Pfizer Reacts to Trump’s Comments and Discusses Pipeline in Its Q4 Earnings Call

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A change in the tax code could help the company create more jobs in the United States, while fewer FDA regulations could help reduce drug prices, according to Pfizer CEO Ian Read.

Pfizer executives were not among the pharma representatives who met with Trump yesterday to discuss various issues affecting the industry, a circumstance that Pfizer attributed to a schedule conflict with its quarterly earnings call. Despite the company’s absence from the meeting, Pfizer’s CEO Ian C. Read commented on some of Trump’s policy suggestions, and also discussed sales trends and projections for Pfizer’s R&D pipeline.

Bringing manufacturing jobs back to the United States would imply a change to the corporate tax code, and perhaps a repatriation initiative, said Read. He noted a major component of getting manufacturing back to America “falls squarely inside of getting a tax reform which allows us to reinvest in the United States and create jobs.” Read continued, “we can be a very positive part of the story of creating jobs in the United States if we get the tax reform," a point that he reiterated later during the call.

Pfizer has benefitted from previous repatriation efforts. In 2004, as a result of the American Jobs Creation Act, Pfizer was among the top five companies that were responsible for $88 billion in repatriations, according to estimates from the Congressional Research Service. Pfizer received $37 billion of the repatriation money as a result of the initiative.

In 2005 and 2006, however, Pfizer eliminated 10,000 jobs. Thus, ironically, repatriation and the “job creation” push resulted in fewer company positions.

In a note to investors, Marc Shoenebaum of Evercore ISI said that his company had spoken with Pfizer about potential cash repatriation, and Pfizer said it could potentially increase US cash from about $10 billion to roughly $60–70 billion by repatriating approximately $14 billion in cash from outside the US and raising about $40 billion in additional debt, wrote Shoenebaum. He also noted that Pfizer executives warned that repatriation might contribute to rises in asset pricing.

Fewer regulations or more regulations?

Read appeared to support Trump’s decision to reduce FDA regulations, saying it would help contribute to lower drug prices. In the call, Read did not elucidate how the cost of drug development (which has historically factored into drug pricing decisions) would change as a result of fewer regulations. Read also seemed to focus on the approval of generics, rather than on branded medications that have no or few competitors.


Trump is “going to cut up to 80% to help streamline the approval process. That will help with drug prices, because it'll induce more competition,” said Read. “We have been advocating for a long time to speed up the approval of generics and remove the barriers to their approval, because that will help with drug prices.”

Read said he interpreted some of Trump's remarks on regulations to be related to how insurance companies determine the cost of drugs for patients. "Cost to patients is driven by the fact that the out-of-pocket expense on average for a patient to visit a hospital is 3%, but on his drug bill, it's 15%. So we'd like to see regulations that would allow that unfair playing field to be squared up."

To ensure that patients have affordable drugs, new regulations or changes to existing regulations may be necessary, noted Read during the call. Specifically, he mentioned changing regulations "to allow value-based contracting between the industry and the health system . . . We have a regulation that was created for fee-for-service, and now we need regulations in a new world of value-based pricing." But an executive order issued on Jan. 30, 2017 requires federal agencies to remove two regulations with the introduction of any new regulation-so new regulations on value-based pricing, as Read suggested, may sacrifice some older regulations that are already in place.

Vaccine sales and future focus

The sale of the vaccine Prevnar 13 was also an important focus of discussion, as Prevnar 13 contributed approximately $6.2 billion in worldwide sales in 2015. Read said that because the company has already “vaccinated approximately 50%” of those over age 65, Read expects to see a decline in sales for the adult population. "In the US, Prevnar 13 declined 33% due to a decrease in revenues for the adult indication after the high initial capture rate of the eligible population following its successful fourth quarter of 2014 launch, which resulted in a smaller remaining catch-up opportunity compared to the prior-year quarter and the unfavorable impact from the timing of government purchases to the pediatric indication.”

According to Pfizer spokesperson Sally Beatty, the government purchasing portion of Read’s comment refers to the fact that the timing of vaccine purchasing decisions is not predictable; the government “has its own rhythm” when it comes to purchasing vaccines, according to Beatty, and this timing negatively affected the sales of Prevnar 13 in 2016. Sales of the vaccine in 2017 are expected to be flat or slightly down, but may be offset by sales to pediatric patients.

Pfizer expects a decision in 2017 on its investigational PD-L1 candidate, avelumab, for the treatment of Merkel cell carcinoma.  Avelumab, the company said, will be important as a monotherapy, but its senior management team believes that its true value will be seen in combination therapies, where it might be coupled with targeted agents such as Inlyta, or with antibody-drug conjugates, vaccines, and other immuno-oncology agents in Pfizer's pipeline. The company reports having 14 biosimilar molecules in development and expects “readouts” on its bavituximab and filgrastim products in 2017.

Sources: Seeking Alpha, Congressional Research Service