How you doing? Been down here for a few days, or?
I just got here yesterday.
Okay.
There's a lot of it.
Okay, great.
Excellent. Well, listen, thank you guys for being here. I think my mic's on. Jas just put out an update, as you guys probably heard, so I don't think-
Great.
Pfizer has a major new update on anything safety. I'm hoping.
We do not.
Okay. All right, let's get that out of the way.
We're starting off on a high note.
Excellent. Dave, good to see you. Looking forward to this fireside, and maybe I'll turn it over to you to kick things off, and I know there's a lot to talk about.
Yeah, there's a lot to talk about. I obviously, Pfizer's at a really interesting period of time in its evolution, coming off what I would consider the COVID high. Clearly, we've kind of reset our expectations for COVID this year, but importantly, are on the precipice of a few things. One is, we're working diligently to close the Seagen acquisition. I'm sure we'll speak about that in a moment as we kind of lean into oncology in our cancer franchise. Secondly, we've entered into an agreement, both ex-U.S. and here within the U.S., regarding our COVID franchise. I'm sure we'll talk about that at some point in time, either today or later in the future. That gives us a little bit more stability and outlook for that franchise going forward.
And third, we've recently announced some pretty sizable cost realignment programs to get our cost base in line with our revenue performance and expectations over the long term, and so I'm sure we'll talk about that as well. So with all that together, obviously an interesting time. We're very focused on execution at this point, so look forward to the conversation.
Outstanding. Well, there's a lot of directions to go, and I'd love to take questions from audience as well.
That'd be great.
Happy to go down any direction, but maybe just to start off where you just mentioned it, there's a huge emphasis for the last couple of years on how the base business EPS was perhaps more like $2, but in light of some of the cost cuts, as well as some of the visibility now coming through on-
Yep.
... PAXLOVID, maybe perhaps it's closer to 3. Is that how you think about it, what the base business underlying EPS... the recurring EPS? Does PAXLOVID should no longer be excluded from that recurring?
Yeah, well, I think, I guess let's take a step back and say, you know, obviously, we have a core business that excludes our COVID franchise. I'll come back to them to that in a moment. That core franchise is, you know, obviously a very stable business model, but importantly, a business model that we're investing behind to grow that business over time. We've been very clear that in the back half of the decade, we've actually invested a lot of the proceeds coming out of COVID to enhance that core business as we think about growth from the 2025 - 2030 timeframe. And think about that kind of in two buckets.
One is the growth coming out of our existing pipeline and our new launches that are happening this year and early next, and importantly, the BD efforts that we put in place, all of which together is about $40 billion of growth at this point in time, by 2030, between those two components. On top of that is we have what I consider kind of an option, an option around the COVID business, that continuing going forward is gonna create, you know, substantial cash flows for us that we can continue to turn around and reinvest to enhance the COVID franchise, but importantly, enhance the core. And though, obviously, the COVID franchise, the variability around performance is higher because it's a relatively new market, if you think about it from that perspective.
But nonetheless, they're gonna be very large products that will produce substantial cash flows for us that can be reinvested and/or returned to shareholders to drive value over time. So, but yes, conceptually, that's how we think about it, and that's how we've kind of positioned the company going forward.
Excellent. The other question, Dave, that also comes up is, obviously, there was a lot of lack of investor excitement around Seagen for a while until some of the EV-302 data came out, and I think that started to evolve.
Correct.
Investors are well aware where the leverage stands or the debt stands after the deal closure.
Yeah.
One question that has come up is, technically, there is still $3 billion in repurchase authorization at Pfizer right now.
Correct.
As much as that's not a big lever that could be pulled right now in light of the amount of leverage, are there pockets of perhaps even signaling to the market that you guys do think you're very dislocated right now?
Yeah, we clearly believe the shares are very much dislocated, based on expectations that we have, and I think many of you've discussed. I think practically speaking, we are very levered compared to our long-term objective from a capital structure perspective. So having that as a backdrop, share repurchases are not within kind of our path of execution at this point in time, because we do need to flow. First priority is let's close Seagen, let's begin the integration of Seagen, and let's begin to de-lever, and once that begins to happen, then share repurchases come back onto the table. 'Cause I do think it's really important long term to have our capital allocation program balanced to some degree between investing in our core business, growing and maintaining our dividend, and importantly, doing share repurchases.
Unfortunately, where the leverage is at the moment, share repurchases are the lowest priority, unfortunately.
Makes sense. The closure timing on the deal, is it primarily on the EU side? I'm clearly not as well-versed on it as some of our-
Yeah, it's actually not on the EU side. It's all here in the U.S.
Okay.
We still expect that deal to close either late this year, which I know we're getting tight on time, but still could happen this year or early next year. We continue to work as you well imagine, we've done a lot of deals over the last several years. So we've worked very proactively and productively with the Trade Commission here in the U.S., and we'll see how, you know, obviously we don't have specific timing around that, but could see a path for, again, later this year or early next.
Got it. And based on, based on everything you guys can tell, there's no surprise suit or something from their side that could mostly just as a signal, just slow it down by six months or anything?
No, I don't believe so. Not that I know about, put it that way. You know, obviously, we continue to work with them, but you know, so a little bit of a black box in these. All of these deals are like that.
That's the extent of my risk arb sophistication on that. Since I've exhausted that, maybe we can turn into the base business now.
Sure.
So, okay, now, reasonable to say also that from a biz dev perspective, things are at a pause. So deal closure, share repurchases, and that's kind of the plan right now?
That is correct. And execution, I'd say.
Okay.
You know, clearly execution both in two fronts, one or actually multiple fronts. First and foremost, in our core business, making sure that we execute successfully through our commercial business, both here in the U.S. and ex-U.S. Secondly, is supporting the launches that are beginning to take hold, and really accelerate those into late this year and early particularly into 2024. And then third, making sure that we invest appropriately around our COVID franchise. Those, those two products, they're very large products. They've only recently become commercialized, and so we need to make sure that we invest appropriately to support the growth, the, support the, the revenue yield around those, but not over-invest or under-invest from that perspective.
Makes sense. I guess, Dave, something I've been thinking out loud, and this is not a question on 2024 guidance or anything-
Yeah.
... but just thinking out loud, if the underlying business does about $2 in EPS, and cost cuts, because they'll be $3.5 billion next year, that's over $0.50 in contribution EPS next year.
Yeah.
PAXLOVID at a 5 million courses commercially, which is sort of the run rate we have this year as well. I'm talking end user demand.
Yep.
At the price point, you have perhaps another $0.50, and we have some pockets, like some vaccine sales, pockets like Pats have probably tracked meaningfully ahead of consensus next year because of the AV 302 data. There is a chance you're materially north of $3 in EPS. Is that a type of scenario that's been contemplated? This could be $3.30, $3.40, or-
You're way ahead of us. That, your math, not mine. I would say that, I would just pause on that and say, we will come back to the market, make sure that we... as we think about our plan for 2024, we'll give everybody a perspective on, you know, kind of how the business is gonna perform, both with and without our COVID franchise, and importantly, what's gonna happen as Seagen closes and we apply the Seagen business model onto our expectations for 2024, and we'll be able to lay all that out at some point in time, so you can get a very clear picture of it. Clearly, Seagen, just to be clear, Seagen is dilutive in the first, you know, two to three years, just given the financing considerations-
Got it
... on the business, so.
Got it. Maybe turning to pipeline, I wanna talk about some of the commercial business as well.
Sure.
I know Pfizer has only one drug in the pipeline, which is the oral GLP, so.
I think it's our total focus now. Yeah.
Okay. So maybe let's start there.
Yeah.
Can you talk about-
Yeah.
... sort of the broader strategy?
Yeah.
I know there was. I keep emailing Ronan.
Yeah.
I probably annoy him.
Yeah.
... that, oh, there's this other obesity phase I that popped up.
Yeah.
There's a novel mechanism that popped up.
Yeah.
Can you speak to sort of the broader strategy around obesity? Internally, do you really think of it-
Yeah.
... as a danuglipron only, or is it actually much more broader?
No, it's broader than that. Obviously, we have... and it's much broader than just, you know, I'll say obesity and diabetes.
Right.
You know, that's one area of focus for us-
Sure.
... but certainly not the end-all, be-all focus for Pfizer. We have a lot of assets in early-stage development and research, and I guess from a phase II perspective, we have many assets in phase II, including danuglipron. I would say that we continue, as you know, a very evolving market. The market's probably gonna be quite large, and with big markets, there's gonna be niches of markets and certain patient needs across the market, and how we play in that market is yet to be determined, and how others play in that market, quite honestly, is yet to be determined.
Got it. And again, we'll go through several pockets-
Yeah.
... of the pipeline step by step, but maybe focusing on the diabetes obesity for a second.
Yeah.
Is the internal expectation singularly focused on danuglipron only, or are you guys also thinking of that as a portfolio based on some of the new phase I GLP, the novel mechanism?
Well, obviously, in research, we are researching a lot of different topics within a lot of different spaces, including, you know, in this area. So it's not the single component for us, but obviously, the latest stage component that we have, an asset we have in our pipeline.
Got it. The phase II, I know there was some confusion around-
Yeah.
... whether there was an internal readout or not, or whether there was an interim readout internally or not?
Yeah.
Can you remind us?
Yeah, we are close to presenting data as we expected, and as we announced, that by the end of the year, we'd likely have data coming out of that trial. And when we have it and have it analyzed appropriately, we will share it with the market.
Got it.
Importantly, what we will do is we will let the data guide our decision on how we move forward. And once we understand and, you know, analyze the data appropriately, then we'll lay it out and talk about the path forward for that specific asset in the future.
Makes sense. And just to be clear, I know people can get fixated on specific words.
Sure.
I think you mentioned presented, but I think you were referring to having a press release out, correct?
Say again.
You mentioned presented on danuglipron. I think you were referring to having the data out-
Correct.
Publicly disclosed.
That's correct. Yeah, publicly disclosed, correct.
Okay.
Yes.
Excellent. Any other questions on danuglipron? I know it's the only program in pipeline. Okay. Okay, excellent. So maybe focusing on Seagen for a second.
Yeah.
For a while, I remember, I had Albert over, and I think a few investors were over, too. We had Albert at our CEO's palace, and we were over a dinner meeting-
Which palace? No, one of them.
One of them. We were talking about how his internal expectations on Seagen revenues were lower than what Street was modeling. I think the number was $7 billion for the currently approved products, which includes PADCEV. And Albert mentioned, "You know what? We internally thought it's less than that, but pipeline is what drives upside beyond the Street numbers." Is that still the view after EV-302 data?
Yeah, I don't know if that's exactly what he meant. So I think what he meant, and I wasn't there, so I don't know his-
We'll-
I don't know his exact-
We'll see if he can invite you.
I don't know the exact... Yeah, exactly. I should come to the palace, too. But I wasn't there. I didn't see the quote. But I think what he meant to say, or what we've said many times, is the Street, from an expectation perspective around Seagen, had essentially modeled their in-line products, and that roughly got to between $7 billion and $8 billion of revenue by 2030. When we said $10 billion by 2030, we actually looked at the pipeline and said, "Okay, there is some value that we can attribute to the pipeline from a revenue perspective," and that takes us from the seven or eight to the approximately $10 billion in revenue we expect coming out of that asset.
Got it. Okay, that makes a lot more sense. That makes a lot more sense. And, as we think about sort of, the most important readouts, because I still think, a part of Pfizer's overall stock move into next year will still depend on sort of emerging data out of Seagen. Is there more definitive, data points? Is there... What specific data points would you point us to, which could be important from a marketplace point?
Yeah.
B6, a lung update or beyond?
Yeah, I don't know if I would point to any one. I think it's a combination. There's a lot of assets they have in their pipeline at this point in time. So there's gonna be, hopefully, a pretty constant presentation of the data coming out of the pipeline, and we'll lay out a plan for when that's gonna be shared as we get into actually owning the asset. Right now, we're kind of watching it from afar, a little bit like all of you, given that it hasn't closed yet.
Okay, excellent. Anything else on Seagen before we move on? Maybe, transitioning then to some of the core franchises. I know the pneumococcal vaccine's been a huge focus. Obviously very important for you guys, very important for Merck, but there's also a lot of emerging companies-
Yeah.
... in that space as well.
Yeah.
First of all, maybe let's start with what's happening right now in the marketplace.
Yeah.
Merck with the... finally, an infant formulation out there, and they seem to be doing a little better than they did on the adult side. Can you speak to that dynamic?
Yeah.
How's that playing out?
Yeah, listen, I think we have, if you look at our franchise, our franchise continues to have a fairly sizable market share in excess of probably 70% at this point in time, both in peds and adults. I think we've actually weathered quite well from a competitive marketplace perspective. Actually, I think our share has actually picked up slightly a little bit recently. This is a space that is gonna be competitive long term with many players. I think, as you said, there's others that are trying to disrupt this space. We're certainly aware of that and are focused against it. This is a franchise that we've had in place for many years. We're well-established commercially.
I think our brand loyalty and our brand name, carries a lot of weight, and our relationships with our healthcare professionals across the globe carry a lot of weight. This is a trusted brand, and we'll continue to lever into that and innovate around it.
Makes sense. Makes a lot of sense. I know, there's been in conversations with Pfizer's vaccine team. I think, we've had some conversations previously as well. One of the points that's always stood out is that Prevnar 7 went to 13, Prevnar 13 went to Prevnar 20, and it's not stopping there.
Yeah.
The goal is to go perhaps to 24 and/or beyond.
Yeah.
One of the questions that's come up is, the way Merck is attempting to do that is by dropping some of the first 13 and adding the next 11.
Correct.
To effectively have a 24, but it's not a full 24 in one.
Yep.
Does Pfizer envision a program which could do beyond 20 in one single shot?
Yeah. I don't know if we've really said how we're working on that specifically. I would say that, from a science perspective, our scientists are evaluating a bunch of different options on how best to think about the development of that product and that franchise going forward. And so I would say all of that is on the table, but I wouldn't say that we've described a path forward specifically on that.
Okay.
I would say that we've been in this space for probably the longest amount of time than anyone, so I think we have a fairly good grasp on what needs to happen here, and I think we continue to work diligently to make sure that we have the best set of products moving forward here.
Okay, excellent. Maybe on sticking to vaccines-
Okay.
I know there's a lot of interest in the RSV launch right now. Can you speak to the market share dynamics with GSK?
Yeah.
How you expect that evolving further into-
Yeah, so let me say first, you know, obviously, the launch has gone pretty successful this year for the market in general. I think the market, from an RSV perspective, was a bit bigger than anybody anticipated as we cycled into the back half of 2023. I would say that as I sit here, we're disappointed in our market share, despite the fact that the market was bigger and our performance has been good overall. If you look at our market share, I don't think we performed as well as we thought we could and what we think we will going forward. Obviously there's certain channels that where we don't have as much market share, and it's been a little bit more exclusive than non-exclusive.
I think as we go into 2024, we have eyes on focusing to make sure that we get more than our fair share in the marketplace.
Okay.
But, you know, this is a competitive landscape, right? We'll have to be very competitive and focused on being able to deliver against that objective.
Got it. I want to transition to flu, and I have more flu-
Yeah
... specific questions as well.
Yeah.
But I know... Do you guys foresee a scenario where you have a COVID, flu, RSV single shot? Is that something on the plans?
Yeah, I think it could happen. We've talked about the fact that potentially a triplet could make sense, but we'll see where that goes at this point in time.
Right.
I mean, there's science behind that, and there's also market dynamics behind that.
That's exactly right.
Right.
So from a price point perspective, do you guys get some sensitivity?
I think it's way too early to even talk about combos versus triplet.
Right.
... pricing. So I think we'd have to evaluate a bunch of different scenarios, understand how we think the market might play out, and then the various dynamics around that.
Got it.
But first, the science has to work.
Right.
You know, you've got to make sure that either it's a combo or triplet, that they work together and don't interfere with one another. And once the science is there, then you can understand how much, from a modelling perspective, at least from a financial lens perspective, what do you think the market size could be? What do you think the price points could be? Therefore, economically, what's the right level of investment that you can support behind these different types of franchises?
Makes a lot of sense. As we think about flu and the evolution and some of the data coming out of your competitor as well, how are you guys thinking about your positioning and your expectations on some of the data coming up for you guys?
Yeah, well, you know, as we said, we're still working hard on the flu. We've continued to advance. As you know, it's been the standalone flu has actually been delayed a little bit compared to what we expected, so it's really into not 2024, into 2025. As we get more data, we'll be able to share more about it. We're just not there yet.
Okay, excellent. Anything on the topic so far from the audience before I transition? Okay, so maybe let's continue down this track. I know Pfizer was obviously engaged in a series of biz dev deals. There's a very interesting slide you guys also showed on the revenue possibilities-
Yeah.
... at $4 billion. Street hasn't necessarily-
Yeah.
... agreed with that-
Yeah.
... which is a different conversation.
Yeah.
Let's talk about some of the deals, maybe one by one.
Yep.
I know, Biohaven is out there. It has done well.
Yeah.
Is it sort of tracking slightly below sometimes where some of the consensus numbers track?
Yeah.
That's been a topic that's come up.
Yeah.
How do you guys see sort of the overall momentum there?
Yeah, it's interesting. It's tracked a bit behind, I guess, sell side consensus-
Right.
... a bit from that product perspective. I would say if you look at our internal plans, actually the total acquisition and Nurtec specifically, has actually performed in line with, if not slightly better than we expected as we sit here today. I think it's still within that category's largest market share. We continue to have the number of, I guess, pills per patient, which as we think about as more of a maintenance drug, has continued to tick up. We continue to get more patients on therapy. We continue to have productive engagements across the healthcare landscape with healthcare professionals in mostly in the primary care offices. And so we're feeling momentum there, and again, it continues to perform as we expected.
I think unfortunately, some of the sell-side estimates got a little bit ahead of themselves-
Right.
... as we thought about it. It takes a while for these products to take hold. It takes a while to get them into, kind of our channels and get into our commercial engine, and so a little patience to be able to ramp these things up needs to be applied to that.
Right.
But again, we feel good about where we are, again, tracking consistent with what we expected upon-
Right.
... deal.
So Dave, there's some deals that Pfizer did, which there was a lot more pushback on-
Yep.
... in terms of valuation or the types of assets.
Yep.
Biohaven, no one disagreed that it's the wrong company.
Yeah.
Maybe valuation, perhaps a little north of where it should have been.
Yeah.
That could be debated. But one thing was clear, which was for a deal size of $13 billion math works really nicely if the drug does $3 billion or so in sales.
Yeah.
Pfizer went out of the way to put out a $6 billion sales number.
Six.
How did you guys think about that?
Yeah, so we looked at
Should that be done in future deals?
Yeah, listen, I think... Well, I guess that's a good debate. We you know, listen, we're taking capital, we're deploying capital into these acquisitions, and I think, from my perspective, giving a little clarity on our expectations of performance in these deals is, should be expected by investors. And so setting a, a bar of $6 billion in revenue is, I think, appropriate, or setting a bar for revenue is appropriate, so you can understand how we're taking capital, within the business and deploying that capital. So yes, I think it's appropriate.
Got it.
Keep in mind, we didn't give you a specific timeline exactly when that's gonna happen, but we said we feel like the franchise can get to those levels.
Got it. Maybe another one, Global Blood.
Yep.
I know that program is tracking at sub-$400 million run rate.
Yeah.
Expectations are $1 billion, and also there's the backup-
601.
... 601 program we're supporting.
601, yeah.
How are you guys feeling on that broadly, right now?
Yeah, feel, we feel good. Again, that's another product that is tracking consistent with our expectations upon the deal model, and I think importantly, we were excited about 601 when we, from a diligence perspective, when we, did the deal. I think the data around 601, if anything, has gotten even stronger than what we expected. So I think that molecule's come along nicely in the clinic. So, again, I think we had a, in this case, both, Biohaven and GBT, you know, they had products on the market that somewhat de-risk, if you will, at least, put a floor, to some degree, on the returns.
And then we knew they had assets in the pipeline, if they were successful, could actually help the returns, even above and beyond, kind of quote-unquote, "the floor." So from a financial CFO perspective, I like those kind of deals because they have both components. There's kind of like an option on top of the underlying business that you purchased.
Got it. I wanted to get into Atrasimod-
Yeah.
... the Arena acquisition as well.
Yeah.
Maybe just before that, it's clear Bristol came out recently. They had to lower the guidance across several of the launches that are ongoing.
Yeah.
Has there been any consideration on your end, just across the board as you look at it higher level, that considering where the stock is and where-
Yeah.
... the expectations are right now, could this be a good chance to maybe recalibrate some of the expectations on some of these launches as well? Or do you feel reasonably comfortable that expectations are just fine and you guys can track it?
Yeah, no, I don't, I don't think on, particularly the ones that we just discussed, I don't think there's any need to adjust those. I think what we've... what we have learned, and, and maybe I'll put my, reflection hat on for a moment as I go through 2023, is that as we think about 2024, is making sure that we give investors a line of sight to our expected performance, but set reasonable, achievable expectations around both revenue and earnings progression, and give some clarity around the different components of our business. Because I think it is important to understand how our non-COVID business is expected to perform.
I think it's just because the variability around the COVID franchise, I think it'd be important to understand what we expect to happen around that franchise and give you some underlying assumptions around that. And then importantly, Seagen's gonna be layered on top of that. So giving investors an insight to, as we layer that, the Seagen acquisition on top of four, five, or what are the puts and takes to kind of top line and bottom line as we think about that acquisition, coming online when, in our business model.
Got it. Okay. So no, so you don't necessarily, based on some of the important launches that are going on right now, you don't see any
No, I think importantly, we have, obviously, Pfizer is probably a little different than some, in the sense that we have a lot of products, right? And so, you know, we shouldn't just be... I don't think that just looking by each individual product is probably the way to value Pfizer. I think the way to sit back and think about Pfizer is, we have a portfolio of products of which we believe that in totality, we can grow successfully and have meaningful returns, over time. Within that portfolio of products, there's gonna be some products that are gonna do extremely well, and there are some products that, quite honestly, are probably gonna lag.
And we need to make sure we invest appropriately behind where we have the biggest opportunity to accelerate our performance, and I'll say, we'd and/or pivot in products where maybe they're struggling, and we should reinvest maybe differently or support that product differently. And I think that's how we look at it, more from a portfolio standpoint than just kind of the sum of all the products.
Got it. So maybe instead of going down line- by- line on some of the new launches can I ask you, and this is kind of where the discussion started when I said, Street thinks there's only one pipeline program.
Yeah.
I think part of the reason why that's happening is there's a perception that a clear line of sight on a $5 billion-plus drug might potentially be...
Yeah.
... an oral GLP. Is there another one internally that you guys think has a realistic chance of being that? And I'll ask you a follow-up on.
Yeah, listen, I don't know if I'm gonna go into that level of detail with you, today. I mean, obviously, there's a lot of different opportunities and different assets that we have in early, and I'll say mid-stage development at this point in time, that we're not gonna sit back and put a number on at this point. It's probably, quite honestly, too early to tell. And I think what's happened is, you will, as we kind of kick this session off, everybody's got them excited about the obesity market , and the size of that, which it will be a big market, there's no doubt. There will be multiple players, there'll be multiple competitors, there'll be multiple ways to access that market, but it's one of many markets, so.
Makes sense. I think there's this perception in the marketplace that perhaps you guys were falling... I, now I'm thinking, like, potentially larger pipeline opportunities-
Yeah, sure
... that you were falling behind, sort of doubt from a timelines perspective, but now, given the opening they've left on the 6-7-year-olds, in a scenario where your trial is a lot more consistent, there, this is the type of pipeline program that Street's not spending enough time on, and this is a readout coming up. Could you speak-
And which one is that? Sorry.
The DMD gene.
The DMD, okay, yeah.
Could you speak to sort of the types of dis- again, I'm not gonna go down-
Yeah.
... the nuances of mini versus micro dystrophin, but-
Yep, yeah.
... the debates you're hearing internally, the type of perception internally on whether there's an opening now that m- didn't exist perhaps a few months ago?
Yeah, there might be. I think it's probably, again, that you're going into levels of details we're probably not gonna discuss today, but, we'll see. Well, you know, the market, obviously, the market is evolving in this space, the science evolving in this space. And, you know, we're - we have, you know, exciting programs, to hopefully help these, young, boys, who suffer from this condition. And, we'll see where it goes.
Okay, makes sense.
Yeah.
In terms of sort of the P&L evolution over the next-
Yeah.
... three years, this is again, not a guidance question-
Yeah.
... but more in terms of LOEs that are hitting.
Yeah.
Do you intend to retain a certain EPS flow regardless of the year? How are you thinking about that dynamic?
Yeah, I would say, I would look at it more from an operating profit perspective. If you look at kind of our operating margins, you know, our operating margins have been squeezed over the last several years. What we're focused on at the moment, and part of this is due, is focused on the, you know, our cost realignment program, but is to get back to pre-COVID margin levels. With a slight little nuance to that, is the COVID franchise, particularly the vaccine product, has a lower margin given our partnership with BioNTech. And if you mix adjust for that, I'm still targeting to get back to pre-COVID margins with that slight adjustment.
That is making sure that we're investing behind what I consider resilient revenues, not revenues that kind of come and go on an annual basis, and importantly, that we invest appropriately to get to those levels of margin rates.
Got it. So, okay, so margin is where the most focus is at, and you're not necessarily saying, "Let's have a certain minimum EPS, regardless of the 20 25 or 2026 in terms of the LOE hits?
No, that's not how... That's just not how we're looking at it from that perspective. And again, we gave a pretty specific kind of, I'll say, stairstep from 20 25-20 30 around kind of our growth expectations on the revenue side. And we've deployed a lot of capital against those growth expectations. I do expect that now that the capital has been deployed, and we begin to deliver upon our expectations, in the back half of the decade, the company should start to generate significant levels of cash flow. And that cash flow can be used in a couple of different ways, back to being more, I'll say, shareholder-friendly utilization, whether it be enhancing the dividend growth or enhancing share repurchases, or investing back into the business in areas where we see really good line of sight of returns.
Got it. So, Dave, in a scenario, let's say, fast-forward several months-
Yep.
Let's say there's a scenario in which excitement around some of the pipeline growth drivers does not build sufficiently enough, and there remains a fair amount of pressure on the stock, as we've seen in the past few months.
Yeah.
Do you envision a scenario? Is there a potential possibility where you even explore a more accelerated buyback to manage your share count, such that it also enables you to have a certain EPS?
I don't believe so. Not in the, not in the near term, no. I, I think what's more... I think at the moment, obviously we're very focused on our dividend, performance and our dividend growth over time, so we'll certainly support that. Then secondly, is making sure that our balance sheet returns to a level, that I think is appropriate for Pfizer. And we'll be, in the, in the next several quarters, just given the near-term close and deployment of all that capital to support the acquisition of Seagen, will be higher than I, from a leverage perspective, than I would, want long term. So our focus will be to de-lever a bit over time.
Leverage, remind us, the leverage right now, where does it stand?
Well-
Three times pro forma?
Well, pro forma, you need to step back and say, listen, we had several one-time events that happened this year, so our leverage is probably, mathematically, if you did the calculation, somewhere around 7x, but those have one-time conditions in there. Excluding that, probably high 3s, low 4s.
High threes, low fours. And okay, and that's basically the gating factor to something much more accelerated-
Correct.
... from a repurchase perspective.
That is correct.
Makes sense. Okay, and it's not like a certain share price could trigger some meaningful change in plans or anything?
No. Listen, if you know my history, I'm a person that believes strongly that share repurchase is a really effective way to deliver a lot of value to shareholders, and I would love nothing more than to lean into a share repurchase program. The reality is, I have this gating factor around my leverage, and I think the leverage needs to come down before I can do that.
Got it.
So I just want to be very clear, and I want to make sure I set everybody's expectations around that.
Got it. And also, again, this may not matter so much from a bigger picture perspective, but as we think about the evolution of some of the cost cuts that have already been announced and the cadence in which-
Yeah.
... they start to kick in and actually-
Yeah.
... impact, can you speak to that?
Yeah. So we announced that versus our guidance levels of August of 2023, that we would take out approximately $3.5 billion of cost between R&D and expenses. $1 billion of that will happen this year, $500 million of that in R&D, and $500 million of that in SI&A, and $2.5 billion to happen in 2024. And think about that as the net cost cut. We may actually cut more than that, but it's we have the optionality to potentially reinvest some of those cost cuts if we see an appropriate project with a good return, so we're committing to the $3.5 billion.
Okay, excellent. I want to start to wrap up the discussion, but there's a couple of things I do want to touch up on. One is a topic which is no longer a Pfizer topic, but it has clearly driven some of the sentiment on the stock, which is clearly, the R&D team at Pfizer saw the TL1A data as it came in.
Yeah.
Clearly, the way Pfizer saw it was very different than externally, how the market saw it-
Yeah.
... or how investors saw it.
Yeah.
How, how did you guys reflect back on that? Was there anywhere in that process that was broken? Because not just in terms of how the clinical data was analyzed internally-
Yeah.
... but also, the disconnect versus external and how rapidly that transaction was done and-
Yeah.
... and there's been feedback, even at this conference, I would tell you, from-
Sure.
... strategics that, "Oh, we didn't get a look, and this could have been something we could have partnered with.
Yeah. Good, good question. I think, you know, obviously, the TL1A product, we essentially gave away to Roivant in exchange for 25% of the company. Ultimately, they are in the process of selling that asset, and so the net effect of that is Pfizer is going to get, you know, $1.7 billion gross, if you will, from a proceeds perspective. The reality is, you know, it's a project that we had full visibility into the data. We understood the product. We understood what we thought the market conditions were with the product. We thought this was the best way to proceed at that point in time. The market's dynamic, the market changed within a year pretty significantly.
But I say we could have killed the product and just shut it down and moved on. We actually, in this case, due to what we did, we're actually going to yield $1.7 billion in cash from a gross perspective. And that's kind of - that's the reality, and that's where we are. I think we went into it, eyes wide open at the time. I don't think we had a clear set of data, a clear set of analysis on what we thought the market was going to - how the market was going to behave. The market's dynamic, and it changed.
Got it. And this is a decision that's driven by R&D and the biz dev team, or are you involved in this?
Yeah, so I would say it's a group decision. It's
Were you part of those discussions?
Sure. I think, you know, we as Pfizer, we have multiple ways in which these decisions are made, and sure, yes.
Got it.
I think, you know, I'm kind of leader of management. I take accountability for those decisions, for sure.
Got it. Makes sense. Maybe just as we start to wrap it up then, how do you reflect back on sort of the last... your tenure here at Pfizer, and how you're thinking about where's that disconnect between how street's looking at Pfizer versus how you're looking at it internally? And you, in some ways-
Yeah.
... you also have a fair amount of external perspective as well.
Yeah, I guess a couple things. Let's go through pros and cons of kind of, you know, my tenure is now a year and a half, so it's a lot's changed in a year and a half. I would say, as I look at the company, the company's done a lot of great work, and it's done a lot of great work, really with a focus to growth in the back half of the decade. So if you really think about all the investments we did, let's, you know, obviously, the company did great work to create, you know, the COVID vaccine and PAXLOVID, but it really took the, I'll say, the dividends out of that - those two products and reinvested it in the business.
It reinvested it in the business to support growth in the years of 2025 to 2030. So it's done and I'd say, let's check the box on that, and we've really done a lot of work to do that. If you've seen our graph around the launches that we've invested behind and the business development work that we've done, we're going to generate a ton of revenue and ultimately cash flow coming out of that. I think if I sit here in my little armchair saying, what maybe we could have done different, is we probably didn't look so much at the very, very near term.
I think we probably could have been a little bit more focused in the here and now, and that might have made a little bit of difference from a share price perspective. And I think we're now to the point that we need to start proving and demonstrating kind of our performance across both the launches and our efforts and get Seagen closed, and you begin to see the power of what we're going to generate, in that timeframe, back half of the decade.
Do you think you guys ended up spending more time on the oral GLP than you should have, looking back?
No, in time, in what respect? In R&D time?
As in just the, in terms of the time spent on, in any discussion that's happened over the last few months, and that sort of ends up taking vast majority of the-
I don't know that it's taken a vast majority of the R&D time. I think what it has done, it's been such a topic with investors and sell-side analysts, that it's taken a disproportionate amount of conversations in events like these. But I think importantly, internally, we've been focused against all of our assets in the clinic. And so I don't think we've dramatically changed, you know, resources into that product or into that space based on the hype, if you will, right now-
Got it.
... right this second.
Got it. So I've intentionally, Dave, not gone down the direction of certain R&D-specific drug nuance topics.
Yeah.
One thing I do want to ask you from a capital allocation perspective is, we know Lilly's oral GLP hit about mid-teens weight loss.
Yep.
Its liver profile and overall safety profile was fine.
Yeah.
There were a couple of one-off liver events, but it was broadly okay, and they're-
Yeah.
... fast into phase III. Since this will be a very large undertaking from an R&D perspective-
Sure.
... to the extent danuglipron moves into phase III has the management decided a certain set of, a certain set of cut-offs that have to hit on, either on weight loss and or on liver profile, for this to move to phase III? Because there's clearly a big decision coming, presumably up to $1 billion in R&D allocation-
Yeah.
... that has to happen to this.
Yeah.
Or would you rather put that towards some of the earlier GLPs? Like, how are you thinking about that?
We'll let the data prove... We'll let the data guide us. I think we're just too early to talk about that.
Okay.
Once we see the data, we'll analyze what it says, and
But there always are criteria for-
Sure.
... a go, no-go on these type-
We clearly do. Not just with this product in this program, with all products and programs. That's just how R&D works.
Excellent, excellent, excellent. Well, unless there's anything else,
That's great.
... thank you so much for joining, and-
Yeah, thank you.
... looking forward to a big 2024, hopefully.
Yeah. Me too.
All right.
Thank you.
Fantastic.