Pfizer Inc. (PFE) Q2 2020 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to Pfizer's Second Quarter 2020 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Chuck Triano, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning and thanks for joining us today to review Pfizer's second quarter 2020 financial results, our updated 2020 financial guidance, Pfizer's progress in helping find solutions for the COVID-19 pandemic as well as other relevant business topics. I'm joined today as usual by our Chairman and CEO, Albert Bourla; Frank D'Amelio, our CFO; Mikael Dolsten, President of Worldwide Research and Development; Angela Hwang, Group President, Pfizer Biopharmaceuticals Group; John Young, our Chief Business Officer; and Doug Lankler, our General Counsel. The slides that will be presented during this call were posted to our website earlier this morning and are available at Pfizer.com/investors. You'll see here that Slide 3 covers our legal disclosures. Albert and Frank will now make prepared remarks, and then we will move to a question-and-answer session. With that, I'll now turn the call over to Albert Bourla. Albert?

Thank you, Chuck, and good morning, everyone. During my remarks, I will discuss our second quarter business performance, provide an update our pipeline and, of course, speak to the progress we are making to combat the global public health challenge posed by the COVID-19 pandemic. Our continued strong performance speaks to the resilience of our business, even during the most challenging times. The second quarter was the first full quarter impacted by COVID-19. Revenues in the quarter included an estimated net unfavorable impact of approximately $500 million, or 4% due to COVID-19, primarily reflecting unfavorable disruption to wellness visits for pediatric and declines in adult patients in the U.S. and lower demand for certain products in China. These declines were partially offset by increased U.S. demand for certain Sterile Injectable products, increased adult demand for Prevnar 13 in certain international markets. Let me start with an update on our biopharmaceuticals group. For the quarter, our Biopharma business grew 6% operationally, driven by strong performances from many of our key growth drivers, including Vyndaqel/Vyndamax, Eliquis, Ibrance, Inlyta, Xtandi and our biosimilars portfolio. Our oncology business was particularly strong, up 20% operationally compared with a year ago quarter. Global Ibrance revenues increased 9% operationally to $1.3 billion during the quarter. In the U.S. Ibrance revenues grew 11% and Ibrance continues to retain a strong leadership position within the CDK class. The international markets delivered strong 18% volume growth in the quarter. This volume growth was partially offset by price reductions in certain EU markets, which resulted in 3% operational revenue growth outside in the U.S. The price reductions occurred last year as a result of renegotiating long-term agreements and we expect the impact will continue through to the fourth quarter of 2020 when the price changes annualize.

Thanks, Albert. Good day, everyone. Starting with total company revenue, we generated $11.8 billion in the second quarter of 2020, down 9% operationally versus the year ago quarter. As in each of the last three quarters, the majority of this decline is due to the fact that we no longer report revenues for our Consumer Healthcare business. Adjusting for Consumer, total company revenues declined 3% operationally. As a reminder, the formation of the Consumer joint venture with GSK will annualize on July 31, so next quarter will be the last one impacted by this negative driver. Albert did a really nice job of describing the revenue drivers for each of our businesses so I won't repeat them, but I do want to make one additional point on each business to punctuate what he said. For Biopharma, the growth that we are seeing is not reliant on net price increases. In fact, on a global basis, net price had a negative 2% impact on Biopharma growth this quarter and in the U.S., net price was flat. These dynamics are consistent with the pricing environment we have seen for several years now, and we continue to believe that pricing will not contribute to our expected growth for the foreseeable future. For Upjohn, it is important to point out that despite a 31% operational decline in revenue this quarter, the business continues to perform in line with our expectations and the assumptions reflected in our initial Upjohn guidance. I should also point out that the 31% becomes minus 6%, excluding the impact of the Lyrica LOE. Now moving down the income statement, we had another quarter with significant declines in adjusted SI&A expenses, which were down 17% operationally. Nearly half of that decline was due to the fact that we no longer report expenses for the Consumer Healthcare business. The remainder of the decrease was driven primarily by decreased sales and marketing activities compared to the prior year quarter due to restrictions on in-person meetings with health care professionals primarily in the U.S. and to a lesser extent, lower spending associated with corporate enabling functions. Reported diluted EPS for the quarter was down significantly compared to the year-ago quarter, mainly driven by a onetime favorable tax settlement recorded in the prior year period. Adjusted diluted EPS was down 2% compared to the prior year second quarter. Excluding the $0.02 negative impact of foreign exchange rates in the period, adjusted diluted EPS was flat compared to the prior year. Foreign exchange also negatively impacted revenues in the quarter by $277 million or 2%. On Slide 13, we are providing an update to the detailed assumptions reflected in our current financial guidance related to the impact of the COVID-19 pandemic on our business. Broadly speaking, we anticipate an ongoing gradual global recovery from the macroeconomic and health care impacts experienced during the second quarter of 2020 beginning in Q3 of 2020. The guidance also assumes we'll be able to continue to operate our manufacturing and supply chain without material disruption and that we will continue investing in potential treatments and vaccines against COVID-19 throughout 2020 but does not include any revenues for a COVID-19 vaccine candidate given that it has not yet been approved. With that in mind, let's take a look at our guidance. Consistent with last quarter, we are providing three sets of financial guidance. Beginning with total company, we are raising our guidance range for revenues by $100 million and our guidance range for adjusted diluted EPS by $0.03 based on the strength and resiliency we see in our business and the dedication of our colleagues despite the challenges inherent in operating during this current global pandemic. We are reaffirming all of the components of our 2020 financial guidance for total company. I want to point out that although changes in foreign exchange rates since mid-April have marginally benefited our full year outlook for revenue and adjusted diluted EPS, today's guidance increases are not primarily driven by changes in foreign exchange. And as a reminder, we maintained both of these guidance ranges last quarter despite absorbing much larger negative impacts from foreign exchange. Moving on to financial guidance for new Pfizer and Upjohn. Both of the changes we made for total Pfizer guidance this quarter are reflected in the updates you see here to our new Pfizer financial guidance. On the Upjohn side, all financial guidance components are being reaffirmed, reflecting that the performance of that business continues to track in line with our expectations. Moving on to key takeaways. In the second quarter, our company performed well, driven by the strong 6% operational revenue growth from our Biopharma business. We raised our 2020 total company and new Pfizer guidance ranges for revenues and adjusted diluted EPS, and we reaffirmed all of the components of our financial guidance, including all guidance ranges for our Upjohn business. We raised sufficient funding through our Upjohn subsidiary to satisfy the $12 billion dividend to be paid to Pfizer upon the close of the combination of Upjohn with Mylan, which is expected to occur in the fourth quarter. We also achieved multiple product and pipeline milestones since our last quarterly update, some of which are listed here. A more complete listing can be found in this morning's press release. Finally, we paid $4.2 billion in dividends to our shareholders in the first half of this year. As always, we remain committed to delivering attractive shareholder returns in 2020 and beyond. Now I'll turn it back to Chuck.

Thank you, Frank. Operator, can we now please start to poll for questions?

Your first question comes from Steve Scala from Cowen.

Well, thank you. One for Frank. Pfizer delivered a much stronger quarter while some peers, including Novartis and Roche, were not as strong, yet the businesses are not that different. To what do you attribute the disparity that we're seeing in the industry? Is it product portfolio or cycle? Is it geography or is it execution? And then maybe for Mikael regarding the COVID-19 vaccine, can you elaborate on the immunogenicity and safety in older adults that was touched upon in the press release? Thank you.

Thank you, Steve. Frank, why don't you take the first question? And maybe, Angela, also you can chime in and then if – Mikael will answer the COVID question. Frank?

Sure. Good morning, Steve. So Steve, obviously, I can't comment on what some of our competitors printed for the quarter. But obviously, we had a strong quarter, and I think I can attribute it to, quite frankly, the excellent execution that we continue to deliver. If you look at the Biopharma business, really strong strength across the portfolio, 6% operational growth, about $600 million in revenue, VYNDAQEL – I'm rounding the numbers. VYNDAQEL was up $200 million, Eliquis was up $200 million, IBRANCE was up $100 million, Inlyta was up $100 million, so really, really strong performance. And by the way, overall, that's despite $500 million hit to revenue from COVID, $400 million of which was in our Biopharma business. Then if you look at our spending, I think we've done a nice job on managing our spending. Obviously, we're getting some help from COVID, but if you look at the rest of the business, we continue to be disciplined on how we spend money. So I think all in, I think we're continuing to execute in a very effective way.

Angela?

Sure. Just to build up what Frank said, I think in addition to the execution, which was a critical element of this, we also have a product portfolio, which, in combination, really worked well together. As you said, there are parts of our portfolio that are similar to others, but this particular collection of disease areas is quite unique. You have oncology and our internal medicine, cardiology business that did not have – didn't feel and didn't experience the kind of downturn in new Rxs unlike some other portfolios. You had the hospital BU that pulled through. You had portfolios that are very much about continuing patients, the large base of patients that are continuing with their medicine. So I think that it really speaks to the strength and the diversity of this portfolio and the unique attributes that make it very resilient in a time like this.

Mikael?

Yes, thank you for the question. We are very pleased with our – both actually the b1 and the b2 vaccine candidate. And as we know, we have selected b2 and now started dosing of patients in a late stage trial. We have started b2 in near 120 patients in the Phase 1. And for the specific questions on the older adults, we were very pleased with the safety and tolerability seen in older adults after both the first injection and the boost. In general, mild to moderate reactions whether locally or systemic and overall, a very stable tolerability profile. We also reported neutralizing antibodies after the boost, day 28, that exceeded a panel of convalescent plasma, which was very rewarding to see. Finally, I want to punctuate that in addition to neutralizing antibodies, our mRNA vaccine also elicits potent antiviral T cell activation, including CD8 T cells that have been implied as key cellular mediator to control viral infection, including coronaviruses.

Thank you, Mikael. And Steve, I can't resist also adding that as you are looking at new Pfizer, what we are trying to build, a much more science-focused Pfizer, you will see three themes: excellence in execution, speed and agility. And you will see that across commercial with the results that you see; across R&D with our ability to advance a program like COVID, very complicated, in such a speed; and across manufacturing, where in the middle of a pandemic, we maintain all our operational units up and running. And we experienced virtually very, very little stock disruptions in a period that demand for some injectables went five, four, six times up. Please go to the next question.

Your next question comes from the line of Tim Anderson with Wolfe Research.

Yes, thank you. A couple of questions, please. Long-term guidance in the past, you've said at least 6 on a five-year CAGR basis, and that excluded anything from COVID-19 in terms of vaccine contribution. Does that guidance still stand? And then second question on IBRANCE. When we see full PALACE results, will there be an obvious reason why the trial failed? Was it mostly a compliance issue, for example? If so, then it seems like docs would likely stick with the brand. But you could argue it the other way, too, which is your product, while it was first to market and the class is the only one that doesn't have a survival benefit in metastatic and in adjuvant, it didn't work. So I guess can you just kind of give us a little bit of insight into PALACE results? And are you confident that IBRANCE remains a growth brand over time?

Yes. Let me answer the first one and then Mikael will speak about the PALACE. The answer is absolutely. It is not 6%, it is at least 6% and that we reiterate and we feel much stronger right now. And that excludes obviously any impact of COVID on the top line. And as I explained multiple times in investor events, the reason why our approximately 6% went to at least 6% while we lost PALACE was because for PALACE, we had $2 billion of revenues in our projections at 50% probability of success, so we lost $1 billion. But at the same time, since we had given the 6%, we advanced – we had successful Phase 3 study in adults, pneumococcal. We have successful POCs in multiple vaccines, which we advanced already right now to Phase 3. Three vaccines, as I spoke, we advanced in Phase III. We have Duchenne muscle dystrophy, positive POC. We have a lot of positive news that when we update the probability of success in our model, more than offset the PALACE. And with that, I want to ask Mikael to comment on why he thinks PALACE failed.

Yes, thank you for the question. We are now analyzing data and details, looking at various sub looking at various sub-analysis and sensitivities. So it's still too early to have a view on what made this study not successful. And as Albert alluded to, IBRANCE has been and is a very strong brand in the metastatic setting. It has a favorable tolerability profile and is supported by a number of randomized controlled clinical studies. And I wanted to just add that real-world data studies have also replicated a progression-free survival and added overall survival data using real-world evidence for IBRANCE in the metastatic setting. Now we'll continue to share with you the learnings we have. And of course, we have the PENELOPE-B study to read out, which we can't comment on. It includes a different patient type than in PALACE.

Maybe Angela could add on the commercial front for IBRANCE?

Sure. Thanks, Chuck. Actually, we continue to see great opportunities in the metastatic indication for IBRANCE. As you can tell, we are firmly entrenched as a leader in metastatic. And even recent research that we conducted with our prescribers, our physician prescribers indicate that they see early treatment, so the early indication as well as metastatic indication quite differently, and that what is being within each of these indications will have their own role. So when you look at our market share, both in terms of in-line as well as across all the lines, after five years in the market, IBRANCE has consistently had dominant market share. So we come into this with a – with confidence in owning metastatic. But I think it's also important to remember the experience and the confidence that both prescribers and patients have in this – the metastatic disease that has been established through time. And to build off of what Mikael said, we do have overall survival benefit. And we saw that in our real-world studies, and we're the only CDK inhibitor that has these real-world studies. And certainly, these studies will further strengthen our leadership in metastatic. So I think on all accounts, when we look at where we are, the real-world data that we've generated, the experience as well as new data and new studies that are ongoing that demonstrate that patients can be retreated. So therefore, if you have already treated a patient early, you can – with a different CDK, you can certainly retreat them again when they become metastatic with something like an IBRANCE. And so on all accounts, we continue to be very bullish about our position with IBRANCE in metastatic cancer, metastatic breast cancer. Thank you.

Thank you, Angela. Let’s go to the next question, please.

Your next question comes from Vamil Divan from Mizuho Securities.

Hi, great. Good morning. Thanks for taking my questions. Just a couple, if I could, one on the vaccine. I'm just curious, I guess, for Mikael, based on what we know now, do you expect this COVID vaccine would be a recurring vaccine that people would take annually or to be just sort of two shots initially? And I guess the reason I'm asking is, when you think about sort of the longer-term outlook, I think a lot of people wanted a Pfizer outlook beyond 2026 when you start losing patent protection for some of your key products. Do you see this as potentially a meaningful contributor at that point in time? Or is it maybe more of an opportunity for the next two to three years? And then my other question is just back on the executive orders. I appreciate the comments you made, Albert, in your prepared remarks. Just any – I know there's supposed to be a meeting today potentially with the Trump administration to discuss the orders that was canceled. I'm wondering if you have any insights you can share on that. Or are there any other plans to discuss on that. Or are there any other plans to discuss the orders with the administration over the next month or so? Thank you.

Yes. On the first question, Mikael can speak, but also, I think Angela can add how we see this evolution. So – and then I will answer the second one. Mikael?

Yes. Thank you for the question. Of course, there is a lot of unknown here with a disease that has just been known to the medical community for maybe six months. But we have seen a dramatic expansion of the coronavirus SARS-CoV-2 across the globe, including appearance of new variants. So we look upon it as in two phases. The first one is the pandemic phase where, of course, coming with a safe, high-quality efficacious vaccine soon is important. And that's why we are so pleased to be able to announce, as we did yesterday, dosing of patients in our pivotal trial. And for that, a two-shot vaccine is likely to give a protection if successful in the clinical study based on both antibody-mediated and cell-mediated, the CD8 T cells that seems to be important in protection against viruses. Considering the – beyond the pandemic phase, which may likely, at the global level, last a few years, it is hard to be certain about the future. But I do think there are scenarios which are very reasonable and we need to be prepared for, that COVID-19 has established itself as a prominent virus, as much circulating in society as flu. And as we will understand the – how long-lasting the various vaccines are, it will allow us to better predict how often one should consider to reimmunize. A platform such as mRNA has the advantage that there is no anti-vector immunity and if needed, you could immunize annually every two years, every four years. And I just wanted to add that beyond being a very important pillar in the future defense against COVID-19 and probably reasonable to assume that there will be other coronaviruses, as we have seen how they have accumulated in a recombined form in many different species, but this platform will be possible to also disrupt platform will be possible to also disrupt the flu market, novel vaccines against CMV and even to go into a novel age group of RSV. So we see a very large opportunity based on the leadership we have with this mRNA platform, particularly by being able to engage both neutralizing antibodies and antiviral CD8 cells. Angela?

So picking up on your – the points about the two phases. Some additional comments on these two phases. I think when it comes to the pandemic phase, we're thinking about it from the perspective of the fact that it could last until the end of 2021 or into 2022 where high volumes of doses will need to be provided for mass vaccinations to mass vaccinations to take place, right? And so I think in this pandemic period, the way that we're thinking about it, and as you've seen, is that we're pricing the vaccine for broad access. Broad access is our main goal and making sure that we can supply it to multiple governments around the world. After that, the next phase is a phase where we think it will become more standard, more seasonal, as you've described it, I think, where we anticipate that we will have to have continued vaccination for a number of years. And this is going to be important to create and maintain the herd immunity globally. So in this time period, we anticipate to return to more regular supply channels and a more value-based pricing approach. So a combination of both of these two is how we see the next many years playing out.

Thank you, Angela. And thank you Mikael. That was very comprehensive, I think. Now as regards to the executive order, as I said, obviously, I was very disappointed to see those orders coming because I feel that they are coming at a period of time that this is not what is needed. This is a period of time that our scientists are working to develop a vaccine or a treatment, and our manufacturing workers are working day and night to maintain, under COVID conditions, supply of medicines and also provide additional supplies for this vaccine. They should worry only about how to defeat this virus and how to maintain the supply and should not start worrying about their jobs. I think the timing was wrong. And I believe that there is a need for a dialogue so that we can move forward, like look backwards. But clearly, there is a need for – on the technical level first, to be an agreement. I don't think there is a need for, right now, for White House meetings. There is a need for people that they understand the topics from both sides, work to find solutions how we can decrease the contribution – how can we decrease the out-of-pocket expense of the Americans that has gone to levels that they are unacceptable right now. This is the real problem and this is what we see that we need to reform. Thank you. Next question, please, operator.

Your next question comes from Randall Stanicky from RBC Capital Markets.

Great, thanks. Albert, I wanted to follow up on the last question. The vaccine opportunity could be a very big one but perhaps may not sell for the 2026 LOE and arguably could add to it. So as you think about business development priorities near term, has anything changed on that front? And when can we expect to see Pfizer get more active there? And then the second question, just on the vaccine, how should we think about U.S. versus OUS pricing given that you disclosed the U.S. contract with the U.S. government, but we may not get color OUS? Thanks.

Yes. Thank you. Very good questions, both of them. In our M&A strategy, nothing has changed. It is exactly what we have defined. We are in the street to be aggressive and deploy capital to license in or acquire early to mid-stage aggressive and deploy capital to license in or acquire early to mid-stage clinical projects that could become medicines in the years 2023, 2024, 2025, 2026, and then they can start picking their sales so that we can maintain post-2026 the 6% growth. And that has not changed. We never say never to anything, particularly if people are asking if we want to do a big acquisition. We never say never to anything. And by the way, our firepower allow us to do vertically – virtually anything that we could decide. But our strategic direction is clear, laser-focused on this area so that we can maintain the growth. And we did have significant achievements in that front. I will mention to you the last two vaccines that we licensed in, which is the Lyme vaccine a few months ago and the COVID vaccine in our agreement with BioNTech. What was the second question?

It was U.S. pricing versus outside pricing for the vaccine.

Yes. Why don’t I let Angela answer the question on the U.S. pricing of the vaccine?

The pricing strategy for our vaccines is universal across the board. And it is based on volumes, advanced commitments, equity and affordability principles. So this agreement in the U.S. that you referred to relates to the first 100 million doses for which Pfizer will receive $1.95 billion, and this is assuming the regulatory approval or authorization. And if the government would like to purchase an additional 500 million doses, it would be at that same price and it's also subject to future mutual agreements. Switching over to the EU or ex U.S., I think, was your other question, how we're thinking about that. Again, we're using the same pricing principles across the globe. And specifically, I won't be able And specifically, I won't be able to disclose to you the content of those confidential discussions. But again, the principles are the same. And because of that, no country in the developed world will receive doses at a lower price than the U.S. for similar volume commitments.

Yes. And I want to emphasize what Angela said in her statement that no country in the developed world, which means Europe, Japan, all the countries that are developed right now, will not receive a lower price for the same volume commitment than the U.S. But that, of course, excludes African countries or other countries that they don't have the means to pay over there. We may do exceptions and offer it to lower price. Thank you very much, Angela. Let’s go to the next question.

Your next question comes from Terence Flynn with Goldman Sachs.

Hi, thanks for taking the questions and congrats on all the progress of the vaccine. I guess this might be a question for Frank. Just wondering, based on the commentary in the press question for Frank. Just wondering, based on the commentary in the press release versus what you guys outlined in the first quarter, it seems to suggest that maybe you're now assuming a somewhat more gradual recovery in the second half. Just wondering if I'm interpreting that correctly. And is that driven by global data points you guys are seeing? Or is that really a result of what's been going on in some states in the U.S.? And then the second question relates to the Phase 3 COVID-19 vaccine program. Was just wondering if you can give any more details on the powering assumptions of the primary end point. And then also, you talk about the interim analyses. Any more details on that front? Thank you.

Frank, go ahead, please.

Yes. So Terence, you're absolutely right. We talked about a gradual recovery in the quarter. And we're saying that in terms of patient visits to doctors, vaccination rates, elective surgeries, where we're expecting a gradual increase, a gradual improvement over Q2 levels beginning in Q3. Same thing with new-to-brand prescriptions, where we're expecting a gradual improvement over 2Q levels beginning in Q3. And then in the U.S., just a gradual improvement in terms of our reps visiting and getting to meet face-to-face with health care professionals. So it's definitely a gradual improvement. That's an update from the language we put into Q1, and most importantly, all of which we have factored into the latest guidance that we provided to you all today for 2020. And that includes total company, new Pfizer and the Upjohn guidance that we provided.

Thank you very, very much, Frank. And Mikael, can you speak a little bit about our study design, the powering assumptions, interim analysis, et cetera.

Yes. Thank you for the question. So we started dosing yesterday in which will be 30,000 healthy adults aged 18 to 85. We have more than 30 states in U.S. picked in areas that will contribute to both enrollment as well as event rate, and that is supplemented by South America and Europe sites. When it comes to how the study will be executed, it is currently assumed that we will have sufficient number of individuals enrolled by early September to allow several interim analysis to support potential filing that could start in September or in October, depending on event rates as well as vaccine efficacy. And at this time point, I think I don't want to give more details. The primary endpoint is efficacy against confirmed COVID-19 in participants without evidence of infection before vaccination as well as efficacy against confirmed COVID-19 in participants with and without evidence of infection before vaccination. And we use PCR technology to confirm infection of SARS-CoV-2 as well as using antibody tests to confirm previous exposure. So all in all, it's well-powered study to detect a meaningful vaccine efficacy, and interim analysis would lead to opportunity to start planning for filing from September running into October. And this is, of course, pending our assumptions on event rate. I want to say that our assumptions were made a few weeks ago, looking at incidence of disease in U.S. and elsewhere. And over the last few weeks, unfortunately, the incidence rate has made the disease even more prevalent. So if anything, we would expect on that planning to be able to hit event rates sooner rather than later, which is, of course, favorable for a potential filing of this vaccine September to October time frame.

Thank you very much, Mikael. And again, we said it very clearly in our press release. The study design has been discussed extensively with FDA, and we are following all the guidelines that FDA has put out there. And that should be the golden standard for anyone who is doing studies for COVID-19. We can go to the next question.

Your next question comes from Louise Chen from Cantor.

Hi, thanks for taking my questions here. So my first question is basically, there have been some concerns that Pfizer could have a hard time meeting this 6% CAGR projection or at least 6% CAGR projection through 2025. What do you think the street is missing here? And then at your upcoming Investor Day, on the R&D Day, what kind of new data and pipeline can we expect to see? And what do you hope to address, the key things that you want to address at this meeting? And then last question I have for you is as you move towards being a biopharma pure play, what kind of margin expansion can we expect to see over the next several years? Thank you.

I will answer the 6%, and then I will ask John Young to speak a little bit what you should expect during the R&D Day. And then obviously, Frank can speak about the margin expansions. Now, as I said, the 6% CAGR, we feel very, very strongly about it. And I don't think that the time horizon on this call will allow me to speak about the entry that we have in our models that I don't see, frankly, in most of the analyst expectations, but let me try. Let's start with the vaccines because it's so much into the – right now, it's so much data and it's so much into the news. I think that the analysts are having, as appropriately, expectations for pneumococcal 20 as we do. But I haven't seen anyone having anything about Clostridium difficile, which is running a Phase III study and is expected to read out, I think, late this year or beginning – I think later in the year. I don't think anyone has anything about RSV that has started a pivotal study. I don't think that anybody has anything about pentavalent meningococcal that has started a pivotal study. I don't think anyone has anything about the Lyme vaccine, but it is in Phase II study and is progressing, and it is – all of that are vaccines that are – there is no basically a similar vaccine in development. You can say pneumococcal 20 has a competing pneumococcal 15. But the rest, I don't think anything like that. We have right now, together with COVID, 7 vaccines in the clinic, 7, right? Let's go now through rare diseases. I think everybody is putting some revenues on the VYNDAQEL and rightly so. But I don't think anyone is having anything about our gene therapy platform, almost nothing. And there is that one, which is the one that we're discussing recently because we had data releases like the Duchenne muscle dystrophy. There are others that are coming sooner to the market like hemophilia A or hemophilia B. And these are very, very big markets, and we're having very, very strong data, so significant probability that we will be successful. I don't think anyone is factoring anything there. And also, some smaller products, but altogether, they have a contribution like the hemophilia, the pan-hemophilia product, TFPI and also about the growth hormone. I don't think anyone is factoring anything there. When you go to internal medicines, I don't think anyone is factoring anything. And we have been able to present recently very good data from our NASH portfolio that's progressing very nicely, but also the GLP, which could be a tremendous opportunity to move, and I can go on and on. So there is a lot of standard – I think right now, people are not modeling. And that could explain why people – some of the people are maybe factoring that the 6%, I don't know, it's 4% or 5%. But I don't think anything – anywhere, when I see the analyst expectations, there's a very big discrepancy between the 6%. But I think that as we have proven to all of you and to the market our ability to execute on these studies and as we start having readouts, I think people will see it and will assign the right value. With that being said, a good way to do that, it is to have a good discussion with you during the Investor Day. And I will ask John to discuss with us what shall we expect to see that day.

Thanks, Albert, and thanks for the question, Louise. So, I think, Albert has just given you some great highlights of some of the programs that – in our pipeline that we believe are potentially underappreciated and maybe haven't been as visible to the analyst community. So our goal for the Investor Day is that we really want to highlight what we are very excited about in terms of the strong capability and the productivity of our R&D organization. We're going to provide an update on each of our 5 core R&D-driven business units in our pipeline. And I think we feel this is exactly the right time to do that with the announcement of the Upjohn transaction and our pipeline, as Albert has just commented, really being stronger than it's been in years. We really do feel this is a perfect time to share the excitement about Pfizer's profile as a leading pure play innovative biopharmaceutical company. So I won't repeat the detail that Albert has gone through, but I would just say that we'll focus the day on programs that we expect to launch by 2025, 2026, programs that the analyst community are generally not currently modeling in their valuations and some programs where there's new data. So I expect that we'll be able to shed some light on several pipeline opportunities that we see as promising and certainly including some of the specific programs that Albert has mentioned.

Thank you very, very much John. And of course, also, the unique thing with this day is that we will try to also present the people behind this success. So we will give you visibility to our scientists and the commercial people that are driving each one of these units. Frank, can you please answer the question on the margin?

Sure. So, let me just start with what's in the release, which is if you look at our guidance for new Pfizer, one of the things we say is 37%, we call it IBT adjusted margin. Now just to refresh everyone's memory, IBT is income before taxes. But in Pfizer, that's basically operating income, and then it includes other income because we have significant equity income coming into that line item from the consumer joint venture. So, now what that is framing the way I think about this is we grow the top line, to Albert's point, at least 6% on a CAGR basis through 2025. We will leverage that to the bottom line. So we're growing when we’re growing the top-line are at least 6%, we're going to clearly have operating income that's growing at a rate that's greater than that. We also believe – I also believe there's opportunities to be more efficient in our SI&A spend so that, that 37%, what we'd like to do, what we expect to do is to see that go from 37% into the higher 30s, so 38%, 39% and then ultimately, I'd like to see that begin with a 4. That's how we think about.

Yes, thank you, Frank. And I realized as I was trying to save some time that I didn't speak about oncology and immune inflammation in things that the analysts are not modeling and – because I may get into trouble with the people of this unit. About immune inflammation, I think a lot of analysts are modeling the abrocitinib. But I don't think that anybody is modeling all the rest of the JAK portfolio. Right now, we have 5 new molecular entities that we are trying in 10 different indications and that was by design. Our strategy was very different than the strategy of other companies that usually, they try for efficiency to select the best target and develop it for everything. What we did, we selected the best target for a specific disease because different drugs or different molecules, they respond very differently if the disease is on the skin or on the gut or on the – or if it is an arthritis. So this strategy now is about to start giving significant readouts for all the other molecules that are coming. And of course, in oncology, in addition to the work that is happening in new model CDKs and resistance to cancer from our La Jolla group, don’t forget the acquisition of Array, that is the boulder, Pfizer boulder we call it right now, that they are an extremely productive group, that they are – keep providing with new leads, and we're expecting to have, in the clinic from this group, 1 to likely 2 new molecules every month. So – sorry, it was a long answer, but it's a long list. We can go to the next question.

Your next question comes from Chris Schott from JP Morgan.

Great. Thanks so much for the questions. My first one was just coming back to COVID vaccine pricing. I guess my question is, do you see this initial $19.50 per dose pricing that we saw last week as a decent proxy for pricing over time? Or should we expect price to decline here as we think about a range of potential vaccines being developed and some of your competitors have maybe different pricing strategies coming to market? And then my second question was kind of a bigger picture one here. It seems like you're running kind of an unprecedented development program with the COVID vaccines. To the extent this is successful, do you see an opportunity to apply some of these approaches to broader product development in an effort to maybe speed development time lines in areas of unmet need? I'm just trying to think here is like, is there some read across the rest of the portfolio to the extent that this study is successful? Thanks so much.

Chris, in the interest of time, instead of asking Angela to answer the first question – that it is – the first one that is managing. Look, it's – the price that we have said in the U.S. is the price that basically is a good benchmark for this level of volumes that people will order. If they order less, the price would be higher. If they order more, it could be a little bit lower. But this is a very good benchmark. And I don't think that this will change during the pandemic because irrelevant how many products will be – it's not irrelevant, but I assume that – and I hope that many vaccines will be registered and will make the cut. But still, the demand for 7.5 billion people will be very, very high. And so this, I think, will be maintained. As Angela said in her answer, after the pandemic, which is, after we have this significant sets of volumes, demand for volumes now, which will take us all the way to 2021, beginning maybe of 2022, obviously, we could go to a much more normal type of situation where volumes will be much more normal and the price also will be based on the competition of the time and also will be based on the value that the product brings, which is not the case right now. Obviously, it is priced well, well, well below the value that brings to society this product. And as regard to your second question, instead of also moving to Mikael about – can we use this platform? We can use this platform. Don't forget that we are working already two years for a flu vaccine by using the RNA platform. And already, Mikael spoke in his question that he sees answer to a similar question before, that he sees multiple opportunities to use the platform in different type of diseases.

Thank you very much.

Next question please operator.

Your next question comes from Umer Raffat from Evercore.

Hi, thanks so much for taking my questions. I have two if I may. And perhaps first, Albert, I know Moderna's CEO said that he expects, based on his data, a 75% to 80% odds of clearing the Phase III bar set by FDA for the COVID vaccine. I'm curious…

Say it again. I'm not sure I – can you say it again, what he said?

Sure, Albert. So Moderna's CEO believes the odds of clearing Phase III is 75% to 80% based on the data they've produced. Are you in the same ballpark based on the data you're seeing? And one for Mikael, if I may. Mikael, in the press release last night where you decided to take the b2 vaccine construct to Phase III and not the previously published b1, what I noticed was the pivotal factor was perhaps that there were more spike-specific T cell epitopes being seen with this second construct. Can you give us a little more specifics on that? And can you also speak to the fact that several studies are suggesting about half of T cell response could actually be on epitopes, which are beyond the spike in the first place? Thank you.

Yes, thank you very much Umer. Look I don’t want myself to speculate now what is the probability that I see if the product will be successful. The study started and the only one that will tell us is the data readout. But I will share the opportunity here because the data that we have seen so far are very, very, very strong. But again, there have been cases that you have very, very strong clinical data in the Phase II, and the Phase III, for some reason, doesn't work. But I think it's very high. I'm optimistic based on the data that I have seen so far, but we need to wait to see what the readout will be. And then Mikael can explain all the excellent questions that you asked.

Yes. Thank you, Albert. So I just want to say it was a great question. And as we said, we had 2 great vaccine candidates. And in the end, the data of totality favor the b2. And the specific question around spike, yes, we detected a number of epitopes. In the spike, there's one fragment that contains RBDE but also in the S2 fragment that's outside RBDE. And we think there is a richness of T cell epitope for CD4 T cells and for CD8. I would like particularly to punctuate that the majority or the overwhelming use in the field of immunology is that to fight against viruses with immune system, you need neutralizing antibodies when the virus is outside the cell, but you need CD8 T cells to kill viral containing cells when the virus is hiding in the cell. And that was really part of our full platform. And it's not just related to spike. It's related to how you construct the envelope, the lipid nanoparticles and how you modify the RNA. And we spent several years to get into that goal that's been associated, over a long time a successful way of preventing viral infection by vaccination. And I think we're on to something really unique in our platform here with that dual way of combating the infection. And of course, it also was related to really good tolerability, low dose, nice immune response in older and younger. So all of that, of course, gives us a lot of encouragement for moving forward here.

Thank you. Next question please.

Your next question comes from David Risinger from Morgan Stanley.

Yes, thanks very much and congrats on all of the positive update. So I have two questions on the COVID vaccine. First, should we expect to see primate data in coming weeks, which provide information on the durability of your vaccine after the second dose? The reason why I ask is, obviously, there's a need for a booster just 30 days after the first dose. So it would be helpful to better understand how durable the efficacy is post the second dose. And second, with respect to your arrangements that you're – that you booked with the U.S government and that you planned to arrange with ex U.S. governments and entities, could you just discuss Pfizer's COVID vaccine liability shield expectation specifically what the U.S. government can protect you against in the event that there are surprising adverse events down the line and then what you can arrange with ex U.S. entities? Thank you.

Now, thank you, Dave. Very good questions, both of them. Mikael, can you please answer the question about when we can expect primate data, the durability? And by the way, our – Dave, our booster is coming 21 days after the first dose. And then I will ask Doug Lankler to comment on the liabilities.

Yes, thank you, Albert. Yes, the primate data, I think, have two key components. One is that we were able to show that there is no signs of any augmentation of a negative effect on disease outcome. On the contrary, we were able to show that our b1 and b2 were able to prevent disease in airways, including lung and also nose and that b2 was very effective in this, suggesting that we can protect the individuals that will be exposed to the virus and possibly, as it needs to be confirmed in humans, also reduce the risk of spreading the virus. It still will be a bit too early to have a lot of data on durability. We are following it in animals and in humans. And we have seen so far that the neutralizing antibodies actually tend to rise even though the total number of antibodies tend to stabilize at some level. And that suggests that we actually continue to evolve a new response with more potent binding antibodies. I want to just also add that when it comes to durability, Dave, if you look in the literature, in general, antibody durability after vaccination can last quite some time. But the really long-lasting durability is in the T cell compartment. And for viral disease, particularly CD8-positive cytotoxic cells, they have been detected ten years or more after SARS-CoV-1. And then finally, while we will monitor durability, of course, in the human study for several years, our platform has the advantage that we can easily boost at an appropriate time point with no anti-vector immunity and we are likely to build those antibodies and T cells. And that's, of course, different from a lot of adenovirus platforms that have difficulty to boost even one time. And we tried all of the platforms, whether viral platforms, protein-based and mRNA and for a pandemic of this, we selected a construct based on a large number of knowledge and experience cross platform and cross constant. Thank you.

Thank you, Mikael. Doug?

Yes, thanks. In the U.S., we expect the PREP Act and the Vaccine Act are going to provide Pfizer broad protections against any personal injury claims that might come out of any type of problems from the vaccine or side effects or otherwise. We’re pursuing similar liability protections outside of the United States through contractual and/or legislative efforts, and we believe this is going to be manageable.

Thank you very much, Doug.

Doug. And operator, if we can take our last question please and then we will have a closing comment from Albert. Thank you.

Your final question comes from the line of Geoffrey Porges from SVB Leerink.

Thank you very much for taking the question. Just a follow up on the COVID pivotal trial over the next few months, could you clarify what you'll be telling us and when and then how that will affect the blinding and ultimately getting the full safety data for a full approval? It sounds as though, as we all know, you're going to get the number of events pretty quickly. So will you communicate when the study is enrolled? Will you communicate the efficacy results at the interim to the extent that you hit the statistical endpoint? And then again, what effect will that have on the full safety data that presumably you still need to get to achieve full approval? Thanks.

Yes. Just for the interest of time, Geoff, obviously, if we hit, in an interim approval, an effective – the effectiveness endpoint, we will certainly communicate that. And then I'm not sure right now if we will provide regular updates as to how many have enrolled and when the enrollment is completed. As Mikael said, it's going to be a very rapid enrollment anyway. So we plan by the end of August to have enrolled the majority of our 30,000 patients. And then the results could come, depends on the efficacy of the vaccine and depends also on the burden of the disease. From September to October, this is the current assumptions. And with that, we will make it known. Obviously, we have done in the past ways that we can unblind data for FDA, and we can still maintain the blindness when the studies are continued because the studies anyway are planned to continue for 2 years that we are going to be monitoring our patients. So that's what I can give you right now.

Let me then thank you all for joining us today and for your continued engagement with Pfizer. I really enjoyed this earnings call, very strong operational performance. So very, very few questions on products and a lot of questions that dominated the call on our pipeline, of course, with, number one, COVID-19 because this is a tremendous opportunity for the world to be able to bring an effective and safe vaccine. As you have heard, our key in-market medicines remain strong, our pipeline remain robust and we remain fully confident in the potential of the long-term growth strategy to yield at least 6% CAGR through 2025 following the completion of the pending Upjohn/Mylan combination. We discussed a lot about our hard work to combat COVID-19, and we have been very encouraged by the early data of our mRNA-based vaccine program with BioNTech. My heartfelt thanks go out to all the colleagues at both companies who are working tirelessly to find medical solutions to this global pandemic. And because of their efforts, I'm confident to say that science will win. Have a rest of the day – a great rest of your day.

Ladies and gentlemen, this does conclude Pfizer's second quarter 2020 earnings conference call. You may now disconnect.