, because you get to leverage your fixed costs. So clearly, the higher the those revenue targets and achievement happen, the better improvement from a margin perspective you should expect from us. And then from a capital allocation perspective, I think you said it right.

[Dave Denton, EVP and CFO at Pfizer]

You know, we are, at the moment, focused on executing our plan, focused on supporting our dividend growth over time, but importantly, beginning to de-leverage, recycling operations assets. Then from a priority standpoint, clearly we've made a significant investment in oncology. You should expect to us to put the investment thesis behind that franchise going forward. Clearly, that's number one of it.

[Albert Bourla, Chairman and CEO at Pfizer]

I would add that following the oncology, where clearly we have right now the biggest part of our R&D expenses, and we have a significant also part of our SI&A expenses. The other areas that we are putting a lot of emphasis when it comes to, to research, clearly vaccines. It's a crown jewel, and we plan to have significant productivity. In internal medicines, our metabolic franchise, it is an area that we are very excited. Obesity is part of that. We do believe that obesity is a big market and, is growing, and we do believe that Pfizer has the capabilities that allows us to play and win in that area. So that's an area that we will continue investing. Immunoinflammation, we have significant investments, is the other area.

[Albert Bourla, Chairman and CEO at Pfizer]

And of course, we have, we're among the fewest that they have antiviral and the, and the effective still, investment. So those are the areas that we will be putting money. Oncology, number one, then vaccines, metabolic diseases, immunoinflammation, antivirals are the ones that, we are continuing to invest. Next question, please.

[Operator]

Next, we have Carrie Holford with Berenberg.

[Kerry Holford, Head of Global Pharmaceutical Equity Research at Berenberg]

Thank you. Just a couple of pipeline questions from me, please. Firstly, on RSV, can we expect you to announce the data for Abrysvo following that third season in Q2? And then also on the two Phase III starts you've highlighted today, B6A in lung, CDK4 in breast. When can we expect Phase III data readouts for these two products? Thank you.

[Albert Bourla, Chairman and CEO at Pfizer]

I'm not sure. What was your question on RSV?

[Kerry Holford, Head of Global Pharmaceutical Equity Research at Berenberg]

It's to understand whether you're going to publish the data from the following, the third season, third winter season of RSV.

[Albert Bourla, Chairman and CEO at Pfizer]

Yes. Yes, I got it. Thank you. Thank you. Okay. Why don't you take that, Michael, on the Abrysvo, and then, Chris?

[Mikael Dolsten, Chief Scientific Officer and President of R&D at Pfizer]

We continue to accumulate important RSV data, and expansion of how this important vaccine can be used. So you should expect this first half of the year, likely Q2, that we share more from our clinical trials, including full second season, but also expansion in traditional age groups. As you can note on ClinicalTrials.gov, we have active trials, and we think that will very nicely allow high-risk groups across a large age span to be addressed.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you, Michael. And then Chris?

[Chris Boshoff, EVP and Chief Oncology Officer at Pfizer]

Thank you very much for the question. So the immediate readouts for this year, second half, 2024, will be vepdegestrant in second line, hormone receptor-positive metastatic breast cancer, the Veritac-2 study. Also second half, 2024, we expect to anticipate results from Breakwater, very important indication, up to 12% of colorectal cancer with Braftovi in first line, BRAF CRC. The new study starting right now is CDK4, B6A, and docetaxel in Phase III programs, and then also I hope later this year for EZH2. Those will appear in clinicaltrials.gov as primary completion dates beyond 2025 and 2026, but obviously there could be interim results with earlier results.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you very much, guys, for answering Carrie's question. Let's go to the next question, please.

[Operator]

The next question comes from Chris Shibutani with Goldman Sachs.

[Chris Shibutani, Managing Director, Biotechnology Equity Research at Goldman Sachs]

Thank you very much. Two questions, if I may. Aamir, with your prior role, you had talked about $25 billion in revenues by 2030, that the company was looking to deliver based upon M&A. We have the impairment with Arena. Is there an update for that? And now that you're in the role of U.S. chief commercial officer, non-oncology, non-COVID, what would be on your wish list in your current seat in terms of where you feel an opportunity to expand those revenues, potentially through business development, that could work to hit that $25 billion target by 2030? Then secondly, with the M&A activity across the industry, investors are always paying attention to what's going on with the FTC.

[Chris Shibutani, Managing Director, Biotechnology Equity Research at Goldman Sachs]

Having passed through this gauntlet with Seagen last year, is there anything you can comment about to help us think about how regulators are thinking about the M&A environment in terms of particularly size of deal or any other dimension that you think is worth being aware of that might have been your observation from your experience in 2023. Thank you.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you very much. Amir, why don't you take the question? By the way, let me clarify that Amir's responsibility includes COVID revenue. So go ahead, Amir.

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

Okay. So, Chris, there's a lot in what you asked. Firstly, on the $25 billion goal that we put out there, I'll just remind that we guided to $20 for what we plan on getting to by 2030 for the deals that we had done. And I would also just remind you that the $25 billion was a 2030 goal. So there is lots of time between now and 2030 to achieve that goal, consistent with our capital allocation priorities that, that Dave described. On your second question, I mean, to be honest, yes, everyone's got a wish list, but my focus is on exactly what I described right now and what we've talked about as a management team, which is delivering value from our launches and delivering value from the deals that we've done.

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

So that's where my focus is. Now, lastly, in terms of FTC, you know, it's not appropriate for us to comment on what the FTC is going to do or not do, but what I can say is that we feel very good about how we have operated with all regulators and in all regulatory bodies across the world to get done all the deals that we did. I think that just speaks to our patient-centric approach and our collaborative nature with regulators.

[Albert Bourla, Chairman and CEO at Pfizer]

Thank you. Next question, please.

[Operator]

Next, we have Akash Tewari with Jefferies.

[Akash Tewari, Managing Director, Global Head of Biopharmaceutical Research at Jefferies]

Fair point on the Prevnar comments, with the impairment charge and kind of the moving parts between adult, pediatric, and international. Consensus has modest top-line growth over the next few years for the entire franchise. Is that a reasonable expectation for investors, given the increased competition from Merck and the U.S. pool shrinking? And then do you have an internal view on what the ACIP recommendation will be regarding Prevnar and V116? Thank you.

[Albert Bourla, Chairman and CEO at Pfizer]

Look, why, Amir, why don't you take the... Is it the Prevnar expectations? We don't comment on what the expectations of the street are, right? So are we— And I think we gave a very good, let's say, high level trajectory, how we see this market. In the U.S., the adult opportunity, it is mainly, as always, in with the adult, a catch-up opportunity. So when you come, you have a pool of all the people that are eligible, but some of them would choose to make the vaccine. Usually, that happens in the first year and maybe a little bit then on the second year. We have exhausted, I think, this opportunity within 96% market share. So right now, I don't think that we will see in the U.S., in the adult, huge opportunity.

[Albert Bourla, Chairman and CEO at Pfizer]

Merck competition is coming into that. So this is not a very big growth area for us, because as I said, this is not where we plan to do. It is huge when you launch it, then very quickly goes down because then it is just the people that they are really graduate, they are going into this cohort in terms of age. The big opportunity is the pediatric, because it is 4 doses, it's not 1, and, because it is a huge cohort every year, way bigger the cohort of newborns than people that are becoming 65 in the country. So that's how we should see it. So, there's nothing much to add into that. Next question, please.

[Operator]

Thank you. Our last question will come from Evan Seigerman with BMO Capital Markets.

[Albert Bourla, Chairman and CEO at Pfizer]

Evan, you're last-

[Evan Seigerman, Managing Director, Head of Healthcare Research at BMO Capital Markets]

Hi, guys. Thank you so much. Oh, thank you, Albert. I appreciate it. Two questions from me. One, when you think about the, you know, the additional $25 billion revenues by 2030, now that Seagen's part of this business, where, where are we in getting to that metric? And then my second question is really on Oxbryta and sickle cell disease. You know, when you bought the asset, you really, you noted that you planned to speed up the distribution of the drug to parts of the world most impacted by the, by the disease. We haven't really seen much OUS, given, you know, recent competitive approvals of Casgevy, you know, in the Middle East. How do you think about the OUS opportunity in context of the, you know, competitive updates there? So Seagen, and then thinking about some Oxbryta comments.

[Albert Bourla, Chairman and CEO at Pfizer]

Yes. On the Seagen, maybe I can take it because that's an easy answer. From Seagen, we expect to get $10 billion by year 2030. That was a number that we put out there when we announced the acquisition. Since then, few things that have reinforced our confidence in this number have occurred. The first one, it is that ADC became the hottest thing on the M&A activity. Everybody wants an ADC, which basically our big bet was in this technology. So looks like there is an overall consensus among investors, companies, analysts, that this is a technology that will deliver a lot. So that give us a lot of comfort that happened after we announced.

[Albert Bourla, Chairman and CEO at Pfizer]

The second thing that also happened after we announced this $10 billion was that Seagen came out with significant readouts of significant products and that were beyond our expectations, but also what you don't see, but we see, they are advancing a lot of stuff that some of them we will show you on the 28th, 29th of February. So also, it was a bet in the technology and a bet in the company. We feel that we did very well in both. So the $10 billion is $10 billion of the 25.... But we remain, we don't change it, but we remain confident that we can make it. Then, of course, in addition to that, there was an additional $10 billion for all the other things that we have done, and these $5 billion that we could execute.

[Albert Bourla, Chairman and CEO at Pfizer]

Now, on Oxbryta, how Oxbryta is doing, Aamir?

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

Yeah. So, Evan, with regards to Oxbryta, and then I'll comment on the acquisition as well, since you referred to that. You know, we're pleased with the U.S. performance. The Q4 was up 30% over the prior year and 14% over the prior quarter. The prescription trends are very solid. We've made a lot of investments in customer-facing teams since we made that acquisition. So we like the momentum that we're seeing in the U.S., and we expect to see more. Right now, the rest of the world is a very small part of Oxbryta revenue, and that is something that will take time to develop, and we'll obviously look at that appropriately.

[Aamir Malik, EVP and Chief U.S. Commercial Officer at Pfizer]

As you think about the GBT acquisition, it's important to look at Oxbryta, but I also would remind you that we're also very excited about GBT601, which we expect can bring a lot of value in addition to Oxbryta. Some of it will, you know, if it's successful from a clinical and regulatory perspective, some sales will be cannibalized, but there will also be room for Oxbryta in the market to continue to grow. So when you look at the combination of the momentum in the U.S., an opportunity that's yet to be developed outside the U.S., and 601, where we presented great data at ASH in December, we think that there's a lot of value to be gained from this acquisition.

[Albert Bourla, Chairman and CEO at Pfizer]

Yes, and I will add, it is the same exact with the GBT acquisition. When we did the acquisition, we announced our projections for year 2030. Since then, things have improved in terms of our confidence to deliver these numbers, and I'm not talking only that Oxbryta is performing exactly as we thought it would, but the most important upside it is that we had data, but we didn't have when we made the acquisition on the 601, that has the potential to become a transformative therapy in the sickle cell and really, really brings to the next- It's a step change, if that thing, if the Phase III, let's say, reconfirms the phase two results. So also over there, I think what we announced, we feel now we're more confident that we should be able to achieve and hopefully exceed.

[Albert Bourla, Chairman and CEO at Pfizer]

So with that, I think it's time to end the call. In summary, we are optimistic about the year ahead. We have defined our five key priorities that will keep us focused. I repeat again, this will be a year of execution. We have assembled a team that I handpicked, that I believe are the absolutely right leaders to execute. I know that the whole world was impressed with the way that we executed our COVID strategies, how we were able to execute on the R&D front, on the manufacturing front, and on the commercial front with two products, the vaccine with the highest market share and with the product in oral antiviral.

[Albert Bourla, Chairman and CEO at Pfizer]

We plan to repeat the same execution excellence level as we are building oncology leadership, as we are progressing the next wave of our pipeline, as we are maximizing the performance of all these new launches that have happened, as we execute our cost realignment program, starting this year with SI&A, but also which you will see the results. But also, of course, the program to improve the gross margin, that you won't see results now because it takes long, but we start it now, as we speak, and laser focus in maximizing value for shareholders with the way that we allocate our capital. The team is there to make sure that this will happen, and I think we should meet again in three months, and we will see how we are progressing against those stated goals. Thank you very much, all. Bye-bye.

[Operator]

Thank you, ladies and gentlemen. This does conclude today's Pfizer's fourth quarter 2023 earnings conference call. We appreciate your participation, and you may disconnect at this time.

Participants

Executives

• Aamir Malik, EVP and Chief U.S. Commercial Officer
• Albert Bourla, Chairman and CEO
• Alexandre de Germay, EVP and Chief International Commercial Officer
• Chris Boshoff, EVP and Chief Oncology Officer
• Dave Denton, EVP and CFO
• Francesca DeMartino, SVP and Chief Investor Relations Officer
• Mikael Dolsten, Chief Scientific Officer and President of R&D

Analysts

• Akash Tewari, Managing Director, Global Head of Biopharmaceutical Research at Jefferies
• Andrew Baum, Global Head of Healthcare Research at Citi
• Carter Gould, Senior Analyst, U.S. Biopharma Equity Research at Barclays
• Chris Schott, Managing Director, Major and Specialty Pharmaceuticals Senior Analyst at JPMorgan
• Chris Shibutani, Managing Director, Biotechnology Equity Research at Goldman Sachs
• David Risinger, Senior Managing Director and Senior Research Analyst at Leerink Partners
• Evan Seigerman, Managing Director, Head of Healthcare Research at BMO Capital Markets
• Geoff Meacham, Managing Director, Equity Research, Biotechnology and Major Pharmaceuticals at Bank of America
• Kerry Holford, Head of Global Pharmaceutical Equity Research at Berenberg
• Louise Chen, Senior Research Analyst and Managing Director, Specialty Pharmaceuticals at Cantor Fitzgerald
• Mohit Bansal, Managing Director, Biopharma Equity Research at Wells Fargo
• Rajesh Kumar, Head of Life Sciences and Healthcare Equity Research at HSBC
• Robyn Karnauskas, Managing Director and Senior Biotech Analyst at Truist Securities
• Steve Scala, Managing Director, Health Care – Major Pharmaceuticals Research Analyst at TD Cowen
• Terence Flynn, Managing Director, Senior U.S. Pharma and Biotech Analyst at Morgan Stanley
• Tim Anderson, Managing Director, Senior Equity Research Analyst, Pharmaceuticals and Biotechnology at Wolfe Research
• Trung Huynh, Analyst, Healthcare at UBS
• Umer Raffat, Senior Managing Director at Evercore ISI