So that, I think, dynamic that the industry always asks that we contribute to the out-of-pocket payments as long as the patients are paying less because there is a significant benefit for all, for healthcare systems, for patients, for us. And so I’m not that concerned about that for the industry as a whole. I’m very concerned for the industry as a whole with the mandatory cost reduction. There is no negotiation there. They are just cutting prices but are occurring for biologics and for more volumes, particularly. One good thing for us, it is, first of all, that we have good exposure on vaccines, that they are a part of that, actually, they are benefiting from the IRA because there is no co-sharing. So we can see that in the volumes again. But on the small molecules where we do have exposure, I would say that we were lucky only one product that was selected for ’26, we could have three or four and only one was selected.
So Eliquis, as Aamir said, we will wait to see. We know, of course, but we can’t discuss in the middle of negotiations about anything that’s happening. And so we’ll see the impact of whatever about this in 2026. Then if next year, they bring some of the other products that they’ve been included and they were not in this year, that will be the Ibrance of the world, that will be the XTANDIs, those are products that anyway, they are approaching their LOE. So even if they come into the IRA, the MPV risk that we have in place is not that big because really, we cut the price for something, but it will not be for a very lengthy period of time but will be for smaller than others period of time. This doesn’t mean that this is not very bad for the industry and for innovation and we clearly opposing and he will try whatever we can to defend it.
Let’s go to the next question because we are running our time.
Operator: We’ll take our next question from Rajesh Kumar with HSBC. Your line is open.
Rajesh Kumar: First question is you very helpfully provided some color on the gross margin. What are the takes and puts there? If we look at your early 70s guidance and the gross margin you’ve achieved in Q1, do we see below 70s gross margin some point in some quarter this year? Or you sort of will get to early 70 with throughout the year, maintaining over 70% margin? And then the bit which is quite difficult to work out from the disclosures is, how did the Paxlovid number impact the gross margin. So any help there so that we can model that right would be much appreciated.
Albert Bourla: Dave?
David Denton: Great. So yes, I think we just gave some color around gross margin being closer to 70% versus closer to 80%, when we entered 2024. We are maintaining that color at this point in time. I would say that it’s unlikely for our gross margin rate to fall below 70% in any given quarter. But I want to just emphasize the gross margin rate will fluctuate a bit primarily given the mix of sales, specifically within the vaccine portfolio, which carries a lower gross margin, number one. Number two, when you look at our performance for gross margin in Q1, a dominant effect of that versus last year is the mix, the lower sales volume of Comirnaty in the quarter in Q1 versus last year’s Q1. Obviously, the final adjustment of the Paxlovid reserve actually did also have a one-time positive impact on the gross margin rate in Q1, but that was less of an impact compared to the mix. So I hope that helps.
Albert Bourla: And as I want to emphasize that on Paxlovid, what really makes me pleased it is the underlying demand of the product, right? So it was approximately in the first quarter only in the U.S., 2 million scripts, right? So that’s significant. And keep in mind that this was the quarter that we moved from a previous way of go-to-market approach to a commercial model, right? But I had a lot of maintenance in execution, but we didn’t step into any of them. So it was again, I’m very pleased how Aamir and the U.S. team executed on that, meticulous execution. So we have a very smooth transition with very low co-payments on the commercial plans. For the vast majority of the insured lives and then at the same time, very good execution with thousands of pharmacies participating, almost 90,000 pharmacies, if I remember, 90% of the pharmacies participating into the Medicare part.
And that went extremely well. And also I want to remind that the Medicare that goes clearly with different price level because it is through the credit of the U.S. government compared to the commercial plans, that they are at 1,000, it’s a different list price. And that difference exists for this year on. Next year, everybody moves to the list price, and of course, the discounts that we give plan by plan. Let’s go to the next question.
Operator: We’ll take our next question from Chris Shibutani with Goldman Sachs. Your line is open.
Chris Shibutani: Two questions, if I may. The first on pneumococcal vaccines with Prevnar as well. Last quarter, you provided some commentary about your thoughts on the tone of the markets, particularly for adult being somewhat more mature. And obviously, competition is coming across the different categories, adult and pediatrics. Can you comment about your view, given that performance was relatively strong and how you’re preparing for competition? The second question I have is on commercial models. There has been some nascent efforts in the industry to go more direct to consumers, for instance, Lilly has a Lilly Direct for their obesity products. Aamir, I’m curious about your thoughts about integrating this type of approach, particularly as I think about certain product categories that you have like migraines and Nurtec, how might this work? Where is Pfizer in terms of exploring these opportunities? Thank you.
Albert Bourla: Aamir?
Aamir Malik: Okay. Chris, thanks for the question. So on Prevnar, you alluded to the commentary we provided around dimensionalizing the market, and I think it’s worthwhile just reiterating that. So the adult market continues to contract and that’s for 2 reasons. There are increasingly fewer eligible 65-plus adults. And then the 19 to 64 underlying medical conditions population is obviously more difficult to activate. So that is a dynamic that is true for our business, but it’s also true for any competitor that’s going to come into the adult vaccine market. So I think that’s important to note. Now for our overall franchise, we continue to expect growth. We did very nicely in Q1. We saw 6% growth. And the big driver of that is increased uptake as well as market share growth in the pediatric.
So pediatrics in Q1 saw a lot of conversion, PCV 13 to 20. And our share exiting Q1 was at 80%, and that was from 71% at the time of launch of PCV 15. So we see good momentum on pediatrics. Now back to your question about the adult segment and competition. We’re continuing to see very good performance where we are. We have 98% market share. We acknowledge that V116 is coming. And as Albert alluded to earlier, we’re not going to speculate on what the regulatory outcomes or recommendations are going to be. But there are a number of things that we can do to defend our business in the adult segment. Firstly, we have a portfolio approach to contracting that we’re deploying in the retail setting but also in the non-retail setting. And it’s also important to note that in the non-retail setting, many organized customers have a preference for workflow management to stock one vaccine that satisfies all the current ACIP of recommendations.
So until we know more, I think the best way to defend our share in the adult segment is to continue to do what we’re doing. And that’s to be laser-focused on maximizing the opportunity that we have in the adult segment, albeit contracting and then continue to drive growth in pediatrics. On your second question around consumers, look, engaging and activating consumers is, as you pointed out, a very, very important part of our business. It’s true in vaccines. It’s true in categories like Paxlovid and Nurtec, just to name a few examples. And we’re always looking at ways to enhance that connection. One example I’ll point to is the work that we’ve done on VaxAssist as a mechanism to help consumers determine their vaccine eligibility but also book appointments.
And that’s a really good example of value that we can bring. And to the extent that we can do more of that, create value for patients as well as for our business in other categories, we’ll certainly look to explore that.
Albert Bourla: Alexandre, very quickly, anything on PCV in international markets?
Alexandre de Germay: Yes. No, we had a great quarter. As you know, we grew by 8% operationally. But more importantly, we also have achieved some key milestones. So we got the European approval of pediatric Prevnar 20 in Europe. We also got it approved in Japan, which are very important market in Australia and many others. So this is great because then we want to build on the very successful Prevnar 30 franchise around the world. As you know, we have exclusive NIP status in 130 market, and now we’re going to be able to build on that. Just one comment on the adults. We still are in the process of getting VTC recommendation in most of the European markets. But where we got it in Germany and in France, we see a very nice pickup.
And why? Because they extended the population covered by the Prevnar 20 outlook. For instance, in Germany, gave us 18 to 59 population at risk and allcomers, 60 and above. And since that and we got this remediation in February, we get very nice pickup in utilization in Germany, and we are about to launch in France as we speak. So in adults, as well, we see a great potential of growth.
Albert Bourla: It’s a very nice cadence of approval and recommendation. Next question please.
Operator: We’ll take our next question from Mohit Bansal with Wells Fargo. Your line is open.
Mohit Bansal: Maybe a question for Dave. Just wanted to understand the cadence of margin improvement as you are embarking on the cost management journey throughout the year because I mean, you had a really high EPS because of the onetime item. But if you think about margin profile over the year, how should we think about it? I understand fourth quarter could be impacted with Comirnaty revenues. And then when we get into 2025, should we think about better leverage or do you think there could be more opportunity to reduce expenses in ’25 as well? Thank you.
David Denton: Yes, thank you for the question. I would say that without giving, since we don’t guide to quarterly expectations for gross margin, I would just say that the focus that we have around improving our cost of goods sold is a multiyear journey. And these costs that we are working to improve take time to adjust and to further implement ways to be more effective and efficient in this infrastructure. So I wouldn’t think of that having a significant impact on 2024, if it would, it would be late 2024 but more ’25 and ’26. But more to come as we know more and as we develop our plans more specifically, we’ll be certain to share some specifics around that.
Operator: We’ll take our next question from Chris Schott with JPMorgan. Your line is open.
Christ Schott: Just two ones for me here. Just on Abrysvo, just really quickly following up on the earlier commentary. Can you just update us on where we are in terms of contracting efforts and progress in the retail channel, just addressing some of the market share issues you highlighted last year? I guess my specific question is, do you have line of sight on contracting at this point, or is that still something that’s going to evolve as the year progresses? And then the second quick one was just on Vyndaqel. Obviously very strong numbers. Maybe just a quick update in terms of where we are with penetration in that market. And how much higher can this go? Just how much more of a growth runway is there for that drug? Thank you.
Albert Bourla: Aamir?
Aamir Malik: Thanks, Chris. So on Abrysvo, as I said, we’re progressing our contracting conversations so we’ll have more to share on that as we do later. And in terms of your question on Vynda. Vynda had a really strong quarter. We were up 96% year-over-year, but importantly also 41% over last quarter. When you look at the drivers, I think there’s a few things. Some of that is temporal. So there were some purchasing patterns with wholesaler and specialty pharmacies. And we also made a lot of efforts towards the end of last year to ensure that the re-enrollment process for patients was very smooth at the beginning of this year. So all of that leads to a little bit of a Q1 bolus. But importantly at the heart of it, part of our strong performance on Vynda is that the fundamentals around diagnosis and demand are really strong.
So we saw a 33% quarter-over-quarter increase in new patient starts. And diagnosis rates over the last several years, we had talked about getting into the 30% to 50% range. We’re approaching the top end of that. And there is still significant opportunity to identify more patients. That’s the biggest unmet need, and that’s where we’re concentrating our commercial efforts going forward. So we do think that we will sustain this momentum, probably not at the same rate that we saw in Q1, but we will continue to perform well with Vynda.
Albert Bourla: Thank you. Alexandre, anything to add?
Alexandre de Germay: Yes, very quickly. On the international front, we also had a very strong quarter because we saw a 28% operational growth but a 43% volume growth, which is comparable to what we see in the U.S. Exactly as Aamir said, there is still opportunity because we basically have established Vyndaqel as the standard of care. And we’ve worked with the health care professional to establish robust infrastructure so that we can screen, diagnose, and treat faster. And the reality is, we still have opportunity to grow because, yes, in markets like France, we are approaching 50%, but in other like Italy, we are around 30%, Japan, 28%. So there is still opportunity to grow and increase diagnosis rates.
