Pfizer Inc Q2 FY2022 Earnings Call

Good day, everyone, and welcome to Pfizer's Second Quarter 2022 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, Chelsea. Good morning. Welcome to Pfizer's second quarter earnings call. We anticipate that this call will last 90 minutes. I'm joined today by Dr. Albert Bourla, our Chairman and CEO; Dave Denton, our CFO; and Mikael Dolsten, President of Worldwide Research and Development and Medical. Joining us for the Q&A session, we will also have Angela Hwang, Group President, Pfizer Biopharmaceuticals Group; Aamir Malik, our Chief Business and Innovation Officer; William Pao, our Chief Development Officer; and Doug Lankler, our General Counsel. The materials for this call and other earnings related materials are on the Investor Relations section of pfizer.com. Please see our forward-looking statements disclaimer on Slide 3 and additional information regarding these statements and our non-GAAP financial measures is available in our earnings release and in our SEC Forms 10-K and 10-Q under Risk Factors and Forward-Looking Statements. Forward-looking statements on the call are subject to substantial risks and uncertainties, speak only as of the call's original date, and we undertake no obligation to update or revise any of the statements. With that, I will turn the call over to Albert.

Thank you, Chris. Hello, everyone. I am proud to say that Pfizer continued to deliver strong operational performance in the second quarter and has increased its full year 2022 operational financial forecasts for revenue and adjusted diluted earnings per share, all while operating in a challenging foreign exchange environment. Compared with the second quarter of 2021, global revenues were up 53% operationally to $27.7 billion and adjusted diluted EPS increased 100% operationally to $2.04. Both results exceeded consensus analyst expectations, and the quarterly revenue figure represented the largest in Pfizer's history. Key growth drivers for the quarter included PAXLOVID, Comirnaty, Eliquis and Vyndaqel/Vyndamax globally, and our Prevnar family of products in the U.S. Year-to-date, we have reached an estimated 845 million patients around the world with our innovative medicines and vaccines, which represents a 77% increase from the prior-year period. And we did all this while also taking steps to help address broader issues impacting global health, including climate change, equitable access and the war in Ukraine. So, where do we go from here? After two-and-a-half long years, like everyone else, we would hope that this global health crisis would be over soon. But as much as hope is important, hope is not science. And science is telling us that COVID-19 likely will remain a major global healthcare concern for years to come. We believe that Pfizer is well positioned not only to maintain but to grow both our commercial and scientific leadership in the battle against COVID-19. In terms of our commercial leadership, we believe Pfizer's skills are even better suited for operating in open markets than they are for government-contracting markets and will be even more competitive when this transition happens. Recently, Angela announced a new commercial structure that prepares us to provide even better support for the ongoing Comirnaty and PAXLOVID revenue streams. In terms of our scientific leadership, we expect to further enhance our position through the continued introduction of new innovations, including preparation for new variants of concern and potentially improving the durability of protection. So far, we have been fortunate that most of the variants have led to less severe illness, but there remains the possibility that a future variant could emerge that combines Omicron's contagiousness with the original virus's severity. This is a scenario no one wants to imagine, but one for which we need to be prepared. That’s why it is critical that Pfizer continues to invest in the research and development of COVID-19 vaccines and treatments. With this context as a backdrop, let me provide an update on our current COVID-19 offerings and then continue with other products. I will start with Comirnaty. To date, we have shipped more than 3.6 billion doses of our vaccine to 180 countries and territories around the world. Comirnaty remains the most utilized COVID-19 vaccine in the markets in which we operate that report market share data. Pfizer's cumulative share of doses administered in these markets have increased from 52% in January of this year to 63% in July of this year. In developed markets, our share has increased from 59% to 68% over that same time period. Next, I would like to briefly touch on the topic of vaccine boosters for the fall. Outside the U.S., global regulators have issued guidance to advance an Omicron-adapted bivalent vaccine candidate to help address the continued evolution of the virus. As such, Pfizer and BioNTech have submitted data to the European Medicines Agency on the safety, tolerability and immunogenicity for the company’s bivalent Omicron BA.1-adapted vaccine candidate. We also continue to work with health authorities around the globe on regulatory submissions. The U.S. Food & Drug Administration recently asked biopharmaceutical companies, including Pfizer, to develop a modified vaccine containing an Omicron BA.4/BA.5 component and we have begun clinical trials with these vaccine candidates. Pfizer is currently proceeding with development of a COVID-19 bivalent Omicron BA.4/BA.5 booster vaccine candidate and is targeting this fall for rollout in the U.S., subject of course to regulatory authorization. Pfizer is well positioned to satisfy its current contractual obligations and potential demand within its production capacity through the end of the year. Because of our robust manufacturing capabilities, we are planning to deliver both variant vaccines in the fall, pending regulatory approvals. Turning to PAXLOVID, we continue to be very pleased with how things are progressing in the U.S. as we are seeing several initiatives supporting increased access for eligible patients. First, the number of facilities with PAXLOVID supply have continued to increase with more than 41,000 sites live as of July 15, an increase of more than 7,000 sites since early May. We are pleased with the FDA's July 6 revision of the Emergency Use Authorization for PAXLOVID that authorized state-licensed pharmacists to prescribe the treatment under certain conditions, thereby expanding access for patients. As you can see on this slide, we have seen a nearly five-fold increase in PAXLOVID utilization since the first quarter. We also continue to retain greater than 90% market share of oral COVID-19 treatments in the U.S. and are taking a state-by-state approach to engaging key government officials to discuss their access strategies. We are also continuing to work with states to educate consumers, healthcare providers and pharmacists about the importance of treating all appropriate high-risk patients rather than limiting treatment to the severely immunocompromised and unvaccinated. In spite of the strong growth we have seen in PAXLOVID uptake in the U.S. due to our and the government's efforts, we estimate that a significant amount of eligible patients outside the U.S. are not yet being treated with the drug and may not know they are at high risk of progressing to severe disease. So, we believe there remains substantial opportunity to grow PAXLOVID utilization. For international developing markets, we are seeing significant increases in usage across many markets, reflecting the recent wave of BA.4/BA.5 and resulting increases in hospitalizations, ICU admissions and deaths. For example, over the month from June 24 to July 24, average daily deaths in Europe almost doubled from a low of 0.6 per 1 million people to 1.15 per 1 million; in Japan, they almost tripled from 0.12 per 1 million people to 0.34 per 1 million; and in Australia, they increased from 1.78 per 1 million people to 2.59 per 1 million. While we have less precise numbers on market shares outside the U.S., our internal estimates indicate that we saw an estimated 116% increase in usage between June 24 and July 15 across international developed markets where we have supply agreements. So, we believe there is a significant opportunity to continue the growth outside the U.S. as physicians become more knowledgeable about PAXLOVID and treat appropriate patients. While COVID-19 remains top of mind for many people, we are seeing encouraging performance with some of our other innovative products as well, and I wanted to take a moment to highlight two of them. We are very pleased with the success of our U.S. launch of Prevnar 20 for adults. Second quarter U.S. revenues for our Prevnar family of vaccines for adults were up 337% operationally, compared with the prior-year quarter to $431 million, with Prevnar 20 representing more than three quarters of the total adult revenue. The great majority of U.S. healthcare networks, IDNs and retailers, who have made formulary decisions, have chosen Prevnar 20 alone as their higher valency pneumococcal vaccine of choice to help protect adults. This has resulted in Prevnar 20 having a 97% market share. This is also the first time there has been a routine recommendation for Prevnar for people in the 19 to 64 age group with underlying medical conditions. This group has an increased risk for contracting pneumococcal pneumonia and, unfortunately, has historically been the hardest to activate. Lastly, we believe the simplicity of Prevnar 20 being the only vaccine that can help protect patients with one dose in one visit is preferable to competitors' offerings. Quarterly revenues for Ibrance grew 1% in the U.S. compared with the same quarter last year, despite a continued increase in the proportion of patients accessing Ibrance through Assistance Program. This marked the first quarterly revenue uptick in the U.S. since the fourth quarter of 2020, which is an encouraging sign. Total volume in the U.S. increased 3% compared with the year ago quarter. Before I turn it over to Mikael, I want to touch on some actions we have taken recently to further demonstrate our commitment to Environmental, Social and Governance principles. We recently announced an Accord for a Healthier World. Under this Accord, we are offering all of our patented, high-quality products that are available in the U.S. or the EU on a not-for-profit basis for 1.2 billion people living in 45 lower income countries. This includes all future Pfizer products, as well. I am thrilled to say that the first product under this Accord has arrived in Rwanda, with more on the way. Pfizer's experts also held a session for 100 Rwandan medical professionals to discuss efficacy, safety and dosing of this milestone. This is just the first step of Accord implementation, but an important one that will impact many lives. We also recently announced our commitment to achieve the Net-Zero Standard across our value chain by year 2040. This is ten years ahead of a new voluntary external standard. This includes aiming to reduce our company emissions by 95% and value chain emissions by 90% within the next roughly 18 years. In response to the war in Ukraine, we are donating the equivalent of all profits from our sales in Russia to causes that provide direct humanitarian support to the people of Ukraine. Our first down payment of $5 million is going to eight global and local NGOs to support humanitarian relief and response efforts, and we will continue to channel these profits to the Ukrainian people until peace is achieved. I am also very proud to share with you that in a recently published report from MSCI, Pfizer’s annual ESG rating increased three notches compared with June 2021, going from B to A. This is just the latest external recognition we have received for our commitment to sustainable and ethical business practices. I couldn’t be prouder of our colleagues' commitment to good governance practices, quality and integrity. With that, I will turn it over to Mikael to update you on our R&D efforts. After Mikael, Dave will provide financial details on the second quarter and our outlook for the remainder of 2022.

Thank you, Albert. I’d like to start by highlighting two recent leadership appointments. I’ve appointed Annaliesa Anderson to lead Vaccine Research & Development, succeeding Kathrin Jansen, who previously announced her retirement. With more than two decades of biopharma R&D experience, Liesa most recently served as CSO for Bacterial Research and Hospital. Over the last two years, she has led the team of infectious disease biologists that designed and delivered PAXLOVID to an emergency use authorization. Under her leadership, we also advanced several bacterial vaccine programs into clinical development and approval. I’ve also named Charlotte Allerton, CSO for Anti-Infectives, a new research unit. Creating this new research unit allows us to expand our focus beyond medicines that typically are used in hospitals. Charlotte is an esteemed scientist who will broaden our anti-viral strategies with additional efforts in antibacterial and anti-fungal science and medicines. Charlotte has been our Head of Medicine Design most notably co-leading the discovery and development of PAXLOVID and will continue in that role, as well. I have had the privilege to work closely with Liesa and Charlotte for more than 10 years and have been continuously impressed by them as world class scientists in their respective fields of expertise. Both have demonstrated good product hunting skills and a sound business mindset. I’m looking forward to working with them in their new roles. Let’s begin with COVID-19. The pandemic continues to evolve into a disease which is causing significant disease burden, including high rates of acute disease, medical care utilization, hospitalization and deaths, during the entire year. A growing number of patients affected by acute COVID infections are developing chronic disease and suffering from long COVID symptoms affecting multiple organs such as the lungs, heart, kidney and brain and the vascular system. We have seen major waves of variants of concern emerge quickly, become dominant, then be superseded by the next variant. Omicron and its sublineages are the most antigenically distinct compared to prior variants of concern, more transmissible and show evidence of partial immune escape from existing vaccines. As the composition of SARS-CoV-2 changes, it is essential we advance new approaches to extend the level of protection that COMIRNATY originally conveyed. In a clinical trial, we evaluated the safety, tolerability and immunogenicity of mono and bivalent Omicron BA.1-modified vaccines administered as a fourth dose in more than 1,900 participants over age 55. We are also evaluating different doses of mono and bivalent BA.1 in participants 18 to 55 years of age. While we saw promising responses to both mono and bivalent versions in the over 55 population, we moved forward with bivalent following guidance from regulators. The BA.1 vaccine candidate elicited a superior immune response for BA.1 compared to the current version of the vaccine: a seroresponse rate which exceeded noninferiority and neutralization activity which increased substantially. The BA.1 vaccine neutralized wild type and Delta similarly to the current version of the vaccine, suggesting the Omicron-modified version maintained responses for the ancestral strain and other variants. Based on these data and following guidance from regulators, we have completed regulatory submissions in Europe, UK and Canada for the 30-microgram bivalent vaccine in individuals 12 and older and plan submissions in other markets soon. The data also showed this vaccine candidate neutralized Omicron BA.4 and BA.5, though to a lesser extent than BA.1. This suggested a need to develop both a BA.1-modified vaccine and a BA.4/5-modified vaccine. We studied BA.4/5 monovalent and bivalent booster candidates in mice and found a substantial increase in neutralization responses to all Omicron variants of concern. Neutralizing titers against BA.4/5 increased 11-fold for the monovalent and 4.8-fold for the bivalent compared to monovalent BA.1 vaccine. These data were shared at the recent FDA advisory committee meeting as a potential surrogate to help expedite development of a BA.4/5 vaccine. We plan to submit the BA.4/5 bivalent vaccine candidate for Emergency Use Authorization in the U.S. in preparation for the fall booster campaign. To adapt more rapidly, we have agreed with FDA that this submission will be based on safety and immunogenicity data generated in adults with an Omicron-modified BA.1 vaccine and supported by BA.4/5 bivalent-specific preclinical data and BA.4/5 bivalent chemistry, manufacturing and controls data. This strategy is bolstered by previous experience showing that overall responses have been similar between human clinical and mouse data, our clinical experience with Beta and Omicron-modified vaccine candidates, and by leveraging our mRNA platform and manufacturing experience for the current vaccine. To support future potential U.S. licensure and global registrations, we plan to initiate a clinical study to evaluate the BA.4/5 bivalent vaccine. The clinical study design is under discussion with the FDA. We aspire to continue leading with science and working to identify vaccines that will help provide strong and durable protection as new SARS-CoV-2 variants emerge. We aim to deliver a next-generation COVID-19 vaccine that can provide durable antibody and T cell immune protection against severe disease and hospitalization for at least one year. We plan to take a stepwise approach by designing and testing different candidates that engage multiple arms of the immune system including antibodies and T cells. First, yesterday we announced the start of a Phase 2 study evaluating a bivalent modRNA vaccine candidate which consists of RNAs encoding novel enhanced prefusion spike proteins for the SARS-CoV-2 ancestral strain and an Omicron variant. The enhanced spike protein encoded from the mRNAs has been modified with the aim of increasing the magnitude and breadth of antibody neutralization response that could better protect against COVID-19. We project delivering key clinical data this fall. Second, we plan to initiate a proof-of-concept study with a potential pan-SARS-CoV-2 vaccine candidate by the end of the year. This combines the super-stabilized spike sequences with a T-cell enhancing construct, aiming to extend durability of protection against severe disease and new emerging SARS-CoV-2 viral variants. Now turning to PAXLOVID, last month, we submitted a new drug application to the U.S. FDA, seeking approval for the treatment of COVID-19 in both vaccinated and unvaccinated adults and pediatric patients 12 years and over weighing at least 40 kilograms at high risk for progression to severe illness. We anticipate a PDUFA date in the first quarter of 2023. We plan to generate further data in those who are immunocompromised, hospitalized with severe COVID-19 and at increased risk for poor outcomes due to the disease or who are pregnant. We also are considering multiple collaborative studies to evaluate potential treatment for long COVID. Finally, we are working with the FDA to finalize a protocol to study patients who may be in need of retreatment. According to CDC, a brief return of symptoms may be part of the natural history of SARS-CoV-2 infection in some people. We believe the occurrence of COVID-19 rebound is uncommon and not uniquely associated with any specific treatment. At this time, cases are being reported at a rate consistent with the EPIC-HR trial. Turning now to flu, we know that currently available vaccines are not optimal in addressing the unmet need as each year many people are infected, hospitalized and die, resulting in tremendous public health and economic impact. Potential advantages of the mRNA platform include shortened timelines to enable a quicker response each season, improved strain matching, faster and more reliable manufacturing and broader immune responses from both antibodies and T cells, the latter needed particularly in older adults. Based on our experience with COVID-19, T cell responses appear to be critical for protection against severe disease and hospitalization in infectious viral disease. Here we show Phase 2 T cell data for our quadrivalent mod-mRNA flu vaccine candidate in subjects 65 and older. We believe this is the first evidence of a flu vaccine candidate inducing substantial responses for both CD4 and CD8 T cells. On the left, at day seven the CD4 T cell response was more than two-fold for all four flu strains for our vaccine compared to a current high dose vaccine now recommended in the U.S. for adults 65 and older. Over half of the cohort receiving our vaccine candidate had a more than two-fold response. On the right, at day seven the CD8 T cell response and responder rates were greater for all four strains for our vaccine candidate versus the comparator. Our belief is that these encouraging T cell responses, combined with higher seroconversion rates through A strains which are the most predominant circulating strains and have pandemic potential may translate into improved efficacy over current seasonal flu vaccines, particularly in those 65 and older. Based on these data, we plan to initiate a Phase 3 efficacy study this year. We’re excited to share that new data on our oral GLP-1 receptor agonists, two abstracts on twice-daily danuglipron and one on our once-daily candidate known as 1532 have been accepted for the European Association for the Study of Diabetes conference in September. These investigational medicines were designed in-house by Pfizer’s innovative chemistry and discovery teams. In a Phase 1 study in adults with Type 2 diabetes, after only six weeks of treatment, 1532 robustly reduced mean daily glucose to almost near-normal levels. Participants also experienced weight loss of up to 5 kilograms, compared with 2 kilograms for placebo. We believe this to be a potentially best-in-class profile across both injectables and orals. Similar changes in body weight were observed in participants with non-diabetic obesity. 1532 is characterized by favorable once-daily pharmacokinetics, a low risk for drug-drug interactions, robust efficacy across multiple metabolic endpoints and GLP-1 receptor agonist class-like tolerability which overall encouraged us to plan for a Phase 2 study to pick the winning candidate prior to a potential Phase 3 study start. These development programs may lead to potential indications in Type 2 diabetes, obesity, NASH and cardiovascular risk reduction in Type 2 diabetes and obesity patients. Over the past 12 months, we have built a strong inflammation and immunology portfolio with diverse products to help address multiple drivers of disease and unmet need. CIBINQO was approved for atopic dermatitis in adults and last week received priority review designation in the U.S. for adolescents 12 to 18 years. We are nearing a regulatory submission for etrasimod in ulcerative colitis. We have submitted regulatory applications in the U.S., Europe and UK for ritlecitinib for alopecia areata and are awaiting acceptances. We also plan to start a Phase 3 study of ritlecitinib in vitiligo this year. We are pleased to now share promising new updated data from our anti-Interferon beta monoclonal antibody in specialized rheumatology. Patients with dermatomyositis show elevated Type I Interferon gene signature in blood, skin and muscle, correlating with disease activity in skin. As we continue our development of this candidate, a potential breakthrough therapy for hard-to-treat dermatomyositis which attacks the skin and muscles, we believe it may have the ability to address a broader set of inflammatory autoimmune diseases, possibly including polymyositis and lupus. On our third quarter 2021 call, I shared data from our ongoing Phase 2 dermatomyositis study, focused on skin inflammation and showing significant reduction in disease activity when compared with placebo in just three months of treatment. Now both doses met the primary efficacy endpoint in skin predominant disease. The disease also manifests with progressively debilitating muscle weakness and fatigue. Early data suggest that in a small cohort of patients with muscle predominant disease, our candidate resulted in numerically better efficacy scores across all key muscle endpoints including patient-reported outcomes after three weeks. We plan to submit the data for presentation once the study completes. Now, a promising update on elranatamab, our investigational B-cell maturation antigen CD3-targeted bispecific antibody. At ASCO, we presented data from a Phase 1 trial in people with relapsed/refractory multiple myeloma whose disease is refractory to at least one agent in each of three major classes of medications approved for the disease. We saw a confirmed overall response rate of 64% and 35% of patients achieved stringent complete response or complete response. More than half who received prior BCMA-directed therapy, such as an antibody-drug conjugate or chimeric antigen receptor T-cell therapy, achieved a response. Responders’ probability of being event free at nine months was 77%. Elranatamab elicited durable Minimal Residual Disease or MRD negativity meaning no disease was detected after treatment in all evaluable patients who experienced a complete response or stringent complete response. Molecular responses were durable as well with 60% – 62% of those complete responders documented to have MRD negativity at more than six months, including two patients who were MRD negative beyond 18 months. MagnetisMM-1 results, and emerging data from MagnetisMM-3 which is studying triple-class refractory multiple myeloma support further development across a broader program with potential registration enabling studies MagnetisMM-5 in patients with double-class exposed multiple myeloma and MagnetisMM7 in newly diagnosed post-transplant patients with multiple myeloma. There is potential for deep and durable results that can be broadly accessible to patients due to off-the-shelf, subcutaneous, and convenient dosing. The efficacy and safety profile we have seen to date in a challenging patient population supports advancement into earlier lines of treatment. Finally, here is a snapshot of select milestones for this year, showing healthy progress in the pipeline. It was an important quarter for COVID execution, and we look forward to sharing complete readouts from anti-Interferon Beta and the modFlu candidate before the end of the year. Thank you for your attention. Let me turn it over to Dave.

Thank you, Mikael and good morning, everyone. As this is my first call as CFO, I thought I would set the stage for the next chapter of Pfizer, and our relentless focus on creating long-term shareholder value. Over the past few years, Pfizer’s cash generation capabilities have expanded significantly, and the efficient deployment of this capital is more critical than ever. It’s clear to me the company is uniquely positioned for growth, and at the same time, enhancing financial returns. And as we look to the future of the company, we are focused on three primary areas to drive significant shareholder value. First and foremost is our continued emphasis and investment in science and innovation. We are investing internally and externally to create breakthrough medicines, deploying more than $50 billion in this area in the past three years alone. Our second priority is maintaining and growing Pfizer’s dividend, paying out more than $25 billion to shareholders over this period. We recognize that our dividend represents an important component of returns for our investors. And finally, from time to time, we will return capital to shareholders through value-enhancing share repurchases. Over the past three years, the company has allocated nearly $9 billion in this area. Clearly, maximizing shareholder value will be a major focus and I believe all three areas will contribute to our success. More recently, in year to date, we deployed more than $12 billion into innovation, paid dividends of $4.5 billion, and repurchased $2 billion of our shares. This demonstrates an on-going commitment to our robust capital deployment framework. With that now let me briefly review our financial results for the quarter. I will confine my remarks largely to adjusted and operational growth figures. Turning to the income statement. Revenues increased 53% operationally in the second quarter of 2022. These results were driven by momentum in PAXLOVID sales and strong sales of the COVID-19 vaccine; and underlying strength from a number of our key products. Excluding PAXLOVID and Comirnaty, Biopharma product revenues grew operationally by 2% compared to the prior year. In-line products, Xeljanz and Chantix, were impacted by labeling changes and a global pause in shipments, respectively. While Ibrance continued to transition into a new COVID normal market environment. PC1, our contract manufacturing business, grew 89% operationally in the second quarter 2021, and therefore faced a tough comparison versus last year, with PC1 declining by 25% operationally. And now bringing that together, Pfizer’s non-COVID-related revenues grew by 1% operationally in the second quarter. Adjusted cost of sales dollars grew more slowly than revenues, resulting in gross margin rate expansion of 570 basis points versus the second quarter of last year. This improvement in gross margin is largely attributable to the impact of higher-margin PAXLOVID sales; partially offset by higher COVID-19 vaccine sales; and the impact of a $450 million write-off of COVID-related inventory that had expired or are expected to expire. Given the unpredictable nature of the virus, we chose to manufacture and hold excess stock to ensure we could meet global health demand for products if an extreme need were to arise. Adjusted SI&A expenses in the second quarter grew by 7% operationally. The increase was primarily driven by spending for PAXLOVID and Comirnaty, and higher healthcare reform fees. The 27% operational increase in adjusted R&D expense in Q2 was primarily driven by investments in multiple late-stage clinical programs, including programs to prevent and treat COVID-19, and costs to develop recently-acquired programs. The effective tax rate on adjusted income in the quarter of 15.4% declined by 170 basis points versus last year driven by a favorable jurisdictional mix of earnings. And as a result, reported diluted earnings per share of $1.73 grew by 77%, while adjusted diluted earnings per share of $2.04 grew 92%; on operational basis adjusted diluted earnings per share grew 100% in the quarter. Foreign exchange movements continue to dampen our results; negatively impacting revenues and adjusted earnings per share by 7% or $0.08 per share. So with that, let’s move to our 2022 guidance. Given our strong second quarter performance and our improving outlook for the year, we are increasing our operational expectations for both revenues and adjusted earnings per share. For the full year, we are increasing our operational revenue expectations by $2 billion, and operational adjusted diluted earnings per share expectations by $0.24. Unfortunately, given additional U.S. dollar strengthening since we last updated guidance in early May, foreign exchange negatively impacts revenues by $2 billion, leaving our reported revenue guidance range unchanged at $98 to $102 billion. This represents an operational growth rate of 29% at the midpoint compared to 2021, a 200 basis point improvement over prior expectations. The improvement in our operational adjusted diluted earnings per share outlook of $0.24 is also negatively impacted by foreign exchange movements, compressing EPS by $0.19. The net impact of these cross currents allows the company to raise the low-end of its adjusted earnings per share outlook by $0.05 to $6.30 to $6.45 a share. This represents 65% operational growth at the midpoint compared to 2021. Regarding our COVID-19-related revenues, we continue to expect the vaccine revenue for the year to be approximately $32 billion, unchanged compared to our prior guidance provided on May 3, despite the impact of approximately $1 billion of incremental negative foreign exchange. For PAXLOVID, we expect sales of approximately $22 billion, keeping the guidance unchanged, despite an incremental $300 million headwind due to FX. Our non-COVID-related revenues are absorbing approximately $700 million of impact from negative foreign exchange. Given the seasonality that we expect, I would also like to give you some color on the expected cadence of these COVID-related revenues across the second half. Based on current guidance for Comirnaty, we expect approximately 25% of second half sales in Q3 and 75% of sales in Q4, driven by expected deliveries of Omicron-adapted vaccines in Q4, again subject to regulatory approval. Conversely for PAXLOVID, we expect approximately 60% of sales in Q3 and 40% in Q4. So, with that, let me give you some detail on changes in our cost and expense guidance. We are decreasing our expected adjusted SI&A spend by $300 million across the range to $12.2 to $13.2 billion. Additionally, we are also increasing our guidance for adjusted R&D expense by $500 million at the low-end only, with the new range of $11.5 billion to $12 billion, reflecting incremental investments in multiple programs, including mRNA vaccine programs outside of COVID-19 and other programs. We are also slightly reducing our expected effective tax rate on adjusted income by 50 basis points to approximately 15.5%. 2022 guidance once again assumes no incremental share repurchases, beyond the $2 billion of share repurchases we completed in March 2022. So in closing, it’s an exciting time in the history of Pfizer. We believe that our strong financial performance in the quarter and our improving operational outlook for the year sets the stage for long-term shareholder value creation. With that, let me turn it over to Chris to start the Q&A session.

Thanks, Dave. At this time let’s start the Q&A session. Please limit yourself to one question per caller. And if you have additional questions we ask you to please get back in the queue and we’ll address as many questions as we have time to do so. And if you have any remaining questions afterwards, the R&D team will be available to answer those questions for you as well. Chelsea, if you could queue up the callers, please.

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

Great. Good morning. I appreciate all the disclosures there at the end. But I wanted to follow up on the Comirnaty guide again. Obviously, you had some incremental contracts that got signed since the last time you gave guidance. You highlighted sort of the FX headwind. So I guess trying to tease out exactly kind of – explicitly kind of what you’re assuming around potentially, I guess, EU doses getting pushed into 2023 and just some additional color there, if you can please. Thank you.

This is Dave. Carter, thank you for the question. Let me walk you through the guidance for this year from a vaccine perspective. As you well know, we had a guidance of $32 billion to begin with as we entered come out of Q1. There’s really three moving parts as I think about our guidance for the year: one is we do have an incremental contract from the USG for 105 million doses this year, which is an uptick to that guidance; secondly, we’re experiencing headwinds from an FX perspective to the tune of $1 billion since Q1, but for the year, really $2 billion in that product alone; and then third, as I just articulated, the cadence of deliveries in the back half is really skewed to Q4. And with that, some ex-U.S. deliveries could move from November into December of the calendar year. And if that were to occur, given our one month lag from a reporting perspective that would cause those revenues to fall into Q1 of 2023. I do not know whether that’s going to happen, but I’m planning that it might happen. So therefore, I’m probably being conservative in my approach, in my outlook to the revenue guide for that specific medicine.

Okay, let’s go to the next question.

Your next question comes from the line of Robyn Karnauskas with Truist Securities.

Thanks for taking my question and all the color on the call today. I guess mine is on PAXLOVID. And maybe you could talk a little bit about I know there, while you said there’s low rate in line with clinical trials for rebounding, maybe that’s underreported and you outlined your plan for new trials. What are you doing to potentially decrease that potential for rebounding in the new studies? Are you extending and doubling the dose? And maybe some trends a couple, give us more color on some trends that you’re seeing on PAXLOVID. I know you mentioned globally. We’re hearing in some states it’s more limited versus others. Maybe just give us more color there on trends you’re seeing on access? Thank you.

Sure. William, why don’t you speak a little bit about the program, what we haven't seen with rebounding? And then Angela, you speak a little bit about the trend of the revenues in the uptake.

Sure. Thanks, Albert, and thanks for the question. So as we reported earlier in the EPIC-HR study, we did see a small percent of potential rebound. But we also saw it in the placebo arm with a very similar rate. Since then we have seen other studies coming out including from the Mayo Clinic, Case Western, and Kaiser Permanente and others showing data that’s very consistent with ours in terms of single-digit percent of rebound. And it’s also been seen not only with placebo, but also with competitor antivirals. And internally, we also have data from real-world data, as well as additional pharmacovigilance data showing again that it’s a very similar low percentage rate of recurrence. That said, though we are working with the FDA to finalize plans for a trial in which we would treat such patients and we’re still deciding on the final outline of that. And in addition as Mikael outlined, we’ll be looking at other cohorts of patients, for example, immunocompromised patients who have a large unmet medical need. And in that setting, we will be looking at, for example, five days, 10 days and 15 days of dosing to determine the optimum dose regimen for those patients.

Thank you, William. I need to say that we are very serious about PAXLOVID and we are looking very diligently. All the anecdotal reports that are coming, but all the data, I repeat all the data, our internal data, we are detecting rebounds by proactively checking viral loads or the external data that have been reported through pharmacovigilance to us, or through studies that have been performed by third parties, very reputable third parties like Kaiser Permanente and the Mayo Clinic. They are consistent that this is low single-digit, actually less than 1% in the external studies. And it was around 2% in the methodology we used in ours and very consistent with the numbers of the placebo. So although we try to see if there is a need to do something about it, seriously, we can’t find any data set other than anecdotal reports. Also, I want to emphasize that even the anecdotal reports, they are all indicating that it is mild. So we don’t have any rebound that is more serious. And clearly, we haven’t identified any single case in which we have resistance to PAXLOVID. So we are looking into it. And William said that we are going to run also some studies—we’re discussing our protocols with FDA to see if treatment of those cases could help. But so far our conclusion, although we are looking a lot, is that it is a very small percentage similar to COVID placebo or other antivirals, and with very mild symptoms.

So globally, I think that we’re doing really well and we’re making excellent progress. We have manufactured 30 million treatment courses, and we delivered 23.5 million of those courses. So I think that contracting is going well. The demand and expectations for the need for PAXLOVID is definitely up there. But maybe let me use some U.S. examples where things are where we have a little bit more data and where things I think are going particularly well. The U.S. actually contracted 10.8 million doses with us so far and 7.4 million doses of all of those have already been allocated to all the states. So I think that gives you a sense of how much demand is coming in from all of the states, and then every single week, our utilization of PAXLOVID has also increased. In fact, most recently we hit an all-time high of 389,000 doses used in just one week. So that gives you a sense of sort of the increase and the momentum. What’s really driving this is, obviously, the education and the familiarity and the experience now of physicians, as well as patients. But also the excellent work that is being done at the federal as well as the state level in terms of education and utilization. And I want to call out in particular, the test-to-treat program that I think has been particularly effective and very positive. To date, more than 41,000 pharmacies are now test-to-treat centers. And that gives access to a tremendous portion of the population to be able to access PAXLOVID. And also recently pharmacists are now able to prescribe PAXLOVID within certain limitations. And over and above whatever states and the federal government are doing Pfizer is also aggressively and assertively supporting education. So actually, we have leveraged the entire Pfizer field force to provide education, we’re running webinars. And to date, we’ve reached over 300,000 healthcare professionals, as well as 80,000 pharmacists just to give you a sense of the extent and the breadth of reach that we have accomplished. And all of that is complemented by public service announcements about driving awareness of the treatment, but also the individual risk that each patient could carry and making them aware that they could be potential candidates for PAXLOVID. So I think with all of these efforts that have gone on and that we’re continuing, we feel really good about the momentum of PAXLOVID, the utilization of PAXLOVID, and the benefit that PAXLOVID can bring, particularly in a time when there are surges going on around the entire world.

Thank you.

Thank you, Robyn. Next question, please Chelsea?

Your next question comes from the line of Terence Flynn with Morgan Stanley.

Hi. Thanks for taking the question. I had a two part one on your mRNA seasonal flu vaccine program. I was just wondering if you had any HAI titer data that you can share from the trial. We saw the CD4/8 T-cell data, but again, wondering if there’s any titer data you can share? And then anything on the safety tolerability there, is it fair to assume that the profile is similar to Comirnaty or are there any particular differences you’d like to call out? Thank you.

Thank you very much Terence. Mikael, why don’t you take this question?

Yes. We will share details in an upcoming conference, but I can just give a little bit more color. As you know, the highest medical burden and hospitalization occurs in the 65 plus where A strains are the most dominant. We had very strong titers against the A strains and exceeding what you would see with the current recommended vaccines. So we are very bullish about our ability with mRNA to induce both strong antibody response and CD4 and CD8 T cells, which are not induced by the current standard of care. And this is the reason why we are sharing today that we are announcing a Phase 3 study. Tolerability, sorry. Tolerability of this 30 microgram dose, in older adults, the 30 microgram dose has very good acceptance, which is the main patient group. And I believe it’s going to be excellent and very similar to other available flu vaccines. I also didn’t mention the B strains earlier. We noted in general lower response to B strains with both standard of care vaccines and we edged on the lower side with our vaccine for B strains. That’s why I was so encouraged to see the unique T cell response against the B strains and the totality of the data makes us encouraged that we will have a strong product for both A and B.

And also Mikael, you spoke about A, you didn’t speak about the B strains in the immunogenicity as they were similar to the current high dose of quadrivalent.

Yes. I didn’t mention the B strains earlier. We noted in general lower response to B strains with both the standard of care and our vaccine edged on the lower side for B strains. That’s part of the reason why we are encouraged by the T cell response which may compensate and lead to a strong overall protection.

And then I think how confident we feel is that although the regulatory pathway is to demonstrate non-inferiority in immunogenicity, we are going for an efficacy trial. So the trial that we announced yesterday is going to measure real efficacy in flu, which we believe—of course science is unpredictable—but we expect to perform very well.

Thank you, Terence. Next question, please.

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

Hi guys. Thanks for taking my question. I had a question and a clarification. The question on PAXLOVID. I know the test-to-treat program from the Biden administration is going to drive volumes. My question is how would the demand dynamics change when we transition to a commercial purchasing model? And let’s say the test-to-treat is still in place, would that be any change or not? And my clarification is Mikael, I think some comments you might have made at a recent non-transcripted meeting on the TL1A program, whether there’s been a signal consistent across the Phase 2a and Phase 2b, could you please clarify that? Thank you very much. I’m referring to the interim analysis that happened recently.

Angela, what do you think if we go to open commercial market? Do you think that we will be better or worse off for PAXLOVID?

Yes. So I think that there are elements that we will be able to implement in the commercial market that currently we don’t. For sure, you heard me share comments about the efforts that we’ve put into PAXLOVID already here in the U.S. and ex-U.S., the execution and the support of education, support of our entire field forces, support of retail, support of patients through education. Now, all that will continue, but I think what happens in a full commercial launch is that you will have multiple distributors and multiple points of distribution throughout the entire country. You will have stocking by every pharmacist, pharmacy, and various points of use. And so I think that in a commercial setting actually, you’ll be able to reach a much broader set of channels that we currently even do today. So I think that’s one difference. I think, the second difference is that what you can do from a commercial perspective will also look different. Remember today we’re under an EUA and while we can do a lot of education, key things like sampling cannot be done in an EUA. So that’s going to be an example of another difference that will happen post EUA. And then I think finally even if you think about consumer education, today we’ve really limited ourselves to unbranded and sort of disease awareness education, but again in a commercial setting, you could support through branded education and talk a lot more about the product. And so all of these are things that actually Pfizer does and the commercial organization of Pfizer does really well. This is our sweet spot. So I think that we look forward to building on top of what the government has been doing, which has been really excellent and building on top of that to do more and to support greater initiatives across the country.

Thank you, Angela. What about TL1A, Mikael?

Briefly, this is our internally discovered antibody against TL1A, a member of the TNF superfamily that is associated with inflammatory diseases. Yes, we had consistent, robust efficacy across the cohorts and very strong efficacy consistent across the trial for a prospectively defined precision biomarker. Tolerability was very good. Now this is induction data, and later this year, we will have maintenance data and as we get those data sets, we will decide about next steps.

Thank you very much.

Let’s go to the next call.

Your next question comes from the line of Mohit Bansal with Wells Fargo.

Great. Thank you for taking my question and congrats on the early oral GLP-1 data, especially for once daily. My question is how much incremental data are we going to see in September from the one you presented today and also how soon can you move this agent into bigger trials? And how do you see the biggest differentiation versus oral semaglutide at this point? Thank you.

Yes. We are very excited about this new data set that you will see at the EASD Meeting in Stockholm in September, there will be additional data. And I think you will find HbA1c very encouraging, although this was a short study. I think, compared to oral semaglutide, the differentiation is substantial. This is a true small molecule that can be given once a day; it’s completely independent of fasting or meal concordance. And I think you will be able to reach higher effects on both glucose as well as on weight reduction. As I reported now, we were almost at near-normal mean daily glucose reduction over four to six weeks and five kilograms of weight loss. And we haven’t yet optimized the titration to even higher doses. So we are very encouraged by what we see and are going to share with regulators soon our next trial set and move swiftly to allow us to pick the winner and the regimen for a potential Phase 3 study to come after the Phase 2b.

Thank you, Mikael.

And also to add that this is for us clearly a high priority project. We have a designation within the company we call the Lightspeed project, a project of significant value to patients and as a result also significant economic value where we give this designation and we move it with a speed of light and we overinvest to make sure that we de-risk and we move fast. And I review personally on a biweekly basis the progress of this program. So that is going to be one of them. Thank you very much. Next question, please.

Your next question comes from the line of Evan Seigerman with BMO Capital Markets.

Hello, thank you so much for taking my question and congrats on the progress. I would love your perspective on the provision for Medicare to negotiate directly with manufacturers as part of the Inflation Reduction Act that we have press reports about. What kind of potential long-term impact on your R&D and innovation would you expect? Thank you.

Thank you. I'm disappointed with what I'm reading in the newspapers. Of course, we can't know exactly what will happen because this situation is very volatile, but everything that they are reporting suggests they are going to implement price-setting in reality. It is not a true negotiation because they're effectively forcing their will by implementing a 95% tax, according to previous guidance that will cause the industry significant harm. We estimate that to be $270 billion over 10 years. There is a positive provision there, to reduce out-of-pocket costs for patients. That's a significant one, but it's too little and too late. They could do way more because that would cost them 10% of the $270 billion but they are choosing a different approach. Although that out-of-pocket reduction is a very positive provision, the rest is likely to force the industry to reduce R&D if it goes the way that they are suggesting. So other than that, I don't have anything to add. We will wait to see exactly what this means in reality and we'll go from there. And also I want to say it is very disappointing that they're choosing to single out one industry. From what I understand, many sectors are facing cost pressures, but there are specific measures affecting only the pharma industry, particularly when this industry has proven the value it brings to public health and to the global economy. We would be in a very different place in the global economy if we didn't have the investments and the thriving life sciences sector. I hope reason will prevail when this discussion goes to Congress.

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

Hi, thanks for taking my question here. Just curious if some of the setbacks that we've seen in the CD47 space changed your view on the market opportunity for your Trillium asset. Thank you.

Yes. Why don't we go to William?

Yes, sure. So thanks for the question, Louise. We saw the news the other day. Internally, we remain confident in our program with the Trillium asset and we proceed with the programs that we are planning and we'll let the data speak for itself when they come out.

Thank you. Next question, please.

Your next question comes from the line of David Risinger with SVB Securities.

Yes, thanks very much and congratulations on the performance. I wanted to ask a little bit about VYNDAQEL and VYNDAMAX. The performance was below our and consensus expectations. If you could speak to that and also talk about the sequential prospects going forward i.e., has the product peaked out in the U.S. and how should we think about future prospects relative to the sales that you booked? Thank you very much.

Well, we continue to be really pleased with how VYNDAQEL is doing. If you look at just from a diagnosis perspective, quarter-over-quarter, year-over-year, we continue to do a really great job of effectively finding and identifying who those ATTR-CM patients are, diagnosing them and then bringing them on to therapies. So in this quarter we have reached an all time high over 40% diagnosis rate. And I think that this is well beyond what we thought we would be able to do in the timeframe that we have had. So we continue to believe in the growth that this product has. The real world data that has been generated now and the overall survival benefits are really compelling. And the fact that we are the only product being able to demonstrate these benefits, I think speaks well to how we'll continue to be able to build in this market despite competition that will arise. I think what you're referring to in terms of the impact and the expectations really is a one-time effect and it was in Japan. This was a very specific price decrease that was planned and driven by regulation. When VYNDAQEL was launched in Japan, based on pricing regulation in the country, the price was much higher than in other countries. And so by regulation, a 75% price decrease occurred. But the underlying growth of VYNDAQEL in Japan is really strong. In the first half of 2022, we had 69% volume growth and 32% year-over-year new patient starts. So hopefully, this gives you a sense that the net revenue impacts you see are, in fact, not a reflection of the demand and the true underlying demand, whether it's in the U.S. or ex-U.S.

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

Your next question comes from the line of Tim Anderson with Wolfe Research.

Well, thank you. A question on your RSV vaccine. There doesn't seem to be much mention of the program in the press release or the slides, and really nothing in prepared remarks, yet we have Phase 3 data results coming out very soon. I'm wondering why. But really my main question is why you recently changed the primary endpoint in the Phase 3 trial, including downsizing of the trial. That comes on top of the delay in readout as announced earlier this year. And if I can slip one in on your quadrivalent mRNA flu, when would we likely see results from your Phase 3 that you're starting up?

Thank you. Mikael, both questions go to you. The first question was RSV, correct?

Yes. We have made great progress in the RSV adult program. As you know, we ran it through two different seasons in the northern and southern hemisphere to make sure we had robust case counts. Things are looking good for a readout that would come soon. I remain very positive about RSV adult based on our Phase 2 challenge data that was stellar and the role this particular antigen and the constructs we are targeting play. We are the only one targeting the pre-fusion conformation of both RSV A and B. You also asked about modRNA flu. Yes, as Albert mentioned, we are going big here with an efficacy study. We are encouraged by the data we're seeing. We think it's a unique dataset. And we plan to soon embark on our Phase 3 after proper dialogue with regulators. Of course, this is an event-driven trial, but if the season is robust, which you can never know, we would expect the Phase 3 to read out next year.

Exactly. And also, I want to add that if we gave the impression that RSV is not important to us, it's extremely important. The previous studies were extremely strong and the current studies are progressing very well. So we have very high confidence, absent a surprise, that we will have a robust product in adults and maternal indications. Both studies are progressing very well.

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

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

Hi, guys. Thanks so much for taking the question. Just had a couple on PAXLOVID real quick. Can you give us an update on the number of countries you're in contract discussions with relative to the start of the year? And then related what's been the biggest contributor of supply expansion in 2Q? And when do you think you guys will be fully normalized? Thank you.

Yes. So we are in contract discussions with a significant number of countries at this point. I can talk about it from a dose perspective: more than 35 million treatment courses have already been contracted with a number of countries and this is what we publicly disclosed. There are additional doses that I can't talk about because either the country didn't want us to disclose them publicly or we're in the middle of negotiations with them. So since we last spoke, we have made progress with contracting. What's more important is that the approach countries are taking is different compared to Comirnaty. With Comirnaty they were interested in securing large amounts upfront, but that's not the case for PAXLOVID. Countries are being prudent with how they order because they know we have manufacturing capacity and can pivot as needed. They also want to manage inventory and not have too much aged product. This drives smaller, more frequent contracting rather than large large contracts. We're also working with supranational organizations acting on behalf of multiple countries, such as the Global Fund and UNICEF. So overall, progress is good and you should expect contracting to continue to inch forward because of how countries want to manage inventory and supply.

Thank you, Angela. Also, we have done tremendous progress on supply. We have been able to reduce dramatically lead times, improved yields, and internalized much of API and finished product manufacturing. Supply is not an issue; we have brought much of production in-house, which increases our flexibility and speed.

Thank you. Next question, please.

Your next question comes from the line of Chris Schott with JPMorgan.

Great. Thanks so much for the questions, just one follow up on the PAXLOVID comments. As we move from some of these large government orders earlier this year to these more on-demand smaller contracts, how should we think about the impact on pricing? I think that you were giving some volume-based discounts before. Help us think about 2023 and beyond pricing for that business. And then on Ibrance dynamics: you mentioned in the prepared remarks you're seeing signs of a recovery. I'm curious about the balance of overall market dynamics relative to the competitive landscape with competitors having adjuvant indications. Thank you.

Thank you very much. We do not provide forward-looking projections on pricing. Generally, when contracting very large quantities with governments we offer special pricing. If we move to normal commercial markets, prices would reflect value and comparable products. When you move to private/commercial markets, there are additional complexities: single-dose packaging, distribution to physician offices, and many more logistics which influence cost and pricing. The open market also presents opportunities because it is more complex and diverse, playing to Pfizer's strengths in commercial presence and field force. We could be more competitive in an open market scenario and that could favor us despite the added complexities.

On Ibrance, the metastatic breast cancer CDK4/6 market is competitive yet Ibrance continues to be the leading CDK4/6 inhibitor. We have a 74% market share across all patients in first line therapy, a number that has been consistent. This shows physicians' experience with and confidence in Ibrance despite new competition, supported by real-world clinical evidence. The growth sources for Ibrance include growth of the CDK class, recovery of new patient starts which have not fully recovered to pre-pandemic levels, and stabilization as payor dynamics normalize. Importantly, class growth is the leading priority: last year the CDK class was used in 48% of first line metastatic breast cancer cases, and this quarter it's 54%. There remains substantial opportunity to grow the class and patient uptake.

Thank you, Chris. Next question, please.

Your next question comes from the line of Chris Shibutani with Goldman Sachs.

Thank you very much. First a quick word of welcome and appreciation to David for your proactive commentary on the facing of revenues. It really mirrors what your predecessor referred to as the rhythm of the numbers. Very helpful. My question is on business development. If Aamir could update us on the team's latest thoughts in view of broader commentary from regulators like the FTC? And second, given lower biotech valuations, are you sensing shifts in receptivity or mindset among potential targets, partners or acquirers?

Aamir is here to address that.

Chris, thank you for the question. On the FTC point, we've demonstrated a strong track record of shepherding transactions through regulatory processes largely built on very constructive relationships with regulatory bodies globally. Our business development focus is consistent: use our unique abilities to translate emerging science into breakthrough medicines. Most deals we do are pro-patient and pro-innovation. We're confident we can continue to advance our BD strategies successfully. We're targeting to add $25 billion of risk-adjusted revenue by 2030 and are making good progress; this year you saw transactions with ReViral and Biohaven which we believe have significant potential. Going forward, we are leaving few stones unturned. Our focus is on scientific substrates with breakthrough potential, deals that accelerate top-line growth in the latter half of the decade, and opportunities where we can add substantial value scientifically or commercially. We're open to deal structures and agnostic to size. We are not focused on cost-synergy-driven deals; we'll remain disciplined. Valuation fluctuations won't drive our strategy; we will remain fundamentals-focused.

It's important when aiming high to remain disciplined—pay the right price for the right science so capital is maximized for value creation. We will continue to be disciplined.

Thank you. Next question, please.

Your next question comes from the line of Andrew Baum with Citi.

Thank you. Two part question, please. Your former Head of Vaccines is now at competitor GSK and when they top-lined the recent positive Phase 3 data for their RSV vaccine in Canada, an observation was made that they stressed the same level of efficacy in the older patient cohort as in younger cohorts. It's possible to imagine that may be uniquely related to the adjuvant they used given immunosenescence. Your vaccine does not have an adjuvant. Is that a concern, particularly over long follow-up? Second, following up on Ibrance, could you discuss ARV-471 and how you're thinking about combinations you will run and the control arm in trials when combining with a CDK4/6 inhibitor?

Thank you. Mikael?

I am very optimistic about our RSV vaccine construct. We have seen high immune titers that are critical for efficacy across all ages. In fact, we are the only one that have shown cross-strain responses for RSV A and B in some of our datasets, including challenge data that looked formidable. While direct comparisons across trials are difficult, we remain very bullish that our bivalent vaccine should stand out in performance and tolerability. Regarding ARV-471, I can speak about the science: we see the drug being active in several lines as a promising estrogen receptor-targeting PROTAC. We plan to design studies in patient populations that contain many estrogen receptor mutants which are often poorly managed by current endocrine therapies. We see potential for combinations with our CDK4/6 inhibitors, with the aim to advance into earlier metastatic lines and possibly into early breast cancer combined with CDK4/6 inhibition. We have high hopes for this class in combination with our pipeline.

I would just add the preclinical data shows that targeted protein degradation with ARV-471 could be superior to selective estrogen receptor degraders, providing a potential clinical advantage.

Thank you. Next question, please.

Your next question comes from the line of Steve Scala with Cowen.

Thank you so much. I would just like to understand more deeply Pfizer's thinking on Factor XI. I could think of three possibilities. First Pfizer believes there is simply no room to improve upon Eliquis. Second Pfizer believes Factor XI could be very useful, but you haven't found the ideal candidate. Third, the jury's still out. Any thoughts?

I think Mikael can elaborate, but bottom line we are looking for science that could provide meaningful improvement over Eliquis and we haven't found that yet. That's the reality. There is not sufficient maturity right now to overcome the strong profile of Eliquis.

You summarized it well. In atrial fibrillation, we have excellent drugs like Eliquis and rivaroxaban, with Eliquis being the market leader. By the time Factor XI agents might come to market, Factor X inhibitors may already be genericized. The room for a new, potentially expensive drug in a crowded area with many great treatments does not look like the best area to deploy large amounts of capital now. We always wish for more options for patients, but currently it does not appear to be the highest priority for investment relative to other opportunities.

Thank you. Next question.

Your final question will come from the line of Elliott Bosco with UBS.

Hi, this is Elliott Bosco from UBS. Thanks for taking our questions. Just a few on PAXLOVID. You mentioned countries needing to manage broader supply. Do you think that current PAXLOVID use trends will result in excess inventory versus what has been contractually purchased? And additionally, could you comment on the recent Codexis retainer arrangement and how we should think about that with regard to 2023 PAXLOVID demand? Thank you.

I think the way we are manufacturing PAXLOVID with knowledge from our prior experiences with COMIRNATY and through our negotiations and discussions with countries is allowing us to do supply planning very well. We are manufacturing as we need and according to the contracts and the demand countries provide. So we are doing that in a very prudent and effective way.

The Codexis question referred to their enzyme supply retainer arrangement and how it ties to 2023 demand.

Dave, would you like to comment on manufacturing and Codexis?

Yes. Over the last several quarters we've improved our manufacturing process, reduced cycle time and importantly improved yield from an output perspective. So we don't need as much raw material and API to produce the same amount of finished goods. And we've invested in our network to make sure that we can actually produce some API as well. So we're in good shape. Some of the earlier external arrangements have been adjusted as we've internalized more capabilities, which may have affected some external suppliers. But overall, supply profile is strong for 2023.

Yes. As I said before, we have moved much of production in-house and improved speed and yields. That led to some cancellations of raw material orders with external suppliers as our needs changed. Thank you very much. I think that was the last question. Let me close with a few takeaways. First, as you see, we continue to deliver strong operational performance. We increased our full year 2022 operational financial forecast, while navigating a challenging forex environment. We believe we are well positioned not only to maintain, but to grow both our commercial and scientific leadership in the battle against COVID-19. The medical need will be there for years to come, and that's why we're investing heavily. We continue to focus on driving long-term shareholder returns by remaining disciplined both on our operations and our capital deployment. You saw even in this quarter we are squeezing administrative expenses and reinvesting in R&D because we have programs that we feel provide good returns. We continue to advance our internal scientific pipeline while executing against our plan to potentially add at least $25 billion of risk-adjusted revenue through business development opportunities by 2030. A few highlights of potential approvals and launches in the next months: CIBINQO adolescent indication; RSV maternal; RSV adults; Prevnar 20 for pediatrics; elranatamab for triple-class refractory myeloma; ritlecitinib for alopecia areata; TRUMENBA meningococcal vaccine; talapro for metastatic castration-resistant prostate cancer; Myfembree for endometriosis; and potentially DMD via mRNA. These are organic pipeline assets and many have high probabilities. With these and business development, we aim for a 6% CAGR by 2025 as we promised in 2019. Year-to-date we are at 6% excluding BD and excluding COVID. We believe we will maintain a 6% CAGR and grow further through BD. Thank you very much for your interest, and for those with summer vacations, enjoy them.

Ladies and gentlemen, this concludes Pfizer's second quarter 2022 earnings conference call. You may now disconnect.