| |
(a)
| As of October 1, 2017, derivative instruments at fair value include interest rate swaps ($97 million), foreign currency swaps ($86 million) and foreign currency forward-exchange contracts ($105 million) and, as of December 31, 2016, include interest rate swaps ($26 million), foreign currency swaps ($43 million) and foreign currency forward-exchange contracts ($497 million).
|
| |
(b)
| As of October 1, 2017, derivative instruments at fair value include interest rate swaps ($532 million), foreign currency swaps ($6 million) and foreign currency forward-exchange contracts ($5 million) and, as of December 31, 2016, include interest rate swaps ($599 million), foreign currency swaps ($36 million) and foreign currency forward-exchange contracts ($54 million).
|
| |
(c)
| As of October 1, 2017, derivative instruments at fair value include foreign currency forward-exchange contracts ($276 million) and interest rate swaps ($1 million) and, as of December 31, 2016, include interest rate swaps ($1 million), foreign currency swaps ($300 million) and foreign currency forward-exchange contracts ($143 million).
|
| |
(d)
| As of October 1, 2017, derivative instruments at fair value include interest rate swaps ($153 million), foreign currency swaps ($710 million) and foreign currency forward-exchange contracts ($33 million) and, as of December 31, 2016, include interest rate swaps ($147 million) and foreign currency swaps ($1.1 billion).
|
There were no significant impairments of financial assets recognized in any period presented.
PFIZER INC. AND SUBSIDIARY COMPANIESCOMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
B. Investments in Debt Securities
|
| | | | | | | | | | | | | | | | | | | | |
The following table provides the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities: |
| | Years | | October 1, 2017 |
|
(MILLIONS OF DOLLARS) | | Within 1 |
| | Over 1 to 5 |
| | Over 5 to 10 |
| | Over 10 |
| | Total |
|
Available-for-sale debt securities | | | | | | | | | | |
Corporate debt(a) | | $ | 2,741 |
| | $ | 2,591 |
| | $ | 1,525 |
| | $ | 17 |
| | $ | 6,874 |
|
Western European, Asian, and other government debt(b) | | 6,071 |
| | 268 |
| | — |
| | — |
| | 6,339 |
|
Western European, Scandinavian and other government agency debt(b) | | 1,955 |
| | 42 |
| | — |
| | — |
| | 1,998 |
|
Supranational debt(b) | | 387 |
| | 195 |
| | — |
| | — |
| | 582 |
|
Government National Mortgage Association and other U.S. government guaranteed asset-backed securities | | 42 |
| | 424 |
| | — |
| | — |
| | 466 |
|
Other asset-backed debt(c) | | 161 |
| | 61 |
| | 3 |
| | — |
| | 226 |
|
U.S. government debt | | — |
| | 112 |
| | — |
| | — |
| | 112 |
|
Held-to-maturity debt securities | | | | | | |
| | | | |
|
Time deposits and other | | 1,133 |
| | — |
| | 3 |
| | — |
| | 1,137 |
|
Western European government debt(b) | | 326 |
| | — |
| | — |
| | — |
| | 326 |
|
Total debt securities | | $ | 12,818 |
| | $ | 3,694 |
| | $ | 1,532 |
| | $ | 18 |
| | $ | 18,061 |
|
| | | | | | | | |
(a)
| Issued by a diverse group of corporations, with a significant concentration in the technology sector, virtually all of which are investment-grade. |
| |
Equity Securities | | | | | | | | | | | | | | | | | | | | | | | | | | | The following presents the calculation of the portion of unrealized (gains)/losses that relates to equity securities, excluding equity-method investments, held at the reporting date: | | | Three Months Ended | | Nine Months Ended | (MILLIONS) | | October 1, 2023 | | October 2, 2022 | | October 1, 2023 | | October 2, 2022 | Net (gains)/losses recognized during the period on equity securities(a) | | $ | 393 | | | $ | 112 | | | $ | 709 | | | $ | 1,353 | | Less: Net (gains)/losses recognized during the period on equity securities sold during the period | | (1) | | | (5) | | | (48) | | | (84) | | Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b) | | $ | 394 | | | $ | 116 | | | $ | 757 | | | $ | 1,436 | |
(a)Reported in Other (income)/deductions––net. See Note 4. (b)Included in net unrealized (gains)/losses are observable price changes on equity securities without readily determinable fair values. As of October 1, 2023, there were cumulative impairments and downward adjustments of $188 million and upward adjustments of $213 million. Impairments, downward and upward adjustments were not significant in the third quarters and first nine months of 2023 and 2022. (b)
| Issued by governments, government agencies or supranational entities, as applicable, all of which are high quality. |
| |
(c)
| Includes receivable-backed, loan-backed, and mortgage-backed securities, all of which are high quality and in senior positions in the capital structure of the security. Receivable-backed securities are collateralized by credit cards receivables, loan-backed securities are collateralized by senior secured obligations of a diverse pool of companies or student loans, and mortgage-backed securities are collateralized by diversified pools of residential and commercial mortgages. |
C. Short-Term Borrowings
| | | | | | | | | | | | | | |
Short-term borrowings include: |
(MILLIONS) | | October 1, 2023 | | December 31, 2022 |
| | | | |
Current portion of long-term debt, principal amount | | $ | 2,250 | | | $ | 2,550 | |
Other short-term borrowings, principal amount(a) | | 288 | | | 385 | |
Total short-term borrowings, principal amount | | 2,538 | | | 2,935 | |
Net fair value adjustments | | 10 | | | 10 | |
| | | | |
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted | | $ | 2,548 | | | $ | 2,945 | |
Short-term borrowings include amounts for commercial paper of $6.1 billion as of October 1, 2017 and $5.8 billion as of (a)December 31, 2016Primarily includes cash collateral. SeeNote 7F.
D. Long-Term Debt
Issuance
| | | | | | | | | | | | | | |
In May 2023, we issued, through our wholly-owned finance subsidiary, PIE, the following senior unsecured notes as part of the financing for our proposed acquisition of Seagen(a), (b): |
(MILLIONS) | | | | Principal |
Interest Rate | | Maturity Date | | October 1, 2023 |
4.65%(c) | | May 19, 2025 | | $ | 3,000 | |
4.45%(c) | | May 19, 2026 | | 3,000 | |
4.45%(c) | | May 19, 2028 | | 4,000 | |
4.65%(c) | | May 19, 2030 | | 3,000 | |
4.75% | | May 19, 2033 | | 5,000 | |
5.11%(c) | | May 19, 2043 | | 3,000 | |
5.30% | | May 19, 2053 | | 6,000 | |
5.34%(c) | | May 19, 2063 | | 4,000 | |
Total long-term debt issued in the second quarter of 2023(d) | | | | $ | 31,000 | |
(a)The notes are fully and unconditionally guaranteed on a senior unsecured basis by Pfizer Inc. PIE was formed to finance a portion of the consideration for the proposed acquisition of Seagen and has no assets or operations and will have no assets or operations, other than as related to the issuance, administration and repayment of the notes and any other debt securities that it may issue in the future.
(b)The notes may be redeemed by us at any time, in whole, or in part, at a make-whole redemption price plus accrued and unpaid interest.
(c)The notes are subject to a special mandatory redemption (at a price equal to 101% of the aggregate principal amount of such series of notes, plus any accrued and unpaid interest) under certain circumstances if the proposed acquisition of Seagen is terminated or does not close by an agreed upon date.
(d)The weighted average effective interest rate for the notes at issuance was 4.93%.
|
| | | | | | | | | | |
The following table provides the amounts of senior unsecured long-term debt issued in the first quarter of 2017: |
| | | | Principal |
| | | | As of October 1, 2017 |
(MILLIONS) | | Maturity Date | | Euro |
| | U.S. Dollar |
|
3-month EURIBOR + 0.20% floating rate notes (0% floor) | | March 6, 2019 | | € | 1,250 |
| | $ | 1,479 |
|
0.00% euro notes(a) | | March 6, 2020 | | 1,000 |
| | 1,183 |
|
0.25% euro notes(a) | | March 6, 2022 | | 1,000 |
| | 1,183 |
|
1.00% euro notes(a) | | March 6, 2027 | | 750 |
| | 887 |
|
Total euro long-term debt issued in the first quarter of 2017(b) | | | | € | 4,000 |
| | $ | 4,732 |
|
4.20% notes(c) | | March 17, 2047 | | | | 1,065 |
|
Total long-term debt issued in the first quarter of 2017(d) | | | | | | $ | 5,797 |
|
| |
(a)
| Redeemable at any time, in whole, or in part, at our option prior to 30 to 90 days of maturity date at the comparable German government bond rate, plus 0.15%; plus, in each case, accrued and unpaid interest. The fixed rate euro notes are also redeemable at our option, in whole, or in part, within 30 to 90 days of maturity date. |
| |
(b)
| The weighted-average effective interest rate for the euro notes at issuance was 0.23%. |
| |
(c)
| The notes, issued in U.S. dollars in Taiwan, are redeemable, at our option, in whole but not in part, on each March 17 on or after March 17, 2020. |
| |
(d)
| The aggregate amount at issuance date was $5,279 million. The increase in the amount since the date of issuance is due to foreign currency exchange. |
PFIZER INC. AND SUBSIDIARY COMPANIESCOMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | |
The following outlines our senior unsecured long-term debt* and the weighted-average stated interest rate by maturity: |
(MILLIONS) | | October 1, 2023 | | December 31, 2022 |
Notes due 2024 (3.9% for 2022)(a) | | $ | — | | | $ | 2,250 | |
Notes due 2025 (3.9% for 2023 and 0.8% for 2022) | | 3,750 | | | 750 | |
Notes due 2026 (3.7% for 2023 and 2.9% for 2022) | | 6,000 | | | 3,000 | |
Notes due 2027 (2.2% for 2023 and 2.1% for 2022) | | 995 | | | 1,000 | |
Notes due 2028 (4.6% for 2023 and 4.8% for 2022) | | 5,660 | | | 1,660 | |
Notes due 2029 (3.5% for 2023 and 2022) | | 1,750 | | | 1,750 | |
Notes due 2030-2034 (4.1% for 2023 and 2.9% for 2022) | | 12,000 | | | 4,000 | |
Notes due 2035-2039 (5.8% for 2023 and 2022) | | 8,026 | | | 8,017 | |
Notes due 2040-2044 (4.1% for 2023 and 3.6% for 2022) | | 7,931 | | | 4,903 | |
Notes due 2045-2049 (4.1% for 2023 and 2022) | | 3,500 | | | 3,500 | |
Notes due 2050-2063 (5.0% for 2023 and 2.7% for 2022) | | 11,250 | | | 1,250 | |
Total long-term debt, principal amount | | $ | 60,862 | | | $ | 32,080 | |
Net fair value adjustments related to hedging and purchase accounting | | 677 | | | 959 | |
Net unamortized discounts, premiums and debt issuance costs | | (491) | | | (175) | |
Other long-term debt | | — | | | 20 | |
Total long-term debt, carried at historical proceeds, as adjusted | | $ | 61,048 | | | $ | 32,884 | |
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above (3.9% for 2023 and 3.7% for 2022)) | | $ | 2,260 | | | $ | 2,560 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
The following table provides the maturity schedule of our Long-term debt outstanding as of October 1, 2017: |
(MILLIONS OF DOLLARS) | | 2018 | | 2019 | | 2020 | | 2021 | | After 2021 | | Total |
Maturities | | $ | 481 |
| | $ | 4,825 |
| | $ | 1,534 |
| | $ | 4,502 |
| | $ | 23,162 |
| | $ | 34,503 |
|
*Our long-term debt is generally redeemable by us at any time at varying redemption prices plus accrued and unpaid interest.
(a)Reclassified to the current portion of long-term debt.
E. Other Noncurrent Liabilities
In August 2017, the U.S. approved Besponsa (inotuzumab ozogamicin) and in June 2017, the EU approved Besponsa as monotherapy for the treatment of adults with relapsed or refractory CD22-positive B-cell precursor acute lymphoblastic leukemia. In connection with the U.S. approval, we incurred an obligation to make guaranteed fixed annual payments over a nine-year period aggregating $296 million related to a research and development arrangement. As a result, we have recorded the estimated net present value of $248 million as an intangible asset in Developed technology rights, and we have recorded $233 million in Other noncurrent liabilities and $15 millionin Other current liabilities as of October 1, 2017. In connection with the EU approval, we incurred an obligation to make guaranteed fixed annual payments over a nine-year period aggregating $148 million related to a research and development arrangement. As a result, we recorded the estimated net present value of $123 million as an intangible asset in Developed technology rights, and we have recorded $117 million in Other noncurrent liabilities and$6 million in Other current liabilities as of October 1, 2017.
F. Derivative Financial Instruments and Hedging Activities
Foreign Exchange Risk
AsRisk––A significant portion of October 1, 2017,our revenues, earnings and net investments in foreign affiliates is exposed to changes in foreign exchange rates. Where foreign exchange risk is not offset by other exposures, we manage our foreign exchange risk principally through the aggregate notional amountuse of foreign exchange derivative financial instruments hedging or offsettingand foreign currency exposures was $31.5 billion. debt. These financial instruments serve to mitigate the impact on net income as a result of remeasurement into another currency, or against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions.
The derivative financial instruments primarily hedge or offset exposures in the euro, U.K. pound, Japanese yen, Canadian dollar and U.K. pound. The maximum length of time over which we are hedging future foreign exchange cash flow relates to our $2.0 billion U.K. pound debt maturing in 2038.
We designate foreign currency forward-exchange contracts as cash flow hedges ofChinese renminbi, and include a portion of our forecasted euro, Japanese yen, U.K. pound, Canadian dollar, and Australian dollar-denominatedforeign exchange-denominated intercompany inventory sales expectedhedged up to occur no more than two years fromyears. We may seek to protect against possible declines in the datereported net investments of each hedge. Asour foreign business entities.
Interest Rate Risk––Our interest-bearing investments and borrowings are subject to interest rate risk. Depending on market conditions, we may change the profile of October 1, 2017,our outstanding debt or investments by entering into derivative financial instruments like interest rate swaps, either to hedge or offset the exposure to changes in the fair value of hedged items with fixed interest rates, or to convert variable rate debt or investments to fixed rates. The derivative financial instruments primarily hedge U.S. dollar fixed-rate debt.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the fair value of the derivative financial instruments and notional amounts: |
| | October 1, 2023 | | December 31, 2022 |
| | | | Fair Value | | | | Fair Value |
(MILLIONS) | | Notional | | Asset | | Liability | | Notional | | Asset | | Liability |
Derivatives designated as hedging instruments: | | | | | | | | | | | | |
Foreign exchange contracts(a) | | $ | 27,979 | | | $ | 960 | | | $ | 781 | | | $ | 26,603 | | | $ | 838 | | | $ | 1,196 | |
Interest rate contracts | | 6,250 | | | 2 | | | 537 | | | 2,250 | | | — | | | 331 | |
| | | | 962 | | | 1,319 | | | | | 838 | | | 1,527 | |
Derivatives not designated as hedging instruments: | | | | | | | | | | | | |
Foreign exchange contracts | | $ | 17,428 | | | 165 | | | 149 | | | $ | 29,814 | | | 240 | | | 362 | |
| | | | | | | | | | | | |
Total | | | | $ | 1,127 | | | $ | 1,468 | | | | | $ | 1,078 | | | $ | 1,889 | |
(a)The notional amount of outstanding foreign currency forward-exchangeexchange contracts hedging our intercompany forecasted inventory sales was $3.9$4.7 billion with a pre-tax lossas of $97 million deferredOctober 1, 2023 and $4.4 billion as of December 31, 2022.
PFIZER INC. AND SUBSIDIARY COMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk exposures: |
| | Gains/(Losses) Recognized in OID(a) | | Gains/(Losses) Recognized in OCI(a) | | Gains/(Losses) Reclassified from OCI into OID and COS(a) |
| | Three Months Ended |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | October 1, 2023 | | October 2, 2022 | | October 1, 2023 | | October 2, 2022 |
Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
| | | | | | | | | | | | |
Foreign exchange contracts(b) | | $ | — | | | $ | — | | | $ | 359 | | | $ | 528 | | | $ | 20 | | | $ | 558 | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 49 | | | 61 | | | 46 | | | 57 | |
Derivative Financial Instruments in Fair Value Hedge Relationships: | | | | | | | | | | | | |
Interest rate contracts | | (213) | | | (124) | | | — | | | — | | | — | | | — | |
Hedged item | | 195 | | | 124 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts | | — | | | — | | | 297 | | | 680 | | | — | | | — | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 5 | | | 78 | | | 35 | | | 32 | |
Non-Derivative Financial Instruments in Net Investment Hedge Relationships(d): | | | | | | | | | | | | |
| | | | | | | | | | | | |
Foreign currency long-term debt | | — | | | — | | | 22 | | | 49 | | | — | | | — | |
Derivative Financial Instruments Not Designated as Hedges: | | | | | | | | | | | | |
Foreign exchange contracts | | 57 | | | (420) | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | $ | 39 | | | $ | (420) | | | $ | 733 | | | $ | 1,396 | | | $ | 102 | | | $ | 647 | |
|
|
|
| | Gains/(Losses) Recognized in OID(a) | | Gains/(Losses) Recognized in OCI(a) | | Gains/(Losses) Reclassified from OCI into OID and COS(a) |
| | Nine Months Ended |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | October 1, 2023 | | October 2, 2022 | | October 1, 2023 | | October 2, 2022 |
Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Interest rate contracts | | $ | — | | | $ | — | | | $ | 68 | | | $ | — | | | $ | — | | | $ | — | |
Foreign exchange contracts(b) | | — | | | — | | | 312 | | | 1,339 | | | (210) | | | 872 | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 139 | | | 105 | | | 136 | | | 100 | |
Derivative Financial Instruments in Fair Value Hedge Relationships: | | | | | | | | | | | | |
Interest rate contracts | | (210) | | | (346) | | | — | | | — | | | — | | | — | |
Hedged item | | 192 | | | 346 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts | | — | | | — | | | 14 | | | 1,613 | | | — | | | — | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 81 | | | 63 | | | 102 | | | 95 | |
Non-Derivative Financial Instruments in Net Investment Hedge Relationships(d): | | | | | | | | | | | | |
Foreign currency short-term borrowings | | — | | | — | | | — | | | 26 | | | — | | | — | |
Foreign currency long-term debt | | — | | | — | | | 5 | | | 119 | | | — | | | — | |
Derivative Financial Instruments Not Designated as Hedges: | | | | | | | | | | | | |
Foreign exchange contracts | | 173 | | | (832) | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | $ | 155 | | | $ | (832) | | | $ | 620 | | | $ | 3,264 | | | $ | 29 | | | $ | 1,068 | |
(a)OID = Other (income)/deductions—net, included in Accumulated otherOther (income)/deductions—net in the condensed consolidated statements of operations. COS = Cost of Sales, included in Cost of sales in the condensed consolidated statements of operations. OCI = Other comprehensive loss. income/(loss), included in the condensed consolidated statements of comprehensive income/(loss).
PFIZER INC. AND SUBSIDIARY COMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(b)The amounts reclassified from OCI into COS were:
•a net gain of $49 million in the third quarter of 2023;
•a net gain of $195 million in the first nine months of 2023;
•a net gain of $125 million in the third quarter of 2022; and
•a net gain of $227 million in the first nine months of 2022.
The remaining amounts were reclassified from OCI into OID. Based on quarter-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax lossgain of $63$302 million within the next 12 months into incomeCost. The maximum length of sales. time over which we are hedging our exposure to the variability in future foreign exchange cash flows is approximately 20 years and relates to foreign currency debt.
(c)We recognized a $4The amounts reclassified from OCI were reclassified into OID.
(d)Short-term borrowings and long-term debt include foreign currency borrowings, which are used in net investment hedges. The related long-term debt carrying values as of October 1, 2023 and December 31, 2022 were $790 million loss inand $795 million, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes cumulative basis adjustments to our debt in fair value hedges: |
| | October 1, 2023 | | December 31, 2022 |
| | | | Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount | | | | Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount |
(MILLIONS) | | Carrying Amount of Hedged Assets/Liabilities(a) | | Active Hedging Relationships | | Discontinued Hedging Relationships | | Carrying Amount of Hedged Assets/Liabilities(a) | | Active Hedging Relationships | | Discontinued Hedging Relationships |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Short-term borrowings, including current portion of long-term debt | | $ | — | | | $ | — | | | $ | 8 | | | $ | — | | | $ | — | | | $ | 10 | |
Long-term debt | | $ | 6,709 | | | $ | (513) | | | $ | 973 | | | $ | 2,235 | | | $ | (321) | | | $ | 1,042 | |
(a)Carrying amounts exclude the third quartercumulative amount of fair value hedging adjustments.
F. Credit Risk
A significant portion of our trade accounts receivable balances are due from wholesalers and governments. For additional information on our trade accounts receivables with significant customers, see 2017Note 13C below and a $67 million gain Note 17C in the first nine months of our 2022 Form 10-K.2017 as an offset to Cost of sales.
Interest Rate Risk
As of October 1, 2017,2023, the aggregate notional amountlargest investment exposures in our portfolio consisted primarily of interest rate derivative financialmoney market funds mainly invested in U.S. Treasury and government debt, as well as sovereign debt instruments designated as fair value hedges was $12.4 billion. The derivative financial instruments primarily hedgeissued by the U.S. dollar fixed-rate debt.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
The following table provides information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk: |
| | Three Months Ended |
| | Amount of Gains/(Losses) Recognized in OID(a), (b), (c) | | Amount of Gains/(Losses) Recognized in OCI (Effective Portion)(a), (d) | | Amount of Gains/(Losses) Reclassified from OCI into OID and COS (Effective Portion)(a), (d) |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | October 1, 2017 |
| | October 2, 2016 |
| | October 1, 2017 |
| | October 2, 2016 |
|
Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Foreign currency swaps | | $ | — |
| | $ | — |
| | $ | 218 |
| | $ | 87 |
| | $ | 148 |
| | $ | (39 | ) |
Foreign currency forward-exchange contracts | | 1 |
| | 2 |
| | (269 | ) | | (212 | ) | | (204 | ) | | (111 | ) |
Derivative Financial Instruments in Net Investment Hedge Relationships: | | |
| | |
| | |
| | |
| | |
| | |
|
Foreign currency forward-exchange contracts | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | |
Derivative Financial Instruments Not Designated as Hedges: | | |
| | |
| | |
| | |
| | |
| | |
|
Foreign currency forward-exchange contracts | | 33 |
| | 20 |
| | — |
| | — |
| | — |
| | — |
|
Foreign currency swaps | | — |
| | (4 | ) | | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | |
Non-Derivative Financial Instruments in Net Investment Hedge Relationships: | | |
| | |
| | |
| | |
| | |
| | |
|
Foreign currency long-term debt | | — |
| | — |
| | (166 | ) | | — |
| | — |
| | — |
|
All other net | | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
|
| | $ | 34 |
| | $ | 18 |
| | $ | (216 | ) | | $ | (126 | ) | | $ | (55 | ) | | $ | (150 | ) |
| | | | | | | | | | | | |
| | Nine Months Ended |
| | Amount of Gains/(Losses) Recognized in OID(a), (b), (c) | | Amount of Gains/(Losses) Recognized in OCI (Effective Portion)(a), (d) | | Amount of Gains/(Losses) Reclassified from OCI into OID and COS (Effective Portion)(a), (d) |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | October 1, 2017 |
| | October 2, 2016 |
| | October 1, 2017 |
| | October 2, 2016 |
|
Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Foreign currency swaps | | $ | — |
| | $ | — |
| | $ | 455 |
| | $ | (204 | ) | | $ | 419 |
| | $ | (165 | ) |
Foreign currency forward-exchange contracts | | (5 | ) | | 1 |
| | (604 | ) | | (770 | ) | | (26 | ) | | (118 | ) |
Derivative Financial Instruments in Net Investment Hedge Relationships: | | |
| | |
| | |
| | |
| | |
| | |
|
Foreign currency forward-exchange contracts | | — |
| | 1 |
| | — |
| | (15 | ) | | — |
| | — |
|
| | | | | | | | | | | | |
Derivative Financial Instruments Not Designated as Hedges: | | |
| | |
| | |
| | |
| | |
| | |
|
Foreign currency forward-exchange contracts | | (111 | ) | | (49 | ) | | — |
| | — |
| | — |
| | — |
|
Foreign currency swaps | | (1 | ) | | (9 | ) | | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | |
Non-Derivative Financial Instruments in Net Investment Hedge Relationships: | | |
| | |
| | |
| | |
| | |
| | |
|
Foreign currency short-term borrowings | | — |
| | — |
| | — |
| | (26 | ) | | — |
| | — |
|
Foreign currency long-term debt | | — |
| | — |
| | (518 | ) | | — |
| | — |
| | — |
|
All other net | | — |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
|
| | $ | (117 | ) | | $ | (56 | ) | | $ | (666 | ) | | $ | (1,014 | ) | | $ | 394 |
| | $ | (283 | ) |
| |
(a)
| OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the condensed consolidated statements of income. COS = Cost of sales, included in Cost of sales in the condensed consolidated statements of income.
|
OCI = Other comprehensive income/(loss), included inGermany, Canada, France, thecondensed consolidated statements of comprehensive income.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| |
(b)
| Includes gains and losses attributable to derivative instruments designated and qualifying as fair value hedges (primarily interest rate swaps), as well as the offsetting gains and losses attributable to the hedged items in such hedging relationships. |
| |
(c)
| There was no significant ineffectiveness for any period presented. |
| |
(d)
| For derivative financial instruments in cash flow hedge relationships, the effective portion is included in Other comprehensive income––Unrealized holding losses on derivative financial instruments, net. For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the effective portion is included in Other comprehensive income––Foreign currency translation adjustments, net.
|
U.K., and Japan.
For information about the fair value ofWith respect to our derivative financial instruments, and the impact on our condensed consolidated balance sheets, see Note 7A above. Certain of our derivative instruments are covered by associated credit-supportinstrument agreements that have credit-risk-related contingent features designed to reduce our counterparties’ exposure to our risk of defaulting on amounts owed. As of October 1, 2017, the aggregate fair value of these derivative instruments that are in a net liability position was $491 million, for whichwith financial institutions, we have posted collateral of $505 million in the normal course of business. If there had been a ratings downgrade, we would not have been required to post any additional collateral to our counterparties.
G. Credit Risk
On an ongoing basis, we review the creditworthiness of counterparties to our foreign exchange and interest rate agreements and do not expect to incur a significant loss from failure of any counterpartiescounterparty. Derivative financial instruments are executed under International Swaps and Derivatives Association master agreements with credit-support annexes that contain zero threshold provisions requiring collateral to perform under the agreements. Therebe exchanged daily depending on levels of exposure. As a result, there are no significant concentrations of credit risk related to our financial instruments with any individual counterparty, except for certain significant customers.financial institution. As of October 1, 2017, we had $946 million due from a well-diversified, high quality group2023, the aggregate fair value of technology companies around the world. For details about our investments, see Note 7B above.
In general, there is no requirement for collateral from customers. However,these derivative financial instruments that are executed under credit-support agreements that providein a net payable position was $941 million, for the ability to requestwhich we have posted collateral payments depending on levels of exposure, our credit rating and the credit rating of the counterparty.$1.0 billion with a corresponding amount reported in Short-term investments. As of October 1, 2017, we received cash collateral of $232 million from various counterparties. The collateral primarily supports2023, the approximateaggregate fair value of our derivative contracts. With respect to thefinancial instruments that are in a net receivable position was $333 million, for which we have received collateral received, the obligations areof $256 million with a corresponding amount reported inShort-term borrowings, including current portion of long-term debt.
Note 8. Other Financial Information
A.Inventories
| | | | | | | | | | | | | | |
The following summarizes the components of Inventories: |
(MILLIONS) | | October 1, 2023 | | December 31, 2022 |
Finished goods | | $ | 2,892 | | | $ | 2,603 | |
Work-in-process | | 6,515 | | | 5,519 | |
Raw materials and supplies | | 797 | | | 859 | |
Inventories(a) | | $ | 10,204 | | | $ | 8,981 | |
Noncurrent inventories not included above(b) | | $ | 1,416 | | | $ | 5,827 | |
(a)The increase from December 31, 2022 of $1.2 billion reflects higher inventory levels for certain products due to supply recovery, new product launches and changes in net market demand, partially offset by $0.7 billion in inventory write-offs for Paxlovid and Comirnaty.
(b)Included in Other noncurrent assets. The decrease from December 31, 2022 of $4.4 billion is primarily driven by inventory write-offs for Paxlovid of $4.2 billion and, to a lesser extent, inventory write-offs for Comirnaty of $0.7 billion, partially offset by increases due to inventory build. The charges and
|
| | | | | | | | |
The following table provides the components of Inventories: |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | December 31, 2016 |
|
Finished goods | | $ | 2,977 |
| | $ | 2,293 |
|
Work-in-process | | 4,070 |
| | 3,696 |
|
Raw materials and supplies | | 879 |
| | 793 |
|
Inventories(a) | | $ | 7,925 |
| | $ | 6,783 |
|
Noncurrent inventories not included above(b) | | $ | 669 |
| | $ | 683 |
|
23
| |
(a)
| The change from December 31, 2016 reflects the build of inventory primarily for and in advance of new or potential product launches and increases to meet targeted levels for certain products in the normal course of business, including those related to demand.
|
| |
(b)
| Included in Other noncurrent assets. There are no recoverability issues associated with these amounts.
|
PFIZER INC. AND SUBSIDIARY COMPANIESCOMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
corresponding inventory write-offs were based on our analysis of Paxlovid and Comirnaty inventory levels as of October 1, 2023 in relation to our commercial outlook for both products. Based on our current estimates and assumptions, there are no recoverability issues for the remaining amounts.
B. Other Current Liabilities
Other current liabilities includes, among other things, amounts payable to BioNTech for the gross profit split for Comirnaty, which totaled $533 million as of October 1, 2023 and $5.2 billion as of December 31, 2022.
C. Supplier Finance Program Obligation
We maintain voluntary supply chain finance agreements with several participating financial institutions. Under these agreements, participating suppliers may voluntarily elect to sell their accounts receivable with Pfizer to these financial institutions. Our suppliers negotiate their financing agreements directly with the respective financial institutions and we are not a party to these agreements. We have no economic interest in our suppliers’ decision to participate and we pay the financial institutions the stated amount of confirmed invoices on the original maturity dates, which is generally within 90 to 120 days of the invoice date. The agreements with the financial institutions do not require Pfizer to provide assets pledged as security or other forms of guarantees for the supplier finance program. All outstanding amounts related to suppliers participating in such financing arrangements are recorded within trade payables in our consolidated balance sheet. As of October 1, 2023 and December 31, 2022, respectively, $781 million and $849 million of our trade payables to suppliers who participate in these financing arrangements were outstanding.
Note 9. Identifiable Intangible Assets and Goodwill
A. Identifiable Intangible Assets
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the components of Identifiable intangible assets: |
| | October 1, 2023 | | December 31, 2022 |
(MILLIONS) | | Gross Carrying Amount | | Accumulated Amortization | | Identifiable Intangible Assets, less Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization | | Identifiable Intangible Assets, less Accumulated Amortization |
Finite-lived intangible assets | | | | | | | | | | | | |
Developed technology rights(a) | | $ | 86,001 | | | $ | (59,146) | | | $ | 26,855 | | | $ | 85,604 | | | $ | (56,307) | | | $ | 29,297 | |
Brands | | 922 | | | (869) | | | 53 | | | 922 | | | (844) | | | 78 | |
Licensing agreements and other | | 2,368 | | | (1,446) | | | 922 | | | 2,237 | | | (1,397) | | | 841 | |
| | | | | | | | | | | | |
| | 89,290 | | | (61,461) | | | 27,830 | | | 88,763 | | | (58,548) | | | 30,215 | |
Indefinite-lived intangible assets | | | | | | | | | | | | |
Brands | | 827 | | | | | 827 | | | 827 | | | | | 827 | |
IPR&D(b) | | 10,803 | | | | | 10,803 | | | 11,357 | | | | | 11,357 | |
Licensing agreements and other | | 764 | | | | | 764 | | | 971 | | | | | 971 | |
| | 12,394 | | | | | 12,394 | | | 13,155 | | | | | 13,155 | |
Identifiable intangible assets(c) | | $ | 101,684 | | | $ | (61,461) | | | $ | 40,224 | | | $ | 101,919 | | | $ | (58,548) | | | $ | 43,370 | |
Balance Sheet Information(a)The increase in the gross carrying amount includes, among other things, $495 million of capitalized milestones and the transfer of $450 million from IPR&D to developed technology rights as a result of the approval in the U.S. for Zavzpret nasal spray, and a $90 million capitalized milestone as a result of the approval of Ngenla in the U.S. (all in the second quarter of 2023).
|
| | | | | | | | | | | | | | | | | | | | | | | | |
The following table provides the components of Identifiable intangible assets: |
| | October 1, 2017 | | December 31, 2016 |
(MILLIONS OF DOLLARS) | | Gross Carrying Amount |
| | Accumulated Amortization |
| | Identifiable Intangible Assets, less Accumulated Amortization |
| | Gross Carrying Amount |
| | Accumulated Amortization |
| | Identifiable Intangible Assets, less Accumulated Amortization |
|
Finite-lived intangible assets | | | | | | | | | | | | |
Developed technology rights(a) | | $ | 89,585 |
| | $ | (53,960 | ) | | $ | 35,625 |
| | $ | 83,390 |
| | $ | (49,650 | ) | | $ | 33,740 |
|
Brands | | 2,135 |
| | (1,127 | ) | | 1,008 |
| | 2,092 |
| | (1,032 | ) | | 1,060 |
|
Licensing agreements and other | | 1,930 |
| | (1,071 | ) | | 859 |
| | 1,869 |
| | (1,005 | ) | | 864 |
|
| | 93,650 |
| | (56,158 | ) | | 37,492 |
| | 87,351 |
| | (51,687 | ) | | 35,664 |
|
Indefinite-lived intangible assets | | | | | | | | | | | | |
Brands and other | | 6,937 |
| |
|
| | 6,937 |
| | 6,883 |
| |
|
| | 6,883 |
|
IPR&D(a) | | 5,292 |
| |
|
| | 5,292 |
| | 10,101 |
| |
|
| | 10,101 |
|
| | 12,229 |
| |
|
| | 12,229 |
| | 16,984 |
| |
|
| | 16,984 |
|
Identifiable intangible assets(b) | | $ | 105,879 |
| | $ | (56,158 | ) | | $ | 49,721 |
| | $ | 104,335 |
| | $ | (51,687 | ) | | $ | 52,648 |
|
(b)The decrease in the gross carrying amount mainly reflects the transfer from IPR&D to developed technology rights as a result of the approval in the U.S. of Zavzpret nasal spray. | |
(c)The decrease is primarily due to amortization expense of $3.5 billion and impairments of $248 million (see Note 4), partially offset by additions of $681 million mostly related to milestone payments for the approvals in the U.S. for Zavzpret nasal spray and Ngenla. (a)
| The changes in the gross carrying amount of Developed technology rights and IPR&D primarily reflect (i) the transfer of $4.8 billion from IPR&D to Developed technology rights to reflect the approval of Eucrisa, (ii) the Developed technology rights and IPR&D acquired as part of the acquisition of AstraZeneca’s small molecule anti-infectives business (see Note 2A), (iii) the Developed technology rights of $371 million recorded in connection with the EU and U.S. approvals of Besponsa (see Note 7E), partially offset by (iv) measurement period adjustments related to Medivation (see Note 2A) and (v) impairments of Developed technology rights (see Note 4).
|
| |
(b)
| The decrease in Identifiable intangible assets, less accumulated amortization, is primarily due to amortization, measurement period adjustments related to Medivation (see Note 2A), as well as impairments of Developed technology rights (see Note 4), partially offset by assets acquired as part of the acquisition of AstraZeneca’s small molecule anti-infectives business (see Note 2A) and the assets recorded in connection with the EU and U.S. approvals of Besponsa (see Note 7E).
|
|
| | | | | | | | | |
Our identifiable intangible assets are associated with the following, as a percentage of total identifiable intangible assets, less accumulated amortization: |
| | October 1, 2017 |
| | IH | | EH | | WRD |
Developed technology rights | | 68 | % | | 32 | % | | — | % |
Brands, finite-lived | | 75 | % | | 25 | % | | — | % |
Brands, indefinite-lived | | 71 | % | | 29 | % | | — | % |
IPR&D | | 80 | % | | 13 | % | | 7 | % |
Amortization
Total amortization expense for finite-lived intangible assets was $1.2 billion for the third quarter of
2017 and $988 million for the third quarter of 2016, and $3.6 billion for the first nine months of 2017 and $3.0 billion for the first nine months of 2016.
PFIZER INC. AND SUBSIDIARY COMPANIESCOMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
B. Goodwill
|
| | | | | | | | | | | | |
The following table provides the components of and changes in the carrying amount of Goodwill: |
(MILLIONS OF DOLLARS) | | IH | | EH | | Total |
Balance, December 31, 2016 | | $ | 30,134 |
| | $ | 24,315 |
| | $ | 54,449 |
|
Additions(a) | | 572 |
| | 92 |
| | 664 |
|
Other(b) | | 491 |
| | 475 |
| | 966 |
|
Balance, October 1, 2017 | | $ | 31,197 |
| | $ | 24,882 |
| | $ | 56,078 |
|
| | | | | | | | |
(a)
| IH additions primarily represent measurement period adjustments related to our Medivation acquisition, and EH additions relate to our acquisition of AstraZeneca’s small molecule anti-infectives business, which are subject to change until we complete the valuation of assets acquired and liabilities assumed (see Note 2A).
|
| |
(b)
| Primarily reflects the impact of foreign exchange and an adjustment of our estimate of goodwill associated with the HIS net assets sold. |
Note 10. Pension and Postretirement Benefit Plans
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the components of net periodic benefit cost/(credit): | | | | | | |
| | Pension Plans | | | | | | | | |
| | U.S. | | International | | Postretirement Plans | | | | | | |
| | Three Months Ended | | | | | | |
(MILLIONS) | | Oct. 1, 2023 | | Oct. 2, 2022 | | Oct. 1, 2023 | | Oct. 2, 2022 | | Oct. 1, 2023 | | Oct. 2, 2022 | | | | | | |
Service cost | | $ | — | | | $ | — | | | $ | 21 | | | $ | 29 | | | $ | 3 | | | $ | 7 | | | | | | | |
Interest cost | | 147 | | | 151 | | | 73 | | | 38 | | | 5 | | | 7 | | | | | | | |
Expected return on plan assets | | (194) | | | (195) | | | (77) | | | (72) | | | (11) | | | (12) | | | | | | | |
Amortization of prior service cost/(credit) | | — | | | — | | | — | | | — | | | (29) | | | (31) | | | | | | | |
Actuarial (gains)/losses(a) | | (11) | | | (193) | | | — | | | — | | | — | | | — | | | | | | | |
Curtailments | | — | | | — | | | — | | | — | | | — | | | (1) | | | | | | | |
Special termination benefits | | — | | | 1 | | | — | | | — | | | — | | | — | | | | | | | |
Net periodic benefit cost/(credit) reported in income | | $ | (58) | | | $ | (235) | | | $ | 17 | | | $ | (6) | | | $ | (32) | | | $ | (30) | | | | | | | |
|
| | Pension Plans | | | | | | | | |
| | U.S. | | International | | Postretirement Plans | | | | | | |
| | Nine Months Ended | | | | | | |
(MILLIONS) | | Oct. 1, 2023 | | Oct. 2, 2022 | | Oct. 1, 2023 | | Oct. 2, 2022 | | Oct. 1, 2023 | | Oct. 2, 2022 | | | | | | |
Service cost | | $ | — | | | $ | — | | | $ | 65 | | | $ | 89 | | | $ | 9 | | | $ | 22 | | | | | | | |
Interest cost | | 442 | | | 387 | | | 216 | | | 121 | | | 16 | | | 21 | | | | | | | |
Expected return on plan assets | | (583) | | | (685) | | | (229) | | | (229) | | | (33) | | | (35) | | | | | | | |
Amortization of prior service cost/(credit) | | 1 | | | 1 | | | — | | | (1) | | | (90) | | | (99) | | | | | | | |
Actuarial (gains)/losses(a) | | 4 | | | 231 | | | 3 | | | — | | | — | | | — | | | | | | | |
Curtailments | | — | | | — | | | (1) | | | — | | | (12) | | | (14) | | | | | | | |
Special termination benefits | | 6 | | | 8 | | | — | | | — | | | — | | | 1 | | | | | | | |
Net periodic benefit cost/(credit) reported in income | | $ | (131) | | | $ | (57) | | | $ | 53 | | | $ | (20) | | | $ | (109) | | | $ | (106) | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table provides the components of net periodic benefit cost/(income): |
| | Three Months Ended |
| | Pension Plans | | |
| | U.S. Qualified | | U.S. Supplemental (Non-Qualified) | | International | | Postretirement Plans |
(MILLIONS OF DOLLARS) | | Oct 1, 2017 |
| | Oct 2, 2016 |
| | Oct 1, 2017 |
| | Oct 2, 2016 |
| | Oct 1, 2017 |
| | Oct 2, 2016 |
| | Oct 1, 2017 |
| | Oct 2, 2016 |
|
Net periodic benefit cost/(credit): | | | | | | | | | | | | | | | | |
|
Service cost | | $ | 67 |
| | $ | 69 |
| | $ | 6 |
| | $ | 5 |
| | $ | 44 |
| | $ | 41 |
| | $ | 10 |
| | $ | 11 |
|
Interest cost | | 157 |
| | 218 |
| | 13 |
| | 18 |
| | 52 |
| | 58 |
| | 23 |
| | 33 |
|
Expected return on plan assets | | (248 | ) | | (239 | ) | | — |
| | — |
| | (87 | ) | | (95 | ) | | (9 | ) | | (8 | ) |
Amortization of: | | |
| | |
| | |
| | |
| | | | |
| | |
| | |
|
Actuarial losses | | 91 |
| | 99 |
| | 12 |
| | 9 |
| | 29 |
| | 23 |
| | 8 |
| | 9 |
|
Prior service costs (credits) | | — |
| | 1 |
| | — |
| | — |
| | (1 | ) | | (1 | ) | | (45 | ) | | (45 | ) |
Curtailments | | 1 |
| | 2 |
| | — |
| | 1 |
| | (2 | ) | | — |
| | (3 | ) | | (8 | ) |
Settlements | | 30 |
| | 21 |
| | 7 |
| | 7 |
| | — |
| | 1 |
| | — |
| | — |
|
| | $ | 99 |
| | $ | 170 |
| | $ | 39 |
| | $ | 39 |
| | $ | 35 |
| | $ | 27 |
| | $ | (17 | ) | | $ | (9 | ) |
| | | | | | | | | | | | | | | | |
| | Nine Months Ended |
| | Pension Plans | | |
| | U.S. Qualified(a) | | U.S. Supplemental (Non-Qualified) | | International | | Postretirement Plans |
(MILLIONS OF DOLLARS) | | Oct 1, 2017 |
| | Oct 2, 2016 |
| | Oct 1, 2017 |
| | Oct 2, 2016 |
| | Oct 1, 2017 |
| | Oct 2, 2016 |
| | Oct 1, 2017 |
| | Oct 2, 2016 |
|
Net periodic benefit cost/(credit): | | | | | | | | | | | | | | | | |
Service cost | | $ | 202 |
| | $ | 193 |
| | $ | 18 |
| | $ | 14 |
| | $ | 127 |
| | $ | 126 |
| | $ | 32 |
| | $ | 31 |
|
Interest cost | | 478 |
| | 486 |
| | 41 |
| | 40 |
| | 152 |
| | 178 |
| | 68 |
| | 77 |
|
Expected return on plan assets | | (759 | ) | | (721 | ) | | — |
| | — |
| | (256 | ) | | (291 | ) | | (27 | ) | | (25 | ) |
Amortization of: | | | | | | | | | | | | | | | | |
Actuarial losses | | 302 |
| | 297 |
| | 37 |
| | 27 |
| | 86 |
| | 70 |
| | 23 |
| | 23 |
|
Prior service costs (credits) | | 3 |
| | 4 |
| | (1 | ) | | (1 | ) | | (3 | ) | | (2 | ) | | (137 | ) | | (127 | ) |
Curtailments | | 10 |
| | 5 |
| | — |
| | 1 |
| | (2 | ) | | (1 | ) | | (15 | ) | | (14 | ) |
Settlements | | 54 |
| | 52 |
| | 32 |
| | 23 |
| | 3 |
| | 2 |
| | — |
| | — |
|
| | $ | 292 |
| | $ | 316 |
| | $ | 127 |
| | $ | 105 |
| | $ | 106 |
| | $ | 81 |
| | $ | (57 | ) | | $ | (36 | ) |
(a)The third quarter of 2022 mainly reflected interim actuarial remeasurement gains, primarily driven by an increase in the discount rate, partially offset by unfavorable plan asset performance. The first nine months of 2022 mainly reflected interim actuarial remeasurement losses, primarily driven by unfavorable plan asset performance, partially offset by gains due to an increase in the discount rate.The components of net periodic benefit cost/(credit) other than the service cost component are primarily included in Other (income)/deductions––net (see Note 4). For the nine months ended October 1, 2023, we contributed $125 million, $128 million, and $28 million to our U.S. Pension Plans, International Pension Plans, and Postretirement Plans, respectively, from our general assets, which include direct employer benefit payments.
| |
(a)
| In April 2017, we settled the remaining obligation associated with the Hospira U.S. qualified defined benefit pension plan. We purchased a group annuity contract on behalf of the remaining plan participants with a third-party insurance provider. As a result, we were relieved of the $156 million net pension benefit obligation and recorded a pretax settlement gain of $41 million, partially offset by the recognition of actuarial losses and prior service costs upon plan settlement of approximately $30 million in Restructuring charges and certain acquisition-related costs during the second quarter of 2017 (see Note 3).
|
PFIZER INC. AND SUBSIDIARY COMPANIESCOMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of and for the nine months ended October 1, 2017, we contributed and expect to contribute in 2017 from our general assets as follows: |
| | | | | | | | | | | | | | | | |
| | Pension Plans | | |
(MILLIONS OF DOLLARS) | | U.S. Qualified | | U.S. Supplemental (Non-Qualified) | | International | | Postretirement Plans |
Contributions from our general assets for the nine months ended October 1, 2017 | | $ | 1,095 |
| | $ | 121 |
| | $ | 134 |
| | $ | 158 |
|
Expected contributions from our general assets during 2017(a) | | $ | 1,095 |
| | $ | 146 |
| | $ | 170 |
| | $ | 204 |
|
| | | | | | | | |
(a)
| Contributions expected to be made for 2017 are inclusive of amounts contributed during the nine months ended October 1, 2017, including the $1.0 billion voluntary contribution that was made in January 2017 for the U.S. qualified plans, which was considered pre-funding for future anticipated mandatory contributions and is also expected to reduce Pension Benefit Guaranty Corporation variable rate premiums. The U.S. supplemental (non-qualified) pension plan, international pension plan and the postretirement plan contributions from our general assets include direct employer benefit payments.
|
Note 11. EarningsEarnings/(Loss) Per Common Share Attributable to Pfizer Inc. Common Shareholders
| | | | | | | | | | | | | | | | | | | | | | | | | | |
The following presents the detailed calculation of EPS/(LPS): |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | October 1, 2023 | | October 2, 2022 |
EPS/(LPS) Numerator | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders | | $ | (2,394) | | | $ | 8,630 | | | $ | 5,477 | | | $ | 26,373 | |
Discontinued operations––net of tax | | 12 | | | (21) | | | 11 | | | 4 | |
| | | | | | | | |
| | | | | | | | |
Net income/(loss) attributable to Pfizer Inc. common shareholders | | $ | (2,382) | | | $ | 8,608 | | | $ | 5,488 | | | $ | 26,378 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
EPS/(LPS) Denominator | | | | | | | | |
Weighted-average common shares outstanding––Basic | | 5,646 | | | 5,607 | | | 5,642 | | | 5,606 | |
Common-share equivalents(a) | | — | | | 111 | | | 72 | | | 124 | |
Weighted-average common shares outstanding––Diluted | | 5,646 | | | 5,718 | | | 5,714 | | | 5,729 | |
Anti-dilutive common stock equivalents(b) | | 58 | | | 3 | | | 2 | | | 1 | |
(a)For the three months ended October 1, 2023, due to the net loss attributable to Pfizer Inc. common shareholders, weighted average common-share equivalents of 56 million shares were not included in the computation of diluted LPSbecause their inclusion would have had an anti-dilutive effect.
(b)These common stock equivalents were outstanding for the periods presented, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.
|
| | | | | | | | | | | | | | | | |
The following table provides the detailed calculation of Earnings per common share (EPS): |
| | Three Months Ended | | Nine Months Ended |
(IN MILLIONS) | | October 1, 2017 |
| | October 2, 2016 |
| | October 1, 2017 |
| | October 2, 2016 |
|
EPS Numerator––Basic | | | | | | | | |
Income from continuing operations(a) | | $ | 2,858 |
| | $ | 1,355 |
| | $ | 9,064 |
| | $ | 6,465 |
|
Less: Net income attributable to noncontrolling interests | | 18 |
| | — |
| | 32 |
| | 25 |
|
Income from continuing operations attributable to Pfizer Inc.(a) | | 2,840 |
| | 1,355 |
| | 9,032 |
| | 6,440 |
|
Less: Preferred stock dividends––net of tax | | — |
| | — |
| | 1 |
| | 1 |
|
Income from continuing operations attributable to Pfizer Inc. common shareholders(a) | | 2,839 |
| | 1,355 |
| | 9,032 |
| | 6,439 |
|
Discontinued operations––net of tax | | — |
| | — |
| | 1 |
| | — |
|
Net income attributable to Pfizer Inc. common shareholders(a) | | $ | 2,839 |
| | $ | 1,355 |
| | $ | 9,033 |
| | $ | 6,439 |
|
EPS Numerator––Diluted | | |
| | |
| | |
| | |
|
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions(a) | | $ | 2,840 |
| | $ | 1,355 |
| | $ | 9,032 |
| | $ | 6,440 |
|
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions | | — |
| | — |
| | 1 |
| | — |
|
Net income attributable to Pfizer Inc. common shareholders and assumed conversions(a) | | $ | 2,840 |
| | $ | 1,355 |
| | $ | 9,034 |
| | $ | 6,440 |
|
EPS Denominator | | |
| | |
| | |
| | |
|
Weighted-average number of common shares outstanding––Basic | | 5,951 |
| | 6,066 |
| | 5,972 |
| | 6,095 |
|
Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements(a) | | 89 |
| | 84 |
| | 85 |
| | 80 |
|
Weighted-average number of common shares outstanding––Diluted(a) | | 6,041 |
| | 6,150 |
| | 6,057 |
| | 6,175 |
|
Stock options that had exercise prices greater than the average market price of our common stock issuable under employee compensation plans(a), (b) | | 47 |
| | 38 |
| | 47 |
| | 60 |
|
| |
(a)
| Amounts for the third quarter and first nine months ended October 2, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, that requires, when applying the treasury stock method for shares that could be repurchased, that the assumed proceeds no longer include the amount of excess tax benefit (see Note 1B).
|
| |
(b)
| These common stock equivalents were outstanding for the periods presented, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect. |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 12. CommitmentsContingencies and Contingencies
Certain Commitments
We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business.business, including tax and legal contingencies, guarantees and indemnifications. The following outlines our legal contingencies, guarantees and indemnifications. For a discussion of our tax contingencies, see Note 5B. Accelerated share repurchase agreement––On February 2, 2017, we entered into an accelerated share repurchase agreement with Citibank to repurchase $5 billion of our common stock. Pursuant to the terms of the agreement, on February 6, 2017, we paid $5 billion to Citibank and received an initial delivery of approximately 126 million shares of our common stock from Citibank at a price of $31.73 per share, which represented, based on the closing price of our common stock on the NYSE on February 2, 2017, approximately 80% of the notional amount of the accelerated share repurchase agreement. On May 16, 2017, the accelerated share repurchase agreement with Citibank was completed, which, per the terms of the agreement, resulted in Citibank owing us a certain number of shares of Pfizer common stock. Pursuant to the agreement’s settlement terms, we received an additional 24 million shares of our common stock from Citibank on May 19, 2017. The average price paid for all of the shares delivered under the accelerated share repurchase agreement was $33.31 per share. The common stock received is included in Treasury Stock5B. This agreement was entered into pursuant to our previously announced share repurchase authorization. At October 1, 2017, our remaining share-purchase authorization was approximately $6.4 billion.
Pending approval in the EU of Mylotarg––Mylotarg was developed, in part, through a research arrangement with a third party. If Mylotarg is approved in the EU in 2018 for the treatment of acute myeloid leukemia, we will incur an obligation for additional fixed payments over a 10-year period aggregating $310 million.
A. Legal Proceedings
Our non-taxlegal contingencies include, but are not limited to, the following:
•Patent litigation, which typically involves challenges to the coverage and/or validity of patents on various products, processes or dosage forms. We are the plaintiff in the vast majority of these actions. An adverse outcome in actions in which we are the plaintiff could result in loss of patent protection for a drug,product, a significant loss of revenues from that druga product or impairment of the value of associated assets. We are the plaintiff in the majority of these actions.
•Product liability and other product-related litigation related to current or former products, which can include personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, among others, and often involves highly complex issues relating to medical causation, label warnings and reliance on those warnings, scientific evidence and findings, actual, provable injury and other matters.
•Commercial and other asserted or unasserted matters, which can include merger-relatedacquisition-, licensing-, intellectual property-, collaboration- or co-promotion-related and product-pricing claims and environmental claims and proceedings, and can involve complexities that will vary from matter to matter.
•Government investigations, which often are related to the extensive regulation of pharmaceutical companies by national, state and local government agencies in the U.S. and in other countries.
jurisdictions.
Certain of these contingencies could result in increased expenses and/or losses, including damages, royalty payments, fines and/or civil penalties, and/or criminal charges, which could be substantial.
substantial, and/or criminal charges.
We believe that our claims and defenses in these matters in which we are a defendant are substantial, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developmentswhich could have a material adverse effect on our results of operations in the period in which the amounts are accrued and/or our cash flows in the period in which the amounts are accrued or paid.
We have accrued for losses that are both probable and reasonably estimable. Substantially all of our contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments, which result from a complex series of judgments about future events and uncertainties, are based on estimates and assumptions that have been deemed reasonable by management, but the assessment process relies heavily on estimates and assumptions that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.
PFIZER INC. AND SUBSIDIARY COMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions.
For proceedings under environmental laws to which a governmental authority is a party, we have adopted a disclosure threshold of $1 million in potential or actual governmental monetary sanctions.
The principal pending matters to which we are a party are discussed below. In determining whether a pending matter is a principal matter, we consider both quantitative and qualitative factors in order to assess materiality, such as, among other things,
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
others, the amount of damages and the nature of any other relief sought, in the proceeding, if such damages and other relief are specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be, or is, a class action and, if not certified, our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; whether related actions have been transferred to multidistrict litigation; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters in which we are the plaintiff, we consider, among other things, the financial significance of the product protected by the patent. As a resultpatent(s) at issue. Some of considering qualitative factors in our determination of principal matters, there are somethe matters discussed below with respect toinclude those which management believes that the likelihood of possible loss in excess of amounts accrued is remote.
A1. Legal Proceedings––Patent Litigation
Like other pharmaceutical companies, weWe are involved in numerous suits relating to our patents (or those of our collaboration/licensing partners to which we have licenses or co-promotion rights), including but not limited to, those discussed below. Most of the suits involveWe face claims by generic drug manufacturers that patents covering our products (or those of our collaboration/licensing partners to which we have licenses or co-promotion rights and to which we may or may not be a party), processes or dosage forms are invalid and/or do not cover the product of the generic drug manufacturer. Also, counterclaims, as well as various independent actions, have been filed alleging that our assertions of, or attempts to enforce, patent rights with respect to certain products constitute unfair competition and/or violations of antitrust laws. In addition to the challenges to the U.S. patents on a number of our products that are discussed below, patent rights to certain of our products or those of our collaboration/licensing partners are being challenged in various other countries. jurisdictions. Some of our collaboration or licensing partners face challenges to the validity of their patent rights in non-U.S. jurisdictions. For example, in April 2022, the U.K. High Court issued a judgment finding invalid a BMS patent related to Eliquis due to expire in 2026. In May 2023, the Court of Appeal dismissed BMS’s appeal and in October 2023, the Supreme Court refused BMS’s permission to appeal. Additional challenges are pending in other jurisdictions. Also, in July 2022, CureVac AG (CureVac) brought a patent infringement action against BioNTech and certain of its subsidiaries in the German Regional Court alleging that Comirnaty infringes certain German utility model patents and certain expired and unexpired European patents. Additional challenges involving Comirnaty patents may be filed against us and/or BioNTech in other jurisdictions in the future. Adverse decisions in these matters could have a material adverse effect on our results of operations.We are also party to other patent damages suits in various jurisdictions pursuant to which generic drug manufacturers, payers, governments or other parties are seeking damages from us for allegedallegedly causing delay of generic entry. Additionally, our licensing and collaboration partners face challenges by generic drug manufacturers to patents covering several of their products that may impact our licenses or co-promotion rights to such products.
We also are often involved in other proceedings, such as inter partes review, post-grant review, re-examination or opposition proceedings, before the U.S. Patent and Trademark Office, the European Patent Office, or other foreign counterparts, as well as court proceedings relating to our intellectual property or the intellectual property rights of others.others, including challenges to such rights initiated by us. Also, if one of our patents (or one of our collaboration/licensing partner’s patents) is found to be invalid by such proceedings, generic or competitive products could be introduced into the market resulting in the erosion of sales of our existing products. For example, several of the patents in our pneumococcal vaccine portfolio have been challenged in inter partes review and post-grant review proceedings in the United States. U.S. Patent and Trademark Office, as well as outside the U.S.The invalidation of theseany of the patents in our pneumococcal portfolio could potentially allow additional competitor vaccines, if approved, to enter the marketplace earlier than anticipated. In the event that any of the patents are found valid and infringed, a competitor’s vaccine, if approved, might be prohibited from entering the market or a competitor pneumococcal vaccine into the marketplace. might be required to pay us a royalty.
We are also subject to patent litigation pursuant to which one or more third parties seeksseek damages and/or injunctive relief to compensate for alleged infringement of its patents by our commercial or other activities. For example, our subsidiary, Hospira, is involved in patent and patent-related disputes over its attempts to bring generic pharmaceutical and biosimilar products to market. If one of our marketed products (or a product of our collaboration/licensing partners to which we have licenses or co-promotion rights) is found to infringe valid patent rights of a third party, such third party may be awarded significant damages or royalty payments, or we may be prevented from further sales of that product. Such damages may be enhanced as much as three-fold in the event thatif we or one of our subsidiaries like Hospira, is found to have willfully infringed valid patent rights of a third party.
PFIZER INC. AND SUBSIDIARY COMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Actions In Which We Are The Plaintiff
Bosulif (bosutinib)Xeljanz (tofacitinib)
In December 2016, Wyeth LLC, Wyeth Pharmaceuticals Inc.,Beginning in 2017, we brought patent-infringement actions against several generic manufacturers that filed separate abbreviated new drug applications (ANDAs) with the FDA seeking approval to market their generic versions of tofacitinib tablets in one or both of 5 mg and PF Prism C.V. (collectively, Wyeth) brought a patent-infringement action against Alembic Pharmaceuticals, Ltd, Alembic Pharmaceuticals, Inc. (collectively, Alembic), Sun Pharmaceutical Industries, Inc.,10 mg dosage strengths, and Sun Pharmaceutical Industries Limited (collectively, Sun),in both immediate and extended release forms. To date, we have settled actions with several manufacturers on terms not material to us. The remaining actions continue in the U.S. District Court for the District of Delaware in connection with abbreviated new drug applications respectively filed with the FDA by Alembic and Sun, each seeking approval to market generic versions of bosutinib. Alembic is challenging patents, which expire in 2026, covering polymorphic forms of bosutinib and methods of treating chronic myelogenous leukemia. Sun is challenging the patent covering polymorphic forms of bosutinib that expires in 2026. as described below.
In March 2017, WyethOctober 2021, we brought a separate patent-infringement action against MSN Laboratories Private LimitedSinotherapeutics Inc. (Sinotherapeutics) asserting the infringement and MSN Pharmaceuticals, Inc. (collectively, MSN),validity of our patent covering extended release formulations of tofacitinib that was challenged by Sinotherapeutics in the U.S. District Court for the District of Delaware in connection with an abbreviated new drug application filed with the FDA by MSN,its ANDA seeking approval to market a generic version of bosutinib, and challenging a patent expiring in 2026 covering polymorphic forms of bosutinib.tofacitinib 11 mg extended release tablets. In September 2017, the case against MSN was dismissed. Also, in September 2017, Wyeth broughtNovember 2022, we filed an additional patent-infringement action against SunSinotherapeutics relating to its challenge of our extended release formulation and method of treatment patents in the U.S. District Court for the District of Delaware asserting the infringement and validity of two other patents challenged by Sun, which expire in 2025 and 2026 respectively, covering compositions of bosutinib and methods of treating chronic myelogenous leukemia.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
EpiPen
In July 2010, King, which we acquired in 2011 and is a wholly-owned subsidiary, brought a patent-infringement action against Sandoz in the U.S. District Court for the District of New Jersey in connection with Sandoz’s abbreviated new drug application filed with the FDA seeking approval to market an epinephrine injectable product. Sandoz is challenging patents, which expire in 2025, covering the next-generation autoinjector for use with epinephrine that is sold under the EpiPen brand name.
Flector Patch (diclofenac)
In October 2015, the owners (Teikoku Seiyaku Co., Ltd. and Altergon SA) of a patent covering Pfizer’s Flector Patch product, along with the New Drug Application holder (IBSA Institut Biochemique SA), brought a patent-infringement action against Actavis Laboratories UT, Inc. in the U.S. District Court for the District of Delaware in connection with an abbreviated new drug application filed by Actavis Laboratories UT, Inc. with the FDA requesting approval to launch a generic version of Flector Patch prior to the 2019 expiration of the patent. In August 2016, Pfizer subsidiary Alpharma Pharmaceuticals LLC was added as a plaintiff to the lawsuit. In August 2017, this case was settled on terms not material to Pfizer.
Precedex Premix
In June 2014,Ben Venue Laboratories, Inc. (Ben Venue)notified our subsidiary, Hospira, that it had filed an abbreviated new drug application with the FDAits ANDA seeking approval to market a generic version of Hospira’s premix version of Precedex and containing allegations that a patent relating to the use of Precedex in an intensive care unit setting, which expires in March 2019, was invalid or not infringed. In August 2014, Hospira and Orion Corporation (co-owner of the patent that is the subject of the lawsuit) filed suit against Ben Venue, Hikma Pharmaceuticals PLC (Hikma), and West-Ward Pharmaceutical Corp. in the U.S. District Court for the District of Delaware asserting the validity and infringement of the patent that is the subject of the lawsuit. In October 2014, Eurohealth International Sarl was substituted for Ben Venue and Hikma. In June 2016, this case was settled on terms not material to Pfizer.tofacitinib 22 mg extended release tablets.
In June 2015, Amneal Pharmaceuticals LLC (Amneal) notified Hospira that it had filed an abbreviated new drug application2023, we brought a patent infringement action against Aurobindo Pharma Limited and Aurobindo Pharma USA, Inc. (collectively, Aurobindo) asserting the infringement and validity of our basic compound patent, in connection with the FDAAurobindo’s ANDA seeking approval to market a generic version of Hospira’s premixtofacitinib 11 mg extended release tablets. Also in June 2023, we brought a patent infringement action against Sun Pharmaceutical Industries Limited and Sun Pharmaceutical Industries, Inc. (collectively, Sun) asserting the infringement and validity of our basic compound patent, in connection with Sun’s ANDA seeking approval to market a generic version of Precedextofacitinib 5 mg and containing allegations that four patents relating10 mg immediate release tablets. In June 2023, we also brought a patent infringement action against Annora Pharma Private Limited (Annora) and Hetero USA, Inc. (Hetero) asserting the infringement and validity of our basic compound patent, in connection with Annora’s ANDA seeking approval to market a generic version of tofacitinib 1 mg/mL oral solution. In August 2023, we reached settlement agreements with each of Sun and Annora on terms not material to the Precedex premix formulationsCompany.
Ibrance (palbociclib)
Beginning in January 2021, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Ibrance tablets. We have settled with one of these generic companies on terms not material to us, and theirhave dismissed the patent infringement actions against all other generic companies except for the action against Synthon Pharmaceuticals Inc. and its affiliated entities, in which we have asserted the infringement and validity of the composition of matter patent, expiring in 2027.
Eucrisa
Beginning in September 2021, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Eucrisa. The companies assert the invalidity and non-infringement of a composition of matter patent expiring in 2026, two method of use allpatents expiring in 2027, and one other method of which expireuse patent expiring in 2032, were invalid or not infringed.2030. In August 2015, Hospira filed suitSeptember 2021, we brought patent infringement actions against Amnealthe generic filers in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the patents challenged by the generic companies. In July 2023, we reached a settlement agreement with one generic company on terms not material to the Company and in July and August 2023, we reached settlement agreements with the remaining generic companies on terms not material to the Company.
Mektovi (binimetinib)
Beginning in August 2022, several generic companies notified us that arethey had filed ANDAs with the subjectFDA seeking approval to market generic versions of Mektovi. The companies assert the lawsuit.
invalidity and non-infringement of two method of use patents expiring in 2030, a method of use patent expiring in 2031, two method of use patents expiring in 2033, and a product by process patent expiring in 2033. Beginning in September 2022, we brought patent infringement actions against the generic filers in the U.S. District Court for the District of Delaware, asserting the validity and infringement of all six patents.
In December 2015, Fresenius Kabi USA LLC (Fresenius) notified HospiraAugust 2022 we received notice from Teva Pharmaceuticals, Inc. (Teva) that it had filed an abbreviated new drug application with the FDAANDA seeking approval to market a generic version of Hospira’s premix versionMektovi. Teva asserts the invalidity and non-infringement of Precedextwo method of use patents expiring in 2033 and containing allegations that four patents relating to the Precedex premix formulations and their use, all of which expirea product by process patent expiring in 2032, were invalid or not infringed.2033. In January 2016, Hospira filed suitJune 2023, we brought a patent infringement action against FreseniusTeva in the U.S. District Court for the Northern District of IllinoisDelaware, asserting the validity and infringement of the patentsthree patents.
Vyndaqel-Vyndamax (tafamidis/tafamidis meglumine)
Beginning in June 2023, several generic companies notified us that are the subject of the lawsuit.
In August 2016, Par Sterile Products, LLC (Par) notified Hospira that itthey had filed an abbreviated new drug applicationANDAs with the FDA seeking approval to market a generic versionversions of Hospira’s premix version of Precedex and containing allegations that four patents relating to the Precedex premix formulations and their use,tafamidis capsules (61 mg) or tafamidis meglumine capsules (20 mg), challenging some or all of which expirethe patents listed in 2032, were invalid or not infringed. In September 2016, Hospira filed suitthe FDA’s Orange Book for Vyndamax (tafamidis) and Vyndaqel (tafamidis meglumine). Scripps Research Institute (Scripps) owns the composition of matter patent and the method of treatment patents covering the products, and Pfizer is the exclusive licensee. Pfizer separately owns the crystalline form patent. Beginning in August 2023, we and Scripps brought
PFIZER INC. AND SUBSIDIARY COMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
patent infringement actions against Parthe generic filers in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the patents in suit. Pfizer is the sole plaintiff in actions that are the subject of the lawsuit. In December 2016, the case was stayed pending the outcome of Hospira’s suit against Amneal (including all appeals).
Toviaz (fesoterodine)
We have an exclusive, worldwide license to market Toviaz from UCB Pharma GmbH (UCB), which owns the patents relating to Toviaz.
Beginning in May 2013, several generic drug manufacturers notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Toviaz and asserting the invalidity, unenforceability and/or non-infringement of all of our patents for Toviaz that are listed in the FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the “Orange Book”. Beginning in June 2013, we filed actions against all of those generic drug manufacturers in the U.S. District Court for the District of Delaware, asserting the infringement of five of the patents for Toviaz: three composition-of-matter patents and a method-of-use patent that expire in 2019 and a patent covering salts of fesoterodine that expires in 2022. In June and July 2015, we settled with four of the generic defendants. The trial relating to the four remaining defendants occurred in July 2015. In April 2016, the District Court held that the patents that were the subject of the lawsuit were valid and infringed. The defendants’ deadline to appeal this decision expired in June 2016.
In December 2014, Mylan Pharmaceuticals, Inc. (Mylan Pharmaceuticals) notified us that it had filed anabbreviated new drug application with the FDA seeking approval to market a generic version of Toviaz and asserting the invalidity, unenforceability and/or non-infringement of all of our patents for Toviaz that are listed in the Orange Book. In January 2015, we filed an action against Mylan Pharmaceuticals in the U.S. District Court for the District of Delaware, asserting the infringement of five of the
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
patents for Toviaz: three composition-of-matter patents and a method-of-use patent that expire in 2019 and a patent covering salts of fesoterodine that expires in 2022. In January 2017, the District Court issued a verdict finding that the five patents that are the subject of the lawsuit are valid and infringed. In August 2017, the District Court issued a written decision consistent with the verdict, finding the five patents valid and infringed. In September 2017, Mylan Pharmaceuticals appealed the District Court’s decision to the U.S. Court of Appeals for the Federal Circuit.
In December 2016, Torrent Pharmaceuticals, Ltd. (Torrent) notified us that it had filed anabbreviated new drug application with the FDA seeking approval to market a generic version of Toviaz and asserting the invalidity, unenforceability and/or non-infringement of all of our patents for Toviaz that are listed in the Orange Book. In February 2017, we filed an action against Torrent in the U.S. District Court for the District of Delaware, asserting the infringement of the same five patents that are the subject of the action against Mylan Pharmaceuticals. In September 2017, this case was dismissed.
Xeljanz (tofacitinib)
In February 2017, we brought a patent-infringement action against MicroLabs USA Inc. and MicroLabs Ltd. (collectively, MicroLabs) in the U.S. District Court for the District of Delaware asserting the infringement and validity of three patents challenged by MicroLabs in its abbreviated new drug application seeking approval to market a generic version of tofacitinib 5 mg tablets. Of the three patents that are the subject of the lawsuit, one covers the active ingredient and expires in December 2025, the second covers an enantiomer of tofacitinib and expires in 2022, and the third covers a polymorphic form of tofacitinib and expires in 2023. Three other patents for Xeljanz expiring in December 2020 have not been challenged by MicroLabs.
Separately, also in February 2017, we brought a patent-infringement action against Sun Pharmaceutical Industries Ltd. in the U.S. District Court for the District of Delaware asserting the infringement and validity of our patent covering a polymorphic form of tofacitinib, expiring in 2023, that was challenged by Sun Pharmaceutical Industries Ltd. in its abbreviated new drug application seeking approval to market a generic version of tofacitinib 11 mg extended release tablets. In November 2017, we brought an additional patent-infringement action against Sun Pharmaceuticals Industries Ltd. in the U.S. District Court for the District of Delaware asserting the infringement and validity of another patent challenged by Sun Pharmaceuticals Industries Ltd, which covers the active ingredient and expires in December 2025.
In March 2017, we brought a patent-infringement action against Zydus Pharmaceuticals (USA) Inc. and Cadila Healthcare Ltd. (collectively, Zydus) in the U.S. District Court for the District of Delaware assertingassert only the infringement and validity of the same three patents thatcrystalline form patent.
Actions in Which We are the subject of the action against MicroLabs, which Zydus challenged in its abbreviated new drug application seeking approval to marketDefendant
Comirnaty
In March 2022, Alnylam Pharmaceuticals, Inc. (Alnylam) filed a generic version of tofacitinib 5 mg tablets.
Also in March 2017, we brought separate actionscomplaint in the U.S. District Court for the District of Delaware against Prinston Pharmaceutical Inc., Zhejiang Huahai Pharmaceutical Co., Ltd., Huahai US Inc.Pfizer and Solco Healthcare US,Pharmacia & Upjohn Company LLC, (collectively Prinston) and against Breckenridge Pharmaceutical Inc., Pensa Pharma S.A. and Laboratorios Del Dr. Esteve, S.A. (collectively Breckenridge) on the two patents expiringour wholly owned subsidiary, alleging that Comirnaty infringes a U.S. patent issued in February 2022, and 2023, respectively, that were challenged by Prinston and Breckenridge in their respective abbreviated new drug applications seeking approval to market generic versions of tofacitinib 5 mg tablets.unspecified monetary damages. In October 2017, we brought an additional patent-infringement action against BreckenridgeJuly 2022, Alnylam filed a second complaint in the U.S. District Court for the District of Delaware assertingagainst Pfizer, Pharmacia & Upjohn Company LLC, BioNTech and BioNTech Manufacturing GmbH, alleging that Comirnaty infringes a U.S. patent issued in July 2022, and seeking unspecified monetary damages. In May 2023, Alnylam filed a separate complaint in the U.S. District Court for the District of Delaware against Pfizer and Pharmacia & Upjohn Company LLC alleging that Comirnaty infringes four U.S. patents issued on various dates in 2023 and seeking unspecified monetary damages.
In August 2022, ModernaTX, Inc. (ModernaTX) and Moderna US, Inc. (Moderna) sued Pfizer, BioNTech, BioNTech Manufacturing GmbH and BioNTech US Inc. in the U.S. District Court for the District of Massachusetts, alleging that Comirnaty infringes three U.S. patents. In its complaint, Moderna stated that it is seeking damages for alleged infringement occurring after March 7, 2022.
In August 2022, ModernaTX filed a patent infringement action in Germany against Pfizer and validity of four additionalcertain subsidiary companies, as well as BioNTech and certain subsidiary companies, alleging that Comirnaty infringes two European patents. In September 2022, ModernaTX filed patent infringement actions in the U.K. and in the Netherlands against Pfizer and certain subsidiary companies, as well as BioNTech and certain subsidiary companies, on the same two European patents. In its complaints, ModernaTX stated that it is seeking damages for alleged infringement occurring after March 7, 2022. In the U.K., Pfizer and BioNTech have brought an action against ModernaTX seeking to revoke these two European patents, challengedwhich was consolidated with the September 2022 action filed by Breckenridge, three of which expire in December 2020 andModernaTX. In November 2023, one of which expiresthe European patents was revoked by the European Patent Office. ModernaTX has filed additional patent infringement actions against Pfizer and BioNTech in December 2025.certain other ex-U.S. jurisdictions.
In April 2023, Arbutus Biopharma Corporation (Arbutus) and Genevant Sciences GmbH (Genevant) filed a complaint in the U.S. District Court for the District of New Jersey against Pfizer and BioNTech alleging that Comirnaty and its manufacture infringe five U.S. patents, and seeking unspecified monetary damages.
In June 2023, Promosome LLC filed a complaint in the U.S. District Court for the Southern District of California against Pfizer and BioNTech alleging that Comirnaty and its manufacture infringe a U.S. patent and seeking unspecified monetary damages. In October 2023, Promosome LLC dismissed the action with prejudice and the action was dismissed by the Court.
Paxlovid
In June 2022, Enanta Pharmaceuticals, Inc. filed a complaint in the U.S. District Court for the District of Massachusetts against Pfizer alleging that the active ingredient in Paxlovid, nirmatrelvir, infringes a U.S. patent issued in June 2022, and seeking unspecified monetary damages.
Abrysvo
In August 2023, GlaxoSmithKline Biologics SA and GlaxoSmithKline LLC filed a complaint in the U.S. District Court for the District of Delaware against Pfizer alleging that the active ingredient in Abrysvo infringes four U.S. patents. The complaint seeks unspecified monetary damages and a permanent injunction against sales of Abrysvo for use in adults over 60 years of age. In addition, we have challenged certain of GSK’s RSV vaccine patents in certain ex-U.S. jurisdictions, including the U.K., the Netherlands and Belgium, and GSK has asserted that Abrysvo infringes these patents.
Matters Involving Pfizer and its Collaboration/Licensing Partners
Comirnaty
In July 2022, Pfizer, BioNTech and BioNTech Manufacturing GmbH filed a declaratory judgment complaint against CureVac in the U.S. District Court for the District of Massachusetts seeking a judgment of non-infringement for three U.S. patents relating to Comirnaty. In May 2023, the case was transferred to the U.S. District Court for the Eastern District of Virginia. Also in May 2023, CureVac asserted that Comirnaty infringes the three patents that were the subject of our declaratory judgment complaint, and asserted that Comirnaty infringes six additional U.S. patents.
In the U.K., Pfizer and BioNTech have sued CureVac seeking a judgment of invalidity of several patents and CureVac has made certain infringement counterclaims.
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Xtandi (enzalutamide)
In December 2016,July 2022, Medivation LLC and Medivation Prostate Therapeutics Inc. (collectively, the Medivation Group)LLC (wholly owned subsidiaries of Pfizer); Astellas Pharma Inc., Astellas US LLC and Astellas Pharma US, Inc. (collectively, Astellas); and The Regents of the University of California filed patent-infringement suits in the U.S. District Court for the District of Delaware against Actavis Laboratories FL, Inc. and Actavis LLC (collectively, Actavis); Zydus; and Apotex Inc. and Apotex Corp. (collectively, Apotex) in connection with those companies’ respective abbreviated new drug applications filed with the FDA for approval to market generic versions of enzalutamide. The generic manufacturers are challenging patents, which expire as early as 2026, covering enzalutamide and treatments for prostate cancer. In May 2017, the Medivation Group filed a patent-infringement suit against Roxane Laboratories Inc. (Roxane) in the same court in connection with Roxane’s abbreviated new drug application with the FDA for approval to market a generic version of enzalutamide.
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Matters Involving Our Collaboration/Licensing Partners
Nexium 24HR (esomeprazole)
We have an exclusive license from AstraZeneca PLC (AstraZeneca) to market in the U.S. the OTC version of Nexium (Nexium 24HR). Between October 2014 and November 2016, Actavis Laboratories FL, Inc. (Actavis), Andrx Labs, LLC (Andrx), Perrigo Company plc (Perrigo), Lupin Limited, Dr. Reddy’s Laboratories, Inc. & Ltd. (Dr. Reddy’s), Hetero USA Inc. (Hetero), Aurobindo Pharma USA Inc. (Aurobindo) and Cipla Limited (Cipla) notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Nexium 24HR prior to the expiration of one or more of AstraZeneca’s patents listed in the Orange Book for Nexium 24HR. AstraZeneca filed actions against each of these companies in the U.S. District Court for the District of New Jersey asserting infringement of the challenged patents. In March 2017, the cases against ActavisZydus Pharmaceuticals (USA) Inc. and Andrx were settled on terms not material to Pfizer. In June 2017, the cases against Perrigo, Dr. Reddy’s and LupinZydus Lifesciences Limited were settled on terms not material to Pfizer. In August 2017, the cases against Hetero and Aurobindo were settled on terms not material to Pfizer. In October 2017, AstraZeneca’s action against Cipla was settled on terms not material to Pfizer. We were not a party to AstraZeneca’s patent-infringement actions.
Toviaz (fesoterodine)––Inter-Partes Reviews
In January 2016, Mylan Pharmaceuticals and Mylan Laboratories (collectively, Mylan) filed petitions with the U.S. Patent and Trademark Office requesting inter partes reviews of five of the patents covering fesoterodine, the active ingredient in Toviaz: three composition-of-matter patents and a method-of-use patent that expire in 2019 and a patent covering salts of fesoterodine that expires in 2022. The patents are owned by UCB, and we have an exclusive, worldwide license to market Toviaz from UCB. In July 2016, the Patent Trial and Appeal Board agreed to institute inter partes reviews of all five patents. Amerigen Pharmaceuticals Limited (Amerigen), Alembic Pharmaceuticals Limited and Torrent Pharmaceuticals Limited have joined the inter partes reviews. In July 2017, the U.S. Patent and Trademark Office issued decisions upholding all five patents. In September 2017, Mylan and Amerigen appealed the U.S. Patent and Trademark Office decisions to the U.S. Court of Appeals for the Federal CircuitZydus).
Eliquis
In February, March, and April 2017, twenty-five generic companies sent BMS Paragraph-IV certification letters informing BMS that they had filed abbreviated new drug applications seeking approval of generic versions of Eliquis, challenging the validity and infringement of one or more of the three patents listed in the Orange Book for Eliquis. The patents currently are set to expire in 2019, 2026, and 2031. Eliquis has been jointly developed and is being commercialized by BMS and Pfizer. In April 2017, BMS and Pfizer2023, the case against Zydus was dismissed without prejudice. In December 2022, the same entities filed a patent-infringement actions against all generic filerssuit in the U.S. District Court for the District of Delaware andNew Jersey against Sun in connection with those companies’ respective ANDAs seeking approval to market generic versions of enzalutamide. In October 2023, the U.S. District Court forcase against Sun was settled on terms not material to Pfizer. The generic manufacturers challenged the Districtcomposition of West Virginia, asserting that each of the generic companies’ proposed products would infringe each of the patent(s) that each generic filer challenged. Some generic filers challenged only the 2031matter patent, some challenged both the 2031 and 2026 patent, and one generic company challenged all three patents.
Bavencio (avelumab)
In July 2017, BMS, E.R. Squibb & Sons LLC, Ono Pharmaceutical Co. Ltd., and Tasuku Honjo brought a patent-infringement action in the U.S. District Court for the District of Delaware against Pfizer, Merck KGaA, and EMD Serono, alleging that Bavencio (avelumab) infringes one patent relating to methods for treating tumors with anti-PD-L1 antibodies, which expires in 2023.
Actions In Which We Are The Defendant
Inflectra (infliximab-dyyb)
In March 2015, Janssen2027, covering enzalutamide and New York University, together, brought a patent-infringement action in the U.S. District Courtpharmaceutical compositions thereof, for the District of Massachusetts against Hospira, Celltrion Healthcare Co. Ltd. and Celltrion Inc. alleging that infliximab-dyyb, to be marketed by Hospira in the U.S. under the brand name Inflectra, would infringe six patents relating to infliximab, its manufacture and use. Claims with respect to four of the patents have since been dismissed by the plaintiffs, leaving two patents at issue in the ongoing action: the infliximab antibody patent and a patent relating to cell culture media. In August 2016, the U.S. District Court for the District of Massachusetts ruled that the antibody patent was invalid, and Janssen has appealed that ruling to the Court of Appeals for the Federal Circuit.
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treating prostate cancer.
A2. Legal Proceedings––Product Litigation
Like other pharmaceutical companies, weWe are defendants in numerous cases, including but not limited to those discussed below, related to our pharmaceutical and other products. Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss.
Asbestos
Between 1967 and 1982, Warner-Lambert owned American Optical Corporation (American Optical), which manufactured and sold respiratory protective devices and asbestos safety clothing. In connection with the sale of American Optical in 1982, Warner-Lambert agreed to indemnify the purchaser for certain liabilities, including certain asbestos-related and other claims. As of October 1, 2017, approximately 56,500 claims naming American Optical and numerous other defendants were pending in various federal and state courts seeking damages for alleged personal injury from exposure to asbestos and other allegedly hazardous materials. Warner-Lambert was acquired by Pfizer in 2000 and is a wholly-ownedwholly owned subsidiary of Pfizer. Warner-Lambert is actively engaged in the defense of, and will continue to explore various means of resolving, these claims.
Numerous lawsuits against American Optical, Pfizer and certain of its previously owned subsidiaries are pending against Pfizer in various federal and state courts seeking damages for alleged personal injury from exposure to products allegedly containing asbestos and other allegedly hazardous materials sold by Pfizer and certain of its previously owned subsidiaries.
There also are a small number of lawsuits pending in various federal and state courts seeking damages for alleged exposure to asbestos in facilities owned or formerly owned by Pfizer or its subsidiaries.
Effexor
Personal Injury Actions
A number of individual lawsuits and multi-plaintiff lawsuits have been filed against us and/or our subsidiaries in various federal and state courts alleging personal injury as a result of the purported ingestion of Effexor. Among other types of actions, the Effexor personal injury litigation includes actions alleging a variety of birth defects as a result of the purported ingestion of Effexor by women during pregnancy. Plaintiffs in these birth-defect actions seek compensatory and punitive damages. In August 2013, the federal birth-defect cases were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Effexor (Venlafaxine Hydrochloride) Products Liability Litigation MDL-2458) in the U.S. District Court for the Eastern District of Pennsylvania. Almost all plaintiffs have voluntarily dismissed their actions. The Multi-District Litigation, as well as the coordinated state court proceedings in California, has been administratively stayed.
Antitrust Actions
Beginning in May 2011, actions, including purported class actions, were filed in various federal courts against Wyeth and, in certain of the actions, affiliates of Wyeth and certain other defendants relating to Effexor XR, which is the extended-release formulation of Effexor. The plaintiffs in each of the class actions seek to represent a class consisting of all persons in the U.S. and its territories who directly purchased, indirectly purchased or reimbursed patients for the purchase of Effexor XR or generic Effexor XR from any of the defendants from June 14, 2008 until the time the defendants’ allegedly unlawful conduct ceased. The plaintiffs in all of the actions allege delay in the launch of generic Effexor XR in the U.S. and its territories, in violation of federal antitrust laws and, in certain of the actions, the antitrust, consumer protection and various other laws of certain states, as the result of Wyeth fraudulently obtaining and improperly listing certain patents for Effexor XR in the Orange Book, enforcing certain patents for Effexor XR and entering into a litigation settlement agreement with a generic drug manufacturer with respect to Effexor XR. Each of the plaintiffs seeks treble damages (for itself in the individual actions or on behalf of the putative class in the purported class actions) for alleged price overcharges for Effexor XR or generic Effexor XR in the U.S. and its territories since June 14, 2008. All of these actions have been consolidated in the U.S. District Court for the District of New Jersey.
In October 2014, the District Court dismissed the direct purchaser plaintiffs’ claims based on the litigation settlement agreement, but declined to dismiss the other direct purchaser plaintiff claims. In January 2015, the District Court entered partial final judgments as to all settlement agreement claims, including those asserted by direct purchasers and end-payer plaintiffs, which plaintiffs appealed to the U.S. Court of Appeals for the Third Circuit. In August 2017, the U.S. Court of Appeals for the Third Circuit reversed the District Court’s decisions and remanded the claims to the District Court.
Zoloft
A number of individual lawsuits and multi-plaintiff lawsuits have been filed against us and/or our subsidiaries in various federal and state courts alleging personal injury as a result of the purported ingestion of Zoloft. Among other types of actions, the Zoloft personal injury litigation includes actions alleging a variety of birth defects as a result of the purported ingestion of Zoloft by women during pregnancy. Plaintiffs in these birth-defect actions seek compensatory and punitive damages and the disgorgement of profits resulting from the sale of Zoloft. In April 2012, the federal birth-defect cases were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Zoloft Products Liability Litigation MDL-2342) in the
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U.S. District Court for the Eastern District of Pennsylvania. A number of plaintiffs have voluntarily dismissed their actions. In April 2016, the District Court granted our motion for summary judgment, dismissing the claims of almost all of the remaining plaintiffs. In May 2016, the plaintiffs appealed the District Court’s decision to the U.S. Court of Appeals for the Third Circuit. In June 2017, the U.S. Court of Appeals for the Third Circuit affirmed the District Court’s decision.
Lipitor
Antitrust Actions
Beginning in November 2011, purported class actions relating to Lipitor were filed in various federal courts against, among others, Pfizer, certain Pfizer affiliates, of Pfizer, and, in most of the actions, Ranbaxy Inc.Laboratories Limited (Ranbaxy) and certain affiliates of Ranbaxy.Ranbaxy affiliates. The plaintiffs in these various actions seek to represent nationwide, multi-state or statewide classes consisting of persons or entities who directly purchased, indirectly purchased or reimbursed patients for the purchase of Lipitor (or, in certain of the actions, generic Lipitor) from any of the defendants from March 2010 until the cessation of the defendants’ allegedly unlawful conduct (the Class Period). The plaintiffs allege delay in the launch of generic Lipitor, in violation of federal antitrust laws and/or state antitrust, consumer protection and various other laws, resulting from (i) the 2008 agreement pursuant to which Pfizer and Ranbaxy settled certain patent litigation involving Lipitor and Pfizer granted Ranbaxy a license to sell a generic version of Lipitor in various markets beginning on varying dates, and (ii) in certain of the actions, the procurement and/or enforcement of
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certain patents for Lipitor. Each of the actions seeks, among other things, treble damages on behalf of the putative class for alleged price overcharges for Lipitor (or, in certain of the actions, generic Lipitor) during the Class Period. In addition, individual actions have been filed against Pfizer, Ranbaxy and certain of their affiliates, among others, that assert claims and seek relief for the plaintiffs that are substantially similar to the claims asserted and the relief sought in the purported class actions described above. These various actions have been consolidated for pre-trial proceedings in a Multi-District Litigation (In re Lipitor Antitrust Litigation MDL-2332)MDL in the U.S. District Court for the District of New Jersey.
In September 2013 and 2014, the District Court dismissed with prejudice the claims byof the direct purchasers. In October and November 2014, the District Court dismissed with prejudice the claims of all other Multi-District LitigationMDL plaintiffs. All plaintiffs have appealed the District Court’s orders dismissing their claims with prejudice to the U.S. Court of Appeals for the Third Circuit. In addition, the direct purchaser class plaintiffs appealed the order denying their motion to amend the judgment and for leave to amend their complaint to the U.S.Court of Appeals. In 2017, the Court of Appeals for the Third Circuit. In August 2017, the U.S. Court of Appeals for the Third Circuit reversed the District Court’s decisions and remanded substantially all of the claims to the District Court.
Also, in January 2013, the State of West Virginia filed an action in West Virginia state court against Pfizer and Ranbaxy, among others, that asserts claims and seeks relief on behalf of the State of West Virginia and residents of that state that are substantially similar to the claims asserted and the relief sought in the purported class actions described above.
Personal Injury Actions
A number of individual and multi-plaintiff lawsuits have been filed against us in various federal and state courts alleging that the plaintiffs developed type 2 diabetes as a result of the purported ingestion of Lipitor. Plaintiffs seek compensatory and punitive damages.EpiPen (Direct Purchaser)
In February 2014, the federal actions were transferred for consolidated pre-trial proceedings to2020, a Multi-District Litigation (In re Lipitor (Atorvastatin Calcium) Marketing, Sales Practices and Products Liability Litigation (No. II) MDL-2502)lawsuit was filed in the U.S. District Court for the District of South Carolina. Since 2016, certain cases in the Multi-District Litigation were remanded to certain state courts. In January 2017, the District Court granted our motion for summary judgment, dismissing substantially all of the remaining cases pending in the Multi-District Litigation. In January 2017, the plaintiffs appealed the District Court’s decision to the U.S. Court of Appeals for the Fourth Circuit.
Viagra
A number of individual and multi-plaintiff lawsuits have been filed against us in various federal and state courts alleging that the plaintiffs developed melanoma and/or the exacerbation of melanoma as a result of the purported ingestion of Viagra. Plaintiffs seek compensatory and punitive damages.
In April 2016, the federal actions were transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In Re: Viagra (Sildenafil Citrate) Products Liability Litigation, MDL-2691) in the U.S. District Court for the Northern District of California. In December 2016, federal actions filed against Lilly and filed against both us and Lilly, were transferred for coordinated pre-trial proceedings to the Multi-District Litigation (In re: Viagra (Sildenafil Citrate) and Cialis (Tadalafil) Products Liability Litigation, MDL-2691).
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Celebrex
Beginning in July 2014, purported class actions were filed in the U.S. District Court for the Eastern District of VirginiaKansas against Pfizer, its current and certain subsidiaries of Pfizer relating to Celebrex. The plaintiffs seek to represent U.S. nationwide or multi-state classes consisting of persons or entities who directly purchased from the defendants, or indirectly purchased or reimbursed patients for some or all of the purchase price of, Celebrex or generic Celebrex from May 31, 2014 until the cessation of the defendants’ allegedly unlawful conduct. The plaintiffs allege delay in the launch of generic Celebrex in violation of federal antitrust laws or certain state antitrust, consumer protection and various other laws as a result of Pfizer fraudulently obtaining and improperly listing a patent on Celebrex, engaging in sham litigation and prolonging the impact of sham litigation through settlement activity that further delayed generic entry. Each of the actions seeks treble damages on behalf of the putative class for alleged price overcharges for Celebrex since May 31, 2014. In December 2014, the District Court granted the parties’ joint motions to consolidate the direct purchaser and end-payer cases, and all such cases were consolidated as of March 2015. In October 2014 and March 2015, we filed motions to dismiss the direct purchasers’ and end-payers’ amended complaints, respectively. In November 2015, the District Court denied in part and granted in part our motion to dismiss the direct purchasers’ amended complaint. In February 2016, the District Court denied in part and granted in part our motion to dismiss the end-payers’ amended complaint, and in August 2016, the District Court dismissed substantially all of the end-payer’s remaining claims. In February 2017, the District Court dismissed with prejudice all of the end-payers’ claims. In March 2017, the end-payers appealed the District Court’s order dismissing their claims with prejudice to the U.S. Court of Appeals for the Fourth Circuit. In August 2017, the District Court granted the direct purchasers’ motion for class certification. In October 2017, Pfizer and the direct purchasers entered into an agreement-in-principle, which is subject to the negotiation of a final settlement agreement and court approval, to resolve the direct purchasers’ class action for $94 million.
Intravenous Solutions
Beginning in November 2016, purported class actions were filed in the U.S. District Court for the Northern District of Illinois against Hospira, Hospira Worldwide, Inc. and certain other defendants relating to intravenous saline solution. Plaintiffs seek to represent classes consisting of all persons and entities in the U.S. who directly purchased intravenous saline solution sold by any of the defendants from January 1, 2013 until the time the defendants’ allegedly unlawful conduct ceases. Plaintiffs allege that the defendants’ conduct restricts output and artificially fixes, raises, maintains and/or stabilizes the prices of intravenous saline solution sold throughout the U.S. in violation of federal antitrust laws. Plaintiffs seek treble damages (for themselves and on behalf of the putative classes) and an injunction against defendants for alleged price overcharges for intravenous saline solution in the U.S. since January 1, 2013. On February 3, 2017, we completed the sale of our global infusion therapy net assets, HIS, which includes intravenous saline solution, to ICU Medical. The litigation is the subject of cross-claims for indemnification by both Pfizer and ICU Medical under the purchase agreement.
Separately, in April 2017, Pfizer, Hospira and two employees of Pfizer received grand jury subpoenas issued by the United States District Court for the Eastern District of Pennsylvania, in connection with an investigation by the U.S. Department of Justice, Antitrust Division. The subpoenas seek documents related to the sale, manufacture, pricing and shortages of intravenous solutions, including saline, as well as communications among market participants regarding these issues. The Department of Justice investigation is also the subject of cross-claims for indemnification by both Pfizer and ICU Medical under the purchase agreement. In addition, in August 2015, the New York Attorney General issued a subpoena to Hospira for similar information. Hospira has produced records to the New York Attorney General and will coordinate with ICU Medical to produce records to the New York Attorney General as appropriate going forward, and Hospira and Pfizer will coordinate with ICU Medical to produce records to the Department of Justice.
Hormone Therapy Consumer Class Action
A certified consumer class action is pending against Wyeth in the U.S. District Court for the Southern District of California based on the alleged off-label marketing of its hormone therapy products. The case was originally filed in December 2003. The class consists of California consumers who purchased Wyeth’s hormone-replacement products between January 1995 and January 2003 and who do not seek personal injury damages therefrom. The class seeks compensatory and punitive damages, including a full refund of the purchase price.
Eliquis
A number of individual and multi-plaintiff lawsuits have been filed against us and Bristol-Myers Squibb Company in various federal and state courts pursuant to which plaintiffs seek to recover for personal injuries, including wrongful death, due to bleeding as a result of the alleged ingestion of Eliquis. Plaintiffs seek compensatory and punitive damages.
In February 2017, the federal actions were transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In Re: Eliquis (Apixaban) Products Liability Litigation MDL-2754) in the U.S. District Court for the Southern District of New York. In July 2017, the District Court dismissed substantially all of the actions that were pending in the Multi-District Litigation. In
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August 2017, certain plaintiffs appealed the District Court’s dismissal to the U.S. Court of Appeals for the Second Circuit. Additional cases continue to be transferred to the Multi-District Litigation.
EpiPen
Beginning in February 2017, purported class actions were filed in various federal courts by indirect purchasers of EpiPen against Pfizer, and/or itsformer affiliates King and Meridian, and/orand various entities affiliated with Mylan N.V., and Mylan N.V. Chief Executive Officer, Heather Bresch. The plaintiffs in these actions seek to represent U.S. nationwide classes comprising persons or entities, who paid for any portion of the end-user purchase price of an EpiPen between 2009 until the cessation of the defendants’ allegedly unlawful conduct. In August 2017, a similar lawsuit brought on behalf of a purported U.S. nationwide class of direct purchaser plaintiffs against Pfizer, King, Meridian and Mylan was voluntarily dismissed without prejudice. Against Pfizer and/or its affiliates, plaintiffswho purchased EpiPen devices directly from the defendants. Plaintiffs in this action generally allege that Pfizer’s and/or its affiliates’Pfizer and Mylan conspired to delay market entry of generic EpiPen through the settlement of patent litigation regarding EpiPen, and thereby delayed market entry of generic EpiPen in violation of federal antitrust laws and various state antitrust or consumer protection laws. At least one lawsuit also alleges that Pfizer and/or Mylan N.V. violated the federal Racketeer Influenced and Corrupt Organizations Act. Plaintiffs also filed various consumer protection and unjust enrichment claims against, and relating to conduct attributable solely to, Mylan Pharmaceuticals regarding EpiPen.law. Plaintiffs seek treble damages for alleged overcharges for EpiPen since 2009.2011. In July 2021, the District Court granted defendants’ motion to dismiss the direct purchaser complaint, without prejudice. In September 2021, plaintiffs filed an amended complaint. In August 2017,2022, the actions were consolidated for coordinated pre-trial proceedings in a Multi-District Litigation (In re: EpiPen (Epinephrine Injection, USP) Marketing, Sales PracticesDistrict Court granted Pfizer’s motion to dismiss the complaint, and Antitrust Litigation, MDL-2785) inplaintiffs appealed to the U.S. District Court of Appeals for the District of Kansas with other EpiPen-related actions against Mylan N.V. and/or its affiliatesTenth Circuit. In October 2023, the parties reached an agreement to which Pfizer, King and Meridian aresettle the litigation on terms not parties.
Nexium 24HR and Protonix
A number of individual and multi-plaintiff lawsuits have been filed against Pfizer, certain of its subsidiaries and/or other pharmaceutical manufacturers in various federal and state courts alleging that the plaintiffs developed kidney-related injuries as a result of the purported ingestion of certain proton pump inhibitors.material to Pfizer. The cases against us involve Nexium 24HR and/or Protonix and seek compensatory and punitive damages and, in some cases, treble damages, restitution or disgorgement. In August 2017, the federal actions were ordered transferred for coordinated pre-trial proceedingssettlement is subject to a Multi-District Litigation (court approval.In re: Proton-Pump Inhibitor Products Liability Litigation (No. II)) in the U.S. District Court for the District of New Jersey.
Docetaxel
•Personal Injury Actions
A number of lawsuits have been filed against Hospira and Pfizer in various federal and state courts alleging that plaintiffs who were treated with Docetaxel developed permanent hair loss. The significant majority of the cases also name other defendants, including the manufacturer of the branded product, Taxotere. Plaintiffs seek compensatory and punitive damages. Additional lawsuits have been filed in which plaintiffs allege they developed blocked tear ducts following their treatment with Docetaxel.
In October 2016, the federal cases were transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In re Taxotere (Docetaxel) Products Liability Litigation, MDL-2740)MDL in the U.S. District Court for the Eastern District of Louisiana. In 2022, the eye injury cases were transferred for coordinated pre-trial proceedings to a MDL in the U.S. District Court for the Eastern District of Louisiana.
•Mississippi Attorney General Government Action
In 2018, the Attorney General of Mississippi filed a complaint in Mississippi state court against the manufacturer of the branded product and eight other manufacturers including Pfizer and Hospira, alleging, with respect to Pfizer and Hospira, a failure to warn about a risk of permanent hair loss in violation of the Mississippi Consumer Protection Act. The action seeks civil penalties and injunctive relief.
Zantac
A number of lawsuits have been filed against Pfizer in various federal and state courts alleging that plaintiffs developed various types of cancer, or face an increased risk of developing cancer, purportedly as a result of the ingestion of Zantac. The significant majority of these cases also name other defendants that have historically manufactured and/or sold Zantac. Pfizer has not sold Zantac since 2006, and only sold an OTC version of the product. In 2006, Pfizer sold the consumer business that included its Zantac OTC rights to Johnson & Johnson and transferred the assets and liabilities related to Zantac OTC to Johnson & Johnson in connection with the sale. Plaintiffs in these cases seek compensatory and punitive damages.
In February 2020, the federal actions were transferred for coordinated pre-trial proceedings to a MDL in the U.S. District Court for the Southern District of Florida (the Federal MDL Court). Plaintiffs in the MDL filed against Pfizer and many other defendants a master personal injury complaint, a consolidated consumer class action complaint alleging, among other things, claims under consumer protection statutes of all 50 states, and a medical monitoring complaint seeking to certify medical monitoring classes under the laws of 13 states. In December 2022, the Federal MDL Court granted defendants’ Daubert
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motions to exclude plaintiffs’ expert testimony and motion for summary judgment on general causation, which has resulted in the dismissal of all complaints in the litigation. Plaintiffs have appealed the Federal MDL Court’s rulings.
In addition, (i) Pfizer has received service of Canadian class action complaints naming Pfizer and other defendants, and seeking compensatory and punitive damages for personal injury and economic loss, allegedly arising from the defendants’ sale of Zantac in Canada; and (ii) the State of New Mexico and the Mayor and City Council of Baltimore separately filed civil actions against Pfizer and many other defendants in state courts, alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in those jurisdictions. In April 2021, a Judicial Council Coordinated Proceeding was created in the Superior Court of California in Alameda County to coordinate personal injury actions against Pfizer and other defendants filed in California state court. Coordinated proceedings have also been created in other state courts. The large majority of the state court cases have been filed in the Superior Court of Delaware in New Castle County.
Chantix
Beginning in August 2021, a number of putative class actions have been filed against Pfizer in various U.S. federal courts following Pfizer’s voluntary recall of Chantix due to the presence of a nitrosamine, N-nitroso-varenicline. Plaintiffs assert that they suffered economic harm purportedly as a result of purchasing Chantix or generic varenicline medicines sold by Pfizer. Plaintiffs seek to represent nationwide and state-specific classes and seek various remedies, including damages and medical monitoring. In December 2022, the federal actions were transferred for coordinated pre-trial proceedings to a MDL in the U.S. District Court for the Southern District of New York. Similar putative class actions have been filed in Canada and Israel, where the product brand is Champix.
A3. Legal Proceedings––Commercial and Other Matters
Average Wholesale Price Litigation
Pfizer, certain of its subsidiaries and other pharmaceutical manufacturers were sued in various state courts by a number of states alleging that the defendants provided average wholesale price (AWP) information for certain of their products that was higher than the actual average prices at which those products were sold. The AWP is used to determine reimbursement levels under Medicare Part B and Medicaid and in many private-sector insurance policies and medical plans. All but one of those actions have been resolved through settlement, dismissal or final judgment. The plaintiff state, Illinois,in the one remaining action claims that the alleged spread between the AWPs at which purchasers were reimbursed and the actual sale prices was promoted by the defendants as an incentive to purchase certain of their products. The actionalleges, among other things, fraudand violation of the state’s unfair trade practices andconsumer protection statutes and seeks monetary and other relief, including civil penalties and treble damages.
Monsanto-Related Matters
In 1997, Monsanto Company (Former Monsanto) contributed certain chemical manufacturing operations and facilities to a newly formed corporation, Solutia Inc. (Solutia), and spun off the shares of Solutia. In 2000, Former Monsanto merged with Pharmacia & Upjohn Company to form Pharmacia. Pharmacia then transferred its agricultural operations to a newly created subsidiary, named Monsanto Company (New Monsanto), which it spun off in a two-stage process that was completed in 2002. Pharmacia was acquired by Pfizer in 2003 and is a wholly-ownedwholly owned subsidiary of Pfizer.
In connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities related to Pharmacia’s former agricultural business. New Monsanto has defended and/or is defending Pharmacia in connection with various claims and litigation arising out of, or related to, the agricultural business, and has been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In connection with its spin-off in 1997, Solutia assumed, and agreed to indemnify Pharmacia for, liabilities related to Former Monsanto’s chemical businesses. As the result of its reorganization under Chapter 11 of the U.S. Bankruptcy Code, Solutia’s indemnification obligations relating to Former Monsanto’s chemical businesses are primarily limited to sites that Solutia has owned or operated. In addition, in connection with its spinoffspin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities primarily related to Former Monsanto’s chemical businesses, including, but not limited to, any such liabilities that Solutia assumed. Solutia’s and New Monsanto’s assumption of, and agreement to indemnify Pharmacia for, these liabilities apply to pending actions and any future actions related to Former Monsanto’s chemical businesses in which Pharmacia is named as a defendant, including, without limitation, actions asserting environmental claims, including alleged exposure to polychlorinated biphenyls. Solutia and/or New Monsanto are defending Pharmacia in connection with various claims and litigation arising out of, or related to, Former Monsanto’s chemical businesses, and have been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.
Environmental Matters
In 2009, as part of our acquisition of Wyeth, we submitted toassumed responsibility for environmental remediation at the U.S. Environmental Protection Agency (EPA) a corrective measures study report with regard to Pharmacia’s discontinued industrial chemical facility in North Haven, Connecticut and a revised site-wide feasibility study with regard to Wyeth Holdings Corporation’sLLC (formerly known as Wyeth Holdings Corporation and American Cyanamid Company) discontinued industrial chemical facility in Bound Brook, New Jersey. In September 2010, our corrective measures study report with regardSince that time, we have executed or have become a party to the North Haven facility was approved by the EPA, and we commenced constructiona number of the site remedy in late 2011 under an Updated Administrative Orderadministrative settlement agreements, orders on Consentconsent, and/or judicial consent decrees, with the EPA. In July 2011, Wyeth Holdings Corporation finalized an Administrative Settlement AgreementU.S. Environmental Protection Agency, the New Jersey Department of Environmental Protection and/or federal and Order on Consent for Removal Action (the 2011 Administrative Settlement Agreement) with the EPA with regardstate natural resource trustees to perform remedial design, removal and remedial actions, and related environmental remediation activities, and to resolve alleged damages to natural resources, at the Bound Brook facility. In May 2012, we completed construction of an interim remedy to address the discharge of impacted groundwater from that facility to the Raritan River. In September 2012, the EPA issued a final remediation plan for the Bound Brook facility’s main plant area, which is generally in accordance with one of the remedies evaluated in our revised site-wide feasibility study. In March 2013, Wyeth Holdings Corporation (now Wyeth Holdings LLC) entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the main plant area and to perform a focused feasibility study for two adjacent lagoons. In September 2015, the U.S., on behalf of the EPA, lodged a complaint and consent decree with the federal District Court for the District of New Jersey that will allow Wyeth Holdings LLC to complete the design and to implement the remedy for the main plant area. In December 2015, the consent decree (which supersedes the 2011 Administrative Settlement Agreement) was entered by the District Court. We have accrued for the currently estimated costs of the site remedy for the North Haven facility and the site remediation for the Bound Brook facility.
these activities.
We are aalso party to a number of other proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, and other state, local or foreign laws in which the primary relief sought is the cost of past and/or future remediation.
PFIZER INC. AND SUBSIDIARY COMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Contracts with Iraqi Ministry of Health
In October 2017, a number of United StatesU.S. service members, civilians, and their families brought a complaint in the U.S. District Court for the District of Columbia against a number of pharmaceutical and medical devices companies, including Pfizer and certain of its subsidiaries, alleging that the defendants violated the United StatesU.S. Anti-Terrorism Act. The complaint alleges that the defendants provided funding for terrorist organizations through their sales practices pursuant to pharmaceutical and medical device contracts with the Iraqi Ministry of Health.Health, and seeks monetary relief. In July 2020, the District Court granted defendants’ motions to dismiss and dismissed all of plaintiffs’ claims. In January 2022, the Court of Appeals reversed the District Court’s decision. In February 2022, the defendants filed for en banc review of the Court of Appeals’ decision. In February 2023, the Court of Appeals denied defendants’ en banc petitions.
Allergan Complaint for Indemnity
In 2019, Pfizer was named as a defendant in a complaint, along with King, filed by Allergan Finance LLC (Allergan) in the Supreme Court of the State of New York, asserting claims for indemnity related to Kadian, which was owned for a short period by King in 2008, prior to Pfizer's acquisition of King in 2010. This suit was voluntarily discontinued without prejudice in January 2021.
Viatris Securities Litigation
In October 2021, a putative class action was filed in the Court of Common Pleas of Allegheny County, Pennsylvania on behalf of former Mylan N.V. shareholders who received Viatris common stock in exchange for Mylan shares in connection with the spin-off of the Upjohn Business and its combination with Mylan (the Transactions). Viatris, Pfizer, and certain of each company’s current and former officers, directors and employees are named as defendants. An amended complaint was filed in January 2023, and alleges that the defendants violated certain provisions of the Securities Act of 1933 in connection with certain disclosures made in or omitted from the registration statement and related prospectus issued in connection with the Transactions, as well as related communications. Plaintiff seeks damages, costs and expenses and other equitable and injunctive relief.
Breach of Contract – Comirnaty
In September 2023, Pfizer and BioNTech Manufacturing GmbH initiated formal proceedings against the Republic of Poland in Belgium’s Court of First Instance of Brussels. Pfizer and BioNTech are seeking an order from the Court holding the Republic of Poland to its commitments for COVID-19 vaccine orders, which were placed by the Republic of Poland as part of their contract signed in May 2021.
A4. Legal Proceedings––Government Investigations
Like other pharmaceutical companies, weWe are subject to investigations and extensive regulation by government agencies in the U.S., other developed markets and multiple emerging markets in which we operate. As a result, we have interactions with government agencies on an ongoing basis. Criminal charges, and substantial fines and/or civil penalties, as well as limitations on our ability to conduct business in applicable jurisdictions, corporate integrity or deferred prosecution agreements, as well as reputational harm and increased public interest in the matter could result from government investigations.investigations in the U.S. and other jurisdictions in which we do business. These matters often involve government requests for information on a voluntary basis or through subpoenas after which the government may seek additional information through follow-up requests or additional subpoenas. In addition, in a qui tam lawsuit in which the government declines to intervene, the relator may still pursue a suit for the recovery of civil damages and penalties on behalf of the government. Among the investigations by government agencies are the matters discussed below.
Phenytoin Sodium CapsulesGreenstone Investigations
•U.S. Department of Justice Antitrust Division Investigation
Since July 2017, the U.S. Department of Justice’s Antitrust Division has been investigating our former Greenstone generics business. We believe this is related to an ongoing broader antitrust investigation of the generic pharmaceutical industry. We have produced records relating to this investigation.
•State Attorneys General and Multi-District Generics Antitrust Litigation
In 2012, Pfizer soldApril 2018, Greenstone received requests for information from the U.K. Marketing Authorisation for phenytoin sodium capsules to a third party, but retainedAntitrust Department of the right to supplyConnecticut Office of the finished product to that third party.Attorney General. In May 2013,2019, Attorneys General of more than 40 states plus the U.K. Competition & Markets Authority (CMA) informed us that it had launched an investigation into the supplyDistrict of phenytoin sodium capsulesColumbia and Puerto Rico filed a complaint against a number of pharmaceutical companies, including Greenstone and Pfizer. The matter has been consolidated with a MDL in the U.K. market. In August 2015, the CMA issued a StatementEastern District of Objections alleging that PfizerPennsylvania. As to Greenstone and Pfizer, Limited, a U.K. subsidiary, engagedthe complaint alleges anticompetitive conduct in conduct that violates U.K.violation of federal and EUstate antitrust laws and state consumer protection laws. In December 2016,June 2020, the CMA imposedState Attorneys General filed a £84.2 million fine on Pfizernew complaint against a large number of companies, including Greenstone and Pfizer, Limited. Pfizer appealed the CMA Decision to The Competition Appeal Tribunal in February 2017.making similar allegations, but
PFIZER INC. AND SUBSIDIARY COMPANIESCOMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
concerning a new set of drugs. This complaint was transferred to the MDL in July 2020. The MDL also includes civil complaints filed by private plaintiffs and state counties against Pfizer, Greenstone and a significant number of other defendants asserting allegations that generally overlap with those asserted by the State Attorneys General.
Subpoena & Civil Investigative Demand relating to Pharmacy Benefit ManagersTris Pharma/Quillivant XR
In March 2016, PfizerOctober 2018, we received a Civil Investigative Demandsubpoena from the U.S. Attorney’s Office for the Southern District of New York related(SDNY) seeking records relating to Pfizer’s contractual relationshipsour relationship with pharmacy benefit managersanother drug manufacturer and its production and manufacturing of drugs including, but not limited to, Quillivant XR. We responded to that subpoena in full and have had no communication with respectthe SDNY in connection with the subpoena since June 2019. Additionally, in September 2020, we received a Civil Investigative Demand (CID) from the Texas Attorney General’s office seeking records of a similar nature to certain pharmaceutical products overthose requested by the period from January 1, 2006 to the present. SDNY. We have provided information to the governmentare producing records in response to this Civil Investigative Demand.request.
SubpoenasGovernment Inquiries relating to Copayment Assistance OrganizationsMeridian Medical Technologies
In December 2015 and July 2016, PfizerFebruary 2019, we received subpoenasa CID from the U.S. Attorney’s Office for the SDNY. The CID seeks records and information related to alleged quality issues involving the manufacture of auto-injectors at the Meridian site. In August 2019, we received a HIPAA subpoena issued by the U.S. Attorney’s Office for the Eastern District of Massachusetts requesting documents related toMissouri, in coordination with the Patient Access Network FoundationDepartment of Justice’s Consumer Protection Branch, seeking similar records and other 501(c)(3) organizations that provide financial assistance to Medicare patients.information. We have been providing information to the governmentproduced records in response to these subpoenas.and subsequent requests.
U.S. Department of Justice InvestigationJustice/SEC Inquiry relating to GreenstoneRussian Operations
As of July 2017,In June 2019, we received an informal request from the U.S. Department of Justice’s Antitrust Division is investigatingForeign Corrupt Practices Act (FCPA) Unit seeking documents relating to our Greenstone generics business.operations in Russia. In September 2019, we received a similar request from the SEC’s FCPA Unit. We believe this is relatedhave produced records pursuant to an ongoing antitrust investigation of the generic pharmaceutical industry. The government has been obtaining information from Greenstone.these requests.
Intravenous SolutionsDocetaxel––Mississippi Attorney General Government Investigation
See Note 12A2. Legal Proceedings––Product Litigation––Intravenous SolutionsDocetaxel––Mississippi Attorney General Government Action above for information regarding a government investigationsinvestigation related to salesDocetaxel marketing practices.
U.S. Department of intravenous solution products.Justice Inquiries relating to India Operations
A5. In March 2020, we received an informal request from the U.S. Department of Justice’s Consumer Protection Branch seeking documents relating to our manufacturing operations in India, including at our former facility located at Irrungattukottai in India. In April 2020, we received a similar request from the U.S. Attorney’s Office for the SDNY regarding a civil investigation concerning operations at our facilities in India. We are producing records pursuant to these requests.
U.S. Department of Justice/SEC Inquiry relating to China Operations
In June 2020, we received an informal request from the U.S. Department of Justice’s FCPA Unit seeking documents relating to our operations in China. In August 2020, we received a similar request from the SEC’s FCPA Unit. We have produced records pursuant to these requests.
Zantac––State of New Mexico and Mayor and City Council of Baltimore Civil Actions
See Legal Proceedings––Matters Resolved DuringProduct Litigation––Zantac above for information regarding civil actions separately filed by the First Nine MonthsState of 2017New Mexico and the Mayor and City Council of Baltimore alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in those jurisdictions.
During 2017, certain matters, includingGovernment Inquiries relating to Biohaven
In June 2022, the matter discussed below, were resolved or wereU.S. Department of Justice's Commercial Litigation Branch and the subjectU.S. Attorney’s Office for the Western District of definitive settlement agreements or settlement agreements-in-principle.New York issued a CID relating to Biohaven. The CID seeks records and information related to, among other things, engagements with health care professionals and co-pay coupons cards. In March 2023, the California Department of Insurance issued a subpoena seeking records similar to those requested by the CID. Biohaven is a wholly-owned subsidiary that we acquired in October 2022. We are producing records in response to these requests.
XtandiU.S. Department of Justice Inquiry relating to Mexico Operations
In March 2023, we received an informal request from the U.S. Department of Justice’s FCPA Unit seeking documents relating to our operations in Mexico.We are producing records pursuant to this request.
PFIZER INC. AND SUBSIDIARY COMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Government Inquiries relating to Xeljanz
In April 2014,2023, we received a HIPAA subpoena issued by the RegentsU.S. Attorney’s Office for the Western District of Virginia, in coordination with the UniversityDepartment of California (the Regents) filed a complaint against the Medivation Group in California Superior Court in San Francisco. Medivation was acquired by Pfizer in September 2016Justice’s Commercial Litigation Branch, seeking records and is now a wholly-owned subsidiary of Pfizer. The Regents’ complaint sought a 10% share, under a license agreement between the Medivation Group and the Regents, of certain payments the Medivation Group receives with respect to Xtandi under the Medivation Group’s sub-licensing and collaboration agreement with Astellas. Trial was scheduled to commence in May 2017. In July 2017, the parties resolved the matter through a settlement on terms not material to Pfizer, which was recorded in the second quarter of 2017 as a measurement period adjustmentinformation related to the Medivation acquisition.programs Pfizer sponsored in retail pharmacies relating to Xeljanz. We are producing records pursuant to this request.
B. Guarantees and Indemnifications
In the ordinary course of business and in connection with the sale of assets and businesses and other transactions, we often indemnify our counterparties against certain liabilities that may arise in connection with the transaction or that are related to events and activities prior to theor following a transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we wouldmay be required to reimburse the loss. These indemnifications are generally subject to threshold amounts, specified claim periods and othervarious restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of October 1, 2017, recorded amounts for2023, the estimated fair value of these indemnifications wereindemnification obligations is not significant.material to Pfizer.
In addition, in connection with our entry into certain agreements and other transactions, our counterparties may be obligated to indemnify us. For example, in November 2020, we and Mylan completed the transaction to spin-off our Upjohn Business and combine it with Mylan to form Viatris. As part of the transaction and as previously disclosed, each of Viatris and Pfizer has agreed to assume, and to indemnify the other for, liabilities arising out of certain matters. Also, our global agreement with BioNTech to co-develop a mRNA-based coronavirus vaccine program aimed at preventing COVID-19 infection, includes certain indemnity provisions pursuant to which each of BioNTech and Pfizer has agreed to indemnify the other for certain liabilities that may arise in connection with certain third-party claims relating to Comirnaty.
See Note 7Dfor information on Pfizer Inc. has’s guarantee of the debt issued by PIE in May 2023. We have also guaranteed the long-term debt of certain companies that itwe acquired and that now are subsidiaries of Pfizer.
C. Contingent Consideration for Acquisitions We may be required to make payments to sellers for certain prior business combinations that are contingent upon future events or outcomes. See Note 1D in our 2022 Form 10-K.
Note 13.Segment, Geographic and Other Revenue Information
A. Segment Information
We manage our commercial operations through two distinct business segments: Pfizer Innovative Health (IH) and Pfizer Essential Health (EH). The IH and EHoperating segments, are each led by a single manager.manager: Biopharma and Business Innovation, an operating segment established in the first quarter of 2023 that includes PC1, our contract development and manufacturing organization and a leading supplier of specialty active pharmaceutical ingredients, and Pfizer Ignite, a recently launched offering that provides strategic guidance and end-to-end R&D services to select innovative biotech companies that align with Pfizer’s R&D focus areas. Biopharma is the only reportable segment. Each operating segment has responsibility for its commercial activitiesactivities. Regional commercial organizations market, distribute and sell our products and are supported by global platform functions that are responsible for certainthe research, development, manufacturing and supply of our products and global corporate enabling functions. In consideration of planned future investments in oncology, including the proposed acquisition of Seagen, we are reorganizing our R&D operations. Beginning in July 2023, discovery to early- and late-phase clinical development for oncology is performed by a new end-to-end Oncology Research and Development (ORD) platform function and discovery to early- and late-phase clinical development for all remaining therapeutic areas is consolidated into the Pfizer Research and Development (PRD) platform function. ORD and PRD replace our former WRDM and Global Product Development (GPD) organizational design. Biopharma receives its R&D services from ORD and PRD. These services include IPR&D projects for new investigational products and additional indications for in-line products that generally have achieved proof-of-concept.products. Each businessoperating segment has a geographic footprint across developed and emerging markets. Our chief operating decision maker uses the revenues and earnings of the two operating segments, among other factors, for performance evaluation and resource allocation.
We regularly review our segments and the approach used by management for performance evaluation and resource allocation.
As described in Other Business Activities and Reconciling Items––Note 1A, acquisitions and divestitures have impacted ourOther business activities include the operating results of operations in 2017 and 2016.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Operating Segments
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Some additional information about our business segments follows: |
IH Segment | | EH Segment |
IH focuses on developing and commercializing novel, value-creating medicines and vaccines that significantly improve patients’ lives,Business Innovation as well as products for consumer healthcare. Key therapeutic areas include internal medicine, vaccines, oncology, inflammation & immunology, rare diseases and consumer healthcare. | | EH includes legacy brands that have lost or will soon lose market exclusivity in both developed and emerging markets, branded generics, generic sterile injectable products, biosimilars, select branded products including anti-infectives and, through February 2, 2017, HIS. EH also includes an R&D organization, as well as our contract manufacturing business. |
Leading brands include:
- Prevnar 13/Prevenar 13
- Xeljanz
- Eliquis
- Lyrica (U.S., Japan and certain other markets) - Enbrel (outside the U.S. and Canada) - Viagra (U.S. and Canada) - Ibrance
- Xtandi
- Several OTC consumer healthcare products (e.g., Advil and
Centrum)
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Leading brands include:
- Lipitor
- Premarin family
- Norvasc
- Lyrica (Europe, Russia, Turkey, Israel and Central Asia countries)
- Celebrex
- Inflectra/Remsima
- Several sterile injectable products
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Other Costs and Business Activities
Certain pre-tax costs are not allocated to our operating segment results, such as costs associated with the following:
WRD, which is generally responsible for research projects forwith: (i) R&D and medical expenses managed by our IH business until proof-of-concept is achievedORD and then for transitioning those projects to the IH segment via the GPD organization for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRD organization also has responsibility for certain science-basedPRD organizations; (ii) corporate enabling functions and other platform-services organizations, which provide technical expertise and other services to the various R&D projects, including EH R&D projects. WRD is also responsible for facilitating all regulatory submissions and interactions with regulatory agencies, including all safety-event activities.
GPD, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios. GPD also provides technical support and other services to Pfizer R&D projects.
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• | Corporate, representing platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement) and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments. Effective in the first quarter of 2017, Corporate also includes the costs associated with our Pfizer Medical organization (Medical), previously reported as part of Other Business Activities. Medical is responsible for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, and partnerships with global public health and medical associations.
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Other unallocatedcorporate costs; (iii) overhead costs representing overhead expensesprimarily associated with our manufacturing operations; and commercial operations(iv) our share of earnings from Haleon/the Consumer Healthcare JV. Reconciling items include the following items, transactions and events that are not directly assessedallocated to our operating segments: (i) all amortization of intangible assets; (ii) acquisition-related items; and (iii) certain significant items, representing substantive and/or unusual, and in some cases recurring, items that are evaluated on an operating segment,individual basis by management and that, either as a result of their nature or size, would not be expected to occur as part of our normal business unit (segment) management does not manage these costs (which include manufacturing variances associated with production).on a regular basis.
PFIZER INC. AND SUBSIDIARY COMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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• | Certain transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and PP&E; (ii) acquisition-related costs, where we incur costs for executing the transaction, integrating the acquired operations and restructuring the combined company; and (iii) certain significant items, representing substantive and/or unusual, and in some cases recurring, items (such as restructuring or legal charges) that are evaluated on an individual basis by management and that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. Such items can include, but are not limited to, non-acquisition-related restructuring costs, as well as costs incurred for legal settlements, asset impairments and disposals of assets or businesses, including, as applicable, any associated transition activities.
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Segment Assets
Assets––We manage our assets on a total company basis, not by operating segment, as many of our operating assets are shared (such as our plant network assets) or commingled (such as accounts receivable, as many of our customers are served by both operating segments).commingled. Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment. Total assets were approximately $172$215 billion as of October 1, 20172023 and $197 billion as of December 31, 20162022.
Selected Statement of Operations Information
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The following provides selected information by reportable segment: |
| | Three Months Ended | | Nine Months Ended |
| | Revenues | | Earnings(a) | | Revenues | | Earnings(a) |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | October 1, 2023 | | October 2, 2022 | | October 1, 2023 | | October 2, 2022 | | October 1, 2023 | | October 2, 2022 |
Reportable Segment: | | | | | | | | | | | | | | | | |
Biopharma | | $ | 12,930 | | | $ | 22,319 | | | $ | 7,545 | | | $ | 14,665 | | | $ | 43,320 | | | $ | 75,066 | | | $ | 25,484 | | | $ | 45,222 | |
Other business activities(b) | | 302 | | | 319 | | | (8,782) | | | (4,007) | | | 928 | | | 974 | | | (14,387) | | | (9,820) | |
Reconciling Items: | | | | | | | | | | | | | | | | |
Amortization of intangible assets | | | | | | (1,179) | | | (822) | | | | | | | (3,466) | | | (2,478) | |
Acquisition-related items | | | | | | (227) | | | (62) | | | | | | | (778) | | | (331) | |
Certain significant items(c) | | | | | | (708) | | | (773) | | | | | | | (1,666) | | | (3,095) | |
| | $ | 13,232 | | | $ | 22,638 | | | $ | (3,352) | | | $ | 9,001 | | | $ | 44,247 | | | $ | 76,040 | | | $ | 5,187 | | | $ | 29,498 | |
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(a)Income/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss). Biopharma’s earnings include dividend income from our investment in ViiV of $30 million in the third quarter of 2023 and $112 million in the third quarter of 2022, and $213 million in the first nine months of 2023 and $237 million in the first nine months of 2022.
(b)Other business activities include revenues and costs associated with Business Innovation and costs that we do not allocate to our operating segments, per above, including acquired IPR&Dexpenses in the periods presented. Earnings in the third quarter and first nine months of 2023 include approximately $5.6 billion and $5.8 billion, respectively, of inventory write-offs and related charges to Cost of sales mainly due to lower-than-expected demand for our COVID-19 products. Earnings in the first nine months of 2022 included COVID-19-related charges of approximately $0.9 billion to Cost of sales, composed of (i) inventory write-offs of approximately $0.5 billion related to COVID-19 products that exceeded or were expected to exceed their approved shelf-lives prior to being used and (ii) charges of approximately $0.4 billion, primarily related to excess raw materials for Paxlovid recorded in the third quarter of 2022.
(c)Certain significant items are substantive and/or unusual, and in some cases recurring, items (as noted above). Earnings in the first nine months of 2023 include, among other items, net losses on equity securities of $711 million recorded in Other (income)/deductions––net. Earnings in the first nine months of 2022 included, among other items: (i) net losses on equity securities of $1.3 billion recorded in Other (income)/deductions––net and (ii) restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring of $701 million ($344 million recorded in Selling, informational and administrative expenses and the remaining amount primarily recorded in Restructuring charges and certain acquisition-related costs). See Note4. B. Geographic Information
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The following summarizes revenues by geographic area: |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | % Change | | October 1, 2023 | | October 2, 2022 | | % Change |
United States | | $ | 7,804 | | | $ | 13,851 | | | (44) | | | $ | 22,497 | | | $ | 33,991 | | | (34) | |
Developed Europe | | 1,981 | | | 3,136 | | | (37) | | | 7,217 | | | 14,705 | | | (51) | |
Developed Rest of World | | 1,073 | | | 2,351 | | | (54) | | | 4,852 | | | 10,671 | | | (55) | |
Emerging Markets | | 2,373 | | | 3,300 | | | (28) | | | 9,681 | | | 16,673 | | | (42) | |
Revenues | | $ | 13,232 | | | $ | 22,638 | | | (42) | | | $ | 44,247 | | | $ | 76,040 | | | (42) | |
|
|
In May 2023, we and our collaboration partner, BioNTech, amended our contract with the EC to deliver COVID-19 vaccines to the EU. The amended agreement includes rephasing of delivery of doses annually through 2026 and an aggregate volume reduction, providing additional flexibility for EU member states. The EC will maintain access to future adapted COVID-19 vaccines and the ability to donate doses, in alignment with the original agreement. See Note 13C. C. Other Revenue Information
Significant Customers––For information on our significant wholesale customers, see Note 17C in our 2022 Form 10-K. Additionally, revenues from the U.S. government represented 7% of total revenues for the nine months ended October 1, 2023 and primarily represent sales of Paxlovid and Comirnaty. Revenues from the U.S. government represented 38% and 27% of total revenues for the three and nine months ended October 2, 2022, respectively, and primarily represented sales of Paxlovid and Comirnaty. Accounts receivable from the U.S. government represented 4% of total trade accounts receivable as of December 31, 2022 and primarily related to sales of Paxlovid and Comirnaty. Due to the transition of Comirnaty and the
PFIZER INC. AND SUBSIDIARY COMPANIESCOMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Selected Income Statement Information
|
| | | | | | | | | | | | | | | | |
The following table provides selected income statement information by reportable segment: |
| | Three Months Ended |
| | Revenues | | Earnings(a) |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | October 1, 2017 |
| | October 2, 2016 |
|
Reportable Segments: | | | | | | | | |
IH | | $ | 8,118 |
| | $ | 7,332 |
| | $ | 4,875 |
| | $ | 4,187 |
|
EH | | 5,050 |
| | 5,712 |
| | 2,765 |
| | 3,128 |
|
Total reportable segments | | 13,168 |
| | 13,045 |
| | 7,640 |
| | 7,315 |
|
Other business activities(b), (c) | | — |
| | — |
| | (759 | ) | | (753 | ) |
Reconciling Items: | | | | | | |
| | |
|
Corporate(c) | | — |
| | — |
| | (1,382 | ) | | (1,537 | ) |
Purchase accounting adjustments(c) | | — |
| | — |
| | (1,154 | ) | | (966 | ) |
Acquisition-related costs(c) | | — |
| | — |
| | (155 | ) | | (280 | ) |
Certain significant items(d) | | — |
| | — |
| | (449 | ) | | (1,969 | ) |
Other unallocated | | — |
| | — |
| | (156 | ) | | (206 | ) |
| | $ | 13,168 |
| | $ | 13,045 |
|
| $ | 3,585 |
| | $ | 1,604 |
|
|
| | Nine Months Ended |
| | Revenues | | Earnings(a) |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | October 1, 2017 |
| | October 2, 2016 |
|
Reportable Segments: | | | | | | | | |
IH | | $ | 23,204 |
| | $ | 21,471 |
| | $ | 14,190 |
| | $ | 12,470 |
|
EH | | 15,639 |
| | 17,725 |
| | 8,558 |
| | 9,985 |
|
Total reportable segments | | 38,843 |
| | 39,196 |
| | 22,748 |
| | 22,454 |
|
Other business activities(b), (c) | | — |
| | — |
| | (2,205 | ) | | (2,096 | ) |
Reconciling Items: | | | | | | | | |
Corporate(c) | | — |
| | — |
| | (3,948 | ) | | (4,217 | ) |
Purchase accounting adjustments(c) | | — |
| | — |
| | (3,527 | ) | | (3,103 | ) |
Acquisition-related costs(c) | | — |
| | — |
| | (347 | ) | | (598 | ) |
Certain significant items(d) | | — |
| | — |
| | (797 | ) | | (4,112 | ) |
Other unallocated | | — |
| | — |
| | (573 | ) | | (753 | ) |
| | $ | 38,843 |
| | $ | 39,196 |
| | $ | 11,351 |
| | $ | 7,575 |
|
| | | | | | | | |
(a)
| Income from continuing operations before provision for taxes on income. IH’s earnings in the third quarter and first nine months of 2017 include dividend income of $54 million and $211 million, respectively, from our investment in ViiV. For additional information, see Note 4.
|
| |
(b)
| Other business activities includes the costs managed by our WRD and GPD organizations. Effective in the first quarter of 2017, Medical, previously reported as part of Other Business Activities, was reclassified to Corporate. We have reclassified approximately $33 million and $94 million of costs from Other Business Activities to Corporate in the third quarter and first nine months of 2016, respectively, to conform to the current period presentation.
|
| |
(c)
| For a description, see the “Other Costs and Business Activities” section above. |
| |
(d)
| Certain significant items are substantive and/or unusual, and in some cases recurring, items (such as restructuring or legal charges) that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. |
For Earningsexpected transition of Paxlovid to commercial market sales in the third quartersecond half of 2017, certain significant items includes: (i) restructuring charges2023, revenues from the U.S. government for the three months ended October 1, 2023 and implementation costs associated withaccounts receivable from the U.S. government as of October 1, 2023 were not material.
Significant Product Revenues
The following provides detailed revenue information for several of our cost-reduction initiatives that are not associated with an acquisition of $90 million, (ii) charges for certain legal matters of $183 million, (iii) income of $12 million, representing an adjustment to amounts previously recorded to write down the HIS net assets to fair value less costs to sell, (iv) certain asset impairment charges of $127 million, (v) charges for business and legal entity alignment of $16 million and (vi) other charges of $45 million. For additional information, see Note 2B, Note 3 and Note 4.major products:
For Earnings in the third quarter of 2016, certain significant items includes: (i) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $375 million, (ii) income for certain legal matters of $40 million, (iii) an impairment charge related to the write-down of the HIS net assets to fair value less estimated costs to sell of $1.4 billion, (iv) certain asset impairment charges of $126 million, (v) charges for business and legal entity alignment of $69 million and (vi) other charges of $17 million. For additional information, see Note 3 and Note 4.
For Earnings in the first nine months of 2017, certain significant items includes: (i) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $253 million, (ii) charges for certain legal matters of $191 million, (iii) incremental charges to amounts previously recorded to write down the HIS net assets to fair value less costs to sell of $52 million, (iv) certain asset impairment charges of $127 million, (v) charges for business and legal entity alignment of $54 million and (vi) other charges of $119 million. For additional information, see Note 2B, Note 3 and Note 4.
For Earnings in the first nine months of 2016, certain significant items includes: (i) restructuring charges and implementation costs associated with our cost-reduction initiatives that are not associated with an acquisition of $743 million, (ii) charges for certain legal matters of $506 million, (iii) an impairment charge related to the write-down of the HIS net assets to fair value less estimated costs to sell of $1.4 billion, (iv) certain asset impairment charges of $1.1 billion, (v) charges for business and legal entity alignment of $180 million and (vi) other charges of $189 million. For additional information, see Note 3 and Note 4. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | Three Months Ended | | Nine Months Ended |
PRODUCT | | PRIMARY INDICATION OR CLASS | | Oct. 1, 2023 | | Oct. 2, 2022 | | Oct. 1, 2023 | | Oct. 2, 2022 |
TOTAL REVENUES | | | | $ | 13,232 | | | $ | 22,638 | | | $ | 44,247 | | | $ | 76,040 | |
GLOBAL BIOPHARMACEUTICALS BUSINESS (BIOPHARMA) | | $ | 12,930 | | | $ | 22,319 | | | $ | 43,320 | | | $ | 75,066 | |
Primary Care | | | | $ | 6,287 | | | $ | 15,846 | | | $ | 23,602 | | | $ | 55,676 | |
Comirnaty direct sales and alliance revenues(a) | | Active immunization to prevent COVID-19 | | 1,307 | | | 4,402 | | | 5,859 | | | 26,477 | |
Eliquis alliance revenues and direct sales | | Nonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism | | 1,498 | | | 1,464 | | | 5,135 | | | 5,001 | |
Prevnar family | | Active immunization to prevent pneumonia, invasive disease and otitis media caused by Streptococcus pneumoniae | | 1,854 | | | 1,607 | | | 4,835 | | | 4,601 | |
Paxlovid | | COVID-19 in certain high-risk patients | | 202 | | | 7,514 | | | 4,414 | | | 17,099 | |
Nurtec ODT/Vydura | | Acute treatment of migraine and prevention of episodic migraine | | 233 | | | — | | | 646 | | | 1 | |
Abrysvo | | Active immunization to prevent RSV infection | | 375 | | | — | | | 375 | | | — | |
Premarin family | | Symptoms of menopause | | 92 | | | 110 | | | 299 | | | 327 | |
BMP2 | | Bone graft for spinal fusion | | 82 | | | 58 | | | 252 | | | 201 | |
FSME-IMMUN/TicoVac | | Active immunization to prevent tick-borne encephalitis disease | | 91 | | | 67 | | | 237 | | | 177 | |
Nimenrix | | Active immunization against invasive meningococcal ACWY disease | | 43 | | | 79 | | | 121 | | | 221 | |
Trumenba | | Active immunization to prevent invasive disease caused by Neisseria meningitidis group B | | 58 | | | 60 | | | 108 | | | 108 | |
All other Primary Care | | Various | | 452 | | | 485 | | | 1,321 | | | 1,463 | |
Specialty Care | | | | $ | 3,757 | | | $ | 3,404 | | | $ | 11,021 | | | $ | 10,267 | |
Vyndaqel family | | ATTR-CM and polyneuropathy | | 892 | | | 602 | | | 2,360 | | | 1,766 | |
Xeljanz | | RA, PsA, UC, active polyarticular course juvenile idiopathic arthritis, ankylosing spondylitis | | 503 | | | 502 | | | 1,210 | | | 1,304 | |
Enbrel (Outside the U.S. and Canada) | | RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis | | 208 | | | 230 | | | 627 | | | 767 | |
Sulperazon | | Bacterial infections | | 122 | | | 178 | | | 619 | | | 598 | |
Ig Portfolio(b) | | Various | | 140 | | | 124 | | | 428 | | | 356 | |
Genotropin | | Replacement of human growth hormone | | 158 | | | 90 | | | 379 | | | 261 | |
Zavicefta | | Bacterial infections | | 130 | | | 98 | | | 378 | | | 302 | |
Inflectra | | Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis | | 121 | | | 131 | | | 373 | | | 403 | |
BeneFIX | | Hemophilia B | | 107 | | | 99 | | | 321 | | | 325 | |
Medrol | | Anti-inflammatory glucocorticoid | | 89 | | | 79 | | | 263 | | | 235 | |
Zithromax | | Bacterial infections | | 60 | | | 71 | | | 254 | | | 250 | |
Oxbryta | | Sickle cell disease | | 85 | | | — | | | 232 | | | — | |
Somavert | | Acromegaly | | 69 | | | 70 | | | 200 | | | 202 | |
Refacto AF/Xyntha | | Hemophilia A | | 61 | | | 58 | | | 177 | | | 188 | |
Fragmin | | Treatment/prevention of venous thromboembolism | | 57 | | | 60 | | | 175 | | | 202 | |
Vfend | | Fungal infections | | 46 | | | 51 | | | 153 | | | 171 | |
Cresemba | | Fungal infections | | 40 | | | 41 | | | 141 | | | 114 | |
Bicillin | | Bacterial infections | | 37 | | | 36 | | | 134 | | | 108 | |
Cibinqo | | Atopic dermatitis | | 37 | | | 11 | | | 91 | | | 17 | |
All other Anti-infectives | | Various | | 270 | | | 298 | | | 820 | | | 900 | |
All other Specialty Care | | Various | | 527 | | | 575 | | | 1,687 | | | 1,799 | |
Oncology | | | | $ | 2,885 | | | $ | 3,070 | | | $ | 8,696 | | | $ | 9,124 | |
Ibrance | | HR-positive/HER2-negative metastatic breast cancer | | 1,244 | | | 1,283 | | | 3,635 | | | 3,841 | |
Xtandi alliance revenues | | mCRPC, nmCRPC, mCSPC | | 313 | | | 320 | | | 877 | | | 878 | |
Inlyta | | Advanced RCC | | 252 | | | 252 | | | 773 | | | 760 | |
PFIZER INC. AND SUBSIDIARY COMPANIESCOMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Equity in the net income of investees accounted for by the equity method is not significant for any of our operating segments.
The operating segment information does not purport to represent the revenues, costs and income from continuing operations before provision for taxes on income that each of our operating segments would have recorded had each segment operated as a standalone company during the periods presented.
B. Geographic Information
As described in Note 1A, acquisitions and divestitures have impacted our results of operations in 2017 and 2016.
|
| | | | | | | | | | | | | | | | | | | | | | |
The following table provides revenues by geographic area: |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
| | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
|
U.S. | | $ | 6,534 |
| | $ | 6,530 |
| | — |
| | $ | 19,516 |
| | $ | 19,561 |
| | — |
|
Developed Europe(a) | | 2,163 |
| | 2,218 |
| | (2 | ) | | 6,309 |
| | 6,982 |
| | (10 | ) |
Developed Rest of World(b) | | 1,632 |
| | 1,711 |
| | (5 | ) | | 4,797 |
| | 4,940 |
| | (3 | ) |
Emerging Markets(c) | | 2,839 |
| | 2,586 |
| | 10 |
| | 8,222 |
| | 7,714 |
| | 7 |
|
Revenues | | $ | 13,168 |
| | $ | 13,045 |
| | 1 |
| | $ | 38,843 |
| | $ | 39,196 |
| | (1 | ) |
| | | | | | | | |
(a)
| Developed Europe region includes the following markets: Western Europe, Scandinavian countries and Finland. Revenues denominated in euros were $1.7 billion in both the third quarter of 2017 and 2016, and $5.0 billion and $5.3 billion in the first nine months of 2017 and 2016, respectively.
|
| |
(b)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (MILLIONS) | | | | Three Months Ended | | Nine Months Ended | PRODUCT | | PRIMARY INDICATION OR CLASS | | Oct. 1, 2023 | | Oct. 2, 2022 | | Oct. 1, 2023 | | Oct. 2, 2022 | Bosulif | | Philadelphia chromosome–positive chronic myelogenous leukemia | | 160 | | | 141 | | | 463 | | | 425 | | Lorbrena | | ALK-positive metastatic NSCLC | | 159 | | | 99 | | | 393 | | | 247 | | Zirabev | | Treatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer | | 100 | | | 146 | | | 335 | | | 432 | | Ruxience | | Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis | | 88 | | | 120 | | | 302 | | | 357 | | Xalkori | | ALK-positive and Proto-Oncogene 1, Receptor Tyrosine Kinase-positive advanced NSCLC | | 86 | | | 118 | | | 283 | | | 362 | | Retacrit | | Anemia | | 82 | | | 87 | | | 262 | | | 308 | | Aromasin | | Post-menopausal early and advanced breast cancer | | 76 | | | 66 | | | 225 | | | 187 | | Bavencio alliance revenues(c) | | Locally advanced or metastatic urothelial carcinoma; metastatic Merkel cell carcinoma; immunotherapy and tyrosine kinase inhibitor combination for patients with advanced RCC | | 18 | | | 73 | | | 186 | | | 198 | | Besponsa | | Relapsed or refractory B-cell acute lymphoblastic leukemia | | 54 | | | 55 | | | 171 | | | 164 | | Braftovi | | In combination with Mektovi for metastatic melanoma in patients with a BRAFV600E/K mutation and, in combination with Erbitux® (cetuximab)(d), for the treatment of BRAFV600E -mutant mCRC after prior therapy | | 56 | | | 58 | | | 156 | | | 156 | | Sutent | | Advanced and/or metastatic RCC, adjuvant RCC, refractory gastrointestinal stromal tumors (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor | | 42 | | | 75 | | | 136 | | | 287 | | Mektovi | | In combination with Braftovi for metastatic melanoma in patients with a BRAFV600E/K mutation | | 45 | | | 45 | | | 127 | | | 129 | | Trazimera | | HER2-positive breast cancer and metastatic stomach cancers | | — | | | 51 | | | 67 | | | 149 | | All other Oncology | | Various | | 110 | | | 80 | | | 304 | | | 243 | | BUSINESS INNOVATION(e) | | $ | 302 | | | $ | 319 | | | $ | 928 | | | $ | 974 | | Pfizer CentreOne(f) | | Various | | 291 | | | 318 | | | 903 | | | 972 | | Pfizer Ignite | | Various | | 10 | | | 1 | | | 25 | | | 1 | | | Total Alliance revenues included above | | $ | 1,645 | | | $ | 1,689 | | | $ | 5,672 | | | $ | 6,320 | |
(a)Excludes revenues for certain Comirnaty-related manufacturing activities performed on behalf of BioNTech, which are included in the PC1 contract development and manufacturing organization. See footnote (f) below. (b)Immunoglobulin (Ig) portfolio includes the revenues from Panzyga, Octagam and Cutaquig. (c)In March 2023, it was announced that our alliance with Merck KGaA to co-develop and co-commercialize Bavencio (avelumab) would terminate. Effective June 30, 2023, Merck KGaA took full control of the global commercialization of Bavencio. Beginning in the third quarter of 2023, the related profit share was replaced by a 15% royalty to Pfizer on net sales of Bavencio, which is recorded in Other (income)/deductions––net. We and Merck KGaA will continue to operationalize our respective ongoing clinical trials for Bavencio; and Merck KGaA will control all future R&D activities. (d)Erbitux® is a registered trademark of ImClone LLC. (e)See Note 13A above for information about Business Innovation. Prior-period financial information has been revised to reflect the current period presentation. (f)PC1 includes revenues from our contract manufacturing, including certain Comirnaty-related manufacturing activities performed on behalf of BioNTech ($11 million for the first nine months of 2023 and $108 million for the first nine months of 2022, respectively), and revenues from our active pharmaceutical ingredient sales operation, as well as revenues related to our manufacturing and supply agreements with former legacy Pfizer businesses/partnerships. Remaining Performance Obligations––Contracted revenue expected to be recognized from remaining performance obligations for firm orders in long-term contracts to supply Comirnaty to our customers totaled approximately $9 billion as of October 1, 2023, which includes amounts received in advance and deferred, as well as amounts that will be invoiced as we deliver these products to our customers in future periods. Of this amount, current contract terms provide for expected delivery of product with contracted revenue from 2023 through 2026, the timing of which may be renegotiated. Remaining performance obligations are based on foreign exchange rates as of the end of our fiscal third quarter of 2023 and exclude arrangements with an original expected contract duration of less than one year. Deferred Revenues––Our deferred revenues primarily relate to advance payments received or receivable from various government or government sponsored customers in international markets for supply of Comirnaty. The deferred revenues related to Comirnaty totaled $3.2 billion as of October 1, 2023, with $2.1 billion and $1.0 billion recorded in current liabilities and noncurrent liabilities, respectively. The deferred revenues related to Comirnaty totaled $2.5 billion as of December 31, 2022, with $2.4 billion and $77 million recorded in current liabilities and noncurrent liabilities, respectively. The increase in Comirnaty deferred revenues during the first nine months of 2023 was primarily the result of additional advance payments received as we entered into amended contracts and the impact of foreign exchange, partially offset by amounts recognized in Revenues as we delivered the products to our customers. During the third quarter and first nine months of 2023, we recognized | Developed Rest of World region includes the following markets: Japan, Canada, Australia, South Korea and New Zealand. |
| |
(c)
| Emerging Markets region includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Africa, Eastern Europe, Central Europe, the Middle East and Turkey. |
PFIZER INC. AND SUBSIDIARY COMPANIESCOMPANIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
C. Other Revenue Information
Significant Product Revenues
As described in Note 1A, acquisitions and divestitures have impacted our results of operations in 2017 and 2016.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
| | | | | | | | | | | | | | | | |
The following table provides detailed revenue information: |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | October 1, 2017 |
| | October 2, 2016 |
|
PFIZER INNOVATIVE HEALTH (IH)(a) | | $ | 8,118 |
| | $ | 7,332 |
| | $ | 23,204 |
| | $ | 21,471 |
|
Internal Medicine | | $ | 2,455 |
| | $ | 2,243 |
| | $ | 7,245 |
| | $ | 6,557 |
|
Lyrica IH(b) | | 1,150 |
| | 1,049 |
| | 3,382 |
| | 3,107 |
|
Eliquis alliance revenues and direct sales | | 644 |
| | 449 |
| | 1,813 |
| | 1,225 |
|
Chantix/Champix | | 240 |
| | 198 |
| | 727 |
| | 631 |
|
Viagra IH(c) | | 206 |
| | 297 |
| | 711 |
| | 897 |
|
BMP2 | | 79 |
| | 63 |
| | 198 |
| | 175 |
|
Toviaz | | 62 |
| | 60 |
| | 187 |
| | 191 |
|
All other Internal Medicine | | 75 |
| | 128 |
| | 228 |
| | 330 |
|
Vaccines | | $ | 1,649 |
| | $ | 1,641 |
| | $ | 4,385 |
| | $ | 4,576 |
|
Prevnar 13/Prevenar 13 | | 1,522 |
| | 1,536 |
| | 4,069 |
| | 4,302 |
|
FSME/IMMUN-TicoVac | | 43 |
| | 33 |
| | 119 |
| | 102 |
|
All other Vaccines | | 85 |
| | 72 |
| | 197 |
| | 172 |
|
Oncology | | $ | 1,616 |
| | $ | 1,104 |
| | $ | 4,551 |
| | $ | 3,206 |
|
Ibrance | | 878 |
| | 550 |
| | 2,410 |
| | 1,492 |
|
Sutent | | 276 |
| | 260 |
| | 805 |
| | 823 |
|
Xalkori | | 146 |
| | 140 |
| | 442 |
| | 415 |
|
Xtandi alliance revenues | | 150 |
| | 2 |
| | 422 |
| | 2 |
|
Inlyta | | 84 |
| | 95 |
| | 256 |
| | 304 |
|
Bosulif | | 57 |
| | 43 |
| | 163 |
| | 121 |
|
All other Oncology | | 26 |
| | 15 |
| | 54 |
| | 49 |
|
Inflammation & Immunology (I&I) | | $ | 1,000 |
| | $ | 960 |
| | $ | 2,863 |
| | $ | 2,907 |
|
Enbrel (Outside the U.S. and Canada) | | 613 |
| | 701 |
| | 1,818 |
| | 2,201 |
|
Xeljanz | | 348 |
| | 235 |
| | 935 |
| | 649 |
|
Eucrisa |
| 15 |
|
| — |
|
| 33 |
|
| — |
|
All other I&I | | 23 |
| | 24 |
| | 78 |
| | 57 |
|
Rare Disease | | $ | 569 |
| | $ | 585 |
| | $ | 1,637 |
| | $ | 1,768 |
|
BeneFIX | | 151 |
| | 176 |
| | 453 |
| | 543 |
|
Refacto AF/Xyntha | | 140 |
| | 140 |
| | 409 |
| | 408 |
|
Genotropin | | 136 |
| | 147 |
| | 375 |
| | 425 |
|
Somavert | | 65 |
| | 59 |
| | 182 |
| | 173 |
|
All other Rare Disease | | 77 |
| | 64 |
| | 218 |
| | 219 |
|
Consumer Healthcare | | $ | 829 |
| | $ | 798 |
| | $ | 2,522 |
| | $ | 2,457 |
|
PFIZER ESSENTIAL HEALTH (EH)(d) | | $ | 5,050 |
| | $ | 5,712 |
| | $ | 15,639 |
| | $ | 17,725 |
|
Legacy Established Products (LEP)(e) | | $ | 2,681 |
| | $ | 2,708 |
| | $ | 7,995 |
| | $ | 8,373 |
|
Lipitor | | 491 |
| | 422 |
| | 1,341 |
| | 1,294 |
|
Premarin family | | 238 |
| | 244 |
| | 711 |
| | 751 |
|
Norvasc | | 226 |
| | 238 |
| | 684 |
| | 714 |
|
EpiPen | | 82 |
| | 110 |
| | 253 |
| | 300 |
|
Xalatan/Xalacom | | 83 |
| | 91 |
| | 241 |
| | 273 |
|
Effexor | | 76 |
| | 70 |
| | 215 |
| | 207 |
|
Zoloft | | 78 |
| | 72 |
| | 215 |
| | 228 |
|
Zithromax | | 61 |
| | 56 |
| | 202 |
| | 203 |
|
Relpax | | 50 |
| | 83 |
| | 193 |
| | 248 |
|
Xanax | | 58 |
| | 55 |
| | 164 |
| | 163 |
|
All other LEP | | 1,237 |
| | 1,268 |
| | 3,776 |
| | 3,992 |
|
Sterile Injectable Pharmaceuticals (SIP)(f) | | $ | 1,273 |
| | $ | 1,461 |
| | $ | 4,270 |
| | $ | 4,481 |
|
Medrol | | 109 |
| | 102 |
| | 352 |
| | 330 |
|
Sulperazon | | 114 |
| | 102 |
| | 345 |
| | 304 |
|
Fragmin | | 79 |
| | 80 |
| | 221 |
| | 240 |
|
Tygacil | | 60 |
| | 69 |
| | 192 |
| | 203 |
|
Precedex | | 51 |
| | 64 |
| | 182 |
| | 199 |
|
All other SIP | | 860 |
| | 1,044 |
| | 2,977 |
| | 3,206 |
|
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | October 1, 2017 |
| | October 2, 2016 |
|
Peri-LOE Products(g) | | $ | 794 |
| | $ | 1,023 |
| | $ | 2,398 |
| | $ | 3,224 |
|
Celebrex | | 212 |
| | 194 |
| | 564 |
| | 550 |
|
Lyrica EH(b) | | 134 |
| | 191 |
| | 428 |
| | 623 |
|
Vfend | | 97 |
| | 140 |
| | 305 |
| | 459 |
|
Viagra EH(c) | | 102 |
| | 89 |
| | 285 |
| | 286 |
|
Pristiq | | 69 |
| | 174 |
| | 230 |
| | 546 |
|
Zyvox | | 68 |
| | 94 |
| | 220 |
| | 334 |
|
Revatio | | 58 |
| | 73 |
| | 189 |
| | 213 |
|
All other Peri-LOE Products | | 55 |
| | 68 |
| | 176 |
| | 214 |
|
Biosimilars(h) | | $ | 141 |
| | $ | 83 |
| | $ | 367 |
| | $ | 228 |
|
Inflectra/Remsima | | 112 |
| | 49 |
| | 284 |
| | 130 |
|
All other Biosimilars | | 28 |
| | 34 |
| | 82 |
| | 97 |
|
Pfizer CentreOne(i) | | $ | 161 |
| | $ | 156 |
| | $ | 514 |
| | $ | 540 |
|
Hospira Infusion Systems (HIS)(j) | | $ | — |
| | $ | 281 |
| | $ | 97 |
| | $ | 879 |
|
Revenues | | $ | 13,168 |
| | $ | 13,045 |
| | $ | 38,843 |
| | $ | 39,196 |
|
| | | | | | | | |
Total Lyrica(b) | | $ | 1,285 |
| | $ | 1,240 |
| | $ | 3,810 |
| | $ | 3,730 |
|
Total Viagra(c) | | $ | 308 |
| | $ | 387 |
| | $ | 996 |
| | $ | 1,183 |
|
Total Alliance revenues | | $ | 741 |
| | $ | 419 |
| | $ | 2,112 |
| | $ | 1,155 |
|
| |
(a)
| The IH business encompasses Internal Medicine, Vaccines, Oncology, Inflammation & Immunology, Rare Disease and Consumer Healthcare. Through December 31, 2016, includes Duavive/Duavee and Viviant (recorded in All other Internal Medicine in 2016), which were transferred from Innovative Health to Essential Health effective January 1, 2017 (recorded in All other LEP (EH) beginning January 1, 2017), in order to align these products with our management of the women’s health portfolio within EH. |
| |
(b)
| Lyrica revenues from all of Europe, Russia, Turkey, Israel and Central Asia countries are included in Lyrica EH. All other Lyrica revenues are included in Lyrica IH. Total Lyrica revenues represent the aggregate of worldwide revenues from Lyrica IH and Lyrica EH. |
| |
(c)
| Viagra revenues from the U.S. and Canada are included in Viagra IH. All other Viagra revenues are included in Viagra EH. Total Viagra revenues represent the aggregate of worldwide revenues from Viagra IH and Viagra EH. |
| |
(d)
| The EH business encompasses Legacy Established Products, Sterile Injectable Pharmaceuticals, Peri-LOE Products, Biosimilars, Pfizer CentreOne and HIS (through February 2, 2017) and includes all legacy Hospira commercial operations. |
| |
(e)
| Legacy Established Products primarily include products that have lost patent protection (excluding Sterile Injectable Pharmaceuticals and Peri-LOE Products). Effective January 1, 2017, All other LEP includes Duavive/Duavee and Viviant, which were transferred from Innovative Health (recorded in All other Internal Medicine (IH) in 2016), in order to align these products with our management of the women’s health portfolio within EH.See note (a) above.
|
| |
(f)
| Sterile Injectable Pharmaceuticals include generic injectables and proprietary specialty injectables (excluding Peri-LOE Products). |
| |
(g)
| Peri-LOE Products include products that have recently lost or are anticipated to soon lose patent protection. These products include: Lyrica in Europe, Russia, Turkey, Israel and Central Asia; Viagra in all countries (excluding the U.S. and Canada); and worldwide revenues for Celebrex, Pristiq, Zyvox, Vfend, Revatio and Inspra. |
| |
(h)
| Biosimilars include Inflectra/Remsima (biosimilar infliximab) in the U.S. and certain international markets, Nivestim (biosimilar filgrastim) in certain European, Asian and Africa/Middle Eastern markets and Retacrit (biosimilar epoetin zeta) in certain European and Africa/Middle Eastern markets. |
| |
(i)
| Pfizer CentreOne includes revenues from our contract manufacturing and active pharmaceutical ingredient sales operation, including sterile injectables contract manufacturing, and revenues related to our manufacturing and supply agreements, including with Zoetis. |
| |
(j)
| HIS (through February 2, 2017) includes Medication Management Systems products composed of infusion pumps and related software and services, as well as IV Infusion Products, including large volume IV solutions and their associated administration sets.
|
REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Pfizer Inc.:
We have reviewed the condensed consolidated balance sheet of Pfizer Inc. and Subsidiary Companies as of October 1, 2017, the related condensed consolidated statements of income and comprehensive income for the three-month and nine-month periods ended October 1, 2017 and October 2, 2016, and the related condensed consolidated statements of cash flows for the nine-month periods ended October 1, 2017 and October 2, 2016. These condensed consolidated financial statements are the responsibility of the Company’s management.
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Pfizer Inc. and Subsidiary Companies as of December 31, 2016, and the related consolidated statements of income, comprehensive income, equity, and cash flows for the year then ended (not presented herein); and in our report dated February 23, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ KPMG LLP
New York, New York
November 9, 2017
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
See the Glossary of Defined Terms at the beginning of this Quarterly Report on Form 10-Q for terms used throughout this MD&A. Our MD&A is provided in addition to the accompanying condensed consolidated financial statements and footnotes to assist readers in understanding Pfizer’s results of operations, financial condition and cash flows. The MD&A is organized as follows:
|
| | | | | |
● | | |
| This section provides information about the following: Our Business; our performance during the third quarter and first nine months of 2017 and 2016; Our Operating Environment; the Global Economic Environment; Our Strategy; Our Business Development Initiatives, such as acquisitions, dispositions, licensing and collaborations; and Our Financial Guidance for 2017. | |
● | | |
| This section includes a Revenues Overview section as well as the following sub-sections: | |
| | |
| This sub-section provides revenue information for several of our major biopharmaceutical products. | |
| | |
| This sub-section provides an overview of several of our biopharmaceutical products. | |
| | |
| This sub-section provides an overview of important biopharmaceutical product developments. | |
| | |
| This sub-section provides a discussion about our costs and expenses. | |
| | |
| This sub-section provides a discussion of items impacting our tax provisions. | |
| | |
| This sub-section provides a discussion of an alternative view of performance used by management. | |
● | | |
| This section provides a discussion of the performance of each of our operating segments. | |
● | | |
| This section provides a discussion of changes in certain components of other comprehensive income. | |
● | | |
| This section provides a discussion of changes in certain balance sheet accounts. | |
● | | |
| This section provides an analysis of our cash flows for the first nine months of 2017 and 2016. | |
● | | |
| This section provides an analysis of selected measures of our liquidity and of our capital resources as of October 1, 2017 and December 31, 2016, as well as a discussion of our outstanding debt and other commitments that existed as of October 1, 2017 and December 31, 2016. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer’s future activities. | |
● | | |
| This section discusses accounting standards that we have recently adopted, as well as those that recently have been issued, but not yet adopted. | |
● | | |
| This section provides a description of the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements presented in this MD&A, relating to, among other things, our anticipated operating and financial performance, business plans and prospects, in-line products and product candidates, including anticipated regulatory submissions, data read-outs, approvals, performance, timing of exclusivity and potential benefits of Pfizer’s products and product candidates, strategic reviews, capital allocation, business-development plans, manufacturing and products supply and plans relating to share repurchases and dividends. Also included in this section is a discussion of legal proceedings and contingencies. | |
Certainrevenue of approximately $140 million and $2.1 billion, respectively, that was included in the balance of Comirnaty deferred revenues as of December 31, 2022. The Comirnaty deferred revenues as of October 1, 2023 will be recognized in Revenues proportionately as we transfer control of the product to our customers and satisfy our performance obligation under the contracts, with the amounts included in ourcurrent liabilities expected to be recognized in Revenues within the next 12 months, and the amounts included in noncurrent liabilities expected to be recognized in Revenues from 2024 through 2026. Deferred revenues associated with contracts for other products were not significant as of October 1, 2023 or December 31, 2022.
Note 14. Subsequent Event
Amended Paxlovid Supply Agreement with the U.S. Government–– On October 13, 2023, we announced an amended agreement with the U.S. government, which will facilitate the expected transition of Paxlovid to traditional commercial markets in November 2023, with prices to be negotiated with commercial payers and a copay assistance program for eligible privately insured patients, as the U.S. government begins to discontinue the distribution of EUA-labeled Paxlovid. We will ensure commercial readiness by providing NDA-labeled commercial supply to all channels by the end of 2023. However, EUA-labeled Paxlovid will remain available free-of-charge to all eligible patients until the end of 2023, and therefore, we expect only minimal uptake of NDA-labeled commercial product before January 1, 2024. Components of this agreement include: (i) a non-cash return of any remaining EUA-labeled U.S. government inventory at the end of 2023, estimated to be 7.9 million treatment courses, with an associated revenue reversal of approximately $4.2 billion to be recorded in the fourth quarter of 2023; (ii) the conversion of those remaining EUA-labeled treatment courses previously purchased by the U.S. government to a volume-based credit, which will support continued access to Paxlovid through a U.S. government patient assistance program operated by Pfizer (which will provide the estimated 7.9 million treatment courses of FDA-approved, NDA-labeled Paxlovid free of charge to all eligible uninsured, Medicare and Medicaid patients through 2024, and to eligible uninsured and underinsured patients through 2028); and (iii) the creation in 2024 of a U.S. Strategic National Stockpile of 1.0 million treatment courses to enable future pandemic preparedness through 2028, to be managed and supplied by Pfizer at no cost to the U.S. government or taxpayers. While we will recognize revenue as the estimated 8.9 million treatment courses are delivered, there is no cash compensation for these treatment courses.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
The following MD&A mayis intended to assist the reader in understanding our financial condition and results of operations, including an evaluation of the amounts and certainty of cash flows from operations and from outside sources, and is provided as a supplement to and should be read in conjunction with the condensed consolidated financial statements and related notes in Item 1. Financial Statementsin this Form 10-Q. References to operational variances pertain to period-over-period changes that exclude the impact of foreign exchange rates. Although foreign exchange rate changes are part of our business, they are not add duewithin our control and because they can mask positive or negative trends in the business, we believe presenting operational variances excluding these foreign exchange changes provides useful information to rounding. All percentages have been calculated using unrounded amounts.evaluate our results.
|
| | | | | | | | | | | | | | | | | | | | | | |
The following table provides the components of the condensed consolidated statements of income: |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS, EXCEPT PER COMMON SHARE DATA) | | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
| | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
|
Revenues | | $ | 13,168 |
| | $ | 13,045 |
| | 1 |
| | $ | 38,843 |
| | $ | 39,196 |
| | (1 | ) |
| | | | | | | | | | | | |
Cost of sales(a) | | 2,847 |
| | 3,085 |
| | (8 | ) | | 7,980 |
| | 9,111 |
| | (12 | ) |
% of revenues | | 21.6 | % | | 23.6 | % | | |
| | 20.5 | % | | 23.2 | % | | |
|
| | | | | | | | | | | | |
Selling, informational and administrative expenses(a) | | 3,500 |
| | 3,559 |
| | (2 | ) | | 10,233 |
| | 10,414 |
| | (2 | ) |
% of revenues | | 26.6 | % | | 27.3 | % | | |
| | 26.3 | % | | 26.6 | % | | |
|
| | | | | | | | | | | | |
Research and development expenses(a) | | 1,859 |
| | 1,881 |
| | (1 | ) | | 5,346 |
| | 5,360 |
| | — |
|
% of revenues | | 14.1 | % | | 14.4 | % | | |
| | 13.8 | % | | 13.7 | % | | |
|
| | | | | | | | | | | | |
Amortization of intangible assets | | 1,177 |
| | 968 |
| | 22 |
| | 3,571 |
| | 2,934 |
| | 22 |
|
% of revenues | | 8.9 | % | | 7.4 | % | | |
| | 9.2 | % | | 7.5 | % | | |
|
| | | | | | | | | | | | |
Restructuring charges and certain acquisition-related costs | | 149 |
| | 531 |
| | (72 | ) | | 377 |
| | 988 |
| | (62 | ) |
% of revenues | | 1.1 | % | | 4.1 | % | | |
| | 1.0 | % | | 2.5 | % | | |
|
| | | | | | | | | | | | |
Other (income)/deductions––net | | 51 |
| | 1,417 |
| | (96 | ) | | (16 | ) | | 2,815 |
| | * |
|
Income from continuing operations before provision for taxes on income | | 3,585 |
| | 1,604 |
| | * |
| | 11,351 |
| | 7,575 |
| | 50 |
|
% of revenues | | 27.2 | % | | 12.3 | % | | |
| | 29.2 | % | | 19.3 | % | | |
|
| | | | | | | | | | | | |
Provision for taxes on income(b) | | 727 |
| | 249 |
| | * |
| | 2,287 |
| | 1,109 |
| | * |
|
Effective tax rate | | 20.3 | % | | 15.5 | % | | |
| | 20.1 | % | | 14.6 | % | | |
|
| | | | | | | | | | | | |
Income from continuing operations(b) | | 2,858 |
| | 1,355 |
| | * |
| | 9,064 |
| | 6,465 |
| | 40 |
|
% of revenues | | 21.7 | % | | 10.4 | % | | |
| | 23.3 | % | | 16.5 | % | | |
|
| | | | | | | | | | | | |
Discontinued operations––net of tax | | — |
| | — |
| | — |
| | 1 |
| | — |
| | * |
|
| | | | | | | | | | | | |
Net income before allocation to noncontrolling interests | | 2,858 |
| | 1,355 |
| | * |
| | 9,066 |
| | 6,465 |
| | 40 |
|
% of revenues | | 21.7 | % | | 10.4 | % | | |
| | 23.3 | % | | 16.5 | % | | |
|
| | | | | | | | | | | | |
Less: Net income attributable to noncontrolling interests | | 18 |
| | — |
| | * |
| | 32 |
| | 25 |
| | 27 |
|
Net income attributable to Pfizer Inc.(b) | | $ | 2,840 |
| | $ | 1,355 |
| | * |
| | $ | 9,034 |
| | $ | 6,440 |
| | 40 |
|
% of revenues | | 21.6 | % | | 10.4 | % | | |
| | 23.3 | % | | 16.4 | % | | |
|
| | | | | | | | | | | | |
Earnings per common share––basic(b): : | | |
| | |
| | |
| | |
| | |
| | |
|
Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 0.48 |
| | $ | 0.22 |
| | * |
| | $ | 1.51 |
| | $ | 1.06 |
| | 43 |
|
Net income attributable to Pfizer Inc. common shareholders | | $ | 0.48 |
| | $ | 0.22 |
| | * |
| | $ | 1.51 |
| | $ | 1.06 |
| | 43 |
|
| | | | | | | | | | | | |
Earnings per common share––diluted(b): | | | | | | |
| | |
| | |
| | |
|
Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 0.47 |
| | $ | 0.22 |
| | * |
| | $ | 1.49 |
| | $ | 1.04 |
| | 43 |
|
Net income attributable to Pfizer Inc. common shareholders | | $ | 0.47 |
| | $ | 0.22 |
| | * |
| | $ | 1.49 |
| | $ | 1.04 |
| | 43 |
|
| | | | | | | | | | | | |
Cash dividends paid per common share | | $ | 0.32 |
| | $ | 0.30 |
| | 7 |
| | $ | 0.96 |
| | $ | 0.90 |
| | 7 |
|
* Calculation not meaningful.
| |
(a)
| Excludes amortization of intangible assets, except as disclosed in Notes to Condensed Consolidated Financial Statements––Note 9A. Identifiable Intangible Assets and Goodwill:Identifiable Intangible Assets.
|
| |
(b)
| Amounts for the three and nine months ended October 2, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant Accounting Policies––Adoption of New Accounting Standards.
|
OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK
Our Business
and Strategy––Pfizer Inc. is a research-based, global biopharmaceutical company. We apply science and our global resources to bring therapies to people that extend and significantly improve their lives through the discovery, developmentlives. In 2023, we are making additional investments in both R&D and manufacture of healthcare products. Our global portfolio includes medicines and vaccines, as well as many of the world’s best-known consumer healthcare products. We work across developed and emerging markets to advance wellness, prevention, treatments and cures that challenge the most feared diseases of our time. We collaborate with healthcare providers, governments and local communitiesSI&A to support Pfizer’s near- and expand accesslonger-term growth plans, including to reliable, affordable healthcare around the world. Our revenues are derived from the salesupport anticipated new launches, commercial launch of ourCOVID-19 products, potential pipeline programs and to a much lesser extent, from alliance agreements, under which we co-promote products discovered or developed by other companies or us (Alliance revenues).
recently acquired assets. We manage our commercial operations through a global structure consisting of two distinct businessoperating segments: Pfizer Innovative Health (IH)Biopharma and Pfizer Essential Health (EH). For additional information, see Notes to Condensed Consolidated Financial Statements––Business Innovation. Biopharma is the only reportable segment. See Note 13A. Segment, Geographic and Other Revenue Information: Segment Information and the “Our Strategy––Commercial Operations” section of this MD&A below.
The majority of our revenues come from the manufacture and sale of biopharmaceutical products. As explained more fully in our 2016 Form 10-K, the biopharmaceutical industry is highly competitive and highly regulated. As a result, we face a number of industry-specific factors and challenges, which can significantly impact our results. These factors include, among others: the loss or expiration of intellectual property rights and the expiration of co-promotion and licensing rights, the ability to replenish innovative biopharmaceutical products, healthcare legislation, pipeline productivity, the regulatory environment, pricing and access pressures and competition. We also face challenges as a result of the global economic environment. For additional information about these factors and challenges, see the “Our Operating Environment” and “The Global Economic Environment” sections of this MD&A and of our 2016 Financial Report and Part I, Item 1A, “Risk Factors” of our 2016 Form 10-K and Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.
The financial information included in our condensed consolidated financial statements for our subsidiaries operating outside the U.S. is as of and for the three and nine months ended August 27, 2017 and August 28, 2016. The financial information included in our condensed consolidated financial statements for U.S. subsidiaries is as of and for the three and nine months ended October 1, 2017 and October 2, 201613A.
Since inception through the third quarter of 2023, we have incurred substantially all costs of approximately $700 million in connection with separating Upjohn. These charges include costs and expenses related to separation of legal entities and transaction costs. |
| | |
References to developed and emerging markets in this MD&A include: |
Developed markets | | U.S., Western Europe, Japan, Canada, Australia, South Korea, Scandinavian countries, Finland and New Zealand |
| | |
Emerging markets (includes, but is not limited to) | | Asia (excluding Japan and South Korea), Latin America, Africa, Eastern Europe, Central Europe, the Middle East and Turkey |
In the fourth quarter of 2022, we began taking steps through our Transforming to a More Focused Company restructuring program to optimize our end-to-end R&D operations to reduce costs and cycle times as well as to further prioritize our internal R&D portfolio in areas where our capabilities are differentiated while increasing external innovation efforts to leverage an expanding and productive biotech sector. See Note 3. For a description of savings related to this program, see the Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiativessection within MD&A.References to operational variancesIn July 2023, we announced that in this MD&A pertain to period-over-period growth rates that excludeconsideration of planned future investments in oncology, including the impactproposed acquisition of foreign exchange. The operational variancesSeagen, we are determined by multiplying or dividing, as appropriate,reorganizing our current period U.S. dollar results by the current period average foreign exchange rates and then multiplying or dividing, as appropriate, those amounts by the prior-year period average foreign exchange rates. Although exchange rate changes are part of our business, they are not within our control. Exchange rate changes, however, can mask positive or negative trends in the business; therefore, we believe presenting operational variances provides useful information in evaluating the results of our business.
In October 2017,2023, we announced that we launched a multi-year, enterprise-wide cost realignment program that aims to realign our costs with our longer-term revenue expectations. The program is expected to deliver annual net cost savings of at least $3.5 billion, of which approximately $1.0 billion is expected to be realized in 2023 and at least an additional $2.5 billion is expected to be realized in 2024 compared to the midpoint of SI&A and R&D expense guidance provided on August 1, 2023. The costs to achieve the savings associated with the new cost realignment program are reviewing strategic alternatives for our Consumer Healthcare business. A rangeexpected to be approximately $3.0 billion, of optionswhich the majority is expected to be cash. These costs will be considered, including a full or partial separationprimarily include severance and implementation costs. We will continue to refine the estimated savings and their associated costs over the remainder of the Consumer Healthcare business from Pfizer through a spin-off, sale or other transaction,year and we may ultimately determine to retain the business. Our other significant business development activities include:
| |
• | On February 3, 2017, we completed the sale of Pfizer’s global infusion therapy net assets, HIS, to ICU Medical for up to approximately $900 million, composed of cash and contingent cash consideration, ICU Medical common stock and seller financing.At closing, we received 3.2 million newly issued shares of ICU Medical common stock, which we initially valued at approximately $428 million, a promissory note in the amount of $75 million and net cash of approximately $200 million before customary adjustments for net working capital. In addition, we are entitled to receive a contingent amount of up to an additional $225 million in cash based on ICU Medical’s achievement of certain cumulative performance targets for the combined company through December 31, 2019. The operating results of HIS are included in our condensed consolidated statement of income and EH’s operating results through February 2, 2017 and, therefore, our financial results, and EH’s
|
operating results,will incorporate them into our full-year guidance for the third quarter of 2017 do not reflect any contribution from HIS global operations, while our financial results, and EH’s operating results, for the third quarter of 2016 reflect three months of HIS global operations. Our financial results, and EH’s operating results, for the first nine months of 2017 reflect approximately one month of HIS domestic operations and approximately two months of HIS international operations, while our financial results, and EH’s operating results, for the first nine months of 2016 reflect nine months of HIS global operations. Assets and liabilities associated with HIS are presented as held for sale in the condensed consolidated balance sheet as of December 31, 2016. The HIS assets held for sale are reported in Assets held for sale and HIS liabilities held for sale are reported in Other current liabilities.
On December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations, we acquired the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S. The total fair value of the consideration transferred for this business was approximately $555 million in cash plus contingent consideration of $490 million. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of this business, and, in accordance with our international reporting period, our financial results, EH’s operating results, and cash flows for the third quarter and first nine months of 2017 reflect approximately three months and eight months, respectively, of the small molecule anti-infectives business acquired from AstraZeneca.
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• | On September 28, 2016, we acquired Medivation for $81.50 per share. The total fair value of consideration transferred for Medivation was approximately $14.3 billion in cash ($13.9 billion, net of cash acquired). Of this consideration, approximately $365 million was not paid as of December 31, 2016, and was recorded in Other current liabilities. Substantially all of the remaining consideration was paid as of October 1, 2017. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Medivation. Therefore, Medivation operations are reflected in our financial results, IH’s operating results, and cash flows for the third quarter and first nine months of 2017. In accordance with our domestic and international reporting periods, our consolidated financial statements for the third quarter and first nine months of 2016 reflect three business days of Medivation operations, which were immaterial.
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• | On June 24, 2016, we acquired Anacor for $99.25 per share. The total fair value of consideration transferred for Anacor was approximately $4.9 billion in cash ($4.5 billion, net of cash acquired), plus $698 million debt assumed. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Anacor. Therefore, Anacor operations are reflected in our financial results, IH’s operating results, and cash flows for the third quarter and first nine months of 2017. In accordance with our domestic and international reporting periods, our consolidated financial statements for the third quarter and first nine months of 2016 reflect approximately three months of Anacor operations.
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2024.
For additional information about our business, strategy and operating environment, see Notesthe Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2022 Form 10-K.
Our Business Development Initiatives––We are committed to Condensed Consolidated Financial Statements–strategically capitalizing on growth opportunities, primarily by advancing our own product pipeline and maximizing the value of our existing products, but also through various business development activities. Our significant recent business development activities include the transactions discussed in Notes1Aand 2, including the proposed acquisition of Seagen, as well as the following: Proposed Acquisition of Telavant Holdings, Inc. (Telavant)–Note 2. Acquisitions, Sale–In October 2023, we and Roivant Sciences Ltd. (Roivant) entered into a definitive agreement with Roche Holdings Inc. (Roche) through which Roche would acquire Telavant for an upfront payment of Hospira Infusion Systems Net Assets, Collaborative Arrangement$7.1 billion and Equity-Method Investmentsa contingent milestone payment of $150 million. Roivant currently owns approximately 75% and we currently own approximately 25% of Telavant. Telavant was created through an arrangement between Roivant and us under which we out-licensed the global development and manufacturing rights and the “Our Strategy”U.S. and “Our Business Development Initiatives” sectionsJapan commercialization rights to our anti-TL1a antibody PF-06480605, now RVT-3101, to Telavant in exchange for our ownership interest in Telavant and Roivant’s agreement to fund the ongoing R&D of this MD&A below.
Impact of Recent Hurricanes in Puerto Rico
We have manufacturing and commercial operations in Puerto Rico, which were impacted byRVT-3101. Under the recent hurricanes toward the endoriginal agreement, we retained commercialization rights to RVT-3101 outside of the third quarter in 2017. While our three manufacturing sites sustained some damageU.S. and became inoperable due to issues impacting Puerto Rico overall, we have made significant progress in repairing our facilities in anticipation of ramping up to full operations over the coming months. As of the date of this Form 10-Q filing, some packaging production has begun at our facilities. We expect our facilities to reach full capacity in early 2018, but there could be certain product shortages in the coming months. Our commercial sales offices in Puerto Rico have been operational since October 9, 2017.
In the third quarter of 2017, we recorded $55 million in Cost of sales for inventory losses, overhead costs related to the period in which the plants could not operate,Japan and incremental costs to date resulting from the hurricanes in Puerto Rico. We may record additional losses in future periods but we are unable to predict them with certainty at this time. As a result of dual source supply options and sufficient pre-hurricane inventory levels, we currently expect the impact on future revenues to be insignificant. We will continue to monitorretain these rights after the situation closelyacquisition of Telavant by Roche. In connection with this new transaction, Telavant’s development, manufacturing and make any updatesU.S. and Japan commercialization
rights will transfer to Roche. Roche’s acquisition of Telavant is subject to customary closing conditions including U.S. anti-trust approval and is expected to close in the fourth quarter of 2023 or the first quarter of 2024. Upon closing of the transaction, we will receive a portion of the upfront cash payment from Roche based on our outlook if warranted.ownership interest and we will record a pre-tax gain of approximately $1.7 billion in Other (income)/deductions––net.
Product Manufacturing
We periodically encounter difficulties or delays in manufacturing, including due to legal or regulatory actions, such as warning letters, suspension of manufacturing or voluntary recall of a product. Within our Essential Health portfolio,Agreement with Flagship Pioneering, Inc. (Flagship)––In July 2023, we and Flagship announced that we have been experiencing product shortages with some products. The product shortages are primarilypartnered to create a new pipeline of innovative medicines. Under the terms of the novel agreement, we and Flagship will each invest $50 million upfront to explore opportunities to develop 10 single-asset programs by leveraging Flagship’s ecosystem of more than 40 human health companies and multiple biotechnology platforms. Pfizer will fund and have an option to acquire each selected development program. Flagship and its bioplatform companies will be eligible to receive up to $700 million in milestones and royalties for products fromeach successfully commercialized program.
For a description of the legacy Hospira portfolio and are largely driven by capacity constraints and technical issues. Inmore significant recent transactions through February 2017, for example, we received a
warning letter from23, 2023, the FDA communicating the FDA’s view that certain violationsfiling date of cGMP regulations exist at Hospira’s manufacturing facility in McPherson, Kansas. We are undertaking corrective actions to address the concerns raised by the FDA. Communication with the FDA is ongoing. Until the violations are corrected, the FDA may refuse to grant premarket approval applications and/or the FDA may refuse to grant export certificates related to products manufactured at McPherson, Kansas. Any continued product shortage interruption at this manufacturing facility could negatively impact our financial results, specifically2022 Form 10-K, see Note 2 in our Sterile Injectable Pharmaceuticals portfolio. In addition to the McPherson facility, we continue to remediate issues at other legacy Hospira facilities manufacturing sterile injectables within our Essential Health portfolio. We expect to make substantial progress on our remediation efforts during 2018.
Our 2017 Performance2022 Form 10-K.
Revenues
Our Third Quarter 2023 and First Nine Months of 2023 Performance
Revenues––Revenues decreased $9.4 billion, or 42%, in the third quarter of 2017 increased 1% compared2023 to $13.2 billion from $22.6 billion in the same period in 2016, which reflectsthird quarter of 2022, reflecting an operational increasedecrease of $178 million,$9.3 billion, or 1%41%, slightly offset by the unfavorableas well as a de minimis impact of foreign exchange.exchange of $94 million. The operational decrease was primarily driven by declines in Paxlovid and Comirnaty. Excluding contributions from Comirnaty and Paxlovid, revenues increased $1.1 billion, or 10%, operationally, reflecting U.S. revenues from Abrysvo following launch of the older adult indication; revenues from Nurtec ODT/Vydura and Oxbryta; and strong growth from the Vyndaqel family and the Prevnar family.
Revenues decreased $31.8 billion, or 42%, in the first nine months of2017 decreased 1% compared2023 to the same period$44.2 billion from $76.0 billion in 2016the first nine months of, which reflects 2022, reflecting an operational increasedecrease of $19 million and$30.7 billion, or 40%, as well as an unfavorable impact of foreign exchange of $1.1 billion, or 1%. The operational decrease was primarily driven by declines in Comirnaty and Paxlovid. Excluding contributions from Comirnaty and Paxlovid, revenues increased $2.2 billion, or 7%, operationally, reflecting revenues from Nurtec ODT/Vydura and Oxbryta; strong growth from the Vyndaqel family; U.S. revenues from Abrysvo following launch of the older adult indication; and growth from the Prevnar family and Eliquis.
As of October 31, 2023, on a total company basis, we forecasted revenues in 2023 of $58 billion to $61 billion, reflecting an operational decline of 40% at the midpoint compared to 2022 revenues, due to expected revenue declines from our COVID-19 products, partially offset by expected operational growth from our non-COVID-19 in-line portfolio, new product and indication launches and recently acquired products. We expect these revenue declines will also have an unfavorable impact on Income from continuing operations before provision/(benefit) for taxes on income.
The following provides an analysis of the changes in revenues for the third quarter and first nine months of 2017:
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(MILLIONS OF DOLLARS) | | Three Months |
| | Nine Months |
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| | | | |
Revenues, for the three months and nine months ended October 2, 2016 | | $ | 13,045 |
| | $ | 39,196 |
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| |
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Disposition-related operational impact––February 2017 sale of HIS(a) | | (280 | ) | | (783 | ) |
| |
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Other operational growth/(decline) | | | | |
Continued growth from key brands(b) and growth from Biosimilars | | 806 |
| | 2,245 |
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Growth in Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation) | | 148 |
| | 420 |
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Declines from Peri-LOE Products, Enbrel (driven by declines in most developed Europe markets), Prevnar 13/Prevenar 13 (driven by declines in the U.S.), and Viagra (IH) (primarily in the U.S.), as well as a decline in our SIP portfolio, and for the first nine months of 2017, also includes a decline in the LEP portfolio | | (598 | ) | | (1,951 | ) |
Other operational factors, net | | 102 |
| | 87 |
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Operational growth, net | | 178 |
| | 19 |
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| | | | |
Operational revenues | | 13,222 |
| | 39,215 |
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Unfavorable impact of foreign exchange | | (54 | ) | | (372 | ) |
Revenues, for the three months and nine months ended October 1, 2017 | | $ | 13,168 |
| | $ | 38,843 |
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(a)
| In the third quarter of 2017, financial results do not reflect any contribution from HIS global operations, compared to the inclusion of three months of HIS global operations in the same period in 2016. In the first nine months of 2017, financial results include approximately one month of HIS domestic operations and approximately two months of HIS international operations, compared to nine months of HIS global operations in the same period in 2016.
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(b)
| Key brands include Ibrance and Eliquis (globally) as well as Lyrica (IH) and Xeljanz (both primarily in the U.S.).
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IncomeIncome/(Loss) from Continuing Operations Before ProvisionProvision/(Benefit) for Taxes on Income
Income/(Loss)The following provides an analysis––Loss from continuing operations before provision/(benefit) for taxes on income/(loss) in the third quarter of 2023 was $3.4 billion, compared to income of $9.0 billion in the same period in 2022, primarily due to lower revenues and increases in Cost of sales and Amortization of intangible assets,partially offset by lower Acquired in-process research and development expenses.
The decrease in Income from continuing operations before provision for taxes on income for of $24.3 billion, to $5.2 billion in the third quarter and first nine months of 2023 from $29.5 billion in the first nine months of 2022, was primarily due to lower revenues and increases in 2017Selling, informational and administrative expenses: and Amortization of intangible assets, partially offset by lower Cost of sales, lower Acquired in-process research and development expenses, lower net losses on equity securities and lower net interest expense. |
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(MILLIONS OF DOLLARS) | | Three Months |
| | Nine Months |
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Income from continuing operations before provision for taxes on income, for the three months and nine months ended October 2, 2016 | | $ | 1,604 |
| | $ | 7,575 |
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| | | | |
Favorable/(Unfavorable) change in revenues | | 123 |
| | (353 | ) |
| | | | |
Favorable/(Unfavorable) changes: | | |
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Nonrecurrence of 2016 impairment on remeasurement of HIS net assets and lower loss on sale of HIS(a) | | 1,434 |
| | 1,369 |
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Lower Cost of sales(b) | | 238 |
| | 1,130 |
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Lower certain asset impairments(a) | | 3 |
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| 937 |
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Lower Restructuring charges and certain acquisition-related costs(c) | | 381 |
| | 611 |
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(Higher)/lower certain legal matters, net(a) | | (223 | ) | | 300 |
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Higher net gains on asset disposals(a) | | 108 |
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| 268 |
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Higher dividend income(a) | | 54 |
| | 204 |
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Lower Selling, information and administrative expenses(d) | | 59 |
| | 181 |
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Lower business and legal entity alignment costs(a) | | 53 |
| | 126 |
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Higher Amortization of intangible assets(e) | | (209 | ) |
| (637 | ) |
Lower royalty-related income(a) | | (93 | ) |
| (363 | ) |
| | | | |
All other items, net | | 52 |
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| 4 |
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Income from continuing operations before provision for taxes on income, for the three months and nine months ended October 1, 2017 | | $ | 3,585 |
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| $ | 11,351 |
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(a)
| See the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions—Net.
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(b)
| See the “Costs and Expenses––Cost of Sales” section of this MD&A. |
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(c)
| See the “Costs and Expenses––Restructuring Charges and Certain Acquisition-Related Costs and Cost-Reduction/Productivity Initiatives” section of this MD&A. |
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(d)
| See the “Costs and Expenses––Selling, Informational and Administrative Expenses” section of this MD&A. |
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(e)
| See the “Costs and Expenses––Amortization of Intangible Assets” section of this MD&A. |
Our Operating Environment––We, like other businesses in our industry, are subject to certain industry-specific challenges. These include, among others, the topics listed below, as well as in the Item 1. Business––Government Regulation and Price Constraints and Item 1A. Risk Factors sections,and the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment section of the MD&Aof our 2022 Form 10-K and the Item 1A. Risk Factors section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 5. Tax Matters.Form 10-Q.
Our Operating Environment
Industry-Specific Challenges
Intellectual Property Rights and Collaboration/Licensing Rights
––The loss, expiration or invalidation of intellectual property rights, patent litigation settlements with generic manufacturersand judgments, and the expiration of co-promotion and licensing rights can have a significantmaterial adverse effect on our revenues. We have lost exclusivity for a numberCertain of our products have experienced patent-based expirations or loss of regulatory exclusivity in certain markets and we have lost collaboration rights with respect to a number of our alliance products in certain markets,the last few years, and we expect certain products to face significantly increased generic competition over the next few years. Also, if oneWhile additional patent expiries will continue, we expect a moderate impact of reduced revenues due to patent expiries from 2023 through 2025. We anticipate a more significant impact of reduced revenues from patent expiries in 2026 through 2030 as several of our patents is found to be invalid by judicial, court or administrative proceedings, such as inter partesreview, post-grant review, re-examination or opposition proceedings, before the U.S. Patent and Trademark Office, the European Patent Office, or other foreign counterparts, generic or competitivein-line products could be introduced into the market resulting in the erosion of sales of our existing products. For example, several of the patents in our pneumococcal vaccine portfolio have been challenged in inter partes review and post-grant review proceedings in the U.S. The invalidation of these patents could potentially allow a competitor pneumococcal vaccine into the marketplace.
As a result of a patent litigation settlement with several generic manufacturers, generic versions of Pristiq launched in the U.S. in March 2017. See the “Intellectual Property Rights and Collaboration/Licensing Rights” section of our 2016 Financial Report for additional information about (i) recent losses and expected losses of product exclusivity in the U.S., Europe and/or Japan impacting product revenues and (ii) recent losses of collaboration rights impacting alliance revenues.
We expect to lose exclusivity for various other products in various markets over the next few years, including, among others, Viagra in the U.S. in December 2017 and the expiration of the basic product patent for Lyrica in the U.S. in December 2018.
For additional information, see the “Patents and Other Intellectual Property Rights” section in Part I, Item 1, “Business” of our 2016 Form 10-K.
We will continue to aggressively defend our patent rights whenever we deem appropriate. For more detailed information about our significant products, see the discussion in the “Revenues––Major Products” and “Revenues––Selected Product Discussion” sections of this MD&A. For a discussion of certain recent developments with respect to patent litigation, see Notes to Condensed Consolidated Financial Statements––Note 12A1. Commitments and Contingencies: Legal Proceedings––Patent Litigation.
Regulatory Environment/Pricing and Access––U.S. Healthcare Legislation
In March 2010, the ACA was enacted in the U.S. For additional information, see the “Government Regulation and Price Constraints” section in Part I, Item 1, “Business” of our 2016 Form 10-K.
We recorded the following amounts as a result of the U.S. Healthcare Legislation:
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• | $157 million in the third quarter of 2017 and $143 million in the third quarter of 2016, and $296 million in the first nine months of 2017 and $302 million in the first nine months of 2016, recorded as a reduction to Revenues related to the Medicare “coverage gap” discount provision; and
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• | $87 million in the third quarter of 2017 and $95 million in the third quarter of 2016, and $218 million in the first nine months of 2017 and $219 million in the first nine months of 2016, recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs.
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Regulatory Environment/Pricing and Access––Government and Other Payer Group Pressures
Governments, MCOs and other payer groups continue to seek increasing discounts on our products through a variety of means, such as leveraging their purchasing power, implementing price controls, and demanding price cuts (directly or by rebate actions). In Europe, Japan, China, Canada, South Korea and some other international markets, governments provide healthcare at low direct cost to patients and regulate pharmaceutical prices or patient reimbursement levels to control costs for the government-sponsored healthcare system, particularly under recent global economic pressures. In the U.S., a primary government activity with implications for pharmaceutical pricing is deficit reduction. Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented, and/or any significant additional taxes or fees that may be imposed on us, as part of any broad deficit-reduction effort could have an adverse impact on our results of operations. Significant Medicare reductions could also result if Congress proceeds with certain proposals to convert the Medicare fee-for-service program into a premium support program, or if it chooses to implement the recommendations made annually by the Medicare Payment Advisory Commission, which are primarily intended to extend the fiscal solvency of the Medicare program. Similar reductions to Medicare spending could result if the threshold for action by the Independent Payment Advisory Board (IPAB) is reached, and the Secretary of the Department of Health and Human Services (to whom responsibility for developing savings proposals specified in the ACA is likely to default in the absence of a seated IPAB) is required to identify savings. Current projections by the Centers for Medicare and Medicaid Services Office of the Actuary indicate that the IPAB threshold will not be reached before 2021.
Consolidation among MCOs has increased the negotiating power of MCOs and other private insurers. Private third-party insurers, as well as governments, increasingly employ formularies to control costs by negotiating discounted prices in exchange for formulary inclusion. Failure to obtain or maintain timely or adequate pricing or formulary placement for our products or obtaining such pricing or placement at unfavorable pricing could adversely impact revenue.
Additionally, efforts by government officials or legislators to implement measures to regulate prices or payment for pharmaceutical products, including legislation on drug importation, could adversely affect our business if implemented. There has recently been considerable public and government scrutiny of pharmaceutical pricing and proposals to address the perceived high cost of pharmaceuticals, and there are indications that there could be a Presidential Executive Order that would focus on pharmaceuticals. We believe medicines are the most efficient and effective use of healthcare dollars based on the value they deliver to the overall healthcare system.experience patent-based expirations. We continue to work with stakeholders to ensure access to medicines within an efficient and affordable healthcare system.
Adoption of other new legislation at the federal or state level could further affect demand for, or pricing of, our products. We face uncertainties due to federal legislative and administrative efforts to repeal, substantially modify or invalidate some or all of the provisions of the ACA, though the likelihood of repeal of the ACA is now low given the recent failure of the Senate’s multiple attempts to repeal various combinations of ACA provisions. In October 2017, the President signed an Executive Order directing federal agencies to modify how the ACA is implemented and announced that his administration will withhold the cost-
sharing subsidies paid to health insurance exchange plans serving low-income enrollees. The revenues generated for Pfizer by the health insurance exchanges under the ACA are minor, so the impact of the recent administration actions is expected to be limited. There is no assurance that any replacement, modification or repeal of the ACA will not adversely affect our business and financial results, particularly if the legislation reduces incentives for employer-sponsored insurance coverage. We also may face uncertainties if our industry is looked to for savings to fund certain legislation, such as reauthorization of the Children’s Health Insurance Program, or lifting the debt ceiling. There have also been recent state legislative efforts to address drug costs, which have generally focused on increasing transparency around drug costs or limiting drug prices. Recent legislation enacted includes, for example, a 2017 Maryland law that prohibits a generic drug manufacturer or wholesale distributor from engaging in price gouging in the sale of certain off-patent or generic drugs, and a 2017 California law that requires manufacturers to provide advanced notification of price increases to certain purchasers and report specified drug pricing information to the state. We cannot predict the success of current or future federal or state legislative efforts. We will continue to work with law makers and advocate for solutions that effectively improve patient health outcomes and lower costs to the healthcare system.
The potential for additional pricing and access pressures in the commercial sector continues to be significant. Some employers, seeking to avoid the tax on high-cost health insurance in the ACA to be imposed in 2020, are already scaling back healthcare benefits and an increasing number are implementing high deductible benefit designs. This is a trend that is likely to continue, especially if proposals to limit the tax exclusion for employer sponsored health insurance ultimately become law. Private third-party payers, such as health plans, increasingly challenge pharmaceutical product pricing, which could result in lower prices, lower reimbursement rates and a reduction in demand for our products. Pricing pressures for our products may occur as a result of highly competitive insurance markets. Healthcare provider purchasers, directly or through group purchasing organizations, are seeking enhanced discounts or implementing more rigorous bidding or purchasing review processes.
Overall, there is increasing pressure on U.S. providers to deliver healthcare at a lower cost and to ensure that those expenditures deliver demonstrated value in terms of health outcomes. Longer term, we are seeing a shift in focus away from fee-for-service payments towards outcomes-based payments and risk-sharing arrangements that reward providers for cost reductions. These new payment models can, at times, lead to lower prices for, and restricted access to, new medicines. At the same time, these models can also expand utilization by encouraging physicians to screen, diagnose and focus on outcomes.
Outside the U.S., governments, including the different EU Member States, may use a variety of cost-containment measures for our pharmaceutical products, including price cuts, mandatory rebates, value-based pricing, and international reference pricing (i.e., the practice of a country linking its regulated medicine prices to those of other countries). This international patchwork of price regulation and differing economic conditions and assessments of value across countries has led to different prices in different countries and some third-party trade in our products between countries.
In particular, international reference pricing adds to the regional impact of price cuts in individual countries and hinders patient access and innovation. Price variations, exacerbated by international reference pricing systems, also have resulted from exchange rate fluctuations. The downward pricing pressure resulting from this dynamic can be expected to continue as a result of reforms to international reference pricing policies and measures targeting pharmaceuticals in some European countries.
In addition, several important multilateral organizations, such as the United Nations (UN) and the Organization for Economic Cooperation and Development (OECD), are increasing policy pressures and scrutiny of international pharmaceutical pricing through issuing reports and policy recommendations (e.g., 2016 UN High Level Panel Report on Access to Medicines and 2017 OECD Report on New Health Technologies––Managing Access, Value and Sustainability). Government adoption of these recommendations may lead to additional pricing pressures.
In response to the evolving U.S. and global healthcare spending landscape, we are continuing to work with health authorities, health technology assessment and quality measurement bodies and major U.S. payers throughout the product-development process to better understand how these entities value our compounds and products. Further, we are seeking to develop stronger internal capabilities focused on demonstrating the value of the medicines that we discover or develop, register and manufacture, by recognizing patterns of usage of our medicines and competitor medicines along with patterns of healthcare costs.
For additional information, see the “Regulatory Environment––Pipeline Productivity” and “Competition” sections of our 2016 Financial Report.
The Global Economic Environment
In addition to the industry-specific factors discussed above, we, like other businesses, are exposed to the economic cycle, which impacts our biopharmaceutical operations globally.
Governments, corporations, and insurance companies, which provide insurance benefits to patients, have implemented increases in cost-sharing and restrictions on access to medicines, potentially causing patients to switch to generic products, delay treatments, skip doses or use less effective treatments. Government financing pressures can lead to negative pricing
pressure in various markets where governments take an active role in setting prices, access criteria (e.g., through public or private health technology assessments), or other means of cost control. Examples include Europe, Japan, China, Canada, South Korea and a number of other international markets. The U.S. continues to maintain competitive insurance markets, but has also seen significant increases in patient cost-sharing and growing government influence as government programs continue to grow as a source of coverage.
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• | We continue to monitor developments regarding government and government agency receivables in several European markets, including Greece, where economic conditions remain challenging and uncertain. For further information about our Accounts Receivable, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A.
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Significant portions of our revenues and earnings, as well as our substantial international net assets, are exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk in part through operational means, including managing same-currency revenues in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk also is managed through the use of derivative financial instruments and foreign currency debt. As we operate in multiple foreign currencies, including the euro, the Japanese yen, the Chinese renminbi, the U.K. pound, the Canadian dollar and approximately 100 other currencies, changes in those currencies relative to the U.S. dollar will impact our revenues and expenses. If the U.S. dollar were to weaken against another currency, assuming all other variables remained constant, our revenues would increase, having a positive impact on earnings, and our overall expenses would increase, having a negative impact on earnings. Conversely, if the U.S. dollar were to strengthen against another currency, assuming all other variables remained constant, our revenues would decrease, having a negative impact on earnings, and our overall expenses would decrease, having a positive impact on earnings. Therefore, significant changes in foreign exchange rates, including those changes resulting from the volatility following the U.K. referendum in which voters approved the exit from the EU, can impact our results and our financial guidance.
The impact of possible currency devaluations in countries experiencing high inflation rates or significant exchange fluctuations, including Venezuela, can impact our results and financial guidance. For further information about our exposure to foreign currency risk, see the “Analysis of Financial Condition, Liquidity and Capital Resources” and the “Our Financial Guidance for 2017” sections of this MD&A.
In June 2016, the U.K. electorate voted in a referendum to leave the EU, which is commonly referred to as “Brexit”. In January 2017, the U.K. Prime Minister announced a 12-point plan of negotiating objectives and confirmed that the U.K. government will not seek continued membership in the EU single market. In March 2017, the U.K. government formally notified the European Council of its intention to leave the EU after it triggered Article 50 of the Lisbon Treaty to begin the two-year negotiation process establishing the terms of the exit and outlining the future relationship between the U.K. and the EU. This process continues to be highly complex and the end result of these negotiations may pose certain implications to our research, commercial and general business operations in the U.K. and the EU, including the approval of our products.
We generated approximately 2% of our worldwide revenues from the U.K. in the first nine months of 2017. However, except for the foreign currency exchange impact from the weakening U.K. pound relative to the U.S. dollar to date, there are no other immediate-term impacts to our business as there has not yet been a formal change in the relationship between the U.K. and the EU. In addition, because of the significant uncertainties associated with the negotiation process, any potential long-term impacts are not currently determinable.
Pfizer maintains a strong financial position while operating in a complex global environment. Due to our significant operating cash flows, financial assets, access to capital markets and available lines of credit and revolving credit agreements, we continue to believe that we have, and will maintain, the ability to meet our liquidity needs for the foreseeable future. Our long-term debt is rated high quality by both S&P and Moody’s. As market conditions change, we continue to monitor our liquidity position. We have taken and will continue to take a conservative approach to our financial investments. Both short-term and long-term investments consist primarily of high-quality, highly liquid, well-diversified, available-for-sale debt securities. For further discussion of our financial condition and credit ratings, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A.
These and other industry-wide factors that may affect our businesses should be considered along with information presented in the “Forward-Looking Information and Factors That May Affect Future Results” section of this MD&A and in Part I, Item 1A, “Risk Factors” of our 2016 Form 10-K and Part II, Item 1A, "Risk Factors," of this Quarterly Report on Form 10-Q.
Our Strategy
We believe that our medicines provide significant value for both healthcare providers and patients, not only from the improved treatment of diseases but also from a reduction in other healthcare costs, such as emergency room or hospitalization costs, as well as improvements in health, wellness and productivity. We continue to actively engage in dialogues about the value of our medicines and how we can best work with patients, physicians and payers to prevent and treat disease and improve outcomes.
We continue to work within the current legal and pricing structures, as well as continue to review our pricing arrangements and contracting methods with payers, to maximize patient access and minimize any adverse impact on our revenues. We remain firmly committed to fulfilling our company’s purpose of innovating to bring therapies to patients that extend and significantly improve their lives. By doing so, we expect to create value for the patients we serve and for our shareholders.
Commercial Operations
We manage our commercial operations through two distinct business segments: Pfizer Innovative Health (IH) and Pfizer Essential Health (EH). The IH and EH operating segments are each led by a single manager. Each operating segment has responsibility for its commercial activities and for certain IPR&D projects for new investigational products and additional indications for in-line products that generally have achieved proof-of-concept. Each business has a geographic footprint across developed and emerging markets.
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Some additional information about our business segments follows: |
| IH Segment | | | EH Segment |
● | IH focuses on developing and commercializing novel, value-creating medicines and vaccines that significantly improve patients’ lives, as well as products for consumer healthcare.
Key therapeutic areas include internal medicine, vaccines, oncology, inflammation & immunology, rare diseases and consumer healthcare.
| | ● | EH includes legacy brands that have lost or will soon lose market exclusivity in both developed and emerging markets, branded generics, generic sterile injectable products, biosimilars, select branded products including anti-infectives and, through February 2, 2017, HIS. EH also includes an R&D organization, as well as our contract manufacturing business. |
● | We expect that the IH biopharmaceutical portfolio of innovative, largely patent-protected, in-line and newly launched products will be sustained by ongoing investments to develop promising assets and targeted business development in areas of focus to help ensure a pipeline of highly-differentiated product candidates in areas of unmet medical need. The assets managed by IH are science-driven, highly differentiated and generally require a high-level of engagement with healthcare providers and consumers. | | ● | EH is expected to generate strong consistent cash flow by providing patients around the world with access to effective, lower-cost, high-value treatments. EH leverages our biologic development, regulatory and manufacturing expertise to seek to advance its biosimilar development portfolio. Additionally, EH leverages capabilities in formulation development and manufacturing expertise to help advance its generic sterile injectables portfolio. EH may also engage in targeted business development to further enable its commercial strategies. |
● | IH will have continued focus on R&D productivity and pipeline strength while maximizing the value of our recently launched brands and in-line portfolio. Our acquisitions of Anacor and Medivation expanded our pipeline in the high priority therapeutic areas of inflammation and immunology and oncology. | | ● | For EH, we continue to invest in growth drivers and manage the portfolio to extract additional value while seeking opportunities for operating efficiencies. This strategy includes active management of our portfolio; maximizing growth of core product segments; acquisitions to strengthen core areas of our portfolio further, such as our recent acquisition of AstraZeneca’s small molecule anti-infectives business; and divestitures to increase focus on our core strengths. In line with this strategy, on February 3, 2017, we completed the sale of Pfizer’s global infusion therapy net assets, representing the infusion systems net assets that we acquired as part of the Hospira transaction, HIS, to ICU Medical. |
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Leading brands include:
- Prevnar 13/Prevenar 13 - Xeljanz - Eliquis
- Lyrica (U.S., Japan and certain other markets) - Enbrel (outside the U.S. and Canada) - Viagra (U.S. and Canada) - Ibrance - Xtandi - Several OTC consumer healthcare products (e.g., Advil and
Centrum)
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Leading brands include:
- Lipitor
- Premarin family - Norvasc - Lyrica (Europe, Russia, Turkey, Israel and Central Asia
countries) - Celebrex
- Inflectra/Remsima - Several sterile injectable products
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For additional information about the 2017 performance for each of our operating segments, see the “Analysis of Operating Segment Information” section of this MD&A.
Description of Research and Development Operations
Innovation is critical to the success of our company, and drug discovery and development is time-consuming, expensive and unpredictable. Our R&D priorities include delivering a pipeline of differentiated therapies and vaccines with the greatest medical and commercial promise, innovating new capabilities that can position Pfizer for long-term leadership and creating new models for biomedical collaboration that will expedite the pace of innovation and productivity. To that end, our research primarily focuses on:
Biosimilars;
Inflammation and Immunology;
Metabolic Disease and Cardiovascular Risks;
Neuroscience;
Oncology;
Rare Diseases; and
Vaccines.
We continue to strengthen our global R&D organization and pursue strategies intended to improve innovation and overall productivity in R&D to achieve a sustainable pipeline that will deliver value in the near term and over time. Our R&D spending is conducted through a number of matrix organizations:
Research Units within our WRD organization are generally responsible for research assets for our IH business (assets that have not yet achieved proof-of-concept). Our Research Units are organized in a variety of ways (by therapeutic area or combinations of therapeutic areas, by discipline, by location, etc.) to enhance flexibility, cohesiveness and focus. Because of our structure, we can rapidly redeploy resources within a Research Unit between various projects as necessary because the workforce shares similar skills, expertise and/or focus.
Our R&D organization within the EH business supports the large base of EH products and is expected to develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars.
Our GPD organization is a unified center for late-stage development for our innovative products and is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios. GPD is expected to enable more efficient and effective development and enhance our ability to accelerate and progress assets through our pipeline. GPD combines certain previously separate development-related functions from the IH business and the WRD organization to achieve a development capability that is expected to deliver high-quality, efficient, and well-executed clinical programs by enabling greater speed, greater cost efficiencies, and reduced complexity across our development portfolio. GPD also provides technical support and other services to Pfizer R&D projects.
Our science-based and other platform-services organizations, where a significant portion of our R&D spending occurs, provide technical expertise and other services to the various R&D projects, and are organized into science-based functions (which are part of our WRD organization), such as Pharmaceutical Sciences, Medicinal Chemistry, Regulatory and Drug Safety, and non-science-based functions, such as Facilities, Business Technology and Finance. As a result, within each of these functions, we are able to migrate resources among projects, candidates and/or targets in any therapeutic area and in most phases of development, allowing us to react quickly in response to evolving needs.
We manage R&D operations on a total-company basis through our matrix organizations described above. Specifically, a single committee with representation from the R&D groups and the IH commercial organization is accountable for aligning resources among all of our WRD, GPD and IH R&D projects and for seeking to ensure optimal capital allocation across the Innovative R&D portfolio. We believe that this approach also serves to maximize accountability and flexibility. Our EH R&D organization manages its resources separately from the WRD and GPD organizations.
Generally, we do not disaggregate total R&D expense by development phase or by therapeutic area since, as described above, we do not manage a significant portion of our R&D operations by development phase or by therapeutic area. Further, as we are able to adjust a significant portion of our spending quickly, as conditions change, we believe that any prior-period information about R&D expense by development phase or by therapeutic area would not necessarily be representative of future spending.
While a significant portion of R&D is done internally, we continue to seek out promising chemical and biological lead molecules and innovative technologies developed by third parties to incorporate into our discovery and development processes or projects, as well as our product lines, by entering into collaborations, alliances and license agreements with other companies, as well as leveraging acquisitions and equity- or debt-based investments. These agreements enable us to co-develop, license or acquire promising compounds, technologies or capabilities. We also enter into agreements pursuant to which a third party agrees to fund a portion of the development costs of one of our pipeline products in exchange for rights to receive potential milestone payments, revenue sharing payments, profit sharing payments and/or royalties. Collaboration, alliance, license and
funding agreements and equity- or debt-based investments allow us to share risk and cost and to access external scientific and technological expertise, and enable us to advance our own products as well as in-licensed or acquired products.
For additional information about R&D by operating segment, see the “Analysis of Operating Segment Information” section of this MD&A. For additional information about our pending new drug applications and supplemental filings, see the “Analysis of the Condensed Consolidated Statements of Income––Product Developments––Biopharmaceutical” section of this MD&A. For additional information about recent transactions and strategic investments that we believe have the potential to advance our pipeline, see the “Our Strategy––Our Business Development Initiatives” section of this MD&A.
Intellectual Property Rights
We continue to aggressivelyvigorously defend our patent rights against increasingly aggressive infringement, whenever appropriate, and we will continue to support efforts that strengthen worldwide recognition of patent rights while taking necessary steps to help ensure appropriate patient access. In addition, we
For additional information, see the Item 1. Business––Patents and Other Intellectual Property Rights and the Item 1A. Risk Factors––Intellectual Property Protection sections of our 2022 Form 10-K. For a discussion of recent developments with respect to patent litigation, see Note 12A1. Regulatory Environment/Pricing and Access––Government and Other Payer Group Pressures––Governments globally, as well as private third-party payers in the U.S., may use a variety of measures to control costs, including, among others, legislative or regulatory pricing reforms, drug formularies (including tiering and utilization management tools), cross country collaboration and procurement, price cuts, mandatory rebates, health technology assessments, forced localization as a condition of market access, “international reference pricing” (i.e., the practice of a country linking its regulated medicine prices to those of other countries), quality consistency evaluation processes and volume-based procurement. We anticipate that these and similar initiatives will continue to employ innovative approaches designedincrease pricing and access pressures globally. In the U.S., we expect to prevent counterfeit pharmaceuticals from enteringsee continued focus by Congress and the supply chainBiden Administration on regulating pricing. The drug pricing provisions of the IRA, which was signed into law in August 2022, began to be implemented in 2023 and to achieve greater controlimplementation efforts will continue over the distributionnext several years. In August 2023, the Biden Administration unveiled the first round of our products, and we will continuemedicines subject to participatethe “Medicare Drug Price Negotiation Program,” which requires manufacturers of select drugs to engage in a process with the Federal government to set new Medicare prices which would go into effect in 2026. Among the medicines included in the generics market for our products, whenever appropriate, once they lose exclusivity. Also, the pursuit of valid business opportunities may require us to challenge intellectual property rights held by other companies that we believe were improperly granted. Such challenges may include negotiation and litigation, which may not be successful. For additional information about our current efforts to enforce our intellectual property rights and certain other patent proceedings, see Notes to Condensed Consolidated Financial Statements––Note 12A1. Commitments and Contingencies: Legal Proceedings––Patent Litigation. For information on risks related to patent protection and intellectual property claims by third parties, see “Risks Related to Intellectual Property” in Part I, Item 1A, “Risk Factors” of our 2016 Form 10-K.
Capital Allocation and Expense Management
We seek to maintain a strong balance sheet and robust liquidity so that we continue to have the financial resources necessary to take advantage of prudent commercial, research and business development opportunities and to directly enhance shareholder value through share repurchases and dividends. For additional information about our financial condition, liquidity, capital resources, share repurchases (including accelerated share repurchases) and dividends, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A. For additional information about our recent business development activities, see the “Our Strategy––Our Business Development Initiatives” section of this MD&A.
We remain focused on achieving an appropriate cost structure for the Company. For additional information about our cost-reduction and productivity initiatives, see the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.
Our Business Development Initiatives
We are committed to capitalizing on growth opportunities by advancing our own pipeline and maximizing the value of our in-line products, as well as through various forms of business development, which can include alliances, licenses, joint ventures, collaborations, equity- or debt-based investments, dispositions, mergers and acquisitions. We view our business development activity as an enabler of our strategies, and we seek to generate earnings growth and enhance shareholder value by pursuing a disciplined, strategic and financial approach to evaluating business development opportunities.first round is Eliquis. We continue to evaluate business development transactions that have the potential to strengthen one or both of our businesses and their capabilities, such as our acquisitions of Hospira, Medivation, Anacor, and AstraZeneca’s small molecule anti-infectives business, as well as collaborations, and alliance and license agreements with other companies, including our collaborations with Cellectis, OPKO and Merck KGaA. We assess our businesses, assets and scientific capabilities/portfolio as part of our regular, ongoing portfolio review process and also continue to consider business development activities that will advance our businesses. In October 2017, we announced that we are reviewing strategic alternatives for our Consumer Healthcare business. A range of options will be considered, including a full or partial separationimpact of the Consumer Healthcare business from Pfizer through a spin-off, sale or other transaction, and we may ultimately determine to retain the business. We expect that any decision regarding strategic alternatives for Consumer Healthcare would be made during 2018. For additional informationIRA on our business, development activities, see Notes to Condensed Consolidated Financial Statements––Note 2. Acquisitions, Saleoperations and financial condition and results as the full effect of Hospira Infusion Systems Net Assets, Collaborative Arrangementthe IRA on our business and Equity-Method Investments.
The more significant recent transactions and events are described below:
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• | Sale of Hospira Infusion Systems Net Assets to ICU Medical, Inc. (EH)––On February 3, 2017, we completed the sale of our global infusion therapy net assets, HIS, to ICU Medical. In connection with this transaction, we recognized pre-tax income of approximately $12 million in the third quarter of 2017 and pre-tax losses of approximately $52 million in the first
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nine months of 2017 in Other (income)/deductions––net, representing adjustments to amounts previously recorded to write down the HIS net assets to fair value less costs to sell. We may record additional adjustmentspharmaceutical industry remains uncertain. In addition, changes to the loss onMedicaid program or the sale of HIS net assets in future periods, pending final working capital adjustments and local market closes, among other agreement provisions, which we do not expectfederal 340B drug pricing program, including legal or legislative developments at the federal or state level with respect to the 340B program, could have a material impact on our consolidated financial statements.
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• | Acquisition of AstraZeneca’s Small Molecule Anti-Infectives Business (EH)––On December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations, we acquired the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S. The total fair value of the consideration transferred for this business was approximately $555 million in cash plus the fair value of contingent consideration of $490 million.
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• | Acquisition of Medivation, Inc. (IH)––On September 28, 2016, we acquired Medivation for $81.50 per share. The total fair value of consideration transferred for Medivation was approximately $14.3 billion in cash ($13.9 billion, net of cash acquired). Medivation’s portfolio includes Xtandi (enzalutamide), an androgen receptor inhibitor that blocks multiple steps in the androgen receptor signaling pathway within tumor cells. Xtandi is being developed and commercialized through a collaboration with Astellas. Astellas has exclusive commercialization rights for Xtandi outside the U.S. In addition, Medivation has a development-stage oncology asset in its pipeline, talazoparib, which is currently in a Phase 3 study for the treatment of BRCA-mutated breast cancer.
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• | Acquisition of Bamboo Therapeutics, Inc. (R&D)––On August 1, 2016, we acquired all the remaining equity in Bamboo, a privately-held biotechnology company, focused on developing gene therapies for the potential treatment of patients with certain rare diseases relating to neuromuscular conditions and those affecting the central nervous system, for $150 million, plus potential milestone payments of up to $495 million contingent upon the progression of key assets through development, regulatory approval and commercialization. We previously purchased a minority stake in Bamboo in the first quarter of 2016 for a payment of approximately $43 million. This acquisition provides us with several clinical and pre-clinical assets that complement our rare disease portfolio, an advanced recombinant AAV vector design and production technology, and a fully functional Phase I/II gene therapy manufacturing facility.
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• | Acquisition of Anacor Pharmaceuticals, Inc. (IH)––On June 24, 2016, we acquired Anacor for $99.25 per share. The total fair value of consideration transferred for Anacor was approximately $4.9 billion in cash ($4.5 billion net of cash acquired) plus $698 million debt assumed. Anacor’s crisaborole, a non-steroidal topical PDE-4 inhibitor with anti-inflammatory properties, was approved by the FDA on December 14, 2016 under the trade name Eucrisa, for the treatment of mild-to-moderate atopic dermatitis in patients two years of age and older, commonly referred to as a type of eczema. Anacor also holds the rights to Kerydin, a topical treatment for onychomycosis (toenail fungus) that is distributed and commercialized by Sandoz in the U.S.
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• | Research and Development Arrangement with NovaQuest Co-Investment Fund V, L.P.––In April 2016, Pfizer entered into an agreement with NovaQuest under which NovaQuest will fund up to $200 million in development costs related to certain Phase III clinical trials of Pfizer’s rivipansel compound and Pfizer will use commercially reasonable efforts to develop and obtain regulatory approvals for such compound. NovaQuest’s development funding is expected to cover up to 100% of the development costs and will be received over approximately twelve quarters from 2016 to 2019. As there is a substantive and genuine transfer of risk to NovaQuest, the development funding is recognized by us as an obligation to perform contractual services and therefore is a reduction of Research and development expenses as incurred. The reduction to Research and development expenses for the third quarter of 2017totaled $16.8 million and for the first nine months of 2017 totaled $48.8 million. The reduction to Research and development expenses for the third quarter of 2016 totaled $14.5 million and for the first nine months of 2016 totaled $29.5 million. Following potential regulatory approval, NovaQuest will be eligible to receive a combination of fixed milestone payments of up to approximately $267 million in total, based on achievement of first commercial sale and certain levels of cumulative net sales as well as royalties on rivipansel net sales over approximately eight years. Fixed sales-based milestone payments will be recorded as intangible assets and amortized to Amortization of intangible assets over the estimated commercial life of the rivipansel product and royalties on net sales will be recorded as Cost of sales when incurred.
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• | Research and Development Arrangement with RPI Finance Trust––In January 2016, Pfizer entered into an agreement with RPI, a subsidiary of Royalty Pharma, under which RPI will fund up to $300 million in development costs related to certain Phase III clinical trials of Pfizer’s Ibrance (palbociclib) product primarily for adjuvant treatment of hormone receptor positive early breast cancer (the Indication). RPI’s development funding is expected to cover up to 100% of the costs primarily for the applicable clinical trials through 2021. As there is a substantive and genuine transfer of risk to RPI, the development funding is recognized by us as an obligation to perform contractual services and therefore is a reduction of Research and development expenses as incurred. The reduction to Research and development expenses for the third quarter of 2017 totaled $27.6 million and for the first nine months of 2017 totaled $54.4 million. The reduction to Research and development expenses for the third quarter of 2016 totaled $11.0 million and for the first nine months of 2016 totaled $32.7 million. If successful and upon approval of Ibrance in the U.S. or certain major markets in the EU for the Indication based
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onbusiness. See the applicable clinical trials, RPI will be eligible to receive a combinationItem 1. Business––Pricing Pressures and Managed Care Organizations and ––Government Regulation and Price Constraints and the Item 1A. Risk Factors––Pricing and Reimbursement sections, and the Overview of approval-based fixed milestone payments of up to $250 million dependent upon resultsOur Performance, Operating Environment, Strategy and Outlook––Our Operating Environment section of the clinical trialsMD&A of our 2022 Form 10-K.
Impact of Recent Tornado in Rocky Mount, North Carolina (NC)––Our manufacturing facility in Rocky Mount, NC was damaged by a tornado in July 2023. The facility is a key producer of sterile injectables and royalties on certain Ibrance sales over approximately seven years. Fixed milestone payments due upon approval will be recorded as intangible assetsis responsible for manufacturing nearly 25 percent of all our sterile injectables—including anesthesia, analgesia, and amortized to Amortizationmicronutrients—which is nearly eight percent of intangible assets overall the estimated commercial lifesterile injectables used in U.S. hospitals. As of the Ibrance product and sales-based royalties willdate of the filing of this Form 10-Q, the majority of the facility’s manufacturing lines have restarted. This expedited restart is the first step toward full recovery for the facility, as Pfizer restarts production through a phased approach, with full production across the site’s three manufacturing suites anticipated by the end of 2023. While manufacturing has resumed, the supply of medicines impacted by the tornado is expected to be affected through at least mid-2024.
During the third quarter of 2023, we recorded as $209 million toCost of sales when incurred.
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• | Approval of Besponsa––In August 2017, the U.S. approved Besponsa (inotuzumab ozogamicin) and in June 2017, the EU approved Besponsa as monotherapy for the treatment of adults with relapsed or refractory CD22-positive B-cell precursor acute lymphoblastic leukemia. In connection with the U.S. approval, we incurred an obligation to make guaranteed fixed annual payments over a nine-year period aggregating $296 million related to a research and development arrangement. As a result, we have recorded the estimated net present value of $248 million as an intangible asset in Developed technology rights, and we have recorded $233 million in Other noncurrent liabilities and $15 millionin Other current liabilities as of October 1, 2017. In connection with the EU approval, we incurred an obligation to make guaranteed fixed annual payments over a nine-year period aggregating $148 million related to a research and development arrangement. As a result, we have recorded the estimated net present value of $123 million as an intangible asset in Developed technology rights, and we have recorded $117 million in Other noncurrent liabilities and$6 million in Other current liabilities as of October 1, 2017.
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For a descriptionfor inventory losses, overhead costs related to the period in which the facility could not operate, and incremental costs resulting from the tornado damage. We continue to evaluate the financial impact of the moretornado on our business and may record additional losses and/or costs in future periods in order to bring our facility fully back online, but we are unable to predict them, along with insurance recoveries, with certainty at this time.
Product Supply––We periodically encounter supply delays, disruptions and shortages, including due to voluntary product recalls and natural or man-made disasters. In response to requests from various regulatory authorities, manufacturers across the pharmaceutical industry, including Pfizer, are evaluating their product portfolios for the potential presence or formation of nitrosamines. This has led to recalls, including our voluntary recall of Chantix in 2021 and additional voluntary recalls initiated for other products in 2022 due to the presence of nitrosamines above the FDA interim acceptable intake limit, and may lead to additional recalls or other market actions for Pfizer products.
Except for the recent tornado in Rocky Mount, NC discussed above, we have not seen a significant recent transactions through February 23, 2017, the filing datedisruption of our supply chain in the first nine months of 2023 and to date, and all of our manufacturing sites globally have continued to operate at or near normal levels; however, we continue to see heightened demand in the industry for certain components and raw materials, which could potentially result in constraining available supply leading to a possible future impact on our business. We are continuing to monitor and implement mitigation strategies in an effort to reduce any potential risk or impact including active supplier management, qualification of additional suppliers and advanced purchasing to the extent possible. For information on
2016 Form 10-K,risks related to product manufacturing, see the “Our Business Development Initiatives”Item 1A. Risk Factors––Product Manufacturing, Sales and Marketing Risks section of our 2016 Financial Report.
Our Financial Guidance for 20172022 Form 10-K.
The Global Economic Environment––In addition to the industry-specific factors discussed above, we, like other businesses of our size and global extent of activities, are exposed to economic cycles. See the Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment section of the MD&A of our 2022 Form 10-K.
COVID-19––In response to COVID-19, we have developed Paxlovid and collaborated with BioNTech to jointly develop Comirnaty, including an Omicron XBB.1.5-adapted monovalent vaccine. As part of our strategy for COVID-19, we are continuing to make significant additional investments in breakthrough science and global manufacturing. This includes continuing to evaluate Comirnaty and Paxlovid, including against new variants of concern, developing variant adapted vaccine candidates and developing potential combination respiratory vaccines and potential next generation vaccines and therapies. We are also evaluating Paxlovid for additional populations. See the Product Developments section within MD&A. In the first nine months of 2023 and to date, we principally sold Comirnaty globally under government contracts. In September 2023, Comirnaty transitioned to traditional commercial market sales in the U.S., triggered by the expiration of current contracts and the COVID-19 vaccines from Pfizer and BioNTech purchased through them becoming either depleted or not used following the introduction of a new variant vaccine. Internationally, we expect sales of Comirnaty in international developed markets to generally be under government contracts in 2023, and in emerging markets, under a combination of private channels and government contracts; in both cases, we expect to start transitioning to commercial markets in 2024.
In the first nine months of 2023 and to date, we principally sold Paxlovid globally to government agencies and distributors. Internationally, for Paxlovid, we are continuing the transition to commercial markets and are expecting most revenue to be generated through commercial channels in 2024. On October 31, 2017,13, 2023, we updated ourannounced an amended agreement with the U.S. government, which will facilitate the expected transition of Paxlovid to traditional commercial markets in November 2023, with minimal uptake of NDA-labeled commercial product expected before January 1, 2024. See 2017Note 14 financial guidance. Specifically, we narrowed the ranges for certain 2017 financial guidance components, including a $0.03 increase to the midpoint of our range for adjusted diluted EPS guidance to a range of $2.58 to $2.62. The midpoint of our new guidance range for adjusted diluted EPS implies 8% growth compared with last year.. |
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Pfizer’s updated 2017 financial guidance is presented below(a),(b):
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Revenues | $52.4 to $53.1 billion |
| (previously $52.0 to $54.0 billion) |
Adjusted cost of sales as a percentage of revenues | 20.0% to 20.5% |
| (previously 20.0% to 21.0%) |
Adjusted selling, informational and administrative expenses | $14.0 to $14.5 billion |
| (previously $13.7 to $14.7 billion) |
Adjusted research and development expenses | $7.5 to $7.8 billion |
| (previously $7.5 to $8.0 billion) |
Adjusted other (income)/deductions | Approximately $500 million of income |
(previously approximately $200 million of income) |
Effective tax rate on adjusted income | Approximately 23.0% |
Adjusted diluted EPS | $2.58 to $2.62 |
(previously $2.54 to $2.60) |
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(a)
| The 2017 financial guidance reflects the following:
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• | Does not assume the completion of any business development transactions not completed as of October 1, 2017, including any one-time upfront payments associated with such transactions.
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Exchange rates assumedTo date, the majority of demand for our COVID-19 products in 2023 has been fulfilled by existing supply of products that were delivered to governments and recorded as revenues in 2022. As of October 31, 2023, we forecasted Comirnaty revenues of approximately $11.5 billion in 2023, down 70% from 2022 results, with gross profit to be split evenly with BioNTech, and Paxlovid revenues of approximately $1 billion in 2023, down 95% from 2022 results. This forecast reflects an expected $9 billion revenue decline, composed of $7 billion for Paxlovid and $2 billion for Comirnaty, versus forecasted revenues as of August 1, 2023, primarily due to an expected $4.2 billion non-cash sales-return of EUA-labeled Paxlovid from the U.S. government, lower-than-expected vaccination- and infection-rates, and delayed commercialization in the U.S. for Paxlovid. These forecasts are a blendbased on estimates and assumptions that are subject to significant uncertainties, including, among others, patient demand, which could be significantly impacted by the infectiousness and severity of the actual exchange rates in effect through September 2017 and mid-October 2017 exchange rates for the remainderpredominant strains of the year.
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• | Reflects an anticipated negative revenue impact of $2.3 billion due to recent and expected generic and biosimilar competition for certain products that have recently lost or are anticipated to soon lose patent protection.
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• | Reflects the anticipated negative impact of $0.1 billion on revenues and $0.01 on adjusted diluted EPS as a result of unfavorable changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2016.
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Guidance for adjusted diluted EPS assumes diluted weighted-average shares outstandingSARS-CoV-2 virus during 2023, proportion of between 6.0the population that receives a vaccine or is treated with an oral antiviral treatment, number of symptomatic infections, and 6.1 billion shares, which reflectsmarket share of Comirnaty and Paxlovid.
For information on the impact of COVID-19 on our $5.0 billion accelerated share repurchase agreement executed in February 2017business, operations and completed in May 2017.
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(b)
| For an understanding of Adjusted income and its components and Adjusted diluted EPS (all of which are non-GAAP financial measures), see the “Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A. |
Pfizer does not provide guidance for GAAP Reported financial measures (other than Revenues) or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP Reported financial measures on a forward-looking basis because it is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gainscondition and losses, acquisition-related expensesresults and potential future asset impairments without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP Reported results for the guidance period.
For information about our actual costs and anticipated costs and cost savingsrisks associated with COVID-19 and our three-year cost-reduction initiative entered into inCOVID-19 products, as well as COVID-19 intellectual property disputes, see the fourth quarter Item 1A. Risk Factors—COVID-19, —Intellectual Property Protection and —Third-Party Intellectual Property Claims sections and the Overview of Our Performance, Operating Environment, Strategy and Outlook 2016section of the MD&A of our 2022 Form 10-K, as well as Notes 8A, 12A1,13andthe Hospira acquisition, our recent business development activities,Forward-Looking Information and global commercial structure, see the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives”Factors that May Affect Future Results section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 3Form 10-Q. Restructuring ChargesIsrael/Hamas Conflict––Our global operations may be impacted by the armed conflict between Israel and Other Costs Associated with AcquisitionsHamas that began on October 7, 2023. For both the nine months ended October 1, 2023 and Cost-Reduction/Productivity Initiatives.
Our 2017 financial guidance isthe fiscal year ended December 31, 2022, the business of our Israel subsidiary represented less than 1% of our consolidated revenues and assets. We are closely monitoring developments in this conflict, including evaluating potential impacts to our business, customers, suppliers, employees, and operations in Israel and elsewhere in the Middle East. At this time, impacts to the Company are uncertain and subject to a numberchange given the volatile nature of factorsthe situation.
Russia/Ukraine Conflict––Our global operations may be impacted by the armed conflict between Russia and uncertainties as described inUkraine. For both the “Our Operating Environment”, “The Global Economic Environment”, “Our Strategy”nine months ended October 1, 2023 and “Forward-Looking Information and Factors That May Affect Future Results” sections of this MD&A; in Part II, Item 1A, “Risk Factors”, of this Quarterly Report on Form 10-Q; and Part I, Item 1A, “Risk Factors”the fiscal year ended December 31, 2022, the business of our Russia and Ukraine subsidiaries represented less than 1% of our consolidated revenues and assets, and while we are monitoring the effects of the armed conflict between Russia and Ukraine, the situation continues to evolve and the long-term implications, including the broader economic consequences of the conflict, are difficult to predict at this time. While as of now, we do not anticipate any significant negative impacts on our business from this conflict, continued regional instability, geopolitical shifts, potential additional sanctions and other restrictive measures against Russia, neighboring countries or allies of Russia, any retaliatory measures taken by Russia, neighboring countries or allies of Russia, and actions by our customers or suppliers, including financial institutions, in response to such measures could adversely affect the global macroeconomic environment, our operations, currency exchange rates and financial markets, which could in turn adversely impact our business and results of
operations. For additional information on our response to the armed conflict between Russia and Ukraine as well as risks associated with the conflict, see the 2016Item 1A. Risk Factors—Global Operations section and the Overview of Our Performance, Operating Environment, Strategy and Outlook section of the MD&A of our 2022 Form 10-K.
SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
For a description of our significant accounting policies, see Notes to Consolidated Financial Statements––Note 1. Basis of Presentation and Significant Accounting Policies1 in our 2022 Form 10-K2016. Form 10-K. Of these policies, the following are considered critical to an understanding of our consolidated financial statements as they require the application of the most subjective and the most complex judgments: (i) Acquisitions (Note 1D)(Note 1D); (ii) Fair Value (Note 1E)(Note 1E); (iii) Revenues (Note 1G)(Note 1G); (iv) Asset Impairments (Note 1K)(Note 1M); (v)Tax Assets and Liabilities and Income Tax Contingencies (Note 1O)(Note 1Q); (vi) Pension and Postretirement Benefit Plans (Note 1P)(Note 1R); and Legal and Environmental Contingencies (Note 1Q)(Note 1S).
For a discussion about the critical accounting estimates and assumptions impacting our consolidated financial statements, see the “SignificantSignificant Accounting Policies and Application of Critical Accounting Estimates and Assumptions”Assumptions section within MD&A of our 2016 Financial Report.2022 Form 10-K. See also Notes to Consolidated Financial Statements––Note 1C. Basis of Presentation and Significant Accounting Policies: Estimates and Assumptions1C in our 2022 Form 10-K for a discussion about the risks associated with estimates and assumptions in our 2016 Form 10-K.assumptions.
ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS
REVENUES AND PRODUCT DEVELOPMENTSRevenues by Geography
Revenues––Overview
The following graphs show revenues by geography (dollars in billions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following presents worldwide revenues by geography: |
| | Three Months Ended |
| | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national |
(MILLIONS) | | Oct. 1, 2023 | | Oct. 2, 2022 | | Oct. 1, 2023 | | Oct. 2, 2022 | | Oct. 1, 2023 | | Oct. 2, 2022 | | % Change |
Operating segments: | | | | | | | | | | | | | | | | | | |
Biopharma | | $ | 12,930 | | | $ | 22,319 | | | $ | 7,717 | | | $ | 13,748 | | | $ | 5,214 | | | $ | 8,571 | | | (42) | | | (44) | | | (39) | |
Business Innovation | | 302 | | | 319 | | | 88 | | | 103 | | | 214 | | | 216 | | | (5) | | | (15) | | | (1) | |
Total revenues | | $ | 13,232 | | | $ | 22,638 | | | $ | 7,804 | | | $ | 13,851 | | | $ | 5,427 | | | $ | 8,786 | | | (42) | | | (44) | | | (38) | |
|
| | Nine Months Ended |
| | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national |
(MILLIONS) | | Oct. 1, 2023 | | Oct. 2, 2022 | | Oct. 1, 2023 | | Oct. 2, 2022 | | Oct. 1, 2023 | | Oct. 2, 2022 | | % Change |
Operating segments: | | | | | | | | | | | | | | | | | | |
Biopharma | | $ | 43,320 | | | $ | 75,066 | | | $ | 22,208 | | | $ | 33,700 | | | $ | 21,112 | | | $ | 41,366 | | | (42) | | | (34) | | | (49) | |
Business Innovation | | 928 | | | 974 | | | 289 | | | 291 | | | 639 | | | 683 | | | (5) | | | (1) | | | (6) | |
Total revenues | | $ | 44,247 | | | $ | 76,040 | | | $ | 22,497 | | | $ | 33,991 | | | $ | 21,750 | | | $ | 42,049 | | | (42) | | | (34) | | | (48) | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following tables provide worldwide revenues by operating segment and by geography: |
| | Three Months Ended |
| | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national |
(MILLIONS OF DOLLARS) | | Oct 1, 2017 |
| | Oct 2, 2016 |
| | Oct 1, 2017 |
| | Oct 2, 2016 |
| | Oct 1, 2017 |
| | Oct 2, 2016 |
| | % Change in Revenues |
Operating Segments(a): | | | | | | | | | | | | | | | | | | |
IH | | $ | 8,118 |
| | $ | 7,332 |
| | $ | 4,777 |
| | $ | 4,244 |
| | $ | 3,341 |
| | $ | 3,088 |
| | 11 |
| | 13 |
| | 8 |
|
EH | | 5,050 |
| | 5,712 |
| | 1,756 |
| | 2,286 |
| | 3,294 |
| | 3,426 |
| | (12 | ) | | (23 | ) | | (4 | ) |
Total revenues | | $ | 13,168 |
| | $ | 13,045 |
| | $ | 6,534 |
| | $ | 6,530 |
| | $ | 6,634 |
| | $ | 6,515 |
| | 1 |
| | — |
| | 2 |
|
|
| | Nine Months Ended |
| | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national |
(MILLIONS OF DOLLARS) | | Oct 1, 2017 |
| | Oct 2, 2016 |
| | Oct 1, 2017 |
| | Oct 2, 2016 |
| | Oct 1, 2017 |
| | Oct 2, 2016 |
| | % Change in Revenues |
Operating Segments(a): | | | | |
| | | | |
| | | | |
| | |
| | |
| | |
|
IH | | $ | 23,204 |
| | $ | 21,471 |
| | $ | 13,708 |
| | $ | 12,308 |
| | $ | 9,496 |
| | $ | 9,163 |
| | 8 |
| | 11 |
| | 4 |
|
EH | | 15,639 |
| | 17,725 |
| | 5,808 |
| | 7,253 |
| | 9,831 |
| | 10,472 |
| | (12 | ) | | (20 | ) | | (6 | ) |
Total revenues | | $ | 38,843 |
| | $ | 39,196 |
| | $ | 19,516 |
| | $ | 19,561 |
| | $ | 19,327 |
| | $ | 19,636 |
| | (1 | ) | | — |
| | (2 | ) |
| |
(a)
| IH = the Innovative Health segment; and EH = the Essential Health segment. For additional information about each operating segment, see the “Our Strategy––Commercial Operations” and “Analysis of Operating Segment Information” sections of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 13A. Segment, Geographic and Other Revenue Information: Segment Information.
|
Revenues––Third Quarter of 20172023 vs. Third Quarter of 20162022
| | | | | | | | | | | | | | | | | | | | |
The following provides an analysis of the change in worldwide revenues by geographic areas in the third quarter of 2023: |
| | Three Months Ended October 1, 2023 |
(MILLIONS) | | Worldwide | | U.S. | | International |
Operational growth/(decline): | | | | | | |
Worldwide declines from Paxlovid | | $ | (7,304) | | | $ | (5,044) | | | $ | (2,260) | |
Worldwide declines from Comirnaty | | (3,091) | | | (1,913) | | | (1,178) | |
Worldwide growth from the Vyndaqel family, the Prevnar family, Eliquis, Xeljanz and Inlyta, partially offset by declines from Ibrance and Xtandi | | 529 | | | 438 | | | 91 | |
U.S. revenues from Abrysvo following launch of the older adult indication in July of 2023 | | 375 | | | 375 | | | — | |
Revenues from Nurtec ODT/Vydura and Oxbryta, which were acquired in the fourth quarter of 2022 | | 317 | | | 310 | | | 7 | |
Other operational factors, net | | (138) | | | (212) | | | 74 | |
Operational growth/(decline), net | | (9,311) | | | (6,047) | | | (3,265) | |
| | | | | | |
Unfavorable impact of foreign exchange | | (94) | | | — | | | (94) | |
Revenues increase/(decrease) | | $ | (9,406) | | | $ | (6,047) | | | $ | (3,359) | |
|
| | | | | | | | | | | | |
The following provides an analysis of the change in revenues by geographic areas in the third quarter of 2017: |
(MILLIONS OF DOLLARS) | | Three Months Ended October 1, 2017 |
| | Worldwide | | U.S. | | International |
| |
| | | | |
Disposition-related operational impact: | |
| | | | |
Financial results in the third quarter of 2017 do not reflect any contribution from HIS global operations, compared to the inclusion of three months of HIS global operations in the same period in 2016 (February 2017 sale) | | $ | (280 | ) | | $ | (220 | ) | | $ | (60 | ) |
| |
| | | | |
Other operational growth/(decline): | | | | | | |
Continued growth from key brands including Ibrance and Eliquis globally, as well as Lyrica (IH) and Xeljanz, both primarily in the U.S. | | 751 |
| | 460 |
| | 291 |
|
Growth in Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation) | | 148 |
| | 148 |
| | — |
|
Growth from Biosimilars | | 55 |
| | 34 |
| | 21 |
|
Decline from Peri-LOE Products, including declines in Pristiq in the U.S., which lost marketing exclusivity in the U.S. in March 2017, as well as Lyrica (EH) and Vfend, both primarily in developed Europe markets | | (220 | ) | | (103 | ) | | (117 | ) |
Decline from the Sterile Injectable Pharmaceuticals portfolio, primarily due to legacy Hospira product shortages in the U.S. | | (182 | ) | | (196 | ) | | 14 |
|
Lower revenues for Viagra (IH) in the U.S. primarily due to wholesaler destocking in advance of anticipated generic competition beginning in December 2017 | | (91 | ) | | (91 | ) | | — |
|
Lower revenues for Enbrel, primarily in most developed Europe markets due to continued biosimilar competition | | (89 | ) | | — |
| | (89 | ) |
Decline in Prevnar 13/Prevenar 13 revenues. U.S. revenues decreased primarily due to the continued decline in revenues for the Adult indication due to a smaller remaining “catch up” opportunity compared to the prior-year quarter, partially offset by growth from the pediatric indication. International revenues increased primarily due to the favorable overall impact of timing of government purchases in certain emerging markets and the launch of Prevenar 13 in China for the pediatric indication. | | (16 | ) | | (40 | ) | | 24 |
|
Other operational factors, net | | 102 |
| | 12 |
| | 89 |
|
Operational growth, net | | 178 |
| | 4 |
| | 174 |
|
| |
|
| | | | |
Unfavorable impact of foreign exchange | | (54 | ) | | — |
| | (54 | ) |
Revenues increase | | $ | 123 |
| | $ | 4 |
| | $ | 120 |
|
Emerging markets revenues increased $254decreased $927 million, or 10%28%, in the third quarter of 20172023 to $2.8$2.4 billion from $3.3 billion in the third quarter of 2022, reflecting an operational increasedecrease of $280$780 million, or 11%. Foreign exchange had24%, and an unfavorable impact from foreign exchange of approximately 1% on emerging markets revenues.4%. The operational increasedecrease in emerging markets was primarily driven by our IH segmentdeclines from Comirnaty and Paxlovid as well as our Legacy Established Productslower Sulperazon revenues largely driven by volume-based procurement in China, partially offset by growth from Eliquis and Sterile Injectable Pharmaceuticals portfolios.Lorbrena.
Revenues––First Nine Months of 20172023 vs. First Nine Months of 20162022
| | | | | | | | | | | | | | | | | | | | |
The following provides an analysis of the worldwide change in revenues by geographic areas in the first nine months of 2023: |
| | Nine Months Ended October 1, 2023 |
(MILLIONS) | | Worldwide | | U.S. | | International |
Operational growth/(decline): | | | | | | |
Worldwide declines from Comirnaty | | $ | (20,351) | | | $ | (4,962) | | | $ | (15,389) | |
Worldwide declines from Paxlovid | | (12,517) | | | (8,554) | | | (3,963) | |
Worldwide growth from the Vyndaqel family, the Prevnar family, Eliquis and Inlyta, partially offset by declines from Ibrance, Xeljanz and Xtandi | | 892 | | | 916 | | | (23) | |
Revenues from Nurtec ODT/Vydura and Oxbryta, which were acquired in the fourth quarter of 2022 | | 878 | | | 863 | | | 15 | |
U.S. revenues from Abrysvo following launch of the older adult indication in July of 2023 | | 375 | | | 375 | | | — | |
Other operational factors, net | | 38 | | | (131) | | | 169 | |
Operational growth/(decline), net | | (30,686) | | | (11,495) | | | (19,191) | |
| | | | | | |
Unfavorable impact of foreign exchange | | (1,107) | | | — | | | (1,107) | |
Revenues increase/(decrease) | | $ | (31,793) | | | $ | (11,495) | | | $ | (20,298) | |
|
| | | | | | | | | | | | |
The following provides an analysis of the change in revenues by geographic areas in the first nine months of 2017: |
(MILLIONS OF DOLLARS) | | Nine Months Ended October 1, 2017 |
| | Worldwide | | U.S. | | International |
| | | | | | |
Disposition-related operational impact: | | | | | | |
Approximately one month of HIS domestic operations and approximately two months of HIS international operations in the first nine months of 2017, compared to nine months of HIS global operations in the same period in 2016 (February 2017 sale) | | $ | (783 | ) | | $ | (626 | ) | | $ | (158 | ) |
| | | | | | |
Other operational growth/(decline): | | | | | | |
Continued growth from key brands including Ibrance and Eliquis globally, as well as Lyrica (IH) and Xeljanz, both primarily in the U.S. | | 2,102 |
| | 1,404 |
| | 698 |
|
Growth in Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation) | | 420 |
| | 420 |
| | — |
|
Growth from Biosimilars | | 143 |
| | 74 |
| | 69 |
|
Decline from Peri-LOE Products, including declines in Pristiq in the U.S., which lost marketing exclusivity in the U.S. in March 2017, as well as Lyrica (EH) and Vfend, both primarily in developed Europe markets | | (779 | ) | | (342 | ) | | (437 | ) |
Lower revenues for Enbrel, primarily in most developed Europe markets due to continued biosimilar competition | | (353 | ) | | — |
| | (353 | ) |
Decline in the Legacy Established Products portfolio | | (250 | ) | | (314 | ) | | 64 |
|
Decline in Prevnar 13/Prevenar 13 revenues. U.S. revenues decreased primarily due to the continued decline in revenues for the Adult indication due to a smaller remaining “catch up” opportunity compared to the first nine months of 2016, partially offset by growth from the pediatric indication. International revenues increased primarily due to the favorable overall impact of timing of government purchases in certain emerging markets and the launch of Prevenar 13 in China for the pediatric indication. | | (213 | ) | | (256 | ) | | 44 |
|
Decline in Viagra (IH) revenues mainly in the U.S. primarily due to lower market growth | | (186 | ) | | (186 | ) | | (1 | ) |
Decline from the Sterile Injectable Pharmaceuticals portfolio, primarily due to legacy Hospira product shortages in the U.S. | | (169 | ) | | (253 | ) | | 84 |
|
Other operational factors, net | | 87 |
| | 33 |
| | 54 |
|
Operational growth (decline), net | | 19 |
| | (45 | ) | | 64 |
|
| | | | | | |
Unfavorable impact of foreign exchange | | (372 | ) | | — |
| | (372 | ) |
Revenues decrease | | $ | (353 | ) | | $ | (45 | ) | | $ | (308 | ) |
Emerging markets revenues increased $508 million,decreased $7.0 billion, or 7%42%, in the first nine months of 20172023 to $8.2$9.7 billion from $16.7 billion in the first nine months of 2022, reflecting an operational increasedecrease of $684 million,$6.4 billion, or 9%. Foreign exchange had39%, and an unfavorable impact from foreign exchange of approximately 2% on emerging markets revenues.3%. The operational increasedecrease in emerging markets was primarily driven by our IH segment as well as our Legacy Established Productsdeclines from Comirnaty, partially offset by growth from Paxlovid, Lorbrena and Sterile Injectable Pharmaceuticals portfolios.Zavicefta.
Revenue Deductions
––Our gross product revenues are subject to a variety of deductions, thatwhich generally are generally estimated and recorded in the same period that the revenues are recognized, and primarily represent chargebacks, rebates and sales allowances to wholesalers, and, to a lesser extent, distributors like MCOs, retailers and government agencies with respect to our pharmaceutical products. Thoserecognized. These deductions represent estimates of rebates and discountsthe related to gross sales for the reporting periodobligations and, as such, knowledge and judgment of market conditions and practice are required when estimating the impact of these revenue deductions on gross sales for a reporting period.
Historically, our adjustments ofto these estimates to reflect actual results or updated expectations, have not been material to our overall business. On a quarterly basis, our adjustments of estimates to reflect actual resultsbusiness and generally have been less than 1% of revenues, and have resulted in either a net increase or a net decrease in revenues. Product-specific rebates, however, can have a significant impact on year-over-year individual product revenue growth trends.
|
| | | | | | | | | | | | | | | | |
The following table provides information about revenue deductions: |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | October 1, 2017 |
| | October 2, 2016 |
|
Medicare rebates(a) | | $ | 355 |
| | $ | 285 |
| | $ | 931 |
| | $ | 777 |
|
Medicaid and related state program rebates(a) | | 439 |
| | 338 |
|
| 1,335 |
| | 1,073 |
|
Performance-based contract rebates(a), (b) | | 773 |
| | 629 |
|
| 2,321 |
| | 1,854 |
|
Chargebacks(c) | | 1,608 |
| | 1,465 |
|
| 4,585 |
| | 4,318 |
|
Sales allowances(d) | | 1,419 |
| | 1,177 |
|
| 3,718 |
| | 3,268 |
|
Sales returns and cash discounts | | 329 |
| | 356 |
| | 1,025 |
| | 1,044 |
|
Total(e) | | $ | 4,923 |
| | $ | 4,251 |
| | $ | 13,916 |
| | $ | 12,334 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
The following presents information about revenue deductions: |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | October 1, 2023 | | October 2, 2022 |
Medicare rebates | | $ | 286 | | | $ | 195 | | | $ | 718 | | | $ | 582 | |
Medicaid and related state program rebates | | 406 | | | 223 | | | 1,228 | | | 689 | |
Performance-based contract rebates | | 1,363 | | | 851 | | | 3,784 | | | 2,518 | |
Chargebacks | | 2,627 | | | 1,946 | | | 7,216 | | | 5,480 | |
Sales allowances | | 1,732 | | | 1,334 | | | 4,841 | | | 3,905 | |
Sales returns and cash discounts | | 379 | | | 247 | | | 1,130 | | | 845 | |
Total | | $ | 6,793 | | | $ | 4,796 | | | $ | 18,918 | | | $ | 14,019 | |
| |
(a)Revenue deductions are primarily a function of product sales volume, mix of products sold, contractual or legislative discounts and rebates. | Rebates are product-specific and, therefore, for any given year are impacted by the mix of products sold. |
| |
(b)
| Performance-based contract rebates include contract rebates with MCOs within the U.S., including health maintenance organizations and PBMs, who receive rebates based on the achievement of contracted performance terms and claims under these contracts. Outside the U.S., performance-based contract rebates include rebates to wholesalers/distributors based on achievement of contracted performance for specific products or sales milestones. |
| |
(c)
| Chargebacks primarily represent reimbursements to U.S. wholesalers for honoring contracted prices to third parties. |
| |
(d)
| Sales allowances primarily represent price reductions that are contractual or legislatively mandated outside the U.S., discounts and distribution fees. |
| |
(e)
| For the three months ended October 1, 2017, associated with the following segments: IH ($2.4 billion) and EH ($2.5 billion). For the three months ended October 2, 2016, associated with the following segments: IH ($1.8 billion); and EH ($2.4 billion). For the nine months ended October 1, 2017, associated with the following segments: IH ($6.4 billion) and EH ($7.5 billion). For the nine months ended October 2, 2016, associated with the following segments: IH ($5.1 billion) and EH ($7.2 billion). |
TotalFor information on our accruals for revenue deductions, forincluding the third quarterbalance sheet classification of these accruals, see 2017Note 1C increased 16% compared to the third quarter of 2016, and total revenue deductions for the first nine months of 2017 increased 13% compared to the first nine months of 2016, primarily as a result of:.an increase in performance-based contract rebates primarily due to sales to managed care customers in the U.S., as well as higher rebates in certain markets outside the U.S.;
an increase in sales allowances primarily in markets outside the U.S.;
an increase in chargebacks from certain IH products, partially offset by decreases across several EH products; and
an increase in Medicaid and related state program rebates, primarily as a result of updated estimates of sales related to these programs.
Our accruals for Medicare rebates, Medicaid and related state program rebates, performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts totaled $4.6 billion as of October 1, 2017, of which (i) approximately $2.5 billion represents accrued rebates included in Other current liabilities, and (ii) approximately $2.1 billion represents other accruals included in Other current liabilities ($472 million), Other noncurrent liabilities ($344 million)and against Trade accounts receivable, less allowance for doubtful accounts ($1.3 billion), in our condensed consolidated balance sheet.Our accruals for Medicare rebates, Medicaid and related state program rebates, performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts totaled$4.3 billion as of December 31, 2016, of which (i) approximately $2.3 billion represents accrued rebates included in Other current liabilities, and (ii) approximately $2.0 billion represents other accruals included in Other current liabilities ($509 million), Other noncurrent liabilities ($357 million) and against Trade accounts receivable, less allowance for doubtful accounts ($1.2 billion), in our condensed consolidated balance sheet.
Revenues—Major Products
|
| | | | | | | | | | | | | | | | | | | | | | |
The following table provides revenue information for several of our major products. As described in Note 1A, acquisitions and divestitures have impacted our results of operations in 2017 and 2016. |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | | | % Change(a) | | | | % Change(a) |
PRODUCT | | PRIMARY INDICATIONS OR CLASS | | Oct 1, 2017 |
| Total |
| | Oper. |
| Oct 1, 2017 |
| Total |
| | Oper. |
|
TOTAL REVENUES | | | | $ | 13,168 |
| | 1 |
| | 1 |
| | $ | 38,843 |
| | (1 | ) | | — |
|
PFIZER INNOVATIVE HEALTH (IH)(b) | | $ | 8,118 |
| | 11 |
| | 11 |
| | $ | 23,204 |
| | 8 |
| | 9 |
|
Internal Medicine | | $ | 2,455 |
| | 9 |
| | 10 |
| | $ | 7,245 |
| | 10 |
| | 11 |
|
Lyrica IH(c) | | Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury | | 1,150 |
| | 10 |
| | 11 |
| | 3,382 |
| | 9 |
| | 9 |
|
Eliquis alliance revenues and direct sales | | Atrial fibrillation, deep vein thrombosis, pulmonary embolism | | 644 |
| | 43 |
| | 43 |
| | 1,813 |
| | 48 |
| | 49 |
|
Chantix/Champix | | An aid to smoking cessation treatment in adults 18 years of age or older | | 240 |
| | 21 |
| | 22 |
| | 727 |
| | 15 |
| | 15 |
|
Viagra IH(d) | | Erectile dysfunction | | 206 |
| | (31 | ) | | (31 | ) | | 711 |
| | (21 | ) | | (21 | ) |
BMP2 | | Development of bone and cartilage | | 79 |
| | 24 |
| | 24 |
| | 198 |
| | 13 |
| | 13 |
|
Toviaz | | Overactive bladder | | 62 |
| | 4 |
| | 5 |
| | 187 |
| | (2 | ) | | — |
|
All other Internal Medicine | | Various | | 75 |
| | (41 | ) | | (41 | ) | | 228 |
| | (31 | ) | | (31 | ) |
Vaccines | | $ | 1,649 |
| | 1 |
| | — |
| | $ | 4,385 |
| | (4 | ) | | (4 | ) |
Prevnar 13/Prevenar 13 | | Vaccines for prevention of pneumococcal disease | | 1,522 |
| | (1 | ) | | (1 | ) | | 4,069 |
| | (5 | ) | | (5 | ) |
FSME/IMMUN-TicoVac | | Tick-borne encephalitis vaccine | | 43 |
| | 31 |
| | 29 |
| | 119 |
| | 17 |
| | 19 |
|
All other Vaccines | | Various | | 85 |
| | 17 |
| | 16 |
| | 197 |
| | 14 |
| | 17 |
|
Oncology | | $ | 1,616 |
| | 46 |
| | 46 |
| | $ | 4,551 |
| | 42 |
| | 43 |
|
Ibrance | | Advanced breast cancer | | 878 |
| | 60 |
| | 59 |
| | 2,410 |
| | 61 |
| | 62 |
|
Sutent | | Advanced and/or metastatic RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor | | 276 |
| | 6 |
| | 6 |
| | 805 |
| | (2 | ) | | (1 | ) |
Xalkori | | ALK-positive and ROS1-positive advanced NSCLC | | 146 |
| | 4 |
| | 4 |
| | 442 |
| | 6 |
| | 8 |
|
Xtandi alliance revenues | | Advanced prostate cancer | | 150 |
| | * |
| | * |
| | 422 |
| | * |
| | * |
|
Inlyta | | Advanced RCC | | 84 |
| | (12 | ) | | (10 | ) | | 256 |
| | (16 | ) | | (14 | ) |
Bosulif | | Philadelphia chromosome–positive chronic myelogenous leukemia | | 57 |
|
| 34 |
|
| 35 |
| | 163 |
| | 35 |
| | 36 |
|
All other Oncology | | Various | | 26 |
| | 74 |
| | 76 |
| | 54 |
| | 10 |
| | 11 |
|
Inflammation & Immunology (I&I) | | $ | 1,000 |
| | 4 |
| | 4 |
| | $ | 2,863 |
| | (1 | ) | | — |
|
Enbrel (Outside the U.S. and Canada) | | Rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis | | 613 |
| | (13 | ) | | (13 | ) | | 1,818 |
| | (17 | ) | | (16 | ) |
Xeljanz | | Rheumatoid arthritis | | 348 |
| | 48 |
| | 49 |
| | 935 |
| | 44 |
| | 44 |
|
Eucrisa | | Mild to moderate atopic dermatitis (eczema) | | 15 |
| | * |
| | * |
| | 33 |
| | * |
| | * |
|
All other I&I | | Various | | 23 |
| | (3 | ) | | 1 |
| | 78 |
| | 35 |
| | 36 |
|
Rare Disease | | $ | 569 |
| | (3 | ) | | (3 | ) | | $ | 1,637 |
| | (7 | ) | | (6 | ) |
BeneFIX | | Hemophilia | | 151 |
| | (14 | ) | | (14 | ) | | 453 |
| | (17 | ) | | (16 | ) |
Refacto AF/Xyntha | | Hemophilia | | 140 |
| | — |
| | (1 | ) | | 409 |
| | — |
| | 3 |
|
Genotropin | | Replacement of human growth hormone | | 136 |
| | (7 | ) | | (6 | ) | | 375 |
| | (12 | ) | | (10 | ) |
Somavert | | Acromegaly | | 65 |
| | 11 |
| | 10 |
| | 182 |
| | 6 |
| | 7 |
|
All other Rare Disease | | Various | | 77 |
| | 21 |
| | 21 |
| | 218 |
| | (1 | ) | | 1 |
|
Consumer Healthcare | | $ | 829 |
| | 4 |
| | 4 |
| | $ | 2,522 |
| | 3 |
| | 3 |
|
PFIZER ESSENTIAL HEALTH (EH)(e) | | $ | 5,050 |
| | (12 | ) | | (11 | ) | | $ | 15,639 |
| | (12 | ) | | (11 | ) |
Legacy Established Products (LEP)(f) | | $ | 2,681 |
| | (1 | ) | | — |
| | $ | 7,995 |
| | (5 | ) | | (3 | ) |
Lipitor | | Reduction of LDL cholesterol | | 491 |
| | 16 |
| | 18 |
| | 1,341 |
| | 4 |
| | 6 |
|
Premarin family | | Symptoms of menopause | | 238 |
| | (2 | ) | | (2 | ) | | 711 |
| | (5 | ) | | (5 | ) |
Norvasc | | Hypertension | | 226 |
| | (5 | ) | | (3 | ) | | 684 |
| | (4 | ) | | (1 | ) |
EpiPen | | Epinephrine injection used in treatment of life-threatening allergic reactions | | 82 |
| | (25 | ) | | (25 | ) | | 253 |
| | (16 | ) | | (15 | ) |
Xalatan/Xalacom | | Glaucoma and ocular hypertension | | 83 |
| | (9 | ) | | (8 | ) | | 241 |
| | (12 | ) | | (12 | ) |
Effexor | | Depression and certain anxiety disorders | | 76 |
| | 8 |
| | 9 |
| | 215 |
| | 4 |
| | 5 |
|
Zoloft | | Depression and certain anxiety disorders | | 78 |
| | 9 |
| | 11 |
| | 215 |
| | (6 | ) | | (4 | ) |
Zithromax | | Bacterial infections | | 61 |
| | 10 |
| | 11 |
| | 202 |
| | (1 | ) | | 3 |
|
Relpax | | Symptoms of migraine headache | | 50 |
| | (39 | ) | | (39 | ) | | 193 |
| | (22 | ) | | (22 | ) |
Xanax | | Anxiety disorders | | 58 |
| | 5 |
| | 4 |
| | 164 |
| | 1 |
| | 2 |
|
All other LEP | | Various | | 1,237 |
| | (2 | ) | | (1 | ) | | 3,776 |
| | (5 | ) | | (4 | ) |
Sterile Injectable Pharmaceuticals (SIP)(g) | | $ | 1,273 |
| | (13 | ) | | (12 | ) | | $ | 4,270 |
| | (5 | ) | | (4 | ) |
Medrol | | Steroid anti-inflammatory | | 109 |
| | 7 |
| | 7 |
| | 352 |
| | 7 |
| | 7 |
|
Sulperazon | | Treatment of infections | | 114 |
| | 11 |
| | 13 |
| | 345 |
| | 14 |
| | 18 |
|
Fragmin | | Slows blood clotting | | 79 |
| | (1 | ) | | (1 | ) | | 221 |
| | (8 | ) | | (6 | ) |
Tygacil | | Tetracycline class antibiotic | | 60 |
| | (12 | ) | | (12 | ) | | 192 |
| | (5 | ) | | (5 | ) |
Precedex | | Sedation agent in surgery or intensive care | | 51 |
| | (21 | ) | | (20 | ) | | 182 |
| | (8 | ) | | (9 | ) |
All other SIP | | Various | | 860 |
| | (18 | ) | | (17 | ) | | 2,977 |
| | (7 | ) | | (6 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | | | % Change(a) | | | | % Change(a) |
PRODUCT | | PRIMARY INDICATIONS OR CLASS | | Oct 1, 2017 |
| Total |
| | Oper. |
| Oct 1, 2017 |
| Total |
| | Oper. |
|
Peri-LOE Products(h) | | $ | 794 |
| | (22 | ) | | (22 | ) | | $ | 2,398 |
| | (26 | ) | | (24 | ) |
Celebrex | | Arthritis pain and inflammation, acute pain | | 212 |
| | 9 |
| | 11 |
| | 564 |
| | 3 |
| | 4 |
|
Lyrica EH(c) | | Epilepsy, neuropathic pain and generalized anxiety disorder | | 134 |
| | (30 | ) | | (31 | ) | | 428 |
| | (31 | ) | | (29 | ) |
Vfend | | Fungal infections | | 97 |
| | (31 | ) | | (29 | ) | | 305 |
| | (33 | ) | | (32 | ) |
Viagra EH(d) | | Erectile dysfunction | | 102 |
| | 14 |
| | 16 |
| | 285 |
| | — |
| | 3 |
|
Pristiq | | Depression | | 69 |
| | (61 | ) | | (61 | ) | | 230 |
| | (58 | ) | | (58 | ) |
Zyvox | | Bacterial infections | | 68 |
| | (28 | ) | | (27 | ) | | 220 |
| | (34 | ) | | (33 | ) |
Revatio | | Pulmonary arterial hypertension | | 58 |
| | (20 | ) | | (20 | ) | | 189 |
| | (11 | ) | | (11 | ) |
All other Peri-LOE Products | | Various | | 55 |
| | (19 | ) | | (17 | ) | | 176 |
| | (17 | ) | | (15 | ) |
Biosimilars(i) | | Various | | $ | 141 |
| | 70 |
| | 67 |
| | $ | 367 |
| | 61 |
| | 63 |
|
Inflectra/Remsima | | Inflammatory diseases | | 112 |
| | * |
| | * |
| | 284 |
| | * |
| | * |
|
All other Biosimilars | | Various | | 28 |
| | (16 | ) | | (18 | ) | | 82 |
| | (15 | ) | | (14 | ) |
Pfizer CentreOne(j) | | | | $ | 161 |
| | 3 |
| | 3 |
| | $ | 514 |
| | (5 | ) | | (5 | ) |
Hospira Infusion Systems (HIS)(k) | | Various | | $ | — |
| | * |
| | * |
| | $ | 97 |
| | (89 | ) | | (89 | ) |
Total Lyrica(c) | | Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury | | $ | 1,285 |
| | 4 |
| | 5 |
| | $ | 3,810 |
| | 2 |
| | 3 |
|
Total Viagra(d) | | Erectile dysfunction | | $ | 308 |
| | (20 | ) | | (20 | ) | | $ | 996 |
| | (16 | ) | | (15 | ) |
Total Alliance revenues | | Various | | $ | 741 |
| | 77 |
| | 78 |
| | $ | 2,112 |
| | 83 |
| | 84 |
|
| |
(a)
| As compared to the three and nine months ended October 2, 2016.
|
| |
(b)
| The IH business encompasses Internal Medicine, Vaccines, Oncology, Inflammation & Immunology, Rare Disease and Consumer Healthcare. Through December 31, 2016, includes Duavive/Duavee and Viviant (recorded in All other Internal Medicine in 2016), which were transferred from Innovative Health to Essential Health effective January 1, 2017 (recorded in All other LEP (EH) beginning January 1, 2017), in order to align these products with our management of the women’s health portfolio within EH. |
| |
(c)
| Lyrica revenues from all of Europe, Russia, Turkey, Israel and Central Asia countries are included in Lyrica EH. All other Lyrica revenues are included in Lyrica IH. Total Lyrica revenues represent the aggregate of worldwide revenues from Lyrica IH and Lyrica EH. |
| |
(d)
| Viagra revenues from the U.S. and Canada are included in Viagra IH. All other Viagra revenues are included in Viagra EH. Total Viagra revenues represent the aggregate of worldwide revenues from Viagra IH and Viagra EH. |
| |
(e)
| The EH business encompasses Legacy Established Products, Sterile Injectable Pharmaceuticals, Peri-LOE Products, Biosimilars, Pfizer CentreOne and HIS (through February 2, 2017) and includes all legacy Hospira commercial operations. |
| |
(f)
| Legacy Established Products primarily include products that have lost patent protection (excluding Sterile Injectable Pharmaceuticals and Peri-LOE Products). Effective January 1, 2017, All other LEP includes Duavive/Duavee and Viviant, which were transferred from Innovative Health (recorded in All other Internal Medicine (IH) in 2016), in order to align these products with our management of the women’s health portfolio within EH. See note (b) above. |
| |
(g)
| Sterile Injectable Pharmaceuticals include generic injectables and proprietary specialty injectables (excluding Peri-LOE Products). |
| |
(h)
| Peri-LOE Products include products that have recently lost or are anticipated to soon lose patent protection. These products include: Lyrica in Europe, Russia, Turkey, Israel and Central Asia; Viagra in all countries (excluding the U.S. and Canada); and worldwide revenues for Celebrex, Pristiq, Zyvox, Vfend, Revatio and Inspra. |
| |
(i)
| Biosimilars include Inflectra/Remsima (biosimilar infliximab) in the U.S. and certain international markets, Nivestim (biosimilar filgrastim) in certain European, Asian and Africa/Middle Eastern markets and Retacrit (biosimilar epoetin zeta) in certain European and Africa/Middle Eastern markets. |
| |
(j)
| Pfizer CentreOne includes revenues from our contract manufacturing and active pharmaceutical ingredient sales operation, including sterile injectables contract manufacturing, and revenues related to our manufacturing and supply agreements, including with Zoetis. |
| |
(k)
| HIS (through February 2, 2017) includes Medication Management Systems products composed of infusion pumps and related software and services, as well as IV Infusion Products, including large volume IV solutions and their associated administration sets. |
| |
* | Indicates calculation not meaningful. |
Amounts may not add due to rounding. All percentages have been calculated using unrounded amounts.
Revenues––Selected Product Discussion
Biopharma
The information | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | | | | | Revenue | | % Change | | |
Product | | Period | | Global Revenues | | Region | | Oct. 1, 2023 | | Oct. 2, 2022 | | Total | | Oper. | | Operational Results Commentary |
Comirnaty(a) | | QTD | | $1,307
Down 70%
(operationally) | | U.S. | | $ | 995 | | | $ | 2,908 | | | (66) | | | | | QTD declines largely driven by lower U.S. government contracted deliveries and lower contracted deliveries and demand in international markets, due to anticipated transition to new variant vaccines globally and to traditional U.S. commercial market sales beginning in September 2023. YTD declines largely driven by lower contracted deliveries and demand in international markets and lower U.S. government contracted deliveries, due to anticipated transition to new variant vaccines globally and to traditional U.S. commercial market sales beginning in September 2023. |
| | | Int’l. | | 312 | | 1,494 | | | (79) | | | (79) | | |
| | | Worldwide | | $ | 1,307 | | $ | 4,402 | | | (70) | | | (70) | | |
| YTD | | $5,859
Down 77%
(operationally) | | U.S. | | $ | 1,340 | | | $ | 6,303 | | | (79) | | | | |
| | | Int’l. | | 4,519 | | | 20,174 | | | (78) | | | (76) | | |
| | | Worldwide | | $ | 5,859 | | | $ | 26,477 | | | (78) | | | (77) | | |
Eliquis | | QTD | | $1,498
Up 3%
(operationally) | | U.S. | | $ | 883 | | | $ | 835 | | | 6 | | | | | Growth driven primarily by continued oral anti-coagulant adoption and market share gains in the non-valvular atrial fibrillation indication in the U.S. and certain markets in Europe, partially offset by declines due to LOE and generic competition in certain international markets. |
| | | Int’l. | | 615 | | | 628 | | | (2) | | | (1) | |
| | | Worldwide | | $ | 1,498 | | | $ | 1,464 | | | 2 | | | 3 | |
| YTD | | $5,135
Up 4%
(operationally) | | U.S. | | $ | 3,296 | | | $ | 2,979 | | | 11 | | | | |
| | | Int’l. | | 1,838 | | | 2,022 | | | (9) | | | (6) | | |
| | | Worldwide | | $ | 5,135 | | | $ | 5,001 | | | 3 | | | 4 | | |
Prevnar family | | QTD | | $1,854
Up 15% (operationally) | | U.S. | | $ | 1,310 | | | $ | 1,089 | | | 20 | | | | | QTD growth primarily driven by: • the adult indications in the U.S. driven by strong patient demand for Prevnar 20 for the eligible adult population, and • the pediatric indication in the U.S. due to the approval of Prevnar 20 and associated stocking, partially offset by lower market share due to competitive entry, as well as • growth of the pediatric indication for Prevenar 13 in certain emerging markets. YTD growth primarily driven by the adult indications in the U.S. due to strong patient demand for Prevnar 20 for the eligible adult population, as well as growth of Prevenar 13 in certain emerging markets, partially offset by the Prevnar pediatric indication in the U.S. driven by lower market share due to competitor entry and unfavorable timing of purchases. |
| | | Int’l. | 544 | | 517 | | 5 | | 5 | |
| | | Worldwide | $ | 1,854 | | $ | 1,607 | | 15 | | 15 | |
| YTD | | $4,835
Up 6% (operationally) | | U.S. | | $ | 3,210 | | | $ | 3,010 | | | 7 | | | | |
| | | Int’l. | | 1,624 | | | 1,591 | | | 2 | | | 6 | | |
| | | Worldwide | | $ | 4,835 | | | $ | 4,601 | | | 5 | | | 6 | | |
Paxlovid | | QTD | | $202
Down 97%
(operationally) | | U.S. | | $ | — | | | $ | 5,044 | | | * | | | | QTD declines primarily driven by: • No third quarter U.S. sales in anticipation of commercial transition, and • lower contractual deliveries in most international markets. YTD declines primarily driven by the above factors as well as no second quarter U.S. sales, partially offset by strong demand in China under the temporary National Reimbursement Drug List (which ended on April 1, 2023) due to surge in COVID-19 infection during the first quarter of 2023. |
| | | Int’l. | | 202 | | 2,470 | | | (92) | | | (91) | | |
| | | Worldwide | | $ | 202 | | $ | 7,514 | | | (97) | | | (97) | | |
| YTD | | $4,414
Down 73%
(operationally) | | U.S. | | $ | 1,960 | | | $ | 10,514 | | | (81) | | | | |
| | | Int’l. | | 2,454 | | | 6,584 | | | (63) | | | (60) | | |
| | | Worldwide | | $ | 4,414 | | | $ | 17,099 | | | (74) | | | (73) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | | | | | Revenue | | % Change | | |
Product | | Period | | Global Revenues | | Region | | Oct. 1, 2023 | | Oct. 2, 2022 | | Total | | Oper. | | Operational Results Commentary |
Ibrance | | QTD | | $1,244
Down 3% (operationally) | | U.S. | | $ | 838 | | | $ | 872 | | | (4) | | | | | Declines primarily driven by lower demand globally due to competitive pressure, lower clinical trial purchases internationally, and planned price decreases in certain international developed markets. |
| | | Int’l. | | 406 | | 411 | | | (1) | | | (1) | |
| | | Worldwide | | $ | 1,244 | | $ | 1,283 | | | (3) | | | (3) | |
| YTD | | $3,635
Down 4%
(operationally) | | U.S. | | $ | 2,438 | | | $ | 2,493 | | | (2) | | | | |
| | | Int’l. | | 1,197 | | | 1,347 | | | (11) | | | (8) | | |
| | | Worldwide | | $ | 3,635 | | | $ | 3,841 | | | (5) | | | (4) | | |
Vyndaqel family | | QTD | | $892
Up 47%
(operationally) | | U.S. | | $ | 511 | | | $ | 329 | | | 55 | | | | | Growth largely driven by continued strong uptake of the ATTR-CM indication, primarily in the U.S. and developed Europe. YTD growth partially offset by a planned price decrease that went into effect in Japan in the second quarter of 2022. |
| | | Int’l. | | 381 | | 273 | | | 40 | | | 36 | | |
| | | Worldwide | | $ | 892 | | $ | 602 | | | 48 | | | 47 | | |
| YTD | | $2,360 Up 35%
(operationally) | | U.S. | | $ | 1,329 | | | $ | 890 | | | 49 | | | | |
| | | Int’l. | | 1,031 | | | 876 | | | 18 | | | 20 | | |
| | | Worldwide | | $ | 2,360 | | | $ | 1,766 | | | 34 | | | 35 | | |
Xeljanz | | QTD | | $503
Up 1%
(operationally) | | U.S. | | $ | 371 | | | $ | 345 | | | 8 | | | | | QTD growth driven primarily by higher net price in the U.S. due to favorable changes in channel mix, partially offset by decreased prescription volumes globally resulting from ongoing shifts in prescribing patterns related to label changes. YTD declines driven primarily by decreased prescription volumes globally resulting from ongoing shifts in prescribing patterns related to label changes. |
| | | Int’l. | | 132 | | | 157 | | | (16) | | | (15) | | |
| | | Worldwide | | $ | 503 | | | $ | 502 | | | — | | 1 | | |
| YTD | | $1,210
Down 6%
(operationally) | | U.S. | | $ | 794 | | | $ | 802 | | | (1) | | | | |
| | | Int’l. | | 416 | | | 502 | | | (17) | | | (13) | | |
| | | Worldwide | | $ | 1,210 | | | $ | 1,304 | | | (7) | | | (6) | | |
Xtandi | | QTD | | $313
Down 2%
(operationally) | | U.S. | | $ | 313 | | | $ | 320 | | | (2) | | | | | QTD decline driven by lower net price mainly due to unfavorable changes in channel mix, partially offset by higher demand. YTD performance driven by higher demand, offset by lower net price mainly due to unfavorable changes in channel mix. |
| | Int’l. | | — | | | — | | | — | | — | |
| | Worldwide | | $ | 313 | | | $ | 320 | | | (2) | | | (2) | | |
| YTD | | $877
Flat
(operationally) | | U.S. | | $ | 877 | | | $ | 878 | | | — | | | |
| | Int’l. | | — | | | — | | | — | | — | |
| | Worldwide | | $ | 877 | | | $ | 878 | | | — | | — | |
Inlyta | | QTD | | $252
Up 1%
(operationally) | | U.S. | | $ | 153 | | | $ | 152 | | | 1 | | | | | Growth primarily reflects continued growth in emerging markets and the U.S. driven by the adoption of combinations of certain immune checkpoint inhibitors and Inlyta for the first-line treatment of patients with advanced RCC, partially offset by lower volumes and lower net price in certain European markets. |
| | Int’l. | 98 | | 100 | | | (2) | | | 1 | |
| | Worldwide | $ | 252 | | $ | 252 | | | — | | 1 | |
| YTD | $773
Up 3%
(operationally) | | U.S. | | $ | 476 | | | $ | 454 | | | 5 | | | | |
| | Int’l. | | 297 | | | 306 | | | (3) | | | 1 | | |
| | Worldwide | | $ | 773 | | | $ | 760 | | | 2 | | | 3 | | |
Nurtec ODT/Vydura | | QTD | | $233
* | | U.S. | | $ | 227 | | | $ | — | | | * | | | | Driven by the acquisition of Biohaven in the fourth quarter of 2022, after which Nurtec ODT/Vydura is now a Pfizer-owned product, compared to the third quarter and first nine months of 2022, during which Pfizer only had commercialization rights outside of the U.S. under a collaboration and license agreement with Biohaven. See Notes 2A and 2E of our 2022 Form 10-K. |
| Int’l. | 6 | | — | | | * | * |
| Worldwide | $ | 233 | | | $ | — | | | * | * |
| YTD | | $646
* | | U.S. | | $ | 633 | | | $ | — | | | * | | | |
| Int’l. | 13 | | 1 | | * | * |
| Worldwide | $ | 646 | | | $ | 1 | | * | * |
Business Innovation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | | | | | Revenue | | % Change | | |
Operating Segment | | Period | | Global Revenues | | Region | | Oct. 1, 2023 | | Oct. 2, 2022 | | Total | | Oper. | | Operational Results Commentary |
Business Innovation | | QTD | | $302
Down 7%
(operationally) | | U.S. | | $ | 88 | | | $ | 103 | | | (15) | | | | | QTD declines primarily driven by lower revenues from our active pharmaceutical ingredient sales operation and lower manufacturing of divested products under manufacturing and supply agreements. YTD declines primarily driven by a reduction in Comirnaty supply to BioNTech and lower revenues from our active pharmaceutical ingredient sales operation, partially offset by higher COVID-19 manufacturing activities performed on behalf of customers. |
Int’l. | 214 | | | 216 | | | (1) | | | (3) | | |
Worldwide | $ | 302 | | | $ | 319 | | | (5) | | | (7) | | |
YTD | | $928
Down 4%
(operationally) | | U.S. | | $ | 289 | | | $ | 291 | | | (1) | | | | |
Int’l. | | 639 | | | 683 | | | (6) | | | (6) | | |
| Worldwide | | $ | 928 | | | $ | 974 | | | (5) | | | (4) | | |
(a)Comirnaty includes direct sales and Alliance revenues related to sales of the Pfizer-BioNTech COVID-19 vaccine, which are recorded within our Primary Care customer group. It does not include revenues for certain Comirnaty-related manufacturing activities performed on behalf of BioNTech, which are included in “Revenues—Selected Product Discussion” below should be read in conjunction with the revenue information included in the “Revenues—Major Products” section.
| |
• | Prevnar 13/Prevenar 13 (IH) worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
|
In the U.S., revenues for Prevnar 13 decreased 4% in the third quarter of 2017 and 9% in the first nine months of 2017, compared to the same periods in 2016, primarily due to the continued decline in revenues for the Adult indication in the U.S. due to a high initial capture ratePC1, which is part of the eligible population following its successful fourth-quarter 2014 launch, which resulted in a smaller remaining “catch up” opportunity (i.e., the opportunity to reach adults age 65 and older who have not been previously vaccinated with Prevnar 13) compared to the prior-year period, partially offset by growth from the pediatric indication. Given the success since the launch of the Adult indication, approximately 53% of the eligible patient pool 65 years and above in the U.S. has already been vaccinated. While the remaining eligible population is large, this cohort is much more difficult to capture.
Internationally, revenues for Prevenar 13 increased 5% operationally in the third quarter ofBusiness Innovation operating segment. See 2017 and 3% operationally in the first nine months of 2017, compared to the same periods in 2016, primarily due to the favorable overall impact of timing of government purchases in certain emerging markets and the launch of Prevenar 13 in China for the pediatric indication. Foreign exchange had a de minimis impact on international revenues in the third quarter of 2017 and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016Note 13C.
In 2014, the ACIP voted to recommend Prevnar 13 for routine use to help protect adults aged 65 years and older against pneumococcal disease, which for adults includes pneumonia caused by the 13 pneumococcal serotypes included in the vaccine. These ACIP recommendations were subsequently approved by the directors at the CDC and U.S. Department of Health and Human Services, and were published in the Morbidity and Mortality Weekly Report in September 2014 by the CDC. As with other vaccines, the CDC regularly monitors the impact of vaccination and reviews the recommendations; in this case, however, the CDC announced formally that it will conduct this review in 2018. A potential adverse change in the ACIP recommendation could negatively impact future Prevnar 13 revenues. Currently, we are working with a number of U.S. investigators to monitor the proportion of community-acquired pneumonia caused by the serotypes included in Prevnar 13 and continue to observe trends.
| |
• | Lyrica (EH (revenues from all of Europe, Russia, Turkey, Israel and Central Asia)/IH (revenues from all other geographies)) worldwide revenues increased operationally in the third quarter and the first nine months of 2017, compared to the same periods in 2016. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
|
In the U.S., Lyrica revenues increased 12% in the third quarter of 2017 and 10% in the first nine months of 2017, compared to the same periods in 2016, driven by sustained demand and positive price impact.
Internationally, Lyrica revenues decreased 8% operationally in the third quarter of 2017 and 10% operationally in the first nine months of 2017, compared to the same periods in 2016, primarily due to losses of exclusivity in developed Europe markets. Foreign exchange had an unfavorable impact on international revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
Lyrica revenues in our IH segment increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, primarily driven by sustained demand and positive price impact in the U.S. Foreign exchange had an unfavorable impact on Lyrica IH revenues in the third quarter and a de minimis impact in the first nine months of 2017, compared to the same periods in 2016.
In our EH segment, worldwide revenues from Lyrica decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, due to losses of exclusivity in developed Europe markets. Foreign exchange had a favorable impact on Lyrica EH worldwide revenues in the third quarter of 2017 and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
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• | Ibrance (IH) worldwide revenues, most of which were recorded in the U.S., increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. The significant revenue growth reflects our scientific/clinical data, continued positive patient experience as well as Ibrance being the class leader among cyclin-dependent kinase inhibitors in major markets. Foreign exchange had a favorable impact on worldwide revenues in the third quarter of 2017 and had an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
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• | Enbrel (IH, outside the U.S. and Canada) worldwide revenues, excluding the U.S. and Canada, decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, primarily due to on-going biosimilar competition in most developed Europe markets, which is expected to continue. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
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• | Lipitor (EH) worldwide revenues increased operationally in the third quarter and the first nine months of 2017, compared to the same periods in 2016. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter of 2017 and first nine months of 2017, compared to the same periods in 2016. In the U.S., revenues increased more than 100% in the third quarter of 2017 and 11% in the first nine months of 2017, compared to the same periods in 2016, primarily due to favorable rebates.
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In our international markets, revenues increased 11% operationally in the third quarter of 2017, compared to the same period in 2016, driven by increased demand in China and certain Middle Eastern markets, partially offset by lower volumes in Japan and pricing pressures in China. International revenues increased 6% operationally in the first nine months of 2017, compared to the same period in 2016, driven by increased demand in China, partially offset by lower volumes in Japan and certain Middle Eastern markets, as well as pricing pressures in China. Foreign exchange had an unfavorable impact on international revenues in the third quarter of 2017 and first nine months of 2017, compared to the same periods in 2016.
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• | Viagra (IH (U.S. and Canada revenues)/EH (all other revenues excluding U.S. and Canada)) worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. The decrease in the third quarter of 2017, compared to the same period in 2016, was primarily due to wholesaler destocking in advance of anticipated generic competition in the U.S. beginning in December 2017. The decrease in the first nine months of 2017, compared to the same period in 2016, was primarily due to lower market growth. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter of 2017 and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
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Revenues in the U.S. decreased 32% in the third quarter of 2017, compared to the same period in 2016, primarily due to wholesaler destocking in advance of anticipated generic competition beginning in December 2017. Revenues in the U.S. decreased 21% in the first nine months of 2017, compared to the same period in 2016, primarily due to lower market growth. International revenues increased 15% operationally in the third quarter of 2017, compared to the same period in 2016, primarily from demand in emerging markets, primarily in China. International revenues increased 3% operationally in the first nine months of 2017, compared to the same period in 2016, primarily from increased demand in emerging markets, mainly China and certain Middle Eastern markets, partially offset by price reductions in China. Foreign exchange had an unfavorable impact on international revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
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• | Xeljanz (IH) worldwide revenues increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. In the U.S., Xeljanz revenues increased 44% in the third quarter of 2017 and 40% in the first nine months of 2017, compared to the same periods in 2016, primarily driven by increased adoption among rheumatologists, growing awareness among patients and improvements in payer access. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter of 2017 and had a de minimis impact in the first nine months of 2017, compared to the same periods in 2016.
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• | BeneFIX and ReFacto AF/Xyntha (IH)––BeneFIX worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, primarily as a result of erosion of market share in the U.S. and European countries due to increasing adoption of extended half-life treatment options as well as a price decrease in the U.K. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
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ReFacto AF/Xyntha worldwide revenues decreased operationally in the third quarter of 2017 and increased operationally in the first nine months of 2017, compared to the same periods in 2016. The increase in the first nine months of 2017 was largely due to increased product demand in certain emerging markets, partially offset by declines in developed markets in Europe and the U.S., primarily driven by increasing adoption of extended half-life treatment options. Foreign exchange had a favorable impact on worldwide revenues in the third quarter of 2017 and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
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• | Sutent (IH) worldwide revenues increased operationally in the third quarter of 2017 and decreased operationally in the first nine months of 2017, compared to the same periods in 2016. The increase in the third quarter of 2017 was primarily driven by increased performance in certain emerging markets. The decrease in the first nine months of 2017 was primarily due to competitive pressure in the U.S. and Europe and cost containment measures in certain developed international markets, partially offset by increased performance in certain emerging markets. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter of 2017 and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
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• | Chantix/Champix (IH) worldwide revenues increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter of 2017 and a de minimis impact in the first nine months of 2017, compared to the same periods in 2016.
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In the U.S., Chantix revenues increased 27% in the third quarter of 2017 and 21% in the first nine months of 2017, compared to the same periods in 2016, primarily due to increased promotional activities, educating healthcare providers on updates to the Chantix label, including removal of the boxed warning, the addition of EAGLES safety and efficacy data, improved patient access and positive price impact.
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• | The Premarin family of products (EH) worldwide revenues decreased operationally in the third quarter of 2017 and first nine months of 2017, compared to the same periods in 2016. Revenues in the U.S. decreased 2% in the third quarter and 5% in the first nine months of 2017, compared to the same periods in 2016, primarily driven by lower volume, partially offset by a positive price impact.
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Internationally, Premarin revenues decreased 8% operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, primarily due to lower volumes in certain emerging markets and, with respect to the first nine months of 2017, the U.K., partially offset by price increases. Foreign exchange had a favorable impact on international revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
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• | Norvasc (EH) worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. Results for the third quarter of 2017 and first nine months of 2017 were impacted by generic competition in Japan, lower volumes in certain Middle Eastern markets and pricing pressures in China, partially offset by demand in China. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
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• | Celebrex (EH) worldwide revenues increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. The increase in the third quarter of 2017, compared to the same period in 2016, was primarily
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driven by favorable rebates in the U.S. and increased demand in China, partially offset by generic competition in the U.S., lower volumes in certain Middle Eastern markets and pricing pressures in China and Mexico. The increase in the first nine months of 2017, compared to the same period in 2016, was primarily driven by favorable rebates in the U.S. and volume growth in emerging markets, primarily China, partially offset by generic competition in the U.S. and most developed international markets and pricing pressures in China and Mexico. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
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• | Xalkori (IH) worldwide revenues increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, as a result of a steady increase in diagnostic rates for the ALK gene mutation across key markets outside the U.S., which has led to more patients being treated. This increase was partially offset by volume declines in the U.S. and Japan due to competitive pressure, partially mitigated by the March 2016 FDA approval of the supplemental NDA to treat patients with metastatic NSCLC whose tumors are ROS1-positive as detected by an FDA-approved test. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter of 2017 and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
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• | Inflectra/Remsima (EH) worldwide revenues increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, due to continued uptake in developed markets in Europe, and the U.S. launch in the fourth quarter of 2016, partially offset by pricing pressures in Europe. Foreign exchange had a favorable impact on worldwide revenues in the third quarter of 2017 and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
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Inflectra uptake in the U.S. is being driven by a number of factors including Inflectra’s clinical data package, patient support programs, price and the access/reimbursement environment. To date, reimbursement coverage has been mixed. While we achieved 100% Medicare coverage, we have experienced access challenges among commercial payers where our lower priced product has* Indicates calculation not received access at parity to the innovator product and remains in a disadvantaged position despite recent price increases taken by the innovator product. We will look at all relevant factors impacting reimbursement given our extensive experience working with commercial payers to enable greater access for Inflectra. Additionally, in September 2017, Pfizer filed suit in the U.S. District Court for the Eastern District of Pennsylvania against Johnson & Johnson (J&J) alleging that J&J’s exclusionary contracts and other anticompetitive practices concerning Remicade® (infliximab) violate federal antitrust laws.meaningful.
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• | Inlyta (IH) worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, primarily due to increased competition in the U.S. and Europe, partially offset by performance in key emerging markets. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
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• | Pristiq (EH) worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, primarily due to loss of exclusivity in the U.S. in March 2017. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
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Zyvox (EH) worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, due to generic competition in developed international markets and the U.S. and corresponding pricing pressures, partially offset by volume growth in China. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
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• | Eucrisa (IH) is approved in the U.S. for the treatment of mild to moderate atopic dermatitis for patients two years of age and older. The FDA approved Eucrisa on December 14, 2016, and Eucrisa was launched in the U.S. late in the first quarter of 2017. Eucrisa is a novel non-steroidal topical ointment and is the first topical prescription treatment for atopic dermatitis approved in over 10 years. Prescription volume continued to strengthen through the third quarter of 2017 supported by the launch of our direct-to-consumer campaign.
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• | Alliance revenues (IH/EH) increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, mainly due to:
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◦ | an increase in Eliquis alliance revenues due to higher demand resulting from increased market penetration of novel oral anticoagulants and market share gains; and |
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◦ | the inclusion of Xtandi alliance revenues of $150 million in the third quarter of 2017 and $422 million in the first nine months of 2017 in the U.S. resulting from the September 2016 acquisition of Medivation. We expect patient assistance program (which provides free medicines to patients) utilization as a percentage of total demand to normalize as we move into next year.
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Foreign exchange had an unfavorable impact on alliance revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
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◦ | Eliquis (IH) has been jointly developed and is commercialized by Pfizer and BMS. Pfizer funds between 50% and 60% of all development costs depending on the study. Profits and losses are shared equally on a global basis, except in certain countries where Pfizer commercializes Eliquis and pays BMS compensation based on a percentage of net sales. We have full commercialization rights in certain smaller markets. BMS supplies the product to us at cost plus a percentage of the net sales to end-customers in these markets. Eliquis is part of the Novel Oral Anticoagulant (NOAC) market; the agents in this class were developed as alternative treatment options to warfarin in appropriate patients.
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◦ | Xtandi (IH) is being developed and commercialized through a collaboration with Astellas. The two companies share equally in the gross profits (losses) related to U.S. net sales of Xtandi. Subject to certain exceptions, Pfizer and Astellas also share equally all Xtandi commercialization costs attributable to the U.S. market. Pfizer and Astellas also share certain development and other collaboration expenses and Pfizer receives tiered royalties as a percentage of international Xtandi net sales (recorded in Other (income)/deductions—net).
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See the “Analysis of the Consolidated Statements of Income—Revenues—Selected Product Descriptions”Item 1. Business—Patents and Other Intellectual Property Rights section of our 2022 Form 10-K for information regarding the expiration of various patent rights, 2016Note 12 Financial Reportfor a discussion of recent developments concerning patent and product
litigation relating to certain of the products discussed above and Note 13C for additional information regarding the primary indications or class of the selected products discussed above. See Notes to Condensed Consolidated Financial Statements—Note 12.Commitments
Costs and Contingencies for a discussion of recent developments concerning patent and product litigation relating to certain of the products discussed above.Expenses
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Costs and expenses follow: |
| | Three Months Ended | Nine Months Ended |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | % Change | | October 1, 2023 | | October 2, 2022 | | % Change |
Cost of sales | | $ | 9,269 | | | $ | 6,063 | | | 53 | | | $ | 17,391 | | | $ | 24,696 | | | (30) | |
Percentage of Revenues | | 70.0 | % | | 26.8 | % | | | | 39.3 | % | | 32.5 | % | | |
Selling, informational and administrative expenses | | 3,281 | | | 3,391 | | | (3) | | | 10,196 | | | 9,032 | | | 13 | |
Research and development expenses | | 2,711 | | | 2,696 | | | 1 | | | 7,864 | | | 7,813 | | | 1 | |
Acquired in-process research and development expenses | | 67 | | | 524 | | | (87) | | | 122 | | | 880 | | | (86) | |
Amortization of intangible assets | | 1,179 | | | 822 | | | 43 | | | 3,466 | | | 2,478 | | | 40 | |
Restructuring charges and certain acquisition-related costs | | 155 | | | 199 | | | (22) | | | 377 | | | 580 | | | (35) | |
Other (income)/deductions—net | | (79) | | | (59) | | | 33 | | | (356) | | | 1,063 | | | * |
* Indicates calculation not meaningful. |
Product Developments—Biopharmaceutical
We continue to invest in R&D to provide potential future sources of revenues through the development of new products, as well as through additional uses for in-line and alliance products. Notwithstanding our efforts, there are no assurances as to when, or if, we will receive regulatory approval for additional indications for existing products or any of our other products in development.
We continue to strengthen our global R&D organization and pursue strategies intended to improve innovation and overall productivity in R&D to achieve a sustainable pipeline that will deliver value in the near term and over time. Our R&D priorities include:
delivering a pipeline of differentiated therapies with the greatest scientific and commercial promise;
innovating new capabilities that can position Pfizer for long-term leadership; and
creating new models for biomedical collaboration that will expedite the pace of innovation and productivity.
Our R&D primarily focuses on:
Biosimilars;
Inflammation and Immunology;
Metabolic Disease and Cardiovascular Risks;
Neuroscience;
Oncology
Rare Diseases; and
Vaccines.
For additional information about our R&D organization, including the EH R&D organization, see the “Overview of Our Performance, Operating Environment, Strategy and Outlook—Our Strategy—Description of Research and Development Operations” section of this MD&A.
A comprehensive update of Pfizer’s development pipeline was published on October 31, 2017 and is available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of our research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.
The following series of tables provides information about significant regulatory actions by, and filings pending with, the FDA and regulatory authorities in the EU and Japan, as well as additional indications and new drug candidates in late-stage development.
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RECENT FDA APPROVALS |
PRODUCT | INDICATION | DATE APPROVED |
Lyrica (pregabalin) | Extended-release tablets CV as once-daily therapy for the management of neuropathic pain associated with diabetic peripheral neuropathy and the management of post-herpetic neuralgia | October 2017
|
Mylotarg (gemtuzumab ozogamicin) | Treatment of adults with newly diagnosed CD33-positive acute myeloid leukemia (AML), and adults and children 2 years and older with relapsed or refractory CD33-positive AML | September 2017 |
Besponsa (inotuzumab ozogamicin) | Treatment of adults with relapsed or refractory B-cell precursor acute lymphoblastic leukemia | August 2017 |
Bavencio (avelumab) | Treatment for patients with locally advanced or metastatic urothelial carcinoma with disease progression on or after platinum-based therapy, which is being developed in collaboration with Merck KGaA, Germany | May 2017 |
Bavencio (avelumab) | Treatment of adults and pediatric patients 12 years and older with metastatic Merkel cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany | March 2017 |
Eucrisa (crisaborole) | A non-steroidal topical anti-inflammatory PDE-4 inhibitor for the treatment of mild-to-moderate atopic dermatitis | December 2016 |
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PENDING U.S. NDAs AND SUPPLEMENTAL FILINGS |
PRODUCT | PROPOSED INDICATION | DATE FILED*
|
PF-05280014(a)
| A potential biosimilar to Herceptin®(trastuzumab)
| August 2017 |
Bosulif (bosutinib) | Treatment of patients with newly diagnosed chronic phase Philadelphia chromosome-positive chronic myeloid leukemia, which is being developed in collaboration with Avillion | August 2017 |
Xeljanz (tofacitinib) | Treatment of adult patients with moderately to severely active ulcerative colitis | July 2017 |
Sutent (sunitinib)(b)
| Adjuvant treatment in adult patients at high risk of recurrent renal cell carcinoma following nephrectomy | May 2017 |
Xeljanz (tofacitinib)(c)
| Treatment of adult patients with active psoriatic arthritis | May 2017 |
PF-06438179(d)
| A potential biosimilar to Remicade® (infliximab)
| April 2017 |
ertugliflozin | Treatment of type 2 diabetes, which is being developed in collaboration with Merck | March 2017 |
Retacrit(e)
| A potential biosimilar to Epogen® and Procrit® (epotein alfa)
| February 2015 |
tafamidis meglumine(f)
| Treatment of transthyretin familial amyloid polyneuropathy | February 2012 |
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* | The dates set forth in this column are the dates on which the FDA accepted our submissions. |
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(a)
| Herceptin® is a registered trademark of Genentech, Inc.
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(b)
| In September 2017, the FDA’s Oncologic Drug Advisory Committee (ODAC) voted six in favor and six against the benefit-risk profile for Sutent as adjuvant treatment of adult patients at high risk of recurrent renal cell carcinoma after nephrectomy (surgical removal of the cancer-containing kidney). |
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(c)
| In August 2017, the FDA’s Arthritis Advisory Committee voted ten to one to recommend approval of the proposed dose of tofacitinib for the treatment of adult patients with active psoriatic arthritis. |
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(d)
| Remicade® is a registered trademark of Janssen. In February 2016, we divested the rights for development and commercialization of PF-06438179, a potential biosimilar to Remicade® (infliximab) in the 28 countries that form the EEA to Sandoz, which was a condition to the European Commission’s approval of the Hospira transaction. We retain commercialization rights to PF-06438179 in all countries outside of the EEA.
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(e)
| Epogen® is a registered U.S. trademark of Amgen Inc.; Procrit® is a registered U.S. trademark of Johnson & Johnson. In October 2015, we received a “complete response” letter from the FDA with respect to our biologics license application (BLA) for Retacrit, our proposed biosimilar to epoetin alfa, which was submitted for all indications of the reference product. In December 2016, we completed the resubmission of the BLA to the FDA for Retacrit in response to the “complete response” letter. In May 2017, the FDA’s ODAC voted to recommend Retacrit for approval. In June 2017, we received a “complete response” letter from the FDA, relating to matters noted in a Warning Letter issued in February 2017 following a routine inspection of the company’s facility in McPherson, Kansas in 2016. This facility was listed as the potential manufacturing site in the BLA for the proposed epoetin alfa biosimilar. The issues noted in the Warning Letter do not relate specifically to the manufacture of epoetin alfa. No additional clinical data was requested at this time and we continue to work closely with the FDA on next steps.
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(f)
| In May 2012, the FDA’s Peripheral and Central Nervous System Drugs Advisory Committee voted that the tafamidis meglumine data provide substantial evidence of efficacy for a surrogate endpoint that is reasonably likely to predict a clinical benefit. In June 2012, the FDA issued a “complete response” letter with respect to the tafamidis NDA. The FDA has requested the completion of a second efficacy study, and also has asked for additional information on the data within the current tafamidis NDA. Pfizer initiated study B3461028 in December 2013, a global Phase 3 study to support a potential new indication in transthyretin cardiomyopathy, which includes transthyretin familial amyloid cardiomyopathy (TTR-FAC) and wild-type cardiomyopathy (WT-CM). We anticipate results from this study in 2018, and continue to work with the FDA to identify next steps. |
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REGULATORY APPROVALS AND FILINGS IN THE EU AND JAPAN |
PRODUCT | DESCRIPTION OF EVENT | DATE APPROVED | DATE FILED*
|
Xeljanz (tofacitinib) | Application filed in the EU for treatment of psoriatic arthritis | — | September 2017 |
Ibrance (palbociclib) | Approval in Japan for Ibrance in combination with endocrine therapy for the treatment of HR+, HER2- inoperable or recurrent breast cancer | September 2017 | — |
Bavencio (avelumab) | Approval in Japan for the treatment of curatively unresectable Merkel cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany | September 2017 | — |
Bavencio (avelumab) | Approval in the EU for the treatment of adult patients with metastatic Merkel cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany | September 2017 | — |
Xeljanz (tofacitinib) | Application filed in the EU for the treatment of ulcerative colitis | — | August 2017 |
Bosulif (bosutinib) | Application filed in the EU for the treatment of patients with newly diagnosed chronic phase Philadelphia chromosome-positive chronic myeloid leukemia, which is being developed in collaboration with Avillion | — | August 2017 |
PF-06438179(a)
| Application filed in Japan for a potential biosimilar to Remicade® (infliximab)
| — | August 2017 |
PF-05280014(b)
| Application filed in the EU for a potential biosimilar to Herceptin® (trastuzumab)
| — | July 2017 |
Besponsa (inotuzumab ozogamicin) | Approval in the EU for the treatment of adult patients with relapsed or refractory B-cell precursor acute lymphoblastic leukemia
| June 2017 | — |
Trumenba
| Approval in the EU for a prophylactic vaccine for active immunization to prevent invasive disease caused by Neisseria meningtidis serogroup B in individuals 10 years of age and older
| May 2017 | — |
Xalkori (crizotinib) | Approval in Japan for the treatment of ROS1-positive non-small cell lung cancer | May 2017 | — |
Xeljanz (tofacitinib) | Application filed in Japan for the treatment of ulcerative colitis | — | May 2017 |
Sutent (sunitinib) | Application filed in the EU for the adjuvant treatment in adult patients at high risk of recurrent renal cell carcinoma following nephrectomy | — | April 2017 |
inotuzumab ozogamicin | Application filed in Japan for the treatment of acute lymphoblastic leukemia | — | April 2017 |
Xeljanz (tofacitinib) | Approval in the EU for Xeljanz in combination with methotrexate for the treatment of moderate to severe active rheumatoid arthritis in adult patients who have responded inadequately to, or who are intolerant to one or more disease-modifying antirheumatic drugs. Xeljanz can be given as monotherapy in case of intolerance to methotrexate or when treatment with methotrexate is inappropriate | March 2017 | — |
ertugliflozin | Application filed in the EU for the treatment of type 2 diabetes, which is being developed in collaboration with Merck | — | February 2017 |
Mylotarg (gemtuzumab ozogamicin) | Application filed in the EU for the treatment of acute myeloid leukemia | — | December 2016 |
Ibrance (palbociclib) | Approval in the EU for palbociclib in combination with
endocrine therapy for the treatment of HR+, HER2- advanced or
metastatic breast cancer, as well as for the treatment of recurrent
advanced breast cancer
| November 2016 | — |
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* | For applications in the EU, the dates set forth in this column are the dates on which the EMA validated our submissions. |
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(a)
| Remicade® is a registered trademark of Janssen. In February 2016, we divested the rights for development and commercialization of PF-06438179, a potential biosimilar to Remicade® (infliximab) in the 28 countries that form the EEA to Sandoz, which was a condition to the European Commission’s approval of the Hospira transaction. We retain commercialization rights to PF-06438179 in all countries outside of the EEA.
|
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(b)
| Herceptin® is a registered trademark of Genentech, Inc.
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LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS
FOR IN-LINE AND IN-REGISTRATION PRODUCTS
|
PRODUCT | PROPOSED INDICATION |
Bavencio (avelumab) | A monoclonal antibody that inhibits PD-L1, in combination with Inlyta (axitinib), a tyrosine kinase inhibitor,
for the first-line treatment of advanced renal cell carcinoma, which is being developed in collaboration with
Merck KGaA, Germany
|
Bavencio (avelumab) | A monoclonal antibody that inhibits PD-L1 for the first-line treatment of stage IIIb/IV non-small cell lung
cancer, which is being developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab) | A monoclonal antibody that inhibits PD-L1 for treatment of stage IIIb/IV non-small cell lung cancer that has progressed after a platinum-containing doublet, which is being developed in collaboration with Merck KGaA, Germany |
Bavencio (avelumab) | A monoclonal antibody that inhibits PD-L1 for treatment of platinum-resistant/refractory ovarian cancer,
which is being developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab) | A monoclonal antibody that inhibits PD-L1 for the first-line treatment of ovarian cancer, which is being
developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab) | A monoclonal antibody that inhibits PD-L1 for maintenance treatment, in the first-line setting, for patients
with urothelial cancer, which is being developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab) | A monoclonal antibody that inhibits PD-L1 for maintenance treatment of advanced or metastatic gastric/
gastro-esophageal junction cancers, which is being developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab) | A monoclonal antibody that inhibits PD-L1 for the third-line treatment of advanced or metastatic gastric/
gastro-esophageal junction cancers, which is being developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab) | A monoclonal antibody that inhibits PD-L1 for treatment of locally advanced squamous cell carcinoma of the
head and neck, which is being developed in collaboration with Merck KGaA, Germany
|
Inlyta (axitinib) | Adjuvant treatment of renal cell carcinoma, which is being developed in collaboration with SFJ |
Ibrance (palbociclib) | Treatment of HER2+ advanced breast cancer, in collaboration with the Alliance Foundation Trials, LLC |
Ibrance (palbociclib) | Treatment of high-risk early breast cancer, in collaboration with the German Breast Group |
Ibrance (palbociclib) | Treatment of HR+ early breast cancer, in collaboration with the Alliance Foundation Trials, LLC, and the Austrian Breast Colorectal Cancer Study Group |
Xtandi (enzalutamide) | Treatment of non-metastatic castration resistant prostate cancer |
Xtandi (enzalutamide) | Treatment of non-metastatic high risk hormone-sensitive prostate cancer |
Xtandi (enzalutamide) | Treatment of metastatic hormone-sensitive prostate cancer |
Vyndaqel (tafamidis meglumine) | Adult symptomatic transthyretin cardiomyopathy |
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NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT |
CANDIDATE | PROPOSED INDICATION |
dacomitinib | A pan-human epidermal growth factor receptor (HER) tyrosine kinase inhibitor for the first-line treatment of patients with advanced non-small cell lung cancer with estimated glomerular filtration rate (eGFR) activating mutations, which is being developed in collaboration with SFJ |
lorlatinib (PF-06463922) | A next generation ALK/ROS1 tyrosine kinase inhibitor for the treatment of patients with ALK-positive metastatic non-small cell lung cancer, previously treated with one or more ALK inhibitors |
PF-06425090 | A prophylactic vaccine for active immunization to prevent clostridium difficile colitis |
PF-05280586(a)
| A potential biosimilar to Rituxan® (rituximab)
|
PF-06439535(b)
| A potential biosimilar to Avastin® (bevacizumab)
|
PF-06410293(c)
| A potential biosimilar to Humira® (adalimumab)
|
rivipansel (GMI-1070) | A pan-selectin inhibitor for the treatment of vaso-occlusive crisis in hospitalized individuals with sickle cell disease, which was licensed from GlycoMimetics Inc. |
somatrogon (PF-06836922) | A long-acting hGH-CTP for the treatment of growth hormone deficiency in children, which is being developed in collaboration with OPKO |
somatrogon (PF-06836922) | A long-acting hGH-CTP for the treatment of growth hormone deficiency in adults, which is being developed
in collaboration with OPKO
|
talazoparib (MDV3800) | An oral PARP inhibitor for the treatment of patients with germline breast cancer susceptibility gene BRCA mutated advanced breast cancer |
tanezumab | An anti-nerve growth factor monoclonal antibody for the treatment of pain, which is being developed in collaboration with Lilly |
| |
(a)
| Rituxan® is a registered trademark of Biogen MA Inc.
|
| |
(b)
| Avastin® is a registered trademark of Genentech, Inc.
|
| |
(c)
| Humira® is a registered trademark of AbbVie Biotechnology Ltd.
|
Additional product-related programs are in various stages of discovery and development. Also, see the discussion in the “Our Strategy––Our Business Development Initiatives” section of this MD&A.
COSTS AND EXPENSES
The changes in expenses below reflect, among other things, the favorable impact of the February 2017 sale of HIS. The operating results of HIS are included in our operating results through February 2, 2017 and, therefore, operating results for the third quarter of 2017 do not reflect HIS global operations, while operating results for the third quarter of 2016 reflect three months of HIS global operations. Operating results for the first nine months of 2017 include approximately one month of HIS domestic operations and approximately two months of HIS international operations, while operating results for the first nine months of 2016 reflect nine months of HIS global operations.
Cost of Sales
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
| | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
|
Cost of sales | | $ | 2,847 |
| | $ | 3,085 |
| | (8 | ) | | $ | 7,980 |
| | $ | 9,111 |
| | (12 | ) |
As a percentage of Revenues | | 21.6 | % | | 23.6 | % | | | | 20.5 | % | | 23.2 | % | | |
Cost of sales decreased 8%increased $3.2 billion in the third quarter of 2017, and 12% in the first nine months of 2017, compared to the same periods in 2016,2023, primarily due to:
| |
• | the favorable impact of the sale of HIS global operations (which carried a higher cost of sales than other products) of $152 million in the third quarter of 2017, and $433 million in the first nine months of 2017;
|
| |
• | the favorable impact of foreign exchange of $223 million and the favorable offset of hedging gains of $66 million, both in the first nine months of 2017;
|
| |
• | the nonrecurring unfavorable impact of $4 million in the third quarter of 2016 and $216 million in the first nine months of 2016 of acquired Hospira inventory, which is measured at fair value on the acquisition date and was amortized over the turn of the related inventory;
|
recognition•a non-cash charge of synergies related to our cost-reduction/productivity initiatives; and
a favorable change in product mix, including an operational decline$5.6 billion recorded in the SIP portfoliothird quarter of 2023 for inventory write-offs and the favorability attributed to products that have lost exclusivity,related charges ($4.7 billion for Paxlovid and $0.9 billion for Comirnaty); and
partially offset by:
•$55209 million in inventory losses, overhead costs related to the period in which our Puerto Rico plants werethe facility could not operational,operate, and incremental costs resulting from tornado damage to date, allour manufacturing facility in Rocky Mount, NC,
partially offset by:
•a reduction of $2.6 billion due to lower sales of Comirnaty; and
•a reduction of $405 million due to lower sales of Paxlovid.
Cost of sales decreased $7.3 billion in the first nine months of 2023, mainly due to:
•a reduction of $12.7 billion due to lower sales of Comirnaty; and
•a reduction of $1.2 billion due to lower sales of Paxlovid,
partially offset by:
•a non-cash charge of $5.8 billion for inventory write-offs and related charges ($4.8 billion for Paxlovid and $1.0 billion for Comirnaty); and
•$209 million in inventory losses, overhead costs related to the period in which resultedthe facility could not operate, and incremental costs resulting from the recent hurricanestornado damage to our manufacturing facility in Puerto Rico.Rocky Mount, NC.
The decreaseincrease in Cost of sales as a percentage of revenues in the third quarter of 2017and the first nine months of 2017, compared to the same periods in 2016, was primarily due to all of the factors discussed above, as well as an increase in alliance revenues, which have no associated cost of sales.
Selling, Informational and Administrative (SI&A) Expenses |
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
| | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
|
Selling, informational and administrative expenses | | $ | 3,500 |
| | $ | 3,559 |
| | (2 | ) | | $ | 10,233 |
| | $ | 10,414 |
| | (2 | ) |
As a percentage of Revenues | | 26.6 | % | | 27.3 | % | | | | 26.3 | % | | 26.6 | % | | |
SI&A expenses decreased 2% in the third quarter of 2017, compared to the same period in 2016, primarily due to:
| |
• | lower advertising, promotional and field force expenses, reflecting the benefits of cost-reduction and productivity initiatives, and lower expenses associated with products that recently lost marketing exclusivity;
|
the favorable impact of the sale of HIS global operations of $39 million;
lower spending for certain products, primarily Prevnar 13/Prevenar 13; and
the favorable impact of foreign exchange of $11 million,
partially offset by:
additional investment across several of our key products, primarily Eucrisa, Ibrance and Xtandi; and
increased spending for biosimilars, primarily related to the U.S. launch of Inflectra.
SI&A expenses decreased 2% in the first nine months of 2017, compared to2023 was mainly driven by the same period in 2016, primarily due to:
| |
• | the non-recurrence of an allowance for doubtful trade accounts receivable of approximately $265 million, resulting from unfavorable developments with a distributor that was recorded in the first quarter of 2016;
|
| |
• | lower advertising, promotional and field force expenses associated with products that recently lost marketing exclusivity and certain other expenses related to disputes in the ordinary course of business;
|
lower spending for certain products, primarily Prevnar 13/Prevenar 13;
the favorable impactnon-cash charge of the sale of HIS global operations of $95 million; and
the favorable impact of foreign exchange of $78 million,
$5.6 billion discussed above, partially offset by:to a much lesser extent by favorable changes in sales mix.
additional investment across several of our key products, primarily Eucrisa, Ibrance, XtandiSelling, Informational and Xeljanz;
increased spending for biosimilars, primarily related to the U.S. launch of Inflectra; and
an increase in charitable contributions.
Research and Development (R&D)Administrative Expenses
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
| | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
|
Research and development expenses | | $ | 1,859 |
| | $ | 1,881 |
| | (1 | ) | | $ | 5,346 |
| | $ | 5,360 |
| | — |
|
As a percentage of Revenues | | 14.1 | % | | 14.4 | % | | | | 13.8 | % | | 13.7 | % | |
|
|
R&DSelling, informational and administrative expenses decreased 1%$109 million in the third quarter of 2023, primarily due to:
•2017a decrease of $325 million due to a lower provision for U.S. healthcare reform fees related to Comirnaty and Paxlovid; and
•a $140 million decrease in spending on products across multiple customer groups,
partially offset by:
•an increase of $320 million for marketing and promotional expenses for recently acquired and launched products.
Selling, informational and administrative and were relatively flatexpenses increased $1.2 billion in the first nine months of 2017, compared to the same periods in 2016,2023, primarily due to:
lower•an increase of $780 million in marketing and promotional expenses duefor recently acquired and launched products;
•an increase of $450 million for the expected Paxlovid commercial launch;
•a $285 million increase in spending on products across multiple customer groups; and
•an increase of $200 million in our liability to the discontinuationbe paid to participants of the global clinical development program for bococizumab in the fourth quarter of 2016;our supplemental savings plan,
the close-out of certain post-marketing clinical trials; and
the favorable impact of the sale of HIS global operations,
partially offset by:
| |
• | increased costs associated with our oncology programs, primarily clinical trial spend on Medivation assets, as well as, in the third quarter of 2017, increased costs associated with our immuno-oncology development programs;
|
•a decrease of $490 million due to a lower provision for U.S. healthcare reform fees related to Comirnaty and Paxlovid.
Research and Development Expenses
Research and development expenses increased $14 million in the third quarter of 2023, primarily due to:
•increased investments of $280 million, mainly to develop recently acquired assets, as well as activities to support upcoming product launches,
partially offset by:
•a decrease of $260 million mainly due to lower compensation-related expenses.
Research and development expenses increased $51 million in the first nine months of 2023,primarily driven by:
•increased costs of $560 million to develop recently acquired assets, activities to support upcoming product launches as well as ongoing late stage internal medicine programs,
partially offset by:
•lower spending of $430 million mainly for ongoing late stage vaccine and hospital programs as well as lower compensation-related expenses; and
•a decrease of $80 million in the value of the portfolio performance share grants reflecting the decrease in the price of Pfizer’s common stock.
Acquired In-Process Research and Development Expenses
Acquired in-process research and development funding creditsexpenses decreased $457 million in the third quarter of 2023 and decreased $759 million in the first nine months of 2023, primarily reflecting the non-recurrence of an upfront payment of $426 million related to the discontinuationclosing of the global clinical development program for bococizumabacquisition of ReViral Ltd. in the fourththird quarter of 2016;
2022. The decrease for the first nine months of 2023 also reflects the non-recurrence of (i) an expense of $75upfront payment to Biohaven and a premium paid on our equity investment in Biohaven totaling $263 million resulting fromand (ii) a $76 million premium paid on our May 2017 agreement with Sangamoequity investment in BioNTech to develop and commercialize gene therapy programs for Hemophilia A;
| |
• | increased costs associated with our C. difficile vaccine program, which initiated a Phase 3 clinical study in March 2017; anda potential mRNA vaccine against shingles, both recorded in the first quarter of 2022.
|
increased costs associated with our tanezumab development program.
For additional information on Cost of sales, SI&A and R&D expenses by operating segment, see the “Analysis of Operating Segment Information” section of this MD&A.
Amortization of Intangible Assets
|
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | % Change | | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
Amortization of intangible assets | | $ | 1,177 |
| | $ | 968 |
| | 22 | | $ | 3,571 |
| | $ | 2,934 |
| | 22 |
As a percentage of Revenues | | 8.9 | % | | 7.4 | % | | | | 9.2 | % | | 7.5 | % | | |
Amortization of intangible assets increased 22%$357 million in the third quarter of 20172023 and 22%$987 million in the first nine months of 2017, compared to the same periods in 2016,2023, primarily due to the inclusionas a result of amortization expense of approximately $221 million (pre-tax) in the third quarterintangible assets from our acquisitions of 2017Biohaven and approximately $751 million (pre-tax) in the first nine monthsGBT, as well as higher amortization of 2017intangible assets related to the identifiable intangible assets acquired from Medivation and Anacor,Prevnar, partially offset by assets that became fully amortized at the end of their estimated useful lives.
assets.
See also Notes to Condensed Consolidated Financial Statements—Note 9A. Identifiable Intangible Assets and Goodwill: Identifiable Intangible Assets.
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
| | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
|
Restructuring charges | | $ | 91 |
| | $ | 404 |
| | (77 | ) | | $ | 150 |
| | $ | 574 |
| | (74 | ) |
Transaction costs | | (14 | ) | | 54 |
| | * |
| | 4 |
| | 114 |
| | (97 | ) |
Integration costs | | 73 |
| | 74 |
| | (1 | ) | | 224 |
| | 300 |
| | (26 | ) |
Restructuring charges and certain acquisition-related costs | | 149 |
| | 531 |
| | (72 | ) | | 377 |
| | 988 |
| | (62 | ) |
Total additional depreciation—asset restructuring | | 39 |
| | 47 |
| | (17 | ) | | 74 |
| | 151 |
| | (51 | ) |
Total implementation costs | | 57 |
| | 78 |
| | (27 | ) | | 150 |
| | 202 |
| | (26 | ) |
Costs associated with acquisitions and cost-reduction/productivity initiatives(a) | | $ | 245 |
| | $ | 655 |
| | (63 | ) | | $ | 601 |
| | $ | 1,341 |
| | (55 | ) |
| |
(a)
| Comprises Restructuring charges and certain acquisition-related costs as well as costs associated with our cost-reduction/productivity initiatives included in Cost of sales, Research and development expenses and/or Selling, informational and administrative expenses, as appropriate. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.
|
In connection with our acquisition of Hospira, we are focusing our efforts on achieving an appropriate cost structure for the combined company. We expect to achieve $1 billion of annual cost savings by 2018 in connection with the Hospira acquisition, 25% more than our initial cost savings target of $800 million, and have achieved approximately $700 million of cost savings through October 1, 2017. The one-time costs to generate the savings are expected to be approximately $1 billion (not including costs of $215 million for full-year 2015 associated with the return of acquired IPR&D rights), incurred for up to a three-year period post-acquisition.
In 2016, we substantially completed previously disclosed cost-reduction initiatives begun in 2014 associated with our global commercial structure reorganization, manufacturing plant network rationalization and optimization initiatives, and additional cost-reduction/productivity initiatives across the enterprise. Through December 31, 2016, we incurred $3.1 billion (pre-tax) in total costs for the 2014-2016 program. The cumulative ongoing annual cost savings associated with the 2014-2016 program (but not including expected cost savings associated with the Hospira acquisition), are approximately $3.1 billion. These savings were recognized, for the most part, through the end of 2016. However, savings from costs incurred in the last half of 2016 are expected to largely occur in 2017 and are reflected in our 2017 financial guidance.
New Cost-Reduction/Productivity Initiatives—2017 through 2019 Activities
As a result of the evaluation performed in connection with our decision in September 2016 to not pursue, at that time, splitting IH and EH into two separate publicly-traded companies, we have identified new opportunities to potentially achieve greater optimization and efficiency to become more competitive in our business. Therefore, we have initiated new enterprise-wide cost-reduction/productivity initiatives, which we expect to complete by the end of 2019. These initiatives will encompass all areas of our cost base and will include further centralization of our corporate and platform functions and optimization of our manufacturing plant network to support IH and EH products and pipelines, as well as activities in other areas where opportunities are identified. The action plans related to these new initiatives are underway and, in order to achieve targeted savings of approximately $1.3 billion by 2020, we expect to incur total costs of approximately $1.0 billion over the next three years. Of this amount, we expect about 80% to be manufacturing operations related and we expect about 20% of the total charges will be non-cash. For additional information about these programs and expected and actual total costs, see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.
Transforming to a More Focused Company Program––For a description of our program, as well as the anticipated and actual costs, see Note 3A. The expectedprogram savings discussed below may be rounded and represent approximations. In connection with restructuring our corporate enabling functions, we achieved gross cost savings of $1.0 billion, or net cost savings, excluding merit and inflation growth and certain real estate cost increases, of $700 million, in the two year period from 2021 through 2022. In connection with transforming our commercial go-to market strategy, we expect net cost savings of $1.4 billion, to be achieved primarily from 2022 through 2024. In connection with manufacturing network optimization, we expect net cost savings of $550 million to be achieved primarily from 2020 through 2023. In connection with optimizing our end-to-end R&D operations, we expect net cost savings of $2.3 billion to be achieved primarily from 2023 through 2025. Certain qualifying costs for this program in all periods since inception were recorded and reflected as Certain Significant Items and excluded from our non-GAAP measure of Adjusted Income/(Loss). See the 2017Non-GAAP Financial Measure: Adjusted Income/(Loss) associated with these activities are reflected in our 2017 financial guidance.section within MD&A.
In addition to these major initiatives,this program, we continuously monitor our operations for cost reductioncost-reduction and/or productivity opportunities, especially in light of the losses of exclusivity and the expiration of collaborative arrangements for various products.
Other (Income)/Deductions—Net
The favorable period-over-period change of $19 million for the third quarter of 2023, compared to the third quarter of 2022, was primarily driven by (i) a gain on the divestiture of our early-stage rare disease gene therapy portfolio to Alexion in the third quarter of 2023 (see Note 2B), (ii) the non-recurrence of an asset impairment charge incurred in the third quarter of 2022, and (iii) equity income from our investment in Haleon in the third quarter of 2023 versus equity losses in the third quarter of 2022, partially offset by (iv) higher net losses on equity securities, and (v) lower net periodic benefit credits associated with pension and postretirement plans recorded in the third quarter of 2023.
|
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
| | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
Other (income)/deductions––net | | $ | 51 |
| | $ | 1,417 |
| | (96 | )% | | $ | (16 | ) | | $ | 2,815 |
| | * |
| |
* | Calculation not meaningful. |
The favorable period-over-period change of $1.4 billion for the first nine months of 2023, compared to the first nine months of 2022, was primarily driven by (i) lower net losses on equity securities, (ii) lower net interest expense, (iii) a gain on the divestiture of our early-stage rare disease gene therapy portfolio to Alexion (see Note 2B), and (iv) higher dividend income.
See also the “Analysis of Operating Segment Information” section of this MD&A.Provision/(Benefit) for Taxes on Income/(Loss)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | % Change | | October 1, 2023 | | October 2, 2022 | | % Change |
Provision/(benefit) for taxes on income/(loss) | | $ | (964) | | | $ | 356 | | | * | | $ | (320) | | | $ | 3,098 | | | * |
Effective tax rate on continuing operations | | 28.8 | % | | 4.0 | % | | | | (6.2) | % | | 10.5 | % | | |
* Indicates calculation not meaningful. |
PROVISION FOR TAXES ON INCOME
|
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | % Change | | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
Provision for taxes on income | | $ | 727 |
| | $ | 249 |
| | * | | $ | 2,287 |
| | $ | 1,109 |
| | * |
Effective tax rate on continuing operations | | 20.3 | % | | 15.5 | % | | | | 20.1 | % | | 14.6 | % | | |
| |
* | Calculation not meaningful. |
For information about our effective tax rate and the events and circumstances contributing to the changes between periods, as well as details about discrete elements that impacted our tax provisions, see Notes to Condensed Consolidated Financial Statements—Note 5. Tax Matters5. NON-GAAP FINANCIAL MEASURE (ADJUSTED INCOME)
General Description of Non-GAAP Financial Measure (Adjusted Income)
Adjusted income is an alternative view of performance used by management. We measure the performance of the overall Company on this basis in conjunction with other performance metrics. Because Adjusted income is an important internal measurement for Pfizer, we believe that investors’ understanding of our performance is enhanced by disclosing this performance measure. We report Adjusted income, certain components of Adjusted income, and Adjusted diluted earnings per share in order to portray the results of our major operations––the discovery, development, manufacture, marketing and sale of prescription medicines, vaccines and consumer healthcare (OTC) products––prior to considering certain income statement elements. We have defined Adjusted income as Net income attributable to Pfizer Inc. before the impact of purchase accounting for acquisitions, acquisition-related costs, discontinued operations and certain significant items, which are described below. Also, see the “Non-GAAP Financial Measure (Adjusted Income)––General Description of Non-GAAP Financial Measure (Adjusted Income)” section of our 2016 Financial Report for additional information. Similarly, we have defined the Adjusted income components as Cost of sales, Selling, informational and administrative expenses, Research and development expenses, Amortization of intangible assets and Other (income)/deductions––net, each before the impact of purchase accounting for acquisitions, acquisition-related costs and certain significant items. We have defined Adjusted diluted earnings per share as Earnings per common share attributable to Pfizer Inc.––dilutedbefore the impact of purchase accounting for acquisitions, acquisition-related costs, discontinued operations and certain significant items. The Adjusted income measure, the Adjusted income component measures and the Adjusted diluted earnings per share measure are not, and should not be viewed as, substitutes for U.S. GAAP net income, U.S. GAAP net income components or U.S. GAAP diluted earnings per share.
The following are examples of how the Adjusted income and Adjusted diluted earnings per share measures are utilized:
senior management receives a monthly analysis of our operating results that is prepared on an Adjusted income and Adjusted diluted earnings per share basis;
our annual budgets are prepared on an Adjusted income and Adjusted diluted earnings per share basis; and
| |
• | senior management’s annual compensation is derived, in part, using Adjusted income and Adjusted diluted earnings per share measures. See the “Non-GAAP Financial Measure (Adjusted Income)––General Description of Non-GAAP Financial Measure (Adjusted Income)” section of our 2016 Financial Report for additional information.
|
Adjusted income and its components and Adjusted diluted earnings per share are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, are limited in their usefulness to investors. Because of their non-standardized definitions, Adjusted income and its components (unlike U.S. GAAP net income and its components) and Adjusted diluted earnings per share (unlike U.S. GAAP diluted earnings per share) may not be comparable to the calculation of similar measures of other companies. Adjusted income and its components and Adjusted diluted earnings per share are presented solely to permit investors to more fully understand how management assesses performance.
We also recognize that, as internal measures of performance, the Adjusted income and its components and Adjusted diluted earnings per share measures have limitations, and we do not restrict our performance-management process solely to these metrics. A limitation of these measures is that they provide a view of our operations without including all events during a period, such as the effects of an acquisition or amortization of purchased intangibles, and do not provide a comparable view of our performance to other companies in the biopharmaceutical industry. We also use other specifically tailored tools designed to achieve the highest levels of performance. For example, our R&D organization has productivity targets, upon which its
effectiveness is measured. In addition, total shareholder return, both on an absolute basis and relative to a publicly-traded pharmaceutical index, plays a significant role in determining payouts under certain of Pfizer’s long-term incentive compensation plans.
See the accompanying reconciliations of certain GAAP reported to non-GAAP adjusted information for the third quarter and first nine months of 2017 and 2016 below.
Purchase Accounting Adjustments
Adjusted income is calculated prior to considering certain significant purchase accounting impacts resulting from business combinations and net asset acquisitions. These impacts, primarily associated with Wyeth (acquired in 2009), Hospira (acquired in 2015), Anacor (acquired in June 2016) and Medivation (acquired in September 2016), can include the incremental charge to cost of sales from the sale of acquired inventory that was written up to fair value, amortization related to the increase in fair value of the acquired finite-lived intangible assets, and to a much lesser extent, depreciation related to the increase/decrease in fair value of the acquired fixed assets (primarily manufacturing facilities), amortization related to the increase in fair value of acquired debt, and the fair value changes associated with contingent consideration. Therefore, the Adjusted income measure includes the revenues earned upon the sale of the acquired products without considering the acquisition cost of those products.
Acquisition-Related Costs
Adjusted income is calculated prior to considering transaction, integration, restructuring and additional depreciation costs associated with business combinations because these costs are unique to each transaction and represent costs that were incurred to restructure and integrate two businesses as a result of the acquisition decision. For additional clarity, only transaction costs, additional depreciation and restructuring and integration activities that are associated with a business combination or a net-asset acquisition are included in acquisition-related costs. We have made no adjustments for the resulting synergies.
Discontinued OperationsCosts and Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Costs and expenses follow: |
| | Three Months Ended | Nine Months Ended |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | % Change | | October 1, 2023 | | October 2, 2022 | | % Change |
Cost of sales | | $ | 9,269 | | | $ | 6,063 | | | 53 | | | $ | 17,391 | | | $ | 24,696 | | | (30) | |
Percentage of Revenues | | 70.0 | % | | 26.8 | % | | | | 39.3 | % | | 32.5 | % | | |
Selling, informational and administrative expenses | | 3,281 | | | 3,391 | | | (3) | | | 10,196 | | | 9,032 | | | 13 | |
Research and development expenses | | 2,711 | | | 2,696 | | | 1 | | | 7,864 | | | 7,813 | | | 1 | |
Acquired in-process research and development expenses | | 67 | | | 524 | | | (87) | | | 122 | | | 880 | | | (86) | |
Amortization of intangible assets | | 1,179 | | | 822 | | | 43 | | | 3,466 | | | 2,478 | | | 40 | |
Restructuring charges and certain acquisition-related costs | | 155 | | | 199 | | | (22) | | | 377 | | | 580 | | | (35) | |
Other (income)/deductions—net | | (79) | | | (59) | | | 33 | | | (356) | | | 1,063 | | | * |
* Indicates calculation not meaningful. |
Adjusted income is calculated prior to considering the resultsCost of operations included in discontinued operations, as well as any related gains or losses on the disposal of such operations.
Certain Significant Items
Sales
Adjusted income is calculated prior to considering certain significant items. Certain significant items represent substantive and/or unusual items that are evaluated on an individual basis. Such evaluation considers bothCost of sales increased $3.2 billion in the quantitativethird quarter of 2023, primarily due to:
•a non-cash charge of $5.6 billion recorded in the third quarter of 2023 for inventory write-offs and the qualitative aspects of their nature. Certain significant items may be highly variablerelated charges ($4.7 billion for Paxlovid and difficult to predict. Furthermore,$0.9 billion for Comirnaty); and
•$209 million in some cases it is reasonably possible that they could reoccur in future periods. For example, major non-acquisition-related cost-reduction programs stand on their own as they are specific to an event or goal with a defined term, but we may have subsequent programs based on reorganizations of the business, cost productivity or in response to loss of exclusivity or economic conditions. Legal charges to resolve litigation are also related to specific cases, which are facts and circumstances specific and, in some cases, may also be the result of litigation matters at acquired companies that were inestimable, not probable or unresolved at the date of acquisition. Unusual items may represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be non-recurring; or items that relate to products we no longer sell. While not all-inclusive, examples of items that could be included as certain significant items would be a major non-acquisition-related restructuring charge and associated implementation costs; amounts related to certain disposals of businesses, products or facilities that do not qualify as discontinued operations under U.S. GAAP; certain intangible asset impairments; adjustmentsinventory losses, overhead costs related to the resolutionperiod in which the facility could not operate, and incremental costs resulting from tornado damage to our manufacturing facility in Rocky Mount, NC,
partially offset by:
•a reduction of certain tax positions;$2.6 billion due to lower sales of Comirnaty; and
•a reduction of $405 million due to lower sales of Paxlovid.
Cost of sales decreased $7.3 billion in the impactfirst nine months of adopting certain significant, event-driven tax legislation; or2023, mainly due to:
•a reduction of $12.7 billion due to lower sales of Comirnaty; and
•a reduction of $1.2 billion due to lower sales of Paxlovid,
partially offset by:
•a non-cash charge of $5.8 billion for inventory write-offs and related charges ($4.8 billion for Paxlovid and $1.0 billion for Comirnaty); and
•$209 million in inventory losses, overhead costs related to certain legal matters, such as certain of those discussedthe period in Noteswhich the facility could not operate, and incremental costs resulting from tornado damage to Condensed Consolidated Financial Statements—Note 12A. Commitments and Contingencies: Legal Proceedings, includedour manufacturing facility in Part I, Item 1 of this Quarterly Report on Form 10-Q. Normal, ongoing defense costs of the Company or settlements of and accruals for legal matters made in the normal course of our business would not be considered certain significant items.Rocky Mount, NC.
Reconciliations of GAAP Reported to Non-GAAP Adjusted Information––Certain Line Items
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended October 1, 2017 |
IN MILLIONS, EXCEPT PER COMMON SHARE DATA | | GAAP Reported |
| | Purchase Accounting Adjustments(a) |
| | Acquisition-Related Costs(a) |
| | Discontinued Operations(a) |
| | Certain Significant Items(a) |
| | Non-GAAP Adjusted |
|
Revenues | | $ | 13,168 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 13,168 |
|
Cost of sales | | 2,847 |
| | (28 | ) | | (26 | ) | | — |
| | (92 | ) | | 2,699 |
|
Selling, informational and administrative expenses | | 3,500 |
| | — |
| | — |
| | — |
| | (22 | ) | | 3,478 |
|
Research and development expenses | | 1,859 |
| | 1 |
| | — |
| | — |
| | (9 | ) | | 1,851 |
|
Amortization of intangible assets | | 1,177 |
| | (1,120 | ) | | — |
| | — |
| | — |
| | 57 |
|
Restructuring charges and certain acquisition-related costs | | 149 |
| | — |
| | (129 | ) | | — |
| | (21 | ) | | — |
|
Other (income)/deductions––net | | 51 |
| | (7 | ) | | — |
| | — |
| | (305 | ) | | (261 | ) |
Income from continuing operations before provision for taxes on income | | 3,585 |
| | 1,154 |
| | 155 |
| | — |
| | 449 |
| | 5,343 |
|
Provision for taxes on income(b) | | 727 |
| | 306 |
| | 72 |
| | — |
| | 161 |
| | 1,267 |
|
Income from continuing operations | | 2,858 |
| | 848 |
| | 83 |
| | — |
| | 288 |
| | 4,077 |
|
Discontinued operations––net of tax | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net income attributable to noncontrolling interests | | 18 |
| | — |
| | — |
| | — |
| | — |
| | 18 |
|
Net income attributable to Pfizer Inc. | | 2,840 |
| | 848 |
| | 83 |
| | — |
| | 288 |
| | 4,059 |
|
Earnings per common share attributable to Pfizer Inc.––diluted | | 0.47 |
| | 0.14 |
| | 0.01 |
| | — |
| | 0.05 |
| | 0.67 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended October 1, 2017 |
IN MILLIONS, EXCEPT PER COMMON SHARE DATA | | GAAP Reported |
| | Purchase Accounting Adjustments(a) |
| | Acquisition-Related Costs(a) |
| | Discontinued Operations(a) |
| | Certain Significant Items(a) |
| | Non-GAAP Adjusted |
|
Revenues | | $ | 38,843 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 38,843 |
|
Cost of sales | | 7,980 |
| | (45 | ) | | (38 | ) | | — |
| | (168 | ) | | 7,729 |
|
Selling, informational and administrative expenses | | 10,233 |
| | (15 | ) | | — |
| | — |
| | (67 | ) | | 10,151 |
|
Research and development expenses | | 5,346 |
| | 7 |
| | — |
| | — |
| | (26 | ) | | 5,326 |
|
Amortization of intangible assets | | 3,571 |
| | (3,438 | ) | | — |
| | — |
| | — |
| | 133 |
|
Restructuring charges and certain acquisition-related costs | | 377 |
| | — |
| | (309 | ) | | — |
| | (68 | ) | | — |
|
Other (income)/deductions––net | | (16 | ) | | (35 | ) | | — |
| | — |
| | (468 | ) | | (519 | ) |
Income from continuing operations before provision for taxes on income | | 11,351 |
| | 3,527 |
| | 347 |
| | — |
| | 797 |
| | 16,023 |
|
Provision for taxes on income(b) | | 2,287 |
| | 990 |
| | 137 |
| | — |
| | 263 |
| | 3,677 |
|
Income from continuing operations | | 9,064 |
| | 2,537 |
| | 211 |
| | — |
| | 534 |
| | 12,345 |
|
Discontinued operations––net of tax | | 1 |
| | — |
| | — |
| | (1 | ) | | — |
| | — |
|
Net income attributable to noncontrolling interests | | 32 |
| | — |
| | — |
| | — |
| | — |
| | 32 |
|
Net income attributable to Pfizer Inc. | | 9,034 |
| | 2,537 |
| | 211 |
| | (1 | ) | | 534 |
| | 12,313 |
|
Earnings per common share attributable to Pfizer Inc.––diluted | | 1.49 |
| | 0.42 |
| | 0.03 |
| | — |
| | 0.09 |
| | 2.03 |
|
See end of tables for notes (a) and (b).
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended October 2, 2016 |
IN MILLIONS, EXCEPT PER COMMON SHARE DATA | | GAAP Reported |
| | Purchase Accounting Adjustments(a) |
| | Acquisition-Related Costs(a) |
| | Discontinued Operations(a) |
| | Certain Significant Items(a) |
| | Non-GAAP Adjusted |
|
Revenues | | $ | 13,045 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 13,045 |
|
Cost of sales | | 3,085 |
| | (32 | ) | | (3 | ) | | — |
| | (93 | ) | | 2,957 |
|
Selling, informational and administrative expenses | | 3,559 |
| | (5 | ) | | — |
| | — |
| | (23 | ) | | 3,531 |
|
Research and development expenses | | 1,881 |
| | — |
| | — |
| | — |
| | (8 | ) | | 1,873 |
|
Amortization of intangible assets | | 968 |
| | (936 | ) | | — |
| | — |
| | — |
| | 32 |
|
Restructuring charges and certain acquisition-related costs | | 531 |
| | — |
| | (277 | ) | | — |
| | (254 | ) | | — |
|
Other (income)/deductions––net | | 1,417 |
| | 6 |
| | — |
| | — |
| | (1,590 | ) | | (168 | ) |
Income from continuing operations before provision for taxes on income | | 1,604 |
| | 966 |
| | 280 |
| | — |
| | 1,969 |
| | 4,819 |
|
Provision for taxes on income(b), (c) | | 249 |
| | 366 |
| | 73 |
| | — |
| | 370 |
| | 1,058 |
|
Income from continuing operations(c) | | 1,355 |
| | 600 |
| | 207 |
| | — |
| | 1,599 |
| | 3,761 |
|
Discontinued operations––net of tax | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net income attributable to noncontrolling interests | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net income attributable to Pfizer Inc.(c) | | 1,355 |
| | 600 |
| | 207 |
| | — |
| | 1,599 |
| | 3,761 |
|
Earnings per common share attributable to Pfizer Inc.––diluted(c) | | 0.22 |
| | 0.10 |
| | 0.03 |
| | — |
| | 0.26 |
| | 0.61 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended October 2, 2016 |
IN MILLIONS, EXCEPT PER COMMON SHARE DATA | | GAAP Reported |
| | Purchase Accounting Adjustments(a) |
| | Acquisition-Related Costs(a) | | Discontinued Operations(a) |
| | Certain Significant Items(a) |
| | Non-GAAP Adjusted |
|
Revenues | | $ | 39,196 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 39,196 |
|
Cost of sales | | 9,111 |
| | (284 | ) | | (3 | ) | | — |
| | (240 | ) | | 8,584 |
|
Selling, informational and administrative expenses | | 10,414 |
| | (13 | ) | | — |
| | — |
| | (59 | ) | | 10,342 |
|
Research and development expenses | | 5,360 |
| | 1 |
| | — |
| | — |
| | (24 | ) | | 5,336 |
|
Amortization of intangible assets | | 2,934 |
| | (2,841 | ) | | — |
| | — |
| | — |
| | 94 |
|
Restructuring charges and certain acquisition-related costs | | 988 |
| | — |
| | (595 | ) | | — |
| | (393 | ) | | — |
|
Other (income)/deductions––net | | 2,815 |
| | 33 |
| | — |
| | — |
| | (3,395 | ) | | (547 | ) |
Income from continuing operations before provision for taxes on income | | 7,575 |
| | 3,103 |
| | 598 |
| | — |
| | 4,112 |
| | 15,388 |
|
Provision for taxes on income(b), (c) | | 1,109 |
| | 962 |
| | 47 |
| | — |
| | 1,377 |
| | 3,496 |
|
Income from continuing operations(c) | | 6,465 |
| | 2,141 |
| | 550 |
| | — |
| | 2,735 |
| | 11,892 |
|
Discontinued operations––net of tax | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net income attributable to noncontrolling interests | | 25 |
| | — |
| | — |
| | — |
| | — |
| | 25 |
|
Net income attributable to Pfizer Inc.(c) | | 6,440 |
| | 2,141 |
| | 550 |
| | — |
| | 2,735 |
| | 11,867 |
|
Earnings per common share attributable to Pfizer Inc.––diluted(c) | | 1.04 |
| | 0.35 |
| | 0.09 |
| | — |
| | 0.44 |
| | 1.92 |
|
| |
(a)
| For details of adjustments, see “Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income” below. |
| |
(b)
| The effective tax rate on Non-GAAP Adjusted income was 23.7% in the third quarter of 2017, compared with 22.0% in the third quarter of 2016. The increase was primarily due to an unfavorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business. The effective tax rate on Non-GAAP Adjusted income was 22.9% in the first nine months of 2017, compared with 22.7% in the first nine months of 2016. The increase was primarily due to a decrease in benefits associated with the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations, partially offset by a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.
|
| |
(c)
| GAAP Reported and Non-GAAP Adjusted amounts for the three and nine months ended October 2, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, requiring: (i) excess tax benefits or deficiencies (including tax benefits of dividend equivalents) of share-based compensation to be recognized as a component of the Provision for taxes on income (the net tax benefit was $35 million in the third quarter of 2016 and $85 million in the first nine months of 2016) and (ii) in the diluted net earnings per share calculation, when applying the treasury stock method for shares that could be repurchased, the assumed proceeds no longer include the amount of excess tax benefit. For additional information, see Notes to Consolidated Financial Statements––Note 1B. Adoption of New Accounting Standards in Pfizer’s 2016 Financial Report.
|
Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income |
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | October 1, 2017 |
| | October 2, 2016 |
|
Purchase accounting adjustments | | | | | | | | |
Amortization, depreciation and other(a) | | $ | 1,126 |
| | $ | 934 |
| | $ | 3,482 |
| | $ | 2,819 |
|
Cost of sales | | 28 |
| | 32 |
| | 45 |
| | 284 |
|
Total purchase accounting adjustments––pre-tax | | 1,154 |
| | 966 |
| | 3,527 |
| | 3,103 |
|
Income taxes(b) | | (306 | ) | | (366 | ) | | (990 | ) | | (962 | ) |
Total purchase accounting adjustments––net of tax | | 848 |
| | 600 |
| | 2,537 |
| | 2,141 |
|
Acquisition-related costs | | | | |
| | |
| | |
|
Restructuring charges(c) | | 70 |
| | 150 |
| | 82 |
| | 181 |
|
Transaction costs(c) | | (14 | ) | | 54 |
| | 4 |
| | 114 |
|
Integration costs(c) | | 73 |
| | 73 |
| | 224 |
| | 300 |
|
Additional depreciation––asset restructuring(d) | | 26 |
| | 3 |
| | 38 |
| | 3 |
|
Total acquisition-related costs––pre-tax | | 155 |
| | 280 |
| | 347 |
| | 598 |
|
Income taxes(e) | | (72 | ) | | (73 | ) | | (137 | ) | | (47 | ) |
Total acquisition-related costs––net of tax | | 83 |
| | 207 |
| | 211 |
| | 550 |
|
Discontinued operations | | | | |
| | |
| | |
|
Total discontinued operations––net of tax, attributable to Pfizer Inc.(f) | | — |
| | — |
| | (1 | ) | | — |
|
Certain significant items | | | | |
| | |
| | |
|
Restructuring charges(g) | | 21 |
| | 254 |
| | 68 |
| | 393 |
|
Implementation costs and additional depreciation––asset restructuring(h) | | 69 |
| | 122 |
| | 185 |
| | 350 |
|
Certain legal matters, net(i) | | 183 |
| | (40 | ) | | 191 |
| | 506 |
|
Loss on sale and impairment on remeasurement of HIS net assets(i) | | (12 | ) | | 1,422 |
| | 52 |
| | 1,422 |
|
Certain asset impairments(i) | | 127 |
| | 126 |
| | 127 |
| | 1,073 |
|
Business and legal entity alignment costs(i) | | 16 |
| | 69 |
| | 54 |
| | 180 |
|
Other(j) | | 45 |
| | 17 |
| | 119 |
| | 189 |
|
Total certain significant items––pre-tax | | 449 |
| | 1,969 |
| | 797 |
| | 4,112 |
|
Income taxes(k) | | (161 | ) | | (370 | ) | | (263 | ) | | (1,377 | ) |
Total certain significant items––net of tax | | 288 |
| | 1,599 |
| | 534 |
| | 2,735 |
|
Total purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items––net of tax, attributable to Pfizer Inc. | | $ | 1,219 |
| | $ | 2,406 |
| | $ | 3,280 |
| | $ | 5,426 |
|
| |
(a)
| Included primarily in Amortization of intangible assets.
|
| |
(b)
| Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate.
|
| |
(c)
| Included in Restructuring charges and certain acquisition-related costs. Restructuring charges include employee termination costs, asset impairments and other exit costs associated with business combinations. Transaction costs represent external costs for banking, legal, accounting and other similar services. Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.
|
| |
(d)
| Included in Cost of sales. Represents the impact of changes in estimated useful lives of assets involved in restructuring actions related to acquisitions.
|
| |
(e)
| Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. The nine months ended October 2, 2016were unfavorably impacted by the remeasurement of certain deferred tax liabilities resulting from plant network restructuring activities.
|
| |
(f)
| Included in Discontinued operations––net of tax.
|
| |
(g)
| Amounts relate to our cost-reduction/productivity initiatives not related to acquisitions. Included in Restructuring charges and certain acquisition-related costs (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives).
|
| |
(h)
| Amounts relate to our cost-reduction/productivity initiatives not related to acquisitions (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives). For the three months ended October 1, 2017, included in Cost of sales ($38 million), Selling, informational and administrative expenses ($22 million) and Research and development expenses ($9 million). For the three months ended October 2, 2016, virtually all included in Cost of sales ($89 million), Selling, informational and administrative expenses ($23 million) and Research and development expenses ($8 million). For the nine months ended October 1, 2017, included in Cost of sales ($113 million), Selling, informational and administrative
|
expenses ($46 million) and Research and developmentexpenses ($26 million). For the nine months ended October 2, 2016, virtually all included in Cost of sales ($269 million), Selling, informational and administrativeexpenses ($56 million) and Research and developmentexpenses ($22 million).
| |
(i)
| Included in Other (income)/deductions—net (see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net).
|
| |
(j)
| For the three months ended October 1, 2017, included in Cost of sales ($54 million) and Other (income)/deductions––net ($9 million income. For the three months ended October 2, 2016, included in Cost of sales ($4 million) and Other (income)/deductions––net ($13 million). For the nine months ended October 1, 2017, included in Cost of sales ($55 million), Selling, informational and administrative expenses ($21 million) and Other (income)/deductions––net ($43 million). For the nine months ended October 2, 2016, included in Cost of sales ($29 million income), Selling, informational and administrative expenses ($3 million), Research and developmentexpenses ($2 million) and Other (income)/deductions––net ($213 million). In the three months and nine months ended October 1, 2017, includes $55 million in inventory losses, overhead costs related to the period in which our Puerto Rico plants were not operational, and incremental costs to date, all of which resulted from the recent hurricanes in Puerto Rico and are included in Cost of sales. For the nine months ended October 1, 2017, includes a net loss of $30 million related to the sale of our 40% ownership investment in Teuto, including the extinguishment of a put option for the remaining 60% ownership interest. For the nine months ended October 2, 2016, primarily includes $150 million paid to Allergan for reimbursement of Allergan’s expenses associated with the terminated transaction.
|
| |
(k)
| Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. The third quarter of 2016 was unfavorably impacted by the tax effects of an impairment charge related to the write-down of the HIS net assets to fair value less estimated costs to sell, mainly related to goodwill, which is not deductible for tax purposes, and the jurisdictional mix of intangible assets. The first nine months of 2016 were favorably impacted by benefits related to the final resolution of an agreement in principle reached in February 2016 and finalized in April 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our initial assessment in 2015 of the likelihood of prevailing on the technical merits of our tax position, as well as benefits associated with our Venezuela operations, partially offset by the unfavorable tax effects of the impairment charge related to the write-down of the HIS net assets to fair value less estimated costs to sell, mainly related to goodwill, which is not deductible for tax purposes, and the jurisdictional mix of intangible assets.
|
ANALYSIS OF OPERATING SEGMENT INFORMATION
The following tables and associated notes provide additional information about the performanceas a percentage of our two operating segments—the IH segment and the EH segment. For additional information about each operating segment, see the “Our Strategy––Commercial Operations” section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 13. Segment, Geographic and Other Revenue Information, as well as the “Selected Balance Sheet Information by Operating Segment” section of the MD&A in our Form 10-Q for the quarter ended April 2, 2017.
As described in Note 1A, acquisitions and divestitures have impacted our results of operations in 2017 and 2016.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
The following tables provide revenue and cost information by reportable operating segment and a reconciliation of that information to our condensed consolidated statements of income: |
| | Third Quarter of 2017 |
(MILLIONS OF DOLLARS) | | Innovative Health (IH)(a) |
| | Essential Health (EH)(a) |
| | Other(b) |
| | Non-GAAP Adjusted(c) |
| | Reconciling Items(d) |
| | GAAP Reported |
|
Revenues | | $ | 8,118 |
| | $ | 5,050 |
| | $ | — |
| | $ | 13,168 |
| | $ | — |
| | $ | 13,168 |
|
Cost of sales | | 1,082 |
| | 1,448 |
| | 170 |
| | 2,699 |
| | 147 |
| | 2,847 |
|
% of revenue | | 13.3 | % |
| 28.7 | % |
| * |
|
| 20.5 | % |
| * |
|
| 21.6 | % |
Selling, informational and administrative expenses | | 1,736 |
| | 727 |
| | 1,016 |
| | 3,478 |
| | 22 |
| | 3,500 |
|
Research and development expenses | | 639 |
| | 249 |
| | 964 |
| | 1,851 |
| | 8 |
| | 1,859 |
|
Amortization of intangible assets | | 40 |
| | 17 |
| | — |
| | 57 |
| | 1,120 |
| | 1,177 |
|
Restructuring charges and certain acquisition-related costs | | — |
| | — |
| | — |
| | — |
| | 149 |
| | 149 |
|
Other (income)/deductions––net | | (253 | ) | | (155 | ) | | 147 |
| | (261 | ) | | 312 |
| | 51 |
|
Income/(loss) from continuing operations before provision for taxes on income | | $ | 4,875 |
| | $ | 2,765 |
| | $ | (2,297 | ) | | $ | 5,343 |
| | $ | (1,759 | ) | | $ | 3,585 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended October 1, 2017 |
(MILLIONS OF DOLLARS) | | Innovative Health (IH)(a) |
| | Essential Health (EH)(a) |
| | Other(b) |
| | Non-GAAP Adjusted(c) |
| | Reconciling Items(d) |
| | GAAP Reported |
|
Revenues | | $ | 23,204 |
| | $ | 15,639 |
| | $ | — |
| | $ | 38,843 |
| | $ | — |
| | $ | 38,843 |
|
Cost of sales | | 2,912 |
| | 4,319 |
| | 497 |
| | 7,729 |
| | 252 |
| | 7,980 |
|
% of revenue | | 12.6 | % | | 27.6 | % | | * |
| | 19.9 | % | | * |
| | 20.5 | % |
Selling, informational and administrative expenses | | 4,914 |
| | 2,212 |
| | 3,026 |
| | 10,151 |
| | 82 |
| | 10,233 |
|
Research and development expenses | | 1,709 |
| | 755 |
| | 2,862 |
| | 5,326 |
| | 20 |
| | 5,346 |
|
Amortization of intangible assets | | 90 |
| | 43 |
| | — |
| | 133 |
| | 3,438 |
| | 3,571 |
|
Restructuring charges and certain acquisition-related costs | | — |
| | — |
| | — |
| | — |
| | 377 |
| | 377 |
|
Other (income)/deductions––net | | (611 | ) | | (248 | ) | | 341 |
| | (519 | ) | | 503 |
| | (16 | ) |
Income/(loss) from continuing operations before provision for taxes on income | | $ | 14,190 |
| | $ | 8,558 |
| | $ | (6,725 | ) | | $ | 16,023 |
| | $ | (4,671 | ) | | $ | 11,351 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Third Quarter of 2016 |
(MILLIONS OF DOLLARS) | | Innovative Health (IH)(a) |
| | Essential Health (EH)(a) |
| | Other(b) |
| | Non-GAAP Adjusted(c) |
| | Reconciling Items(d) |
| | GAAP Reported |
|
Revenues | | $ | 7,332 |
| | $ | 5,712 |
| | $ | — |
| | $ | 13,045 |
| | $ | — |
| | $ | 13,045 |
|
Cost of sales | | 1,039 |
| | 1,546 |
| | 372 |
| | 2,957 |
| | 128 |
| | 3,085 |
|
% of revenue | | 14.2 | % |
| 27.1 | % |
| * |
|
| 22.7 | % |
| * |
|
| 23.6 | % |
Selling, informational and administrative expenses | | 1,647 |
| | 813 |
| | 1,071 |
| | 3,531 |
| | 28 |
| | 3,559 |
|
Research and development expenses | | 671 |
| | 292 |
| | 911 |
| | 1,873 |
| | 8 |
| | 1,881 |
|
Amortization of intangible assets | | 25 |
| | 7 |
| | — |
| | 32 |
| | 936 |
| | 968 |
|
Restructuring charges and certain acquisition-related costs | | — |
| | — |
| | — |
| | — |
| | 531 |
| | 531 |
|
Other (income)/deductions––net | | (237 | ) | | (73 | ) | | 142 |
| | (168 | ) | | 1,584 |
| | 1,417 |
|
Income/(loss) from continuing operations before provision for taxes on income | | $ | 4,187 |
| | $ | 3,128 |
| | $ | (2,496 | ) | | $ | 4,819 |
| | $ | (3,215 | ) | | $ | 1,604 |
|
See end of tables for notes (a) through (d).
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended October 2, 2016 |
(MILLIONS OF DOLLARS) | | Innovative Health (IH)(a) |
| | Essential Health (EH)(a) |
| | Other(b) |
| | Non-GAAP Adjusted(c) |
| | Reconciling Items(d) |
| | GAAP Reported |
|
Revenues | | $ | 21,471 |
| | $ | 17,725 |
| | $ | — |
| | $ | 39,196 |
| | $ | — |
| | $ | 39,196 |
|
Cost of sales | | 2,930 |
| | 4,677 |
| | 977 |
| | 8,584 |
| | 527 |
| | 9,111 |
|
% of revenue | | 13.6 | % | | 26.4 | % | | * |
| | 21.9 | % | | * |
| | 23.2 | % |
Selling, informational and administrative expenses | | 4,947 |
| | 2,435 |
| | 2,960 |
| | 10,342 |
| | 72 |
| | 10,414 |
|
Research and development expenses | | 1,815 |
| | 876 |
| | 2,645 |
| | 5,336 |
| | 23 |
| | 5,360 |
|
Amortization of intangible assets | | 74 |
| | 20 |
| | — |
| | 94 |
| | 2,841 |
| | 2,934 |
|
Restructuring charges and certain acquisition-related costs | | — |
| | — |
| | — |
| | — |
| | 988 |
| | 988 |
|
Other (income)/deductions––net | | (764 | ) | | (267 | ) | | 484 |
| | (547 | ) | | 3,362 |
| | 2,815 |
|
Income/(loss) from continuing operations before provision for taxes on income | | $ | 12,470 |
| | $ | 9,985 |
| | $ | (7,066 | ) | | $ | 15,388 |
| | $ | (7,813 | ) | | $ | 7,575 |
|
| |
(a)
| Amounts represent the revenues and costs managed by each of our operating segments. The expenses generally include only those costs directly attributable to the operating segment. |
| |
(b)
| Other comprises the costs included in our Adjusted income components (see footnote (c) below) that are managed outside of our two operating segmentsand includes the following:
|
|
| | | | | | | | | | | | | | | | | | | | |
| | Third Quarter of 2017 |
| | Other Business Activities | | | |
(MILLIONS OF DOLLARS) | | WRD(i) |
| | GPD(ii) |
| | Corporate(iii) |
| | Other Unallocated(iv) |
| | Total |
|
Revenues | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Cost of sales | | — |
| | — |
| | 28 |
| | 142 |
| | 170 |
|
Selling, informational and administrative expenses | | — |
| | — |
| | 993 |
| | 23 |
| | 1,016 |
|
Research and development expenses | | 568 |
| | 193 |
| | 194 |
| | 8 |
| | 964 |
|
Amortization of intangible assets | | — |
| | — |
| | — |
| | — |
| | — |
|
Restructuring charges and certain acquisition-related costs | | — |
| | — |
| | — |
| | — |
| | — |
|
Other (income)/deductions––net | | (2 | ) | | — |
| | 167 |
| | (18 | ) | | 147 |
|
Loss from continuing operations before provision for taxes on income | | $ | (566 | ) | | $ | (193 | ) | | $ | (1,382 | ) | | $ | (156 | ) | | $ | (2,297 | ) |
|
| | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended October 1, 2017 |
| | Other Business Activities | | | | |
(MILLIONS OF DOLLARS) | | WRD(i) |
| | GPD(ii) |
| | Corporate(iii) |
| | Other Unallocated(iv) |
| | Total |
|
Revenues | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Cost of sales | | — |
| | — |
| | (3 | ) | | 500 |
| | 497 |
|
Selling, informational and administrative expenses | | — |
| | (1 | ) | | 2,995 |
| | 31 |
| | 3,026 |
|
Research and development expenses | | 1,674 |
| | 560 |
| | 616 |
| | 12 |
| | 2,862 |
|
Amortization of intangible assets | | — |
| | — |
| | — |
| | — |
| | — |
|
Restructuring charges and certain acquisition-related costs | | — |
| | — |
| | — |
| | — |
| | — |
|
Other (income)/deductions––net | | (29 | ) | | — |
| | 339 |
| | 31 |
| | 341 |
|
Loss from continuing operations before provision for taxes on income | | $ | (1,645 | ) | | $ | (559 | ) | | $ | (3,948 | ) | | $ | (573 | ) | | $ | (6,725 | ) |
|
| | | | | | | | | | | | | | | | | | | | |
| | Third Quarter of 2016 |
| | Other Business Activities | | | | |
(MILLIONS OF DOLLARS) | | WRD(i) |
| | GPD(ii) |
| | Corporate(iii) |
| | Other Unallocated(iv) |
| | Total |
|
Revenues | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Cost of sales | | — |
| | — |
| | 104 |
| | 268 |
| | 372 |
|
Selling, informational and administrative expenses | | — |
| | 1 |
| | 1,073 |
| | (3 | ) | | 1,071 |
|
Research and development expenses | | 575 |
| | 172 |
| | 169 |
| | (5 | ) | | 911 |
|
Amortization of intangible assets | | — |
| | — |
| | — |
| | — |
| | — |
|
Restructuring charges and certain acquisition-related costs | | — |
| | — |
| | — |
| | — |
| | — |
|
Other (income)/deductions––net | | 5 |
| | — |
| | 191 |
| | (54 | ) | | 142 |
|
Loss from continuing operations before provision for taxes on income | | $ | (580 | ) | | $ | (173 | ) | | $ | (1,537 | ) | | $ | (206 | ) | | $ | (2,496 | ) |
|
| | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended October 2, 2016 |
| | Other Business Activities | | | | |
(MILLIONS OF DOLLARS) | | WRD(i) |
| | GPD(ii) |
| | Corporate(iii) |
| | Other Unallocated(iv) |
| | Total |
|
Revenues | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Cost of sales | | — |
| | — |
| | 194 |
| | 783 |
| | 977 |
|
Selling, informational and administrative expenses | | — |
| | 1 |
| | 2,910 |
| | 48 |
| | 2,960 |
|
Research and development expenses | | 1,629 |
| | 487 |
| | 523 |
| | 6 |
| | 2,645 |
|
Amortization of intangible assets | | — |
| | — |
| | — |
| | — |
| | — |
|
Restructuring charges and certain acquisition-related costs | | — |
| | — |
| | — |
| | — |
| | — |
|
Other (income)/deductions––net | | (22 | ) | | — |
| | 590 |
| | (83 | ) | | 484 |
|
Loss from continuing operations before provision for taxes on income | | $ | (1,608 | ) | | $ | (488 | ) | | $ | (4,217 | ) | | $ | (753 | ) | | $ | (7,066 | ) |
| |
(i)
| WRD—the R&D expenses managed by our WRD organization, which is generally responsible for research projects for our IH business until proof-of-concept is achieved and then for transitioning those projects to the IH segment via the GPD organization for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRD organization also has responsibility for certain science-based and other platform-services organizations, which provide technical expertise and other services to the various R&D projects, including EH R&D projects. WRD is also responsible for facilitating all regulatory submissions and interactions with regulatory agencies, including all safety-event activities. |
| |
(ii)
| GPD––the costs associated with our GPD organization, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios. GPD also provides technical support and other services to Pfizer R&D projects.
|
| |
(iii)
| Corporate—the costs associated with Corporate, representing platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement) and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments. Effective in the first quarter of 2017, Corporate also includes the costs associated with our Pfizer Medical organization (Medical), previously reported as part of Other Business Activities. Medical is responsible for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, and partnerships with global public health and medical associations. We have reclassified approximately $33 million and $94 million of Medical costs from Other Business Activities to Corporate in the third quarter and first nine months of 2016, respectively, to conform to the current period presentation.
|
We recognized a $4 million loss in the third quarter of 2017 and a $67 million gain in the first nine months of 2017 as an2023 was mainly driven by the non-cash charge of $5.6 billion discussed above, partially offset to a much lesser extent by favorable changes in sales mix.
Selling, Informational and Administrative Expenses
Selling, informational and administrativeCost expenses decreased $109 million in the third quarter of sales2023, primarily due to:
•a decrease of $325 million due to a lower provision for U.S. healthcare reform fees related to foreign currency forward-exchange contracts designated as cash flow hedgesComirnaty and Paxlovid; and
•a $140 million decrease in spending on products across multiple customer groups,
partially offset by:
•an increase of $320 million for marketing and promotional expenses for recently acquired and launched products.
Selling, informational and administrative expenses increased $1.2 billion in the first nine months of 2023, primarily due to:
•an increase of $780 million in marketing and promotional expenses for recently acquired and launched products;
•an increase of $450 million for the expected Paxlovid commercial launch;
•a portion$285 million increase in spending on products across multiple customer groups; and
•an increase of $200 million in our liability to be paid to participants of our foreign exchange-denominated forecasted intercompany inventory sales. For additional information, see Notessupplemental savings plan,
partially offset by:
•a decrease of $490 million due to Condensed Consolidated Financial Statements––Note 7F. Derivative Financial Instrumentsa lower provision for U.S. healthcare reform fees related to Comirnaty and Hedging Activities.Paxlovid.
| |
(iv)
| Other Unallocated—other unallocated costs, representing overhead expenses associated with our manufacturing and commercial operations that are not directly assessed to an operating segment, as business unit (segment) management does not manage these costs (which include manufacturing variances associated with production). |
For information purposes only, the following tables present reconciliations of our segment operating results to segment operating results including estimated Other costs generally associated with each segment. While we do not manage our segments or have performance goals under such an allocated manner, we believe that some investors may find this information useful in their analyses.
The estimated Other costs generally associated with our operating segments do not purport to reflect the additional amounts that each of our operating segments would have incurred had each segment operated as a standalone company during the period presented.
Research and Development Expenses
For information purposes only,Research and development expenses increased $14 million in the third quarter of 2023, primarily due to:
•increased investments of $280 million, mainly to develop recently acquired assets, as well as activities to support upcoming product launches,
partially offset by:
•a decrease of $260 million mainly due to lower compensation-related expenses.
Research and development expenses increased $51 million in the first nine months of 2023,primarily driven by:
•increased costs of $560 million to develop recently acquired assets, activities to support upcoming product launches as well as ongoing late stage internal medicine programs,
partially offset by:
•lower spending of $430 million mainly for ongoing late stage vaccine and hospital programs as well as lower compensation-related expenses; and
•a decrease of $80 million in the value of the portfolio performance share grants reflecting the decrease in the price of Pfizer’s common stock.
Acquired In-Process Research and Development Expenses
Acquired in-process research and development expenses decreased $457 million in the third quarter of 2023 and decreased $759 million in the first nine months of 2023, primarily reflecting the non-recurrence of an upfront payment of $426 million related to the closing of the acquisition of ReViral Ltd. in the third quarter of 2022. The decrease for the first nine months of 2023 also reflects the non-recurrence of (i) an upfront payment to Biohaven and a premium paid on our equity investment in Biohaven totaling $263 million and (ii) a $76 million premium paid on our equity investment in BioNTech to develop a potential mRNA vaccine against shingles, both recorded in the first quarter of 2022.2017, we estimate that Other costs,
Amortization of Intangible Assets
Amortization of intangible assets increased $357 million in the third quarter of 2023 and $987 million in the first nine months of 2023, primarily as described above, for combined WRDa result of amortization of intangible assets from our acquisitions of Biohaven and GPD costsGBT, as well as higher amortization of $2.2 billion, and combined Corporateintangible assets related to Prevnar, partially offset by fully amortized assets.
Restructuring Charges and Other UnallocatedCosts Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
Transforming to a More Focused Company Program––For a description of our program, as well as the anticipated and actual costs, see Note 3A. The program savings discussed below may be rounded and represent approximations. In connection with restructuring our corporate enabling functions, we achieved gross cost savings of $4.0$1.0 billion, afteror net cost savings, excluding merit and inflation growth and certain real estate cost increases, of $700 million, in the two year period from 2021 through 2022. In connection with transforming our commercial go-to market strategy, we expect net cost savings of $1.4 billion, to be achieved primarily from 2022 through 2024. In connection with manufacturing network optimization, we expect net cost savings of $550 million to be achieved primarily from 2020 through 2023. In connection with optimizing our end-to-end R&D operations, we expect net cost savings of $2.3 billion to be achieved primarily from 2023 through 2025. Certain qualifying costs for this program in all periods since inception were recorded and reflected as Certain Significant Items and excluded from our non-GAAP measure of Adjusted Income/(Loss). See the Non-GAAP Financial Measure: Adjusted Income/(Loss) section within MD&A. In addition to this program, we continuously monitor our operations for cost-reduction and/or productivity opportunities, especially in light of the losses of exclusivity and the expiration of collaborative arrangements for various products. In October 2023, we announced that we launched a multi-year, enterprise-wide cost realignment program that aims to realign our costs with our longer-term revenue expectations. See the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Business and Strategysection within MD&A. Other (Income)/Deductions—Net
The favorable period-over-period change of $19 million for the third quarter of 2023, compared to the third quarter of 2022, was primarily driven by (i) a gain on the divestiture of our early-stage rare disease gene therapy portfolio to Alexion in the third quarter of 2023 (see Note 2B), (ii) the non-recurrence of an asset impairment charge incurred in the third quarter of 2022, and (iii) equity income from our investment in Haleon in the third quarter of 2023 versus equity losses in the third quarter of 2022, partially offset by (iv) higher net interest-related expense not attributable to an operating segment includedlosses on equity securities, and (v) lower net periodic benefit credits associated with pension and postretirement plans recorded in Corporate (approximately $704 millionthe third quarter of 2023.
The favorable period-over-period change of $1.4 billion for the first nine months of 2017 in Other (income)/deductions––net); and (ii) net income from investments and other assets not attributable2023, compared to an operating segment included in Corporate (approximately $146 million for the first nine months of 2022, was primarily driven by (i) lower net losses on equity securities, (ii) lower net interest expense, (iii) a gain on the divestiture of our early-stage rare disease gene therapy portfolio to Alexion (see 2017 in Other(income)/deductions––netNote 2B), are generally associated with our operating segments, as follows:and (iv) higher dividend income. |
| | | | | | | | | | | | | | | | |
| | Nine Months Ended October 1, 2017 |
| | | | Estimated Other Costs Associated with IH(ii) | | |
(MILLIONS OF DOLLARS) | | Innovative Health Non-GAAP Adjusted(i), (iii) |
| | Estimated WRD/GPD(ii) |
| | Estimated Corporate/Other Unallocated(ii) |
| | Innovative Health with Estimated Other Costs Associated with Innovative Health Non-GAAP Adjusted(ii), (iii) |
|
Revenues | | $ | 23,204 |
| | $ | — |
| | $ | — |
| | $ | 23,204 |
|
Cost of sales | | 2,912 |
| | — |
| | 68 |
| | 2,980 |
|
Selling, informational and administrative expenses | | 4,914 |
| | (1 | ) | | 1,688 |
| | 6,601 |
|
Research and development expenses | | 1,709 |
| | 2,220 |
| | 575 |
| | 4,504 |
|
Amortization of intangible assets | | 90 |
| | — |
| | — |
| | 90 |
|
Restructuring charges and certain acquisition-related costs | | — |
| | — |
| | — |
| | — |
|
Other (income)/deductions––net | | (611 | ) | | (29 | ) | | (84 | ) | | (725 | ) |
Income from continuing operations before provision for taxes on income | | 14,190 |
| | (2,190 | ) | | (2,246 | ) | | 9,754 |
|
|
| | | | | | | | | | | | | | | | |
| | Nine Months Ended October 1, 2017 |
| | | | Estimated Other Costs Associated with EH(ii) | | |
(MILLIONS OF DOLLARS) | | Essential Health Non-GAAP Adjusted(i), (iii) |
| | Estimated WRD/GPD(ii) |
| | Estimated Corporate/Other Unallocated(ii) |
| | Essential Health with Estimated Other Costs Associated with Essential Health Non-GAAP Adjusted(ii), (iii) |
|
Revenues | | $ | 15,639 |
| | $ | — |
| | $ | — |
| | $ | 15,639 |
|
Cost of sales | | 4,319 |
| | — |
| | 429 |
| | 4,749 |
|
Selling, informational and administrative expenses | | 2,212 |
| | — |
| | 1,338 |
| | 3,550 |
|
Research and development expenses | | 755 |
| | 15 |
| | 53 |
| | 823 |
|
Amortization of intangible assets | | 43 |
| | — |
| | — |
| | 43 |
|
Restructuring charges and certain acquisition-related costs | | — |
| | — |
| | — |
| | — |
|
Other (income)/deductions––net | | (248 | ) | | — |
| | (104 | ) | | (353 | ) |
Income from continuing operations before provision for taxes on income | | 8,558 |
| | (15 | ) | | (1,716 | ) | | 6,827 |
|
| |
(i)
| Amount represents the revenues and costs managed by each of our operating segments. The expenses generally include only those costs directly attributable to the operating segment. See note (a) above for more information. |
| |
(ii)
| Represents costs not assessed to an operating segment, as business unit (segment) management does not manage these costs. For a description of these other costs and business activities, see note (b) above. |
| |
• | WRD/GPD––The information provided for WRD and GPD was substantially all derived from our estimates of the costs incurred in connection with the R&D projects associated with each operating segment.
|
| |
• | Corporate/Other Unallocated––The information provided for Corporate and Other Unallocated was derived mainly using proportional allocation methods based on global, regional or country revenues or global, regional or country headcount, as well as certain cost metrics, as appropriate, such as those derived from research and development and manufacturing costs, and, to a lesser extent, specific identification and estimates. Management believes that the allocations of Corporate and Other Unallocated costs are reasonable.
|
The estimated Other costs generally associated with our operating segments do not purport to reflect the additional amounts that each of our operating segments would have incurred had each segment operated as a standalone company during the period presented.
| |
(iii)
| See note (c) below for an explanation of our Non-GAAP Adjusted financial measure. |
| |
(c)
| See the “Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A for a definition of these “Adjusted Income” components. |
| |
(d)
| Includes costs associated with (i) purchase accounting adjustments; (ii) acquisition-related costs; and (iii) certain significant items, which are substantive and/or unusual, and in some cases recurring, items (such as restructuring or legal charges), that are evaluated on an individual basis by management. For additional information about these reconciling items and/or our Non-GAAP adjusted measure of performance, see the “Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A. |
Third Quarter of 2017 vs. Third Quarter of 2016
Innovative Health Operating Segment
Revenues
IH Revenues increased $786 million, or 11%, to $8.1 billion, reflecting an 11% operational increase. Foreign exchange had a de minimis impact on IH RevenuesNote 4.Provision/(Benefit) for Taxes on Income/(Loss)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | % Change | | October 1, 2023 | | October 2, 2022 | | % Change |
Provision/(benefit) for taxes on income/(loss) | | $ | (964) | | | $ | 356 | | | * | | $ | (320) | | | $ | 3,098 | | | * |
Effective tax rate on continuing operations | | 28.8 | % | | 4.0 | % | | | | (6.2) | % | | 10.5 | % | | |
* Indicates calculation not meaningful. |
The following provides an analysis ofFor information about our effective tax rate and the increase in IH Revenues: |
| | | | |
(MILLIONS OF DOLLARS) | | |
IH Revenues, for the three months ended October 2, 2016 | | $ | 7,332 |
|
| | |
Operational growth/(decline): | | |
Continued growth from key brands including Ibrance and Eliquis globally, as well as Lyrica and Xeljanz, both primarily in the U.S. | | 751 |
|
Growth in Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation) | | 148 |
|
Lower revenues for Viagra in the U.S. primarily due to wholesaler destocking in advance of anticipated generic competition beginning in December 2017 | | (91 | ) |
Lower revenues for Enbrel, primarily in most developed Europe markets due to continued biosimilar competition | | (89 | ) |
Decline in Prevnar 13/Prevenar 13 revenues. U.S. revenues decreased primarily due to the continued decline in revenues for the Adult indication due to a smaller remaining “catch up” opportunity compared to the prior-year quarter, partially offset by growth from the pediatric indication. International revenues increased primarily due to the favorable overall impact of timing of government purchases in certain emerging markets and the launch of Prevenar 13 in China for the pediatric indication. | | (16 | ) |
Other operational factors, net | | 95 |
|
Operational growth, net | | 799 |
|
| | |
Unfavorable impact of foreign exchange | | (13 | ) |
IH Revenues increase | | 786 |
|
IH Revenues, for the three months ended October 1, 2017 | | $ | 8,118 |
|
Total IH revenues from emerging markets increased $167 million, or 18%, to $1.1 billion on both a reportedevents and operational basis. Foreign exchange had a de minimis impact on total IH revenues from emerging markets.
Costs and Expenses
| |
•
| Cost of sales as a percentage of Revenues decreased 0.8 percentage points, primarily driven by a favorable change in product mix, including an increase in alliance revenue, which have no associated cost of sales, partially offset by an increase in royalty expense, mostly related to Ibrance, and the unfavorable impact of foreign exchange.
|
| |
• | The increase in Cost of sales of 4% was primarily driven by an increase in royalty expense, mostly related to Ibrance, and the unfavorable impact of foreign exchange, partially offset by a favorable change in product mix.
|
| |
• | The increase in Selling, informational and administrativeexpenses of 5% was primarily driven by additional investment across several of our key products, primarily Eucrisa, Ibrance and Xtandi. The increase was partially offset by lower spending for certain other products, primarily Prevnar 13/Prevenar 13, and the favorable impact of foreign exchange.
|
| |
•
| The decrease in Research and developmentexpenses of 5% primarily reflects:
|
| |
◦ | the discontinuation of the global clinical development program for bococizumab in the fourth quarter of 2016, |
partially offset by increased costs associated with:
| |
◦ | our oncology programs, primarily clinical trial spend on legacy Medivation assets and our immuno-oncology development programs; |
| |
◦ | our C. difficile vaccine program, which initiated a Phase 3 clinical study in March 2017; and
|
| |
◦ | our tanezumab development program. |
| |
• | The favorable change in Other (income)/deductions––net primarily reflects:
|
| |
◦ | the addition of $73 million in Xtandi royalty income; |
| |
◦ | a $54 million increase in dividend income from our investment in ViiV; and |
| |
◦ | a $50 million milestone payment received for an out-licensed product, |
partially offset by:
| |
◦ | lower royalty income for Enbrel of $139 million, resulting from the expiration on October 31, 2016 of the 36-month royalty period under the collaboration agreement for Enbrel in the U.S. and Canada (the collaboration period under the agreement expired on October 31, 2013). |
Essential Health Operating Segment
Revenues
EH Revenues decreased $662 million, or 12%, to $5.0 billion, reflecting an 11% operational decrease, of which 5% operationally was duecircumstances contributing to the sale of HIS. Foreign exchange had an unfavorable impact of 1% on EHchanges between periods, as well as details about discrete elements that impacted our tax provisions, see RevenuesNote 5.The following provides an analysis of the decrease in EH Revenues: |
| | | | |
(MILLIONS OF DOLLARS) | | |
EH Revenues, for the three months ended October 2, 2016 | | $ | 5,712 |
|
| | |
Disposition-related operational impact: | | |
Financial results in the third quarter of 2017 do not reflect any contribution from HIS global operations, compared to the inclusion of three months of HIS global operations in the same period in 2016 (February 2017 sale) | | (280 | ) |
| | |
Other operational growth/(decline): | | |
Decline from Peri-LOE Products, including declines in Pristiq in the U.S., which lost marketing exclusivity in the U.S. in March 2017, as well as Lyrica and Vfend, both primarily in developed Europe | | (220 | ) |
Decline from the Sterile Injectable Pharmaceuticals portfolio, primarily due to legacy Hospira product shortages in the U.S. | | (182 | ) |
Growth from Biosimilars | | 55 |
|
Other operational factors, net | | 6 |
|
Operational decline, net | | (621 | ) |
| | |
Unfavorable impact of foreign exchange | | (41 | ) |
EH Revenues decrease | | (662 | ) |
EH Revenues, for the three months ended October 1, 2017 | | $ | 5,050 |
|
Total EH revenues in developed markets decreased $749 million, or 18%, to $3.3 billion, reflecting an 18% operational decline, of which 6% operationally was due to the unfavorable impact of the sale of HIS. Total EH revenues in developed markets were also negatively impacted by a 33% operational decline from Peri-LOE Products and a 20% operational decline from the Sterile Injectable Pharmaceuticals portfolio primarily due to legacy Hospira product supply shortages in the U.S., partially offset by 65% operational growth from Biosimilars. Foreign exchange had a de minimis impact on total EH revenues in developed markets.
Total EH revenues from emerging markets increased $87 million, or 5%, to $1.7 billion, reflecting 7% operational growth, primarily driven by 6% operational growth from the Legacy Established Products portfolio and 14% operational growth from the Sterile Injectable Pharmaceuticals portfolio. Foreign exchange had an unfavorable impact of 1%. Excluding HIS from both periods, EH revenues in emerging markets grew 8% operationally.
Costs and Expenses
The changes in EH expenses below reflect, among other things, the favorable impact | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Costs and expenses follow: |
| | Three Months Ended | Nine Months Ended |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | % Change | | October 1, 2023 | | October 2, 2022 | | % Change |
Cost of sales | | $ | 9,269 | | | $ | 6,063 | | | 53 | | | $ | 17,391 | | | $ | 24,696 | | | (30) | |
Percentage of Revenues | | 70.0 | % | | 26.8 | % | | | | 39.3 | % | | 32.5 | % | | |
Selling, informational and administrative expenses | | 3,281 | | | 3,391 | | | (3) | | | 10,196 | | | 9,032 | | | 13 | |
Research and development expenses | | 2,711 | | | 2,696 | | | 1 | | | 7,864 | | | 7,813 | | | 1 | |
Acquired in-process research and development expenses | | 67 | | | 524 | | | (87) | | | 122 | | | 880 | | | (86) | |
Amortization of intangible assets | | 1,179 | | | 822 | | | 43 | | | 3,466 | | | 2,478 | | | 40 | |
Restructuring charges and certain acquisition-related costs | | 155 | | | 199 | | | (22) | | | 377 | | | 580 | | | (35) | |
Other (income)/deductions—net | | (79) | | | (59) | | | 33 | | | (356) | | | 1,063 | | | * |
* Indicates calculation not meaningful. |
Cost of the February 2017 saleSales
Cost of HIS. The operating results of HIS are includedsales increased $3.2 billion in EH’s operating results through February 2, 2017 and, therefore, operating results for EH for the third quarter of 2017 do not reflect HIS global operations, while operating results for EH for2023, primarily due to:
•a non-cash charge of $5.6 billion recorded in the third quarter of 2023 for inventory write-offs and related charges ($4.7 billion for Paxlovid and $0.9 billion for Comirnaty); and
•2016 reflect three months of HIS global operations.$209 million in inventory losses, overhead costs related to the period in which the facility could not operate, and incremental costs resulting from tornado damage to our manufacturing facility in Rocky Mount, NC,
| |
• | Cost of sales as a percentage of Revenues increased 1.6 percentage points primarily due to cost increases reflecting the shift to EH of certain legacy Hospira costs that were previously unallocated to EH as a result of harmonizing the Hospira cost policy, and the impact of product losses of exclusivity, partially offset by the favorable impact of the sale of HIS, which had a higher cost of sales than the other EH products.
|
| |
• | The decrease in Cost of sales of 6% was primarily due to:
|
| |
◦ | the favorable impact of the sale of HIS, which had a higher cost of sales than the other EH products; |
| |
◦ | a net decrease in royalty expense and, to a lesser extent, |
| |
◦ | lower volumes driven by, among other things, the Sterile Injectable Pharmaceuticals (SIP) portfolio, primarily due to legacy Hospira product shortages in the U.S., |
partially offset by:
| |
◦ | cost increases reflecting the shift to EH of certain legacy Hospira costs that were previously unallocated to EH as a result of harmonizing the Hospira cost policy. |
| |
• | Selling, informational•a reduction of $2.6 billion due to lower sales of Comirnaty; and administrativeexpenses decreased 11%, mainly due to lower advertising, promotional and field force expenses, reflecting the benefits of cost-reduction and productivity initiatives, and lower expenses associated with products that recently lost marketing exclusivity, as well as the favorable impact of the sale of HIS, partially offset by increased spending for biosimilars, primarily related to the U.S. launch of Inflectra. |
| |
• | Research and developmentexpenses decreased 15%, primarily due to the close-out of certain post-marketing clinical trials and the favorable impact of the sale of HIS.
|
| |
• | The favorable change in Other (income)/deductions––netprimarily reflects income from resolution of a contract disagreement and the favorable impact of foreign exchange.
|
First Nine Months of 2017 vs. First Nine Months of 2016
Innovative Health Operating Segment
Revenues
IH Revenues increased $1,733 million, or 8%, to $23.2 billion, reflecting a 9% operational increase. Foreign exchange had an unfavorable impact of 1% on IH Revenues.
The following provides an analysis•a reduction of the increase in IH Revenues:$405 million due to lower sales of Paxlovid.
Cost of sales decreased $7.3 billion in the first nine months of 2023, mainly due to: |
| | | | |
(MILLIONS OF DOLLARS) | | |
IH Revenues, for the nine months ended October 2, 2016 | | $ | 21,471 |
|
| | |
Operational growth/(decline): | | |
Continued growth from key brands including Ibrance and Eliquis globally, as well as Lyrica and Xeljanz, both primarily in the U.S. | | 2,102 |
|
Growth in Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation) | | 420 |
|
Lower revenues for Enbrel, primarily in most developed Europe markets due to continued biosimilar competition | | (353 | ) |
Decline in Prevnar 13/Prevenar 13 revenues. U.S. revenues decreased primarily due to the continued decline in revenues for the Adult indication due to a smaller remaining “catch up” opportunity compared to the first nine months of 2016, partially offset by growth from the pediatric indication. International revenues increased primarily due to the favorable overall impact of timing of government purchases in certain emerging markets and the launch of Prevenar 13 in China for the pediatric indication. | | (213 | ) |
Lower revenues for Viagra in the U.S. primarily due to lower market growth | | (186 | ) |
Other operational factors, net | | 113 |
|
Operational growth, net | | 1,883 |
|
| | |
Unfavorable impact of foreign exchange | | (150 | ) |
IH Revenues increase | | 1,733 |
|
IH Revenues, for the nine months ended October 1, 2017 | | $ | 23,204 |
|
•a reduction of $12.7 billion due to lower sales of Comirnaty; andTotal IH revenues from emerging markets increased $377 million, or 14%,•a reduction of $1.2 billion due to $3.1 billion, reflecting a 15% operational increase. Foreign exchange had an unfavorable impactlower sales of 1% on Total IH revenues from emerging markets.
Costs and Expenses
| |
• | Cost of sales as a percentage of Revenues decreased 1.1 percentage points primarily driven by a favorable change in product mix, including an increase in alliance revenue, which have no associated cost of sales, partially offset by an increase in royalty expense, mostly related to Ibrance.Paxlovid,
|
| |
• | The decrease in Cost of sales of 1% was primarily driven by favorable product mix and the favorable impact of foreign exchange, partially offset by an increase in royalty expense, mostly related to Ibrance.
|
| |
• | The decrease in Selling, informational and administrativeexpenses of 1% was primarily driven by the non-recurrence of an allowance for doubtful trade accounts receivable, resulting from unfavorable developments with a distributor that was recorded in the first quarter of 2016, lower spending for certain products, primarily Prevnar 13/Prevenar 13, and the favorable impact of foreign exchange, partially offset by additional investment across several of our key products, primarily Eucrisa, Ibrance, Xtandi and Xeljanz.
|
| |
• | The decrease in Research and developmentexpenses of 6% primarily reflects:
|
| |
◦ | the discontinuation of the global clinical development program for bococizumab in the fourth quarter of 2016, |
partially offset by:
| |
◦ | increased costs associated with: |
| |
▪ | our oncology programs, including clinical trial spend on legacy Medivation assets; |
| |
▪ | our C. difficile vaccine program, which initiated a Phase 3 clinical study in March 2017; and |
| |
▪ | our tanezumab development program; and |
| |
◦ | an expense of $28 million, representing IH’s portion of the $75 million expense resulting from our May 2017 agreement with Sangamo to develop and commercialize gene therapy programs for Hemophilia A. |
•a non-cash charge of $5.8 billion for inventory write-offs and related charges ($4.8 billion for Paxlovid and $1.0 billion for Comirnaty); and
| |
• | The unfavorable change in Other (income)/deductions––net primarily reflects:•$209 million in inventory losses, overhead costs related to the period in which the facility could not operate, and incremental costs resulting from tornado damage to our manufacturing facility in Rocky Mount, NC. The increase in Cost of sales as a percentage of revenues in the third quarter and in the first nine months of 2023 was mainly driven by the non-cash charge of $5.6 billion discussed above, partially offset to a much lesser extent by favorable changes in sales mix. Selling, Informational and Administrative Expenses Selling, informational and administrative expenses decreased $109 million in the third quarter of 2023, primarily due to: •a decrease of $325 million due to a lower provision for U.S. healthcare reform fees related to Comirnaty and Paxlovid; and •a $140 million decrease in spending on products across multiple customer groups, |
| |
◦ | lower royalty income for Enbrel of $414 million, resulting from the expiration on October 31, 2016 of the 36-month royalty period under the collaboration agreement for Enbrel in the U.S. and Canada (the collaboration period under the agreement expired on October 31, 2013), |
partially offset by:
| |
◦ | an increase of $204 million in dividend income from our investment in ViiV; |
| |
◦ | the addition of $160 million of Xtandi royalty income; and |
| |
◦ | a $50 million milestone payment received for an out-licensed product. |
Essential Health Operating Segment
Revenues•an increase of $320 million for marketing and promotional expenses for recently acquired and launched products.
EH RevenuesSelling, informational and administrative decreased $2.1expenses increased $1.2 billion or 12%,in the first nine months of 2023, primarily due to:
•an increase of $780 million in marketing and promotional expenses for recently acquired and launched products;
•an increase of $450 million for the expected Paxlovid commercial launch;
•a $285 million increase in spending on products across multiple customer groups; and
•an increase of $200 million in our liability to $15.6 billion, reflecting be paid to participants of our supplemental savings plan,
partially offset by:
•a 11% operational decrease of which 4% operationally was$490 million due to a lower provision for U.S. healthcare reform fees related to Comirnaty and Paxlovid.
Research and Development Expenses
Research and development expenses increased $14 million in the salethird quarter of HIS. Foreign exchange had an unfavorable impact of 1% on EH Revenues.2023, primarily due to:
The following provides an analysis•increased investments of $280 million, mainly to develop recently acquired assets, as well as activities to support upcoming product launches,
partially offset by:
•a decrease of $260 million mainly due to lower compensation-related expenses.
Research and development expenses increased $51 million in the first nine months of 2023,primarily driven by:
•increased costs of $560 million to develop recently acquired assets, activities to support upcoming product launches as well as ongoing late stage internal medicine programs,
partially offset by:
•lower spending of $430 million mainly for ongoing late stage vaccine and hospital programs as well as lower compensation-related expenses; and
•a decrease of $80 million in the value of the portfolio performance share grants reflecting the decrease in EHthe price of Pfizer’s common stock.
Acquired In-Process Research and Development Expenses
Acquired in-process research and development Revenues: |
| | | | |
(MILLIONS OF DOLLARS) | | |
EH Revenues, for the nine months ended October 2, 2016 | | $ | 17,725 |
|
| | |
Disposition-related operational impact: | | |
Approximately one month of HIS domestic operations and approximately two months of HIS international operations in the first nine months of 2017, compared to nine months of HIS global operations in the same period in 2016 (February 2017 sale) | | (783 | ) |
| | |
Other operational growth/(decline): | | |
Decline from Peri-LOE Products, including declines in Pristiq in the U.S., which lost marketing exclusivity in the U.S. in March 2017, as well as Lyrica and Vfend, both primarily in developed Europe | | (779 | ) |
Decline in the Legacy Established Products portfolio | | (250 | ) |
Decline from the Sterile Injectable Pharmaceuticals portfolio, primarily due to legacy Hospira product shortages in the U.S. | | (169 | ) |
Growth from Biosimilars | | 143 |
|
Other operational factors, net | | (26 | ) |
Operational decline, net | | (1,864 | ) |
| | |
Unfavorable impact of foreign exchange | | (222 | ) |
EH Revenues decrease | | (2,086 | ) |
EH Revenues, for the nine months ended October 1, 2017 | | $ | 15,639 |
|
Total EH revenuesexpenses decreased $457 million in developed marketsthe third quarter of 2023 and decreased $2.2 billion, or 17%, to $10.5 billion,$759 million in the first nine months of 2023, primarily reflecting a 17% operational decline,the non-recurrence of which 5% operationally was duean upfront payment of $426 million related to the unfavorable impactclosing of the saleacquisition of HIS. Total EH revenues in developed markets were also negatively impacted by a 36% operational decline from Peri-LOE Products, a 7% operational declineReViral Ltd. in the Legacy Established Products portfolio and a 9% operational decline from the Sterile Injectable Pharmaceuticals portfolio, partially offset by 64% operational growth from Biosimilars. Foreign exchange had an unfavorable impactthird quarter of 1%.
Total EH revenues from emerging markets increased $131 million, or 3%, to $5.1 billion, reflecting 6% operational growth, primarily driven by 5% operational growth from the Legacy Established Products portfolio and 15% operational growth from the Sterile Injectable Pharmaceuticals portfolio. Foreign exchange had an unfavorable impact of 3%. Excluding HIS in both periods, EH revenues in emerging markets grew 7% operationally.
Costs and Expenses
2022. The changes in EH expenses below reflect, among other things, the favorable impact of the February 2017 sale of HIS. The operating results of HIS are included in EH’s operating results through February 2, 2017 and, therefore, operating results for EHdecrease for the first nine months of 2017 include approximately one month2023 also reflects the non-recurrence of HIS domestic operations(i) an upfront payment to Biohaven and approximately twoa premium paid on our equity investment in Biohaven totaling $263 million and (ii) a $76 million premium paid on our equity investment in BioNTech to develop a potential mRNA vaccine against shingles, both recorded in the first quarter of 2022.
Amortization of Intangible Assets
Amortization of intangible assets increased $357 million in the third quarter of 2023 and $987 million in the first nine months of HIS international2023, primarily as a result of amortization of intangible assets from our acquisitions of Biohaven and GBT, as well as higher amortization of intangible assets related to Prevnar, partially offset by fully amortized assets.
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
Transforming to a More Focused Company Program––For a description of our program, as well as the anticipated and actual costs, see Note 3A. The program savings discussed below may be rounded and represent approximations. In connection with restructuring our corporate enabling functions, we achieved gross cost savings of $1.0 billion, or net cost savings, excluding merit and inflation growth and certain real estate cost increases, of $700 million, in the two year period from 2021 through 2022. In connection with transforming our commercial go-to market strategy, we expect net cost savings of $1.4 billion, to be achieved primarily from 2022 through 2024. In connection with manufacturing network optimization, we expect net cost savings of $550 million to be achieved primarily from 2020 through 2023. In connection with optimizing our end-to-end R&D operations, while operating resultswe expect net cost savings of $2.3 billion to be achieved primarily from 2023 through 2025. Certain qualifying costs for EHthis program in all periods since inception were recorded and reflected as Certain Significant Items and excluded from our non-GAAP measure of Adjusted Income/(Loss). See the Non-GAAP Financial Measure: Adjusted Income/(Loss) section within MD&A. In addition to this program, we continuously monitor our operations for cost-reduction and/or productivity opportunities, especially in light of the losses of exclusivity and the expiration of collaborative arrangements for various products. In October 2023, we announced that we launched a multi-year, enterprise-wide cost realignment program that aims to realign our costs with our longer-term revenue expectations. See the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Business and Strategysection within MD&A. Other (Income)/Deductions—Net
The favorable period-over-period change of $19 million for the third quarter of 2023, compared to the third quarter of 2022, was primarily driven by (i) a gain on the divestiture of our early-stage rare disease gene therapy portfolio to Alexion in the third quarter of 2023 (see Note 2B), (ii) the non-recurrence of an asset impairment charge incurred in the third quarter of 2022, and (iii) equity income from our investment in Haleon in the third quarter of 2023 versus equity losses in the third quarter of 2022, partially offset by (iv) higher net losses on equity securities, and (v) lower net periodic benefit credits associated with pension and postretirement plans recorded in the third quarter of 2023.
The favorable period-over-period change of $1.4 billion for the first nine months of 2016 reflect2023, compared to the first nine months of HIS global operations.2022, was primarily driven by (i) lower net losses on equity securities, (ii) lower net interest expense, (iii) a gain on the divestiture of our early-stage rare disease gene therapy portfolio to Alexion (see Note 2B), and (iv) higher dividend income. Provision/(Benefit) for Taxes on Income/(Loss)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | % Change | | October 1, 2023 | | October 2, 2022 | | % Change |
Provision/(benefit) for taxes on income/(loss) | | $ | (964) | | | $ | 356 | | | * | | $ | (320) | | | $ | 3,098 | | | * |
Effective tax rate on continuing operations | | 28.8 | % | | 4.0 | % | | | | (6.2) | % | | 10.5 | % | | |
* Indicates calculation not meaningful. |
For information about our effective tax rate and the events and circumstances contributing to the changes between periods, as well as details about discrete elements that impacted our tax provisions, see Note 5. Discontinued Operations
For information about our discontinued operations, see Note 2B. PRODUCT DEVELOPMENTS
A comprehensive update of Pfizer’s development pipeline was published as of October 31, 2023 and is available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of our research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.
This section provides information as of the date of this filing about significant marketing application-related regulatory actions by, and filings pending with, the FDA and regulatory authorities in the EU and Japan.
The tables below include filing and approval milestones for products that have occurred in the last twelve months and generally do not include approvals that may have occurred prior to that time. The tables include filings with regulatory decisions pending (even if the filing occurred outside of the last twelve-month period).
COVID-19 Vaccine Products
Beginning with the original monovalent Pfizer-BioNTech COVID-19 Vaccine, initially authorized for emergency use, to Comirnaty (COVID-19 Vaccine, mRNA, 2023-2024 Formula), approved by the FDA for individuals 12 years and older and Pfizer-BioNTech COVID-19 Vaccine (2023-2024 Formula) authorized by the FDA for emergency use for individuals 6 months through 11 years of age, efforts to stay current with circulating COVID-19 strains have resulted in the rapid development of targeted, adapted vaccines for licensure in the U.S., Europe, Japan and other markets. The adapted vaccines have included two bivalent formulations (Original and Omicron BA.1, not authorized in the U.S., and Original and Omicron BA.4/BA.5). As updated COVID-19 vaccines are formulated to more closely target currently circulating vaccines, prior vaccine formulations are generally no longer utilized in a majority of the markets.
The 2023-2024 Formula includes a monovalent (single) component that corresponds to the Omicron sub-variant XBB.1.5 of severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The table below summarizes the approval of the 2023-2024 Formula in the markets indicated:
| | | | | | | | | | | | | | |
Product | Indication | Regulatory Status |
U.S.(a) | EU | Japan |
Comirnaty (COVID-19 Vaccine, mRNA, 2023-2024 Formula) | Active immunization to prevent COVID-19 caused by SARS-CoV-2 for individuals 6 months through 4 years of age | Authorized September 2023 | Approved August 2023 | Approved September 2023 |
Active immunization to prevent COVID-19 caused by SARS-CoV-2 for individuals 5 through 11 years of age | Authorized September 2023 | Approved August 2023 | Approved September 2023 |
Active immunization to prevent COVID-19 caused by SARS-CoV-2 in individuals 12 years of age and older | Approved September 2023 | Approved August 2023 | Approved September 2023 |
(a)In September 2023, Pfizer and BioNTech announced the FDA approved a regulatory application for their Omicron XBB.1.5-adapted monovalent COVID-19 vaccine for individuals 12 years of age and older (Comirnaty (COVID-19 Vaccine, mRNA, 2023-2024 Formula)). The FDA also granted EUA for the Omicron XBB.1.5-adapted monovalent COVID-19 vaccine for individuals 6 months through 11 years of age (Pfizer-BioNTech COVID-19 Vaccine (2023-2024 Formula)).
Other Products
| | | | | | | | | | | | | | |
PRODUCT | INDICATION OR PROPOSED INDICATION | APPROVED/FILED* |
U.S. | EU | JAPAN |
Ngenla (somatrogon)(a) | Pediatric growth hormone deficiency | Approved June 2023 | Approved February 2022 | Approved January 2022 |
Prevnar 20/Apexxnar (Vaccine) | Active immunization to prevent pneumonia, invasive disease and otitis media caused by Streptococcus pneumoniae (adults) | Approved June 2021 | Approved February 2022 | Filed September 2023 |
Active immunization to prevent pneumonia, invasive disease and otitis media caused by Streptococcus pneumoniae (pediatric) | Approved April 2023 | Filed November 2022 | Filed March 2023 |
TicoVac (Vaccine) | Active immunization to prevent tick-borne encephalitis disease | Approved August 2021 | | Filed March 2023 |
Paxlovid(b)(nirmatrelvir and ritonavir) | COVID-19 in high-risk adults | Approved May 2023 | Approved February 2023 | Approved February 2022 |
Nurtec ODT/Vydura (rimegepant) | Acute treatment of migraine with or without aura (adults) | Approved February 2020 | Approved April 2022 | |
Prevention of episodic migraine (adults) | Approved May 2021 | Approved April 2022 | |
Litfulo/Ritfulo (ritlecitinib) | Alopecia areata | Approved June 2023 | Approved September 2023 | Approved June 2023 |
Zavzpret (zavegepant) (intranasal) | Acute treatment of migraine with or without aura (adults) | Approved March 2023 | | |
Penbraya (PF-06886992) (Vaccine) | Active immunization to prevent serogroups ABCWY meningococcal infections (adolescent and young adults) | Approved October 2023 | Filed June 2023 | |
Abrysvo (Vaccine) | Active immunization to prevent RSV infection (maternal) | Approved August 2023 | Approved August 2023 | Filed February 2023 |
Active immunization to prevent RSV infection (older adults) | Approved May 2023 | Approved August 2023 | Filed May 2023 |
Velsipity (etrasimod) | Ulcerative colitis (moderately to severely active) | Approved October 2023 | Filed November 2022 | |
Braftovi (encorafenib) and Mektovi (binimetinib) | BRAFV600E-mutant metastatic non-small cell lung cancer | Approved October 2023 | | |
Elrexfio (elranatamab) | Multiple myeloma triple-class relapsed/refractory | Approved August 2023 | Filed January 2023 | Filed June 2023 |
Talzenna (talazoparib) | Combination with Xtandi (enzalutamide) for adult patients with homologous recombination repair (HRR) gene-mutated mCRPC(c) | Approved June 2023 | Filed February 2023 | Filed February 2023 |
fidanacogene elaparvovec (PF-06838435)(d) | Hemophilia B | Filed June 2023 | Filed June 2023 | |
Xtandi (enzalutamide)(e) | Non-metastatic castration-sensitive prostate cancer (nmCSPC) with high risk of biochemical recurrence (BCR) | Filed August 2023 | Filed September 2023 | |
*For the U.S., the filing date is the date on which the FDA accepted our submission. For the EU, the filing date is the date on which the EMA validated our submission.
(a)Being developed in collaboration with OPKO.
(b)Previously authorized under EUA in the U.S. (December 2021) and approved by the FDA in high-risk adults (May 2023). Remains under EUA for children (12-18 years of age; >88lbs) in the U.S.
(c)Listed patient population applies to U.S. only. Patient population in the filed application in the EU is an all-comers population in men with mCRPC.
(d)Being developed in collaboration with Spark Therapeutics, Inc.
(e)Being developed in collaboration with Astellas.
In China, the following products received regulatory approvals in the last twelve months: Xeljanz for the treatment of adult patients with active psoriatic arthritis in October 2022; Prevenar 13 in infants and children aged 6 weeks to 15 months, in April 2023; Staquis (crisaborole) for the topical treatment of mild to moderate atopic dermatitis patients aged 3 months and older in August 2023; and Litfulo (ritlecitinib), a once-daily oral treatment, for individuals 12 years of age and older with severe alopecia areata (AA) in October 2023.
The following provides information about additional indications and new drug candidates in late-stage development:
| | | | | | | | | | | |
| | PRODUCT/CANDIDATE | PROPOSED DISEASE AREA |
LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS FOR IN-LINE AND IN-REGISTRATION PRODUCTS | Ibrance (palbociclib)(a) | ER+/HER2+ metastatic breast cancer |
Talzenna (talazoparib) | Combination with Xtandi (enzalutamide) for DNA Damage Repair (DDR)-deficient mCSPC |
Ngenla (somatrogon) (b) | Adult growth hormone deficiency |
Braftovi (encorafenib) and Erbitux® (cetuximab)(c) | First-line BRAFV600E-mutant mCRC |
Braftovi (encorafenib) and Mektovi (binimetinib) and Keytruda® (pembrolizumab)(d) | BRAFV600E/K-mutant metastatic or unresectable locally advanced melanoma |
Paxlovid (nirmatrelvir; ritonavir) | COVID-19 in high-risk children (6-11 years of age; >88lbs) |
zavegepant (oral) | Prevention of chronic migraine (adults) |
Litfulo (ritlecitinib) | Vitiligo |
Elrexfio (elranatamab) | Multiple myeloma double-class exposed |
Newly diagnosed multiple myeloma post-transplant maintenance |
Newly diagnosed multiple myeloma transplant-ineligible |
Oxbryta (voxelotor) | Sickle cell disease (pediatric) |
Eliquis (apixaban) | Venous thromboembolism (pediatric) |
Abrysvo (vaccine) | Active immunization to prevent RSV infection in high-risk adults |
NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT | | aztreonam-avibactam (PF-06947387) | Treatment of infections caused by Gram-negative bacteria with limited or no treatment options |
giroctocogene fitelparvovec (PF-07055480)(e) | Hemophilia A |
PF-06425090 (Vaccine) | Immunization to prevent primary clostridioides difficile infection |
sasanlimab (PF-06801591) | Combination with Bacillus Calmette-Guerin for non-muscle-invasive bladder cancer |
fordadistrogene movaparvovec (PF-06939926) | Duchenne muscular dystrophy (ambulatory) |
marstacimab (PF-06741086) | Hemophilia |
VLA15 (PF-07307405) vaccine(f) | Immunization to prevent Lyme disease |
PF-07252220 (quadrivalent mRNA-based vaccine) | Immunization to prevent influenza |
Vepdegestrant (PF-07850327)(g) | Breast cancer metastatic - 2nd line ER+/HER2- |
inclacumab (PF-07940370) | Sickle cell disease |
| PF-06823859 | Dermatomyositis, polymyositis |
(a)Being developed in collaboration with The Alliance Foundation Trials, LLC.
(b)Being developed in collaboration with OPKO.
(c)Erbitux® is a registered trademark of ImClone LLC. In the EU, we are developing in collaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono.
(d)Keytruda® is a registered trademark of Merck Sharp & Dohme Corp. In the EU, we are developing in collaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono.
(e)Being developed in collaboration with Sangamo Therapeutics, Inc.
(f)Being developed in collaboration with Valneva SE.
(g)Being developed in collaboration with Arvinas.
For additional information about our R&D organization, see Note 13 and the Item 1. Business—Research and Development section of our 2022 Form 10-K. NON-GAAP FINANCIAL MEASURE: ADJUSTED INCOME/(LOSS)
Adjusted income/(loss) is an alternative measure of performance used by management to evaluate our overall performance as a supplement to our GAAP Reported performance measures. As such, we believe that investors’ understanding of our performance is enhanced by disclosing this measure. We use Adjusted income/(loss), certain components of Adjusted income/(loss) and Adjusted diluted EPS/(LPS) to present the results of our major operations––the discovery, development, manufacture, marketing, sale and distribution of biopharmaceutical products worldwide––prior to considering certain income statement elements as follows:
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Measure | | Definition | | Relevance of Metrics to Our Business Performance |
Adjusted income/(loss) | | Net income/(loss) attributable to Pfizer Inc. common shareholders(a) before the impact of amortization of intangible assets, certain acquisition-related items, discontinued operations and certain significant items | | •Provides investors useful information to: ◦evaluate the normal recurring operational activities, and their components, on a comparable year-over-year basis ◦assist in modeling expected future performance on a normalized basis •Provides investors insight into the way we manage our budgeting and forecasting, how we evaluate and manage our recurring operations and how we reward and compensate our senior management(b) |
Adjusted cost of sales, Adjusted selling, informational and administrative expenses, Adjusted research and development expenses and Adjusted other (income)/deductions––net | | Cost of sales, as a percentage of RevenuesSelling, informational and administrative expenses, Research and development expenses increased 1.2 percentage points, andprimarily due to cost increases reflecting the shift to EH of certain legacy Hospira costs that were previously unallocated to EH as a result of harmonizing the Hospira cost policy, and Other (income)/deductions––net(a), each before the impact of product lossesamortization of exclusivity, partially offset by the favorable impactintangible assets, certain acquisition-related items, discontinued operations and certain significant items, which are components of the sale of HIS, which had a higher cost of sales than the other EH products, and the favorable impact of foreign exchange.Adjusted income/(loss) measure |
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•Adjusted diluted EPS/(LPS) | | The decrease in EPS/(LPS) attributable to Pfizer Inc. common shareholders––dilutedCost of sales(a) before the impact of 8% primarily reflects;amortization of intangible assets, certain acquisition-related items, discontinued operations and certain significant items
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◦ | the favorable impact of the sale of HIS, which had a higher cost of sales than the other EH products; |
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◦ | the favorable impact of foreign exchange; |
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◦ | a net decrease in royalty expense and, to a lesser extent, |
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◦ | lower volumes driven by, among other things, the SIP portfolio, primarily due to legacy Hospira product shortages in the U.S., |
partially offset by:
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◦ | cost increases reflecting the shift to EH of certain legacy Hospira costs that were previously unallocated to EH as a result of harmonizing the Hospira cost policy. |
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• | Selling, informational and administrativeexpenses decreased 9% primarily due to lower advertising, promotional, and field force expenses associated with products that recently lost marketing exclusivity and certain other expenses related to disputes in the ordinary course of business, as well as the favorable impact of the sale of HIS and the favorable impact of foreign exchange, partially offset by increased spending for biosimilars, primarily related to the U.S. launch of Inflectra.
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• | Research and developmentexpenses decreased 14%, primarily due to the close-out of certain post-marketing clinical trials and the favorable impact of the sale of HIS.
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• | The unfavorable change in Other (income)/deductions––net primarily reflects the non-recurrence of a resolution of a contract disagreement in the first quarter of 2016, partially offset by a gain on the redemption of an acquired bond.
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ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Changes(a)Most directly comparable GAAP measure.
(b)The short-term incentive plans for substantially all non-sales-force employees worldwide are funded from a pool based on our performance, measured in significant part versus three budgeted metrics, one of which is Adjusted diluted EPS (as defined for annual incentive compensation purposes), which is derived from Adjusted income/(loss) and accounts for 40% of the bonus pool funding tied to financial performance. Additionally, the payout for performance share awards is determined in part by Adjusted net income/(loss), which is derived from Adjusted income/(loss). Beginning in the first quarter of 2022, we no longer exclude any expenses for acquired IPR&D from our non-GAAP Adjusted results but we continue to exclude certain of these expenses for our financial results for annual incentive compensation purposes. The bonus pool funding, which is largely based on financial performance, is adjusted by our R&D pipeline performance, as measured by four metrics, and performance against certain of our ESG metrics, and may be further modified by our Compensation Committee’s assessment of other factors.
Adjusted income/(loss) and its components and Adjusted diluted EPS/(LPS) are non-GAAP financial measures that have no standardized meaning prescribed by GAAP and, therefore, are limited in their usefulness to investors. Because of their non-standardized definitions, they may not be comparable to the calculation of similar measures of other companies and are presented to permit investors to more fully understand how management assesses performance. A limitation of these measures is that they provide a view of our operations without including all events during a period, and do not provide a comparable view of our performance to peers. These measures are not, and should not be viewed as, substitutes for their most directly comparable GAAP measures of Net income/(loss) attributable to Pfizer Inc. common shareholders, components of AccumulatedNet income/(loss) attributable to Pfizer Inc. common shareholders and EPS/(LPS) attributable to Pfizer Inc. common shareholders—diluted, respectively.
We also recognize that, as internal measures of performance, these measures have limitations, and we do not restrict our performance-management process solely to these measures. We also use other comprehensive losstools designed to achieve the highest levels of performance. For example, our R&D organization has productivity targets, upon which its effectiveness is measured. In addition, total shareholder return, both on an absolute basis and relative to a publicly traded pharmaceutical index, plays a significant role in determining payouts under certain of our incentive compensation plans.
Adjusted Income/(Loss) and Adjusted Diluted EPS/(LPS)
Amortization of Intangible Assets—Adjusted income/(loss) excludes all amortization of intangible assets.
Acquisition-Related Items—Adjusted income/(loss) excludes certain acquisition-related items, which are composed of transaction, integration, restructuring charges and additional depreciation costs for business combinations because these costs are unique to each transaction and represent costs that were incurred to restructure and integrate businesses as a result of an acquisition. We have made no adjustments for resulting synergies. Acquisition-related items may include purchase accounting impacts such as the incremental charge to cost of sales from the sale of acquired inventory that was written up to fair value, depreciation related to the increase/decrease in fair value of acquired fixed assets, amortization related to the increase in fair value of acquired debt, and the fair value changes for contingent consideration.
Discontinued Operations—Adjusted income/(loss) excludes the results of discontinued operations, as well as any related gains or losses on the disposal of such operations. We believe that this presentation is meaningful to investors because, while we review our product portfolio for strategic fit with our operations, we do not build or run our business with the intent to discontinue parts of our business. Restatements due to discontinued operations do not impact compensation or change the
Adjusted income/(loss) measure for the compensation in respect of the restated periods, but are presented for consistency across all periods.
Certain Significant Items—Adjusted income/(loss) excludes certain significant items representing substantive and/or unusual items that are evaluated individually on a quantitative and qualitative basis. Certain significant items may be highly variable and difficult to predict. Furthermore, in some cases it is reasonably possible that they could reoccur in future periods. For example, although major non-acquisition-related cost-reduction programs are specific to an event or goal with a defined term, we may have subsequent programs based on reorganizations of the business, cost productivity or in response to LOE or economic conditions. Legal charges to resolve litigation are also related to specific cases, which are facts and circumstances specific and, in some cases, may also be the result of litigation matters at acquired companies that were inestimable, not probable or unresolved at the date of acquisition, or legal matters related to divested products or businesses. Gains and losses on equity securities and pension and postretirement actuarial remeasurement gains and losses have a very high degree of inherent market volatility, which we do not control and cannot predict with any level of certainty, and we do not believe including these gains and losses assists investors in understanding our business or is reflective of our core operations and business. Unusual items represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be non-recurring; or items that relate to products we no longer sell. See the Reconciliations of GAAP Reported to Non-GAAP Adjusted information—Certain Line Items below for a non-inclusive list of certain significant items and the Non-GAAP Financial Measure: Adjusted Income section within MD&A of our 2022 Form 10-K.
Reconciliations of GAAP Reported to Non-GAAP Adjusted Information––Certain Line Items
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| | Three Months Ended October 1, 2023 |
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER SHARE DATA) | | Cost of sales(a) | | Selling, informational and administrative expenses(a) | | Other (income)/deductions––net(a) | | Net income/(loss) attributable to Pfizer Inc. common shareholders(a), (b) | | Earnings/(loss) per common share attributable to Pfizer Inc. common shareholders––diluted(c) |
GAAP Reported | | $ | 9,269 | | | $ | 3,281 | | | $ | (79) | | | $ | (2,382) | | | $ | (0.42) | |
Amortization of intangible assets | | — | | | — | | | — | | | 1,179 | | | |
Acquisition-related items | | (127) | | | (2) | | | (8) | | | 227 | | | |
Discontinued operations(d) | | — | | | — | | | — | | | (13) | | | |
Certain significant items: | | | | | | | | | | |
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(e) | | (20) | | | (71) | | | — | | | 185 | | | |
| | | | | | | | | | |
(Gains)/losses on equity securities(f) | | — | | | — | | | (393) | | | 393 | | | |
Actuarial valuation and other pension and postretirement plan (gains)/losses | | — | | | — | | | 6 | | | (6) | | | |
Other(g) | | (216) | | | (4) | | | 85 | | | 137 | | | |
Income tax provision—non-GAAP items | | | | | | | | (687) | | | |
Non-GAAP Adjusted | | $ | 8,906 | | | $ | 3,205 | | | $ | (388) | | | $ | (968) | | | $ | (0.17) | |
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| | Nine Months Ended October 1, 2023 |
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER SHARE DATA) | | Cost of sales(a) | | Selling, informational and administrative expenses(a) | | Other (income)/deductions––net(a) | | Net income/(loss) attributable to Pfizer Inc. common shareholders(a), (b) | | Earnings/(loss) per common share attributable to Pfizer Inc. common shareholders––diluted |
GAAP Reported | | $ | 17,391 | | | $ | 10,196 | | | $ | (356) | | | $ | 5,488 | | | $ | 0.96 | |
Amortization of intangible assets | | — | | | — | | | — | | | 3,466 | | | |
Acquisition-related items | | (360) | | | (7) | | | (158) | | | 778 | | | |
Discontinued operations(d) | | — | | | — | | | — | | | (11) | | | |
Certain significant items: | | | | | | | | | | |
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(e) | | (70) | | | (196) | | | — | | | 450 | | | |
Certain asset impairments(f) | | — | | | — | | | (264) | | | 264 | | | |
(Gains)/losses on equity securities(f) | | — | | | — | | | (711) | | | 711 | | | |
Actuarial valuation and other pension and postretirement plan (gains)/losses | | — | | | — | | | — | | | — | | | |
Other(g) | | (238) | | | (18) | | | 21 | | | 242 | | | |
Income tax provision—Non-GAAP items | | | | | | | | (1,478) | | | |
Non-GAAP Adjusted | | $ | 16,723 | | | $ | 9,974 | | | $ | (1,466) | | | $ | 9,908 | | | $ | 1.73 | |
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| | Three Months Ended October 2, 2022 |
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER SHARE DATA) | | Cost of sales(a) | | Selling, informational and administrative expenses(a) | | Other (income)/deductions––net(a) | | Net income/(loss) attributable to Pfizer Inc. common shareholders(a), (b) | | Earnings/(loss) per common share attributable to Pfizer Inc. common shareholders––diluted |
GAAP Reported | | $ | 6,063 | | | $ | 3,391 | | | $ | (59) | | | $ | 8,608 | | | $ | 1.51 | |
Amortization of intangible assets | | — | | | — | | | — | | | 822 | | | |
Acquisition-related items | | 3 | | | (2) | | | (12) | | | 62 | | | |
Discontinued operations(d) | | — | | | — | | | — | | | 15 | | | |
Certain significant items: | | | | | | | | | | |
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(e) | | (20) | | | (137) | | | — | | | 306 | | | |
Certain asset impairments(f) | | — | | | — | | | (200) | | | 200 | | | |
(Gains)/losses on equity securities(f) | | — | | | — | | | (111) | | | 111 | | | |
Actuarial valuation and other pension and postretirement plan (gains)/losses | | — | | | — | | | 193 | | | (193) | | | |
Other(g) | | (8) | | | (12) | | | (325) | | | 349 | | | |
Income tax provision—non-GAAP items | | | | | | | | (109) | | | |
Non-GAAP Adjusted | | $ | 6,038 | | | $ | 3,239 | | | $ | (515) | | | $ | 10,172 | | | $ | 1.78 | |
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| | Nine Months Ended October 2, 2022 |
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER SHARE DATA) | | Cost of sales(a) | | Selling, informational and administrative expenses(a) | | Other (income)/deductions––net(a) | | Net income/(loss) attributable to Pfizer Inc. common shareholders(a), (b) | | Earnings/(loss) per common share attributable to Pfizer Inc. common shareholders––diluted |
GAAP Reported | | $ | 24,696 | | | $ | 9,032 | | | $ | 1,063 | | | $ | 26,378 | | | $ | 4.60 | |
Amortization of intangible assets | | — | | — | | — | | 2,478 | | |
Acquisition-related items | | 12 | | (5) | | (51) | | 331 | | |
Discontinued operations(d) | | — | | — | | — | | (9) | | |
Certain significant items: | | | | | | |
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(e) | | (62) | | (344) | | — | | 701 | | |
Certain asset impairments(f) | | — | | — | | (200) | | 200 | | |
(Gains)/losses on equity securities(f) | | — | | — | | (1,348) | | 1,348 | | |
Actuarial valuation and other pension and postretirement plan (gains)/losses | | — | | — | | (225) | | 225 | | |
Other(g) | | (24) | | (47) | | (536) | | 621 | | |
Income tax provision—Non-GAAP items | | | | | (1,107) | | |
Non-GAAP Adjusted | | $ | 24,621 | | $ | 8,635 | | $ | (1,298) | | $ | 31,165 | | $ | 5.44 | |
(a)Items that reconcile GAAP Reported to non-GAAP Adjusted balances are shown pre-tax. Our effective tax rates for GAAP Reported income/(loss) from continuing operations were: 28.8% and (6.2)% in the three and nine months ended October 1, 2023, respectively, and 4.0% and 10.5% in the three and nine months ended October 2, 2022, respectively. See Note 5. Our effective tax rates for non-GAAP Adjusted income/(loss) were 22.3% and 10.4% in the three and nine months ended October 1, 2023, respectively, and 4.4% and 11.9% in the three and nine months ended October 2, 2022, respectively. (b)The amounts for the three and nine months ended October 1, 2023 and October 2, 2022 include reconciling amounts for Research and development expenses that are not material.
(c)For the third quarter of 2023, basic weighted-average shares outstanding of 5,646 million (excluding common share equivalents) were used to calculate GAAP Reported and non-GAAP Adjusted Loss per common share attributable to Pfizer Inc. common shareholders––diluted.
(e)Includes employee termination costs, asset impairments and other exit costs related to our cost-reduction and productivity initiatives not associated with acquisitions. See Note 3. (g)For the third quarter and first nine months of 2023, the total Cost of sales 2017 reflect the following:
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• | For Foreign currency translation adjustments net, for the third quarter of 2017, primarily reflects the weakening of the U.S. dollar against the euro, Canadian dollar and Australian dollar; for the first nine months of 2017, primarily reflects the weakening of the U.S. dollar against the euro, Canadian dollar, Swedish krona and the Australian dollar. For the first nine months of 2017, also includes the reclassification of amounts related to the agreement to sell our 40% ownership investment in Teuto. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 2D. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments.
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• | For Unrealized holding losses on derivative financial instruments, net and Unrealized holding gains on available-for-sale securities, net, reflect the impact of fair value remeasurements and the reclassification of realized amounts into income. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 7. Financial Instruments.
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• | For Benefit plans: actuarial losses, net, for the third quarter and first nine months of 2017, primarily reflects (i) the amortization of changes in the pension benefit obligation previously recognized in Other comprehensive income; (ii) the unfavorable impact of foreign exchange; and (iii) an increase in actuarial losses due to an interim remeasurement. The first nine months of 2017 also reflects the remeasurement gain due to the settlement of the Hospira U.S. qualified defined benefit plan. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit Plans.
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ANALYSIS OF THE CONDENSED CONSOLIDATED BALANCE SHEETS
For information about certain of our financial assets$216 million and liabilities, including Cash and cash equivalents, Short-term investments, Long-term investments, Short-term borrowings, including current portion of long-term debt, and Long-term debt, see the “Analysis of the Condensed Consolidated Statements of Cash Flows” section of this MD&A, the “Analysis of Financial Condition, Liquidity and Capital Resources: Selected Measures of Liquidity and Capital Resources” section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 7. Financial Instruments.
For information about certain balances$238 million, respectively, primarily include $209 million in Trade accounts receivable, less allowance for doubtful accounts, see also the “Analysis of Financial Condition, Liquidity and Capital Resources: Selected Measures of Liquidity and Capital Resources: Accounts Receivable” section of this MD&A.
For information about events and circumstances impacting our tax-related accounts, see Notes to Condensed Consolidated Financial Statements—Note 5. Tax Matters.
For information related to changes in Accumulated other comprehensive loss, see the “Analysis of the Condensed Consolidated Statements of Comprehensive Income” section of this MD&A and Notes to Condensed Consolidated Financial Statements—Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests.
The changes in our asset and liability accounts as of October 1, 2017, compared to December 31, 2016, generally reflect, among other things, the impact of assets acquired and liabilities assumed as part of the acquisition of AstraZeneca’s small molecule anti-infectives business, measurement period adjustmentsinventory losses, overhead costs related to the period in which the facility could not operate, and incremental costs resulting from tornado damage to our manufacturing facility in Rocky Mount, NC. For the third quarter of 2023, the total Other (income)/deductions––net adjustment of $85 million primarily includes a $222 million gain on the divestiture of our early-stage rare disease gene therapy portfolio to Alexion, partially offset by charges of $71 million for certain legal matters, representing legal obligations related to pre-acquisition matters and certain product liability expenses related to products discontinued and/or divested by Pfizer. For the first nine months of 2023, the total Other (income)/deductions––net adjustment of $21 million primarily includes (i) the $222 million gain on the divestiture of our early-stage rare disease gene therapy portfolio to Alexion, and (ii) dividend income of $211 million related to our investment in Nimbus resulting from Takeda Pharmaceutical Company Limited’s acquisition of Medivation,Nimbus’s oral, selective allosteric tyrosine kinase 2 (TYK2) inhibitor program subsidiary, partially offset by charges of (i) $246 million for certain legal matters, primarily representing certain product liability and fluctuations in foreign currency exchange ratesother legal expenses related to products discontinued and/or divested by Pfizer and legal obligations related to pre-acquisition matters, and (ii) $92 million mostly related to our equity-method accounting pro-rata share of intangible asset amortization and impairments, costs of separating from GSK and restructuring costs recorded by Haleon. For the third quarter of 2022, the total .Other (income)/deductions––net The following explanations exclude adjustment of $325 million primarily included charges of (i) $212 million mostly representing our equity-method accounting pro rata share of costs of separating from GSK recorded by Haleon/the impact of the acquisition of AstraZeneca’s small molecule anti-infectives business, measurement periodConsumer Healthcare JV, and adjustments to our equity-method basis differences which are also related to the acquisitionseparation of Medivation, as well as Haleon/the sale of HIS to ICU MedicalConsumer Healthcare JV from GSK, and foreign exchange (see Notes to Condensed Consolidated Financial Statements––Note 2. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement(ii) $77 million for certain legal matters, representing certain product liability and Equity-Method Investments and Note 9. Identifiable Intangible Assets and Goodwill for additional information).
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• | For Trade accounts receivable, less allowance for doubtful accounts, the change reflects the timing of sales and collections in the normal course of business.
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• | For Inventories, the change reflects the build of inventory primarily for and in advance of new or potential product launches and increases to meet targeted levels for certain products in the normal course of business, including those related to demand.
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• | For Other current assets, the change reflects a decrease in receivables associated with our derivative financial instruments, as well as the timing of receipt and payments in the normal course of business, partially offset by an increase in VAT receivable balances due to a change in our supply chain.
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• | For PP&E,the change primarily reflects depreciation during the period and reductions due to restructuring efforts, partially offset by capital additions in the normal course of business.
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• | For Identifiable intangible assets, less accumulated amortization, the change primarily reflects amortization for the period, partially offset by intangible assets recorded in connection with the EU and U.S. approvals of Besponsa.For additional information, see Notes to Condensed Consolidated Financial Statements—Note 7E. Financial Instruments: Other Noncurrent Liabilities.
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• | For Other noncurrent assets, the change reflects a decrease in receivables associated with our derivative financial instruments, partially offset by net increases in the normal course of business.
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• | For Trade accounts payable, the change reflects the timing of purchases and payments in the normal course of business, including the impact of efforts to improve working capital efficiencies.
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• | For Accrued compensation and related items, the decrease reflects normal bonus payments made to employees and a reduction related to the termination of a Hospira U.S. qualified defined benefit pension plan, partially offset by current year’s accruals. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit Plans.
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• | For Other current liabilities, the change reflects a decrease in liabilities associated with:
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◦ | payment for consideration transferred for Medivation; |
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◦ | payments for restructuring activities and payments for liabilities related to the closeout of bococizumab clinical studies; and |
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◦ | our derivative financial instruments, |
partially offset by:
◦an increaseother legal expenses related to accrued healthcare fees;products discontinued and/or divested by Pfizer. For the first nine months of 2022, the total Other (income)/deductions––net adjustment of $536 million primarily included charges of (i) $273 million mostly representing our equity-method accounting pro rata share of restructuring charges and costs of separating from GSK recorded by Haleon/the Consumer Healthcare JV, and adjustments to our equity-method basis differences which are also related to the separation of Haleon/the Consumer Healthcare JV from GSK, and (ii) $175 million for certain legal matters, primarily representing certain product liability and other legal expenses related to products discontinued and/or divested by Pfizer.
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◦ | an accrual for net funds due to ICU Medical for net economic benefit payments (see Notes to Condensed Consolidated Financial Statements––Note 2B. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement and Equity-Method Investments: Sale of Hospira Infusion Systems Net Assets to ICU Medical, Inc. (EH)); and |
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◦ | the impact of timing of payments in the normal course of business. |
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• | For Pension benefit obligations, net, the decrease primarily reflects the $1.0 billion voluntary pension contribution in January 2017 and payments to plan participants.
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• | For Other noncurrent liabilities, the change reflects a decrease in liabilities associated with:
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◦ | an increase in reclassification of short-term liabilities; |
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◦ | our derivative financial instruments; and |
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◦ | the reversal of a contingent liability as a result of exiting our investment in Teuto (see Notes to Condensed Consolidated Financial Statements––Note 2D. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement and Equity-Method Investments: Equity Method Investments),
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partially offset by:
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◦ | an increase of $351 million to record obligations in connection with the EU and U.S. approvals of Besponsa(see Notes to Condensed Consolidated Financial Statements—Note 7E. Financial Instruments: Other Noncurrent Liabilities);
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◦ | an increase in deferred revenue from a milestone payment received from Merck for the ertugliflozin collaboration agreement (see Notes to Condensed Consolidated Financial Statements––Note 2C. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement and Equity-Method Investments: Collaboration Arrangement); and
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◦ | accruals in the normal course of business. |
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• | For Treasury stock, the change reflects $5 billion paid to Citibank in February 2017 pursuant to the terms of an accelerated share repurchase agreement. See Notes to Condensed Consolidated Financial Statements—Note 12. Commitments and Contingencies for additional information.
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ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| | | | | | | | | | | |
| | Nine Months Ended | | |
(MILLIONS OF DOLLARS) | | October 1, 2017 |
| | October 2, 2016 |
| | % Change |
|
Cash provided by/(used in): | | | | | | |
Operating activities(a) | | $ | 9,728 |
| | $ | 10,151 |
| | (4 | ) |
Investing activities | | 38 |
| | (4,704 | ) | | * |
|
Financing activities(a) | | (9,650 | ) | | (6,915 | ) | | 40 |
|
Effect of exchange-rate changes on cash and cash equivalents | | 67 |
| | (79 | ) | | * |
|
Net increase/(decrease) in Cash and cash equivalents | | $ | 184 |
| | $ | (1,547 | ) | | * |
|
| |
* | Calculation not meaningful. |
| |
(a)
| Amounts for the nine months ended October 2, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, that requires that cash flows present (i) excess tax benefits as Other tax accounts, net as part of operating activities, rather than financing activities on a prospective basis beginning in the year of adoption, and (ii) cash paid by us when directly withholding shares for tax-withholding purposes as a cash outflow from financing activities, rather than operating activities and is reflected in the year of adoption. The year-to-date excess tax benefit was $87 million in the first nine months of 2016. For cash paid by us for withholding purposes, $134 million for the first nine months of 2016 is presented as financing activitiesin the condensed consolidated statement of cash flows (see Notes to Consolidated Financial Statements—Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards).
|
In the condensed consolidated statements of cash flows, the line item Other changes in assets and liabilities, net of acquisitions and divestitures is presented excluding the effects of changes in foreign currency exchange rates, as these changes do not reflect actual cash inflows or outflows, and excluding any other significant non-cash movements. Accordingly, the amounts shown will not necessarily agree with the changes in the assets and liabilities that are presented in our condensed consolidated balance sheets. | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended | | |
(MILLIONS) | | October 1, 2023 | | October 2, 2022 | | | | Drivers of change |
Cash provided by/(used in): | | | | | | | | |
Operating activities | | $ | 3,460 | | | $ | 20,685 | | | | | The change was primarily driven by a decrease in net income adjusted for non-cash items and the timing of receipts and payments in the ordinary course of business, including a decrease in advance payments for Comirnaty and Paxlovid and net changes in inventory greater than one year (see Note 8A). |
Investing activities | | $ | (21,282) | | | $ | (11,373) | | | | | The change was driven mainly by $12.7 billion greater net purchases of short-term investments in 2023 and a $4.0 billion dividend received from the Consumer Healthcare JV in 2022 that was allocated to investing activities, partially offset by $6.2 billion cash used to acquire Arena, net of cash acquired, in 2022 and a $1.5 billion decrease in purchases of long-term investments. |
Financing activities | | $ | 20,624 | | | $ | (9,819) | | | | | The change was driven mainly by $30.8 billion of proceeds from the issuance of long-term debt in 2023. |
| | | | | | | | |
| | | | | | | | |
Operating Activities
Our net cash provided by operating activities was $9.7 billion in the first nine months of 2017, compared to $10.2 billion in the same period in 2016. The decrease in net cash provided by operating activities reflects the timing of receipts from customers and payments to vendors in the ordinary course of business, as well as an increase in benefit plan contributions.
In the first nine months of 2017, the line item Other adjustments, net primarily reflects, among other items, the decrease in the provision for bad debt expense, an increase in dividends from an equity-method investment reclassified to investing activities in 2017 and an increase in net gains on sales of PP&E.
In the first nine months of 2017 and 2016, the line item Other changes in assets and liabilities, net of acquisitions and divestitures, primarily reflects changes, in the normal course of business, in trade accounts receivable, inventories, other current assets, other noncurrent assets, trade accounts payable, accrued compensation and other current and noncurrent liabilities. For the first nine months of 2016, this line item also includes the adjustments necessary to reflect the payments of certain legal claims accrued in prior periods, including for Protonix-related matters. For additional information about accounts receivable, see also the “Selected Measures of Liquidity and Capital Resources: Accounts Receivable” section of this MD&A.
For additional information about changes in other assets and liabilities account balances, see also “Analysis of the Condensed Consolidated Balance Sheets” in this MD&A.
Investing Activities
Our net cash provided by investing activities was $38 million in the first nine months of 2017, compared to net cash used in investing activities of $4.7 billion in the same period in 2016. The change in net cash provided by investing activities was primarily attributable to:
| |
• | a decrease in cash used for acquisitions—cash paid of $1.0 billion, net of cash acquired, primarily for the acquisition of AstraZeneca’s small molecule anti-infectives business in 2017 and substantially all of the remaining consideration for the Medivation acquisition, compared to cash paid of $17.7 billion, net of cash acquired, primarily for the acquisitions of Medivation, Bamboo and Anacor in 2016 (see Notes to Condensed Consolidated Financial Statements—Note 2A. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement and Equity-Method Investments: Acquisitions); and
|
| |
• | an increase in Other investing activities, net, including dividends received from an equity-method investment,
|
partially offset by:
| |
• | less net proceeds generated from the sale of investments of $12.2 billion in 2017 for cash needs.
|
Financing Activities
Our net cash used in financing activities was $9.6 billion in first nine months of 2017, compared to $6.9 billion in the same period in 2016. The change in net cash used in financing activities was primarily attributable to:
| |
• | $2.2 billion less proceeds raised from net short-term borrowings in the first nine months of 2017, compared to the first nine months of 2016; and
|
| |
• | $5.8 billion cash dividends paid in the first nine months of 2017, compared to $5.5 billion in the same period in 2016,
|
partially offset by:
| |
• | the issuance of long-term debt of $5.3 billion in the first nine months of 2017, compared to $5.0 billion in the same period in 2016 (see Notes to Condensed Consolidated Financial Statements––Note 7D. Financial Instruments: Long-Term Debt).
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ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES AND MARKET RISK
We rely largely onOur historically robust operating cash flows, short-term investments, short-term commercial paper borrowings and long-term debtwhich we expect to provide forcontinue, is a key strength of our liquidity requirements.and capital resources and our primary funding source. We continue our efforts to improve cash inflows through working capital efficiencies. We target specific areasbelieve as a result of focus including accounts receivable, inventories, accounts payable, and other working capital, which allows us to optimize our operating cash flows. Due to our significant operating cash flows as well asthis, together with our financial assets, access to capital markets, revolving credit agreements, and available lines of credit, and revolving credit agreements, we believe that we have and will maintain the ability to meet our liquidity needs to support ongoing operations, our capital allocation objectives, and our contractual and other obligations for the foreseeable future, which include:
For information about our diverse sources of funds, off-balance sheet arrangements, contractual and other obligations, global economic conditions, market risk and LIBOR, see the Analysis of Financial Condition, Liquidity, Capital Resources and Market Risk sectionwithin MD&A of our 2022 Form 10-K. For more information on guarantees and indemnifications, see Note 12B. Debt Issuance––In May 2023, we completed a public offering of $31 billion aggregate principal amount of senior unsecured notes as part of the financing for our proposed acquisition of Seagen. The net proceeds have been invested in short-term investments in a combination of money market funds and available-for-sale debt securities until the completion of the proposed acquisition. See Notes 7Aand7D. Credit Ratings––The cost and availability of financing are influenced by credit ratings, and an increase or decrease in our business;
dividend payments and potential increases in the dividend rate;
share repurchases;
the cash requirements associated with our cost-reduction/productivity initiatives;
paying down outstanding debt;
contributions to our pension and postretirement plans; and
business-development activities.
credit rating could have a beneficial or adverse effect on financing. Our long-term debt is rated high-quality by both S&P and Moody’s. SeeIn March 2023, following the “Credit Ratings” section below. As market conditions change, we continueannouncement of the proposed acquisition of Seagen, Moody’s changed its outlook on our long-term debt to monitorNegative; S&P downgraded our liquidity position. We have takenshort-term rating from A-1+ to A-1. In October 2023, following the announcement of the amended Paxlovid supply agreement with the U.S. government and will continueupdated 2023 guidance, S&P changed its outlook on our long-term debt to take a conservative approach to our financial investments. Both short-term and long-term investments consist primarily of high-quality, highly liquid, well-diversified available-for-sale debt securities.Negative.
Selected Measures of Liquidity and Capital Resources |
| | | | | | | | |
The following table provides certain relevant measures of our liquidity and capital resources: |
(MILLIONS OF DOLLARS, EXCEPT RATIOS AND PER COMMON SHARE DATA) | | October 1, 2017 |
| | December 31, 2016 |
|
Selected financial assets: | | | | |
Cash and cash equivalents(a) | | $ | 2,779 |
| | $ | 2,595 |
|
Short-term investments(a) | | 14,146 |
| | 15,255 |
|
Long-term investments(a) | | 7,311 |
| | 7,116 |
|
| | 24,236 |
| | 24,967 |
|
Debt: | | |
| | |
|
Short-term borrowings, including current portion of long-term debt | | 9,448 |
| | 10,688 |
|
Long-term debt | | 34,503 |
| | 31,398 |
|
| | 43,951 |
| | 42,085 |
|
Selected net financial liabilities(b) | | $ | (19,714 | ) | | $ | (17,118 | ) |
| | | | |
Working capital(c) | | $ | 12,074 |
| | $ | 7,834 |
|
Ratio of current assets to current liabilities | | 1.43:1 |
| | 1.25:1 |
|
Total Pfizer Inc. shareholders’ equity per common share(d) | | $ | 10.20 |
| | $ | 9.81 |
|
| | | | | | | | | | | | | | | | | | | | |
(a)
| See Notes to Condensed Consolidated Financial Statements––Note 7. Financial Instruments for a descriptionAs of certain assets held and for a descriptionthe date of credit risk relatedthe filing of this Form 10-Q, the ratings assigned to our financial instruments held.
|
| commercial paper and senior unsecured long-term debt: |
(b)NAME OF RATING AGENCY
| The increase in selected net financial liabilities is primarily driven by (i) our decrease in short-term investments, the proceeds of which were used for various cash needs and (ii) the net increase in long-term debt. We retain a strong financial liquidity position as a result of our net cash provided by operating activities, our high-quality financial asset portfolio and access to capital markets. Both Moody’s and S&P rating agencies maintained our strong investment-grade corporate debt rating subsequent to the acquisitions of Medivation and Anacor. For additional information, see the “Credit Ratings” section of this MD&A. |
| Pfizer Short-Term Rating | | Pfizer Long-Term Rating | | Outlook/Watch |
(c)Moody’s
| The increase in working capital is primarily due to the timing of accruals, cash receipts and payments in the ordinary course of business, a decline in short-term borrowings and an increase in inventory related to new or potential products, partially offset by a decline in short-term investments used for various cash needs and the sale of HIS assets to ICU Medical. |
| P-1 | | A1 | | Negative Outlook |
(d)S&P
| Represents total Pfizer Inc. shareholders’ equity divided by the actual number of common shares outstanding (which excludes treasury stock). | A-1 | | A+ | | Negative Outlook |
For additional information about the sources and uses of our funds, see the “Analysis of the Condensed Consolidated Balance Sheets” and the “Analysis of the Condensed Consolidated Statements of Cash Flows” sections of this MD&A.
On March 17, 2017, we completed a public offering of $1.065 billion principal amount of senior unsecured notes due 2047 with an interest rate of 4.20%, and on March 6, 2017, we completed a public offering of €4.0 billion principal amount of senior unsecured notes with a weighted-average effective interest rate of 0.23% (see Notes to Condensed Consolidated Financial Statements––Note 7D. Financial Instruments: Long-Term Debt).
Domestic and International Short-Term Funds
Many of our operationsThese ratings are conducted outside the U.S., and significant portions of our cash, cash equivalents and short-term investments are held internationally. We generally hold up to $10 billion of these short-term funds in U.S. tax jurisdictions. The amount of funds held in U.S. tax jurisdictions can fluctuate due to the timing of receipts and payments in the ordinary course of business and due to other reasons, such as business-development activities. As part of our ongoing liquidity assessments, we regularly monitor the mix of domestic and international cash flows (both inflows and outflows). Repatriation of overseas funds can result in additional U.S. federal, state and local income tax payments. We record U.S. deferred tax liabilities for certain unremitted earnings, but when amounts earned overseas are expected to be indefinitely reinvested outside the U.S., no accrual for U.S. taxes is provided.
Accounts Receivable
We continue to monitor developments regarding government and government agency receivables in several European markets where economic conditions remain challenging and uncertain. Historically, payments from a number of these European governments and government agencies extend beyond the contractual terms of sale. Specifically, we received delayed payments for 2016 revenues from the Greek government; virtually all Greece government receivables pertain to 2017 revenues. Also, the Greek government restructured its debt to other third parties in the third quarter of 2016. We determined our allowance for doubtful accounts to reflect these events, and have $35 million in net receivables from the Greek government as of October 1, 2017. Reported revenues from all customers in Greece for the nine months ended October 1, 2017 were $180 million.
We believe that our allowance for doubtful accounts is appropriate. Our assessment is based on an analysis of the following: (i) payments received to date; (ii) the consistency of payments from customers; (iii) direct and observed interactions with the governments (including court petitions) and with market participants (for example, the factoring industry); and (iv) various third-party assessments of repayment risk (for example, rating agency publications and the movement of rates for credit default swap instruments).
As of October 1, 2017, we had about $533 million in aggregate gross accounts receivable from governments and/or government agencies in Italy, Spain, Greece and Portugal where economic conditions remain challenging and uncertain. Such receivables in excess of one year from the invoice date, totaling $65 million, were as follows: $40 million in Italy; $18 million in Portugal; $4 million in Greece; and $3 million in Spain.
Although certain European governments and government agencies sometimes delay payments beyond the contractual terms of sale, we seek to appropriately balance repayment risk with the desire to maintain good relationships with our customers and to ensure a humanitarian approach to local patient needs.
We will continue to closely monitor repayment risk and, when necessary, we will continue to adjust our allowance for doubtful accounts.
Our assessments about the recoverability of accounts receivables can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions. For information about the risks associated with estimates and assumptions, see Notes to Consolidated Financial Statements––Note 1C. Basis of Presentation and Significant Accounting Policies:Estimates and Assumptions included in our 2016 Financial Report.
Credit Ratings
Two major corporate debt-rating organizations, Moody’s and S&P, assign ratings to our short-term and long-term debt. A security rating is not a recommendationrecommendations to buy, sell or hold securities and the rating isratings are subject to revision or withdrawal at any time by the rating organization.organizations. Each rating should be evaluated independently of any other rating.
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The following table provides the current ratings assigned by these rating agencies to our commercial paper and senior unsecured long-term debt: |
NAME OF RATING AGENCY | | Pfizer
Commercial Paper
| | Pfizer
Long-Term Debt
| Date of Last Rating Change |
| Rating | | Rating | |
Moody’s(a)
| | P-1 | | A1 | | October 2009 |
S&P(b)
| | A-1+ | | AA | | October 2009 |
| |
(a)
| In September 2016, Moody’s updated their credit outlook from negative outlook to stable. |
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(b)
| In April 2016, S&P updated their credit outlook from negative watch to stable. |
Debt Capacity
We have available linesCapacity––Lines of credit and revolving credit agreements with a group of banks and other financial intermediaries. We maintain cash and cash equivalent balances and short-term investments in excess of our commercial paper and other short-term borrowings. Credit––As of October 1, 2017,the date of the filing of this Form 10-Q, we had access to $7.8a total of $15 billion in committed U.S. revolving credit facilities, consisting of an $8.0 billion facility maturing in November 2024 and a $7 billion facility maturing in November 2028, which may be used for general corporate purposes including to support our global commercial paper borrowings. In addition to the U.S. revolving credit facilities, our lenders have provided us an additional $298 million in lines of credit, of which $689$268 million expire within one year. Of theseEssentially all lines of credit $7.7 billion were unused of which our lenders have committed to loan us $7.0 billion at our request. Also, $7.0 billion of our unused lines of credit, all of which expire in 2021, may be used to support our commercial paper borrowings.
Global Economic Conditions––General
The global economic environment has not had, nor do we anticipate it will have, a material impact on our liquidity or capital resources. Due to our significant operating cash flows, financial assets, access to capital markets and available lines of credit and revolving credit agreements, we continue to believe that we have, and will maintain, the ability to meet our liquidity needs for the foreseeable future. We monitor our liquidity position continuously in the face of evolving economic conditions.
Global Economic Conditions––U.K.
In June 2016, the U.K. electorate voted in a referendum to leave the EU, which is commonly referred to as “Brexit”. In January 2017, the U.K. Prime Minister announced a 12-point plan of negotiating objectives and confirmed that the U.K. government will not seek continued membership in the EU single market. In March 2017, the U.K. government formally notified the
European Council of its intention to leave the EU after it triggered Article 50 of the Lisbon Treaty to begin the two-year negotiation process establishing the termsdate of the exit and outlining the future relationship between the U.K. and the EU. This process continues to be highly complex and the end resultfiling of these negotiations may pose certain implications to our research, commercial and general business operations in the U.K. and the EU, including the approval of our products.
We generated approximately 2% of our worldwide revenues from the U.K. in the first nine months of 2017. However, except for the foreign currency exchange impact from the weakening U.K. pound relative to the U.S. dollar to date, there are no other immediate-term impacts to our business as there has not yet been a formal change in the relationship between the U.K. and the EU. In addition, because of the significant uncertainties associated with the negotiation process, any potential long-term impacts are not currently determinable.
Global Economic Conditions––Venezuela Operations
Our Venezuela operations continue to operate with the U.S. dollar as the functional currency due to the hyperinflationary status of the Venezuelan economy.
In the second quarter of 2015, the Venezuelan government identified three official rates of exchange. These were the CENCOEX rate of 6.3; the SICAD rate of 13.5 (as of November 2017); and the SIMADI rate of 3,345 (as of November 2017). Effective in March 2016, the CENCOEX rate was replaced by the DIPRO rate of 10 (as of February 2017); the SICAD rate ceased to be offered; and the SIMADI rate was planned to be replaced by the DICOM rate. The Venezuelan government continued to publish the SIMADI rate, which was commonly referred to as the DICOM rate, and then began to publish the DICOM rate beginning in August 2017. That SIMADI, now DICOM, rate has grown from 206 in March 2016 to about 3,345 (as of November 2017). Based on conditions in Venezuela, we resolved that our Venezuelan bolivar-denominated net monetary assets that are subject to revaluation are no longer expected to be substantially settled at the Venezuelan government CENCOEX official rate of 6.3 or the DIPRO official rate of 10, but at a rate of 500 at the end of the second quarter and third quarter of 2016, and 670 at the end of the fourth quarter of 2016, and at the end of the first and second quarters of 2017, and 2,640 at the end of the third quarter of 2017.
We cannot predict whether there will be further devaluations of the Venezuelan currency or whether our use of the DICOM rate will continue to be supported by evolving facts and circumstances. Further, other potential actions by the Venezuelan government in response to economic uncertainties could impact the recoverability of our investment in Venezuela, which could result in an impairment charge and, under extreme circumstances, could impact our ability to continue to operate in the country in the same manner as we have historically.
On July 11, 2016, the Venezuelan government administration announced a new program under a State of Emergency decree that is intended to control the use of raw materials, production and distribution of products, specifically for medicines and foods. It is uncertain how this program will be applied to Pfizer in Venezuela. We continue to operate under adverse conditions in Venezuela and have $6 million of net monetary assets and $40 million of non-monetary assets, excluding inventory carried at lower of cost or market, in Venezuela at August 27, 2017, our international quarter-end.
Off-Balance Sheet Arrangements
In the ordinary course of business and in connection with the sale of assets and businesses, we often indemnify our counterparties against certain liabilities that may arise in connection with a transaction or that are related to activities prior to a transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters, and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications generally are subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of October 1, 2017, recorded amounts for the estimated fair value of these indemnifications were not significant.
Certain of our co-promotion or license agreements give our licensors or partners the rights to negotiate for, or in some cases to obtain under certain financial conditions, co-promotion or other rights in specified countries with respect to certain of our products.
Share-Purchase Plans and Accelerated Share Repurchase Agreements
Our October 2014 $11 billion share-purchase plan was exhausted in the first quarter of 2017. In December 2015, the Board of Directors authorized an $11 billion share repurchase program, and share repurchases commenced thereunder in the first quarter of 2017.
On February 2, 2017, we entered into an accelerated share repurchase agreement with Citibank to repurchase $5 billion of our common stock. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 12. Commitments and Contingencies and “Unregistered Sales of Equity Securities and Use of Proceeds––Issuer Purchases of Equity Securities” in Part II, Item 2 of this Quarterly Report on Form 10-Q.
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The following table provides the number of shares of our common stock purchased and the cost of purchases under our publicly announced accelerated share repurchase agreements: |
| | Three Months Ended | | Nine Months Ended |
(SHARES IN MILLIONS, DOLLARS IN BILLIONS) | | October 1, 2017 |
| | October 2, 2016 |
| | October 1, 2017(a) |
| | October 2, 2016(b) |
|
Shares of common stock purchased | | — |
| | — |
| | 150 |
| | 154 |
|
Cost of purchase | | $ | — |
| | $ | — |
| | $ | 5.0 |
| | $ | 5.0 |
|
| |
(a)
| Represents shares purchased pursuant to an accelerated share repurchase agreement with Citibank. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 12. Commitments and Contingencies and “Unregistered Sales of Equity Securities and Use of Proceeds––Issuer Purchases of Equity Securities” in Part II, Item 2 of this Quarterly Report on Form 10-Q.
|
| |
(b)
| Represents shares purchased pursuant to an accelerated share repurchase agreement entered into on March 8, 2016. For additional information, see Notes to Consolidated Financial Statements––Note 12. Equity in our 2016 Financial Report.
|
AtCapital Allocation Framework––Our capital allocation framework is primarily devised to facilitate the achievement of medical breakthroughs through R&D investments and business development activities and returning capital to shareholders through dividends and share repurchases. We expect to finance the proposed acquisition of Seagen substantially through $31 billion of long-term debt issued in May 2023, and the balance from a combination of short-term financing and existing cash. See Note 1A and the Item 1A. Risk Factors section for additional information about our proposed acquisition of Seagen. On October 1, 2017,4, 2023, our remaining share-purchase authorization was approximately $6.4 billion.
Dividends on Common Stock
In September 2017, our Board of DirectorsBOD declared a dividend of $0.32$0.41 per share, payable on December 1, 2017,4, 2023, to shareholders of record at the close of business on November 10, 2023. At October 1, 2023, our remaining share-purchase authorization was $3.3 billion, with no repurchases in the first nine months of 2023. See 2017Note 12. in our 2022 Form 10-K for more information on our publicly announced share-purchase plans.
Our financing plan for Seagen does not involve monetizing any portion of our Haleon stake. Our intentions with respect to our Haleon stake are set out in our Schedule 13D (as amended) initially filed with the SEC on July 27, 2022. NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standards
Recently Issued Accounting Standards, Not Adopted as of October 1, 2017
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The following table provides a brief descriptionRecently Issued Accounting Standard, Not Adopted as of recently issued accounting standards, not yet adopted: October 1, 2023 |
Standard/Description | | Effective Date | | Effect on the Financial Statements or Other Significant Matters |
In May 2014,June 2022, the FASB issued amended guidance related to revenue from contracts with customers. The new guidance introduces a new principles-based framework for revenue recognition and disclosure. Since its issuance the FASB has issued six ASUs, amending the guidance and effective date, and the SEC has rescinded certain related SEC guidance; the most recent of these changes was issued in December 2016. | | January 1, 2018. | | We have made substantial progress in completing our review of the impact of this guidance across our various business arrangements and revenue-related activities, and do not expect the adoption of this standard to have a material impact on our reported Revenues in our consolidated financial statements, revenue recognition processes, or our internal controls. We are reviewing our disclosures for revenue recognition and do not anticipate significant changes will be needed to conform with the disclosure requirements of the new guidance.
The interpretation and applicability of the new revenue recognition standard to collaboration arrangements in certain industries is still being assessed. We expect that milestone payments received in our collaboration agreements, which are recorded in Other (income)/deductions––net, and currently amortized over the life of the agreement, will, for many arrangements, be amortized over the remaining development period or sooner, if there is a distinct and separable licensing component. We are required to apply the new rules to existing contracts as if the new principles had always existed, and therefore, upon adoption, we expect to record a cumulative effect adjustment to Retained earnings as of the adoption date in the range of $350 million to $550 million to accelerate what would have been future income under the current rules into prior periods. The financial statement impact on pre-tax income is expected to be less than $100 million in any future annual period.
We continue to monitor additional changes, modifications, clarifications or interpretations undertaken by the FASB, which may impact our current conclusions. In addition, we continue to monitor other changes, such as changes in our business, new collaboration arrangements, business combinations, etc., which may impact our current conclusions prior to the adoption date.
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Standard/Description | | Effective Date | | Effect on the Financial Statements or Other Significant Matters |
In January 2016, the FASB issued an update to its guidance on recognition and measurement of financial assets and liabilities.
Among other things, the new guidance makes the following targeted changes to existing guidance:
1. Requires certain equity investments to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.
2. Requires a qualitative assessment of equity investments without readily determinable fair values to identify impairment.
3. Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements.
In September 2017, the FASB issued a proposed amendment to this new standard which is intended to clarify certain aspects of the guidance.
| | January 1, 2018. | | We have substantially completed our review of the impact of this new guidance on our consolidated financial statements, and will continue to assess events which may occur prior to adoption. As of October 1, 2017, we have $1.0 billion in available-for-sale equity securities and approximately $273 million of restricted stock and private equity securities which will be subject to the new rules. Further, for the nine months ended October 1, 2017, we recognized $406 million of previously unrealized holding gains and $119 million of previously unrealized losses on available-for-sale equity securities in Other comprehensive income, which would have been recorded to Other (income)/ deductions––net under the new rules. The impact of adoption will be recorded as a cumulative effect adjustment to Retained earnings. We expect the adoption of this new accounting standard may increase the volatility of our income in future periods due to changes in the fair value of equity investments. We do not expect that the proposed amendment, as currently drafted, will have any substantive impact to our assessment discussed above. We continue to monitor changes, modifications, clarifications or interpretations undertaken by the FASB, which may impact our current conclusions.
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In August 2016, the FASB issued new guidance on the classification of certain transactions in the Statement of Cash Flows.
| | January 1, 2018. Earlier application is permitted. | | We have substantially completed our review and will continue to assess events which may occur prior to adoption. Retrospective application is required. Upon adoption, we expect to reclassify approximately $362 million of cash outflows related to debt redemption in 2016 from operating activities to financing activities. We also expect to reclassify approximately $32 million of cash inflows from trust-owned life insurance contracts in 2016 from operating activities to investing activities. Cash outflows from trust-owned life insurance contracts represent benefit payments and are classified as operating activities. In addition, although there is no impact on the presented historical comparative financial statements, the new guidance may impact the classification of certain cash flows related to contingent consideration in a business acquisition, depending on the ultimate settlement amount of the reported contingency liability. |
In October 2016, the FASB issued new guidance on the presentation of restricted cash in the Statement of Cash Flows.
| | January 1, 2018. Earlier application is permitted. | | We have substantially completed our review and will continue to assess events which may occur prior to adoption. Retrospective application is required. Our restricted cash balances as of the end of 2016 were approximately $18.1 million of short-term restricted cash and $45.3 million of long-term restricted cash. Our restricted cash balances as of October 1, 2017 were approximately $6.4 million of short-term restricted cash and $68.7 million of long-term restricted cash. |
In October 2016, the FASB issued an update to its guidance on income tax accounting. The new guidance replaces the prohibition against recognizing current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party with a requirement to do so, unless the asset transferred is inventory.
| | January 1, 2018. | | We have substantially completed our review and will continue to assess events which may occur prior to adoption. Our analysis of the standard indicates that our estimate of the impact to our consolidated financial statements, using current assumptions, is not material. However, while we currently do not have any specific plans, we cannot predict intercompany asset transfers other than inventory that may occur in the future, as they are dependent on economic and operational factors that may change over time.
For example, an acquisition might cause us to realign legal entities and to transfer assets between entities as we integrate an acquired company into Pfizer. We anticipate that after adoption, our effective tax rate could be impacted by the immediate recognition of the tax consequences of intercompany asset transfers other than inventory. The impact of adoption will be recorded as a cumulative effect adjustment to Retained Earnings.
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In January 2017, the FASB issued newfinal guidance to clarify that a contractual restriction on the sale of an equity securitydefinition of a business. The new guidance provides a new framework for determining whether business development transactions should be accounted for as acquisitions (or disposals) of assets or businesses. If the fair value is not considered part of the gross assets acquiredunit of account of the equity security and, therefore, is concentrated innot considered when measuring fair value. Recognizing a single identifiable asset, the transaction will not qualify for treatmentcontractual sale restriction as a business. The new guidance also requires that to be considered a business, a setseparate unit of integrated activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs, without regard as to whether a market participant could replace missing elements. In addition, the new guidance narrows the definition of the term “output” to make it consistent with how outputs are described in the updated revenue recognition guidance.account is not permitted.
| | January 1, 2018. Earlier application is2024, with early adoption permitted. | | We have substantially completed our review and will continue to assess events which may occur prior to adoption. The new accounting standard is applicable on a prospective basis upon adoption and therefore has no impact on completed transactions. We expect that subsequent to our anticipated adoption date of January 1, 2018, fewer transactions will be accounted for as business acquisitions (decreasing the amount of goodwill incurred and potentially increasing IPR&D expense) or disposals of a business. We will continue to monitor for changes in our business, and business combination or other transactions which might close after adoption and be impacted by these new standards. |
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Standard/Description | | Effective Date | | Effect on the Financial Statements or Other Significant Matters |
In February 2017, the FASB issued amended guidance related to the derecognition of nonfinancial assets.
| | January 1, 2018. Earlier application is permitted. | | We have substantially completed our review and will continue to assess events which may occur prior to adoption. The new guidance applies to the full or partial sale or transfer of nonfinancial assets, including intangible assets, real estate and inventory, under which the gain or loss is the difference between the consideration received and the carrying value of the asset. The new guidance does not impact out-licensing arrangements. We are not expecting a material impact on existing transactions. We will continue to monitor for changes in our business and transactions which might be impacted by these new standards. The impact of adoption, if any, will be recorded as a cumulative effect adjustment to Retained Earnings.
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In March 2017, the FASB issued guidance on the presentation of net periodic pension and postretirement benefit cost. Under the new rules, entities that sponsor defined benefit plans will present net benefit cost as follows:
1. Service cost will be included in the same income statement line items where other employee compensation costs are reported.
2. The other components of net benefit cost will be presented outside of income from operations, if such a subtotal is presented.
3. Only the service cost component will be capitalized, when applicable (for example, as a cost of inventory, internal-use software, or a self-constructed fixed asset).
If a separate line item is used to present the other components of net benefit cost, it should have an appropriate description. If a separate line item or items is not used, the line item or items in the income statement where the other components of net benefit cost are included must be disclosed.
| | January 1, 2018. | | We have made substantial progress in completing our review of the impact of this new guidance. We anticipate that upon adoption, the net benefit costs other than service costs will be reclassified to Other (income)/deductions-net from their current classification within Cost of sales, Selling, informational and administrative expenses, and Research and development expenses. We expect to adopt the practical expedient which allows us to ignore capitalized pension expense in the retrospective adjustments in our Statements of Income. Net benefit cost/(income) other than service costs was $154 million for the year ended December 31, 2016 and $89 million for the nine months ended October 1, 2017 (see Notes to Condensed Consolidated Financial Statements––Note 10.Pension and Postretirement Benefits for further details). We are still assessing the impact on our results of operations for business segment reporting, changes in accounting processes, such as inventory standard costing methodologies, and policies.
Effective January 1, 2018, future accruals under the Pfizer Consolidated Pension Plan (our largest U.S. defined benefit plan), will freeze, and the Pfizer defined contribution savings plan will provide additional annual contributions to those previously accruing benefits under the Pfizer Consolidated Pension Plan. This change will result in elimination of future service costs for the plan.
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In May 2017, the FASB issued new guidance on the accounting for modifications of share-based payment awards. The new guidance clarifies that changes in the terms or conditions of a share-based payment award be accounted for as a modification unless all the following conditions are met:
1.
The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified.2.
The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.3.
The modification does not change the classification of the award as an equity instrument or a liability instrument. | | January 1, 2018. Early application is permitted, including in interim periods. | | We have substantially completed our review and will continue to assess events that may occur prior to adoption. The new accounting standard is applicable on a prospective basis upon adoption and therefore has no impact on completed transactions. The impact of adopting this guidance will be dependent upon whether we make any future modifications of share-based payment awards, and we have no plans to modify share-based payment awards at this time. |
In February 2016, the FASB issued an update to its guidance on leases. The new ASU provides guidance for both lessee and lessor accounting models. Among other things, the new guidance requires that a right of use asset and a lease liability be recognized for leases with a duration of greater than one year.
| | January 1, 2019. Earlier application is permitted. | | We have made substantial progress in completing our review of the impact of this new guidance. We anticipate recognition of at least $2 billion of additional assets and corresponding liabilities on our balance sheet. We are currently assessing the potential impact of embedded leases on our consolidated financial statements, given our manufacturing outsourcing, service arrangements and other agreements. In connection with this guidance we will need to design new global processes and technological solutions to provide the appropriate financial accounting and disclosure data. We continue to monitor changes, modifications, clarifications or interpretations undertaken by the FASB, which may impact our conclusions. |
In March 2017, the FASB issued new guidance that shortens the amortization period for certain callable debt securities held at a premium. The new guidance requires the premium to be amortized to the earliest call date.
| | January 1, 2019. Early application is permitted, including in interim periods, so long as any adjustments are reflected as of the beginning of the fiscal year that includes the interim period in which the guidance is applied. | | We are assessing the impact, of the provisions of this new guidance on our consolidated financial statements. |
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Standard/Description | | Effective Date | | Effect on the Financial Statements or Other Significant Matters |
In July 2017, the FASB issued new guidance on accounting for certain financial instruments with characteristics of liabilities and equity, and accounting for certain financial instruments with down round features (a feature in a financial instrument that reduces the strike price of an issued financial instrument if the issuer sells shares of its stock for an amount less than thebut currently stated strike price of the issued financial instrument or issues an equity-linked financial instrument with a strike price below the currently stated strike price of the issued financial instrument).
| | January 1, 2019. Earlier application is permitted. | | We are assessing the impact of the provisions of this new guidance on our consolidated financial statements. |
In August 2017, the FASB issued new guidance making targeted improvements to accounting for hedging activities. The objective of this amendment is to improve financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements, and also to simplify the application of hedge accounting guidance.
| | January 1, 2019. Early adoption is permitted, including in interim periods.
| | We are assessing the impact of the provisions of this new guidance on our consolidated financial statements and, pending our final review, we may consider early adoption. |
In June 2016, the FASB issued new guidance on accounting for credit losses of financial instruments. The new guidance replaces the probable initial recognition threshold for incurred loss estimates in current GAAP with a methodology that reflects expected credit loss estimates.
| | January 1, 2020. Earlier application is permitted as of fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. | | We are assessing the impact of the provisions of this new guidance on our consolidated financial statements. Previously, when credit losses were measured under GAAP, an entity generally only considered past events and current conditions in measuring the incurred loss. The new guidance requires us to identify, analyze, document and support new methodologies for quantifying expected credit loss estimates for our financial instruments, using information such as historical estimates and current economic environmental conditions, plus the use of reasonable supportable forecast information. |
In January 2017, the FASB issued new guidance for goodwill impairment testing. The new guidance eliminates the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under the new guidance the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, although it cannot exceed the total amount of goodwill allocated to that reporting unit.
| | January 1, 2020. Earlier application is permitted. | | We have not yet completed our review of the impact of this new guidance on our consolidated financial statements. However, we do not expect this new guidance to have a material impact on our consolidated financial statements. |
FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS
This report and other written or oral statements that we make from time to time containForm 10-Q contains forward-looking statements. SuchWe also provide forward-looking statements in other materials we release to the public, as well as public oral statements. Given their forward-looking nature, these statements involve substantial risks, uncertainties and uncertainties. potentially inaccurate assumptions.
We have tried, wherever possible, to identify such statements by using words such as “will,” “may,” “could,” “likely,” “ongoing,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “assume,” “target,” “forecast,” “guidance,” “goal,” “objective,” “aim”“aim,” “seek,” “potential,” “hope” and other words and terms of similar meaning or by using future datesdates.
We include forward-looking information in connection with anyour discussion of the following, among other things, topics:
•our anticipated operating and financial performance, including financial guidance and projections;
•reorganizations, business plans, strategy and prospects,prospects;
•expectations for our product pipeline, in-line products and product candidates, including anticipated regulatory submissions, data read-outs, study starts, approvals, launches, clinical trial results and other developing data; revenue contribution and projections; potential pricing and reimbursement; potential market dynamics, size and utilization rates; growth, performance, timing of exclusivity and potential benefits of Pfizer’s products and product candidates, benefits;
•strategic reviews, capital allocation business-development objectives, dividends and share repurchases;
•plans manufacturing and product supply and plans relating to share repurchases and dividends. In particular, these include statements relating to future actions, business plansfor and prospects of our acquisitions, dispositions and other business development activities, the disposition of the HIS net assets, prospective products or product approvals, future performance or results of current and anticipated products, our ability to successfully capitalize on growth opportunities and prospects;
•sales, efforts, expenses, interest rates, foreign exchange rates and the outcome of contingencies, such as legal proceedings, plansproceedings;
•expectations for impact of or changes to existing or new government regulations or laws;
•our ability to anticipate and respond to macroeconomic, geopolitical, health and industry trends, pandemics, acts of war and other large-scale crises; and
•manufacturing and product supply.
In particular, forward-looking information in this Form 10-Q includes statements relating to share repurchasesspecific future actions, performance and dividends, government regulationeffects, including, among others, plans for and financial results,prospects of our proposed acquisition of Seagen, including in particular,expectations regarding financing and closing of the transaction; the expected benefits of the organizational changes to our operations; our 2023 revenue expectations; our ongoing efforts to respond to COVID-19, including our plans and expectations regarding Comirnaty and Paxlovid, and any potential future vaccines or treatments; the forecasted revenue, demand, manufacturing and supply of Comirnaty and Paxlovid, including expectations for the commercial market for Comirnaty and
Paxlovid; our expectations regarding the impact of COVID-19 on our business; the expected impact of patent expiries and generic competition; the recent hurricanes in Puerto Rico set forth in the “Overview of Our Performance, Operating Environment, Strategyexpected pricing pressures on our products and Outlook––Our Business––Impact of Recent Hurricanes in Puerto Rico” section of this MD&A, the anticipated progress in remediation efforts at certainimpact to our business; the availability of our Hospira manufacturing facilities set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Business––Product Manufacturing” section of this MD&A, the anticipated timeframeraw materials for any decision regarding strategic alternatives for Pfizer Consumer Healthcare set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Strategy––Our Business Development Initiatives” section of this MD&A, our anticipated liquidity position set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment” and the “Analysis of Financial Condition, Liquidity and Capital Resources” sections of this MD&A, the financial guidance set forth in the “Our Financial Guidance for 2017” section of this MD&A, the anticipated costs and cost savings, including from our acquisition of Hospira and our cost-reduction/productivity initiatives set forth in the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A and in Notes to Condensed Consolidated Financial Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives, 2023; the benefits expected from our business development transactions,transactions; our anticipated operating cash flows and liquidity position; the anticipated product performance set forthcosts, savings and potential benefits from certain of our initiatives, including our enterprise-wide cost realignment program, which we launched in “RevenuesOctober 2023, and Product Developmentsour Transforming to a More Focused Company program; our expectations regarding the impact from the recent tornado on our manufacturing facility in Rocky Mount, NC; and our planned capital spending.
Given their nature, we cannot assure that any outcome expressed in these forward-looking statements will be realized in whole or in part. Actual outcomes may vary materially from past results and those anticipated, estimated, implied or projected. These forward-looking statements may be affected by underlying assumptions that may prove inaccurate or incomplete, or by known or unknown risks and uncertainties, including those described in this section and in the —Item 1A. Risk FactorsRevenues section in our 2022 Form 10-K and the —Item 1A. Risk FactorsSelected Product Discussion” section of this MD&A andForm 10-Q. Therefore, you are cautioned not to unduly rely on forward-looking statements, which speak only as of the contributions thatdate of this Form 10-Q. We undertake no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law. You are advised, however, to consult any further disclosures we expect to make from our general assets to our pension and postretirement plans during on related subjects.
2017 set forth in Notes to Condensed Consolidated Financial Statements––Note 10. Pension and Postretirement Benefit Plans. AmongSome of the factors that could cause actual results to differ materially from pastare identified below, as well as those discussed in the Item 1A. Risk Factors section in our 2022 Form 10-K, the Item 1A. Risk Factorssection of this Form 10-Q and within MD&A. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. The occurrence of any of the risks identified below, in the Item 1A. Risk Factors section in our 2022 Form 10-K, the Item 1A. Risk Factorssection of this Form 10-Q or within MD&A, or other risks currently unknown, could have a material adverse effect on our business, financial condition or results and future plans and projected future results areof operations, or we may be required to increase our accruals for contingencies. It is not possible to predict or identify all such factors. Consequently, you should not consider the following:following to be a complete discussion of all potential risks or uncertainties:Risks Related to Our Business, Industry and Operations, and Business Development
•the outcome of research and developmentR&D activities, including, without limitation, the ability to meet anticipated pre-clinical andor clinical trialendpoints, commencement andand/or completion dates for our pre-clinical or clinical trials, regulatory submission anddates, and/or regulatory approval dates, andand/or launch dates for product candidates, as well asdates; the possibility of unfavorable pre-clinical and clinical trial results, including the possibility of unfavorable new pre-clinical or clinical data and additionalfurther analyses of existing pre-clinical or clinical data;
decisions risks associated with preliminary, early stage or interim data; the risk that pre-clinical and clinical trial data are subject to differing interpretations and assessments, including during the peer review/publication process, in the scientific community generally, and by regulatory authorities regardingauthorities; and whether and when additional data from our pipeline programs will be published in scientific journal publications, and if so, when and with what modifications and interpretations;
•our ability to approve our drug applications, which will depend on the assessment by suchsuccessfully address comments received from regulatory authorities such as the FDA or the EMA, or obtain approval for new products and indications from regulators on a timely basis or at all;
•regulatory decisions impacting labeling, including the scope of the benefit-risk profile suggested by the totality of the efficacy andindicated patient populations, product dosage, manufacturing processes, safety information submitted; decisions by regulatory authorities regarding labeling, ingredients andand/or other matters, thatincluding decisions relating to emerging developments regarding potential product impurities, uncertainties regarding the ability to obtain, and the scope of, recommendations by technical or advisory committees, and the timing of, and ability to obtain, pricing approvals and product launches, all of which could affectimpact the availability or commercial potential of our products; and uncertainties regarding our ability to address the comments in complete response letters received by us with respect to certain of our drug applications to the satisfaction of the FDA;
the speed with which regulatory authorizations, pricing approvalsproducts and product launchescandidates;
•claims and concerns that may be achieved;
arise regarding the safety or efficacy of in-line products and product candidates, including claims and concerns that may arise from the outcome of post-approval clinical trials, which could result in the loss ofimpact marketing approval, for a product or changes in the labeling, for, and/or increased or new concerns about the safety or efficacy of, a product that could affect its availability or commercial potential;
risks associated with preliminary, early stagepotential, including uncertainties regarding the commercial or interimother impact of the results of the Xeljanz ORAL Surveillance (A3921133) study or actions by regulatory authorities based on analysis of ORAL Surveillance or other data, including the risk that final results of studies for which preliminary, early stage or interim data have been provided and/or additional clinical trials may be different from (including less favorable than) the preliminary, early stage or interim data results and may not support further clinical development of the applicable product candidate or indication;on other JAK inhibitors in our portfolio;
•the success and impact of external business-developmentbusiness development activities, including the ability to identify and execute on potential business development opportunities; the ability to satisfy the conditions to closing of announced transactions in the anticipated time frame or at all orall; the ability to realize the anticipated benefits of any such transactions;transactions in the anticipated time frame or at all; the potential need for and impact of additional equity or debt financing to pursue these opportunities, which could result in increased leverage and/or a further downgrade of our credit ratings; challenges integrating the businesses and operations; disruption to business and operations relationships; risks related to growing revenues for certain acquired products; significant transaction costs; and unknown liabilities;
competitive developments,•risks and uncertainties related to Pfizer’s proposed acquisition of Seagen, including, among other things, risks related to the satisfaction or waiver of the conditions to closing the proposed acquisition (including the failure to obtain necessary regulatory approvals) in the anticipated timeframe or at all, including the possibility that the proposed acquisition does not close; risks related to the ability to realize the anticipated benefits of the proposed acquisition, including the possibility that
the expected benefits from the acquisition will not be realized or will not be realized within the expected time period; the risk that the businesses will not be integrated successfully; disruption from the transaction making it more difficult to maintain business and operational relationships; negative effects of the announcement or the consummation of the proposed acquisition on the market price of Pfizer’s common stock and/or operating results; significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the proposed acquisition or Seagen’s business; risks related to the financing of the transaction; other business effects and uncertainties, including the effects of industry, market, business, economic, political or regulatory conditions; future exchange and interest rates; changes in tax and other laws, regulations, rates and policies; the impact of the proposed acquisition on ourfuture business combinations or disposals; uncertainties regarding the commercial success of Pfizer’s and Seagen’s commercialized and pipeline products; the uncertainties inherent in R&D; whether and when drug applications may be filed in any jurisdictions for Pfizer’s or Seagen’s pipeline products; whether and when any such applications may be approved by regulatory authorities, which will depend on myriad factors, including making a determination as to whether the product's benefits outweigh its known risks and determination of the product's efficacy and, if approved, whether any such products will be commercially successful; and competitive position ofdevelopments;
•competition, including from new product entrants, in-line branded products, generic products, private label products, biosimilars and product candidates that treat or prevent diseases and conditions similar to those treated or intended to be prevented by our in-line drugsproducts and drugproduct candidates;
the implementation by the FDA and regulatory authorities in certain other countries of an abbreviated legal pathway to approve biosimilar products, which could subject our biologic products to competition from biosimilar products, with attendant competitive pressures, after the expiration of any applicable exclusivity period and patent rights;
risks related to our ability to develop and launch biosimilars, including risks associated with “at risk” launches, defined as the marketing of a product by Pfizer before the final resolution of litigation (including any appeals) brought by a third party alleging that such marketing would infringe one or more patents owned or controlled by the third party;
the ability to meet competition from generic, branded and biosimilar products after the loss or expiration of patent protection for our products or competitor products;
•the ability to successfully market both new and existing products, domestically and internationally;including biosimilars;
•difficulties or delays in manufacturing, including delays caused by natural events, such as hurricanes;sales or marketing; supply disruptions, shortages or stock-outs at our facilities;facilities or third-party facilities that we rely on; and legal or regulatory actions, such as warning letters, suspension of manufacturing, seizure of product, injunctions or voluntary recall of a product;actions;
trade buying patterns;
•the impact of existingpublic health outbreaks, epidemics or pandemics (such as COVID-19) on our business, operations and financial condition and results, including impacts on our employees, manufacturing, supply chain, sales and marketing, R&D and clinical trials;
•risks and uncertainties related to our efforts to continue to develop and commercialize Comirnaty and Paxlovid or any potential future legislationCOVID-19 vaccines, treatments or combinations, as well as challenges related to their manufacturing, supply and regulatory provisions on product exclusivity;distribution, including, among others, the risk that as the market for COVID-19 products becomes more endemic and seasonal, demand for any of our COVID-19 products has and may continue to be reduced or not meet expectations, or may no longer exist, which has and may continue to lead to reduced revenues, excess inventory on-hand and/or in the channel which, for Paxlovid and Comirnaty, has resulted in significant inventory write-offs in the third quarter of 2023 and could continue to result in inventory write-offs or other unanticipated charges; challenges related to the transition to the commercial market for our COVID-19 products; uncertainties related to the public’s adherence to vaccines, boosters and treatments; and risks related to our ability to achieve our revenue forecasts for Comirnaty and Paxlovid or any potential future COVID-19 vaccines or treatments;
•trends toward managed care and healthcare cost containment, and our ability to obtain or maintain timely or adequate pricing or favorable formulary placement for our products;
the impact of any significant spending reductions or cost controls affecting Medicare, Medicaid or other publicly funded or subsidized health programs or changes in the tax treatment of employer-sponsored health insurance that may be implemented, and/or any significant additional taxes or fees that may be imposed on the pharmaceutical industry as part of any broad deficit-reduction effort;
the impact of any U.S. healthcare reform or legislation, including any repeal, substantial modification or invalidation of any or all of the provisions of the U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act;
U.S. federal or state legislation or regulatory action and/or policy efforts affecting, among other things, pharmaceutical product pricing, reimbursement or access, including under Medicaid, Medicare and other publicly funded or subsidized health programs; patient out-of-pocket costs for medicines, manufacturer prices and/or price increases that could result in new mandatory rebates and discounts or other pricing restrictions; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; restrictions on direct-to-consumer advertising; limitations on interactions with healthcare professionals; or the use of comparative effectiveness methodologies that could be implemented in a manner that focuses primarily on the cost differences and minimizes the therapeutic differences among pharmaceutical products and restricts access to innovative medicines; as well as pricing pressures for our products as a result of highly competitive insurance markets;
legislation or regulatory action in markets outside the U.S. affecting pharmaceutical product pricing, reimbursement or access, including, in particular, continued government-mandated reductions in prices and access restrictions for certain biopharmaceutical products to control costs in those markets;
the exposure of our operations outside the U.S. to possible capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, as well as political unrest, unstable governments and legal systems and inter-governmental disputes;
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;
any significant breakdown, infiltration or interruption of our information technology systems and infrastructure;
legal defense costs, insurance expenses and settlement costs;
the risk of an adverse decision or settlement and the adequacy of reserves related to legal proceedings, including patent litigation, product liability and other product-related litigation, including personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, commercial, environmental, government investigations, employment and other legal proceedings, including various means for resolving asbestos litigation, as well as tax issues;
our ability to protect our patents and other intellectual property, both domestically and internationally;
•interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations and monetary policy actions in countries experiencing high inflation rates and the volatility following the U.K. referendum in which voters approved the exit from the EU;rates;
governmental laws and regulations affecting domestic and foreign operations, including, without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside the U.S. that may result from pending and possible future proposals;
•any significant issues involving our largest wholesale distributors or government customers, which account for a substantial portion of our revenues;revenues, including contract negotiations or renegotiations with government customers;
•the possible impact of the increased presence of counterfeit medicines or vaccines in the pharmaceutical supply chain on our revenues and on patient confidence in the integrity of our medicines;chain;
the end result of any negotiations between the U.K. government and the EU regarding the terms of the U.K.’s exit from the EU, which could have implications on our research, commercial and general business operations in the U.K. and the EU;
•any significant issues that may arise related to the outsourcing of certain operational and staff functions to third parties, including with regard to quality, timelinessparties; and compliance with applicable legal requirements and industry standards;
any significant issues that may arise related to our joint venturesJVs and other third-party business arrangements;
changes in U.S. generally accepted accounting principles;
changes in interpretations of existing laws and regulations, or changes in laws and regulations, in the U.S. and other countries;
•uncertainties related to general economic, political, business, industry, regulatory and market conditions including, without limitation, uncertainties related to the impact on us, our customers, suppliers and lenders and counterparties to our foreign-exchange and interest-rate agreements of challenging global economic conditions, such as inflation, and recent and possible future changes in global financial markets;
•the exposure of our operations globally to possible capital and exchange controls, economic conditions, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, unstable governments and legal systems and inter-governmental disputes;
•the impact of disruptions related risk thatto climate change and natural disasters, including uncertainties related to the impact of the recent tornado at our allowance for doubtful accounts may not be adequate;manufacturing facility in Rocky Mount, NC;
•any changes in business, political and economic conditions due to actual or threatened terrorist activity, geopolitical instability, political or civil unrest or military action, including the ongoing conflicts between Russia and Ukraine and in the U.S.Middle East and other parts of the world, and related U.S. military action overseas;their economic consequences;
growth in costs and expenses;
changes in our product, segment and geographic mix;
•the impact of purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items;
the impact of acquisitions, divestitures, restructurings, internal reorganizations, product recalls, withdrawals and other unusual items, including uncertainties related to regulator-directed risk evaluations and assessments, including our ability to realize the projected benefitsongoing evaluation of our cost-reduction and productivity initiatives andproduct portfolio for the potential presence or formation of the internal separation of our commercial operations into our current operating structure;nitrosamines;
•trade buying patterns;
•the risk of an impairment charge related to our intangible assets, goodwill or equity-method investments;
risks related to internal control over financial reporting;
•the impact of, and risks and uncertainties related to, restructurings and internal reorganizations, as well as any other corporate strategic initiatives and growth strategies, and cost-reduction and productivity initiatives, each of which requires upfront costs but may fail to yield anticipated benefits and may result in unexpected costs, organizational disruption or other unintended consequences;
•the ability to successfully achieve our acquisitionsclimate goals and progress our environmental sustainability and other ESG priorities;
Risks Related to Government Regulation and Legal Proceedings
•the impact of Hospira, Anacor, Medivation and AstraZeneca’s small molecule anti-infectives business,any U.S. healthcare reform or legislation or any significant spending reductions or cost controls affecting Medicare, Medicaid or other publicly funded or subsidized health programs, including the IRA, or changes in the tax treatment of employer-sponsored health insurance that may be implemented;
•U.S. federal or state legislation or regulatory action and/or policy efforts affecting, among other things, the ability to realize the anticipated benefits of those acquisitions, including the possibility that expected cost savings related to the acquisition of Hospirapharmaceutical product pricing, intellectual property, reimbursement or access or restrictions on U.S. direct-to-consumer advertising; limitations on interactions with healthcare professionals and accretion related to the acquisitions of Hospira, Anacor and Medivation will not be realized or will not be realized within the expected time frame; the risk that the businesses will not be integrated successfully; disruption from the transactions making it more difficult to maintain business and operational relationships; risks related to our ability to grow revenues for Xtandi and expand Xtandi into the non-metastatic castration-resistant prostate cancer setting; significant transaction costs; and unknown liabilities; and
risks and uncertainties related to our evaluation of strategic alternativesother industry stakeholders; as well as pricing pressures for our Consumer Healthcare business, including, among other things, the ability to realize the anticipated benefits of any strategic alternatives we may pursue for our Consumer Healthcare business, including the potential for disruption to our business resulting from the evaluation of strategic alternatives for Pfizer Consumer Healthcare; the possibility that we may not be able to realize a higher value for Pfizer Consumer Healthcare through strategic alternatives; and unknown liabilities.
We cannot guarantee that any forward-looking statement will be realized. Achievement of anticipated results is subject to substantial risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially from past results
and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements, and are cautioned not to put undue reliance on forward-looking statements.
We undertake no obligation to publicly update forward-looking statements, whetherproducts as a result of new information, future eventshighly competitive insurance markets;
•legislation or otherwise, exceptregulatory action in markets outside of the U.S., such as required byChina or Europe, including, without limitation, laws related to pharmaceutical product pricing, intellectual property, medicine safety, environmental impact of medicines, reimbursement or access, including, in particular, continued government-mandated reductions in prices and access restrictions for certain biopharmaceutical products to control costs in those markets;
•legal defense costs, insurance expenses, settlement costs and contingencies, including those related to actual or alleged environmental contamination;
•the risk and impact of an adverse decision or settlement and the risk related to adequacy of reserves related to legal proceedings;
•the risk and impact of tax related litigation and investigations;
•governmental laws and regulations affecting our operations, including, without limitation, the IRA, changes in laws and regulations or their interpretation, including, among others, changes in tax laws and regulations internationally and in the U.S., the adoption of global minimum taxation requirements outside the U.S. generally effective in most jurisdictions
January 1, 2024 and potential changes to existing tax law or by the rulescurrent U.S. Presidential administration and regulationsCongress;
Risks Related to Intellectual Property, Technology and Security
•any significant breakdown or interruption of the SEC. You are advised, however, to consult any further disclosures we make on related subjects.
our information technology systems and infrastructure (including cloud services);
Our •2016any business disruption, theft of confidential or proprietary information, security threats on facilities or infrastructure, extortion or integrity compromise resulting from a cyber-attack or other malfeasance by, but not limited to, nation states, employees, business partners or others;
• Form 10-K listed various important factorsthe risk that our currently pending or future patent applications may not be granted on a timely basis or at all, or any patent-term extensions that we seek may not be granted on a timely basis, if at all; and
•risks to our products, patents and other intellectual property, such as: (i) claims of invalidity that could cause actual resultsresult in LOE; (ii) claims of patent infringement, including asserted and/or unasserted intellectual property claims; (iii) claims we may assert against intellectual property rights held by third parties; (iv) challenges faced by our collaboration or licensing partners to differ materiallythe validity of their patent rights; or (v) any pressure, or legal or regulatory action by, various stakeholders or governments that could potentially result in us not seeking intellectual property protection or agreeing not to enforce or being restricted from pastenforcing intellectual property rights related to our products, including Comirnaty and projected future results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find them in Part I, Item 1A, of that filing under the heading “Risk Factors.” We incorporate that section of that Form 10-K in this filing and investors should refer to it. Reference is also made to Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.Paxlovid.
The operating segment information provided in this report does not purport to represent the revenues, costs and income from continuing operations before provision for taxes on income that each of our operating segments would have recorded had each segment operated as a standalone company during the periods presented.
This report includes 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. In addition, clinical trial data are subject to differing interpretations, and, even when we view data as sufficient to support the safety and/or effectiveness of a product candidate or a new indication for an in-line product, regulatory authorities may not share our views and may require additional data or may deny approval altogether.
Legal Proceedings and Contingencies
Information with respect to legal proceedings and contingencies required by this Item is incorporated herein by reference to Notes to Condensed Consolidated Financial Statements––Note 12A. Commitments and Contingencies: Legal Proceedings in Part I, Item 1, of this Quarterly Report on Form 10-Q.
ItemITEM 3. Quantitative and Qualitative Disclosures About Market Risk
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item is incorporated by reference from the discussion underin the heading Analysis of Financial Condition, Liquidity, Capital Resources and Market Risk Management insection within MD&A of our 2016 Financial Report.2022 Form 10-K.
ItemITEM 4. Controls and Procedures
CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be disclosed in our periodic reports filed with the SEC.
During our most recent fiscal quarter, there has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION |
PART II - OTHER INFORMATION
ItemITEM 1. Legal Proceedings
LEGAL PROCEEDINGS
The information required by this Item is incorporated herein by reference to Notes to Condensed Consolidated Financial Statements––Note 12A. Commitments and Contingencies: Legal Proceedings in Part I, Item 1, of this Quarterly Report on Form 10-Q.
Certain legal proceedings in which we are involved are discussed in Note 12A.Tax Matters
ITEM 1A. RISK FACTORS
Additional information with respect to tax matters required by this Item is incorporated herein by reference to Notes to Condensed Consolidated Financial Statements––Note 5B. Tax Matters: Tax Contingencies in Part I, Item 1, of this Quarterly Report on Form 10-Q.
We account for income tax contingencies using a benefit recognition model. If our initial assessment fails to result in the recognition of a tax benefit, we regularly monitor our position and subsequently recognize the tax benefit: (i) if there are changes in tax law, analogous case law or there is new information that sufficiently raise the likelihood of prevailing on the technical merits of the position to “more likely than not”; (ii) if the statute of limitations expires; or (iii) if there is a completion of an audit resulting in a favorable settlement of that tax year with the appropriate agency. We regularly re-evaluate our tax positions based on the results of audits of federal, state and foreign income tax filings, statute of limitations expirations, changes in tax law or receipt of new information that would either increase or decrease the technical merits of a position relativerefer to the “more-likely-than-not” standard.
Item 1A. Risk Factors
The “Our Operating Environment” and “Forward-LookingForward-Looking Information and Factors That May Affect Future Results” sections of theResults section within MD&A of this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” of our 20162022 Form 10-K are incorporated by reference herein.and to the Item 1A. Risk Factors section of our 2022 Form 10-K. We are including the following revised risk factor,factors, which updates and supersedes the corresponding risk factor disclosed in our 2016 Form 10-K, and should be read in conjunction with our description ofthe risk factors discussed in Part I, the Item 1A, “Risk Factors”1A. Risk Factors section of our 20162022 Form 10-K:10-K.
PRODUCT MANUFACTURING AND MARKETING RISKSPROPOSED ACQUISITION OF SEAGEN
We may be unable to complete the acquisition of Seagen within the anticipated timeframe or at all, which could prevent us from receiving the anticipated benefits from the acquisition in the anticipated timeframe or at all.
DifficultiesOn March 12, 2023, we entered into a merger agreement with Seagen. The transaction is expected to close in late 2023 or delaysearly 2024, and remains subject to customary closing conditions, including receipt of required regulatory approvals. As a result, there is no assurance that the acquisition will be consummated in product manufacturingthe anticipated timeframe or marketingat all. In addition, Pfizer may be required to pay Seagen a reverse termination fee of approximately $2.22 billion, subject to certain limitations set forth in the merger agreement, if the merger agreement is terminated by either party as a result of certain antitrust and/or foreign direct investment law-related conditions. Any failure to consummate the acquisition in the anticipated timeframe or at all could affect future results through regulatory actions, shut-downs, approval delays, withdrawals, recalls, penalties, supply disruptions or shortages, reputational harm, product liability, unanticipated costs or otherwise. Examplesprevent Pfizer from receiving the expected benefits from the acquisition. See Note 1and the Forward-Looking Information and Factors That May Affect Future Results section within MD&A.We have expended and will continue to expend significant time and resources in connection with the acquisition of such difficulties or delays include, but are not limitedSeagen and have incurred substantial indebtedness to fund the acquisition.
Pfizer has expended and will continue to expend significant management time and resources and expenses related to the inabilityacquisition of Seagen, many of which must be paid regardless of whether the acquisition is consummated. For example, such time, resources and expenses are being and will continue to increase production capacity commensuratebe incurred in connection with demand;seeking regulatory approvals for the failuretransaction. We intend to predict market demand for,finance a portion of the transaction with the proceeds from the $31 billion of long-term debt issued in May 2023, plus additional short-term indebtedness to be issued prior to the acquisition, which indebtedness may limit our operating or financial flexibility relative to gain market acceptanceour current position.
We may not be successful in identifying and executing potential business development transactions, such as our acquisition of approved products;Seagen, or realizing the financial and strategic goals that were contemplated at the time of any historical or potential business development transaction, which could have an adverse impact on our ability to meet our growth objectives.
We have established significant growth goals, which we plan to achieve, in part, by accelerating revenue growth by not only advancing our own product pipelines and maximizing the value of our existing products, but also through various forms of business development activities, which can include alliances, licenses, JVs, collaborations, equity- or debt-based investments, dispositions, divestments, mergers and acquisitions. Our proposed acquisition of Seagen is part of that accelerated revenue growth plan. We view our business development activity as an enabler of our strategies and seek to generate growth by pursuing opportunities and transactions that have the potential to strengthen our business and our capabilities. The success of our business development activities is dependent on the availability and accurate evaluation of appropriate opportunities, competition from others that are seeking similar opportunities and our ability to successfully identify, structure and execute transactions, including the ability to satisfy or waive closing conditions in the anticipated timeframes, or at all, and our ability to successfully integrate acquired businesses and develop and commercialize acquired products. Pursuing, executing and consummating these transactions may require substantial investment, which may require us to obtain additional equity or debt
financing, which could result in increased leverage and/or a downgrade of our credit ratings or limit our operating or financial flexibility relative to our current position. The success of our business development transactions depends on our ability to realize the anticipated benefits of these transactions and is subject to numerous risks and uncertainties, many of which are outside of our control, including the possibility that the supply of incoming materialsexpected benefits from such transactions will not be realized or will not be realized within the expected time period. Unsuccessful clinical trials, regulatory hurdles and commercialization challenges may be delayedadversely impact revenue and income contribution from acquired products and businesses. We may fail to generate expected revenue growth for our existing products, product pipeline and acquired products or become unavailable and that the quality of incoming materials may be substandard and not detected; the possibility thatbusinesses or we may fail to maintain appropriate quality standards throughout the internal and external supply network and/or comply with cGMPs and other applicable regulationsachieve anticipated cost savings, such as serialization (which allowsthose expected with respect to Seagen, within expected time frames or at all, which may impact our ability to meet our growth objectives. In certain transactions, we may agree to provide certain transition services for trackan extended period of time, which may divert our focus and traceresources that would otherwise be invested into maintaining or growing our business. Similarly, the accretive impact anticipated from transactions may not be realized or may be delayed. Integration of these products or businesses may result in the supply chainloss of key employees, the disruption of ongoing business, including third-party relationships, or inconsistencies in standards, controls, procedures and policies. Further, while we seek to enhance patient safety);mitigate risks and liabilities through, among other things, due diligence, we may be exposed to supply chain continuityrisks and liabilities as a result of naturalbusiness development transactions. There is no assurance that we will be able to acquire attractive businesses or man-made disasters at our facilities or at a supplier or vendor, including those that may be related to climate change; or failure to maintain the integrityenter into strategic business relationships on favorable terms ahead of our supply chains against intentional and criminal actscompetitors, or that such as economic adulteration, product diversion, product theft, and counterfeit goods.acquisitions or strategic business development relationships will be accretive to earnings or improve our competitive position.
Regulatory agencies periodically inspect our drug manufacturing facilities to ensure compliance with applicable cGMP requirements. Failure to comply with these requirements may subject us to possible legal or regulatory actions, such as warning letters, suspension of manufacturing, seizure of product, injunctions or voluntary recall of a product, any of which could have a material adverse effect on our business, financial condition and results of operations. In February 2017, we received a warning letter from the FDA communicating the FDA’s view that certain violations of cGMP regulations exist at Hospira’s manufacturing facility in McPherson, Kansas. We are undertaking corrective actions to address the concerns raised by the FDA. Communication with the FDA is ongoing. Until the violations are corrected and confirmed by the FDA, the FDA may refuse toITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
grant premarket approval applications and/or the FDA may refuse to grant export certificates related to products manufactured at McPherson, Kansas. In addition, in September 2017, Meridian, a subsidiary of Pfizer Inc., received a warning letter from the FDA asserting the FDA’s view that certain violations of cGMP and Quality System Regulations exist at Meridian’s manufacturing sites in St. Louis, Missouri. We are undertaking corrective actions to address the concerns raised by the FDA, and communication with the FDA is ongoing. Until the violations are corrected and confirmed by the FDA, the FDA may refuse to grant premarket approval of applications and/or the FDA may refuse to grant export certificates related to products manufactured at St. Louis, Missouri.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides certain information with respect to oursummarizes purchases of shares of the Company’sour common stock during the third fiscal quarter of 2023:
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Period | | Total Number of Shares Purchased(a) | | Average Price Paid per Share(a) | | Total Number of Shares Purchased as Part of Publicly Announced Plan | | Approximate Value of Shares That May Yet Be Purchased Under the Plan(b) |
July 3 through July 30, 2023 | | 14,608 | | | $ | 38.14 | | | — | | | $ | 3,292,882,444 | |
July 31 through August 27, 2023 | | 57,757 | | | $ | 35.49 | | | — | | | $ | 3,292,882,444 | |
August 28 through October 1, 2023 | | 28,145 | | | $ | 34.73 | | | — | | | $ | 3,292,882,444 | |
Total | | 100,510 | | | $ | 35.66 | | | — | | | |
(a)2017:Represents (i) 98,065 shares of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of awards under our long-term incentive programs and (ii) the open market purchase by the trustee of 2,445 shares of common stock in connection with the reinvestment of dividends paid on common stock held in trust for employees who deferred receipt of performance share awards.
ITEM 5. OTHER INFORMATION
During the three months ended October 1, 2023, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
ITEM 6. EXHIBITS
|
| | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased(b) |
| | Average Price Paid per Share(b) |
| | Total Number of Shares Purchased as Part of Publicly Announced Plan |
| | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan(a) |
|
July 3, 2017 through July 30, 2017 | | 12,102 |
| | $ | 33.46 |
| | — |
| | $ | 6,355,862,076 |
|
July 31, 2017 through August 27, 2017 | | 51,568 |
| | $ | 33.03 |
| | — |
| | $ | 6,355,862,076 |
|
August 28, 2017 through October 1, 2017 | | 33,579 |
| | $ | 34.06 |
| | — |
| | $ | 6,355,862,076 |
|
Total | | 97,249 |
| | $ | 33.44 |
| | — |
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(a)
| Our October 2014 $11 billion share-purchase plan was exhausted in the first quarter of 2017. In December 2015, the Board of Directors authorized an $11 billion share repurchase program, and share repurchases commenced thereunder in the first quarter of 2017. On February 2, 2017, we entered into an accelerated share repurchase agreement with Citibank to repurchase $5 billion of our common stock. Pursuant to the terms of the agreement, on February 6, 2017, we paid $5 billion to Citibank and received an initial delivery of approximately 126 million shares of our common stock from Citibank at a price of $31.73 per share, which represented, based on the closing price of our common stock on the NYSE on February 2, 2017, approximately 80% of the notional amount of the accelerated share repurchase agreement. On May 16, 2017, the accelerated share repurchase agreement with Citibank was completed, which, per the terms of the agreement, resulted in Citibank owing us a certain number of shares of Pfizer common stock. Pursuant to the agreement’s settlement terms, we received an additional 24 million shares of our common stock from Citibank on May 19, 2017. The average price paid for all of the shares delivered under the accelerated share repurchase agreement was $33.31 per share. The common stock received is included in Treasury Stock. This agreement was entered into pursuant to our previously announced share repurchase authorization. At October 1, 2017, our remaining share-purchase authorization was approximately $6.4 billion.
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(b)
| These columns reflect the following transactions during the third fiscal quarter of 2017: (i) the surrender to Pfizer of 91,487 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees; (ii) the surrender to Pfizer of 100 shares of common stock to satisfy tax withholding obligations in connection with the vesting of performance share awards issued to employees; (iii) the surrender of 16 shares of common stock to satisfy withholding obligations in connection with the settlement of total shareholder return units; and (iv) the open market purchase by the trustee of 5,646 shares of common stock in connection with the reinvestment of dividends paid on common stock held in trust for employees who were granted performance share awards and who deferred receipt of such awards.
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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| | | | |
| | - | Amendment No. 1 to the Pfizer Supplemental Savings Plan |
| | - | Amended and Restated Pfizer Inc. Global Performance Plan |
| | - | Computation of Ratio of Earnings to Fixed Charges. |
| | - | Accountants’ Acknowledgment. |
| | - | Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | - | Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | - | Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | - | Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| Exhibit 101: | | |
| EX-101.INS | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| EX-101.SCH EX-101.CAL
EX-101.LAB
EX-101.PRE
EX-101.DEF
| | Inline XBRL Taxonomy Extension Schema Inline XBRL Taxonomy Extension Calculation Linkbase
Inline XBRL Taxonomy Extension Label Linkbase
Inline XBRL Taxonomy Extension Presentation Linkbase
Inline XBRL Taxonomy Extension Definition Document
|
| Exhibit 104 | | Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | Pfizer Inc. |
| | (Registrant) |
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Dated: | November 9, 20178, 2023 | /s/ Loretta V. CangialosiJennifer B. Damico |
| | Loretta V. Cangialosi, Jennifer B. Damico Senior Vice President and
Controller (Principal Accounting Officer and
Duly Authorized Officer)
|