Earnings Call Transcript
PFIZER INC (PFE)
Earnings Call Transcript - PFE Q3 2020
Chuck Triano, Senior Vice President of Investor Relations
Good day everyone and welcome to Pfizer's Third Quarter 2020 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Chuck Triano, Senior Vice President of Investor Relations. Please go ahead sir. Thank you, operator. Good morning and thanks for joining us today to review Pfizer's third quarter 2020 financial results our updated 2020 financial guidance Pfizer's role in helping find solutions for the COVID-19 pandemic as well as other relevant business topics. I'm joined today as usual by our Chairman and CEO, Dr. Albert Bourla; Frank D'Amelio, our CFO; and Mikael Dolsten our Chief Scientific Officer and President of Worldwide Research Development and Medical; Angela Hwang Group President Pfizer Biopharmaceuticals Group; John Young, our Chief Business Officer; and Doug Lankler, our General Counsel. The slides that will be presented during the call were posted to our website earlier this morning and are available at pfizer.com/investors. You'll see here on slide three, our disclaimer regarding forward-looking statements we will make during the call regarding among other topics our anticipated future operating and financial performance, business plans and prospects, and expectations for our product pipeline and in-line products which of course are subject to risks and uncertainties as well as the use of non-GAAP financial information. Additional information regarding these forward-looking statements and our non-GAAP financial measures is available in our earnings release including under the Disclosure Notice section and under Risk Factors in our SEC reports 10-K and 10-Q. Forward-looking statements on this call speak only as of the original date of this call and we undertake no obligation to update or revise any of these statements. Albert and Frank will now make prepared remarks and then we'll move to a Q&A session. With that, I'll now turn the call over to Albert Bourla. Albert?
Albert Bourla, CEO
Thank you, Chuck and good morning everyone. A great day here in New York. During my remarks, I will discuss our strong third quarter business performance, speak to the progress we are making in the battle against COVID-19, provide an update on our pipeline and how it is setting us up for an anticipated period of sustained growth, and briefly touch on the topic of affordable access to innovative medicines and vaccines. Let's start with an update on our Biopharmaceutical Group. For the quarter, revenues in our biopharma business grew 4% operationally driven primarily by the ongoing strong performance of Vyndaqel/Vyndamax; growth from our leading portfolio of biosimilars; and the continued strength of key brands including Eliquis, IBRANCE, Xeljanz, Inlyta, and XTANDI.
Frank D'Amelio, CFO
Thanks, Albert. Good day, everyone. I know you've seen our release, so let me provide a few highlights regarding the quarterly financials. Our Biopharma business, which will become new Pfizer, following the close of the Upjohn transaction, generated $10.2 billion in revenue for the quarter, which represented 84% of total company revenue. On an operational basis, Biopharma revenue grew 4% in the quarter and 7% for the first nine months of the year. The 7% year-to-date operational revenue growth for Biopharma was driven by continued solid volume growth and our price-to-volume mix was a 9% increase in volume and a 2% negative impact from price. For Upjohn, although the year-over-year comparison is skewed again by the impact of generic Lyrica and changes in the China market, the business continues to perform in line with our expectations and assumptions already reflected in our Upjohn guidance for the year. Now moving down the income statement. I'll touch quickly on gross margin, which saw a slight negative impact during the quarter, mainly driven by lower sales from Lyrica, Celebrex, Lipitor, and Norvasc, which are all part of our Upjohn business, as well as some incremental costs due to COVID-19. There was some offset to this impact due to lower inventory write-offs compared to the year-ago quarter. We had another quarter where we saw a significant year-over-year decline in adjusted SI&A expenses, which were down 10% operationally. There are two obvious factors at work here: the exclusion of consumer health expenses and lower selling expenses due to COVID; but also a third factor, which is a planned reduction in spending associated with our corporate-enabling functions. We're in the midst of aligning those functions to the new Pfizer structure, which will be a smaller and less complex organization. We are finalizing this initiative and we'll be able to better quantify the expected financial benefit when we provide our 2021 financial guidance for new Pfizer. Reported diluted EPS for the quarter was down significantly compared to the year-ago quarter, mainly driven by the non-recurrence of a one-time gain from the consumer joint venture formation in the year-ago quarter and adjusted diluted EPS was down 3% compared to the prior year quarter. Excluding the $0.02 negative impact of foreign exchange rates in the period, adjusted diluted EPS was $0.01 lower compared to the prior year. Foreign exchange also negatively impacted revenues in the quarter by about $100 million or 1%. Consistent with last quarter, we are providing three sets of financial guidance a few points here regarding our assumptions. The guidance continues to only include the adverse spending on our COVID vaccine candidate, but does not include any potential revenue we may receive this year if the vaccine is authorized and we deliver doses to various governments where we have agreements. In terms of our broader COVID-related assumptions, we expect the gradual recovery in healthcare activity for the remainder of the year. I'd also note that upon the closing of the Upjohn transaction, we will treat the Upjohn business as a discontinued operation. So assuming the completion of the Upjohn transaction before December 31, the financial guidance we are providing will not be aligned with the ultimate numbers we print for the year. I'll start by saying, there were no changes made to either the new Pfizer or Upjohn 2020 guidance factors and only slight refinements to total company guidance. For total company, we are tightening our guidance range for revenues, which results in a small decrease in our midpoint and this is mainly a factor of reducing the top end of the range, as opposed to a change in our forecast. Costs as a percentage of revenue is slightly increased, mainly due to COVID-related costs, while the SI&A range is lowered a bit at the midpoint, mainly COVID, and enabling function-driven and R&D increases slightly mainly due to additional COVID program spending. This nets out to a slight increase in the midpoint of our adjusted diluted EPS range. Moving on to financial guidance for new Pfizer and Upjohn which is shown here. As I referenced, we are not making any changes to either new Pfizer or to Upjohn. Moving on to key takeaways, in the third quarter, our company performed well, driven by strong revenue growth, from our biopharma business. We narrowed ranges for our 2020 total company guidance for revenues, cost of sales, SI&A, R&D, and adjusted diluted EPS. And we reaffirmed our existing guidance components for both, new Pfizer and Upjohn. We also achieved multiple product and pipeline milestones, since our last quarterly update, some of which are listed here. A more complete listing can be found in this morning's press release. Finally, we paid $6.3 billion to our shareholders in the first nine months of this year. As always, we remain committed to delivering attractive shareholder returns, in 2020, and beyond. Now I'll turn it back over to Chuck.
Chuck Triano, Senior Vice President of Investor Relations
Great. Thank you, Frank and Albert for the prepared remarks. So time now to start our Q&A session. And operator, can I ask you to please poll for the questions?
Operator, Operator
Your first question comes from the line of Umer Raffat from Evercore.
Umer Raffat, Analyst
Hi everyone. I appreciate the opportunity to ask my question. I know there are many inquiries, but I'll direct this one to Albert for the generalist investors who are listening. Could you please explain how a blinded trial functions and that you may not have visibility on its progress for those who aren’t specialists? Now, onto my question. In your trial, a positive COVID case is defined by one general symptom and a positive PCR test. However, the general symptoms can vary widely. Given that there's no sterilizing immunity observed in the nonhuman primates, is it reasonable to expect to see some positive PCR results from the vaccine, even with significant neutralizing titers? Additionally, could you remind us of the cycle threshold for the PCR test you are utilizing? Thank you.
Albert Bourla, CEO
Thank you, Umer. I will now ask Mikael to provide a brief comment. In a pivotal study, it is essential to maintain blinding so that neither the healthcare providers administering the vaccine nor the patients receiving it know whether they are getting the vaccine or a placebo. All data is securely stored and locked with a code that restricts access to a small, protected team at Pfizer. The Data Monitoring Committee will periodically receive unblinded information, but they have not begun yet. The committee consists of independent experts, but they have not had access to any unblinded data or conducted any interim analyses. With that, I will turn it over to Mikael to address the specific technical question.
Mikael Dolsten, Chief Scientific Officer
Yeah. Thank you for the question. So Umer, we have as you know two primary endpoints. The first relates to, impact of naive patients to the first infection. And the second one relates to the same, but also adding, re-infection in those that were previously infected with SARS-CoV-2. We use PCR machines on a commercial platform that, we have thoroughly validated. And feel very comfortable with. And use established criteria for positive cases. The central read in our large laboratory is the crucial one here. We are also able at the end of the study to look at patients that did not develop symptoms, since as you said we are particularly focused on illness cases. So we use a serology test for the nucleocapsid protein that, allow us also to look at impact at the end of the trial for patients that were asymptomatic. The symptom in the scale that we use was established in consultation with many KOL and FDA. But we also have secondary endpoint that uses CDC's symptom scale. So I think, hopefully that covered many aspects of your questions.
Albert Bourla, CEO
Thank you, Mikael. So we move to our next question, please operator?
Operator, Operator
The next question comes from the line of Vamil Divan from Mizuho.
Vamil Divan, Analyst
Great. Thanks a lot for taking my question. So, maybe one in Eliquis and then one back on the COVID-19 vaccine. So on Eliquis, I saw the commentary around the, net price being lower. It covers gap and also the channel mix. I'm wondering if you can maybe just sort of quantify that a little bit more for us. And maybe any sort of sense of how we should think about the pricing dynamics of that product going forward just since it's obviously an important product, for you guys. And then on the COVID-19 vaccine Albert, appreciate your comments, the other day around communicating, when you have specific information. I think one thing that's just sort of been a little bit confusing, a bit more and maybe you're trying to address that now is the sort of either you'll have conclusive results on an interim analysis. And so maybe can you just sort of talk to that. Or maybe Mikael can comment on some of the confidence you have that an interim analysis in this trial should be sufficient to show conclusive efficacy as opposed to waiting, for the final results. Thank you.
Albert Bourla, CEO
Yes. Thank you. I will ask Angela to speak about the Eliquis. Let me take first a little bit this COVID-19. Look, we are cautiously optimistic that we will have results and possibly an interim analysis. We never – you never know before you have the final analysis. This cautious optimism is coming from the very strong immunogenicity data that we have very strong neutralizing titers and a very strong T-cell response, excluding CD8, which is one of the important. But as I said, you never know until you have a study readout. And we have reached the last mile here right, so we expect that these things will start coming soon. So let's all have the patience that's required for something so important for public health and global economy. And with that, I will ask Angela to comment on Eliquis.
Angela Hwang, Group President Pfizer Biopharmaceuticals Group
So thanks for the question. So this gross-to-net adjustment is clearly a key feature of Eliquis because of the large number of Medicare patients that we have. And every year not only are there a different number or an increasing number of Medicare patients but also there are changes in the coverage gap. And as we mentioned, the key change this time is the length of time that patients are in this catastrophic coverage gap, which is longer in Q3 of 2020, compared to Q3 of 2019 by about 25% and this is sort of the level of impact that we saw this year. And so obviously this increases our expense and is the reason for the unfavorable impact. But hopefully, that gives you some sense of what happened between Q3 of this year and Q3 of last year. Thank you.
Chuck Triano, Senior Vice President of Investor Relations
Thanks, Angela and Albert. Operator, let’s move to the next question please.
Operator, Operator
The next question is from Gregg Gilbert from Truist.
Gregg Gilbert, Analyst
Hi, thanks for the question. First, Albert you noted that there's still that gap on abrocitinib versus Street estimates and what the company sees. I was hoping you could provide a little more detail behind your bullish view beyond what you offered on the call about it not being a zero-sum game. And the second part of my question is Albert, you've expressed a lot of confidence in Pfizer's ability to hit that revenue CAGR and you did so again today without COVID and without deals. But how focused are you and the team on bringing in assets to buttress that growth and/or add growth drivers that come later in the decade? Thanks.
Albert Bourla, CEO
Thank you very much. I will answer the second part and then I will ask Angela actually to walk us through the abrocitinib projections that we are having. We are very confident on the 6% CAGR. And I think we have broken it down to what we believe will take to reach there. Right now if you take the middle point of our guidance with $41.6 billion, we will need additional $14 billion by 2025 to achieve 6% growth. We believe $8 billion are projected to come from our in-line portfolio and we put that during our earnings release. So that means that we are having a $6 billion that need to come from our current pipeline. Based on our projections on the revenue this requires only 40% adjustment. So $6 billion of the $15 billion that we are expecting to have non-risk adjusted in that year is a very good safety margin. That being said, also we generate a lot of cash and we want to invest this cash. And right now our business development strategy, it is to invest in something that we believe can generate significant value for the shareholders and this is to our R&D machine, an R&D machine that has completely turned around its productivity and right now is having industry-leading metrics in the multiple fronts. So our business development will be invested in Phase II – Phase III-ready programs that could become medicines in the period of 2023, 2024, 2025, 2026. And those from one hand can enhance the 6% growth but even more importantly, will allow us to maintain and sustain this growth beyond 2026. So with that clarification and thank you very much Gregg for the question, I would like to ask Angela to speak a little bit about abrocitinib.
Angela Hwang, Group President Pfizer Biopharmaceuticals Group
Thank you, Albert, and thanks for the question and giving us the opportunity to follow up since our discussion during R&D Day. We are really excited about this opportunity and we're enthusiastic about it, because it is a condition that has a large number of patients, a significant unmet need. And both of these things is what we believe drives the size of opportunity for abro. So let me unpack that a little bit. First of all there are significant number of AD sufferers. Globally, there are 60 million AD sufferers, age 12 and up and 27 million of those are in the U.S. And just for a bit of context that is 10 times the number of RA sufferers today. Of those 60 million, only 7% of them today are being treated with a systemic agent. And so the systemic market opportunity has the real potential to more than double with the introduction of better systemic treatment because the patient need is just so high. And let me just also put that in context with a market that we know very well today, which is psoriasis. The market for systemic in psoriasis doubled over the last 10 years with the introduction of advanced systemic biologics and also more recently the IL inhibitors. So if we step back and take a look at those numbers, even at a modest 1% share of the 60 million patient population, or if you think about the future systemic market, all I need is 8% of that systemic market for abro to reach a $3 billion revenue at peak. And so, when you think about all of that and think about the advanced systemic markets that are also in place today of which there is just one and 60% of those patients who are on this product are not reaching clear or almost clear skin at 16 weeks, it demonstrates that there really is a lot of room for additional systemic options. So to Albert's point earlier about the fact that this is not a zero-sum game, we don't see the opportunity for abro as only being about gaining market share from competitors. Actually, the way we see it, is that it is an opportunity to grow the advanced systemic market through the introduction of excellent treatment options. And we believe that the differentiated profile that abro has will allow us to be a leader in this growing market. And also, don't forget market development and creating new markets is a real sweet spot for Pfizer. So, we are very excited about the launch and look forward to bringing this important medicine to the market. Thank you.
Chuck Triano, Senior Vice President of Investor Relations
Thanks, Angela. And Greg, yes just one comment on your second question about the deals. A reminder that Valneva in the Lyme disease vaccine area is going well. Arixa, a deal we just announced in the antibiotic segment. So clearly, Pfizer is still going to remain active in bringing in assets that can help bolster the long-term revenue growth of the company there. With that, let’s take our next question please, operator.
Operator, Operator
Your next question comes from the line of Terence Flynn from Goldman Sachs.
Terence Flynn, Analyst
Hi. Thank you for addressing the question and for your efforts regarding the COVID treatment and vaccine. I understand you may have limitations on your commentary, but people are curious about any changes to the DMC's mandate in light of the new FDA guidance, particularly concerning the timing of the interim efficacy analysis. Specifically, is the DMC now required to wait for a certain number of severe cases or two months of safety follow-up data before evaluating the efficacy? I know you have expressed confidence in reporting data by the end of October, so I am just looking to clarify the timing of the analysis and any updates on that front. Thank you.
Albert Bourla, CEO
Thank you, Terence. I understand that everyone is looking for any possible information. We aim to maintain a responsible balance between transparency and not fueling speculation. To answer your specific question, as of today, no Data Monitoring Committee has changed their mandates. There have been no changes like that. I can also reiterate that we haven't conducted any interim analysis yet, and we believe that the analysis on efficacy will begin soon. Once we have results, whether positive or negative, we will announce them. This announcement will happen a few days after the DMC informs us, which typically takes five to seven days. If this occurs before the third week of November, which is likely since we anticipate it soon—possibly just before or shortly after the end of October—we will announce it before November 15. At this moment, no analysis has been performed, and the DMC is completely blinded to any data, as are we. Once the conditions are met, they will unblind the data and start informing us. So, let’s be patient. I recognize the increasing stress levels and the urgent need for a vaccine globally. We're witnessing the fears we had before coming true, as COVID is returning in Europe, the U.S., and worldwide. We are diligently and carefully working to ensure we bring this project across the finish line. Thank you.
Chuck Triano, Senior Vice President of Investor Relations
Great. Thanks, Albert, very helpful. Next question please, operator.
Operator, Operator
Your next question comes from the line of Geoffrey Porges from SVB Leerink.
Geoffrey Porges, Analyst
Thank you for taking my question. Albert, I apologize for continuing to ask about the COVID readout, but you seem very optimistic about having a positive efficacy readout by the end of October, which you plan to disclose. It appears that this will happen within five to seven days afterward. This indicates that you expect the first interim efficacy threshold to be around 75% to 80%. Is that correct? Additionally, can you discuss the realistic timeline for the first dosing? Given that the FDA needs to convene an Advisory Committee and you will require an ACIP recommendation before distributing the vaccine, do you think it is realistic to plan for anyone to be vaccinated outside of clinical trials by the end of the year? Thank you.
Albert Bourla, CEO
Thank you, Geoff. No need to apologize for your questions; I understand how significant this is for everyone. To clarify, I'm not overly optimistic that the vaccine will work; I'm cautiously optimistic. I clearly stated that we may know by the end of October whether it’s effective. I want to emphasize that October is not tied to our timeline; it's more about the elections, which is an artificial milestone for us. This vaccine will not be aligned with any political party; it is meant for all citizens globally. I hope it proves to be highly effective, but we need to wait for the study results. Regarding distribution, assuming we have positive data, we will be prepared to apply for emergency use authorization in the U.S. shortly after receiving safety data, which we expect to have by the third week of November. If we apply around that time, the FDA will take as long as needed to give approval, and I can't comment on that process. However, we plan to have the product available. If all goes well, we will be ready to distribute an initial quantity. We have a contract with the U.S. government to provide 100 million doses by March, and we feel confident in meeting that goal. Additionally, there’s a provision to supply 40 million doses this year. We anticipate delivering around 30 to 40 million doses, assuming we receive approval and the U.S. government supervises the vaccine distribution. To put this in perspective, 30 million doses could serve 15 million people, so it won't be widely available initially; it will be limited. As we enter early 2021, we expect a much larger distribution of the vaccine worldwide. I hope this gives you some perspective. Thank you for your interest, and we are all hopeful that science will prevail.
Chuck Triano, Senior Vice President of Investor Relations
Thanks Albert. Next question please, operator.
Operator, Operator
Your next question is from Louise Chen from Cantor.
Louise Chen, Analyst
Hi, thanks for taking my questions here. First question I had was is there any way to help us think through if you've reached these 32 events yet? I know there's a lot of investor interest here so just trying to get as much color as we can? And then can you provide an update on how many actual doses of vaccine you've already manufactured? It sounds like you're obviously very positive on your goals here. And the last question is will you continue to look at potential adjuvant opportunities for IBRANCE? Or are you really just going to focus on next-generation CDKs?
Albert Bourla, CEO
Let me address this question. We have produced hundreds of thousands of doses and are rapidly progressing at both sites to significantly increase production. Regarding the events, I can’t provide more insight than what we’ve already shared. We will accumulate the necessary events and then unblind the data. The Data Monitoring Committee will inform us whether the results are negative, positive, or if we should continue. If the results are negative or positive, we will communicate that to you. If we are to continue, we will press on until we reach the next milestone. There isn’t much more to consider at this point. However, I can confirm that we will begin this process very soon. Now I'll hand it over to Angela for comments on IBRANCE.
Angela Hwang, Group President Pfizer Biopharmaceuticals Group
So yes thanks for the question on IBRANCE. In terms of our focus for IBRANCE where we've been as you know is really looking at the early breast cancer indications which disappointingly did not pan out for us in PALLAS and PENELOPE so we are very much focused on metastatic breast cancer as our opportunity with IBRANCE. And here we continue to feel really confident about what we've seen with our data as well as what we're seeing from a market share perspective right? So first-line use of CDK in metastatic breast cancer as a class, it's still only at 52%, but we have a long way to go in terms of our ability to grow this class. But actually, for IBRANCE itself, it has a very high market share 87% in fact. And we've had this leadership position in first-line treatment for many years. And in fact, since May even post the announcement of the monarchE data, we have seen this consistent market share. So I think that our focus on metastatic breast cancer and our focus on growing the use of the CDK class in metastatic cancer will continue to provide us a tremendous amount of opportunity. I think just as a follow-up to your question in terms of are there other ideas and other thoughts for IBRANCE, just to remind you that we do have still the PATINA trial that is ongoing, which will read out in the second half of 2022 for a different population HR-positive and HER2-positive population. So it's a slightly different question, but really touches on additional expansion opportunities for IBRANCE. Thank you.
Chuck Triano, Senior Vice President of Investor Relations
Great. Thanks, Angela. Thanks for the question, Louise. Let's take our next question, please.
Operator, Operator
Your next question is from Navin Jacob from UBS.
Navin Jacob, Analyst
Thanks so much for taking my question. And I will be very in line with my colleagues about questioning questions on the COVID vaccines. Maybe let me try this a different way. Versus your original assumptions, when you were designing the trial and based on the literature and the data set – data that are out there, not necessarily in the trial, but just from what you're seeing outside of the trial, how do you think the symptomatically for folks that are infected compared to when you originally designed the study? That's question number one. And similarly, I suppose also, with infection rate itself, I think when you enhance the size of the study from 30,000 to 44,000 patients, one of the reasons – rationale for increasing the size is because of what you deemed to be a slower infection rate. I'm wondering about that, as well as the symptom rate relative to the original assumptions? Thank you so much.
Albert Bourla, CEO
Yeah. Thank you, Navin, and again I understand the interest here. I don't want to comment much more. But what we see is our infection rates that they're aligned with what we see in the country. That's not something to be a surprise, because it's a large study that we try to position geographically in multiple sites that represent basically the country in the U.S. where we have the bulk of the patients. The increase of 30,000 to 44,000 anyway wouldn't make any difference in the early readouts. It would only make a difference because of the larger numbers at the very, very late readouts. So I don't think that was the reason, but we did it. It was mainly, because we felt very good about the safety profile, so we started – we opened our vaccination to kids of 16 years old in beginning then we went to 12 years old, and then we went to people that they are suffering from HIV, from hepatitis B, from hepatitis C. So this is why. And also we use it to improve the diversity of the study which we have made it public so it's very, very good right now. I feel very good about the diversity of our study. So Navin thanks for your question. Let's all keep our fingers crossed, but we will have positive readouts.
Chuck Triano, Senior Vice President of Investor Relations
Great. Let's move to the next question, please operator.
Operator, Operator
Your next question comes from Chris Schott from JPMorgan.
Chris Schott, Analyst
Great. Thanks so much for the questions. I guess, my first was on abrocitinib and market development. Thank you for the earlier comment. I guess, my question is if I look at the RA situation it took some time for the JAKs to gain traction. Obviously, now the class is doing really well. Do you expect a similar situation in AD? So, launch that eventually gets very large, but maybe takes some time to build momentum? Or are there differences in this market that could allow for faster uptake here? And then my second question was on VYNDAQEL, and how we think about growth from here? Should we think about the ratio of diagnosed patients to those who receive drug to shrink significantly over time? Or should we think about there being a persistent gap between diagnosis rates and those who actually receive the product? Thank you.
Albert Bourla, CEO
Yeah. Excellent questions, both I think are appropriate to be answered by Angela. So Angela, why don't we start with abrocitinib and how you think the market will evolve given the experience on RA and JAKs? And then of course in VYNDAQEL what – how that change between diagnosis and treatment can evolve over time?
Angela Hwang, Group President Pfizer Biopharmaceuticals Group
Thank you. In the areas of inflammation and immunology, we are addressing very complex and chronic diseases that cause significant debilitation and suffering for our patients. Both rheumatoid arthritis (RA) and atopic dermatitis share this burden. However, the key difference is that RA is a well-established disease with many treatment options, including biologics, even when we launched Xeljanz. In contrast, atopic dermatitis currently lacks effective treatments. As we discussed earlier, systemic treatments mainly involve steroids, and while Dupixent has helped many patients, there are still limited options available. The unmet need for atopic dermatitis patients is considerable. Developing new treatments takes time to reach peak market potential, but we believe that addressing the significant unmet needs, particularly for atopic dermatitis, will create new opportunities. Patients often prioritize alleviating their condition, and if we can develop agents that resolve their issues quickly, it will open avenues that didn't exist before. Regarding Vyndaqel, there will always be a gap between diagnosed patients and those who receive treatment. Additionally, there is a step between those treated and those who actually get their prescriptions filled. This quarter, 82% of patients deemed eligible for treatment received a Vyndaqel prescription, an increase from 78% last quarter. While the gap isn’t large, there is room for improvement. We have ample opportunities to enhance the patient journey from diagnosis to treatment, from treatment to receiving prescriptions, and from receiving prescriptions to obtaining the medicine from specialty pharmacies. Given that this is still a new condition that is early in its launch, we believe we can make significant improvements throughout the entire process. Thank you.
Chuck Triano, Senior Vice President of Investor Relations
Great. Thanks for the comments, Angela Hwang. Next question please operator.
Operator, Operator
Your next question comes from Steve Scala from Cowen.
Steve Scala, Analyst
Thank you. Albert with all due respect, could you please be absolutely clear whether the 32 events have been reached already? It seems that the answer is, yes, Pfizer has the 32 events otherwise I think you would say no. And on to the DMD gene therapy, will Phase 3 start this year? And has Pfizer and FDA agreed on a potency assay? Thank you.
Albert Bourla, CEO
Yes, Steve, I appreciate your curiosity and creativity. Everyone can approach this from different angles, but I believe I have provided as complete an answer as we are ready to give. You asked in a very inventive way, so I will clarify that no, we do not have the 32 events at this time. That's all I can say. Can you remind me what the second part of the question was?
Chuck Triano, Senior Vice President of Investor Relations
Yes question was in DMD has the FDA agreed on a potency assay?
Albert Bourla, CEO
Mikael, maybe you can take that?
Mikael Dolsten, Chief Scientific Officer
Absolutely. I think Steve you first asked will Phase 3 start this year. We expect and I believe Phase 3 will start this year and relatively soon. As you know the profile through modification of the steroid dose from one mg per kg to two mg per kg looks really great now. And Albert spoke in his introduction to the 19 treated boys, in which in the recent, after the steroid change we have had no cases with complement activation so we're very excited about the current plan. Now for the assay, yes, as part of our final protocol development with FDA, we changed from an initial inverted terminal repeat methodology to a transient method as suggested by FDA along with the weight of the patients to determine those. And that's all in place and made the initial dose of what was expressed as 3E14 go down to the 2E14. It's the very same dose that we use all the time. It's just that the different assay gives a different readout. But all of that is in place. We have a terrific technology platform that I think is the leading in this field how to measure the various endpoints including the concentration of the virus gene therapy.
Chuck Triano, Senior Vice President of Investor Relations
Great. Thanks, Mikael. Thanks for the question Steve. Let’s move to our next question please operator.
Operator, Operator
Your next question comes from Tim Anderson from Wolfe Research.
Tim Anderson, Analyst
Thank you. I have a non-COVID question, which is following the initial news where, you said, you spin at Upjohn, you described the company is likely to pay less of its free cash back to shareholders in the form of dividends and buybacks. And I'm wondering, if that's still the current view, especially, if you can achieve the revenue growth targets you've given of at least 6% over the next several years. And that question ties into another question on M&A. What's the upper limit on the size of the deals you might be considering? Should we assume these will likely be sub-$10 billion transactions? Or are larger deals also potentially on the table?
Albert Bourla, CEO
Thank you, Tim for asking a non-COVID question. Appreciate it really. And also it came at the time that I thought Frank will not have a chance to speak, but now we are giving him the exact right forum. So Frank, take it from here.
Frank D'Amelio, CFO
Thank you, Albert. And Tim thanks for the question. So on M&A, we always say we never say never because one of the nice things about being part of Pfizer is we have the firepower to pretty much do any kind of a deal we want and I think we've been able to demonstrate that in the past. So I wouldn't limit us or cap us on some specific dollar amount given the firepower that we have. Albert mentioned earlier, our focus has been mid-phase, Phase II, Phase III kind of things that would impact our revenue base 2024, 2025, 2026. But in terms of capacity quite frankly, we're very much unlimited, strong balance street, strong capital structure, strong investment grade. We generate lots of operating cash flow. So we're in a very good position quite frankly to be very proactive as we need to be on M&A. And then in terms of your Upjohn question. From my perspective, we get the Upjohn deal done. We form Viatris. We're going to get $12 billion in cash. Our intent with that $12 billion in cash is to pay down debt given we're transferring give or take about $4 billion of EBITDA to Upjohn. But our capital deployment priorities don't change as a result of that transaction. We'll still return capital to our shareholders as we have been doing. We'll continue to invest in the business and our pipeline obviously and capital and then we'll continue to invest in M&A. So from my perspective capital priorities don't change. And in terms of M&A capacity, we're fortunate enough where we really have lots of capacity and lots of firepower.
Albert Bourla, CEO
Thank you, Frank. Thanks, Tim. And we move to our next question, please.
Operator, Operator
Your next question comes from Randall Stanicky from RBC Capital Markets.
Randall Stanicky, Analyst
Great. Thanks. Albert, can you discuss the plan for sharing safety data with the public after receiving EUA or approval for your vaccine? We want to ensure people feel more comfortable, especially since there may be concerns about the willingness of individuals to take the vaccine, which could be lower than in previous months. It's important that these numbers increase for achieving herd immunity. Also, for Frank, regarding the enabling-function costs mentioned in January at $4.5 billion, could you provide some perspective on that? How much of those savings have you already achieved, and how quickly can you realize additional savings in 2021? I'm looking to understand the margin opportunity better. Thanks.
Albert Bourla, CEO
Yes, let me address the first part before passing it to Frank. I will also ask Angela to assist in answering this question. I have noticed some skepticism regarding the vaccine, primarily due to its politicization. This is a genuine concern that we need to tackle, and we have been working on it for some time. We are implementing unprecedented measures for this vaccine, particularly in terms of transparency. We have made our protocol public and are sharing our Phase I data in real-time with both the community and other scientists and companies developing COVID vaccines, allowing them to learn from our findings. We have released initial results from our pivotal study with unblinded safety data. Additionally, we have made a pledge to adhere to high ethical and quality standards to ensure transparency and a science-driven approach, which I believe is crucial to improve public perception. Importantly, we have declined government funding to keep Pfizer out of politics; this vaccine will not be labeled as a Republican or Democratic vaccine, but rather a vaccine for the world. Moving forward, we will continue our efforts. The FDA will review our safety data publicly through an advisory committee, which is another positive step. Angela, would you like to add anything about our future plans?
Angela Hwang, Group President Pfizer Biopharmaceuticals Group
Sure. Well, over and above what Albert said, obviously, having clear public education and a well-supported public education effort is going to be critical, right? We need to educate the public on the importance of actually getting the vaccine and then of course, around the safety processes and creating confidence around the development process that has gone into developing these vaccines. And so this happens sort of at two levels: first is about how Pfizer is working through intermediaries and opinion leaders to provide this education; and then secondly what we can do ourselves. So on the first front, we have already been and are continuing our efforts to work with industry partners, patient organizations, government and other public health institutions to share with them our expertise, so that they can create and build content and also deliver education as they need. So just as I said, this is well underway. There's a multichannel approach. That includes ETC and these experts are already deploying a wide range of channels and forms of communication to educate and to educate specific communities. On the other hand for us, once we have authorization and once we have a label, we'll be able to do additional communication and more education around our vaccine specifically. We also recognize that of course, there are certain communities that have been minority communities specifically that have been more affected by this disease than others, so we're also supporting the development of specific content and education that can more effectively reach these communities and be more customized with sort of the approach and the content that we are sharing. So this is a very big effort that is already underway and I think you're going to see more and more of this build-up towards the end of the year.
Albert Bourla, CEO
Thank you, Angela. And before I ask Frank to take the question about cost of enabling functions, I would like also Mikael to comment about our pharmacovigilance program that we have put in place and how that also could play a significant role in ensuring about the vaccine's safety. Mikael?
Mikael Dolsten, Chief Scientific Officer
Thank you, Albert. So we have the pharmacovigilance platform in the industry that has experience to handle the largest number of the adverse event reporting by far. And we have started very proactively and been in open dialogue with the operation with speed and FDA about putting this pharmacovigilance platform to play, to monitor sophisticated participant whether viewing a potential EUA and later approval. And that includes building control cohorts already now for understanding continuous disease reporting of what we expect to be the first group of responders such as health care workers and first-line responders. We also recognize the big need for many stakeholders from pharmacists, nurses, patients, physicians to have access to rapid information. We have a very strong medical information platform across the globe and we have now augmented it both with staff and with self-serving Webex platform to be able to respond to many aspects of how we store, distribute the vaccine and expected so far mild to moderate tolerability et cetera seen with this vaccine and similar vaccines. So I think we feel we are very well prepared for that. Thank you.
Albert Bourla, CEO
Thank you, Mikael. Now Frank, back to you.
Frank D'Amelio, CFO
Yes. And Randall the way I'll do this let me run some numbers and provide some I'll call it financial context. And then I'll drill down and I'll answer the question. So just first on SI&A because you're talking about the enabling function so on SI&A for the quarter we were $2.87 billion. We were down 10% year-over-year. It was really driven by three things: on the consumer separations, which was give or take about half the reduction; reduced spending in enabling functions; and some of it was COVID-driven. I called that out because a piece of that is enabling functions, which was probably what triggered the question. Now let me run the overall numbers and then I'll drill down and answer the question. So our previous guidance on SI&A for the year was $11.5 billion to $12.5 billion. We tightened the range to $11.5 billion to $12 billion and that was really driven by COVID savings because obviously we knew about consumer, we had enabling function spending already in our plan. So it was really driven primarily by COVID spending. Then of that $11.5 billion to $12 billion, I think $4 billion to $4.5 billion is the enabling functions, which is now getting to your question. The way I think about this is you look at that $4 billion to $4.5 billion as an either/or an expense-to-revenue ratio of the total company as it exists today and the new company when we're a smaller company because of the revenues that move to Viatris. We want that expense-to-revenue ratio to be the same or less than what it currently is today. So that's kind of a simple way to think about how we're thinking about this and how we are planning in terms of what to do with our enabling functions. Then the question you asked was Frank, you asked me a pacing question. In terms of 2021, '22, we'll obviously go as fast as we can and get as much of it as we can into 2021. Obviously, some of it will fall into 2022 just because of the nature of some of the places where we do business and certain things taking more time than others. And I'll provide more clarity on this when we provide our 2021 guidance including the SI&A guidance on our next earnings call.
Randall Stanicky, Analyst
Thank you, Frank.
Chuck Triano, Senior Vice President of Investor Relations
Sure. Get another question here please, operator.
Operator, Operator
Your next question comes from Geoff Meacham from Bank of America.
Unidentified Analyst, Analyst
Hey, guys. This is Scott on for Geoff. Thanks for taking my question. You disclosed last quarter that the FDA indicated an AdCom meeting was not anticipated for tanezumab. But it seems like they want one now in March 2021, so that will push out the December PDUFA. So what changed? And maybe you can give us some more insight into your discussions with the FDA. And then, maybe as a follow-up, the assay itself wasn't highlighted as an assay with peak sales was from Investor Day. So what do you expect kind of internally peak sales upside to be here if you receive approval? Thanks.
Albert Bourla, CEO
Angela, why don't you take those two? And then also, maybe Mikael can comment later on the discussion with FDA, but you first Angela.
Angela Hwang, Group President Pfizer Biopharmaceuticals Group
Sure. The tanezumab trial is one of the largest submissions Pfizer has made to the FDA. Our data is comprehensive, and there's a lot to consider. Therefore, we're not surprised by the request for an advisory committee meeting. We anticipate this as a valuable chance to review and discuss our findings from the data and clinical trials with the committee. We believe it will foster a productive conversation. Regarding the opportunity, we see it similar to many conditions, but particularly significant regarding osteoarthritis, which has a substantial unmet need in treatment. Approximately 27 million Americans suffer from this, and 11 million have moderate to severe osteoarthritis. In the U.S., 80% of those moderate to severe patients have tried and failed three or more analgesics. This indicates that these patients currently cannot achieve sufficient pain relief. Given the patient population we are addressing, the chance to provide a novel and non-opioid method of pain relief is something we believe will highly interest patients.
Albert Bourla, CEO
Thank you, Angela. Mikael, anything to add about tanezumab filing, and FDA's request for advisory committee?
Mikael Dolsten, Chief Scientific Officer
I thought Angela answered great. Maybe I can add two things. As a potential first-in-class treatment, it's not uncommon for the FDA to hold an AdCom to discuss the submission. So in a way, it was expected. And of course, the discussion will be focused on those many patients that are not well controlled or unresponsive, not eligible who do not want to take any of the existing pain medication, and as an alternative to longer use of opioids, that's where the discussion will be. And as Angela said, we always welcome AdComs in order to share our experience and get external perspective.
Albert Bourla, CEO
Thank you, Mikael. Chuck, back to you.
Chuck Triano, Senior Vice President of Investor Relations
Thanks for the insight folks. Next question please.
Operator, Operator
Your next question comes from David Risinger from Morgan Stanley.
David Risinger, Analyst
Yes, thanks very much. So, I have one question for Albert and one for Frank. Albert thanks for the update today. Could you please define what you mean when you say you will disclose results when there is a conclusive readout? Does that mean interim efficacy success on the primary endpoint? Or does your definition of a conclusive readout include more than just the primary endpoint? And for Frank, regarding enabling functions, you've been talking about that for a couple of years, and my understanding is that, you've already been driving efficiencies in the corporate cost structure of Pfizer. So, could you just update us on where the run rate stands today versus the $4 billion to $4.5 billion you were discussing a couple of years ago? Thank you.
Albert Bourla, CEO
Thank you, David. My definition of conclusive result positive or negative, it is a futility or a demonstrated efficacy, readout in the primary endpoint. That's how things work. So, Frank?
Frank D'Amelio, CFO
Thank you, Albert. So, Dave, we have been continuously reducing our enabling functions over the years, which has been reflected in the guidance we've provided over the past one to two years. The estimate of $4 billion to $4.5 billion should be seen as a baseline for 2025. We will focus on building that baseline as we progress into 2021 and 2022. Our aim is to achieve and capitalize on as many of those savings as possible and as swiftly as we can. Keep in mind that $4 billion to $4.5 billion will serve as the starting point for our projections.
Albert Bourla, CEO
All right. Thanks, Frank. And operator, can we take our last question for the call please. Thank you.
Operator, Operator
Your final question comes from Andrew Baum from Citi.
Andrew Baum, Analyst
Thank you. A couple of questions. Firstly, out-of-pocket caps seem to have been proposed twice once by the Senate and then more recently by the President prior to the most favored nation executive Order. Thinking about VYNDAQEL and other high-priced small molecules obviously this could be very helpful to your business, if this comes to pass. Do you think there's a high probability that regardless of which administration out-of-pocket caps for Medicare patients is likely to feature as a central part of health care reform? And then second, just to clarify on COVID, the interim analysis. We're receiving questions from our clients repeatedly about the level of disclosure. Will it be a simple we met we look forward to sharing the data? Or do you actually disclose the data at the time the efficacy readout is given?
Albert Bourla, CEO
Thank you, Andrew. Regarding out-of-pocket costs, Pfizer and the industry have indicated that the current insurance benefit structure is no longer sustainable. Many Americans are paying out-of-pocket for their medications, often when they have insurance, leading to high costs for essential medicines. This situation needs to change, and there seems to be a shared understanding across the political spectrum. We will continue to collaborate with all stakeholders in hopes of reforming benefit designs to lessen the out-of-pocket expenses for Americans when accessing their medications. This change is necessary not only to improve the financial stability of the industry but primarily to benefit patients and the healthcare system at large. Currently, some patients struggle to afford their medications, resulting in many not taking prescribed medicines. This ultimately leads to increased healthcare costs as patients end up in hospitals. Thus, reform is essential from both a financial and humanitarian perspective. As for COVID-19, we plan to release information about the trial outcomes and will later publish data in a peer-reviewed journal. If all goes well, we expect to submit the data by the third or fourth week of November, and there will also be an opportunity to share findings during the advisory committee meeting. That wraps up our call, Chuck, doesn't it?
Chuck Triano, Senior Vice President of Investor Relations
That's correct. Albert back to you for closing remarks.
Albert Bourla, CEO
Thank you all for joining us today and for your continued support of Pfizer. As mentioned, our strong performance demonstrates the resilience of our business and the strength of our portfolio, as well as the dedication of our team and the effectiveness of our products. We have great confidence in our pipeline, appreciating both its breadth and depth, and we will continue to seek out additional promising assets as needed. It's important that we execute effectively and deliver for patients. We are also closely monitoring the impact of COVID on the global economy, which is a significant factor for us to consider. The pandemic’s effects are substantial, and it is clear that many actions are necessary to manage this situation. Vaccines are expected to be a crucial tool in this fight, and we are working hard on this front. I appreciate your interest and ask for your patience as we navigate these challenges. Let’s hope that science prevails. Thank you very much, everyone.
Operator, Operator
Ladies and gentlemen, this concludes Pfizer's third quarter 2020 earnings conference call. Thank you for your participation. You may now disconnect.