News: Pfizer Reports Third-Quarter 2008 Results. Genetic …
Pfizer Inc (NYSE: PFE):
($ in millions, except per share amounts)
Third-Quarter Year-to-Date
———————— ————————
2008 2007 Change 2008 2007 Change
——– ——– —— ——– ——– ——
Reported Revenues $ 11,973 $ 11,990 — $ 35,950 $ 35,548 1%
Reported Net Income 2,278 761 199% 7,838 5,420 45%
Reported Diluted EPS 0.34 0.11 209% 1.16 0.78 49%
Adjusted Revenues(1) 12,159 11,950 2% 36,030 35,414 2%
Adjusted Income(1) 4,180 3,963 5% 11,977 11,711 2%
Adjusted Diluted
EPS(1) 0.62 0.58 7% 1.77 1.68 5%
See end of text prior to tables for notes.
Pfizer Inc (NYSE: PFE) today reported financial results for
third-quarter 2008. The Company recorded reported revenues of $12.0
billion, consistent with the year-ago quarter, despite the negative
impact of the loss of U.S. exclusivity for Zyrtec, which Pfizer ceased
selling in late January 2008, and for Camptosar in February 2008.
Zyrtec and Camptosar third-quarter 2008 revenues decreased by $549
million ($428 million and $121 million, respectively), compared with
the year-ago quarter. Foreign exchange favorably impacted reported
revenues by approximately $620 million or 5%, as did the solid
performance of many key products. Reported revenues in third-quarter
2008 were negatively impacted by a $217 million adjustment to prior
years’ liabilities for product returns. U.S. reported revenues
accounted for 41% of the total compared with 48% in the year-ago
quarter, while international reported revenues accounted for 59% of
the total compared with 52% in the year-ago quarter. In the U.S.,
reported revenues were $4.9 billion, a decrease of 15%, while
international reported revenues were $7.1 billion, an increase of 13%,
compared to third-quarter 2007. The increase in international reported
revenues reflects the favorable impact of foreign exchange of 10% and
operational growth of 3%.
For third-quarter 2008, Pfizer posted reported net income of $2.3
billion, compared with $761 million in the prior-year quarter, and
reported diluted EPS of $0.34, compared with $0.11 in the prior-year
quarter. These increases were primarily attributable to the after-tax
charges of $2.1 billion related to the decision to exit Exubera in the
year-ago quarter, which was partially offset by the after-tax charge
in third-quarter 2008 of approximately $640 million resulting from the
previously announced agreements in principle to resolve certain
litigation involving the Company’s non-steroidal anti-inflammatory
(NSAID) pain medicines as well as the after-tax charge of
approximately $150 million associated with the aforementioned
adjustment to prior years’ product returns liabilities.
For the first nine months of 2008, Pfizer recorded reported
revenues of $36.0 billion, an increase of 1% compared with $35.5
billion in the same period in 2007, despite the loss of U.S.
exclusivity of Norvasc (March 2007), Zyrtec (January 2008) and
Camptosar (February 2008), which collectively decreased revenues by
$2.1 billion. Foreign exchange favorably impacted revenues by
approximately $2.0 billion or 6%, as did the solid performance of many
key products. U.S. reported revenues accounted for 42% of the total
compared with 49% in the year-ago period, while international reported
revenues accounted for 58% of the total compared with 51% in the
year-ago period. In the U.S., reported revenues were $15.2 billion, a
decrease of 13%, while international reported revenues were $20.8
billion, an increase of 15% compared to the year-ago period. The
increase in international reported revenues reflects the favorable
impact of foreign exchange of 11% and operational growth of 4%.
For the first nine months of 2008, the Company posted reported net
income of $7.8 billion, compared with $5.4 billion in the prior-year
period, and reported diluted EPS of $1.16, compared with $0.78 in the
prior-year period. These increases were primarily attributable to the
previously mentioned after-tax charges of $2.1 billion related to
Exubera in the year-ago quarter, lower restructuring charges
associated with cost-reduction initiatives, as well as savings
generated by those initiatives, which were partially offset by the
previously mentioned after-tax charge of approximately $640 million
associated with the resolution of certain NSAID litigation in
third-quarter 2008.
Adjusted Revenue(1), Adjusted Income(1) and Adjusted Diluted
EPS(1) Results
For third-quarter 2008, Pfizer posted adjusted revenues (1) of
$12.2 billion, an increase of 2% compared with $12.0 billion in the
year-ago quarter. For the first nine months of 2008, Pfizer posted
adjusted revenues(1) of $36.0 billion, an increase of 2% compared with
$35.4 billion in the first nine months of 2007. Adjusted revenues(1)
were positively impacted by foreign exchange and the solid performance
of many key products, and negatively impacted by the loss of U.S.
exclusivity of Norvasc, Zyrtec and Camptosar.
For third-quarter 2008, Pfizer recorded adjusted income(1) of $4.2
billion, an increase of 5% compared with $4.0 billion in the year-ago
quarter, and adjusted diluted EPS(1) of $0.62, an increase of 7%
compared with $0.58 in the year-ago quarter. For the first nine months
of 2008, Pfizer recorded adjusted income(1) of $12.0 billion, an
increase of 2% compared with $11.7 billion in the year-ago period, and
adjusted diluted EPS(1) of $1.77, an increase of 5% compared with
$1.68 in the year-ago period. In third-quarter 2008, adjusted
income(1) and adjusted diluted EPS(1) were positively impacted by
foreign exchange and savings associated with cost-reduction
initiatives, which were partially offset by a decrease in net interest
income. In the first nine months of 2008 compared with the same period
in 2007, adjusted income(1) and adjusted diluted EPS(1) were impacted
by the aforementioned factors in addition to the 2007 payment to
Bristol-Myers Squibb Company in connection with the apixaban
collaboration, as well as the 2008 favorable income tax adjustments.
Reported and adjusted diluted EPS(1) were also positively impacted
by the full benefit of Pfizer’s purchase of $10.0 billion of the
Company’s common stock in 2007.
Executive Commentary
“We remain on-track to meet our 2008 objectives, despite the
turbulent global economy,” said Chairman and Chief Executive Officer
Jeff Kindler. “We continued to deliver steady results this quarter,
with many of our most important medicines performing well around the
world, including Lyrica, Celebrex, Viagra, Sutent, Zyvox and Geodon,
as well as Lipitor in a highly competitive market. Looking ahead, we
are making progress on our growth strategies, including increasing the
number of programs in our Phase 3 portfolio from 16 to 25 in the last
six months. With the formation of the Primary Care, Specialty Care and
Emerging Markets units, which join the existing Oncology and
Established Products units, we continue to evolve our pharmaceutical
operations into smaller, more focused units that can anticipate and
respond more quickly to our customers’ and patients’ changing needs.”
Frank D’Amelio, Chief Financial Officer, commented, “Based on our
year-to-date performance and outlook for the remainder of 2008, we are
raising the lower end of our guidance range for full-year 2008
revenues to $48.0 to $49.0 billion from $47.0 to $49.0 billion. In
addition, we have increased our guidance to at least a $2.0 billion
reduction of absolute adjusted total costs(2) at the end of 2008
compared with 2006 on a constant currency basis(3). At the end of
third-quarter 2008, cost reductions under this program totaled $1.7
billion. We are pleased with our progress and continue to look for new
opportunities to further reduce and more effectively manage our costs.
Finally, with our strong balance sheet and operating cash flow, we
remain confident that we have the financial flexibility to
successfully execute our strategies and meet our financial objectives
in the face of the current macroeconomic environment.”
Product Performance
($ in millions, except percentages)
Third-Quarter Year-to-Date
————————- ————————–
2008 2007 Change 2008 2007 Change
——— ——– —— ——— ——— ——
In-Line
Products(4) $ 10,061 $ 9,323 8% $ 29,503 $ 27,363 8%
New Products(5) 448 402 11% 1,369 1,021 34%
——— ——– ——— ———
Total In-Line and
New Products(6) 10,509 9,725 8% 30,872 28,384 9%
Loss of
Exclusivity
Products(7) 684 1,311 (48%) 2,278 4,338 (47%)
Returns Adjustment (217) — * (217) — *
——— ——– ——— ———
Total
Pharmaceutical 10,976 11,036 (1%) 32,933 32,722 1%
Animal Health 708 636 11% 2,042 1,854 10%
Other(8) 289 318 (9%) 975 972 –
——— ——– ——— ———
Total Revenues $ 11,973 $11,990 — $ 35,950 $ 35,548 1%
========= ======== ========= =========
See end of text prior to tables for notes.
* Calculation not meaningful.
Pharmaceutical
Pharmaceutical revenues for third-quarter 2008 were $11.0 billion,
a decrease of 1% compared with the prior-year quarter, including the
favorable impact of foreign exchange of approximately $570 million or
5%. Third-quarter 2008 revenues from in-line and new products(6)
increased 8% compared with the year-ago quarter, which excludes the
impact of the loss of U.S. exclusivity of Norvasc, Zyrtec and
Camptosar, which collectively decreased revenues by $627 million
compared with the year-ago quarter. Additionally, pharmaceutical
revenues were impacted by a $217 million adjustment to the prior
years’ product returns liabilities.
Lipitor revenues in third-quarter 2008 were $3.1 billion, a
decrease of 1% compared with the prior-year quarter. In the U.S.,
Lipitor revenues were $1.6 billion, a decrease of 13% compared with
the prior-year quarter, while revenues from international markets were
$1.6 billion, an increase of 16%. The increase in international
revenues reflects the favorable impact of foreign exchange of
approximately $130 million, or 10%, and operational growth of 6%. The
global statin market remains highly competitive, marked by
decelerating market growth and increasing cost constraints. Pfizer
continues to respond to these market dynamics by focusing on Lipitor’s
differentiated clinical profile backed with strong landmark outcomes
data. Pfizer recently launched a new multi-channel “Heart to Heart”
direct-to-consumer campaign featuring patient testimonials to motivate
new patients to speak with their physicians.
Lyrica revenues in third-quarter 2008 were $675 million, an
increase of 45% compared with the prior-year quarter, driven by high
patient and physician satisfaction globally demonstrated by strong
physician prescribing patterns, as well as growth in the U.S.
fibromyalgia market, where we continue to expand our leadership
position. In the U.S., Lyrica revenues rose to $379 million, an
increase of 40% compared with the prior-year quarter, while
international revenues grew to $296 million, an increase of 51%
primarily from operational growth.
Celebrex revenues in third-quarter 2008 were $625 million, an
increase of 8% compared with the year-ago quarter, supported by
continued educational and promotional efforts highlighting the
benefit-risk proposition of Celebrex, as well as the favorable impact
of foreign exchange. In the U.S., Celebrex revenues were $450 million,
an increase of 4% compared with the prior-year quarter, while
international revenues were $175 million, an increase of 21%.
Sutent revenues in third-quarter 2008 were $226 million, an
increase of 49% compared with the year-ago quarter, demonstrating
continued strong performance and market leadership in its approved
indications. In the U.S., Sutent revenues were $62 million, an
increase of 4% compared with the prior-year quarter, while
international revenues were $164 million, an increase of 79%. Sutent
is now available in all major markets and is supported by efficacy,
survival and cost-effectiveness data. Further, our robust life cycle
plan currently includes Phase 3 clinical trials in cancers with unmet
medical need, such as breast, lung, colorectal, liver and prostate
cancers.
Chantix (known as Champix outside the U.S.) revenues in
third-quarter 2008 were $182 million, a decrease of 24% compared with
third-quarter 2007. In the U.S., Chantix revenues were $96 million, a
decline of 49% compared with the prior-year quarter, while
international revenues were $86 million, an increase of 60%.
Third-quarter 2008 U.S. results continued to be negatively impacted by
the changes to the Chantix U.S. label in prior quarters. Pfizer
continues its educational and promotional efforts focused on the
Chantix benefit-risk proposition, the significant health consequences
of smoking and the importance of physician-patient dialogue in helping
patients quit smoking. In September, the U.S. branded
direct-to-consumer campaign was re-launched with print, television and
web advertising. Chantix has now been either approved or launched in
all major markets.
Animal Health
Animal Health revenues for third-quarter 2008 were $708 million,
an increase of 11% compared with $636 million in the year-ago quarter.
The increase was driven by the favorable impact of foreign exchange,
which increased revenues by approximately $35 million or 6%, in
addition to strong global livestock and companion animal product
performance.
Costs and Expenses
In third-quarter 2008, adjusted cost of sales(1) as a percentage
of revenues was 14.5% compared with 15.1% in third-quarter 2007. This
improvement reflects the benefits from our cost-reduction initiatives,
partially offset by a less favorable geographic mix.
Adjusted selling, informational and administrative (SI&A)
expenses(1) were $3.4 billion in third-quarter 2008, a decrease of 6%
compared with the prior-year quarter, due to the continued favorable
impact of our cost-reduction initiatives, which was partially offset
by the unfavorable impact of foreign exchange compared with the
year-ago period.
Adjusted research and development (R&D) expenses were $1.8 billion
in third-quarter 2008, an increase of 2% compared with the prior-year
period. This primarily reflects increased spending on Phase 3
programs, partially offset by the favorable impact of cost-reduction
initiatives.
Overall, foreign exchange increased adjusted total costs(2) by
$242 million or 3% in third-quarter 2008 compared with the prior-year
period. Excluding the impact of foreign exchange, adjusted total
costs(2) decreased by approximately $460 million, or 6%, compared with
the year-ago quarter. The operational improvement was driven partially
by the reduction in workforce to 83,400 at the end of third-quarter
2008, a decline of 3,600 compared with the end of third-quarter 2007,
as well as manufacturing and research and development site exits.
At the end of third-quarter 2008, Pfizer achieved its goal to
reduce absolute adjusted total costs(2) by at least $1.5 to $2.0
billion at the end of 2008 compared with 2006 on a constant currency
basis(3), having realized a total reduction of $1.7 billion. Pfizer
now expects to reduce absolute adjusted total costs(2) by at least
$2.0 billion by the end of 2008. These initiatives span essentially
all divisions, functions, markets and sites, and reflect a workforce
reduction of 14,600 since the target was established in January 2007.
Financial Guidance
For full-year 2008, Pfizer’s financial guidance, at current
exchange rates(9) is summarized below. Revenue guidance has been
narrowed to a range of $48.0 to $49.0 billion from $47.0 to $49.0
billion, adjusted SI&A expenses(1) guidance has been narrowed to a
range of $14.4 to $14.7 billion from $14.4 to $14.9 billion, and
adjusted diluted EPS(1) guidance has been narrowed to a range of $2.36
to $2.41 from $2.35 to $2.45. Additionally, reported diluted EPS(10)
guidance has been reduced to a range of $1.61 to $1.71 from $1.73 to
$1.88, reflecting in part the charges associated with the previously
mentioned resolution of certain NSAID litigation.
2007 Actual 2008 Guidance
———————————————————————-
Revenues $48.2 billion $48.0 to $49.0 billion
———————————————————————-
Adjusted Cost of Sales(1) as a
Percentage of Revenues 16.0% 15.0% to 15.5%
———————————————————————-
Adjusted SI&A Expenses(1) $15.2 billion $14.4 to $14.7 billion
———————————————————————-
Adjusted R&D Expenses(1) $7.5 billion $7.3 to $7.6 billion
———————————————————————-
Effective Tax Rate on Adjusted
Income(1) 21.0% 21.5% to 22.0%
———————————————————————-
Reported Diluted EPS(10) $1.17 $1.61 to $1.71
———————————————————————-
Adjusted Diluted EPS(1) $2.18 $2.36 to $2.41
———————————————————————-
Cash Flows from Operations $13.4 billion $17.0 to $18.0 billion
———————————————————————-
For additional details, please see the attached financial
schedules, product revenue tables, supplemental information and
disclosure notice.
(1) “Adjusted income” and its components and “adjusted diluted
earnings per share (EPS)” are defined as reported net income and its
components and reported diluted EPS excluding purchase-accounting
adjustments, acquisition-related costs, discontinued operations and
certain significant items. Adjusted Revenues, Adjusted Cost of Sales,
Adjusted SI&A expenses and Adjusted R&D expenses are income statement
line items prepared on the same basis, and therefore, components of
the overall Adjusted Income measure. As described under Adjusted
Income in the Management’s Discussion and Analysis of Financial
Condition and Results of Operations section of Pfizer’s Form 10-Q for
the fiscal quarter ended June 29, 2008, management uses adjusted
income, among other factors, to set performance goals and to measure
the performance of the overall company. We believe that investors’
understanding of our performance is enhanced by disclosing this
measure. Reconciliations of third-quarter 2008 and 2007, first nine
months of 2008 and 2007, and full-year 2007 adjusted income and its
components and adjusted diluted EPS to reported net income and its
components and reported diluted EPS, as well as reconciliations of
full-year 2008 adjusted income and adjusted diluted EPS guidance to
full-year 2008 reported net income and reported diluted EPS guidance,
are provided in the materials accompanying this report. The 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) Represents primarily the total of Adjusted Cost of Sales(1),
Adjusted SI&A expenses(1) and Adjusted R&D expenses(1).
(3) Constant currency basis means that the applicable projected
financial measure is based upon the actual foreign exchange rates in
effect during 2006.
(4) Represents worldwide revenues for all pharmaceutical products,
excluding revenues included in notes (5) and (7).
(5) Represents worldwide revenues for pharmaceutical products
launched since 2006: Chantix/Champix, Eraxis, Selzentry/Celsentri,
Sutent, Thelin and Toviaz.
(6) Total worldwide pharmaceutical revenues excluding the revenues
of major products that have lost exclusivity in the U.S. in 2007 and
2008 as described in note (7). See the table accompanying this report.
(7) Represents worldwide revenues for pharmaceutical products that
lost exclusivity in the U.S. in 2007 and 2008: Camptosar, Norvasc and
Zyrtec.
(8) Includes Consumer Healthcare business transition activity,
Capsugel and Pfizer Centersource.
(9) Current exchange rates approximate rates at the time of the
third-quarter earnings press release (October 2008).
(10) Excludes the potential effects of business-development
transactions not completed as of September 28, 2008, and of
litigation-related matters not substantially resolved as of September
28, 2008, as we do not forecast those items.
PFIZER INC AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(millions of dollars, except per common share data)
Third Quarter % Incr. Nine Months % Incr.
—————– / —————– /
2008 2007 (Decr.) 2008 2007 (Decr.)
——– ——– ——- ——– ——– ——-
Revenues $11,973 $11,990 - $35,950 $35,548 1
Costs and
expenses:
Cost of sales (a) 2,122 4,618 (54) 6,397 8,614 (26)
Selling,
informational
and
administrative
expenses (a) 3,523 3,768 (7) 10,878 10,973 (1)
Research and
development
expenses (a) 1,885 1,999 (6) 5,642 5,829 (3)
Amortization of
intangible
assets 621 774 (20) 2,063 2,372 (13)
Acquisition-
related in-
process research
and development
charges 13 - * 567 283 100
Restructuring
charges and
acquisition-
related costs 366 455 (20) 1,113 2,318 (52)
Other (income)/
deductions–net 721 (260) * 221 (1,149) *
——– ——– ——– ——–
Income from
continuing
operations before
provision/
(benefit) for
taxes on income
and minority
interests 2,722 636 328 9,069 6,308 44
Provision/
(benefit) for
taxes on income 463 (161) * 1,251 800 56
Minority interests 6 1 378 18 6 199
——– ——– ——– ——–
Income from
continuing
operations 2,253 796 183 7,800 5,502 42
——– ——– ——– ——–
Discontinued
operations:
Loss from
discontinued
operations–net
of tax 1 - * (4) - *
Gains/(losses) on
sales of
discontinued
operations–net
of tax 24 (35) * 42 (82) *
——– ——– ——– ——–
Discontinued
operations–net
of tax 25 (35) * 38 (82) *
——– ——– ——– ——–
Net income $ 2,278 $ 761 199 $ 7,838 $ 5,420 45
======== ======== ======== ========
Earnings per
common share -
basic:
Income from
continuing
operations $ 0.34 $ 0.12 183 $ 1.16 $ 0.79 47
Discontinued
operations–net
of tax - (0.01) * - (0.01) *
——– ——– ——– ——–
Net income $ 0.34 $ 0.11 209 $ 1.16 $ 0.78 49
======== ======== ======== ========
Earnings per
common share -
diluted:
Income from
continuing
operations $ 0.33 $ 0.12 175 $ 1.16 $ 0.79 47
Discontinued
operations–net
of tax 0.01 (0.01) * - (0.01) *
——– ——– ——– ——–
Net income $ 0.34 $ 0.11 209 $ 1.16 $ 0.78 49
======== ======== ======== ========
Weighted-average
shares used to
calculate
earnings per
common share:
Basic 6,718 6,875 6,730 6,964
======== ======== ======== ========
Diluted 6,736 6,894 6,750 6,986
======== ======== ======== ========
(a) Exclusive of amortization of intangible assets, except as
discussed in footnote 5 below.
* Calculation not meaningful.
Certain amounts and percentages may reflect rounding adjustments.
1. The above financial statements present the three-month and nine-
month periods ended September 28, 2008 and September 30, 2007.
Subsidiaries operating outside the United States are included for
the three-month and nine-month periods ended August 24, 2008 and
August 26, 2007.
2. The financial results for the three-month and nine-month periods
ended September 28, 2008 are not necessarily indicative of the
results which ultimately might be achieved for the current year.
3. The financial results for the three-month and nine-month periods
ended September 30, 2007, include charges associated with the
impairment of Exubera assets and the decision to exit and stop
additional investment in the product. These charges include
approximately $1.1 billion of intangible asset impairments, $661
million of inventory write-offs, $454 million of fixed asset
impairments, and $584 million of other exit costs. The charges are
primarily included in Cost of Sales ($2.6 billion), Selling,
informational and administrative expenses ($83 million), and
Research and development expenses ($131 million).
4. As required, the estimated value of Acquisition-related in-process
research and development charges (IPR&D) is expensed at
acquisition date. In the first nine months of 2008, we expensed
$567 million of IPR&D, primarily related to our acquisitions of
Serenex, Inc., Encysive Pharmaceuticals Inc., CovX, Coley
Pharmaceutical Group, Inc. and two smaller acquisitions related to
Animal Health. In the first nine months of 2007, we expensed $283
million of IPR&D, primarily related to our acquisitions of
BioRexis Pharmaceutical Corp. and Embrex, Inc.
5. Amortization expense related to acquired intangible assets that
contribute to our ability to sell, manufacture, research, market
and distribute our products are included in Amortization of
intangible assets as they benefit multiple business functions.
Amortization expense related to acquired intangible assets that
are associated with a single function are included in Cost of
sales, Selling, informational and administrative expenses or
Research and development expenses, as appropriate.
6. Other (income)/deductions–net for the three-month and nine-month
periods ended September 28, 2008, includes approximately $900
million related to our agreements in principle to resolve certain
litigation involving non-steroidal anti-inflammatory (NSAID) pain
medicines.
7. Provision for taxes on income includes tax benefits in the first
nine months of 2008 of approximately $305 million related to
favorable tax settlements and of approximately $426 million
related to the sale of one of our biopharmaceutical companies
(Esperion Therapeutics Inc.), both recorded in the second quarter
of 2008. Provision for taxes on income in the third quarter and
first nine months of 2007 include a tax benefit ($681 million)
relating to charges associated with Exubera.
PFIZER INC AND SUBSIDIARY COMPANIES
RECONCILIATION OF REPORTED NET INCOME AND ITS COMPONENTS AND REPORTED
DILUTED EPS
TO ADJUSTED INCOME AND ITS COMPONENTS AND ADJUSTED DILUTED EPS
(UNAUDITED)
(millions of dollars, except per common share data)
Quarter Ended September 28, 2008
——————————————————-
Purchase Acqui- Discon- Certain
Accounting sition- tinued Signi-
Adjust- Related Oper- ficant
Reported ments Costs ations Items(2) Adjusted
——– ———- ——– ——- ——– ———
Revenues $11,973 $ - $ - $ - $ 186 $ 12,159
Costs and
expenses:
Cost of sales
(a) 2,122 - - - (362) 1,760
Selling,
informational
and
administrative
expenses (a) 3,523 3 - - (97) 3,429
Research and
development
expenses (a) 1,885 (8) - - (108) 1,769
Amortization
of intangible
assets 621 (585) - - - 36
Acquisition-
related in-
process R&D
charges 13 (13) - - - -
Restructuring
charges and
acquisition-
related costs 366 - (28) - (338) -
Other
(income)/
deductions–
net 721 (1) - - (940) (220)
——– ———- ——– ——- ——– ———
Income from
continuing
operations
before
provision for
taxes on
income and
minority
interests 2,722 604 28 - 2,031 5,385
Provision for
taxes on
income 463 144 4 - 588 1,199
Minority
interests 6 - - - - 6
——– ———- ——– ——- ——– ———
Income from
continuing
operations 2,253 460 24 - 1,443 4,180
——– ———- ——– ——- ——– ———
Discontinued
operations:
Income/(loss)
from
discontinued
operations–
net of tax 1 - - (1) - -
Gains/(losses)
on sales of
discontinued
operations–
net of tax 24 - - (24) - -
——– ———- ——– ——- ——– ———
Discontinued
operations–
net of tax 25 - - (25) - -
——– ———- ——– ——- ——– ———
Net income $ 2,278 $ 460 $ 24 $ (25) $ 1,443 $ 4,180
======= ========= ======= ====== ======= ========
Earnings per
common share -
diluted:
Income from
continuing
operations $ 0.33 $ 0.07 $ - $ - $ 0.22 $ 0.62
Discontinued
operations–
net of tax 0.01 - - (0.01) - -
——– ———- ——– ——- ——– ———
Net income $ 0.34 $ 0.07 $ - $(0.01) $ 0.22 $ 0.62
======== ========== ======== ======= ======== =========
Nine Months Ended September 28, 2008
——————————————————-
Purchase Acqui- Discon- Certain
Accounting sition- tinued Signi-
Adjust- Related Oper- ficant
Reported ments Costs ations Items(2) Adjusted
——– ———- ——– ——- ——– ———
Revenues $35,950 $ - $ - $ - $ 80 $ 36,030
Costs and
expenses:
Cost of sales
(a) 6,397 - - - (801) 5,596
Selling,
informational
and
administrative
expenses (a) 10,878 9 - - (353) 10,534
Research and
development
expenses (a) 5,642 (22) - - (344) 5,276
Amortization
of intangible
assets 2,063 (1,965) - - - 98
Acquisition-
related in-
process R&D
charges 567 (567) - - - -
Restructuring
charges and
acquisition-
related costs 1,113 - (36) - (1,077) -
Other
(income)/
deductions–
net 221 (3) - - (961) (743)
——– ———- ——– ——- ——– ———
Income from
continuing
operations
before
provision for
taxes on
income and
minority
interests 9,069 2,548 36 - 3,616 15,269
Provision for
taxes on
income 1,251 550 6 - 1,467 3,274
Minority
interests 18 - - - - 18
——– ———- ——– ——- ——– ———
Income from
continuing
operations 7,800 1,998 30 - 2,149 11,977
——– ———- ——– ——- ——– ———
Discontinued
operations:
Income/(loss)
from
discontinued
operations–
net of tax (4) - - 4 - -
Gains/(losses)
on sales of
discontinued
operations–
net of tax 42 - - (42) - -
——– ———- ——– ——- ——– ———
Discontinued
operations–
net of tax 38 - - (38) - -
——– ———- ——– ——- ——– ———
Net income $ 7,838 $ 1,998 $ 30 $ (38) $ 2,149 $ 11,977
======== ========== ======== ======= ======== =========
Earnings per
common share -
diluted:
Income from
continuing
operations $ 1.16 $ 0.29 $ - $ - $ 0.32 $ 1.77
Discontinued
operations–
net of tax - - - - - -
——– ———- ——– ——- ——– ———
Net income $ 1.16 $ 0.29 $ - $ - $ 0.32 $ 1.77
======== ========== ======== ======= ======== =========
(a) Exclusive of amortization of intangible assets, except as
discussed in note 1.
See end of tables for notes.
Certain amounts may reflect rounding adjustments.
PFIZER INC AND SUBSIDIARY COMPANIES
RECONCILIATION OF REPORTED NET INCOME AND ITS COMPONENTS AND REPORTED
DILUTED EPS
TO ADJUSTED INCOME AND ITS COMPONENTS AND ADJUSTED DILUTED EPS
(UNAUDITED)
(millions of dollars, except per common share data)
Quarter Ended September 30, 2007
—————————————————–
Purchase Acqui- Discon- Certain
Accounting sition- tinued Signi-
Adjust- Related Oper- ficant
Reported ments Costs ations Items(2) Adjusted
——– ———- ——- ——- ——– ——–
Revenues $11,990 $ - $ - $ - $ (40) $11,950
Costs and
expenses:
Cost of sales
(a) 4,618 (14) - - (2,794) 1,810
Selling,
informational
and
administrative
expenses (a) 3,768 3 - - (133) 3,638
Research and
development
expenses (a) 1,999 (8) - - (261) 1,730
Amortization of
intangible
assets 774 (745) - - (1) 28
Acquisition-
related in-
process R&D
charges - - - - - -
Restructuring
charges and
acquisition-
related costs 455 - (1) - (454) -
Other (income)/
deductions–net (260) (3) - - (56) (319)
——– ———- ——- ——- ——– ——–
Income from
continuing
operations
before provision
for taxes on
income and
minority
interests 636 767 1 - 3,659 5,063
(Benefit)/
provision for
taxes on income (161) 208 2 - 1,050 1,099
Minority
interests 1 - - - - 1
——– ———- ——- ——- ——– ——–
Income from
continuing
operations 796 559 (1) - 2,609 3,963
——– ———- ——- ——- ——– ——–
Discontinued
operations:
Income from
discontinued
operations–net
of tax - - - - - -
Gains/(losses)
on sales of
discontinued
operations–net
of tax (35) - - 35 - -
——– ———- ——- ——- ——– ——–
Discontinued
operations–net
of tax (35) - - 35 - -
——– ———- ——- ——- ——– ——–
Net income $ 761 $ 559 $ (1) $ 35 $ 2,609 $ 3,963
======== ========== ======= ======= ======== ========
Earnings per
common share -
diluted:
Income from
continuing
operations $ 0.12 $ 0.08 $ - $ - $ 0.38 $ 0.58
Discontinued
operations–net
of tax (0.01) - - 0.01 - -
——– ———- ——- ——- ——– ——–
Net income $ 0.11 $ 0.08 $ - $ 0.01 $ 0.38 $ 0.58
======== ========== ======= ======= ======== ========
Nine Months Ended September 30, 2007
—————————————————–
Purchase Acqui- Discon- Certain
Accounting sition- tinued Signi-
Adjust- Related Oper- ficant
Reported ments Costs ations Items(2) Adjusted
——– ———- ——- ——- ——– ——–
Revenues $35,548 $ - $ - $ - $ (134) $35,414
Costs and
expenses:
Cost of sales
(a) 8,614 (49) - - (3,138) 5,427
Selling,
informational
and
administrative
expenses (a) 10,973 9 - - (294) 10,688
Research and
development
expenses (a) 5,829 (22) - - (423) 5,384
Amortization of
intangible
assets 2,372 (2,292) - - - 80
Acquisition-
related in-
process R&D
charges 283 (283) - - - -
Restructuring
charges and
acquisition-
related costs 2,318 - (8) - (2,310) -
Other (income)/
deductions–net (1,149) (20) - - 16 (1,153)
——– ———- ——- ——- ——– ——–
Income from
continuing
operations
before provision
for taxes on
income and
minority
interests 6,308 2,657 8 - 6,015 14,988
Provision for
taxes on income 800 654 5 - 1,812 3,271
Minority
interests 6 - - - - 6
——– ———- ——- ——- ——– ——–
Income from
continuing
operations 5,502 2,003 3 - 4,203 11,711
——– ———- ——- ——- ——– ——–
Discontinued
operations:
Income from
discontinued
operations–net
of tax - - - - - -
Gains/(losses)
on sales of
discontinued
operations–net
of tax (82) - - 82 - -
——– ———- ——- ——- ——– ——–
Discontinued
operations–net
of tax (82) - - 82 - -
——– ———- ——- ——- ——– ——–
Net income $ 5,420 $ 2,003 $ 3 $ 82 $ 4,203 $11,711
======== ========== ======= ====== ======== ========
Earnings per
common share -
diluted:
Income from
continuing
operations $ 0.79 $ 0.28 $ - $ - $ 0.61 $ 1.68
Discontinued
operations–net
of tax (0.01) - - 0.01 - -
——– ———- ——- ——- ——– ——–
Net income $ 0.78 $ 0.28 $ - $ 0.01 $ 0.61 $ 1.68
======== ========== ======= ====== ======== ========
(a) Exclusive of amortization of intangible assets, except as
discussed in note 1.
See end of tables for notes.
Certain amounts may reflect rounding adjustments.
Certain prior period amounts were reclassified to conform to the
current period presentation.
PFIZER INC AND SUBSIDIARY COMPANIES
NOTES TO RECONCILIATION OF REPORTED NET INCOME AND ITS COMPONENTS AND
REPORTED DILUTED EPS TO ADJUSTED INCOME AND ITS COMPONENTS AND
ADJUSTED DILUTED EPS
(UNAUDITED)
1) Amortization expense related to acquired intangible assets that
contribute to our ability to sell, manufacture, research, market
and distribute our products are included in Amortization of
intangible assets as they benefit multiple business functions.
Amortization expense related to acquired intangible assets that
are associated with a single function are included in Cost of
sales, Selling, informational and administrative expenses or
Research and development expenses, as appropriate.
2) Certain significant items includes the following:
Third Quarter Nine Months
—————- —————–
(millions of dollars) 2008 2007 2008 2007
——- ——– ——– ——–
Restructuring charges - Cost-
reduction initiatives(a) $ 338 $ 437 $ 1,077 $ 2,267
Implementation costs - Cost-
reduction initiatives(b) 378 373 1,140 864
Litigation-related matters(c) 936 35 936 61
Returns liabilities adjustment(d) 217 - 217 -
Asset impairment charges and
other associated costs(e) 115 2,804 115 2,804
Consumer Healthcare business
transition activity(f) 9 (8) (3) (24)
Other 38 18 134 43
——- ——– ——– ——–
Total certain significant
items, pre-tax 2,031 3,659 3,616 6,015
Income taxes(g) (588) (1,050) (1,467) (1,812)
——- ——– ——– ——–
Total certain significant
items–net of tax $1,443 $ 2,609 $ 2,149 $ 4,203
======= ======== ======== ========
(a) Included in Restructuring charges and acquisition-related costs.
(b) Included in Cost of sales ($172 million), Selling, informational
and administrative expenses ($95 million), Research and
development expenses ($108 million), and Other
(income)/deductions - net ($3 million) for the three months
ended September 28, 2008. Included in Cost of sales ($520
million), Selling, informational and administrative expenses
($270 million), Research and development expenses ($348
million), and Other (income)/deductions - net ($2 million) for
the nine months ended September 28, 2008. Included in Cost of
sales ($173 million), Selling, informational and administrative
expenses ($70 million), Research and development expenses ($130
million) for the three months ended September 30, 2007. Included
in Cost of sales ($437 million), Selling, informational and
administrative expenses ($198 million), Research and development
expenses ($292 million), and Other (income)/deductions - net
($63 million income) for the nine months ended September 30,
2007.
(c) Included in Other (income)/deductions - net and for the three-
month and nine-month periods ended September 28, 2008, includes
approximately $900 million related to our agreements in
principle to resolve certain NSAID litigation.
(d) Included in Revenues and reflects an adjustment to the prior
years’ liabilities for product returns.
(e) The financial results for the three-month and nine-month periods
ended September 30, 2007, include charges primarily related to
the decision to exit Exubera and are comprised of approximately
$1.1 billion of intangible asset impairments, $661 million of
inventory write-offs, $454 million of fixed asset impairments
and $584 million of other exit costs. The charges are primarily
included in Cost of sales ($2.6 billion), Selling, informational
and administrative expenses ($83 million) and Research and
development expenses ($131 million).
(f) Included in Revenues ($31 million), Cost of sales ($38 million)
and Selling, informational and administrative expenses ($2
million) for the three months ended September 28, 2008. Included
in Revenues ($137 million), Cost of sales ($131 million) and
Selling, informational and administrative expenses ($3 million)
for the nine months ended September 28, 2008. Included in
Revenues ($50 million), Cost of sales ($41 million), Selling,
informational and administrative expenses ($5 million), and
Other (income)/deductions - net ($4 million income) for the
three months ended September 30, 2007. Included in Revenues
($144 million), Cost of sales ($121 million), Selling,
informational and administrative expenses ($12 million), and
Other (income)/deductions - net ($13 million income) for the
nine months ended September 30, 2007.
(g) Included in Provision for taxes on income and for the nine months
ended September 28, 2008, includes approximately $426 million
recorded in the second quarter of 2008 related to the sale of
one of our biopharmaceutical companies (Esperion Therapeutics
Inc.).
PFIZER INC AND SUBSIDIARY COMPANIES
RECONCILIATION OF REPORTED NET INCOME AND ITS COMPONENTS AND REPORTED
DILUTED EPS
TO ADJUSTED INCOME AND ITS COMPONENTS AND ADJUSTED DILUTED EPS
(UNAUDITED)
(millions of dollars, except per common share data)
Twelve Months Ended December 31, 2007
—————————————————–
Purchase Acqui- Discon- Certain
Accounting sition- tinued Signi-
Adjust- Related Oper- ficant
Reported ments Costs ations Items Adjusted
——– ———- ——- ——- ——– ——–
Revenues $48,418 $ - $ - $ - $ (209) $48,209
Costs and
expenses:
Cost of sales
(a) 11,239 (49) - - (3,497) 7,693
Selling,
informational
and
administrative
expenses (a) 15,626 12 - - (418) 15,220
Research and
development
expenses (a) 8,089 (29) - - (516) 7,544
Amortization of
intangible
assets 3,128 (3,013) - - - 115
Acquisition-
related in-
process R&D
charges 283 (283) - - - -
Restructuring
charges and
acquisition-
related costs 2,534 - (11) - (2,523) -
Other (income)/
deductions–net (1,759) (22) - - 235 (1,546)
——– ———- ——- ——- ——– ——–
Income from
continuing
operations
before provision
for taxes on
income and
minority
interests 9,278 3,384 11 - 6,510 19,183
Provision for
taxes on income 1,023 873 1 - 2,131 4,028
Minority
interests 42 - - - - 42
——– ———- ——- ——- ——– ——–
Income from
continuing
operations 8,213 2,511 10 - 4,379 15,113
——– ———- ——- ——- ——– ——–
Discontinued
operations:
Income/(loss)
from
discontinued
operations–net
of tax (3) - - 3 - -
Gains/(losses)
on sales of
discontinued
operations–net
of tax (66) - - 66 - -
——– ———- ——- ——- ——– ——–
Discontinued
operations–net
of tax (69) - - 69 - -
——– ———- ——- ——- ——– ——–
Net income $ 8,144 $ 2,511 $ 10 $ 69 $ 4,379 $15,113
======== ========== ======= ====== ======== ========
Earnings per
common share -
diluted:
Income from
continuing
operations $ 1.18 $ 0.37 $ - $ - $ 0.63 $ 2.18
Discontinued
operations–net
of tax (0.01) - - 0.01 - -
——– ———- ——- ——- ——– ——–
Net income $ 1.17 $ 0.37 $ - $0.01 $ 0.63 $ 2.18
======== ========== ======= ====== ======== ========
(a) Amortization expense related to acquired intangible assets that
contribute to our ability to sell, manufacture, research, market
and distribute our products are included in Amortization of
intangible assets as they benefit multiple business functions.
Amortization expense related to acquired intangible assets that
are associated with a single function are included in Cost of
sales, Selling, informational and administrative expenses or
Research and development expenses, as appropriate.
Certain amounts may reflect rounding adjustments.
Certain prior period amounts were reclassified to conform to the
current period presentation.
PFIZER INC
SEGMENT/PRODUCT REVENUES
THIRD QUARTER 2008
(UNAUDITED)
(millions of dollars)
QUARTER-TO-DATE
———————————————————-
WORLDWIDE U.S. INTERNATIONAL
——————– —————— ——————
% % %
2008 2007 Change 2008 2007 Change 2008 2007 Change
======================================================================
TOTAL
REVENUES 11,973 11,990 - 4,908 5,747 (15) 7,065 6,243 13
======================================================================
———————————————————————-
PHARMA-
CEUTICAL 10,976 11,036 (1) 4,525 5,352 (15) 6,451 5,684 14
———————————————————————-
- CARDIO-
VASCULAR
AND
METABOLIC
DISEASES 4,537 4,620 (2) 1,907 2,252 (15) 2,630 2,368 11
LIPITOR 3,142 3,170 (1) 1,569 1,810 (13) 1,573 1,360 16
NORVASC 562 640 (12) 22 48 (53) 540 592 (9)
CHANTIX /
CHAMPIX 182 241 (24) 96 186 (49) 86 55 60
CADUET 148 149 (1) 116 128 (9) 32 21 54
CARDURA 125 119 6 1 1 14 124 118 6
- CENTRAL
NERVOUS
SYSTEM
DISORDERS 1,556 1,297 20 725 609 19 831 688 21
LYRICA 675 465 45 379 269 40 296 196 51
GEODON /
ZELDOX 258 228 13 210 186 13 48 42 13
ZOLOFT 135 124 9 27 31 (13) 108 93 16
ARICEPT** 131 100 30 1 1 (9) 130 99 30
NEURONTIN 102 106 (4) 20 21 (5) 82 85 (4)
XANAX /
XANAX XR 91 85 7 16 17 (10) 75 68 12
RELPAX 83 81 2 50 53 (6) 33 28 17
- ARTHRITIS
AND PAIN 768 735 5 491 475 4 277 260 6
CELEBREX 625 577 8 450 433 4 175 144 21
- INFECTIOUS
AND
RESPIRATORY
DISEASES 989 859 15 318 277 15 671 582 15
ZYVOX 281 232 21 161 144 12 120 88 35
VFEND 189 162 17 58 52 11 131 110 20
ZITHROMAX /
ZMAX 91 89 2 1 6 (67) 90 83 6
DIFLUCAN 93 96 (3) 4 3 9 89 93 (3)
- UROLOGY 820 758 8 436 416 5 384 342 12
VIAGRA 509 450 13 236 208 13 273 242 13
DETROL /
DETROL LA 298 294 1 198 203 (2) 100 91 9
- ONCOLOGY 645 664 (3) 111 240 (54) 534 424 26
SUTENT 226 151 49 62 60 4 164 91 79
CAMPTOSAR 122 243 (50) (3) 137 * 125 106 17
AROMASIN 121 102 19 39 33 17 82 69 19
- OPHTHAL-
MOLOGY 459 413 11 138 131 5 321 282 14
XALATAN /
XALACOM 450 402 12 138 131 5 312 271 15
- ENDOCRINE
DISORDERS 294 271 9 62 66 (7) 232 205 14
GENOTROPIN 225 216 5 54 60 (12) 171 156 11
- ALL OTHER 337 962 (65) 11 609 (98) 326 353 (8)
ZYRTEC /
ZYRTEC D - 428 * - 428 * - - -
- ALLIANCE
REVENUE
(Aricept,
Exforge,
Macugen,
Olmetec,
Rebif and
Spiriva) 571 457 25 326 277 18 245 180 37
———————————————————————-
ANIMAL
HEALTH 708 636 11 303 292 4 405 344 17
———————————————————————-
OTHER *** 289 318 (9) 80 103 (22) 209 215 (3)
———————————————————————-
* - Calculation not meaningful.
** - Represents direct sales under license agreement with Eisai Co.,
Ltd.
*** - Includes Consumer Healthcare business transition activity,
Capsugel and Pfizer Centersource.
Certain amounts and percentages may reflect rounding adjustments.
PFIZER INC
SEGMENT/PRODUCT REVENUES
NINE MONTHS 2008
(UNAUDITED)
(millions of dollars)
YEAR-TO-DATE
————————————————————–
WORLDWIDE U.S. INTERNATIONAL
——————– ——————– ——————–
% % %
2008 2007 Change 2008 2007 Change 2008 2007 Change
======================================================================
TOTAL
REV-
ENUES 35,950 35,548 1 15,185 17,438 (13) 20,765 18,110 15
======================================================================
———————————————————————-
PHARMA-
CEUTICAL32,933 32,722 1 14,048 16,287 (14) 18,885 16,435 15
———————————————————————-
-CARDIO-
VASCULAR
AND
META-
BOLIC
DIS-
EASES 13,498 13,858 (3) 5,835 7,016 (17) 7,663 6,842 12
LIPITOR 9,255 9,247 - 4,717 5,331 (12) 4,538 3,916 16
NORVASC 1,702 2,351 (28) 59 577 (90) 1,643 1,774 (7)
CHANTIX
/
CHAMPIX 666 603 10 398 499 (20) 268 104 157
CADUET 441 414 7 352 372 (5) 89 42 112
CARDURA 378 378 - 4 3 30 374 375 -
-CENTRAL
NERVOUS
SYSTEM
DIS-
ORDERS 4,426 3,716 19 2,078 1,742 19 2,348 1,974 19
LYRICA 1,871 1,265 48 1,065 728 46 806 537 50
GEODON /
ZELDOX 731 622 18 594 510 16 137 112 22
ZOLOFT 408 397 3 95 132 (28) 313 265 18
ARICEPT* 356 285 25 1 1 23 355 284 25
NEUR-
ONTIN 295 321 (8) 53 57 (7) 242 264 (8)
XANAX /
XANAX XR 267 239 12 48 45 5 219 194 14
RELPAX 240 230 4 147 149 (1) 93 81 15
- ARTH-
RITIS
AND PAIN 2,279 2,110 8 1,445 1,371 5 834 739 13
CELEBREX 1,825 1,653 10 1,330 1,250 6 495 403 23
- INFEC-
TIOUS
AND
RESPIR-
ATORY
DISEASES 2,920 2,609 12 916 843 9 2,004 1,766 14
ZYVOX 832 692 20 495 445 11 337 247 37
VFEND 547 455 20 166 153 8 381 302 26
ZITHRO-
MAX /
ZMAX 320 328 (3) 8 24 (64) 312 304 2
DIFLUCAN 280 311 (10) 8 9 (18) 272 302 (10)
- URO-
LOGY 2,369 2,172 9 1,267 1,192 6 1,102 980 12
VIAGRA 1,432 1,266 13 658 574 15 774 692 12
DETROL /
DETROL
LA 901 866 4 604 604 - 297 262 13
- ONCO-
LOGY 1,932 1,911 1 417 723 (42) 1,515 1,188 28
SUTENT 627 399 57 188 174 8 439 225 95
CAMPTO-
SAR 451 713 (37) 86 397 (78) 365 316 16
AROMASIN 342 287 19 108 96 12 234 191 22
- OPH-
THAL-
MOLOGY 1,316 1,179 12 392 380 3 924 799 16
XALATAN
/
XALACOM 1,291 1,151 12 392 380 3 899 771 17
- ENDO-
CRINE
DIS-
ORDERS 857 769 11 191 187 2 666 582 14
GENO-
TROPIN 669 619 8 170 173 (2) 499 446 12
- ALL
OTHER 1,714 3,151 (46) 573 2,093 (73) 1,141 1,058 8
ZYRTEC /
ZYRTEC D 125 1,274 (90) 125 1,274 (90) - - -
- ALLI-
ANCE
REVENUE
(Ari-
cept,
Exforge,
Macugen,
Olmetec,
Rebif
and
Spiriva) 1,622 1,247 30 934 740 26 688 507 36
———————————————————————-
ANIMAL
HEALTH 2,042 1,854 10 812 810 - 1,230 1,044 18
———————————————————————-
OTHER ** 975 972 - 325 341 (5) 650 631 3
———————————————————————-
* - Represents direct sales under license agreement with Eisai Co.,
Ltd.
** - Includes Consumer Healthcare business transition activity,
Capsugel and Pfizer Centersource.
Certain amounts and percentages may reflect rounding adjustments.
PFIZER INC AND SUBSIDIARY COMPANIES
RECONCILIATION FROM REPORTED PHARMACEUTICAL REVENUES TO TOTAL
IN-LINE AND NEW PRODUCTS(2) PHARMACEUTICAL REVENUES
(UNAUDITED)
(millions of dollars)
Worldwide
—————————————————–
Third Quarter % Incr. Nine Months % Incr.
—————– / —————– /
2008 2007 (Decr.) 2008 2007 (Decr.)
——– ——– ——– ——– ——– ——–
Total reported
Pharmaceutical
revenues $10,976 $11,036 (1) $32,933 $32,722 1
Norvasc 562 640 (12) 1,702 2,351 (28)
Camptosar 122 243 (50) 451 713 (37)
Zyrtec/Zyrtec D - 428 * 125 1,274 (90)
Other (1) (217) - * (217) - *
——- —— ——- ——
Total in-line
products and
new products(2)
Pharmaceutical
revenues $10,509 $ 9,725 8 $30,872 $28,384 9
======= ====== ======= ======
U.S.
—————————————————–
Third Quarter % Incr. Nine Months % Incr.
—————– / —————– /
2008 2007 (Decr.) 2008 2007 (Decr.)
——– ——– ——– ——– ——– ——–
Total reported
Pharmaceutical
revenues $ 4,525 $ 5,352 (15) $14,048 $16,287 (14)
Norvasc 22 48 (53) 59 577 (90)
Camptosar (3) 137 * 86 397 (78)
Zyrtec/Zyrtec D - 428 * 125 1,274 (90)
Other (1) (157) - * (157) - *
——- —— ——- ——
Total in-line
products and
new products(2)
Pharmaceutical
revenues $ 4,663 $ 4,739 (2) $13,935 $14,039 (1)
======= ====== ======= ======
International
—————————————————–
Third Quarter % Incr. Nine Months % Incr.
—————– / —————– /
2008 2007 (Decr.) 2008 2007 (Decr.)
——– ——– ——– ——– ——– ——–
Total reported
Pharmaceutical
revenues $ 6,451 $ 5,684 13 $18,885 $16,435 15
Norvasc 540 592 (9) 1,643 1,774 (7)
Camptosar 125 106 17 365 316 16
Zyrtec/Zyrtec D - - - - - -
Other (1) (60) - * (60) - *
——- —— ——- ——
Total in-line
products and
new products(2)
Pharmaceutical
revenues(3) $ 5,846 $ 4,986 17 $16,937 $14,345 18
======= ====== ======= ======
* Calculation not meaningful.
Certain amounts and percentages may reflect rounding adjustments.
(1) Represents an adjustment to the prior years’ liabilities for
product returns.
(2) Total in-line and new products Pharmaceutical revenues, which
exclude the revenues of major products that have lost exclusivity in
the U.S. since the beginning of 2007 and the prior years’ returns
liabilities adjustment (1), is an alternative view of our
Pharmaceutical revenues, and we believe that investors’ understanding
of Pharmaceutical revenues is enhanced by disclosing this performance
measure. Norvasc lost its U.S. exclusivity in March 2007 and
Camptosar lost its U.S. exclusivity in February 2008, and as is
typical in the pharmaceutical industry, this has resulted in a
dramatic decline in revenues due to generic competition.
Zyrtec/Zyrtec D lost its U.S. exclusivity in January 2008 and we
ceased marketing the product in late January 2008. We believe that
excluding the impact of these products and the prior years’ returns
liabilities adjustment (1) assist the reader in understanding the
dynamics of our diverse Pharmaceutical product portfolio in 2008.
Because of its non-standardized definition, this total in-line and
new products Pharmaceutical revenues measure has limitations as it
may not be comparable with the calculation of similar measures of
other companies. This additional revenue measure is not, and should
not be viewed as, a substitute for the U.S. GAAP comparison of
Pharmaceutical revenues.
(3) Total in-line and new products Pharmaceutical international
revenues reflect a favorable impact in the third quarter and first
nine months of 2008 due primarily to changes in foreign exchange
rates.
PFIZER INC
SUPPLEMENTAL INFORMATION
1) Change in Revenues
The weakening of the U.S. dollar relative to other currencies,
primarily the euro, Japanese yen and Canadian dollar, favorably
impacted our revenues by approximately $620 million, or 5%, in
third-quarter 2008, compared to the same period in 2007, and by
approximately $2.0 billion, or 6%, in the first nine months of 2008,
compared to the same period in 2007.
Reported revenues in third-quarter 2008 include a reduction of
$217 million to adjust our prior years’ liabilities for product
returns. We previously accrued for returns based on our overall
returns experience, as well as our understanding of the amount of
product in the wholesale and retail channel. After a recent detailed
review of our returns experience, we determined that our previous
methodology needed to be revised, as the lag time between product sale
and return was actually much longer than we had previously assumed.
Although fully recorded in the current period, virtually all of the
adjustment relates back several years. We have also reviewed our
expense calculations for the prior years and determined that the
expense recorded in those years was not materially different from what
would have been recorded under our revised approach.
2) Change in Cost of Sales
Reported cost of sales decreased 54% in third-quarter 2008,
compared to the same period in 2007, and decreased 26% in the first
nine months of 2008, compared to the same period in 2007. The
decreases primarily reflect a $2.6 billion charge in third-quarter
2007 related to our decision to exit Exubera and the savings impact of
our cost-reduction initiatives, partially offset by the unfavorable
impact of foreign exchange, and for the first nine months of 2008,
higher implementation costs associated with our cost-reduction
initiatives.
Reported cost of sales included implementation charges related to
our cost-reduction initiatives of $172 million for third-quarter 2008,
$520 million for the nine months ended September 28, 2008, $173
million for third-quarter 2007, and $437 million for the nine months
ended September 30, 2007.
Reported cost of sales also included $38 million for third-quarter
2008, $131 million for the nine months ended September 28, 2008, $41
million for third-quarter 2007, and $121 million for the nine months
ended September 30, 2007, related to business-transition activities
associated with the sale of our Consumer Healthcare business,
completed in December 2006. This continuing activity is transitional
in nature and generally results from agreements that seek to
facilitate the orderly transfer of operations of our former Consumer
Healthcare business to the new owner.
Reported cost of sales as a percentage of revenues decreased 20.8
percentage points to 17.7% in third-quarter 2008, compared to
third-quarter 2007, reflecting a $2.6 billion charge in third-quarter
2007 related to our decision to exit Exubera and the favorable impact
of our cost-reduction initiatives, partially offset by the impact of
foreign exchange.
3) Change in Selling, Informational & Administrative (SI&A)
Expenses and Research & Development (R&D) Expenses
Reported SI&A expenses decreased 7% in third-quarter 2008, and
decreased 1% in the nine months ended September 28, 2008, compared to
the same periods in 2007, reflecting the savings associated with our
cost-reduction initiatives and a $83 million charge in third-quarter
2007 related to our decision to exit Exubera, partially offset by the
impact of foreign exchange and the impact of higher implementation
costs associated with our cost-reduction initiatives.
Reported SI&A expenses included implementation charges related to
our cost-reduction initiatives of $95 million for third-quarter 2008,
$270 million for the nine months ended September 28, 2008, $70 million
for third-quarter 2007, and $198 million for the nine months ended
September 30, 2007.
Reported R&D expenses, excluding acquisition-related in-process
research and development charges (IPR&D), decreased 6% in
third-quarter 2008, and decreased 3% in the nine months ended
September 28, 2008, compared to the same periods in 2007. The
decreases were primarily due to collaboration payments made to
Bristol-Myers Squibb Company in second-quarter 2007 in connection with
our collaboration to develop and commercialize apixaban and a $131
million charge in third-quarter 2007 related to our decision to exit
Exubera, in addition to the realization of savings associated with our
cost-reduction initiatives. These decreases were partially offset by
higher R&D spending related to Phase 3 clinical trials in
third-quarter 2008 and the unfavorable impact of foreign exchange.
Reported R&D expenses included implementation charges related to
our cost-reduction initiatives of $108 million for third-quarter 2008,
$348 million for the nine months ended September 28, 2008, $130
million for third-quarter 2007, and $292 million for the nine months
ended September 30, 2007.
IPR&D charges of $567 million in the first nine months of 2008
primarily related to our acquisitions of Serenex, Inc., Encysive
Pharmaceuticals, Inc., CovX, Coley Pharmaceutical Group, Inc. and two
smaller acquisitions related to Animal Health. IPR&D charges in the
first nine months of 2007 of $283 million, primarily related to our
acquisitions of BioRexis Pharmaceutical Corp. and Embrex, Inc.
4) Asset Impairment Charges and Other Costs Associated with
Exiting Exubera
In third-quarter 2007, after an assessment of the financial
performance of Exubera, an inhalable form of insulin for the treatment
of diabetes, as well as its lack of acceptance by patients, physicians
and payers, we decided to exit the product.
Total pre-tax charges for the third quarter and first nine months
of 2007 were $2.8 billion and were primarily included in Cost of sales
($2.6 billion), Selling, informational and administrative expenses
($83 million), and Research and development expenses ($131 million).
Total pre-tax charges for the third quarter and first nine months of
2008 were not significant.
5) Other Income and Other Deductions
($ millions) Third Quarter Nine Months
—————– —————–
2008 2007* 2008 2007*
——– ——– ——– ——–
Net Interest (Income)/Expense(a) $ (186) $ (280) $ (488) $ (814)
Royalty Income (59) (36) (194) (169)
Net Losses/(Gains) on Asset
Disposals - (10) 7 (89)
Litigation-related matters(b) 936 53 934 53
Other, Net 30 13 (38) (130)
——– ——– ——– ——–
Other (Income)/Deductions-Net $ 721 $ (260) $ 221 $(1,149)
======== ======== ======== ========
*Certain prior period amounts were reclassified to conform to the
current period presentation.
(a) The decreases in net interest income in the third quarter and
first nine months of 2008, compared to the same periods in 2007, were
due primarily to lower net financial assets and lower interest rates.
(b) In third-quarter 2008, we recorded litigation-related charges
of approximately $900 million related to our agreements in principle
to resolve certain litigation involving our non-steroidal
anti-inflammatory (NSAID) pain medicines.
6) Effective Tax Rate
The effective tax rate on reported Income from continuing
operations before provision/(benefit) for taxes on income and minority
interests for third-quarter 2008 was a 17.0% cost compared to a 25.4%
benefit in third-quarter 2007, and in the first nine months of 2008
was a 13.8% cost compared to a 12.7% cost in the first nine months of
2007, reflecting tax benefits in second-quarter 2008 of $305 million
related to favorable tax settlements for multiple tax years and $426
million related to the sale of one of our biopharmaceutical companies
(Esperion Therapeutic Inc.), higher acquired IPR&D expenses in 2008,
which are not deductible for tax purposes, and a tax benefit in
third-quarter 2007 of $681 million related to charges associated with
Exubera.
The effective tax rate on adjusted income(1) was a cost of 22.3%
in third-quarter 2008, a cost of 21.4% in the first nine months of
2008, a cost of 21.7% in third-quarter 2007, and a cost of 21.8% in
the first nine months of 2007. The lower rate on adjusted income(1) in
the first nine months of 2008 reflects the $305 million in tax
benefits related to the resolution of tax issues noted above,
partially offset by a change in geographical mix of income.
On October 3, 2008, the Tax Extenders and Alternative Minimum Tax
Relief Act (the Extenders Act) extended the research and development
tax credit from January 1, 2008 through December 31, 2009. We estimate
that this research and development credit will reduce income tax
expense in fourth-quarter 2008 by approximately $120 million to $150
million. Certain provisions of the Tax Increase and Prevention
Reconciliation Act (TIPRA) have been extended through 2010. These
provisions reduce our U.S. tax cost on certain types of foreign income
and were originally due to expire for us in 2009.
7) Reconciliation of 2008 Adjusted Income(1) and Adjusted Diluted
EPS(1) Guidance to 2008 Reported Net Income and Reported Diluted EPS
Guidance
Previous Full-Year 2008 Revised Full-Year 2008
Guidance Guidance
($ billions,
except per-share Net Diluted Net Diluted
amounts) Income(a) EPS(a) Income(a) EPS(a)
———– ————- ———– ————-
Income/(Expense)
——————
Adjusted
Income/Diluted
EPS(1) $15.8 - $2.35 - $15.9 - $2.36 -
Guidance $16.6 $2.45 $16.3 $2.41
Purchase
Accounting
Impacts:
Business
Development
Transactions
Completed as of
12/31/07 (2.1) (0.31) (1.9) (0.28)
Business
Development
Transactions
Completed from
1/1/08 through
9/28/08 (0.5) (0.08) (0.6) (0.08)
Costs Related to
Cost-Reduction
Initiatives (1.6 - 1.9) (0.24 - 0.29) (1.6 - 1.9) (0.24 - 0.29)
Litigation-Related
Matters(b) - - (0.7) (0.10)
Returns
Liabilities
Adjustment(c) - - (0.1) (0.02)
Tax Benefits
Related to Sale
of Esperion 0.4 0.06 0.4 0.06
Other, Net - - (0.2) (0.04)
———– ————- ———– ————-
Reported Net
Income/Diluted
EPS $11.7 - $1.73 - $10.9 - $1.61 -
Guidance $12.8 $1.88 $11.6 $1.71
=========== ============= =========== =============
(a) Guidance in the table above excludes the potential effects of
business-development transactions not completed as of September 28,
2008 and of litigation-related matters not substantially resolved as
of September 28, 2008, as we do not forecast those items.
(b) Litigation-related matters primarily reflect our agreements in
principle to resolve certain litigation involving our NSAID pain
medications.
(c) Reflects an adjustment to the prior years’ liabilities for
product returns.
(1) “Adjusted income” and “adjusted diluted earnings per share
(EPS)” are defined as reported net income and reported diluted EPS
excluding purchase-accounting adjustments, acquisition-related costs,
discontinued operations and certain significant items. As described
under Adjusted Income in the Management’s Discussion and Analysis of
Financial Condition and Results of Operations section of Pfizer’s Form
10-Q for the quarterly period ended June 29, 2008, management uses
adjusted income, among other factors, to set performance goals and to
measure the performance of the overall company. We believe that
investors’ understanding of our performance is enhanced by disclosing
this measure. The adjusted income and adjusted diluted EPS measures
are not, and should not be viewed as, substitutes for U.S. GAAP net
income and diluted EPS.
DISCLOSURE NOTICE: The information contained in this earnings
release and the attachments is as of October 21, 2008. The Company
assumes no obligation to update any forward-looking statements
contained in this earnings release or the attachments as a result of
new information or future events or developments.
This earnings release and the attachments contain forward-looking
information about the Company’s financial results and estimates,
business plans and prospects, in-line products and product candidates
that involve substantial risks and uncertainties. You can identify
these statements by the fact that they use words such as “will,”
“anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,”
“believe,” “target,” “forecast” and other words and terms of similar
meaning in connection with any discussion of future operating or
financial performance or business plans and prospects. Among the
factors that could cause actual results to differ materially are the
following: the success of research and development activities;
decisions by regulatory authorities regarding whether and when to
approve our drug applications as well as their decisions regarding
labeling and other matters that could affect the availability or
commercial potential of our products; the speed with which regulatory
authorizations, pricing approvals and product launches may be
achieved; the success of external business development activities;
competitive developments, including with respect to competitor drugs
and drug candidates that treat diseases and conditions similar to
those treated by our in-line drugs and drug candidates; the ability to
successfully market both new and existing products domestically and
internationally; difficulties or delays in manufacturing; trade buying
patterns; the ability to meet generic and branded competition after
the loss of patent protection for our products and competitor
products; the impact of existing and future legislation and regulatory
provisions on product exclusivity; trends toward managed care and
healthcare cost containment; U.S. legislation or regulatory action
affecting, among other things, pharmaceutical product pricing,
reimbursement or access, including under Medicaid and Medicare, the
importation of prescription drugs from outside the U.S. at prices that
are regulated by governments of various foreign countries,
direct-to-consumer advertising and interactions with healthcare
professionals and the involuntary approval of prescription medicines
for over-the-counter use; the impact of the Medicare Prescription
Drug, Improvement and Modernization Act of 2003; legislation or
regulatory action in markets outside the U.S. affecting pharmaceutical
product pricing, reimbursement or access; contingencies related to
actual or alleged environmental contamination; claims and concerns
that may arise regarding the safety or efficacy of in-line products
and product candidates; significant breakdown, infiltration or
interruption of our information technology systems and infrastructure;
legal defense costs, insurance expenses, settlement costs and the risk
of an adverse decision or settlement related to product liability,
patent protection, governmental investigations, ongoing efforts to
explore various means for resolving asbestos litigation, and other
legal proceedings; the Company’s ability to protect its patents and
other intellectual property both domestically and internationally;
interest rate and foreign currency exchange rate fluctuations;
governmental laws and regulations affecting domestic and foreign
operations, including tax obligations; changes in generally accepted
accounting principles; uncertainties related to general economic,
political, business, industry, regulatory and market conditions; any
changes in business, political and economic conditions due to actual
or threatened terrorist activity in the U.S. and other parts of the
world, and related U.S. military action overseas; growth in costs and
expenses; changes in our product, segment and geographic mix; and the
impact of acquisitions, divestitures, restructurings, product
withdrawals and other unusual items, including our ability to realize
the projected benefits of our cost-reduction initiatives. A further
list and description of risks, uncertainties, and other matters can be
found in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2007, and in its reports on Forms 10-Q and 8-K.
This earnings release may include discussion of certain clinical
studies relating to various in-line products and/or product
candidates. These studies typically are part of a larger body of
clinical data relating to such products or product candidates, and the
discussion herein should be considered in the context of the larger
body of data.