Good day, everyone, and welcome to Pfizer's fourth-quarter 2020 earnings conference call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Chuck Triano, Senior Vice President of Investor Relations.

Thank you, operator. Good morning, everyone, and thanks for joining us today to review Pfizer's fourth-quarter and full-year 2020 financial results, our 2021 financial guidance, as well as other relevant business topics. I'm joined today as usual by our Chairman and CEO, Dr. Albert Bourla; Frank D'Amelio, our CFO; Mikael Dolsten, President of Worldwide Research, Development, and Medical; Angela Hwang, Group President, Biopharmaceuticals Group; John Young, our Chief Business Officer; and Doug Lankler, General Counsel.

Thank you, Chuck, and good morning, everyone. 2020 was a year like none other in Pfizer’s history. With the separation of Upjohn complete, we saw the culmination of Pfizer’s decade-long conversion into a pure-play, science and innovation-focused company. Through our collaboration with BioNTech, we delivered the world’s first breakthrough COVID-19 vaccine in less than a year. And by harnessing the power of a variety of digital capabilities, we made sure that despite the lockdowns and travel restrictions, we continued to serve patients around the world who rely on our medicines and vaccines. Despite this challenging environment and the incredible amount of resources we devoted to developing a safe and effective COVID-19 vaccine, we generated 8% operational revenue growth for the year from our core biopharmaceutical product portfolio, excluding the revenue impact from consumer healthcare and excluding $154 million in sales of the Pfizer BioNTech COVID-19 vaccine that we recorded in the fourth quarter. Keep in mind that this 8% operational growth includes a negative 2% impact due to the slowdown in macroeconomic and healthcare activity resulting from the pandemic. This operational growth was driven primarily by continued strong performances from Vyndaqel/Vyndamax, Eliquis, Oncology Biosimilars, Ibrance, Prevenar 13 outside of the U.S., Inlyta, Xeljanz, and Xtandi, so basically all the growth drivers contributed significantly.

Thanks, Albert. Good day, everyone. I know you've seen our release, so let me provide a few highlights regarding the financials. We again saw very solid revenue growth for the business in the quarter and the year, which continues to support our projected 6%-plus revenue CAGR through the end of 2025. As a reminder, this growth projection excludes any contribution from the COVID vaccine. In terms of the price and volume mix for the year, the growth of the 8% operational growth we posted, excluding consumer healthcare and the COVID vaccine, our underlying Biopharmaceuticals portfolio generated 10% volume growth, offset by a negative 2% price impact. So, continued very strong volume overall. Foreign exchange had a slightly positive impact on revenue in the quarter with a 1% benefit for the full year, while for the full year, we saw an overall negative impact of 1%. So, 1% positive for the quarter, 1% negative for the full year. Now, moving down the income statement. Adjusted gross margins were lower in the quarter, mainly due to the negative impact of foreign exchange, product mix and unfavorable year-over-year impact of cash flow hedging on inventory and COVID-related expenses. However, it's important to note that on an annual basis, adjusted gross margin for 2020 was within 90 basis points of 2019 and around 80%. Adjusted SI&A expenses in the quarter were lower by 2% on an operational basis and lower by 10% on an annual basis. There remain two main factors that drive the decrease for the year, the exclusion of consumer health and lower selling expenses due to COVID, and to a lesser extent, the early implementation of a planned reduction in spending associated with our corporate-enabling functions. Adjusted R&D expenses grew 24% in the quarter and 15% for the year on an operational basis. This growth was primarily driven by our investment in developing the COVID-19 vaccine. Reported diluted EPS for the quarter was up significantly compared to the prior year quarter, mainly driven by lower asset impairment charges compared to the year-ago quarter. For the year, reported earnings were lower, mainly due to the non-recurrence of the gain on the consumer joint venture formation in 2019. And adjusted diluted EPS grew 17% for the quarter and 20% for the year on an operational basis. I'd add that our full-year adjusted diluted EPS was $2.22, which is below the range of $2.28 to $2.38 we had provided in terms of new Pfizer financials on a full-year basis. I just want to remind you that we had indicated on last quarter's earnings call that our actual reported numbers would be lower than the guidance because the guidance assumed a full year of operating without Upjohn as well as assuming a full-year benefit of transitional service agreement recoveries and lower interest expenses from the deployment of the $12 billion in proceeds to pay down debt. So with the deal not closing until November, we only had a small benefit from these factors in our reported 2020 financials. Now, let's move to our 2021 guidance. We provided total Company guidance, which includes the COVID vaccine, and then we provided some additional sub-ledger detail on our assumptions regarding the projected COVID vaccine contribution, so you can also get a read on the business out. In terms of revenue, we are projecting a range of $59.4 billion to $61.4 billion, which includes a foreign exchange benefit of approximately $1.4 billion. And at the guidance range midpoint represents operational growth of 41% from 2020. For adjusted cost of goods, the range is 32% to 33% as a percentage of revenue, which incorporates the COVID vaccine, gross profit share payment to BioNTech, as well as some other related items I will speak to in a moment. On a side end, what we see is the impact of increased sales and marketing expense behind key growth brands as well as for expected product launches, led by our enabling function, cost savings. In addition, we see growth in R&D, which follows along with our pipeline development cadence. And I note, given our clinical trial success metrics Albert referenced, we're confident about making sound R&D investments. Adjusted other income and deductions is projected at just over $2 billion of income. In addition to the usual items included here, remind you for modeling purposes that three larger items in terms of income are our GSK consumer healthcare joint venture equity income, ViiV dividend income and transition service agreement recoveries, primarily related to Viatris. Working this through with our projected 15% tax rate yield and adjusted diluted EPS range of $3.10 to $3.20 with 38% operational growth at the midpoint. This range is a bit higher than what we discussed three weeks ago and was driven mainly by an increase in our COVID vaccine sales projections since then.

David, unfortunately, you are cutting off and I couldn't hear you. Can you repeat the question of the vaccine from the beginning?

Thanks very much. So first of all, congrats on the phenomenal vaccine progress and the benefits that Pfizer is driving for society. That's much appreciated by everyone on this call and beyond. My two questions relate to vaccine prospects and Xeljanz. So, first, could you speak to how you are projecting vaccine sales for 2021?

Unfortunately, the line is not good, David. We can't hear you.

Thank you. I have two questions. In what scenarios would you not sell all 2 billion doses of COVID vaccine Pfizer can manufacture in 2021? Some competitors haven't exactly exceeded expectations, and only a small fraction of global demand has been satisfied to date. So, it seems as though you'll sell every dose you make and that the current guidance is going to be way low. Second question is on the Xeljanz CV study, should we assume DVT tracked similarly to MACE? And given that Pfizer has other JAKs in development, what do you believe are the long-term implications for the JAK class overall given this recent Xeljanz CV study?

Thank you, Steve. Let me take the COVID one, and then I will ask Mikael to comment on the Xeljanz first part, and then Angela on the implications from commercial. Steve, we try not to give a low expectation, we try to give a responsible expectation. If we are asking if there is a scenario that we will sell everything, yes, there is. Also, I would tell you that if that was an open market, which means that the physicians and citizens have the ability to choose which vaccine they would receive, I would feel very comfortable that we will have the lion market share because we are first and we are best, as you have clearly indicated. And we have great operations in basically every country in the world. But, this is not an open market, at least for this year. This year, it is a market that it is controlled by governments appropriately because I think we are in a crisis, as you know. And also, it is a market that creates a lot of political pressure. So, not always the decisions are sound, solid, and avoiding panic. So, with that in mind, we have a formula that we try to implement in a responsible way that takes into consideration the contracts that we have, the potential for future contracts, but also takes into consideration the strength of the contracts, takes into consideration the potential for other vaccines to present data. And in fact, the reason why we changed our revenue projections, which resulted in $0.10 improvement in our bottom line, is because we did have more news from the AstraZeneca registration and the way that it is perceived in Europe. We had the news from the J&J that reported data. We have much better visibility now in the last two weeks on their manufacturing capabilities, all of that resulted in us increasing our projections. Clearly, there are a lot - this is a multidimensional, let's say, challenge to have accurate projections. And clearly, we are having dynamic changes, which we will follow, and we will update our estimates as time comes. But, in all honesty, I couldn't responsibly just say right now, we are going to sell everything we can make, the 2 billion, when we have all this dynamic situation that is evolving. Now, why don't we move to Mikael to talk a little bit about the MACE, on Xeljanz, and then Angela on the revenue expectations.

Yes. Thank you, Albert, and Steve, for the questions. As you know, the 1133 study for Xeljanz was rather unique population with increased severe risk. Now, Xeljanz has been studied in numerous clinical trials and in the market where a large population has used it in a more general RA population or in ulcerative colitis. And in those populations, it has had a very robust efficacy to safety profile. I think, RA by itself has more CV liabilities, standard RA patients, and this was a very specific subset. Now, going to other JAK inhibitors, the next generation of JAK inhibitors such as abrocitinib in registration for atopic dermatitis, or as Albert reported, ritlecitinib, which is a unique JAK3/TEC inhibitor, each JAK inhibitor differs by itself. And we think both of these two that I mentioned have very encouraging benefit to risk profiles. And while regulatory agencies have, in some instances, inferred general class-label across JAKs, I think the experience will tell that abrocitinib for atopic dermatitis has very compelling efficacy and risk profile, and ritlecitinib for alopecia that's reading out later this year or for vitiligo and ulcerative colitis where we have very encouraging Phase 2 data, again, has a unique profile. So, I don't think that we should extend 1133 to other JAKs, and I think we’ll also need to look at Xeljanz having a very robust profile in a population that was not a smaller version of the 1133 study. Thank you very much.

Thanks, Mikael. And then, just building off of what Mikael has said. As you know, we have a very robust data set that has been built around Xeljanz for over seven years, 50 different clinical trials, 260,000 patients that are currently on Xeljanz, and of course, a very robust real-world data set that goes along with these 260,000 patients. So, I think based on all of this and together with the fact that we are still so early on in our understanding of the 1133 data as it pertains to Xeljanz that we feel confident that Xeljanz will remain an important part of the treatment paradigm for RA patients and for patients with PsA and UC as well, and that it has an appropriate and favorable benefit risk profile for this sort of patient population type. And so, of course, we will share the data with you as we continue to learn more about the study. But for now, that's how we see it. And then, I think you had one more question in terms of how we think about this in terms of the impact on our other JAKs. And as Mikael said, scientifically, each one of these molecules are very different. And they're all being designed with a different benefit risk profile to match the different disease conditions as well as the different patient types. And so, I think as a result, we continue to be very confident about our JAK portfolio and the investments that we're making in each one of these. And we think that what we will be able to deliver are differentiated profiles that will be appropriate and fit-for-purpose for that condition and for that patient type.

Your next question comes from the line of Gregg Gilbert from Truist Securities.

Thank you, Albert. It seems pretty clear that Pfizer, the stock anyway is not getting a whole lot of credit for the COVID-19 vaccine. And whether or not you agree that that's fair, I'm curious how you expect to leverage the expertise you've built in this area into areas that investors might view as contributing more to long-term franchise value, regardless of what happens to the COVID-19 part of the story. And then, a second vaccine-related question perhaps for Angela. There's been a lot of focus on your vaccine and others about logistics and supply and coverage of variants. But, it seems to me that at some point, a key metric, if not the most important metric will be how many people want to get a vaccine. So, curious what your work tells you on that front, and whether you plan to get involved as a company in helping drive awareness and demand at some point, or is that not really Pfizer's role to play?

Thank you, Gregg. I completely agree with you. However, I believe we are not getting the recognition we deserve, particularly regarding our core business and pipeline, not just the vaccines, especially when looking at our stock price. Our business is growing at 6% and double digits in terms of profit, excluding any contributions from COVID, which warrants a significantly higher valuation in our industry. This relevance holds even more truth when discussing the COVID-19 vaccine; people should recognize its value. In terms of strategically utilizing this platform, I think our RNA technology has demonstrated its potential to impact disease treatment and prevention across various applications. Pfizer has gained a decade's worth of expertise in just one year and has made infrastructure investments that would typically take five years within a similar timeline. We intend to leverage this knowledge to help more patients. Regarding the COVID vaccine, we see evolving dynamics indicating its ongoing potential and a recurring business opportunity. Initially, we were uncertain about the durability of immunity. Although we lack conclusive data on our vaccine's immunity at this point, there's growing evidence showing that individuals infected with the disease exhibit a decline in immune response over time, indicating a need for boosters. Numerous studies have shown that high levels of immune responses correlate with better protection against variants, underscoring the necessity to maintain elevated antibody levels. Furthermore, it seems likely that variants could emerge that might evade the strong protection our current vaccine offers. Therefore, we are preparing to respond rapidly, with a commitment to delivering new booster vaccines in under 100 days to address emerging variants. This adaptability will be vital as COVID evolves from a pandemic phase to a more routine vaccination approach. Pfizer holds a distinct advantage thanks to our strong data, developed brand trust, and our infrastructure and expertise. RNA technology will extend beyond COVID-19 vaccines; we are currently fast-tracking our flu vaccine efforts and exploring various applications for this technology in other vaccine and therapeutic areas. Our non-COVID business remains strong with a solid pipeline, and I believe that COVID has the potential to significantly alter our revenue and earnings trajectory starting now. With that, I'll turn it over to Angela to address your question about the COVID vaccine.

Thank you for your question. You're referring to vaccine confidence, which has been a significant topic since the introduction of the vaccine. I'm encouraged by the data we regularly receive that indicates vaccine confidence is indeed increasing. Compared to just a month ago, there has been a notable rise in the public's interest and willingness to get vaccinated. This increase is largely due to the positive real-world experiences of those who have received the vaccine. I believe this trend will continue. Regarding our efforts to drive awareness and demand, it’s important to note that we are currently operating under an emergency use authorization. There are limitations on what we can do in this setting. However, we have been working diligently with various medical and public health organizations to support education nationwide. Recently, we launched a public service announcement in collaboration with patient advocacy groups to educate the public and build confidence in the vaccine. On a more focused level, Pfizer has provided extensive training and support to healthcare professionals to ensure they can confidently administer vaccines. In the past month, over 30,000 healthcare professionals have been trained by Pfizer, which also contributes to building confidence. Naturally, we anticipate being able to engage even more once we receive the biologics license application approval. We are progressing toward that and will enhance our existing education initiatives, allowing us to amplify our efforts once we have full approval. Thank you.

Great. Thank you, Frank and Albert for the prepared remarks. Operator, at this point, can we please poll for questions? Thank you.

Your next question comes from the line of Terence Flynn with Goldman Sachs.

Thank you for the question and for all the efforts on the COVID vaccine. I'm curious if there is an integrated system being established by the government or Pfizer to track vaccine breakthrough cases and perform sequencing. Furthermore, who will ultimately decide when it's necessary to modify the vaccine to address an emerging variant, and how is consensus reached on that matter? Thank you.

Yes. Mikael, would you like to take this question, please?

Yes. There are different organized, at the government levels, efforts. In the U.S., the position of sequences both to track new strains, like the South Africa and Brazil, as well among unvaccinated and vaccinated or deposited in certain databases. There is one initiative in the UK. And then, of course, Pfizer has the unique collaboration in real-world evidence with Israeli ministers of health which will allow us to track first real-world evidence for our vaccine in the population. And as you may know, we are the number one to have such data that shows 92% to 95% in real-world evidence vaccine efficacy, primarily seen initially in an older population. That's harder normally to get this stunning data. And it also showed a very low, 0.25 about for both - 24 and 26 for first and second injection of adverse events. So, really well-performing in a large population of millions of individuals. And of course, that will also track if there are breakthrough infections. Now, in general, I think, it has been claimed that South African and Brazil variants are more difficult to treat. And vaccines that have lower antibody levels will have much more breakthroughs, given that the mRNA vaccines have high antibody levels. And that was, I think, implied in Albert's answer. We expect them to be much more resistant to breakthroughs for a longer time. And I think, data from several labs shows that if you maintain with mRNA vaccines, high antibody levels, you will actually protect very well even against those variants. And that suggests - and we are just embarking on such studies that you could boost with the current vaccine, a further time and avoid some of these breakthrough infections that were reported recently in some vaccine studies. That would be our aspiration to demonstrate that by keeping individuals with very high titers, you can really impact. And that can be recorded, as you asked in various systems that are now in place in many countries. And that could be a very important way to transit into a more sustained protection, sustained business model where the monitoring allows you to plan when the next boost should happen.

Your next question comes from the line of Louise Chen from Cantor.

So, my first question is, if the COVID vaccine becomes routine, how do you think governments and physicians will choose among the different vaccines that have received emergency use authorization? Also, how do you view the 95% efficacy rate in light of mutations? Lastly, regarding your PCV20, if it gets approved, what do you expect the ACIP recommendation to be, and what would you ideally like it to be? Additionally, do you think there will be any upgrades for those over 65 due to additional serotypes?

Why don't we start with PCV20, Angela, and then we can come back to COVID. Angela?

Sure. So, in terms of PCV20, I mean, what we believe our value there is the additional serotype and that in the adult, these additional serotypes are meaningful because it will give us 33% more protection against strains causing IPD in adults, and 42% more protection against strains causing IPD for pediatrics. So, we feel that this is very value-creating and provides us the opportunity to really bring an important option into the market that is an upgrade compared to what it is that we have today. And then, to your question about ACIP, of course, we're working closely with the FDA for approval, and with the CDC at the right moments in time to get the right recommendation. We believe that the recommendation will be positive as it pertains to PCV20, and we look forward to working with them to achieve that.

Thank you. Now, as regards to how people could choose or physicians could choose if that is routine. I believe that if this is routine, the decision will come as with all other vaccines and medicines, the strength of the data. I think that this is why I made before the comments that given that we are first could mean that we are vaccinating a lot of people right now with the first doses. Given that we have such a strong safety and efficacy and database in an open choice situation, we will get the vast majority of the share of choices. But, I think, we'll come reality, likely after in 2022, when the governments do their whole vaccination scheme. And also in that year, there will be ample, I believe, capacity. So, volume will not be a case, even if everyone wants to get one vaccine, I think, will be enough to make this one vaccine. What about the 95% efficacy in terms of variants? I think, we answered that. But, Mikael, maybe you want to reiterate once more why the higher the efficacy, the better it is, not only for the current, but also for the variants.

Yes, very brief. It's clear from convalescent plasma studies that’s now the last couple of weeks, been out and also from plasma from vaccine recipient, higher antibody levels seems to protect from variants in the preclinical studies from patients. So, I think, it will project into the vaccines with high antibody levels and T-cell immunity, which are an additional protection mechanism, will do very well against variants and keep boosting them, will keep the variants off the population for a longer time before there is any need to shift to variant selective. So, I think, the data we have with mRNA vaccine put them really in a unique category, having the strong immune response, the ability to boost and the ability to, if needed, reconfigure.

Your next question comes from the line of Umer Raffat from Evercore.

I want to hit up on two different topics. One, as we think about possible new vaccine for the new variants, do you guys have plans in place? Are you working on it right now? Should we anticipate some sort of Phase 1 data by some point in this early summer? And, has there been a consideration to allocate some of this 2 billion in doses capacity to a new version of vaccine? And separately, going back to the Phase 3 you reported, it's been a few weeks. And, one of the questions I've had is, of the patients that tested positive on the vaccine, post dose two, what did we learn about what mutations those patients had on deep sequencing? What did we learn about their NAb titers and T cells? And I wonder if there's anything we can draw on correlate of protection. Thank you.

Umer, very, very good, excellent questions. Mikael, do you want to take the last one and also the first one, and then I can speak later on the manufacturing piece.

Yes. With variants, we are embarking on a study, which will give a boost after 6 months, and possibly also compared with a 12-month dose, we'll compare the wild type, the current vaccine with a variant vaccine, likely based on the 484, I mean from Brazil and South Africa. I think that given the data are so strong with our vaccine, as we alluded to, it may very well be that the third boost at the proper time point is sufficient, and you continue to monitor variant. But, we will be prepared, if needed with data, as you said, around early summer. Quality protection is something we're working with a lot of scientists, not just looking at data in our trial, but in public consortium with INH, looking at data across many trials, and we will see the outcome. I expect, again, high antibody levels, plus T cell immunity will provide the best durability. And that makes us very optimistic about the unique profile of mRNA vaccine.

Thank you, Mikael. The 2 billion doses we are discussing are for the current vaccine, and we are exploring ways to enhance that further. Currently, we are committed to delivering 2 billion doses. The initial reason we chose mRNA was due to its ability to simplify this process significantly. This technology allows us to create a new version of the same vaccine by merely altering the messenger RNA, which makes manufacturing and development straightforward. While biology can be complex, this method is relatively simple compared to other technologies. Therefore, I do not foresee a significant increase in our manufacturing capacity if we need to develop a new vaccine. We could manage around 2 billion doses, perhaps slightly fewer if we start producing a new vaccine to address new variants while taking into account the existing ones, should that be necessary.

Your next question comes from the line Geoffrey Porges from SVB Leerink.

And unfortunately, we'll continue a little bit on this thing. Mikael, could you give us a sense of whether you think the so-called South African and Brazilian variants that have similar mutations, represent terminal or near-terminal adaptations of the virus, or do you think that we will see sort of almost recurring and infinite adaptations that we may have to contemplate adapting the vaccines too? And then, secondly, have you contemplated giving a single dose of vaccine to those who previously been infected, given what's probably 20% to 25% antibody positivity in the U.S. population? And lastly, could your next-gen variant vaccine be refrigerator stable? Thanks.

Mikael?

Yes. The first strains like the UK strain was mainly selected for transmissibility to spread quickly. As there were previously infected people in South Africa and Brazil, the new strains have been selected for immune escape, which is the 484; I mean that is the most important. High antibody titers, as alluded to before, from our vaccine seem still to be able to react quite nicely with that strain, although at somewhat more moderate reduction. We think keeping high titer up in patients will be a very good carry forward approach, until there is a need for a strain change. Now with that concept, the up high antibody titer, you should immunize whether you have had infection or not twice. That gives you maximum titer and allows you to fight off variant strains for as long time as possible before you may need a boost, or after some time that there may be any reason to a variant vaccine, as Albert alluded to. And, we are currently initiating study to understand when a third immunization would be helpful for participants, and we will be studying 6 to 12 months as initial assumption. And, of course, we continue to make efforts to make refrigerated vaccines that include lyophilization or portable liquid with a stabilized product. And we think, end of this year or early next year, we'll have such a product.

Your next question is from Vamil Divan from Mizuho.

Maybe I'll just shift gears a little bit off the vaccine, I guess somewhat tied to vaccine, but a little different angle here. In terms of capital allocation, Albert, you were mentioning that no change to your strategy. So, the vaccine obviously is going to give you a boost to your sales and cash flow, at least in the near-term here. So, I'm just wondering, should we expect Pfizer to be maybe more active and complete more transactions in the coming months to just try and boost your pipeline than you otherwise might have been, or if not, I guess, just anything you could sort of comment on your kind of thoughts around this added cash flow, and what you might look to do there? And then, my second question is on Vyndamax, where it looks like you are having pretty good traction there, maybe better than we thought, given the pandemic. And I'm just wondering if you can maybe comment to where this product is now relative to where maybe you would have expected a year ago, sort of pre-pandemic. I'm trying to get a sense, there are real sort of bolus of patients or you could maybe make more traction as the pandemic eases, or are you already doing quite well in terms of gaining penetration into those patients now, so we should sort of expect the same sort of state of uptake going forward? So, any thoughts would be helpful. Thank you.

Thank you, Vamil, and for your interesting question beyond COVID. You're correct; our capital allocation reflects our strategy, and COVID-19 has validated that strategy. It shows that we possess the resources of a large biopharma while maintaining the agility of a small biotech. Not many would have anticipated Pfizer being the first to achieve something like this, but that's what we've been developing over the past few years. Our capital allocation policy remains flexible; however, the dividend will be maintained as Frank mentioned, and it is a vital aspect of our investment thesis. We will focus on advancing Phase 2 and Phase 3 programs through our R&D efforts to produce medicines and vaccines that can generate revenue to bridge any gaps. We believe we can sustain a 6% dividend beyond 2025. COVID has indeed increased our cash flexibility, but we were not in a cash-strapped position before, and this change allows us to act even more comfortably. Regardless of our improved position, we will responsibly manage shareholders' funds and invest prudently. We won't overspend but are willing to take calculated risks and pay a fair price for the opportunities we value. As for Vyndamax, Angela, how do you see its evolution? Is there a significant patient influx, or do you anticipate continued growth? What are your thoughts on this?

So, we have been really pleased with what we've seen with Vyndaqel/Vyndamax and the patients that we have been able to diagnose. And, I think, this has gone better than we thought actually, even with the pandemic. Currently, this last quarter, we were able to diagnose 21% of the population with ATTR-CM. And so, the increase, that we've seen quarter-over-quarter, gives us a lot of confidence that our ability to diagnose and the imaging techniques that are being used, the non-invasive techniques are working really well. I would say the bolus is gone. That was something that was maybe in the first half of - from the first half of the year when we launched. And I think where we are now is in a pretty good cadence of using our suspect and detect techniques, as well as the ability to refer to imaging centers to get the diagnosis. And I think that our success rate in diagnosis is evidence of this. And so, I think we'll continue to see cadence like this. But, of course, there's still massive opportunity, 80% more patients still to be diagnosed. And so, we're really focused now on using technologies and different techniques to heighten and to look and to screen more effectively for patients, because once we know that once we can find them, they can get diagnosed. So, that's where our focus is going to continue to be in 2021.

Your next question comes from Tim Anderson from Wolfe Research.

Thank you. I have a couple of questions. Regarding the mRNA platform, you mentioned leveraging that technology beyond just a COVID vaccine, possibly for seasonal flu. I'm curious about the timelines for these opportunities. Could you provide a rough estimate on when Pfizer and BioNTech might launch a non-COVID mRNA vaccine product? I assume it could be around five years from now, but any insights would be appreciated. Additionally, on the guidance for 2021, the other income line shows a significant figure of $2.2 billion, which is well above the usual amount for that item. You referenced contributions from the consumer joint venture and ViiV, along with Viatris being a new addition. Could you elaborate on why this number is so high for 2021 and what the expected run rate for that line item will be after 2021?

Thank you very much, Tim. Frank will address the second question and Mikael will take the first one. Before I turn it over to Mikael to discuss flu, I want to make an introductory remark. I believe that the COVID situation has established a new normal. We at Pfizer are not looking to return to the previous timelines for development, even though we were already leading the industry benchmarks. If we can achieve that with COVID, why not with cancer or flu? The collaboration from regulators during COVID was crucial, but we also undertook many different approaches. Our goal is to ensure that these insights are applied throughout our portfolio and pipeline. Now, Mikael, please share your thoughts on the timelines for flu.

Yes. Thank you, Albert. And I think you said it well that the type of light speed approach is with the mRNA platform should, of course, be projected into other areas as well as flu. So, Tim, you mentioned 2025, I think that it would be more conservative and traditionally realistic goal, and we are looking at ways to bring it as a potential product for approval earlier than 2025. Of course, it depends on whether there are good flu seasons with the cases coming along or not. And I think, as life continues with vaccinated folks, flu will take up new momentum. So, our aim is ahead of 2025.

Albert, I'll respond to the question about other income. Tim, let me go over the numbers first before I address your query. You mentioned the overall figure in our 2021 guidance. It's important to note that in 2020, our other income was approximately $1.5 billion in adjusted results. We're increasing from roughly $1.5 billion to the guidance of around $2.2 billion. The primary factors contributing to this increase include recoveries from transition service agreements, mainly due to the completion of the Viatris transaction, higher income from joint ventures, and some benefits from pension expenses. These factors explain the rise from about $1.5 billion in 2020 to the $2.2 billion guidance for 2021. Looking beyond 2021, it’s worth noting that the key consideration will be what happens with the consumer joint venture and how GSK decides to manage its part in that venture. We hold a 32% stake in that venture, so we will need to monitor GSK's actions, as these decisions could affect our other income in the future. That will be the main point of attention for us in that area.

Your next question comes from the line of Geoff Meacham from Bank of America.

I have two quick questions. First, regarding the BCMA bispecific agents, could you discuss how you see these fitting into the treatment landscape and how the competitive environment is evolving? Specifically, what differentiates your program from others? Second, I'd like to follow up on capital allocation priorities following Upjohn. The company has historically been active in share repurchase programs. Should we anticipate a reduced or less significant role for share repurchases moving forward, especially as you consider a potentially higher dividend payout ratio and the need to acquire additional assets ahead of the 2026 to 2028 loss of exclusivity cycles? I would appreciate your insight on how these factors fit into your overall strategy. Thank you.

Sorry, I was muted. Mikael, would you like to take the first question?

Yes. BCMA or elranatamab, we're very excited about that rig. And this had a high dose 1,000 μg/kg, 83% response rate in a heavy pretreated population, and it has shown a significant number of stringent or complete responses. And it's given subdued that's a very nice tolerability profile. So, although it's filled with several entrants, I think we have an opportunity to aim for being absolutely in the first wave here and with a really nice best-in-class profile. We're moving with first opportunity we see for accelerated approval in triple refractory patients that either have seen no prior BCMA-based treatment or have seen prior BCMA treatments such as ADC or CAR-T. So, we are planning such cohorts to start soon with a potential for registration. And, we're moving into second and third line, in combination with classical image and other combinations that are used in order to come to first and second-line opportunity, particularly within it.

Thank you very much for the question, Ronny. I think Mikael sort of touched on the key points. So, I think we'd really just sort of highlight that obviously we have our existing partnership on Bavencio or PD-L1. I think you saw in our release that we confirmed recent approval in Europe for a really interesting indication that could be very valuable for patients. And as Mikael just said, additionally to that, with our own internal program, which is a PD-1, not a PD-L1, it's a PD-1, sasanlimab. In December, in fact, we initiated the study that Mikael just mentioned. And I think the thing that we are very excited about in terms of its potential for sasanlimab is that it's a subcutaneous PD-1. We think the marketplace for more convenient PD-1s is actually still to be developed. Plainly PD-1s, given their efficacy data across a whole range of tumors have enormous potential to be a backbone for the long term. So, we think that as that market evolves, the opportunity for a PD-1 has effectiveness, which has been proven across multiple other compounds, but also combined significant convenience enhancements is actually very significant. So, we're very excited about sasanlimab, and we will keep you updated with progress as that program develops.

Your next question comes from the line of Navin Jacob from UBS.

I have a couple of questions for Frank and one for Mikael, if I may. Frank, I'm curious if there was any change in inventory in the U.S. from Q3 to Q4 of 2020, and how that compares to the inventory changes in the U.S. between Q3 and Q4 of 2019. Also, regarding the high-20% margins for the COVID vaccine, which suggests at 100% economics around 50% to 60% operating margin, how much might we expect that operating margin to increase over time as R&D expenses decrease? Now for Mikael, a crucial question everyone has is regarding the durability of efficacy, which is impacted by new variants. How exactly is the agency measuring durability of efficacy or requiring manufacturers or developers to do so? What specific trials or endpoints are involved, or how is that characterized? Any insights would be appreciated.

Thank you for the question, Navin. Regarding inventory, we have about three weeks on hand, which is similar to last year at this time. From Q3 to Q4, there hasn't been a significant change in inventory levels, still around three weeks. As for the high-20s percentage, your framing of the question is interesting. I see R&D spending not as the main factor contributing to that high-20s figure; instead, it's primarily driven by COGS. This is largely due to pandemic pricing and the various components of COGS I mentioned earlier. We are currently below 50% in gross margin based on our financials. When expenses are added, we reach the high-20s range. To address your question further, pricing will be a critical factor moving forward. As volumes increase, we'll continue to reduce unit costs. The royalty and profit share remain constant. While we will manage R&D spending, the main priority is how we can adjust pricing. The more volume we achieve, the lower the unit costs will be, which will positively impact our bottom line.

Your final question comes from the line of Chris Schott from JP Morgan.

I have two quick questions. First, regarding the BCMA bispecific, can you discuss how you envision these agents fitting into the treatment paradigm? Also, how do you perceive the competitive landscape evolving? Specifically, what distinguishes your program from others? Secondly, on capital allocation priorities after Upjohn, the company has historically been active in share repurchase. Should we expect a reduced focus on share repurchase moving forward given a potentially higher dividend payout ratio and your goals for acquiring additional assets ahead of the 2026 to 2028 LOE cycles? I would appreciate your thoughts on how this fits into your overall strategy. Thank you.

Sorry, I was muted. Mikael, would you like to take the first question?

Yes. BCMA or elranatamab, we're very excited about that rig. And this had a high dose 1,000 μg/kg, 83% response rate in a heavy pretreated population, and it has shown a significant number of stringent or complete responses. And it's given subdued that's a very nice tolerability profile. So, although it's filled with several entrants, I think we have an opportunity to aim for being absolutely in the first wave here and with a really nice best-in-class profile. We're moving with first opportunity we see for accelerated approval in triple refractory patients that either have seen no prior BCMA-based treatment or have seen prior BCMA treatments such as ADC or CAR-T. So, we are planning such cohorts to start soon with a potential for registration. And, we're moving into second and third line, in combination with classical image and other combinations that are used in order to come to first and second-line opportunity, particularly within it.

Thank you very much for the question, Ronny. I think Mikael sort of touched on the key points. So, I think we'd really just sort of highlight that obviously we have our existing partnership on Bavencio or PD-L1. I think you saw in our release that we confirmed recent approval in Europe for a really interesting indication that could be very valuable for patients. And as Mikael just said, additionally to that, with our own internal program, which is a PD-1, not a PD-L1, it's a PD-1, sasanlimab. In December, in fact, we initiated the study that Mikael just mentioned. And I think the thing that we are very excited about in terms of its potential for sasanlimab is that it's a subcutaneous PD-1. We think the marketplace for more convenient PD-1s is actually still to be developed. Plainly PD-1s, given their efficacy data across a whole range of tumors have enormous potential to be a backbone for the long term. So, we think that as that market evolves, the opportunity for a PD-1 has effectiveness, which has been proven across multiple other compounds, but also combined significant convenience enhancements is actually very significant. So, we're very excited about sasanlimab, and we will keep you updated with progress as that program develops.

Thanks. And Albert, did you have some closing remarks?

So, wow, time flies, 11:30. So, thank you very much for joining us today and for your continued engagement with Pfizer. The new Pfizer is all about two things, science and patients. I think it's the combination of both, a decade-long transformation from a diversified enterprise to a more focused and innovative biopharma company. By uniting transformational technology and cutting-edge science, we are pioneering biopharmaceutical innovations to do more than just treat difficult diseases. I think we are curing and preventing them. We believe our success in developing COVID-19 was just the beginning. Thanks to the incredible transformation we have executed over the last 10 years, Pfizer is now advancing one of the strongest pipelines in our Company's history. We have 95 potential new therapies or indications in 6 therapeutic areas with 9 programs in registration, 24 in Phase 3 clinical trials. This means 95 potential opportunities to change the lives of patients around the world. And when patients win, we all win. Have a great rest of your day.

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