On July 28, 2022 Pfizer Inc. (NYSE: PFE) reported that strong financial results for second-quarter 2022 and updated certain components of 2022 financial guidance(4) (Press release, Pfizer, JUL 28, 2022, View Source [SID1234617085]). Pfizer reaffirmed its previous 2022 revenue guidance, despite unfavorable impacts from foreign exchange, while reaffirming its revenue guidance for Comirnaty(1), the Pfizer-BioNTech SE (BioNTech) COVID-19 vaccine, and for Paxlovid, its oral COVID-19 treatment.
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The second-quarter 2022 earnings presentation and accompanying prepared remarks from management as well as the quarterly update to Pfizer’s R&D pipeline can be found at www.pfizer.com.
EXECUTIVE COMMENTARY
Dr. Albert Bourla, Chairman and Chief Executive Officer, stated: "In multiple meaningful ways, we made significant progress this quarter on our strategies to bring value to our patients and shareholders, while also making commitments to prioritize the broader needs of the world, including those of the environment and our most vulnerable populations. For example, we set an ambitious goal for ourselves to achieve the Net-Zero Standard for greenhouse gas emissions by 2040, ten years ahead of the timeline described in the standard. We also launched an initiative to help bring all of our current and future patented medicines and vaccines to the 1.2 billion people living in 45 lower-income countries around the world at not-for-profit prices, a first in the industry."
Dr. Bourla continued: "Even while launching these initiatives to support a healthier, more equitable world, we remain equally committed to strong financial execution on behalf of our shareholders. In the second quarter, we
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recorded the largest amount of quarterly sales in our history. We also presented potentially best-in-class data for etrasimod and announced the proposed strategic acquisition of Biohaven, both of which are closely tied to our purpose: Breakthroughs that change patients’ lives."
David Denton, Chief Financial Officer and Executive Vice President, stated: "I am very pleased with the performance of our business this quarter, with strong operational revenue and earnings growth driven by multiple therapeutic areas across the company, and our COVID-19 franchises continuing to serve patients in need while also propelling us to an all-time high in quarterly sales. We continue to prioritize high-value uses for our capital, with an emphasis on reinvesting in our business by funding both internally and externally developed science and innovation while also continuing to grow our dividend and buy back shares, when appropriate, to help offset dilution. I am confident that Pfizer is well-positioned to continue to deliver exceptional value for our patients and shareholders going forward."
Beginning in the first quarter of 2022, Adjusted(3) financial measures include expenses for all acquired in-process research and development (IPR&D) costs incurred in connection with upfront and milestone payments on collaboration and in-license agreements, including premiums on equity securities, as well as asset acquisitions of acquired IPR&D and are reported as a separate income statement line item. Previously, these costs were recorded within the R&D expenses line item and certain of these costs were excluded from Adjusted(3) results. The change to include all acquired IPR&D expenses within Adjusted(3) results had no impact on Adjusted(3) diluted EPS in second-quarter 2022 and negatively impacted Adjusted(3) diluted EPS by $0.03 in second-quarter 2021.
Also in the first quarter of 2022, Pfizer implemented a change in policy to exclude all amortization of intangibles from Adjusted(3) income, which favorably impacted Adjusted(3) diluted EPS by $0.02 in second-quarter 2022 and by $0.03 in second-quarter 2021.
Prior period amounts have been revised to conform to the current period presentation for both amortization of intangibles and acquired IPR&D.
Business development activities(6) completed in 2021 and 2022(5) impacted financial results in the periods presented. Some amounts in this press release may not add due to rounding. All percentages have been calculated using unrounded amounts. References to operational variances pertain to period-over-period changes that exclude the impact of foreign exchange rates(7).
2022 FINANCIAL GUIDANCE(4)
Pfizer raised its 2022 financial guidance, on an operational basis(7), for revenues and Adjusted diluted EPS(3) by approximately $2 billion and $0.24, respectively. After including the expected incremental unfavorable impacts of changes in foreign exchange rates since last quarter’s earnings report, the guidance range for revenues remains unchanged and the bottom end of the guidance range for Adjusted diluted EPS(3) was increased by $0.05.
▪Comirnaty(1) revenues of approximately $32 billion, which reflects favorable operational updates compared to prior guidance, offset by unfavorable incremental impacts from foreign exchange. This guidance includes doses expected to be delivered in fiscal 2022(5), primarily under contracts signed as of mid-July 2022.
▪Paxlovid revenues of approximately $22 billion, which reflects favorable operational updates compared to prior guidance, offset by unfavorable incremental impacts from foreign exchange. This guidance includes treatment courses expected to be delivered in fiscal 2022(5), primarily relating to supply contracts signed or committed as of mid-July 2022.
The midpoint of the guidance range for Adjusted diluted EPS(3) reflects a 65% operational increase over the 2021 Adjusted diluted EPS(3) of $4.06, which has been revised from its original presentation to exclude all amortization of intangibles and to include the impact of all acquired IPR&D expenses.
Financial guidance for Adjusted diluted EPS(3) is calculated using approximately 5.75 billion weighted average shares outstanding, and assumes no additional share repurchases in 2022. The expected increase in weighted average shares outstanding compared to 2021 of approximately 50 million shares has an unfavorable impact on 2022 Adjusted diluted EPS(3) of $0.03 at the midpoint of the guidance range.
Other components of Pfizer’s 2022 financial guidance, all of which are presented with the expected impacts from changes in foreign exchange rates included, are presented below.
Guidance for Adjusted(3) SI&A expenses was decreased by $300 million compared to the previous guidance range, primarily reflecting lower expected selling expenses for certain products and geographies, as well as a decline in deferred compensation savings plan expenses, which are tied to market performance.
The midpoint of the guidance range for Adjusted(3) R&D expenses was increased by $250 million compared to the previous guidance, primarily as a result of planned incremental investments in mRNA vaccine programs outside of COVID-19 as well as various other projects.
Guidance for the effective tax rate on Adjusted(3) income was lowered by 0.5 percentage points compared to the
previous guidance, reflecting favorability in the jurisdictional mix of earnings, settlements of global tax examinations and the expiration of local statutes of limitations, among other drivers.
CAPITAL ALLOCATION
During the first six months of 2022, Pfizer deployed its capital in a variety of ways, which primarily include the following two broad categories:
▪Reinvesting capital into initiatives intended to enhance the future growth prospects of the company, including:
▪$5.1 billion invested in internal research and development projects, and
▪More than $7 billion invested in completed business development transactions, including approximately $6.3 billion for the acquisition of Arena Pharmaceuticals, Inc.
▪Returning capital directly to shareholders through a combination of:
▪$4.5 billion of cash dividends, or $0.80 per share of common stock, and
▪$2.0 billion, which was used to repurchase 39.1 million shares on the open market in March 2022, at an average cost of $51.10 per share.
In addition to the capital investments listed above, in the first six months of 2022, Pfizer announced the acquisitions of ReViral Ltd. (ReViral), which closed in the international third quarter of 2022, and Biohaven Pharmaceutical Holding Company Ltd. (Biohaven), which, upon completion, will require upfront capital investments totaling approximately $13.3 billion.
As of July 28, 2022, Pfizer’s remaining share repurchase authorization is $3.3 billion. Current financial guidance does not anticipate any additional share repurchases in 2022.
Second-quarter 2022 diluted weighted-average shares outstanding used to calculate Reported(2) and Adjusted(3) diluted EPS was 5,712 million shares, an increase of 35 million shares, primarily due to shares issued for employee compensation programs, partially offset by the impact of shares repurchased in first-quarter 2022, which resulted in a $0.01 reduction to Reported(2) and Adjusted(3) diluted EPS compared to the prior-year quarter.
QUARTERLY FINANCIAL HIGHLIGHTS (Second-Quarter 2022 vs. Second-Quarter 2021)
Second-quarter 2022 revenues totaled $27.7 billion, an increase of $8.8 billion, or 47%, compared to the prior-year quarter, reflecting operational growth of $10.1 billion, or 53%, as well as an unfavorable impact of foreign exchange of $1.3 billion, or 7%. Excluding growth from Paxlovid and Comirnaty(1), company revenues grew $128 million, or 1%, operationally.
Second-quarter 2022 operational growth was primarily driven by:
▪Paxlovid, which contributed $8.1 billion in global sales, driven by the U.S. launch under emergency use authorization in December 2021 and international launches in late 2021 and early 2022 following regulatory approvals or emergency use authorizations;
▪Comirnaty(1) globally, up 20% operationally, driven by strong operational growth in international markets, led by increased sales of doses to serve emerging markets and increased deliveries to certain international developed markets, partially offset by a slower pace of deliveries to the U.S. and Canada;
▪Eliquis globally, up 23% operationally, driven primarily by continued oral anti-coagulant adoption and market share gains in non-valvular atrial fibrillation, particularly in the U.S. and certain markets in Europe, as well as favorable changes in channel mix in the U.S.;
▪Prevnar family (Prevnar 13 & 20) in the U.S., up 41%, driven by strong stocking and patient demand following the launch of Prevnar 20 for the adult population, partially offset by unfavorable timing of government and private purchasing of Prevnar 13 for the pediatric indication; and
▪Vyndaqel/Vyndamax globally, up 16% operationally, driven by continued strong uptake of the transthyretin amyloid cardiomyopathy indication, primarily in the U.S. and developed Europe, partially offset by a planned price decrease which recently went into effect in Japan,
partially offset primarily by lower revenues for:
▪Chantix globally, down 99% operationally, which continues to be negatively impacted by a global pause in shipments of Chantix due to the presence of N-nitroso-varenicline above an acceptable level of intake set by various global regulators, the ultimate timing for resolution of which may vary by country;
▪Xeljanz in the U.S., down 35%, driven primarily by declines in net price due to unfavorable changes in channel mix, decreased prescription volumes resulting from ongoing shifts in prescribing patterns related to Janus kinase (JAK) class label changes, and unfavorable wholesaler inventory buying patterns; and
▪Sutent globally, down 47% operationally, primarily reflecting lower volume demand in the U.S. and Europe following its loss of exclusivity in August 2021 and January 2022, respectively.
Second-quarter 2022 Cost of Sales(2) as a percentage of revenues decreased 5.8 percentage points compared with the prior-year quarter. The drivers for the decrease include, among other things:
▪favorable changes in sales mix, including significant sales of Paxlovid as well as higher alliance revenues, which have no associated cost of sales; and
▪favorable impacts resulting from changes in foreign exchange rates,
partially offset by:
▪higher sales of Comirnaty(1), which includes a charge for the 50% gross profit split with BioNTech and applicable royalty expenses; and
▪a $450 million write-off of inventory related to COVID-19 products that have exceeded or are expected to exceed their approved shelf-lives prior to being used.
SI&A Expenses(2) increased 7% operationally in second-quarter 2022 compared with the prior-year quarter, primarily reflecting higher investments for Paxlovid and Comirnaty and a higher provision for healthcare reform fees based on sales of Paxlovid and Comirnaty, partially offset by a decrease in deferred compensation savings plan expenses.
Second-quarter 2022 R&D Expenses(2) increased 27% operationally compared with the prior-year quarter, primarily driven by increased investments across multiple late-stage clinical programs, including development costs and at-risk manufacturing for programs to prevent and treat COVID-19, as well as costs to develop recently acquired assets.
Acquired IPR&D Expenses(2) decreased 100% operationally in second-quarter 2022 compared with the prior-year quarter, primarily reflecting the acquisition of Amplyx Pharmaceuticals, Inc. in second-quarter 2021, and no transactions giving rise to acquired IPR&D expenses in second-quarter 2022.
Pfizer recorded $772 million of other deductions––net(2) in second-quarter 2022 compared with $1.3 billion of other income––net(2) in second-quarter 2021. The period-over-period change was primarily driven by:
▪net losses on equity securities in second-quarter 2022 versus net gains on equity securities recognized in the prior-year quarter; and
▪net periodic benefit costs associated with pension and postretirement plans incurred in second-quarter 2022 versus net periodic benefit credits recognized in second-quarter 2021.
Pfizer’s effective tax rate on Reported income(2) for second-quarter 2022 decreased compared to the prior-year quarter primarily due to a favorable change in the jurisdictional mix of earnings.
RECENT NOTABLE DEVELOPMENTS (Since May 3, 2022)
Product Developments
▪Comirnaty (COVID-19 vaccine, mRNA)(8)
▪Clinical and Research Developments
▪In May 2022, Pfizer and BioNTech announced topline safety, immunogenicity and vaccine efficacy data from a Phase 2/3 trial evaluating a third 3-µg dose of the vaccine in children 6 months to under 5 years of age. Following a third dose in this age group, the vaccine was found to elicit a strong immune response, with a favorable safety profile similar to placebo. A formal analysis will be performed when at least 21 cases have accrued from seven days after the third dose, and will be shared once available.
▪In June 2022, Pfizer and BioNTech announced positive data evaluating the safety, tolerability and immunogenicity of two Omicron-adapted COVID-19 vaccine candidates: one monovalent and the other bivalent, a combination of the current COVID-19 vaccine and a vaccine candidate targeting the spike protein of the Omicron BA.1 variant of concern. Data from the Phase 2/3 trial found that a booster dose of both Omicron-adapted vaccine candidates elicited a substantially higher immune response against Omicron BA.1 as compared to the companies’ current COVID-19 vaccine. The robust immune response was seen across two investigational dose levels, 30-µg and 60-µg. One month after administration, a booster dose of the Omicron-adapted monovalent candidates (30-µg and 60-µg) increased neutralizing geometric mean titers (GMT) against Omicron BA.1 13.5 and 19.6-fold above pre-booster dose levels, while a booster dose of the Omicron-adapted bivalent candidates conferred a 9.1 and 10.9-fold increase in neutralizing GMTs against Omicron BA.1. Both Omicron-adapted vaccine candidates were well-tolerated in participants who received one or the other Omicron-adapted vaccine.
▪In July 2022, Pfizer and BioNTech announced the initiation of a randomized, active-controlled, observer-blind, Phase 2 study to evaluate the safety, tolerability, and immune response of an enhanced COVID-19 mRNA-based vaccine candidate at a 30-µg dose level. This next-generation bivalent COVID-19 vaccine candidate, BNT162b5, consists of RNAs encoding enhanced prefusion spike proteins for the SARS-CoV-2 ancestral strain (wild-type) and an Omicron variant. The enhanced spike protein encoded from the mRNAs in BNT162b5 have been modified with the aim of increasing the magnitude and breadth of the immune response that could better protect against COVID-19. This is the first of multiple vaccine candidates with an enhanced design which the companies plan to evaluate as part of a long-term scientific COVID-19 vaccine strategy to potentially generate more robust, longer-lasting and broader immune responses against SARS-CoV-2 infections and associated COVID-19.
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▪Regulatory Developments
▪In May 2022, Pfizer and BioNTech announced that the U.S. Food and Drug Administration (FDA) expanded the emergency use authorization (EUA) for Comirnaty to include a booster dose after completion of the primary series of the vaccine in children 5 through 11 years of age. The 10-µg booster dose is given at least five months after the second dose of the two-dose 10-µg primary series.
▪In June 2022, the FDA’s Vaccines and Related Biological Products Advisory Committee (VRBPAC) voted to include a SARS-CoV-2 Omicron component for COVID-19 boosters in the U.S. for the fall of 2022. Following the meeting, an official recommendation stated that the FDA has asked manufacturers, including Pfizer, to develop and begin clinical trials with a modified vaccine containing an Omicron BA.4/BA.5 component.
▪In June 2022, Pfizer and BioNTech announced that the European Medicines Agency (EMA) has initiated a rolling review for a variant-adapted version of the companies’ COVID-19 vaccine. This rolling review is initially based on chemistry, manufacturing, and controls (CMC) data shared with EMA earlier in June. As clinical data become available, including data on immunogenicity against Omicron and its subvariants, it will be added to the rolling submission.
▪In June 2022, Pfizer and BioNTech announced the FDA granted EUA of Comirnaty as a three 3-µg dose series for children 6 months through 4 years of age (also referred to as 6 months to less than 5 years of age). The 3-µg dose was carefully selected as the preferred dose for children under 5 years of age based on safety, tolerability and immunogenicity data.
▪In July 2022, Pfizer and BioNTech announced that the companies have submitted a variation to the EMA requesting to update the Conditional Marketing Authorization (CMA) in the European Union (EU) with data supporting the vaccination of children ages 6 months to less than 5 years of age with the 3-µg dose of Comirnaty as a three-dose series.
▪In July 2022, Pfizer and BioNTech announced the FDA approved the companies’ supplemental Biologics License Application (sBLA) for Comirnaty to include individuals 12 through 15 years of age. The vaccine was previously made available to this age group in the U.S. under EUA, and to date more than 9 million 12- to 15-year-old adolescents in the U.S. have completed a primary series. Pfizer and BioNTech have also filed for regulatory approval of the vaccine for this age group with the EMA and other regulatory authorities around the world.
▪Commercial Developments
▪In May 2022, Pfizer and BioNTech announced an agreement with the European Commission (EC) to amend their originally agreed contractual delivery schedules for Comirnaty. The
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amendment rephases planned deliveries to help support the EC and Member States’ ongoing immunization programs and is aligned to the companies’ commitment to working collaboratively to identify pragmatic solutions to address the evolving pandemic needs. Doses scheduled for delivery in June through August 2022 will now be delivered in September through fourth-quarter 2022. This change of delivery schedule did not impact the companies’ full-year 2022 revenue guidance or the full-year commitment of doses to be delivered to EC Member States in 2022.
▪In June 2022, Pfizer and BioNTech announced a new vaccine supply agreement with the U.S. government to provide an additional 105 million COVID-19 doses (30-µg, 10-µg and 3-µg) that may include adult Omicron-adapted COVID-19 vaccines, subject to authorization from the FDA. The doses are planned to be delivered as soon as late summer 2022 and continue into the fourth quarter of this year. The U.S. government will pay the companies $3.2 billion upon delivery of the first 105 million doses. The U.S. government also has the option to purchase up to 195 million additional doses, bringing the total number of potential doses to 300 million.
▪Ibrance (palbociclib)
▪In May 2022, Pfizer announced the presentation of real-world evidence of 2,888 patients demonstrating an associated benefit for hormone receptor-positive (HR+), human epidermal growth factor receptor 2-negative (HER2-) metastatic breast cancer (mBC) patients treated with Ibrance in combination with an aromatase inhibitor (AI), as compared to AI alone, in the first-line setting. After balancing for baseline demographic and clinical characteristics, palbociclib + AI versus AI alone was associated with a 24% reduction in the risk of death (HR=0.76 [95% CI, 0.65–0.87]) and a 30% reduction in the risk of disease progression (HR=0.70 [95% CI, 0.62–0.78]) in the observational, retrospective real-world analysis. Safety data were not collected as part of this analysis.
▪In June 2022, Pfizer announced overall survival (OS) results from the Phase 3 PALOMA-2 trial, which evaluated Ibrance in combination with letrozole compared to placebo plus letrozole for the first-line treatment of postmenopausal women with estrogen receptor-positive (ER+), HER2- mBC. With a median follow-up of 90 months, patients receiving Ibrance in combination with letrozole had numerically longer OS compared to placebo plus letrozole (median (95% CI) 53.9 months (49.8–60.8) vs median 51.2 months (43.7–58.9)); the results were not statistically significant. The PALOMA-2 trial was designed for a primary endpoint of progression-free survival (PFS), which was met in 2016, with OS as one of the secondary endpoints.
▪Myfembree (relugolix 40 mg, estradiol 1.0 mg and norethindrone acetate 0.5 mg)
▪In May 2022, Myovant Sciences (Myovant) and Pfizer announced the FDA had extended the review period for the supplemental New Drug Application (sNDA) for Myfembree for the management of moderate to severe pain associated with endometriosis. The FDA requires extended time to review
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additional information it had requested from the companies regarding bone mineral density. The extended Prescription Drug User Fee Act (PDUFA) goal date is August 6, 2022.
▪In June 2022, Myovant and Pfizer announced that the FDA accepted for review a sNDA for Myfembree proposing updates to Myfembree’s U.S. Prescribing Information based on safety and efficacy data from the Phase 3 LIBERTY randomized withdrawal study in premenopausal women with heavy menstrual bleeding associated with uterine fibroids for up to two years. The PDUFA goal date for this sNDA is January 29, 2023.
▪In June 2022, Myovant and Pfizer announced that results of the Phase 3 SPIRIT 1 and SPIRIT 2 studies of investigational once-daily Myfembree in over 1,200 women with moderate to severe pain associated with endometriosis were published in The Lancet. SPIRIT 1 and 2 each met their co-primary endpoints with 75% of women in the relugolix combination therapy group in both studies achieving a clinically meaningful reduction in dysmenorrhea compared with 27% and 30% of women in the placebo groups at Week 24, respectively (both p < 0.0001). For non-menstrual pelvic pain, relugolix combination therapy achieved a clinically meaningful reduction in 59% and 66% of women, compared with 40% and 43% of women in the placebo groups (p < 0.0001). In both studies, relugolix combination therapy was associated with a generally well-tolerated safety profile, including bone mineral density loss of <1% over 24 weeks.
▪Paxlovid (nirmatrelvir [PF-07321332] tablets and ritonavir tablets)(8)
▪Clinical and Research Developments
▪In June 2022, Pfizer announced data from the Phase 2/3 EPIC-SR (Evaluation of Protease Inhibition for COVID-19 in Standard-Risk Patients) study evaluating the use of Paxlovid in patients who are at standard risk for developing severe COVID-19. In the EPIC-SR study, the novel primary endpoint of self-reported, sustained alleviation of all symptoms for four consecutive days was not met, as previously reported. While not all statistically significant, data from standard-risk patients, both vaccinated and unvaccinated, are supportive of efficacy data observed in the EPIC-HR study. Due to a very low rate of hospitalization or death observed in the standard-risk patient population, Pfizer decided to cease enrollment into EPIC-SR and include available data in the New Drug Application (NDA) submission to the FDA to support the use of Paxlovid in appropriate individuals at high risk of progression to severe illness.
▪Regulatory Developments
▪In June 2022, Pfizer announced the submission of an NDA to the FDA for approval of Paxlovid for the treatment of COVID-19 in both vaccinated and unvaccinated individuals who are at high risk for progression to severe illness from COVID-19, consistent with current emergency use authorization. The submission provides the longer-term follow-up data necessary for acceptance
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and potential approval. According to the U.S. Centers for Disease Control and Prevention’s (CDC) defined risk factors, 50-60% of the U.S. population aged 12 and older is estimated to have one or more risk factors for progressing to severe COVID-19 illness.
Pipeline Developments
A comprehensive update of Pfizer’s development pipeline was published today and is now available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of Pfizer’s research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.
▪Elranatamab (PF-06863135) — In June 2022, Pfizer announced new data from a planned interim analysis of the Phase 2 MagnetisMM-3 registration-enabling trial of elranatamab, an investigational B-cell maturation antigen (BCMA) CD3-targeted bispecific antibody, in people with relapsed/refractory multiple myeloma whose disease is refractory to at least one agent in each of three major classes of medications approved for the disease. With a median follow up of 3.71 months, initial efficacy results showed that the objective response rate for elranatamab was 60.6%. The trial is still ongoing to the primary endpoint analysis with results expected later this year, which, if positive, would form the basis of potential regulatory filings.
▪Etrasimod (Selective S1P Receptor Modulator) — In May 2022, Pfizer presented detailed results from two pivotal studies that make up the ELEVATE UC Phase 3 registrational program evaluating etrasimod, a once-daily, oral, selective sphingosine 1-phosphate (S1P) receptor modulator candidate for the treatment of moderately-to-severely active ulcerative colitis (UC). Both Phase 3, multi-center, randomized, placebo-controlled trials achieved all primary and key secondary endpoints, with etrasimod demonstrating a safety profile consistent with previous studies. In the 52-week ELEVATE UC 52 study, clinical remission was 27.0% for patients receiving etrasimod compared to 7.4% for patients receiving placebo at week 12 (19.8% differential, P=˂.001) and was 32.1% compared to 6.7% at week 52 (25.4% differential, P=˂.001). In the 12-week ELEVATE UC 12 study, clinical remission was achieved among 24.8% of patients receiving etrasimod compared to 15.2% of patients receiving placebo (9.7% differential, P=.0264). The data are expected to form the basis for planned future regulatory filings, which will be initiated later this year.
▪Ervogastat (PF-06865571)/Clesacostat (PF-05221304) Combination Therapy — In May 2022, Pfizer announced the FDA had granted Fast Track designation to its investigational combination therapy of ervogastat (a diacylglycerol O-acyltransferase 2 inhibitor, or DGAT2i) and clesacostat (an acetyl-CoA carboxylase inhibitor, or ACCi) for the treatment of non-alcoholic steatohepatitis (NASH) with liver fibrosis. Pfizer is currently studying the combination in an ongoing Phase 2 clinical trial evaluating the impact of treatment on resolution of NASH or improvement in liver fibrosis, expected to complete in 2024.
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▪TTI-622 (Signal-Regulatory Protein α-Fc Fusion Protein) — In June 2022, Pfizer, MorphoSys U.S. Inc. (MorphoSys) and Incyte announced a clinical trial collaboration and supply agreement to investigate the immunotherapeutic combination of Pfizer’s TTI-622, a novel SIRPα-Fc fusion protein, and Monjuvi(9) (tafasitamab-cxix) plus lenalidomide in patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) who are not eligible for autologous stem cell transplantation (ASCT). Under the terms of the agreement, Pfizer will initiate a multicenter, international Phase 1b/2 study of TTI-622 with Monjuvi and lenalidomide for patients with relapsed or refractory DLBCL who are not eligible for ASCT. MorphoSys and Incyte will provide Monjuvi for the study, which will be sponsored and funded by Pfizer and is planned to be conducted in North America, Europe and Asia-Pacific.
Corporate Developments
▪In May 2022, Pfizer and Biohaven announced that the companies have entered into a definitive agreement under which Pfizer will acquire Biohaven and its calcitonin gene-related peptide (CGRP) programs, including rimegepant, zavegepant and a portfolio of five pre-clinical CGRP assets. Under the terms of the agreement, Pfizer will acquire all outstanding common shares of Biohaven not already owned by Pfizer for $148.50 per share in cash. Biohaven common shareholders, including Pfizer, will also receive 0.5 of a share of New Biohaven, a new publicly traded company that will retain Biohaven’s non-CGRP development stage pipeline compounds, per Biohaven common share. Pfizer will pay transaction consideration totaling approximately $11.6 billion in cash. Pfizer will also make payments at closing to settle Biohaven’s third party debt and for the redemption of all outstanding shares of Biohaven’s redeemable preferred stock. New Biohaven will also have the right to receive tiered royalties from Pfizer on any annual net sales of rimegepant and zavegepant in the U.S. in excess of $5.25 billion. The proposed transaction is expected to close by early 2023, subject to the completion of the New Biohaven spin-off transaction and other customary closing conditions. All required antitrust clearances have been received.
▪In May 2022, Pfizer launched ‘An Accord for a Healthier World’, a groundbreaking initiative that seeks to greatly reduce the health inequities that exist between many lower-income countries and the rest of the world. The initiative aims to provide all of Pfizer’s current and future patented, high-quality medicines and vaccines available in the U.S. or the EU on a not-for-profit basis to 1.2 billion people in 45 lower-income countries.
▪In June 2022, Pfizer provided an update on its ownership interest in Haleon plc (Haleon), the newly independent company which holds the joint Consumer Healthcare business of GSK plc (GSK) and Pfizer following the demerger of approximately 80% of GSK’s ownership interest in the business to GSK’s shareholders and the listing of Haleon on the London Stock Exchange, which occurred in July 2022. In addition, Haleon listed American Depositary Shares (ADSs) representing Haleon ordinary shares on the New York Stock Exchange. In keeping with Pfizer’s transformation into a more focused, global leader in science-
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based innovative medicines and vaccines, Pfizer intends to exit its 32% ownership interest in Haleon in a disciplined manner, with the objective of maximizing value for Pfizer shareholders.
▪In June 2022, which falls in Pfizer’s international(5) third quarter of 2022, Pfizer completed its acquisition of ReViral, a privately held, clinical-stage biopharmaceutical company focused on discovering, developing, and commercializing novel antiviral therapeutics that target respiratory syncytial virus (RSV). ReViral brings to Pfizer a portfolio of promising therapeutic candidates, including sisunatovir, an orally administered inhibitor designed to block fusion of the RSV virus to the host cell currently in Phase 2 clinical development for both adult and pediatric populations.
▪In June 2022, Valneva SE (Valneva) and Pfizer announced the companies have entered into an equity subscription agreement and have updated the terms of their collaboration and license agreement for Lyme disease vaccine candidate VLA15. As part of the equity subscription agreement, which closed on June 22, 2022, Pfizer invested €90.5 ($95) million in Valneva, representing 8.1% of Valneva’s share capital at a price of €9.49 per share, through a reserved capital increase. Valneva will fund 40% of the remaining shared development costs compared to 30% in the initial agreement. Pfizer will pay Valneva tiered royalties ranging from 14% to 22% of net sales of VLA15, compared to royalties starting at 19% in the initial agreement. In addition, the royalties will be complemented by up to $100 million in milestones payable to Valneva based on cumulative sales. Other development and early commercialization milestones are unchanged, of which $168 million remain, including a $25 million payment to Valneva upon Pfizer’s initiation of the Phase 3 study.
▪In June 2022, Roivant Sciences (Roivant) and Pfizer announced the unveiling of Priovant Therapeutics (Priovant), a clinical-stage biotechnology company dedicated to developing and commercializing novel therapies for autoimmune diseases with the greatest morbidity and mortality. Priovant was established in September 2021 through a transaction between Roivant and Pfizer, in which Pfizer granted an exclusive license to brepocitinib and ropsacitinib to Priovant. Pfizer holds a 25% equity ownership interest in Priovant.
▪In June 2022, Pfizer announced a commitment to further reduce Greenhouse Gas (GHG) emissions and aims to achieve the voluntary Net-Zero Standard by 2040, ten years earlier than the timeline described in the standard. As part of the commitment, Pfizer aims to decrease its GHG emissions by 95% and its value chain emissions by 90% from 2019 levels by 2040 through accelerating the transition away from fossil fuels and engaging suppliers to catalyze equivalent action. Pfizer also signed a pledge by the U.S. Department of Health & Human Services (HHS) that calls on stakeholders in the U.S. healthcare system – including hospitals, health systems, payers, suppliers and pharmaceutical companies – to reduce GHG emissions and build a more climate resilient healthcare infrastructure.
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For additional details, see the attached financial schedules, product revenue tables and disclosure notice.
(1)Comirnaty includes direct sales and alliance revenues related to sales of the Pfizer-BioNTech SE (BioNTech) COVID-19 vaccine, which are recorded within Pfizer’s Vaccines therapeutic area. It does not include revenues for certain Comirnaty-related manufacturing activities performed on behalf of BioNTech, which are included in the Pfizer CentreOne contract development and manufacturing organization. Revenues related to these manufacturing activities totaled $55 million and $101 million for second-quarter and the first six months of 2022, respectively, and $87 million for both second-quarter and the first six months of 2021.
(2)Revenues is defined as revenues in accordance with U.S. generally accepted accounting principles (GAAP). Reported net income and its components are defined as net income attributable to Pfizer Inc. and its components in accordance with U.S. GAAP. Reported diluted earnings per share (EPS) is defined as diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.
(3)Adjusted income and Adjusted diluted EPS are defined as U.S. GAAP net income attributable to Pfizer Inc. common shareholders and reported EPS attributable to Pfizer Inc. common shareholders—diluted before the impact of amortization of intangible assets, certain acquisition-related items, discontinued operations and certain significant items. See the accompanying reconciliations of certain GAAP Reported to Non-GAAP Adjusted information for the second quarter and the first six months of 2022 and 2021. Adjusted income and its components and Adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS(2). See the Non-GAAP Financial Measure: Adjusted Income sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Pfizer’s 2021 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarterly period ended April 3, 2022 and the accompanying Non-GAAP Financial Measure: Adjusted Income section of this press release for a definition of each component of Adjusted income as well as other relevant information.
(4)Pfizer does not provide guidance for GAAP Reported financial measures (other than revenues and acquired IPR&D expenses) or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP Reported financial measures on a forward-looking basis because it is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gains and losses, certain acquisition-related expenses, gains and losses from equity securities, actuarial gains and losses from pension and postretirement plan remeasurements and potential future asset impairments without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP Reported results for the guidance period.
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Financial guidance for full-year 2022 reflects the following:
▪Does not assume the completion of any business development transactions not completed as of July 3, 2022, with the exception of signed transactions through mid-July 2022, which are expected to give rise to acquired in-process R&D (IPR&D) expenses during fiscal 2022.
▪Reflects an anticipated incremental negative impact of $0.11 on Adjusted diluted EPS(3) related to the inclusion of all acquired IPR&D expenses that have been incurred or are expected to be incurred for transactions signed as of mid-July 2022, which would have been excluded from Adjusted(3) results under our previous accounting policy on non-GAAP measures. This excludes any impact from the proposed acquisition of Biohaven, which is expected to close by early 2023.
▪Includes Pfizer’s pro rata share of Haleon plc’s (Haleon) anticipated earnings, which is recorded in Adjusted other (income)/deductions(3) on a one-quarter lag, and assumes no changes to Pfizer’s 32% ownership stake in Haleon in 2022.
▪Includes an estimated benefit of approximately $0.06 on Adjusted diluted EPS(3) resulting from a change in policy for intangible amortization expense in which Pfizer began excluding all amortization of intangibles from Adjusted income(3) compared to excluding only amortization of intangibles related to large mergers or acquisitions under the prior methodology. This change went into effect beginning in the first quarter of 2022 and prior period amounts have been revised to conform to the new policy.
▪Reflects an anticipated negative revenue impact of $0.6 billion due to recent and expected generic and biosimilar competition for certain products that have recently lost patent protection or that are anticipated to lose patent protection during fiscal-year 2022.
▪Exchange rates assumed are a blend of actual rates in effect through second-quarter 2022 and mid-July 2022 rates for the remainder of the year. Financial guidance reflects the anticipated unfavorable impact of approximately $5.0 billion on revenues and approximately $0.31 on Adjusted diluted EPS(3) as a result of changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2021.
▪Guidance for Adjusted diluted EPS(3) assumes diluted weighted-average shares outstanding of approximately 5.75 billion shares, which assumes only share repurchases completed to date in 2022.
(5)Pfizer’s fiscal year-end for international subsidiaries is November 30 while Pfizer’s fiscal year-end for U.S. subsidiaries is December 31. Therefore, Pfizer’s second quarter and first six months for U.S. subsidiaries reflects the three and six months ended on July 3, 2022 and July 4, 2021, while Pfizer’s second quarter and first six months for subsidiaries operating outside the U.S. reflects the three and six months ended on May 29, 2022 and May 30, 2021.
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(6)The following business development activity, among others, impacted financial results for the current or prior fiscal year:
▪On March 11, 2022, Pfizer announced the completion of its acquisition of Arena Pharmaceuticals, Inc., a clinical-stage company developing innovative potential therapies for the treatment of several immuno-inflammatory diseases, for $100 per share, in cash. The total fair value of the consideration transferred was $6.6 billion ($6.2 billion, net of cash acquired).
▪On December 31, 2021, Pfizer completed the sale of its Meridian subsidiary, the manufacturer of EpiPen and other auto-injector products, which generated approximately $300 million in annual revenues and which previously had been managed within the Hospital therapeutic area. Beginning in the fourth quarter of 2021, the financial results of Meridian are reflected as discontinued operations for all periods presented.
▪On December 24, 2021, Pfizer entered into a multi-year research collaboration with Beam Therapeutics Inc. (Beam) to utilize Beam’s in vivo base editing programs, which use mRNA and lipid nanoparticles, for three targets for rare genetic diseases of the liver, muscle and central nervous system. Under the terms of the agreement, Pfizer paid Beam a $300 million upfront payment. If Pfizer elects to opt in to licenses for all three targets, Beam would be eligible for up to an additional $1.05 billion in development, regulatory and commercial milestone payments for a potential total deal consideration of up to $1.35 billion. Beam is also eligible to receive royalties on global net sales for each licensed program.
▪On November 17, 2021, Pfizer acquired all outstanding shares, warrants, options and deferred shares not already owned by Pfizer of Trillium Therapeutics Inc. (Trillium), a clinical-stage immuno-oncology company developing therapies targeting cancer immune evasion pathways and specific cell targeting approaches, for a price of $18.50 per share in cash, for total consideration of $2.0 billion, net of cash acquired. Pfizer accounted for the transaction as an asset acquisition since the lead asset, TTI-622, represented substantially all of the fair value of the gross assets acquired. As a result, Pfizer recorded a $2.1 billion charge in fourth-quarter 2021, representing the acquired in-process R&D asset.
▪On November 9, 2021, Pfizer and Biohaven Pharmaceutical Holding Company Ltd. (Biohaven) announced a strategic collaboration and license agreement for Pfizer to commercialize rimegepant and zavegepant for the treatment and prevention of migraines outside of the U.S., subject to regulatory approval. Upon the closing of the transaction on January 4, 2022, Pfizer paid Biohaven $500 million, including an upfront payment of $150 million and an equity investment of $350 million. Pfizer recognized $263 million for the upfront payment and premium paid on its equity
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investment in acquired IPR&D expenses. Biohaven is also eligible to receive up to $740 million in non-U.S. commercialization milestone payments, in addition to tiered double-digit royalties on net sales outside of the U.S. In addition to the milestone payments and royalties above, Pfizer will also reimburse Biohaven for the portion of certain additional milestone payments and royalties due to third parties in accordance with preexisting Biohaven agreements, which are attributed to ex-U.S. sales.
▪On July 22, 2021, Arvinas Inc. (Arvinas) and Pfizer announced a global collaboration to develop and commercialize ARV-471, an investigational oral PROTAC (PROteolysis TArgeting Chimera) estrogen receptor protein degrader. The estrogen receptor is a well-known disease driver in most breast cancers. Under the terms of the agreement, Pfizer paid Arvinas $650 million upfront and made a $350 million equity investment in Arvinas. Arvinas is also eligible to receive up to $400 million in approval milestones and up to $1 billion in commercial milestones. The companies will equally share worldwide development costs, commercialization expenses and profits.
(7)References to operational variances in this press release pertain to period-over-period changes that exclude the impact of foreign exchange rates. Although exchange rate changes are part of Pfizer’s business, they are not within Pfizer’s control and since they can mask positive or negative trends in the business, Pfizer believes presenting operational variances excluding these foreign exchange changes provides useful information to evaluate Pfizer’s results.
(8)Paxlovid and emergency uses of the Pfizer-BioNTech COVID-19 Vaccine have not been approved or licensed by the FDA. Emergency uses of Comirnaty have been authorized by the FDA, under an Emergency Use Authorization (EUA) to prevent Coronavirus Disease 2019 (COVID-19) in individuals 6 months of age and older. Comirnaty is licensed by the FDA for individuals 12 years of age and older. In addition, Comirnaty is under EUA for individuals 6 months of age and older, a third dose for certain immunocompromised individuals 5 years of age and older, a booster dose for individuals 5 years of age and older, and a second booster dose for individuals 50 years of age and older and for certain immunocompromised individuals 12 years of age and older. Paxlovid has been authorized for emergency use by the FDA under an EUA, for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients (12 years of age and older weighing at least 40 kg [88 lbs]) with positive results of direct SARS-CoV-2 viral testing, and who are at high-risk for progression to severe COVID-19, including hospitalization or death. The emergency uses are only authorized for the duration of the declaration that circumstances exist justifying the authorization of emergency use of the medical product under Section 564(b)(1) of the FD&C Act unless the declaration is terminated or authorization revoked sooner. Please see the EUA Fact Sheets at www.cvdvaccine-us.com and www.covid19oralrx.com.
(9)Monjuvi is a registered trademark of MorphoSys AG.
Adjusted income and its components and Adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by GAAP and, therefore, are limited in their usefulness to investors. Because of their non-standardized definitions, they may not be comparable to the calculation of similar measures of other companies and are presented to permit investors to more fully understand how management assesses performance. A limitation of these measures is that they provide a view of our operations without including all events during a period, and do not provide a comparable view of our performance to peers. These measures are not, and should not be viewed as, substitutes for their most directly comparable GAAP measures of Net income attributable to Pfizer Inc. common shareholders, components of Net income attributable to Pfizer Inc. common shareholders and EPS attributable to Pfizer Inc. common shareholders—diluted, respectively.
We also recognize that, as internal measures of performance, these measures have limitations, and we do not restrict our performance-management process solely to these measures. We also use other tools designed to achieve the highest levels of performance. For example, our R&D organization has productivity targets, upon which its effectiveness is measured. In addition, total shareholder return, both on an absolute basis and relative to a publicly traded pharmaceutical index, plays a significant role in determining payouts under certain of our incentive compensation plans.
Beginning in the first quarter of 2022, our reconciliation of certain GAAP reported to non-GAAP adjusted information is updated to reflect the following, and prior period information has been revised to conform to the current period presentation:
Adjusted Income and Adjusted Diluted EPS
Acquired IPR&D—Non-GAAP Adjusted financial measures include expenses for all acquired in-process research and development (IPR&D) costs incurred in connection with upfront and milestone payments on collaboration and in-license agreements, including premiums on equity securities, as well as asset acquisitions of acquired IPR&D. Previously, certain of these items were excluded from our non-GAAP adjusted results. Acquired IPR&D expenses that previously would have been excluded from non-GAAP Adjusted income but are now included in both GAAP Reported income and non-GAAP Adjusted income: (i) had no impact in the second quarter of 2022, (ii) were approximately $339 million pre-tax ($276 million, net of tax), or $0.05 per share, in the first six months of 2022 and (iii) were approximately $186 million for both pre-tax and net of tax, or $0.03 per share, in both the second quarter and first six months of 2021.
Amortization of Intangible Assets—We began excluding all amortization of intangibles from non-GAAP Adjusted income, compared to excluding only amortization of intangibles related to large mergers or acquisitions under the prior methodology, and presenting it as a separate reconciling line. Previously, the adjustment under the prior methodology was included as part of a reconciling line entitled "Purchase accounting adjustments" that we no longer separately present. The impact of this policy change resulted in a benefit of $0.02 and $0.03 on Adjusted diluted EPS in the second quarter and first six months of 2022, respectively, and $0.03 and $0.04 in the second quarter and first six months of 2021, respectively.
Acquisition-Related Items—Acquisition-related items may now include purchase accounting impacts that previously would have been included as part of a reconciling line entitled "Purchase accounting adjustments" that we no longer separately present, such as: (i) the incremental charge to cost of sales from the sale of acquired inventory that was written up to fair value, (ii) depreciation related to the increase/decrease in fair value of acquired fixed assets, (iii) amortization related to the increase in fair value of acquired debt and (iv) the fair value changes for contingent consideration.
See the reconciliations of certain GAAP Reported to Non-GAAP Adjusted information for the second quarter and first six months of 2022 and 2021 below and the Non-GAAP Financial Measure: Adjusted Income sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Pfizer’s 2021 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarterly period ended April 3, 2022 for additional information.