Pfizer (PFE) Presents at 35th Annual J.P. Morgan Healthcare Conference (Transcript)

| About: Pfizer Inc. (PFE)

Pfizer Inc. (NYSE:PFE)

35th Annual J.P. Morgan Healthcare Conference Call

January 10, 2017 01:30 PM ET

Executives

Frank D’Amelio - EVP, Business Operations and CFO

Albert Bourla - Group President, Pfizer Innovative Health

Mikael Dolsten - President, Worldwide R&D

Analysts

Chris Schott - J.P. Morgan

Chris Schott

Good morning, everybody. I’m Chris Schott, Pharmaceutical Analyst at J.P. Morgan and very pleased to be speaking with Pfizer today. So, we’re going to do a fireside chat discussion here, a bit of an extended session, and there’ll not be a breakup session following this, just for background.

Before we kickoff, I want to just read the forward-looking statement. On behalf of Pfizer, let’s remind you that our discussion during this conference will include forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Additionally, information regarding these factors is discussed under the disclosure notice section in Pfizer’s earnings press release, as well as in Pfizer’s 2015 Annual Report in Form 10-K. The forward-looking statements during this conference or during this presentation speak only to the original date of the call, and Pfizer undertakes no obligation to update or revise any of these statements.

So, with that out of the way, from Pfizer we have Frank D’Amelio, the Company’s Executive Vice President of Business Operations; and Chief Financial Officer, Albert Bourla, the Group President of Pfizer Innovative Health; and Mikael Dolsten, President of Worldwide R&D.

So, with that maybe to kickoff, question for Frank or anybody on the team.

Question-and-Answer Session

Q - Chris Schott

We obviously had a lot of moving pieces with Pfizer, if we think back in 2016 and there was Allergan; there was a decision on the split; there were several tuck-in acquisitions. So, as we turn the page onto 2017, can you just talk through some of your teams’ priorities and the Company’s positioning as we think about this year?

Frank D’Amelio

Sure. Can everybody hear me okay? So, maybe the way I’ll do this is I’ll do good guys and bad guys for 2017.

Chris Schott

Perfect.

Frank D’Amelio

So, in terms of good guys, really, if you think about the top-line, products like Ibrance, Eliquis Xeljanz, Lyrica, Chantix, all performing very well. Chantix now has really turned the corner nicely, now that we’ve gotten the label change. And we expect emerging markets to continue to grow. Last quarter emerging markets grew 9%. Inflectra, biosimilars, we’ve launched that product and we expect nice performance out of that in 2017 and in business development, we’ve supplemented our portfolio with Xtandi from the Medivation acquisition, and Eucrisa from the Anacor acquisition.

We’ll continue to manage our costs and expense structure, we’ll continue to return capital to our shareholders. Hopefully, you all saw, we increased our dividend by $0.08 in December. But every time we increase the dividend by $0.08, that’s about a $0.5 billion of incremental capital that we’re returning to our shareholders. And so, those are all the things that we’ll do. We’ll continue to look at business development as a supplement to our strategy. But those are -- I’ll call those kind of the tailwinds will grow earnings. Again, if you look this year, if you look at our last guidance from the third quarter results, we gave EPS guidance of $2.38 to $2.43, so midpoint of $2.405. Our EPS number last year was $2.20. If you take the midpoint of $2.40, put that over $2.20, that’s $0.20; that’s despite FX headwinds that reduced that. So, we have performed well operationally. We expect to continue to do that on a going forward basis.

Let me mention the tailwinds, I mentioned tailwinds. So, I think the two tailwinds, the two bad guys for next year at this point, we will continue to have LOEs. LOEs will be, give or take about $2.5 billion; that’s our current estimate; we will tune that up for our earnings call when we give you our guidance for 2017 on January the 31st. And then foreign exchange, currency remains a negative for us right now. What we’ll do when we get on the earnings call is just what we did last year. We will show you 2017 guidance at 2016 foreign exchange rates, and then we will show what the impact is of displaying [ph] rates we choose in the January and then we will get to what our final guidance is. But foreign exchange is a bad guy right now. So, I looked yesterday at euro to the dollar, it was like $1.04, $1.05. You go back a couple of years, it was $1.38; at the beginning of 2016, it was $1.09 -- $1.08, $1.09. So, currency continues to be a bad guy for us as well. That’s kind of little of rhythm of the business.

Chris Schott

Absolutely. Before we dig into some Pfizer specific questions, drug pricing’s become a hot topic I think at this conference and for the Group as a whole over the last 12 to 18 months or so. So what are your guys’ thoughts on drug pricing and drug price increases?

Frank D’Amelio

So, let me start, I’ll start and end with the same sense, which is we don’t anticipate any major changes in how we do drug pricing, maybe that’s how I’ll start. Now, let me go through why we, why I believe that. And I am going to do it, I am going to start with running some numbers.

So, if you look at total healthcares spend, and you look at prescription drugs, pharmaceuticals as a percentage of that, it’s about 10% to 12%. It’s been that for the last few decades. All projections are it will continue to be that for the next few decades, kind of fact one.

Fact two, if you look at healthcare as a percentage of GDP, in the U.S. it’s about 17%. Of that 17%, about 2% is prescription drugs. If you compare that to the OECD countries, healthcare as a percentage of their GDP is about 6% to 7%, 1.5% of that is prescription drugs. There is not some big disconnect or big difference between what we spend on prescription drugs as a percentage of healthcare -- as a percentage of GDP and what the OECD countries do. Third point, if you look at the average consumer out of pocket, out of pocket for prescription drugs in the U.S. for the average consumer 15% for prescription drugs, for a treatment from physician is 9%; hospitals 3%. Just in terms of some of the statistics.

So, you look at all that and then you look at what we’ve done on pricing. If you look at Pfizer overall -- and I am here now at with Pfizer over nine years, our global pricing in any given point of every year, since I have been here, plus or minus 2%. And then we assume reductions in developed Europe, we assume increases in U.S., we assume increases in the U.S. in the mid to high single digit range. We have been responsible, we are responsible, we’ll continue to be responsible on pricing. And I think the key going forward is to create therapeutically differentiated drugs that provide value to patients; and by providing value to patients, we provide value to our shareholders.

But I think I began with I don’t see some change, any kind of major change; I’d end with I don’t see some major changes.

Chris Schott

Okay, that’s helpful. Let’s shift to Pfizer here. So, first, sticking with Frank, appetite and focus for capital deployment and then business development right now. Just share some of your thoughts of where you are spending your time and how are you prioritizing your capital at this point?

Frank D’Amelio

Sure. So, I think the short answer is our capital -- our priorities for capital deployment haven’t changed. I mean they’ve been returning capital to shareholders. You look for the first three quarters of 2016, we returned $10.5 billion; $5 billion through shares buyback, $5.5 billion through dividends. You look the last five years, we’ve returned $77 billion to our shareholders; $33 billion in the dividends, $44 billion in buybacks -- $44 billion to $45 billion in buybacks. So, that priority hasn’t changed. We get the dividends as important part of our investment thesis. We’ll continue to invest in the business, which we’ve been doing and we’ll continue to look at opportunities to deploy capital for M&A.

I mean if you look the last 18 months or so, so you go back to the Hospira deal and then fast forward to let’s say the end of 2016, we did about $38 billion in M&A. Hospira was $17 billion; Medivation was $14 billion; Anacor was $5 billion in change and then we’ve done some other smaller deals, the AstraZeneca and Inflectra deal, little deals here and there, about $38 billion. And on our biz dev, hopefully one of the things you’ve noticed is our bias has been for revenue growth now or soon. And the reason for that is when you look at our valuation, clearly we’ll continue to grow earnings but one of the things we see as an opportunity to create incremental value is to get some more growth on the top line. And so, our bias on biz dev has been revenue growth now or soon. So, what was now? Hospira was now, Medivation was now, Anacor was soon. Anacor’s worked out. When we bought Anacor and had January 7 PDUFA date, the drug’s already been approved, we’re preparing for launch.

And I think the only other thing I would say on biz dev is remember when we bought Hospira, Ian and I and Albert and Mikael, we would get up and we’d say okay, now that we’ve done Hospira, we’ve really strengthened our essential business, our bias now is going to be on innovative business. You look since then, we biased the innovative business; we bought Medivation, we bought Anacor, oncology information and immunology. I think on a going forward basis now, our bias will simply be just what’s the best thing overall for shareholder value? Compass [ph] will be shareholder value.

Chris Schott

And just on that point to be kind of now or soon dynamic, we should expect that to continue in terms of the focus of deals are all there in the very near term to top line…

Frank D’Amelio

Not exclusively because we’ve also done some deals that were earlier phase. If you said to me our bias, our bias would be revenue growth now or soon. But we won’t rule out doing -- we’ve done some earlier phase deals over that period as well, Bamboo and some of the deals like that.

Chris Schott

One more on the business development, just broader views of industry consolidation. What are you expecting as you’re kind of looking more broadly for the sector; do you see a lot more activity as we go into 2017 and 2018 or do you think things actually slow down. Just any broader thoughts would be helpful.

Frank D’Amelio

So, I’ve been in this industry now almost a decade, and it’s been an industry that has been consolidating I think still is consolidating and will continue to consolidate. I mean, all the deals I just mentioned in a sense are forms of consolidation. So, I think there will continue to be consolidation. Now, one of the things I get asked the questions about, Frank, all of the proposals now around tax reform, does that give you pause, should you wait before you would do anything on the deal front? And my answer is obviously we play the cards, we’ve been dumped. So, if we see a deal that we think works today and with the cards we’ve been dealt, [ph] I don’t know why we will wait. I think we would pursue that deal as long as it will create value for our shareholders. But the short answer is yes, I think we will continue to see consolidation in the industry. We’ve seen it, we still it, and we’ll continue to see it.

Chris Schott

And on that, would you be surprised if you saw large transactions this year or do you think it’s going to more of these -- again, speaking more broadly at the industry, more of these kind of smaller tuck-in type of…

Frank D’Amelio

I think clearly, we’ll see more tuck-ins and bolt-ons, we’ve been seeing lots of those in terms of I call it more kind of big galactic deals. I don’t want to make predictions but I think they’re possible.

Chris Schott

Okay, one or two others and I’ll transition over. You mentioned corporate tax reform. Just what would broad corporate tax reform mean for Pfizer?

Frank D’Amelio

I am sensitive to time; on this one, I could spend all day on tax reform. Maybe I’ll hit two of the things that obviously we find very, very positive in terms of some the items being proposed now. And then, if there’s anything you want me to hit on, Chris, let me know. So, obviously, the lowering of the corporate tax rate would be a good thing. I’ve seen a proposal now, I think President-elect Trump’s proposal is 15%, I think Paul Ryan’s proposal was 20%. Our current book rate is 24%; and obviously, it’s not just book rate but cash rate too. But both of those would be good. And then the other one is obviously what they’re talking about relative to overseas earnings and repatriation. So, President-elect Trump’s proposal is 10% I believe, Paul Ryan’s is I think 8.75% on one and 3.5% on the other. For us, this is potentially a really big positive. Let me just run a couple of numbers and just try to demonstrate why. And then I’ll stop, and if you want me to go into any more detail on this, I will.

If you read last year’s 10-K, you look at our tax session, you read it thoroughly including the footnotes. Here are some of the things you’ll find. So, I’ll publicly disclose. We have 80 billion of permanently deferred earnings; then we have a deferred tax liability on the books of 23.6 billion. Now that 23.6 billion or the taxes we would pay on overseas earnings that have been designated for repatriation. So, you’d have to gross that number up to what the real total number is based on an assumption between what the local taxes were that were paid and then that number minus the 35% we’d have to pay to bring it back to the U.S.

Now, we don’t provide that rate, but just hypothetically, if you gross that number up to 75-80 million, just hypothetically, I’m not saying that’s the number but if you did, you take the first 80 plus the 80, you get a 160 billion. Now, let’s use Paul Ryan’s plan, but use 10% because it makes the math easier for me. 10% on a 160 billion is 16 billion, you pay that over eight years in the Ryan plan; it’s 2 billion a year. Now, what do I have, what does Pfizer have? We have a 160 billion previously taxed income account. So, now, year one, we generate 20 billion of operating cash flow. I bring it all back to the U.S. tax free. My 160 became 140. Year two, I generated another 20 billion of operating cash flow, I bring it all back to the U.S. tax free. My 140 billion became a 120 billion so forth and so on. It gives us huge capital firepower as a corporation for all of the things that we talked about, to return capital to shareholders; to do strategic business development; to invest in our business. It’s a huge potential positive for us.

Chris Schott

Two follow-ups there. One, you mentioned that you wouldn’t be restricted from doing a deal now, just waiting for potential tax reform to occur. Would it change the calculus a little bit if we had clarity on tax reform that otherwise might not make sense that would now make sense?

Frank D’Amelio

Short answer is it could.

Chris Schott

Second question, is there -- the industry is global, is there cost opportunities that will result from corporate tax reform in terms of what you choose to manufacture or there’s a thing about essentially import taxes et cetera would -- is I think beyond just simply tax that would be involved in tax reform?

Frank D’Amelio

So, some of the items we’re discussing that are being discussed, so obviously there’s the border adjustability tax, which on anything that would be sent into the U.S. or imported by the U.S. to be this -- I guess this 20% is being discussed now, which would be a challenge for whole bunch of industries. But then, we talk about possibility of a patent box, where you create IP in U.S., you manufacture it in the U.S. and then for that you get a tax rate that’s an incentive to whatever the actual corporate tax rate is. That would obviously I think be a real positive for job creation in the U.S. and that would deal with I think a lot of the job items that we’re trying to deal with as a Company.

Chris Schott

Let’s bring Albert into the conversation here. So, first question, Ibrance obviously been a huge success so far, but just update how launch is progressing. And as we think about the publication of the PALOMA-2 et cetera, how much larger of an opportunity is there for the product over the coming years here?

Albert Bourla

Chris, let me start by saying how happy we’re with the performance so far. We have a product that has been prescribed by more than 8,500 physicians in U.S. alone to more than 44,000 patients. Our strategy during the initial phase of the launch was to establish the medicine as standard of care within the early adopting physicians. I believe that in the U.S., growth moving forward will come from the late adopting physicians which already have prescribed many of them the product but in limited number of their patients, maybe one or three patients. And we believe that the publication of PALOMA-2 which happened already November and the subsequent incorporation of the data of PALOMA-2 into the label will become a significant update for this population. Let’s not forget that in PALOMA-2, there was 10 months difference in progression free survival between the treatment and the control arm. And PALOMA-2 is the only pivotal study that has demonstrated more than two years progression free survival for first line metastatic breast cancer win. We have already submitted the data to the FDA and we expect PDUFA date is in April 2017.

Chris Schott

How quickly do you think you can address that broader population? Is this something that’s -- this is a multi-year process or is this something could ramp very quickly?

Albert Bourla

I think in the U.S. again, the growth will continue over years. So, it will take time to increase the penetration. Moving to Europe, however, in Europe, we did have approval of the product late last year in December. The label is very good. We have in Europe flexibility in the selection of the aromatase inhibitor. It’s not restricting us. And also we’re having in the label all the lines of therapy, metastatic breast cancer therapy providing with of course this ER+ HER2 negative. The ramp up though will vary country by country. We will have countries that we have early access and over there we should expect to see equally impressive or even better ramp up than what we’ve seen in the U.S. but there will be other countries that will be slower as negotiations for actions will continue and there’s a price difference of course between U.S. and Europe.

Chris Schott

Any color on that price difference at this point?

Albert Bourla

I cannot provide you details, first of all, because we’re actively negotiating now. But generally speaking, we should expect the same differences with all medicines in oncology between Europe and U.S.

Chris Schott

Another one on Ibrance, talk about the competitive landscape for the product. How are you thinking about how things could change over the coming years with potential two competitors coming to market here?

Albert Bourla

I think in the last few months, we did see some more data from competing CDK. And I am referring to one MONALEESA [ph] and other CDK inhibitors. I think that this data, they are just adding to the body of evidence but they must create the significance of CDK inhibition for the breast cancer. And I think those will benefit overall the class. We feel very confident that we will maintain strong leadership within this class and the confidence is based on the strength of the data, it’s based on the first mover advantage but more importantly it is based on the very positive patient experience so far.

Chris Schott

Okay.

Albert Bourla

Let me provide few facts. Ibrance is the only medicine that it is approved in U.S., in Europe and in total of 56 countries right now in the world. It has become already standard of care in U.S., I mentioned before 44,000 women already. This is testament not only to its efficacy, but more important to the excellent safety profile and tolerability of the product with very low rate of Grade 3 or 4 side effects like fatigue or diarrhea affecting the quality of life of the patients. It is the only medicine, CDK, but has consistent positive results across three pivotal studies so far. And last but not least, we have a very robust lifecycle program with four ongoing Phase 3 studies, two of them in early breast cancer and over 100 studies that are investigating Ibrance in breast or non-breast indications. So, we feel very confident about our leadership in the class.

Chris Schott

Moving to another new exciting launch opportunity, Eucrisa. Can you just talk a little bit about how we should think about the launch dynamics with that product and the market opportunity that you are going after?

Albert Bourla

Yes. Eucrisa got approval late last year in December. And we are excited about this opportunity. The atopic dermatitis is a significant medical need where 18 million to 25 million people in U.S. alone suffering from this dieses and 80% to 90% of the people suffering, they have mild or moderate atopic dermatitis which is the indication that Eucrisa has been approved. Also significantly, 18% of the population that is suffering from atopic dermatitis, it is children 17 years of age and younger. And again, Eucrisa has received approval for pediatric uses.

Now, these conditions right now in the U.S., there are treatment options for the patients, but those options they have limitations regarding safety domain including some black box warnings or they have restrictions, restrictions on the site of application or restriction on the duration of treatment. Those restrictions, those issues, they are playing significant role particularly in the pediatric population; it’s a significant consideration. Now, Eucrisa has a clinical profile in safety and efficacy but particularly in safety that I think will position the product as excellent first line option treatment for the atopic dermatitis.

You asked our expectations. We are preparing for the launch. I think we will launch officially the product at the end of the quarter, beginning of March, April. And this is one -- usually we don’t it but this is one that we have done it in the past, we publicly stated what are our expectations for this product, and we can reiterate today that we expect the product to achieve the $2 billion big sales.

Chris Schott

Biosimilars is a topic that’s increasingly being debated in the market. And it seems like Pfizer’s in a somewhat unique position of having some products that maybe are seeing some pressures from biosimilars. At the same time, you got your own fairly broad portfolio of products developing on your own. So, can you maybe just talk a little bit about how you see the landscape for biosimilars playing out and ultimately anything about whether it’s Enbrel facing pressures relative to the launch portfolio? How you see this factoring into the Pfizer story over time?

Albert Bourla

Well, I think the market has replied very positive, has responded very positively in the introduction of biosimilars. And I think biosimilars will have place in the treatment tool that physicians are having in their disposal to treat diseases. And this is why we have embraced into a very aggressive strategy in building biosimilars. You are right but we will also have the negative impact on our Enbrel, which we have internationally, not in the U.S. anymore. But all in all, we are very bullish about the biosimilars opportunity. The positives will definitely outweigh the negatives in our case. And we are looking to launch the first one and then continue very successfully with the remaining in the pipeline.

Chris Schott

Maybe one more question Prevnar adult in Europe. Can you just talk about the opportunities and challenges that that market brings and maybe compare and contrast the very rapid ramp we saw in the U.S. for the adult indication? How should we think about that relative to the European opportunity?

Albert Bourla

It’s an excellent question. In Europe, when it comes to adult vaccination, it’s all about recommendation and reimbursement, not very different than U.S. We continue advocating for both. We work very close with national technical committees to advocate for recommendations and with national payers to advocate for reimbursement. The difference is that in Europe, you have to do it country-by-country and in many cases you have to do it region-by-region within the same country and that poses some challenges in terms of timing of success. 2016 for example was not a good year in terms of recommendations for Prevnar adult. We had one in Denmark that was above 65, but were having some co-morbidity conditions and we had one region in Spain, in Madrid region. So, it was modest.

This year in 2017, we are expecting more critical decisions, more significant decisions from countries like France, Italy, Belgium, and then we will continue. The price differences of course play a role but in terms of ramp up, in terms of people that are getting vaccinated, we have some countries that we have equally good success as in the U.S. right now.

Chris Schott

Do you eventually see penetration in Europe in terms of the catch-up bolus et cetera reaching a level that we saw in the U.S. that’s going to take time or do you think this factor is that keeps that from getting there.

Albert Bourla

Again, excellent question. Look, I think Prevnar overall, the adult remain very significant for us. Now, we will incorporate our expectations for the product and the guidance that Frank will provide at the end of the month. But generally speaking, we think that in U.S. the adult indication, given the tremendous success that we have so far just to provide some information, by the end of 2016, we believe we have vaccinated 50% of the American population above 65 years old. That’s a significant number. So, I think in U.S., the adult sales will decline as we are exhausting catch-up opportunity. And this decline will be tempered by the growth that we’ll see in international markets. We have Europe as we said; we just got approval for pediatric of course in China. I would say that moving forward in the U.S., our efforts with adult will focus on capturing the remaining 50%. We know however that capturing the second 50% is much more challenging than capturing the first 50%. And also we want to expand vaccination to protect people from 19 to 64 year of age where we have registration. However, we are aware that to materialize -- to realize the full potential of this opportunity, we need ACIP approval. Overall, I think next year, our Prevnar sales as a brand will be likely at best flat.

Chris Schott

Let’s shift over to R&D side of the equation. So, Mikael, maybe a broad question first. So, when you look at your internal pipeline, do you feel at this point, you have a robust enough internal pipeline to support growth for the business over time or do you see a need to continue to build out the mid and late stage pipelines to be able to create a kind of sustainable engine for the organization?

Mikael Dolsten

Thank you for your question. I think we have one of the strongest pipelines in a decade here, and it really positions us well for growth. Although I should say we are always hungry to see more opportunities. And let me just share briefly three aspects on the pipeline, quantity, quality and then external augmentation.

On the quantity side, so, I’ll run a few numbers. Since 2011 in the last six years, we’ve had 20 approvals, of which more than half are new medical entities that gives us an average rhythm of three to four approvals per year. We have initiated some 40 pivotal studies of which 32 were Phase 3 and the remaining eight were pivotal Phase 2. That gives us about six to seven per year.

We think the current pipeline which contains 94 clinical programs, half biologicals, half small molecules, about two-thirds NMEs is well-positioned for the next three years to drive a similar strong output. And as we turn the corner around 2020, we think we have a lot of science that could further accelerate the size of the product and the number of approvals that could come out.

Of course what really matters is the quality, the various products in the pipeline here that we project would come from these flow that I described. And I want to just share a few aspects on that. So, we talk increasing about anchor products, and anchor mechanism and that’s product that really addressed large unmet needs and provide opportunities for multibillion dollar size products and anchor mechanics is a space where Pfizer R&D with partners can be strong on the science that can extend lifespan of the products, the new indications or combinations around them.

And currently I wanted to exemplify like ten anchors, and I’ll try to run through them quick here. Albert spoke about Prevnar 13 advance, and as we continue to drive that product with recent approval in China, we end of last year put into the clinic a novel pneumococcal vaccine that covers 20 serotypes further aiming to expand our real leadership in this area since year 2000. We also have a second anchoring vaccine that relates to novel bacterial vaccine in difficult to treat infections, that’s our C. difficile vaccine that reached proof-of-concept last year, a devastating infection where we now very soon will start Phase 3.

In oncology, you heard Albert speak to us about Ibrance and a large program will have new indications outside breast. We’re planning soon to start HER2+ breast cancer studies as well moving into the early breast cancer at a later phase of this decade. But we also saw the strong signs around this anchor are planning within a year or so to be in the clinic with a novel molecule in this space that can deal with resistance when patients progress on molecules like Ibrance or if there would be any other CDKs that would be in the market. So, again, it’s the science behind our anchors. Xtandi provided us with a novel anchoring prostate cancer and there are also opportunities to expand that type of androgen receptor blocker into other indication as well at the later end of this decade to move into the early phase of prostate cancer.

And finally, avelumab is our third anchor to get with a very comprehensive immune-oncology portfolio. In immunology, we were the first to bring Xeljanz as a JAK inhibitor into inflammatory diseases. And as we expand that through science and communication, we also have a handful of different JAK and related kinase inhibitors in Phase 2 now covering 10 different indications from rheuma, [ph] GI, into derm. Eucrisa from Anacor allowed us to get into tropical treatment of diseases like atopic dermatitis and we now have built an anchor portfolio around tropical delivery of novel small molecules that will play beyond Anacor for atopic dermatitis but could also potentially go into psoriasis.

In rare disease, we made the deal with Bamboo Therapeutics and that’s allowed us to expand the gene anchor mechanism. And we’re collaborating with SPARK but we plan around 2018 to have three different gene therapy programs in the clinic. And finally, in internal medicine, we have anchor opportunities in NASH with multiple drugs in the clinic as well in Alzheimer’s with both the base and GSM. And running through this, you get a sense that this really a combination of internally discovered and developed and external augmented. And that’s what’s my third point around Medivation, Anacor and Bamboo, and that’s really how we try to work together to drive unique long-lasting R&D pipeline for us.

Chris Schott

Immuno-oncology has been a big focus within your pipeline. So, can you just talk a little bit about expectations, what should we be watching as we think 2017 in terms of data presentations et cetera on the I/O portfolio?

Mikael Dolsten

The way we look upon immune-oncology is that it’ll be an year of combination drawings. We saw the first entry of PD-1 L-1s, and we’re focusing a lot around doublets and triplets. And the way we want to position them is to look at tumors as hot, warm or cold tumors and each of them will have a different composition of combination drawings. So, the hot typically where you remove the breaks with drugs such as avelumab, you then augment with products like 4-1BB and OX40. Once you come in to the warm tumors, the temperature is slightly lower, you may need to add other drugs that remove road blocks such as macrophages and we have studies on drugs CCR2, we are working on IDO1. And finally, when you have the cold tumors where you don’t the immune system get there, that’s when you have to deploy strategy such as oncolytic viruses where we recently had a collaboration with Western Oncolytics. You may use of course key but also antibody drug conjugates where we have a component like PTK7. And you likely want to try vaccination to augment immune system to infiltrated tumors and CAR-T, like allogeneic approach with Cellectis. The particular examples that are now starting to deliver data is avelumab with 4-1BB, we just now are starting triplet with OX40. We would have studies with avelumab combined with rituximab and 4-1BB; we’ll have more data on rituximab with the 4-1BB by itself.

And then we have I-O targeted agents, we have studies with avelumab with low less lorlatinib, our ALK inhibitor that will generate data in avelumab within lifetime. So, I hope you got the sense. It will be a combination of I-O, I-O; triple I-O, I-O targeted therapy as well as I-O with chemo and radiotherapy where we have studies now in head and neck.

Chris Schott

In light of some the accelerated development efforts and some filing timelines of your competitors, particularly in lung cancer, can you just talk about how you see -- it’s obviously one of the biggest opportunities for these agents, how do you see the Company positioned specifically in long?

Albert Bourla

Yes. We think there are ample opportunities to participate, on one hand with the monotherapies, but of course we are more excited about the combination approaches. So, when you look at line, we see opportunities in second line for avelumab where we will have data in about a year. And in first line, we try to incorporate the best learning that has come out of some of the studies when it comes to the amount of PDL-1 positive cells, you want to have in your studies with PDL-1 agents. However, at the same time, we are likely even more excited about opportunity in line for like in segments of ALK positive tumors that we’re studying avelumab with Xalkori or lorlatinib, our second generation ALK inhibitor, and with avelumab and augmenting drugs like 4-1BB. So that’s how we look upon that we will participate actively in the first generation but it’s really the next wave that we think can grow the field substantially.

Chris Schott

Great. I think that just wraps out our time today. Thank you so much; it’s very helpful. Thanks everyone for attending.

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