Pfizer (PFE) Morgan Stanley 22nd Annual Global Healthcare Conference summary

2024 execution and financial outlook

• 2024 is focused on execution, cost improvement, and right-sizing for growth after a challenging 2023.

• Delivery of one million incremental Paxlovid doses to the U.S. stockpile was completed in Q3.

• Non-COVID business performance has been stable, while COVID-related revenue remains less predictable.

• Guidance philosophy emphasizes conservative, achievable targets, with improved predictability expected for COVID franchise in 2025.

• Part D redesign in 2025 is expected to have a minor impact, with broader Medicare and IRA changes being both constructive and dilutive.

Cost structure, margin improvement, and investment

• Multi-phase COGS improvement program underway: phase I focuses on operational efficiencies, with phases II and III targeting portfolio optimization and global manufacturing consolidation.

• Most COGS improvements will materialize in 2025 and 2026, with limited impact in 2024.

• $4 billion cost reduction in SI&A and R&D is largely on track, supporting new product launches and Seagen integration.

• R&D and SG&A are expected to remain steady in absolute dollars, with future margin gains driven by COGS and sales leverage.

• Flexibility exists to adjust SI&A and R&D spending if product cycles underperform.

Capital allocation and leverage

• Deleveraging to sub-3.25x gross leverage is a multi-year goal, with normal cash conversion resuming in 2025-2026 after Paxlovid credit arrangements cycle out.

• Balanced capital allocation is planned post-deleveraging, with a preference for share repurchases but continued business development investments.

• Future business development will seek a mix of early and late-stage assets, with flexibility based on market dynamics and balance sheet capacity.

• Dividend growth will remain a priority, but near-term increases are expected to be at the lower end of the historical range.