Pfizer's CEO Discusses Q3 2013 Results - Earnings Call Transcript

Oct.29.13 | About: Pfizer Inc. (PFE)

Pfizer Inc. (NYSE:PFE)

Q3 2013 Earnings Conference Call

October 29, 2013 10:00 AM ET

Executives

Charles E. Triano – Senior Vice President of Investor Relations

Ian C. Read – Chairman and Chief Executive Officer

Frank A. D'Amelio – Executive Vice President of Business Operations and Chief Financial Officer

Geno Germano – President and General Manager of Specialty Care and Oncology

John Young – President and General Manager of Primary Care

Mikael Dolsten – President of Worldwide Research and Development

Amy W. Schulman – Executive Vice President and General Counsel; Business Unit Lead, Consumer Healthcare

Analysts

Gregg Gilbert – Bank of America/Merrill Lynch

Jami Rubin – Goldman Sachs & Co.

Chris T. Schott – JPMorgan Securities LLC

Tim Anderson – Sanford C. Bernstein & Co. LLC

Mark Schoenebaum – ISI Group

Marc Goodman – UBS Securities

Seamus Fernandez – Leerink Swann LLC

John T. Boris – SunTrust Robinson Humphrey

Alex Arfaei – BMO Capital Markets

Tony Butler – Barclays Capital, Inc.

Andrew S. Baum – Citigroup Global Markets Ltd.

Steve M. Scala – Cowen & Co. LLC

David R. Risinger – Morgan Stanley & Co. LLC

Operator

Good day, everyone, and welcome to Pfizer’s Third Quarter 2013 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.

Charles E. Triano

Thank you, operator. Good morning and thank you for joining us today to review Pfizer’s third quarter 2013 performance. I’m joined today by our Chairman and CEO, Ian Read; Frank D’Amelio, our CFO; Mikael Dolsten, President of Worldwide Research and Development; Geno Germano, President and General Manager of Specialty Care and Oncology; Amy Schulman, General Counsel and Business Unit Lead for our Consumer Business; and John Young, President and General Manager of Primary Care.

The slide that will be presented on this call can be viewed on our homepage, pfizer.com, by clicking on the link for Pfizer Quarterly Corporate Performance Third Quarter 2013 located in the Investor Presentations section at the lower right hand corner of this page.

Before we start, I would like to remind you that our discussions during this conference call will include forward-looking statements and that actual results could differ materially from those projected in the forward-looking statements. The factors that could cause actual results to differ are discussed in Pfizer’s 2012 Annual Report on Form 10-K and in our reports on Forms 10-Q and 8-K. The discussions during this call will also include certain financial measures that were not prepared in accordance with Generally Accepted Accounting Principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in Pfizer’s current report on Form 8-K dated today, October 29, 2013.

With that, I’ll now turn call over to Ian Read. Ian?

Ian C. Read

Thank you, Chuck. I’ll begin with some comments on the quarter. Overall, we delivered good operational performance, generated solid financial results and continued to see steady progress with many of our in-line products and pipeline assets. Operationally, revenues for the Oncology business grew 26% due to the continued strong performance of new products, primarily Inlyta and Xalkori. We also had another strong quarter operationally from Lyrica, which grew 11%; and from Celebrex, which grew 13%. Despite macroeconomic and other factors, the emerging markets business grew 5% operationally, primarily due to volume growth for key products in the Primary Care area such as Lipitor, Norvasc, Lyrica and Celebrex, especially in China. We still anticipate achieving mid single-digit growth in emerging markets for the year.

Turning to an update on our recently launched and approved products and pipeline assets. Earlier this month, we received FDA approval of Duavee, our novel combination therapy for the treatment of moderate-to-severe vasomotor symptoms associated with menopause and the prevention of postmenopausal osteoporosis, and we anticipate launching this product in the U.S. during the first quarter of next year. We and our partner, Bristol-Myers Squibb continue to focus on improving the performance and physician uptake for Eliquis.

In the U.S., we have seen positive momentum in the week-over-week growth in total prescriptions, and in late September, we launched our direct-to-consumer television advertising campaign. Eliquis also has been launched for stroke prevention in atrial fibrillation and several additional markets including Australia, Spain, and Canada where reimbursement has been established. We also see potential expansion opportunities for Eliquis with additional indications. With Bristol-Myers, we’ve submitted an sNDA in the U.S. for VTE prevention in patients undergoing orthopedic surgery.

Turning to Xeljanz. We are pleased with the progress of the launch in the U.S. and various other markets, which continues to be in line with our expectations, particularly in the context of being part of a large, but slow growth segment within the anti-TNF market. We are seeing a steady increase in prescriptions. Comparing the third quarter with the second quarter this year, we saw a 53% sequential growth in total prescription volume in the U.S.

Overall, the physician’s feedback on Xeljanz has been very positive. Satisfaction amongst users is high. In fact, nearly 3,000 healthcare providers have prescribed Xeljanz and over 75% have been repeat prescribers. We know that before prescribing, rheumatologists want to have a deep knowledge and confidence in Xeljanz’s safety profile and clinical experience, particularly given it is a first-in-class product. To-date, the vast majority of physicians have reacted favorably to Xeljanz’s clinical profile and we are focusing our efforts on continuing to educate physicians on Xeljanz’s clinical data.

We also have several Phase 3 programs underway for Xeljanz. The Phase 3 program in psoriasis is progressing and is one of the largest global clinical trial programs in moderate-to-severe chronic plaque psoriasis to-date. There are five studies in the program. Earlier this month, we announced the top line results from the first two studies, which provided information consistent with our expectations based on the Phase 2 data for psoriasis. The other three studies in the Phase 3 psoriasis program include two pivotal studies and a long-term extension study.

We anticipate top line results for the pivotal trials in the second quarter of 2014 and will issue a top line data release after we’ve received and reviewed the results. We have initiated a Phase 3 program to evaluate Xeljanz for the treatment of patients with active psoriatic arthritis, which includes two pivotal trials that evaluate the safety and efficacy of Xeljanz and one long-term extension study. The first data from these trials is anticipated in 2015, and we continue to study Xeljanz for other important inflammatory diseases with several Phase 2 and Phase 3 programs ongoing.

This includes a Phase 3 program in ulcerative colitis and a Phase 2 program in Crohn's disease, ankylosing spondylitis, and a topical formulation for psoriasis. We are also moving forward with once-a-day modified release program for Xeljanz in RA. The FDA recently agreed that a Phase 3 study is not necessary for the once-a-day dose and we plan to file a new drug application with the FDA in 2015.

Beyond the Xeljanz and Eliquis Phase 3 programs, we have or will be initiating several Phase 3 studies and will be reporting on clinical trial data results from our primary care, vaccines, and oncology portfolios. I continue to be pleased with the steps we have taken and the progress we are making towards improving our R&D performance.

Looking at the primary care pipeline, there are several promising candidates. This month, we’re initiating a Phase 3 program for bococizumab, the proposed generic name for RN316, our PCSK9 monoclonal antibody to lower LDL cholesterol. This is a global program that includes multiple lipid-lowering studies as well as two cardiovascular outcome studies in more than 22,000 patients.

Compared to the PCSK9 inhibitor Phase 3 cardiovascular outcome trials being conducted by our competitors, only our bococizumab Phase 3 program includes a dedicated cardiovascular outcome study in patients who cannot achieve LDL levels lower than 100 mg per dL despite the use of statins. This is a very high risk patient population with significant unmet need who represents a tremendous cost to our healthcare system.

Our second Phase 3 outcomes trial will address whether driving LDL cholesterols to levels well below current guideline recommended targets will lead to a further reduction in cardiovascular events. Importantly, compared to other programs, our Phase 3 program includes the broadest range of risk – of high-risk patients and need of improved cholesterol management. We are currently completing the final analysis of the datasets of our completed Phase 2b study and plan to submit the results of presentation at the American College of Cardiology Meeting in March 2014.

We are planning to continue development of tanezumab for the treatment of osteoarthritis, chronic low back pain, and cancer pain. We have just entered into a collaboration agreement with Eli Lilly & Company to jointly develop and globally commercialize tanezumab, which provides that in addition to certain potential milestone payments to Pfizer. Pfizer and Lilly will equally share product development expenses and potential revenues and certain product-related costs. The tanezumab program is currently subject to a partial clinical hold by the FDA pending submission of non-clinical data to the FDA, which we anticipate submitting in the first half of 2014. In addition, we are initiating a Phase 3 program with our partner Merck for ertugliflozin, our SGL2 inhibitor for the treatment of type 2 diabetes.

Turning to vaccines, we expect to have data read-outs in three disease areas; pneumococcal pneumonia in adults, meningitis B, and Staph aureus. For pneumococcal pneumonia, the case accrual in the CAPiTA trial involving Prevenar 13 adult has been completed. The processing of the cases will take several months to complete and we have not yet seen the data. We expect the read-out of the top line results early in 2014.

For meningitis B, we anticipate sharing results of the Phase 2 study data in adolescents and young adults who are the major carriers of this disease at a key Medical Congress in the first half of 2014. Of note, our vaccine contains two protein components, which elicit a broad immune response against the majority of meningitis B vaccine strains in these immunized individuals.

We are encouraged by the efficacy and tolerability data we have seen to-date and have already initiated a pivotal Phase 3 clinical development program that includes Phase 2 and Phase 3 trials that will include more than 20,000 participants. If trial, enrollment, and recruiting goes as planned, data from this program are expected in the next several years. For Staph aureus, we recently concluded a Phase 2a study, which showed encouraging signals that our vaccine elicits positive immune response. The next step is to move into a Phase 2b study in surgical patients. We anticipate sharing results from the Phase 2a study in the first half of 2014 at a key medical congress.

In oncology, we also anticipate several readouts in 2014. In breast cancer, we expect the final efficacy and safety data from the Phase 2 palbociclib study to readout in early 2014 to be presented at ASCO in June 2014 or at another congress next year. We have initiated two Phase 3 studies of palbociclib. One study mimics the trial design of the Phase 2 study in patients with postmenopausal ER-positive, HER2 negative advanced breast cancer, which has a planned enrollment of 450 patients. The other study is in patients with hormone receptor positives, HR-positive and HER2 negative advanced recurrent breast cancer. It compares fulvestrant plus palbociclib to fulvestrant plus placebo. In addition, we expect to start a Phase 3 study for palbociclib in the next few months in early breast cancer for high risk patients with neo-adjuvant treatment.

For non-small cell lung cancer, we are expecting top line results from two Phase 3 studies of dacomitinib in the early part of next year. We have five programs in various stages to develop biosimilars to innovate – of innovative products. Our development program includes biosimilars for Herceptin, which is scheduled to start Phase 3 within the next few months. In addition, we have a biosimilar development program for Rituxan and Remicade and Humira that are scheduled for Phase 3 to start next year, and our biosimilar for Avastin will begin Phase 1 next year.

The ongoing R&D investment level to support our late stage pipeline opportunities is warranted by the significant revenue potential associated with these programs and we expect that as these programs further progress, some incremental R&D investment will be necessary. That said, we will balance this need with overall shareholder return and we will continue to be opportunistic regarding additional internal and externally sourced compounds that can further enhance our research pipeline.

I will close with a few words about new commercial structure we’ve announced last quarter. We have been aligning talent, asset and individual reporting system to support our new operating structure. We remain on track for commencing operations in the new structure at the start of 2014 and for providing a 2014 baseline management view of profit and loss for each business starting with our financial results for the first quarter of 2014.

In summary, I believe we are making steady progress across the business by enhancing the quality of the pipeline, demonstrating fiscal discipline on how we deploy our capital and executing on our business plans in order to drive greater value for our shareholders.

Now, I’ll turn it over to Frank to take you through the details of the quarter.

Frank A. D'Amelio

Thanks, Ian. Good day, everyone. I want to remind everybody that as a result of the full disposition of Zoetis on June 24 of this year, the financial results of the Animal Health business are reported as a discontinued operation in condensed consolidated statements of income for year-to-date 2013 and third quarter and year-to-date 2012. As always, the charts I’m reviewing today are included in our webcast.

Now let’s move on to the financials. Third quarter 2013 reported revenues of approximately $12.6 billion decreased 2% year-over-year, reflecting a 2% negative impact from foreign exchange. Excluding the impact of foreign exchange, revenues decreased operationally by $38 million or less than 1% primarily due to the negative impact of the continued erosion of branded Lipitor in the U.S., developed Europe and certain other markets. the ongoing expiration of the Spiriva collaboration in certain countries, a decrease in government purchases of Prevnar and Enbrel in certain emerging markets and the loss of exclusivity of certain other products, including Lyrica in Canada, February, 2013, and Viagra in most major markets in Europe in June of 2013. These were partially offset by the growth of certain in-line products, including Lyrica, Enbrel, Inlyta and Xalkori globally and Celebrex and Xeljanz in the U.S.

I want to point out that reported revenues also included $67 million from transitional manufacturing and supply agreements with Zoetis, which are expected to continue for approximately two years. Adjusted diluted EPS of $0.58 increased 16%, primarily due to the aggregate decrease and adjusted cost of sales, adjusted SI&A expenses and adjusted R&D expenses of $341 million or 5%, due to the benefit of our ongoing cost reduction and productivity initiatives, the non-recurrence of the $250 million payment in the year-ago quarter for the acquisition of the exclusive over-the-counter rights to Nexium, which was included in R&D expenses, as well as the favorable impact of foreign exchange on these items of $166 million or 2%.

These were partially offset by higher SI&A spending to support new product launches. In addition, there were fewer diluted weighted average shares outstanding due to our ongoing share repurchase program and the first full quarter impact of the Zoetis exchange offer, which also favorably impacted adjusted diluted EPS.

Reported diluted EPS was $0.39 versus $0.43 in the year-ago quarter and favorably impacted primarily by lower legal charges, lower acquisition related and other cost and fewer shares outstanding, which were more than offset by the loss of exclusivity of certain products, lower income from discontinued operations and the higher effective tax rate.

During the third quarter, biopharmaceutical revenues in the BRIC-MT markets increased 2% operationally, driven primarily by strong volume growth in China, especially for Lipitor. In these BRIC-MT markets, volume growth of 3% was partially offset by price reductions of 1%.

Revenue from all emerging markets increased 5% operationally in the third quarter. If you exclude the portfolio of products whose rights were transferred to our joint venture in China with Hisun in the third quarter, we would have had operational revenue growth compared to the third quarter of 2012 of 6% in our emerging markets business, 4% in the BRIC-MT markets and 16% in China.

Foreign exchange negatively impacted third quarter adjusted revenues by 2% or $271 million, and had a positive impact of 2% or $166 million on the aggregate of adjusted cost of sales, adjusted SI&A expenses and adjusted R&D expenses. As a result, foreign exchange negatively impacted third quarter adjusted diluted EPS by approximately $0.01 compared to year-ago quarter.

Now moving onto our 2013 financial guidance, based on our year-to-date performance and outlook for the remainder of the year, we are narrowing the ranges for certain components of our full-year 2013 financial guidance. We are narrowing the reported revenue range to $50.8 billion to $51.8 billion from $50.8 billion to $52.8 billion.

I want to remind everyone that beginning on November 1, 2013, we enter into the 36-month sunset period and the collaboration agreement with Amgen for Enbrel in the U.S. and Canada. During this period, we expected our share of the Enbrel collaboration, which is high margin, because there is no associated cost of good sold will decline significantly. In addition, going forward, the recognition of profits from the Enbrel collaboration will shift from alliance revenue to other income as we move to a royalty structure. Furthermore, these royalty payments will be much less than our current level of Enbrel profits. Outside of the U.S. and Canada, however, our exclusive rights of Enbrel will continue in perpetuity.

I also want to point out that our Spiriva collaboration, which is also recorded in Alliance revenue will continue to wind down during the fourth quarter 2013 and 2014, most notably to the U.S. and Canada. Currently, the majority of Alliance revenue is composed of Enbrel in the U.S and Canada, as well as Spiriva.

Moving onto adjusted cost of goods sold as a percentage of revenues, we are narrowing this range to 18% to 18.5%. We are narrowing our adjusted SI&A expense range to $14.2 billion to $14.7 billion while continuing to absorb launch cost and support of new products. We are narrowing our R&D guidance range from $6.3 billion to $6.6 billion, which will support our high potential late-stage pipeline opportunities. We now expect other deductions to be approximately $400 million and continue to expect the effective tax rate on adjusted income to be approximately 28%. We are narrowing and lowering the reported diluted EPS range to $3.05 to $3.15 and we are narrowing our adjusted diluted EPS range to $2.15 to $2.20 from $2.10 to $2.20.

Now moving onto key takeaways, third quarter results continue to reflect the loss of exclusivity of certain products in various geographies as well as the ongoing volatility in emerging markets. We continue to expect full-year operational revenue growth in our emerging markets business to be in the mid single-digit percentage range.

In addition we continue to mitigate the earnings impact of product LOEs with both expense discipline and share repurchases. We narrowed the ranges for certain components of our adjusted financial guidance. Our recently launched products are progressing at a measured and steady pace. We are advancing initiatives internally so that we will implement our new commercial structure at the start of 2014. We remain excited about our high potential late-stage pipeline assets and expect to allocate R&D investments to support their advancement beginning in the fourth quarter of 2013 or early 2014.

Finally, we continue to create shareholder value through the prudent allocation of our capital. To-date in 2013, we have repurchased approximately $13.1 billion or approximately 462.1 million shares. We continue to expect to repurchase in the mid-teens of billions of dollars of our common stock this year. As a result, we expect to return more than $20 billion to our shareholders this year between buybacks and dividends. In addition, we expect the first quarter 2014 dividend level to be set by our Board of Directors during our December Board Meeting, and finally, we remain committed to delivering attractive shareholder returns in 2013 and beyond.

Now, I’ll turn it back to Chuck.

Charles E. Triano

Thank you, Frank. And operator, please if we could now poll for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question comes from Gregg Gilbert from Bank of America.

Gregg Gilbert – Bank of America-Merrill Lynch

Thanks a lot. To the extent that there are a couple of other PCSK9s out there, can you talk about what you needed to see in Phase 2 to make this large investment and potentially how your product is differentiated beyond the clinical trial differences you highlighted? And secondly, Ian, curious how you think the collaboration in Japan is going with Mylan and whether you think that could be a good model in other places or more broadly? Thanks.

Ian C. Read

Thank you, Gregg. Well, clearly, we’ve seen in the Phase 2 data, sufficient quality of data to encourage us to enter into Phase 3 and believe we have a highly competitive product. So I’d ask John Young to give more details on that and also discuss the Mylan collaboration.

John Young

Okay. Thanks, Gregg. So let me take PCSK9 or bococizumab. First of all, we think we actually have a great antibody, which came out of our Rinat Labs in San Francisco. And I think in addition to having excellent substrate to take into clinical development, we also believe that we’ve been able to put together a differentiator or potentially differentiated clinical program. So our program will be the only program investigating both high-risk primary and secondary prevention populations. And when we begin to look at the program in more detail, it includes a dedicated CV outcome study in patients who can’t achieve LDL levels lower than 100 milligrams per deciliter despite the use of statins. It’s a very high-risk patient population with a lot of unmet clinical need. And those patients, as you heard from Ian, really do represent tremendous cost to the healthcare system, so a positive outcome in that population we believe will be very significant, and we also combined in our program a second Phase 3 outcomes trial that will address whether driving LDL levels to well below current guideline recommended targets will lead to further reduction in cardiovascular events.

And I think lastly, the point to make is that importantly compared to other programs, our Phase 3 program includes the broadest range of high-risk patients in need of improved cholesterol management. And as I said, uniquely it includes both high-risk primary and secondary prevention patients.

So overall, we believe that the combination of good basic substrate and the antibody combined with a clinical program that we believe has the potential to demonstrate real differentiation across patient populations with significant unmet need that will enable us to bring a very competitive profile into what is clearly potentially a very attractive and promising marketplace.

In terms of Mylan, we continue to make positive progress with Mylan in Japan. the collaboration is on track. currently, we are selling around about 250 products from the combined company’s generic portfolios. The transition integration of all 200 Mylan succondees to the Pfizer organization has been completed, and we’ve completed the launch of the collaboration’s first generic pipeline products in June based on initial performance, all nine products are forecasted to meet or exceed our full-year plans. So I think let me just finish on Mylan and say that we’re extremely pleased with the progress that we’ve made and we’re going to look to maintain that momentum into 2014.

Ian C. Read

Thank you, John. I’d add that we’re also very comfortable and pleased with the quality of partnership with Mylan, so…

Charles E. Triano

Okay, thank you. next question, please, operator.

Operator

Your next question comes from Jami Rubin from Goldman Sachs.

Jami Rubin – Goldman Sachs & Co.

Thank you. This is either for Ian or John. I’m just wondering if you could talk about how you plan to monetize the value business, just how do you see this business growing, what are the opportunities on the table that will help to unlock value? And are one of those opportunities to sell the business, and if so, is there a time limit? Do you have to wait a certain amount of time, I know that you’ve talked about the other businesses if you were to spin them out, you have to wait three years, but is there is a similar limit if you were going to sell this business, would you sell part of it? And also, if you were to sell it, would you be willing to accept someone else’s stock in exchange for it? And then just a follow-up question on PCSK9, your competitors are not planning on getting – I don’t believe they need outcomes trials to gain FDA approval, do you feel that you need these outcomes trials for approval or is this just to broaden your label and for further differentiation? Thanks.

Ian C. Read

Well, Jami. Thank you for those questions. On PCSK9, I’ll ask John to comment on that first, but I think the issue is in this marketplace, we – our trials are constructed so as to be able to demonstrate value to society and payors. John, do you want to add anything more to that?

John Young

Yes. I think in terms of the program, as I’ve already said, we believe we’ve put together a really robust and potentially differentiated program. Clearly, we know that LDL-C is a very well established surrogate for cardiovascular risk, but certainly, we knew from dialogue and discussion we’ve had with the FDA that it’s conceivable that regulators may require demonstration of a beneficial effect on CV events before approving a new class of agents such as PCSK9 inhibitors.

At a minimum robust LDL-C lowering along with a comprehensive long-term safety database will likely be required for initial approval of bococizumab and potentially with our medicines in the class as well. And the bococizumab Phase 3 program is designed to address the potential for regulatory authorities to require in addition to LDL-C lowering, a robust long-term clinical safety database and cardiovascular outcomes data for approval.

Ian C. Read

Mikael, if you want to add anything, vis-à-vis the development of PCSK9 from the technical point of view?

Mikael Dolsten

Yes. we have put in a lot of technical capabilities how to develop antibodies with the most potent and biopharmaceutically appropriate characteristics, and when you look at the class, I think you can see emerging data suggesting some of the antibodies being very potent and some being intermediate. And as Ian alluded to, we were very encouraged by the potent effect of our antibody in Phase 2 and its really robust LDL lowering tolerability and low frequency of anti-drug antibody?

Ian C. Read

Thank you. And Jami, on your questions on the value where we call it established products business unit, right now, we are focused on setting up the new organization model where we have two innovative businesses and one established business. You know we’re doing that because we firmly believe those businesses have different characteristics and we want management uniquely focused on maximizing the growth opportunities of those businesses.

So, John, who is running that part of the business will clearly be looking at how to maximize the growth in the emerging markets, how to maximize our supply chain advantages in the developed markets, what growth opportunities there are in sterile injectables, either organically or inorganically, are there other BD activities that could be undertaken in that business such as 505(b) filings. And frankly it’s simply too early to speculate on the future developments of those business. Right now as an organization, we are focused on getting them up and running, the management up in running in place looking at all of the different growth opportunities I just discussed looking at supply chain there are, and once those businesses are up and running and once there is transparency, then we’ll see how the market evaluates some of the parts of those businesses.

Charles E. Triano

Great, thank you, Ian. Operator, please next question.

Operator

Your next question comes from Chris Schott from JPMorgan.

Chris T. Schott – JPMorgan Securities LLC

Great thanks very much, just following up on that, Ian how long do you think are you going to want to see these three business units running separately before you will be comfortable and in a position to evaluate and make that decision on the next steps for Pfizer with regards to the strategic alternatives for your portfolio of businesses? Is that something that’s going to take a year or is that something longer? I guess I am kind of thinking that as we -- next year is about setting them up. As you go out into 2015, is that a timeframe where it’s reasonable to think about decision on some of these? The second question I had, similarly a follow-up on Jami’s question, if you were to decide that the value core was something that made sense to separate from Pfizer, are there structures so it will allow you to do that prior to 2017 if that’s the right decision or is that something that’s unreasonable to think about from a timing perspective. Just trying to get some clarity on the timing if in fact you went that direction with the business? Thanks very much.

Ian C. Read

Thank you, Chris. I don’t have a fixed timeline in my mind. Right now, we are really focused on the operational aspect and let’s see the value these businesses will come from their exclusive execution and management making them valuable by focusing on growth. And as that occurs, we’ll evaluate our options in a timely manner. And I will ask Frank to comment on actual mechanics and -- of any type of transaction with…

Frank A. D’Amelio

Sure. So Chris, the way to think about this is I’ll call it public transactions versus private transactions. In a public transaction, three years of audited financials are required. So think about three years for perspective, we have audited financials. In a private transaction, sale of a partial business of an entire business or some sort of a joint venture and anything like that it depends on a significance test. And there is three elements to the significance test, there is an asset test, an income test, and an investment test. And what really drives the requirement there for audited financials is based on the size of the acquirer, and then the income, the assets and the investment of what’s being acquired compared to the acquirer’s income investments and assets. And that can range anywhere from zero in terms of audited financials up to three years. So that's really what will drive the audited financial requirements, but once again to punctuate what Ian said, what we are all about doing is getting these businesses to operationally hum and execute with excellence.

Chris Schott – JP Morgan

Alright. Thank you Frank.

Charles E. Triano

Thanks, Frank, our next question please.

Operator

Your next question comes from Tim Anderson from Sanford C. Bernstein.

Tim Anderson – Sanford C. Bernstein & Co. LLC

Thank you. Two questions please if I could just go back to the split up. Can you better characterize the possibility that Pfizer does not split itself up in the complete sense of a word you previously alluded to the idea that if a market appropriately revalues Pfizer once they better appreciate the financials for those different divisions that perhaps at full split up would not be necessary. So my question is, is it reasonably possible that you don’t fully split up. And then on palbociclib when might we start to see data in non-breast cancers, it seems like you should either have data in hand already or you should very closely have it in hand on tumor types in the blood cancer area, in colorectal and then lung. And can you say so far that you haven’t had any failures in any of these other tumor types.

Ian C. Read

Thank you, Tim. Well this issue of split is totally dictated by what our view will be on how to maximize shareholder value at the appropriate time. So when these businesses are operating, when there is transparency for analysts, when they have had time to establish track record then we will look at that and we will make decisions based on how best to maximize the value to shareholders irrespective of size or composition or structure of residual companies, because this management team is focused on producing shareholder value and that’s how we’ll take the decision and I don’t really think I can add anything more than that of than to say that our guiding star is how to create shareholder value. Geno, would you like to talk about palbo?

Geno Germano

Sure. So Tim let me just comment that our highest priority is to efficiently advance our breast cancer program right now at palbociclib as Ian mentioned we've initiated two of the Phase 3 trials, we’ll initiate another Phase 3 trial in breast cancer this year. And frankly we are looking at other breast cancer populations to explore further as well. We are firmly in the lead here and we really excited about the data and this is our highest priority and notwithstanding that statement we are exploring the use palbo and a number of other tumor types as said including melanoma and lung cancer, et cetera these are primarily Phase 1 level studies and we are not reporting any data at this point.

Tim Anderson – Sanford C. Bernstein & Co. LLC

Thank you, Geno.

Charles E. Triano

Thanks, Geno. Next question please.

Operator

Your next question comes from Mark Schoenebaum from ISI Group.

Mark Schoenebaum – ISI Group

Hey. Thank you very much for taking my question. If I could turn back to PCSK9, if I may, might you help us out with the timeline for the completion of the outcomes trials and let us know if there are opportunities in those trials for early stoppage based on interim results? And then, could you also tell us what the dosing is, that’s being used in the trial, is it once-a-month, twice-a-month, et cetera?

And then CAPiTA, if I might, could you just walk us through the steps that need to occur after you see the CAPiTA data to ensure that sales pick up? I know you have to wait for certain recommendations, certain buyers, I wondered if you could just walk us through that? And is there a scenario where that trial misses statistical significance on its primary endpoint, Mikael, but the trends are robust enough that you could still see a recommendation come out of the relevant bodies or do you really think you need to show statistical significance? Sorry for my long-winded question. Thank you.

Ian C. Read

So, John, if you can talk a little bit about PCSK9 again?

John Young

Okay.

Ian C. Read

And then we’ll hand it over to I think, Geno, for the commentary on the CAPiTA.

Geno Germano

Okay. Thanks Mark. So obviously, it’s fair to say that all of the PCSK9 programs are in relatively early stages of their clinical development. And as I mentioned and answered to an earlier question, one of the things that all of the programs, including ours will have to be determined as the data sets as they emerge and what will be required for approval, not something it will continue to have dialogue with the agency about it. So I think it’s really premature to determine if there is any interim read-out of data that would lead to an earlier approval either a lipid-lowering indication or of the outcome indication. Mark, can you remind me of the second part of your question?

Mark Schoenebaum – ISI Group

Dosing.

Geno Germano

In terms of dosing, okay, so the dosing schedule that we are taking into our clinical program is a twice a month dosing schedule. So I would say you heard already from Mikael, we will be presenting the results of our Phase 2b study early next year and from the analysis that we’ve done of that data so far – it’s incomplete at this point. But certainly we believe that that twice-a-month dosing schedule actually provides really the optimal consistent cholesterol lowering right across the dosage interval in order to maintain the optimal clinical effect and ideally the optimal clinical outcomes. So we feel really positive about the twice-a-month dosing schedule being the optimal dosing schedule for bococizumab.

Ian C. Read

That being said, Mikael do you want to add on something about – some technology that we are excited about that?

Mikael Dolsten

Yes, just based on excellent way in which John described our PCSK9 clinical strategy. It’s a really well-behaving antibody and just twice monthly administration schedule is the logical on next step as John described. However, we think that as part of a potential lifecycle management strategy, there are opportunities to also explore once monthly schedule, that may include the use of technology such as Halozyme technology for which we have a exclusive license within the PCSK9 class.

And we are now performing early test on the suitability of that technology to extend half-life and also lower the volume that you need to inject. The antibody itself at high dose has the potential for once a month, but we would rather see a technology like this to give a really convenient opportunity. So as you can see as we go forward with twice months we have a lifecycle management potential to offer additional regimens.

Mark Schoenebaum – ISI Group

Thank you Mikael and Geno, CAPiTA.

Geno Germano

Sure, so with regard to the steps for CAPiTA, as we’ve indicated we’ve completed accumulation of a required the number of events, we are in the process now of finalizing the analysis of those events in completing the data management associated with creating our top line results and we are at the same time in discussions with the CDC and now the ACIP and pneumococcal working group to ensure they are understanding of the protocol and the potential outcomes so that when we have the data they can move on the data rapidly.

So we are in ongoing discussions with them and this is obviously in the United States. So when the data is available the working group will be exposed to the data and we will come – will do their - the grading process and prepare for bringing those data and their assessment to the formal ACIP Committee. And the ACIP Committee meets three times a year in February and June and in October, its unlikely that will have data available for the February meeting, but we are targeting the June meeting it could occur in June or it could occur in October.

So that’s the U.S. situation, ex-U.S. in most cases we don’t have the pneumonia indication in most ex-U.S. markets therefore the CAPiTA trial results will from the basis for the pneumonia indication and we will file those applications and depending upon the review times, we would expect to see the pneumonia indication up here in the 12 month to 14 month timeframe beyond those filings.

So hopefully that gives you some sense of the steps and the timing associated with CAPiTA. With regard to the outcomes, there are multiple endpoints including vaccine type non-bacteremic pneumonia, and vaccine type all-cause pneumonia or vaccine type pneumonia and invasive pneumococcal disease. So there are a number of different scenarios you can play out depending upon the outcomes. Obviously we’re targeting the most favorable outcome which would be demonstration of effect, positive effect on prevention of vaccine type non-bacteremic pneumonia.

Charles E. Triano

Thanks Geno. Moving on to the next question please.

Operator

Your next question comes from Marc Goodman from UBS.

Marc Goodman – UBS Securities

Yes, couple of things. First, can you help us quantify the impact of these government purchases Prevnar and Enbrel and the lumpiness there and how that’s going to impact the next quarter? Second, in China, I mean, it looks like the growth continues very strongly there. I mean, why are you not having the problems that some of the other players are having there? Can you just talk about the dynamics, or may be it is impacting you and the growth would have been even better? And then Geno may be you can just talk about some of the dynamics of the new oncology drugs that have launched and what’s happening there and how those ramps are going? Thanks.

Ian C. Read

So, thank you Marc. If I understood the question you would like to understand some of the seasonality or lump seasonality, or lumpiness in government purchases of Enbrel and Prevnar. So perhaps if John can talk about that in the emerging markets and then deal with China. And then Geno if you will talk to Prevenar in the..

Marc Goodman – UBS Securities

The oncology and product.

Ian C. Read

in the oncology product.

Marc Goodman – UBS Securities

In light as are going forward.

Ian C. Read

Thank you. All right, thanks Marc. Clearly there is some volatility. I think, if you heard that, the emerging markets while they clearly represent overall significant continued opportunities for growth, but we do see quarter-on-quarter volatility as you know and particularly it is in the area of government tenders. So without going into all the details, but to give you sort of sense some of the moving pieces, with Prevnar our IP shipments in Turkey this year for example, we certainly have seen a fall in sales in Turkey this year, we had NIP sales last year, we haven’t seen those year-to-date.

In Brazil we’ve seen a decreased institutional purchases for Enbrel and also for Prevnar and the AFME or Africa Middle East region. Enbrel in Brazil shows about a 2% decline this quarter and a 12% decline year-to-date just to give you a sense of the rhythm of the business in Brazil.

And I think, overall obviously the emerging markets represent half history of markets running the world, but I think the sort of high level sort of message is as we have always seen and will see some quarter-on-quarter volatility particularly in the area of institutional purchases. But overall, the performance the underlying performance of the business in the emerging markets for both Enbrel and Prevnar in 2013 remains very positive, but we have seen in those markets and calling Brazil and Turkey particularly some volatility over the third quarter.

In China we continue to operate as we have always operated, we are globally we operate with a heightened sense, in the strict sense of our compliance obligations I don't believe our business in China is being particularly affected by anything other than just the macro economic situations that are occurring in emerging markets. The growth has slowed up somewhat in China compared to the previous year, but continues to be robust and we continue to expect our Chinese business to perform well.

Geno Germano

Yes, just Marc a couple of comments on Inlyta and Xalkori which we are really pleased with the progress that’s been made there for the quarter for Inlyta we did 83 million which is about 200% above what we did last year same quarter and a double-digit increase over our prior quarter about half of that's in the U.S. where we grew by about 50% relative to last year.

So we see a nice continued fairly robust uptake of Inlyta physicians are really pleased with this product patients are responding well. We have about a 30% share second line in the U.S. and about a 35% of share of second line in Japan. So we are doing well we think in many cases as future growth has come from expansion of use beyond academic medical centers and with oncologists sort of very familiar with the drug. And we think there is good opportunity for further growth there.

Xalkori also is becoming a great product, $73 million for the quarter, up about 25% from last year and about 10% from the previous quarter. The trick there is the same story; we need to get the diagnostic in full use. We are about 66% in the U.S. and a little bit less in Europe and Japan. So we'll continue to work on that, and continue to identify the appropriate patient and grow that business.

Charles E. Triano

Thanks, Geno. Next question please.

Operator

Your next question comes from Seamus Fernandez from Leerink Swann.

Ian C. Read

Seamus, we can hear you.

Seamus Fernandez – Leerink Swann LLC

Sorry, can you hear me?

Ian C. Read

Yes, we can hear you fine.

Seamus Fernandez – Leerink Swann LLC

Okay, great. So, just first off on the potential moves as you know between now and 2017 how should we be thinking about the prospects. I know that there is a group at Pfizer that’s I believe constantly looking at opportunities to do incremental separations. Do you see that as a possibility, is that something that Pfizer is consistently looking at between now and 2016 and do you see opportunities for value creation there I guess that’s more question for Ian. And then separately on tanezumab, can you just update us again on where we stand with the anti-NGF scientifically the move forward in osteoarthritis, chronic low back pain and cancer pain and again how we should think about the potential changes in the development path as you partner with Eli Lilly? Thanks.

Ian C. Read

So we have set up the organizational construct, because we believe that is the best way to focus and maximize the different parts of our business as each segment represents my opinion in different models. It also gives us a lot of optionality going forward as we look at ways of creating shareholder value. So going back to your question, we’re always looking of ways of maximizing shareholder value and I think this contract gives us the maximum optionality and ability to look at different ways of creating that value and we will take those decisions at the appropriate time as the opportunities mature. So with that I’ll ask John to talk about tanezumab.

John Young

Okay. Thanks Seamus. So just to give you an update I think as you know in December 2012 the FDA placed a partial clinical hold on the development of NGF inhibitors including tanezumab and that partial clinical hold was unrelated to the prior hold that related to bone and joint related safety. And that was based – the latest clinical hold was based on peripheral nervous system effects observed in animal studies conducted with NGF inhibitors by other manufacturers. In April this year we reached an agreement with the FDA on the path forward removal of that partial clinical hold, and to answer the questions which led to the partial clinical hold I do think it was initiated to demonstrate sympathetic nervous system safety and requisite non-clinical study in July of this year and that study is progressing on schedule.

So we intend to submit the results from that study in the first half of 2014 and assuming a positive review of the non-clinical data by the FDA and removal of a clinical hold, we are preparing to resume the Phase 3 studies for tanezumab early in 2014. So we are very excited about the deal that we’ve announced today with Eli Lilly and we believe that represents a very positive opportunity for us to collaborate to take tanezumab into Phase 3 clinical development and ultimately we believe into the marketplace, which clearly has significant need and opportunity for new pain treatment options and so we’re very excited about the potential for tanezumab assuming that we are able to deliver positive data from those non-clinical studies. So I hope that helps Seamus.

Charles E. Triano

Thanks, John. Next question, please?

Operator

Your next question comes from John Boris from SunTrust.

John T. Boris – SunTrust Robinson Humphrey

Thanks for taking the questions. First question for Frank, when you take a look at the Alliance revenue at least consensus estimates for Alliance revenue in 2014, 2015 I think they are around $1.7 billion, $1.8 billion, are you comfortable with those numbers being where they are at in light of the exploration of the majority of your agreements. And then when you look at the consensus revenue estimate of $50.5 billion for 2014 or – can you just maybe walk us through some of the pushes, pulls or influencers on losses of exclusively that influence that number and are you comfortable with it. Secondly on Mylan Pfizer agreement that you have in Japan, can you help us understand some of the accounting around that and also the level of penetration that you have got into the generic market in Japan. A very attractive opportunity there, especially in light of what the Japanese government is trying to push there and then lastly, just a pipeline question on the SGLT2. Can you help us understand what the points of differentiation are especially in light of there being three other entrants potentially in that market before you enter and then any thoughts around the combination strategy that you might have with Januvia? Thanks.

Ian C. Read

Thank you, John. So Frank, you want to…

Frank A. D’Amelio

Yeah.

Ian C. Read

Address some of the projections for the question.

Frank A. D’Amelio

So, I think the way I’ll do this for 2014 in total is maybe some of the headwinds and then some of the tailwinds. So in terms of headwinds, no surprises we continue to have some losses of exclusivity that will affect those in 2014. Enbrel entering the 36 months sunset period is one of them and Spiriva in Japan is another. So there will be some LOEs that we’ll experience, that will impact 2014. We said previously $3 billion to $4 billion in LOE impacts for the next couple of years. That’s clearly with what we are expecting for 2014.

If you look at some of the tailwinds we continue expect growth in emerging markets, some of our new products. We’ve had some nice growth in Xalkori, Inlyta, Xeljanz. We expect to see new product growth continue in a steady and measured way and we’ve had some nice performance in some of our inline products. Lyrica this quarter, Celebrex this quarter 11%, 13% globally. So lots of opportunities there and in terms of addressing headwinds in addition to the opportunity, the areas on the top line we’ll continue to manage our cost of expense structure, we’ll continue to use our balance sheet and our capital structure to help us manage beyond the LOE in revenue headwinds like we’ve been doing over the last couple of years.

In terms of Alliance revenue, let me just run the numbers and then I’ll answer the question. If you look at the alliance revenues this quarter, $700 million down from $900 million in the year-ago quarter, down 22%, year-to-date down 15%, $2.6 billion to $2.2 billion, the majority of the alliance revenues to-date are really from Enbrel and Spiriva. and going forward, the alliance revenues are going to come from Rebif, which is in the numbers today and then obliviously Eliquis growing.

So that will be the rhythm of the numbers relative to the alliance revenues, but clearly, on a going forward basis, the alliance revenues will be declining and they will be declining significantly. In terms of Mylan accounting, I think the simple answer is, we record the revenues from the products that are coming out of the arm collaboration. John, do you want to make any comment on the penetration in the market or is too early to…

John Young

Yes, I mean I think it’s really too early, John to talk about penetration and market shares, specifically other than to say that we are on track. we have seen the – we’ve met all of our milestones in terms of the transfer of Mylan colleagues into the Pfizer organization. we are currently selling around about 250 products from the combined company’s generic portfolios in the marketplace. and the project plan is in place to [indiscernible] to Pfizer distribution, which is the real strength of our organization in Japan and processes and work are in place to address any quality or supply risks. in terms of manufacturing and development, initiatives kicked off to build manufacturing capacity for collaboration volumes.

And I think overall message in Mylan is the joint venture is certainly progressing very much according to our plans. In terms of our ertugliflozin, as you know, we entered into a worldwide collaboration except Japan with Merck to develop and commercialize ertugliflozin and ertugliflozin containing fixed dose combinations with metformin and Januvia tablets. it’s our innovative proprietary SGLT-2 inhibitor for treatment of type 2 diabetes and we are initiating Phase 3 clinical trials with our partner Merck.

I certainly don’t want to comment in detail about competitors in this class. So I want to say that our two lead competitors have had probably a troubled regulatory pathway and the U.S. and Europe and we believe that the dialogue that we’ve been able to have with the FDA as well as the strength of the molecule, certainly has enabled us to put together a development program combined with the strength of our partnership with Merck that gives us a very good runway into the marketplace.

Ian C. Read

Thank you, John. Mikael, do you want to comment on the technical aspects of our products and differentiation.

Mikael Dolsten

Yes, let me build on the excellent discussion that John had on ertugliflozin. So it’s highly selective molecule for the SGLT2 transporter and as you will learn when you explore that class, there is difference in the selectivity among the molecule. it’s highly potent; it’s a very low dose, which is really a key characteristic when you aim to combine with other drugs such as market leading Januvia and metformin is performing very well in the Phase 2 studies with robust lowering of HbA1c and also favorable effect on blood pressure. So we think really these unique characteristics of a best-in-class molecule combined with a long experience with Januvia allows for a very favorable long-term opportunity.

John T. Boris – SunTrust Robinson Humphrey

Thank you, Mikael.

Charles E. Triano

Our next question please?

Operator

The next question comes from Alex Arfaei from BMO Capital Markets.

Alex Arfaei – BMO Capital Markets

Good morning, and thank you for taking the questions. Two if I may? Ian, I wanted you to get your latest thoughts about entering the cancer immunotherapy market, perhaps partnering palbociclib in breast cancer with one of the leading of the PD-1s. it seems like that could be a pretty promising combination. And a follow-up, we’ve recently heard some negative comments from your peers about entering the biosimilar market, including commercial risk. so I’m just wondering what is it that made you confident to proceed with this early aggressive biosimilar strategy? Thank you.

Ian C. Read

So on the biosimilar market, each company takes its own view of the commercial opportunities. We feel that we have the technology and the ability to bring bisomilars to the market that will be very well characterized. We believe that in that marketplace, we don’t see it reacting like the small molecule generic market. We believe it will probably act more like the sterile injectable market.

We bring to that commercialization, the credibility and the quality of Pfizer’s manufacturing and research. and we think it is a reasonably low cost development opportunity for products that have a high commercial opportunity. So we think it’s a good appropriate allocation of resources for the potential payoff. Geno, would you like to talk about the immunotherapy or and if you want pass to Mikael as well between the two of you.

Geno Germano

Okay. so I mean, Alex, obviously it’s a really pretty active exciting time with all that’s happening with the checkpoint modulators and using monotherapy in various combinations across many different tumor types. We see this as an emerging field with a lot of experimentation going on to identify appropriate patients and appropriate combinations. and we’re actively exploring a number of mechanisms ourselves internally with our 4-1BB monoclonal antibody and some of the vaccine approaches that we have access to as well as looking at potential partnerships. Mike do you want to add?

Mikael Dolsten

Yes, I think Ian has got it very well. We have of course, invested heavily in our signal-transduction inhibitors and as you mentioned palbociclib is one of the real example of potential breakthrough drugs here. But the ability to combine small molecule, large molecule with cancer immunotherapy is going to have very interesting potential and we have as Geno alluded to a number of internal activities, but they are also open for partnership which in general we have shown is a great way to grow value in this industry.

Alex Arfaei – BMO Capital Markets

Thank you.

Charles E. Triano

Thanks Mikael. Moving on to the next question please.

Operator

Your next question comes from Tony Butler from Barclays Capital.

Tony Butler – Barclays Capital, Inc.

Thanks very much. Ian talked to biosimilars you alluded to a notion that there would be some incremental R&D cost could you provide some color around that please. And then secondly if I may, one pipeline question on the Mening B 20,000 patient study could you provide some timing for total enrollment and when that might read out and moreover Michael do you need high tiders to both proteins in order to provide appropriate killing of the bacteria? Thanks very much.

Ian C. Read

Tony, I wasn’t quite sure of your question on the biosimilars, the incremental R&D expenditures inst per se because of biosimilars is because of the what I think I describe is a very, very strong cohort of Phase 3 products coming in develop in the near future and one that we are also – we are appropriate partnering to ensure that we maximize shareholder return. So Mikael, do you want to talk about the tider issue?

Mikael Dolsten

Yes. So thank you for the interest in Mening B and we do think it’s a very important vaccine. It’s a kind of the missing component in staph aureus [ph] meningococcal strains, the Meningococcal B. So we have three trials that are well underway, efficacy, safety and lot consistency trial. And we believe that you should aspire to raise the relevant prices to both proteins. Together these two proteins that were carefully selected during our development process, they will cover a great majority of meningococcal strain, which is a unique feature of our vaccine and we noticed in our Phase 2 trial a robust and good tolerability. As you know, we are focusing on adolescent population which is the main carrier of the disease.

Ian C. Read

Thank you. And Tony just to expand our biosimilar spend is we have been spending and its sort of in our baseline spend of our development program. So I didn't particularly see that as a driver of R&D spend.

Charles E. Triano

And Geno just on the timing of the enrollment rate I think we have comments there or meningitis B?

Geno Germano

We are enrolling now and I think we anticipate completing enrollment in the 2015 timeframe.

Charles E. Triano

Thank you. Our next question please.

Operator

Your next question comes from Andrew Baum from Citi.

Andrew S. Baum – Citigroup Global Markets Ltd.

Good morning. Couple of questions please. First Ian and Frank, back to portfolio management. Could you give us some guide to the total cost and the saving of those costs for the operational separation of the established products business. Just in helping us understand how optionality pans out. And then second to Mikael. Could you give us an update on the Phase 1 anti 4-1BB CD137 trial. It’s been running for two and half years in a very refractory patient population. What's the chances we could get data prior to 2015. Thank you.

Ian C. Read

Thank you, Andrew. Frank if you could sort of take us through the patients of restructuring and costs and the timing of that et cetera and then Mikael can answer the second question.

Frank D’Amelio

Yes. So I think in terms of implementation costs there are not material implementation costs. In fact as we look at the new structure there is some opportunities for synergies to the tune of couple hundred million dollars. Minimal amount in 2014 is we’re basically getting the structure in place and we see an opportunity in 2015, 2016 to capitalize on the new structure and generate couple of hundred million in operational synergies. So that’s how I think about the puts and the takes on that.

Mikael Dolsten

So for 4-1BB you know the mechanism links to activate the immune cells particularly T-cell mediated and you are right we have been exploring it for quite sometime to fully understand its property and we have studies ongoing – dose escalation studies both as immunotherapy and in combination with Rituximab in hematological patients. We are also looking at combination of full 4-1BB with other immunotherapy as part of our plan and we really share data as this protocol warps up at relevant conferences.

Andrew S. Baum – Citigroup Global Markets Ltd.

Thank you.

Charles E. Triano

Will go to our next question please.

Operator

Your next question comes from Steve Scala from Cowen.

Steve M. Scala – Cowen & Co. LLC

Thank you. A couple of follow ups with respect to the headwinds from the wind down in the Enbrel North America and Spiriva collaborations with an estimate of a $1 billion reduction in net income for these collaborations be a reasonable guess for all of 2014. so that’s the first question. Second is, how do you assess the Herceptin biosimilar opportunity, given that the standard of care in HER2-positive breast cancer is evolving so quickly and that evolution may limit Herceptin’s role overtime, meanwhile Roche says it will compete aggressively and there may be other biosimilar competitors as well. So it’s a shrinking market with unknown number of competitors attractive. And then lastly, on the staph vaccine, you said data in 2014, on the second quarter of call, you had said data later this year, so any reason for that slight delay? Thank you.

Ian C. Read

Frank, if you could comment on the Alliance revenue and then John on Herceptin and the nature of that marketplace and the pressures for managed care and I think Mikael on the timing.

Frank A. D’Amelio

So on the alliance revenue, I ran the numbers before on Alliance revenue. We’ll provide an update on the 2014 revenue number and the guidance for 2014 on our next earnings call. We’ll incorporate into that number obviously, the impact of the Alliance revenue declined on a year-over-year basis. So on the next earnings call, we’ll provide the details on 2014.

John Young

Okay. In terms of the question on biosimilars, almost by definition, biosimilars do lead clinical practice, they follow it. And so again, clearly today, we know that overall the biosimilars marketplace, the biotherapeutics marketplace is around about $100 billion marketplace globally for all biotherapeutics and that marketplace is expected to grow to around about $300 billion by 2019.

So I guess sort of first point to make in terms of our presence in the biosimilar marketplace is, biotherapeutics overall is a very significant opportunity and the biosimilar segment of that is expected to grow from its current value of around about $1.4 billion to potentially around, let’s say $22 billion by 2020. So the key point to make there is, it is a big opportunity.

In terms of Herceptin, clearly, don’t want to comment on our competitors and any additional therapeutic research that they are doing, allowing to say that, today Herceptin remains a standard of care for that particular patient population. And so at the point that we have a biosimilar available to enter into the marketplace, then we believe that that would be a potentially good option for physicians and healthcare systems for use in patients for Herceptin or that molecule trastuzumab is an appropriate clinical choice.

Charles E. Triano

Thank you. Mikael, on timing.

Mikael Dolsten

Yes. So we have completed successively Phase 1/2 trial and our Herceptin is very good biosimilar version of the originator and we are now in the plans of starting a Phase 3 that we’ll be initiating dosing within the next couple of months. And just to add to what John said, clearly as you discussed there will be always an evolving marketplace and in manner of these indications which are driven by a continuous flow of product. We do see still that many of these regimens include combination with Herceptin biologicals on top of Herceptin instead of traditional chemotherapeutics. And we anticipate that our molecule could offer a quality alternative.

Ian C. Read

On the Staph-aureus, I haven't looked at the transcript perhaps we misspoke I think perhaps we said we had data or internal data of Staph-aureus in that time period, but we intend to take it to a congress next year. So probably that was a confusion we created and if did we apologies for that.

John Young

I think that's right, Ian, it was presentation of the data.

Ian C. Read

Yes.

Charles E. Triano

Next question please.

Operator

Your next question comes from David Risinger from Morgan Stanley.

David R. Risinger – Morgan Stanley & Co. LLC

Yes, thanks very much. I just have two questions. First, with respect to the CAPiTA outcomes trial, could you just talk about the reason for the delay in the results, just sort of recap why it's been delayed so long. I am guessing you are going to say it's simply a winter cool, but is there anyway to read anything positive or negative into the delays relative to the expected timing when CAPiTA was started many, many years ago? And then separately with respect to biosimilar Herceptin, do you have agreement with the FDA on how that trial will be run in the U.S. and also when do you plan to file biosimilar Herceptin in the U.S. and ex-U.S.? Thank you.

Ian C. Read

Geno, if you’d like to talk about CAPiTA?

Geno Germano

Yes, I think on CAPiTA David you’re right. I probably will say that it's event driven and when we have some -- we have the number of events but just to comment on a couple of factors the incidents of infection coincides with the severity of the flu seasons for example, so flu seasons have been milder then you may not have as many events and that can be a factor contributing to accumulation of events. And then there is overall efficacy or effectiveness of the vaccine. Obviously if the vaccine is extraordinarily effective then the only events that you're going to accumulate are the ones in the placebo group you won't accumulate any or very few in the vaccine group that would be a good problem to have and we will know soon what the real answer is.

Ian C. Read

Thank you, Geno. John, could you talk about Herceptin.

John Young

Yes, so don't want to talk in detail about filing timelines but in terms of your question about the regulatory pathway, certainly the EU and U.S. have increasingly provided more guidance on the pathways for regulatory approval, which include extensive analytical and preclinical data, robust competitive clinical and immunogenicity data as well and that guidance is consistent with our development strategy for our portfolio of biosimilars including trastuzumab. So we anticipate a Phase 3 start for that program by the end of the year and will be progressing that program in line with our guidance as expeditiously as possible.

Ian C. Read

Thank you, John.

Charles E. Triano

Thanks John. And I think with that we will complete our call. Thank you very much everyone for your attention this morning.

Ian C. Read

Thank you.

Operator

Ladies and gentlemen, this concludes today's Pfizer's third quarter 2013 earnings conference call. Thank you for participating. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Pfizer (PFE): Q3 EPS of $0.58 beats by $0.02. Revenue of $12.64B misses by $0.05B. (PR)