Pfizer Inc Q3 FY2021 Earnings Call

Good day, everyone, and welcome to Pfizer's Third Quarter 2021 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Chris Stevo, Senior Vice President and Chief Investor Relations Officer. Please go ahead, sir.

Thank you, Sylvia. Good morning. Welcome to Pfizer's third quarter earnings call. I am joined today by Dr. Albert Bourla, our Chairman and CEO; Frank D’Amelio, our CFO; Mikael Dolsten, President of Worldwide Research and Development and Medical; Angela Hwang, Group President, Pfizer Biopharmaceuticals Group; Aamir Malik, our Chief Business Innovation Officer; and Doug Lankler, our General Counsel. We expect this call to last 90 minutes. Materials for this call and other earnings-related materials are on the Investor Relations section of pfizer.com. Please see our forward-looking statements disclosure on Slide 3, which is shown right now, and additional information regarding these statements and our non-GAAP financial measures is available on our earnings release and in our SEC forms 10-K and 10-Q under risk factors. Forward-looking statements on the call speak only as of the call's original date, and we undertake no obligation to update or revise any of the statements. With that, I will turn the call over to Albert.

Thank you, Chris. Hello, everyone. I'm happy to report that Pfizer generated another solid performance in the third quarter, recording 130% operational revenue growth compared with the third quarter of 2020. When excluding direct sales and alliance revenues provided by our COVID-19 vaccine, we generated 7% operational revenue growth compared with the previous year quarter. We also are raising our 2021 total company guidance for both revenues and adjusted EPS. While we are proud of our financial performance, we're even more proud of what these financial results represent in terms of the positive impact we are having on human lives around the world. In the first nine months of 2021, our innovative medicines and vaccines reached nearly a billion people. It's fair to say millions of lives have been saved because of this. Excluding our COVID-19 vaccine, we reached nearly 300 million people during that time. These are humbling numbers for all of us at Pfizer. At the same time, we delivered to our shareholders the 331st consecutive quarterly dividend. We also continue to advance our R&D pipeline. Some key milestones include the first COVID-19 vaccine authorized for emergency use in the U.S. for children 5 to 11 years of age; the first patient dosed in our large Phase III RENOIR study for our RSV bivalent vaccine candidate; and the initiation of Phase II/III studies for both IV and oral protease inhibitor candidates for COVID-19. Let me start with commentary on some of our key growth drivers in the quarter. The biggest of which was Comirnaty, which contributed $13 billion in global revenue during the third quarter. Today, we have produced 2.6 billion doses and shipped 2 billion doses to 152 countries or territories. So far, 75% of our Comirnaty revenues have been generated outside the U.S. and we continue to sign agreements with governments around the world. We also remain on track to produce 3 billion doses this year, of which at least 1 billion will go to middle- and low-income countries. In addition, our weekly market set of COVID-19 vaccines administered continues to increase. In the U.S., our four-week average market share increased from about 56% in April to about 74% as of October 31st. And in the EU, it went from about 70% to about 80% during the same time period. These market increases are primarily the result of our booster being the first to receive emergency use authorization, and our two-dose series being preferred by some countries around the world for use in certain younger populations. We also continue to follow the science to help ensure we stay ahead of the virus. Let me speak to two examples. First, top-line results from our Phase III randomized controlled trial demonstrated a booster dose administered to individuals 16 years of age and older who previously received the Pfizer-BioNTech primary two-dose series restored vaccine protection against COVID-19 to the high levels achieved after the second dose. Second, the U.S. Food and Drug Administration has authorized our COVID-19 vaccine for emergency use for children 5 through 11 years of age, the first and only vaccine to receive such authorization. For this age group, the vaccine is to be administered in a two-dose regimen of 10 microgram doses given 21 days apart. The 10-microgram dose level was carefully selected based on safety, tolerability, and immunogenicity data. Last week, we announced that the U.S. government exercised its final purchase option under the existing U.S. supply agreement to purchase 50 million additional doses of Comirnaty. This brings the total number of pediatric doses purchased by the U.S. government to 115 million, which is enough to vaccinate every U.S. child. Overall, the U.S. has now purchased a total of 600 million doses across all age ranges under this supply agreement. Now, let's take a look at some of the quarter's other key growth drivers. Eliquis has continued to deliver strong performance with global revenues up 19% operationally to $1.3 billion in the third quarter. In the U.S., sales growth for Eliquis was driven mainly by a 16% growth in prescription volume. Vyndaqel and Vyndamax revenues were up 42% operationally to $501 million globally. Our disease education efforts in the U.S. continue to support increases in appropriate diagnosis. While the main driver of growth in Japan has been the successful establishment of several referral networks in select areas resulting in new patient starts. Ibrance continued outside of the U.S.; revenues outside of the U.S. were up 9% operationally to $500 million. This growth was driven by accelerating demand as the delays in diagnosis and treatment initiations caused by COVID-19 show signs of recovery across several international markets. Global revenues for Ibrance were up only 1% operationally as the international growth was largely offset by a 3% decline in the U.S. The U.S. decline was driven by an increase in the proportion of patients accessing Ibrance through our Patient Assistance Program. We continue to be pleased with the performance of our Oncology Biosimilars Portfolio, which is now the largest in the industry with six biosimilars approved in the U.S. for patients living with cancer. Global revenues from this portfolio grew 51% operationally during the quarter to $398 million. This growth was primarily driven by continued strong results from our U.S. therapeutic monoclonal antibody launches. In international developed markets, oncology biosimilars contributed 29% operational growth, driven by new launches of ZIRABEV and continued growth of TRAZIMERA. Of course, with such a broad portfolio of life-changing and life-saving products, it will be uncommon to not have a few challenges. U.S. revenues for our Prevnar family, Prevnar 13 and Prevnar 20, for example, were down 2%, primarily due to a 36% decline in the adult indication of Prevnar 13 due to the ongoing prioritization of primary and booster vaccination campaigns for COVID-19 and the later start of the flu season compared with last year. Other contributing factors were the continued impact of the lower remaining unvaccinated eligible adult population and the June 2019 change to the Advisory Committee on Immunization Practices recommendation for the Prevnar 13 adult indication to shared clinical decision-making. Just two weeks ago, ACIP voted to recommend Prevnar 20 for routine use to help protect adults against invasive disease and pneumonia caused by the 20 Streptococcus pneumoniae serotypes in the vaccine. Specifically, the ACIP voted to recommend Prevnar 20 for adults aged 65 and older, and adults aged 19 to 64 with certain risk conditions without the need to be followed by PPSV23 vaccination. This recommendation recognizes for the first time the significance of helping protect more population under age 65 with comorbid and immunocompromising conditions who are at increased risk of disease against these 20 disease-causing serotypes. This new one-dose regimen option, once endorsed by the CDC director, also will help simplify longstanding adult pneumococcal recommendations. As a reminder, Prevnar 20 is the only vaccine the FDA has approved not only for invasive pneumococcal disease, but also for pneumonia. In September, the FDA issued a drug safety communication related to its completed review of the Xeljanz oral safety trial. We are in continuing dialogue with the FDA about its assessment and the resulting final context in the Xeljanz label. With this important step taken, we hope we are a step closer to having an update regarding the new drug application for abrocitinib in atopic dermatitis, and the supplemental NDA for Xeljanz in ulcerative colitis, both of which are currently under FDA review. In terms of Xeljanz, it's currently approved across multiple indications in the U.S.; we believe that Xeljanz prescribing behavior will adjust in the coming months based on the FDA's update, resulting in an initial correction in the short-term. But based on the trends we have observed and the broad application of Xeljanz across its approved indications, we believe Xeljanz has the potential to return to growth, once the final risk label is issued and physicians have adjusted their prescribing habits accordingly as we go into 2022 and beyond. Sotyktu received marketing authorization for the treatment of moderate to severe atopic dermatitis in adults and adolescents aged 12 years and over from the UK Medicines and Healthcare Products Regulatory Agency and the Japanese Ministry of Health, Labour and Welfare in both doses. It also received a positive opinion for use in adults from the European Medicines Agency Committee for Medicinal Products for Human Use. We are hopeful this momentum will continue. We have applications currently filed for review with regulators around the globe, including in the U.S. and Australia. Overall, we remain confident in the importance of the JAK inhibitor class for appropriate patients with inflammatory diseases, and we are pursuing a variety of options for advancing additional JAK inhibitor assets within our portfolio. For example, Pfizer has granted an exclusive license to Brepocitinib and TYK2, both in Phase III development, to a new company formed in collaboration with a partner that has a proven track record in late-stage inflammation and immunology drug development. The new company will direct all future development decisions while Pfizer will have a 25% stake and retain certain ex-U.S. commercial rights for Brepocitinib and TYK2. This transaction will enable the allocation of resources to advance development of Brepocitinib and TYK2 while allowing Pfizer to focus on diversifying its pipeline. And one way in which we are continuing to bolster our pipeline is through strategic business development agreements. This slide highlights 10 such agreements we have entered into in recent years, spanning four different therapeutic areas. To further build on our strength in cancer research, we acquired Array BioPharma. The team in Boulder, Colorado has become a center of excellence for targeted therapies in not only cancer, but other diseases as well, with an expected 1-2 new compounds entering the clinic every year. Leveraging our strength in gene therapy, we entered into a collaboration with Vivet Therapeutics for a potential gene therapy for Wilson Disease, a rare genetic disorder that can cause severe hepatic damage, neurological symptoms, and potentially death. Our acquisition of Therachon builds on our rare disease team's 30 years commitment to develop innovative medicines that address significant unmet medical needs of people with rare diseases. Regarding our worldwide exclusive licensing agreement with Akcea, we believe our expertise and breadth of experience in cardiovascular and metabolic diseases makes us well suited to accelerate clinical development of AKCEA-ANGPTL3-LRx, an investigational antisense therapy being developed to treat patients with certain cardiovascular and metabolic diseases. We are excited about our collaboration with Valneva to develop and commercialize Valneva's Lyme disease vaccine candidate, VLA15, the only active Lyme disease vaccine program in clinical development today. Of course, our collaboration with BioNTech on the COVID-19 vaccine led to the first mRNA vaccine ever approved, and this relationship was born out of our companies' initial collaboration to develop an improved flu vaccine based on mRNA technology. Building on our strengths in prostate cancer and women's health, we have entered into an agreement with Myovant. We joined them to develop and commercialize Orgovyx (relugolix) in advanced prostate cancer, and relugolix combination tablets in women's health in the U.S. and Canada. Our global collaboration with Arvinas to develop and commercialize ARV-471, an investigational oral estrogen receptor protein degrader built on our metastatic breast cancer franchise, allowing us to potentially go into earlier non-metastatic patients and add to efficacy in a metastatic setting. Trillium's CD47, SIRP-alpha-focused technology has the potential to be foundational in cancer immunotherapy as checkpoint inhibitors have been. We look forward to that acquisition closing later this year or in the first half of 2022. With pre-approvals, four EUAs and multiple submissions and readouts, these transactions are already bearing fruit and positioning us to reach even greater pace. Before I close, I want to welcome to the call Aamir Malik, who joined us in August as Executive Vice President and Chief Business Innovation Officer. Aamir came to us from McKinsey, where during his 25-year career, he developed growth strategies, guided mergers and acquisitions, and implemented large-scale programs to improve patients' lives and transform performance for life science companies. This includes working closely with Pfizer on several strategic initiatives. I have known Aamir for more than 15 years, and I'm certain he will be an incredible addition to Pfizer as we look to the next era of innovation. Looking ahead, we continue to focus on driving operational excellence across the organization and pursuing the kinds of first-in-class science that will define the new Pfizer. Given our third quarter performance and our current expectations for the near-term, we continue to expect a revenue CAGR of at least 6% on a risk-adjusted basis through the end of 2025 and double-digit growth on the bottom line. I would remind you that these projections do not include any potential impact from Comirnaty, recent or subsequent business development activities, or potential future mRNA programs. Rather, we remain very confident in our ability to achieve these growth rates because of the strength of our current product portfolio and R&D pipeline. Now, I will turn it over to Mikael to speak more about our R&D efforts, and then Frank will provide financial details on the quarter and our outlook for the remainder of 2021, which looks solid. Mikael.

Thank you, Albert. I appreciate the chance to share updates on Pfizer's robust R&D pipeline. As the measure of the transformation that we've instituted in our R&D organization, we track our average clinical success rates against peers. In every phase and in trend we achieved greater success rates than peer average in 2020, and have continued to sustain those higher rates in 2021. Today I will provide updates from our vaccines, rare disease, inflammation and immunology portfolios, and on our overall protease inhibitor program. In several cases, I will reference publicly available data on other agents so that you can understand our enthusiasm about what we're seeing in our development program. Of course, head-to-head clinical trials would be necessary to support any comparative claim. Last Friday, the FDA granted Emergency Use Authorization for 5 to 11-year-olds and the CDC's Advisory Committee on Immunization Practices is meeting today to discuss recommendation. On the left, we show the comparable immune response observed with 10 microgram dosing in children 5 through 11, compared to 30 microgram dosing in 16 to 25 year-olds. On the right, we show 90.7% vaccine efficacy observed. This too is comparable to what we have seen in older populations. The rate and severity of fever and chills after the first and second doses were less in the younger children than either adolescents or adults. We believe that vaccinating younger children is one important step in making our way through this pandemic. Looking ahead, we expect initial pivotal data from the studies in 2 to less than 5-years-old this quarter, and in 6 months to less than 2-years-old next quarter, with full data readouts to follow. On the right, we show improved handling conditions that have been approved for vials used for those 5 to 11-year-olds. Of note are the smaller pack sizes and the ability to refrigerate for up to 10 weeks. We plan to submit data to regulators for potential approval of similar handling conditions for vials used to dose the 12 and older population. We are the first manufacturer to report Phase III clinical efficacy data on a third dose boost and, to the best of our knowledge, are the only company with an ongoing pivotal efficacy boost study. In a study of participants 16 and older, shown on top, a booster demonstrated a relative vaccine efficacy of 95.6% compared to the original two-dose schedule during a period in which Delta was the prevalent strain, affirming the protective impact of the early immunological data which led to the EUA. It's projected that the third dose boost vaccine efficacy is even higher compared to the unvaccinated population, potentially above 98%. This assumes that vaccine efficacy for those vaccinated with two-doses versus unvaccinated is above 55% at this time point. We observed consistent efficacy in younger and older adults. While the majority of cases were in the older age group, as would be expected, we recorded a relative vaccine efficacy of 100% in individuals aged 16 to 30 years. Data from Israel shown at the bottom and published by Professor Mark Lipsitch of Harvard and others in Lancet showed that the third dose protected individuals against severe COVID-19 related outcomes. We plan to monitor the participants in our clinical study, and at an appropriate time, consider a randomized fourth dose boost in the study to document the impact of additional and possibly annual repeat vaccination. This will be supplemented with real-world evidence data. Countries have started to recognize the favorable risk-benefit profile of our vaccine. In each country shown here, our vaccine was recommended and was the only one permitted in younger populations, and indications are not restricted for boosting. News over the weekend from another manufacturer suggested that their vaccine may not be available in the near-term for younger populations. We are encouraged by these science-driven decisions, which have helped make Comirnaty one of the most used COVID-19 vaccines globally. Next, gene therapy. In hemophilia A, we have temporarily and voluntarily paused screening and dosing in our Phase III study evaluating Factor VIII gene therapy, which we're developing with Sangamo, in order to implement a protocol amendment following their observation of Factor VIII levels greater than 150% in some trial participants. To date, no patient has experienced a thrombotic event and some patients are being treated with oral anticoagulant to reduce the risk of thrombosis. We are committed to resuming dosing as quickly as possible once the protocol amendment, which is intended to provide guidelines for clinical management of elevated Factor VIII levels, is implemented. Separately, based on recent interaction with the FDA, Pfizer no longer plans to conduct an interim analysis of Phase III data from our hemophilia A and B gene therapy programs. We anticipate pivotal data readouts to be based on full analysis of at least 50 study participants for hemophilia A and 40 participants for the hemophilia B program. This will push out the timing of readouts of those trials compared to our previous expectation. For hemophilia A, we're working to evaluate the impact of both the FDA feedback as well as the protocol amendment on timelines and we'll share an update at the appropriate time. For hemophilia B, we anticipate a readout in the first quarter of 2023. We continue to collect long-term follow-up updates in our Phase 1b Duchenne muscular dystrophy study, in which 19 ambulatory boys in the U.S. have been treated and plan to present the 1-year dataset at a scientific meeting. We recently shared information on muscle weakness, sometimes with myositis, in some cases with hospitalizations in three participants in the Phase III ambulatory trial with a specific subset of dystrophin truncation mutation. They were treated with higher doses of steroids and all improved within a few weeks, were discharged from the hospital and have recovered or are still recovering. The Data Monitoring Committee has confirmed that immunological assessment performed in the trial support the hypothesis that the immune response is against the transgene-encoded dystrophin protein. This type of reaction is a risk potentially inherent in any gene replacement therapy, and similar severe adverse events reported in other programs support the notion that this is a class effect. We have proposed the protocol change to exclude patients with mutations affecting exons 9 through 13 inclusive or a deletion that affects both exons 29 and 30. A few sites have resumed new patient activities and we anticipate that nearly all ex-U.S. trial sites will have restarted clinical activity by the end of this month. These mutations are estimated to represent less than 15% of patients with DMD. We recognize the devastating impact DMD has on these boys and their families and plan to include patients with some of these excluded mutations in future study. In addition, we continue to work with FDA to address outstanding R&D questions related to the Phase III studies, including technical aspects of our potency assay matrix. We have made considerable progress with development of the potency assays as per FDA guidance, and are now in an active phase of filing this update. While we cannot speculate as to when sites may open, we're working to reach alignment with the FDA as soon as possible. In addition, we have 12 pre-clinical gene therapy programs and are anticipating approximately one to two INDs each year. We'll now turn to a high potency PDE4 plus immune modulator we are exploring in atopic dermatitis and psoriasis. Topical delivered high potency PDE4 plus inhibition may offer a differentiated efficacy and safety profile compared to other mechanisms of action whether used orally or topically. PDE4 inhibition could provide both rapid and deep responses versus other agents, with the potential for further improvement at higher doses. Even at a significantly lower dose, we observed promising clinical efficacy compared to what we have seen with PDE4 topicals in other trials. We expect to initiate Phase 2b studies in both diseases in 2022, exploring higher doses. On the left, we show in vitro potency at the low dose versus Roflumilast and Crisaborole. Our asset demonstrated approximately 240-fold greater inhibition of IL-4 and approximately 25-fold greater inhibition of IL-13 versus Roflumilast. On the right, we observed clinical and significant improvement in Eczema Area and Severity Index versus comparators in other studies, with a 45% reduction from baseline at Week 6. Our asset shows stronger or similar efficacy at Week 6 as compared to reported data from another study at Week 8 with the recently approved topical JAK1/2 inhibitor Ruxolitinib. There was no stinging observed at the application site. On the left, we saw an approximately 80% reduction in IL-23 in activated skin compared to vehicle in an in vitro skin model. This displays a relevant mechanism of action for high potency PDE4 plus in psoriasis. On the right, patients saw significant clinical improvement in Psoriasis Area and Severity Index versus a comparator in a separate study with a 4.5-point reduction from baseline at Week 6. Let's turn to a TL1A inhibitor, which targets a newly identified member of the TNF superfamily being explored for ulcerative colitis. In a Phase 2a study, we saw a promising endoscopic improvement. Based on the benefit-risk profile seen, there's a potential for TL1A inhibition to be used earlier in the treatment paradigm. Phase 2b studies in inflammatory bowel disease are ongoing with estimated primary completion in the fourth quarter of 2022. On the left, our TL1A inhibitor demonstrated greater endoscopic improvement than what Tofacitinib demonstrated in a similar trial with 34% of patients responding at Week 14. We matched the population based on the characteristics of those involved in our TL1A study using propensity score matching. The Week 4 response for Tofacitinib is interpolated based on Week 8 data of the induction study and Month 12 data from the maintenance and open-label studies. On the right, a post-hoc analysis found that 48% of patients who were biomarker-positive achieved endoscopic improvement versus 13% of patients who were biomarker-negative. Approximately 70% of patients were biomarker-positive and we believe a precision medicine approach utilizing key biomarkers may enhance patient selection and improve patient outcomes. Next, we have a novel small molecule base inhibitor, a potential breakthrough therapy for dermatomyositis that we develop in a research collaboration with Mass General Brigham. This is a disease with very limited treatment options. In an ongoing Phase II clinical trial, we have observed significant reduction in clinical disease activity in skin compared to placebo. We anticipate the readout of the full Phase II study in the first quarter of 2022. On the left, in this figure, treatment demonstrated an 83.6% decrease in gene signature scores from baseline at Week 12 compared to 11.8% with placebo. On the right, treatment also showed significant decrease in clinical disease activity at Week 12 compared to placebo. An important step in addressing the pandemic will be the availability of effective outpatient treatments for people who acquired COVID-19. In a paper published today in Science, we share the design and pre-clinical profile of our novel investigational oral protease inhibitor, including its in vitro pan-coronavirus antiviral activity, in vivo efficacy, selectivity and pre-clinical safety profile. A robust program to study the breadth of both treatment and prevention in high-risk, standard-risk, and household contact populations is well underway. Projected pivotal readouts start potentially this quarter and extend through mid-2022. Finally, our recent milestones are a reflection of those high clinical success rates that I shared at the beginning, and we look forward to continuing the momentum in 2022. Select milestones expected in the fourth quarter include a pivotal data readout for our C. difficile candidates, a proof-of-concept readout for an investigational agent for severe hypertriglyceridemia and cardiovascular risk reduction, and a proof-of-concept readout for an investigational diabetes candidate. Milestones expected in the first half of 2022 include Phase III results for our RSV adult and maternal vaccine candidate, a potential pivotal Phase II result for an agent in relapsed refractory multiple myeloma, a proof-of-concept readout for our mRNA flu vaccine candidate, a proof-of-concept readout for the potential Lyme disease vaccine on which we are collaborating with Valneva, a proof-of-concept readout for ROBO2-Fc for focal segmental glomerulosclerosis, a proof-of-concept readout for Danuglipron for obesity, and Phase III results of Talzenna and Xtandi in first-line metastatic castration-resistant prostate cancer. In addition, we expect continued active business development to further augment the clinical portfolio. Thank you for your attention and I look forward to your questions. Now, let me turn it over to Frank.

Thanks, Mikael. I know you've seen our release, so let me provide a few highlights regarding the financials. The COVID-19 vaccine, once again, had a significant positive impact on our quarterly results and Albert has already addressed the key points on the COVID-19 landscape. Turning to the income statement, revenue increased 130% operationally in the third quarter of 2021, driven by COVID-19 vaccine sales and strong performance from a number of our other key growth drivers. And looking at the revenue growth, excluding the COVID-19 vaccine contribution from direct sales and alliance revenues as Albert said earlier, we saw a continuation of solid performance from the businesses again this quarter, delivering 7% operational revenue growth despite a negative 5% impact from price. This resulted in a robust volume growth of 12% for the business, excluding the COVID-19 vaccine contribution. The 12% volume growth is in spite of an approximately 2% negative impact to growth from Chantix recall and distribution pause. This supports our projected revenue CAGR of at least 6% from 2020 through the end of 2025. Of course, there will be some variability in quarterly growth rate due to a variety of factors, but we continue to expect at least 6% CAGR through 2025. There was no impact from the number of selling days in the quarter as compared to the year-ago period, unlike in our first quarter, where we had more selling days compared to the year-ago period. I'd remind you that the offset to this imbalance will be seen in the fourth quarter results, where we will have fewer selling days as compared to the year-ago quarter. For the full year, this results in essentially the same number of selling days in 2021 as 2020. I will come back to this in a little bit when I discuss the updated guidance. The adjusted cost of sales increase this quarter reduced gross margin by approximately 22 percentage points compared to the third quarter of 2020, which is almost entirely driven by the impact of the COVID-19 vaccine. Adjusted SG&A expenses increased primarily due to a level of promotional spend and sales force activity similar to pre-pandemic levels. The increase in adjusted R&D expense this quarter was primarily driven by increased investments in COVID-19 related programs, as well as other programs within our pipeline. The growth rate for reported diluted EPS was 445%, while adjusted diluted EPS grew 129% operationally. Foreign exchange movements resulted in a 4% benefit to revenue, as well as a 4% benefit or $0.02 to adjusted diluted EPS. Let's move to our revised 2021 guidance. We have again provided total company guidance which includes the business with the COVID-19 vaccine. And then we provided some additional sub-ledger details on our assumptions on the projected COVID-19 vaccine contribution and the business without the COVID-19 vaccine. Our revenue guidance has increased, and we now expect total company revenue to be in a range of $81 to $82 billion, increasing by $2.5 billion at the midpoint. With the COVID-19 vaccine revenue for the year now expected to be approximately $36 billion, an increase of approximately $2.5 billion compared to our prior guidance. The projected COVID-19 vaccine revenue as a percentage of total company revenue at the midpoint has increased to 44% as compared to 42% at our previous 2021 guidance. I'll come back to that in a minute. We also adjusted our cost and expense guidance, mostly to reflect actual performance to date. Let me give you some more detail here. Adjusted cost of sales range has decreased to between 39.1% to 39.6%. On adjusted SG&A, we have tightened the range and now expect $11.6 to $12.1 billion, a decrease of $150 million at the midpoint. In addition, we increased our adjusted R&D guidance range to $10.4 to $10.9 billion, an increase of $400 million at the endpoint to reflect anticipated incremental spending on COVID-19 and other mRNA-based projects. We are keeping our assumption for the effective tax rate for the year flat compared to prior guidance at approximately 16%. This yields an increased adjusted diluted EPS range of $4.13 to $4.18, or 84% growth at the midpoint compared to 2020, including an expected 4% benefit from foreign exchange. Let me quickly remind you of some assumptions in context on the projected COVID-19 vaccine contribution and our collaboration agreement. As discussed earlier, the Pfizer-BioNTech COVID-19 vaccine collaboration construct is a 50/50 gross profit split. Pfizer books the vast majority of the global collaboration revenue, except for Germany and Turkey where we receive a profit share from BioNTech, and we do not participate in the China region. We continue to expect that we can manufacture 3 billion doses in total by the end of 2021. The $2.5 billion increase in expected COVID revenues to $36 billion primarily represents the impact of contracts signed since mid-July, which was the cut-off for our prior guidance. This assumes deliveries of approximately 2.3 billion doses in fiscal year 2021 compared to prior guidance of deliveries of 2.1 billion doses and continues to assume that we will produce 3 billion doses during calendar year 2021. This difference of 700 million doses represents doses which will be delivered in fiscal year 2022. To refresh your memory, our cost of sales for the COVID-19 vaccine revenue includes manufacturing and distribution costs, applicable royalty expenses, and a payment to BioNTech representing the 50% gross profit split. We continue to expect that the adjusted income before tax margin for the COVID-19 vaccine contribution to be in the high 20s as a percentage of revenue. This margin level also includes the anticipated spending on additional mRNA programs and spending on the COVID-19 protease inhibitor antiviral programs. If we remove the projected COVID-19 vaccine contribution from both periods, you will see that we slightly decreased the 2021 revenue range to $45 to $46 billion, representing approximately 6% operational revenue growth at the midpoint. The decrease in guidance at the midpoint largely reflects the impact from the Chantix recall and pause in shipments. In terms of adjusted diluted EPS without the contribution from the COVID-19 vaccine, we have increased the range to be between $2.60 to $2.65 for the year which represents approximately 12% operational growth at the midpoint. These growth rates are all consistent with how we've been publicly positioning the business post the Upjohn separation. You may notice that the implied Q4 guidance suggests non-COVID-19 operational revenue to decline by 1%, especially as compared to the revenue growth that we've seen year-to-date of 8%. Let me walk through the drivers of this. The largest driver of the decline is a difference in number of selling days compared to the comparable quarter in 2020. You will remember my discussion of extra selling days in Q1 when we had three more selling days in the U.S. and four more selling days in the international markets. And I talked then about how Q4 would largely offset that impact, leaving 2021 as a whole with approximately the same number of selling days as 2020. In Q4, we will now have four fewer selling days each in domestic and international, eight less in total as compared to Q4 2020. This is expected to decrease sales by approximately $600 million, and have a negative impact on the growth rate of 6% for the company, excluding COVID vaccine sales. We expect the Chantix sales to be zero in Q4 due to recall and pause in shipments, representing another 2% headwind to growth. And while it is not our normal practice to discuss 2022 outlook during the Q3 conference call, I wanted to make a brief comment related to potential Comirnaty sales next year, as we've noticed some estimates of those sales would be very high. While we have the capacity to produce 4 billion doses in 2022 at this point, we expect to recognize revenues for 1.7 billion doses in 2022, representing COVID vaccine direct sales and alliance revenues of approximately $29 billion. We continue to engage with governments regarding potential future orders for 2022 including doses for which certain governments have the option to order and take deliveries in 2022. And going forward, we will continue to be prudent in our capital allocation activities with the opportunities for deployment shown here on this slide. In summary, a strong quarter and first nine months of the year, based on continued strong performance for our growth drivers. We have increased our revenue and EPS guidance for the remainder of the year, mainly driven by increased expectations for Comirnaty sales. Our pipeline continues to advance and we have invested to support that advance. We look forward to an expected closing of the Trillium acquisition as soon as this quarter or in the first half of 2022, subject to the satisfaction of the closing conditions. With that, let me turn it over to Chris to start the Q&A session.

Thanks, Frank. Sylvia, we're ready for our first question, please.

Your first question comes from Umer Raffat from Evercore.

Hi, guys. Thanks so much for taking my questions. I have three today, if I may. Perhaps first, Albert, do you expect vaccine efficacy on hospitalizations to fade over time? I know this has been a big point of discussion and has direct implications for the longer-term booster usage. Do you expect the hospitalization efficacy to dip below, let's say, an 80% number? Number two, on the protease inhibitor, I was curious if you guys are expecting different activity in the high-risk versus a low-risk trial? I acknowledge the endpoints are different, but is there any reason to expect viral load reduction to look different between the two? And then finally, on the DMD gene therapy trial, I was curious if you have evaluated anti-dystrophin antibodies, perhaps beyond the patients with exon 9-13 or 29, 30. I am just trying to understand if there's a bit of an immune response against the dystrophin being made in other patients as well and whether that will be relevant for the primary endpoint or not. Thank you so much.

Thank you very much. I think I will give all three questions to Mikael because they are clearly in his domain. Mikael, what do you think about the vaccine efficacy, the protease activity and the DMD?

Thank you very much. Our own studies and the real-world evidence coming from Israel all show that you do get waning over time, driven by the immune system as expected, gradually reducing antibodies in the blood and activating immune cells, as well as the appearance of more aggressive strains, in this case, the Delta strain. We think that the data show that you first lose protection against symptomatic disease as you have noted in our trials, and then you lose some protection, but more slowly, over severe disease and hospitalization. We were really pleased to share with you today that when you look at the real-world evidence data, we're able, in a very meaningful and substantial way, to improve with a third dose boost against all facets of disease, whether symptomatic, whether severe disease, hospitalization, and even death. So yes, there is just a shift in time, and that's why we already now are preparing for revaccination when the third boost immunity may start to fade, possibly over the year, which we think would be the type of data to generate to support more of an annual vaccination similar to flu. For the oral protease inhibitor, we think there is an opportunity with our approach where we are able to have high levels of the oral drug to get robust efficacy against high-risk and low-risk populations. And that's obviously what we would like to see as the trial reads out, and we have to wait for data. I just wanted to emphasize that our standard-risk group includes vaccinated breakthrough infections and non-vaccinated standard-risk patients. This is the only trial currently running, to the best of my knowledge, that contains a study population that includes vaccinated individuals who might experience breakthrough infection. It's a unique study population, which is expected to have more and more prominence once the majority of people are vaccinated. And finally, on DMD gene therapy, we're looking at ways to support this patient group that lack a part of the DMD protein, so they are not tolerant to that portion of the protein and hence they may generate an immune response to that part when they get the new gene. I don't think that will happen in individuals who are born with all components of dystrophin, but maybe mutated to be not highly functional. So, our focus right now is to execute in the majority of patients—about 85%—and then develop supportive protocols, which we think are very feasible also for those that have less tolerance and are more prone to immune responses when they're given the full normal dystrophin transgene.

Thank you very much, Mikael. Let's go to the next question.

Your next question comes from Vamil Divan from Mizuho Securities.

Great. Thank you so much for taking my questions. So maybe just a couple like the one — I appreciate, Frank, the comments you made around 2022 in terms of the COVID vaccine sales. Can you maybe just share updated thoughts on how you guys are seeing the revenue stream from these vaccines playing out over time? A lot of focus beyond ’23, ’24, ’25. And so connected with that, or maybe a broader question about a year ago, you guys hosted that R&D Day and kind of went through the whole pipeline and talked about the $18 billion to $20 billion of revenue that you expect to lose because of that expiration starting in 2026. At that point, you mentioned that the pipeline you felt with the least provision to replace that revenue stream. I'm curious, given everything that’s happened in the past year, what's your updated expectations on your ability to overcome those patent losses in the future? Thank you.

Thank you. Frank, do you want to take out this? And then also Angela, you can chime in on the revenue stream.

Thanks, Albert. Hi, Vamil. So, Vamil, the way I would think about '22 is kind of a rhythm that's similar to '21. And what I mean is, we'll continue to update the numbers for '22, based on the contracts that we've signed and then obviously the deliveries that will be shipped in '22 that go with those contracts. So, think about this year: as we've updated our guidance each quarter, we've been able to increase our revenue guidance for the COVID vaccine because of incremental contracts signed from one quarter to the next. We're using that same approach for 2022. So right now, 1.7 billion, I call that kind of banked, if you will, in terms of the doses and the $29 billion that goes with that. Obviously, we've got to ship those doses, but we have contracts in hand that support the 1.7 billion doses and the $29 billion revenue. So that'll be the rhythm of the numbers, the way to think about it going forward in '22. Beyond '22, obviously, we're working our way through those numbers. We continue to believe that the vaccine has durability and that there will continue to be significant revenues beyond '22, but in terms of specifics there, we're continuing to work on that. Albert, I can turn that over to Angela if you'd like.

Sure. Thank you. And maybe just one more add to that, which is that, as you look into '22 and also the out-years, as Frank said, we will update you as the contracts get confirmed. But many of our contracts already have been confirmed and those are multi-year contracts. So, we already know that looking into '22 and the out years, that there are some that are going to continue to be government-driven. And then maybe the one other thing that will change over the next foreseeable period is just the development of a private market. Most likely, we’ll see that developing in the U.S. sooner than the others, because ex-U.S. is where the multiyear contracts have already been secured. But I think that that will be a new dynamic that we are absolutely ready to manage. We're already transitioning our portfolio, and if you look at the presentations of the vaccine, we have moved into smaller pack sizes and improved stability and storage enhancements that we're making all with the view of preparing to transition into vaccinations in the community setting, and preparing for a durable business. So, I would just add that to what Frank just mentioned.

Thanks Angela. And what I will add in this question in addition to what Angela said, I will add that also commercially that's a position of strength for us. I think moving into a private market is where we know how to make a difference as well. The other thing that I will say is, as you've noticed from the numbers, we are moving ahead to produce 4 billion doses. We have already secured the contracts for 1.7 billion doses. And we have additional options and are in negotiations with a number of countries. But I will raise a concern I had raised earlier: when most of the negotiation for doses in the next year are coming from high-income countries and some middle-income countries, I think we are producing enough, but for the low- and middle-income countries who receive doses at non-for-profit or at severely discounted prices, they need to place orders. That's including COVAX and WHO and other mechanisms. So, the 4 billion doses that we will produce could still be skewed toward higher-income countries if lower-income and some middle-income countries do not place orders. As regards the broader question of the 6% CAGR, I think nothing has changed; if anything, the probabilities are improving in terms of how our pipeline can cover the gap to make sure that we have a 6% CAGR. So, when it comes to the 6% through 2025, we feel very confident that we will achieve it. I remind everyone that this is excluding any potential Comirnaty contributions, recent or subsequent business development activities, or potential future mRNA programs. So, excluding those, we are confident in the strength of the current product portfolio and R&D pipeline. Thank you. Next question, please.

Your next question comes from Tim Anderson from Wolfe Research.

Thank you. On the oral protease inhibitor, it's closely watched by investors now that Merck has positive results with molnupiravir but it seems like in your prepared remarks, you spent more time talking about various pipeline programs versus this one where we'll have readouts sooner. So, I'm wondering if this suggests a lower level of confidence by Pfizer in these upcoming readouts. And then can you just talk about your views of molnupiravir and also the recent data they released? And also, how do you think drugs like this, whether it's your own protease inhibitor or molnupiravir, will be used in a real-world setting? Will it primarily be used in the studied populations which are really unvaccinated patients or will it be used more broadly?

Thank you very much. We're very bullish on the oral protease inhibitor. This is why, earlier this year during summer, I approved another billion-dollar investment at risk to start manufacturing and to run three studies in parallel: one for the high-risk population, one for the standard population and one for the household contact population. The studies are ongoing, so there is not much to say right now, other than we feel optimistic, but we need to see the results of the studies and if positive, we'll be ready. The way those will be used: there is a significant need in the high-risk population, but because the cost of these medicines is far lower than monoclonal antibodies, I think the standard-risk population also will have significant uptake. And of course, there is a high-volume opportunity in the contact population that could really change the paradigm. There will be unvaccinated persons who will make up a substantial share of infections, and these medicines will be predominantly used for them, but there will also be breakthrough infections in vaccinated people, especially those at higher risk. Mikael made the comment about that when he spoke about the study that we're running for standard-risk population; to our knowledge it is the only one ongoing.

Absolutely. I think Albert outlined it very well. We are optimistic and enthusiastic, but as always, we're waiting for the data that we hope to come before year-end for the high-risk study. The standard-risk study, as you heard, is unique in that it includes vaccinated individuals with breakthrough infections; it will be a growing need for those that do not get repeat vaccinations. For the household study, a protease inhibitor with a good safety profile is really intriguing. Protease inhibitors of this kind do not possess the types of side-effect concerns sometimes associated with polymerase inhibitors and may require less follow-up for certain safety issues. That's why we think the protease inhibitor is well-suited as the pandemic moves toward an endemic phase. We're eagerly awaiting the readouts.

Thank you, Mikael. Next question, please.

Your next question comes from Ronny Gal from Bernstein.

Good morning, and thanks for taking my question. I have three, if I may. First, regarding your oncology biosimilar, you noted the switch drive has been successful. You've not commented specifically on filing for interchangeability. Can you clarify that point? Second, going across the wires there are some comments from DC about negotiating drug prices for 30 drugs by 2028 as part of the negotiated agreement. Is this something that the drug industry can live with or not? Is this something you're objecting to, or is this something that within a great bargain that will settle drug prices for the Drug Price legislation for the next three years, is this something the drug industry is comfortable with? And last, regarding your oral GLP-1, are you expecting results in diabetes in the fourth quarter of this year? Some of your peers suggested that the intra-day variation in blood concentration of oral GLP-1 is bound to lead to higher side effect profile for the efficacy delivered. Can you discuss what is your view here?

Thank you very much Ronny. I will answer the drug price question and Angela, I will pass you the biosimilar question and the rest of the oral GLP-1 question to Mikael. So let me start with negotiating drug prices. First of all, I think we have an issue that we've said before with out-of-pocket costs for patients. The problem is not the relatively small proportion of healthcare spending represented by drugs—drugs are around 12% of the overall healthcare spend. So by definition they cannot be the entire problem. The issue patients face is out-of-pocket costs when paying for medicines. The overall system of insurance design can result in significant out-of-pocket costs for patients, which is not the case for many other healthcare services. What needs to be done is to have reforms that affect patient out-of-pocket costs. I truly believe there is an opportunity in Congress to reach a deal right now that will reduce out-of-pocket costs for patients. When it comes to negotiating drug pricing, negotiation happens already—Medicare negotiates and other payers negotiate. What some propose, however, moves beyond negotiation into effective price-fixing by subjecting companies to punitive taxes on sales in private markets if they disagree with a government-set price. That is not a fair negotiation and would be counterproductive. We are open to negotiated solutions that reduce patient out-of-pocket costs while recognizing the need to preserve incentives for medical innovation. With that, I'm passing to Angela to speak about the biosimilar interchangeability question and then Mikael on oral GLP-1.

For the oncology biosimilar for that molecule, we will have interchangeability studies and we're planning to file for interchangeability in December 2021.

The oral GLP-1 is a class with a lot of promise. The oral candidate we have is currently the most advanced true oral small molecule GLP-1 receptor agonist. It does not have the same type of pharmacokinetic challenges as oral peptide delivery. As you stated, we will have soon this year a readout with a slower titration for diabetes to optimize efficacy, convenience, and tolerability. This is well known for all GLP-1 peptides. We'll later next year have an obesity readout. An oral GLP-1 has the opportunity to be a very attractive option compared to injectables, particularly for patients for whom convenience strongly matters. We look forward to generating more data and understanding how to optimally position an oral agent.

Thank you. Next question, please.

Your next question comes from Steve Scala from Cowen.

Thank you. A couple of questions. First on the oral COVID antiviral, the initial data seems to have been delayed from the third quarter or the fourth quarter of this year to the fourth quarter of this year and the first quarter of next year. So, what is the reason for the delay, for instance, are the events tracking below expectations? And secondly, a follow-up on obesity. The readout in obesity in the first half of next year is quite intriguing. How quickly thereafter, assuming it's positive, could a Phase III study in obesity alone generate results? Thank you.

Thank you. A very good question. By the way, I don't think that we ever expected the oral data in Q3. I think we were always expecting it in Q4 with a range into Q1 of next year. There's a very good chance we'll have data by the end of the year, but sometimes enrollment and events and data cleaning take longer than anticipated, so we've given the range of Q4 to Q1. We're preparing manufacturing capacity and will be ready if the data are positive. Mikael, on the obesity program?

Yes. We have sites enrolling well across all the oral protease inhibitor studies and we have used the target date for the potential range. For the oral GLP-1 in obesity, we will optimize the titration because titration is important to balance efficacy and tolerability. This is a small molecule for which manufacturing is not complicated, and pending positive data and dialogue with regulators, a Phase III program could move quickly given the familiarity regulators have with the GLP-1 class.

Thank you. Next question, please.

Your next question comes from Louise Chen from Cantor.

Hi, thanks for taking my question. My first question is on the oral antiviral for COVID. Just curious how much you think you can manufacture—how much you can manufacture, what do you think about the durability of these sales? And then is there any first-mover advantage to getting on the market with this? And then my second question is just on CD47. Quite a few are in development. So how do you plan to differentiate your Trillium assets? Thank you.

On the oral protease inhibitor, as I said, we are manufacturing now and will have product available this year depending on readouts and regulatory approvals. As we move into next year, our manufacturing capacity is ramping up. The durability of this franchise is linked to the persistence of COVID-19: as long as COVID-19 circulates, there will be demand for both vaccines and therapeutics. I expect multi-year durability, but that remains to be seen. Mikael, can you speak about the CD47 differentiation?

That's a great question. We think there are several aspects of unique differentiation for the Trillium candidate and that's why we were keen to acquire it. Number one, this is a ligand trap with an Fc fusion to provide longer half-life. It has lower binding to CD47 than a typical antibody and has shown both in pre-clinical studies and in clinical studies that you do not get the problematic on-target anemia that you see with some antibodies. That's important, particularly for blood cancer patients who already have fragile bone marrow function, but also for potential solid tumors treated with chemotherapy. Number two, to the best of my knowledge this product has shown single-agent activity in blood cancers and we have the most advanced dataset coming out in lymphoid malignancies, both related to B-cell malignancies, lymphomas and myelomas. We see opportunities to combine it with several existing Pfizer assets to provide unique life-cycle management. Several unique aspects, we look forward to the potential deal closing and to working with the Trillium team to accelerate these assets.

Thank you, Mikael. Angela, I didn't ask if you have anything to add on the market size for the oral therapy besides what I said about durability?

Well, the population that we're looking at for treatment—the high-risk, the standard risk, and household contacts—is up to about 150 million people when we consider vaccination rates and infection rates and the various risk groups. That makes this an attractive and durable opportunity. Also, governments may be interested in stockpiling these treatments similar to how they stockpile influenza antivirals, which is an additional commercial opportunity to consider.

Thank you, Angela. Next question, please.

Your next question comes from Matthew Harrison from Morgan Stanley.

Great. Good morning. Thanks for taking my questions. I have three, I appreciate. First one is, can you talk about the 2022 revenue for the COVID vaccine and just give us some sense of what of that is primary series and what of that is boosters and just how you think about that developing over time? Then second on your flu data for your mRNA vaccine: can you comment on whether you've had any regulatory discussions and if you think you could get approved on immunogenicity data alone, or you would need to run an actual efficacy study, and then what should we expect to see with that initial readout? And third, can you detail what the protocol changes for hemophilia A are and what you think the underlying factors are that are driving those high levels of Factor VIII? Thank you.

Thank you. The 2022 revenues are mostly from contracts we have already signed—the $29 billion tied to the 1.7 billion doses. In high-income countries, many of those will be boosters; in middle-income countries there will be a mix of primary series doses and boosters; pediatric vaccinations will also contribute, particularly outside the U.S., and some pediatric revenue may be realized in the next fiscal year. Mikael, on the mRNA flu regulatory discussion and the hemophilia protocol changes?

We're intrigued by using mRNA for flu because it can generate both an antibody response against hemagglutinin and a T-cell response that could be protective, particularly for more severe influenza. The current protein-based flu vaccines are not very potent at generating T-cell responses, so mRNA may offer an advantage. Whether you can register a product on immune parameters alone is something we are considering and will discuss with regulators as we generate data, but a robust outcome dataset including vaccine efficacy would be advantageous. For hemophilia A, we observed some patients with Factor VIII levels above 150%. While we have not observed clinical thrombotic events, out of an abundance of caution we proposed a protocol amendment to provide guidance for clinical management of elevated Factor VIII levels, including monitoring and treatment options such as oral anticoagulation if clinically indicated. We believe the high Factor VIII levels may relate to vector dose, expression variability, or individual patient biology, and the amendment is intended to manage this risk and allow dosing to potentially resume safely.

Thank you, Mikael. Next question, please.

Your next question comes from Chris Schott from JPMorgan.

Great. Thanks so much. Just two for me. First, coming back to the vaccine targets for '22: as we think about the doses beyond the 1.7 billion that you've now contracted for, is there still incremental sales opportunity in developed markets for next year or have most governments already contracted? I'm trying to get a sense if most of those remaining doses will go to emerging markets and low-priced geographies where the vaccines are sold closer to cost, or could there be some still higher price per dose business to be had? My second question on the vaccine is also on the margin. Is that high-20s margin that we saw this year a reasonable assumption for next year given the R&D work going on, etc.? And then a final question on the COVID protease inhibitor: regarding the standard-risk trial including vaccinated and unvaccinated populations, is that study powered to look at those populations separately if we were to see different outcomes? Thanks so much.

Thank you. Angela will talk about remaining developed-market opportunities and Frank will talk about margins, and Mikael will address the trial powering question.

Thanks for the question, Chris. We're not done with developed markets. Many contracts are in place but many of those contracts have options attached to them which have not yet been exercised. So yes, there is still opportunity in 2022 for developed markets to acquire additional doses.

On the IBT margin as a percentage of revenue for the COVID vaccine: that percentage includes manufacturing and distribution costs, applicable royalty expense, and the gross profit split with BioNTech, which together get you to a gross margin. We also include in that percentage the R&D associated with COVID-related programs for both prevention and treatment and other mRNA-related programs. When you put all of that together, we've guided this year to an IBT as a percentage of revenues in the high 20s. For next year, you should assume a similar level, and we'll provide updated guidance on all P&L line items when we close out Q4 and provide guidance for 2022.

Regarding the standard-risk oral protease inhibitor trial: yes, we have prespecified secondary endpoints that will analyze vaccinated breakthrough infections separately from unvaccinated participants. If the treatment efficacy is as we hope in both groups, it should be feasible to make claims for both vaccinated breakthrough infections and the broader population that includes unvaccinated patients. This is unique and important, because many other COVID therapeutics' trials did not include vaccinated populations.

Thank you, Mikael. Next question, please.

Your next question comes from Geoffrey Porges from FBB/Leerink.

Thank you very much. A few quick questions. First, on Prevnar, could you give us a sense of whether you believe Prevnar will return to growth next year and what supply you expect to have in terms of number of doses for next year? Secondly, on the question of overall guidance, it seems to me that next year should be another growth year for Pfizer given what you're saying about the opportunities for both the COVID vaccine and the antiviral. I know you haven't given guidance, but can you give us a sense of whether that's your expectation as well? And then lastly on capital, it seems pretty clear that you'll almost be in a net positive cash position by the end of this year given the cash that's coming in for the COVID vaccine. There have been some suggestions that you might redeploy that capital into returning to the consumer business. Is that of any interest or do you intend to maintain the focus on strictly innovative biopharma? Thanks.

As we think about the Prevnar adult revenues, we have to consider different age ranges. For the 65-plus population, the opportunity will come from aging-in cohorts and potential revaccination decisions; we are awaiting CDC guidance on whether those previously vaccinated with PCV13 will be candidates for revaccination. The 18-to-64 age group is a new population for Prevnar 20 and represents a large additional opportunity in 2022 and beyond.

On guidance, we will provide full guidance at our Q4 close and in our early-2022 communications. As for capital allocation, we continue to prioritize a growing dividend and reinvesting in the business and R&D. Aamir, would you like to comment on business development priorities?

Thanks, Albert. We see business development as a very important part of our strategy and plan to be very active in deal-making. Specifically, we'll be interested in compelling later-stage assets that can contribute positively to top-line growth in the back half of the decade, and in accessing medical breakthroughs in earlier stages of development. We believe focusing on these areas will be more value-creating than large, integration-heavy deals that take a long time. Of course, we will consider opportunities case-by-case.

Thank you, Aamir. Next question, please.

Your next question comes from Andrew Baum from Citi.

Thank you. A couple of questions. As you look at the competitive environment for oral antivirals for COVID, could you talk about how you're thinking about the probability of either your compound or the competitor having a REMS program? I know that another company did at one point, but I think it has a REMS now and your protease inhibitor shouldn't require one from a safety perspective. If you care to comment on the competitive outlook for those two drugs from a regulatory perspective that would be interesting. And then second, you've spoken previously, Angela, about the Xeljanz rebate providing sufficient ammunition against AbbVie to ensure that Abrocitinib is not disadvantaged when you launch in securing positions on formularies. When I look at the totality of the rebate that AbbVie's products generate, it would seem to be a multiple of what Xeljanz does. Doesn't that still mean that you're potentially going to be disadvantaged as you seek to win share in the atopic dermatitis indication? Many thanks.

Andrew, on the abrocitinib access question: we've learned over time and we've talked about this before that access builds through time and through demonstrated value. We have a significant number of contracts in place that are reflected in gross-to-net and in our overall contracting. Access will continue to be built over time; the clinical profile and the value we bring to patients will help us secure appropriate access. We'll do what we've always done to secure access for new launches.

On the regulatory outlook for protease inhibitors versus polymerase inhibitors and REMS: pending positive data, we will discuss post-approval pharmacovigilance plans with regulators and implement appropriate safety monitoring. For the high-risk group, treatment durations are shorter, and combinations could be considered in the future. For the household exposure study, you're treating potentially healthy individuals, so safety considerations are paramount. Protease inhibitors generally target viral proteases and do not incorporate into host genomes, so from a theoretical perspective they may be preferable for prophylactic use compared to nucleoside polymerase inhibitors where concerns about incorporation have been raised. That said, we'll follow regulators' guidance on any required risk-management programs.

Thank you. Next question, please.

Your final question comes from the line of Carter Gould from Barclays.

Great. Good morning. Thanks for squeezing us in. I guess to start, I just wanted to come back to the 2022 guide. Can you first clarify that that 1.7 billion doses are inclusive of the 700 million that were left over from 2021? And I guess regardless your 4 billion capacity far exceeds the doses you expect to deliver. I appreciate Frank's comment that projected doses to be distributed will likely evolve. But is it safe to assume you're done increasing capacity and/or could 2022 be a peak on capacity? And then on the TL1A inhibitor, this is the first time I think we're hearing you guys talk about this publicly; what gives you confidence that immunogenicity—or any immunogenicity observed—will not be a problem or that you have confidence it will decrease with the subcutaneous formulation? Any insight on this front? And then finally, do you still plan to hold that Analyst Day this year or has the thinking changed on that front? Thank you.

I think the way to think about the 1.7 billion doses is that those are doses for which we have confirmed contracts that support revenue recognition in 2022. As Frank mentioned, some doses that were contracted for in late 2021 will be recognized as revenue in 2022 due to delivery timing. So there's a distinction between contract timing and revenue recognition timing.

Carter, we expect to produce 3 billion doses in 2021 and 4 billion in 2022. Quite frankly, as demand requires, we can continue to expand our capacity. For example, we've made significant process improvements that reduced certain manufacturing cycle times from 110 days down to 31 days in some cases, which is over a 70% improvement. I don't view capacity as the constraining factor; the question is aligning capacity to demand and contract timing.

On TL1A: TL1A is a member of the TNF superfamily and has genetic associations with inflammatory bowel disease. We're by far the most advanced with a biological targeting TL1A. So far, we have not seen any meaningful impact of immunogenicity on the drug's activity in patients. We think we will be able to manage any immunogenicity, and the TL1A antibody is being developed as a convenient subcutaneous product. Importantly, in our Phase 2a study we identified a biomarker that identifies a high-responder population; in that biomarker-positive group efficacy has been notably strong and above what other agents have reported in similar settings. We aim to reproduce those results in the ongoing Phase 2b study, which could allow us to use a precision-medicine approach for patient selection. Thank you for your interest and we will keep you updated.

Yes. The Analyst Day remains our plan. That is our plan currently.

All right, so you've heard that. I will make one closing comment. Clearly, we're very happy and very excited—and proud—about the impact that we have on global public health with 152 countries receiving our vaccine. More than a billion people have received our medicines and products; it's a record not only for us but for any pharmaceutical company so far. Also, that has come with very strong financial results: our more than $80 billion of revenues this year likely sets a new record for the industry. We are optimistic about the future because our pipeline has very exciting projects moving into the clinic, and we are utilizing our learnings and development experience from COVID-19 to accelerate further and create new standards for patients and the industry. Thank you very much for your support and I wish you a nice day.

Ladies and gentlemen, that concludes Pfizer's Third Quarter 2021 Earnings Conference Call. You may now disconnect.