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Pfizer - "a year of execution"

While the quote below helped to close out Pfizer's latest call, it is a great place to begin this analysis. [all materials at the very bottom]

"We are optimistic about the year ahead.. We have defined our five key priorities that will keep us focused.. This will be a year of execution.. I have assembled a team, that I hand picked, that I believe are the absolutely right leaders to execute."

- Albert Bourla – Pfizer Inc. – Chairman and Chief Executive Officer

When measuring and assessing investments a simple place to begin is with three areas - people, process, and performance.

In the wake of extreme highs, and now lows, there has been a near wholesale change of leadership atop a biopharma bellwether; it is thus intriguing that one individual has remained throughout - Mikael Dolsten (Chief Scientific Officer & President, Pfizer R&D).

Now, you probably thought I was going to say Albert Bourla(!); well, if the quote above is to be extrapolated from - ask me again in twelve to eighteen months (i.e., if this blueprint has proven out as faded and wayward).

Pfizer has been through the tropiest of rollercoaster rides; if this were the plot of a movie, it would be thoroughly panned as being too predictable... and yet here we are.

We're being given markers that align with internal goals and plans, that much is obvious; whatever you may think (e.g., versus where this exercise would have landed things back in 2019) or believe, my hunch is, Albert Bourla and company will be held to these.

This is it, the team is assembled, there are no excuses; these people, this "handpicked team" will execute or.. it is likely a new team closes out the second half of the 2020's.

2024 will be a transformative year for Pfizer, one way or the other.

The "five key priorities":

  • Achieve world-class oncology leadership

  • Deliver the next wave of pipeline innovation

  • Maximize performance of our new products

  • Expand margins by realigning our cost base

  • Allocate capital to enhance shareholder value

[just to quickly interject something that is coming to mind]

Missing from this call were, the historically typical, platitudes with regard to the commercial engine at the core of Pfizer - each commercial head (Aamir Malik - USA | Alexandre de Germay - International | Chris Boshoff - Oncology) came with fairly specific examples alluding to underlying plans, etc.

[back on track]

Achieve world-class oncology leadership

Significant allocation of resources to oncology, to be judged against the progression of no less than eight potential blockbusters by decade's end; February 29th, as rare a day as ever, will be Chris Boshoff's day to shine (perhaps further gild his path forward).. An opportunity to influence what people begin to put in their models, stay tuned.

Take all the exciting bits that make up Seagen and now sprinkle in the best of Pfizer's oncology pipeline and portfolio; call it Seagen+ and strap in for a healthy mix of commercial and clinical milestones (through all phases).

Deliver the next wave of pipeline innovation

For a biopharma major the pipeline, while inherently opportunistic, is equal parts defensive and offensive; there is a salesforce to be fed and maintained in addition to scientific areas of expertise needing leveraged. Internal disruption is paramount in a world of multitudinous, agile, and ruthless competition - yet, exceedingly challenging to achieve at such scale.

It's a massive research and development budget at Pfizer when you consider the fairly limited scope: 'Oncology, Vaccines, Anti-Infectives, Internal Medicine Metabolic Diseases, and Inflammation and Immunology'. While some of these could be considered catch-all therapeutic areas a quick glance within (and even their chosen verbiage) highlights Pfizer's focus.

Oncology is such a large venture for Pfizer that it has been made into a near stand-alone entity; something akin to what Roche has going with Genentech (though just oncology), only if pRED had been subsumed by gRED from the outset (i.e., it is really Pfizer Oncology being absorbed into Seagen).

[another quick interjection]

The recasting of divisions with oncology allowed to do their thing, undistracted to the greatest extent possible, is quite the tack; equally striking is the difference between the heads of commercial for the US and International.. It is quite clear that tectonic shifts are coming for the US commercial enterprise.

[back to monologuing some thoughts that have been couped up]

Vaccines have been an area of excellence and here the breadth of Pfizer's aspirations, while wide, seems manageable. As with other areas the nature of an approval and reimbursement can change over time and that leaves the mines at least semi-stoped for some assets (e.g., RSV).

'Prevnar 4.0', a hit here is not optional, as it stands the current generation has already seen barbarians at the gates - if you were to define pillars of the Pfizer brand expected to endure this is likely instantly conjured. For now, Pfizer's staying rather tight lipped, it should be noted there have been departures at the top of their vaccines division - perhaps some extra scrutiny here is warranted (and likely won't abate). That said, thus far issues seem to be more commercial in nature.

Pfizer remains committed to anti-infectives as many (perhaps most) peers have set their sights elsewhere; what used to be their 'hospital' silo is a rather impressive armamentarium of indispensable assets. This area reminds of Roche's diagnostics unit by my estimation, an underappreciated facet to the business.

Internal Medicine, now spicier with 100% more verbiage, 'Internal Medicine Metabolic Diseases'.. Make no mistake, Albert Bourla isn't done with the metabolic side to 'cardio-metabolic', "I’ve reaffirmed our commitment to our emerging cardiometabolic programs, with several early clinical development compounds."; while it is easy to call this optionality, Pfizer is spending a commensurate amount of capital here.

With Bill Sessa onboard one might be forgiven for worrying that the general category is correct, yet the ultimate targets suspect (or just too heavily chased). After having a rough go thus far, they're strategically remaining quiet about follow on assets. It is here foremost that I believe Mikael Dolsten's future rests and remain surprised that he hasn't yet fallen victim to their track record.

Inflammation and Immunology, has seen a strategy shift and just recorded an impairment charge on that shift; now, was that more of an accounting move only time will tell.. Having first gone with a sort of 'JAKi-for-all' approach, subsequently shuffling assets around as the regulatory winds blew, spending a healthy sum on an external asset, only to be capped off with one of the greater business development faux pas of all time - is this an area of focus?

The current portfolio and pipeline here are feeling a bit disjointed; perhaps there is an overhaul coming as some things have been sort of airdropped into the bucket, etc. - which also makes me wonder about those North Carolina facilities and if they anchor to those sunk costs?

Maximize performance of our new products

Things aren't so dire; the last twelve months saw myriad launches and Pfizer has assets that any salesforce would be chomping at the bit to hawk. Across the board assets seem underappreciated or if they're established - long lambasted with opinions wholly immovable. That is a great setup for investors with even a modicum of patience in my honest opinion.

Expand margins by realigning our cost base & Allocate capital to enhance shareholder value

Massive investments have been made over the last few years; an equally extensive operation is underway to make the business more efficient - there are levers throughout waiting to be pulled. The top-line seems to be at a nadir, business mix should improve, the logistics of that mix will improve, and almost every possible bit has low hanging fruit to be plucked.

By my math and quite clearly stated by management for some time now, we should expect buybacks to come back into the picture beyond merely offsetting stock-based compensation.

You'll want to consult their filings (which always come quite delayed) to get a feel for cash flows and net debt post Seagen; that said they can always monetize their stakes in ViiV and Haleon for healthy sums.. easily $13,000,000,000 plus.

From the equity holder's perspective consider that: net debt will trend down, dividends will grow, buybacks will initiate, the topline has stabilized, and margins are set to expand..

br. -john

p.s. I'll add more from the transcript wrt the q&a when I get the energy/ motivation but it was a call where mgmt clearly wanted people more focused on execution than science - the latter bit (oncology at least) we get to delve into on Leap Day!!

p.p.s. there are some interesting bits w/in the pipeline deck, e.g. Oncology has expanded from two pages to five!!

p.p.p.s. it was interesting to hear Allogene mentioned by Boshoff on the call, though they're clearly a satellite story at the moment (people tried to conjure up color on Cerevel ala Televant as well)!!

p.p.p.p.s. (haHA) once I've dropped all the individual sales data into excel I'll perhaps circle back on the release itself - though I may wait on the full filing first!!

Release/ Report

Prepared Remarks




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