Pfizer Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 1, 2024

There are 25 speakers on the call.

Operator

Good day, everyone, and welcome to the Pfizer's First Quarter 2024 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Francesca DiMartino, Chief Investor Relations Officer and Senior Vice President. Please go ahead, ma'am.

Speaker 1

Good morning, and welcome to Pfizer's earnings call. I'm Francesca Di Martino, Chief Investor Relations Officer. On behalf of the Pfizer team, thank you for joining us. This call is being made available via audio webcast@pfizer.com. Earlier this morning, we released our results for the Q1 of 2024 via a press release that is available on our website atfizer.com.

Speaker 1

I'm joined today by Doctor. Albert Bourla, our Chairman and CEO and Dave Denton, our CFO. Albert and Dave have some prepared remarks and we will then open the call for questions. Joining for the Q and A session, we also have Doctor. Chris Boshoff, EVP and Chief Oncology Officer Alexandre Desjermis, EVP and Chief International Commercial Officer Doctor.

Speaker 1

Michael Dolsten, Chief Scientific Officer and President of R and D Doug Lankler, EVP and General Counsel and Amir Malik, EVP and Chief U. S. Commercial Officer. Before we get started, I want to remind you that we will be making forward looking statements and discussing certain non GAAP financial measures. I encourage you to read the disclaimers in our slide presentation, the press release we issued this morning and our disclosures in our SEC filings, which are all available on the IR website on pfizer.com.

Speaker 1

Forward looking statements on the call are subject to substantial risks and uncertainties, speak only as of the call's original date, and we undertake no obligation to update or revise any of the statements. With that, I will turn the call over to Albert.

Speaker 2

Thank you, Francesca. Good morning, everyone. Thank you for joining our call. In the Q1, we had a solid start to the year and we are cautiously optimistic about what we will achieve in 2024. I'm pleased and appreciative how our Pfizer colleagues are executing with discipline as they focus on the patients and others we serve.

Speaker 2

This helped us deliver a strong performance during the quarter in our non COVID product portfolio, drive progress towards our oncology leadership, advance our pipeline and continue to strengthen our business. Today, we'll discuss highlights from the quarter and provide updates about how we are continuing to make progress with the 5 strategic priorities we shared with you at the start of the year. We are proud of the positive impact we achieved around the world with our deep capabilities and global scale. Through the 1st 3 months of the year, we reached more than 119,000,000 patients without medicines and vaccines. We will continue to build on Pfizer's 175 year history of driving medical and pharmaceutical breakthroughs as we maximize the opportunities in front of us.

Speaker 2

Our confidence in the year ahead comes from our focus on executing the strategic priorities that we believe will deliver operational, commercial and financial success across our business. The priorities are: achieve world class oncology leaders deliver the next wave of pipeline innovation maximize performance of our new products, expand margins by realigning our cost base and allocate capital to enhance shareholder value. In the Q1, we made notable progress with each one and I will share some highlights. Many of you joined us in our Oncology Innovation Day in February and I hope you found it to be a valuable opportunity to see how we are well positioned to achieve world class oncology leaders. We are pleased with the excellence we have been able to achieve in both integration and commercial execution.

Speaker 2

With a strong mix of Pfizer and Sid and colleagues in the newly combined team, we believe we have one of the most experienced and talented groups of oncology leaders in the industry. We are also already seeing the benefit of strong commercial execution with our newly cross trained sales and field medical teams. In the Q1 of 2024, our oncology revenues grew 19% operationally over the same quarter a year ago, driven in part by the acquisition of the 4 in line products from legacy Seizum and in particularly the strong ongoing launch of PadScan in frontline locally advanced metastatic urothelial cancer regardless of cisplatin LHCb following FDA approval based on the groundbreaking EV302 test. We have an increased demand for Xtandi, which continues to be a backbone therapy across the prostate cancer treatment continuum. And we have continued growth from Loebren, which could emerge as the potential first line standard of care in all positive metastatic non small cell lung cancer.

Speaker 2

Earlier this week, we also announced the full FDA approval of TIFTAK to treat recurring or metastatic cervical cancer. TIFTAK is the 1st antibody drug conjugate to have positive overall survival data for patients with previously treated recurrent or metastatic cervical cancer. Going forward, we are guided by a strategy focusing on our greatest opportunities to make a difference for patients with cancer. With the power of our deep expertise, broad and diverse portfolio and global scale, we are confident we are well on our way toward our 2,030 goal of doubling the number of patients treated with our innovative cancer medicines, increasing the number of blockbuster medicines in our portfolio from 5 today to 8 or more and driving an anticipated tenfold increase in the proportion of revenue from dialogics. This is important because it brings the potential to provide more durable revenue based on several factors, including inflation reduction market considerations and the greater challenges of copying complex biologics.

Speaker 2

We will look forward to sharing continued updates with you on the progress in accelerating oncology breakthroughs. Now I'll turn to our progress in delivering the next wave of pipeline innovation. In oncology, during the quarter, we had 3 pivotal Phase III study starts, including the 1st Phase III trial for our selected CDK4 inhibitor at Limbocycline. Integrating beta sick directed ADC, sickvoteluk, the body, SV, and the 4th Phase III trial for Ehrlexvio in multiple melanoma. At the upcoming American Society of Clinical Oncology Annual Meeting, we will present data spanning each of our tumor areas of focus and core scientific materials, including new 5 year progression free survival data for lorbrand.

Speaker 2

Resting data for ADCETRIS in diffuse large cell lymphoma and additional developments from across our deep and diverse pipeline. We are also driving continued execution beyond oncology with a sharpened focus on key value drivers expected to build potential multibillion dollar product portfolios. Through the Q1, we are on track with delivering on our anticipated milestones and have important updates in both our growing respiratory and hematology portfolio. With Abrism, we believe we have the opportunity to further expand what is currently the broadest approved range of patients for the RSV vaccine, including adults 60 years older and infants from birth to 6 months via maternal immunization. We recently reported positive results from the Phase III MONITI trial evaluating Abrasoid in adults aged 18 to 59 at increased risk for RSV disease.

Speaker 2

The trial met its primer endpoints and we intend to submit this data to regulatory agencies. We believe Abrasimodo has the potential to become the 1st and only RSV vaccine for adults 18 years and older. Hematology is another priority area. With the progress of recent and near term milestones, we are confident that we could establish a potential multi $1,000,000,000 product portfolio across hemophilia and sickle cell disease. We recently received the 1st U.

Speaker 2

S. FDA gene therapy approval for Pfizer with FDA approval of Beckvys, a one time gene therapy for adults with hemophilia B. This program builds upon our growing presence in hemophilia. We expect an FDA decision before year end for merspacimon, which has the potential to become the first once weekly subcutaneous treatment for the hemophilia B market and the first treatment delivered as a flat dose for both hemophilia A and hemophilia B. Moving to sickle cell, we recently started the Phase III study of oxyvelatone, our potentially best in class next generation hemoglobin S polymerization inhibitor.

Speaker 2

We are committed to addressing the undeserved needs of the sickle cell disease community and we are leveraging our capabilities for potential breakthroughs for this patient. Now, I will turn to our strategic priority of maximizing performance of our new products. While it may take a year to realize the full benefit of the change we put in place as we speak to bring a more efficient structure to a commercial operation, We are pleased by the impact we are already seeing from our sharpened focus and Pfizer colleagues embracing our high performance culture. Earlier, I mentioned the momentum of our oncology program. Our Pfizer U.

Speaker 2

S. Commercial Pfizer International Commercial Organizations are also moving ahead in driving progress with growth in their respective markets. We have several potential key growth drivers for this year and into year 2025. With AGRIDSMOD, we are very pleased with the positive data in the 18 to 59 ACE group that differentiates our product and we are encouraged by the opportunities to continue increasing overall RSV market growth and market share. Another example of is our enthusiasm for the potential of Nurtec to help the more than 1,000,000,000 people living with migraine worldwide.

Speaker 2

With oral CGRP penetration leaving room for potential significant growth, we will continue to focus on reducing access barriers for healthcare professionals and patients as well as on education through direct to consumer marketing. With Doctor. Brightman, we'll continue to educate healthcare professionals and patients on the importance of proactively treating the underlying cause of sickle cell disease by reframing treatment goals to chronic and proactive treatment. Vilsipi is coming off its annual launch and we are focused on ensuring patient access as a first line advanced therapy or a option for moderate to severe ulcerative colitis. And I will mention, Litfula, We will work toward continuing to accelerate the consideration of advanced systemic treatments for appropriate patients with alopecia areata and further unlock access to its food.

Speaker 2

Additionally, we continue to protect and grow our core brands and key blockbusters including Prevnar, Fintecho and Evolus. In a moment, Dave will provide updates on how we are also making progress with 2 other strategic priorities with 2 other strategic priorities, expanding margins by realigning our cost base and allocating capital to enhance shareholder value. When we consider what we had seen in the Q1, along with our continued progress in executing our 5 strategic priorities, We are cautiously optimistic about the year ahead. We are continuing to focus on commercial execution, protecting and growing our products and driving strong starts with new commercial loans. With the progress we are making in advancing our cost realignment program as well as our confidence in the underlying strength of our business and our continued execution, we have raised our outlook for 2024 adjusted earnings per share by $0.10 We have confidence in our company with some of the most experienced and talented colleagues in the industry who have demonstrated many times before, but we are very good at execution and we expect to continue delivering life changing medicines for 100 of millions of patients globally and meaningful value for our shareholders.

Speaker 2

Now I will turn it over today to discuss the financial performance during the quarter as well as our progress in strengthening our business and enhancing shareholder value. Dave?

Speaker 3

Thank you, Albert, and good morning, everyone. As we continue to navigate a challenging post COVID environment, I'm pleased to share that this year is off to a solid start. We are both protecting and growing our core brands, while investing in building a more effective organization. Our relentless focus on execution is positioning Pfizer to improve shareholder returns. This morning, I'll briefly review the highlights of our Q1 results, then I'll touch on our capital allocation priorities.

Speaker 3

I'll wrap up by outlining our 2024 financial guidance as well as our key priorities for the remainder of this year. Turning to the Q1, let me walk down the P and L. Total company revenues for the quarter were $14,900,000,000 reflecting an operational decline of $3,500,000,000 or 19% versus last year. As you know, our business continues to be negatively impacted by a declining COVID environment on a global basis. To that end, we expect our COVID products will continue to have an outsized effect on both our top line and our bottom line throughout this year.

Speaker 3

However, I do want to point out that we expect our COVID products will continue to be contributors to both revenue and cash flows for the foreseeable future. Strong commercial execution across the enterprise drove 11% operational revenue growth in the quarter when you exclude Comerity and Paxlovid. Performance was positively impacted by our renewed focus on key products and markets, refined allocation of commercial field resources globally and further alignment of marketing resources into key priority areas. Contributing to this performance were our acquired products from Cgen, alongside in line products such as Vindikale, Eliquis and Abrisbo. Dampening our growth in the quarter was the expected lower global demand for Ibrance and Superuzon, driven largely by lower demand in China in the Q1 of 2024 versus last year.

Speaker 3

Adjusted gross margin for the Q1 improved by 530 basis points to 79.6% versus Q1 of last year. This improvement was driven by 3 factors. 1st were lower sales of commodity, resulting in favorable sales mix. 2nd, in the quarter, we recorded a product return adjustment for PAXLOVID associated with our U. S.

Speaker 3

Government contract. And I'll touch upon that in just a moment. And finally, we executed strong cost management across our manufacturing network. Improvements in our gross margin rate will continue to be an important focus for the company going forward. Total adjusted operating expenses increased modestly by 1% to $5,900,000,000 compared to Q1 of last year, despite adding expenses associated with the acquired Seagen business.

Speaker 3

This disciplined cost control puts us squarely on track to delivering on our $4,000,000,000 net savings commitment by the end of the year. Adjusted SI and A expenses increased 3% operation in the quarter, driven by an increase in marketing and promotional expenses for recently acquired or launched products, partially offset by a decrease in expenses for both PAXLOVID and Comirnaty. Consistent with our strategy, we are prioritizing our R and D spending to enhance overall returns while supporting growth for our pipeline. For the quarter, adjusted R and D expenses were $2,500,000,000 a decrease of 1% operationally versus LY. The slight decline was driven primarily by a lower spending resulting from our cost realignment program and lower spending on certain vaccines programs, largely offset by increased investments mainly to develop certain assets acquired from CIGA.

Speaker 3

Q1 reported diluted earnings per share were $0.55 Our adjusted diluted earnings per share was $0.82 which exceeded our expectations due to favorable gross margin performance as well as strong cost management across the enterprise. As I stated earlier, during the quarter, we recorded a favorable product return adjustment associated with our U. S. Government contract for Paxlovid. Recall that during Q4 of last year, we estimated the U.

Speaker 3

S. Government credit for PAXLOVID was $3,500,000,000 Earlier this year, the U. S. Government announced that the EUA labeled product was no longer authorized for emergency use and the agreed upon return period had now expired. Given those facts, we can now finalize the total value of the U.

Speaker 3

S. Government credit. This resulted in a favorable adjustment to revenues of $771,000,000 for Paxlovid and contributed $0.11 to the company's earnings per share. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long term shareholder value. Our strategy consists of maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return and making value enhancing share repurchases after delevering our balance sheet.

Speaker 3

During the Q1, we returned $2,400,000,000 to shareholders via our quarterly dividend, invested $2,500,000,000 in internal R and D and as expected, business development activity was minimal in the quarter. We are committed to delivering our capital structure with a gross leverage target of 3.25x, which we expect to achieve over time. In support of that goal, during the quarter, we paid down approximately $1,250,000,000 in maturing debt. And in May, we will pay down another $1,000,000,000 of outstanding notes. And importantly, during the quarter, we began to monetize our Halion stake through an initial sale of $3,500,000,000 which reduced our equity position in the company from 32% to approximately 23%.

Speaker 3

Looking ahead to the next couple of quarters, I'd like to point out that we expect operating cash flow to be significantly below typical levels, largely due to the timing of certain payments. Despite this near term pressure, clearly, our objective is to return to a more balanced capital allocation strategy over time. Let me spend just a few minutes on our outlook for the remainder of this year. As we entered 2024, the company was highly focused on delivering on its financial commitments and our performance in Q1 demonstrates that we are off to a solid start. With that objective in mind and the fact that it's still early in the year, we are modestly updating the earnings outlook for this year.

Speaker 3

We are raising our full year adjusted diluted earnings per share guidance range by $0.10 to a new range of $2.15 to $2.35 Looking ahead, this increase takes into consideration both our improving line of sight to our cost savings targets and continued strength in our underlying business. As a reminder, our EPS guidance also includes an anticipated $0.40 of earnings dilution from the CGen acquisition, largely due to financing costs. While the Paxlovid revenue return adjustment moves us to the upper end of the revenue guidance range, our top line revenue expectations remain unchanged for the year. We continue to expect revenues in the range of $58,500,000,000 to $61,500,000,000 In addition, even though commodity revenues continue to perform consistent with our plan, it is important to remember that we expect approximately 90% of our sales to occur in the second half of the year, mostly in Q4 given the seasonal nature of this product. Lastly, we remain on track to deliver at least $4,000,000,000 of net savings from our cost realignment program by the end of the year.

Speaker 3

Improving our cost base will put us on strong footing towards margin expansion and improved financial returns as we move forward. As you know, over the past 2 years, the company has made significant investments to drive growth in the back half of the decade, and we remain encouraged by the long term growth outlook for Pfizer. 2024 is clearly a year of focus. The foundation that we established this year sets the stage to deliver on our commitment to enhance shareholder value both this year and through the end of the decade. And with that, I'd like to turn it back over to Albert as we begin our Q and A session.

Operator

Thank you, David. Now let's start the Q

Speaker 2

and A session. Operator, please assemble the

Operator

We'll take our first question from Louise Chan with Cantor. Your line is now open. Hi, thanks for taking my question. I had a question for you on your RSV vaccine sales. Just curious what drove the downtick versus the 4th quarter?

Operator

It looks like GSK had a similar downtick. And then how do you think about potential competition coming into the market for vaccines and treatments? Does that impact your future growth projections for the franchise?

Speaker 2

Thank you. I think, Amir, that's a question for you. Then maybe Alexander also you can add because now we started already to register and approve the product in international markets. Amir?

Speaker 4

Louise, thanks for the question. So it very much appears like the RSV vaccination market is following a seasonal trend. So you expect the dynamics in Q4 versus Q1 to be different. In Q1, what we saw for the market is, for older adults, it certainly attenuated over the course of the quarter. So there was a peak in the 2nd week of January and then a steady week by week decline since then.

Speaker 4

Now in terms of the dynamics for our business and of Brisebo, our performance was in line with what we expected. We think this will follow a seasonal trend and we think we're very well positioned for several reasons. One is we're progressing our retail contracting. 2nd is we have a real strength in the non retail channel. You referred to GSK, they reported their revenues.

Speaker 4

When you look at the mix of U. S. Revenues as reported, it's about a sixty-forty mix. Our retail share is lower than that, but our non retail share is much higher. And that portion of our business really doubled between Q4 and Q1 from about 9% to 17%.

Speaker 4

And I think that just speaks to our strength in doctors' offices and the relationships we have with organized customers. And I'll also note that later this year, if approved, we will have a new presentation of the Actavial, which demonstrates ease of administration. And also our clinical data which Albert referred to in his remarks for label expansion for a Brisebo for 18 59 year olds as well as that are at risk as well as durable efficacy through 2 seasons. I think the combination of these commercial efforts as well as potential label expansion really position us well for a fall season.

Speaker 2

Thank you. Now, Alexander?

Speaker 5

Yes. So, Luis, thanks for the questions. On the international front, we actually made great progress on the Abrismo. As you know, we got approval in the second half of 2023 in Europe and in the U. K.

Speaker 5

And since then, we've been working with the health authority and the experts to provide medical evidence and health care system benefit associated with the protection against low respiratory tract inflation associated with RSV through immunizations of maternal, optical immunization of all the others. So we're making good progress. And actually, we've already received the recommendation in the U. K, in Austria, in Norway, and we are progressing and waiting some recommendation from the vaccine technical committee in many other European markets. We also had good progress from a regulatory standpoint, because it was a milestone with the approval of older adults and MI during the maternal immunization in Japan in the Q1 as well as Kingdom of Saudi Arabia.

Speaker 5

So, overall, they don't get translated to financials, because it takes time to get to the approval, to get the BTC, and to get funding for those campaign. But we see significant opportunity that we can address and meet medical need in the international. Just to give you one example, in Europe, for instance, half of the hospitalization due to respiratory tract infection in the 1st year of life were caused by RSV. So there is definitely a great opportunity, and the majority of those hospitalizations occur for the 1st 3 months of age. As you know, Abrasive is the only maternal vaccine that helps protect infants from low retroactive infection caused by RSV immunization from birth to a 6 months.

Speaker 5

So we see a great opportunity.

Speaker 2

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

Operator

Thank you. We'll take our next question from Terence Flynn with Morgan Stanley. Your line is now open.

Speaker 6

Great. Thanks for taking the question. Maybe just a 2 part for me. Just wondering if you can comment at all about any potential impact in 2020 5 from the Part D redesign? We've heard a couple of other companies already comment here.

Speaker 6

And then one on the pipeline, can you give us any update on danugliplirond and your plans more broadly in obesity? Thank you.

Speaker 2

Yes. Thank you. Kiritanugliplirond is in the interest. Let me take that one so to clear the way. It's not news.

Speaker 2

They will not have news on the nuclear. Everything is as we have discussed before. So we are waiting around midyear to get the totality of the data that relates to the once a day formulation. And then based on the data and everything else, we will make decision for future plans. So we'll speak about them when we have more to say.

Speaker 2

However, now let's go to Amir about the Part D redesign in 2025, if you expect any.

Speaker 4

Sure. Terrence, thanks for the question. And as you can imagine, there's many moving parts to Part D redesign. I think relevant to our business, I think it's important to first note that, as part of what already went place with the redesign, there is no cost sharing imposed on vaccines. So that given our significant vaccines portfolio is a positive.

Speaker 4

And then obviously over the course of 2425, there's other dynamics with out of pocket cost caps, which create better access for patients. And that is helpful to volumes. And we're starting to see that in 'twenty four in some parts of our business, including on Vinda. And then there's things to come, including a change in that cap, as well as patient smoothing. So we'll see how that plays out.

Speaker 4

And, obviously there's also changes in how costs are shared between plans, manufacturers, government, and patients. So how all of that gets implemented, you know, we're tracking that very closely. We're not offering any specific guidance in terms of direct dollar impact on our business in 2025 because there's still a lot to come on this. And when we're ready to do that we certainly will.

Speaker 2

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

Operator

We'll take our next question from Akash Tewari with Jefferies. Your line is open.

Speaker 7

Hey, thanks so much. On tafamidis, really strong quarter, but I wanted to ask on Patent Life. Given we've seen the EU patent office strike down multiple invalidity oppositions and on the U. S. Side, it looks like defendants are conceding infringement.

Speaker 7

How should we think about IP for this product? Why shouldn't this stay patented out to 2,035? And then number 2, really strong quarter for PadSeV and you do have the pending TIVDAC launch in first line cervical. Is there any possibility we could see Seagen become accretive to Pfizer earnings by next year? Thanks so much.

Speaker 2

That's very good questions. Why don't we go first to you, Dave, to speak a little bit about clearly Cision is doing very well if you expect that can become accretive earlier. Also I would like to hear some comments from Chris about the progress of the Cision portfolio and then Doug can comment on the IP situation or legal counsel. So Dave? Yes.

Speaker 3

So just maybe on CGen from a financial perspective, obviously, clearly a very solid quarter and a very solid start to the year. I think we're not changing our expectations both short term and long term for CGM, but I think we're cautiously optimistic as we look forward. So probably nothing to update financially other than our continued commitment to the financial metrics that we've already established. And again, we're probably cautiously optimistic on the trends that we're seeing underlying that business at this point in time.

Speaker 2

You want to make some comments also, Chris, about the performance of the system business?

Speaker 8

Yes, I think just to add to what Dave has said, it's early days for Pat Seth as you pointed out. The for 302, the data was we just launched early this year. We've already seen 164% year on year pro form a growth. It's early, but we're very pleased that we've got NCCN guidelines category 1, we've got the New England Journal publication, we've got uptake in both academic and community settings. In fact, 70% of the current accounts on the community.

Speaker 8

And we're looking forward now because I think we're well set for the future in the muscle invasive bladder cancer setting and those two studies that we'll read out later in 2025, 'twenty six, 'twenty seven.

Speaker 2

Thank you very much, Chris. Doug, what about the situation with the IP disputes?

Speaker 9

Yes. Vindiquel and Vindimax currently has U. S. Patent exclusivity, excuse me, through the end of this year. But we have a patent pending patent term extension, which would take it out to December of 2028.

Speaker 9

And we may be filing additional requests for patent term extensions, while that is pending. In major European markets, our patents expire in November of 2026 and, in Japan, the patent expires in 2026, but there's regulatory exclusivity through March of 2029 for cardiomyopathy.

Speaker 2

Thank you, Doug. Operator, let's move to the next question. Thank you, Akash.

Operator

Thank you. We'll take our next question from Evan Singerman with BMO Capital Markets. Your line is open.

Speaker 10

Hi, guys. Thank you so much for taking my question. I want to touch on gross margin. Obviously, a nice improvement in this quarter. And I believe back in December, you had said for the full year, it'd be around 70%.

Speaker 10

Do you expect that we could actually see a better gross margin for the full year given kind of the benefit we've seen or there's some other puts and takes that we should be aware of?

Speaker 3

Yes. So this is Dave. We're always looking to improve our performance from both a gross margin and operating performance perspective. So I'll say we'll continue to focus on that. Obviously, as you know, there's 3 things that improved our gross margin rate in the quarter, some of those are temporal, some of those are more permanent.

Speaker 3

I think what is encouraging within our gross margin performance is the fact that our cost control element across our manufacturing platform was really strong. We expect that to be continued to be a focus. Keep in mind that our commodity volume is very back half weighted. Primarity, as you know, carries because of our profit share carries a very low gross margin rate. So that mix will reverse itself in the back half of the year compressing and putting pressure on our gross margin rate.

Speaker 3

So you should expect that dynamic to occur as that product plays itself out through 2024.

Speaker 2

Thank you very much. All right, let's go to the next question, please.

Operator

Thank you. We'll take our next question from Vamil Divan with Guggenheim Securities. Your line is open.

Speaker 11

Great. Thanks for taking the questions and congratulations on the quarter. The 2 products I want to just kind of touch on in terms of on your newer growth drivers. So one is Nurtec, which came in a little bit later than we expected. Obviously, the Q1 there tends to be impacted a lot by gross to net.

Speaker 11

I'm just trying to understand if you can give a little more details on what the dynamics for the quarter and any sort of change to your sort of expectation on that product outlook? And then the second one is on the myeloma site, Oraxio. Just noticed in your slide presentation that used to be listed under the key growth drivers in prior quarters. This year on Slide 9 when you show your key growth drivers is no longer listed there. So I'm just curious as I was it looks like it was an intentional change.

Speaker 11

I'm just curious sort of what drove the decision to remove that from the group of key growth drivers?

Speaker 2

Thank you very much, Vamil. Amir Dortek and then Chris myeloma.

Speaker 4

Thanks for the question, Vamil. So I'm happy to talk a little bit about Nurtec. We'd like to accelerate the momentum of Nurtec, and we're taking several steps to do that. For the quarter itself, what we're encouraged by is the demand and the volumes that we saw. And then on the flip side, as you already alluded to, the performance in the quarter was impacted by gross to net.

Speaker 4

So on demand, a few points to just keep in mind, Nurtec continued its market leadership within the class with a 49% TRx share and that was up 28% from Q1 of last year. Secondly, NBRx share, which we keep a very close eye on, that volume, as a whole hit its high point since we closed the Biohaven acquisition at the end of 'twenty 2. So that was up versus last year, but also importantly up versus Q4 of 'twenty three. And there were about 11,000 new Nurtec writers in Q1. And this is 90% of all the new writers within the oral CGRP class.

Speaker 4

So there's a lot about the volume and the demand that we're encouraged by. Now on gross to net, there were 3 issues this quarter. 1 is you typically tend to see this dynamic in the first quarter of every year. We saw that last year too, just given the benefit design dynamics. Secondly, we did have some, payer mix issues between government and commercial channels this quarter.

Speaker 4

And then finally, there was an unfavorable one time prior period adjustment to our GTNs, in Q1. Your question about the rest of the year, for Neurotech, we expect continued growth. We've talked about the fact that the fundamentals in terms of untreated patients and undertreated patients remain strong. We also think that some of the gross to net that I described is going to be temporal and they'll slowly abate over the course of the rest of the year. And then we have made a number of changes in our commercial execution in terms of what we're doing with patient engagement, in focusing our field force resources on physician awareness in a different way, and also working to reduce friction for patient access.

Speaker 4

So overall, we do expect continued growth from Nurtec in the balance of 24.

Speaker 2

Thank you. Chris, about the Eurexiv?

Speaker 8

Thank you, Albert. So the reason Albert didn't list Eurexiv as a major growth driver, just to remind, so he pointed out to our brain, I stand here and Pat Seth as the immediate biggest growth drivers for oncology, but we're absolutely confident that our Regsvale will become over the next couple of months years, a major driver for oncology. Just a reminder, we've seen very promising effect very promising efficacy data in highly refractory patient populations with deep endurable responses. And we've reported the longest reported median progressive free survival in the recurrent relapsed refractory setting of 17.2 months. Now of course, recognizing there's no definitive conclusion because there's no head to head studies.

Speaker 8

We're currently encouraged by what we've seen with the uptake and with the bulk of new patient starts as we have planned and we remain very optimistic for the future from the current indication as well as from the future indications. And a reminder that we have 4 ongoing registrational studies in the next 12 months, the 1st Phase 3 study will read out multiple and the MM5 study. We've also recently received J code for access and we smoothened reimbursement process and continue to gain favorable positions on various pathways and in some the most favorable pathways. We are looking forward to update you very soon on more things for Oraxia.

Speaker 2

Okay. Thank you, Chris. And maybe Alexander, you have anything to add about the product in international markets?

Speaker 5

Yes. On Orax Fear, we actually have it's we're progressing very nicely because as you know, we got a call in Europe in December of 2023 and in the UK in January and in Japan in March 2024. So we are now moving into reimbursements and we've got early access considering the clinical profile, exceptional clinical profile of the products. So that's why we got in some market early access and that's why we started sales in the Q1. But we are very satisfied by that.

Speaker 5

We could close the tap the time to market gap versus competitor. And in some cases, like in Japan, we actually indeed became 1st in class approved. So that we are moving into registration reimbursement discussion and introduction of the product later in the year.

Speaker 2

Yes. Overall, in most international markets, there is a gap between the approval and the access grant. But because of the profile of the product we saw early access, which is basically something that happens on an exceptional base if the product is unique. But some countries before they approve the price, they are allowing you to have access with your own price and then they may get adjusted. So but there's a very good signs for this product.

Speaker 2

We are really feeling very bullish when we see the clinical profile and the opinions that we're keeping on it. Thank you. Let's move now to the next question please.

Operator

Take our next question from Dave Risinger with Learnik Partners. Your line is open.

Speaker 12

Yes, thanks very much. So, how many questions am I allowed to ask?

Speaker 2

You, Dave, you don't have a limit.

Speaker 12

Very kind of you, Albert.

Speaker 13

Okay. So I have I'll keep it to 2.

Operator

So first,

Speaker 12

regarding the company's cost structure, I'm just trying to get a sense of whether it bottomed out in the Q1 or if there are additional cost reductions ahead after March 30 such that the cost structure of the company is coming down after the Q1? And then second, with respect to Vindiquel, I appreciate the comments in response to the question earlier, but I'm just trying to get a little bit better understanding of how to think about it. So there was a comment about patent term extension potentially applying beyond December of 'twenty eight. So if Pfizer is successful, what would the date be instead of December 28 for the U. S?

Speaker 12

And then for the EU, the comment was November of 26, but I've heard that there was a positive EU patent development and I'm trying to understand what that would extend the EU to? Thanks so much.

Speaker 2

Thank you very much, Dave. So, Dan, please you take the cost structure.

Speaker 3

Yes. First, as you well know, rightsizing our cost structure is incredibly important for us from as we think of forward for margin expansion in improving our financial returns. As we look through Q1 and through the balance of the year, keep in mind that the cost changes that we've made in the U. S. Are largely complete.

Speaker 3

Obviously, in ex U. S. Some of those changes lag, so you will see changes in the cost structure ex U. S. For the balance of the year.

Speaker 3

Those are probably not quite as large as we look forward, compared to what has already happened at this point. But I would just say that this will be a constant focus for us as we think about cost and margin enhancements going forward. This is a now we're on a continual cycle of thinking about how we invest and what is the appropriate cost structure in support of our revenue objectives for this business going forward.

Speaker 2

Thank you, Dave. And, Doug, can you please clarify a few things about Vintacar to Dave's very single question?

Speaker 9

Sure. Just to be clear, Dave, we shouldn't think beyond December 2028 on Vindacar and Vindamax. So we've got a patent term extension that is filed and is pending. And all I was saying was that in addition to that patent term extension, which would take it out to December 2028 that we filed and is pending, we may file additional patent term extensions again though just to take it out to December 2028. I hope that's clear.

Speaker 2

Thank you for clarifying that. Okay. Now let's go to the next question, please.

Operator

Thank you. We'll take our next question from Tarang Hommel with UBS. Your line is now open.

Speaker 14

Hi, guys. Trung Nguyen from UBS. Thanks for taking my questions. One on the ACIP meeting coming up and just a clarification on the guide, if I may. So on ACIP in June, what's your expectations on the recommendation for the 50 to 59 population?

Speaker 14

Could this be a shared clinical decision like the 60 plus? Or do you think this is going to be risk based? Is there any chance you can get the 18 to 59 data on the agenda for this meeting? And just on the guide, a clarification here on the credit for the quarter, because you've kept your $3,000,000,000 guide for PACS. I appreciate the comment you're now going to be at the upper end of guide.

Speaker 14

But on PAX, do you expect to have $770,000,000 less pack sales than you imagined at the start of the year, given that you updated your EPS guide? Or was this expected? Thanks.

Speaker 3

Well, maybe I'll take that first. From a guide perspective, I would not we obviously did not expect this final adjustment. It was an estimate that we did at the end of the year. We're now finalizing the adjustment based on the returns that we've seen and it is now complete. I would say that as we look forward for the full year, both for PAXLOVID and for the full year of all of our products, we're cautiously optimistic about where we are.

Speaker 3

I think PAXLOVID started off from a very solid utilization. And keep in mind, that product will trend consistent with infection rates across the globe. And we're still cautiously optimistic that we will achieve our objective and we do not expect anything less than our original expectation at this point in time.

Speaker 2

Thank you, David. And Michael on the ACIP meetings and the June October recommendations is better.

Speaker 15

Yes. First to punctuate, good to hear you're interested in our RSV vaccine. We have a lot of positive and informative data sets coming. 18 to 59, we have already been out sharing robust outcome for that and filing is imminent to happen in U. S.

Speaker 15

FDA. We also have data coming on 2nd season, full 2nd season and data so far that have been available show robust and probably best in class profile for us. And you heard Amir mention, we also have new delivery formats. So there is a lot of positive things happening to further strengthen Briscoe. For a formal decision on recommendation, ASIC normally wait until the product is FDA approved.

Speaker 15

We don't know exactly when FDA will potentially approve. We think clearly given this unique age range that it can happen to be meaningful for the fall, but that needs to be of course pending FDA's views. But we will certainly be very open to share data from several of these new important data sets that could help Aesip to understand the planning of the various RSV products. And we think that would be very helpful for ACIP as a Bristol dataset of robust and in some sense unique in a positive way.

Speaker 2

Thank you. In general, couple of comments for those both of these questions. On the ACIP, we always don't speak for ACIP. So it's not appropriate. So ACIP will do what they think to do.

Speaker 2

Of course, typically, as we say, they wait to see FDA approvals and we hope that they will ask us to present the data in the June, but it's something that we don't know. What we know it is that whatever they decide, whenever they decide, we have prepared our marketing and commercial plans in the U. S. As we do, of course, in other countries, so that we can maximize the approvals or the recommendations or the data that we have available. So that's one thing.

Speaker 2

The other thing David explained that we are cautiously optimistic, of course, about that comes through the entire line of guidance that we gave. We are cautiously optimistic on revenues, we are cautiously optimistic on margins and of course, we improve again cautiously that we think the EPS. You need to see all of that in the context of guys who have been there last year with a big misalignment between what we were expecting to come for COVID and eventually what came. And in fact, it is something that makes us to be double cautious. When we speak about projections.

Speaker 2

We know credibility is extremely important for us. So everything we say, we feel rocket solid, that we will achieve and we don't say anything more than that. We prefer to achieve rather than say. So that is a context to all the guidance that we have provided this time. So with that, let's go on to the next question.

Operator

We'll take our next question from Umer Raffat with Evercore ISI. Your line is now open.

Speaker 16

Hi, guys. Thanks for taking my question. A couple of financials focus questions, if I may. First, on gross margin, Dave, I remember last time you mentioned 2 specific things, in sourcing of recently acquired products as well as new launches as being a drag on gross margin. Considering both those things were presumably baked into 1Q and 1Q looked more like what the historic margin build would have implied.

Speaker 16

Wouldn't that suggest full year margin is tracking meaningfully north of the full year guidance of 70%? Or were there one offs like some inventory work down from recent acquisitions in 1Q that helped it? And secondly, and maybe this is for you and Albert both, is there potential for a significant monetization for some of your excess manufacturing capacity from over the years, be it fill finish or beyond, just considering what the broader environment is and some of the questions on dividend? Thank you very much.

Speaker 2

I think David can take both of them. Dave?

Speaker 3

Yes. So on the gross margin side, as I said, there was a couple of things that impacted favorably our performance in Q1. The items that you listed, both new product launches and in sourcing, the in sourcing is probably a longer term implication to us because those don't happen in an immediate quarter. So that's you think about CGM, it's probably a multi year phenomenon that we have here. I don't think that was an outsized impact to that.

Speaker 3

And obviously, the new launches, we plan for those to be compressing our gross margin rates, of which they did. I think we're off to a very solid start. But keep in mind what I said earlier, in the back half of the year, commodity sales will begin to ramp up. They compress our gross margin rate fairly significantly given the partner contribution and payment that we have to our partner. So I would expect that to dampen our gross margin performance in the back half

Speaker 5

of the

Speaker 3

year. Umer, as you well know, is we're focused on over delivering if we can. So I think we will do everything we can to continue to improve our performance there. And then finally, as we think about, the balance sheet, 1st and foremost, I just want to reiterate that our number one priority from a capital allocation perspective is both supporting and growing our dividend over time, and that is not at risk. Secondly, yes, we always look at the assets that we have across our platform and understand what's the best way to capitalize on those assets.

Speaker 3

And some of that may be monetizing some of that, some of that may be operating them more effectively. So everything is on the table from that perspective.

Speaker 2

Thank you, Dave. And although your answer was very complete, I will just reiterate something that you said because seems like that some people, they want to hear it again. The dividend is a sacred cow for us. Dividend, it is secure and we will continue our policy on dividend as we have promised repeatedly. And we don't have to monetize things to be able to achieve that.

Speaker 2

The reason why we are looking at all our assets is because we want to maximize return on the capital. And of course, we will see opportunities and when it makes sense like the ones that you described, there is a serious now issue with sterile capacity that people are looking to apply. We will look at everything, but it's not that we are looking right now on this on that because we need to support the dividend or we need to support the delevering opportunities or we need to support the investments in the business, right? We can do that without doing any of that. Thank you very much.

Speaker 2

Let's go to the next question.

Operator

We'll take our next question from Geoff Meacham with Bank of America. Your line is now open.

Speaker 17

Hey, everyone. Thanks for the question. Just have 2 quick ones. The first is now that CGen has been fully integrated and you'll see some commercial leverage from the deal. Would you expect to see more of a gradual impact on the padsev and etcetera trajectories looking out a few years?

Speaker 17

Or could you have a more near term inflection? Then the second question, Dave Alberts, the capital allocation commitment to the dividend is super clear. Would we view on Slide 12 as dividend and deleveraging as the two highest priorities? Or is bolt on BD still in the mix for this year or next? Thank you.

Speaker 2

Yes. Let's go to Chris to understand the commercial impact on Seats and then how that will take time.

Speaker 8

Thank you very much. So as you know, we did a number of months planning prior to close to ensure we had a seamless integration and we completed cross training of our commercial field force teams in January, especially for breast scans between Trichaiza and Ibrance, but also for hematology between ADCETRIS and Lrexvio. And we should start seeing that further playing out now over the coming months. As we've mentioned, we're obviously very pleased that there's been tremendous colleague retention. So we haven't had an issue with colleague retention, both from the legacy Pfizer and the legacy CGM organization as we build the new business.

Speaker 8

We expect PASF to continue to do well. There's significant enthusiasm from healthcare providers, from patients, from patient advocacy groups because of the groundbreaking data, double the overall survival. So we are confident that we'll continue to see PADCIP growth. We've also seen TUKAISA, for instance, 21% year over year pro form a basis growth. And in fact, this last quarter was the highest performance of Tekaiser.

Speaker 8

So overall, great confidence. And we started the 1st new Phase 3 study with an NME from the Cision portfolio with Sigurd Attack. And we hope to

Speaker 2

update you on other Phase III studies from the Cigen legacy Cigen portfolio. From my perspective, of course, we have invested so much into this business and we think that this is an area that we can make a huge difference to the world. I'm monitoring that very closely. I'm very impressed actually, I would say, nicely surprised on the positive side, how well both on the Pfizer impact of the 1 plus 1 equals 3 rather than 2, But already we have started seeing it both in the research organization because we are putting now a lot of Phase 3 on starts and you don't see, but I have high visibility on what's going on in earlier stages where we put a lot of stuff in the clinic. And then also in the commercial that you can see now stabilization of Ibrance on the Pfizer side and then high growth of the CGM assets despite the fact that as I said, you should expect a decline in the 1st 6 months.

Speaker 2

When you have an integration, always you have a decline. I haven't seen a single integration what we have done, but it didn't face challenges because people are changing territories, people are changing, let's say, jobs, marketers are moving around. All of that creates, let's say, a disruption. Here, we have the opposite. We have a very, very strong growth on both sides.

Speaker 2

So I'm really, really pleased. Now of course, cautious optimistic, will take time to see the full benefit. But certainly under Chris' leadership and he has formed a terrific team, we are off to a very good start. Now Dave, why don't you take us to the next question?

Speaker 3

So as it relates to your question regarding capital allocation, clearly our first priority, number one priority is supporting both the dividend as well as delevering our balance sheet. So that is job 1 from my perspective. As it relates to bolt on acquisitions, in the near term, you would not expect us to do much there. We are that is a lower priority in the near term until we get ourselves. Hope that helps.

Speaker 2

Thank you. Next question please.

Operator

Thank you. We'll take our next question from Sherpa Turbakanda with Truist. Your line is open.

Speaker 18

Hi, guys. Thank you so much for taking my questions and congrats on the progress. I have a question about your breast cancer franchise from the Ibrance perspective. You have pivotal data from the estrogen receptor PROTAC, the collaboration with the partnership with Arvina expected later this year. One is, what are your expectations for these data?

Speaker 18

And how important are these data for you to make decisions around either continuing or initiating bepTECH combo Phase 3 trials, like whether it's CDK4six combo or CDK4 combo or both of them? Thank you.

Speaker 2

Thank you very much. Chris?

Speaker 8

Yes. Thank you very much for the question. Just a reminder to point out with Ibrance that over 773,000 patients have now been treated globally with Ibrance. So it is currently still the CDK force takes leader. We're very excited about 2 programs, vepdegastron, which we believe to be best in class next generation estrogen receptor degrader and also a thermo cyclic next generation CDK4 specific inhibitor.

Speaker 8

For pebdecastrant, as you point out, we'll get the data later this year for VERITAK2, but we are planning additional studies at risk. So you can expect to see first line studies, both a first line study with atermacyclab and standard of care endocrine therapy as well as atermacyclab plus Vertegastran. And for atermacyclab, as you've seen in a heavily pre treated population, we've seen an overall response rate of 32% with median progress free survival of 8.1 months. We therefore highly encouraged and definitely very encouraged by the safety profile. And we see more continuous dosing, very good compliance and more complete coverage of CDK4 and that's why we're confident to accelerate CDK4 into registration strategy.

Speaker 8

And the first study has already started, as you know, the second line study.

Speaker 2

Thank you, Bruce. Next question, please.

Speaker 18

Thank you. We'll take

Operator

our next question from Carter Gould with Barclays. Your line is open.

Speaker 10

Good morning. Thanks for taking the question. I wanted to

Speaker 19

ask a follow-up by as I think it's important and I fully respect the focus on 2024 and Albert's commentary on conservatism around guidance. But to come back to the IRA impacts for thinking about 2025, when

Speaker 14

do you think you'll be

Speaker 19

in a better position to comment a little bit under your contracting discussions are underway pretty late in the earnings season here and most of your peers have already made comments and your Part D exposure isn't exactly a surprise. So any color there on time line would be helpful. And I guess for David, you've talked about the operating margin improvement being sort of multiyear process.

Speaker 11

Is there

Speaker 19

a risk that the IRA sort of presents a little bit of a hiccup to that in 2025? Thank you.

Speaker 2

Thank you. Amir, do you have any comments on that?

Speaker 4

Sure. Sukarno, I think you heard us describe the dynamics. And later this year, we will have more clarity on what that means. And so we can certainly share that. I think there's also a specific question that comes up often about Eliquis.

Speaker 4

So let me address that now because we're clearly in a live negotiation on that. BMS, our alliance partner is leading that process. You've heard them describe and we also described that there will be transparency around the outcome of that for impact in 'twenty six, in the September timeframe. And so at that point, we'll be in a position to share more.

Speaker 3

Yes. And I guess as it relates to 2025 and the impact of the IRA from a margin expansion perspective, I would say without giving any specifics on that is as we look forward, we obviously run multiple scenarios around how our business might perform. And in those scenarios, we would model different impacts to the IRA because it's still unclear, because it's still a lot of moving parts, specifically as we just spoke about. Under those scenarios, we will work hard to offset any implication we might have through improving our cost structure.

Speaker 2

And I want on the area also to set something that clearly in 2025, we will have 2 events are happening, which are we will have to contribute to as pharmaceutical industry. So that will put pressure on the price in the chain. But also because of the significant change in the out of pocket dynamics and which I hope that will be implemented as the law says immediately because I'm hearing efforts to try to play with that. But if that is the case, which we are certain because that's the law, we will see significant growth uptake, right, for everyone, not for us, of course, for everyone because there is huge number of abandonment that is happening at the pharmacy level when people are asked to pay this very high out of focus, particularly the first one quarter and maybe 2 when they need to exhaust their, let's say, their co pays or the deductible. So that I think dynamic, you know that the industry always ask that we contribute to the out of pocket payments as long as the patients are paying less because there is a significant benefit for all, for the health care system, for the patients, for us.

Speaker 2

And so I'm not that concerned about that for the industry as a whole. I'm very concerned for the industry as a whole with the mandatory cost reductions. There is no negotiation there. They're just cutting prices that are occurring for biologics and for more molecules particularly. One good thing for us, it is first of all that we have good exposure on vaccines that they are not part of that actually they are benefiting from the IRA because there is no co sharing.

Speaker 2

So we can see that in the volumes again. But on the small molecules where we do have exposure, I would say that we were lucky. Only one product was selected for 26, we could have 3 or 4 and only one was selected. So Eliquis, as Amir said, we will wait to see. We know, of course, but we can discuss in the middle of negotiations about anything that's happening.

Speaker 2

And so we'll see the impact of whatever that is in 2026. Then if next year they bring some of the other products that they could be included and they were not in this year, That would be the eyebrows of the world, that would be the Xtandi's Elsens. Those are products that anyway they are approaching their LOE. So even if they come into the IRA, the NPV risk that we have in place is not that big because really we'll cut the price for something that will not be for a very lengthy period of time, but will be for a smaller than others period of time. This doesn't mean that this is not very bad for the industry and for innovation and we clearly opposing it, we will try whatever we can to defend it.

Speaker 2

Let's go to the next question because we are running out of time.

Operator

Thank you. We'll take our next question from Rajesh Kumar with HSBC. Your line is open.

Speaker 20

Hi, good morning. Thanks for taking the questions. First question is, you very helpfully provided some color on the gross margin, what are the takes and puts there. If we look at your early 70s guidance and the gross margin you've achieved in Q1, do we see below 70s gross margin some point in some quarter this year? Or you sort of will get to early 70s with throughout the year maintaining over 70% margin?

Speaker 20

And then the bit, which is quite difficult to work out from the disclosures is how did the Paxlovid number impact the gross margin? So any help there so that we can model that right would be much appreciated.

Speaker 3

Dave? Great. So yes, I think we just gave some color around gross margin being closer to 70% versus closer to 80% when we entered 2024. We are maintaining that color at this point in time. I would say that it's unlikely for our gross margin rate to fall below 70% in any given quarter.

Speaker 3

But I want to just emphasize the gross margin rate will fluctuate a bit, primarily given the mix of sales specifically within the vaccine portfolio, which carries a lower gross margin, number 1. Number 2, when you look at our performance for gross margin in Q1, a dominant effect of that versus last year is the mix, the lower sales volume of commodity in the quarter in Q1 versus last year's Q1. Obviously, the final adjustment of the Paxlovid reserve actually did also have a one time positive impact on the gross margin rate in Q1, but that was less of an impact compared to the mix. So I hope that helps.

Speaker 2

And also I want to emphasize that on PAXLOVID, what really makes me pleased is the underlying demand of the product, right? So it was at the approach approximately in the Q1 only in the U. S. 2,000,000 scripts, right? So that's significant.

Speaker 2

And keep in mind that this was the quarter that we moved from a previous way of go to market approach to a commercial model, right? VAD had a lot of milestones in execution, but we didn't step into any of that. So it was again, I'm very pleased how Amir and Keith, the U. S. Team executed on that meticulous execution.

Speaker 2

So we have a very smooth transition with very low co patient on the commercial plants for the vast majority of their insured lives. And then at the same time, very good execution with thousands of pharmacists participating, almost 90,000 pharmacists, if I remember well, 90% excuse me, of the pharmacies participating into the Medicare part and that went extremely well. And also I want to remind that the Medicare that goes clearly with different price level because it's through the credit of the U. S. Government compared to the commercial plans that they are at the 1,000 it's a different list price.

Speaker 2

And in fact, the difference exists for this year on. Next year, everybody moves to the list price and of course, the discounts that we give plan by plan. Next, over to Greg, you guys on please.

Operator

Thank you. We'll take our next question from Krish Shibutani with Goldman Sachs. Your line is open.

Speaker 21

Two questions, if I may. The first on pneumococcal vaccines with Prevnar as well. Last quarter, you provided some commentary about your thoughts on the tone of the markets, particularly for adult being somewhat more mature. And obviously, competition is coming across the different categories adult and pediatrics. Can you comment about your view given that performance was relatively strong and how you're preparing for competition?

Speaker 21

The second question I have is on commercial models. There has been some nascent efforts in the industry to go more direct to consumers. I say for instance, Lilly has a Lilly Direct for their obesity products. Amir, I'm curious about your thoughts about integrating this type of approach, particularly as I think about certain product categories that you have like migraines and Nurtec. How might this work?

Speaker 21

Where is Pfizer in terms of exploring these opportunities? Thank you.

Speaker 2

Amir?

Speaker 4

Okay. Chris, thanks for the question. So on Prevnar, you alluded to the commentary we prodded around dimensionalizing the market, and I think it's worthwhile just reiterating that. So the adult market continues to contract and that's for two reasons. There are increasingly fewer eligible 65 plus adults And then the 19 to 64 underlying medical conditions population is obviously more difficult to activate.

Speaker 4

So that is a dynamic that is true for our business, but it's also true for any competitor that's going to come into the adult vaccine market. So I think that's important to note. Now for our overall franchise, we continue to expect growth. We did very nicely in Q1. We saw 6% growth.

Speaker 4

And the big driver of that is increased uptakes as well as market share growth in the pediatric segment. So pediatrics in Q1, we saw a lot of conversion, PCV13 to 20. And our share exit in Q1 was at 80%. And that was from 71% at the time of launch of PCV15. So, we see good momentum on pediatrics.

Speaker 4

Now, back to your question about the adult segment and competition, we're continuing to see very good performance where we are. We have 98% market share. We acknowledge that V114 is coming. And as Albert alluded to earlier, we're not going to speculate on what the regulatory outcomes or recommendations are going to be. But there are a number of things that we can do to defend our business in the adult segment.

Speaker 4

Firstly, we have a portfolio approach to contracting that we're deploying in the retail setting, but also in the non retail setting. And it's also important to note that in the non retail setting, many organized customers have a preference for workflow management to stock one vaccine that satisfies all the current ACIP recommendation. So until we know more, I think the best way to defend our share in the adult segment is to continue to do what we're doing and that's to be laser focused on maximizing the opportunity that we have in the adult segment, albeit contracting, and then continue to drive growth in pediatrics. On your second question around consumers, look, engaging and activating consumers is, as you pointed out, a very, very important part of our business. It's true in vaccines.

Speaker 4

It's true in categories like Paxlovid and Nurtec, just to name a few examples. And we're always looking at ways to enhance that connection. One example I'll point to is the work that we've done on vax assist as a mechanism to help consumers determine their vaccine eligibility, but also book appointments. And that's a really good example of value that we can bring. And to the extent that we can do more of that, create value for patients as well as for our business and other categories, we'll certainly look to explore that.

Speaker 4

Alexander, very quickly, anything on PCV

Speaker 2

in international markets? Yes.

Speaker 5

No, we had a great quarter. As you know, we grew by 8% operationally. But more importantly, we also have achieved some key milestones. So we got the European approval of pediatric TRENDAR-twenty in Europe. We also got it approved in Japan, which is a very important market in Australia and many others.

Speaker 5

So this is great because then we want to build on the very successful PEMDAR 30 franchise around the world. As you know, we have exclusive NIP status in 130 market, and now we're going to be able to build on that. Just one comment on the adults. We still are in the process of getting BTC recommendation in most of the European market. But where we got it, in Germany and in France, we see very nice pickup.

Speaker 5

And why? Because they extended the population covered by the Prevnar20 adults. For instance, in Germany, Stico gave us 18 to 59 population at risk and all commerce, 60 and above. And since that, and we got this recommendation in February, we get very nice pickup and utilization in Germany, and we are about to launch in France as we speak. So in adults as well, we see a great potential of growth.

Speaker 2

It's very nice cadence of approval and the very nice cadence of recommendation. Next question, please.

Operator

Thank you. We'll take our next question from Mohit Bansal with Wells Fargo. Your line is open.

Speaker 22

Great. Thank you very much for taking my question. Maybe a question for Dave. Just wanted to understand the cadence of margin improvement as you are embarking on the cost management journey throughout the year because I mean like so you had a really high EPS because of the one time item. But if you think about margin profile over the year, how should we think about it?

Speaker 22

I understand Q4 could be impacted with the Commerity revenues. And then when we get into 2025, should we think about better leverage? Or do you think there could be more opportunity to reduce expenses in 2025 as well?

Speaker 14

Thank you.

Speaker 3

Yes. Thank you for the question. I would say that without giving since we don't guide to quarterly is a multi year journey. And these costs that we have around improving our cost of goods sold is a multi year journey. And these costs that we are working to improve take time to adjust and to further implement ways to be more effective and efficient in this infrastructure.

Speaker 3

So I wouldn't think of that having a significant impact on 2024, but more, if it would, it'd be late 2024, but more 2025 and 26. So but more to come as we know more and as we develop our plans more specifically, we'll be certain to share some specifics around that.

Operator

We'll take our next question from Chris Schott with JPMorgan. Your line is

Speaker 13

open. Great. Just two ones for me here. Just on Brizvo, just really quickly following up on the earlier commentary. Can you just update us on where we are in terms of contracting efforts and progress in the retail channel, just addressing some of the market share issues you highlighted last year?

Speaker 13

Guess my specific question is, do you have line of sight on contracting at this point? Or is that still something that's going to evolve as the year progresses? And then the second quick one was just on Bendikil. Obviously, very strong numbers. Maybe just a quick update in terms of where we are with penetration in that market and where do we how much higher can this go and just how much more of a growth runway is there for that drug?

Speaker 13

Thank

Speaker 2

you. Amit?

Speaker 4

Thanks, Chris. So on Abresco, as I said, we're progressing our contracting conversations. So, we'll have more to share on that as we do later. And in terms of your question on Vinda, Vinda had a really strong quarter. We were up 96% year over year, but importantly also 41% over last quarter.

Speaker 4

When you look at the drivers, I think there's a few things. Some of that is temporal. So there were some purchasing patterns with wholesaler and specialty pharmacies. Then we also made a lot of efforts towards the end of last year to ensure that the reenrollment process for patients was very smooth at the beginning of this year. So all of that leads to a little bit of a Q1 bolus.

Speaker 4

But importantly, at the heart of it, part of our strong performance on Vinda is that the fundamentals around diagnosis and demand are really strong. So we saw a 33% quarter over quarter increase in new patient starts. And diagnosis rates, over the last several years, we had talked about getting into the 30 to 50 percent range. We're approaching the top end of that, and there is still significant opportunity to identify more patients. That's the biggest unmet need and that's where we're concentrating our commercial efforts going forward.

Speaker 4

So we do think that we will sustain this momentum, probably not at the same rate that we saw in Q1, but we will continue to perform well within that.

Speaker 2

Thank you. Alexander, anything to add?

Speaker 5

Yes. Very quickly on the international front, we also had a very strong quarter because we saw a 28% operational growth, but a 43% volume growth, which is comparable to what we see in the U. S. Exactly as Amir said, there is still opportunity, because we basically have established Vindekrel as the standard of care. And we've worked with the health care professional to establish robust infrastructure so that we can screen, diagnose and treat faster.

Speaker 5

And the reality is, we still have opportunity to grow, because, yes, in markets like France, we are approaching 50%. But in other, like Italy, we are around 30%, Japan 28%. So there is still opportunity to grow in increased job usage rates.

Speaker 2

Thank you very much. Next question, we'll take 2 more questions because we are running out of time. So next question, please.

Speaker 12

Thank you.

Operator

We'll take our next question from Tim Anderson with Wolfe Research. Your line is

Speaker 9

open.

Speaker 2

Tim?

Speaker 23

Yes.

Speaker 11

Can you hear me?

Speaker 2

Yes. Yes.

Speaker 23

So it's a busy pipeline readout year. I'm wondering, Michael, can you just point to perhaps the 1 or 2 bigger upcoming readouts that excite you the most where your confidence is highest that could be value creating? So I'm not looking for a description of everything reading out, just maybe 1 or 2 that excite you the most.

Speaker 2

Thank you, Steve. Mike, excite us all, please. Yes.

Speaker 15

I'm excited about the potential approval for mastasumab for both hemophilia A and B to continue to grow our hematology franchise momentum. D and D Yin therapy, we actually today got the equivalent or breakthrough designation RMAT based on the early clinical data available. So we are super excited about that. And relatively near time, the readout is coming. COVID flu combination vaccine, 859 readout, Phase 3.

Speaker 15

And then one need pipeline, poinsigramab, cachexia, which I think pending readout has really breakthrough mechanisms.

Speaker 2

That's fantastic. And anything from your side, Chris?

Speaker 8

Perhaps just to mention again the potential unprecedented new 5 year data for LORBRANA, which will be presented oral at ASCO. We could define the growth of LORBRANA over the next decade. There's 2 other upcoming That would be

Speaker 2

good if you are talking to that, I think, this year.

Speaker 8

And there's 2 other readouts that's important to us. The one is Breakwater, which is the first line opportunity in BRAF positive colorectal cancer, reminder that that's up to 12% of colorectal cancer, particularly poor prognosis. So we're looking forward to that readout and breakwater. And then also, as mentioned earlier, VERITAK II in second line ER positive breast cancer, which can define also help to define the future path for venetectinib.

Speaker 2

Thank you very much. And the last question please.

Operator

Thank you. Our last question will come from Steve Scala with TD Cowen. Your line is now open.

Speaker 24

Thank you. I have two questions. In the Pfizer mRNA flu vaccine efficacy trial, was superior efficacy versus approved flu vaccine shown in the 65 plus cohort? This data was to have been presented last year, but I don't believe we've ever gotten an update. And then secondly, your interest in obesity more broadly.

Speaker 24

So the outlook for Danugliperone is not good. Bolt ons don't look likely, but and this is just one very simple data point. There are postings on pfizer.com for obesity clinical lead positions suggesting something is moving forward. So what exactly is moving forward in obesity at Pfizer? Thank you.

Speaker 2

Yes. On the obesity and Michael also can comment, of course, together with the mRNA flu vaccine. But I said multiple times, first of all, metabolic is an area that we have traditionally very big strength in terms of research. And this is an area that we have the right to win. So we are strong and we keep investing in the whole area because we have the infrastructure.

Speaker 2

And obesity is a very big part of it, given the magnitude of the market. So we will be very active in the obesity with current mechanism of actions and new mechanism of actions. We said repeatedly that we had 3 agents right now in the clinic and we have multiple that are preclinical that we are progressing. But we don't have anything to say per se right now because on time you are waiting some of their data and for the other ones it's too early to speak about them. So that's why we are not commending much of that.

Speaker 2

And we will, let's say, continue being very active in the obesity space in one way or another. Now what about the mRNA flu vaccine? And anything you want to add also to the obesity mind?

Speaker 15

I think you said it so well on obesity. I'll focus on mRNA vaccine and just say that we did share that we had a very robust paywall data for 18 to 59 in the OUTCOME EVENT trial on the 1st generation flu mRNA platform, we actually further refined that product in order to expand activity against these stereotypes, although the disease is dominated by A. We saw an opportunity to do that. And that technology is now with the COVID flu combo vaccine running for 18 to 59 years old. And relatively soon we'll have a readout.

Speaker 15

We think that's really the near term opportunity to bring both of the variant viruses under one simple administration approach. For the 65 plus what you referred to was an early trial with the 1st generation. We have now moved focus to the 2nd generation and are in preparation of subsequent clinical studies on that.

Speaker 2

Thank you, Michael. So thank you, operator and thank you everyone for your interest. That was a very good call. In summary, we are very pleased with the solid start in 2024. We are cautiously optimistic about the year ahead.

Speaker 2

And with our continued progress in executing our five priorities, we are confident that we will continue to deliver for our patients, shareholders and our company. Thank you again for your interest in Pfizer and we hope to have you have a wonderful week. Thank you.

Operator

Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful day.

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Earnings Conference Call
Pfizer Q1 2024
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