Pfizer Inc at Morgan Stanley Global Healthcare Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay, great. One clarification. So that's an incremental 1 million doses to the stockpile? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 12:30PM, PFE.N - Pfizer Inc at Morgan Stanley Global Healthcare Conference

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay, great. Maybe just to step back, obviously, you mentioned this, you're focused on delivering on your commitments in 2024, given the 2023 dynamics. One question we get frequently now is how you're thinking about 2025. I know you're not going to provide guidance today. But just from a framework perspective, you took a very conservative approach in 2024. As we look back, I mean, your initial guidance was $2.05 to $2.25. And then you recently upgraded that to $2.45 to $2.65. So again, maybe talk about some of those elements of upside surprises this year and then the framework top down as you think about 2025.

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay, great. Maybe one other before we come to the COGS and gross margin side. I would love your perspective on the impact of Part D redesign in 2025. That's another question that we've been fielding for a lot of companies. Our math suggests low single-digit impact, so pretty de minimis for Pfizer. But again, do you generally agree with that assessment? And then the second is, aside from COVID, any other variables or dynamics that we need to think about on the revenue side for 2025?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. Appreciate that. The COGS improvement program that you had, it's multiphased. You provided some details around the first phase of this. And I think that's been another area of conservatism, at least based on our math for this year. So maybe just -- could you elaborate as we think about how that phasing is going to occur back half of this year into '25 and '26?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. Got it. And I guess, as you think about getting back to those pre-pandemic operating margins, obviously, the COGS is a piece of that. But then R&D and SG&A are the other two components. And so there's, at the same time, though, a number of investments that Pfizer is making for some of your new product launches. Obviously, you have the Seattle pipeline, ADCs that you want to continue to progress, as well as other internal programs. So maybe just as you think about the puts and takes on the non-COGS side of it, what are some of the key variables that we should keep in mind for 2025?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay, so it sounds like steady-state R&D and SG&A, kind of steady state on an absolute dollar basis now.

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay, so then any margin improvement is coming at the cost of goods line. And obviously, leverage is depending on the top line.

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. Understood. If, let's say, again -- sometimes product cycles don't deliver at the level of expectations, and they come in below expectations. Would you have willingness to be more flexible in some of those costs in that sense to preserve margins? Or do you think it's more likely kind of costs are going to fund the business longer term and so you're more willing to take kind of a hit on the margin side? How do you think of that trade-off there?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. Understood. The other topic I want to touch on is capital allocation. And so obviously, your focus now on paying down some of the Seagen debt. You talked about getting back to sub 3.25 times on a gross basis from a leverage perspective. On our numbers, you'll be there by the end of this year. Do you think that's generally a fair assessment? Are there other things that we need to think about in terms of pacing of that deleveraging?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay, so more kind of a '26 timeframe here.

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay, great. Let's fast forward, assuming you achieve that leverage target kind of like you said, '26 timeframe. How do you prioritize then use of cash at that point?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. And as you think about business development, obviously, Pfizer has been one of the more active companies here when you think of Seattle Genetics and some of the prior deals. And you've got some targets out there. So as you think about that type of deals, therapeutic area, just any color. I know this is a couple of years out, given you're deleveraging, but how do you think about those kinds of areas you want to fill into as well as size of opportunities? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 12:30PM, PFE.N - Pfizer Inc at Morgan Stanley Global Healthcare Conference

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Yes, okay. That makes sense. So again, to summarize, it sounds like you'd prefer to lean in maybe more on some of the less-derisked assets and more kind of development stage, so you have more of a split of derisked assets and more development stage as opposed to more post-derisked assets?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. Understood. Maybe just -- I know it's a dynamic market, but just would love your perspective right now on kind of -- what you're seeing out there right now from maybe like mid-cap biotech side. Is this a buyer's market? Obviously, it's been a tough capital raising environment, but what are you seeing in terms of that side, maybe even the partnership side as well?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay, great. The other piece, you touched on this a little bit, is just dividend growth. So it looks like low single digit is kind of where you're shaking out now over the last few years. I think pre-COVID, you were mid single digit. So is low single digit kind of the right cadence that we should think about here on the dividend growth side? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 12:30PM, PFE.N - Pfizer Inc at Morgan Stanley Global Healthcare Conference

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. Understood. And again, as you think about the outer years, like some of those puts and takes, maybe just talk about anything else that we should think about as we get into the back half of the decade. Because sometimes we get that question of how secure is the dividend if some of these new product cycles don't materialize to that level of expectations.

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Yes. Okay, great. Maybe just in the last part of the talk, I want to focus on some of the pipeline -- recently launched products, pipeline products. You talked a little bit about the vaccine business here on the COVID side. Maybe just -- the error bars, as we all know, are very wide around COVID and vaccinations. I mean, we looked to Australia recently as kind of a proxy. Volumes there are down, I think, like 40% on a year-over-year basis. As you think about that program in the US to kind of continue to activate vaccinations, you talked about the wave we're going through right now, how are you thinking about that? And again, I know the error bars are wide, but I mean just at a high level, what should we think about going in the back half? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 12:30PM, PFE.N - Pfizer Inc at Morgan Stanley Global Healthcare Conference

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. Have you talked about, I mean, market share in the US, how you expect that to play out? I mean, obviously, you have an advantage ex-US. I think US was more 55%, 50%, roughly, last year. Is that a good baseline, or do you think you can kind of improve upon that in the US?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. One kind of corollary question is the COVID-flu combination vaccine. You recently had an update there. You missed non-inferiority on the B strain. You hit on the A strain. You have, I think, a next-gen version also that you're working on. But maybe just talk to us about kind of next steps. And then where does this fit in in terms of kind of the longer-term vaccine franchise here?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. Any insights in terms of when we might have visibility from you guys on kind of next steps?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay, great. The other one on the vaccine side that I know is in focus is RSV. Obviously, you guys and GSK have been one of the leaders here in terms of developing this market. And so as you think about this season, I think one of the big questions is how much of a bolus was there last year? How many new people will come and get activated? And then what's the reboosting frequency look like? And so I know they're some of those crystal-ball questions. But maybe just help us think through those dynamics here as we head into the second RSV season.

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. Do you think -- I mean, another company has speculated that maybe the February ACIP might be the appropriate time, because then you have another season worth of data. Does that feel about right or is it likely more into '25?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. And maybe, obviously, you guys are in a unique position. You have multiple vaccines here. Any just synergies that you're able to leverage through the season that we should think about as we think about some of the other competitors that are trying to kind of come into this market? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 12:30PM, PFE.N - Pfizer Inc at Morgan Stanley Global Healthcare Conference

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay. And then before we get to danuglipron, I want to make sure we have some time there. Just the one, there was some data yesterday from a competitor to Prevnar 20. So again, I know this isn't directly in your wheelhouse, but putting on your R&D hat, just as we think about that franchise, I know you guys have an effort to continue to advance a next-gen version as well. So maybe just any takeaways from that data set? I know it's early, but as you think about the Prevnar franchise?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Okay, great. Just in the last few minutes, danuglipron, maybe just remind us. You've come up with a once-a-day formulation now. You're doing some dose-optimization work. I think we're going to get that early next year. What are you hoping to see from that study to then make a big Phase 3 investment? Because it seems like given the scope and range of those trials, that would be a fairly large R&D program. So what do you need to see to be confident to make that investment?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Yes. A question we get is if the data don't meet your expectations, is obesity a category that Pfizer is committed to over the longer term because of the size of the opportunity, some of the history at Pfizer. How do you think about that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 12:30PM, PFE.N - Pfizer Inc at Morgan Stanley Global Healthcare Conference

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Yes. Okay. Maybe just last one here is on the Seattle integration. So obviously, we talked about the deleveraging aspect. But maybe just high level, how has the integration gone at the company? And then anything from your seat that you think is underappreciated by the Street still about this deal?

Question: Terence Flynn - Morgan Stanley & Co. LLC - Analyst : Great. Well, I think we're up against time. But thanks so much for taking the time.