UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 2020April 4, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
COMMISSION FILE NUMBER 1-3619
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PFIZER INC.
(Exact name of registrant as specified in its charter)
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| Delaware | 13-5315170 |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
235 East 42nd Street, New York, New York 10017
(Address of principal executive offices) (zip code)
(212) 733-2323
(Registrant’s telephone number)
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| Securities registered pursuant to Section 12(b) of the Act: |
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| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Common Stock, $.05 par value | | PFE | | New York Stock Exchange |
| 0.250% Notes due 2022 | | PFE22 | | New York Stock Exchange |
| 1.000% Notes due 2027 | | PFE27 | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated filer x Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
At November 2, 2020,May 10, 2021, 5,558,396,5995,597,693,867 shares of the issuer’s voting common stock were outstanding.
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Condensed Consolidated Balance Sheets as of September 27, 2020 and December 31, 2019 | |
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Management’s | |
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| Item 3. | |
| Defaults Upon Senior Securities | N/A |
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| Mine Safety Disclosures | N/A |
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| Item 5. | |
| Other Information | N/A |
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| N/A = Not Applicable | |
Unless the context requires otherwise, references to “Pfizer,” “the Company,” “we,” “us” or “our” in this Quarterly Report on Form 10-Q (defined below) refer to Pfizer Inc. and its subsidiaries. References to “Notes” in this Form 10-Q are to the notes to the condensed or consolidated financial statements in this Form 10-Q or our 2020 Form 10-K. We also have used several other terms in this Quarterly Report on Form 10-Q, most of which are explained or defined:
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2019 Financial Report | Financial Report for the fiscal year ended December 31, 2019, which was filed as Exhibit 13 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 |
20192020 Form 10-K | Annual Report on Form 10-K for the fiscal year ended December 31, 2019 |
ACA (Also referred to as U.S. Healthcare Legislation) | U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act2020 |
| ACIP | Advisory Committee on Immunization Practices |
| ALK | anaplastic lymphoma kinase |
| Alliance revenues | Revenues from alliance agreements under which we co-promote products discovered or developed by other companies or us |
| Allogene | Allogene Therapeutics, Inc. |
| AML | Acute Myeloid Leukemia |
Anacor | Anacor Pharmaceuticals, Inc. |
| Array | Array BioPharma Inc. |
| Astellas | Astellas Pharma Inc., Astellas US LLC and Astellas Pharma US, Inc. |
| ATTR-CM | transthyretin amyloid cardiomyopathy |
Bamboo | Bamboo Therapeutics, Inc. |
| BioNTech | BioNTech SE |
BiopharmaBLA | Pfizer Biopharmaceuticals GroupBiologics License Application |
| BMS | Bristol-Myers Squibb Company |
| BNT162b2 | Pfizer-BioNTech COVID-19 Vaccine |
| BOD | Board of Directors |
| CDC | U.S. Centers for Disease Control and Prevention |
cGMPCMA | current Good Manufacturing Practicesconditional marketing authorization |
CHMPConsumer Healthcare JV | Committee for Medicinal Products for Human UseGSK Consumer Healthcare JV |
| COVID-19 | novel coronavirus disease of 2019 |
| Developed Europe | Includes the following markets: Western Europe, Scandinavian countries and Finland |
| Developed Markets | Includes the following markets: U.S., Developed Europe, Japan, Canada, Australia, South Korea Australia and New Zealand |
| Developed Rest of World | Includes the following markets: Japan, Canada, Australia, South Korea Australia and New Zealand |
| EMA | European Medicines Agency |
| Emerging Markets | Includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Eastern Europe, Latin America, EasternCentral Europe, Africa, the Middle East, Central EuropeAfrica and Turkey |
| EPS | earnings per share |
| EU | European Union |
| EUA | emergency use authorization |
| Exchange Act | Securities Exchange Act of 1934, as amended |
FASB | Financial Accounting Standards Board |
| FDA | U.S. Food and Drug Administration |
FTCForm 10-Q | U.S. Federal Trade CommissionQuarterly Report on Form 10-Q for the quarterly period ended April 4, 2021 |
| GAAP | Generally Accepted Accounting Principles |
| GIST | gastrointestinal stromal tumors |
GPD | Global Product Development organization |
| GSK | GlaxoSmithKline plc |
hGH-CTP | human growth hormone |
| Hospira | Hospira, Inc. |
IBT | Income before tax |
| IPR&D | in-process research and development |
| IRS | U.S. Internal Revenue Service |
IV | intravenous |
J&J | Johnson & Johnson |
| JV | Joint Venturejoint venture |
| King | King Pharmaceuticals LLC (formerly King Pharmaceuticals, Inc.) |
LDL | low density lipoprotein |
| LIBOR | London Interbank Offered Rate |
| Lilly | Eli Lilly & Company |
| LOE | loss of exclusivity |
| MCO | managed care organization |
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GLOSSARY OF DEFINED TERMS
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| mCRC | metastatic colorectal cancer |
| mCRPC | metastatic castration-resistant prostate cancer |
| mCSPC | metastatic castration-sensitive prostate cancer |
mRNA | messenger ribonucleic acid |
| MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Medivation | Medivation LLC (formerly Medivation, Inc.) |
| Meridian | Meridian Medical Technologies, Inc. |
Moody’sMTM | Moody’s Investors Servicemark-to-market |
| Mylan | Mylan N.V. |
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NDAMylan-Japan collaboration | new drug applicationa pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan that terminated on December 21, 2020 |
| Myovant | Myovant Sciences Ltd. |
| nmCRPC | non-metastatic castration-resistant prostate cancer |
| NSCLC | non-small cell lung cancer |
| OPKO | OPKO Health, Inc. |
PARPOTC | poly ADP ribose polymeraseover-the-counter |
| PBM | pharmacy benefit manager |
| PGS | Pfizer Global Supply |
| Pharmacia | Pharmacia Corporation |
PP&E | property, plant & equipment |
| PsA | psoriatic arthritis |
Quarterly Report on Form 10-Q | Quarterly Report on Form 10-Q for the quarterly period ended September 27, 2020 |
| RA | rheumatoid arthritis |
| RCC | renal cell carcinoma |
| R&D | research and development |
RNA | ribonucleic acid |
| Sandoz | Sandoz, Inc., a division of Novartis AG |
| SEC | U.S. Securities and Exchange Commission |
| SI&A | selling, informational and administrative |
S&P | Standard and Poor’s |
TCJA | legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017 |
Therachon | Therachon Holding AG |
| UC | ulcerative colitis |
| U.K. | United Kingdom |
| U.S. | United States |
ValnevaUpjohn Business | Valneva SEPfizer’s global, primarily off-patent branded and generics business, which includes a portfolio of 20 globally recognized solid oral dose brands, including Lipitor, Lyrica, Norvasc, Celebrex and Viagra, as well as a U.S.-based generics platform, Greenstone, that was spun-off on November 16, 2020 and combined with Mylan to create Viatris |
ViiVViatris | ViiV Healthcare Limited |
VBP | Volume-based procurement |
WRDM | Worldwide Research, Development and MedicalViatris Inc. |
Some amounts in this Form 10-Q may not add due to rounding. All percentages have been calculated using unrounded amounts. All trademarks mentioned are the property of their owners.
The information contained on our website, our Facebook, YouTube and LinkedIn pages or our Twitter accounts, or any third-party website, is not incorporated by reference into this Form 10-Q.
PART I - | | |
| PART I. FINANCIAL INFORMATION |
ItemITEM 1. Financial StatementsFINANCIAL STATEMENTS
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| | | | | Three Months Ended | | Nine Months Ended | | | | Three Months Ended |
| (MILLIONS, EXCEPT PER COMMON SHARE DATA) | (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | September 27,
2020 | | September 29,
2019 | | September 27,
2020 | | September 29,
2019 | (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | | April 4,
2021 | | March 29,
2020 |
| Revenues | Revenues | | $ | 12,131 | | | $ | 12,680 | | | $ | 35,961 | | | $ | 39,062 | | Revenues | | | $ | 14,582 | | | $ | 10,083 | |
| Costs and expenses: | Costs and expenses: | | Costs and expenses: | | | |
Cost of sales(a) | | 2,529 | | | 2,602 | | | 7,188 | | | 7,611 | | |
Cost of sales(a) | | Cost of sales(a) | | | 4,211 | | | 1,940 | |
Selling, informational and administrative expenses(a) | Selling, informational and administrative expenses(a) | | 3,016 | | | 3,260 | | | 8,919 | | | 10,110 | | Selling, informational and administrative expenses(a) | | | 2,783 | | | 2,541 | |
Research and development expenses(a) | Research and development expenses(a) | | 2,360 | | | 2,283 | | | 6,216 | | | 5,827 | | Research and development expenses(a) | | | 2,014 | | | 1,672 | |
| Amortization of intangible assets | Amortization of intangible assets | | 898 | | | 1,212 | | | 2,688 | | | 3,578 | | Amortization of intangible assets | | | 872 | | | 849 | |
| Restructuring charges and certain acquisition-related costs | Restructuring charges and certain acquisition-related costs | | 4 | | | 365 | | | 435 | | | 295 | | Restructuring charges and certain acquisition-related costs | | | 23 | | | 54 | |
| (Gain) on completion of Consumer Healthcare JV transaction | (Gain) on completion of Consumer Healthcare JV transaction | | 0 | | | (8,087) | | | (6) | | | (8,087) | | (Gain) on completion of Consumer Healthcare JV transaction | | | 0 | | | (6) | |
| Other (income)/deductions––net | Other (income)/deductions––net | | 1,148 | | | 319 | | | 507 | | | 537 | | Other (income)/deductions––net | | | (1,004) | | | 190 | |
| Income from continuing operations before provision/(benefit) for taxes on income | | 2,176 | | | 10,727 | | | 10,014 | | | 19,190 | | |
| Provision/(benefit) for taxes on income | | (26) | | | 3,047 | | | 968 | | | 2,566 | | |
| Income from continuing operations before provision for taxes on income | | Income from continuing operations before provision for taxes on income | | | 5,683 | | | 2,842 | |
| Provision for taxes on income | | Provision for taxes on income | | | 805 | | | 359 | |
| Income from continuing operations | Income from continuing operations | | 2,202 | | | 7,680 | | | 9,046 | | | 16,625 | | Income from continuing operations | | | 4,877 | | | 2,483 | |
| | Income from discontinued operations––net of tax | | Income from discontinued operations––net of tax | | | 9 | | | 881 | |
| | Discontinued operations––net of tax | | 0 | | | 4 | | | 0 | | | 4 | | |
| Net income before allocation to noncontrolling interests | Net income before allocation to noncontrolling interests | | 2,202 | | | 7,684 | | | 9,046 | | | 16,628 | | Net income before allocation to noncontrolling interests | | | 4,886 | | | 3,364 | |
| Less: Net income attributable to noncontrolling interests | Less: Net income attributable to noncontrolling interests | | 8 | | | 4 | | | 25 | | | 19 | | Less: Net income attributable to noncontrolling interests | | | 9 | | | 9 | |
| Net income attributable to Pfizer Inc. | | $ | 2,194 | | | $ | 7,680 | | | $ | 9,022 | | | $ | 16,609 | | |
| Net income attributable to Pfizer Inc. common shareholders | | Net income attributable to Pfizer Inc. common shareholders | | | $ | 4,877 | | | $ | 3,355 | |
| Earnings per common share––basic: | Earnings per common share––basic: | | | | | | | | | Earnings per common share––basic: | | | | | |
| Income from continuing operations attributable to Pfizer Inc. common shareholders | Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 0.39 | | | $ | 1.38 | | | $ | 1.62 | | | $ | 2.98 | | Income from continuing operations attributable to Pfizer Inc. common shareholders | | | $ | 0.87 | | | $ | 0.45 | |
| Discontinued operations––net of tax | | 0 | | | 0 | | | 0 | | | 0 | | |
| Income from discontinued operations––net of tax | | Income from discontinued operations––net of tax | | | 0 | | | 0.16 | |
| Net income attributable to Pfizer Inc. common shareholders | Net income attributable to Pfizer Inc. common shareholders | | $ | 0.39 | | | $ | 1.38 | | | $ | 1.62 | | | $ | 2.98 | | Net income attributable to Pfizer Inc. common shareholders | | | $ | 0.87 | | | $ | 0.60 | |
| Earnings per common share––diluted: | Earnings per common share––diluted: | | | | | | | | | Earnings per common share––diluted: | | | | | |
| Income from continuing operations attributable to Pfizer Inc. common shareholders | Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 0.39 | | | $ | 1.36 | | | $ | 1.60 | | | $ | 2.92 | | Income from continuing operations attributable to Pfizer Inc. common shareholders | | | $ | 0.86 | | | $ | 0.44 | |
| Discontinued operations––net of tax | | 0 | | | 0 | | | 0 | | | 0 | | |
| Income from discontinued operations––net of tax | | Income from discontinued operations––net of tax | | | 0 | | | 0.16 | |
| Net income attributable to Pfizer Inc. common shareholders | Net income attributable to Pfizer Inc. common shareholders | | $ | 0.39 | | | $ | 1.36 | | | $ | 1.60 | | | $ | 2.92 | | Net income attributable to Pfizer Inc. common shareholders | | | $ | 0.86 | | | $ | 0.60 | |
| | Weighted-average shares––basic | Weighted-average shares––basic | | 5,557 | | | 5,545 | | | 5,552 | | | 5,581 | | Weighted-average shares––basic | | | 5,584 | | | 5,545 | |
| Weighted-average shares––diluted | Weighted-average shares––diluted | | 5,633 | | | 5,649 | | | 5,622 | | | 5,690 | | Weighted-average shares––diluted | | | 5,662 | | | 5,613 | |
(a)ExcludesExclusive of amortization of intangible assets, except as disclosed in Note 9A9 in this Form 10-Q and Notes to Consolidated Financial Statements––Note 1L. Basis of Presentation and Significant Accounting Policies: Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets1L in our 2019 Financial Report.2020 Form 10-K.
See Notes to Condensed Consolidated Financial Statements.Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| | | | | Three Months Ended | | Nine Months Ended | | | | Three Months Ended |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | September 27,
2020 | | September 29,
2019 | |
| (MILLIONS) | | (MILLIONS) | | | April 4,
2021 | | March 29,
2020 |
| Net income before allocation to noncontrolling interests | Net income before allocation to noncontrolling interests | | $ | 2,202 | | | $ | 7,684 | | | $ | 9,046 | | | $ | 16,628 | | Net income before allocation to noncontrolling interests | | | $ | 4,886 | | | $ | 3,364 | |
| Foreign currency translation adjustments, net(a) | Foreign currency translation adjustments, net(a) | | 1,609 | | | (468) | | | 96 | | | (628) | | Foreign currency translation adjustments, net(a) | | | 465 | | | (1,256) | |
| Reclassification adjustments | | 0 | | | 268 | | | 0 | | | 270 | | |
| | | | | 1,609 | | | (200) | | | 96 | | | (358) | | |
| Unrealized holding gains/(losses) on derivative financial instruments, net | Unrealized holding gains/(losses) on derivative financial instruments, net | | (372) | | | 150 | | | (661) | | | 241 | | Unrealized holding gains/(losses) on derivative financial instruments, net | | | 214 | | | (501) | |
Reclassification adjustments for (gains)/losses included in net income(b)(a) | Reclassification adjustments for (gains)/losses included in net income(b)(a) | | 143 | | | (29) | | | (25) | | | (372) | | Reclassification adjustments for (gains)/losses included in net income(b)(a) | | | 259 | | | 19 | |
| | | | (230) | | | 122 | | | (685) | | | (131) | | | | | 473 | | | (482) | |
| Unrealized holding gains/(losses) on available-for-sale securities, net | Unrealized holding gains/(losses) on available-for-sale securities, net | | 239 | | | 15 | | | 231 | | | 48 | | Unrealized holding gains/(losses) on available-for-sale securities, net | | | 79 | | | (51) | |
Reclassification adjustments for (gains)/losses included in net income(c)(b) | Reclassification adjustments for (gains)/losses included in net income(c)(b) | | (85) | | | (7) | | | (25) | | | 30 | | Reclassification adjustments for (gains)/losses included in net income(c)(b) | | | (242) | | | 15 | |
| | | | | 155 | | | 8 | | | 205 | | | 77 | | | | | (163) | | | (36) | |
| Benefit plans: actuarial gains/(losses), net | | (1,211) | | | (171) | | | (1,372) | | | (175) | | |
| Reclassification adjustments related to amortization | | 67 | | | 60 | | | 200 | | | 180 | | |
| Reclassification adjustments related to settlements, net | | 174 | | | 38 | | | 240 | | | 40 | | |
| Other | | (206) | | | 42 | | | (123) | | | 60 | | |
| | | | (1,177) | | | (31) | | | (1,055) | | | 105 | | |
| Benefit plans: prior service (costs)/credits and other, net | | 0 | | | 0 | | | 0 | | | (1) | | |
| Reclassification adjustments related to amortization of prior service costs and other, net | Reclassification adjustments related to amortization of prior service costs and other, net | | (45) | | | (44) | | | (134) | | | (137) | | Reclassification adjustments related to amortization of prior service costs and other, net | | | (40) | | | (45) | |
| Reclassification adjustments related to curtailments of prior service costs and other, net | | 0 | | | (46) | | | 0 | | | (46) | | |
| | Other | Other | | (3) | | | 3 | | | 1 | | | 4 | | Other | | | (3) | | | (1) | |
| | | | (47) | | | (88) | | | (133) | | | (180) | | | | | (43) | | | (45) | |
| Other comprehensive income/(loss), before tax | Other comprehensive income/(loss), before tax | | 310 | | | (190) | | | (1,572) | | | (486) | | Other comprehensive income/(loss), before tax | | | 732 | | | (1,821) | |
| Tax provision/(benefit) on other comprehensive income/(loss) | Tax provision/(benefit) on other comprehensive income/(loss) | | (262) | | | 84 | | | (527) | | | 50 | | Tax provision/(benefit) on other comprehensive income/(loss) | | | 84 | | | (380) | |
| Other comprehensive income/(loss) before allocation to noncontrolling interests | Other comprehensive income/(loss) before allocation to noncontrolling interests | | $ | 572 | | | $ | (275) | | | $ | (1,045) | | | $ | (536) | | Other comprehensive income/(loss) before allocation to noncontrolling interests | | | $ | 647 | | | $ | (1,441) | |
| Comprehensive income before allocation to noncontrolling interests | | $ | 2,774 | | | $ | 7,409 | | | $ | 8,001 | | | $ | 16,092 | | |
| | Comprehensive income/(loss) before allocation to noncontrolling interests | | Comprehensive income/(loss) before allocation to noncontrolling interests | | | $ | 5,533 | | | $ | 1,923 | |
| Less: Comprehensive income/(loss) attributable to noncontrolling interests | Less: Comprehensive income/(loss) attributable to noncontrolling interests | | 11 | | | (6) | | | 16 | | | 8 | | Less: Comprehensive income/(loss) attributable to noncontrolling interests | | | 10 | | | 9 | |
| Comprehensive income attributable to Pfizer Inc. | | $ | 2,763 | | | $ | 7,415 | | | $ | 7,986 | | | $ | 16,084 | | |
| Comprehensive income/(loss) attributable to Pfizer Inc. | | Comprehensive income/(loss) attributable to Pfizer Inc. | | | $ | 5,523 | | | $ | 1,914 | |
(a)Amounts in the third quarter of 2020 primarily include gains from the strengthening of certain major currencies against the U.S. dollar and a net gain related to foreign currency translation adjustments and the impact of our net investment hedging program, both attributable to our equity method investment in the GSK Consumer Healthcare joint venture. Amounts in the first nine months of 2020 primarily include gains from the strengthening of certain major currencies against the U.S. dollar, partially offset by a net loss related to foreign currency translation adjustments and the impact of our net investment hedging program, both attributable to our equity method investment in the GSK Consumer Healthcare joint venture. See Note 2B.
(b)Reclassified into Other (income)/deductions—net and Cost of salessales. in the condensed consolidated statements of income. See Note 7E.
(c)(b)Reclassified into Other (income)/deductions—net net.
in the condensed consolidated statements of income.
See Notes to Condensed Consolidated Financial Statements.Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| | (MILLIONS OF DOLLARS) | | September 27,
2020 | | December 31, 2019 | |
| (MILLIONS) | | (MILLIONS) | | April 4,
2021 | | December 31, 2020 |
| | | (Unaudited) | | | | | (Unaudited) | | |
| Assets | Assets | | Assets | |
| Cash and cash equivalents | Cash and cash equivalents | | $ | 1,587 | | | $ | 1,305 | | Cash and cash equivalents | | $ | 1,768 | | | $ | 1,784 | |
| Short-term investments | Short-term investments | | 8,912 | | | 8,525 | | Short-term investments | | 11,899 | | | 10,437 | |
| Restricted short-term investments | | 11,413 | | | 0 | | |
| Trade accounts receivable, less allowance for doubtful accounts: 2020—$533; 2019—$527 | | 10,012 | | | 8,724 | | |
| Trade accounts receivable, less allowance for doubtful accounts: 2021—$512; 2020—$508 | | Trade accounts receivable, less allowance for doubtful accounts: 2021—$512; 2020—$508 | | 9,864 | | | 7,930 | |
| Inventories | Inventories | | 9,295 | | | 8,283 | | Inventories | | 8,493 | | | 8,046 | |
| Current tax assets | Current tax assets | | 4,000 | | | 3,344 | | Current tax assets | | 3,419 | | | 3,264 | |
| Other current assets | Other current assets | | 2,519 | | | 2,622 | | Other current assets | | 4,091 | | | 3,605 | |
| | Total current assets | Total current assets | | 47,739 | | | 32,803 | | Total current assets | | 39,533 | | | 35,067 | |
| Equity-method investments | Equity-method investments | | 15,949 | | | 17,133 | | Equity-method investments | | 16,532 | | | 16,856 | |
| Long-term investments | Long-term investments | | 3,059 | | | 3,014 | | Long-term investments | | 3,696 | | | 3,406 | |
| Property, plant and equipment, less accumulated depreciation: 2020—$16,636; 2019—$16,789 | | 14,403 | | | 13,967 | | |
| Identifiable intangible assets, less accumulated amortization | | 30,927 | | | 35,370 | | |
| Property, plant and equipment, less accumulated depreciation: 2021—$15,105; 2020—$14,812 | | Property, plant and equipment, less accumulated depreciation: 2021—$15,105; 2020—$14,812 | | 14,011 | | | 13,900 | |
| Identifiable intangible assets | | Identifiable intangible assets | | 27,974 | | | 28,471 | |
| Goodwill | Goodwill | | 59,902 | | | 58,653 | | Goodwill | | 49,791 | | | 49,577 | |
| Noncurrent deferred tax assets and other noncurrent tax assets | Noncurrent deferred tax assets and other noncurrent tax assets | | 2,649 | | | 2,099 | | Noncurrent deferred tax assets and other noncurrent tax assets | | 2,537 | | | 2,383 | |
| Other noncurrent assets | Other noncurrent assets | | 4,355 | | | 4,450 | | Other noncurrent assets | | 4,744 | | | 4,569 | |
| | Total assets | Total assets | | $ | 178,983 | | | $ | 167,489 | | Total assets | | $ | 158,818 | | | $ | 154,229 | |
| | Liabilities and Equity | Liabilities and Equity | | | | | Liabilities and Equity | | | | |
| Short-term borrowings, including current portion of long-term debt: 2020—$2,149; 2019—$1,462 | | $ | 13,363 | | | $ | 16,195 | | |
| Short-term borrowings, including current portion of long-term debt: 2021—$3,676; 2020—$2,002 | | Short-term borrowings, including current portion of long-term debt: 2021—$3,676; 2020—$2,002 | | $ | 4,352 | | | $ | 2,703 | |
| Trade accounts payable | Trade accounts payable | | 4,141 | | | 4,220 | | Trade accounts payable | | 4,064 | | | 4,309 | |
| Dividends payable | Dividends payable | | 2,112 | | | 2,104 | | Dividends payable | | 0 | | | 2,162 | |
| Income taxes payable | Income taxes payable | | 1,430 | | | 980 | | Income taxes payable | | 1,401 | | | 1,049 | |
| Accrued compensation and related items | Accrued compensation and related items | | 2,425 | | | 2,720 | | Accrued compensation and related items | | 1,985 | | | 3,058 | |
| Deferred revenues | | Deferred revenues | | 2,052 | | | 1,113 | |
| Other current liabilities | Other current liabilities | | 10,683 | | | 11,083 | | Other current liabilities | | 12,798 | | | 11,527 | |
| | Total current liabilities | Total current liabilities | | 34,154 | | | 37,304 | | Total current liabilities | | 26,652 | | | 25,920 | |
| | Long-term debt | Long-term debt | | 49,785 | | | 35,955 | | Long-term debt | | 35,347 | | | 37,133 | |
| Pension benefit obligations, net | | 5,350 | | | 5,638 | | |
| Postretirement benefit obligations, net | | 1,087 | | | 1,124 | | |
| Pension benefit obligations | | Pension benefit obligations | | 4,526 | | | 4,766 | |
| Postretirement benefit obligations | | Postretirement benefit obligations | | 635 | | | 645 | |
| Noncurrent deferred tax liabilities | Noncurrent deferred tax liabilities | | 4,542 | | | 5,578 | | Noncurrent deferred tax liabilities | | 4,355 | | | 4,063 | |
| Other taxes payable | Other taxes payable | | 11,720 | | | 12,126 | | Other taxes payable | | 11,759 | | | 11,560 | |
| Other noncurrent liabilities | Other noncurrent liabilities | | 6,851 | | | 6,317 | | Other noncurrent liabilities | | 6,677 | | | 6,669 | |
| Total liabilities | Total liabilities | | 113,487 | | | 104,042 | | Total liabilities | | 89,953 | | | 90,756 | |
| | Commitments and Contingencies | Commitments and Contingencies | | Commitments and Contingencies | | 0 | | 0 |
| | Preferred stock | | 0 | | | 17 | | |
| | Common stock | Common stock | | 470 | | | 468 | | Common stock | | 472 | | | 470 | |
| Additional paid-in capital | Additional paid-in capital | | 88,161 | | | 87,428 | | Additional paid-in capital | | 89,002 | | | 88,674 | |
| | Treasury stock | Treasury stock | | (110,980) | | | (110,801) | | Treasury stock | | (111,349) | | | (110,988) | |
| Retained earnings | Retained earnings | | 100,284 | | | 97,670 | | Retained earnings | | 95,158 | | | 90,392 | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (12,676) | | | (11,640) | | Accumulated other comprehensive loss | | (4,664) | | | (5,310) | |
| Total Pfizer Inc. shareholders’ equity | Total Pfizer Inc. shareholders’ equity | | 65,259 | | | 63,143 | | Total Pfizer Inc. shareholders’ equity | | 68,620 | | | 63,238 | |
| Equity attributable to noncontrolling interests | Equity attributable to noncontrolling interests | | 236 | | | 303 | | Equity attributable to noncontrolling interests | | 245 | | | 235 | |
| Total equity | Total equity | | 65,495 | | | 63,447 | | Total equity | | 68,865 | | | 63,473 | |
| Total liabilities and equity | Total liabilities and equity | | $ | 178,983 | | | $ | 167,489 | | Total liabilities and equity | | $ | 158,818 | | | $ | 154,229 | |
See Notes to Condensed Consolidated Financial Statements.Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | PFIZER INC. SHAREHOLDERS | | | | |
| | Preferred Stock | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
| (MILLIONS, EXCEPT PREFERRED SHARES) | | Shares | | Stated Value | | Shares | | Par Value | | Add’l
Paid-In Capital | | Shares | | Cost | | Retained Earnings | | Accum. Other Comp.
Loss | | Share-
holders’ Equity | | Non-controlling interests | | Total Equity |
| Balance, June 28, 2020 | | 0 | | | $ | 0 | | | 9,394 | | | $ | 470 | | | $ | 87,886 | | | (3,840) | | | $ | (110,978) | | | $ | 100,203 | | | $ | (13,246) | | | $ | 64,336 | | | $ | 228 | | | $ | 64,564 | |
| Net income | | | | | | | | | | | | | | | | 2,194 | | | | | 2,194 | | | 8 | | | 2,202 | |
| Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | 569 | | | 569 | | | 3 | | | 572 | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | | | | | | | | | | | | | | | (2,113) | | | | | (2,113) | | | | | (2,113) | |
| Preferred stock | | | | | | | | | | | | | | | | — | | | | | — | | | | | 0 | |
| Noncontrolling interests | | | | | | | | | | | | | | | | | | | | — | | | (1) | | | (1) | |
| Share-based payment transactions | | | | | | 3 | | | — | | | 275 | | | — | | | (2) | | | | | | | 273 | | | | | 273 | |
| Purchases of common stock | | | | | | | | | | | | — | | | — | | | | | | | — | | | | | 0 | |
| Preferred stock conversions and redemptions | | — | | | — | | | | | | | — | | | — | | | — | | | | | | | — | | | | | 0 | |
| Other | | | | | | | | | | — | | | — | | | — | | | — | | | | | — | | | (1) | | | (1) | |
| Balance, September 27, 2020 | | 0 | | | $ | 0 | | | 9,397 | | | $ | 470 | | | $ | 88,161 | | | (3,840) | | | $ | (110,980) | | | $ | 100,284 | | | $ | (12,676) | | | $ | 65,259 | | | $ | 236 | | | $ | 65,495 | |
|
| | PFIZER INC. SHAREHOLDERS | | | | |
| | Preferred Stock | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
| (MILLIONS, EXCEPT PREFERRED SHARES) | | Shares | | Stated Value | | Shares | | Par Value | | Add’l
Paid-In Capital | | Shares | | Cost | | Retained Earnings | | Accum. Other Comp.
Loss | | Share-
holders’ Equity | | Non-controlling interests | | Total Equity |
| Balance, June 30, 2019 | | 458 | | | $ | 18 | | | 9,363 | | | $ | 468 | | | $ | 86,963 | | | (3,801) | | | $ | (110,786) | | | $ | 94,440 | | | $ | (11,535) | | | $ | 59,568 | | | $ | 357 | | | $ | 59,924 | |
| Net income | | | | | | | | | | | | | | | | 7,680 | | | | | 7,680 | | | 4 | | | 7,684 | |
| Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | (265) | | | (265) | | | (9) | | | (275) | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | | | | | | | | | | | | | | | (2,006) | | | | | (2,006) | | | | | (2,006) | |
| Preferred stock | | | | | | | | | | | | | | | | — | | | | | — | | | | | 0 | |
| Noncontrolling interests | | | | | | | | | | | | | | | | | | | | — | | | 2 | | | 2 | |
| Share-based payment transactions | | | | | | 3 | | | — | | | 136 | | | — | | | (8) | | | | | | | 128 | | | | | 128 | |
| Purchases of common stock | | | | | | | | | | | | (34) | | | — | | | | | | | — | | | | | 0 | |
| Preferred stock conversions and redemptions | | (8) | | | — | | | | | | | — | | | — | | | — | | | | | | | (1) | | | | | (1) | |
| Other | | | | | | | | | | — | | | — | | | — | | | — | | | | | — | | | (61) | | | (61) | |
| Balance, September 29, 2019 | | 449 | | | $ | 18 | | | 9,366 | | | $ | 468 | | | $ | 87,099 | | | (3,835) | | | $ | (110,795) | | | $ | 100,113 | | | $ | (11,801) | | | $ | 65,103 | | | $ | 293 | | | $ | 65,396 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | PFIZER INC. SHAREHOLDERS | | | | |
| | Preferred Stock | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
| (MILLIONS, EXCEPT PREFERRED SHARES) | | Shares | | Stated Value | | Shares | | Par Value | | Add’l
Paid-In Capital | | Shares | | Cost | | Retained Earnings | | Accum. Other Comp.
Loss | | Share-
holders’ Equity | | Non-controlling interests | | Total Equity |
| Balance, January 1, 2021 | | 0 | | | $ | 0 | | | 9,407 | | | $ | 470 | | | $ | 88,674 | | | (3,840) | | | $ | (110,988) | | | $ | 90,392 | | | $ | (5,310) | | | $ | 63,238 | | | $ | 235 | | | $ | 63,473 | |
| Net income | | | | | | | | | | | | | | | | 4,877 | | | | | 4,877 | | | 9 | | | 4,886 | |
| Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | 646 | | | 646 | | | 1 | | | 647 | |
| Cash dividends declared, per share: $0 | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | | | | | | | | | | | | | | | (84) | | | | | (84) | | | | | (84) | |
| Preferred stock | | | | | | | | | | | | | | | | — | | | | | — | | | | | 0 | |
| Noncontrolling interests | | | | | | | | | | | | | | | | | | | | — | | | — | | | 0 | |
| Share-based payment transactions | | | | | | 38 | | | 2 | | | 329 | | | (11) | | | (361) | | | | | | | (30) | | | | | (30) | |
| Purchases of common stock | | | | | | | | | | | | — | | | — | | | | | | | — | | | | | 0 | |
| Preferred stock conversions and redemptions | | — | | | — | | | | | | | — | | | — | | | — | | | | | | | — | | | | | 0 | |
| Other | | | | | | | | | | — | | | — | | | — | | | (27) | | | | | (27) | | | — | | | (27) | |
| Balance, April 4, 2021 | | 0 | | | $ | 0 | | | 9,445 | | | $ | 472 | | | $ | 89,002 | | | (3,851) | | | $ | (111,349) | | | $ | 95,158 | | | $ | (4,664) | | | $ | 68,620 | | | $ | 245 | | | $ | 68,865 | |
|
| | PFIZER INC. SHAREHOLDERS | | | | |
| | Preferred Stock | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
| (MILLIONS, EXCEPT PREFERRED SHARES) | | Shares | | Stated Value | | Shares | | Par Value | | Add’l
Paid-In Capital | | Shares | | Cost | | Retained Earnings | | Accum. Other Comp.
Loss | | Share-
holders’ Equity | | Non-controlling interests | | Total Equity |
| Balance, January 1, 2020 | | 431 | | | $ | 17 | | | 9,369 | | | $ | 468 | | | $ | 87,428 | | | (3,835) | | | $ | (110,801) | | | $ | 91,397 | | | $ | (5,367) | | | $ | 63,143 | | | $ | 303 | | | $ | 63,447 | |
| Net income | | | | | | | | | | | | | | | | 3,355 | | | | | 3,355 | | | 9 | | | 3,364 | |
| Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | (1,441) | | | (1,441) | | | — | | | (1,441) | |
| Cash dividends declared, per share: $0 | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | | | | | | | | | | | | | | | (71) | | | | | (71) | | | | | (71) | |
| Preferred stock | | | | | | | | | | | | | | | | — | | | | | — | | | | | 0 | |
| Noncontrolling interests | | | | | | | | | | | | | | | | | | | | — | | | | | 0 | |
| Share-based payment transactions | | | | | | 23 | | | 1 | | | 252 | | | (6) | | | (209) | | | | | | | 44 | | | | | 44 | |
| Purchases of common stock | | | | | | | | | | | | — | | | — | | | | | | | — | | | | | 0 | |
| Preferred stock conversions and redemptions | | (14) | | | (1) | | | | | | | (1) | | | — | | | — | | | | | | | (1) | | | | | (1) | |
| Other | | | | | | | | | | — | | | — | | | — | | | — | | | | | — | | | — | | | 0 | |
| Balance, March 29, 2020 | | 417 | | | $ | 17 | | | 9,393 | | | $ | 470 | | | $ | 87,680 | | | (3,841) | | | $ | (111,010) | | | $ | 94,680 | | | $ | (6,808) | | | $ | 65,028 | | | $ | 312 | | | $ | 65,341 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
See Notes to Condensed Consolidated Financial Statements.Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | PFIZER INC. SHAREHOLDERS | | | | |
| | Preferred Stock | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
| (MILLIONS, EXCEPT PREFERRED SHARES) | | Shares | | Stated Value | | Shares | | Par Value | | Add’l
Paid-In Capital | | Shares | | Cost | | Retained Earnings | | Accum. Other Comp.
Loss | | Share-
holders’ Equity | | Non-controlling interests | | Total Equity |
| Balance, January 1, 2020 | | 431 | | | $ | 17 | | | 9,369 | | | $ | 468 | | | $ | 87,428 | | | (3,835) | | | $ | (110,801) | | | $ | 97,670 | | | $ | (11,640) | | | $ | 63,143 | | | $ | 303 | | | $ | 63,447 | |
| Net income | | | | | | | | | | | | | | | | 9,022 | | | | | 9,022 | | | 25 | | | 9,046 | |
| Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | (1,036) | | | (1,036) | | | (9) | | | (1,045) | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | | | | | | | | | | | | | | | (6,408) | | | | | (6,408) | | | | | (6,408) | |
| Preferred stock | | | | | | | | | | | | | | | | — | | | | | — | | | | | 0 | |
| Noncontrolling interests | | | | | | | | | | | | | | | | | | | | — | | | (81) | | | (81) | |
| Share-based payment transactions | | | | | | 28 | | | 1 | | | 748 | | | (6) | | | (210) | | | | | | | 539 | | | | | 539 | |
| Purchases of common stock | | | | | | | | | | | | — | | | — | | | | | | | — | | | | | 0 | |
Preferred stock conversions and redemptions(a) | | (431) | | | (17) | | | | | | | (15) | | | 1 | | | 31 | | | | | | | (1) | | | | | (1) | |
| Other | | | | | | | | | | — | | | — | | | — | | | — | | | | | — | | | (1) | | | (1) | |
| Balance, September 27, 2020 | | 0 | | | $ | 0 | | | 9,397 | | | $ | 470 | | | $ | 88,161 | | | (3,840) | | | $ | (110,980) | | | $ | 100,284 | | | $ | (12,676) | | | $ | 65,259 | | | $ | 236 | | | $ | 65,495 | |
|
| | PFIZER INC. SHAREHOLDERS | | | | |
| | Preferred Stock | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
| (MILLIONS, EXCEPT PREFERRED SHARES) | | Shares | | Stated Value | | Shares | | Par Value | | Add’l
Paid-In Capital | | Shares | | Cost | | Retained Earnings | | Accum. Other Comp.
Loss | | Share-
holders’ Equity | | Non-controlling interests | | Total Equity |
| Balance, January 1, 2019 | | 478 | | | $ | 19 | | | 9,332 | | | $ | 467 | | | $ | 86,253 | | | (3,615) | | | $ | (101,610) | | | $ | 89,554 | | | $ | (11,275) | | | $ | 63,407 | | | $ | 351 | | | $ | 63,758 | |
| Net income | | | | | | | | | | | | | | | | 16,609 | | | | | 16,609 | | | 19 | | | 16,628 | |
| Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | (525) | | | (525) | | | (11) | | | (536) | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | | | | | | | | | | | | | | | (6,068) | | | | | (6,068) | | | | | (6,068) | |
| Preferred stock | | | | | | | | | | | | | | | | (1) | | | | | (1) | | | | | (1) | |
| Noncontrolling interests | | | | | | | | | | | | | | | | | | | | — | | | (5) | | | (5) | |
| Share-based payment transactions | | | | | | 34 | | | 2 | | | 848 | | | (7) | | | (320) | | | | | | | 530 | | | | | 530 | |
| Purchases of common stock | | | | | | | | | | | | (213) | | | (8,865) | | | | | | | (8,865) | | | | | (8,865) | |
| Preferred stock conversions and redemptions | | (28) | | | (1) | | | | | | | (2) | | | — | | | — | | | | | | | (3) | | | | | (3) | |
| Other | | | | | | | | | | — | | | — | | | — | | | 19 | | | | | 19 | | | (61) | | | (42) | |
| Balance, September 29, 2019 | | 449 | | | $ | 18 | | | 9,366 | | | $ | 468 | | | $ | 87,099 | | | (3,835) | | | $ | (110,795) | | | $ | 100,113 | | | $ | (11,801) | | | $ | 65,103 | | | $ | 293 | | | $ | 65,396 | |
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(a)See Note 11.
See Notes to Condensed Consolidated Financial Statements.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | Nine Months Ended | | | Three Months Ended |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | |
| (MILLIONS) | | (MILLIONS) | | April 4,
2021 | | March 29,
2020 |
| Operating Activities | Operating Activities | | | | | Operating Activities | | | | |
| Net income before allocation to noncontrolling interests | Net income before allocation to noncontrolling interests | | $ | 9,046 | | | $ | 16,628 | | Net income before allocation to noncontrolling interests | | $ | 4,886 | | | $ | 3,364 | |
| Income from discontinued operations—net of tax | | Income from discontinued operations—net of tax | | 9 | | | 881 | |
| Net income from continuing operations before allocation to noncontrolling interests | | Net income from continuing operations before allocation to noncontrolling interests | | 4,877 | | | 2,483 | |
| Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: | Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: | | | | | Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: | | | | |
| Depreciation and amortization | Depreciation and amortization | | 3,731 | | | 4,626 | | Depreciation and amortization | | 1,226 | | | 1,166 | |
| Asset write-offs and impairments | Asset write-offs and impairments | | 990 | | | 224 | | Asset write-offs and impairments | | 46 | | | 44 | |
| TCJA impact | | 0 | | | (319) | | |
Gain on completion of Consumer Healthcare JV transaction, net of cash conveyed(a) | | (6) | | | (8,233) | | |
| Gain on completion of Consumer Healthcare JV transaction, net of cash conveyed | | Gain on completion of Consumer Healthcare JV transaction, net of cash conveyed | | 0 | | | (6) | |
| Deferred taxes from continuing operations | Deferred taxes from continuing operations | | (597) | | | 2,067 | | Deferred taxes from continuing operations | | 199 | | | 82 | |
| | Share-based compensation expense | Share-based compensation expense | | 492 | | | 448 | | Share-based compensation expense | | 172 | | | 57 | |
| Benefit plan contributions in excess of expense/income | Benefit plan contributions in excess of expense/income | | (1,643) | | | (429) | | Benefit plan contributions in excess of expense/income | | (373) | | | (276) | |
| Other adjustments, net | Other adjustments, net | | (156) | | | (622) | | Other adjustments, net | | (291) | | | 120 | |
| Other changes in assets and liabilities, net of acquisitions and divestitures | Other changes in assets and liabilities, net of acquisitions and divestitures | | (3,080) | | | (5,571) | | Other changes in assets and liabilities, net of acquisitions and divestitures | | (1,327) | | | (1,515) | |
| Net cash provided by operating activities from continuing operations | | Net cash provided by operating activities from continuing operations | | 4,530 | | | 2,155 | |
| Net cash provided by operating activities from discontinued operations | | Net cash provided by operating activities from discontinued operations | | 9 | | | 978 | |
| Net cash provided by operating activities | Net cash provided by operating activities | | 8,778 | | | 8,819 | | Net cash provided by operating activities | | 4,538 | | | 3,133 | |
| | Investing Activities | Investing Activities | | | | | Investing Activities | | | | |
| Purchases of property, plant and equipment | Purchases of property, plant and equipment | | (1,467) | | | (1,504) | | Purchases of property, plant and equipment | | (554) | | | (449) | |
| Purchases of short-term investments | Purchases of short-term investments | | (9,309) | | | (4,583) | | Purchases of short-term investments | | (6,054) | | | (2,551) | |
| Proceeds from redemptions/sales of short-term investments | Proceeds from redemptions/sales of short-term investments | | 8,397 | | | 7,766 | | Proceeds from redemptions/sales of short-term investments | | 5,465 | | | 3,257 | |
| Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less | Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less | | (10,741) | | | 8,307 | | Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less | | (996) | | | (416) | |
| Purchases of long-term investments | Purchases of long-term investments | | (284) | | | (134) | | Purchases of long-term investments | | (27) | | | (22) | |
| Proceeds from redemptions/sales of long-term investments | Proceeds from redemptions/sales of long-term investments | | 648 | | | 116 | | Proceeds from redemptions/sales of long-term investments | | 256 | | | 152 | |
| Acquisition of business, net of cash acquired | | 0 | | | (10,861) | | |
| | Acquisitions of intangible assets | | (38) | | | (364) | | |
Other investing activities, net(a) | | 194 | | | 145 | | |
| Net cash used in investing activities | | (12,601) | | | (1,112) | | |
| Other investing activities, net | | Other investing activities, net | | 163 | | | (24) | |
| Net cash provided by/(used in) investing activities from continuing operations | | Net cash provided by/(used in) investing activities from continuing operations | | (1,747) | | | (53) | |
| Net cash provided by/(used in) investing activities from discontinued operations | | Net cash provided by/(used in) investing activities from discontinued operations | | 0 | | | (19) | |
| Net cash provided by/(used in) investing activities | | Net cash provided by/(used in) investing activities | | (1,747) | | | (71) | |
| | Financing Activities | Financing Activities | | | | | Financing Activities | | | | |
| Proceeds from short-term borrowings | Proceeds from short-term borrowings | | 12,352 | | | 11,582 | | Proceeds from short-term borrowings | | 0 | | | 5,302 | |
| Principal payments on short-term borrowings | Principal payments on short-term borrowings | | (17,449) | | | (4,088) | | Principal payments on short-term borrowings | | 0 | | | (7,551) | |
| Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less | Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less | | 1,628 | | | 2,604 | | Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less | | (25) | | | 3,207 | |
| Proceeds from issuance of long-term debt | Proceeds from issuance of long-term debt | | 16,700 | | | 4,942 | | Proceeds from issuance of long-term debt | | 0 | | | 1,241 | |
| Principal payments on long-term debt | Principal payments on long-term debt | | (2,511) | | | (5,806) | | Principal payments on long-term debt | | 0 | | | (2,181) | |
| Purchases of common stock | | 0 | | | (8,865) | | |
| | Cash dividends paid | Cash dividends paid | | (6,328) | | | (6,051) | | Cash dividends paid | | (2,172) | | | (2,105) | |
| Proceeds from exercise of stock options | | 206 | | | 303 | | |
| Other financing activities, net | Other financing activities, net | | (460) | | | (667) | | Other financing activities, net | | (610) | | | (113) | |
| Net cash provided by/(used in) financing activities | | 4,138 | | | (6,045) | | |
| Net cash provided by/(used in) financing activities from continuing operations | | Net cash provided by/(used in) financing activities from continuing operations | | (2,807) | | | (2,200) | |
| | Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents | Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents | | (39) | | | (41) | | Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents | | 0 | | | (15) | |
| Net increase in cash and cash equivalents and restricted cash and cash equivalents | | 277 | | | 1,620 | | |
| Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents | | Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents | | (15) | | | 846 | |
| Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period | Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period | | 1,350 | | | 1,225 | | Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period | | 1,825 | | | 1,350 | |
| Cash and cash equivalents and restricted cash and cash equivalents, at end of period | Cash and cash equivalents and restricted cash and cash equivalents, at end of period | | $ | 1,627 | | | $ | 2,846 | | Cash and cash equivalents and restricted cash and cash equivalents, at end of period | | $ | 1,809 | | | $ | 2,196 | |
| Supplemental Cash Flow Information | | Supplemental Cash Flow Information | | | | |
| ‘- continued - | |
| See Notes to Condensed Consolidated Financial Statements. | |
| | | Cash paid (received) during the period for: | | Cash paid (received) during the period for: | | | | |
| Income taxes | | Income taxes | | $ | 394 | | | $ | 239 | |
| Interest paid | | Interest paid | | 445 | | | 472 | |
| Interest rate hedges | | Interest rate hedges | | 10 | | | (11) | |
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | | | | | | | | |
| Supplemental Cash Flow Information | | | | |
| Non-cash transactions: | | | | |
| | | | |
32% equity-method investment in GSK Consumer Healthcare JV in exchange for contributing Pfizer’s Consumer Healthcare business(a) | | $ | 0 | | | $ | 15,711 | |
| Cash paid (received) during the period for: | | | | |
| Income taxes | | 2,445 | | | 2,636 | |
| Interest paid | | 1,297 | | | 1,246 | |
| Interest rate hedges | | (45) | | | (78) | |
(a)The $8.2 billion Gain on completion of Consumer Healthcare JV transaction, net of cash conveyed for the nine months ended September 29, 2019 reflects the receipt of a 32% equity-method investment in the new company valued at $15.7 billion in exchange for net assets contributed of $7.6 billion and is presented in operating activities net of $146 million cash conveyed that is reflected in Other investing activities, net. See Note 2B.
See Notes to Condensed Consolidated Financial Statements.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation and Significant Accounting Policies
See the Glossary of Defined Terms at the beginning of this Quarterly Report on Form 10-Q for terms used throughout the condensed consolidated financial statements and related notes in this Quarterly Report on Form 10-Q.
A. Basis of Presentation
We prepared thethese condensed consolidated financial statements following the requirements of the SEC for interim reporting.in conformity with U.S. GAAP, consistent in all material respects with those applied in our 2020 Form 10-K, except as disclosed in Note 1C. As permitted under those rules,the SEC requirements for interim reporting, certain footnotes or other financial information that are normally required by U.S. GAAP can behave been condensed or omitted.
These financial statements include all normal and recurring adjustments that are considered necessary for the fair statement of results for the interim periods presented. The financial information included in our condensedthis Form 10-Q should be read in conjunction with the consolidated financial statements for subsidiaries operating outside the U.S. is as of and for the three and nine months ended August 23, 2020 and August 25, 2019. The financial informationaccompanying notes included in our condensed consolidated financial statements for U.S. subsidiaries is as of and for the three and nine months ended September 27, 2020 and September 29, 2019.
Form 10-K
Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.
We are responsiblePfizer’s fiscal quarter-end for subsidiaries operating outside the U.S. is as of and for the unaudited financial statements included in this Quarterly Report on Form 10-Q. The interim financial statements include all normalthree months ended February 28, 2021 and recurring adjustments that are considered necessaryFebruary 23, 2020, and for U.S. subsidiaries is as of and for the fair statement of results for the interim periods presented. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statementsthree months ended April 4, 2021 and accompanying notes included in our 2019 Financial Report.March 29, 2020.
At the beginning of our 2019 fiscal year, we began to manage our commercial operations through a new global structure consisting of 3 business segments––Biopharma, Upjohn and through July 31, 2019, Consumer Healthcare. Biopharma and Upjohn are the only reportable segments. See Note 14.
Beginning in 2020, Upjohn began managing our Meridian subsidiary, the manufacturer of EpiPen and other auto-injector products, and a pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan (Mylan-Japan). As a result, revenues and expenses associated with Meridian and Mylan-Japan are reported in our Upjohn business beginning in the first quarter of 2020. In 2019, revenues and expenses from Meridian and Mylan-Japan were recorded in our Biopharma business. We performed certain reclassifications between the Biopharma and Upjohn segments to conform 2019 segment revenues and expenses associated with Meridian and Mylan-Japan to the current presentation. There was no impact to our consolidated financial statements. See Note 14.
Acquisitions and other businessBusiness development activities completed in 2019 and in the first nine months of 2020, including the contribution of our Consumer Healthcare business to the GSK Consumer Healthcare joint venture, impacted financial results in the periods presented. See Notes to Consolidated Financial Statements—Note 1A. Basis of Presentation and Significant Accounting Policies: Basis of Presentation1A in our 2019 Financial Report,2020 Form 10-K, and Note 2.
Certain amounts On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan to form Viatris. For additional information, see Note 2B in our 2020 Form 10-K. On December 21, 2020, which falls in Pfizer’s international first quarter of 2021, Pfizer and Viatris completed the condensed consolidatedtermination of the Mylan-Japan collaboration pursuant to an agreement dated November 13, 2020 and we transferred related inventories and operations that were part of the Mylan-Japan collaboration to Viatris. As a result, the financial statementsposition and associated notes may not add dueresults of operations of the Upjohn Business and the Mylan-Japan collaboration are presented as discontinued operations for all periods presented. Prior-period information has been restated to rounding. All percentages have been calculated using unrounded amounts.reflect our current organization structure.
B. Adoption of New Accounting StandardsStandard Adopted in 20202021
On January 1, 2020,2021, we adopted 4 new accounting standards.
Credit Losses on Financial Instruments––We adopted a new accounting standard for credit losses on financial instruments, which replacesincome tax that eliminates certain exceptions to the probable initialguidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition thresholdof deferred tax liabilities for incurred loss estimates under prior guidance with a methodology that reflects expected credit loss estimates. The standard generally impacts financial assets that have a contractual right to receive cash and are not accounted for at fair value through net income, such as accounts receivable and held-to-maturity debt securities.outside basis differences. The new guidance requires usalso simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.
For information on new accounting standards adopted in 2020, see Note 1B in our 2020 Form 10-K.
C. Change in Accounting Principle
In the first quarter of 2021, we adopted a change in accounting principle to identify, analyze, documenta more preferable policy under U.S. GAAP to immediately recognize actuarial gains and support new methodologieslosses arising from the remeasurement of our pension and postretirement plans (“MTM Accounting”).Under the prior policy, we deferred recognition of these gains and losses in Accumulated other comprehensive loss. The accumulated actuarial gains/losses outside of a “corridor” were then amortized into net periodic benefit costs over the average remaining service period or the average life expectancy of participants. This change has been applied to all pension and postretirement plans on a retrospective basis for quantifying expected creditall prior periods presented, and as of January 1, 2020, resulted in a cumulative effect decrease to Retained earnings of $6.3 billion, with a corresponding offset to Accumulated other comprehensive loss estimates for certain financial instruments, using information such. Each time a pension or postretirement plan is remeasured, the actuarial gain or loss is recognized immediately and classified as historical experience,Other (income)/deductions––net.
We believe that MTM Accounting is a more preferable policy as it provides improved transparency of results and performance, better alignment with fair value accounting principles and a better reflection of current economic conditions and information,interest rate trends on plan investments and assumptions and the useactuarial impact of reasonable and supportable forecasted information. The standard also amends existing impairment guidance for available-for-sale debt securities to incorporate a credit loss allowance and allows for reversals of credit impairments in the event the issuer’s credit improves.
We adopted the new accounting standard utilizing the modified retrospective method and, therefore, no adjustments were made to amounts in our prior period financial statements. The cumulative effect of adopting the standard as an adjustment to theplan remeasurements.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
opening balance of Retained earnings was not material. The impact of adoption did not have a material impact on our condensed consolidated statements of income for the three and nine months ended September 27, 2020 or condensed consolidated statement of cash flows for the nine months ended September 27, 2020, nor on our condensed consolidated balance sheet as of September 27, 2020. See Note 1C. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| The impacts of the adjustments on our condensed consolidated financial statements are summarized as follows: |
| | Three Months Ended |
| | April 4, 2021 | | March 29, 2020 |
| (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | Previous Accounting Principle | | Impact of Change | | As Reported | | Previous Accounting Principle | | Impact of Change | | As Adjusted |
| Condensed Consolidated Statements of Income: | | | | | | | | | | | | |
| Other (income)/deductions––net | | $ | (857) | | | $ | (146) | | | $ | (1,004) | | | $ | 216 | | | $ | (25) | | | $ | 190 | |
| Income from continuing operations before provision for taxes on income | | 5,536 | | | 146 | | | 5,683 | | | 2,817 | | | 25 | | | 2,842 | |
| Provision for taxes on income | | 773 | | | 32 | | | 805 | | | 355 | | | 4 | | | 359 | |
| Income from discontinued operations––net of tax | | 9 | | | 0 | | | 9 | | | 948 | | | (68) | | | 881 | |
| Net income before allocation to noncontrolling interests | | 4,772 | | | 114 | | | 4,886 | | | 3,410 | | | (47) | | | 3,364 | |
| Net income attributable to Pfizer Inc. common shareholders | | 4,763 | | | 114 | | | 4,877 | | | 3,401 | | | (47) | | | 3,355 | |
| | | | | | |
Earnings per common share––basic: | | | | | | | | | | | | |
| Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 0.85 | | | $ | 0.02 | | | $ | 0.87 | | | $ | 0.44 | | | $ | 0 | | | $ | 0.45 | |
| Income from discontinued operations––net of tax | | 0 | | | 0 | | | 0 | | | 0.17 | | | (0.01) | | | 0.16 | |
| Net income attributable to Pfizer Inc. common shareholders | | 0.85 | | | 0.02 | | | 0.87 | | | 0.61 | | | (0.01) | | | 0.60 | |
Earnings per common share––diluted: | | | | | | | | | | | | |
| Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 0.84 | | | $ | 0.02 | | | $ | 0.86 | | | $ | 0.44 | | | $ | 0 | | | $ | 0.44 | |
| Income from discontinued operations––net of tax | | 0 | | | 0 | | | 0 | | | 0.17 | | | (0.01) | | | 0.16 | |
| Net income attributable to Pfizer Inc. common shareholders | | 0.84 | | | 0.02 | | | 0.86 | | | 0.61 | | | (0.01) | | | 0.60 | |
| | | | | | | | | | | | |
| Condensed Consolidated Statements of Comprehensive Income: | | | | | | | | | | | | |
| Foreign currency translation adjustments, net | | $ | 546 | | | $ | (81) | | | $ | 465 | | | $ | (1,272) | | | $ | 16 | | | $ | (1,256) | |
| Benefit plans: actuarial gains/(losses), net | | 47 | | | (47) | | | 0 | | | (166) | | | 166 | | | 0 | |
| Reclassification adjustments related to amortization | | 75 | | | (75) | | | 0 | | | 66 | | | (66) | | | 0 | |
| Reclassification adjustments related to settlements, net | | 19 | | | (19) | | | 0 | | | 53 | | | (53) | | | 0 | |
| Other | | (81) | | | 81 | | | 0 | | | 16 | | | (16) | | | 0 | |
| Tax provision/(benefit) on other comprehensive income/(loss) | | 72 | | | 12 | | | 84 | | | (377) | | | (3) | | | (380) | |
| | | | | | |
| Condensed Consolidated Statements of Cash Flows: | | | | | | | | | | | | |
| Deferred taxes from continuing operations | | $ | 167 | | | $ | 32 | | | $ | 199 | | | $ | 77 | | | $ | 4 | | | $ | 82 | |
| Benefit plan contributions in excess of expense/income | | (226) | | | (146) | | | (373) | | | (250) | | | (25) | | | (276) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | April 4, 2021 | | December 31, 2020 |
| (MILLIONS) | | Previous Accounting Principle | | Impact of Change | | As Reported | | Previous Accounting Principle | | Impact of Change | | As Adjusted |
| Condensed Consolidated Balance Sheets: | | | | | | | | | | | | |
| Noncurrent deferred tax assets and other noncurrent tax assets | | $ | 2,569 | | | $ | (32) | | | $ | 2,537 | | | $ | 2,383 | | | $ | 0 | | | $ | 2,383 | |
| Other noncurrent assets | | 4,738 | | | 6 | | | 4,744 | | | 4,569 | | | 0 | | | 4,569 | |
| Pension benefit obligations | | 4,527 | | | 0 | | | 4,526 | | | 4,766 | | | 0 | | | 4,766 | |
| Retained earnings | | 95,044 | | | 114 | | | 95,158 | | | 96,770 | | | (6,378) | | | 90,392 | |
| Accumulated other comprehensive loss | | (4,523) | | | (141) | | | (4,664) | | | (11,688) | | | 6,378 | | | (5,310) | |
| | | | | | | | | | | | |
Goodwill Impairment Testing––We prospectively adopted the new standard, which 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. There was no impact to our condensed consolidated financial statements from the adoption of this new standard.
Implementation Costs in a Cloud Computing Arrangement––We prospectively adopted the new standard related to customers’ accounting for implementation costs incurred in a cloud computing arrangement that is considered a service contract. The new guidance aligns the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.
Collaboration Agreements––We prospectively adopted the new standard, which provides new guidance clarifying the interaction between the accounting for collaborative arrangements and revenue from contracts with customers. There was no impact to our condensed consolidated financial statements from the adoption of this new standard.
On January 1, 2019, we adopted 4 new accounting standards. For additional information, see Notes to Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2019 included in our 2019 Financial Report.
C.D. Revenues and Trade Accounts Receivable
Customers––Our prescription pharmaceutical products are sold principally to wholesalers, but we also sell directly to retailers, hospitals, clinics, government agencies and pharmacies. In the U.S., we primarily sell our vaccines products directly to the federal government, CDC, wholesalers, individual provider offices, retail pharmacies and integrated delivery networks. Outside the U.S., we primarily sell our vaccines to government and non-government institutions.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Deductions from Revenues––Our accruals for Medicare, rebates, Medicaid and related state program rebates,and performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts are as follows:
| | (MILLIONS OF DOLLARS) | | September 27, 2020 | | December 31, 2019 | |
| (MILLIONS) | | (MILLIONS) | | April 4,
2021 | | December 31, 2020 |
Reserve against Trade accounts receivable, less allowance for doubtful accounts | Reserve against Trade accounts receivable, less allowance for doubtful accounts | | $ | 1,126 | | | $ | 1,257 | | Reserve against Trade accounts receivable, less allowance for doubtful accounts | | $ | 848 | | | $ | 861 | |
Other current liabilities: | Other current liabilities: | | Other current liabilities: | |
| Accrued rebates | Accrued rebates | | 3,270 | | | 3,285 | | Accrued rebates | | 3,211 | | | 3,017 | |
| Other accruals | Other accruals | | 573 | | | 581 | | Other accruals | | 449 | | | 436 | |
| Other noncurrent liabilities | Other noncurrent liabilities | | 622 | | | 565 | | Other noncurrent liabilities | | 340 | | | 399 | |
| Total accrued rebates and other accruals | | $ | 5,591 | | | $ | 5,689 | | |
| Total accrued rebates and other sales-related accruals | | Total accrued rebates and other sales-related accruals | | $ | 4,848 | | | $ | 4,712 | |
Trade Accounts Receivable––Trade accounts receivable are stated at their net realizable value. The allowance for credit losses against gross trade accounts receivable reflects theour best estimate of expected credit losses of the receivables portfolio determined on the basis of historical experience, current information, and forecasts of future economic conditions. In developing the estimate for expected credit losses, trade accounts receivables are segmented into pools of assets depending on market (U.S. versus international), delinquency status, and customer type (high risk versus low risk and government versus non-government), and fixed reserve percentages are established for each pool of trade accounts receivables.
In determining the reserve percentages for each pool of trade accounts receivables, we considered our historical experience with certain customers and customer types, regulatory and legal environments, country and political risk, and other relevant current and future forecasted macroeconomic factors. These credit risk indicators are monitored on a quarterly basis to determine whether there have been any changes in the economic environment that would indicate the established reserve percentages should be adjusted, and are considered on a regional basis to reflect more geographic-specific metrics. Additionally, write-offs and recoveries of customer receivables are tracked against collections on a quarterly basis to determine whether the reserve percentages remain appropriate. When management becomes aware of certain customer-specific factors that impact credit risk, specific allowances for these known troubled accounts are recorded. Trade accounts receivable are written off after all reasonable means to collect the full amount (including litigation, where appropriate) have been exhausted.
During the three and nine months ended September 27,April 4, 2021 and March 29, 2020, additions to the allowance for credit losses, write-offs and recoveries of customer receivables were not material to our condensed consolidated financial statements. For additional information on our trade accounts receivable, see Note 1G in our 2020 Form 10-K.
Note 2. Discontinued Operations and Equity-Method Investment
A. Discontinued Operations
Upjohn Separation and Combination with Mylan
On November 16, 2020, we completed the spin-off and the combination of the Upjohn Business with Mylan to form Viatris. See Note 1A.
In connection with this transaction, Pfizer and Viatris entered into various agreements to effect the separation and combination to provide a framework for our relationship after the combination, including a separation and distribution agreement, interim operating models, including agency arrangements, manufacturing and supply agreements (MSAs), transition service agreements (TSAs), a tax matters agreement, and an employee matters agreement, among others. The interim agency operating model arrangements primarily include billings, collections and remittance of rebates that we are performing on a transitional basis on behalf of Viatris. Under the MSAs, Pfizer or Viatris, as the case may be, manufactures, labels and packages products for the other party. In the first three months of 2021, the amounts recorded under the above agreements were not material to our consolidated results of operations. Net amounts due from Viatris under the above agreements were approximately $871 million as of April 4, 2021 and $401 million as of December 31, 2020. The cash flows associated with the above agreements are included in Net cash provided by operating activities from continuing operations, except fora $277 million payment to Viatris made in the first quarter of 2021 pursuant to terms of the separation agreement, which is reported in Other financing activities, net, and was recorded as a payable to Viatris in Other current liabilities as of December 31, 2020. In addition, Pfizer and Mylan had pre-existing arms-length commercial agreements, which are continuing with Viatris and are not material to Pfizer’s consolidated financial statements.
The operating results of the Upjohn Business and the Mylan-Japan collaboration are reported as Income from discontinued operations––net of tax.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2. Acquisition, Equity-Method Investment and Licensing Arrangements
A. Acquisition
Array | | | | | | | | | | | | | | |
Components of Income from discontinued operations––net of tax: |
| | Three Months Ended(a) |
| (MILLIONS) | | April 4,
2021 | | March 29,
2020 |
| Revenues | | $ | 27 | | | $ | 1,946 | |
| Costs and expenses: | | | | |
| Cost of sales | | 14 | | | 442 | |
| Selling, informational and administrative expenses | | (8) | | | 332 | |
| Research and development expenses | | 1 | | | 51 | |
| Amortization of intangible assets | | 0 | | | 36 | |
| Restructuring charges and certain acquisition-related costs | | 0 | | | 15 | |
| Other (income)/deductions––net | | 1 | | | 70 | |
| Pre-tax income from discontinued operations | | 19 | | | 1,000 | |
| Provision for taxes on income | | 10 | | | 119 | |
| | | | |
| | | | |
| | | | |
| | | | |
| Income from discontinued operations––net of tax | | $ | 9 | | | $ | 881 | |
On July 30, 2019, we acquired Array, a commercial stage biopharmaceutical company focused on(a)In the discovery, development and commercialization of targeted small molecule medicines to treat cancer and other diseases of high unmet need, for $48 per share in cash. The total fair value of the consideration transferred was $11.2 billion ($10.9 billion, three months ended April 4, 2021, Income from discontinued operations—net of cash acquired). Array’s portfolio includes Braftovi (encorafenib) and Mektovi (binimetinib), a broad pipeline of targeted cancer medicines in different stages of R&D, as well as a portfolio of outlicensed medicines, which may generate milestones and royalties over time. The final allocation of the consideration transferredtax primarily relates to the assets acquiredMylan-Japan collaboration, which did not terminate until December 21, 2020 and which falls in Pfizer’s international first quarter of 2021, and adjustments to tax and legal matters directly related to the disposed Upjohn Business. In the three months ended March 29, 2020, Income from discontinued operations—net of tax relates to the Upjohn Business and the liabilities assumed has now been completed. In connection with this acquisition, we recorded: (i) $6.3 billionMylan-Japan collaboration and includes the change in Identifiable intangible assets, consisting of $2.0 billion of Developed technology rights with a useful life of 16 years, $2.8 billion of IPR&D and $1.5 billion for Licensing agreements ($1.2 billion for technology in development––indefinite-lived licensing agreements and $360 million for developed technology––finite-lived licensing agreements with a useful life of 10 years), (ii) $6.1 billion of Goodwill, (iii) $1.1 billion of net deferred tax liabilities and (iv) $451 million of assumed long-term debt, which was paid in fullaccounting principle in the thirdfirst quarter of 2019.
In 2020, we recorded measurement period adjustments2021 to the estimated fair values initially recorded in 2019,MTM Accounting, which resulted inhas been applied on a reduction inretrospective basis for all prior periods presented. See Identifiable intangible assetsNote 1C of approximately $900 million with a corresponding change to Goodwill and net deferred tax liabilities. The measurement period adjustments were recorded to better reflect market participant assumptions about facts and circumstances existing as of the acquisition date and did not have a material impact on our condensed consolidated statement of income for the three and nine months ended September 27, 2020..
B. Equity-Method Investment
Formation of GSK Consumer Healthcare Joint VentureJV
On July 31, 2019, we completed thea transaction in which we and GSK combined our respective consumer healthcare businesses into a new consumer healthcare joint ventureJV that operates globally under the GSK Consumer Healthcare name. In exchange, for contributing our Consumer Healthcare business to the joint venture, we received a 32% equity stake in the new company and GSK owns the remaining 68%. Upon the closing of the transaction, we deconsolidated our Consumer Healthcare business and recognized a pre-tax gain of $8.1 billion ($5.4 billion, net of tax) in our fiscal third quarter of 2019 in (Gain) on completion of Consumer Healthcare JV transaction for the difference in the fair value of our 32% equity stake in the new company and the carrying value of our Consumer Healthcare business. We may record additional adjustments to the gain in future periods, which we do not expect to have a material impact on our consolidated financial statements. Our financial results, and our Consumer Healthcare segment’s operating results, for the third quarter of 2019 reflect one month of Consumer Healthcare segment domestic operations and two months of Consumer Healthcare segment international operations. Likewise, our financial results, and our Consumer Healthcare segment’s operating results, for the first nine months of 2019 reflect seven months of Consumer Healthcare segment domestic operations and eight months of Consumer Healthcare segment international operations. The financial results for the third quarter and first nine months of 2020 do not reflect any contribution from the Consumer Healthcare business.
We are accounting for our interest in GSKthe Consumer Healthcare JV as an equity-method investment. The carrying value of our investment in GSKthe Consumer Healthcare JV is approximately $15.8$16.3 billion as of September 27, 2020April 4, 2021 and $17.0$16.7 billion as of December 31, 20192020 and is reported as a private equity investment in the Equity-method investments line in our condensed consolidated balance sheet. GSKas of April 4, 2021 and December 31, 2020. The Consumer Healthcare JV is a foreign investee whose reporting currency is the U.K. pound, and therefore we translate its financial statements into U.S. dollars and recognize the impact of foreign currency translation adjustments in the carrying value of our investment and in Otherother comprehensive income.income. The decrease in the value of our investment from December 31, 2019 to September 27, 2020 is primarily due to approximately $617$126 million in pre-tax foreign currency translation adjustments (see Note 6), as well as dividends totaling approximately $825$274 million, which were received from the GSK Consumer Healthcare joint venture in June and September 2020, partially offset by our share of the joint venture’s earnings during that period of $306 million.JV’s earnings. We record our share of earnings from the GSK Consumer Healthcare joint ventureJV on a quarterly basis on a one-quarter lag in Other (income)/deductions––net commencing from August 1, 2019. Therefore, we recorded our share of the joint venture’s earnings generated in the second quarter of 2020, which totaled approximately $166 million, in our operating results in the third quarter of 2020.. Our total share of the joint venture’sJV’s earnings generated in the fourth quarter of 2019 and the first six months of 2020, which we recorded in our operating results forin the first nine monthsquarter of 2021, was $71 million. Our total share of the JV’s earnings generated in the fourth quarter of 2019, which we recorded in our operating results in the first quarter of 2020 was approximately $306$11 million. See Note 4. AsThe total amortization and adjustment of the July 31, 2019 closing date, we estimated that the fair value of our investment in GSK Consumer Healthcare was approximately $15.7 billion and that 32% of the underlying equity in the carrying value of the net assets of GSK Consumer Healthcare was approximately $11.2 billion,
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
resulting in an initial basis difference of approximately $4.5 billion. In the fourth quarter of 2019, we preliminarily completed the allocation of the basis difference, which resulteddifferences resulting from the excess of the initial fair value of our investment over the underlying equity in the carrying value of the net assets of the joint venture, primarily to inventory, definite-lived intangible assets, indefinite-lived intangible assets, related deferred tax liabilities and equity method goodwill within the investment account. During the fourth quarter of 2019, GSK Consumer Healthcare revised the initial carrying value of the net assets of the joint venture and our 32% share of the underlying equity in the carrying value of the net assets of GSK Consumer Healthcare was reduced to approximately $11.0 billion and our initial basis difference was increased to approximately $4.8 billion. The adjustment was allocated to equity method goodwill within the investment account. We began recording the amortization of basis differences allocated to inventory, definite-lived intangible assets and related deferred tax liabilities in Other (income)/deductions—net commencing August 1, 2019. During the third quarter of 2020, we recognized a write-off of a portion of our basis differences allocated to indefinite-lived and definite-lived intangible assets and related deferred tax liabilities associated with the divestiture of certain brands by GSK Consumer Healthcare during its second quarter of 2020. The amortization and write-off of these basis differences for the second quarter of 2020 totaling approximately $62 million of expenseJV is included in our operating results in Other (income)/deductions––net inthe third quarterand was not material to our results of 2020. The total amortization and write-off of these basis differences for the fourth quarter of 2019 and the first six months of 2020, which was included in our operating results in Other (income)/deductions—netoperations in the first nine months of 2020, was approximately $110 million of expense.periods presented. See Note 4.Amortization of basis differences on inventory and related deferred tax liabilities was completely recognized by the second quarter of 2020. Basis differences on definite-lived intangible assets and related deferred tax liabilities are being amortized over the lives of the underlying assets, which range from 8 to 20 years.
As a part of Pfizer, pre-tax income on a management business unit basis for the Consumer Healthcare business was $100 million for the third quarter of 2019 and $654 million for the nine months ended September 29, 2019.
| | | | | | | | |
Summarized financial information for our equity method investee, GSK Consumer Healthcare, as of and for the three and nine months ending June 30, 2020, the most recent period available, is as follows: |
(MILLIONS OF DOLLARS) | | June 30,
2020 |
Current assets | | $ | 7,136 | |
Noncurrent assets | | 37,108 | |
Total assets | | $ | 44,244 | |
| | |
Current liabilities | | $ | 4,992 | |
Noncurrent liabilities | | 5,195 | |
Total liabilities | | $ | 10,187 | |
| | |
Equity attributable to shareholders | | $ | 33,919 | |
Equity attributable to noncontrolling interests | | 138 | |
Total net equity | | $ | 34,057 | |
| | | | | | | | | | | | | | |
| | |
| (MILLIONS OF DOLLARS) | | Three Months Ended June 30, 2020 | | Nine Months Ended
June 30, 2020 |
| Net sales | | $ | 2,927 | | | $ | 9,618 | |
| Cost of sales | | (1,061) | | | (4,266) | |
| Gross profit | | $ | 1,866 | | | $ | 5,352 | |
| Income from continuing operations | | 524 | | | 995 | |
| Net income | | 524 | | | 995 | |
| Income attributable to shareholders | | 518 | | | 959 | |
C. Licensing Arrangements
Agreement with Valneva SE
On April 30, 2020, we signed an agreement to co-develop and commercialize Valneva’s Lyme disease vaccine candidate VLA15. VLA15 is the only active Lyme disease vaccine program in clinical development today, and covers six serotypes that are prevalent in North America and Europe. Valneva and Pfizer will work closely together throughout the development of VLA15. Valneva is eligible to receive a total of $308 million in cash payments consisting of a $130 million upfront payment, which was paid and recorded in Research and development expenses in our fiscal second quarter of 2020, as well as $35 million in development milestones and $143 million in early commercialization milestones. Under the terms of the agreement, Valneva will fund 30% of all development costs through completion of the development program, and in return we will pay Valneva tiered royalties. We will lead late-stage development and have sole control over commercialization. | | | | | | | | | | | | | | | | |
| | | | |
| Summarized financial information for our equity method investee, the Consumer Healthcare JV, for the three months ending December 31, 2020, the most recent period available and for the three months ending December 31, 2019, is as follows: | | |
| | Three Months Ended | | |
| (MILLIONS) | | December 31, 2020 | | December 31, 2019 | | |
| Net sales | | $ | 3,096 | | | $ | 3,188 | | | |
| Cost of sales | | (1,188) | | | (1,811) | | | |
| Gross profit | | $ | 1,908 | | | $ | 1,377 | | | |
| Income from continuing operations | | 233 | | | 46 | | | |
| Net income | | 233 | | | 46 | | | |
| Income attributable to shareholders | | 221 | | | 37 | | | |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Agreement with BioNTech
On April 9, 2020, we signed a global agreement with BioNTech to co-develop a potential first-in-class, mRNA-based coronavirus vaccine program, BNT162, aimed at preventing COVID-19 infection. The collaboration aims to rapidly advance multiple COVID-19 vaccine candidates into human clinical testing based on BioNTech’s proprietary mRNA vaccine platforms, with the objective of ensuring rapid worldwide access to the vaccine, if approved. The collaboration leverages our broad expertise in vaccine R&D, regulatory capabilities, and global manufacturing and distribution network. In connection with the agreement, we paid BioNTech an upfront cash payment of $72 million, which was recorded in Research and development expenses in our fiscal second quarter of 2020, and we made an equity investment of $113 million in common stock of BioNTech. BioNTech is eligible to receive potential future milestone payments of up to $563 million for a total consideration of $748 million. While Pfizer and BioNTech will share development costs equally if the vaccine is approved and successfully commercialized, Pfizer will be responsible for all of the development costs until commercialization of the vaccine. Thereafter, BioNTech would repay Pfizer its 50 percent share of these development costs through reductions in gross profit sharing and milestone payments to BioNTech over time. BioNTech and Pfizer will also work jointly to commercialize the vaccine worldwide (excluding China, Hong Kong, Macau and Taiwan, which are subject to a separate collaboration between BioNTech and Shanghai Fosun Pharmaceutical (Group) Co., Ltd) if development is successful and regulatory approval is obtained. We made an additional investment of $50 million in common stock of BioNTech as part of an underwritten equity offering by BioNTech, which closed in July 2020.
Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
We incur significant costs in connection with acquiring, integrating and restructuring businesses and in connection with our global cost-reduction/productivity initiatives. For example:
•In connection with acquisition activity, we typically incur costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and
•In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems.
All of our businesses and functions may be impacted by these actions, including sales and marketing, manufacturing and R&D, as well as our corporate enabling functions (such as digital, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement).
A. Transforming to a More Focused Company Program
With the formation of the GSK Consumer Healthcare joint ventureJV in 2019 and the anticipated combinationspin-off of our Upjohn our global, primarily off-patent branded and generics business, with Mylan,Business in the fourth quarter of 2020, Pfizer is transforminghas transformed into a more focused, global leader in science-based innovative medicines. Accordingly, in the fourth quarter of 2019, we began to identifymedicines and undertakevaccines. We have undertaken efforts to ensure our cost base aligns appropriately with our Biopharmaceutical revenue base as a result of both the completed GSK Consumer Healthcare and expected Upjohn transactions.base. While certain direct costs have transferred or will transfer to the GSK Consumer Healthcare joint ventureJV and to the Upjohn entities,Business in connection with the spin-off, there are indirect costs which aredid not expected to transfer. In addition, we are taking steps to restructure our organizationscorporate enabling functions to appropriately support and drive the purpose of the three core functions of our focused innovative medicines business:business and R&D Manufacturing and Commercial.
We expect corporate enabling functionPGS platform functions. The program costs associated with this multi-year programdiscussed below are expected to be incurred primarily from 2020 through 2022, and may be rounded and represent approximations.
We expect costs for this program, primarily related to corporate enabling functions, to total approximately $1.2$1.6 billion on a pre-tax basis, with substantially all costs to be cash expenditures. Actions maywill include, among others, changes in location of certain activities, expanded use and co-location of centers of excellence and shared services, and increased use of digital technologies. The associated actions and the specific costs will primarily include severance and benefit plan impacts, exit costs as well as associated implementation costs.
Also, as part of this program, we expect to incur costs related to manufacturing network optimization, including certain legacy cost-reduction initiatives, of approximately $500 million, with approximately 20% of the costs to be non-cash. The costs associated withfor this effort are expected to be incurred primarily from 2020 through 2022, and will include, among other things, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
From the start of this program in the fourth quarter of 2019 through September 27, 2020, we incurred approximately $600 million associated with this program.
Current-Period Key Activities
For the first nine months of 2020,April 4, 2021, we incurred costs of $621 million composed primarily of the Transforming to a More Focused Company program. For the first nine months of 2019, we incurred costs of $452 million composed of $300 million associated with the 2017-2019 and Organizing for Growth initiatives, $272 million associated with the integration of Array, and $74 million associated with the integration of Hospira, partially offset by income of $194 million, primarily due to the reversal of certain accruals upon the effective favorable settlement of an IRS audit for multiple tax years and other acquisition-related initiatives.$1.0 billion.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits: |
| | | Three Months Ended | | Nine Months Ended |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | September 27,
2020 | | September 29,
2019 |
| Restructuring charges/(credits): | | | | | | | | |
| Employee terminations | | $ | (15) | | | $ | 82 | | | $ | 357 | | | $ | (86) | |
| Asset impairments | | 22 | | | 3 | | | 45 | | | 3 | |
| Exit costs/(credits) | | (11) | | | (1) | | | (9) | | | 33 | |
Restructuring charges/(credits)(a) | | (4) | | | 83 | | | 392 | | | (50) | |
Transaction costs(b) | | 0 | | | 65 | | | 14 | | | 65 | |
Integration costs and other(c) | | 7 | | | 217 | | | 29 | | | 281 | |
| Restructuring charges and certain acquisition-related costs | | 4 | | | 365 | | | 435 | | | 295 | |
Net periodic benefit costs recorded in Other (income)/deductions––net | | 0 | | | 9 | | | 29 | | | 19 | |
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(d): | | | | | | | | |
| Cost of sales | | 4 | | | 6 | | | 14 | | | 21 | |
| Selling, informational and administrative expenses | | 0 | | | 0 | | | 0 | | | 2 | |
| Research and development expenses | | 0 | | | 0 | | | (3) | | | 6 | |
| Total additional depreciation––asset restructuring | | 4 | | | 6 | | | 10 | | | 29 | |
Implementation costs recorded in our condensed consolidated statements of income as follows(e): | | | | | | | | |
| Cost of sales | | 11 | | | 14 | | | 32 | | | 45 | |
| Selling, informational and administrative expenses | | 36 | | | 23 | | | 114 | | | 48 | |
| Research and development expenses | | 1 | | | 3 | | | 2 | | | 16 | |
| | | | | | | | |
| Total implementation costs | | 48 | | | 40 | | | 148 | | | 109 | |
| Total costs associated with acquisitions and cost-reduction/productivity initiatives | | $ | 56 | | | $ | 420 | | | $ | 621 | | | $ | 452 | |
| | | | | | | | | | | | | | | | | | |
| The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits, which are composed primarily of the Transforming to a More Focused Company program: |
| | Three Months Ended | | |
| (MILLIONS) | | April 4,
2021 | | March 29,
2020 | | | | |
| Restructuring charges/(credits): | | | | | | | | |
| Employee terminations | | $ | 22 | | | $ | 10 | | | | | |
| Asset impairments | | (4) | | | 31 | | | | | |
| | | | | | | | |
Restructuring charges/(credits)(a) | | 18 | | | 41 | | | | | |
Transaction costs(b) | | 0 | | | 3 | | | | | |
Integration costs and other(c) | | 5 | | | 10 | | | | | |
| Restructuring charges and certain acquisition-related costs | | 23 | | | 54 | | | | | |
Net periodic benefit costs recorded in Other (income)/deductions––net(d) | | 8 | | | 1 | | | | | |
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(e): | | | | | | | | |
| Cost of sales | | 10 | | | 5 | | | | | |
| | | | | | | | |
| Research and development expenses | | 0 | | | (5) | | | | | |
| Total additional depreciation––asset restructuring | | 10 | | | 0 | | | | | |
Implementation costs recorded in our condensed consolidated statements of income as follows(f): | | | | | | | | |
| Cost of sales | | 11 | | | 8 | | | | | |
| Selling, informational and administrative expenses | | 64 | | | 15 | | | | | |
| | | | | | | | |
| | | | | | | | |
| Total implementation costs | | 75 | | | 22 | | | | | |
| Total costs associated with acquisitions and cost-reduction/productivity initiatives | | $ | 116 | | | $ | 77 | | | | | |
(a)In the first nine months of 2020, restructuring charges mainly represent employee terminationRepresents acquisition-related costs associated with our Transforming to a More Focused Company cost-reduction program. In the third quarter of 2019, restructuring charges mainly represented employee termination costs associated with cost-reduction and productivity initiatives as well as our acquisition of Array. In the first nine months of 2019, restructuring credits mostly represented the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of an IRS audit for multiple tax years, partially offset by employee termination costs associated with cost-reduction and productivity initiatives, as well as our acquisition of Array. See Notes to Consolidated Financial Statements––Note 5D. Tax Matters: Tax Contingencies in our 2019 Financial Report.
The restructuring activities for 2020 are associated with the following:
•For the third quarter of 2020, Biopharma ($6 million charge); Upjohncredit in 2021) and cost-reduction/productivity initiatives ($325 million credit);charge in 2021 and Other ($7a $40 million credit)charge in 2020).
•For the first nine months of 2020, Biopharma ($3 million credit); Upjohn ($10 million charge); and Other ($386 million charge).
The restructuring activities for 2019 are associated with the following:
•For the third quarter of 2019, Biopharma ($10 million charge); Upjohn ($6 million credit); and Other ($79 million charge).
•For the first nine months of 2019, Biopharma ($38 million credit); Upjohn ($27 million credit); and Other ($15 million charge). Restructuring costs identified as Other are for restructuring activities associated with corporate enabling functions, WRDM, GPD and other manufacturing and commercial operations, as applicable. For the first nine months of 2020, restructuring costs identified as Other primarily relate to corporate enabling functions.
(b)Transaction costs representRepresents external costs for banking, legal, accounting and other similar services.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(c)Integration costs and other representRepresents external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs. In the third quarter and first nine months of 2020, integration costs and other were mostly related to our acquisition of Array. In the third quarter and first nine months of 2019, integration costs and other primarily included $157 million in payments to Array employees for the fair value of previously unvested stock options that was recognized as post-closing compensation expense. See Notes to Consolidated Financial Statements––Note 2A. Acquisitions, Divestitures, Equity-Method Investments and Assets and Liabilities Held for Sale, Licensing Arrangements and Research and Development and Collaborative Arrangements: Acquisitions in our 2019 Financial Report.
(d)Additional depreciation––asset restructuring representsAmount for the three months ended March 29, 2020 includes the impact of a change in accounting principle. See Note 1C.
(e)Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.
(e)(f)Implementation costs representRepresents external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes the components and changes in restructuring accruals: |
| (MILLIONS OF DOLLARS) | | Employee
Termination
Costs | | Asset
Impairment
Charges | | Exit Costs | | Accrual |
Balance, December 31, 2019(a) | | $ | 887 | | | $ | 0 | | | $ | 46 | | | $ | 933 | |
| Provision | | 357 | | | 45 | | | (9) | | | 392 | |
Utilization and other(b) | | (411) | | | (45) | | | (23) | | | (479) | |
Balance, September 27, 2020(c) | | $ | 832 | | | $ | 0 | | | $ | 14 | | | $ | 847 | |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes the components and changes in restructuring accruals: |
| (MILLIONS) | | Employee
Termination
Costs | | Asset
Impairment
Charges | | Exit Costs | | Accrual |
Balance, December 31, 2020(a) | | $ | 782 | | | $ | 0 | | | $ | 15 | | | $ | 798 | |
| Provision | | 22 | | | (4) | | | 0 | | | 18 | |
Utilization and other(b) | | (102) | | | 4 | | | 0 | | | (99) | |
Balance, April 4, 2021(c) | | $ | 702 | | | $ | 0 | | | $ | 15 | | | $ | 717 | |
(a)Included in Other current liabilities ($714628 million) and Other noncurrent liabilities ($219169 million).
(b)Includes adjustments for foreign currency translation.
(c)Included in Other current liabilities ($607561 million) and Other noncurrent liabilities ($240156 million).
Note 4. Other (Income)/Deductions—Net
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Components of Other (income)/deductions––net include: |
| | | Three Months Ended | | Nine Months Ended |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | September 27,
2020 | | September 29,
2019 |
Interest income(a) | | $ | (17) | | | $ | (60) | | | $ | (70) | | | $ | (185) | |
Interest expense(a) | | 416 | | | 409 | | | 1,178 | | | 1,158 | |
| Net interest expense | | 399 | | | 348 | | | 1,108 | | | 973 | |
| Royalty-related income | | (214) | | | (155) | | | (525) | | | (475) | |
| Net gains on asset disposals | | (2) | | | (32) | | | 0 | | | (33) | |
Net (gains)/losses recognized during the period on equity securities(b) | | 70 | | | (6) | | | (408) | | | (153) | |
| | | | | | | | |
Income from collaborations, out-licensing arrangements and sales of compound/product rights(c) | | (30) | | | (20) | | | (245) | | | (124) | |
Net periodic benefit costs/(credits) other than service costs(d) | | 54 | | | (19) | | | (122) | | | (110) | |
| Certain legal matters, net | | 38 | | | 64 | | | 64 | | | 84 | |
Certain asset impairments(e) | | 900 | | | 28 | | | 900 | | | 188 | |
Business and legal entity alignment costs(f) | | 0 | | | 87 | | | 0 | | | 343 | |
| Net losses on early retirement of debt | | 0 | | | 0 | | | 0 | | | 138 | |
GSK Consumer Healthcare JV equity method (income)/loss(g) | | (103) | | | 0 | | | (196) | | | 0 | |
Other, net(h) | | 38 | | | 24 | | | (69) | | | (294) | |
| Other (income)/deductions––net | | $ | 1,148 | | | $ | 319 | | | $ | 507 | | | $ | 537 | |
| | | | | | | | | | | | | | | | | | |
Components of Other (income)/deductions––net include: |
| | | | | Three Months Ended |
| (MILLIONS) | | | | | | April 4,
2021 | | March 29,
2020 |
| Interest income | | | | | | $ | 0 | | | $ | (34) | |
| Interest expense | | | | | | 336 | | | 390 | |
| Net interest expense | | | | | | 336 | | | 356 | |
| Royalty-related income | | | | | | (176) | | | (119) | |
| Net (gains)/losses on asset disposals | | | | | | (39) | | | 1 | |
Net (gains)/losses recognized during the period on equity securities(a) | | | | | | (401) | | | 255 | |
Income from collaborations, out-licensing arrangements and sales of compound/product rights(b) | | | | | | (231) | | | (115) | |
Net periodic benefit costs/(credits) other than service costs(c) | | | | | | (266) | | | (103) | |
| Certain legal matters, net | | | | | | 51 | | | 9 | |
| | | | | | | | |
| | | | | | | | |
Consumer Healthcare JV equity method (income)/loss(d) | | | | | | (62) | | | 33 | |
| Other, net | | | | | | (216) | | | (126) | |
| Other (income)/deductions––net | | | | | | $ | (1,004) | | | $ | 190 | |
(a)Interest income decreasedThe gains in the thirdfirst quarter and first nine months of 2020, primarily driven by a lower investment balance and lower short-term rates. Interest expense remained relatively flat in the third quarter and first nine months2021 include, among other things, unrealized gains of 2020, mainly as a result of the issuance of new debt$409 million related to the planned combination of Mylaninvestments in Allogene and Upjohn, offset by lower rates on commercial paper. See Note 7D.
(b)BioNTech. The losses in the thirdfirst quarter of 2020 include, among other things, unrealized losses of $131$134 million related to our investment in Allogene.
(b)The gains in the first nine monthsquarter of 2020 include,2021 includes, among other things, unrealized gains$188 million of $243 millionnet collaboration income from BioNTech related to our investment in Allogene and unrealized gains of $154 million related to our investment in BioNTech. The gains in the first nine months of 2019 included, among other things, unrealized gains of $115 million related to our investments in Cortexyme, Inc. and SpringWorks Therapeutics, Inc. For additional information on investments, see Note 7B.
(c)Includes income from upfront and milestone payments from our collaboration partners and income from out-licensing arrangements and sales of compound/product rights.COVID-19 vaccine. The first nine monthsquarter of 2020 mainly includes, among other things, (i) an upfront payment to us of $75 million from our sale of our CK1 assets to Biogen, Inc., (ii) $40 million
(c)Amounts include the impact of milestone income from Puma Biotechnology, Inc. related to Neratinib regulatory approvalsa change in the EU accounting principle. See Notes 1C and (iii) $30 million of milestone income from Lilly related to the first commercial sale in the U.S. of LOXO-292 for the treatment of RET fusion-positive NSCLC. The first nine months of 2019 primarily included, among other things, $70 million in milestone income from Mylan Pharmaceuticals Inc. related to the FDA’s approval and launch of Wixela Inhub®, a generic of Advair Diskus®10.
(d)See Note 10.
(e)The third quarter and first nine months of 2020 include intangible asset impairment charges of $900 million related to Biopharma IPR&D assets for unapproved indications of certain cancer medicines, acquired in connection with our Array acquisition, and reflect, among other things, updated commercial forecasts. The first nine months of 2019 included intangible asset impairment charges of: (i) $90 million related to WRDM IPR&D, for a pre-clinical stage asset from our acquisition of Bamboo for gene therapies for the potential treatment of patients with certain rare diseases, which was the result of a
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
determination to not use certain Bamboo IPR&D acquired in future rare disease development, (ii) $40 million related to an Upjohn finite-lived developed technology right, acquired in connection with our acquisition of King, for government defense products and reflected, among other things, updated commercial forecasts including manufacturing cost assumptions, and (iii) $10 million related to a Biopharma finite-lived developed technology right, acquired in connection with our acquisition of Anacor, for the treatment for toenail fungus marketed in the U.S. market only, and reflected, among other things, updated commercial forecasts. The first nine months of 2019 also included other asset impairments of $48 million.
(f)In the third quarter and first nine months of 2019, represents incremental costs associated with the design, planning and implementation of our new organizational structure, effective in the beginning of 2019, and primarily includes consulting, legal, tax and advisory services.
(g)The income for the third quarter and first nine months of 2020 represents our pro-rata share of earnings from the GSK Consumer Healthcare joint venture, partially offset by equity method basis difference write-offs and amortization. See Note 2B.
(h)The third quarter of 2020 includes, among other things, charges of $144 million related to the remeasurement of Euro debt issued by Upjohn Finance B.V. in the second quarter of 2020 (see Note 7D) and dividend income of $44 million from our investment in ViiV. The first nine months of 2020 includes, among other things, dividend income of $196 million from our investment in ViiV and charges of $110 million, reflecting the change in the fair value of contingent consideration. The third quarter of 2019 included, among other things, dividend income of $43 million from our investment in ViiV and charges of $121 million for external incremental costs, such as transaction costs and costs to separate our Consumer Healthcare business into a separate legal entity, associated with the formation of the GSK Consumer Healthcare joint venture. The first nine months of 2019 included, among other things, (i) dividend income of $184 million from our investment in ViiV, (ii) charges of $146 million for external incremental costs, such as transaction costs and costs to separate our Consumer Healthcare business into a separate legal entity, associated with the formation of the GSK Consumer Healthcare joint venture, and (iii) $50 million of income from insurance recoveries related to Hurricane Maria.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Additional information about the intangible assets that were impaired during 2020 in Other (income)/deductions follows: |
| | Fair Value(a) | | Nine Months Ended September 27, 2020 |
| (MILLIONS OF DOLLARS) | | Amount | | Level 1 | | Level 2 | | Level 3 | | Impairment |
Intangible assets––IPR&D(b) | | $ | 1,100 | | | $ | 0 | | | $ | 0 | | | $ | 1,100 | | | $ | 900 | |
| | | | | | | | | | |
| | | | | | | | | | |
(a)The fair value amount is presented as of the date of impairment, as these assets are not measured at fair value on a recurring basis.
(b)Reflects intangible assets written down to fair value in the first nine months of 2020. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows associated with the asset and then applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the product; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
Note 5. Tax Matters
A. Taxes on Income from Continuing Operations
Our effective tax rate for continuing operations was (1.2)% for the third quarter of 2020, compared to 28.4% for the third quarter of 2019 and was 9.7%14.2% for the first nine monthsquarter of 2020,2021, compared to 13.4%12.6% for the first nine monthsquarter of 2019.
2020. The lowerhigher effective tax rate for the third quarter of 2020 in comparison with the same period in 2019 was primarily due to:
•the non-recurrence of the tax expense of $2.7 billion recorded in the third quarter of 2019 associated with the gain related to the completion of the GSK Consumer Healthcare joint venture transaction;
•tax benefits associated with intangible asset impairment charges of $900 million related to Biopharma IPR&D acquired in connection with our Array acquisition; and
•the favorablean unfavorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.
The lower effective tax rate for the first nine months of 2020 in comparison with the same period in 2019 was primarily due to the aforementioned factors above, partially offset by:
•the non-recurrence of the $1.4 billion tax benefits, representing taxes and interest, recorded in the first nine months of 2019 due to the favorable settlement of an IRS audit for multiple tax years (see Notes to Consolidated Financial Statements––Note 5D. Tax Matters: Tax Contingencies in our 2019 Financial Report); and
•the non-recurrence of the tax benefit recorded in the first nine months of 2019 as a result of additional guidance issued by the U.S. Department of Treasury related to the TCJA.
We have elected, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, to pay our initial estimated $15 billion repatriation tax liability on accumulated post-1986 foreign earnings over eight years through 2026. The third annual installment of this liability which iswas paid by its April 15, 2021 due to be paid in April 2021,date and is reported in current Incometaxes payable, and the as of April 4, 2021. The remaining liability is reported in noncurrent Other taxes payablepayable. in our condensed consolidated balance sheet as of September 27, 2020. Our obligations may vary as a result of changes in our uncertain tax positions and/or availability of attributes such as foreign tax and other credit carryforwards.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law in the U.S. to provide certain relief as a result of the COVID-19 pandemic. In addition, governments around the world have enacted or implemented various forms of tax relief measures in response to the economic conditions in the wake of COVID-19. As of September 27, 2020, neither the CARES Act nor changes to income tax laws or regulations in other jurisdictions had a significant impact on our effective tax rate.
B. Tax Contingencies
We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution.
The U.S. is one of our major tax jurisdictions, and we are regularly audited by the IRS. With respect to Pfizer, the IRS has issued a Revenue Agent’s Report (RAR)Reports (RARs) for tax years 2011-2013.2011-2013 and 2014-2015. We are not in agreement with the RARRARs and are currently appealing certain disputed issues. Tax years 2014-20152016-2018 are currently under audit. Tax years 2016-20202019-2021 are open
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
but not under audit. All other tax years are closed.
In addition to the open audit years in the U.S., we have open audit years in othercertain major international tax jurisdictions such as Canada (2013-2020), Japan (2017-2020), Europe (2011-2020, primarily reflecting Ireland, the U.K., France, Italy, Spain and Germany), Latin America (1998-2020, primarily reflecting Brazil) and Puerto Rico (2016-2020).dating back to 2010.
For additional information, see Note 5D in our 2020 Form 10-K.
C. Tax Provision/(Benefit) on Other Comprehensive Income/(Loss)
| Components of Tax provision/(benefit) on other comprehensive income/(loss) include: | Components of Tax provision/(benefit) on other comprehensive income/(loss) include: | Components of Tax provision/(benefit) on other comprehensive income/(loss) include: |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | September 27,
2020 | | September 29,
2019 | |
| (MILLIONS) | | (MILLIONS) | | April 4,
2021 | | March 29,
2020 | |
Foreign currency translation adjustments, net(a) | Foreign currency translation adjustments, net(a) | | $ | 47 | | | $ | 86 | | | $ | (144) | | | $ | 96 | | Foreign currency translation adjustments, net(a) | | $ | 21 | | | $ | (247) | | |
| Unrealized holding gains/(losses) on derivative financial instruments, net | Unrealized holding gains/(losses) on derivative financial instruments, net | | (43) | | | 31 | | | (126) | | | 37 | | Unrealized holding gains/(losses) on derivative financial instruments, net | | 59 | | | (133) | | |
| Reclassification adjustments for (gains)/losses included in net income | Reclassification adjustments for (gains)/losses included in net income | | 7 | | | (3) | | | (13) | | | (62) | | Reclassification adjustments for (gains)/losses included in net income | | 34 | | | 15 | | |
| | (37) | | | 28 | | | (139) | | | (24) | | | 93 | | | (118) | | |
| Unrealized holding gains/(losses) on available-for-sale securities, net | Unrealized holding gains/(losses) on available-for-sale securities, net | | 30 | | | 2 | | | 29 | | | 6 | | Unrealized holding gains/(losses) on available-for-sale securities, net | | 10 | | | (6) | | |
| Reclassification adjustments for (gains)/losses included in net income | Reclassification adjustments for (gains)/losses included in net income | | (11) | | | (1) | | | (3) | | | 4 | | Reclassification adjustments for (gains)/losses included in net income | | (30) | | | 2 | | |
| | 19 | | | 1 | | | 26 | | | 10 | | | (20) | | | (5) | | |
| Benefit plans: actuarial gains/(losses), net | | (288) | | | (41) | | | (308) | | | (42) | | |
| Reclassification adjustments related to amortization | | 15 | | | 23 | | | 46 | | | 41 | | |
| Reclassification adjustments related to settlements, net | | 40 | | | 9 | | | 52 | | | 10 | | |
| Other | | (48) | | | (1) | | | (28) | | | 2 | | |
| | | (281) | | | (10) | | | (238) | | | 12 | | |
| | Reclassification adjustments related to amortization of prior service costs and other, net | Reclassification adjustments related to amortization of prior service costs and other, net | | (11) | | | (11) | | | (32) | | | (33) | | Reclassification adjustments related to amortization of prior service costs and other, net | | (10) | | | (11) | | |
| Reclassification adjustments related to curtailments of prior service costs and other, net | | 0 | | | (11) | | | 0 | | | (11) | | |
| | Other | Other | | (1) | | | 1 | | | 1 | | | 1 | | Other | | 0 | | | 0 | | |
| | (11) | | | (21) | | | (31) | | | (43) | | | (10) | | | (11) | | |
| Tax provision/(benefit) on other comprehensive income/(loss) | Tax provision/(benefit) on other comprehensive income/(loss) | | $ | (262) | | | $ | 84 | | | $ | (527) | | | $ | 50 | | Tax provision/(benefit) on other comprehensive income/(loss) | | $ | 84 | | | $ | (380) | | |
(a)Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be heldwe intend to hold indefinitely.
Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the changes, net of tax, in Accumulated other comprehensive loss: |
| | | Net Unrealized Gains/(Losses) | | | Benefit Plans | | |
| (MILLIONS) | | Foreign Currency Translation Adjustments | | Derivative Financial Instruments | | Available-For-Sale Securities | | | | Prior Service (Costs)/Credits and Other | | Accumulated Other Comprehensive Income/(Loss) |
Balance, December 31, 2020(a) | | $ | (5,450) | | | $ | (428) | | | $ | 116 | | | | | $ | 452 | | | $ | (5,310) | |
Other comprehensive income/(loss)(b) | | 442 | | | 380 | | | (142) | | | | | (33) | | | 646 | |
| | | | | | | | | | | | |
| Balance, April 4, 2021 | | $ | (5,008) | | | $ | (48) | | | $ | (26) | | | | | $ | 419 | | | $ | (4,664) | |
(a)Amounts include the impact of a change in accounting principle. See Note 1C.
(b)Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests. Foreign currency translation adjustments primarily include gains from the strengthening of the U.K. pound, euro and Australian dollar against the U.S. dollar, and net gains related to the impact of our net investment hedging program, partially offset by net losses from foreign currency translation adjustments related to our equity-method investment in the Consumer Healthcare JV (see Note 2B).
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the changes, net of tax, in Accumulated other comprehensive loss: |
| | | Net Unrealized Gains/(Losses) | | Benefit Plans | | |
| (MILLIONS OF DOLLARS) | | Foreign Currency Translation Adjustments | | Derivative Financial Instruments | | Available-For-Sale Securities | | Actuarial Gains/(Losses) | | Prior Service (Costs)/Credits and Other | | Accumulated Other Comprehensive Income/(Loss) |
| Balance, December 31, 2019 | | $ | (5,952) | | | $ | 20 | | | $ | (35) | | | $ | (6,257) | | | $ | 584 | | | $ | (11,640) | |
Other comprehensive income/(loss)(a) | | 249 | | | (546) | | | 179 | | | (817) | | | (102) | | | (1,036) | |
| | | | | | | | | | | | |
| Balance, September 27, 2020 | | $ | (5,703) | | | $ | (526) | | | $ | 144 | | | $ | (7,074) | | | $ | 482 | | | $ | (12,676) | |
(a)Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of $9 million loss for the first nine months of 2020. Foreign currency translation adjustments primarily include gains from the strengthening of certain major currencies against the U.S. dollar, partially offset by net after-tax losses related to foreign currency translation adjustments and the impact of our net investment hedging program, both attributable to our equity method investment in GSK Consumer Healthcare joint venture (see Note 2B). The actuarial gains/(losses) activity mainly reflects interim U.S. Pfizer Consolidated Pension remeasurements, which resulted in an increase of $1.2 billion in the pension plan liability, primarily due to a reduction in the discount rate since December 31, 2019.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Financial Instruments
A. Fair Value Measurements
Financial Assets and Liabilities Measured at Fair Value using a Market Approach on a Recurring Basis and Fair Value Hierarchy:Hierarchy, using a Market Approach:
| | | September 27, 2020 | | | December 31, 2019 | | April 4, 2021 | | | December 31, 2020 |
| (MILLIONS OF DOLLARS) | | Total | | Level 1 | | Level 2 | | | Total | | Level 1 | | Level 2 | |
| (MILLIONS) | | (MILLIONS) | | Total | | Level 1 | | Level 2 | | | Total | | Level 1 | | Level 2 |
| Financial assets: | Financial assets: | | | | | | | | | | | | | | Financial assets: | | | | | | | | | | | | | |
| Short-term investments | Short-term investments | | | | Short-term investments | | | |
| Classified as equity securities with readily determinable fair values: | Classified as equity securities with readily determinable fair values: | | | | Classified as equity securities with readily determinable fair values: | | | |
Money market funds(a) | Money market funds(a) | | $ | 12,273 | | | $ | 0 | | | $ | 12,273 | | | | $ | 705 | | | $ | 0 | | | $ | 705 | | Money market funds(a) | | $ | 1,427 | | | $ | 0 | | | $ | 1,427 | | | | $ | 567 | | | $ | 0 | | | $ | 567 | |
| | Classified as available-for-sale debt securities: | Classified as available-for-sale debt securities: | | | | Classified as available-for-sale debt securities: | | | |
| Government and agency—non-U.S. | Government and agency—non-U.S. | | 5,906 | | | 0 | | | 5,906 | | | | 4,863 | | | 0 | | | 4,863 | | Government and agency—non-U.S. | | 6,169 | | | 0 | | | 6,169 | | | | 7,719 | | | 0 | | | 7,719 | |
| Government and agency—U.S. | Government and agency—U.S. | | 582 | | | 0 | | | 582 | | | | 811 | | | 0 | | | 811 | | Government and agency—U.S. | | 1,221 | | | 0 | | | 1,221 | | | | 982 | | | 0 | | | 982 | |
| Corporate and other | Corporate and other | | 1,371 | | | 0 | | | 1,371 | | | | 1,013 | | | 0 | | | 1,013 | | Corporate and other | | 902 | | | 0 | | | 902 | | | | 1,008 | | | 0 | | | 1,008 | |
| | 7,859 | | | 0 | | | 7,859 | | | | 6,687 | | | 0 | | | 6,687 | | | 8,292 | | | 0 | | | 8,292 | | | | 9,709 | | | 0 | | | 9,709 | |
| Total short-term investments | Total short-term investments | | 20,132 | | | 0 | | | 20,132 | | | | 7,392 | | | 0 | | | 7,392 | | Total short-term investments | | 9,719 | | | 0 | | | 9,719 | | | | 10,276 | | | 0 | | | 10,276 | |
| Other current assets | Other current assets | | | | | | | | | | | | | | Other current assets | | | | | | | | | | | | | |
| Derivative assets: | Derivative assets: | | | | Derivative assets: | | | |
| Interest rate contracts | Interest rate contracts | | 16 | | | 0 | | | 16 | | | | 53 | | | 0 | | | 53 | | Interest rate contracts | | 5 | | | 0 | | | 5 | | | | 18 | | | 0 | | | 18 | |
| Foreign exchange contracts | Foreign exchange contracts | | 321 | | | 0 | | | 321 | | | | 413 | | | 0 | | | 413 | | Foreign exchange contracts | | 389 | | | 0 | | | 389 | | | | 234 | | | 0 | | | 234 | |
| Total other current assets | Total other current assets | | 337 | | | 0 | | | 337 | | | | 465 | | | 0 | | | 465 | | Total other current assets | | 394 | | | 0 | | | 394 | | | | 251 | | | 0 | | | 251 | |
| Long-term investments | Long-term investments | | | | | | | | | | | | | | Long-term investments | | | | | | | | | | | | | |
Classified as equity securities with readily determinable fair values(b)(a) | Classified as equity securities with readily determinable fair values(b)(a) | | 2,092 | | | 2,063 | | | 28 | | | | 1,902 | | | 1,863 | | | 39 | | Classified as equity securities with readily determinable fair values(b)(a) | | 3,123 | | | 3,046 | | | 77 | | | | 2,809 | | | 2,776 | | | 32 | |
| | Classified as available-for-sale debt securities: | Classified as available-for-sale debt securities: | | | | Classified as available-for-sale debt securities: | | | |
| | Government and agency—non-U.S. | | Government and agency—non-U.S. | | 9 | | | 0 | | | 9 | | | | 6 | | | 0 | | | 6 | |
| Government and agency—U.S. | Government and agency—U.S. | | 142 | | | 0 | | | 142 | | | | 303 | | | 0 | | | 303 | | Government and agency—U.S. | | 66 | | | 0 | | | 66 | | | | 121 | | | 0 | | | 121 | |
| Corporate and other | Corporate and other | | 7 | | | 0 | | | 7 | | | | 11 | | | 0 | | | 11 | | Corporate and other | | 0 | | | 0 | | | 0 | | | | 0 | | | 0 | | | 0 | |
| | 149 | | | 0 | | | 149 | | | | 315 | | | 0 | | | 315 | | | 75 | | | 0 | | | 75 | | | | 128 | | | 0 | | | 128 | |
| Total long-term investments | Total long-term investments | | 2,241 | | | 2,063 | | | 178 | | | | 2,216 | | | 1,863 | | | 354 | | Total long-term investments | | 3,198 | | | 3,046 | | | 152 | | | | 2,936 | | | 2,776 | | | 160 | |
| Other noncurrent assets | Other noncurrent assets | | | | | | | | | | | | | | Other noncurrent assets | | | | | | | | | | | | | |
| Derivative assets: | Derivative assets: | | | | Derivative assets: | | | |
| Interest rate contracts | Interest rate contracts | | 131 | | | 0 | | | 131 | | | | 266 | | | 0 | | | 266 | | Interest rate contracts | | 21 | | | 0 | | | 21 | | | | 117 | | | 0 | | | 117 | |
| Foreign exchange contracts | Foreign exchange contracts | | 100 | | | 0 | | | 100 | | | | 261 | | | 0 | | | 261 | | Foreign exchange contracts | | 106 | | | 0 | | | 106 | | | | 5 | | | 0 | | | 5 | |
| Total derivative assets | Total derivative assets | | 231 | | | 0 | | | 231 | | | | 526 | | | 0 | | | 526 | | Total derivative assets | | 127 | | | 0 | | | 127 | | | | 122 | | | 0 | | | 122 | |
Insurance contracts(c)(b) | Insurance contracts(c)(b) | | 626 | | | 0 | | | 626 | | | | 575 | | | 0 | | | 575 | | Insurance contracts(c)(b) | | 726 | | | 0 | | | 726 | | | | 693 | | | 0 | | | 693 | |
| Total other noncurrent assets | Total other noncurrent assets | | 857 | | | 0 | | | 857 | | | | 1,102 | | | 0 | | | 1,102 | | Total other noncurrent assets | | 853 | | | 0 | | | 853 | | | | 814 | | | 0 | | | 814 | |
| Total assets | Total assets | | $ | 23,567 | | | $ | 2,063 | | | $ | 21,504 | | | | $ | 11,176 | | | $ | 1,863 | | | $ | 9,313 | | Total assets | | $ | 14,165 | | | $ | 3,046 | | | $ | 11,119 | | | | $ | 14,278 | | | $ | 2,776 | | | $ | 11,501 | |
| | Financial liabilities: | Financial liabilities: | | | | Financial liabilities: | | | |
| Other current liabilities | Other current liabilities | | | | Other current liabilities | | | |
| Derivative liabilities: | Derivative liabilities: | | | | Derivative liabilities: | | | |
| | Foreign exchange contracts | Foreign exchange contracts | | $ | 464 | | | $ | 0 | | | $ | 464 | | | | $ | 114 | | | $ | 0 | | | $ | 114 | | Foreign exchange contracts | | $ | 239 | | | $ | 0 | | | $ | 239 | | | | $ | 501 | | | $ | 0 | | | $ | 501 | |
| Total other current liabilities | Total other current liabilities | | 464 | | | 0 | | | 464 | | | | 114 | | | 0 | | | 114 | | Total other current liabilities | | 239 | | | 0 | | | 239 | | | | 501 | | | 0 | | | 501 | |
| Other noncurrent liabilities | Other noncurrent liabilities | | | | | | | | | | | | | | Other noncurrent liabilities | | | | | | | | | | | | | |
| Derivative liabilities: | Derivative liabilities: | | | | Derivative liabilities: | | | |
| | Foreign exchange contracts | Foreign exchange contracts | | 808 | | | 0 | | | 808 | | | | 604 | | | 0 | | | 604 | | Foreign exchange contracts | | 494 | | | 0 | | | 494 | | | | 599 | | | 0 | | | 599 | |
| Total other noncurrent liabilities | Total other noncurrent liabilities | | 808 | | | 0 | | | 808 | | | | 604 | | | 0 | | | 604 | | Total other noncurrent liabilities | | 494 | | | 0 | | | 494 | | | | 599 | | | 0 | | | 599 | |
| Total liabilities | Total liabilities | | $ | 1,272 | | | $ | 0 | | | $ | 1,272 | | | | $ | 718 | | | $ | 0 | | | $ | 718 | | Total liabilities | | $ | 732 | | | $ | 0 | | | $ | 732 | | | | $ | 1,100 | | | $ | 0 | | | $ | 1,100 | |
(a)As of September 27, 2020, $11.4 billion of proceeds from the Upjohn debt transactions (see Note 7D) are invested in money market funds and included in Restricted short-term investments in the condensed consolidated balance sheet.
(b)As of September 27, 2020, long-termLong-term equity securities of $181$168 million as of April 4, 2021 and $190 million as of December 31, 2019, long-term equity securities of $176 million2020 were held in restricted trusts for employee benefit plans.
(c)(b)Includes life insurance policies held in restricted trusts attributable to the funding of variousfor U.S. non-qualified employee benefit plans. The underlying invested assets in these insurance contracts are marketable securities, which are carried at fair value, with changes in fair value recognized in Other (income)/deductions—net in the condensed consolidated statements of income (see(see Note 4).
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes the financial liabilities not measured at fair value on a recurring basis, including the carrying values and estimated fair values using a market approach: | | |
| | September 27, 2020 | | | | December 31, 2019 | | |
| | Carrying Value | | Estimated Fair Value | | | | Carrying Value | | Estimated Fair Value | | |
| (MILLIONS OF DOLLARS) | | | | Total | | Level 2 | | | | | | Total | | Level 2 | | |
| Financial Liabilities | | | | | | | | | | | | | | | | |
Long-term debt, excluding the current portion(a) | | $ | 49,785 | | | $ | 59,073 | | | $ | 59,073 | | | | | $ | 35,955 | | | $ | 40,842 | | | $ | 40,842 | | | |
(a)As of September 27, 2020, $11.4 billion of proceeds from the Upjohn debt transactions (see Note 7D) are invested in money market funds and included in Restricted short-term investments in the condensed consolidated balance sheet. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Carrying values and estimated fair values using a market approach: |
| | April 4, 2021 | | | | December 31, 2020 |
| (MILLIONS) | | Carrying Value | | Estimated Fair Value at Level 2 | | | | Carrying Value | | Estimated Fair Value at Level 2 |
| Financial Liabilities | | | | | | | | | | |
| Long-term debt, excluding the current portion | | $ | 35,347 | | | $ | 40,504 | | | | | $ | 37,133 | | | $ | 45,533 | |
The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities, long-term receivables and short-term borrowings not measured at fair value on a recurring basis were not significant as of September 27, 2020April 4, 2021 and December 31, 2019.2020. The fair value measurements of our held-to-maturity debt securities and our short-term borrowings are based on Level 2 inputs. The fair value measurements of our long-term receivables and private equity securities which represent investments in the life sciences sector are based on Level 3 inputs using a market approach.inputs.
In addition, as of September 27, 2020 and December 31, 2019, we had long-term receivables whose fair value is based on Level 3 inputs; the differences between the estimated fair values and carrying values of these receivables were not significant.B. Investments
Total Short-Term, and Long-Term Investments and Equity-Method Investments
| | The following summarizes our investments by classification type: | The following summarizes our investments by classification type: | The following summarizes our investments by classification type: |
| (MILLIONS OF DOLLARS) | | September 27, 2020 | | December 31, 2019 | |
| (MILLIONS) | | (MILLIONS) | | April 4, 2021 | | December 31, 2020 |
| Short-term investments | Short-term investments | | | | | Short-term investments | | | | |
Equity securities with readily determinable fair values(a) | Equity securities with readily determinable fair values(a) | | $ | 12,273 | | | $ | 705 | | Equity securities with readily determinable fair values(a) | | $ | 1,427 | | | $ | 567 | |
| Available-for-sale debt securities | Available-for-sale debt securities | | 7,859 | | | 6,687 | | Available-for-sale debt securities | | 8,292 | | | 9,709 | |
| Held-to-maturity debt securities | Held-to-maturity debt securities | | 193 | | | 1,133 | | Held-to-maturity debt securities | | 2,180 | | | 161 | |
| Total Short-term investments | Total Short-term investments | | $ | 20,325 | | | $ | 8,525 | | Total Short-term investments | | $ | 11,899 | | | $ | 10,437 | |
| | Long-term investments | Long-term investments | | Long-term investments | |
| Equity securities with readily determinable fair values | Equity securities with readily determinable fair values | | $ | 2,092 | | | $ | 1,902 | | Equity securities with readily determinable fair values | | $ | 3,123 | | | $ | 2,809 | |
| | Available-for-sale debt securities | Available-for-sale debt securities | | 149 | | | 315 | | Available-for-sale debt securities | | 75 | | | 128 | |
| Held-to-maturity debt securities | Held-to-maturity debt securities | | 37 | | | 42 | | Held-to-maturity debt securities | | 31 | | | 37 | |
Private equity securities at cost | Private equity securities at cost | | 780 | | | 756 | | Private equity securities at cost | | 467 | | | 432 | |
| Total Long-term investments | Total Long-term investments | | $ | 3,059 | | | $ | 3,014 | | Total Long-term investments | | $ | 3,696 | | | $ | 3,406 | |
| Equity-method investments | Equity-method investments | | 15,949 | | | 17,133 | | Equity-method investments | | 16,532 | | | 16,856 | |
| Total long-term investments and equity-method investments | Total long-term investments and equity-method investments | | $ | 19,008 | | | $ | 20,147 | | Total long-term investments and equity-method investments | | $ | 20,228 | | | $ | 20,262 | |
| Held-to-maturity cash equivalents | Held-to-maturity cash equivalents | | $ | 130 | | | $ | 163 | | Held-to-maturity cash equivalents | | $ | 60 | | | $ | 89 | |
(a)As of September 27, 2020April 4, 2021 and December 31, 2019, included2020, includes money market funds primarily invested in U.S. Treasury and government debt. As of September 27, 2020, $11.4 billion of proceeds from the Upjohn debt transactions (see
(b)Note 7D) are invested in money market funds and included in Restricted short-termRepresent investments in the condensed consolidated balance sheet.life sciences sector.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
B. Investments
Debt Securities
| | At September 27, 2020, our investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt securities at September 27, 2020 and December 31, 2019 is as follows, including the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities as of September 27, 2020: | |
| At April 4, 2021, our debt investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows: | | At April 4, 2021, our debt investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows: |
| | September 27, 2020 | | December 31, 2019 | | April 4, 2021 | | December 31, 2020 |
| | | Gross Unrealized | | Maturities (in Years) | | | | Gross Unrealized | | | | Gross Unrealized | | Maturities (in Years) | | | Gross Unrealized | |
| (MILLIONS OF DOLLARS) | | Amortized Cost | | Gains | | Losses | | Fair Value | | Within 1 | | Over 1
to 5 | | Over 5 | | Total | | Amortized Cost | | Gains | | Losses | | Fair Value | |
| (MILLIONS) | | (MILLIONS) | | Amortized Cost | | Gains | | Losses | | Fair Value | | Within 1 | | Over 1
to 5 | | Over 5 | | | Amortized Cost | | Gains | | Losses | | Fair Value |
| Available-for-sale debt securities | Available-for-sale debt securities | | | | | | | | | | | | | | | | | | | Available-for-sale debt securities | | | | | | | | | | | | | | | | | | | | | | |
Government and agency––non-U.S. | Government and agency––non-U.S. | | $ | 5,743 | | | $ | 164 | | | $ | (1) | | | $ | 5,906 | | | $ | 5,906 | | | $ | 0 | | | $ | 0 | | | $ | 5,906 | | | $ | 4,895 | | | $ | 6 | | | $ | (38) | | | $ | 4,863 | | Government and agency––non-U.S. | | $ | 6,209 | | | $ | 23 | | | $ | (54) | | | $ | 6,178 | | | $ | 6,169 | | | $ | 9 | | | $ | 0 | | | $ | 7,593 | | | $ | 136 | | | $ | (4) | | | $ | 7,725 | |
| Government and agency––U.S. | Government and agency––U.S. | | 726 | | | 0 | | | (1) | | | 725 | | | 582 | | | 142 | | | 0 | | | 725 | | | 1,120 | | | 0 | | | (6) | | | 1,114 | | Government and agency––U.S. | | 1,288 | | | 0 | | | (1) | | | 1,287 | | | 1,221 | | | 66 | | | 0 | | | 1,104 | | | 0 | | | (1) | | | 1,103 | |
Corporate and other(a) | Corporate and other(a) | | 1,379 | | | 3 | | | (5) | | | 1,378 | | | 1,371 | | | 7 | | | 0 | | | 1,378 | | | 1,027 | | | 0 | | | (2) | | | 1,025 | | Corporate and other(a) | | 900 | | | 3 | | | 0 | | | 903 | | | 902 | | | 0 | | | 0 | | | 1,006 | | | 2 | | | 0 | | | 1,008 | |
| Held-to-maturity debt securities | Held-to-maturity debt securities | | Held-to-maturity debt securities | |
| Time deposits and other | Time deposits and other | | 290 | | | 0 | | | 0 | | | 290 | | | 258 | | | 10 | | | 23 | | | 290 | | | 535 | | | 0 | | | 0 | | | 535 | | Time deposits and other | | 423 | | | 0 | | | 0 | | | 423 | | | 397 | | | 16 | | | 10 | | | 283 | | | 0 | | | 0 | | | 283 | |
Government and agency––non-U.S. | Government and agency––non-U.S. | | 70 | | | 0 | | | 0 | | | 70 | | | 65 | | | 0 | | | 5 | | | 70 | | | 803 | | | 0 | | | 0 | | | 803 | | Government and agency––non-U.S. | | 1,847 | | | 0 | | | 0 | | | 1,847 | | | 1,842 | | | 4 | | | 1 | | | 5 | | | 0 | | | 0 | | | 5 | |
| Total debt securities | Total debt securities | | $ | 8,208 | | | $ | 168 | | | $ | (7) | | | $ | 8,369 | | | $ | 8,182 | | | $ | 159 | | | $ | 28 | | | $ | 8,369 | | | $ | 8,380 | | | $ | 6 | | | $ | (47) | | | $ | 8,340 | | Total debt securities | | $ | 10,667 | | | $ | 25 | | | $ | (55) | | | $ | 10,637 | | | $ | 10,531 | | | $ | 94 | | | $ | 11 | | | $ | 9,991 | | | $ | 138 | | | $ | (5) | | | $ | 10,124 | |
(a)Primarily issued by a diverse group of corporations.
For our portfolio of available-for-sale and held-to-maturity debt securities, anyAny expected credit losses to these portfolios would be immaterial to theour financial statements.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Equity Securities
| | The following presents the calculation of the portion of unrealized (gains)/losses that relates to equity securities, excluding equity method investments, still held at the reporting date: | |
| 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: | | 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 | | | Three Months Ended |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | September 27,
2020 | | September 29,
2019 | |
| (MILLIONS) | | (MILLIONS) | | | April 4,
2021 | | March 29,
2020 |
Net (gains)/losses recognized during the period on equity securities(a) | Net (gains)/losses recognized during the period on equity securities(a) | | $ | 70 | | | $ | (6) | | | $ | (408) | | | $ | (153) | | Net (gains)/losses recognized during the period on equity securities(a) | | | $ | (401) | | | $ | 255 | |
| Less: Net (gains)/losses recognized during the period on equity securities sold during the period | Less: Net (gains)/losses recognized during the period on equity securities sold during the period | | 2 | | | (3) | | | (16) | | | (13) | | Less: Net (gains)/losses recognized during the period on equity securities sold during the period | | | (28) | | | (19) | |
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b) | Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b) | | $ | 68 | | | $ | (3) | | | $ | (391) | | | $ | (140) | | Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b) | | | $ | (372) | | | $ | 274 | |
(a)Reported in Other (income)/deductions––net. See Note 4.
(b)Included in net unrealized gains are observable price changes on equity securities without readily determinable fair values. Since January 1, 2018, there were cumulative impairments and downward adjustments of $82$87 million and upward adjustments of $63$61 million. Impairments, downward and upward adjustments were not significant in the thirdfirst quarters of 2021 and the first nine months of 2020 and 2019.2020.
C. Short-Term Borrowings
| | Short-term borrowings include: | Short-term borrowings include: | Short-term borrowings include: |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | December 31, 2019 | |
| (MILLIONS) | | (MILLIONS) | | April 4,
2021 | | December 31, 2020 |
| Commercial paper | Commercial paper | | $ | 10,990 | | | $ | 13,915 | | Commercial paper | | $ | 416 | | | $ | 556 | |
| Current portion of long-term debt, principal amount | Current portion of long-term debt, principal amount | | 2,152 | | | 1,458 | | Current portion of long-term debt, principal amount | | 3,679 | | | 2,004 | |
Other short-term borrowings, principal amount(a) | Other short-term borrowings, principal amount(a) | | 226 | | | 860 | | Other short-term borrowings, principal amount(a) | | 260 | | | 145 | |
| Total short-term borrowings, principal amount | Total short-term borrowings, principal amount | | 13,367 | | | 16,233 | | Total short-term borrowings, principal amount | | 4,355 | | | 2,705 | |
| Net fair value adjustments related to hedging and purchase accounting | Net fair value adjustments related to hedging and purchase accounting | | 0 | | | 5 | | Net fair value adjustments related to hedging and purchase accounting | | 0 | | | 0 | |
| Net unamortized discounts, premiums and debt issuance costs | Net unamortized discounts, premiums and debt issuance costs | | (4) | | | (43) | | Net unamortized discounts, premiums and debt issuance costs | | (3) | | | (2) | |
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted | Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted | | $ | 13,363 | | | $ | 16,195 | | Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted | | $ | 4,352 | | | $ | 2,703 | |
(a)Other short-term borrowings primarily includeIncludes cash collateral. See Note 7E7F.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
D. Long-Term Debt
New Issuances
| | | | | | | | | | | | | | |
| In the second quarter of 2020, we issued the following senior unsecured notes: |
| (MILLIONS OF DOLLARS) | | | | |
| | | | Principal |
| Interest Rate | | Maturity Date | | As of
September 27, 2020 |
Pfizer Inc.(a) | | | | |
| 0.800% | | May 28, 2025 | | $ | 750 | |
| 1.700% | | May 28, 2030 | | 1,000 | |
| 2.550% | | May 28, 2040 | | 1,000 | |
| 2.700% | | May 28, 2050 | | 1,250 | |
| | | | $ | 4,000 | |
Upjohn Inc., a wholly-owned subsidiary of Pfizer Inc.(b) | | | | |
| 1.125% | | June 22, 2022 | | $ | 1,000 | |
| 1.650% | | June 22, 2025 | | 750 | |
| 2.300% | | June 22, 2027 | | 750 | |
| 2.700% | | June 22, 2030 | | 1,450 | |
| 3.850% | | June 22, 2040 | | 1,500 | |
| 4.000% | | June 22, 2050 | | 2,000 | |
| | | | $ | 7,450 | |
Upjohn Finance B.V., a wholly-owned subsidiary of Upjohn Inc.(b) | | | | |
| 0.816% | | June 23, 2022 | | € | 750 | |
| 1.023% | | June 23, 2024 | | 750 | |
| 1.362% | | June 23, 2027 | | 850 | |
| 1.908% | | June 23, 2032 | | 1,250 | |
| | | | € | 3,600 | |
(a)The notes may be redeemed by us at any time, in whole, or in part, at varying redemption prices plus accrued and unpaid interest. The weighted-average effective interest rate for the notes at issuance was 2.11%.
(b)In June 2020, Upjohn Inc. and Upjohn Finance B.V. completed privately placed debt offerings in connection with the previously announced proposed Reverse Morris Trust transaction that will ultimately combine Upjohn and Mylan to form a new company, Viatris. The notes may be redeemed by Upjohn Inc. and Upjohn Finance B.V., as applicable, at any time, in whole, or in part, at varying redemption prices plus accrued and unpaid interest. The weighted-average effective interest rates at issuance were 2.95% for the $7.45 billion notes and 1.37% for the €3.60 billion notes. If the proposed transaction with Mylan does not close on or prior to February 1, 2021, or if, prior to such date, Upjohn Inc. and Mylan notify the trustee that the business combination agreement for the proposed transaction with Mylan is terminated, or the transaction will not otherwise be pursued, the notes must be redeemed at redemption prices equal to 101% of their respective principal amounts, plus accrued and unpaid interest. Pfizer has guaranteed these notes, and such guarantees will automatically and unconditionally terminate without the consent of holders of the notes upon the proposed distribution to Pfizer’s stockholders of all of the issued and outstanding shares of Upjohn Inc.’s common stock held by Pfizer (the Distribution). Upjohn Inc. has guaranteed the notes issued by Upjohn Finance B.V., and Upjohn Inc. will remain a guarantor of such notes post Distribution. Following the separation, Upjohn Inc. and Upjohn Finance B.V., as applicable, will remain the obligor. The proceeds from the financings will be used in part to fund a cash distribution from Upjohn Inc. to Pfizer immediately prior to the Distribution. In the interim, the $11.4 billion of proceeds are classified as Restricted short-term investments in the condensed consolidated balance sheet as of September 27, 2020 pursuant to the terms of the transaction agreements.
| | | | | | | | | | | | | | |
In the first quarter of 2020, we issued the following senior unsecured notes at a weighted average effective interest rate of 2.67%: |
(MILLIONS OF DOLLARS) | | | | Principal |
Interest Rate | | Maturity Date | | As of
September 27, 2020 |
2.625%(a)
| | April 1, 2030 | | $ | 1,250 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
(a)The notes may be redeemed by us at any time, in whole, or in part, at a redemption price plus accrued and unpaid interest.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | |
| The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt: |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | December 31, 2019 |
Total long-term debt, principal amount(a) | | $ | 48,473 | | | $ | 34,820 | |
| Net fair value adjustments related to hedging and purchase accounting | | 1,621 | | | 1,305 | |
| Net unamortized discounts, premiums and debt issuance costs | | (314) | | | (176) | |
| Other long-term debt | | 5 | | | 5 | |
| Total long-term debt, carried at historical proceeds, as adjusted | | $ | 49,785 | | | $ | 35,955 | |
| Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above) | | $ | 2,149 | | | $ | 1,462 | |
(a)As of September 27, 2020, $11.4 billion of proceeds from the Upjohn debt transactions are invested in money market funds and included in Restricted short-term investments in the condensed consolidated balance sheet.
Retirements
In March 2020, we repurchased at par all $1.065 billion principal amount outstanding of our senior unsecured notes that were due in 2047 before the maturity date, which did not have a material impact on our condensed consolidated financial statements. | | | | | | | | | | | | | | |
| The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt: |
| (MILLIONS) | | April 4,
2021 | | December 31, 2020 |
| Total long-term debt, principal amount | | $ | 34,032 | | | $ | 35,774 | |
| Net fair value adjustments related to hedging and purchase accounting | | 1,512 | | | 1,562 | |
| Net unamortized discounts, premiums and debt issuance costs | | (200) | | | (207) | |
| Other long-term debt | | 4 | | | 4 | |
| Total long-term debt, carried at historical proceeds, as adjusted | | $ | 35,347 | | | $ | 37,133 | |
| Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above) | | $ | 3,676 | | | $ | 2,002 | |
E. Derivative Financial Instruments and Hedging Activities
Foreign Exchange Risk
A significant portion of our revenues, earnings and net investments in foreign affiliates is exposed to changes in foreign exchange rates. We 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. We also manage our foreign exchange riskprincipally through the use of derivative financial instruments and foreign currency 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, Swedish krona, Canadian dollar and Chinese renminbi.
As a part of our cash flow hedging program, Additionally, we designate foreign exchange contracts to hedge a portion of our forecasted intercompany inventory sales denominated in euro, Japanese yen, Chinese renminbi, Canadian dollar, U.K. pound and Australian dollar-denominated intercompany inventory sales expecteddollar for up to occur no more than two years from the date of each hedge.years.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Interest Rate Risk
Our interest-bearing investments and borrowings are subject to interest rate risk. From time to time, dependingDepending on market conditions, we willmay change the profile of 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)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 the notional amounts: | |
| (MILLIONS OF DOLLARS) | | September 27, 2020 | | December 31, 2019 | |
| The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations): | | The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations): |
| | | | Fair Value | | | Fair Value | | April 4, 2021 | | December 31, 2020 |
| | Notional | | Asset | | Liability | | Notional | | Asset | | Liability | | | Fair Value | | | Fair Value |
| Derivatives designated as hedging instruments: | | | | | | | | | | | | | |
| (MILLIONS) | | (MILLIONS) | | Notional | | Asset | | Liability | | Notional | | Asset | | Liability |
Derivatives designated as hedging instruments: | | Derivatives designated as hedging instruments: | | | | | | | | | | | | |
Foreign exchange contracts(a) | Foreign exchange contracts(a) | | $ | 24,545 | | | $ | 346 | | | $ | 1,187 | | | $ | 25,193 | | | $ | 591 | | | $ | 662 | | Foreign exchange contracts(a) | | $ | 22,799 | | | $ | 408 | | | $ | 654 | | | $ | 24,369 | | | $ | 145 | | | $ | 1,005 | |
| Interest rate contracts | Interest rate contracts | | 1,995 | | | 147 | | | 0 | | | 6,645 | | | 318 | | | 0 | | Interest rate contracts | | 450 | | | 26 | | | 0 | | | 1,950 | | | 135 | | | 0 | |
| | 493 | | | 1,187 | | | 909 | | | 662 | | | 435 | | | 654 | | | 280 | | | 1,005 | |
| | Derivatives not designated as hedging instruments: | | |
Derivatives not designated as hedging instruments: | | Derivatives not designated as hedging instruments: | |
| Foreign exchange contracts | Foreign exchange contracts | | $ | 16,084 | | | 75 | | | 85 | | | $ | 19,623 | | | 82 | | | 55 | | Foreign exchange contracts | | $ | 14,726 | | | 86 | | | 78 | | | $ | 15,063 | | | 94 | | | 95 | |
| | Total | Total | | $ | 568 | | | $ | 1,272 | | | $ | 992 | | | $ | 718 | | Total | | $ | 521 | | | $ | 732 | | | $ | 373 | | | $ | 1,100 | |
(a)The notional amount of outstanding foreign currency forward-exchangeexchange contracts hedging our intercompany forecasted inventory sales was $5.1 billion as of September 27, 2020April 4, 2021 and $5.9$5.0 billion as of December 31, 2019.2020.
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: |
| | | Amount of
Gains/(Losses)
Recognized in OID(a) | | Amount of Gains/(Losses)
Recognized in OCI(a), (b) | | Amount of Gains/(Losses)
Reclassified from
OCI into OID and COS(a) |
| (MILLIONS OF DOLLARS) | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 |
| Three Months Ended | | | | | | | | | | | | |
| Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts(c) | | $ | — | | | $ | — | | | $ | (379) | | | $ | 131 | | | $ | (149) | | | $ | 7 | |
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach(d) | | — | | | — | | | 7 | | | 21 | | | 7 | | | 22 | |
| Derivative Financial Instruments in Fair Value Hedge Relationships: | | | | | | | | | | | | |
| Interest rate contracts | | (9) | | | 378 | | | — | | | — | | | — | | | — | |
| Hedged item | | 9 | | | (378) | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
| Foreign exchange contracts | | — | | | — | | | (257) | | | 112 | | | 0 | | | 0 | |
The portion on foreign exchange contracts excluded from the assessment of hedge effectiveness(d) | | — | | | — | | | 9 | | | 43 | | | 38 | | | 45 | |
| Non-Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
Foreign currency short-term borrowings(e) | | — | | | — | | | 0 | | | 45 | | | 0 | | | 0 | |
Foreign currency long-term debt(e) | | — | | | — | | | (72) | | | 79 | | | 0 | | | 0 | |
| Derivative Financial Instruments Not Designated as Hedges: | | | | | | | | | | | | |
| Foreign exchange contracts | | 255 | | | (77) | | | — | | | — | | | — | | | — | |
All other net(d) | | — | | | — | | | 0 | | | (1) | | | 0 | | | 0 | |
| | | $ | 255 | | | $ | (77) | | | $ | (692) | | | $ | 429 | | | $ | (104) | | | $ | 74 | |
| | | | | | | | | | | | |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Amount of Gains/(Losses) Recognized in OID(a) | | Amount of Gains/(Losses) Recognized in OCI(a), (b) | | Amount of Gains/(Losses) Reclassified from OCI into OID and COS(a) |
| (MILLIONS OF DOLLARS) | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 |
| Nine Months Ended | | | | | | | | | | | | |
| Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts(c) | | $ | — | | | $ | — | | | $ | (721) | | | $ | 137 | | | $ | (23) | | | $ | 265 | |
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach(d) | | — | | | — | | | 49 | | | 105 | | | 48 | | | 108 | |
| | | | | | | | | | | | |
| Derivative Financial Instruments in Fair Value Hedge Relationships: | | | | | | | | | | | | |
| Interest rate contracts | | 383 | | | 1,191 | | | — | | | — | | | — | | | — | |
| Hedged item | | (383) | | | (1,191) | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
| Foreign exchange contracts | | — | | | — | | | (17) | | | 87 | | | 0 | | | 0 | |
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(d) | | — | | | — | | | 185 | | | 136 | | | 122 | | | 99 | |
| | | | | | | | | | | | |
| Non-Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
Foreign currency short-term borrowings(e) | | — | | | — | | | 8 | | | 65 | | | 0 | | | 0 | |
Foreign currency long-term debt(e) | | — | | | — | | | (69) | | | 89 | | | 0 | | | 0 | |
| | | | | | | | | | | | |
| Derivative Financial Instruments Not Designated as Hedges: | | | | | | | | | | | | |
| Foreign exchange contracts | | 205 | | | (201) | | | — | | | — | | | — | | | — | |
All other net(d) | | — | | | — | | | 12 | | | 0 | | | (1) | | | 0 | |
| | $ | 205 | | | $ | (201) | | | $ | (553) | | | $ | 617 | | | $ | 147 | | | $ | 472 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk exposures (including those reported as part of discontinued operations): |
| | | 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) | | April 4,
2021 | | March 29,
2020 | | April 4,
2021 | | March 29,
2020 | | April 4,
2021 | | March 29,
2020 |
| Three Months Ended | | | | | | | | | | | | |
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| Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts(b) | | $ | — | | | $ | — | | | $ | 202 | | | $ | (529) | | | $ | (268) | | | $ | (46) | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 12 | | | 29 | | | 9 | | | 27 | |
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| Derivative Financial Instruments in Fair Value Hedge Relationships: | | | | | | | | | | | | |
| Interest rate contracts | | (26) | | | 386 | | | — | | | — | | | — | | | — | |
| Hedged item | | 26 | | | (386) | | | — | | | — | | | — | | | — | |
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| Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
| Foreign exchange contracts | | — | | | — | | | 154 | | | 384 | | | 0 | | | 0 | |
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(c) | | — | | | — | | | (1) | | | 147 | | | 29 | | | 41 | |
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Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d) | | | | | | | | | | | | |
| Foreign currency short-term borrowings | | — | | | — | | | 38 | | | 8 | | | 0 | | | 0 | |
| Foreign currency long-term debt | | — | | | — | | | 56 | | | 45 | | | 0 | | | 0 | |
| | | | | | | | | | | | |
| Derivative Financial Instruments Not Designated as Hedges: | | | | | | | | | | | | |
| Foreign exchange contracts | | 42 | | | (59) | | | — | | | — | | | — | | | — | |
All other net(c) | | — | | | — | | | 0 | | | (1) | | | 0 | | | 0 | |
| | $ | 42 | | | $ | (59) | | | $ | 460 | | | $ | 83 | | | $ | (230) | | | $ | 23 | |
(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 in the condensed consolidated statements of comprehensive income.
(b)For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the gains and losses are included in Other comprehensive income/(loss)––Foreign currency translation adjustments, net.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(c)(b)The amounts reclassified from OCI into COS were:
•a net gainloss of $34 million in the third quarter of 2020;
•a net gain of $184$45 million in the first nine months of 2020;
•a net gain of $66 million in the third quarter of 2019;2021; and
•a net gain of $169$70 million in the first nine monthsquarter of 2019.2020.
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 loss of $192$20 million within the next 12 months into income. The maximum length of time over which we are hedging our exposure to the variability in future foreign exchange cash flowflows is approximately 22 years and relates to our $1.8 billion U.K. pound debt maturing in 2043.foreign currency debt.
(d)(c)The amounts reclassified from OCI were reclassified into OID.
(e)(d)Long-termShort-term borrowings and long-term debt includesinclude foreign currency borrowings with carrying values of $2.0 billion as of September 27, 2020, which are used as hedging instruments in net investment hedge relationships.hedges. The short-term borrowings carrying value as of April 4, 2021 was $1.2 billion. The long-term debt carrying values as of April 4, 2021 and December 31, 2020 were $872 million and $2.1 billion, respectively.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes the amounts recorded in our condensed consolidated balance sheet related to cumulative basis adjustments for fair value hedges: |
| | September 27, 2020 | | December 31, 2019 |
| | | | 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 OF DOLLARS) | | 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 investments | | $ | 45 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| Long-term investments | | 0 | | | 0 | | | 0 | | | 45 | | | 0 | | | 0 | |
| | | | | | | | | | | | |
| Long-term debt | | 2,019 | | | 131 | | | 1,165 | | | 7,092 | | | 266 | | | 690 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes cumulative basis adjustments for fair value hedges to our long-term debt: |
| | April 4, 2021 | | December 31, 2020 |
| | | | 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 |
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| | | | |
| Long-term debt | | $ | 494 | | | $ | 21 | | | $ | 1,202 | | | $ | 2,016 | | | $ | 117 | | | $ | 1,149 | |
(a)Carrying amounts exclude the cumulative amount of fair value hedging adjustments.
Certain
F. Credit Risk
A significant portion of our trade accounts receivable balances are due from drug wholesalers. For additional information on our trade accounts receivables with significant customers, see Note 13B below and Note 17B in our 2020 Form 10-K.
As of April 4, 2021, the largest investment exposures in our portfolio represent primarily sovereign debt instruments issued by the U.S., U.K., Germany, France, Japan and Canada.
With respect to our derivative financial instrument agreements with financial institutions, we do not expect to incur a significant loss from failure of any counterparty. Derivative financial instruments are covered by associatedexecuted under International Swaps and Derivatives Association (ISDA) master agreements with credit-support agreementsannexes that have credit-risk-related contingent features designedcontain zero threshold provisions requiring collateral to reduce both counterparties’ exposure tobe exchanged daily depending on levels of exposure. As a result, there are no significant concentrations of credit risk of defaulting on amounts owed by the other party.with any individual financial institution. As of September 27, 2020,April 4, 2021, the aggregate fair value of these derivative financial instruments that are in a net liabilitypayable position was $1.1 billion,$613 million, for which we have posted collateral of $1.2 billion$675 million with a corresponding amount reported in the normal course of business. If there had been a downgrade by S&P or Moody’s, we would not have been required to post any additional collateral.
Short-term investments. As of September 27, 2020, we received cash collateral of $169 million from various counterparties that fully supportsApril 4, 2021, the approximateaggregate fair value of our derivative contracts and isfinancial instruments that are in a net receivable position was $53 million, for which we have received collateral of $124 million with a corresponding amount reported inShort-term borrowings, including current portion of long-term debt.
F. 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 counterparties to perform under the agreements. There are no significant concentrations of credit risk related to our financial instruments with any individual counterparty. For additional information about concentrations of certain credit risk related to certain significant customers, see Notes to Consolidated Financial Statements––Note 17C. Segment, Geographic and Other Revenue Information: Other Revenue Information in Pfizer’s 2019 Financial Report. As of September 27, 2020, we had $1.4 billion due from a well-diversified, high quality group of banks from around the world. For details about our investments, see Note 7B.
In general, there is no requirement for collateral from customers. However, derivative financial instruments are executed under credit-support agreements that provide for the ability to request to receive cash collateral, depending on levels of exposure, our credit rating and the credit rating of the counterparty.
Note 8. InventoriesOther Financial Information
| | | | | | | | | | | | | | |
The following summarizes the components of Inventories: |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | December 31, 2019 |
| Finished goods | | $ | 3,521 | | | $ | 2,750 | |
| Work-in-process | | 5,014 | | | 4,743 | |
| Raw materials and supplies | | 760 | | | 790 | |
Inventories(a) | | $ | 9,295 | | | $ | 8,283 | |
Noncurrent inventories not included above(b) | | $ | 948 | | | $ | 714 | |
| | | | | | | | | | | | | | |
The following summarizes the components of Inventories: |
| (MILLIONS) | | April 4,
2021 | | December 31, 2020 |
| Finished goods | | $ | 3,289 | | | $ | 2,878 | |
| Work-in-process | | 4,364 | | | 4,430 | |
| Raw materials and supplies | | 840 | | | 738 | |
Inventories(a) | | $ | 8,493 | | | $ | 8,046 | |
Noncurrent inventories not included above(b) | | $ | 981 | | | $ | 890 | |
(a)The change from December 31, 20192020 reflects increases for certain products, including inventory build for new product launches and market demand, supply recovery and network strategy, and an increase due to foreign exchange.
(b)Included in Other noncurrent assets. There are no recoverability issues associated withfor these amounts.
B. Other Current Liabilities
Other current liabilities related to the gross margin split with BioNTech for BNT162b2 totaled $1.4 billion as of April 4, 2021 and $25 million as of December 31, 2020.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 9. Identifiable Intangible Assets and Goodwill
A. Identifiable Intangible Assets
Balance Sheet Information
| The following summarizes the components of Identifiable intangible assets: | The following summarizes the components of Identifiable intangible assets: | The following summarizes the components of Identifiable intangible assets: |
| | | | September 27, 2020 | | December 31, 2019 | | April 4, 2021 | | December 31, 2020 |
| (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 | |
| (MILLIONS) | | (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 | Finite-lived intangible assets | | | | | | | | | | | | | Finite-lived intangible assets | | | | | | | | | | | | |
Developed technology rights(a) | Developed technology rights(a) | | $ | 90,052 | | | $ | (66,212) | | | $ | 23,840 | | | $ | 88,730 | | | $ | (63,106) | | | $ | 25,625 | | Developed technology rights(a) | | $ | 74,056 | | | $ | (51,840) | | | $ | 22,217 | | | $ | 73,545 | | | $ | (50,902) | | | $ | 22,643 | |
| Brands | Brands | | 922 | | | (766) | | | 156 | | | 922 | | | (741) | | | 181 | | Brands | | 922 | | | (782) | | | 140 | | | 922 | | | (774) | | | 148 | |
Licensing agreements and other(b) | Licensing agreements and other(b) | | 2,385 | | | (1,238) | | | 1,146 | | | 1,772 | | | (1,191) | | | 582 | | Licensing agreements and other(b) | | 2,305 | | | (1,223) | | | 1,082 | | | 2,292 | | | (1,186) | | | 1,106 | |
| | | 93,358 | | | (68,216) | | | 25,142 | | | 91,425 | | | (65,037) | | | 26,387 | | | 77,284 | | | (53,845) | | | 23,439 | | | 76,759 | | | (52,862) | | | 23,896 | |
| Indefinite-lived intangible assets | Indefinite-lived intangible assets | | | | | | | | | | | | | Indefinite-lived intangible assets | | | | | | | | | | | | |
| Brands | Brands | | 1,991 | | | 1,991 | | | 1,991 | | | 1,991 | | Brands | | 827 | | | 827 | | | 827 | | | 827 | |
IPR&D(c) | IPR&D(c) | | 3,221 | | | 3,221 | | | 5,919 | | | 5,919 | | IPR&D(c) | | 3,135 | | | 3,135 | | | 3,175 | | | 3,175 | |
Licensing agreements and other(b) | Licensing agreements and other(b) | | 573 | | | 573 | | | 1,073 | | | 1,073 | | Licensing agreements and other(b) | | 573 | | | 573 | | | 573 | | | 573 | |
| | 5,785 | | | | | 5,785 | | | 8,983 | | | | | 8,983 | | | 4,535 | | | | | 4,535 | | | 4,575 | | | | | 4,575 | |
Identifiable intangible assets(d)(b) | Identifiable intangible assets(d)(b) | | $ | 99,143 | | | $ | (68,216) | | | $ | 30,927 | | | $ | 100,408 | | | $ | (65,037) | | | $ | 35,370 | | Identifiable intangible assets(d)(b) | | $ | 81,819 | | | $ | (53,845) | | | $ | 27,974 | | | $ | 81,334 | | | $ | (52,862) | | | $ | 28,471 | |
(a)The changeincrease in the gross carrying amount primarily reflect the transferreflects $300 million of $600 million from IPR&Dcapitalized BNT162b2 sales milestones due to Developed technology rights to reflect the approval of Braftovi in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant metastatic colorectal cancer after prior therapy and a $200 million measurement period adjustment related to the acquisition of Array (see Note2A).BioNTech.
(b)The changes in the gross carrying amounts primarily reflect the transfer of $600 million from Indefinite-lived Licensing agreements and other to finite-lived Licensing agreements and other to reflect the approval in the U.S. of several products subject to out-licensing arrangements acquired from Array, as well as measurement period adjustments related to the acquisition of Array.
(c)The changes in the gross carrying amount primarily reflect a $1.2 billion measurement period adjustment related to the acquisition of Array, a $900 million impairment of IPR&D (see Note 4), and the transfer of $600 million from IPR&D to Developed technology rights to reflect the approval of Braftovi in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant metastatic colorectal cancer after prior therapy.
(d)The decrease is primarily due to amortization, partially offset by the $900 million impairmentcapitalization of the BNT162b2 milestone payments described above.
Nearly all of our identifiable intangible assets are managed by our commercial organization, with only 9% of total IPR&D and measurement period adjustments related to the acquisition of Array.
| | | | | | | | | | | | | | | | | | | | |
| Our identifiable intangible assets are associated with the following, as a percentage of total identifiable intangible assets, less accumulated amortization: |
| | September 27, 2020 |
| | Biopharma | | Upjohn | | WRDM |
| Developed technology rights | | 99 | % | | 1 | % | | 0 | |
| Brands, finite-lived | | 100 | % | | 0 | | | 0 | |
| Brands, indefinite-lived | | 42 | % | | 58 | % | | 0 | |
| IPR&D | | 92 | % | | 0 | | | 8 | % |
| Licensing agreements and other, finite-lived | | 99 | % | | 1 | % | | 1 | % |
| Licensing agreements and other, indefinite-lived | | 100 | % | | 0 | | | 0 | |
Amortization
Total amortization of finite-lived intangible assets was $910$883 million for the thirdfirst quarter of 20202021 and $1.2 billion for the third quarter of 2019, and $2.7 billion$861 million for the first nine monthsquarter of 20202020.
Note 10. Pension and $3.6 billion for the first nine months of 2019.
B. Goodwill
| | | | | | | | | | | | | | | | | | | | |
The following summarizes the components and changes in the carrying amount of Goodwill: |
| (MILLIONS OF DOLLARS) | | Biopharma | | Upjohn | | Total |
| Balance, December 31, 2019 | | $ | 48,202 | | | $ | 10,451 | | | $ | 58,653 | |
Additions(a) | | 727 | | | 0 | | | 727 | |
Other(b) | | 420 | | | 102 | | | 522 | |
| Balance, September 27, 2020 | | $ | 49,349 | | | $ | 10,553 | | | $ | 59,902 | |
(a)Additions primarily represents the impact of measurement period adjustments related to our Array acquisition (seeAs discussed in Note 2A1C, we adopted a change in accounting principle to a more preferable policy under U.S. GAAP to immediately recognize actuarial gains and losses arising from the remeasurement of pension and postretirement plans. This change has been applied to all pension and postretirement plans on a retrospective basis for all prior periods presented.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes the components of net periodic benefit cost/(credit), including in 2020 costs/(credits) reported as part of discontinued operations: |
| | |
| | | Pension Plans | | |
| | | U.S. | | | | International | | Postretirement
Plans |
| | Three Months Ended |
| (MILLIONS) | | April 4,
2021 | | March 29,
2020 | | | | | | April 4,
2021 | | March 29,
2020 | | April 4,
2021 | | March 29,
2020 |
| Service cost | | $ | 0 | | | $ | 0 | | | | | | | $ | 33 | | | $ | 36 | | | $ | 9 | | | $ | 10 | |
| Interest cost | | 113 | | | 141 | | | | | | | 36 | | | 42 | | | 7 | | | 13 | |
| Expected return on plan assets | | (261) | | | (252) | | | | | | | (82) | | | (81) | | | (10) | | | (9) | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Amortization of prior service credits | | (1) | | | (1) | | | | | | | 0 | | | (1) | | | (39) | | | (43) | |
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| Actuarial (gains)/losses | | (47) | | | 163 | | | | | | | 0 | | | 3 | | | 0 | | | 0 | |
| Special termination benefits | | 7 | | | 1 | | | | | | | 0 | | | 0 | | | 1 | | | 0 | |
| Net periodic benefit cost/(credit) reported in income | | $ | (187) | | | $ | 53 | | | | | | | $ | (12) | | | $ | (1) | | | $ | (32) | | | $ | (30) | |
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The components of net periodic benefit cost/(credit) other than the service cost component are included in Other (income)/deductions––net (see Note 4).
(b)RepresentsFor the impact of foreign exchange.three months ended April 4, 2021, we contributed $83 million, $40 million, and $19 million to our U.S. Pension Plans, International Pension Plans, and Postretirement Plans, respectively, from our general assets, which include direct employer benefit payments.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 10. Pension and Postretirement Benefit Plans
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes the components of net periodic benefit cost/(credit): |
| | Three Months Ended |
| | | Pension Plans | | |
| | | U.S.
Qualified | | U.S. Supplemental
(Non-Qualified) | | International | | Postretirement
Plans |
| (MILLIONS OF DOLLARS) | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 |
| Service cost | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 36 | | | $ | 31 | | | $ | 10 | | | $ | 9 | |
| Interest cost | | 131 | | | 157 | | | 9 | | | 12 | | | 40 | | | 53 | | | 13 | | | 19 | |
| Expected return on plan assets | | (251) | | | (222) | | | 0 | | | 0 | | | (75) | | | (79) | | | (9) | | | (8) | |
| Amortization of: | | | | | | | | | | | | | | | | |
| Actuarial losses | | 32 | | | 37 | | | 4 | | | 2 | | | 31 | | | 20 | | | 0 | | | 0 | |
| Prior service credits | | (1) | | | (1) | | | 0 | | | 0 | | | (1) | | | (1) | | | (43) | | | (43) | |
| | | | | | | | | | | | | | | | |
| Curtailments | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | (47) | |
| Settlements | | 171 | | | 1 | | | 3 | | | 22 | | | 1 | | | 12 | | | 0 | | | (10) | |
| Special termination benefits | | 0 | | | 3 | | | 0 | | | 5 | | | 0 | | | 0 | | | 0 | | | 1 | |
| Net periodic benefit cost/(credit) reported in income | | $ | 82 | | | $ | (25) | | | $ | 15 | | | $ | 41 | | | $ | 32 | | | $ | 37 | | | $ | (30) | | | $ | (78) | |
|
| | Nine Months Ended |
| | | Pension Plans | | |
| | | U.S.
Qualified | | U.S. Supplemental
(Non-Qualified) | | International | | Postretirement
Plans |
| (MILLIONS OF DOLLARS) | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 |
| Service cost | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 108 | | | $ | 94 | | | $ | 29 | | | $ | 28 | |
| Interest cost | | 393 | | | 472 | | | 26 | | | 37 | | | 122 | | | 162 | | | 38 | | | 57 | |
| Expected return on plan assets | | (754) | | | (667) | | | 0 | | | 0 | | | (228) | | | (239) | | | (27) | | | (25) | |
| Amortization of: | | | | | | | | | | | | | | | | |
| Actuarial losses | | 96 | | | 110 | | | 11 | | | 7 | | | 93 | | | 61 | | | 0 | | | 2 | |
| Prior service credits | | (2) | | | (2) | | | 0 | | | (1) | | | (2) | | | (3) | | | (129) | | | (132) | |
| | | | | | | | | | | | | | | | |
| Curtailments | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | (47) | |
| Settlements | | 191 | | | 3 | | | 47 | | | 21 | | | 2 | | | 12 | | | 0 | | | (10) | |
| Special termination benefits | | 0 | | | 4 | | | 2 | | | 14 | | | 0 | | | 0 | | | 0 | | | 2 | |
| Net periodic benefit cost/(credit) reported in income | | $ | (77) | | | $ | (80) | | | $ | 85 | | | $ | 78 | | | $ | 96 | | | $ | 88 | | | $ | (89) | | | $ | (124) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes the amounts we contributed, and the amounts we expect to contribute during 2020, to our pension and postretirement plans from our general assets for the periods indicated: |
| | 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 September 27, 2020 | | $ | 1,253 | | | $ | 169 | | | $ | 151 | | | $ | 84 | |
Expected contributions from our general assets during 2020(a) | | 1,253 | | | 188 | | | 186 | | | 122 | |
(a)Contributions expected to be made for 2020 are inclusive of amounts contributed during the nine months ended September 27, 2020. 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. For the U.S. qualified plans, we made a $1.25 billion voluntary contribution in September 2020.
Note 11. Equity
A. Preferred Stock
Prior to May 4, 2020, Pfizer’s Series A convertible perpetual preferred stock (the Series A Preferred Stock) was held by an employee stock ownership plan trust (the Trust). All outstanding shares of Series A Preferred Stock were converted, at the direction of the independent fiduciary under the Trust and in accordance with the certificate of designations for the Series A Preferred Stock, into shares of Pfizer common stock on May 4, 2020. The Trust received an aggregate of 1,070,369 shares of
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Pfizer common stock upon conversion, with 0 shares of Series A Preferred Stock remaining outstanding as a result of the conversion.
B. Dividends
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following presents quarterly cash dividends: |
| 2020 | | 2019 |
Date
Declared | | Payment
Date | | Dividend Per
Share | | Date
Declared | | Payment
Date | | Dividend Per Share |
| December 13, 2019 | | March 6, 2020 | | $ | 0.38 | | | December 14, 2018 | | March 1, 2019 | | $ | 0.36 | |
| April 23, 2020 | | June 5, 2020 | | 0.38 | | | April 25, 2019 | | June 7, 2019 | | 0.36 | |
| June 25, 2020 | | September 1, 2020 | | 0.38 | | | June 27, 2019 | | September 3, 2019 | | 0.36 | |
| September 24, 2020 | | December 1, 2020 | | 0.38 | | | September 24, 2019 | | December 2, 2019 | | 0.36 | |
Note 12. Earnings Per Common Share Attributable to Pfizer Inc. Common Shareholders
| The following presents the detailed calculation of EPS: | The following presents the detailed calculation of EPS: | The following presents the detailed calculation of EPS: |
| | | | Three Months Ended | | Nine Months Ended | | | | Three Months Ended |
| (IN MILLIONS) | | September 27,
2020 | | September 29,
2019 | | September 27,
2020 | | September 29,
2019 | |
| (MILLIONS) | | (MILLIONS) | | | April 4,
2021 | | March 29,
2020 |
| EPS Numerator––Basic | EPS Numerator––Basic | | | | | | | | | EPS Numerator––Basic | | | | | |
| Income from continuing operations | | $ | 2,202 | | | $ | 7,680 | | | $ | 9,046 | | | $ | 16,625 | | |
| Less: Net income attributable to noncontrolling interests | | 8 | | | 4 | | | 25 | | | 19 | | |
| Income from continuing operations attributable to Pfizer Inc. | Income from continuing operations attributable to Pfizer Inc. | | 2,194 | | | 7,676 | | | 9,022 | | | 16,606 | | Income from continuing operations attributable to Pfizer Inc. | | | $ | 4,868 | | | $ | 2,474 | |
| Less: Preferred stock dividends––net of tax | Less: Preferred stock dividends––net of tax | | 0 | | | 0 | | | 0 | | | 1 | | Less: Preferred stock dividends––net of tax | | | 0 | | | 0 | |
| Income from continuing operations attributable to Pfizer Inc. common shareholders | Income from continuing operations attributable to Pfizer Inc. common shareholders | | 2,194 | | | 7,676 | | | 9,021 | | | 16,605 | | Income from continuing operations attributable to Pfizer Inc. common shareholders | | | 4,868 | | | 2,474 | |
| Discontinued operations––net of tax | | 0 | | | 4 | | | 0 | | | 4 | | |
| Income from discontinued operations––net of tax | | Income from discontinued operations––net of tax | | | 9 | | | 881 | |
| | Net income attributable to Pfizer Inc. common shareholders | Net income attributable to Pfizer Inc. common shareholders | | $ | 2,194 | | | $ | 7,680 | | | $ | 9,021 | | | $ | 16,609 | | Net income attributable to Pfizer Inc. common shareholders | | | $ | 4,877 | | | $ | 3,354 | |
| EPS Numerator––Diluted | EPS Numerator––Diluted | | | | | | | | | EPS Numerator––Diluted | | | | | |
| Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions | Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions | | $ | 2,194 | | | $ | 7,676 | | | $ | 9,022 | | | $ | 16,606 | | Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions | | | $ | 4,868 | | | $ | 2,474 | |
| Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions | | 0 | | | 4 | | | 0 | | | 4 | | |
| Income from discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions | | Income from discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions | | | 9 | | | 881 | |
| Net income attributable to Pfizer Inc. common shareholders and assumed conversions | Net income attributable to Pfizer Inc. common shareholders and assumed conversions | | $ | 2,194 | | | $ | 7,680 | | | $ | 9,022 | | | $ | 16,609 | | Net income attributable to Pfizer Inc. common shareholders and assumed conversions | | | $ | 4,877 | | | $ | 3,355 | |
| EPS Denominator | EPS Denominator | | | | | | | | | EPS Denominator | | | | | |
| Weighted-average number of common shares outstanding––Basic | Weighted-average number of common shares outstanding––Basic | | 5,557 | | | 5,545 | | | 5,552 | | | 5,581 | | Weighted-average number of common shares outstanding––Basic | | | 5,584 | | | 5,545 | |
| Common-share equivalents: stock options, stock issuable under employee compensation plans and convertible preferred stock | | 76 | | | 104 | | | 70 | | | 110 | | |
| Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements | | Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements | | | 78 | | | 68 | |
| Weighted-average number of common shares outstanding––Diluted | Weighted-average number of common shares outstanding––Diluted | | 5,633 | | | 5,649 | | | 5,622 | | | 5,690 | | Weighted-average number of common shares outstanding––Diluted | | | 5,662 | | | 5,613 | |
Anti-dilutive common stock equivalents(a) | Anti-dilutive common stock equivalents(a) | | 7 | | | 3 | | | 5 | | | 2 | | Anti-dilutive common stock equivalents(a) | | | 2 | | | 3 | |
(a)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 13.12. Contingencies and Certain Commitments
We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business, including tax and legal contingencies. The following outlines our legal contingencies. For a discussion of our tax contingencies, see Note 5B. For a discussion of our legal contingencies, see below.
A. Legal Proceedings
Our legal 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 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, a significant loss of revenues from that drug or impairment of the value of associated assets.
•Product liability and other product-related litigation, which can include personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, among others, 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 acquisition-, licensing-, intellectual property-, collaboration- or co-promotion-related and product-pricing claims and environmental claims and proceedings, 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 jurisdictions.
Certain of these contingencies could result in increased expenses and/or losses, including damages, fines and/or civil penalties, which could be substantial, and/or criminal charges.
We believe that our claims and defenses in 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
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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 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.
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.
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,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(s) at issue. As a resultSome 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.
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(UNAUDITED)
A1. Legal Proceedings––Patent Litigation
Like other pharmaceutical companies, weWe are involved in numerous suits relating to our patents, including but not limited to, those discussed below. Most of the suits involve claims by generic drug manufacturers that patents covering our products (or those of our collaboration/licensing partners), 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 jurisdictions. For example, some of our collaboration or licensing partners face challenges to the validity of their patent rights in non-U.S. jurisdictions. We are also party to patent damages suits in various jurisdictions pursuant to which generic drug manufacturers, payers, governments or other parties are seeking damages from us for allegedly causing delay of generic entry. Additionally, our licensing and collaboration partners face challenges by generic drug manufacturers to patents covering products for which we have licenses or co-promotion rights.
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 relating to our intellectual property or the intellectual property rights of others. Also, if one of our 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 were challenged in inter partes review and post-grant review proceedings in the U.S. In October 2017, the Patent Trial and Appeal Board (PTAB) refusedinitiated proceedings, which remain pending, with respect to 2 of our pneumococcal vaccine patents. However, the PTAB declined to initiate proceedings as to two other pneumococcal vaccine patents; those 2 patents. In June 2018, the PTAB ruled on anotherpatents, and 1 other patent, holding that 1 claim was valid and that all other claims were invalid. The party challenging that patent appealed the decision. In November 2019, the U.S. Court of Appeals for the Federal Circuit vacated the PTAB’s ruling and requested that the PTAB redecide the challenge.In March and June 2019, an additional patent was found invalidare now being challenged in separate proceedings by the PTAB. We appealed. In January 2020, the U.S. Court of Appeals for the Federal Circuit vacated the original decision and requested that the PTAB redecide the case.federal court in Delaware. Challenges to other pneumococcal vaccine patents remain pending in jurisdictions outside the U.S.The invalidation of all of the patents in our pneumococcal portfolio could potentially allow a competitor’s pneumococcal vaccine into the marketplace. In the event that any of the patents are found valid and infringed, a competitor’s pneumococcal vaccine might be prohibited from entering the market or a competitor might be required to pay Pfizerus a royalty.
We are also subject to patent litigation pursuant to which one or more third parties seek damages and/or injunctive relief to compensate for alleged infringement of its patents by our commercial or other activities. For example, our Hospira subsidiaries are involved in patent and patent-related disputes over their attempts to bring generic pharmaceutical and biosimilar products to market. If one of our marketed products is found to infringe valid patent rights of a third party, such third party may be awarded
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(UNAUDITED)
significant damages, 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.
Actions In Which We Are The Plaintiff
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 (ANDA) 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.
Xeljanz (tofacitinib)
Beginning in 2017, we brought patent-infringement actions against several generic manufacturers that filed separate abbreviated new drug applicationsANDAs with the FDA seeking approval to market their generic versions of tofacitinib tablets in one or both of 5 mg and 10 mg dosage strengths, and in both immediate and extended release forms. To date, we have settled actions against the following genericwith several manufacturers have been settled on terms not material to Pfizer: (i) MicroLabs USA Inc. and MicroLabs Ltd.; (ii) Sun Pharmaceutical Industries Ltd.; (iii) Prinston Pharmaceutical Inc., Zhejiang Huahai Pharmaceutical Co., Ltd., Huahai US Inc. and Solco Healthcare US, LLC; (iv) Breckenridge Pharmaceutical Inc., Pensa Pharma S.A. and Laboratorios Del Dr. Esteve, S.A.; and (v) Ajanta Pharma Ltd. and Ajanta Pharma USA Inc.us. The remaining actions continue in the U.S. District Court for the District of Delaware as described below.
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 asserting the infringement and validity of 3 patents: the patent covering the active ingredient expiring in December 2025 (the 2025 Patent), the patent covering an enantiomer of tofacitinib expiring in 2022, and the patent covering a polymorphic form of tofacitinib expiring in 2023 (the 2023 Patent), which Zydus challenged in its abbreviated new drug applicationANDA seeking approval to market a generic version of tofacitinib 5 mg tablets.
In December 2018, we brought a separate patent infringement action against Teva Pharmaceuticals USA, Inc. (Teva) in the U.S. District Court for the District of Delaware asserting the infringement and validity of our patent covering extended release
PFIZER INC. AND SUBSIDIARY COMPANIES
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(UNAUDITED)
formulations of tofacitinib that was challenged by Teva in its abbreviated new drug applicationANDA seeking approval to market a generic version of tofacitinib 11 mg extended release tablets.
Inlyta (axitinib)
In April 2018, Apotex Inc. notified us that it had filed an abbreviated new drug application withJanuary 2021, we brought a separate patent-infringement action against Aurobindo Pharma Limited (Aurobindo) asserting the FDAinfringement and validity of the 2025 Patent and the 2023 Patent, which Aurobindo challenged in its ANDA seeking approval to market a generic version of Inlyta. Apotex Inc. asserted the invaliditytofacitinib 5 mg and non-infringement of the crystalline form patent for 10 mg tablets.
Inlyta that expires in 2030. In May 2018, we filed suit against Apotex Inc. in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the crystalline form patent for Inlyta. In September 2020, we settled the case against Apotex Inc. on terms not material to Pfizer.
In May 2019, Glenmark Pharmaceuticals Limited (Glenmark) notified us that it had filed an abbreviated new drug applicationANDA with the FDA seeking approval to market a generic version of Inlyta. Glenmark asserts the invalidity and non-infringement of the crystalline form patent for Inlyta that expires in 2030. In June 2019, we filed suit against Glenmark in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the crystalline form patent for Inlyta.
Kerydin (tavaborole)
In September 2018, several generic companies notified us that they had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Kerydin. The generic companiesassert the invalidity and non-infringement of methods of use and formulation patents for tavaborole that expire in 2026 and 2027, including pediatric exclusivity. In October 2018, Anacor, our wholly-owned subsidiary, filed infringement lawsuits against each of the generic filers in the U.S. District Court for the District of Delaware and the U.S. District Court for the District of West Virginia. The cases were consolidated in a Multi-District Litigation in the U.S. District Court for the District of Delaware, and, in September 2020, the District Court issued a final judgment in favor of the generic defendants, which will not have a material impact on Pfizer.
Ibrance (palbociclib)
In March 2019, several generic companies notified us that they had filed abbreviated new drug applicationsANDAs with the FDA seeking approval to market generic versions of Ibrance. The generic companies assert the invalidity and non-infringement of 2 composition of matter patents, one of which expires in 2023 and one of which expires in 2027, as a result of a U.S. Patent Term Extension certificate issued in January 2021, and a method of use patent covering palbociclib, each of which expireexpires in 2023. In April 2019, we brought patent infringement actions against each of the generic filers in various federal courts, asserting the validity and infringement of the patents challenged by the generic companies. Beginning in September 2020, we received correspondence from several generic companies notifying us that they would seek approval to market generic versions of Ibrance. The generic companies assert the invalidity and non-infringement of our crystalline form patent which expires in 2034. Beginning in October 2020, we brought patent infringement actions against each of these generic companies in various federal courts, asserting the validity and infringement of the crystalline form patent.
Chantix (varenicline)
In January 2020, we brought a patent infringement action against Viwit Pharmaceutical Co. Ltd. (Viwit) in the U.S. District Court for the District of Delaware asserting the validity and infringement of 3 patents challenged by Viwit in its abbreviated new drug application seeking approval to market a generic version of varenicline, 0.5 mg and 1.0 mg tablets. In September 2020, we settled the case against Viwit on terms not material to Pfizer.
Lyrica (pregabalin)
•United Kingdom
In June 2014, Generics (U.K.) Ltd (trading as Mylan) filed an invalidity action against the Lyrica pain use patent in the High Court of Justice in London. Subsequently, Actavis Group PTC ehf filed an invalidity action in the same court, and Pfizer sued Actavis Group PTC ehf, Actavis U.K. Ltd and Caduceus Pharma Ltd (together, Actavis) for infringement and requested preliminary relief. Our request for preliminary relief was denied in a January 2015 hearing, and the denial subsequently was confirmed on appeal.
In February 2015, the National Health Service (NHS) England was ordered by the High Court, as an intermediary, to issue guidance for prescribers and pharmacists directing the prescription and dispensing of Lyrica by brand when pregabalin was prescribed for the treatment of neuropathic pain. NHS Wales and NHS Northern Ireland also issued prescribing guidance. The guidance to prescribe and dispense Lyrica for neuropathic pain was withdrawn upon patent expiration in July 2017.
We also filed infringement actions against (i) Teva UK Ltd, and (ii) Dr. Reddy’s Laboratories (UK) Ltd and Caduceus Pharma Ltd (together, Dr. Reddy’s) in February 2015, seeking the same relief as in the action against Actavis. Dr. Reddy’s filed an invalidity counterclaim. These actions were stayed pending the outcome of the Mylan and Actavis cases.
The Mylan and Actavis invalidity actions were heard in the High Court at the same time as the Actavis infringement action. The High Court ruled against us, holding that the asserted claims were either not infringed or invalid, and appeals followed. In November 2018, the U.K. Supreme Court ruled that all the relevant claims directed to neuropathic pain were invalid.
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In October 2015, after Sandoz GmbH and Sandoz Ltd (together, Sandoz) launched a full label generic pregabalin product, we obtained from the High Court a preliminary injunction enjoining Sandoz from further sales of the product and ordering Sandoz to identify the parties holding its product. Sandoz identified wholesaler AAH Pharmaceuticals Ltd and pharmacy chain Lloyds Pharmacy Ltd (supplied by AAH), and we requested that these parties cease further sales and withdraw the Sandoz full label product. In October 2015, Lloyds was added to the Sandoz action, and we obtained a preliminary order from the High Court requiring Lloyds to advise its pharmacists that the Sandoz full label product should not be dispensed. In November 2015, the High Court confirmed the preliminary injunction against Sandoz and Lloyds. Sandoz filed an invalidity counterclaim. Upon agreement of the parties, in December 2015, the proceedings against Lloyds were discontinued, and the proceedings against Sandoz were stayed pending outcome of the Mylan and Actavis cases. The preliminary injunction against Sandoz remained in place until patent expiration in July 2017.
In May 2020, Dr. Reddy’s filed a claim for damages in connection with the above-referenced legal actions. In July 2020, the Scottish Ministers and 14 Scottish Health Boards (together, NHS Scotland) filed a claim for damages in connection with the above-referenced legal action concerning Sandoz. In September 2020, Teva, Sandoz, Ranbaxy, Inc. (Ranbaxy), Actavis, and the Secretary of State for Health and Social Care, together with 32 other National Health Service entities (together, NHS England, Wales, and Northern Ireland) filed claims for damages in the above-referenced legal actions.
•Japan
In January 2017, Sawai Pharmaceutical Company Limited (a Japanese generic company) (Sawai) filed an invalidation action against the Lyrica pain use patent in the Japanese Patent Office (JPO). Hexal AG has filed a separate invalidation action that was stayed pending the result of the Sawai action. Multiple parties were allowed to intervene in the Sawai case. In July 2020, the JPO recognized the validity of certain amended claims of the patent covering Lyrica. We are appealing the decision. In August 2020, the Japanese regulatory authority granted regulatory approval to multiple generic companies and we filed legal actions against the generic companies seeking preliminary and permanent injunctions to prevent infringement of our patent.
Matter Involving Our Collaboration/Licensing Partners
Eliquis
In February, March, and April 2017, NaN generic companies sent BMS Paragraph-IV certification letters informing BMS that they had filed abbreviated new drug applicationsANDAs seeking approval of generic versions of Eliquis, challenging the validity and infringement of one or more of the 3 patents listed in the Orange Book for Eliquis. NaN of the patents expired in December 2019 and the remaining patents currently are set to expire in 2026 and 2031. Eliquis has been jointly developed and is being commercialized by BMS and Pfizer. In April 2017, BMS and Pfizer filed patent-infringement actions against all generic filers in the U.S. District Court for the District of Delaware and the
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U.S. District Court for the District 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 2031 patent, some challenged both the 2031 and 2026 patent, and one generic company challenged all 3 patents. In August 2020, the U.S. District Court for the District of Delaware ruled that both the 2026 patent and the 2031 patent are valid and infringed by the proposed generic products. In August and September 2020, the generic filers appealed the District Court’s decision to the U.S. Court of Appeals for the Federal Circuit. Prior to the August 2020 ruling, we and BMS settled with certain of the generic companies on terms not material to Pfizer,us, and we and BMS may settle with other generic companies in the future.
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. Claims against American Optical and numerous other defendants are 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 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.
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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
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.
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 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 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
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(UNAUDITED)
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) 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 of the direct purchasers. In October and November 2014, the District Court dismissed with prejudice the claims of all other Multi-District Litigation 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 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 Pfizer in various federal and state courts alleging that the plaintiffs developed type 2 diabetes purportedly as a result of the ingestion of Lipitor. Plaintiffs seek compensatory and punitive damages.
In February 2014, the federal actions were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Lipitor (Atorvastatin Calcium) Marketing, Sales Practices and Products Liability Litigation (No. II) MDL-2502) in the U.S.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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. In June 2018, the U.S. Court of Appeals for the Fourth Circuit affirmed the District Court’s decision.
Viagra
Since April 2016, a Multi-District Litigation has been pending in the U.S. District Court for the Northern District of California (In Re: Viagra (Sildenafil Citrate) Products Liability Litigation, MDL-2691), in which plaintiffs allege that they developed melanoma and/or the exacerbation of melanoma purportedly as a result of the ingestion of Viagra. Additional cases filed against Lilly with respect to Cialis have also been consolidated in the Multi-District Litigation (In re: Viagra (Sildenafil Citrate) and Cialis (Tadalafil) Products Liability Litigation, MDL-2691). In January 2020, the District Court granted our and Lilly’s motion to exclude all of plaintiffs’ general causation opinions. As a result, in April 2020, the District Court entered summary judgment in favor of defendants and dismissed all of plaintiffs’ claims. In April 2020, plaintiffs filed a notice of appeal in the U.S. Court of Appeals for the Ninth Circuit.
EpiPen
Beginning in February 2017, purported class actions were filed in various federal courts by indirect purchasers of EpiPen against Pfizer, and/or its affiliates King and Meridian, and/or various entities affiliated with Mylan, and Mylan former 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 February 2020, a similar lawsuit was filed in the U.S. District Court for the District of Kansas against Pfizer, King, Meridian and the Mylan entities on behalf of a purported U.S. nationwide class of direct purchaser plaintiffs who purchased EpiPen devices directly from the defendants (the 2020 Lawsuit). Against Pfizer and/or its affiliates, plaintiffs in these actions generally allege that Pfizer’s and/or its affiliates’ settlement of patent litigation regarding EpiPen delayed market entry of generic EpiPen in violation of federal antitrust laws and various state antitrust laws. At least 1 lawsuit also alleges that Pfizer and/or Mylan violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO). Plaintiffs also filed various federal antitrust, state consumer protection and unjust enrichment claims against, and relating to conduct attributable solely to, Mylan and/or its affiliates regarding EpiPen. Plaintiffs seek treble damages for alleged overcharges for EpiPen since 2011. In August 2017, all of these actions, except for the 2020 Lawsuit, were consolidated for coordinated pre-trial proceedings in a Multi-District Litigation (In re: EpiPen (Epinephrine Injection, USP) Marketing, Sales Practices and Antitrust Litigation, MDL-2785) in the U.S. District Court for the District of Kansas with other EpiPen-related actions against Mylan and/or its affiliates to which Pfizer, King and Meridian are not parties.
In July 2020, a new lawsuit was filed in the U.S. District Court for the District of Colorado on behalf of indirect purchasers. Plaintiff represents a putative U.S. nationwide class of persons or entities who paid for any portion of the end-user purchase price of certain refill or replacement EpiPens since 2010. Plaintiff alleges that Pfizer and Meridian misrepresented the shelf-life and expiration date of EpiPen, in violation of the federal RICO statute. Plaintiff seeks treble damages for alleged unnecessary replacement or refill purchases of EpiPens by members of the putative class.
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 purportedly as a result of the ingestion of certain proton pump inhibitors. The cases against Pfizer involve Protonix and/or Nexium 24HR 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 proceedings to a Multi-District Litigation (In re: Proton-Pump Inhibitor Products Liability Litigation (No. II)) in the U.S. District Court for the District of New Jersey. On July 31, 2019, we and GSK combined our respective consumer healthcare businesses into a new consumer healthcare joint venture that operates globally under the GSK Consumer Healthcare name. As part of our Consumer Healthcare JV transaction with GSK, the joint venture transaction, the joint ventureJV has agreed to assume, and to indemnify Pfizer for, liabilities arising out of such litigation to the extent related to Nexium 24HR.
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.
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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) in the U.S. District Court for the Eastern District of Louisiana.
•Mississippi Attorney General Government Action
In October 2018, the Attorney General of Mississippi filed a complaint in Mississippi state court against the manufacturer of the branded product and 8 other manufacturers including Pfizer and Hospira, alleging, with respect to Pfizer and Hospira, a failure to
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warn about a risk of permanent hair loss in violation of the Mississippi Consumer Protection Act. The action seeks civil penalties and injunctive relief.
Array Securities Litigation
In November 2017, 2 purported class actions were filed in the U.S. District Court for the District of Colorado alleging that Array, which we acquired in July 2019 and is our wholly owned subsidiary, and certain of its former officers violated federal securities laws in connection with certain disclosures made, or omitted, by Array regarding the NRAS-mutant melanoma program. In March 2018, the actions were consolidated into a single proceeding. In March 2021, the parties reached an agreement in principle to resolve the litigation on terms not material to us, which is subject to Court approval.
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 over-the-counterOTC version of the product. Plaintiffs seek compensatory and punitive damages and, in some cases, treble damages, restitution or disgorgement.
In February 2020, the federal actions were transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In re Zantac/Ranitidine NDMA Litigation, MDL-2924) in the U.S. District Court for the Southern District of Florida. InFrom June to December 2020: (i) plaintiffs in the Multi-District Litigation filed against Pfizer and many other defendants a consolidated consumer class action complaint alleging, among other things, violations of the RICO statute and consumer protection statutes of all 50 states, and a consolidated third-party payor class action complaint alleging violation of the RICO statute and seeking reimbursement for payments made for the prescription version of Zantac; (ii) Pfizer received service of a2 Canadian class action complaintcomplaints 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 (iii) the State of New Mexico filed a civil action against Pfizer and many other defendants, alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in New Mexico.Mexico; and (iv) Pfizer received service of a suit filed by the Mayor and City Council of Baltimore naming Pfizer and other defendants alleging various claims under Maryland law.
A3. Legal Proceedings––Commercial and Other Matters
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 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.
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 spin-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.
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Environmental Matters
In 2009, we submitted to 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. In September 2010, our corrective measures study report was approved by the EPA, and we commenced construction of the site remedy in late 2011 under an Updated
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Administrative Order on Consent with the EPA. In September 2019, the EPA acknowledged that construction of the site remedy has been completed. In March 2021, the State of Connecticut, Department of Energy & Environmental Protection issued a Stewardship Permit to Pharmacia & Upjohn Company LLC, our wholly-owned subsidiary, that will govern the ongoing operation, maintenance, and management of the North Haven site, and which will not have a material impact on Pfizer.
Also in 2009, we submitted a revised site-wide feasibility study with regard to Wyeth Holdings Corporation’s (formerly, American Cyanamid Company) discontinued industrial chemical facility in Bound Brook, New Jersey. In July 2011, Wyeth Holdings Corporation finalizedexecuted an Administrative Settlement Agreement and Order on Consent for Removal Action (the 2011 Administrative Settlement Agreement) with the EPA with regard to the Bound Brook facility. In May 2012,accordance with the 2011 Administrative Settlement Agreement, we completed construction of an interim remedy to address the discharge of impacted groundwater from thatthe 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 2 adjacent lagoons. In September 2015, the U.S., on behalf of the EPA, filed a complaint and consent decree with the federal District Court for the District of New Jersey that allows Wyeth Holdings LLC to complete the design and to implement the remedy for the main plant area. In December 2015, theThe consent decree (which supersedes the 2011 Administrative Settlement Agreement) was entered by the District Court.Court in 2015. In September 2018, the EPA issued a final remediation plan for the 2 adjacent lagoons, which is generally in accordance with one of the remedies evaluated in our focused feasibility study, and, in September 2019, 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 lagoons.
We have accrued for the estimated costs of the site remedies for the North Haven and Bound Brook facilities.
We are a 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.
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, and seeks monetary relief. In July 2020, the District Court granted defendants’ motions to dismiss and dismissed all of plaintiffs’ claims. The plaintiffs are appealing the District Court’s decision. In July 2018, the U.S. Department of Justice requested documents related to this matter, which were provided. In August 2020, the U.S. Department of Justice informed Pfizer that it had closed its investigation.
Allergan Complaint for Indemnity
In August 2018, Pfizer was named as a defendant in a third-party complaint for indemnity, along with King, filed by Allergan Finance LLC (Allergan) in a Multi-District Litigation (In re National Prescription Opiate Litigation MDL 2804) in the U.S. District Court for the Northern District of Ohio. The lawsuit asserted 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. In December 2018, the District Court dismissed the lawsuit. In February 2019, Allergan filed a similar complaint in the Supreme Court of the State of New York, asserting claims for indemnity related to Kadian. That suit was voluntarily discontinued without prejudice in January 2021.
Breach of Contract––Xalkori/Lorbrena
Pfizer isWe are a defendant in a breach of contract action brought by New York University (NYU) in the Supreme Court of the State of New York (Supreme Court). NYU alleges that it is entitled to royalties on Pfizer’s sales of Xalkori under the terms of a Research and License Agreement between NYU and Sugen, Inc. Sugen, Inc. was acquired by Pharmacia in August 1999, and Pharmacia was acquired by Pfizer in 2003 and is a wholly owned subsidiary of Pfizer. The action was originally filed in 2013. In December 2015, the Supreme Court dismissed the action and, in May 2017, the New York State Appellate Division reversed the decision and remanded the proceedings to the Supreme Court. In January 2020, the Supreme Court denied both parties’ summary judgment motions.
In October 2020, NYU filed a separate breach of contract action against Pfizer alleging that it is entitled to royalties on sales of Lorbrena under the terms of the same NYU-Sugen, Inc. Research and Licensing Agreement.
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A4. Legal Proceedings––Government Investigations
Like other pharmaceutical companies, weWe are subject to extensive regulation by government agencies in the U.S., other developed markets and multiple emerging markets in which we operate. Criminal charges, substantial fines and/or civil penalties, limitations on our ability to conduct business in applicable jurisdictions, corporate integrity or deferred prosecution agreements, as well as reputational harm and
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increased public interest in the matter could result from government investigations in the U.S. and other jurisdictions in which we do business. 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.
Greenstone 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. The government has been obtaining information from GreenstoneWe have produced records relating to this investigation.
•State Attorneys General Generics Antitrust Litigation
In April 2018, Greenstone received requests for information from the Antitrust Department of the Connecticut Office of the Attorney General. In May 2019, Attorneys General of more than 40 states plus the District of Columbia and Puerto Rico filed a complaint against a number of pharmaceutical companies, including Greenstone and Pfizer. The matter has been consolidated with a Multi-District Litigation (In re: Generic Pharmaceuticals Pricing Antitrust Litigation MDL No. 2724) in the Eastern District of Pennsylvania. As to Greenstone and Pfizer, the complaint alleges anticompetitive conduct in violation of federal and state antitrust laws and state consumer protection laws. In June 2020, the State Attorneys General filed a new complaint against a large number of companies, including Greenstone and Pfizer, making similar allegations, but concerning a new set of drugs. This complaint was transferred to the Multi-District Litigation in July 2020.
Subpoena relating to Manufacturing of Quillivant XR
In October 2018, we received a subpoena from the U.S. Attorney’s Office for the Southern District of New York (SDNY) seeking records relating to our relationship with another drug manufacturer and its production and manufacturing of drugs including, but not limited to, Quillivant XR. We have produced records pursuant to the subpoena.
Government Inquiries relating to Meridian Medical Technologies
In February 2019, we received a civil investigative demand from the U.S. Attorney’s Office for the SDNY. The civil investigative demand seeks records and information related to alleged quality issues involving the manufacture of auto-injectors at our Meridian site. In August 2019, we received a HIPAA subpoena from the U.S. Attorney’s Office for the Eastern District of Missouri seeking similar records and information. We are producing records in response to these requests.
U.S. Department of Justice/SEC Inquiry relating to Russian Operations
In June 2019, we received an informal request from the U.S. Department of Justice’s Foreign Corrupt Practices Act (FCPA) Unit seeking documents relating to our operations in Russia. In September 2019, we received a similar request from the SEC’s FCPA Unit. We are producinghave produced records pursuant to these requests.
Contracts with Iraqi Ministry of Health
See Note 13A3. Contingencies and Certain Commitments: Legal Proceedings––Commercial and Other Matters––Contracts with Iraqi Ministry of Health above for information regarding U.S. government investigations related to contracts with the Iraqi Ministry of Health.
Docetaxel––Mississippi Attorney General Government ActionInvestigation
See Note 13A2. Contingencies and Certain Commitments: Legal Proceedings––Product Litigation––Docetaxel––Mississippi Attorney General Government ActionInvestigation above for information regarding a government actioninvestigation related to Docetaxel marketing practices.
U.S. Department of Justice Inquiries relating to India Operations
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 are producing records pursuant to these requests.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Zantac––State of New Mexico Civil Action
See Note 13A2.12A2. Contingencies and Certain Commitments: Legal Proceedings––Product Litigation––Zantac above for information regarding a civil action filed by the State of New Mexico alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in New Mexico.
A5. Legal Proceedings––Matters Resolved During the First Nine Months of 2020
During the first nine months of 2020, certain matters, including the matter discussed below, were resolved or became the subject of definitive settlement agreements or settlement agreements-in-principle.
Hormone Therapy Consumer Class Action
A certified consumer class action was 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 consisted of California consumers who purchased Wyeth’s hormone-replacement products between January 1995 and January 2003 and who did not seek personal injury damages therefrom. The class sought compensatory and punitive damages, including a full refund of the purchase price. In March 2020, the parties reached an agreement, and obtained preliminary court approval, to resolve this matter for $200 million, which was paid in full in the second quarter of 2020.
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 or following a transaction. If the indemnified party were to make a successful claim pursuant to the
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terms of the indemnification, we may be required to reimburse the loss. These indemnifications are generally subject to various restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of September 27, 2020,April 4, 2021, the estimated fair value of these indemnification obligations was not significant.
In addition, in connection with our entry into certain agreements and other transactions, our counterparties may agree to indemnify us. For example, our collaboration agreement with EMD Serono, Inc. to co-promote Rebif in the U.S. expired at the end of 2015 and included certain indemnity provisions. Patent litigation brought by Biogen Idec MA Inc. against EMD Serono Inc. and Pfizer is pending in the U.S. District Court for the District of New Jersey and the United States Court of Appeals for the Federal Circuit. EMD Serono Inc. has acknowledged that it is obligated to satisfy any award of damages. In addition, 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, Viatris has agreed to assume, and to indemnify Pfizer for, liabilities arising out of certain matters.
Pfizer Inc. hasWe have also guaranteed the long-term debt of certain companies that itwe acquired and that now are subsidiaries of Pfizer. See Note 7D.
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. For additional information, see Notes to Consolidated Financial Statements––Note 1D. Basis of Presentation and Significant Accounting Policies: Acquisition1D s in our 2019 Financial Report. The estimated fair value of contingent consideration as of September 27, 2020 is $701 million, of which $125 million is recorded in Other current liabilities and $576 million in Other noncurrent liabilities and $711 million, of which $160 million was recorded in Other current liabilities and $551 million in Other noncurrent liabilities as ofDecember 31, 2019. The decrease in the contingent consideration balance from December 31, 2019 is primarily due to payments made upon the achievement of certain milestones, partially offset by fair value adjustments.Form 10-K.
Note 14. Segment,13. Product, Geographic and Other Revenue Information
A. Segment | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes revenues by geographic area: | | | | | | |
| | | Three Months Ended | | |
| (MILLIONS) | | April 4,
2021 | | March 29,
2020 | | %
Change | | | | | | |
| United States | | $ | 7,597 | | | $ | 5,289 | | | 44 | | | | | | | |
| Developed Europe | | 3,038 | | | 1,708 | | | 78 | | | | | | | |
| Developed Rest of World | | 1,123 | | | 919 | | | 22 | | | | | | | |
| Emerging Markets | | 2,824 | | | 2,166 | | | 30 | | | | | | | |
| Revenues | | $ | 14,582 | | | $ | 10,083 | | | 45 | | | | | | | |
| | | | | | | | | | | | |
We and our collaboration partner, BioNTech, have entered into agreements to supply pre-specified doses of BNT162b2 with multiple developed and emerging nations around the world and are continuing to deliver doses of BNT162b2 under such agreements. We currently sell the BNT162b2 vaccine directly to government and government sponsored customers. This includes supply agreements entered into in November 2020 and February 2021 with the European Commission (EC) on behalf of the different EU member states and certain other countries. Each EU member state submits its own BNT162b2 vaccine order to us and is responsible for payment pursuant to terms of the supply agreements negotiated by the EC.
B. Other Revenue Information
Significant Customers
For information on our significant wholesale customers, see Note 17B in our 2020 Form 10-K. Additionally, revenues from sales of BNT162b2 to the U.S. Government represented 14% of total revenues for the three months ended April 4, 2021. Accounts receivable from sales of BNT162b2 to the U.S. Government represented 12% of total trade accounts receivable as of April 4, 2021.
At the beginning of our fiscal year 2019, we reorganized our commercial operations and began to manage our commercial operations through a new global structure consisting of 3 distinct business segments: Biopharma, Upjohn and through July 31, 2019, Pfizer’s Consumer Healthcare business (Consumer Healthcare), each led by a single manager. Each operating segment has responsibility for its commercial activities. Upjohn is, and through July 31, 2019 Consumer Healthcare was, responsible for its own R&D activities while Biopharma receives its R&D services from GPD and WRDM. These services include IPR&D projects for new investigational products and additional indications for in-line products. Each business has a geographic footprint across developed and emerging markets. Our chief operating decision maker uses the revenues and earnings of the operating segments, among other factors, for performance evaluation and resource allocation. Biopharma and Upjohn are the only reportable segments.
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Beginning in 2020, Upjohn began managing our Meridian subsidiary, the manufacturer of EpiPen and other auto-injector products, and a pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan (Mylan-Japan). As a result, revenues and expenses associated with Meridian and Mylan-Japan are reported in our Upjohn business beginning in the first quarter of 2020. In 2019, revenues and expenses from Meridian and Mylan-Japan were recorded in our Biopharma business. We have revised prior-period information (Revenues and Earnings, as defined by management) to conform to the current management structure.
Acquisitions and other business development activities completed in 2019 and in the first nine months of 2020, including the contribution of our Consumer Healthcare business to the GSK Consumer Healthcare joint venture, impacted financial results in the periods presented. See Notes to Consolidated Financial Statements—Note 1A. Basis of Presentation and Significant Accounting Policies: Basis of Presentation in our 2019 Financial Report, and Note 2.
Operating Segments
| | | | | | | | | | | |
Some additional information about our Biopharma and Upjohn business segments follows: |
| Pfizer
Biopharmaceuticals
Group
| | |
Biopharma is a science-based innovative medicines business that includes six business units – Oncology, Inflammation & Immunology, Rare Disease, Hospital, Vaccines and Internal Medicine. The Hospital unit commercializes our global portfolio of sterile injectable and anti-infective medicines and includes Pfizer’s contract manufacturing operation, Pfizer CentreOne. Each business unit is committed to delivering breakthroughs that change patients’ lives. | | Upjohn is a global, primarily off-patent branded and generic medicines business, which includes a portfolio of 20 globally recognized solid oral dose brands, as well as a U.S.-based generics platform, Greenstone. |
Select products include:
- Prevnar 13/Prevenar 13
- Ibrance
- Eliquis
- Xeljanz
- Enbrel (outside the U.S. and Canada)
- Vyndaqel/Vyndamax
- Xtandi
- Chantix/Champix
- Sutent
| | Select products include:
- Lipitor
- Lyrica
- Norvasc
- Celebrex
- Viagra
- Certain generic medicines
|
Other Costs and Business ActivitiesSignificant Product Revenues
Certain pre-tax costs are not allocated to our operating segment results, such as costs associated with the following:
•WRDM––the R&D and Medical expenses managed by our WRDM organization, which is generally responsibleThe following provides detailed revenue information for research projects for our Biopharma portfolio until proof-of-concept is achieved and then for transitioning those projects to the GPD organization for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRDM organization also has responsibility for certain science-based and other platform-services organizations, which provide end-to-end technical expertise and other services to the various R&D projects, as well as the Worldwide Medical and Safety group, which ensures that Pfizer provides all stakeholders––including patients, healthcare providers, pharmacists, payers and health authorities––with complete and up-to-date information on the risks and benefits associated with Pfizer products so that they can make appropriate decisions on how and when to use Pfizer’s medicines.
•GPD––the costs associated with our GPD organization, which is generally responsible for clinical trials from WRDM in the Biopharma portfolio, including late stage portfolio spend. GPD also provides technical support and other services to Pfizer R&D projects. GPD is responsible for facilitating all regulatory submissions and interactions with regulatory agencies.
•Other––the operating resultsseveral of our Consumer Healthcare business, through July 31, 2019, and costs associated with other commercial activities not managed as part of Biopharma or Upjohn, including all strategy, business development, portfolio management and valuation capabilities, which previously had been reported in various parts of the organization.major products:
| | | | | | | | | | | | | | | | | | | | | | | | |
| (MILLIONS) | | | | Three Months Ended | | |
| PRODUCT | | PRIMARY INDICATION OR CLASS | | April 4,
2021 | | March 29,
2020 | | | | |
TOTAL REVENUES(a) | | | | $ | 14,582 | | | $ | 10,083 | | | | | |
| Vaccines | | | | $ | 4,894 | | | $ | 1,611 | | | | | |
| BNT162b2 alliance revenues and direct sales | | Active immunization to prevent COVID-19 | | 3,462 | | | 0 | | | | | |
| Prevnar 13/Prevenar 13 | | Pneumococcal disease | | 1,284 | | | 1,450 | | | | | |
| FSME/IMMUN-TicoVac | | Tick-borne encephalitis disease | | 53 | | | 48 | | | | | |
| Nimenrix | | Meningococcal disease | | 46 | | | 75 | | | | | |
| All other Vaccines | | Various | | 49 | | | 38 | | | | | |
| Oncology | | | | $ | 2,862 | | | $ | 2,435 | | | | | |
| Ibrance | | HR-positive/HER2-negative metastatic breast cancer | | 1,254 | | | 1,248 | | | | | |
| Xtandi alliance revenues | | mCRPC, nmCRPC, mCSPC | | 267 | | | 209 | | | | | |
| Inlyta | | Advanced RCC | | 229 | | | 169 | | | | | |
| Sutent | | Advanced and/or metastatic RCC, adjuvant RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor | | 200 | | | 205 | | | | | |
| Xalkori | | ALK-positive and ROS1-positive advanced NSCLC | | 134 | | | 149 | | | | | |
| Bosulif | | Philadelphia chromosome–positive chronic myelogenous leukemia | | 123 | | | 100 | | | | | |
Retacrit(b) | | Anemia | | 109 | | | 89 | | | | | |
Ruxience(b) | | Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis | | 98 | | | 7 | | | | | |
Zirabev(b) | | Treatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer | | 86 | | | 6 | | | | | |
| Lorbrena | | ALK-positive metastatic NSCLC | | 60 | | | 42 | | | | | |
| Aromasin | | Post-menopausal early and advanced breast cancer | | 52 | | | 34 | | | | | |
| Besponsa | | Relapsed or refractory B-cell acute lymphoblastic leukemia | | 50 | | | 44 | | | | | |
| Braftovi | | In combination with Mektovi for metastatic melanoma in patients with a BRAFV600E/K mutation and, in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant mCRC after prior therapy | | 47 | | | 37 | | | | | |
| Mektovi | | In combination with Braftovi for metastatic melanoma in patients with a BRAFV600E/K mutation | | 35 | | | 37 | | | | | |
| All other Oncology | | Various | | 119 | | | 59 | | | | | |
| Internal Medicine | | | | $ | 2,594 | | | $ | 2,332 | | | | | |
| Eliquis alliance revenues and direct sales | | Nonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism | | 1,643 | | | 1,300 | | | | | |
| Chantix/Champix | | An aid to smoking cessation treatment in adults 18 years of age or older | | 217 | | | 270 | | | | | |
| Premarin family | | Symptoms of menopause | | 143 | | | 152 | | | | | |
| Pristiq | | Depression | | 60 | | | 41 | | | | | |
| Toviaz | | Overactive bladder | | 57 | | | 60 | | | | | |
| All other Internal Medicine | | Various | | 474 | | | 509 | | | | | |
Hospital(a) | | | | $ | 2,343 | | | $ | 2,088 | | | | | |
| Sulperazon | | Bacterial infections | | 192 | | | 187 | | | | | |
| Medrol | | Anti-inflammatory glucocorticoid | | 99 | | | 129 | | | | | |
| Zavicefta | | Bacterial infections | | 94 | | | 49 | | | | | |
| Zithromax | | Bacterial infections | | 89 | | | 138 | | | | | |
| Vfend | | Fungal infections | | 80 | | | 74 | | | | | |
| Fragmin | | Treatment/prevention of venous thromboembolism | | 71 | | | 59 | | | | | |
| EpiPen | | Epinephrine injection used in treatment of life-threatening allergic reactions | | 66 | | | 84 | | | | | |
| Zyvox | | Bacterial infections | | 55 | | | 70 | | | | | |
| Precedex | | Sedation agent in surgery or intensive care | | 55 | | | 42 | | | | | |
IVIg Products(c) | | Various | | 105 | | | 98 | | | | | |
Pfizer CentreOne(d) | | Various | | 391 | | | 152 | | | | | |
| All other Anti-infectives | | Various | | 397 | | | 395 | | | | | |
| All other Hospital | | Various | | 648 | | | 610 | | | | | |
| Inflammation & Immunology (I&I) | | $ | 1,065 | | | $ | 978 | | | | | |
| Xeljanz | | RA, PsA, UC, active polyarticular course juvenile idiopathic arthritis | | 538 | | | 451 | | | | | |
| Enbrel (Outside the U.S. and Canada) | | RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis | | 319 | | | 347 | | | | | |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
•Corporate and Other Unallocated––the costs associated with corporate enabling functions (such as digital, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance, and worldwide procurement), patient advocacy activities and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments, as well as overhead expenses associated with our manufacturing (which include manufacturing variances associated with production) and commercial operations that are not directly assessed to an operating segment, as business unit (segment) management does not manage these costs. Corporate and Other Unallocated also includes our share of earnings from the GSK Consumer Healthcare joint venture and other charges related to the GSK Consumer Healthcare joint venture, primarily representing our pro-rata share of restructuring and business combination accounting charges recorded by the GSK Consumer Healthcare joint venture.
•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 gains on the completion of joint venture transactions, restructuring charges, legal charges or gains and losses from equity securities) 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.
Segment Assets
We manage our assets on a Total Company basis, not by operating segment, as many of our operating assets are shared or commingled; therefore, such information is not presented.
Selected Income Statement Information
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes selected income statement information by reportable segment: |
| | Three Months Ended |
| | | Revenues | | Earnings(a) |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | September 27,
2020 | | September 29,
2019 |
| Reportable Segments: | | | | | | | | |
| Biopharma | | $ | 10,215 | | | $ | 9,952 | | | $ | 6,807 | | | $ | 6,506 | |
| Upjohn | | 1,916 | | | 2,351 | | | 1,009 | | | 1,384 | |
| Total reportable segments | | 12,131 | | | 12,303 | | | 7,816 | | | 7,890 | |
| Other business activities | | 0 | | | 377 | | | (1,939) | | | (1,469) | |
| Reconciling Items: | | | | | | | | |
| Corporate and other unallocated | | 0 | | | 0 | | | (1,192) | | | (1,439) | |
| Purchase accounting adjustments | | 0 | | | 0 | | | (823) | | | (1,141) | |
| Acquisition-related costs | | 0 | | | 0 | | | (11) | | | (300) | |
Certain significant items(b) | | 0 | | | 0 | | | (1,675) | | | 7,187 | |
| | $ | 12,131 | | | $ | 12,680 | | | $ | 2,176 | | | $ | 10,727 | |
|
| | Nine Months Ended |
| | | Revenues | | Earnings(a) |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | September 27,
2020 | | September 29,
2019 |
| Reportable Segments: | | | | | | | | |
| Biopharma | | $ | 30,017 | | | $ | 28,429 | | | $ | 20,186 | | | $ | 18,461 | |
| Upjohn | | 5,944 | | | 8,535 | | | 3,367 | | | 5,635 | |
| Total reportable segments | | 35,961 | | | 36,964 | | | 23,554 | | | 24,096 | |
| Other business activities | | 0 | | | 2,098 | | | (4,958) | | | (3,776) | |
| Reconciling Items: | | | | | | | | |
| Corporate and other unallocated | | 0 | | | 0 | | | (3,437) | | | (4,116) | |
| Purchase accounting adjustments | | 0 | | | 0 | | | (2,545) | | | (3,357) | |
| Acquisition-related costs | | 0 | | | 0 | | | (46) | | | (152) | |
Certain significant items(b) | | 0 | | | 0 | | | (2,554) | | | 6,495 | |
| | | $ | 35,961 | | | $ | 39,062 | | | $ | 10,014 | | | $ | 19,190 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (MILLIONS) | | | | Three Months Ended | | |
| PRODUCT | | PRIMARY INDICATION OR CLASS | | April 4,
2021 | | March 29,
2020 | | | | |
Inflectra/Remsima(b) | | Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis | | 177 | | | 158 | | | | | |
| All other I&I | | Various | | 31 | | | 22 | | | | | |
| Rare Disease | | | | $ | 824 | | | $ | 639 | | | | | |
| Vyndaqel/Vyndamax | | ATTR-cardiomyopathy and polyneuropathy | | 453 | | | 231 | | | | | |
| BeneFIX | | Hemophilia B | | 112 | | | 121 | | | | | |
| Refacto AF/Xyntha | | Hemophilia A | | 89 | | | 89 | | | | | |
| Genotropin | | Replacement of human growth hormone | | 80 | | | 103 | | | | | |
| Somavert | | Acromegaly | | 65 | | | 64 | | | | | |
| All other Rare Disease | | Various | | 26 | | | 31 | | | | | |
| Total Alliance revenues | | | | $ | 1,770 | | | $ | 1,382 | | | | | |
Total Biosimilars(b) | | | | $ | 530 | | | $ | 288 | | | | | |
Total Sterile Injectable Pharmaceuticals(e) | | $ | 1,482 | | | $ | 1,401 | | | | | |
(a)Income from continuing operations before provision/(benefit) for taxes on incomeOn November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan to form Viatris. See Note 1A. Biopharma’s earnings include dividend income of $44 millionBeginning in the thirdfourth quarter of 2020, and $43 million in the third quarterresults of 2019, and $196 million in the first nine months of 2020 and $184 million in the first nine months of 2019 from our investment in ViiV. See Note 4.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(b)Certain significant items are substantive and/or unusual, and in some cases recurring, items (as noted above) 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. In the third quarter and first nine months of 2020, includes, among other items, intangible asset impairment charges of $900 million, recorded in Other (income)/deductions—net, related to IPR&D assets acquired in connection with our Array acquisition. In the third quarter and first nine months of 2019, includes, among other items, a pre-tax gain of $8.1 billion recorded in (Gain) on completion of Consumer Healthcare JV transaction associated with the completion of the GSK Consumer Healthcare joint venture transaction (See Note 2). Certain significant items are discussed further in Note 3 and Note 4.
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
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes revenues by geographic area: |
| | | Three Months Ended | | Nine Months Ended |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | %
Change | | September 27,
2020 | | September 29,
2019 | | %
Change |
| United States | | $ | 5,716 | | | $ | 5,850 | | | (2) | | | $ | 16,770 | | | $ | 18,360 | | | (9) | |
Developed Europe(a) | | 2,087 | | | 2,135 | | | (2) | | | 6,095 | | | 6,450 | | | (5) | |
| Developed Rest of World | | 1,634 | | | 1,585 | | | 3 | | | 4,642 | | | 4,758 | | | (2) | |
| Emerging Markets | | 2,694 | | | 3,110 | | | (13) | | | 8,453 | | | 9,493 | | | (11) | |
| Revenues | | $ | 12,131 | | | $ | 12,680 | | | (4) | | | $ | 35,961 | | | $ | 39,062 | | | (8) | |
| | | | | | | | | | | | |
(a)Revenues denominated in euros were $1.7 billion in the third quarter of 2020 and $1.7 billion in the third quarter of 2019, and were $4.9 billion in the first nine months of 2020 and $5.2 billion in the first nine months of 2019.
C. Other Revenue Information
Significant Product Revenues
The following provides detailed revenue information for several of our major products:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (MILLIONS OF DOLLARS) | | | | Three Months Ended | | Nine Months Ended |
| PRODUCT | | PRIMARY INDICATION OR CLASS | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 |
| TOTAL REVENUES | | | | $ | 12,131 | | | $ | 12,680 | | | $ | 35,961 | | | $ | 39,062 | |
| PFIZER BIOPHARMACEUTICALS GROUP (BIOPHARMA) | | $ | 10,215 | | | $ | 9,952 | | | $ | 30,017 | | | $ | 28,429 | |
Internal Medicine(a) | | | | $ | 2,085 | | | $ | 2,128 | | | $ | 6,695 | | | $ | 6,508 | |
| Eliquis alliance revenues and direct sales | | Nonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism | | 1,114 | | | 1,025 | | | 3,686 | | | 3,121 | |
| Chantix/Champix | | An aid to smoking cessation treatment in adults 18 years of age or older | | 223 | | | 276 | | | 728 | | | 825 | |
| Premarin family | | Symptoms of menopause | | 168 | | | 182 | | | 471 | | | 542 | |
| BMP2 | | Development of bone and cartilage | | 70 | | | 66 | | | 197 | | | 212 | |
| Toviaz | | Overactive bladder | | 59 | | | 61 | | | 183 | | | 186 | |
| All other Internal Medicine | | Various | | 451 | | | 517 | | | 1,429 | | | 1,621 | |
| Oncology | | | | $ | 2,761 | | | $ | 2,350 | | | $ | 7,843 | | | $ | 6,547 | |
| Ibrance | | Metastatic breast cancer | | 1,357 | | | 1,283 | | | 3,955 | | | 3,677 | |
| Xtandi alliance revenues | | mCRPC, nmCRPC, mCSPC | | 266 | | | 225 | | | 741 | | | 594 | |
| Sutent | | Advanced and/or metastatic RCC, adjuvant RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor | | 202 | | | 224 | | | 616 | | | 704 | |
| Inlyta | | Advanced RCC | | 195 | | | 139 | | | 559 | | | 316 | |
| Xalkori | | ALK-positive and ROS1-positive advanced NSCLC | | 122 | | | 130 | | | 409 | | | 385 | |
| Bosulif | | Philadelphia chromosome–positive chronic myelogenous leukemia | | 111 | | | 90 | | | 324 | | | 267 | |
Retacrit(b) | | Anemia | | 102 | | | 64 | | | 278 | | | 147 | |
| Lorbrena | | ALK-positive metastatic NSCLC | | 55 | | | 32 | | | 142 | | | 77 | |
| Braftovi | | In combination with Mektovi for metastatic melanoma for patients who test positive for a BRAF genetic mutation and, in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant metastatic colorectal cancer after prior therapy | | 42 | | | 18 | | | 116 | | | 18 | |
| Mektovi | | In combination with Braftovi for metastatic melanoma for patients who test positive for a BRAF genetic mutation | | 34 | | | 19 | | | 103 | | | 19 | |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (MILLIONS OF DOLLARS) | | | | Three Months Ended | | Nine Months Ended |
| PRODUCT | | PRIMARY INDICATION OR CLASS | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 |
Ruxience(b) | | Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis | | 59 | | | 0 | | | 78 | | | 0 | |
| All other Oncology | | Various | | 217 | | | 125 | | | 522 | | | 342 | |
Hospital(a), (c) | | | | $ | 1,728 | | | $ | 1,840 | | | $ | 5,535 | | | $ | 5,505 | |
| Sulperazon | | Bacterial infections | | 143 | | | 163 | | | 432 | | | 505 | |
| Medrol | | Anti-inflammatory glucocorticoid | | 87 | | | 109 | | | 295 | | | 348 | |
| Zithromax | | Bacterial infections | | 25 | | | 77 | | | 218 | | | 254 | |
| Precedex | | Sedation agent in surgery or intensive care | | 55 | | | 36 | | | 211 | | | 116 | |
| Vfend | | Fungal infections | | 52 | | | 87 | | | 201 | | | 265 | |
| Panzyga | | Primary humoral immunodeficiency | | 62 | | | 46 | | | 199 | | | 107 | |
| Fragmin | | Treatment/prevention of venous thromboembolism | | 60 | | | 62 | | | 178 | | | 185 | |
| Zyvox | | Bacterial infections | | 51 | | | 61 | | | 176 | | | 195 | |
Pfizer CentreOne(d) | | Various | | 242 | | | 176 | | | 618 | | | 556 | |
| All other Anti-infectives | | Various | | 384 | | | 434 | | | 1,195 | | | 1,260 | |
All other Hospital(c) | | Various | | 568 | | | 589 | | | 1,813 | | | 1,713 | |
| Vaccines | | | | $ | 1,717 | | | $ | 1,808 | | | $ | 4,574 | | | $ | 4,795 | |
| Prevnar 13/Prevenar 13 | | Pneumococcal disease | | 1,534 | | | 1,603 | | | 4,100 | | | 4,268 | |
| Nimenrix | | Meningococcal disease | | 50 | | | 52 | | | 180 | | | 159 | |
| FSME/IMMUN-TicoVac | | Tick-borne encephalitis disease | | 77 | | | 64 | | | 170 | | | 197 | |
| All other Vaccines | | Various | | 56 | | | 89 | | | 124 | | | 171 | |
| Inflammation & Immunology (I&I) | | $ | 1,173 | | | $ | 1,226 | | | $ | 3,299 | | | $ | 3,482 | |
| Xeljanz | | RA, PsA, UC, active polyarticular course juvenile idiopathic arthritis | | 654 | | | 599 | | | 1,741 | | | 1,634 | |
| Enbrel (Outside the U.S. and Canada) | | RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis | | 321 | | | 415 | | | 1,005 | | | 1,285 | |
Inflectra/Remsima(b) | | Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis | | 162 | | | 155 | | | 471 | | | 446 | |
| All other I&I | | Various | | 35 | | | 58 | | | 83 | | | 116 | |
| Rare Disease | | | | $ | 752 | | | $ | 601 | | | $ | 2,071 | | | $ | 1,592 | |
| Vyndaqel/Vyndamax | | ATTR-cardiomyopathy and polyneuropathy | | 351 | | | 156 | | | 859 | | | 259 | |
| BeneFIX | | Hemophilia B | | 107 | | | 125 | | | 337 | | | 372 | |
| Genotropin | | Replacement of human growth hormone | | 107 | | | 124 | | | 316 | | | 357 | |
| Refacto AF/Xyntha | | Hemophilia A | | 92 | | | 104 | | | 272 | | | 319 | |
| Somavert | | Acromegaly | | 67 | | | 64 | | | 198 | | | 192 | |
| All other Rare Disease | | Various | | 27 | | | 28 | | | 89 | | | 94 | |
UPJOHN(a) | | | | $ | 1,916 | | | $ | 2,351 | | | $ | 5,944 | | | $ | 8,535 | |
| Lipitor | | Reduction of LDL cholesterol | | 356 | | | 476 | | | 1,191 | | | 1,506 | |
| Lyrica | | Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury | | 352 | | | 527 | | | 1,058 | | | 2,888 | |
| Norvasc | | Hypertension | | 183 | | | 219 | | | 601 | | | 735 | |
| Celebrex | | Arthritis pain and inflammation, acute pain | | 133 | | | 179 | | | 428 | | | 526 | |
| Viagra | | Erectile dysfunction | | 121 | | | 120 | | | 342 | | | 379 | |
| Effexor | | Depression and certain anxiety disorders | | 80 | | | 80 | | | 242 | | | 242 | |
| Zoloft | | Depression and certain anxiety disorders | | 76 | | | 74 | | | 233 | | | 217 | |
EpiPen(a) | | Epinephrine injection used in treatment of life-threatening allergic reactions | | 58 | | | 74 | | | 194 | | | 197 | |
| Xalatan/Xalacom | | Glaucoma and ocular hypertension | | 62 | | | 68 | | | 188 | | | 201 | |
| Xanax | | Anxiety disorders | | 55 | | | 50 | | | 149 | | | 147 | |
| All other Upjohn | | Various | | 442 | | | 485 | | | 1,317 | | | 1,496 | |
CONSUMER HEALTHCARE BUSINESS(e) | | $ | 0 | | | $ | 377 | | | $ | 0 | | | $ | 2,098 | |
| Total Alliance revenues | | | | $ | 1,250 | | | $ | 1,141 | | | $ | 4,036 | | | $ | 3,418 | |
Total Biosimilars(b) | | | | $ | 424 | | | $ | 236 | | | $ | 1,001 | | | $ | 632 | |
Total Sterile Injectable Pharmaceuticals(f) | | $ | 1,195 | | | $ | 1,248 | | | $ | 3,839 | | | $ | 3,703 | |
(a)Beginning in 2020, Upjohn began managing our Meridian subsidiary, the manufacturer of EpiPen and other auto-injector products, and a pre-existing strategic collaboration between Pfizer and Mylan for generic drugswhich was previously included in Japan (Mylan-Japan). As a result, revenues associated with our Meridian subsidiary, except for product revenues for EpiPen sold in Canada, and Mylan-Japan,former Upjohn operating segment, are reported in our Upjohn business beginning in the first quarter of 2020. We have reclassified revenues
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
associated with our Meridian subsidiary and Mylan-Japan from the Hospital and Internal Medicine categories to the Upjohn business to conform 2019 product revenues to the current presentation.therapeutic area for all periods presented.
(b)Biosimilars are highly similar versions of approved and authorized biological medicines and primarily include revenues from Inflectra/Remsima, Retacrit, Ruxience and Ruxience.Zirabev.
(c)Hospital is a business unit that commercializes our global portfolio of sterile injectable and anti-infective medicines. Hospital also includes Pfizer CentreOne(d). All other Hospital primarily includesIntravenous immunoglobulin (IVIg) products include the revenues from legacy Sterile Injectables Pharmaceuticals (SIP) products (that are not anti-infective products)Panzyga, Octagam and to a much lesser extent, solid oral dose products (that are not anti-infective products). SIP anti-infective products that are not individually listed above are recorded in “All other Anti-infectives”.Cutaquig.
(d)Pfizer CentreOne includes revenues from our contract manufacturing and active pharmaceutical ingredient sales operation, including sterile injectables contract manufacturing, andas well as revenues related to our manufacturing and supply agreements.agreements with former legacy Pfizer businesses/partnerships, including but not limited to, manufacturing and supply agreements with Viatris following the spin-off of the Upjohn Business.
(e)On July 31, 2019, Pfizer’s Consumer Healthcare business, an over-the-counter medicines business, was combined with GSK’s consumer healthcare business to form a new consumer healthcare joint venture. See Note 2B.
(f)Total Sterile Injectable Pharmaceuticals represents the total of all branded and generic injectable products in the Hospital business,therapeutic area, including anti-infective sterile injectable pharmaceuticals.
Deferred Revenues
Note 15. Subsequent Event
AgreementOur deferred revenues primarily relate to Combine Upjohnadvance payments received or receivable in connection with Mylan––On July 29, 2019,contracts that we announced an agreemententered into during 2021 and 2020 with various government or government sponsored customers in international markets for supply of BNT162b2. The deferred revenues associated with the advance payments related to combine Upjohn with Mylan, creating aBNT162b2 total $1.9 billion as of April 4, 2021 and $957 million as of December 31, 2020 and are recorded in current liabilities. The increase in the BNT162b2 deferred revenues during the first quarter of 2021 was the result of additional advance payments received as we entered into new global pharmaceutical company, Viatris.or amended contracts or as we invoiced customers in advance of vaccine deliveries. During the first quarter of 2021, we recognized revenue of $192 million that was included in the balance of BNT162b2 deferred revenues as of December 31, 2020. The transaction is structuredBNT162b2 deferred revenues as an all-stock, Reverse Morris Trust transaction, under which Upjohnof April 4, 2021 will be spun offrecognized in Revenues proportionately as we deliver doses of the vaccine to our shareholderscustomers and immediately thereafter, combinedsatisfy our performance obligation under the contracts, which we expect to occur within the next 12 months.
Subsequent to the end of our fiscal first quarter of 2021 and through April 30, 2021, we received or were due additional advance payments associated with Mylan. Pfizer shareholders would own 57% of the combined new company, and former Mylan shareholders would own 43%. The transaction was approved by Mylan’s shareholders in June 2020. In October 2020, Pfizer and Mylan announced that the FTC accepted a proposed consent order, which concluded the FTC’s review of the proposed combination of Mylan and Pfizer’s Upjohn business, and that the parties have now obtained all required antitrust clearances for the proposed transaction. Also, in October 2020, Pfizer announced that it had set the close of business on November 13, 2020 as the record date for the proposed spin-off and that the transaction is expectedagreements to close on November 16, 2020, subject to customary closing conditions.supply BNT162b2 totaling approximately $3.8 billion.
Report of Independent Registered Public Accounting FirmITEM 2. MANAGEMENTS’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
To the Board of Directors and Shareholders of Pfizer Inc.:
Results of Review of Interim Financial Information
We have reviewed the condensed consolidated balance sheet of Pfizer Inc. and subsidiaries (the Company) as of September 27, 2020, the related condensed consolidated statements of income, comprehensive income and equity for the three-month and nine-month periods ended September 27, 2020 and September 29, 2019, the related condensed consolidated statements of cash flows for the nine-month periods ended September 27, 2020 and September 29, 2019 and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2019, 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 27, 2020, 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, 2019 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated 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 PCAOB, 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.
/s/ KPMG LLP
New York, New York
November 5, 2020
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. All trademarks in this MD&A are the property of their respective owners. The MD&A is organized as follows:
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| This section provides information about the following: Our Business; Our Business Development Initiatives; our performance during the third quarter and first nine months of 2020 and 2019; Our Operating Environment; The Global Economic Environment; Our Strategy; and Our Financial Guidance for 2020. | |
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| This section discusses our disclosures for those accounting policies and estimates that we consider important in understanding our consolidated financial statements. | |
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| This section includes the following sub-sections: | |
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| This sub-section provides an overview of revenues by operating segment and geography as well as revenue deductions. | |
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| This sub-section provides an overview of several of our biopharmaceutical products. | |
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| This sub-section provides an overview of important biopharmaceutical product developments. | |
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| This sub-section provides a discussion about our costs and expenses. | |
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| This sub-section provides a discussion of items impacting our tax provisions. | |
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| This sub-section provides a discussion of an alternative view of performance used by management. | |
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| This section provides a discussion of the performance of each of our operating segments. | |
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| This section provides an analysis of our cash flows for the first nine months of 2020 and 2019. | |
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| This section provides an analysis of selected measures of our liquidity and of our capital resources as of September 27, 2020 and December 31, 2019, as well as a discussion of our outstanding debt and other commitments that existed as of September 27, 2020 and December 31, 2019. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer’s future activities. | |
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| This section discusses accounting standards that we have recently adopted, as well as those that recently have been issued, but not yet adopted. | |
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| 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. | |
Certain amounts in this MD&A may not add due to rounding. All percentages have been calculated using unrounded amounts.
OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK
Our Business and Strategy
We apply science and our global resources to bring therapies to people that extend and significantly improve their lives through the discovery, development, manufacture and distribution of healthcare products, including innovative medicines and vaccines. 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 communities to support and expand access to reliable, affordable healthcare around the world. Our revenues are derived from the sale of our products 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).
At the beginning of our 2019 fiscal year, we began to manage our commercial operations through a new global structure consisting of three business segments––Biopharma, Upjohn and, through July 31, 2019, Consumer Healthcare. Biopharma and Upjohn are the only reportable segments. For additional information about this operating structure, see Note 14Aand the “Commercial Operations” section in Part I, Item 1, “Business” of our 2019 Form 10-K.
Beginning in 2020, Upjohn began managing our Meridian subsidiary, the manufacturer of EpiPen and other auto-injector products, and a pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan (Mylan-Japan). As a result, revenues and expenses associated with Meridian and Mylan-Japan are reported in our Upjohn business beginning in the first quarter of 2020. In 2019, revenues and expenses from Meridian and Mylan-Japan were recorded in our Biopharma business. We performed certain reclassifications between the Biopharma and Upjohn segments to conform 2019 segment revenues and expenses associated with Meridian and Mylan-Japan to the current presentation. There was no impact to our consolidated financial statements.
The majorityMost of our revenues come from the manufacture and sale of biopharmaceutical products. As explained more fullyWith the formation of the Consumer Healthcare JV in our 2019 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 expirationcompletion of co-promotionthe spin-off and licensing rights,combination of our Upjohn Business with Mylan in November 2020, Pfizer has transformed into a focused, global leader in science-based innovative medicines and vaccines. We operate as a single operating segment engaged in the ability to replenish innovativediscovery, development, manufacturing, marketing, sales and distribution of biopharmaceutical products healthcare legislation, pipeline productivity, the regulatory environment, pricing and access pressures, product manufacturing 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 in our 2019 Financial Report and Part I, Item 1A, “Risk Factors” of our 2019 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 23, 2020 and August 25, 2019. 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 September 27, 2020 and September 29, 2019.
References to operational variances in this MD&A pertain to period-over-period growth rates that exclude the impact of foreign exchange. The operational variances are determined by multiplying or dividing, as appropriate, 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 to evaluate the results of our business.
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.
Our significant recent business development activities include:
•Agreement with CStone Pharmaceuticals (CStone)––On September 29, 2020, Pfizer entered into a strategic collaboration with CStone to address oncological needs in China. The collaboration encompasses a $200 million upfront equity investment by Pfizer in CStone, a collaboration between the companies for the development and commercialization of CStone’s sugemalimab (CS1001, PD-L1 antibody) in mainland China, and a framework between the companies to bring additional oncology assets to the Greater China market. The transaction closed on October 9, 2020 and as of the closing date, Pfizer held a 9.9% stake in CStone.
•Agreement with Valneva––On April 30, 2020, we signed an agreement to co-develop and commercialize Valneva’s Lyme disease vaccine candidate VLA15, which is currently in Phase 2 clinical studies. In June 2020, Valneva announced that the antitrust-related condition precedent was met and, consequently, the agreement became effective. VLA15 is the only active Lyme disease vaccine program in clinical development today, and covers six serotypes that are prevalent in North America and Europe. See Note 2C.
•Agreement with BioNTech––On April 9, 2020, we signed a global agreement with BioNTech to co-develop a potential first-in-class, mRNA-based coronavirus vaccine program, BNT162, aimed at preventing COVID-19 infection. The collaboration aims to rapidly advance multiple COVID-19 vaccine candidates into human clinical testing based on BioNTech’s proprietary mRNA vaccine platforms, with the objective of ensuring rapid worldwide access to the vaccine, if approved. The collaboration leverages our broad expertise in vaccine R&D, regulatory capabilities, and global manufacturing and distribution network. We and BioNTech are jointly conducting clinical trials for the COVID-19 vaccine candidates across multiple sites in the U.S., Europe, South America, Africa, Japan and Turkey. For additional information, including information regarding our COVID-19 vaccine development program, see the “Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment”and “Product Developments—Biopharmaceutical” sections of this MD&A and Note 2C.
•Formation of a New Consumer Healthcare Joint Venture––On July 31, 2019, we completed the transaction in which we and GSK combined our respective consumer healthcare businesses into a new consumer healthcare joint venture that operates globally under the GSK Consumer Healthcare name. The joint venture develops and markets brands in the oral health, pain relief, respiratory, nutrition/gastro-intestinal and skin health categories and is one of the world’s leading over-the-counter healthcare companies. Our financial results, and our Consumer Healthcare segment’s operating results, for the third quarter of 2019 reflect one month of Consumer Healthcare segment domestic operations and two months of Consumer Healthcare segment international operations. Likewise, our financial results, and our Consumer Healthcare segment’s operating results, for the first nine months of 2019 reflect seven months of Consumer Healthcare segment domestic operations and eight months of Consumer Healthcare segment international operations. worldwide. The financial results for the third quarter and first nine months of 2020 do not reflect any contribution from the Consumer Healthcare business. See Note 2B.
•Agreement to Combine Upjohn with Mylan––On July 29, 2019, we announced an agreement to combine Upjohn with Mylan, creating a new global pharmaceutical company, Viatris. The transaction is structured as an all-stock, Reverse Morris Trust transaction, under which Upjohn will be spun off to our shareholders and, immediately thereafter, combined with Mylan. Pfizer shareholders would own 57% of the combined new company, and former Mylan shareholders would own 43%. The transaction is expected to be tax free to Pfizer and Pfizer shareholders. The transaction was approved by Mylan’s shareholders in June 2020. In June 2020, Upjohn Inc. and Upjohn Finance B.V. (a wholly-owned subsidiary of Upjohn Inc.) completed privately placed debt offerings in connection with the transaction. See Note 7DBusiness and the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A. In October 2020, Pfizer and Mylan announced that the FTC accepted a proposed consent order, which concluded the FTC’s review of the proposed combination of Mylan and Pfizer’s Upjohn business, and that the parties have now obtainedMylan-Japan collaboration are reflected as discontinued operations for all required antitrust clearances for the proposed transaction. Also, in October 2020, Pfizer announced that it had set the close of business on November 13, 2020 as the record date for the proposed spin-off and that the transaction is expectedperiods presented. Prior-period information has been restated to close on November 16, 2020, subject to customary closing conditions.reflect our current organization structure. We expect to incur costs of approximately $700 million in connection with separating Upjohn, of which approximately 40%70% has been incurred since inception and through the first nine monthsquarter of 2020. Such2021. These charges include costs and expenses related to separation of legal entities and anticipated transaction costs.
For additional information about our business, strategy and operating environment, see the Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2020 Form 10-K.
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 within our control and since they can mask positive or negative trends in the business, we believe presenting operational variances excluding these foreign exchange changes provides useful information to evaluate our results.
Our Business Development Initiatives
We are committed to strategically capitalizing on growth opportunities by advancing our own product pipeline and maximizing the value of our existing products, as well as through various business development activities.
Our significant recent business development activities include:
Acquisition of Amplyx Pharmaceuticals, Inc.(Amplyx)––In April 2021, we announced that we acquired Amplyx, a privately-held company dedicated to the development of therapies for debilitating and life-threatening diseases that affect people with compromised immune systems. Amplyx’s lead compound, Fosmanogepix (APX001), is a novel investigational asset in Phase 2 development for the treatment of invasive fungal infections.
For additional information, including discussion of recent significant business development activities, see Note 2. For a description of the more significant recent transactions through February 27, 2020,25, 2021, the filing date of our 20192020 Form 10-K, see the “Our Business Development Initiatives” section ofNote 2 in our 2019 Financial Report.2020 Form 10-K.
Our ThirdFirst Quarter 2020 and First Nine Months of 20202021 Performance
Revenues
Revenues decreased $549 million,increased $4.5 billion, or 4%45%, in the thirdfirst quarter of 2020,2021, compared to the same period in 2019,2020, reflecting an operational decreaseincrease of $444 million,$4.2 billion, or 4%42%, as well as an unfavorablea favorable impact of foreign exchange of $104$284 million, or 1%3%. Excluding revenues from BNT162b2 of $3.5 billion, revenues increased 8% operationally, including a negative 5% impact from pricing. The 8% operational growth reflects strong growth in Eliquis, Vyndaqel/Vyndamax, Xeljanz, Xtandi, Inlyta, Biosimilars and the Hospital therapeutic area, partially offset by Prevnar 13/Prevenar 13, Ibrance and Chantix in the U.S. and Enbrel internationally.
Excluding the impactRevenues were favorably impacted by approximately $400 million as a result of the Consumer Healthcare transaction, revenues decreased 1% operationally, reflecting an 18% operational declinefirst quarter of 2021 having three additional selling days in our Upjohn business mainly duethe U.S. and four additional selling days in international markets as compared to the U.S. lossfirst quarter of exclusivity2020. This increase in selling days will be offset in the fourth quarter of Lyrica and lower revenues for Lipitor and Norvasc2021 resulting in China due toessentially the same number of selling days in the full year of 2021 as full year 2020. The favorable impact in the first quarter of the VBP program, which2021 from selling days was partially offset by 4% operational growth in our Biopharma business. Excluding the impactnon-recurrence of Lyrica infavorable impacts related to COVID-19 on the U.S., Upjohn revenues declined 12% operationally. Revenues for the thirdfirst quarter of 2020, included an estimated unfavorable impact of approximately $500 million, or 4%, due to COVID-19, primarily driven by lowerincluding increased demand for certain products in Chinaof approximately $150 million and unfavorable disruptions to wellness visits for patients inadditional wholesaler inventories of approximately $100 million. The net favorable impact on the U.S., which negatively impacted prescribing patterns for certain products, partially offset by increased adult uptake for Prevenar 13 in certain international markets resulting from greater vaccine awareness for respiratory illnesses, as well as the recoveryfirst of a portionquarter 2021 revenues of all of the missed dosesabove factors was approximately $150 million, accounting for approximately 1.5 percentage points of Prevnar 13 in the U.S. from second-quarter 2020.operational growth.
Revenues decreased $3.1 billion, or 8%, in the first nine months of 2020, compared to the same period in 2019, reflecting an operational decrease of $2.6 billion, or 7%, as well as an unfavorable impact of foreign exchange of $516 million, or 1%. Excluding the impact of the Consumer Healthcare transaction, revenues decreased 1% operationally, reflecting a 29% operational decline in our Upjohn business mainly due to the U.S. loss of exclusivity of Lyrica and lower revenues for Lipitor and Norvasc in China due to the impact of the VBP program, which was partially offset by 7% operational growth in our Biopharma business. Excluding the impact of Lyrica in the U.S., Upjohn revenues declined 11% operationally. Revenues for the first nine months of 2020 included an estimated unfavorable impact of approximately $800 million, or 2%, due to COVID-19, primarily reflecting lower demand for certain products in China and unfavorable disruptions to wellness visits for patients in the U.S., which negatively impacted prescribing patterns for certain products, partially offset by increased U.S. demand for certain sterile injectable products and increased adult uptake for Prevenar 13 in certain international markets, resulting from greater vaccine awareness for respiratory illnesses.
See the “AnalysisAnalysis of the Condensed Consolidated Statements of Income–Income––Revenues by Operating SegmentGeography and Geography” sectionRevenues––Selected Product Discussion sections for more information, including a discussion of key drivers of our revenue performance.
For worldwide revenues and revenues by geography, for selected products, see the discussion in the “Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion” section of this MD&A. For information regarding the primary indications or class of certain products, see Note 14C.13B.
Income from Continuing Operations Before Provision/(Benefit)continuing operations before provision for Taxestaxes on Incomeincome
The following provides an analysisincrease of the decrease$2.8 billion in Income from continuing operations before provision/(benefit)provision for taxes on incomein the first quarter of 2021, compared to the same period in 2020, was primarily attributable to higher revenues, net gains in the first quarter of 2021 versus net losses in the first quarter of 2020 on equity securities, higher net periodic benefit credits related to pension and postretirement plans and higher income from collaborations, partially offset by higher for the third quarter and first nine months of 2020:
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| (MILLIONS OF DOLLARS) | | Three Months | | Nine Months |
Income from continuing operations before provision/(benefit) for taxes on income, for the three and nine months ended September 29, 2019 | | $ | 10,727 | | | $ | 19,190 | |
| Unfavorable change in revenues | | (549) | | | (3,101) | |
| Favorable/(Unfavorable) changes: | | | | |
Lower Cost of sales(a) | | 73 | | | 423 | |
Lower Selling, informational and administrative expenses(b) | | 244 | | | 1,191 | |
Higher Research and development expenses(c) | | (77) | | | (388) | |
Lower Amortization of intangible assets(d) | | 313 | | | 890 | |
Lower/(higher) Restructuring charges and certain acquisition-related costs(e) | | 361 | | | (139) | |
Non-recurrence of (Gain) on completion of Consumer Healthcare JV transaction | | (8,087) | | | (8,081) | |
Lower business and legal entity alignment costs(f) | | 87 | | | 343 | |
(Lower)/higher net gains recognized during the period on equity-securities(f) | | (76) | | | 255 | |
GSK Consumer Healthcare JV equity method income(f) | | 103 | | | 196 | |
Non-recurrence of net losses on early retirement of debt(f) | | — | | | 138 | |
Higher income from collaborations, out-licensing arrangements and sales of compound/product rights(f) | | 10 | | | 121 | |
Higher royalty-related income(f) | | 59 | | | 50 | |
(Lower)/higher net periodic benefit credits other than service costs(f) | | (73) | | | 12 | |
Higher asset impairment charges(f) | | (872) | | | (712) | |
Loss on remeasurement of Euro debt issued by Upjohn(f) | | (144) | | | (144) | |
Higher net interest expense(f) | | (50) | | | (134) | |
Favorable/(Unfavorable) change in the fair value of contingent consideration(f) | | 11 | | | (78) | |
Non-recurrence of insurance recoveries related to Hurricane Maria in 2019(f) | | — | | | (50) | |
| All other items, net | | 117 | | | 34 | |
Income from continuing operations before provision/(benefit) for taxes on income, for the three and nine months ended September 27, 2020 | | $ | 2,176 | | | $ | 10,014 | |
(a)See the “Costs and Expenses––Cost of Sales” section of this MD&A.
(b)sales, Selling, informational and administrative expenses See the “Costs and Expenses––Selling, Informational and Administrative (SI&A) Expenses” section of this MD&A.
(c)See the “Costs and Expenses––Research and Development (R&D) Expenses” sectiondevelopment expenses. Seethe Analysis of the Condensed Consolidated Statements of Income within this MD&A.
(d)See the “Costs&A and Expenses––Amortization of Intangible Assets” section of this MD&A.
(e)See the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A.
(f)See Note 4.4.
For information on our tax provision and effective tax rate, see the “Provision/(Benefit)Provision for Taxes on Income”Income section of thiswithin MD&A and Note 5.
Our Operating Environment
Industry-Specific Challenges
We, like other businesses in our industry, are subject to certain industry-specific challenges. These include, among others, the topics listed below and in our 2020 Form 10-K.
Intellectual Property Rights and Collaboration/Licensing Rights
The loss, expiration or invalidation of intellectual property rights, patent litigation settlements with manufacturers and the expiration of co-promotion and licensing rights can have a material adverse effect on our revenues. Certain of our current products have experienced patent-based expirations or loss of regulatory exclusivity in certain markets in the last few years, and we expect certain products to face significantly increased generic competition over the next few years. For example, Lyrica lost patent protection in the U.S. in June 2019 and multi-source generic competition began in July 2019. Also, the basic product patent for Chantix in the U.S. expired in November 2020. While multi-source generic competition for Chantix has not yet begun, it could commence at any time. Also, the basic product patent for Sutent in the U.S. will expire on November 10, 2020.in August 2021. While additional patent expiries will continue, we expect thea moderate impact of reduced revenues due to patent expiries will be significant in 2020, then moderating downward to a much lower level from 2021 through 2025. We continue to vigorously defend our patent rights against infringement, and we will continue to support efforts that strengthen worldwide recognition of patent rights while taking necessary steps to ensure appropriate patient access.
For additional information including theon patent rights we consider most significant in relation to our business as a whole, together with the year in which the basic product patent expires and recent and expected losses of product exclusivity, see the “PatentsItem 1. Business––Patents and Other Intellectual Property Rights”Rights section in Part I, Item 1, “Business” of our 20192020 Form 10-K.
We will continue to aggressively defend our patent rights whenever we deem appropriate. For a discussion of certain recent developments with respect to patent litigation, see Note 13A1.
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 2019 Form 10-K.
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| We recorded the following amounts as a result of the U.S. Healthcare Legislation: |
| | Three Months Ended | | Nine Months Ended |
| (MILLIONS OF DOLLARS) | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 |
Reduction to Revenues, related to the Medicare “coverage gap” discount provision | | $ | 417 | | | $ | 307 | | | $ | 767 | | | $ | 596 | |
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. | | 58 | | | 52 | | | 168 | | | 173 | |
Regulatory Environment/Pricing and Access––Government and Other Payer Group Pressures
The pricing of medicines and vaccines by pharmaceutical manufacturers and the cost of healthcare, which includes medicines, vaccines, medical services and hospital services, continues to be important to payers, governments, patients, and other stakeholders. Governments, MCOs and other payor groups continue to seek increasing discounts on our products through a variety of means and could have a material adverse impact on our results of operations. We believe that medicines are amongst the most powerful tools for patients in curing, treating and preventing illness and disability, and that all patients should have appropriate access to the medicines their doctors prescribe. We may consider a number of factors when determining a medicine’s price, including, for example, its impact on patients and their disease, other available treatments, the medicine’s potential to reduce other healthcare costs (such as hospital stays), and affordability. Within the U.S., in particular, we may also engage with patients, doctors and healthcare plans regarding their views. We also negotiate with insurers, including PBMs and MCOs, often providing significant discounts to them from the list price. The price that patients pay in the U.S. for the medicines their physicians prescribe is ultimately set by healthcare providers and insurers. On average, in the U.S., insurers impose a higher out-of-pocket burden on patients for prescription medicines than for comparably-priced medical services. Private third-party payers and federalFederal and state governments and private third-party payers in the U.S. continue to take action to manage the utilization of drugs and control the cost of drugs, including increasingly employing formularies to control costs by taking into account discounts in connection with decisions about
formulary inclusion or favorable formulary placement. For example,We consider a number of factors impacting the pricing of our medicines and vaccines. Within the U.S., we often engage with patients, doctors and healthcare plans. We also often provide significant discounts from the list price to insurers, including PBMs and MCOs. The price that patients pay in Julythe U.S. for prescribed medicines and September 2020, President Trump signed four Executive Orders related to drug pricing, including orders addressing Medicare Part D rebate reform, the provision of deeply discounted insulin and/or an EpiPen to patients of Federally Qualified Health Centers, drug importation from Canada,vaccines is ultimately set by healthcare providers and most favored nation pricing for Medicare Part B and Part D. Each of these Executive Orders will require rulemaking or satisfaction of other requirements before they can be implemented. We will continue to work with insurance providers, governments and others to improve access to today’s innovative treatments. Certain governments, including the different EU member states, the U.K., China, Japan, Canada, South Korea and some other international markets, provide healthcare at low-to-zero direct cost to consumers at the point of care and have significant power as large single payers to regulate pharmaceutical prices or patient reimbursement levels to control costs for the government-sponsored healthcare system, particularly under recent global financing pressures.insurers. Governments globally may use a variety of cost-containment measures, for our pharmaceutical products, including proposing pricing reform or legislation, 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.
In China, a centralized VBP program was initiatedthe U.S., we expect to see continued focus on regulating pricing resulting in 2018. Under this procurement model, a tender process has been established where a certain portion of included molecule volumes are guaranteedadditional legislation and regulation under the newly elected Congress and the Biden Administration. We anticipate that these and similar initiatives will continue to tender winners. The program is intended to contain healthcare costs by driving utilization of generics that have passed quality consistency evaluation, which has resulted in dramatic price cuts for off-patent medicines. Upjohn and most off-patent originators were not successful in the first bidding process under this pilot, which was finalized in December 2018 and implemented in March 2019, and most contracts went to local generic companies. This pilot program covered 25 molecules, including atorvastatin calcium tablets (Lipitor) and amlodipine besylate tablets (Norvasc). In April 2020, China implemented another round of expansion of the national VBP program, which covers 33 new molecules, including Biopharma’s Zithromax tablets and Diflucan capsules and no Upjohn products. Biopharma was not successful in the bidding process for this expansion. In June 2020, China announced the latest round of the expansion of the VBP program, which is being implemented in November 2020 and includes Biopharma’s Xeljanz and Zyvox tablets and Upjohn’s Viagra, Zoloft and Celebrex. Pfizer was successful for the bidding process for Zyvox tablets, which was Pfizer’s first win in the VBP bidding process. Pfizer did not win the bidding process for Xeljanz, Viagra, Zoloft and Celebrex.
increase pricing pressures globally. For additional information, see the “GovernmentItem 1. Business––Pricing Pressures and Managed Care Organizations and ––Government Regulation and Price Constrains” sectionConstraints sections in Part I, Item 1, “Business” of our 2019 Form 10-K.
Other Industry-Specific Challenges
Regulatory agencies periodically inspect our drug manufacturing facilities to evaluate compliance with cGMP or other applicable 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, debarment, recall of a product, delays or denials of product approvals, import bans or denials of import certifications, any of which could have a material adverse effect on our business, financial condition and results of operations. In December 2019-January 2020 for example, the FDA conducted an inspection of our McPherson facility and issued an inspection report noting several findings to which Pfizer responded. Based on the outcome of this inspection, the FDA upgraded the inspection classification of the McPherson site to Voluntary Action Indicated (VAI) from Official Action Indicated. VAI status will allow supplements, including those for manufacturing changes/improvements and new products, to proceed for approval following the normal FDA process for a site with an acceptable compliance status. For additional information, see the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment––Industry-Specific Challenges––Product Manufacturing” section of our 2019 Financial Report.
We and other pharmaceutical companies continue to face industry-specific challenges that can significantly impact our business, including, among others, the regulatory environment, pipeline productivity, product manufacturing and competition. For additional information, see the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment––Industry-Specific Challenges––Regulatory Environment––Pipeline Productivity”, “––Product Manufacturing” and “––Competition”sections of our 2019 Financial Report and Part I, Item 1A, “Risk Factors” of our 2019 Form 10-Kand Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.
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 the economic cycle, which impactscycle. For additional information, please see the Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment section of the MD&A of our biopharmaceutical operations globally.2020 Form 10-K.
COVID-19 Pandemic. Pandemic
In December 2019, illnesses associated with
The continuation of the COVID-19 were reported and the viruspandemic has since caused widespread and significant disruptions to daily life and economies across geographies. The World Health Organization has classified the outbreak as a pandemic. The pandemic’s impact onimpacted our business, operations and financial condition and results was less severe at its peak than originally anticipated, but is recovering at a somewhat slower pace than originally expected. Forresults.
additional information on the impact of COVID-19 on our revenues, please see the “Overview of Our Performance, Operating Environment, Strategy and Outlook–Our Third Quarter 2020 and First Nine Months of 2020 Performance” section of this MD&A.
Pfizer’s Response to COVID-19
We are fully committed to confronting the public health challenge posed by the COVID-19 pandemic by collaborating with industry partners, global regulators and academic institutions to develop potential approaches to prevent and treat COVID-19. Our researchers and scientists alsoWe have been exploring potential new uses of existing medicines in our portfolio that may be able to help infected patients.
In response to the COVID-19 pandemic, in March 2020, we issued a five-point plan calling on the biopharmaceutical industry to join us in committing to unprecedented collaboration to combat COVID-19. Subsequently, we announcedmade some important advances, in the battle against the COVID-19 pandemic, including, among others:
•WeAs discussed in our 2020 Form 10-K, in December 2020, the FDA authorized the distribution and The Pfizer Foundation announceduse of BNT162b2 in the commitment of $40 million in medical and charitable cash grantsU.S. to help combatprevent COVID-19 for individuals 16 years of age and older under an EUA. In May 2021, the health effectsFDA expanded the EUA to authorize the use in individuals 12 to 15 years of age. BNT162b2 has not been approved or licensed by the FDA. The EUA authorizes distribution and use of this product subject to the conditions set forth in the EUA, and only for the duration of the declaration by the Department of Health & Human Services that circumstances exist justifying authorization of emergency use of drugs and biological products (such as BNT162b2) during the COVID-19 pandemic inunder Section 564 of the U.S. Federal Food, Drug and Cosmetic Act (the Declaration), or until revocation of the EUA by the FDA. The FDA has issued EUAs to certain other companies for products intended for the prevention or treatment of COVID-19 and may continue to do so during the duration of the Declaration. The FDA expects EUA holders to work towards submission of a BLA as soon as possible. BNT162b2 has now been granted a CMA, EUA or temporary authorization in many other countries around the world. A majority of these grants have been distributed. The Pfizer Foundation is a charitable organization established by Pfizer Inc. It is a separate legal entity from Pfizer Inc. with distinct legal restrictions.
•We confirmed a lead compound and analogues in our portfolio are potent inhibitors of the SARS-CoV-2 3C-like protease, based on the results of initial screening assays. In addition, preliminary data suggest the lead protease inhibitor shows antiviral activity against SARS-CoV-2,companies have requested similar amendments to expand the virus that causes COVID-19. In July 2020, we published the chemical structureauthorizations for use in individuals 12 to 15 years of a 3C-like (3CL) protease inhibitor, PF-00835321, and itsage by other regulatory authorities worldwide. We also announced in vitro activity against coronaviruses, including SARS-CoV-2. In September 2020, we announcedMay 2021 the initiation of a Phase 1b clinical trial to evaluate the safety, tolerability and pharmacokineticsrolling submission of a novel investigational protease inhibitor for COVID-19, PF-07304814, which is a phosphate prodrug of PF-00835231.
•We entered into a global agreement (except for China, Hong Kong, Macau and Taiwan) with BioNTech to co-develop a potential first-in-class, mRNA-based coronavirus vaccine, BNT162, aimed at preventing COVID-19 infection. As part of this co-development program, which we refer to as Project Lightspeed, we and BioNTech announced in July 2020 the start of a global Phase 3 safety and efficacy clinical study to evaluate a single nucleoside-modified messenger RNA candidate. After extensive review of preclinical and clinical data from Phase 1/2 clinical trials, and in consultationBLA with the FDA’s CenterFDA seeking full approval for Biologics EvaluationBNT162b2 for individuals 16 years of age and Researcholder. We are continuing to study vaccines to help prevent COVID-19, including evaluating BNT162b2 in additional populations, booster doses and other global regulators, we and BioNTech chose to advance the BNT162b2 vaccine candidate into the Phase 3 study, at a 30μg dose level in a 2 dose regimen. BNT162b2, which received Fast Track designation from the FDA in July 2020, encodes an optimized SARS-CoV-2 full length spike glycoprotein, which is the target of virus neutralizing antibodies. We currently plan to enroll up to approximately 44,000 participants in the Phase 3 study. Enrollment in the trial has been proceeding as planned with current enrollment at more than 43,000 participants, with nearly 37,000 having received their second vaccination as of November 2, 2020. We may receive a conclusive readout on efficacy from the Phase 3 trial in the near future. Assuming positive data and availability of the necessary safety and manufacturing data, we expect to be ready to seek Emergency Use Authorization in the U.S. as early as late November 2020.emerging variants. Subject to clinical success, manufacturing capacitycontinuous process improvements, expansion at current facilities and regulatory approval or authorization,adding new suppliers and contract manufacturers, the companies currently aim to supply up to 1.3believe that they can potentially manufacture at least 2.5 billion doses globallyin total by the end of 2021 and to date,at least 3 billion doses in 2022. The companies have entered into agreements with various governments to supply over 300 millionpre-specified doses of BNT162,BNT162b2 with multiple developed and emerging nations around the world and are continuing to deliver doses of BNT162b2 to governments under such agreements. We also signed agreements with Israel and Canada to supply BNT162b2 doses in 2022 and beyond and are currently negotiating similar potential agreements with multiple other countries. As of May 4, 2021, based on the 1.6 billion doses that are to be delivered overin 2021 under agreements that have been signed through mid-April 2021, we forecasted approximately $26 billion in revenues in 2021 from BNT162b2, with gross margin to be split evenly with BioNTech. This forecast may be adjusted in the coursefuture as additional agreements are signed and as circumstances warrant.
•In March 2021, we initiated a Phase 1 study in healthy adults to evaluate the safety and tolerability of 2020 to 2021, with optionsan investigational, novel oral antiviral therapeutic for over 500 million additional doses. Additionally,COVID-19, PF-07321332, which is a SARS-CoV2-3CL protease inhibitor. This Phase 1 trial is being conducted in the companiesU.S. We also have begun tender negotiations with the European Commission (EC) for a proposed supply of 200 million doses of BNT162 to EU Member States, with an optionongoing Phase 1b clinical trial for an additional 100 million doses. For additional information on ourintravenously administered investigational protease inhibitor for COVID-19, vaccine development program, see the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Business Development Initiatives” section of this MD&A, Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q and Note 2C.PF-07304814.
Despite our significant investments and efforts, any of our ongoing development programs for any potential treatment or vaccine forrelated to COVID-19 may not be successful as the risk of failure is significant, and there can be no certainty these efforts will yield a successful product or that these costs will ultimately be recouped. In addition, we may change the way we approach or provide additional research funding for potential drug and/or vaccine development related to COVID-19. We will continue to share information from our research that could benefit the global effort to respond to this unprecedented healthcare crisis.
Impact of COVID-19 on Pfizer’sOur Business and Operations
We are continuing to monitor the latest developments regarding the COVID-19 pandemic onAs part of our business, operations,on-going monitoring and financial condition and results, andassessment, we have made certain assumptions regarding the pandemic for purposes of our operational planning and financial projections, including assumptions regarding the duration, and severity of the pandemic and the global macroeconomic impact of the pandemic. For additional information, please also see our financial guidance set forth in the “Overview of Our Performance, Operating Environment, Strategypandemic, as well as COVID-19 vaccine supply and Outlook––Our Financial Guidance for 2020” section of this MD&A.contracts, which remain dynamic. Despite careful tracking and planning, however, we are unable to accurately predict the extent of the impact of the pandemic on our business, operations and financial condition and results due to the uncertainty of future developments. In particular, we believe the ultimate impact on our business, operations and financial condition and results will be affected by the
speed and extent of the continued spread of the coronavirus globally, the duration of the pandemic, new information that may emerge concerning the severity and incidence of COVID-19, the safety, efficacy and availability of a vaccine and treatments for COVID-19, the global macroeconomic impact of the pandemic and governmental or regulatory actions to contain the virus or control supply of medicines. We are focused on all aspects of our business and are implementing measures aimed at mitigating issues where possible, including by using digital technology to assist in operations for our commercial, manufacturing, R&D and enabling functions globally.
•Our Colleagues. At this time,As discussed in our colleagues2020 Form 10-K, our business and operations were impacted in most locations who are able to perform their job functions outside2020 by the pandemic in various ways, which is ongoing in 2021. For detail on the impact of our facilities continue to work remotely. Certain of our colleagues, primarily those in the Pfizer Global Supply and Worldwide Research and Development organizations continue to report to work and are subject to strict protocols intended to reduce the risk of transmission, including social distancing, maintaining contact logs, increased cleaning and use of personal protective equipment as necessary.
•Our Sales and Marketing. We have experienced an impactCOVID-19 pandemic on our sales and marketing activities due to widespread restrictions on in-person meetings with healthcare professionals andproducts, see the refocused attentionAnalysis of the medical community on fighting COVID-19. Access to prescribers for sales force colleagues during the third quarterConsolidated Statements of 2020 was mixed. AtIncome—Revenues—Selected Product Discussion section within this time, some sales force colleagues are meeting in-person with healthcare professionals. We are actively reviewing and assessing epidemiological data and our colleagues remain ready to resume in-person engagements with healthcare professionals on a location-by-location basis as soon as it is safe to do so.
During the pandemic,MD&A. In 2021, we have adapted our promotional platform by amplifying our existing digital capabilitiescontinued not to reach healthcare professionals and customers to provide critical education and information, including increasing the scale of our remote engagement.
•Our Manufacturing and Supply Chain.Our manufacturing and supply chain professionals have been working continuously in an effort to ensure continued patient access to our medicines and vaccines. To date, we have not seensee a significant disruption into our supply chain to date, and all of our manufacturing sites around the worldglobally have continued to operate at or near normal levels.
•Our Clinical Trials. After a brief pause to the recruitment portion of certain ongoing clinical studies and a delay to most new study starts, However, we restarted recruitment across the development portfolio (including new study starts)are seeing an increase in late-April 2020.
•Our Products. Our portfolio of products comprises medicines and vaccines which have and may experience varying impacts from the COVID-19 pandemic. Some of our products, such as Eliquis and Ibrance, are medically necessary but also more reliant on maintenance therapy with continuing patients in addition to new patients. Certain other products, such as Vyndaqel/Vyndamax, Chantix/Champix and products used in certain elective surgeries, are more reliant on new patient starts and typically require doctor visits, including wellness visits. Other medicines have been identified as medically necessary for treatmentoverall demand in the pandemic, such asindustry for certain ofcomponents and raw materials potentially constraining available supply, which could have a future impact on our Hospital sterile injectable products. A large proportion of our portfolio comprises oral or self-injected medicines that do not require a visitbusiness. We are continuing to monitor and implement mitigation strategies in an infusion center or a physician’s office for administration, but vaccines and physician-administered medicines which do require office visits were impacted by COVID-19-related mobility restrictions or limitations during the first nine months of 2020. Specialty pharmacy channels, from which we derive a majority of our revenue, enable direct delivery of these specialty medicineseffort to patients.
•Our Financial Condition and Access to Capital Markets. Due to our significant operating cash flows, as well as our financial assets, access to capital markets and revolving credit agreements, we believe we have, and will maintain, the ability to meet liquidity needs for the foreseeable future.reduce any potential impact.
We will continue to pursue efforts to maintain the continuity of our operations while monitoring for new developments related to the COVID-19 pandemic, which are unpredictable.pandemic. Future COVID-19 developments could result in additional favorable or unfavorable impacts on our business, operations or financial condition and results. If we experience significant disruption in our manufacturing or supply chains or significant disruptions in clinical trials or other operations, or if demand for our products is ultimately significantly reduced as a result of the
COVID-19 pandemic, we could experience a material adverse impact on our business, operations and financial condition and results. See Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.
For other global economic environment matters impacting our business,additional information, please see the “Overview Item 1A. Risk Factors—COVID-19 Pandemic section and the Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment”Outlook section of our 2019 Financial Report.
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 20192020 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 adverse impact on our revenues. We are firmly committed to fulfilling our Company’s purpose: Breakthroughs that change patients’ lives. By doing so, we expect to create value for the patients we serve and for our colleagues and shareholders. For a more comprehensive discussion of our strategy including additional discussion of certain items, see the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Strategy”section of our 2019 Financial Report.
Organizing for Growth
We believe we have one of the strongest pipelines we have had in over a decade, and believe we are well positioned for future growth. While additional patent expiries will continue, we expect the impact of reduced revenues due to patent expiries will be significant in 2020, then moderating downward to a much lower level from 2021 through 2025. This confluence of events has provided us an opportunity to look at and refine how we organize our business to best achieve sustainable growth and to deliver our medicines and vaccines to the maximum number of people who need them.
At the beginning of our fiscal year 2019, we began to manage our commercial operations through a new global structure consisting of three businesses, each led by a single manager—Biopharma, Upjohn and, through July 31, 2019, Pfizer’s Consumer Healthcare business. See Note 14A. We designed this new global structure to take advantage of new growth opportunities driven by the evolving and unique dynamics of relevant markets. As part of our Organizing for Growth initiative, we also reorganized our R&D operations, as explained in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Strategy––Organizing for Growth” section of our 2019 Financial Report.
Subsequent to the re-alignment of our commercial operations in 2019, on July 29, 2019, we announced an agreement to combine Upjohn with Mylan, creating a new global pharmaceutical company, Viatris. See the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Business Development Initiatives” section in this MD&A. We believe the new company will transform and accelerate Upjohn’s and Mylan’s ability to serve patients’ needs and expand their capabilities across more than 165 markets. The combination will drive a sustainable, diverse and differentiated portfolio of prescription medicines, complex generics, over-the-counter products and biosimilars supported by commercial and regulatory expertise, established infrastructure, R&D capabilities and manufacturing and supply chain excellence.
As we prepare for expected growth, we are focused on creating a simpler, more efficient organization by streamlining structures, processes and governance within each business and the functions that support them. As our innovative pipeline matures based on anticipated progression of current trials and the initiation of new pivotal trials, including new trials for medicines we may acquire or in-license, we will need to increase our R&D investments. In addition, as our pipeline potentially delivers new commercialization opportunities, we will need to increase our investments in new-market-creation activities. We have initiated an enterprise-wide digital effort to accelerate drug development, enhance experiences (patient and physician) and access and leverage technology and robotics to simplify and automate our processes.
Transforming to a More Focused Company Program
With the formation of the GSK Consumer Healthcare joint venture and the anticipated combination of Upjohn, our global, primarily off-patent branded and generics business, with Mylan, Pfizer is transforming into a more focused, global leader in science-based innovative medicines. Accordingly in the fourth quarter of 2019, we began to identify and undertake efforts to ensure our cost base aligns appropriately with our Biopharmaceutical revenue base, which is expected to be 20% less (based on the midpoint of the range for 2020 New Pfizer revenue guidance, compared to 2019 Total Company reported revenue) as a result of both the completed GSK Consumer Healthcare and expected Upjohn transactions. While certain direct costs have transferred or will transfer to the GSK Consumer Healthcare joint venture and to the Upjohn entities, there are indirect costs which are not expected to transfer. In addition, we are taking steps to restructure our organizations to appropriately support and drive the purpose of the three core functions of our focused innovative medicines business: R&D, Manufacturing and Commercial. See the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A.
Our Financial Guidance for 2020
On October 27, 2020, we updated and tightened ranges for certain components of Total Company 2020 financial guidance, including a slight increase to the midpoint of the Adjusted diluted EPS guidance range and reaffirmed all 2020 financial guidance components for New Pfizer and Upjohn.
Financial guidance reflects management’s current expectations for operational performance, foreign exchange rates as well as various COVID-19-related uncertainties, primarily those related to the severity, duration and global macroeconomic impact of the pandemic.
Key guidance assumptions regarding these uncertainties broadly reflect an ongoing, gradual global recovery from the macroeconomic and healthcare impacts of the COVID-19 pandemic. These assumptions are guided by the trajectory of the pandemic’s impact on Pfizer’s business to date, which was less severe at its peak than originally anticipated, but is recovering at a somewhat slower pace than originally expected. Current guidance continues to assume no revenue contributions from a potential COVID-19 vaccine.
2020 Financial Guidance for Total Company
| | | | | |
|
Pfizer’s updated 2020 financial guidance is presented below(a), (b):
|
Revenues | $48.8 to $49.5 billion |
| (previously $48.6 to $50.6 billion) |
Adjusted cost of sales as a percentage of revenues | 20.2% to 20.7% |
| (previously 19.5% to 20.5%) |
Adjusted selling, informational and administrative expenses | $11.5 to $12.0 billion |
| (previously $11.5 to $12.5 billion) |
Adjusted research and development expenses | $8.8 to $9.1 billion |
| (previously $8.6 to $9.0 billion) |
Adjusted other (income)/deductions | Approximately $1.0 billion of income |
| |
| (previously approximately $800 million of income) |
Effective tax rate on adjusted income | Approximately 15.0% |
| |
|
Adjusted diluted EPS | $2.88 to $2.93 |
| (previously $2.85 to $2.95) |
| |
| |
| |
(a)The 2020 financial guidance reflects the following:
•Financial guidance for Total Company reflects a full-year 2020 contribution from Biopharma and Upjohn, the current construct of the company, and excludes any impact from the pending Upjohn combination with Mylan.
���Does not assume the completion of any business development transactions not completed as of September 27, 2020, including any one-time upfront payments associated with such transactions.
•Includes Pfizer’s pro rata share of the GSK Consumer Healthcare joint venture anticipated earnings, which is recorded in Adjusted other (income)/deductions on a one-quarter lag. Therefore, 2020 financial guidance for Adjusted other (income)/deductions and Adjusted diluted EPS reflects Pfizer’s share of the joint venture’s earnings that were generated in the fourth quarter of 2019 and the first and second quarters of 2020 (recorded by Pfizer in the first nine months of 2020) as well as Pfizer’s share of the joint venture’s projected earnings during the third quarter of 2020 (to be recorded by Pfizer in the fourth quarter of 2020).
•Reflects an anticipated negative revenue impact of $2.4 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.
•Exchange rates assumed are a blend of actual exchange rates in effect through third-quarter 2020 and mid-October 2020 rates for the remainder of the year. Financial guidance reflects the anticipated unfavorable impact of approximately $0.5 billion on revenues and approximately $0.04 on Adjusted diluted EPS as a result of changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2019.
•Guidance for adjusted diluted EPS assumes diluted weighted-average shares outstanding of approximately 5.6 billion shares, which assumes no share repurchases in 2020.
(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.
Beginning in 2020, Upjohn began managing Pfizer’s Meridian subsidiary, the manufacturer of EpiPen and other auto-injector products, and a pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan (Mylan-Japan). As a result, revenues and expenses associated with Meridian and Mylan-Japan are reported in Pfizer’s Upjohn business beginning in the first quarter of 2020.
Pfizer, Upjohn and Mylan agreed (simultaneous with their entry into the transaction agreements governing the proposed combination of Upjohn and Mylan) to review and negotiate in good faith a potential transfer of Pfizer’s Meridian Medical Technologies business (the Meridian Business) to Upjohn, such that it would be sold to Mylan in the pending transaction for the Upjohn business. The Meridian Business supplies EpiPen Auto-Injectors to Mylan under a supply agreement expiring December 31, 2020 (the EpiPen Supply Agreement). Instead of entering into an agreement to transfer the Meridian Business to Mylan, the parties have agreed to extend the EpiPen Supply Agreement for an additional four-year period through December 31, 2024, with an option for Mylan to further extend the term for an additional one-year period thereafter.
Pfizer and Mylan have also reached a preliminary agreement on the general terms under which Pfizer would transfer certain Pfizer assets that currently form part of the Mylan-Japan collaboration to Mylan or, following the proposed combination of Upjohn and Mylan, to Viatris. Any such proposed transaction would be subject to the finalization and execution of a definitive agreement that would contain customary closing conditions, including but not limited to, receipt of any necessary regulatory approvals. There can be no assurance that any agreement or transaction will result from these negotiations, and if the parties are unsuccessful in their efforts to negotiate the terms of such potential transactions, the Pfizer assets that currently form part of the Mylan-Japan collaboration will remain with Pfizer.
2020 Financial Guidance for New Pfizer
| | | | | |
2020 reaffirmed financial guidance for New Pfizer is presented below(a), (b):
|
Revenues | $40.8 to $42.4 billion |
| |
Adjusted IBT Margin(c)
| Approximately 37.0% |
Adjusted Diluted EPS | $2.28 to $2.38 |
| |
Operating Cash Flow(d)
| $10.0 to $11.0 billion |
| |
(a)The financial guidance for New Pfizer reflects a full-year 2020 view of the company assuming the pending Upjohn combination with Mylan was completed at the beginning of 2020 and reflects contributions from the Biopharma business as it is presently being managed, which excludes contributions from Pfizer’s Meridian subsidiary and the Pfizer-Mylan strategic collaboration in Japan (Mylan-Japan). Pfizer’s Meridian subsidiary and Mylan-Japan were managed by Pfizer’s Biopharma business in 2019, but were moved to Upjohn in 2020. Financial guidance for New Pfizer also includes the full-year effect of the following items that assume the pending Upjohn combination with Mylan was completed at the beginning of 2020: (i) $12 billion of net proceeds from Upjohn to be retained by Pfizer, which Pfizer will use to repay its own existing indebtedness; and (ii) other transaction-related items, such as income from transition services agreements between Pfizer and Viatris. In addition, 2020 financial guidance for New Pfizer Adjusted IBT Margin and Adjusted diluted EPS reflects Pfizer’s share of the GSK Consumer Healthcare joint venture’s earnings that were generated in the fourth quarter of 2019 and in the first and second quarters of 2020 (recorded by Pfizer in the first nine months of 2020), as well as Pfizer’s share of the joint venture’s projected earnings during the third quarter of 2020 (to be recorded by Pfizer in the fourth quarter of 2020).
(b)For additional information regarding 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.
(c)Adjusted income before tax margin (Adjusted IBT margin) is defined as revenue less the sum of Adjusted cost of sales, Adjusted SI&A expenses, Adjusted R&D expenses, Adjusted amortization of intangible assets and Adjusted other (income)/deductions as a percentage of revenue. Adjusted IBT margin is presented because management believes this performance measure supplements investors’ and other readers’ understanding and assessment of the financial performance of New Pfizer. Adjusted IBT margin is not, and should not be viewed as, a substitute for U.S. GAAP income before tax margin.
(d)Includes a $1.25 billion voluntary contribution made to the U.S. qualified pension plans in September 2020.
2020 Financial Guidance for Upjohn
| | | | | |
2020 reaffirmed financial guidance for Upjohn is presented below(a):
|
Revenues | $8.0 to $8.5 billion |
| |
Adjusted EBITDA(b)
| $3.8 to $4.2 billion |
(a)Financial guidance for Upjohn reflects a full-year 2020 contribution from the Upjohn business as it is presently being managed, which includes contributions from Pfizer’s Meridian subsidiary and the Pfizer-Mylan strategic collaboration in Japan (Mylan-Japan). Pfizer’s Meridian subsidiary and Mylan-Japan were managed by Pfizer’s Biopharma business in 2019 but were moved to Upjohn in 2020.
(b)Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) is defined as reported U.S. GAAP net income, and its components, adjusted for interest expense, provision for taxes on income and depreciation and amortization, further adjusted to exclude purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items (some of which may recur, such as gains on the completion of joint venture transactions, restructuring charges, legal charges or gains and losses from equity securities, but which management does not believe are reflective of ongoing core operations). Adjusted EBITDA is presented because management believes this performance measure supplements investors’ and other readers’ understanding and assessment of the financial performance of Upjohn. Adjusted EBITDA as defined is not a measurement of financial performance under GAAP, and should not be considered as an alternative to net income or cash flow from operations determined in accordance with GAAP.
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 gains and losses, acquisition-related expenses, gains and losses from equity securities 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 savings associated with our Transforming to a More Focused Company program, see the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this MD&A and Note 3.
Our 2020 financial guidance is subject to a number of assumptions, as well as factors and uncertainties as described in the “Our Operating Environment”, “The Global Economic Environment”, “Our Strategy” and “Forward-Looking Information and Factors That May Affect Future Results” sections of this MD&A; Part I, Item 1A, “Risk Factors” of our 2019 Form 10-K; and Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.
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 2019 Financial Report2020 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: Acquisitions (Note 1D)(Note 1D); Fair Value (Note 1E)(Note 1E); Revenues (Note 1G)(Note 1G); Asset Impairments (Note 1L)(Note 1L); Tax Assets and Liabilities and Income Tax Contingencies (Note 1P)(Note 1P); Pension and Postretirement Benefit Plans (Note 1Q)(Note 1Q); and Legal and Environmental Contingencies (Note 1R)(Note 1R).
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 ofwithin MD&A in our 2019 Financial Report.2020 Form 10-K. See also Notes to Consolidated Financial Statements––Note 1C. Basis of Presentation and Significant Accounting Policies: Estimates and Assumptions1C in our 2019 Financial Report2020 Form 10-K for a discussion about the risks associated with estimates and assumptions.
For a discussion of a recently adopted accounting standardsstandard, a change in accounting principle related to our pension and postretirement plans, and significant accounting policies, see NoteNotes 1B, 1C andNote 1C. 1D.
ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Revenues by Operating Segment and Geography
The following graphs show revenues by operating segment and geography:
Third Quarter
| | | | | | | | |
2020 Revenues by Geography | | % of Total |
U.S. | | 47% |
International | | 53% |
| | | | | | | | |
2019 Revenues by Geography | | % of Total |
U.S. | | 46% |
International | | 54% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following presents worldwide revenues by geography: |
| | Three Months Ended |
| | | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national |
| (MILLIONS) | | April 4,
2021 | | March 29,
2020 | | April 4,
2021 | | March 29,
2020 | | April 4,
2021 | | March 29,
2020 | | % Change in Revenues |
| Total revenues | | $ | 14,582 | | | $ | 10,083 | | | $ | 7,597 | | | $ | 5,289 | | | $ | 6,985 | | | $ | 4,793 | | | 45 | | | 44 | | | 46 | |
First Nine Months
| | | | | | | | |
2020 Revenues by Geography | | % of Total |
U.S. | | 47% |
International | | 53% |
| | | | | | | | |
2019 Revenues by Geography | | % of Total |
U.S. | | 47% |
International | | 53% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following presents worldwide revenues by operating segment and geography: |
| | Three Months Ended |
| | | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national |
| (MILLIONS OF DOLLARS) | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 | | % Change in Revenues |
Operating Segments(a): | | | | | | | | | | | | | | | | | | |
| Biopharma | | $ | 10,215 | | | $ | 9,952 | | | $ | 5,363 | | | $ | 5,142 | | | $ | 4,852 | | | $ | 4,811 | | | 3 | | | 4 | | | 1 | |
| Upjohn | | 1,916 | | | 2,351 | | | 354 | | | 585 | | | 1,563 | | | 1,766 | | | (18) | | | (40) | | | (12) | |
| Consumer Healthcare | | — | | | 377 | | | — | | | 124 | | | — | | | 253 | | | (100) | | | (100) | | | (100) | |
| Total revenues | | $ | 12,131 | | | $ | 12,680 | | | $ | 5,716 | | | $ | 5,850 | | | $ | 6,415 | | | $ | 6,830 | | | (4) | | | (2) | | | (6) | |
|
| | Nine Months Ended |
| | | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national |
| (MILLIONS OF DOLLARS) | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 | | % Change in Revenues |
Operating Segments(a): | | | | | | | | | | | | | | | | | | |
| Biopharma | | $ | 30,017 | | | $ | 28,429 | | | $ | 15,621 | | | $ | 14,270 | | | $ | 14,396 | | | $ | 14,160 | | | 6 | | | 9 | | | 2 | |
| Upjohn | | 5,944 | | | 8,535 | | | 1,149 | | | 3,103 | | | 4,795 | | | 5,432 | | | (30) | | | (63) | | | (12) | |
| Consumer Healthcare | | — | | | 2,098 | | | — | | | 988 | | | — | | | 1,110 | | | (100) | | | (100) | | | (100) | |
| Total revenues | | $ | 35,961 | | | $ | 39,062 | | | $ | 16,770 | | | $ | 18,360 | | | $ | 19,191 | | | $ | 20,701 | | | (8) | | | (9) | | | (7) | |
(a)For additional information about each operating segment, see the “AnalysisQuarter of Operating Segment Information” section of this MD&A and Note 14A.
Third2021 vs. First Quarter of 2020 vs. Third Quarter of 2019
| | | | | | | | | | | | | | | | | | | | |
| The following provides an analysis of the worldwide change in revenues by geographic areas in the third quarter of 2020: |
| | Three Months Ended September 27, 2020 |
| (MILLIONS OF DOLLARS) | | Worldwide | | U.S. | | International |
| Operational growth/(decline): | | | | | | |
Continued growth from certain key brands(a) | | $ | 235 | | | $ | 118 | | | $ | 118 | |
| Higher revenues for Biosimilars, primarily driven by recent oncology biosimilar launches in the U.S. and other global markets and continued growth from Retacrit, primarily in the U.S. | | 188 | | | 137 | | | 51 | |
| Higher revenues for the rare disease business driven by the U.S. launches of Vyndaqel in May 2019 and Vyndamax in September 2019 for ATTR-CM; and in international markets, primarily driven by the March 2019 launch of the ATTR-CM indication in Japan and the February 2020 approval of the ATTR-CM indication in the EU | | 154 | | | 78 | | | 76 | |
| Higher revenues for Inlyta, primarily due to increased demand in the U.S. and certain developed international markets, following the approvals in 2019 for combinations of certain immune checkpoint inhibitors plus Inlyta for the first-line treatment of patients with advanced RCC | | 57 | | | 32 | | | 26 | |
| Lower revenues for Consumer Healthcare reflecting the July 31, 2019 completion of the GSK Consumer Healthcare joint venture transaction. As a result, for the third quarter of 2019, revenues reflect one month of Consumer Healthcare segment domestic operations and two months of Consumer Healthcare segment international operations, while for the third quarter of 2020, there is no contribution from the Consumer Healthcare business | | (377) | | | (124) | | | (253) | |
| Lower worldwide revenues for Lyrica, primarily in the U.S., reflecting the expected significantly lower volumes associated with multi-source generic competition that began in July 2019 | | (174) | | | (157) | | | (18) | |
| Declines in revenues for Lipitor and Norvasc, reflecting significant revenue declines associated with the VBP program in China, which was initially implemented in certain cities in March 2019, and expanded nationwide beginning in December 2019, resulting in significant volume and price erosion | | (150) | | | (8) | | | (143) | |
| Decreased revenue for the Hospital business, primarily in emerging markets and driven by lower demand for certain anti-infective products in China due to lower infection rates driven by fewer elective surgical procedures, shorter in-patient hospital stays and improved infection control | | (90) | | | 20 | | | (109) | |
| Lower revenues for Enbrel internationally, primarily reflecting continued biosimilar competition in most developed Europe markets, as well as in Japan and Brazil, all of which is expected to continue | | (87) | | | — | | | (87) | |
| Decline in Prevnar 13/Prevenar 13 revenues primarily in the U.S., reflecting the unfavorable impact of timing associated with government purchases for the pediatric indication and the impact of the revised adult recommendation from the ACIP, partially offset by the recovery of a portion of the missed doses from the second quarter of 2020, resulting from COVID-19-related mobility restrictions or limitations. The decline in the U.S. was partially offset by continued strong pediatric uptake in China as well as increased adult uptake in certain international markets resulting from greater vaccine awareness for respiratory illnesses, including specifically pneumococcal disease, due to the COVID-19 pandemic | | (55) | | | (140) | | | 85 | |
| Decline in revenues for Celebrex driven by lower volume in Japan, resulting from generic competition which began in June 2020 | | (45) | | | (2) | | | (43) | |
| Other operational factors, net | | (101) | | | (88) | | | (13) | |
| Operational growth/(decline), net | | (444) | | | (134) | | | (310) | |
| | | | | | |
| Unfavorable impact of foreign exchange | | (104) | | | — | | | (104) | |
Revenues decrease | | $ | (549) | | | $ | (134) | | | $ | (415) | |
(a)Certain key brands represent Ibrance, Eliquis and Xeljanz. See the “Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion” section of this MD&A for product analysis information.
Revenues for the third quarter of 2020 included an estimated net unfavorable impact of approximately $500 million, or 4%, due to COVID-19, primarily driven by lower demand for certain products in China and unfavorable disruptions to wellness visits for patients in the U.S., which negatively impacted prescribing patterns for certain products, partially offset by increased adult uptake for Prevenar 13 in certain international markets resulting from greater vaccine awareness for respiratory illnesses, as well as the recovery of a portion of the missed doses of Prevnar 13 in the U.S. from second-quarter 2020. | | | | | | | | | | | | | | | | | | | | |
| The following provides an analysis of the worldwide change in revenues by geographic areas in the first quarter of 2021: |
| | Three Months Ended April 4, 2021 |
| (MILLIONS) | | Worldwide | | U.S. | | International |
| Operational growth/(decline): | | | | | | |
Growth from BNT162b2, Eliquis, Vyndaqel/Vyndamax, Xeljanz, Xtandi, Inlyta, Biosimilars and the Hospital therapeutic area, partially offset by declines from Prevnar 13/Prevenar 13 and Ibrance. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | $ | 4,339 | | | $ | 2,384 | | | $ | 1,956 | |
| Lower revenues for Chantix/Champix and Enbrel. The decrease in Chantix/Champix was driven by the U.S. and primarily reflects a negative impact of the COVID-19 pandemic resulting in a decline in patient visits to doctors for preventative health purposes, as well as the loss of patent protection in the U.S. in November 2020. The decrease for Enbrel internationally primarily reflects continued biosimilar competition in most developed Europe markets and Japan, which is expected to continue | | (93) | | | (45) | | | (48) | |
| Other operational factors, net | | (31) | | | (31) | | | (1) | |
| Operational growth/(decline), net | | 4,216 | | | 2,308 | | | 1,907 | |
| | | | | | |
| Favorable impact of foreign exchange | | 284 | | | — | | | 284 | |
Revenues increase/(decrease) | | $ | 4,499 | | | $ | 2,308 | | | $ | 2,192 | |
Emerging markets revenues decreased $415increased $658 million, or 13%30%, in the thirdfirst quarter of 2021 to $2.8 billion from $2.2 billion in the first quarter of 2020, to $2.7 billion from $3.1 billion in the third quarter of 2019, reflecting an operational decreaseincrease of $268$672 million, or 9%31%, and an unfavorable impact from foreign exchange of approximately 5%1%. The operational decreaseincrease in emerging markets was primarily driven by Lipitorrevenues from BNT162b2 and Norvasc in our Upjohn segment, lower revenues for GSK Consumer Healthcare reflecting the July 31, 2019 completion of the Consumer Healthcare joint venture transaction and certain products in the Hospital business, primarily Zithromax and Vfend in our Biopharma segment, partially offset primarily by growth from Eliquis, Ibrance and Prevenar 13 in our Biopharma segment.Eliquis.
Revenues––First Nine Months of 2020 vs. First Nine Months of 2019
| | | | | | | | | | | | | | | | | | | | |
| The following provides an analysis of the change in worldwide revenues by geographic areas in the first nine months of 2020: |
| | Nine Months Ended September 27, 2020 |
| (MILLIONS OF DOLLARS) | | Worldwide | | U.S. | | International |
| Operational growth/(decline): | | | | | | |
Continued growth from certain key brands(a) | | $ | 1,047 | | | $ | 612 | | | $ | 435 | |
| Higher revenues for the rare disease business driven by the U.S. launches of Vyndaqel in May 2019 and Vyndamax in September 2019 for ATTR-CM; and in international markets, primarily driven by the March 2019 launch of the ATTR-CM indication in Japan and the February 2020 approval of the ATTR-CM indication in the EU | | 508 | | | 346 | | | 162 | |
| Higher revenues for Biosimilars, primarily driven by recent oncology biosimilar launches in the U.S. and other global markets and continued growth from Retacrit, primarily in the U.S. | | 378 | | | 286 | | | 92 | |
| Higher revenues for Inlyta, primarily due to increased demand in the U.S. and certain developed international markets, following the approvals in 2019 for combinations of certain immune checkpoint inhibitors plus Inlyta for the first-line treatment of patients with advanced RCC | | 248 | | | 187 | | | 61 | |
| Higher revenues for Xtandi primarily driven by continued strong demand in the mCRPC and nmCRPC indications as well as the mCSPC indication, which was approved in the U.S. in December 2019 | | 146 | | | 146 | | | — | |
| Higher revenues for the Hospital business in the U.S., primarily driven by increased demand for certain sterile injectable products utilized in the intubation and ongoing treatment of mechanically-ventilated COVID-19 patients as well as continued growth from Panzyga following its November 2018 U.S. launch, partially offset by lower demand for certain anti-infective products in China due to lower infection rates driven by fewer elective surgical procedures, shorter in-patient hospital stays and improved infection control | | 123 | | | 227 | | | (104) | |
| Lower revenues for Consumer Healthcare reflecting the July 31, 2019 completion of the GSK Consumer Healthcare joint venture transaction. As a result, for the first nine months of 2019, revenues reflect seven months of Consumer Healthcare segment domestic operations and eight months of Consumer Healthcare segment international operations, while for the first nine months of 2020, there is no contribution from the Consumer Healthcare business | | (2,098) | | | (988) | | | (1,110) | |
| Lower worldwide revenues for Lyrica, primarily in the U.S., reflecting the expected significantly lower volumes associated with multi-source generic competition that began in July 2019 | | (1,829) | | | (1,749) | | | (80) | |
| Declines in revenues for Lipitor and Norvasc, primarily resulting from the VBP program in China, which was initially implemented in certain cities in March 2019, and expanded nationwide beginning in December 2019, resulting in significant volume and price erosion | | (404) | | | 4 | | | (409) | |
| Lower revenues for Enbrel internationally, primarily reflecting continued biosimilar competition in most developed Europe markets, as well as in Japan and Brazil, all of which is expected to continue | | (246) | | | — | | | (246) | |
| Decline in Prevnar 13/Prevenar 13 revenues primarily in the U.S., driven by the unfavorable impact of timing associated with government purchases for the pediatric indication, the expected unfavorable impact of disruptions to wellness visits for pediatric and adult patients due to COVID-19-related mobility restrictions or limitations and the impact of the revised adult recommendation from the ACIP. The decline in the U.S. was partially offset by increased adult uptake in certain international markets resulting from greater vaccine awareness for respiratory illnesses, including specifically pneumococcal disease, due to the COVID-19 pandemic, as well as continued strong pediatric uptake in China | | (102) | | | (355) | | | 253 | |
| Decline in revenues for Celebrex driven by lower volume in Japan, resulting from generic competition which began in June 2020 and by pricing pressures and lower volumes in certain emerging markets | | (94) | | | (10) | | | (84) | |
| Decline in revenues for Revatio driven by lower U.S. Oral Suspension formulation sales and pricing pressures due to multi-source generic competition | | (58) | | | (56) | | | (2) | |
| Other operational factors, net | | (204) | | | (240) | | | 36 | |
| Operational growth/(decline), net | | (2,585) | | | (1,591) | | | (994) | |
| | | | | | |
| Unfavorable impact of foreign exchange | | (516) | | | — | | | (516) | |
Revenues decrease | | $ | (3,101) | | | $ | (1,591) | | | $ | (1,510) | |
(a)Certain key brands represent Ibrance, Eliquis and Xeljanz. See the “Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion” section of this MD&A for product analysis information.
Revenues for the first nine months of 2020 included an estimated unfavorable impact of approximately $800 million, or 2%, due to COVID-19, primarily reflecting lower demand for certain products in China and unfavorable disruptions to wellness visits for patients in the U.S., which negatively impacted prescribing patterns for certain products, partially offset by increased U.S. demand for certain sterile injectable products and increased adult uptake for Prevenar 13 in certain international markets, resulting from greater vaccine awareness for respiratory illnesses.
Emerging markets revenues decreased $1.0 billion, or 11%, in the first nine months of 2020 to $8.5 billion from $9.5 billion in the first nine months of 2019, reflecting an operational decrease of $596 million, or 6%. Foreign exchange had an unfavorable impact of approximately 5% on emerging markets revenues. The operational decrease in emerging markets was primarily driven by lower revenues for GSK Consumer Healthcare reflecting the July 31, 2019 completion of the Consumer Healthcare joint venture transaction, Lipitor and Norvasc in our Upjohn segment and Sulperazon and Vfend in our Biopharma segment, partially offset by growth from Prevenar 13, Eliquis, Ibrance, Zavicefta, Xalkori and Xeljanz in our Biopharma segment.
Revenue Deductions
Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized. Such variable consideration represents chargebacks, rebates, sales allowances and sales returns. These deductions represent estimates of related obligations and, as such, knowledge
and judgment 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 presents information about revenue deductions: | The following presents information about revenue deductions: | The following presents information about revenue deductions: |
| | | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | September 27,
2020 | | September 29,
2019 | |
| (MILLIONS) | | (MILLIONS) | | April 4,
2021 | | March 29,
2020 | |
Medicare rebates(a) | Medicare rebates(a) | | $ | 183 | | | $ | 295 | | | $ | 542 | | | $ | 1,080 | | Medicare rebates(a) | | $ | 189 | | | $ | 184 | | |
Medicaid and related state program rebates(a) | Medicaid and related state program rebates(a) | | 283 | | | 503 | | | 918 | | | 1,531 | | Medicaid and related state program rebates(a) | | 346 | | | 296 | | |
Performance-based contract rebates(a), (b) | | 954 | | | 923 | | | 2,836 | | | 2,784 | | |
| Performance-based contract rebates | | Performance-based contract rebates | | 753 | | | 615 | | |
Chargebacks(c) | Chargebacks(c) | | 1,532 | | | 1,328 | | | 4,319 | | | 4,252 | | Chargebacks(c) | | 1,431 | | | 1,031 | | |
Sales allowances(d) | Sales allowances(d) | | 1,247 | | | 1,350 | | | 3,913 | | | 4,164 | | Sales allowances(d) | | 1,144 | | | 1,022 | | |
| Sales returns and cash discounts | Sales returns and cash discounts | | 281 | | | 262 | | | 823 | | | 1,065 | | Sales returns and cash discounts | | 224 | | | 223 | | |
Total(e) | Total(e) | | $ | 4,479 | | | $ | 4,660 | | | $ | 13,350 | | | $ | 14,875 | | Total(e) | | $ | 4,087 | | | $ | 3,371 | | |
(a)RebatesRevenue deductions are product-specific and, therefore, for any given year are impacted by theprimarily a function of product sales volume, 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 aresold, contractual or legislatively mandated outside the U.S.,legislative discounts and distribution fees.
(e)For the three months ended September 27, 2020, associated with the following segments: Biopharma ($3.3 billion) and Upjohn ($1.2 billion). For the three months ended September 29, 2019, associated with the following segments: Biopharma ($3.0 billion), Upjohn ($1.6 billion) and Other ($0.1 billion). For the nine months ended September 27, 2020, associated with the following segments: Biopharma ($9.9 billion) and Upjohn ($3.5 billion). For the nine months ended September 29, 2019, associated with the following segments: Biopharma ($8.7 billion), Upjohn ($5.8 billion) and Other ($0.4 billion).
Total revenue deductions for the third quarter of 2020 decreased 4%, compared to the third quarter of 2019, and total revenue deductions for the first nine months of 2020 decreased 10%, compared to the first nine months of 2019, primarily as a result of:
•a decrease in Medicaid and Medicare rebates, driven by a significant decrease in Lyrica sales in the U.S. due to multi-source generic competition that began in July 2019,
partially offset by:
•an increase in chargebacks as a result of higher revenue for certain Biopharma products.
Total revenue deductions in the first nine months of 2020 also decreased as a result of lower sales returns and cash discounts, primarily due to the non-recurrence of a sales return reserve recorded for Lyrica in the prior year in advance of anticipated multi-source generic competition that began in the U.S. in July 2019.rebates.
For information on our accruals for Medicare rebates, Medicaid and related state program rebates, performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts,revenue deductions, including the balance sheet classification of these accruals, see Note 1C.1D.
Revenues––Selected Product Discussion
The tables below provide worldwide revenues and revenues by geography, for selected products. References to total change pertain to period-over-period growth rates that include foreign exchange. The difference between the total change and operational change represents the impact of foreign exchange. Amounts may not add due to rounding. All percentages have been calculated using unrounded amounts. An asterisk (*) indicates the calculation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Revenue | | | | | | |
| (MILLIONS) | | | | | | Three Months Ended | | % Change | | |
| Product | | Global
Revenues | | Region | | April 4, 2021 | | March 29, 2020 | | Total | | Oper. | | Operational Results Commentary |
| BNT162b2 | | $3,462
* | | U.S. | | $ | 2,038 | | | $ | — | | | * | | | | Driven by global uptake, following a CMA, EUA or temporary authorization. |
| Int’l. | | 1,424 | | | — | | | * | | * | |
| Worldwide | | $ | 3,462 | | | $ | — | | | * | | * | |
| Eliquis | | $1,643
Up 25%
(operationally) | | U.S. | | $ | 981 | | | $ | 805 | | | 22 | | | | | Primarily driven by continued increased adoption in non-valvular atrial fibrillation as well as oral anti-coagulant market share gains, as well as a favorable adjustment related to the Medicare “coverage gap” provision resulting from lower than previously expected discounts in prior periods. |
| Int’l. | | 662 | | | 495 | | | 34 | | | 29 | | |
| Worldwide | | $ | 1,643 | | | $ | 1,300 | | | 26 | | | 25 | | |
Prevnar 13/ Prevenar 13 | | $1,284
Down 12%
(operationally) | | U.S. | | $ | 638 | | | $ | 794 | | | (20) | | | | | Primarily driven by decline in the U.S., resulting from: •disruptions to wellness visits due to COVID-19-related mobility restrictions or limitations, including adults delaying other vaccinations while receiving COVID-19 inoculations due to CDC guidance; •impact of the revised ACIP recommendation for the adult indication to shared clinical decision making, which means the decision to vaccinate should be made at the individual level between healthcare providers and their patients, as well as the continued impact of a lower remaining eligible adult population; and •decline for the pediatric indication, primarily reflecting the unfavorable impact of COVID-19 and lower year-over-year birth rates. |
| Int’l. | | 646 | | | 656 | | | (2) | | | (3) | |
| Worldwide | | $ | 1,284 | | | $ | 1,450 | | | (11) | | | (12) | |
| Ibrance | | $1,254
Down 1% (operationally) | | U.S. | | $ | 794 | | | $ | 852 | | | (7) | | | | | Primarily driven by decline in the U.S., which reflects relatively stable U.S. prescription volume demand and Ibrance’s continued strong leadership position within the CDK 4/6 class, but also an increase in the proportion of patients accessing Ibrance through our Patient Assistance Program due to economic hardships brought on by the COVID-19 pandemic which is expected to normalize over time as the economic impact of the pandemic subsides. Also reflects continued strong volume growth internationally, partially offset by pricing pressures. |
| Int’l. | | 460 | | | 396 | | | 16 | | | 11 | | |
| Worldwide | | $ | 1,254 | | | $ | 1,248 | | | — | | (1) | | |
| Xeljanz | | $538
Up 18%
(operationally) | | U.S. | | $ | 332 | | | $ | 286 | | | 16 | | | | | Primarily driven by the U.S., reflecting higher volumes within the RA, PsA and UC indications, enabled by improvements in formulary access. Also reflects operational growth internationally mainly driven by continued uptake in the RA indication and, to a lesser extent, the UC indication in certain developed markets. |
| Int’l. | 206 | | | 166 | | | 25 | | | 21 | | |
| Worldwide | $ | 538 | | | $ | 451 | | | 19 | | | 18 | | |
Vyndaqel/
Vyndamax | | $453
Up 88%
(operationally) | | U.S. | | $ | 206 | | | $ | 127 | | | 62 | | | | | Primarily driven by the approval in February 2020 of the ATTR-CM indication in the EU, as well as continued strong uptake of the ATTR-CM indication in the U.S. and Japan. |
| Int’l. | 247 | | | 105 | | * | * |
| Worldwide | $ | 453 | | | $ | 231 | | 96 | | 88 | |
| Xtandi | | $267
Up 28%
(operationally) | | U.S. | | $ | 267 | | | $ | 209 | | | 28 | | | | | Primarily driven by continued strong demand for Xtandi in the mCRPC and nmCRPC indications, as well as the mCSPC indication, which was approved in the U.S. in December 2019. |
| Int’l. | — | | | — | | — | — |
| Worldwide | $ | 267 | | | $ | 209 | | 28 | | 28 | |
| Inlyta | | $229
Up 34%
(operationally) | | U.S. | | $ | 141 | | | $ | 116 | | | 22 | | | | | Primarily due to increased demand in the U.S. and developed Europe following the approvals in 2019 for combinations of certain immune checkpoint inhibitors and Inlyta for the first-line treatment of patients with advanced RCC. |
| Int’l. | 88 | | | 53 | | | 65 | | | 58 | | |
| Worldwide | $ | 229 | | | $ | 169 | | | 36 | | | 34 | | |
| Biosimilars | | $530
Up 79%
(operationally) | | U.S. | | $ | 327 | | | $ | 167 | | | 96 | | | | | Primarily driven by recent oncology monoclonal antibody biosimilar launches globally and continued growth from Retacrit in the U.S. |
| Int’l. | 203 | | | 122 | | | 67 | | | 56 | | |
| Worldwide | $ | 530 | | | $ | 288 | | | 84 | | | 79 | | |
| Hospital | | $2,343
Up 10%
(operationally) | | U.S. | | $ | 905 | | | $ | 890 | | | 2 | | | | | Primarily driven by Pfizer CentreOne, our contract manufacturing operation, reflecting sales of legacy Upjohn products to Viatris under manufacturing and supply agreements and remdesivir to Gilead Sciences Inc., as well as growth from recent anti-infective product launches in international markets, partially offset by lower year-over-year volume for certain products globally due to a COVID-19-related surge in demand in the prior-year quarter. |
| Int’l. | 1,437 | | | 1,198 | | | 20 | | | 15 | | |
| Worldwide | $ | 2,343 | | | $ | 2,088 | | | 12 | | | 10 | | |
* Calculation is not meaningful or results are equal to or greater than 100%.
•Prevnar 13/Prevenar 13 (Biopharma):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 868 | | | $ | 1,008 | | | (14) | | | | | $ | 2,143 | | | $ | 2,498 | | | (14) | | | |
| International | | 665 | | | 595 | | | 12 | | | 14 | | | 1,957 | | | 1,770 | | | 11 | | | 14 | |
| Worldwide revenues | | $ | 1,534 | | | $ | 1,603 | | | (4) | | | (3) | | | $ | 4,100 | | | $ | 4,268 | | | (4) | | | (2) | |
The decline in the third quarter of 2020 in the U.S. primarily reflects the unfavorable impact of timing associated with government purchases for the pediatric indication and the impact of the revised adult recommendation from the ACIP, further discussed below, partially offset by the recovery of a portion of the missed doses, resulting from COVID-19-related mobility restrictions or limitations, from the second quarter of 2020. The decline in the U.S. in the first nine months of 2020 was primarily driven by the unfavorable impact of timing associated with government purchases for the pediatric indication, the expected unfavorable impact of disruptions to wellness visits for pediatric and adult patients due to COVID-19-related mobility restrictions or limitations and the impact of the revised adult recommendation from the ACIP.
The operational growth in the third quarter and first nine months of 2020 internationally primarily reflects increased adult uptake in certain international markets resulting from greater vaccine awareness for respiratory illnesses, including specifically pneumococcal disease, due to the COVID-19 pandemic, as well as continued strong pediatric uptake in China.
On June 26, 2019, the ACIP voted to revise the pneumococcal vaccination guidelines and recommend Prevnar 13 for adults 65 and older based on the shared clinical decision making of the provider and patient, which means the decision to vaccinate should be made at the individual level between health care providers and their patients, maintaining reimbursement. The recommendation reaffirms that there remains vaccine preventable pneumococcal disease in the population of adults 65 years or older, which may be prevented through direct vaccination. The ACIP’s recommendation was approved by the directors at the CDC and U.S. Department of Health and Human Services, and published by the CDC in the Morbidity and Mortality Weekly Report in the fourth quarter of 2019. The ACIP’s latest recommendation did not have an impact on Prevnar 13 revenues in 2019, due to timing of the Morbidity and Mortality Weekly Report publication. The ACIP’s latest recommendation had a slight unfavorable impact in the third quarter and first nine months of 2020 and is expected to modestly impact future periods.
•Ibrance (Biopharma):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 909 | | | $ | 832 | | | 9 | | | | | $ | 2,689 | | | $ | 2,405 | | | 12 | | | |
| International | | 448 | | | 451 | | | (1) | | | 1 | | | 1,266 | | | 1,273 | | | (1) | | | 3 | |
| Worldwide revenues | | $ | 1,357 | | | $ | 1,283 | | | 6 | | | 6 | | | $ | 3,955 | | | $ | 3,677 | | | 8 | | | 9 | |
The growth in the third quarter and first nine months of 2020 in the U.S. was mainly driven by increased cyclin-dependent kinase (CDK) class penetration and Ibrance’s continued CDK market share leadership in metastatic breast cancer. The operational growth in the third quarter and first nine months of 2020 internationally reflects the continued strong volume growth in most markets, partially offset by pricing pressures in certain developed Europe markets.
•Eliquis alliance revenues and direct sales (Biopharma): Eliquis 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 market; the agents in this class were developed as alternative treatment options to warfarin in appropriate patients.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 557 | | | $ | 541 | | | 3 | | | | | $ | 2,084 | | | $ | 1,768 | | | 18 | | | |
| International | | 557 | | | 484 | | | 15 | | | 16 | | | 1,602 | | | 1,353 | | | 18 | | | 21 |
| Worldwide revenues | | $ | 1,114 | | | $ | 1,025 | | | 9 | | | 9 | | | $ | 3,686 | | | $ | 3,121 | | | 18 | | | 19 | |
The worldwide operational growth in the third quarter and first nine months of 2020 was primarily driven by continued increased adoption in non-valvular atrial fibrillation as well as oral anti-coagulant market share gains, partially offset by a lower net price due to an increased impact from the Medicare “coverage gap” and unfavorable channel mix in the U.S.
•Xeljanz (Biopharma):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 469 | | | $ | 444 | | | 6 | | | | | $ | 1,213 | | | $ | 1,201 | | | 1 | | | |
| International | | 185 | | | 154 | | | 20 | | | 23 | | | 528 | | | 434 | | | 22 | | | 26 | |
| Worldwide revenues | | $ | 654 | | | $ | 599 | | | 9 | | | 10 | | | $ | 1,741 | | | $ | 1,634 | | | 6 | | | 8 | |
U.S. revenue growth in the third quarter and first nine months of 2020 was the result of higher volumes within the RA and PsA indications driven by continued improvements in formulary access, partially offset by increased discounts from recently-signed contracts which were entered into in order to unlock access to additional patient lives. The revenue growth in the U.S. in the first nine months of 2020 was also due to higher volumes in the UC indication driven by continued improvements in formulary access.
The operational growth internationally in the third quarter and first nine months of 2020 was mainly driven by continued uptake in the RA indication and, to a lesser extent, from the recent launch of the UC indication in certain developed markets.
•Lipitor (Upjohn):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 20 | | | $ | 25 | | | (21) | | | | | $ | 87 | | | $ | 76 | | | 15 | | | |
| International | | 336 | | | 451 | | | (26) | | | (25) | | | 1,104 | | | 1,430 | | | (23) | | | (21) | |
| Worldwide revenues | | $ | 356 | | | $ | 476 | | | (25) | | | (24) | | | $ | 1,191 | | | $ | 1,506 | | | (21) | | | (19) | |
The worldwide operational decline in the third quarter and first nine months of 2020 primarily reflects significant revenue declines associated with the VBP program in China, which was initially implemented in certain cities in March 2019, and expanded nationwide beginning in December 2019, resulting in significant volume and price erosion.
•Lyrica (Upjohn):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 43 | | | $ | 200 | | | (78) | | | | | $ | 175 | | | $ | 1,924 | | | (91) | | | |
| International | | 308 | | | 326 | | | (6) | | | (5) | | | 883 | | | 964 | | | (8) | | | (8) | |
| Worldwide revenues | | $ | 352 | | | $ | 527 | | | (33) | | | (33) | | | $ | 1,058 | | | $ | 2,888 | | | (63) | | | (63) | |
The worldwide decline in the third quarter and first nine months of 2020 was primarily driven by the U.S. due to the expected significantly lower volumes driven by multi-source generic competition that began in the U.S. in July 2019.
•Enbrel (Biopharma, outside the U.S. and Canada):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | — | | | $ | — | | | — | | | | $ | — | | | $ | — | | | — | | | |
| International | | 321 | | | 415 | | | (23) | | | (21) | | | 1,005 | | | 1,285 | | | (22) | | | (19) | |
| Worldwide revenues | | $ | 321 | | | $ | 415 | | | (23) | | | (21) | | | $ | 1,005 | | | $ | 1,285 | | | (22) | | | (19) | |
The worldwide operational decline in the third quarter and first nine months of 2020 was primarily due to continued biosimilar competition in most developed Europe markets as well as in Japan and Brazil, all of which is expected to continue.
•Vyndaqel/Vyndamax (Biopharma):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 158 | | | $ | 79 | | | * | | | | $ | 431 | | | $ | 87 | | | * | | |
| International | | 193 | | | 77 | | | * | | * | | 429 | | | 173 | | | * | | * |
| Worldwide revenues | | $ | 351 | | | $ | 156 | | | * | | * | | $ | 859 | | | $ | 259 | | | * | | * |
The growth in the U.S. in the third quarter and first nine months of 2020 was driven by the launches of Vyndaqel in May 2019 and Vyndamax in September 2019 for the treatment of ATTR-CM. The operational growth in international markets in the third quarter and first nine months of 2020 was primarily driven by the March 2019 launch of the ATTR-CM indication in Japan and the February 2020 approval of the ATTR-CM indication in the EU.
•Xtandi alliance revenues (Biopharma): Xtandi 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).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 266 | | | $ | 225 | | | 18 | | | | | $ | 741 | | | $ | 594 | | | 25 | | | |
| International | | — | | | — | | | — | | — | | — | | | — | | | — | | — |
| Worldwide revenues | | $ | 266 | | | $ | 225 | | | 18 | | | 18 | | | $ | 741 | | | $ | 594 | | | 25 | | | 25 |
The growth in the U.S. in the third quarter and first nine months of 2020 was primarily driven by continued strong demand for Xtandi in the mCRPC and nmCRPC indications, as well as the mCSPC indication, which was approved in the U.S. in December 2019.
•Chantix/Champix (Biopharma):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 185 | | | $ | 227 | | | (19) | | | | | $ | 575 | | | $ | 666 | | | (14) | | | |
| International | | 38 | | | 49 | | | (23) | | | (22) | | | 153 | | | 159 | | | (4) | | | (1) | |
| Worldwide revenues | | $ | 223 | | | $ | 276 | | | (19) | | | (19) | | | $ | 728 | | | $ | 825 | | | (12) | | | (11) | |
The worldwide operational revenue decline in the third quarter and first nine months of 2020 was driven by the U.S. and primarily reflects expected lower demand resulting from reduced doctor visits, including wellness visits when Chantix is typically prescribed, due to COVID-19-related mobility restrictions or limitations. The decline in the first nine months of 2020 was partially offset by increased demand in Spain as a result of government reimbursement starting in January 2020.
•Sutent (Biopharma):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 56 | | | $ | 64 | | | (13) | | | | | $ | 169 | | | $ | 217 | | | (22) | | | |
| International | | 146 | | | 160 | | | (9) | | | (6) | | | 448 | | | 488 | | | (8) | | | (5) | |
| Worldwide revenues | | $ | 202 | | | $ | 224 | | | (10) | | | (8) | | | $ | 616 | | | $ | 704 | | | (13) | | | (10) | |
The worldwide operational decline in the third quarter and first nine months of 2020 reflects continued erosion as a result of increased competition in the U.S. and certain international developed markets, partially offset by growth in certain emerging markets.
•Norvasc (Upjohn):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 7 | | | $ | 9 | | | (23) | | | | | $ | 23 | | | $ | 30 | | | (23) | | | |
| International | | 175 | | | 209 | | | (16) | | | (15) | | | 578 | | | 704 | | | (18) | | | (16) | |
| Worldwide revenues | | $ | 183 | | | $ | 219 | | | (17) | | | (16) | | | $ | 601 | | | $ | 735 | | | (18) | | | (16) | |
The worldwide operational decline in the third quarter and first nine months of 2020 primarily reflects significant revenue declines associated with the VBP program in China, which was initially implemented in certain cities in March 2019, and expanded nationwide beginning in December 2019, resulting in significant volume and price erosion.
•Inlyta (Biopharma):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 124 | | | $ | 92 | | | 34 | | | | | $ | 372 | | | $ | 185 | | | * | | |
| International | | 71 | | | 46 | | | 53 | | | 55 | | | 187 | | | 131 | | | 43 | | | 47 | |
| Worldwide revenues | | $ | 195 | | | $ | 139 | | | 41 | | | 41 | | | $ | 559 | | | $ | 316 | | | 77 | | | 79 | |
The worldwide operational growth in the third quarter and first nine months of 2020 was primarily due to increased demand in the U.S. and certain developed international markets, following the approvals in 2019 for combinations of certain immune checkpoint inhibitors plus Inlyta for the first-line treatment of patients with advanced RCC.
•The Premarin family of products (Biopharma):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 157 | | | $ | 170 | | | (8) | | | | | $ | 441 | | | $ | 510 | | | (14) | | | |
| International | | 11 | | | 11 | | | (7) | | | (2) | | | 31 | | | 32 | | | (4) | | | — |
| Worldwide revenues | | $ | 168 | | | $ | 182 | | | (8) | | | (7) | | | $ | 471 | | | $ | 542 | | | (13) | | | (13) | |
The worldwide operational decline in the third quarter and first nine months of 2020 was primarily driven by continued competitive pressures in the U.S., which is expected to continue.
•Inflectra/Remsima (Biopharma):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 88 | | | $ | 77 | | | 15 | | | | | $ | 244 | | | $ | 208 | | | 17 | | | |
| International | | 74 | | | 78 | | | (5) | | | (5) | | | 227 | | | 238 | | | (5) | | | (2) | |
| Worldwide revenues | | $ | 162 | | | $ | 155 | | | 5 | | | 5 | | | $ | 471 | | | $ | 446 | | | 6 | | | 7 | |
The worldwide operational revenue growth in the third quarter and first nine months of 2020 was primarily driven by steady volume and share growth in the U.S. across hospital channels, clinics and alternate sites of care and switch-to-biosimilar products policies implemented in Canada, partially offset by pricing pressures globally as well as competitive pressures internationally.
While Inflectra has achieved parity access to Remicade® (infliximab) in Medicare Part B, in the U.S., nearly half of all commercial patients are not able to access Inflectra due to exclusionary conduct by J&J. In September 2017, Pfizer filed suit in the U.S. District Court for the Eastern District of Pennsylvania against J&J alleging that J&J’s exclusionary contracts and other anticompetitive practices concerning Remicade violate federal antitrust laws. In June 2019, Pfizer received a Civil Investigative Demand from the FTC seeking documents and information relating to the alleged conduct and market conditions at issue in Pfizer’s lawsuit against J&J. Pfizer understands that the FTC’s investigation is focused on J&J’s alleged conduct at issue in Pfizer’s lawsuit against J&J.
•Sulperazon (Biopharma):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | — | | | $ | — | | | — | | | | $ | — | | | $ | — | | | — | | |
| International | | 143 | | | 163 | | | (12) | | | (11) | | | 432 | | | 505 | | | (14) | | | (12) | |
| Worldwide revenues | | $ | 143 | | | $ | 163 | | | (12) | | | (11) | | | $ | 432 | | | $ | 505 | | | (14) | | | (12) | |
The international operational decline in the third quarter and first nine months of 2020 was primarily driven by lower demand in China due to lower infection rates driven by fewer elective surgical procedures, shorter in-patient hospital stays and improved infection control compared to the prior year periods.
•Celebrex (Upjohn):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 12 | | | $ | 14 | | | (14) | | | | | $ | 33 | | | $ | 44 | | | (24) | | | |
| International | | 121 | | | 166 | | | (27) | | | (26) | | | 395 | | | 482 | | | (18) | | | (17) | |
| Worldwide revenues | | $ | 133 | | | $ | 179 | | | (26) | | | (25) | | | $ | 428 | | | $ | 526 | | | (19) | | | (18) | |
The worldwide operational decline in the third quarter and first nine months of 2020 was primarily driven by lower volume in Japan, resulting from generic competition which began in June 2020. The first nine months of 2020 were also impacted by pricing pressures and lower volumes in certain emerging markets.
•Xalkori (Biopharma):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 29 | | | $ | 36 | | | (20) | | | | | $ | 106 | | | $ | 111 | | | (5) | | | |
| International | | 93 | | | 94 | | | (1) | | | 1 | | | 303 | | | 274 | | | 11 | | | 14 | |
| Worldwide revenues | | $ | 122 | | | $ | 130 | | | (6) | | | (5) | | | $ | 409 | | | $ | 385 | | | 6 | | | 8 | |
The worldwide operational decline in the third quarter of 2020 was primarily driven by the U.S., as a result of lower demand, partially offset by growth in China, following the impact of inclusion of Xalkori in the 2019 National Reimbursement Drug List (NRDL). The worldwide operational growth in the first nine months of 2020 was primarily driven by China, following the impact of inclusion of Xalkori in the 2019 NRDL.
•Viagra (Upjohn):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 10 | | | $ | 20 | | | (52) | | | | | $ | 38 | | | $ | 72 | | | (48) | | | |
| International | | 111 | | | 99 | | | 12 | | | 14 | | | 305 | | | 306 | | | (1) | | | 1 | |
| Worldwide revenues | | $ | 121 | | | $ | 120 | | | 1 | | | 3 | | | $ | 342 | | | $ | 379 | | | (10) | | | (8) | |
The worldwide operational growth in the third quarter of 2020 was driven primarily by China resulting from COVID-19 recovery, partially offset by continued volume erosion due to multi-source generic competition in the U.S. The worldwide operational decline in the first nine months of 2020 was driven by continued volume erosion due to multi-source generic competition in the U.S., partially offset by continued growth in certain international markets.
•Alliance revenues (Biopharma):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | | | | % Change | | | | | | % Change |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. | | September 27,
2020 | | September 29,
2019 | | Total | | Oper. |
| U.S. | | $ | 832 | | | $ | 773 | | | 8 | | | | | $ | 2,850 | | | $ | 2,383 | | | 20 | | | |
| International | | 417 | | | 368 | | | 13 | | | 12 | | | 1,186 | | | 1,034 | | | 15 | | | 16 | |
| Worldwide revenues | | $ | 1,250 | | | $ | 1,141 | | | 10 | | | 9 | | | $ | 4,036 | | | $ | 3,418 | | | 18 | | | 18 | |
The worldwide operational growth in the third quarter and first nine months of 2020 was primarily due to increases in Eliquis and Xtandi alliance revenues included in the above discussion.
See the Note 14CItem 1. Business—Patents and Other Intellectual Property Rights section of our 2020 Form 10-K for information regarding the primary indications or classexpiration of the selected products discussed.
Seevarious patent rights, Note 1312 for a discussion of recent developments concerning patent and product litigation relating to certain of the products discussed.
See the “Patentsdiscussed above, and Other Intellectual Property Rights” section in Part I, Item 1, “Business” of our 2019 Form 10-KNote 13B for information regarding the expirationprimary indications or class of various patent rights.the selected products discussed.
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.
For additional information about our R&D organization, see the “Research and Development” section in Part I, Item 1, “Business” of our 2019 Form 10-K.Developments
A comprehensive update of Pfizer’s development pipeline was published as of October 27, 2020May 4, 2021 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 marketing application-related regulatory actions by, and filings pending with, the FDA and regulatory authorities in the EU and Japan, as well as additional indicationsJapan. The table below includes only approvals for products that have occurred in the last twelve months and new drug candidates in late-stage development.
| | | | | | | | |
RECENT FDA APPROVALS |
PRODUCT | INDICATION | DATE APPROVED |
Bavencio (avelumab) | For the maintenance treatment of patients with locally advanced or metastatic urothelial carcinoma that has not progressed with first-line platinum-containing chemotherapy, which is being developed in collaboration with Merck KGaA, Germany | June 2020 |
Nyvepria (pegfilgrastim-apgf)(a)
| A biosimilar to Neulasta® (pegfilgrastim) to decrease the incidence of infection, as manifested by febrile neutropenia, in patients with non-myeloid malignancies receiving myelosuppressive anti-cancer drugs associated with a clinically significant incidence of febrile neutropenia
| June 2020 |
Braftovi (encorafenib)(b)
| Braftovi (encorafenib) in combination with Erbitux® (cetuximab) for the treatment of BRAFV600E-mutant metastatic colorectal cancer after prior therapy
| April 2020 |
Xtandi (enzalutamide) | Treatment of metastatic castration-sensitive prostate cancer, which is being developed through a collaboration with Astellas | December 2019 |
Abrilada(adalimumab-afzb)(c)
| A biosimilar to Humira® (adalimumab) for the treatment of certain patients with rheumatoid arthritis, juvenile idiopathic arthritis, PsA, ankylosing spondylitis, adult Crohn's disease, UC and plaque psoriasis
| November 2019 |
(a)Neulasta® is a registered U.S. trademarkdoes not include approvals that may have occurred prior to that time. The table includes filings with regulatory decisions pending (even if the filing occurred outside of Amgen Inc.
(b)Erbitux® is a registered trademark of ImClone LLC.
(c)Humira® is a registered trademark of AbbVie Biotechnology Ltd. Pfizer is working to make Abrilada available to U.S. patients as soon as feasible based on the terms of its agreement with AbbVie. Current plans are to launch Abrilada in 2023.
| | | | | | | | |
PENDING U.S. NDAs AND SUPPLEMENTAL FILINGS |
PRODUCT | PROPOSED INDICATION | DATE FILED* |
abrocitinib (PF-04965842) | Treatment of moderate-to-severe atopic dermatitis | October 2020 |
Xeljanz (tofacitinib) | Treatment of ankylosing spondylitis | August 2020 |
tanezumab | For patients with chronic pain due to moderate-to-severe osteoarthritis (OA) who have experienced inadequate pain relief with other analgesics, which is being developed in collaboration with Lilly | March 2020 |
*The date set forth in this column is the date on which the FDA accepted our submission.
last twelve-month period). | | | | | | | | | | | |
REGULATORY APPROVALS AND FILINGS IN THE EU AND JAPAN | | |
| PRODUCT | DESCRIPTION OF EVENTDISEASE AREA | DATE APPROVEDAPPROVED/FILED* |
| U.S. | DATE FILED*EU | JAPAN |
PF-07302048 (COVID-19 Vaccine)(a) | Immunization to prevent COVID-19 (16 years of age and older) | EUA Dec. 2020 | CMA Dec. 2020 | Approved Feb. 2021 |
Bavencio (avelumab)(b) | First-line maintenance urothelial cancer | Approved June 2020 | Approved Jan. 2021 | Approved Feb. 2021 |
Nyvepria
(pegfilgrastim-apgf) | Neutropenia in patients undergoing cancer chemotherapy (biosimilar) | Approved June 2020 | Approved Nov. 2020 | |
Braftovi (encorafenib)(c) | Second or third-line BRAFv600E-mutant mCRC (combination with Erbitux® (cetuximab)) |
| Approved June 2020 | Approved Nov. 2020 |
Braftovi (encorafenib) and Mektovi (binimetinib)(c) | Second or third-line BRAFV600E-mutant mCRC (combination with Erbitux® (cetuximab)) | | | Approved Nov. 2020 |
Xtandi (enzalutamide)(d) | mCSPC | | Approved April 2021 | Approved May 2020 |
| abrocitinib (PF-04965842) | Application filed in the EU for the treatment of moderate-to-severe atopicAtopic dermatitis | —Filed Oct. 2020 | October Filed Oct. 2020 | Filed Dec. 2020 |
Infliximab Pfizer (infliximab) | (a)Ankylosing spondylitis (biosimilar) | | | Application approved in Japan for a biosimilar to Remicade® (Infliximab) for the treatment of ankylosing spondylitisApproved
| October Oct. 2020 | — |
Bevacizumab Pfizer (bevacizumab) | (b)NSCLC (biosimilar) | | | Application approved in Japan for a biosimilar to Avastin® (bevacizumab) for the treatment of non-small cell lung cancerApproved
| September Sept. 2020 | — |
Rituximab Pfizer (rituximab)(c) | Application approved in Japan for a biosimilar to Rituxan® (rituximab) for the treatment of chronicChronic idiopathic thrombocytopenic purpura (biosimilar)
| | | Approved Aug. 2020 |
tanezumab(e) | August 2020 | — |
tanezumab | Application filed in Japan for patients with chronicChronic pain due to moderate-to-severe osteoarthritis (OA) who have experienced inadequate pain relief with other analgesics | —Filed March 2020 | AugustFiled March 2020 | Filed Aug. 2020 |
Bosulif
(bosutinib) | Application approved in Japan for the first-line treatment ofFirst-line chronic myelogenous leukemia (CML) | June 2020 | — | Approved June 2020 |
Daurismo
(glasdegib) | Application approved in the EU for Daurismo (glasdegib) in combinationCombination with low-dose cytarabine a type of chemotherapy, for the treatment of newly diagnosed (de novo or secondary) AML in adult patients who are not candidates for standard chemotherapy | June 2020 | —Approved June 2020 | |
Bavencio (avelumab) | Application filed in the EU for first-line maintenance treatment of patients with locally advanced or metastatic urothelial carcinoma, which is being developed in collaboration with Merck KGaA, Germany | —Xeljanz
(tofacitinib) | June Ankylosing spondylitis | Filed Aug. 2020 | Filed Feb. 2021 | |
Braftovi (encorafenib)(d)
| Application approved in the EU for Braftovi (encorafenib) inRelugolix fixed dose combination with Erbitux® (cetuximab), for the treatment of adult patients with mCRC with a BRAF mutation, who have received prior systemic therapy, which is being developed in collaboration with the Pierre Fabre Group
| June 2020 | — |
Bavencio (avelumab) | Application filed in Japan for first-line maintenance treatment of patients with locally advanced or metastatic urothelial carcinoma, which is being developed in collaboration with Merck KGaA, Germany | — | May 2020 |
Ruxience (rituximab)(e)
| Application approved in the EU for a biosimilar to MabThera® (rituximab) for the treatment of non-Hodgkin’s lymphoma, chronic lymphocytic leukemia, RA, granulomatosis with polyangiitis and microscopic polyangiitis, and pemphigus vulgaris
| April 2020 | — |
Staquis (crisaborole) | Application approved in the EU for the treatment of mild to moderate atopic dermatitis in adults and pediatric patients from 2 years of age with ≤ 40% body surface area affected | March 2020 | — |
tanezumab | Application filed in the EU for adult patients with moderate to severe chronic pain associated with OA for whom treatment with NSAIDs and/or an opioid is ineffective, not tolerated or inappropriate | — | March 2020 |
Braftovi (encorafenib) and Mektovi (binimetinib) | Application filed in Japan for second-or-third-line treatment of BRAF-mutant mCRC in patients who have received prior systemic therapy, which is being developed in collaboration with Ono Pharmaceutical Co., Ltd.
| — | March 2020 |
Vyndaqel (tafamidis free acid) | Application approved in the EU for a once-daily 61 mg oral capsule, for the treatment of wild-type or hereditary transthyretin amyloidosis in adult patients with cardiomyopathy
| February 2020 | — |
Amsparity (adalimumab)(f)
| Application approved in the EU for a biosimilar to Humira® (adalimumab) for the treatment of certain patientsUterine fibroids (combination with RA, juvenile idiopathic arthritis, axial spondyloarthritis, PsA, psoriasis, hidradenitis suppurativa, Crohn’s disease, UC, uveitis,estradiol and pediatric plaque psoriasisnorethindrone acetate)
| Filed Aug. 2020 | February 2020 | — |
Xeljanz (tofacitinib) | Application approved in the EU for Xeljanz (tofacitinib) 11 mg prolonged release tablets 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 | December 2019 | — |
Bavencio (avelumab) | Application approved in Japan for Bavencio (avelumab) in combination with Inlyta (axitinib) for the first-line treatment of advanced RCC, which is being developed in collaboration with Merck KGaA, Germany | December 2019 | — |
Lorbrena (lorlatinib) | First- line ALK-positive NSCLC | Approved Mar. 2021 | Filed Feb. 2021 | Filed Dec. 2020 |
somatrogon PF-06881894(PF-06836922)(g)
| Pediatric growth hormone deficiency | Application filed in the EU for a potential biosimilarFiled
Jan. 2021 | Filed Feb. 2021 | Filed Jan. 2021 |
PF-06482077 (Vaccine) | Immunization to Neulasta® (pegfilgrastim)prevent invasive and non-invasive pneumococcal infections (adults) | Filed Dec. 2020 | —Filed Feb. 2021 | October 2019 |
Xtandi (enzalutamide)TicoVac
(Vaccine) | Application filed in the EU for the treatment of metastatic castration-sensitive prostate cancer, which is being developed through a collaboration with AstellasImmunization to prevent tick-borne encephalitis | —Filed Feb. 2021 | July 2019 | |
*For applications inthe U.S., the filing date is the date on which the FDA accepted our submission. For the EU, the dates set forth in this column arefiling date is the datesdate on which the EMA validated our submissions.submission.
(a)RemicadePF-07302048 or BNT162b2 (Pfizer/BioNTech COVID-19 vaccine) received EUA from the FDA in December 2020 and CMA from the EMA in December 2020 for use in individuals 16 years of age and older. In May 2021, the FDA expanded the EUA to include the use of BNT162b2 in individuals 12 to 15 years of age. Pfizer and BioNTech have requested similar amendments to expand the authorizations for use in individuals 12 to 15 years of age by other regulatory authorities worldwide. In May 2021, Pfizer and BioNTech initiated a rolling submission of a BLA with the FDA for approval of the COVID-19 vaccine in individuals 16 years of age and older. The Prescription Drug User Fee Act goal date for a decision by the FDA will be set once the BLA is complete and formally accepted for review by the FDA.
(b)Being developed in collaboration with Merck KGaA, Germany.
(c)Erbitux® is a registered trademark of Janssen Biotech, Inc.
(b)Avastin® is a registered trademark of Genentech, Inc.
(c)Rituxan® is a registered trademark of Biogen MA Inc.ImClone LLC. In the EU, we are developing in collaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono Pharmaceutical Co., Ltd.
(d)Erbitux® is a registered trademark of ImClone LLC.Being developed in collaboration with Astellas.
(e)MabThera® isBeing developed in collaboration with Lilly. In March 2021, the FDA Joint Arthritis Advisory Committee and Drug Safety and Risk Management Advisory Committee on tanezumab resulted in a registered trademark ofF. Hoffman-La Roche AG.19:1 against vote on whether the proposed risk evaluation and mitigation strategy (REMS) for tanezumab will ensure benefits outweigh risks.
(f)Humira® is a registered trademark of AbbVie Biotechnology Ltd. Pfizer does not currently plan to commercialize AmsparityBeing developed in the EU due to unfavorable market conditions.collaboration with Myovant.
(g)Neulasta® is a registered trademark of Amgen Inc. In September 2020, the EMA’s CHMP adopted a positive opinion recommending the approval of PF-06881894, as a potential biosimilar to Neulasta® (pegfilgrastim).Being developed in collaboration with OPKO.
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 |
PRODUCT | PROPOSED INDICATION |
Bavencio (avelumab)(a) | 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, GermanyFirst-line NSCLC |
Ibrance (palbociclib)(b) | Treatment of ER+/HER2+ advancedmetastatic breast cancer in collaboration with the Alliance Foundation Trials, LLC |
Lorbrena (lorlatinib) | Treatment of patients with metastatic non-small cell lung cancer whose tumors are ALK-positive as detected by an FDA-approved test |
Xeljanz (tofacitinib) | Treatment of ankylosing spondylitis (ex-U.S.) |
Xtandi (enzalutamide)(c) | Treatment of non-metastatic castration-sensitiveNon-metastatic high-risk castration sensitive prostate cancer which is being developed through a collaboration with Astellas |
| Talzenna (talazoparib) | An oral PARP inhibitor, in combinationCombination with Xtandi (enzalutamide), for the treatment offirst-line mCRPC |
| PF-06482077 (Vaccine) | Invasive and non-invasive pneumococcal infections (pediatric) |
somatrogon (PF-06836922)(d) | Adult growth hormone deficiency |
tanezumab(e) | Cancer pain |
Braftovi (encorafenib) and Erbitux® (cetuximab)(f) | First-line BRAFv600E-mutant mCRC |
Relugolix fixed dose combination(g) | Combination with estradiol and norethindrone acetate for endometriosis |
Relugolix fixed dose combination(g) | Combination with estradiol and norethindrone acetate for contraceptive efficacy |
Braftovi (encorafenib) and Mektovi (binimetinib) and Keytruda® (pembrolizumab)(h) | BRAFv600E-mutant metastatic castration-resistant prostate canceror unresectable locally advanced melanoma |
In October 2020, we announced that we have stopped the Daurismo (glasdegib) Intensive cohort of the Phase 3 BRIGHT AML 1019 trial evaluating Daurismo in combination with cytarabine and daunorubicin in adults with previously untreated AML. The results of an interim analysis reviewed by an independent Data Monitoring Committee showed the trial was unlikely to achieve statistical significance in the primary endpoint of overall survival. No new safety signals were observed.
In October 2020, we and the German Breast Group announced that the collaborative Ibrance (palbociclib) Phase 3 PENELOPE-B trial did not meet the primary endpoint of improved invasive disease-free survival in women with hormone receptor-positive (HR+), human epidermal growth factor-negative (HER2-) early breast cancer who have residual invasive disease after completing neoadjuvant chemotherapy. No unexpected safety signals were observed.
| | | | | |
| NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT |
CANDIDATEaztreonam-avibactam
(PF-06947387) | PROPOSED INDICATION |
aztreonam-avibactam
(PF-06947387) | A beta lactam/beta lactamase inhibitor for the treatmentTreatment of patients with infections caused by Gram-negative bacteria including those that produce metallo-beta-lactamases, for which there are limited or no treatment options |
| fidanacogene elaparvovec (PF-06838435) | An investigational gene therapy for the treatment of hemophiliaHemophilia B |
Giroctocogenegiroctocogene fitelparvovec (SB-525 or PF-07055480) (PF-07055480) | An investigational gene therapy for moderately severe to severe hemophiliaHemophilia A patients |
PF-06482077 | A 20-Valent pneumococcal conjugate vaccine for the prevention of invasive pneumococcal disease and pneumonia caused by Streptococcus pneumoniae serotypes covered by the vaccine in adults 18 years of age and older
|
PF-06482077 | A 20-Valent pneumococcal conjugate vaccine for the prevention of invasive pneumococcal disease and pneumonia caused by Streptococcus pneumoniae serotypes covered by the vaccine in infants
|
| PF-06425090 (Vaccine) | A prophylactic vaccine for prevention of primaryPrimary clostridioidesdifficile infection (CDI) in individuals
|
PF-06886992
| Prevention of invasiveSerogroups meningococcal disease caused by Neisseria meningitidis serogroups A,B,C,W(adolescent and Y in persons one through 25 years of ageyoung adults) |
| PF-06928316 (Vaccine) | A respiratoryRespiratory syncytial virus (RSV) vaccine for the prevention of RSV disease in young infants through maternal immunization and in older adults through direct immunization |
PF-07302048 (BNT162)
| A mRNA-based vaccine for the prevention of SARS-CoV-2, the virus that causes COVID-19 disease, in partnership with BioNTechinfection (maternal) |
| PF-07265803 | An oral inhibitor of p38 mitogen-activated protein kinase for the treatment of patients with symptomatic dilatedDilated cardiomyopathy due to a Lamin A/C gene mutation |
| ritlecitinib (PF-06651600) | A selective dual Janus kinase 3 (JAK3) and Tyrosine kinase Expressed in hepatocellular Carcinoma (TEC) family inhibitor for the treatment of patients with moderate to severe alopeciaAlopecia areata |
sasanlimab (PF-06801591)
| A monoclonal antibody that inhibits PD-1, in combinationCombination with Bacillus Calmette-Guerin (BCG), for the treatment of non-muscle invasivenon-muscle-invasive bladder cancer |
somatrogon (PF-06836922)fordadistrogene movaparvovec (PF-06939926) | A long-acting hGH-CTP for the treatment of growth hormone deficiency in children, which is being developed in collaboration with OPKODuchenne muscular dystrophy |
somatrogon (PF-06836922)marstacimab (PF-06741086) | A long-acting hGH-CTP for the treatment of growth hormone deficiency in adults, which is being developed in collaboration with OPKO |
tanezumab | An anti-nerve growth factor monoclonal antibody for the treatment of cancer pain, which is being developed in collaboration with LillyHemophilia |
Additional product-related programs(a)Being developed in collaboration with Merck KGaA, Germany.
(b)Being developed in collaboration with the Alliance Foundation Trial.
(c)Being developed in collaboration with Astellas.
(d)Being developed in collaboration with OPKO.
(e)Being developed in collaboration with Lilly.
(f)Erbitux® is a registered trademark of ImClone LLC. In the EU, we are developing in various stagescollaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono Pharmaceutical Co., Ltd.
(g)Being developed in collaboration with Myovant.
(h)Keytruda® is a registered trademark of discoveryMerck Sharp & Dohme Corp.
For additional information about our R&D organization, see the Item 1. Business—Research and development.Development section of our 2020 Form 10-K.
Costs and ExpensesCOSTS AND EXPENSES
The changes in expenses below reflect, among other things, a decline in expenses resulting from the July 31, 2019 completion of the Consumer Healthcare JV transaction with GSK (see Note 2B). In addition, the COVID-19 pandemic impacted certain operating expenses in the third quarter and first nine months of 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Costs and expenses follow: | | | | | |
| | Three Months Ended | |
| (MILLIONS) | | April 4,
2021 | | March 29,
2020 | | %
Change | | | | | | |
| Cost of sales | | $ | 4,211 | | | $ | 1,940 | | | * | | | | | | |
Percentage of Revenues | | 28.9 | % | | 19.2 | % | | | | | | | | |
| Selling, informational and administrative expenses | | 2,783 | | | 2,541 | | | 10 | | | | | | | |
| Research and development expenses | | 2,014 | | | 1,672 | | | 20 | | | | | | | |
| Amortization of intangible assets | | 872 | | | 849 | | | 3 | | | | | | | |
| Restructuring charges and certain acquisition-related costs | | 23 | | | 54 | | | (57) | | | | | | | |
| Other (income)/deductions—net | | (1,004) | | | 190 | | | * | | | | | | |
| * Indicates calculation not meaningful or results are equal to or greater than 100%. |
Cost of Sales
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | %
Change | | September 27,
2020 | | September 29,
2019 | | %
Change |
| Cost of sales | | $ | 2,529 | | | $ | 2,602 | | | (3) | | | $ | 7,188 | | | $ | 7,611 | | | (6) | |
As a percentage of Revenues | | 20.8 | % | | 20.5 | % | | | | 20.0 | % | | 19.5 | % | | |
|
Cost of sales decreased $73 million in the third quarter of 2020,increased $2.3 billion, primarily due to:
•the non-recurrenceimpact of BNT162b2, which includes a charge for rivipansel in 2019, primarily for inventory manufactured for expected future sale;the 50% gross margin split with BioNTech and royalty expenses;
•the favorable impactincreased sales volumes of the July 31, 2019 completion of the Consumer Healthcare joint venture transaction with GSK,other products, driven by Pfizer CentreOne; and
partially offset by:
•the unfavorable impact of foreign exchange and hedging activity on intercompany inventory; and
•the unfavorable impact of incremental costs incurred in response to the COVID-19 pandemic.
Cost of sales decreased $423 million in the first nine months of 2020, primarily due to:
•the favorable impact of the July 31, 2019 completion of the Consumer Healthcare joint venture transaction with GSK;
•the non-recurrence of a charge for rivipansel in 2019, primarily for inventory manufactured for expected future sale; and
•a favorable impact of foreign exchange,
partially offset by:
•the unfavorable impact of incremental costs incurred in response to the COVID-19 pandemic.
The slight increase in Cost of sales as a percentage of revenues in the third quarter of 2020, compared to the same period in 2019, was primarily due to all of the factors discussed above, as well as lower Lyrica revenues, mainly in the U.S. due to multi-source generic competition that began in July 2019, lower Lipitor and Norvasc revenues due to the VBP program in China and lower Celebrex revenues in Japan due to generic competition that began in June 2020.inventory.
The increase in Cost of sales as a percentage of revenues in the first nine monthsquarter of 2020,2021, compared to the same period in 2019,2020, was primarily due to all of the factors discussed above, as well as lower Lyrica revenues, mainly in the U.S. due to multi-source generic competition that began in July 2019, partially offset by a favorable change in product mix, primarily due to revenue growth in the Oncology portfolio and Vyndaqel, and 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) | | September 27,
2020 | | September 29,
2019 | | %
Change | | September 27,
2020 | | September 29,
2019 | | %
Change |
| Selling, informational and administrative expenses | | $ | 3,016 | | | $ | 3,260 | | | (7) | | | $ | 8,919 | | | $ | 10,110 | | | (12) | |
As a percentage of Revenues | | 24.9 | % | | 25.7 | % | | | | 24.8 | % | | 25.9 | % | | |
|
SI&A expenses decreased $244increased $242 million, in the third quarter of 2020, primarilymostly due to:
•an increase to expense resulting from the favorable impactincrease in our liability to be paid to participants of the July 31, 2019 completion of the Consumer Healthcare joint venture transaction with GSK;our supplemental savings plan;
•lower spending associated with corporate enabling functions;
•lower spendingcosts related to BNT162b2, primarily driven by a higher provision for healthcare reform fees based on sales and marketing activities due to the impact of the COVID-19 pandemic;sales; and
•a decreasean increase in field force expense as well as advertising and promotion expenses, primarilyexternal, incremental costs directly related to Lipitor and Norvasc, due to the VBP program in China, which was initially implemented in certain cities in March 2019 and expanded nationwide beginning in December 2019, as well as Celebrex in Japan due to generic competition that began in June 2020, and Lyrica in the U.S. due to generic competition that began in July 2019,implementing our cost-reduction/productivity initiatives,
partially offset by:
•separation costs associated with our planned Upjohn transaction with Mylan, as well as legal entity restructuring costs, and mainly includes consulting, legal, tax and advisory services.
SI&A expenses decreased $1.2 billion in the first nine months of 2020, mostly due to:
•the favorable impact of the July 31, 2019 completion of the Consumer Healthcare joint venture transaction with GSK;
•lower spending associated with corporate enabling functions;
•lower spending on sales and marketing activities due toChantix following the impactloss of the COVID-19 pandemic;
•a decrease in field force expense as well as advertising and promotion expenses, primarily related to Lipitor and Norvasc, due to the VBP program in China, which was initially implemented in certain cities in March 2019 and expanded nationwide beginning in December 2019, as well as Lyricapatent protection in the U.S. due to generic competition that began in July 2019, and Celebrex in Japan due to generic competition that began in June 2020;
•lower investments across the Internal Medicine and Inflammation & Immunology portfolios; and
•the favorable impact of foreign exchange,
partially offset by:
•legal entity restructuring, as well as separation costs associated with our planned Upjohn transaction with Mylan, and mainly includes consulting, legal, tax and advisory services; and
•additional investment in emerging markets and in the Oncology portfolio in developed markets.November 2020.
Research and Development (R&D) Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | %
Change | | September 27,
2020 | | September 29,
2019 | | %
Change |
| Research and development expenses | | $ | 2,360 | | | $ | 2,283 | | | 3 | | | $ | 6,216 | | | $ | 5,827 | | | 7 | |
As a percentage of Revenues | | 19.5 | % | | 18.0 | % | | | | 17.3 | % | | 14.9 | % | | |
|
R&D expenses increased $77$342 million, in the third quarter 2020, primarily due to:
•costs relatedexternal spending on Pfizer’s efforts to our collaboration agreement with BioNTechdevelop BNT162b2 and therapeutics to co-develop a COVID-19 vaccine;help treat COVID-19; and
•an increase in the value of the portfolio performance share grants reflecting the increasechanges in the price of Pfizer’s common stock in the third quarter of 2020,stock.
partially offset by:
•the non-recurrence of an upfront payment associated with the acquisition of Therachon in July 2019.
R&D expenses increased $388 million in the first nine months of 2020, mostly due to:
•costs related to our collaboration agreement with BioNTech to co-develop a COVID-19 vaccine, including an upfront payment to BioNTech;
•an upfront payment to Valneva; and
•increased investments towards building new capabilities and driving automation,
partially offset by:
•the non-recurrence of an upfront payment associated with the acquisition of Therachon in July 2019.
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) | | September 27,
2020 | | September 29,
2019 | | %
Change | | September 27,
2020 | | September 29,
2019 | | %
Change |
| Amortization of intangible assets | | $ | 898 | | | $ | 1,212 | | | (26) | | | $ | 2,688 | | | $ | 3,578 | | | (25) | |
As a percentage of Revenues | | 7.4 | % | | 9.6 | % | | | | 7.5 | % | | 9.2 | % | | |
|
Amortization of intangible assets decreased $313 million in the third quarter of 2020 and $890 million in the first nine months of 2020, primarily due to the non-recurrence of amortization of fully amortized assets and the impairment of Eucrisa in the fourth quarter of 2019, partially offset by an increase in amortization of intangible assets from our acquisition of Array. See Note 2A.
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| (MILLIONS OF DOLLARS) | | Sept. 27, 2020 | | Sept. 29, 2019 | | %
Change | | Sept. 27, 2020 | | Sept. 29, 2019 | | %
Change |
Restructuring charges/(credits)—acquisition-related costs(a) | | $ | 4 | | | $ | 19 | | | (80) | | | $ | 3 | | | $ | (196) | | | * |
Restructuring charges/(credits)—cost reduction initiatives(b) | | (7) | | | 64 | | | * | | 389 | | | 145 | | | * |
| Restructuring charges/(credits) | | (4) | | | 83 | | | * | | 392 | | | (50) | | | * |
Transaction costs(c) | | — | | | 65 | | | * | | 14 | | | 65 | | | (79) | |
Integration costs and other(c) | | 7 | | | 217 | | | (97) | | | 29 | | | 281 | | | (90) | |
| Restructuring charges and certain acquisition-related costs | | 4 | | | 365 | | | (99) | | | 435 | | | 295 | | | 47 | |
| Net periodic benefit costs | | — | | | 9 | | | * | | 29 | | | 19 | | | 47 | |
| Total additional depreciation—asset restructuring | | 4 | | | 6 | | | (36) | | | 10 | | | 29 | | | (64) | |
| Total implementation costs | | 48 | | | 40 | | | 21 | | | 148 | | | 109 | | | 36 | |
Costs associated with acquisitions and cost-reduction/productivity initiatives(d) | | $ | 56 | | | $ | 420 | | | (87) | | | $ | 621 | | | $ | 452 | | | 38 | |
| * Indicates calculation not meaningful or results are equal to or greater than 100%. |
(a)Includes employee termination costs, asset impairments and other exit costs associated with business combinations. Charges for the third quarter of 2019 represent employee termination costs related to our acquisition of Array. Credits for the first nine months of 2019 were mostly due to the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of an IRS audit for multiple years. See Notes to Consolidated Financial Statements––Note 5D. Tax Matters: Tax Contingencies in our 2019 Financial Report.
(b)Includes employee termination costs, asset impairments and other exit costs not associated with acquisitions. The charges for the first nine months of 2020 primarily represent employee termination costs associated with our Transforming to a More Focused Company program. For the third quarter of 2019, the charges were mainly composed of employee termination costs, and for the first nine months of 2019, the charges were mostly related to employee termination costs and exit costs.
(c)See Note 3.
(d)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,Selling, informational and administrative expenses and/or Other (income)/deductions––net as appropriate. See Note 3.
Transforming to a More Focused Company Program
For a description of our Transforming to a More Focused Company program, andas well as the anticipated and actual costs, see Note 33. .The program savings discussed below may be rounded and represent approximations. In connection with the costs primarily related to the corporate enabling functions initiatives, we expect gross cost savings of approximately $900$1.0 billion, or net cost savings, excluding merit and inflation growth and certain real estate cost increases, of $700 million, to be achieved primarily over the two-year period 2021-2022.from 2021 through 2022. In connection with manufacturing network optimization, including legacy cost reduction initiatives, we expect targeted net cost savings of approximately $300 million to be achieved primarily from 2020 through 2022.
Certain qualifying costs associated withfor this program were recorded in the fourth quarterfirst quarters of 20192021 and in the first three quarters of 2020 and are reflected as Certain Significant Items and excluded from our non-GAAP measure of Adjusted Income. See the “Non-GAAPNon-GAAP Financial Measure (Adjusted Income)”Measure: Adjusted Income section of this MD&A.
In addition to this major 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.
Other (Income)/Deductions—Net
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | %
Change | | September 27,
2020 | | September 29,
2019 | | %
Change |
| Other (income)/deductions––net | | $ | 1,148 | | | $ | 319 | | | * | | $ | 507 | | | $ | 537 | | | (6) | |
| * Indicates calculation not meaningful or results are equal to or greater than 100%. |
For information about•net gains on equity securities in the componentsfirst quarter of 2021 versus net losses recorded in the first quarter of 2020;
•Other (income)/deductions—higher net periodic benefit credits other than service costs related to pension and postretirement plans; and
•, seehigher income from collaborations, out-licensing arrangements and sales of compound/product rights.
See Note 4.4
See also the “Analysis of Operating Segment Information” section of this MD&A.for additional information.
Provision/(Benefit) for Taxes on IncomePROVISION FOR TAXES ON INCOME
| | | | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | %
Change | | September 27,
2020 | | September 29,
2019 | | %
Change | |
| Provision/(benefit) for taxes on income | | $ | (26) | | | $ | 3,047 | | | * | | $ | 968 | | | $ | 2,566 | | | (62) | | |
| (MILLIONS) | | (MILLIONS) | | April 4,
2021 | | March 29,
2020 | | %
Change | |
| Provision for taxes on income | | Provision for taxes on income | | $ | 805 | | | $ | 359 | | | * | |
| Effective tax rate on continuing operations | Effective tax rate on continuing operations | | (1.2) | % | | 28.4 | % | | 9.7 | % | | 13.4 | % | | | Effective tax rate on continuing operations | | 14.2 | % | | 12.6 | % | | |
| * Indicates calculation not meaningful or results are equal to or greater than 100%. | * Indicates calculation not meaningful or results are equal to or greater than 100%. | * Indicates calculation not meaningful or results are equal to or greater than 100%. |
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.
Non-GAAP Financial Measure (Adjusted Income)
General Description of Non-GAAP Financial Measure (Adjusted Income)DISCONTINUED OPERATIONS
NON-GAAP FINANCIAL MEASURE: ADJUSTED INCOME
Adjusted income is an alternative viewmeasure of performance used by management. We measure themanagement to evaluate our overall performance of the overall Company on this basis in conjunction with other performance metrics. Because Adjusted income is an important internal measurement for Pfizer,measures. As such, we believe that investors’ understanding of our performance is enhanced by disclosing this performance measure. We reportuse Adjusted income, certain components of Adjusted income and Adjusted diluted earnings per share in orderEPS to portraypresent the results of our major operations––the discovery, development, manufacture, marketing, sales and saledistribution of prescription medicines and vaccines–biopharmaceutical products worldwide––prior to considering certain income statement elements. We have defined Adjusted incomeelements 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 2019 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.follows:
The following are examples of how the Adjusted income and Adjusted diluted earnings per share measures are utilized: | | | | | | | | | | | | | | |
| Measure | | Definition | | Illustrative Use |
| Adjusted income | | Net income attributable to Pfizer Inc. common shareholders(a) before the impact of purchase accounting for acquisitions, acquisition-related items, discontinued operations and certain significant items | | •Monthly managerial analysis of our operating results and our annual budgets are prepared using these non-GAAP measures •Senior management’s compensation is determined, in part, using these non-GAAP measures(b) |
Adjusted cost of sales, Adjusted selling, informational and administrative expenses, Adjusted research and development expenses, Adjusted amortization of intangible assets and Adjusted other (income)/deductions––net | | Cost of sales, Selling, informational and administrative expenses, Research and development expenses, Amortization of intangible assets and Other (income)/deductions––net (a), each before the impact of purchase accounting for acquisitions, acquisition-related items, discontinued operations and certain significant items, which are components of the Adjusted income measure | |
| Adjusted diluted EPS | | EPS attributable to Pfizer Inc. common shareholders––diluted(a) before the impact of purchase accounting for acquisitions, acquisition-related items, discontinued operations and certain significant items | |
•(a)senior management receives a monthly analysis of our operating results that is prepared on an Adjusted income and Adjusted diluted earnings per share basis;Most directly comparable GAAP measure.
•(b)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.
Effective in 2020, the bonusThe 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 by three metrics, one of which is Adjusted diluted earnings per share,EPS, which is derived from Adjusted income and accounts for 40% of the bonus pool funding. Additionally, the payout for some Performance Share Awards is determined in part by Adjusted net income, which is derived from Adjusted income. Effective for the 2020 performance year and consistent with shareholder feedback received in 2019, the Compensation Committee of the BOD approved adding an R&D pipeline achievement factor to the existing short-term incentive financial metrics.
Adjusted income, and its components and Adjusted diluted earnings per shareEPS, 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)they may not be comparable to the calculation of similar measures of other companies. Adjusted incomecompanies 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 they do not provide a comparable view of our performance relative to other companies inpeers. These measures are not, and should not be viewed as, substitutes for their directly comparable GAAP measures of Net income attributable to Pfizer Inc. common shareholders, components of Net income attributable to Pfizer Inc. common shareholders and EPS attributable to Pfizer Inc. common shareholders—diluted, respectively. See the biopharmaceutical industry.accompanying reconciliations of certain GAAP reported to non-GAAP adjusted information for the first quarters of 2021 and 2020 below.
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 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-tradedpublicly traded pharmaceutical index, plays a significant role in determining payouts under certain of Pfizer’s long-termour 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 2020 and 2019.
Purchase Accounting Adjustments
Adjusted income is calculated prior to consideringexcludes 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 2016), Medivation (acquired in 2016) and Array (acquired in 2019), 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 withfor 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 consideringexcludes acquisition-related items, which are comprised of transaction, integration, restructuring charges and additional depreciation costs associated withfor 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.an acquisition. We have made no adjustments for the resulting synergies.
Discontinued Operations
Adjusted income is calculated prior to consideringexcludes the results of operations included in 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 therapeutic areas and product lines 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 measure for the compensation in respect of the restated periods, but are presented for consistency across all periods.
Certain Significant Items
Adjusted income is calculated prior to consideringexcludes certain significant items. Certain significant items representrepresenting substantive and/or unusual items that are evaluated individually on an individual basis. Such evaluation considers both thea quantitative and the qualitative aspects of their nature.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 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 exclusivityLOE 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, examplesFor a non-inclusive list of items that could be included as certain significant items would be: (i) gains on the completionsee Details of joint venture transactions such as the gain on the completion of the GSK Consumer Healthcare joint venture transaction; (ii)Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income below.
Beginning in 2021, we exclude pension and postretirement actuarial remeasurement gains and losses from equity securitiesour measure of Adjusted income because of their inherent market volatility, which we do not control and cannot predict with any level of certainty and because we do not believe that including these gains and losses assists investors in understanding our business or is reflective of our core operations and business; (iii) a major non-acquisition-related restructuring charge and associated implementation costs; (iv) amounts related to certain disposals of businesses, products or facilities that do not qualify as discontinued operations under U.S. GAAP; (v) certain intangible asset impairments; (vi) adjustments related tobusiness.
Also, see the resolution of certain tax positions; (vii) the impact of adopting certain significant, event-driven tax legislation, such as the TCJA; Non-GAAP Financial Measure: Adjusted Incomeor (viii) charges related to certain legal matters. Normal, ongoing defense costs section of the Company or settlements of and accruals for legal matters made in the normal courseMD&A of our business would not be considered certain significant items.2020 Form 10-K for additional information.
Reconciliations of GAAP Reported to Non-GAAP Adjusted Information––Certain Line Items
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 27, 2020 |
| IN MILLIONS, EXCEPT PER COMMON SHARE DATA | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
| Revenues | | $ | 12,131 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 12,131 | |
| Cost of sales | | 2,529 | | | 5 | | | — | | | — | | | (32) | | | 2,502 | |
| Selling, informational and administrative expenses | | 3,016 | | | (1) | | | — | | | — | | | (147) | | | 2,869 | |
| Research and development expenses | | 2,360 | | | 1 | | | — | | | — | | | (8) | | | 2,354 | |
| Amortization of intangible assets | | 898 | | | (826) | | | — | | | — | | | — | | | 73 | |
| Restructuring charges and certain acquisition-related costs | | 4 | | | — | | | (11) | | | — | | | 7 | | | — | |
| (Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | | | — | |
| Other (income)/deductions––net | | 1,148 | | | (4) | | | — | | | — | | | (1,495) | | | (351) | |
| Income from continuing operations before provision/(benefit) for taxes on income | | 2,176 | | | 823 | | | 11 | | | — | | | 1,675 | | | 4,685 | |
Provision/(benefit) for taxes on income(b) | | (26) | | | 197 | | | 3 | | | — | | | 432 | | | 606 | |
| Income from continuing operations | | 2,202 | | | 626 | | | 9 | | | — | | | 1,242 | | | 4,079 | |
| Discontinued operations––net of tax | | — | | | — | | | — | | | — | | | — | | | — | |
| Net income attributable to noncontrolling interests | | 8 | | | — | | | — | | | — | | | — | | | 8 | |
| Net income attributable to Pfizer Inc. | | 2,194 | | | 626 | | | 9 | | | — | | | 1,242 | | | 4,071 | |
| Earnings per common share attributable to Pfizer Inc.––diluted | | 0.39 | | | 0.11 | | | — | | | — | | | 0.22 | | | 0.72 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended April 4, 2021 |
| (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
| Revenues | | $ | 14,582 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 14,582 | |
| Cost of sales | | 4,211 | | | 5 | | | — | | | — | | | (39) | | | 4,177 | |
| Selling, informational and administrative expenses | | 2,783 | | | (1) | | | — | | | — | | | (124) | | | 2,659 | |
| Research and development expenses | | 2,014 | | | 1 | | | — | | | — | | | (3) | | | 2,013 | |
| Amortization of intangible assets | | 872 | | | (763) | | | — | | | — | | | — | | | 109 | |
| Restructuring charges and certain acquisition-related costs | | 23 | | | — | | | 2 | | | — | | | (25) | | | — | |
| (Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | | | — | |
| Other (income)/deductions––net | | (1,004) | | | 53 | | | — | | | — | | | 350 | | | (600) | |
| Income from continuing operations before provision for taxes on income | | 5,683 | | | 704 | | | (2) | | | — | | | (160) | | | 6,225 | |
Provision for taxes on income(b) | | 805 | | | 187 | | | — | | | — | | | (38) | | | 954 | |
| Income from continuing operations | | 4,877 | | | 517 | | | (1) | | | — | | | (122) | | | 5,271 | |
| Income from discontinued operations––net of tax | | 9 | | | — | | | — | | | (9) | | | — | | | — | |
| Net income attributable to noncontrolling interests | | 9 | | | — | | | — | | | — | | | — | | | 9 | |
| Net income attributable to Pfizer Inc. common shareholders | | 4,877 | | | 517 | | | (1) | | | (9) | | | (122) | | | 5,262 | |
| Earnings per common share attributable to Pfizer Inc. common shareholders––diluted | | 0.86 | | | 0.09 | | | — | | | — | | | (0.02) | | | 0.93 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended September 27, 2020 |
| IN MILLIONS, EXCEPT PER COMMON SHARE DATA | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
| Revenues | | $ | 35,961 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 35,961 | |
| Cost of sales | | 7,188 | | | 14 | | | — | | | — | | | (114) | | | 7,088 | |
| Selling, informational and administrative expenses | | 8,919 | | | (1) | | | — | | | — | | | (497) | | | 8,421 | |
| Research and development expenses | | 6,216 | | | 4 | | | — | | | — | | | (244) | | | 5,976 | |
| Amortization of intangible assets | | 2,688 | | | (2,474) | | | — | | | — | | | — | | | 215 | |
| Restructuring charges and certain acquisition-related costs | | 435 | | | — | | | (46) | | | — | | | (389) | | | — | |
| (Gain) on completion of Consumer Healthcare JV transaction | | (6) | | | — | | | — | | | — | | | 6 | | | — | |
| Other (income)/deductions––net | | 507 | | | (89) | | | — | | | — | | | (1,316) | | | (898) | |
| Income from continuing operations before provision/(benefit) for taxes on income | | 10,014 | | | 2,545 | | | 46 | | | — | | | 2,554 | | | 15,159 | |
Provision/(benefit) for taxes on income(b) | | 968 | | | 564 | | | 11 | | | — | | | 602 | | | 2,145 | |
| Income from continuing operations | | 9,046 | | | 1,981 | | | 35 | | | — | | | 1,952 | | | 13,014 | |
| Discontinued operations––net of tax | | — | | | — | | | — | | | — | | | — | | | — | |
| Net income attributable to noncontrolling interests | | 25 | | | — | | | — | | | — | | | — | | | 25 | |
| Net income attributable to Pfizer Inc. | | 9,022 | | | 1,981 | | | 35 | | | — | | | 1,952 | | | 12,989 | |
| Earnings per common share attributable to Pfizer Inc.––diluted | | 1.60 | | | 0.35 | | | 0.01 | | | — | | | 0.35 | | | 2.31 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 29, 2019 |
| IN MILLIONS, EXCEPT PER COMMON SHARE DATA | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
| Revenues | | $ | 12,680 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 12,680 | |
| Cost of sales | | 2,602 | | | 4 | | | — | | | — | | | (147) | | | 2,459 | |
| Selling, informational and administrative expenses | | 3,260 | | | 1 | | | — | | | — | | | (64) | | | 3,196 | |
| Research and development expenses | | 2,283 | | | 1 | | | — | | | — | | | (343) | | | 1,940 | |
| Amortization of intangible assets | | 1,212 | | | (1,140) | | | — | | | — | | | — | | | 72 | |
| Restructuring charges and certain acquisition-related costs | | 365 | | | — | | | (300) | | | — | | | (64) | | | — | |
| (Gain) on completion of Consumer Healthcare JV transaction | | (8,087) | | | — | | | — | | | — | | | 8,087 | | | — | |
| Other (income)/deductions––net | | 319 | | | (6) | | | — | | | — | | | (281) | | | 32 | |
| Income from continuing operations before provision/(benefit) for taxes on income | | 10,727 | | | 1,141 | | | 300 | | | — | | | (7,187) | | | 4,981 | |
Provision/(benefit) for taxes on income(b) | | 3,047 | | | 239 | | | 58 | | | — | | | (2,581) | | | 763 | |
| Income from continuing operations | | 7,680 | | | 902 | | | 242 | | | — | | | (4,606) | | | 4,218 | |
| Discontinued operations––net of tax | | 4 | | | — | | | — | | | (4) | | | — | | | — | |
| Net income attributable to noncontrolling interests | | 4 | | | — | | | — | | | — | | | — | | | 4 | |
| Net income attributable to Pfizer Inc. | | 7,680 | | | 902 | | | 242 | | | (4) | | | (4,606) | | | 4,214 | |
| Earnings per common share attributable to Pfizer Inc.––diluted | | 1.36 | | | 0.16 | | | 0.04 | | | — | | | (0.82) | | | 0.75 | |
| | | | | | | | | | | | |
| | | | | Nine Months Ended September 29, 2019 | | | Three Months Ended March 29, 2020 |
| IN MILLIONS, EXCEPT PER COMMON SHARE DATA | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted | |
| (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
| Revenues | Revenues | | $ | 39,062 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 39,062 | | Revenues | | $ | 10,083 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 10,083 | |
| Cost of sales | Cost of sales | | 7,611 | | | 15 | | | — | | | — | | | (196) | | | 7,430 | | Cost of sales | | 1,940 | | | 4 | | | — | | | — | | | (26) | | | 1,917 | |
| Selling, informational and administrative expenses | Selling, informational and administrative expenses | | 10,110 | | | 2 | | | (2) | | | — | | | (139) | | | 9,971 | | Selling, informational and administrative expenses | | 2,541 | | | — | | | — | | | — | | | (92) | | | 2,450 | |
| Research and development expenses | Research and development expenses | | 5,827 | | | 3 | | | — | | | — | | | (372) | | | 5,458 | | Research and development expenses | | 1,672 | | | 1 | | | — | | | — | | | — | | | 1,673 | |
| Amortization of intangible assets | Amortization of intangible assets | | 3,578 | | | (3,377) | | | — | | | — | | | — | | | 201 | | Amortization of intangible assets | | 849 | | | (778) | | | — | | | — | | | — | | | 71 | |
| Restructuring charges and certain acquisition-related costs | Restructuring charges and certain acquisition-related costs | | 295 | | | — | | | (150) | | | — | | | (145) | | | — | | Restructuring charges and certain acquisition-related costs | | 54 | | | — | | | (13) | | | — | | | (40) | | | — | |
| (Gain) on completion of Consumer Healthcare JV transaction | (Gain) on completion of Consumer Healthcare JV transaction | | (8,087) | | | — | | | — | | | — | | | 8,087 | | | — | | (Gain) on completion of Consumer Healthcare JV transaction | | (6) | | | — | | | — | | | — | | | 6 | | | — | |
| Other (income)/deductions––net | Other (income)/deductions––net | | 537 | | | — | | | — | | | — | | | (740) | | | (203) | | Other (income)/deductions––net | | 190 | | | (3) | | | — | | | — | | | (449) | | | (262) | |
| Income from continuing operations before provision/(benefit) for taxes on income | | 19,190 | | | 3,357 | | | 152 | | | — | | | (6,495) | | | 16,204 | | |
Provision/(benefit) for taxes on income(b) | | 2,566 | | | 685 | | | 69 | | | — | | | (759) | | | 2,560 | | |
| Income from continuing operations before provision for taxes on income | | Income from continuing operations before provision for taxes on income | | 2,842 | | | 776 | | | 13 | | | — | | | 602 | | | 4,233 | |
Provision for taxes on income(b) | | Provision for taxes on income(b) | | 359 | | | 175 | | | 3 | | | — | | | 140 | | | 678 | |
| Income from continuing operations | Income from continuing operations | | 16,625 | | | 2,673 | | | 83 | | | — | | | (5,737) | | | 13,644 | | Income from continuing operations | | 2,483 | | | 601 | | | 10 | | | — | | | 462 | | | 3,555 | |
| Discontinued operations––net of tax | | 4 | | | — | | | — | | | (4) | | | — | | | — | | |
| Income from discontinued operations––net of tax | | Income from discontinued operations––net of tax | | 881 | | | — | | | — | | | (881) | | | — | | | — | |
| Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | | 19 | | | — | | | — | | | — | | | — | | | 19 | | Net income attributable to noncontrolling interests | | 9 | | | — | | | — | | | — | | | — | | | 9 | |
| Net income attributable to Pfizer Inc. | | 16,609 | | | 2,673 | | | 83 | | | (4) | | | (5,737) | | | 13,625 | | |
| Earnings per common share attributable to Pfizer Inc.––diluted | | 2.92 | | | 0.47 | | | 0.01 | | | — | | | (1.01) | | | 2.39 | | |
| Net income attributable to Pfizer Inc. common shareholders | | Net income attributable to Pfizer Inc. common shareholders | | 3,355 | | | 601 | | | 10 | | | (881) | | | 462 | | | 3,546 | |
| Earnings per common share attributable to Pfizer Inc. common shareholders––diluted | | Earnings per common share attributable to Pfizer Inc. common shareholders––diluted | | 0.60 | | | 0.11 | | | — | | | (0.16) | | | 0.08 | | | 0.63 | |
|
(a)For details of adjustments, see “DetailsDetails of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income”Income.
(b)The effective tax rate on Non-GAAP Adjusted income was 12.9% in the third quarter of 2020, compared to 15.3% in the thirdfirst quarter of 2019. The effective tax rate on Non-GAAP Adjusted income was 14.1%2021, compared to 16.0% in the first nine monthsquarter of 2020, compared to 15.8% in the first nine months of 2019.2020. The decreases weredecrease was primarily due to a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.
Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income
| | | Three Months Ended | | Nine Months Ended | | | Three Months Ended |
| (MILLIONS OF DOLLARS) | | Sept. 27, 2020 | | Sept. 29, 2019 | | Sept. 27, 2020 | | Sept. 29, 2019 | |
| (MILLIONS) | | (MILLIONS) | | | April 4,
2021 | | March 29,
2020 |
| Purchase accounting adjustments | Purchase accounting adjustments | | | | | | | | | Purchase accounting adjustments | | | | | |
Amortization, depreciation and other(a) | Amortization, depreciation and other(a) | | $ | 829 | | | $ | 1,145 | | | $ | 2,559 | | | $ | 3,372 | | Amortization, depreciation and other(a) | | | $ | 709 | | | $ | 780 | |
| Cost of sales | Cost of sales | | (5) | | | (4) | | | (14) | | | (15) | | Cost of sales | | | (5) | | | (4) | |
| Total purchase accounting adjustments––pre-tax | Total purchase accounting adjustments––pre-tax | | 823 | | | 1,141 | | | 2,545 | | | 3,357 | | Total purchase accounting adjustments––pre-tax | | | 704 | | | 776 | |
Income taxes(b) | Income taxes(b) | | (197) | | | (239) | | | (564) | | | (685) | | Income taxes(b) | | | (187) | | | (175) | |
| Total purchase accounting adjustments––net of tax | Total purchase accounting adjustments––net of tax | | 626 | | | 902 | | | 1,981 | | | 2,673 | | Total purchase accounting adjustments––net of tax | | | 517 | | | 601 | |
| Acquisition-related items | Acquisition-related items | | | | | | | | | Acquisition-related items | | | | | |
Restructuring charges/(credits)(c) | Restructuring charges/(credits)(c) | | 4 | | | 19 | | | 3 | | | (196) | | Restructuring charges/(credits)(c) | | | (6) | | | — | |
Transaction costs(c) | Transaction costs(c) | | — | | | 65 | | | 14 | | | 65 | | Transaction costs(c) | | | — | | | 3 | |
Integration costs and other(c) | Integration costs and other(c) | | 7 | | | 217 | | | 29 | | | 281 | | Integration costs and other(c) | | | 5 | | | 10 | |
| Additional depreciation––asset restructuring(d) | | — | | | — | | | — | | | 2 | | |
| | Total acquisition-related items––pre-tax | Total acquisition-related items––pre-tax | | 11 | | | 300 | | | 46 | | | 152 | | Total acquisition-related items––pre-tax | | | (2) | | | 13 | |
Income taxes(e) | | (3) | | | (58) | | | (11) | | | (69) | | |
Income taxes(b) | | Income taxes(b) | | | — | | | (3) | |
| Total acquisition-related items––net of tax | Total acquisition-related items––net of tax | | 9 | | | 242 | | | 35 | | | 83 | | Total acquisition-related items––net of tax | | | (1) | | | 10 | |
| Discontinued operations | Discontinued operations | | | | | | | | | Discontinued operations | | | | | |
| Total discontinued operations––net of tax, attributable to Pfizer Inc.(f) | | — | | | (4) | | | — | | | (4) | | |
Income from discontinued operations––net of tax(d) | | Income from discontinued operations––net of tax(d) | | | (9) | | | (881) | |
| Certain significant items | Certain significant items | | | | | | | | | Certain significant items | | | | | |
Restructuring charges/(credits)––cost reduction initiatives(g)(e) | Restructuring charges/(credits)––cost reduction initiatives(g)(e) | | (7) | | | 64 | | | 389 | | | 145 | | Restructuring charges/(credits)––cost reduction initiatives(g)(e) | | | 25 | | | 40 | |
Implementation costs and additional depreciation––asset restructuring(h)(f) | Implementation costs and additional depreciation––asset restructuring(h)(f) | | 52 | | | 46 | | | 158 | | | 135 | | Implementation costs and additional depreciation––asset restructuring(h)(f) | | | 85 | | | 23 | |
Net (gains)/losses recognized during the period on equity securities(i) | | 73 | | | (3) | | | (429) | | | (139) | | |
Certain legal matters, net(i) | | 38 | | | 63 | | | 64 | | | 72 | | |
Certain asset impairments(i) | | 900 | | | — | | | 900 | | | 149 | | |
Business and legal entity alignment costs(j) | | 127 | | | 89 | | | 416 | | | 353 | | |
(Gain) on completion of Consumer Healthcare JV transaction(k) | | — | | | (8,087) | | | (6) | | | (8,087) | | |
Net losses on early retirement of debt(i) | | — | | | — | | | — | | | 138 | | |
Other(l) | | 493 | | | 641 | | | 1,062 | | | 738 | | |
| Net (gains)/losses recognized during the period on equity securities(g) | | Net (gains)/losses recognized during the period on equity securities(g) | | | (399) | | | 195 | |
Certain legal matters, net(g) | | Certain legal matters, net(g) | | | 11 | | | 9 | |
| Business and legal entity alignment costs(h) | | Business and legal entity alignment costs(h) | | | 74 | | | 76 | |
Actuarial valuation and other pension and postretirement plan (gains)/losses(i) | | Actuarial valuation and other pension and postretirement plan (gains)/losses(i) | | | (39) | | | 82 | |
(Gain) on completion of Consumer Healthcare JV transaction(j) | | (Gain) on completion of Consumer Healthcare JV transaction(j) | | | — | | | (6) | |
Other(k) | | Other(k) | | | 83 | | | 183 | |
| Total certain significant items––pre-tax | Total certain significant items––pre-tax | | 1,675 | | | (7,187) | | | 2,554 | | | (6,495) | | Total certain significant items––pre-tax | | | (160) | | | 602 | |
Income taxes(m) | | (432) | | | 2,581 | | | (602) | | | 759 | | |
Income taxes(b) | | Income taxes(b) | | | 38 | | | (140) | |
| Total certain significant items––net of tax | Total certain significant items––net of tax | | 1,242 | | | (4,606) | | | 1,952 | | | (5,737) | | Total certain significant items––net of tax | | | (122) | | | 462 | |
| | Total purchase accounting adjustments, acquisition-related items, discontinued operations and certain significant items––net of tax, attributable to Pfizer Inc. | Total purchase accounting adjustments, acquisition-related items, discontinued operations and certain significant items––net of tax, attributable to Pfizer Inc. | | $ | 1,878 | | | $ | (3,466) | | | $ | 3,967 | | | $ | (2,984) | | Total purchase accounting adjustments, acquisition-related items, discontinued operations and certain significant items––net of tax, attributable to Pfizer Inc. | | | $ | 385 | | | $ | 192 | |
(a)Included primarily in Amortization of intangible assets.
(b)Included in Provision/(benefit)Provision for taxes on income.Income taxes includes 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’sthe applicable tax rate.
(c)Included in Restructuring charges and certain acquisition-related costs. For additional information, see the “Costs and Expenses—Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives”section of this MD&A andSee Note 3.
(d)Included in Selling, informational and administrative expensesIncome from discontinued operations––net of tax. for the nine months ended September 29, 2019See. Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions related to acquisitions. Note 2A.
(e)Included in Provision/(benefit) 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 first nine months of 2019 include the impact of the non-taxable reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of a U.S. IRS audit for multiple tax years.
(f)Included in Discontinued operations––net of tax.
(g)Amounts relate toIncludes employee termination costs, asset impairments and other exit costs not associated with acquisitions, which are included in Restructuring charges and certain acquisition-related costs (see the “Costs and Expenses—Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives”section of this MD&A and Note 3).
(h)(f)Amounts relateRelates to our cost-reduction/cost-reduction and productivity initiatives not related to acquisitions (see Note 3). For the three months ended September 27,April 4, 2021, primarily included in Cost of sales ($21 million) and Selling, informational and administrative expenses ($64 million). For the three months ended March 29, 2020, primarily included in Cost of sales ($1514 million) and Selling, informational and administrative expenses ($36 million). For the nine months ended September 27, 2020, primarily included in Cost of sales ($46 million) and Selling, informational and administrative expenses ($114 million). For the three months ended September 29, 2019, primarily included in Cost of sales ($20 million) and Selling, informational and administrative expenses ($23 million). For the nine months ended September 29, 2019, included in Cost of sales ($65 million), Selling, informational and administrative expenses ($48 million) and Research and development expenses ($2115 million).
(i)(g)Included in Other (income)/deductions—netnet. (seeSee Note 4).
(j)(h)For the three months ended September 27,April 4, 2021, primarily included in Cost of sales ($17 million) and Selling, informational and administrative expenses ($53 million) and for the three months ended March 29, 2020, primarily included in Cost of sales ($1911 million) and Selling, informational and administrative expenses ($10261 million) and primarily represents separation costs associated with our planned Upjohn transaction with Mylan, as well as legal entity restructuring costs, and mainly includesrepresents costs for consulting, legal, tax and advisory services. For the nine months ended September 27, 2020, included in Cost of sales ($64 million), Research and development expenses ($15 million) and Selling, informational and administrative expenses ($337 million) and primarily represents legal entity restructuring costs, as well as separation costsservices associated with our planned Upjohn transaction with Mylan, and mainly includes consulting,the internal reorganization of legal entities.
tax and advisory services. For the three and nine months ended September 29, 2019, primarily includedIncluded in Other (income)/deductions––netnet. For the three months ended April 4, 2021, includes a $47 million interim actuarial remeasurement pre-tax gain and represented incremental costs associated withfor the design, planning and implementation of our new organizational structure, effective in the beginning of 2019, and primarily included consulting, legal, tax and advisory services.three months ended March 29, 2020, includes an $81 million interim actuarial remeasurement pre-tax loss. See Note 1C.
(k)(j)Included in (Gain) on completion of Consumer Healthcare JV transactiontransaction. (seeSee Note 2B).
(l)(k)For the three months ended September 27, 2020,April 4, 2021, primarily included in Other (income)/deductions––net($77 million). For the first ninethree months ofended March 29, 2020, primarily included in Selling, informational and administrative expenses ($46 million), Research and development expenses ($231 million)and Other (income)/deductions––net ($781 million). For the three months ended September 29, 2019, included in Cost of sales ($128 million), Selling, informational and administrative expenses ($39 million), Research and development expenses ($34017 million) and Other (income)/deductions––net ($134164 million). For the first nine months of 2019, included in Cost of sales ($130 million), Selling, informational and administrative expenses ($80 million), Research and development expenses ($351 million) and Other (income)/deductions––net ($178 million). The third quarter and first nine months of 2020 include, amongAmong other things, the following charges recorded in Other (income)/deductions––net: (i) $220 million for foreign exchange remeasurement and interest expense related to debt issued by a subsidiary of Upjohn in the second quarter of 2020 and (ii) $167 million of settlement losses within the U.S. Pfizer Consolidated Pension Plan. The first ninethree months of 2020 alsoended April 4, 2021 includes (i) charges of $297$49 million and the three months ended March 29, 2020 includes charges of $160 million recorded in Other (income)/deductions––net, primarily representing our pro rata share of restructuring and business combination accounting charges recorded by the GSK Consumer Healthcare joint venture, partially offset by gains from the divestiture of certain of the joint venture’s brands recorded by the GSK Consumer Healthcare joint venture, and our write-off and amortization of equity method basis differences primarily related to those brand divestitures and to inventory and (ii) upfront payments of $130 million to Valneva and $72 million to BioNTech, which were both recorded to JV.Research and development expenses. The third quarter and first nine months of 2019 include, among other things, (i) a $337 million charge in Research and development expenses related to our acquisition of Therachon and (ii) a $127 million charge in Cost of sales related to rivipansel, primarily for inventory manufactured for expected future sale. In addition, the third quarter of 2019 includes charges of $161 million, primarily in Other (income)/deductions––net ($121 million) and Selling, informational and administrative expenses ($39 million) and the first nine months of 2019 include charges of $223 million, primarily in Other (income)/deductions––net ($146 million) and Selling, informational and administrative expenses ($76 million), for external incremental costs, such as transaction costs and costs to separate our Consumer Healthcare business into a separate legal entity associated with the formation of the GSK Consumer Healthcare joint venture.
(m)Included in Provision/(benefit) 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 and first nine months of 2020 were favorably impacted by tax benefits associated with intangible asset impairment charges of $900 million related to Biopharma IPR&D acquired in connection with our Array acquisition. The third quarter and first nine months of 2019 were unfavorably impacted by the tax expense associated with the gain related to the completion of the Consumer Healthcare joint venture transaction with GSK. The first nine months of 2019 were favorably impacted primarily by a benefit of approximately $1.4 billion, representing tax and interest, resulting from a favorable settlement of a U.S. IRS audit for multiple tax years, as well as a tax benefit recorded as a result of additional guidance issued by the U.S. Department of Treasury related to the TCJA.
Analysis of Operating Segment Information
The following tables and associated notes provide additional information about the performance of each of our two reportable operating segments—Biopharma and Upjohn, and our Consumer Healthcare operating segment through July 31, 2019. See the “Overview of Our Performance, Operating Environment, Strategy and Outlook—Our Strategy—Organizing for Growth” section of this MD&A and Note 14.
Acquisitions and other business development activities completed in 2019 and in the first nine months of 2020, including the contribution of our Consumer Healthcare business to the GSK Consumer Healthcare joint venture, impacted financial results in the periods presented. For additional information, see Notes to Consolidated Financial Statements—Note 1A. Basis of Presentation and Significant Accounting Policies: Basis of Presentation in our 2019 Financial Report, and Note 2.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The following summarizes revenue and cost information by reportable operating segment and a reconciliation of that information to our condensed consolidated statements of income: |
| | Third Quarter of 2020 |
| (MILLIONS OF DOLLARS) | | Biopharma(a) | | Upjohn(a) | | Other(b) | | Non-GAAP Adjusted(c) | | Reconciling Items(d) | | GAAP Reported |
| Revenues | | $ | 10,215 | | | $ | 1,916 | | | $ | — | | | $ | 12,131 | | | $ | — | | | $ | 12,131 | |
| Cost of sales | | 1,883 | | | 560 | | | 60 | | | 2,502 | | | 27 | | | 2,529 | |
| % of revenue | | 18.4 | % | | 29.2 | % | | * | | 20.6 | % | | * | | 20.8 | % |
| Selling, informational and administrative expenses | | 1,513 | | | 299 | | | 1,057 | | | 2,869 | | | 148 | | | 3,016 | |
| Research and development expenses | | 228 | | | 58 | | | 2,067 | | | 2,354 | | | 6 | | | 2,360 | |
| Amortization of intangible assets | | 71 | | | — | | | 1 | | | 73 | | | 826 | | | 898 | |
| Restructuring charges and certain acquisition-related costs | | — | | | — | | | — | | | — | | | 4 | | | 4 | |
| (Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | | | — | |
| Other (income)/deductions––net | | (287) | | | (10) | | | (54) | | | (351) | | | 1,499 | | | 1,148 | |
| Income/(loss) from continuing operations before provision/(benefit) for taxes on income | | 6,807 | | | 1,009 | | | (3,131) | | | 4,685 | | | (2,509) | | | 2,176 | |
* Indicates calculation not meaningful or result is equal to or greater than 100%.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 27, 2020 |
| (MILLIONS OF DOLLARS) | | Biopharma(a) | | Upjohn(a) | | Other(b) | | Non-GAAP
Adjusted(c) | | Reconciling Items(d) | | GAAP Reported |
| Revenues | | $ | 30,017 | | | $ | 5,944 | | | $ | — | | | $ | 35,961 | | | $ | — | | | $ | 35,961 | |
| Cost of sales | | 5,371 | | | 1,563 | | | 155 | | | 7,088 | | | 100 | | | 7,188 | |
| % of revenue | | 17.9 | % | | 26.3 | % | | * | | 19.7 | % | | * | | 20.0 | % |
| Selling, informational and administrative expenses | | 4,492 | | | 859 | | | 3,070 | | | 8,421 | | | 498 | | | 8,919 | |
| Research and development expenses | | 630 | | | 169 | | | 5,178 | | | 5,976 | | | 240 | | | 6,216 | |
| Amortization of intangible assets | | 213 | | | 1 | | | 2 | | | 215 | | | 2,474 | | | 2,688 | |
| Restructuring charges and certain acquisition-related costs | | — | | | — | | | — | | | — | | | 435 | | | 435 | |
| (Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | (6) | | | (6) | |
| Other (income)/deductions––net | | (874) | | | (15) | | | (9) | | | (898) | | | 1,405 | | | 507 | |
| Income/(loss) from continuing operations before provision/(benefit) for taxes on income | | 20,186 | | | 3,367 | | | (8,395) | | | 15,159 | | | (5,145) | | | 10,014 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Third Quarter of 2019 |
| (MILLIONS OF DOLLARS) | | Biopharma(a) | | Upjohn(a) | | Other(b) | | Non-GAAP
Adjusted(c) | | Reconciling Items(d) | | GAAP Reported |
| Revenues | | $ | 9,952 | | | $ | 2,351 | | | $ | 377 | | | $ | 12,680 | | | $ | — | | | $ | 12,680 | |
| Cost of sales | | 1,750 | | | 544 | | | 164 | | | 2,459 | | | 143 | | | 2,602 | |
| % of revenue | | 17.6 | % | | 23.1 | % | | * | | 19.4 | % | | * | | 20.5 | % |
| Selling, informational and administrative expenses | | 1,590 | | | 365 | | | 1,241 | | | 3,196 | | | 64 | | | 3,260 | |
| Research and development expenses | | 227 | | | 59 | | | 1,655 | | | 1,940 | | | 343 | | | 2,283 | |
| Amortization of intangible assets | | 71 | | | — | | | — | | | 72 | | | 1,140 | | | 1,212 | |
| Restructuring charges and certain acquisition-related costs | | — | | | — | | | — | | | — | | | 365 | | | 365 | |
| (Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | (8,087) | | | (8,087) | |
| Other (income)/deductions––net | | (193) | | | — | | | 226 | | | 32 | | | 287 | | | 319 | |
| Income/(loss) from continuing operations before provision/(benefit) for taxes on income | | 6,506 | | | 1,384 | | | (2,909) | | | 4,981 | | | 5,746 | | | 10,727 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 29, 2019 |
| (MILLIONS OF DOLLARS) | | Biopharma(a) | | Upjohn(a) | | Other(b) | | Non-GAAP
Adjusted(c) | | Reconciling Items(d) | | GAAP Reported |
| Revenues | | $ | 28,429 | | | $ | 8,535 | | | $ | 2,098 | | | $ | 39,062 | | | $ | — | | | $ | 39,062 | |
| Cost of sales | | 5,124 | | | 1,632 | | | 674 | | | 7,430 | | | 181 | | | 7,611 | |
| % of revenue | | 18.0 | % | | 19.1 | % | | * | | 19.0 | % | | * | | 19.5 | % |
| Selling, informational and administrative expenses | | 4,791 | | | 1,087 | | | 4,093 | | | 9,971 | | | 139 | | | 10,110 | |
| Research and development expenses | | 591 | | | 173 | | | 4,694 | | | 5,458 | | | 369 | | | 5,827 | |
| Amortization of intangible assets | | 201 | | | 1 | | | — | | | 201 | | | 3,377 | | | 3,578 | |
| Restructuring charges and certain acquisition-related costs | | — | | | — | | | — | | | — | | | 295 | | | 295 | |
| (Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | (8,087) | | | (8,087) | |
| Other (income)/deductions––net | | (738) | | | 7 | | | 528 | | | (203) | | | 740 | | | 537 | |
| Income/(loss) from continuing operations before provision/(benefit) for taxes on income | | 18,461 | | | 5,635 | | | (7,891) | | | 16,204 | | | 2,986 | | | 19,190 | |
(a)Amounts represent the revenues and costs managed by each of the Biopharma and Upjohn reportable operating segments for the periods presented. The expenses generally include only those costs directly attributable to the operating segment.
(b)Other comprises the revenues and costs included in our Adjusted income components (see footnote (c) below) that are managed outside Biopharma and Upjohn and includes the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Third Quarter of 2020 |
| | Other Business Activities | | | |
| (MILLIONS OF DOLLARS) | | WRDM(i) | | GPD(ii) | | Other(iii) | | Corporate and Other Unallocated(iv) | | Total |
| Revenues | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Cost of sales | | — | | | 1 | | | — | | | 59 | | | 60 | |
| Selling, informational and administrative expenses | | 41 | | | — | | | 109 | | | 906 | | | 1,057 | |
| Research and development expenses | | 896 | | | 887 | | | 6 | | | 279 | | | 2,067 | |
| Amortization of intangible assets | | — | | | — | | | — | | | 1 | | | 1 | |
| Restructuring charges and certain acquisition-related costs | | — | | | — | | | — | | | — | | | — | |
| (Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | |
| Other (income)/deductions––net | | 1 | | | — | | | — | | | (54) | | | (54) | |
| Income/(loss) from continuing operations before provision/(benefit) for taxes on income | | (937) | | | (887) | | | (115) | | | (1,192) | | | (3,131) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 27, 2020 |
| | Other Business Activities | | |
| (MILLIONS OF DOLLARS) | | WRDM(i) | | GPD(ii) | | Other(iii) | | Corporate and Other Unallocated(iv) | | Total |
| Revenues | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Cost of sales | | (1) | | | 1 | | | — | | | 155 | | | 155 | |
| Selling, informational and administrative expenses | | 109 | | | — | | | 323 | | | 2,638 | | | 3,070 | |
| Research and development expenses | | 2,120 | | | 2,385 | | | 17 | | | 655 | | | 5,178 | |
| Amortization of intangible assets | | — | | | — | | | — | | | 2 | | | 2 | |
| Restructuring charges and certain acquisition-related costs | | — | | | — | | | — | | | — | | | — | |
| (Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | |
| Other (income)/deductions––net | | 3 | | | — | | | 1 | | | (13) | | | (9) | |
| Income/(loss) from continuing operations before provision/(benefit) for taxes on income | | (2,231) | | | (2,386) | | | (341) | | | (3,437) | | | (8,395) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Third Quarter of 2019 |
| | Other Business Activities | | | | |
| (MILLIONS OF DOLLARS) | | WRDM(i) | | GPD(ii) | | Other(iii) | | Corporate and Other Unallocated(iv) | | Total |
| Revenues | | $ | — | | | $ | — | | | $ | 377 | | | $ | — | | | $ | 377 | |
| Cost of sales | | — | | | — | | | 113 | | | 51 | | | 164 | |
| Selling, informational and administrative expenses | | 34 | | | — | | | 263 | | | 943 | | | 1,241 | |
| Research and development expenses | | 591 | | | 834 | | | 19 | | | 211 | | | 1,655 | |
| Amortization of intangible assets | | — | | | — | | | — | | | — | | | — | |
| Restructuring charges and certain acquisition-related costs | | — | | | — | | | — | | | — | | | — | |
| (Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | |
| Other (income)/deductions––net | | (9) | | | 1 | | | — | | | 234 | | | 226 | |
| Income/(loss) from continuing operations before provision/(benefit) for taxes on income | | (616) | | | (835) | | | (19) | | | (1,439) | | | (2,909) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 29, 2019 |
| | Other Business Activities | | | | |
| (MILLIONS OF DOLLARS) | | WRDM(i) | | GPD(ii) | | Other(iii) | | Corporate and Other Unallocated(iv) | | Total |
| Revenues | | $ | — | | | $ | — | | | $ | 2,098 | | | $ | — | | | $ | 2,098 | |
| Cost of sales | | — | | | 1 | | | 663 | | | 9 | | | 674 | |
| Selling, informational and administrative expenses | | 84 | | | — | | | 1,058 | | | 2,951 | | | 4,093 | |
| Research and development expenses | | 1,671 | | | 2,324 | | | 82 | | | 618 | | | 4,694 | |
| Amortization of intangible assets | | — | | | — | | | — | | | — | | | — | |
| Restructuring charges and certain acquisition-related costs | | — | | | — | | | — | | | — | | | — | |
| (Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | |
| Other (income)/deductions––net | | (11) | | | — | | | — | | | 538 | | | 528 | |
| Income/(loss) from continuing operations before provision/(benefit) for taxes on income | | (1,744) | | | (2,326) | | | 294 | | | (4,116) | | | (7,891) | |
(i)WRDM—the R&D and Medical expenses managed by our WRDM organization, which is generally responsible for research projects for our Biopharma portfolio until proof-of-concept is achieved and then for transitioning those projects to the GPD organization for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRDM organization also has responsibility for certain science-based and other platform-services organizations, which provide end-to-end technical expertise and other services to the various R&D projects, as well as the Worldwide Medical and Safety group, which ensures that Pfizer provides all stakeholders––including patients, healthcare providers, pharmacists, payers and health authorities––with complete and up-to-date information on the risks and benefits associated with Pfizer products so that they can make appropriate decisions on how and when to use Pfizer’s medicines.
(ii)GPD––the costs associated with our GPD organization, which is generally responsible for clinical trials from WRDM in the Biopharma portfolio, including late stage portfolio spend. GPD also provides technical support and other services to Pfizer R&D projects. GPD is responsible for facilitating all regulatory submissions and interactions with regulatory agencies.
(iii)Other—the operating results of our Consumer Healthcare business, through July 31, 2019, and costs associated with other commercial activities not managed as part of Biopharma or Upjohn, including all strategy, business development, portfolio management and valuation capabilities, which previously had been reported in various parts of the organization.
(iv)Corporate and Other Unallocated––the costs associated with corporate enabling functions (such as digital, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement), patient advocacy activities and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments, as well as overhead expenses associated with our manufacturing (which include manufacturing variances associated with production) and commercial operations that are not directly assessed to an operating segment, as business unit (segment) management does not manage these costs. Corporate and Other Unallocated also includes our share of earnings from the GSK Consumer Healthcare joint venture and other charges related to the GSK Consumer Healthcare joint venture, primarily representing our pro-rata share of restructuring and business combination accounting charges recorded by the GSK Consumer Healthcare joint venture.
We recognized the following amounts in Cost of sales related to forward-exchange contracts designated as cash flow hedges of a portion of our foreign exchange-denominated forecasted intercompany inventory sales (see Note 7E):
•a $34 million net gain in the third quarter of 2020;
•a $184 million net gain in the first nine months of 2020;
•a $66 million net gain in the third quarter of 2019; and
•a $169 million net gain in the first nine months of 2019.
(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 gains on the completion of joint venture transactions, restructuring charges, legal charges or gains and losses from equity securities), 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 2020 vs. Third Quarter of 2019
Biopharma Operating Segment
Revenues
Biopharma Revenues increased $263 million, or 3%, to $10.2 billion in the third quarter of 2020 from $10.0 billion in the third quarter of 2019, reflecting an operational increase of $349 million, or 4%, partially offset by the unfavorable impact of foreign exchange of $86 million, or 1%.
The following provides an analysis of the increase in Biopharma worldwide Revenues:
| | | | | | | | |
(MILLIONS OF DOLLARS) | | |
Biopharma Revenues, for the three months ended September 29, 2019
| | $ | 9,952 | |
| | |
Operational growth/(decline): | | |
Continued growth from certain key brands(a)
| | 235 | |
Higher revenues for Biosimilars, primarily driven by recent oncology biosimilar launches in the U.S. and other global markets and continued growth from Retacrit, primarily in the U.S. | | 188 | |
Higher revenues for the rare disease business driven by the U.S. launches of Vyndaqel in May 2019 and Vyndamax in September 2019 for ATTR-CM; and in international markets, primarily driven by the March 2019 launch of the ATTR-CM indication in Japan and the February 2020 approval of the ATTR-CM indication in the EU | | 154 | |
Higher revenues for Inlyta, primarily due to increased demand in the U.S. and certain developed international markets, following the approvals in 2019 for combinations of certain immune checkpoint inhibitors plus Inlyta for the first-line treatment of patients with advanced RCC | | 57 | |
Decreased revenue for the Hospital business, primarily in emerging markets and driven by lower demand for certain anti-infective products in China due to lower infection rates driven by fewer elective surgical procedures, shorter in-patient hospital stays and improved infection control | | (90) | |
Lower revenues for Enbrel internationally, primarily reflecting continued biosimilar competition in most developed Europe markets, as well as in Japan and Brazil, all of which is expected to continue | | (87) | |
Decline in Prevnar 13/Prevenar 13 revenues primarily in the U.S., reflecting the unfavorable impact of timing associated with government purchases for the pediatric indication and the impact of the revised adult recommendation from the ACIP, partially offset by the recovery of a portion of the missed doses from the second quarter of 2020, resulting from COVID-19-related mobility restrictions or limitations. The decline in the U.S. was partially offset by continued strong pediatric uptake in China as well as increased adult uptake in certain international markets resulting from greater vaccine awareness for respiratory illnesses, including specifically pneumococcal disease, due to the COVID-19 pandemic | | (55) | |
Other operational factors, net | | (54) | |
Operational growth, net | | 349 | |
Unfavorable impact of foreign exchange | | (86) | |
Biopharma Revenues increase
| | 263 | |
Biopharma Revenues, for the three months ended September 27, 2020
| | $ | 10,215 | |
(a)Certain key brands represent Ibrance, Eliquis and Xeljanz. See the “Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion” section of this MD&A for product analysis information.
Total Biopharma revenues from emerging markets decreased $98 million, or 5%, to $1.9 billion in the third quarter of 2020 from $2.0 billion in the third quarter of 2019, reflecting operational growth of $25 million, or 1%. Foreign exchange had an unfavorable impact of 6% on total Biopharma revenues from emerging markets. The operational increase in emerging markets was primarily driven by Eliquis, Ibrance and Prevenar 13, partially offset by certain products in the Hospital business, primarily Zithromax and Vfend.
Costs and Expenses
•Cost of sales as a percentage of Revenues increased 0.8 percentage points, driven by an unfavorable impact of foreign exchange and an increase in royalty expenses based on the mix of products sold.
•The increase in Cost of sales of 8% was mainly driven by an increase in sales volumes for various products and an unfavorable impact of foreign exchange, as well as an increase in royalty expense based on the mix of products sold, partially offset by a favorable change in product mix.
•The decrease in Selling, informational and administrativeexpenses of 5% was mostly driven by lower spending on sales and marketing activities due to the impact of the COVID-19 pandemic, lower investments across the Internal Medicine portfolio, and a favorable impact of foreign exchange, partially offset by additional investment in emerging markets and in the Inflammation & Immunology portfolio.
•Research and developmentexpenses were relatively flat.
•The favorable change in Other (income)/deductions––net includes, among other things, an increase in royalty-related income, the non-recurrence of an asset impairment charge in 2019, and an increase in income from collaborations, out-licensing arrangements and sales of compound/product rights.
Upjohn Operating Segment
Revenues
Upjohn Revenues decreased $435 million, or 18%, to $1.9 billion in the third quarter of 2020 from $2.4 billion in the third quarter of 2019, reflecting an operational decrease of $416 million, or 18%, and the unfavorable impact of foreign exchange of $18 million, or 1%.
The following provides an analysis of the decrease in Upjohn worldwide Revenues:
| | | | | | | | |
(MILLIONS OF DOLLARS) | | |
Upjohn Revenues, for the three months ended September 29, 2019
| | $ | 2,351 | |
| | |
Operational growth/(decline): | | |
Lower worldwide revenues for Lyrica, primarily in the U.S., reflecting the expected significantly lower volumes associated with multi-source generic competition that began in July 2019 | | (174) | |
Declines in revenues for Lipitor and Norvasc, reflecting significant revenue declines associated with the VBP program in China, which was initially implemented in certain cities in March 2019, and expanded nationwide beginning in December 2019, resulting in significant volume and price erosion | | (150) | |
Decline in revenues for Celebrex driven by lower volume in Japan, resulting from generic competition which began in June 2020 | | (45) | |
Other operational factors, net | | (46) | |
Operational decline, net | | (416) | |
Unfavorable impact of foreign exchange | | (18) | |
Upjohn Revenues decrease
| | (435) | |
Upjohn Revenues, for the three months ended September 27, 2020
| | $ | 1,916 | |
Total Upjohn revenues from emerging markets decreased $183 million, or 19%, to $772 million in the third quarter of 2020 from $955 million in the third quarter of 2019, reflecting an operational decline of $159 million, or 17%. Foreign exchange had an unfavorable impact of 3% on total Upjohn revenues from emerging markets. The operational decrease in emerging markets was primarily driven by Lipitor and Norvasc in China.
Costs and Expenses
•Cost of sales as a percentage of Revenues increased 6.1 percentage points, driven by lower Lyrica revenues, primarily in the U.S. due to multi-source generic competition that began in July 2019, lower Lipitor and Norvasc revenues due to the volume-based procurement (VBP) program in China, which was initially implemented in March 2019 and expanded nationwide beginning in December 2019, and lower Celebrex revenues in Japan due to generic competition that began in June 2020, as well as an unfavorable impact of foreign exchange, partially offset by lower royalty expense for Lyrica due to its U.S. patent expiration.
•The increasein Cost of sales of 3% was mainly driven by an unfavorable impact of foreign exchange.
•Selling, informational and administrativeexpenses decreased 18% driven by a decrease in field force expense as well as advertising and promotion expenses, primarily related to Lipitor and Norvasc, due to the VBP program in China, which was initially implemented in certain cities in March 2019 and expanded nationwide beginning in December 2019, as well as Celebrex in Japan due to generic competition that began in June 2020 and Lyrica in the U.S. due to generic competition that began in July 2019.
•Research and developmentexpenses and Other (income)/deductions––net were relatively unchanged.
First Nine Months of 2020 vs. First Nine Months of 2019
Biopharma Operating Segment
Revenues
Biopharma Revenues increased $1.6 billion, or 6%, to $30.0 billion in the first nine months of 2020 from $28.4 billion in the first nine months of 2019, reflecting an operational increase of $2.0 billion, or 7%, and an unfavorable impact of foreign exchange of $431 million, or 2%.
The following provides an analysis of the increase in Biopharma worldwide Revenues:
| | | | | | | | |
(MILLIONS OF DOLLARS) | | |
Biopharma Revenues, for the nine months ended September 29, 2019
| | $ | 28,429 | |
| | |
Operational growth/(decline): | | |
Continued growth from certain key brands(a)
| | 1,047 | |
Higher revenues for the rare disease business driven by the U.S. launches of Vyndaqel in May 2019 and Vyndamax in September 2019 for ATTR-CM; and in international markets, primarily driven by the March 2019 launch of the ATTR-CM indication in Japan and the February 2020 approval of the ATTR-CM indication in the EU | | 508 | |
Higher revenues for Biosimilars, primarily driven by recent oncology biosimilar launches in the U.S. and other global markets and continued growth from Retacrit, primarily in the U.S. | | 378 | |
Higher revenues for Inlyta, primarily due to increased demand in the U.S. and certain developed international markets, following the approvals in 2019 for combinations of certain immune checkpoint inhibitors plus Inlyta for the first-line treatment of patients with advanced RCC | | 248 | |
Higher revenues for Xtandi primarily driven by continued strong demand in the mCRPC and nmCRPC indications as well as the mCSPC indication, which was approved in the U.S. in December 2019 | | 146 | |
Higher revenues for the Hospital business in the U.S., primarily driven by increased demand for certain sterile injectable products utilized in the intubation and ongoing treatment of mechanically-ventilated COVID-19 patients as well as continued growth from Panzyga following its November 2018 U.S. launch, partially offset by lower demand for certain anti-infective products in China due to lower infection rates driven by fewer elective surgical procedures, shorter in-patient hospital stays and improved infection control | | 123 | |
Lower revenues for Enbrel internationally, primarily reflecting continued biosimilar competition in most developed Europe markets, as well as in Japan and Brazil, all of which is expected to continue | | (246) | |
Decline in Prevnar 13/Prevenar 13 revenues primarily in the U.S., driven by the unfavorable impact of timing associated with government purchases for the pediatric indication, the expected unfavorable impact of disruptions to wellness visits for pediatric and adult patients due to COVID-19-related mobility restrictions or limitations and the impact of the revised adult recommendation from the ACIP. The decline in the U.S. was partially offset by increased adult uptake in certain international markets resulting from greater vaccine awareness for respiratory illnesses, including specifically pneumococcal disease, due to the COVID-19 pandemic, as well as continued strong pediatric uptake in China | | (102) | |
Other operational factors, net | | (84) | |
Operational growth, net | | 2,019 | |
Unfavorable impact of foreign exchange | | (431) | |
Biopharma Revenues increase
| | 1,588 | |
Biopharma Revenues, for the nine months ended September 27, 2020
| | $ | 30,017 | |
(a)Certain key brands represent Ibrance, Eliquis and Xeljanz. See the “Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion” section of this MD&A for product analysis information.
Total Biopharma revenues from emerging markets increased $45 million, or 1%, to $6.0 billion in the first nine months of 2020 from $5.9 billion in the first nine months of 2019, reflecting operational growth of $404 million, or 7%. Foreign exchange had an unfavorable impact of 6% on total Biopharma revenues from emerging markets. The operational increase in emerging markets was primarily driven by Prevenar 13, Eliquis, Ibrance, Zavicefta, Xalkori and Xeljanz, partially offset by Sulperazon and Vfend.
Costs and Expenses
•Cost of sales as a percentage of Revenues was relatively flat.
•The increase in Cost of sales of 5% was mainly driven by an increase in sales volumes for various products and an increase in royalty expenses based on the mix of products sold, as well as an unfavorable change in product mix, partially offset by a favorable impact of foreign exchange.
•The decrease in Selling, informational and administrativeexpenses of 6% was mostly driven by lower spending on sales and marketing activities due to the impact of the COVID-19 pandemic, lower investments across the Internal Medicine and Inflammation & Immunology portfolios, and a favorable impact of foreign exchange, partially offset by additional investment in emerging markets and in the Oncology portfolio in developed markets.
•The increasein Research and developmentexpenses of 6% was mainly related to increased medical spending, primarily for Oncology, Internal Medicine, and Rare Disease.
•The favorable change in Other (income)/deductions––net includes, among other things, an increase in income from collaborations, out-licensing arrangements and sales of compound/product rights and an increase in royalty-related income.
Upjohn Operating Segment
Revenues
Upjohn Revenues decreased $2.6 billion, or 30%, to $5.9 billion in the first nine months of 2020 from $8.5 billion in the first nine months of 2019, reflecting an operational decrease of $2.5 billion, or 29%, and the unfavorable impact of foreign exchange of $84 million, or 1%.
The following provides an analysis of the decrease in Upjohn worldwide Revenues:
| | | | | | | | |
(MILLIONS OF DOLLARS) | | |
Upjohn Revenues, for the nine months ended September 29, 2019
| | $ | 8,535 | |
| | |
Operational decline: | | |
Lower worldwide revenues for Lyrica, primarily in the U.S., reflecting the expected significantly lower volumes associated with multi-source generic competition that began in July 2019 | | (1,829) | |
Declines in revenues for Lipitor and Norvasc, primarily resulting from the VBP program in China, which was initially implemented in certain cities in March 2019, and expanded nationwide beginning in December 2019, resulting in significant volume and price erosion | | (404) | |
Decline in revenues for Celebrex driven by lower volume in Japan, resulting from generic competition which began in June 2020 and by pricing pressures and lower volumes in certain emerging markets | | (94) | |
Decline in revenues for Revatio driven by lower U.S. Oral Suspension formulation sales and pricing pressures due to multi-source generic competition | | (58) | |
Other operational factors, net | | (121) | |
Operational decline, net | | (2,507) | |
Unfavorable impact of foreign exchange | | (84) | |
Upjohn Revenues decrease
| | (2,591) | |
Upjohn Revenues, for the nine months ended September 27, 2020
| | $ | 5,944 | |
Total Upjohn revenues from emerging markets decreased $490 million, or 17%, to $2.5 billion in the first nine months of 2020 from $3.0 billion in the first nine months of 2019, reflecting an operational decline of $406 million. or 14%, and the unfavorable impact of foreign exchange of 3% on total Upjohn revenues from emerging markets. The operational decline in emerging markets was primarily driven by Lipitor and Norvasc in China.
Costs and Expenses
•Cost of sales as a percentage of Revenues increased 7.2 percentage points, driven by lower Lyrica revenues, primarily in the U.S. due to multi-source generic competition that began in July 2019, lower Lipitor and Norvasc revenues due to the VBP program in China, which was initially implemented in March 2019 and expanded nationwide beginning in December 2019, and lower Celebrex revenues primarily in Japan due to generic competition that began in June 2020, as well as an unfavorable impact of foreign exchange, partially offset by lower royalty expense for Lyrica due to its U.S. patent expiration.
•The decrease in Cost of sales of 4% was mainly driven by lower royalty expense and a decrease in sales volume primarily due to the Lyrica patent expiration and multi-source generic competition that began in the U.S. in July 2019.
•Selling, informational and administrativeexpenses decreased 21% driven by a decrease in field force expense as well as advertising and promotion expenses, primarily related to Lipitor and Norvasc, due to the VBP program in China, which was initially implemented in certain cities in March 2019 and expanded nationwide beginning in December 2019, as well as Lyrica in the U.S. due to generic competition that began in July 2019 and Celebrex in Japan due to generic competition that began in June 2020.
•Research and developmentexpenses and Other (income)/deductions––net were relatively unchanged.
ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended | | |
| (MILLIONS OF DOLLARS) | | September 27,
2020 | | September 29,
2019 | | %
Change |
| Cash provided by/(used in): | | | | | | |
| Operating activities | | $ | 8,778 | | | $ | 8,819 | | | — | |
| Investing activities | | (12,601) | | | (1,112) | | | * |
| Financing activities | | 4,138 | | | (6,045) | | | * |
| Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents | | (39) | | | (41) | | | (5) | |
Net increase in Cash and cash equivalents and restricted cash and cash equivalents | | $ | 277 | | | $ | 1,620 | | | (83) | |
| * Calculation not meaningful or results are equal to or greater than 100%. |
| | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | |
| (MILLIONS) | | April 4,
2021 | | March 29, 2020 | | | | Drivers of change |
| Cash provided by/(used in): | | | | | | | | |
| Operating activities from continuing operations | | $ | 4,530 | | | $ | 2,155 | | | | | The change is driven primarily by higher net income and advance payments in 2021 for BNT162b2 recorded in deferred revenue. The change also reflects the impact of timing of receipts and payments in the ordinary course of business.
The change in Other adjustments, net is driven primarily by an increase in net unrealized gains on equity securities and an increase in equity income, partially offset by an increase in equity method dividends received and an increase in net losses on foreign exchange contracts hedging a portion of our forecasted intercompany inventory sales. |
| Investing activities from continuing operations | | $ | (1,747) | | | $ | (53) | | | | | The change is driven mainly by a $3.5 billion increase in purchases of short-term investments with original maturities of greater than three months and a $580 million increase in net purchases of short-term investments with original maturities of three months or less, partially offset by a $2.2 billion increase in redemptions of short-term investments with original maturities of greater than three months. |
| Financing activities from continuing operations | | $ | (2,807) | | | $ | (2,200) | | | | | The change is driven mostly by a $3.2 billion decrease in proceeds from short-term borrowings with maturities of three months or less, a $1.2 billion decrease in proceeds from issuances of long-term debt, and a $277 million payment to Viatris in connection with the spin-off of the Upjohn business, partially offset by a $2.2 billion net reduction in repayments of short-term borrowings with maturities of greater than three months and a $2.2 billion reduction in principal repayments on long-term debt. |
| | | | | | | | |
| | | | | | | | |
89Cash Flows from Discontinued Operations
Operating Activities
The decrease in net cash provided by operating activities is driven by an increase in benefit plan contributionsCash flows from discontinued operations relate to our former Upjohn Business and the lower contribution from the Consumer Healthcare business as a result of the July 31, 2019 completion of the Consumer Healthcare joint venture transaction with GSK, partially offset by the upfront cash payment associated with our acquisition of Therachon in the third quarter of 2019.
The change in Other adjustments, net primarily reflects an increase in equity method dividends received and the Upjohn Euro bond remeasurement, partially offset by increases in net unrealized gains on equity securities, an increase in equity income, and an increase in accreted interest on debt discount.
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.
Other changes in assets and liabilities, net of acquisitions and divestitures reflects changes in the normal course of business, primarily in trade accounts payable, other current and noncurrent assets, and other current and noncurrent liabilities. This line item also reflects the non-recurrence of a non-cash favorable settlement of an IRS audit for multiple tax years in 2019.
Investing Activities
The increase in net cash used in investing activities was mostly attributable to:
•a $19.0 billion increase in net purchases of short-term investments with original maturities of three months or less, largely due to the $11.4 billion of proceeds from the Upjohn long-term debt issuances in the second quarter of 2020, which were invested in money market fundsMylan-Japan collaboration (see Note 7D and Note 7A2A); and
•a $4.7 billion increase in purchases of short-term investments with original maturities of greater than three months,
partially offset by:
•the cash used to acquire Array, net of cash acquired, of $10.9 billion in the third quarter of 2019.
Financing Activities
The change in net cash provided by/(used in) financing activities was primarily attributable to:
•an increase in issuances of long-term debt of $11.8 billion (see Note 7D);
•a decrease in purchases of common stock of $8.9 billion; and
•lower repayments on long-term debt of $3.3 billion,
partially offset by:
•the $3.5 billion net payments on short-term borrowings in the first nine months of 2020, compared to $10.1 billion net proceeds raised from short-term borrowings in the first nine months of 2019..
ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES AND MARKET RISK
We rely largely on operating cash flows, short-term investments short-termor commercial paper borrowings and long-term debt to provide for our liquidity requirements. We continue our effortsstrive to improve cash inflows through working capital efficiencies. We target specific areas 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 as our financial assets, access to capital markets and available lines of credit and revolving credit agreements, we believe that we have, and will maintain, the ability to meet our liquidity needs for the foreseeable future, which can include, among others:
•the working capital requirements of our operations, including our R&D activities;
•investments 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.
Our long-term debt is rated high-quality by both S&P and Moody’s. See the “Credit Ratings” section below. As market conditions change, we continue to monitor our liquidity position.future. We have taken and will continue to take a conservative approach to our financial investments. Both short-terminvestments and long-termmonitoring of our liquidity position in response to market changes. Our debt investments consist primarily of high-quality, highly liquid, well-diversified available-for-sale debt securities.
Debt Capacity––Lines of Credit
We have available lines of credit and revolving credit agreements with a group of banks and other financial intermediaries. We typically maintain cash and cash equivalent balances and short-term investments which, together with our available revolving credit facilities, are in excess of our commercial paper and other short-term borrowings. As of April 4, 2021,we had access to a $7 billion U.S. revolving credit facility expiring in 2025. In addition, our lenders have provided us an additional $317 million in lines of credit, of which $283 million expire within one year. Essentially all lines of credit were unused as of April 4, 2021.
Selected Measures of Liquidity and Capital Resources
| | The following presents certain relevant measures of our liquidity and capital resources: | The following presents certain relevant measures of our liquidity and capital resources: | The following presents certain relevant measures of our liquidity and capital resources: |
| (MILLIONS OF DOLLARS, EXCEPT RATIOS) | | September 27,
2020 | | December 31, 2019 | |
| (MILLIONS, EXCEPT RATIOS) | | (MILLIONS, EXCEPT RATIOS) | | April 4,
2021 | | December 31, 2020 |
Selected financial assets(a): | Selected financial assets(a): | | | | | Selected financial assets(a): | | | | |
| Cash and cash equivalents | Cash and cash equivalents | | $ | 1,587 | | | $ | 1,305 | | Cash and cash equivalents | | $ | 1,768 | | | $ | 1,784 | |
| Short-term investments | Short-term investments | | 8,912 | | | 8,525 | | Short-term investments | | 11,899 | | | 10,437 | |
| Restricted short-term investments | | 11,413 | | | — | | |
| Long-term investments, excluding private equity securities at cost | Long-term investments, excluding private equity securities at cost | | 2,279 | | | 2,258 | | Long-term investments, excluding private equity securities at cost | | 3,229 | | | 2,973 | |
| | | | 24,191 | | | 12,088 | | | | 16,895 | | | 15,195 | |
| Debt: | Debt: | | | | | Debt: | | | | |
| Short-term borrowings, including current portion of long-term debt | Short-term borrowings, including current portion of long-term debt | | 13,363 | | | 16,195 | | Short-term borrowings, including current portion of long-term debt | | 4,352 | | | 2,703 | |
| Long-term debt | Long-term debt | | 49,785 | | | 35,955 | | Long-term debt | | 35,347 | | | 37,133 | |
| | | | 63,148 | | | 52,150 | | | | 39,699 | | | 39,835 | |
| Selected net financial liabilities | Selected net financial liabilities | | $ | (38,957) | | | $ | (40,062) | | Selected net financial liabilities | | $ | (22,803) | | | $ | (24,641) | |
| Working capital(b) | Working capital(b) | | $ | 13,585 | | | $ | (4,501) | | Working capital(b) | | $ | 12,880 | | | $ | 9,147 | |
| Ratio of current assets to current liabilities | Ratio of current assets to current liabilities | | 1.40:1 | | 0.88:1 | Ratio of current assets to current liabilities | | 1.48:1 | | 1.35:1 |
|
(a)See Note 7 for a description of certain assets held and for a description of credit risk related to our financial instruments held.
(b)The increase in working capital was primarily due to:
•driven by an increase mainly driven byin short-term investments due to operating cash flow generation, and the long-term debt issuances discussed below, partially offset by debt repayment and capital expenditures; and
•the timing of accruals, cash receipts and payments in the ordinary course of business.
In June 2020, Upjohn Inc. and Upjohn Finance B.V. (a wholly-owned subsidiary of Upjohn Inc.) completed privately placed debt offerings of $7.45 billion and €3.60 billion aggregate principal senior unsecured notes, respectively (the Upjohn Debt Transactions). See the “Agreement to Combine Upjohn with Mylan” section below for the discussion on the use of proceeds.
In May 2020, we completed a public offering of $4.0 billion aggregate principal amount of senior unsecured notes.
In March 2020, we:
•completed a public offering of $1.25 billion aggregate principal amount of senior unsecured sustainability notes. The proceeds were initially used to repay outstanding commercial paper and subsequently will be used to help manage our environmental impact and support increased patient access to our medicines and vaccines, especially among underserved populations, and strengthen healthcare systems; and
•repurchased at par all $1.065 billion principal amount outstanding of senior unsecured notes that were due in 2047 before the maturity date, which did not have a material impact on our condensed consolidated financial statements.business, partially offset by capital expenditures.
For additional information, see Note 7D.
For additional information about the sources and uses of our funds, see the “AnalysisAnalysis of the Condensed Consolidated Statements of Cash Flows”Flows section of thiswithin MD&A.
Agreement to Combine Upjohn with Mylan
In connection with our agreement to combine Upjohn with Mylan to form a new company, Viatris, discussed inFor information about credit ratings, interest rate risk and LIBOR, global economic conditions, and market risk, see the “OverviewAnalysis of Our Performance, Operating Environment, StrategyFinancial Condition, Liquidity, Capital Resources and Outlook––Our Business Development Initiatives”Market Risk—Selected Measures of Liquidity and Capital Resources section of thiswithin MD&A in Juneour 2020 Upjohn Inc. (i) incurred $11.4 billion of debt in the Upjohn Debt Transactions, (ii) entered into a revolving credit agreement for up to $4 billion, $1.5 billion of which will be available in a single draw at or around the closing of the combination of Upjohn with Mylan for the sole purpose of funding the cash payment of $12 billion by Upjohn Inc. to Pfizer as partial consideration for Pfizer’s contribution of the Upjohn Business to Upjohn Inc. and (iii) entered into a $600 million delayed draw term loan agreement. Immediately prior to the proposed distribution to Pfizer’s stockholders of all of the issued and outstanding shares of Upjohn Inc.’s common stock held by Pfizer (the Distribution), Upjohn Inc. will make a cash distribution of $12 billion to Pfizer. The proceeds of the revolving credit agreement, term loan agreement and the Upjohn Debt Transactions will be used to fund the $12 billion cash distribution from Upjohn Inc. to Pfizer prior to the Distribution. In the interim, the $11.4 billion of proceeds from the Upjohn Debt Transactions were invested by Upjohn Inc. in money market funds and classified as Restricted short-term investments in the condensed consolidated balance sheet as of September 27, 2020. Upon completion of the Upjohn Debt Transactions on June 23, 2020, the commitments under the senior unsecured $12 billion bridgeForm 10-K.
facility were fully terminated. Pfizer has guaranteed the notes in the Upjohn Debt Transactions, and such guarantees will automatically and unconditionally terminate without the consent of holders of the notes upon the Distribution. Upjohn Inc. has guaranteed the notes issued by Upjohn Finance B.V., and Upjohn Inc. will remain a guarantor of such notes post Distribution. Following the separation, Upjohn Inc. and Upjohn Finance B.V., as applicable, will remain the obligor with respect to all of the aforementioned debt. See Note 7D.
Domestic and International Selected Financial Assets
Many of our operations are conducted outside the U.S., and significant portions of our selected financial assets are held internationally. 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). The changes in tax law under the TCJA, which includes transitioning U.S. international taxation from a worldwide tax system to a territorial tax system, allow us to more easily access our selected financial assets globally.
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 recommendation to buy, sell or hold securities and the rating is subject to revision or withdrawal at any time by the rating organization. Each rating should be evaluated independently of any other rating.
In June 2019, S&P placed Pfizer on “CreditWatch Negative” following the announcement of Pfizer’s intention to acquire Array. The CreditWatch placement was resolved with a one-notch downgrade of Pfizer’s debt rating to ‘AA-’ upon the consummation of the transaction. In July 2019, we announced that we entered into a definitive agreement to combine Upjohn with Mylan, which resulted in actions from both Moody’s and S&P. Moody’s placed Pfizer’s long-term rating under review for downgrade (limited to one-notch, or ‘A2’ upon close of the Mylan transaction) while S&P lowered Pfizer’s rating to ‘AA-’ (as a result of the Array transaction) and confirmed it will still remain on CreditWatch Negative (with the expectation the rating will be lowered one additional notch to ‘A+’ upon close of the Mylan transaction).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes 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 | | Outlook/Watch | | Date of Last Rating Change |
| Rating | | Rating | |
Moody’s | | P-1 | | A1 | | Under Review for Downgrade | | October 2009 |
S&P | | A-1+ | | AA- | | CreditWatch Negative | | July 2019 |
Debt Capacity––Lines of Credit
We have available lines of credit and revolving credit agreements with a group of banks and other financial intermediaries. We typically maintain cash and cash equivalent balances and short-term investments which, together with our available revolving credit facilities, are in excess of our commercial paper and other short-term borrowings. As of September 27, 2020,we had access to a total of $11 billion in U.S. revolving credit facilities consisting of a $7 billion facility expiring in 2024 and a $4 billion facility expiring in September 2021, which may be used to support our commercial paper borrowings. In addition to the U.S. revolving credit facilities, our lenders have provided us an additional $604 million in lines of credit, of which $574 million expire within one year. Of these total lines of credit, $11.6 billion were unused as of September 27, 2020.
LIBOR
From time to time, we issue variable rate debt based on LIBOR, or undertake interest rate swaps that contain a variable element based on LIBOR. The U.K. Financial Conduct Authority announced in July 2017 that it will no longer compel banks to submit rates that are currently used to calculate LIBOR after 2021. Various governing parties, including government agencies, are working on a benchmark transition plan for LIBOR (and other interbank offered rates globally). We are monitoring their progress, and we will likely amend contracts to accommodate any replacement rate where it is not already provided. We do not expect the transition to an alternative rate to have a material impact on our liquidity or financial resources.
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. For additional information see the “Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment” section in this MD&A.
Global Economic Conditions––Venezuela and Argentina Operations
Our Venezuela and Argentina operations function in hyperinflationary economies. The impact to Pfizer is not considered material.
Off-Balance Sheet Arrangements
CertainIn 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. For more information on guarantees and indemnifications, see Note 12B.
Additionally, 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.
For guarantees and indemnifications information, see Note 13B.
Share-Purchase Plans and Accelerated Share Repurchase Agreements
At September 27, 2020,April 4, 2021, our remaining share-purchase authorization was approximately $5.3 billion, with no repurchases in the first ninethree months of 2020 and no repurchases currently planned for the remainder of 2020.2021. See Notes to Consolidated Financial Statements––Note 12. Equity12 in our 2019 Financial Report2020 Form 10-K for more information on our publicly announced share-purchase plans, including our accelerated share repurchase agreements.plans.
Dividends on Common Stock
For. The BOD decided to maintain Pfizer’s quarterly cash dividend information, see Note 11.at its current level for the second quarter of 2021 despite the recent declaration of a dividend payment by Viatris that is payable to those Pfizer shareholders that continue to hold, as of the Viatris dividend record date, Viatris shares received from the combination of Upjohn and Mylan.
Our current and projected dividends provide a return to shareholders while maintaining sufficient capital to invest in growing our businesses.business. Our dividends are not restricted by debt covenants. While the dividend level remains a decision of Pfizer’s Board of DirectorsBOD and will continue to be evaluated in the context of future business performance, we currently believe that we can support future annual dividend increases, barring significant unforeseen events. Also, Pfizer expects that immediately following the closing of the proposed transaction to combine Upjohn with Mylan, the combined dividend dollar amount received by Pfizer shareholders, based upon the combination of continued Pfizer ownership and approximately 0.12 shares of the new company (Viatris) expected to be granted for each Pfizer share in a spin-off, will equate to Pfizer’s dividend amount in effect immediately prior to closing.
NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standards
See Note 1B.
| | | | | | | | | | | | | | |
Recently Issued Accounting Standards,Standard, Not Adopted as of September 27, 2020April 4, 2021 |
| Standard/Description | | Effective Date | | Effect on the Financial Statements or Other Significant Matters |
In December 2019, the FASB issued new guidance that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.
| | January 1, 2021. Early adoption is permitted. | | We do not expect this guidance to have a material impact on our consolidated financial statements.
|
In March 2020, the FASB issued new guidance to address referenceReference rate reform by providingprovides temporary optional expedients and exceptions to the guidance for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued after 2021 because of reference rate reform.
The new guidance provides the following optional expedients: 1.Simplify accounting analyses under current U.S. GAAP for contract modifications. 2.Simplify the assessment of hedge effectiveness and allow hedging relationships affected by reference rate reform to continue. 3.Allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform. | | Elections can be adopted prospectively at any time in the first quarter of 2020 through December 31, 2022.
| | We are assessing the impact of the provisions of this new guidance 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,” “seek” 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, reorganizations, business plans and prospects, prospects;
•expectations for our product pipeline, in-line products and product candidates, including anticipated regulatory submissions, data read-outs, study starts, approvals, post-approval clinical trial results and other developing data that become available, revenue contribution, growth, performance, timing of exclusivity and potential benefits, benefits;
•strategic reviews, capital allocation objectives, dividends and share repurchases;
•plans for and prospects of our acquisitions, dispositions and other business-developmentbusiness development activities, benefits anticipated from the reorganization ofand our commercial operations in 2019, ability to successfully capitalize on these opportunities;
•sales, efforts, expenses, interest rates, foreign exchange rates and the outcome of contingencies, such as legal proceedings,proceedings;
•expectations for impact of or changes to existing or new government regulation, regulations or laws;
•our ability to successfully capitalize on growth opportunities or prospects, anticipate and respond to macroeconomic, geopolitical, health and industry trends, pandemics, acts of war and other large-scale crises; and
•manufacturing and product supply,supply.
In particular, forward-looking information in this Form 10-Q includes statements relating to specific future actions and effects, including, among others, our efforts to respond to COVID-19, including our development of a vaccine to help prevent COVID-19 and our investigational protease inhibitors, the forecasted revenue contribution of BNT162b2 and the potential number of doses that we and BioNTech believe can be manufactured; our expectations regarding the impact of COVID-19 on our business, operations and financial results and plans relating to share repurchases and dividends. In particular, these include statements relating to future actions, including, among others, the expected timing of closing of and costs associated with the pending transaction to combine Upjohn with Mylan to create a new global pharmaceutical company set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Business Development Initiatives” section of this MD&A,business; the expected impact of patent expiries on our business set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment––Industry-Specific Challenges––Intellectual Property Rights and Collaboration/Licensing Rights” and “––Our Strategy––Organizing for Growth” sections of this MD&A, our efforts to respond to COVID-19, including, among other things, expectations regarding our investigational vaccine candidate against SARS-CoV-2 and our investigational protease inhibitor, and the anticipated impact of COVID-19 on our business, operations and financial results set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment” and “––Our Financial Guidance for 2020” sections of this MD&A,competition from generic manufacturers; the benefits expected from the reorganization of our commercial operations in 2019 andbusiness development transactions; our anticipated liquidity position; our expectations regarding growth set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Strategy––Organizing for Growth” section of this MD&A,Ibrance; the anticipated costs and savings from certain of our initiatives, primarily fromincluding our Transforming to a More Focused Company program, set forthprogram; our planned capital spending; and the expectations for our quarterly dividend payments.
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 “OverviewItem 1A. Risk Factors section in our 2020 Form 10-K.
Therefore, you are cautioned not to unduly rely on forward-looking statements, which speak only as of Our Performance, Operating Environment, Strategy and Outlook—Our Strategy—Transformingthe date of this Form 10-Q. We undertake no obligation to update forward-looking statements, whether as a More Focused Company” and “Costs and Expenses––Restructuring Charges andresult of new information, future events
Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” sections of this MD&A and in Notesor otherwise, except as required by applicable securities law. You are advised, however, to Condensed Consolidated Financial Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives, the financial guidance set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Financial Guidance for 2020” section of this MD&A, the expected impact of ACIP’s latest recommendation for Prevnar 13 for adults 65 and olderconsult any further disclosures we make on Prevnar 13’s revenues set forth in the “Analysisrelated subjects.
Some of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion––Prevnar 13/Prevenar 13” section of this MD&A, our anticipated liquidity position set forth in the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A,our expectations regarding dividends set forth in the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A and the benefits expected from our business development transactions and the contributions that we expect to make from our general assets to the company’s pension and postretirement plans during 2020 set forth in the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Financial Guidance for 2020” section of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 10. Pension and Postretirement Benefit Plans. Among 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 2020 Form 10-K and within this 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 or in the Item 1A. Risk Factors section in our 2020 Form 10-K, or other risks currently unknown, could have a material adverse effect on our business, financial condition or results of 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 to be a complete discussion of all potential risks or uncertainties:
Risks Related to Our Business, Industry and future plansOperations, and projected future results are the following:Business Development:
•the outcome of R&D activities, including, the ability to meet anticipated pre-clinical or clinical endpoints, commencement and/or completion dates for our pre-clinical or clinical trials, regulatory submission dates, and/or regulatory approval dates and/or launch dates, as well as the possibility of unfavorable pre-clinical and clinical trial results, including the possibility of unfavorable new pre-clinical or clinical data and further analyses of existing pre-clinical or clinical data;
•our ability to successfully address comments received from regulatory authorities such as the FDA or the EMA, or obtain approval from regulators which will depend on myriad factors, including such regulator making a determination as to whether a product’s benefits outweigh its known risks and a determination of the product’s efficacy;timely basis or at all; regulatory decisions impacting labeling, manufacturing processes, safety and/or other matters; andthe impact of recommendations by technical or advisory committees, such as ACIP, that may impactcommittees; and the usetiming of our vaccines;
•the speed with which regulatory authorizations, pricing approvals and product launches may be achieved;launches;
•claims and concerns that may 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, changes in product labeling, and/or new or increased concerns about the side effects or efficacy of, a product that could affect its availability or commercial potential, such asincluding uncertainties regarding the update tocommercial or other impact of the U.S. and EU prescribing information for Xeljanz;results of the Xeljanz ORAL Surveillance (A3921133) study or any potential actions by regulatory authorities based on analysis of ORAL Surveillance or other data;
•the success and impact of external business-developmentbusiness development activities, including the ability to identify and execute on potential business development opportunities,opportunities; the ability to satisfy the conditions to closing of announced transactions in the anticipated time frame or at all,all; the ability to realize the anticipated benefits of any such transactions in the anticipated timeframetime frame or at all; and the potential need to obtainfor and impact of additional equity or debt financing to pursue these opportunities, which could result in increased leverage and impactand/or a 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,competition, including the impact on our competitive position offrom new product entrants, in-line branded products, generic products, private label products, biosimilars and product candidates that treat diseases and conditions similar to those treated by our in-line drugs and drug candidates;
•the implementation by the FDA and regulatory authorities in certain 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 commercialize 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, and access challenges for our biosimilar products where our product may not receive appropriate formulary access or remains in a disadvantaged position relative to the innovator product;
•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, sales or marketing, including delays caused by natural events, such as hurricanes;marketing; supply disruptions, shortages or stock-outs at our or our third party suppliers’ facilities; and legal or regulatory actions, such as warning letters, suspension of manufacturing, seizure of product, injunctions, debarment, recall of a product, delays or denials of product approvals, import bans or denial of import certifications;actions;
•the impact of public health outbreaks, epidemics or pandemics (such as the COVID-19 pandemic) on our business, operations and financial condition and results, including due to travel limitations and government-mandated work-from-home or shelter-in-place orders,impacts on our employees, manufacturing, disruptions or delays, supply chain, interruptions, including
challenges related to reliance on third-party suppliers, disruptions to pipelinemarketing, research and development and clinical trials, including difficulties or delays in enrollment of certain clinical trials, decreased product demand, including due to reduced numbers of in-person meetings with prescribers, patient visits with physicians, vaccinations and elective surgeries resulting in fewer new prescriptions or refills of existing prescriptions and reduced demand for products used in procedures, further reduced product demand as a result of increased unemployment, challenges presented by reallocating human capital, R&D, manufacturing and other resources to assist in responding to the pandemic without disruption to our operations, costs associated with the COVID-19 pandemic, including protocols intended to reduce the risk of transmission, increased supply chain costs and additional R&D costs incurred in our efforts to develop a potential vaccine and treatment for COVID-19, challenges related to our business development initiatives, including potential delays or disruptions related to regulatory approvals, interruptions or delays in the operations of certain regulatory authorities, which may delay the approvals of new products we are developing, potential label expansions for existing products and the launch of newly-approved products, potential increased cyber incidents such as phishing, social engineering and malware attacks, and other challenges presented by disruptions to our normal operations in response to the pandemic, as well as uncertainties regarding the duration and severity of the pandemic and its impacts and government or regulatory actions to contain the virus or control the supply of medicines, each of which may also amplify the impact of the other factors listed in this section;trials;
•risks and uncertainties related to our efforts to develop a vaccine to help prevent COVID-19 and potential treatment or vaccinetreatments for COVID-19, including uncertainties related to the risk that our development programs may not be successful, commercially viable or receive approval or Emergency Use Authorization from regulatory authorities, risks associated with preliminary data, including the possibility of unfavorable new preclinical or clinical trial data and further analyses of existing preclinical or clinical trial data that may be inconsistent with the data used for selection of the BNT162b2 vaccine candidate and dose level for the Phase 2/3 study, the risk that 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, whether and when additional data from the BNT162 mRNA vaccine program will be published in scientific journal publications and, if so, when and with what modifications, disruptions in the relationships between us and our collaboration partners or third-party suppliers, the risk that other companies may produce superior or competitive products, the risk that demand for any products may no longer exist, risks related to the availability of raw materials to manufacture any such products,as well as challenges related to our vaccine candidate’s ultra-low temperature formulationtheir manufacturing, supply and attendant storage, distribution and administration requirements, including risks related to handling after delivery by Pfizer, the risk that we may not be able to successfully develop non-frozen formulations, the risk that we may not be able to recoup costs associated with our R&D and manufacturing efforts and risks associated with any changes in the way we approach or provide additional research funding for potential drug development related to COVID-19, the risk that we may not be able to create or scale up manufacturing capacity on a timely basis or have access to logistics or supply channels commensurate with global demand for any potential approved vaccine or product candidate, which would negatively impact our ability to supply the estimated numbers of doses of our vaccine candidate within the projected time periods indicated, and other challenges and risks associated with the pace of our vaccine development program, and pricing and access challenges for such products, including in the U.S.;
•trade buying patterns;
•the impact of existing and future legislation and regulatory provisions on product exclusivity;distribution;
•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;
•interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates;
•any significant issues involving our largest wholesale distributors, which account for a substantial portion of our revenues;
•the impact of the increased presence of counterfeit medicines in the pharmaceutical supply chain;
•any significant issues related to the outsourcing of certain operational and staff functions to third parties; and any significant issues related to our JVs and other third-party business arrangements;
•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 and recent and possible future changes in global financial markets;
•any changes in business, political and economic conditions due to actual or threatened terrorist activity, civil unrest or military action;
•the impact of product recalls, withdrawals and other unusual items;
•trade buying patterns;
•the risk of an impairment charge related to our intangible assets, goodwill or equity-method investments;
•the impact of, and risks and uncertainties related to, restructurings and internal reorganizations, as well as any other corporate strategic initiatives, 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 or organizational disruption;
Risks Related to Government Regulation and Legal Proceedings:
•the impact of 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 or changes in the tax treatment of employer-sponsored health insurance that may be implemented;
•the impact of any U.S. healthcare reform or legislation, including any replacement, repeal, modification or invalidation of some 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, intellectual property, 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; general budget control actions; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; revisions to reimbursement of biopharmaceuticals under government programs; restrictions on U.S. 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 differencesprofessionals and minimizes the therapeutic differences among
pharmaceutical products and restricts access to innovative medicines;other industry stakeholders; as well as pricing pressures for our products as a result of highly competitive insurance markets;
•legislation or regulatory action in markets outside of the U.S., including China, affecting pharmaceutical product pricing, intellectual property, 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.globally to possible capital and exchange controls, economic conditions, 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;
•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 adequacy of reserves related to legal proceedings;
•the risk and impact of tax related litigation;
•governmental laws and regulations affecting our operations, including, without limitation, changes in laws and regulations or their interpretation, including, among others, changes in tax laws and regulations, including, among others, any potential changes to the existing tax law by the current U.S. Presidential administration and Congress increasing the corporate tax rate and/or the tax rate on foreign earnings;
Risks Related to Intellectual Property, Technology and Security:
•any significant breakdown, infiltration or interruption of our information technology systems and infrastructure;
•legal defense costs, insurance expenses and settlement costs;
•the risk of, and costs associated with, an adverse decision or settlement and the adequacy of reserves related to legal proceedings, including patent litigation, such as claims that our patents are invalid and/or do not cover the product of the generic drug manufacturer or where one or more third parties seeks damages and/or injunctive relief to compensate for alleged infringement of its patents by our commercial or other activities, 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;
•the risk that our currently pending or future patent applications may not be granted or 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
•our ability to protect our patents and other intellectual property, both domestically and internationally, including against claims of invalidity that could result in loss of exclusivity, such asLOE, unasserted intellectual property claims related to our Lyrica patents in Japan, and in response to any pressure, or legal or regulatory action by, various stakeholders or governments that could potentially result in us not seeking intellectual property protection for or agreeing not to enforce or being restricted from enforcing intellectual property related to our medicines,products, including our vaccine to help prevent COVID-19 and potential vaccines and treatments for COVID-19;COVID-19.
•interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates;
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
•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, including further clarifications and/or interpretations of or changes to the TCJA enacted in 2017;
•any significant issues involving our largest wholesale distributors, which account for a substantial portion of our revenues;
•the possible impact of the increased presence of counterfeit medicines in the pharmaceutical supply chain on our revenues and on patient confidence in the integrity of our medicines;
•uncertainties based on the formal change in relationship between the U.K. government and the EU, which could have implications on our research, commercial and general business operations in the U.K. and the EU, including the approval and supply of our products;
•any significant issues that may arise related to the outsourcing of certain operational and staff functions to third parties, including with regard to quality, timeliness and compliance with applicable legal or regulatory requirements and industry standards;
•any significant issues that may arise related to our joint ventures and other third-party business arrangements;
•further clarifications and/or changes in interpretations of existing laws and regulations, or changes in laws and regulations, in the U.S. and other countries, including changes in U.S. generally accepted accounting principles;
•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 and recent and possible future changes in global financial markets; the related risk that our allowance for doubtful accounts may not be adequate; and the risks related to volatility of our income due to changes in the market value of equity investments;
•any changes in business, political and economic conditions due to actual or threatened terrorist activity or civil unrest in the U.S. and other parts of the world, and related U.S. military action overseas;
•growth in costs and expenses;
•changes in our product, segment and geographic mix;
•the impact of purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items;
•the impact of product recalls, withdrawals and other unusual items;
•the risk of an impairment charge related to our intangible assets, goodwill or equity-method investments;
•the impact of, and risks and uncertainties related to, acquisitions and divestitures, such as the acquisition of Array, our transaction with GSK which combined our respective consumer healthcare businesses into a new consumer healthcare joint venture and our agreement to combine Upjohn with Mylan to create a new global pharmaceutical company, Viatris, including, among other things, risks related to the satisfaction of the conditions to closing to any pending transaction (including the failure to obtain any necessary shareholder and regulatory approvals) in the anticipated timeframe or at all and the possibility that such transaction does not close; the ability to realize the anticipated benefits of those transactions, including the possibility that the expected cost savings and/or accretion from certain of those transactions will not be realized or will not be realized within the expected time frame; the risk that the businesses will not be integrated successfully; negative effects of the announcement or the consummation of the transaction on the market price of Pfizer’s common stock, Pfizer’s credit ratings and/or Pfizer’s operating results; disruption from the transactions making it more difficult to maintain business and operational relationships; risks related to our ability to grow revenues for certain acquired products; significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the transaction, other business effects, including the effects of industry, market, economic, political or regulatory conditions, future exchange and interest rates, changes in tax and other laws, regulations, rates and policies, future business combinations or disposals; competitive developments; and as it relates to the Consumer Healthcare JV with GSK, the possibility that a future separation of the joint venture as an independent company via a demerger of GSK’s equity interest to GSK’s shareholders and a listing of the joint venture on the U.K. equity market may not occur; and
•the impact of, and risks and uncertainties related to, restructurings and internal reorganizations, including the reorganization of our commercial operations in 2019, as well as any other corporate strategic initiatives, 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 or organizational disruption.
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 are cautioned not to put undue reliance on forward-looking statements.
We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law or by the rules and regulations of the SEC. You are advised, however, to consult any further disclosures we make on related subjects.
Additional discussion regarding certain risks, uncertainties and assumptions described above, as well as other material risks to our business, is included under the heading entitled “Risk Factors” in Part I, Item 1A, of our 2019 Form 10-K and Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q. These risks could cause actual results to differ materially from past and projected future results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. We incorporate that section of the 2019 Form 10-K in this filing and investors should refer to it. 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.
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information required by this item is incorporated by reference from the discussion in Part II, Item 7A, “Quantitativethe Analysis of Financial Condition, Liquidity, Capital Resources and Qualitative Disclosures About Market Risk—FinancialSelected Measures of Liquidity and Capital Resources—Market Risk Management”,section within MD&A of our 20192020 Form 10-K.
ItemITEM 4. 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.
PART II - | | |
| PART II. OTHER INFORMATION |
ItemITEM 1. Legal ProceedingsLEGAL PROCEEDINGS
The information required by this Item is incorporated herein by reference toCertain legal proceedings in which we are involved are discussed in Note 13A.12A in Part I, Item 1, of this Quarterly Report on Form 10-Q..
ItemITEM 1A. Risk FactorsRISK FACTORS
We refer to the “Our Operating Environment”, “The Global Economic Environment”, “COVID-19 Pandemic” and “Forward-Looking Information and Factors That May Affect Future Results” sections of the MD&A of this Quarterly Report on Form 10-Q and to Part I, Item 1A, “Risk Factors” of our 2019 Form 10-K. We are including the following risk factor, which should be read in conjunction with the risk factors discussed in Part I, Item 1A, “Risk Factors” of our 20192020 Form 10-K.
COVID-19 PANDEMIC
Our business, operations and financial condition and results have been and may continue to be impacted by the COVID-19 pandemic to varying degrees. The pandemic has presented a number of risks and challenges for our business, including, among others, impacts due to travel limitations and government-mandated work-from-home or shelter-in-place orders; manufacturing disruptions and delays; supply chain interruptions, including challenges related to reliance on third-party suppliers; disruptions to pipeline development and clinical trials, including difficulties or delays in enrollment of certain clinical trials; decreased product demand, including due to reduced numbers of in-person meetings with prescribers, patient visits with physicians, vaccinations and elective surgeries resulting in fewer new prescriptions or refills of existing prescriptions and reduced demand for products used in procedures; further reduced product demand as a result of increased unemployment; challenges presented by reallocating human capital, R&D, manufacturing and other resources to assist in responding to the pandemic without disruption to our operations; costs associated with the COVID-19 pandemic, including protocols intended to reduce the risk of transmission; increased supply chain costs and additional R&D costs incurred in our efforts to develop a vaccine and treatment for COVID-19; challenges related to our business development initiatives, including potential delays or disruptions related to regulatory approvals; interruptions or delays in the operations of certain regulatory authorities, which may delay the approvals of new products we are developing, potential label expansions for existing products and the launch of newly-approved products; potential increased cyber incidents such as phishing, social engineering and malware attacks; challenges related to our intellectual property, both domestically and internationally, including in response to any pressure or legal or regulatory action, by various stakeholders or governments that could potentially result in us not seeking intellectual property protection for, licensing or agreeing not to enforce our intellectual property rights related to our medicines, including potential vaccines and treatments for COVID-19; and other challenges presented by disruptions to our normal operations in response to the pandemic, as well as uncertainties regarding the duration and severity of the pandemic and its impacts and government or regulatory actions to contain the virus or control the supply of medicines.
We also face uncertainties related to our efforts to develop a potential treatment or vaccine for COVID-19, including uncertainties related to the risk that our development programs may not be successful, commercially viable or receive approval or Emergency Use Authorization from regulatory authorities; risks associated with preliminary data, including the possibility of unfavorable new preclinical or clinical trial data and further analyses of existing preclinical or clinical trial data that may be inconsistent with the data used for selection of the BNT162b2 vaccine candidate and dose level for the Phase 2/3 study; the risk that 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; whether and when additional data from the BNT162 mRNA vaccine program will be published in scientific journal publications and, if so, when and with what
modifications; disruptions in the relationships between us and our collaboration partners or third-party suppliers; the risk that other companies may produce superior or competitive products; the risk that demand for any products we may develop may no longer exist; risks related to the availability of raw materials to manufacture any such products; challenges related to our vaccine candidate’s ultra-low temperature formulation and attendant storage, distribution and administration requirements, including risks related to handling after delivery by Pfizer; the risk that we may not be able to successfully develop non-frozen formulations; the risk that we may not be able to recoup costs associated with our R&D and manufacturing efforts and risks associated with any changes in the way we approach or provide additional research funding for potential drug development related to COVID-19; the risk that we may not be able to create or scale up manufacturing capacity on a timely basis or have access to logistics or supply channels commensurate with global demand for any potential approved vaccine or product candidate, which would negatively impact our ability to supply the estimated numbers of doses of our vaccine candidate within the projected time periods indicated, and other challenges and risks associated with the pace of our vaccine development program; and pricing and access challenges for such products, including in the U.S.
Further, the COVID-19 pandemic, and the volatile global economic conditions stemming from the pandemic, could precipitate or amplify the other risks that we identify in the “Risk Factors” section of our 2019 Form 10-K, which could materially adversely affect our business, operations and financial condition and results.
We are continuing to monitor the latest developments regarding the COVID-19 pandemic on our business, operations and financial condition and results, and have made certain assumptions regarding the pandemic for purposes of our operational planning and financial projections, including assumptions regarding the duration and severity of the pandemic and the global macroeconomic impact of the pandemic. Despite careful tracking and planning, however, we are unable to accurately predict the extent of the impact of the pandemic on our business, operations and financial condition and results due to the uncertainty of future developments. In particular, we believe the ultimate impact on our business, operations and financial condition and results will be affected by the speed and extent of the continued spread of the coronavirus globally, the duration of the pandemic, new information that may emerge concerning the severity and incidence of COVID-19, the safety, efficacy and availability of a vaccine and treatments for COVID-19, the global macroeconomic impact of the pandemic and governmental or regulatory actions to contain the virus or control supply of medicines. The pandemic may also affect our business, operations or financial condition and results in a manner that is not presently known to us or that we currently do not consider to present significant risks.
For additional information on how the COVID-19 pandemic has already impacted our business, operations and financial condition and results, see the “Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Third Quarter 2020 and First Nine Months of 2020 Performance––Revenues” and “––The Global Economic Environment” sections of the MD&A of this Quarterly Report on Form 10-Q.
ItemITEM 2. Unregistered Sales of Equity Securities and Use of ProceedsUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following summarizes purchases of our common stock during the thirdfirst quarter of 20202021(a):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 Value of Shares That May Yet Be Purchased Under the Plan(a) |
| June 29 through July 26, 2020 | | 21,706 | | | $ | 33.47 | | | — | | | $ | 5,292,881,709 | |
| July 27 through August 23, 2020 | | 18,025 | | | $ | 38.34 | | | — | | | $ | 5,292,881,709 | |
| August 24 through September 27, 2020 | | 4,978 | | | $ | 37.71 | | | — | | | $ | 5,292,881,709 | |
| Total | | 44,709 | | | $ | 35.90 | | | — | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 Value of Shares That May Yet Be Purchased Under the Plan(a) |
| January 1 through January 31, 2021 | | 17,147 | | | $ | 26.60 | | | — | | | $ | 5,292,881,709 | |
| February 1 through February 28, 2021 | | 7,967,778 | | | $ | 33.96 | | | — | | | $ | 5,292,881,709 | |
| March 1 through April 4, 2021 | | 2,654,032 | | | $ | 33.78 | | | — | | | $ | 5,292,881,709 | |
| Total | | 10,638,957 | | | $ | 33.90 | | | — | | | |
(a)See the Notes to Consolidated Financial Statements––Note 12. Equity12 in our 2019 Financial Report, which is incorporated by reference.2020 Form 10-K.
(b)Represents (i) 10,633,238 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.programs and (ii) the open market purchase by the trustee of 5,719 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 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
ItemITEM 6. ExhibitsEXHIBITS
| | | | | | | | | | | |
| | - | Amendment No. 3,Preferability Letter of KPMG dated as of September 18, 2020, to the Separation and Distribution Agreement, dated as of July 29, 2019, by and between Pfizer Inc. and Upjohn Inc. (Pursuant to Item 601(b)(2) of Regulation S-K, the registrant hereby agrees to supplementally furnish to the SEC upon request any omitted schedule or exhibit to the Separation and Distribution Agreement).May 13, 2021 |
| | - | Accountants’ Acknowledgment.Subsidiary Issuers of Guaranteed Securities |
| | | - | 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.
| | | | | | | | |
| | Pfizer Inc. |
| | (Registrant) |
| | |
| | |
| Dated: | November 5, 2020May 13, 2021 | /s/ Jennifer B. Damico |
| | Jennifer B. Damico, Senior Vice President and
Controller
(Principal Accounting Officer and
Duly Authorized Officer) |
