Pfizer Inc.
Q2 2021 Earnings Call Transcript

Published: 28 Jul 2021

[Operator:]

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 Stevo, Senior Vice President and Chief Investment Relations Officer. Please go ahead, sir.

[Chris Stevo:]

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 Advisor. 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 Hwang, Group President, Pfizer Biopharmaceuticals Group; John Young, our Chief Business Officer; and Doug Lankler, General Counsel.

[Albert Bourla:]

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. Most notably, we delivered extremely strong financial results. Even excluding direct sales and alliance revenues provided by our COVID-19 vaccine. We generated 10% operational revenue growth compared with 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 continued to accelerate the production and delivery of the Pfizer-BioNTech COVID-19 vaccine and, in collaboration with BioNTech, have now shipped more than one 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. Let me start with a 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.

[Mikael Dolsten:]

Thank you, Albert. I'm delighted to share some highlights from Pfizer's R&D pipeline, which continues to be one of our greatest strengths. Today, I will 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 impacts 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. ARV-471 represents breakthrough drug design technology. PROTAC protein degraders efficiently eliminate rather than inhibit disease-causing proteins. To our knowledge, ARV-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 of action from the many SERDs in development. In the future, novel assets like ARV-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 mechanisms of action. Early clinical data show ARV-471 has the potential to be an endocrine therapy of choice across treatment settings in breast cancer. ARV-471 is being evaluated as a treatment for metastatic breast cancer in a Phase 1 dose escalation study, a Phase 1b combination study with IBRANCE, and a Phase 2 monotherapy dose expansion study. Starting in 2022, we expect to initiate Phase 3 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 pre-clinical data that has us excited. The chart on the left shows ARV-471 demonstrated impressive anti-tumor activity in combination with IBRANCE palbociclib in pre-clinical studies. In the Phase 1 interim analysis of 21 patients, ARV-471 demonstrated a compelling efficacy signal in heavily pretreated patients, the majority with prior fulvestrant treatment and all with prior CDK4/6 inhibition treatment.

[Frank D'Amelio:]

Thanks, Mikael. 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 were 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 revenue growth despite a negative 4% impact from price. 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 in 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 will have fewer selling days as compared to the year-ago quarter. For the full year, this results and 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 and product mix. Adjusted SI&A expenses increased owing to a more normalized level of promotional and sales force activity along with some impact from foreign exchange. The increase in Adjusted R&D expenses 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 on adjusted income increased to 16.6% 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 $0.03, to adjusted diluted EPS. Now, let's move to our revised 2021 guidance. 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 billion to $80 billion, with the COVID-19 vaccine revenue for the year being projected to be approximately $33.5 billion based on contracts signed through mid-July. I'd note that this projection does not include the doses with our contract with the U.S. Government announced last week. For Adjusted cost of sales, the range has increased 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. The projected COVID-19 vaccine Revenue as a percentage of total company revenue at the midpoint has increased to 42% as compared to 36% in our previous 2021 guidance. On Adjusted SI&A, we have made a small increase to the projection and now expect $11.5 billion to $12.5 billion. In addition, we increased our adjusted R&D guidance range to $10 billion 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 adjusted diluted EPS range of $3.95 to $4.05 or 77% growth at the midpoint compared to 2020, including an expected 4% benefit from foreign exchange. Let me quickly remind you of some assumptions and context on the 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 3 billion doses in 2021 subject to continuous process improvements, expansion at current facilities and adding new suppliers and contract manufacturers. 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 costs, applicable royalty expenses, as well as a payment to BioNTech representing the 50% gross profit split. We continue to expect that the adjusted income before tax margin for 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 for delivery of additional doses during the year, we will provide a guidance update in our subsequent earnings releases. 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 billion 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 $2.55 and $2.65 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 and EPS guidance for the remainder of the year. In addition, we have 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 Stevo:]

Thank you, Frank. Operator, if we could have the first question please.

[Operator:]

Your first question comes from the line of Kerry Holford from Berenberg.

[Kerry Holford:]

Thank you. A few questions on the COVID vaccine, please. Essentially a point of clarification. I just checked the upgraded 2021 sales guidance, the vaccine reflects the doses you expect to deliver this year, and not for those contracted to delivery in 2022. As you stand today, can you talk directionally about how you see 2022? So with that your sales is relative to this new guidance trigger for 2021, give them only for audiences that you would require delivery of the new updated version 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 U.S. government is equivalent to prior U.S. orders? And now just that pricing compare in the ex-U.S. contracts that you've more recently signed? Thank you.

[Albert Bourla:]

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 doses. These are confirmed orders, contract signed. And we have said repeatedly to deliver, to expect to have 3 billion doses manufacturing this year. And we are, of course, discussing about those doses and most of them are in very advanced discussions. Sorry, I believe that we will eventually - I would get those doses. Now keep in mind 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 and almost half to low-income countries and lower 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. It is going to go to 2022. This is how our financial calendar works. Only the U.S. 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 doses. How will 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 have also - they got all the way through 2024. U.S. just got an additional 200 million doses. And eventually every country in the world right now is discussing with us for additional doses. Our total expected capacity for 2022, it is 4 billion doses. And I believe given the needs that likely would be allocated to the entire world. Then, you asked a question about the Delta variant, and maybe I will Mikael to provide a few on that.

[Mikael Dolsten:]

Thank you, Albert. As you noted in the presentation, all data right now point to that the current vaccine is highly effective against Delta variant. They may be waning over time as often is seen with the vaccine and that's why we shared today that if you do get a third dose boost of the current vaccines, you seem to regain very high neutralizing antibody against Delta. We are also producing a Delta variant specific that is mainly to make sure we cover all options of the future, but we remain highly confident in that the current vaccine when used appropriately will be effective against Delta and we are in dialogs with regulatory agencies about this potential of a third dose of a vaccine pending epidemiology of the vaccinated over time. Thank you.

[Albert Bourla:]

Thank you very much, Mikael. And Kerry, also on the price per dose. We do not discuss our prices with these individual country, but we have given our overall policy which says that the high-income countries they have compatible prices, but they vary only based on the - we give discounts to the prices based on the volumes that are committed. Middle-income countries that have approximately half of price and for the lower-middle and low-income countries we are providing our vaccines on a non for profit basis. Thank you.

[Chris Stevo:]

Thank you, Albert. Next question please, operator.

[Operator:]

Your next question comes from Matthew Harrison from Morgan Stanley.

[Matthew Harrison:]

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 Bourla:]

Mikael, I think you could to take those two questions and then if Angela wants to add something.

[Mikael Dolsten:]

Yes, 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 salient study and during that period, they have passed PDUFA timeline for both us and other that develop new JAK. We certainly hope as the workload from COVID may attenuate that the agency will have soon, I've been able to review all available data as we do consider that JAKs have a really meaningful and important role in management of RA, properly used in the right patients and also new indications where there are fewer alternatives such as a atopic dermatitis, alopecia, Vitiligo and so on. So we cannot give any firm timelines, but we certainly hope it will be relatively soon. 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 in the University 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 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 first to look at the time schedule for both immunogenicity and head to head event trial.

[Albert Bourla:]

Angela, do you have anything to add.

[Angela Hwang:]

I think Mikael covered all the key points. Just to reassure everyone that we are in constant communication with the FDA and they're just doing their risk benefit analysis like they would with any and all molecule. And so we are very confident that there is a role that JAKs do play and we just - we are waiting eagerly for the response from the FDA. Thank you.

[Chris Stevo:]

Operator, go ahead with the next question please.

[Operator:]

Your next question comes from Daniel Busby from RBC Capital.

[Daniel Busby:]

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 than CDC and FDA, at least at this point in time. Can you provide any additional color about why that's the case? Is it 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? 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 though?

[Albert Bourla:]

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. I think what we have said is not new, i.e., for months I'm saying that we believe based on the date of efficacy. Holistically, but we will need a booster eight to 12 months from the second dose. And we have seen with the Delta that might be needed a little bit earlier, particularly for some parts of the population. But we have to submit the data again. So I don't think that the FDA or CDC can speak because they have very different authority when they speak and it's extremely - they have very different considerations. We will submit those data by August 16. We 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 dose booster, then CDC need to understand the situation in the country and back over a period of time. And they will have to make a recommendation about the boost. 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. Clearly, countries with the big percentage of their population in the January, February timeframe. They have very different efficacy because the time is the clock is ticking. And with that, I will go to Angela about the Prevnar 20 and ACIP.

[Angela Hwang:]

Yes, thanks. Thanks, Albert. Well, 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 coverage that - the broad coverage that provides but also the fact that our label contains indication for both IBD as well as pneumonia is really unique. And I think that this pneumonia indication is a true strength of the Prevnar family being that were the only company that have the 80,000 catheter trial where this pneumonia indication was based. And so with this, what we anticipate coming up in October, our policy questions that will be addressed for both PCV 20 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. For Prevnar 20, there's a question around vaccinations of 65 plus as well as 50 plus, in addition to the 18 to 49 or 18 to 59 immunocompromised. From 15, the range and the policy question posed there was 65 plus. So, when you look at what's different, only Prevnar 20 was being looked at for the 50 plus. 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 set-up 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.

[Operator:]

Your next question comes from Chris Schott from JPMorgan.

[Chris Schott:]

Just coming back to the COVID-19 booster, would you envision this as an annual booster? Or with these levels of antibody titers, would you envision that third dose could give more sustained protection against COVID? I was thinking about just kind of how the market evolves over time? And then my second question was just coming back to the JAKs and 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. And also anything you've learned with regular regulatory interactions, etc., that's changed your view there? And then maybe second question on the JAKs is just with Xeljanz. What wouldn't EMEA like label revision mean for Xeljanz as we think about the U.S. commercial opportunity? Thanks so much.

[Albert Bourla:]

Mikael, I think you can take the booster in terms of, is it the third dose and the annual think or is going to be an annual re-vaccinations. And then, Angela we move to you for vaccine and Xeljanz.

[Mikael Dolsten:]

Well, Albert, spoke earlier to the importance of both following a vaccine efficacy in different regions of the world and into a new strength. Right now, we have a surge in the Delta strain. It's the most infective strain ever seen and it puts pressure on vaccinated individuals. The data we showed today indicate at six to eight months we can boost up to 100-fold 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. So these type of data is a typical package we will put together in this case for all 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 in real world evidence. We expect the third dose to be potent and somewhat maybe more long lasting than the second, but we also recognize that the virus constantly evolve and you all start to notice about Delta plus variant. 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 it to be boost at the right time before you risk for infecting side, we need to monitor. But all in all, we believe that similar to flu business it may be likely for the COVID business, but we are gathering data to validate and will constantly work with key opinion leaders and regulators in interpreting the data.

[Albert Bourla:]

Angela?

[Angela Hwang:]

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 in at this point as we've discussed earlier, we're just - we're just waiting and waiting to hear from them as to their ort of their points of view. But both doses are and still in discussion and I think ultimately - I think ultimately where you might be going to your question is sort of what happens if we only get one or the other. And I just want to reinforce that we are very confident in the potential of abro whether it will both doses or for one. And the reason is that we come back to just the size of the market. We've discussed this before that there is a very, very large market with huge unmet need. There are 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. And 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. And then coming back 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 SPM - SmPC, excuse me. And there the label is really looking at a cautionary note. For those who are 65 plus who are smokers or have malignancy risk and the caution there is for physicians to consider alternative therapies prior to using Xeljanz. 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.

[Chris Stevo:]

Sylvia, next question please.

[Operator:]

Your next question comes from Ronny Gal from Bernstein.

[Ronny Gal:]

The first one would also be in the boosters. I fully understand that at 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 have not so far waned 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 dose comes down? And the second question is around by similar business. This is something you highlighted. We are not really seeing a lot in the pipeline or the clinically available pipeline for your biosimilar business beyond the HUMIRA biosimilars. Can you discuss your plans for that business? Are you - is this still the emphasis for Pfizer or are you emphasizing that?

[Albert Bourla:]

Thank you, Ronny. Mikael, again I think I will ask you to make comments on if we see waning of immunity also in severe disease or in hospitalizations. And we have seen data that all about that. Mikael?

[Mikael Dolsten:]

Yes, thank you, Albert. It's very good question. So first, we do see a 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 the drop in titer that we alluded to. If you raise it, may have a good probability to reverse that waning. Fortunately, the protection against severe disease, hospitalization and fatal 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. 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 bodies have waned, but the slow but still noticeable gradual decline in protection also again severe disease is something that's on our eyes and certainly we believe that by boosting you may strengthen antibodies and T-cells and you have an early warning signals whether to do that with some modest waning in hospitalization given its 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 Bourla:]

Thank you, Mikael. Angela?

[Angela Hwang:]

Thanks for the question. On the biosimilars, and certainly we've been so pleased with the tremendous growth that we've seen in this area and the deep utilization of our biosimilars. I will say that for our biosimilar portfolio and where we see it today, since we've made this pivot to a pure play sort of innovation and innovation focus and our pipeline, we are really now looking at that biosimilar portfolio vis-a-vis other investment in breakthrough therapies that we have to make. 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 are 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 Bourla:]

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 and particularly best-in-class, best-in-class, and there are so many, right? So that's why our R&D budget is increasing. So thank you very much. But to you Chris.

[Chris Stevo:]

Thank you, Albert. Operator, next question please.

[Operator:]

Your next question comes from Geoff Meacham from Bank of America.

[Geoff Meacham:]

Just have two for Mikael on COVID boosters. When you look at the new cases of the Delta variant, the protection varies quite a bit in vaccinated 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 the vaccine over time? And then second question for Albert or for Frank. 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 Bourla:]

Thank you very much. Let me start with our consumer. Frank will be saying the second one. We always have this urgency and this extra cash inflows do not change neither our strategic direction nor materially our ability to perform and give us better flexibility, and we plan to allocate capital to develop the business with a very big sense of presence. Now the COVID boosters and your question about why we see differences around the geographies. In fact, Mikael will explain in a moment. The data from all geographies are consistent if you take into consideration the time element. But Mikael, please take it.

[Mikael Dolsten:]

Yes, you said it very well, Albert. We first get the glimpse from real world evidence in Israel given the very rapid massive vaccination they did over basically January to March. And January started with all their adults and those more vulnerable. They are now out six to eight months and have a large number of them. So that's why they see their vaccine waning and that's why they also communicate about our consideration for a third dose. Other countries that started later and ramping up the rollout slower will and are starting to see similar trends, representing what you still 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. Finally, there is also an element that some countries, particularly U.K. extended the interval between those 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. This advantage of extending the range between dose one and two is that you expose of the dose one many individuals to high risk of re-infection. But you do gain likely a somewhat extended protection. So these are two examples. When you started to vaccinate, the time difference between those 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 Bourla:]

And thus to clarify when Mikael says extended because the spread between the second is not that they will get more out of the second. It is that the real protection stuff later from the second dose. And this is the case that most of the data in the U.K., for example, are one to three months. And most of the data in Israel when receive is in three to six months, and most of the cases are happening. And we have also visibility to other data, including some data of here in the U.S., but the trend is the same, is pointing to the same direction. But you have very good protection in the beginning, then there is a waning. When you come closer to the six months, which is even more profound with Delta and the waning it is mainly - is more profound for mild cases, but there is clear waning also for hospitalization and severe diseases. What used to be 100% in the first months, now is coming to the low '90s and cases to be 80s. So that's the difference between the different geographies. If the time element, you will see very actually impressive consistence. Okay, Chris, back to you.

[Chris Stevo:]

Thank you, Albert. Sylvia, next question please.

[Operator:]

Your next question comes from Andrew Baum from Citi.

[Andrew Baum:]

Many thanks. Firstly, in relation to Prevnar 20. Could you talk to how you expect ACIP to address the current recommendations for Pneumovax? Is that dropped given the serotypes which you are now addressing with Prevnar 20? Second, you commented on a number of the other vaccines. You didn't comment on your C. diff candidates where the primary endpoint is rapidly approaching. Could you just comment on your led to degree of optimism or not for that vaccine? And then finally, in relation to the patient assistance program for IBRANCE, just looking at the script trends, Verzenio versus IBRANCE, there's clearly a disconnect there. It could be due to the 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 Bourla:]

Thank you. Mikael, you want to take first this question you didn't speak about. I think it we'll see that you referred to.

[Mikael Dolsten:]

Well, we had to reach pipeline and we thought that we wanted to allow you that question to not speak too much ourselves with selected assets where we thought you - we wanted to hear some update. CDF, we continue with the trial. We passed one review that had 30 cases and we are 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 read out. We are expecting this fall to have another readout in that trial pending events. But certainly, I continue to believe it's a very well-designed vaccine. There is precedence with antibodies if you neutralize the toxins. So I continue to say be patient. We continue to mature the study and I do hope it will have an encouraging read out. But like in any clinical study, you can never be fully certain about the outcome, but I remain very encouraged and optimistic myself.

[Albert Bourla:]

So thank you, Mikael. And the surprised by not is not that there was something behind it. It is that we have to select few losses that we could present new data. Angela, please take the question about Pneumovax, if what do you think the ACIP will do and the program with IBRANCE.

[Angela Hwang:]

Sure, well, the question of Pneumovax is something that we can refer to in the ACIP discussion that was had recently. Again, comes back to the policy questions that were posed. And clearly there just to them to reinforce what I said earlier, which was that they were different policy questions posed both PCV 20 as well as Merck 15. The question of whether 50 plus would be vaccinated with only for PCV 20. And specifically your question about Pneumovax, that is being evaluated only with Merck 15 not with PCV 20 or with any PCV. So again, different policy questions and very specific to each pneumococcal. And then going to your question about the path 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 because they are on commercial insurance their economic status is very much than aligned to employment. And what we've seen throughout the pandemic are two 2 things. One is the - is a slowdown in new patient starts, which actually is one of the reasons forward for the negative growth that you saw in the IBRANCE in the U.S. And the second and more prominent one this quarter is the path. So I think what you're seeing is very consistent with what we're seeing in the environment generally as it pertains to economic hardship, and so that is definitely one explanation. And then the other explanation would be a slowdown in the new patient starts that we've been seeing as well.

[Albert Bourla:]

Thank you, Angela.

[Chris Stevo:]

Sylvia, next question please.

[Operator:]

Your next question comes from Carter Gould from Barclays.

[Carter Gould:]

Thanks for taking all the questions and I appreciate all the color on the pipeline from Mikael. A couple from us. First, you gave us a pre-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 have moved very fast there. Can you comment just around your ability to supply the market in bulk sort of out of the gate system and 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 Bourla:]

Yes, let me take quickly the first two and then for the JAK, Mikael maybe you can take. The pediatric study - we are, as you said, as we have said, we are projecting in the September timeframe, immediately after summer. But FDA has asked some requirements and we are looking at them, but our intention is to try to even with these requirements to try to come in the same time frame. So we are not changing right now our expectations as to when the side we can recruit. If we need to do more in less time, we will try to accommodate that. So that's the first one. On the oral the supply, on the oral and the supplies. 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. So I have authorized our team to invest and manufacture at least significant quantities of the oral. So if we are successful, we will have quantity for the world as much as possible, that's a significant investment that we are doing at risk. It would go all the way to 1 billion including some of these work that is happening. So, but I think it is or I thing to do and I gave them the green line. They should not be thinking about cost right now. They should be thinking about success of the oral program. And then for the JAK, Mikael, do you know when the study will be published or the results.

[Mikael Dolsten:]

We have focused to share all the days of the study obtained this fall with regulators. And as you know, conclusions have already been post about the data from both European, like the PRAC committee and U.S. 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 U.S., European regulators to finalize things and like Angela spoke to, that will give a clarity into the class of JAK and to Xeljanz, and patients with treatment lines that benefit and 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 covers all Xeljanz patient and we have continued to share those robust data.

[Albert Bourla:]

Thank you.

[Chris Stevo:]

Thank you, Albert. Operator, next question please.

[Operator:]

Your next question comes from Geoffrey Porges from SVB Leerink.

[Geoffrey Porges:]

Thank you very much for taking the question. Mikael, 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, but of course, it will pick up before 484K and then be even more resistant to vaccine-induced immunity? 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, Delta plus strain? And then lastly, have you contemplated heterozygous boosting with your vaccine after, for example the ChAdOx vaccine or vice versa? Is that something you're studying?

[Albert Bourla:]

Mikael?

[Mikael Dolsten:]

Yes, starting with the Delta plus. So right now Delta is the 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 outcompete Delta. So when we say plus, it means just continue to monitor into the future at some time point, whether six to 12 months, there are likely going to be strains that pick up additional mutation, but they also fit. Meanwhile, what we have seen with the wild-type vaccine is that we see for each dose not yet a higher magnitude of antibodies, but breadth. The rapids are of different cell producing antibodies growth and growth. So you seem to cover with increasing dose more variants. If you go back and look at the slides, we used the Beta variant an example that was somewhat of a difference of the dose two, harder to neutralize the Beta variant of the dose two, three easier to neutralize the Beta variant. So that's why we this far find the wild-type is very useful for existing and new variants. Now as Albert 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 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 boost. 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 heterologous boost. There are trials coming out, performed, for example in U.K. that showed favorable outcome for those that vaccinated with AstraZeneca on getting an mRNA boost such as BioNTech which they used. Those are data that you should review and I'm sure patients and physician have their own conclusion. I know there is in U.S. similar studies to benefit from that mRNA vaccines can be given repeatedly, while adenovirus delivered vaccine has limitations for repeat use.

[Albert Bourla:]

Thank you, Mikael. I want to make to emphasize that our strategy when it comes to that, we take no chances here. This is to risk. So we have a variant that it is of concern, all risk we make immediately, at least a vaccine to try. We first time we said that with better. But was seen aggressive. So we start doing the vaccine and we have a vaccine right now. We are going to submitted to the FDA. Eventually, they'll need. It was very clear because after we did that, we've got data for initially but also we got the South African study, about 800% efficacy in the better or smaller numbers 100% efficacy. So we don't needed, but we tried. The same we do now with Delta. It looks like we will not need is where everything that we see so far. But we are developing one in the backstage. 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 protection, we take 95 days to be able to have a vaccine. So that's why we always strive to be ahead of the curve, but two series of initial to take risks. Back to you Chris

[Chris Stevo:]

Thank you. Albert. Sylvia, next question please.

[Operator:]

Your next question comes from Louise Chen from Cantor.

[Louise Chen:]

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 U.S. 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 a 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 Bourla:]

Yes, on the vaccination rates, Louise, from what I see and what we see with different poles, from people that we are reluctant, it seems that this will play a role. Some people change their reluctancy through willingness to get vaccinated if the vaccine gets full approval. And in terms of the timelines, again I leave to FDA I know that the procedure is entrepreneurial the second, how receptive regulators are on a third dose. I think regulations are receptive for not to data, and they need to see the full package of data. Once they see it, they have to speak. So I don't want to make comments about that. And RSV, which is clearly a very, very large opportunity, but it is growing even more because of the – we see that the immunology of the disease is getting more and more hot. I will ask Mikael to give us some color.

[Mikael Dolsten:]

Yes, we are very excited about the data and opportunity for an RSV adult vaccine. There are 100,000 of cases per year in the U.S. 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 compromised. Now there are actually up to 15,000 deaths just in the U.S. annually. So it's not just about a difficult disease. There are 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 target RSV A and B subgroup. Please recall that the A and B subgroup variants are likely of similar quantities circulating, some yes one is larger than the others, some yes are equal. So we cover all of the available RSV protection by variant vaccine if shown successful in the final studies. Also I wanted to make it clear that when you look at the data in our study of the very prominent 100% protection. There are benchmark 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 U.K. 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 good protection unless you have both part for the A and the B strain. Angela, anything you want to shed light on how you commercially see this.

[Angela Hwang:]

Yes, no thanks Mikael. And maybe just to reinforce what Mikael said, which is that there are hundreds of thousands of older adults that are hospitalized and 10s of thousands of deaths each year. In fact, this is the second leading cause of respiratory illness following flu. So we think that we have a great opportunity to in fact develop this market because it is quite under diagnosed 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 Prevnar franchise so, all in all a tremendous and the exciting commercial opportunity.

[Albert Bourla:]

Thank you to both. As you can see, these a bit of excitement to both Angela and Mikael and I share the same both for the size of the medical need right now. But also for the capabilities of what looks like a very effective vaccine remain to be program with a Phase 3 study, but we are going to execute with the same speed as we are doing lately, our vaccine studies. Back to you, Chris.

[Chris Stevo:]

Thank you, Albert. Sylvia, we're just over time, but maybe we could do one very brief questions please.

[Operator:]

Your next question comes from the line of Terence Flynn from Goldman Sachs.

[Terence Flynn:]

Maybe I just had a two-part of first, just wondering if you can provide the latest – estimate on your vaccine efficacy from the Phase 3 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 Prevnar 20, how are you thinking about that in the context of your long-term guidance? Can that actually grow your Prevnar franchise significantly and any more detail you can provide there? Thank you so much.

[Albert Bourla:]

Mikael, it was I think 92%. Can you comment on the latest estimate and do you have seen any breakthrough.

[Mikael Dolsten:]

Yes, this is the Phase 3 trial that will be very soon published on Med archive and it will appear in the top peer-reviewed journal. Please check in on Med archive 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 months two and four, and then about 83% to 84% months four to six, we have retained during that period very high protection again severe disease and hospitalization.

[Albert Bourla:]

Thank you, and Terence Mikael and excuse me Angela about the Prevnar. Do you think you can grow it I'm asking you to do it, but what do you think?

[Angela Hwang:]

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, they're really two up there. There are two questions being posed that are different to what we have with Prevnar 13 today, which is number one. The ability, 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 on information, and we hope to have a positive outcome at the end of ACIP. But honestly, this is, this is all to be discussed. And I think a little too early to speculate what could happen. We need to have a robust scientific discussion to really understand what these opportunities are.

[Albert Bourla:]

Okay. Angela. We will give you some 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. We really appreciate and we learned a lot from this engagement. Our experience with, the COVID-19 vaccines have taught us a great deal about what is possible and what is impossible, and most things are possible. So, most notably, it has told us that we can drive step changes at Pfizer, not just incremental sales. To keep you updated on the progress we are making in R&D. We will host our next focused investor update later this year. The date will be announced soon. For this event, the Pfizer vaccines teams will provide an update on our vaccine pipeline progress, including our plans to continue advancing our cutting edge science in such areas as an mRNA program for COVID-19 and flu as well as the RSV research programs for both maternal and adult indication and other mRNA vaccines that we are working on. Before we close, I want to once again thank Chuck Triano, Chuck for his many contributions to Pfizer and for successfully elevating our Investor Relations function with best-in-class. Chuck, you are of course pro and on behalf of all Pfizer colleagues, I wish you and your family all the best in the next chapter of your life. Chuck is leaving behind some big shoes to fill which is why you are thrilled that Chris Stevo 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 healthcare industry would be a great asset as we continue to advance our innovate pipeline to deliver breakthrough therapies and vaccines to patients and long-term value to shareholders. With that, I will bring our call to a close. Thank you for joining us. Have a great rest of your day.