Download - Pfizer (PFE) Earnings Report: Q3 2015 Conference Call ... · Pfizer (PFE) Earnings Report: Q3 2015 Conference Call Transcript The following Pfizer conference call took place on October

CompanyName:Pf izerIncCompanyTicker:PFESector:HealthCareIndustry:Drugs

EventDescription:Q32015EarningsCallMarketCapasofEventDate:210.68BPriceasofEventDate:35.5

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Pfizer(PFE)EarningsReport:Q32015ConferenceCallTranscriptThefollowingPfizerconferencecalltookplaceonOctober27,2015,10:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

CharlesTriano;Pfizer;SVPofInvestorRelationsIanRead;Pfizer;CEOandChairmanofExecutiveCommitteeFrankD'Amelio;Pfizer;CFOandEVPofBusinessOperationsAlbertBourla;Pfizer;GroupPresidentoftheVaccines,OncologyandConsumerHealthcareBusinessJohnYoung;Pfizer;GroupPresidentofGlobalEstablishedPharmaBusinessMikaelDolsten;Pfizer;PresidentofWorldwideResearch&DevelopmentGenoGermano;Pfizer;GroupPresidentofGlobalInnovativePharmaBusiness

OtherPart icipants

DavidRisinger;MorganStanley;AnalystJamiRubin;GoldmanSachsGroup;AnalystGregoryGilbert;DeutscheBank;AnalystMarkSchoenebaum;EvercoreISI;AnalystMarcGoodman;UBSInvestmentBank;AnalystTimothyAnderson;SanfordC.Bernstein;AnalystSeamusFernandez;LeerinkPartners;AnalystChristopherSchott;JPMorganChase;AnalystColinBristow;BofAMerrillLynch;AnalystSteveScala;CowenandCompany;AnalystVamilDivan;CreditSuisse;AnalystAndrewBaum;Citigroup;AnalystAlexArfaei;BMOCapitalMarketsEquityResearch;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

ThisisConference#36488823

Goodday,everyone,andwelcometoPfizer'sThirdQuarter2015EarningsConferenceCall.Today'scallisbeingrecorded.

Atthistime,IwouldliketoturnthecallovertoMr.ChuckTriano,SeniorVicePresidentofInvestorRelations.Pleasegoahead,sir.

CharlesT riano (SVPofInvestorRelations):

Thankyou,operator.Goodmorning,andthankyouforjoiningustodaytoreviewPfizer'sthirdquarter2015performance.I'mjoinedtoday,asusual,byourChairmanandCEO,IanRead;FrankD'Amelio,ourCFO;MikaelDolsten,PresidentofWorldwideResearchandDevelopment;AlbertBourla,Presidentof




Vaccines,OncologyandConsumer;GenoGermano,PresidentofGlobalInnovativePharma;JohnYoung,PresidentofEstablishedPharma;andDougLankler,GeneralCounsel.

Theslidesthatwillbepresentedonthecallcanbeviewedatourhomepage,pfizer.com,byclickingonthelinkforPfizerQuarterlyCorporatePerformanceThirdQuarter2015,whichislocatedintheInvestorPresentationssectioninthelowerright-handcornerofthispage.

Beforewestart,I'dliketoremindyouthatourdiscussionduringthisconferencecallwillincludeforward-lookingstatementsandthatactualresultscoulddiffermateriallyfromthoseprojected.ThefactorsthatcouldcauseactualresultstodifferarediscussedinPfizer's2014AnnualReportaswellasonForms10-KandinourreportsonForms10-Qand8-K.

Discussionsduringthecallwillalsoincludecertainfinancialmeasuresthatwerenotpreparedinaccordancewithgenerallyacceptedaccountingprinciples.Reconciliationofthosenon-GAAPfinancialmeasurestothemostdirectlycomparableGAAPfinancialmeasurescanbefoundinourcurrentreportonForm8-Kdatedtoday,October27,2015.

We'llnowmakepreparedremarks,andthenwewillmovetoaquestion-and-answersession.Withthat,I'llturnthecallovertoIanRead.Ian?

IanRead (CEOandChairmanofExecutiveCommittee):

Thankyou,Chuck,andthankyouforjoiningourcallthismorning.Duringmyremarks,Iwillbrieflyrecaphighlightsfromthequarter,provideabriefupdateonthepipelineandclosewithafewthoughtsontheissueofdrugpricing.

Tobegin,Iwouldnotethatwe'vehadanotherquarterofstrongoperationalperformanceandwehavegrownrevenuesoperationallyeveryquarterthisyear.Thistoplinegrowthresultedfromseveralfactors,includingthestrongperformanceofinlinebrands,suchasLyricaintheU.S.,EnbrelandChantix;theuptakefromournewproductsthatareearlyintheirlifecycle,includingPrevnar13Adult,IBRANCEandEliquis;andgrowthintheemergingmarkets.Weremainfocusedoncontinuingtogeneratethistypeofperformance,whereagreaterproportionofourEPSgrowthisgeneratedfromtoplinerevenuegrowth.

JustabriefwordregardingPrevnar13.Wecontinuetoseeaveryattractiveworldwideopportunityfortheadultindication.IntheU.S,wehavedoneanexcellentjobfindingandprotecting25percentto30percentoftheeligiblepopulationolderthan65,andwedidthismorequicklythananticipated.Asareminder,onthelastquarter'searningcall,wesayweexpecttocontinuetofocusontheremainingpopulationover65intheU.S.,althoughthiswouldrequiresustainedeffortasthisgroupismoredifficulttoreach.

Alsoofnote,duringthequarter,weclosedtheHospiraacquisition.AndI'mpleasedtoreportthattheintegrationisprogressingsmoothlyandwe'rebeginningtoseetheexpectedvaluecontributiontoourGIPbusiness.Intermsofrevenue,wearenowtheleadingglobalplayerinthefast-growingsterileinjectablebusiness,andwe'rethenumber2biosimilarscompanyintheworld.Throughtheacquisition,wenowhave3marketedproductsandmorethan7yearsofin-marketexperienceforoneoftheseproducts.Ourbiosimilarspipelineisnowoneofthelargestpipelinesgloballywith7additionalmoleculesinourportfoliounderdevelopment.

WerecentlyreceivedacompleteresponseletterfromtheFDAforRetacrit,abiosimilarepoetin.WeareworkingcloselywiththeFDAtoaddresstheconcernsoftheletter,andatthistime,wedonotbelieveanyfurtherclinicaltrialsareneeded.WeareconfidentthattheadditionalevidenceweprovidewillsupportapprovalandremaincommittedtobringingthisimportantmedicinetopatientsintheU.S.asquicklyaspossible.




Afewcommentsaboutthepipeline.Iseeourpipelinemomentumcontinuingtobuildandremainparticularlyencouragedbygrowingstrengthandpresenceinimmuno-oncology.Regardingtheanti-PD-L1avelumabpartneredwithMerckKGaA,theFDArecentlygrantedorphandrugandFastTrackdesignationsfortreatmentofmetastaticMerkelcellcarcinoma,arareandaggressivetypeofskincancer.Ifsuccessful,thefirstpotentialcommerciallaunchofavelumabisanticipatedin2017,andourgoalistohaveatleastoneormoreadditionallauncheseachyearthrough2022.

Beyondavelumab,wehaveabroadimmuno-oncologyportfolioacrossnumerousmechanisms,including4-1BB,OX-40,avaccine-basedimmuno-oncologyregime,andCCR2.Fouroftheseassetsarealreadyintheclinic-4-1BB,OX-40,CCR2andavelumab.Andweexpecttohaveupto10differentIOdrugsintheclinicby2016.Wecontinuetoseecombinationtherapyashavingthegreatestpotentialwithinimmuno-oncology,andourbroadportfolioofIO,smallmoleculeandADConcologyassetswillaffordustheopportunitytotestawiderangeofcombinationregimesonourownandwithourpartner,MerckKGaA.WecontinuetogrowourfootprintinIOthroughothercollaboration,suchasCARTwithCellectisandinIDOwithiTeos,andweenteredintoacollaborationwithKirintocombineour4-1BBwiththeiranti-CCR4antibodyandstartedaPhaseIstudyinMay.Webelievethisportfolio,alongwithourskilledscientists,shouldenablePfizertobeaformidableplayerinthishigh-opportunityarea.

Turningtovaccines.InearlyJuly,weannouncedthefirstpatientwasenrolledinthePhaseIIclinicaltrialofourinvestigationalStaphylococcusaureusvaccine.Weanticipatethisstudywillcompleteinlate'17withaninterimanalysisplannedforlatein2016.Also,[congruent]withtheFDA,werestartedthePhaseIItrialforourClostridiumdifficilevaccine,whichhaspreviouslyreceivedFarTrack-FastTrackdesignationinAugust2014.Enrollmentinthisprogramisnowcomplete,andweexpecttoreviewdatafromitbyendoftheyear.

Inchronicpain,thereremainsasignificantunmetneedwithnearly1in5adultsaffected.Toaddressthatopportunity,PfizerandLillyhaveresumedPhaseIIIchronicpainprogramfortanezumab.Thisprogramconsistsof6studiesandapproximately7,000patientsacrossosteoarthritis,chroniclowbackpainandcancerpain.Thestudyresultsareprojectedtobeginreportingoutin2017and'18.Ofnote,inthepriorclinicalstudiesinmorethan11,000patients,tanezumabdemonstratedclinicallymeaningfulefficacyversusplaceboandothercommonlyusedpainmedicines.

Ininflammationandimmunology,wearefocusingourfutureinvestmentsindevelopmentprogramsonindicationsforXeljanzinrheumatoidarthritis,psoriaticarthritisandulcerativecolitiswhiledeprioritizingfurtherdevelopmentinCrohn'sdiseaseandankylosingspondylitis.Additionally,wereceivedacompleteresponseletterfromtheFDAonpsoriasis.Whilewehaveyettomeetwiththeagencytodiscusstheirconcerns,werecognizethatovercomingtheissuesraisedmaybedifficult,especiallyinlightoftheevolvingmarketplace.WewillreconsiderourinvestmentinthepsoriasisindicationforXeljanzfollowingthisdiscussionwiththeFDA.Iwouldnotethatanewgenerationofpotentialtherapies,includingoralselectedJAKinhibitorsandIRAK-4areplannedtoenterPhaseIIstudiesin2016forinflammatoryboweldisease,atopicdermatitisandrheumaticdiseases.

Wehaveaonce-dailyfilingforXeljanzunderreviewattheFDAwithaPDUFAdateinFebruaryforthetreatmentofmoderatetosevereRAinpatientswithinadequateresponseorintolerancetomethotrexate.Andifapproved,webelieveonce-dailydosingwilladdtoitscompetitiveprofile.Inaddition,weintendtoresubmitamarketingauthorizationapplicationtotheEuropeanMedicinesAgencybythefirstquarterof2016forthetreatmentofmoderatetosevereRA.

Inassessingthecurrentprofileofourpipeline,IbelievewehaveacompetitivemixofcompoundsandmodalitiesacrossthetherapeuticareasIjustspokeaboutinadditiontocardiovasculardiseases,rarediseasesandneuroscience,whereourexpertisematchesthepotentialwesee.Iampleasedwithourrateofprogress.




BeforeturningthecallovertoFrank,I'dliketoofferafewthoughtsregardingdrugpricing.There'sbeenalotofattentionontheissueofdrugpricing.AndgiventheupcomingU.S.elections,itwillcontinuetobediscussedanddebated.Ultimately,Ibelievegoodpublicpolicywillprevail,ensuringthebestoutcomeforpatientswhilepreservingamarket-basedsystemthatenablestheindustrytocontinuedevelopingnewtreatmentsandcures.However,thatpolicydiscussionmusttakeintoaccounttheroleofmedicinesandthevaluetheydelivertotheoverallhealth-caresystem.

Medicinesareamongthemosteffectiveandefficientuseofprivateandpublichealth-caredollars.Theyrepresentaround10percentoftotalhealth-carecostsandareexpectedtoremainthesamepercentageoverthenextseveralyears.Thisisbecausethepriceofmedicinesdropsignificantlyoncethepatentexpires.Today,about9outof10prescriptionsintheU.S.areforgenericdrugs,whichleadstosignificantlyreducedcostsinthehealth-caresystem.Forexample,12millionpeopletakeatorvastatin,andthecosthasdeclinedaround90percentsince2005.

Sogiventhehighuseofgenerics,manypatientshaveaccesstomedicineswithlowcopays.What'sdifficultiswhenindividualscannotaffordtheincreasesintheircopayswhentheirtreatmentisonaspecialtytier.Noindividualshouldhavetobearthefullcostoftheirtreatmentwhentheybecomesick.Theincreaseincopaystemsfromhealth-carepoliciesthathaveashort-termfocuswithlimitedincentivestopayfortreatmentsorcures.Havinganefficientandanaffordablehealth-caresystemrequiresincentiveswhereinsuranceplanscanbesuccessfulwhentheyinvestinlong-termoutcomesandprovidersaresuccessfulwheninsuringwellnessandpreventionratherthantreatingsickness.Andtosustainthemostvibrant,innovativebiopharmaceuticalintheworld,wemustpreservethemarket-basedsystemintheU.S.thatenablesustocontinuetodevelopbreakthroughtreatmentsandcuresforthebenefitofpatients.

Insummary,wehadanotherquarterofsolidexecutiononallfronts,productlaunches,costandexpensemanagement,andthecontinuedsuccessfulintegrationofHospiraintoourbusiness.We'reontracktohaveasolidfinishtotheyear.Weremainfocusedoncreatingvalueforourshareholdersandcontinuingtoresearchanddevelopnewtreatmentsthathelppatientslivelonger,healthierlives.

NowI'llturnitovertoFrank,who'lltakeyouthroughthenumbersforthequarter.

FrankD'Amelio (CFOandEVPofBusinessOperations):

Thanks,Ian.Goodday,everyone.Asalways,thechartsI'mreviewingtodayareincludedinourwebcast.Asyouknow,onSeptember3,2015,wecompletedtheacquisitionofHospira.ConsequentlyandinaccordancewithourU.S.andinternationalreportingperiods,ourresultsforthirdquarter2015and9monthsendedSeptember27,2015,includeapproximately1monthoflegacyHospiraU.S.operationsbutdonotincludeanyfinancialresultsfromlegacyHospirainternationaloperations.

Thirdquarter2015reportedrevenueswereapproximately$12.1billionandreflectyear-over-yearoperationalgrowthof$795millionor6percent,mainlydrivenbythestrongperformanceindevelopedmarkets-Prevnar13Adult,IBRANCEandEliquis,allofwhichareearlyintheirlifecycles;LyricaprimarilyintheU.S.;1monthoflegacyHospiraoperationsintheU.S.;and5percentoperationalgrowthinemergingmarkets,mainlyfrominnovativeproducts.Reportedrevenuescontinuetobeunfavorablyimpactedbyforeignexchangeof$1.1billionor9percentandthelossofexclusivityofCelebrexandZyvoxintheU.S.andLyricaincertaindevelopedEuropeanmarkets.

AdjusteddilutedEPSwas$0.60versus$0.57intheyearagoquarter.Theincreasewasprimarilyduetorevenuegrowthofcertainnewinlineandacquiredproducts,alowereffectivetaxrateandfewerdilutedweightedaveragesharesoutstanding,whichdeclinedby160millionsharesversustheyearagoquarterduetooursharerepurchaseprogram,whichincludestheimpactofour$5billionacceleratedshare




repurchaseagreementexecutedinFebruaryof2015andcompletedinJuly.AdjusteddilutedEPSwasunfavorablyimpactedby$0.06duetoforeignexchangeandthecontinuedproductlossesofexclusivityincertaingeographies.

ReporteddilutedEPSwas$0.34comparedwith$0.42intheyearagoquarterduetothepreviouslymentionedfactorsandthenonrecurrenceofaonetimechargeassociatedwiththehealth-carereformfeeversustheyearagoquarteraswellastheunfavorableimpactofincreasedpurchaseaccountingadjustments,restructuringchargesandacquisition-relatedcostsassociatedwiththeacquisitionofHospiraandhigherassetimpairmentcharges.

Foreignexchangenegativelyimpactedthirdquarterreportedrevenuesbyapproximately$1.1billionor9percentandpositivelyimpactedadjustedcostofsales,adjustedSI&AexpensesandadjustedR&Dexpenses,intheaggregate,by$601millionor8percent.Asaresult,foreignexchangenegativelyimpactedthirdquarteradjusteddilutedEPSbyapproximately$0.06comparedwiththeyearagoquarter.

Nowmovingontothefinancialhighlightsofourbusinesssegments.Forthethirdquarter,GlobalInnovativePharmaceuticalrevenuesincreased10percentoperationallyyear-over-yearduetothestrongperformanceofrecentlylaunchedproducts,includingEliquisgloballyandXeljanzintheU.S.,andthestrongperformanceofViagraandLyricaintheU.S.andEnbrelinmostinternationalmarkets,whichwerepartiallyoffsetbycontinuedgenericcompetitionforRapamuneintheU.S.Incomebeforetaxesincreased14percentoperationallyduetotheoperationalincreaseinrevenuesandthe7percentoperationaldecreaseincostofsales,partiallyoffsetbya6percentoperationalincreaseinSI&Aexpenses,primarilyduetoadditionalinvestmentandrecentlylaunchedproductsandcertaininlineproducts,andthe7percentoperationalincreaseinR&D,reflectingincreasedinvestmentsinourlate-stagepipelineprimarilyforbococizumab,tanezumab,partiallyoffsetbylowerpostmarketingtrialexpenses.

ThirdquarterVOCrevenuesincreased37percentoperationallyduetothe50percentoperationalrevenuegrowthfromourGlobalVaccinesbusinessasaresultofPrevnar13,whichgrew77percentintheU.S.and10percentinternationally;a54percentoperationalincreaseonOncologyrevenuesdrivenbyIBRANCEintheU.S.and,toalesserextent,bySutent,XalkoriandInlytainmostmarkets;andthe7percentoperationalincreaseinConsumerHealthcarerevenuesduetoNexium24HRintheU.S.Incomebeforetaxesincreased52percentoperationallymainlyduetoincreasedrevenueswithanassociatedimprovementingrossmargin,whichwerepartiallyoffsetbya26percentoperationalincreaseinSI&AexpensesduetohigherpromotionalexpensesforPrevnar13AdultandIBRANCEandan18percentoperationalincreaseinR&Dexpensesduetoincreasedcostassociatedwithouroncologyprograms,primarilyouralliancewithMerckKGaA,partiallyoffsetbylowerclinicaltrialexpensesincertainvaccineprograms.

Inthethirdquarter,GlobalEstablishedPharmaceuticalrevenuesdecreased8percentoperationallymainlyduetothelossofexclusivityandimmediatemultisourcegenericcompetitionforCelebrexintheU.S.inDecemberof2014andgenericcompetitionforZyvoxintheU.S.beginninginthefirsthalfof2015andLyricaincertaindevelopedmarketsinEuropebeginninginthefirstquarter2015,whichwerepartiallyoffsetbythe$330millioncontributionfrom1monthoflegacyHospiraoperationsintheU.S.and1percentoperationalgrowthinemergingmarkets.Incomebeforetaxesdeclined11percentoperationallyduetodecreaseinrevenuesanda3.2percentagepointoperationalincreaseincostofsalesasapercentageofrevenuesduetounfavorablechangeinproductmix;an8percentoperationalincreaseinR&DexpensesreflectingincreasedspendinginbiosimilarsandlegacyHospiradevelopmentprograms,largelyoffsetbylowerpostmarketingclinicaltrialexpenses,allofwhichwerepartiallyoffsetbyan11percentoperationaldecreaseinSI&Aexpenses,drivenbylowerexpensesforproductsthathaverecentlylostexclusivityandcost-reductionproductivityinitiatives.




IwanttoremindeveryonethatonSeptember30,weupdatedour2015financialguidancerangesforreportedrevenuesandreportedanadjusteddilutedEPSsolelytoreflecttheanticipatedimpactoflegacyHospiraoperationsonPfizer'sfinancialresultsfromSeptember3,2015,throughfiscalyear-end2015.Today,weareupdatingtherangesto-forcertaincomponentsofour2015financialguidancetoreflectthefollowingfactors-stand-alonePfizer'sstrongperformanceto-datecoupledwithanimprovedoperationalbusinessoutlookfortheremainderoftheyear;theanticipatedimpactoflegacyHospiraoperationsfromSeptember3,2015,throughfiscalyear-end2015oncomponentsotherthanreportedrevenuesandadjusteddilutedEPS;andtheminimalfavorableimpactfromforeignexchangeratessincemid-July.

Consequently,wenowexpectthereportedrevenuestobeintherangeof$47.5billionto$48.5billion,mainlydrivenbytheperformanceofPrevnar13AdultandIBRANCEintheU.S.aswellasEliquisglobally.Iwanttopointoutthatthisrangecontinuestoabsorbananticipated$3.3billionnegativeimpactfromproductlossofexclusivityandlossesofalliancerevenuethisyearanda$3.1billionnegativeimpactfromforeignexchangeversus2014.Wealsoanticipateadjustedcostofsalesasapercentageofrevenuetobeintherangeof18.7percentto19.2percent;adjustedSI&Atobeintherangeof$13.6billionto$14.1billion;andadjustedR&Dexpensestobeintherangeof$7.5billionto$7.8billion.Finally,weexpectreporteddilutedEPStobeintherangeof$1.37to$1.43andadjusteddilutedEPStobeintherangeof$2.16to$2.20.

NowI'dliketowalkyouthroughthe2015guidancerangesforreportedrevenues,reporteddilutedEPSandadjusteddilutedEPS.Specifically,whatI'mpointingoutonthischartistheimpactofstand-alonePfizer'soperationsonthese3guidanceranges.Withrespecttoreportedrevenues,we'reraisingthemidpointofthepreviousguidancerangeprovidedonSeptember30by$1billion,andwe'reincreasingthemidpointofouradjusteddilutedEPSguidancerangeby$0.11.WithrespecttoreporteddilutedEPS,asaresultofPfizer'sstand-aloneoperations,we'veincreasedthemidpointoftherangeby$0.09.Thisincreaseincludesa$0.02negativeimpactfromrestructuringchargesassociatedwiththeHospiraacquisitionthatareincrementaltoourpreviousguidanceprovidedonSeptember30.

Movingontokeytakeaways.WeachievedanotherquarterofstrongfinancialperformancedespiteproductLOEs.Iwanttopointoutthatthisisthefourthconsecutivequarterthatstand-alonePfizerachievedoperationalrevenuegrowth,whichwasdrivenbyproductsthatareearlyintheirlifecycles,includingPrevnar13Adult,IBRANCEandEliquis.Weraisedthemidpointsofour2015reportedrevenueandadjusteddilutedEPSguidancerangesby$1billionand$0.11,respectively,toreflectbothouryear-to-datestrongoperationalperformanceaswellasourimprovedoperationaloutlookfortheremainderoftheyear.WeclosedtheHospiraacquisitiononSeptember3,whichwasimmediatelyaccretivetoadjusteddilutedEPSuponclosingandexpectedtobeaccretiveby$0.10to$0.12infirstfullyearaftertheclosewithadditionalaccretionanticipatedthereafter,andwecontinuetoexpectthetransactiontodeliver$800millionincostsavingsby2018.Wecontinuetocreateshareholdervaluethroughprudentcapitalallocation.To-date,in2015,we'vereturned$11.4billiontoshareholdersthroughdividendsandsharerepurchases,andwecontinuetoexpecttoreturnapproximately$13billiontoshareholdersin2015throughacombinationofdividendsandsharerepurchases.Finally,weremaincommittedtodeliveringattractiveshareholderreturnsin2015andbeyond.

NowI'llturnitbacktoChuck.


Thankyou,FrankandIan,forthecommentary.Operator,canwepleasepollforquestions.

QUESTIONS&ANSWERS




Operator :

(OperatorInstructions)ThefirstquestioncomesfromDavidRisingerofMorganStanley.

DavidRisinger (Analyst-MorganStanley):

Ihave2questions.ThefirstisonIBRANCE.Ian,couldyoujusttalkaboutthefirst-moveradvantageforIBRANCEandhowyouseethatplayingoutinthemarketplace?Andalsoifyoucouldcommentonexpectationsforbreastcancersurvivaldataandthenanycommentsonthetimingofreadoutsinothercancers.

Andthenseparately,withrespecttoyourpursuitofM&AinInnovativePharma,maybebothyou,IanandFrank,cancommentonyourcurrentfocusandhowyouwanttosetexpectationsforinvestors.Andalso,Frank,ifyoucouldjusttalkthroughthedifferencebetweenthebenefitsofa60-40inversionversusan80-20inversionandjustcharacterizehowtheeconomicswoulddifferinthose2differentscenarios.


Thankyou.Albert,couldyouanswertheIBRANCEquestions,please?

Albert Bourla(GroupPresidentoftheVaccines,OncologyandConsumerHealthcareBusiness):

Yes,certainly.Letmestartwiththecompetitiveenvironmentandthefirst-moveradvantage.AndIbelievethat,speakingaboutourprogram,wehavethemostadvancedandthemuchbroaderprogramthananyothercompetitorsofar.AndIsaythemostadvancedbecausewearethefirstoneandtheonlyone,butwehaveregistrationrightnowinU.S.,aproductthathasbeenprescribedwithover4,000physiciansandhasbeenreceivedbymorethan50,000patientssofar.AndwehavealsofiledinEurope,andourfilehasbeenvalidatedbytheEuropeanauthorities.

Also,Isaythatwehaveamuchbroaderprogrambecausewedohave,rightnow,already2studiesinfirstline.Wehave2studiesinrecurrentmetastaticbreastcancer,andwehave3studies,clinical,runninginearlierphaseofbreastcancer.Andinaddition,beyondbreastcancer,wehavealready30studiesthatare-excuseme,22studiesthatarerunninginotherindicationofsolidtumors.Sowehaveaclear-notjustmoveradvantage,butaverymuchbroadprogramasweseepalbociclibasamajorfranchisegoingforward.

Intermsoftimingonreadoutsand-thatdependsonthestudies.The2studieswehavealreadywrittenout.ThePALOMA-2study,whichistheconfirmatorystudy,we'llreadoutnextyear.Wehavetheearlybreastcancerstudies.Thatpilotwillreadaround2017orcomeincompletionin2017,andtheother2,PENELOPE-BandPALLAS,willcomearound2020.Andasregardssurvivaldata,wedon'thaveanynewsonsurvivaldata,whichisexpected,becausethemediansurvivalinthistypeofpopulationisapproximately4years.Soitwilltakesometimeuntilalltheseeventswillbeaccumulated.


Thankyou,Albert.OnInnovativePharmaandBD,IthinkI'llsortoflimitmycommentstosomethingsimilartothepreviousquarter,wherewelookatBDasawayofacceleratingvaluetoshareholders.Wefeelthatifallthingsareequalonreturns,strengtheningtheinnovativepartofthecompanywillgiveamorebalancedbusinessbetweenbothEstablishedandInnovative,especiallyinapotentialsplitscenario,ifweweretosplitthecompany.AndwecontinuetobeactivelylookingatBDandlookingatsourcesofvalue,whicharebothpipeline,whichareoperationalsynergiesandpotentialfinancialsynergies.Andcertainly,I'llaskFranktoexpanduponandtalkaboutthe60-40or80-20spaceandaboutthe-howpotentiallywidethetargetsareforthistypeofinnovation.





SoDavid,thewaytothinkaboutthisislessthan60percentfullinversion,lessthan80percent,butcallitgreaterthan60percentkindofaninbetween,atweenerinversion.Thewaywethinkaboutthisisthere's4bucketsofcashinahypotheticaltransactionlikethis.Sothere'sourexistingoverseascashandthenthere'sourgoing-forwardoperatingcashflowandthenthere'sthetarget'sexistingoverseascashandthentheirgoing-forwardoperation-operatingcashflow.Thetarget'sexistingoverseascashandgoing-forwardoperatingcashflowwouldbeunencumbered.Ourexistingoverseascashandgoing-forwardcash-operatingcashflowwouldbeencumbered.Andthenthequestionbecomes,inatweenersituation,howmuchofourencumberedexistingoverseascashandhowmuchofourencumberedgoing-forwardoperatingcashcanbecomeunencumbered.Andthat'sbasedontaxplanningandthosekindsofactions,andthatisreally,I'llcallit,onacase-by-case,situation-by-situation,company-by-companybasis.Butwethinkofitinthose4buckets.


Thankyou,Frank.SowhenyoulookatdoingBD,youhavesometradeoff,what'stheprice,what'sthevalue,what'sthepipelineandwhat'stherisksyouseeonacase-by-casebasisofsittinginthe80-40-80-20spaceand60-40space.Sothankyou.


Thankyou.Operator,canwemovetonextquestion,please?

Operator :

YournextquestionisfromJamiRubinofGoldmanSachs.

JamiRubin (Analyst-GoldmanSachsGroup):

Canyouhearmeallright?


Yes,loudandclear,Jami.

JamiRubin (Analyst-GoldmanSachsGroup):

Ian,justafollow-uponthatquestiononM&A.Thelasttimewemet,youhadhighlightedtheattractivenessofataxinversionand-ataxinversiondeal.Infact,yousortofsignaledapreferenceforataxinversiondealoveranoutright,say,U.S.-basedacquisition.AndnowwithCongresslookinglessandlesslikelytoactontaxreformandyourstockholdingupexceedinglywellinthisvolatilehealth-carespace,particularlygivenhowmustspecialtypharmahaspulledback,whereareyouinyourquesttodeploycapital?Canyougiveusasenseoftimeline?Itjustseemstomelikeaphenomenaltimetouseyourstock.


Thanks,Jami.Ihavetocheckthetranscripts.I'mnotquitesurethatIexpressedapreferenceeitherway.IthinkIexpressedapreferenceforanInnovativedeal,andIthinkIexpressedapreferenceforanydealthatcreatesthegreatestshareholdervalue,whichwouldhavetobeacombinationof,asIsaid,pipeline,operationalsynergiesandfinancialsynergies.Idothinktherehasbeenanadjustmentinthepriceforsomeofthespecialtycompanies.There'sbeenanadjustmentintheirprice.I'mnotsosurethere'sbeenanadjustmentintheirexpectationsofwhattheywanttosellthecompany.ButIdoagreewithyouthatBDis-wedohavetheabilitytodoBD.Itcanbeanimportantwayofaddingvalue.Thismanagement




teamisnotafraidoftakingboldsteps,andwe'relookingatopportunities.Andwhenwemakeourdecisionastowhatisthebestwayofenhancingvalue,wewillmove.


Thanks,Ian.Canwemoveontothenextquestion,please,operator?

Operator :

YournextquestionisfromGregGilbertofDeutscheBank.


Goodmorning,Gregg.

GregoryGilbert (Analyst-DeutscheBank):

Goodmorning.I'veheardthe2CEOsusethewordboldinthelastcoupleofmonths,sowe'llseehowtellingthatis.Butaquick3-parter.FirstisthePrevnarfranchise.Howbigcouldthatbecomeandhowdurabledoyouthinkthatcouldbe?

Secondly,MerckseemsprettyexcitedabouttheSGLT2programtheylicensedfromyou,especiallyinlightofLilly'soutcomesbenefit.Socanyoureminduswhattheeconomicsarethereandanythingyousaidabouttheprofileofthatproduct?

Andlastly,onRetacrit.OnthatCRL,Ian,arethereanysignsthattheFDA'sgrapplingwithpolicyorlegalorprecedentissuesthere?Orisitsimplyjustabouttheapplicationandsomedatatheywant-nonclinicaldata?


I'daskAlberttotalkaboutPrevnar,andthenFrankwilldo-giveyouanideaofthecontractualrelationshiponSGLT2,whichIthinkisanunderappreciatedassetandahugeopportunityforusandMerckinthatmarketplace.AndthenperhapsJohncouldtalkaboutwhatwe'reexperiencingwiththeFDAonthebiosimilarsgroup.


Thankyou,Ian,andGreg.Thanksforthequestion.Weareobviouslyverypleasedwiththeresultsofar,andwecontinuetobeexcitedwiththeopportunity.IntheU.S.,letmestart,2thingsstandout.Thefirstisthatwewereabletomakepneumoniavaccinationaneeds-basedratherthanaseasonaleventthatusedtobeuntilnow.Andthesecond,ofcourse,thatwewereverysuccessfulcatchingupadultspreviouslyvaccinatedwiththeoldtechnologyproduct.

For2016,wecontinuetobelievethatthecatch-upopportunitywillstillberobust,althoughmaynotgrowversus2015.Togiveyousomegreatercontext,therewere45millioneligibleadultswhentherecommendationwasissued.Weestimatethatwehavepenetratedapproximately25percentto30percentofthispopulationsofarandthatweremostlypreviouslyvaccinatedwiththeotherproduct,withPNEUMOVAX.Whiletherearestillmanyadultsremaining,thiscohort,asIansaid,ismuchhardertocaptureandwilltakemoreworktoreach.Butwedohaveprogramstoreachthemandalsohaveprogramtoreachthepopulationbelow65thatisimmunocompromisedandtheycanbenefitfromPrevnar13.

NowinEurope,wereceivedapprovalforpneumonia,andwecontinuetoworkwithtechnicalcommitteescountrybycountrytoobtainrecommendationsandreimbursement.Thiswillbephasedoverthenext2




yearsperioddependingonthecountry,butingeneral,IexpectEuropetodemonstratestronggrowth.


Thankyou.Soinsummary,wethinkit'sadurablefranchise,andwe'revery,veryenthusiasticaboutcontinuingtoinvestanddevelopthatmarketplace.Frank,canyoutalkabouttheeconomicsoftheSGLT2contractwithMerck?


Yes.SoIthinkjustasasummaryisthinkaboutitasa60-40splitonprofit.Wegetthe40percentoftheprofit.


OK.Andthenonthebiosimilars…

JohnYoung (GroupPresidentofGlobalEstablishedPharmaBusiness):

Retacrit.


Retacrit.


Sothanksforyourquestions,Greg.So-andjustasyouheardinIan'sopeningcomment,wereceivedacompleteresponseletterfortheepoetinHospiraBLAfromtheFDAonOctober16thisyear.Ithinkimportantly,ourinitialassessmentindicatesnoadditionalclinicalstudiesarerequiredatthispoint.

Soobviously,wecan't,toyourwiderquestion,commentonwhattheFDAare-thepositionthey'retakingwithothercompany'sbiosimilars.Wedon'thaveanyinsightintothat.WhatwecansayisthatwearecurrentlyreviewingourCRL,preparingourresponses.Weexpectsubmissionofourresponsesometimeduringthefirsthalfof2016withanexpected6-monthreviewundertheBsUFA,BiosimilarsUserFeeAct.


Thankyou,John.


Thanks,John.Canwemoveontothenextquestion,please?

Operator :

YournextquestionisfromMarkSchoenebaumofEvercoreISI.


Goodmorning,Mark.


Excuseme,operator.Weseemtobegettingalagonthequestionscomingin.

MarkSchoenebaum(Analyst-EvercoreISI):




Isthisbetter?ThisisMark.


Yes.Icanhearyounow,Mark.

MarkSchoenebaum(Analyst-EvercoreISI):

OK,I'msorryaboutthat.Firstofall,congratulationsonallthegreatshareperformanceandfantasticshareholdercommunicationoverthelastyearorso.Alotofmyquestionshavebeenanswered,butIthoughtI'daskacoupleofclarification.Numberone,Ian,Ithink-andagain,pleasecorrectmeifI'mwrong,Ithinkyou'vesaidbeforethatifyouweretodo-ifyouweretofindavalue-enhancingdealthatwasn'taninversionthatyouwouldlikethatdealtoclosebeforetheendof'16.Becauseaftertheendof'16,risksofpolicy-legalstatutorychangesincrease.I'djustliketoknowifyoustillfeelthatway.

AndthenontheR&Dside,Iheardaremarkablenumber,andIwantedtomakesureIunderstoodthenumber.Thenumberwas16.Ithinkyou-anditwas-whatwasthatnumber?Ihearditis-youwillhave16immuno-oncologydrugsintheclinicnextyear.Orisitsomethingelse?Andifthat'sreallytrue--


Ten.Wehave10noveldrugsintheclinicnextyear,Mark,thataredifferent,andwecanaskMikaeltorunthroughthoseinamoment.There'sjusttoomanytoremembernow.

Andonthecommentonthe-ontaxes.GiventheproposedrulebytheTreasury,whichhasnotyetbeenimplementedbuthasaretroactivedate,clearly,anythingaroundthisarea,youneedtobe-oneneedstobeverycarefulonlegislativechanges.Soifwe-iftherewasadealtobedone,IpreferittobedoneunderthepresentCongress,andthenyou'reoutofriskforthenewCongresscominginandmakingchangesintherules.Andofcourse,youdon'tknowwhattheconfirmationofthenewCongresswillbe.Soyou'dratherdoitinaCongresswhatyoudoknowwhoissettingtherulesandwhattherulesare.Soifwecangotothe10products,Mikael.

MikaelDolsten (PresidentofWorldwideResearch&Development):

Yes,yes.SoMark,wehavesaidthatwe'llhaveupto10bynextyear,andthatincludealreadyintheclinicavelumab,4-1BB,OX-40,CCR2.We'rejustnowstartingtoenrollforourfirsttripletbasedonthevaccine,VBIR1.WearemovingswiftlywithanadditionalPD-1.Wehave-startingtofileanINDthatwe'llbedosingnextyearforourfirstbifunctionalagainst[p-keratin],anothersmallmoleculeimmunomodulatorIDO1.WehaveanM-CSFantibody,whichbringsitto9.Andthenwehaveacoupleofprogramsthatarerunningtowardslikelyendof'16,early'17,whichincludeplatformssuchasadditionalbifunctionalCART,additionalvaccinesandfurthercheckpointinhibitors.SoIthinkyou'vegotthesense,it'sveryrobust.Ittouchesmultiplemodalitiesandgivesusunprecedentedopportunityforcombinations.


Thankyou,Mikael.


Nextquestion,please,operator.

Operator :

YournextquestionisfromMarcGoodmanofUBS.




MarcGoodman (Analyst-UBSInvestmentBank):

JustonIBRANCE,IthinkIheardthemetricthatthere's50,000patientsonthedrug.Canyoujustconfirmthatandtellushowthat'schangedoverthepastquarter?

Second,maybe,Frank,youcantalkaboutthegrossmarginandjustsomeoftheunderlyingdynamicsandmovementsinthegrossmarginsowecanunderstandhowtothinkaboutitkindofgoingforwardwhat'ssustainableandwhat'sonetime.

Andthenthird,maybesomeofthepipelinePhaseIIassetsthatyouhaven'ttalkedaboutbeforebutsomethingthatweshouldbekeepinganeyeonaswemoveinto'16.


OK.I'llaskAlberttoclarifythenumberofpatientsonIBRANCE.


Yes.ThenumberthatImentionedwas15,000,1-5,not50,000.AndcomparedtothepreviousnumberinQ2,wehad9,000.Soit's15,000,upfrom9,000inQ2.Andalso,togiveyouanotherstatistic,itis4,000health-carepractitioners,upfrom3,000attheendofQ2.


Thankyou,Albert.Frank?


Yes.Onthegrossmargins,sothewayI'llansweritisjustI'lldocostofone-costofgoodssold,justthereciprocal.SolastyearQ3,18.3percent.ThisyearQ3,17.4percent.Sodown90bps.Whatreallydrovethatwasoperationalimprovement.There'salotgoingonthere,Marc.Sothinkaboutforeignexchangeintermsofcostofgoodssoldasapercentageisagoodguide,lowersthecostofgoodssold;ROEs,particularlyCelebrex,thebadguide,sohurtsourcostofgoodssoldintermsofwillbeincreasingit.Thosekindofmitigateeachotherandthenforthequarter,operationalimprovementsreallydrovethenumber.Ourguidancefortheyear,18.7percentto19.2percent.

Sowhat'sreallygoingonthere,ifyoucomparethattotheyear-to-datenumber,the17.3percentyear-to-datecostofgoodssoldisforeignexchange.Ifyouadjustforforeignexchange,that17.3percentbecomesalmost18.5percent,whichisclosetotheguidancerange.AndthenwhenyouaddinHospira,someofourprojectedsalesremainderoftheyeargetalittlebitofaliftinthenumber,whichgetsyoutothe18.7percentto19.2percent.


OK.SoI'daskMikaelifhe'drunthroughsomeofournear-termopportunitiesandthentakethatandextenditabittothe-thefurther[ofour]PhaseIIopportunities.


Thankyouverymuch.Sonearterm,maybeawaytolookuponitiswehavereallyafewrealexcitingoncologyplatforms.You'rewellawareandwediscussedIBRANCEinbreastbutalsomovingintoheadandneckandpancreaticadenocarcinoma.Thesecondplatformoncology,obviously,avelumabwithIOcombination4-1BB,OX-40,andwe'llactuallysoonsharedataon4-1BBwith-invariouscombinations;andalsoInlytathat'susedinIOcombination,inthiscasewehaveMerck,KEYTRUDA.Wehave2breakthroughdrugdesignationsthataremovingtowardsregistrationplanning-inotuzumabforALLand




XalkoriforROS-positivelungcancer,anindicationwhereyouhavelongdurationoftreatment.

Nowthesewere4oncologyplatforms.AndnononcologyinneartermareHER2glyphosinesthatwebrieflytouchedupontoday,tanezumabinpain,bococizumabPCSK9incardiovascularandXeljanzinUC,psoriaticarthritis.Comingtowardstheearlierpipeline,wehavelesstouchedupon-wehavearealexcitingreg/phasepipelinestartingtoemergewithrecentlyPhaseIIIforrivipanselinsicklecelldisease.WehaveanotherPD-9inhibitorforpreventionofsicklecelldisease.AndwehavestudiesongoinginDuchenneandHuntingtonwithdrugsthataretouchingtheseorphandiseases.Andifdataisverystrong,therearepotentialtoconsiderFastTrackacceleratedapproval.WeheardfromIanmentioningthatourC.difficilePhaseIIstudyisnowcompletelyenrolled.We'rereallylookingforwardtoseethatdatacomenextyear.

Andthencomingbacktooncology,wehaveanewADCPTK-7thatshowedinterestingdatainPhaseIgoingtowardsPhaseIb2.Wehavethefollow-ondrugtoXalkori392thathaveshownrealrobustsignalsinthispartofthepipeline.Andwe'restartingnextyearmultiplePhaseIIforouremergingimmunokinaseplatformwithIRAK-4wherewethinkwemaybeindustryleading,highlyselectiveJAK3,dual-actingJAK1to2andalsoJAK1inhibitorthateachwilltouchcarefullyselectedindicationwherewethinkeachprofilehasauniquepurposeandfittofillfortheneedsofpatients.Ihopethatgaveyoualittlebitofaflavorofanexcitingbothnear-andmid-termpipeline.

Operator :

YournextquestionisfromTimAndersonofBernstein.

T imothyAnderson (Analyst-SanfordC.Bernstein):

Apipelinequestion,anonmarketquestionandthenastrategyquestion.Earlierintheyearwhenwetalkedtoyou,youmentionedyouhaveanoralPCSK9indevelopment.AndifIrememberright,yousaidwemightseedatain2016,humandata.I'mwonderingifthat'sstilltheplan.

SecondquestiongoesbacktoPrevnarinadults.Whenwe've,Ithink,lookedinthepastatbenchmarks,healthypenetrationintotheadultpopulationmightbesomethinglike60percent.I'mwonderingifyoucansaywhatyouthinkrealisticpenetrationofPrevnarinadultsislikelytobeinU.S.andEurope.

Andthenlastquestionisonpotentiallysplittingup.Investorsareobviouslyassumingthatyou'lldothisatsomepointin2017ormaybelater.Butlookingatitfromtheotherend,whatwouldbethecounterargumentstosplittingup?Inotherwords,whyitmightmakesensethatPfizerwouldnotwanttogodowntherouteofsplittingup.Whataresomeofthebiggesthurdlestoovercome?


Well,onthesplit,aswe'vesaidbefore,wehaven'tmadeadecision.Wesaidwe'llmakeadecisionin-thelatestwe'llmakeitisthefourthquarterof'16.Andthe4criteriawe'vesetupisarethebusinessesdoingwellinsidePfizer?AretheylikelytobesuccessfuloutsideofPfizer?Istheretrappedvalue?Anddowebelievewecanrealizethattrappedvalue?Fromtheotherendofnotdoingasplit,ifweweretodoamajoracquisitionintheinterveningtimeperiod,thenitwouldcertainlychangethetimelinesofasplit.Itwouldn'tnecessarilychangethelogicofit.Totheextentthat,thatlogicprovesout,itwouldcertainly-itmayevenstrengthenthelogicforit.Butthatwouldbeadecisionthatwouldbetakenpostanytypeofacquisitionandpostunderstandingthetimelinethatitinvolves.


Andtheanswertoall4ofthequestionsthatIansummarizedneedstobeyes.Intermsofwewillgodownasplitpath,all-theanswertoall4questionsneedstobeyes.





Soonthepipelinequestion,Mikael?


Yes.SothankyouforrememberingourexcitingsmallmoleculeprogramagainstthePCSK9target.Andobviously,weareincreasinglyexcitedaboutthatspaceaswehaveseensomeofthisdruggetaroundasCETPdrugs.Andweareontrackfordosingpatientsendofthisyear,andwehavecollectedourINDdocument.Soit'sperfectlyontrack.AndIshouldsayit'sanothermechanismthatwehaveidentifiedinourdiscoveryworktointervenewiththePCSK9function,andwe'reveryexcitedtogetitintohumansandseeitsimpact.


Thankyou,Mikael.AndAlbert,onthePrevnar13Adultpenetrationquestion.


Yes.It'saveryinterestingquestion.AndletmesaythatitseemsthatpreviousbenchmarksoranalogsofadultpenetrationhavebecomesomehowirrelevantaftertheverysuccessfulintroductionofPrevnarAdult.Andthiswas-Iwillgiveyoujustsomedatatosupportmystatementthatrightnow,wehaveachievedamarketshareof87percent.That'sextremelyhigh,asyoucanunderstand.Inpharmaciesrightnow,wearehavingamarketshareof90percent.Andkeepinmindthatpharmacistsalso,theiroverallshareofparticipatinginvaccinatingandcatchinguppatientshasincreaseddramatically.

Iwouldsaythatwehavedisruptthischannelwithourintroduction.Also,ourconsumeractivationandinformationcampaignshavebecomeverysuccessful,andourcommercialshaverankedveryhigh.Andasaresult,theawarenessamonghealth-carepractitioners,forexample,inU.S.,is-hasexceeded90percentaccordingtomarketresearchthatwehaverun,which,ofcourse,isanexceptional-exceptionallyhigh.SoIcannotpredictwhateventuallywillbetheoverallpenetrationofAdultinthiscountry,butIwouldsaythatweareveryoptimisticwiththesuccessofthisfirstyearastohowmuchwecanachieveforthebenefitofthepatientsinU.S.


Thankyou,Albert.



Operator :

YournextquestionisfromSeamusFernandezofLeerink.

SeamusFernandez (Analyst-LeerinkPartners):

Thanksverymuchforthequestion.Sojustacouplequickones.Historically,youguyshaveprovidedsomenumbersaroundyourthoughtsonthesizeofthebiosimilarsmarket.Wheredoyouseethat?Canyoujustupdateusonyourthoughtsonthesizeoftheoverallbiosimilarsmarketandwhereandwhenyoureallyseetheaccelerationinthatmarketoccurring?

Andthenthesecondquestion,canyoujustgiveusasenseagainofthelevelofpenetrationthatwe'reatin-with15,000patients?WhatdoestheIBRANCElabelcurrentlyapproach?Andthenultimately,with




theadjuvantsettinginbreastcancer,canyouremindusagainhowmuchofthemarketwould-thatwouldopenup?Thanks.


Thankyou.Sizeofthebiosimilarsopportunity.John,wouldyouliketocommentonthat,please?


Yes,sure.Sothanksforthequestions,Seamus.Soobviously,asyouknow,thebiosimilarsmarketisstillintheprocessofformingindifferentregionsoftheworld.We'reveryexcitedtobeplayingaleadingroleintheformationofthatmarketwiththeportfoliothatwenowhave,bothofourownlegacyPfizerpipelineofbiosimilarsbutalsotheendmarketsportfolioofproductsfromHospira.

Overall,themarketopportunitythatweseeisaroundabout$100billionworthofrevenuesfromcurrentlypatentedbrandedbiologicsthatwilllosepatentprotectionoverthenext5years.Theglobalmarketforbiosimilars,lookingatmanyanalysts,isexpectedtogrowfromaroundabout$1billiontodaytosomewhereintheorderof$17billionto$20billionby2020.Clearly,thereareanumberoffactorsthatwilldriveandinfluencetheevolutionofthatmarketplace,suchassubstitutions,suchasthelabels-thatextrapolationoflabelsthatproductsthatcometomarketwillhave.

Butoverall,Iwouldjustsaythatwebelievethatwe'rereallywellplacedtodrawontheheritageasareallystrongbiologicscompanyinR&Dandinmanufacturing,whichwebelievewillleaveustobeverywellplacedinthatmarketasitformsaroundtheworld.


OK.SoAlbert,perhapsyoucouldtakeusforalittlebitwiththelayersofopportunitiesweseeandthenumberofpatientsorpotentialpatients,probablytalkingabouttheU.S.in-forIBRANCE.


Yes.AndIwillalsospeakalittlebitmoregenerally.Andletmestartbysayinghowexcitedweare,ofcourse,withthisopportunity.Thebreastcanceristhemostcommoncanceramongwomenworldwide.There's1.7milliondiagnosedeveryyearwithbreastcancer.Andapproximately60percentofthem,whichmeansapproximately1million,areER+,HER2-,anareathatIBRANCEhasdemonstratedefficacysofar.

NowwithIBRANCE,weareworkingtobuildabroadfranchise,andthisishowyoushouldseearoundbreastcancerandbeyond.Speakingaboutbreastcancer,we'restartingwiththefirstlineandthenwemovetorecurrentandthentoearlybreastcancer.IntheU.S.,weexpecttoexpand,firstofall,astheopportunitygoes,ourmarketshereinthefirstline.Rightnow,wehaveamarketshareofapproximately27percent.Andthenmovingtonextquarternextyear,weexpecttoexpandthatevenfurther.WealsoexpecttohaveanacceptedfilingbyFDAofourPALOMA-3datathisyear,whichweexpectwillgiveusregistrationforlaterlinesoftherapyinthemetastaticsetting.

InEurope,wehavefiledandourfilingwasvalidated.ThefilinginEuropewasbasedonbothPALOMA-1andPALOMA-3data,whichmeansthatcoverstheentiremetastaticpopulation,notonlythefirstlineaswasoursubmissionandcurrentlabelinU.S.We'realsoworkingtoexpandourlabeltoearlierphasesofbreastcancer,asIsaid-indicatedearlier,whichiscurrently3majorPhaseIIIstudiesrunningthatincludesbasicallythousandsofpatients-Imean,thePENELOPE-Bisastudythatincludesmorethan1,000patients;thePALLAS,itisastudythatwillincludealmost5,000patients,4,600patients;andthe[PALLET]study,whichisthefirstonethatwasintroducedinthissetting,isexpectedtocomeintoprimarycompletionaround'17.





Thankyou,Albert.


Thanks,Albert.We'llmoveontothenextquestion,please.

Operator :

YournextquestionisfromChrisSchottofJPMorgan.

ChristopherSchott (Analyst-JPMorganChase):

Great,thanksforthequestions.Ijusthad2here.Thefirst,ifwethinkaboutbusinessdevelopment,potentiallyyou'reseeingkindof3broadareasinyourbusiness.Seemslikeyou'retalkingaboutimprovingtoplinegrowth,drivingoperatingsynergiesand/orimprovingyourtaxrateorfinancialsynergies.Iknowtheseareallimportant,buthowwouldyourankorderthose3intermsofimportance?Aresomeofthosemust-havesandsomeofthosenice-to-haves?Justwanttounderstandasyou'rekindoflookingatthelandscapewhatyoucouldgoafter,howyou'reweighingthose3broadcategories.

Mysecondquestionwasoninversion,whichhasbeentalkedaboutalot.Butjustinthecurrentpoliticalenvironmentwherethere'salotofnegativeheadlinesaroundkindofpharmaalreadyoutthere,howdoyouthinkaboutpoliticalriskofinversionjustinthiskindofelectionseasonandwithalotofnoisearoundthedrugindustrykindofalreadyoutthere?


SoIthink,Chris,bestwaytothinkaboutthisisthatwewanttotargetthemaximumreturnoninvestment.Andsothemixandmatchcombinationof,asyousaid,financialpipelinegrowth,financialsynergies,costsynergies.Andthesortofpuzzleistofindthetargetcompanywhosepriceandthose3combinationsallowsusthehighestrateofreturnonthedispositionofpreciouscapital.

SoIwon't-andthenonthenegativeissuesofpharma,I'malittle-I'dliketohearafewwordsaboutthat.Ithinktherehasbeensomenegativepressonparticularpharmaceuticalcompanies.Idon'tseethatsocietyissayingtheydon'twantinnovationandsocietyisnotlookingforcuresforAlzheimer'sandParkinson'sandcancer.AndsoIthinkourindustrycontinuestoremainfirmlyingoodsteadinthesensethatweremainalowpercentageofthehealth-carecosts.Soweare,Ibelieve,themostefficientwayofdealingwithcostsinthehealth-caresystem.AndsoIthinkpublicpolicyissquarelybehindhavinganinnovativeindustry.Certainly,Ithinkwecanmakethecasethatthisindustry,riskadjusted,isappropriatelyprofitable.It'sPEanditsreturnoncapitalandreturnoninvestmentsare,Ithink,appropriateinsidetheaveragesofthestockmarket.SoIthinkthereturnsforpharmaceuticalcompaniesarereasonableinthatcontext.SoIdobelievethatwehavealotofpositiveargumentstomakewhenhavingthisdialoguewithsociety.

Soaroundthepoliticalramifications,theshareholdersofPfizerexpectustomaximizethereturn,andtheemployeesofPfizerwanttohavearobust,successfulcompanyinthefuture.Theirjobsandtheircareersdependuponit.Sopartoftheleadershipofthisistoensurethiscompanycanbesuccessfulinthefuture.Tobesuccessfulinthefuture,weneedtohaveacompetitivetaxrate.Sothatiswhyit'sanimportantissueforus.


Thanks,Ian.Nextquestion,please,operator.




Operator :

YournextquestioncomesfromColinBristowofBankofAmericaMerrillLynch.

ColinBristow(Analyst-BofAMerrillLynch):

Twoquestions.Ithinkalothasbeencovered,butacouplemoreontheSGLT2.Andhowshouldwethinkaboutyourpositioningheregivenyou'llbefourthtomarketandyouwon'thaveanyCVdatauntilthesortof'19,'20timeframe?Thefeedbackwe'vebeengettingisit'slargelyaJardine-specificbenefituntilprovenotherwise.AndsotowhatextentyourelyonacompetitorshowingCVoutcomesdatatoconferclasseffectgivenyou'llpotentiallybethelasttohaveaCVreadout?

Andthenjustsecondquestion.Lastquarteryoustatedthatyouseebiotechvaluationsthat'spricedtoperfectioninmanyways.Clearly,there'sbeenasignificantadjustmentsincethen.Inlightofthis,it'dbegreattogetyourcurrentthoughtsfromvaluations.Andhowisthischanginghowyou'rethinkingaboutyourstrategywithregardstoM&Aandthepotentialgeographyoftargets?


Yes,Colin,onthebiotech,Ithinktherehasbeenareadjustmentinpricing.AsIsaid,Ithinkit'sbeenareadjustmentofthestockprice.I'mnotsureyetthere'sbeenareadjustmentonwhatinvestorsandtheleadersofthesecompaniesbelievetheircompanymaybeworthinatransactionalsituation.SoIthinkif-we'dhavetowaitalittlewhiletoseeifthenewstockvaluationssettlein,inrealityofmanagement'sbeliefinthevalueofthecompanies.

Andthenthesecondquestionwason--

Unidentif iedCompanyRepresentative :

SGLT2.


SGLT2.SoIthinkGenocantakeusthroughsomeofthelogiconthat.

GenoGermano (GroupPresidentofGlobalInnovativePharmaBusiness):

Sure.Colin,we'reverypleasedabouttheSGLTprogramandtherecentfindingsfromtheBI/Lillyprogramoncardiovascularoutcomes.Wehaveacardiovascularoutcometrialunderway.Infact,it'sfullyenrolledalreadywithourSGLTpartnershipwithMerck.InlightofthenewfindingsfromBIandLilly,weareconsideringadditionalworkthatwemaydotofurtheraugmentthepackagethatwe'repursuingwithourprogram.

Wehave-inadditiontothesingle-entitydevelopmentprogram,acombination-fixed-dosecombinationwithJanuviaandwithmetformin,andofcoursewiththemarketpositionofJanuviainthediabetesmarket,wethinkthatwe'llbeverycompetitivewithourdatapackage,andwelookforwardtoenteringthatmarket.


I'dliketosayI'mextremelypleasedthatPfizerisdoingapartnershipwithMerck,2greatcompanieswithgreatheritageinthisspace,andwelookforwardtobeingverysuccessfulwiththiscombinationproduct.


Thanks,IanandGeno.Nextquestion,please.




Operator :

YournextquestionisfromSteveScalaofCowen.

SteveScala(Analyst-CowenandCompany):

Thankyou.Ihave3.TheJAVELINtrialofavelumabinsecondlinenon-smallcelllungcancerhasaprimarycompletionof2021.SoIimaginethereareinterimlooksbetweennowandthen.Maybeyoucouldtelluswhenthoseinterimlooksareorwhenthefirstoneis,perhaps.

Secondly,ontheCDK4/6inhibitorlandscape,IthinkthegeneralviewisthattheNovartisagentisnotdifferentiated,buttheLillydrugdoeslookquiteuniqueandpotentiallyathreattopalbociclib.Ithinktherecentbreakthroughdestinationwasnotable.Iwouldlikeyourview.

Andthenlastly,thoughtsontherecentbaricitinibversusHumirastudyanditspotentialimpactonXeljanz?Whyisn'tthisarisktoXeljanz?


OK.PerhapsI'llaskMikaeltotalkalittlebitabouttheCDK4/6competitivespaceandwhatweknowanddon'tknow.


Yes,thankyou.SoIthinkIwillstartandalittlebitpunctuatewhatAlbertsaidthatpalbociclib,IBRANCE,istheonlyCDK4/6inhibitorstudiedinmultiplerandomizedcontrolstudiesandhassuchaprofoundprogramforadvanced,recurrent,earlybreastandmultipleindicationalsobeyondbreast.It'sahighlyselectivedrug,bothCDK4and6.WedothinkhittingbothCDK4and6ispreferable.Andit'sverytolerable,whichisimportantforadrugthatit'splayinginpatientsfromfirstlineuptoearlybreastcancer.

Whatwehaveseenfromtheabemaciclibdrugisdatafromasimilarinveryadvancedpatientsthroughmultiplechemo,almostasalvageline.Andthat'sobviouslypositiveforpatientsbeingatthatverydifficultadvancedstage.Weknowthatit'sadrugthatit'smuchbroaderthantheCDK4and6thatcharacterize,asyourightfullysaid,palboandribociclib.

Soforme,it'skindofadifferentdrugclass,broader,lessspecificandmayplayverywellinthismoreadvancedsettingwherethedatahasbeencurrently.Andobviously,therehavebeensometolerabilitiesjustreportedwhichmayreflectthisbroaderprofile.It'sverydifficulttocommentoncompetitordrugs.Solikealways,wesay,let'shavedataoverthenextfewyearsandexperiencefrompatientsguideus.ButIthoughtthatmaybegaveyouanopportunityforustosummarizethestatustoday.


Yes,andIthinkoneofthecompetitivepositionswe'retakingistoaccelerateaverybroad,in-depthclinicaltrialprogrambehindIBRANCEtoensurethatphysicianshaveabroadexperiencewithmultipleindicationsandgetinearlyandestablishastandardofcarethere.SoIthinkthat'souranswerto-ifthereisacompetitivethreat,that'showwe'redealingwithit.Wouldyou,Geno,talkaboutXeljanz?


Sure.SoSteve,thebaricitinibdatathatwasrecentlyreleasedshowedthesuperiorityonACR20andtheDAS28endpoints.Inourownprogram,asyouknow,wehadatrialincludingHumirawhereweshowedstrongnumericalseparationnotonlyonACR20butonACR50andACR70,moredifficultendpointstodemonstrateadifference.




Nowthattrialwasnotdesignedasasuperioritytrial.Itwasmoreofacomparativetrial.Butthatledustoinitiateahead-to-headsuperioritystudywithXeljanzinRAcomparedtoHumirawherewe'retestingbothmonotherapyandXeljanzwithmethotrexateagainstHumirawithmethotrexate.Soit'sarobuststudy.We'rereadingoutinthefirstquarterof2017.Wethinkthat,thatwillhelpshedmorelightontheperformanceofthisdruginthissetting,thisclinicalsetting.

Theendpointforourhead-to-headisACR50.Asyouknow,Ianmentionedbeforewehavetheonce-a-daydossierfiledwiththeFDAnow,andthat'll-withaPDUFAdateofFebruary2016.Andthenwehaveourpost-marketingsafetystudythatalsohasarmswithEnbrelandHumira.Andsowe'llhavereallygoodcomparativedataovertheshortandmediumtermtoputthesedrugsintoperspective.Frankly,IthinkthattheJAKpathwayisapowerfulpathwaythatoffersthepotentialforstrongefficacy,andwethinkthat,thatwillplayoutwithbothbaricitinibandXeljanzinthelongrun.


Yes,Ithinkwelikeourpositionofhavingopportunitytolookatitwithandwithoutmethotrexateaswell,whichisifanyofyouhavehadtotakemethotrexate,they'llunderstandwhypeopledon'tliketotakeit.

Albert,wouldyouliketodiscusstheJAVELINquestion?


Yes.Steve,Idonothavehandythedataforwhentheinterimanalysiswillhappeninthisstudy.Andanyway,asyouknow,isoureventdriven,soyouneverknowwhateventuallywillhappen.WhatIalsocantellyou,thisis,asyouknow,asecondlinelungcancerstudy.Weareplanningtoinitiatethefirstlinestudythisyear,hopefully,andthatwillhaveanexpectedreadoutmuchearlier,soaround'17.


Thankyouverymuch.



Operator :

YournextquestionisfromVamilDivanofCreditSuisse.

VamilDivan (Analyst-CreditSuisse):

SoIjusthaveacouple,onebuildingonwhatyouwerejusttalkingaboutwiththeJAKinhibitorsandXeljanz.Canyoujustgivealittlemoredetailonthedecisionyoumadetosortoffocusyourpriorities?Yousaidyou'restoppingdevelopmentinCrohn's,ankylosingspondylitis,focusingonotherindications.Wasthatsomethingspecifictotheproduct?Wasitsafetyorefficacyoftheproductinthoseindications?Orisitmoreofakindofviewofthecommercialcompetitivedynamicsinthoseotherindications?

Andthensecond,justone,ifIcould,onEliquis.Justwonderedifyoucangivealittlemorecoloronwhatyou'vebeenseeingthere.[Wehaven't]reallytouchedonthatonthiscallyet.AndI'mwonderingifyouexpectanysortofnegativeimpactgiventheapprovalofPraxbind,thereversalagentforPradaxa,recently.I'mjustwonderingdoyouthinkthatmightimpactphysicianprescribingoverthenextyearorsopriortohavinganantidoteforEliquisandtheFactorXaavailable.





Geno,good2questionsforyou.


Sure.SoletmestartwithXeljanz.Aswecontinuetoseethestudiesreadout,obviously,webecomemoreinformedaboutthe-howthisagentisworkinginthesevariouspatientpopulationsandvariousdiseasestates.Ourdecisionsonprioritizationaremadeonthebasisofthedatathatwe'reseeing,theemergingprofileofthedrug,again,acrossdifferentpatientpopulationsandalsothetimingof-andtheamountofworkthat'srequiredtocontinuetheseprograms.Soit'sanumberoffactorsthathaveledtothedecisionsthatwe'vemade.WeareveryexcitedaboutcontinuingintheRA,inthepsoriaticarthritisandtheulcerativecolitisareas,wherewe'reveryencouragedwithwhatwe'veseensofar.Andtheseareverylarge,robustmarketopportunities.Sowe'relookingforwardtoabrightfutureforXeljanz.

WithregardtoEliquis,frankly,we'recontinuingtoseeEliquistakeshareintheNOACmarketaroundtheworld.We'releadingproductnowinanumberofcountries.We'realeaderwithcardiologistsinmanymorecountries.Weestablishedourfootholdinthestroke-preventionmarketandnowinthethromboembolismmarket.We'recontinuingtomakeinroadsinprimarycare.Sothatenginejustkeepsrolling.

Withregardtotheantidote,thefeedbackthatwe'vegottenfromthephysiciansinthemarketplaceisthatit'sanice-to-haveandtheywelcomeit.Wedon'texpectittohaveamajordisruptiveeffectonthemarketplace.


Thankyou,Geno.


Thanks,Geno,nextquestion,operator.

Operator :

YournextquestionisfromAndrewBaumofCRTI.

AndrewBaum(Analyst-Citigroup):

It'sAndrewBaumfromCiti,actually.Threequestions,shortones.First,Mikael,doyouhavea[SERD]anywherenearclinic?

Second,withregardtobiosimilars,I'dbeinterestedinPfizer'sviewoninterchangeability.IsiteconomicallydesirablewithintheU.S.landscapegivenmy-there'samuchlikelyrapiderosionofrevenueasaconsequence?

Andthenfinally,inrelationtoinversion,InotethatMedtronic,afterinverting[inside]Covidienseeminglyhavehadtoimport$10billionworthofoffshorecashwithonly$500milliontaxbill.Giventhisdidnotfallat60percentlevel,doesthismeanthatthere'sstillasurprisingamountyoucanusedespitebeinghardinthatthreshold?


Well,let'sanswerthequestionsintheordertheyweretaken.


Soyes,Iassumeyou'reconsideringwhatelseinourpipelinecouldcombinewithIBRANCE.Andwedo




have-asyouknow,thePALOMA-3iswithathirdfulvestrant.Wehavesomeinternalactivitieson[poralSERD],butnothingthatallowmetogiveyouadatewhenitcouldorcouldnotgettotheclinic.Iwanted,though,tosaythatwehaveexplorationintheclinicwithaPI3K/mTORinhibitorthatwehaveourselvesthathaveauniquetolerabilityprofilebecauseit'sgivenintermittently.Sowedoexplorewithinternalandpotentialpartnerdrugshowyoucouldcombine.ButIwouldprobablybemorekeentogobeyondtheestrogenreceptorblockadeandlookforamechanistthatcouldbemore-muchadditive,synergisticwhenwedeveloptheCDK4/6franchisefurther.


Thankyou,Mikael.John,canyoudiscusstheinterchangeabilityissue?


Yes.So,Imean,firstofall,Imean,let'sjustsaythatweviewbiosimilarsasplayingakeyroleinthefutureofhealthcare,andtheycanaddressevolvingneedsofpatients,physiciansandpayers.Ontheinterchangeabilityquestionspecifically,Ithinkourviewasacompanyisthatinterchangeabilityshouldbebasedonscienceunderphysiciansupervisionsincebiosimilarsarenotthesameasthereferenceproducts.Thetraditionalparadigmsthatyoumightseeinasmallmoleculeofinterchangeabilityandautomaticsubstitutionjustdon'tapply.Sowebelievethatregulatorsandalsopayersshouldandwilllookatthedataspecifictoeachindividualbiologicmolecule.That'swhywehavecomprehensivedevelopmentprogramsforourbiosimilars,sothatwecanactuallyhelpphysiciansandpatientstobeabletomakeinformeddecisionsabouthowtoappropriatelyusethosemolecules.

Andsoourkeypointhereisthatwereallyisaneedformorescientificprogresstomakeinterchangeabilityfeasibleandforthattoreallybedrivenbythedataforindividualmolecules.


Thankyou.Frank,onthevariousflavorsofinversion.


Yes,IthinkthebestwayI'llanswerthis,Andrew,isyourquestion,Ithink,isactuallyagoodexampleofwhatIsaidbefore,whichisit'sreallytarget-thetargetspecificintermsofhowmuchofthebenefityoucanpreserveofaninversionifyou'reanin-betweenerintermsoflessthan80beinggreaterthan60.Andtheexampleyougaveis,Ithink,agoodexampleofwherebenefitisbeingpreserved.Butitjustpunctuatesmypointbeforethatit'sreallytargetbytarget,companybycompanyspecific.


I'dliketopointoutthattheserulesareproposedrulesthathavenotbeentriggered.


Operator,ifwecould,takeourlastquestion,please.

Operator :

YourfinalquestioncomesfromAlexArfaeiofBMOCapitalMarkets.

AlexArf aei(Analyst-BMOCapitalMarketsEquityResearch):

Goodmorningandthankyoufortakingthequestionsandcongratulationsonthestrongquarter.Ian,justbuildinguponyourearliercommentsontrappedvalueonthesplitdecision,isitfairtosaythatthe




ongoingstrongperformanceofyourinnovativebusinessstrengthensthesplitargumentsincetheredoesappeartobesignificanttrappedvaluethere?Sointermsofago-nogodecision,Iguess,isitfairtosaythatthesplitargumentisstrengtheningfromyourperspective?

Andthenonimmuno-oncology,givenyourfocusoncombinations,howareyouthinkingaboutpricinginthecurrentenvironmentgivenhowthefirst-generationproductsarepriced?


SoIthinkonthesplit,totheextentthatbothbusinessesaredoingwellandcancombinepremiumP/Eratios,ifthoseP/Eratiosaren'tbeingseeninthecombinedstock,thenitwouldbeanargumenttosaythatthistrappedvaluecouldbereleasedbyasplit.SoIthinkwe'lllookatthatandlookatwhat-howthemarketispricingthePfizerInc.stockcomparedtowhatwouldlook-whattheindividualstockshouldtradeatiftheirPEswereunfettered,sotospeak,bybeingontheirown.

AndthenIdothinkyou'rerightthatIbelievethatoneofthecompetitiveadvantageswillbeifacompanyownsthesequenceoftreatmentsandthecombinationproducts.SoIreallyseeinoncology,you-it'sbecomingachronicdiseasewhereyoumovefromonecombinationtothenexttothenexttothenext.Andsotheabilitytobothpricethosecombinationsindividuallyandprice-ifyouhaveenoughinyourportfoliotoalsopricealongerperiodofdifferenttreatmentsisgoingtobeextremelyimportantin-asacompetitiveability.


Thanks,Ian,andthankyou,everybody,foryourattentiononthecall.

Operator :

Thisconcludestoday'sthirdquarter2015earningsconferencecall.Youmayalldisconnect.

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