Add
PFE to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| PFE > SEC Filings for PFE > Form 10-Q on 9-Aug-2012 | All Recent SEC Filings |
9-Aug-2012
Quarterly Report
Introduction
Our MD&A is provided in addition to the accompanying condensed consolidated financial statements and footnotes to assist readers in understanding Pfizer's results of operations, financial condition and cash flows. The MD&A is organized as follows:
? Overview of Our Performance, Operating Environment, Strategy and Outlook. This section, beginning on page 47, provides information about the following: our business; our performance during the second quarter and first six months of 2012 and 2011; our operating environment; our strategy; our business development initiatives; and our financial guidance for 2012.
? Analysis of the Condensed Consolidated Statements of Income. This section begins on page 55, and consists of the following sub-sections:
o Revenues. This sub-section, beginning on page 55, provides an analysis of our products and revenues for the second quarter and first six months of 2012 and 2011, as well as an overview of research and development expenses and important biopharmaceutical product developments.
o Costs and Expenses. This sub-section, beginning on page 68, provides a discussion about our costs and expenses.
o Provision for Taxes on Income. This sub-section, on page 72, provides a discussion of items impacting our tax provisions.
o Discontinued Operations. This sub-section, beginning on page 72, provides an analysis of the financial statement impact of our discontinued operations.
o Adjusted Income. This sub-section, beginning on page 72, provides a discussion of an alternative view of performance used by management.
? Analysis of the Condensed Consolidated Statements of Comprehensive Income. This section, on page 77, provides a discussion of changes in certain components of other comprehensive income.
? Analysis of the Condensed Consolidated Balance Sheets. This section, on page 77, provides a discussion of changes in certain balance sheet accounts.
? Analysis of the Condensed Consolidated Statements of Cash Flows. This section, beginning on page 78, provides an analysis of our cash flows for the first six months of 2012 and 2011.
? Analysis of Financial Condition, Liquidity and Capital Resources. This section, beginning on page 79, provides an analysis of selected measures of our liquidity and of our capital resources as of July 1, 2012 and December 31, 2011 and a discussion of our outstanding debt and commitments that existed as of July 1, 2012 and December 31, 2011. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer's future activities.
? New Accounting Standards. This section, beginning on page 81, discusses recently adopted and recently issued accounting standards.
? Forward-Looking Information and Factors That May Affect Future Results. This section, beginning on page 82, provides a description of the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements set forth in this MD&A relating to our financial and operating performance, business plans and prospects, in-line products and product candidates, strategic review, capital allocation, business-development plans, and share-repurchase and dividend-rate plans. Such forward-looking statements are based on management's current expectations about future events, which are inherently susceptible to uncertainty and changes in circumstances.
The following table provides the components of the condensed consolidated statements of income:
Three Months Ended Six Months Ended
(MILLIONS OF DOLLARS, EXCEPT PER July 1, July 3, % July 1, July 3, %
COMMON SHARE DATA) 2012 2011 Change 2012 2011 Change
Revenues $ 15,057 $ 16,485 (9 ) $ 29,942 $ 32,509 (8 )
Cost of sales 2,752 3,571 (23 ) 5,497 7,040 (22 )
% of revenues 18.3 % 21.7 % 18.4 % 21.7 %
Selling, informational and
administrative expenses 3,977 4,800 (17 ) 7,954 9,178 (13 )
% of revenues 26.4 % 29.1 % 26.6 % 28.2 %
Research and development
expenses 1,699 2,231 (24 ) 3,753 4,311 (13 )
% of revenues 11.3 % 13.5 % 12.5 % 13.3 %
Amortization of intangible
assets 1,291 1,384 (7 ) 2,711 2,749 (1 )
% of revenues 8.6 % 8.4 % 9.1 % 8.5 %
Restructuring charges and
certain acquisition-related
costs 190 478 (60 ) 787 1,368 (42 )
% of revenues 1.3 % 2.9 % 2.6 % 4.2 %
Other deductions--net 664 423 57 2,321 1,255 85
Income from continuing
operations before provision for
taxes on income 4,484 3,598 25 6,919 6,608 (5 )
% of revenues 29.8 % 21.8 % 23.1 % 20.3 %
Provision for taxes on income 1,290 1,077 20 2,001 1,951 (3 )
Effective tax rate 28.8 % 29.9 % 28.9 % 29.5 %
Income from continuing
operations 3,194 2,521 27 4,918 4,657 6
% of revenues 21.2 % 15.3 % 16.4 % 14.3 %
Discontinued operations--net of
tax 66 97 (32 ) 145 195 (26 )
Net income before allocation to
noncontrolling interests 3,260 2,618 25 5,063 4,852 4
% of revenues 21.7 % 15.9 % 16.9 % 14.9 %
Less: Net income attributable to
noncontrolling interests 7 8 (13 ) 16 20 (20 )
Net income attributable to
Pfizer Inc. $ 3,253 $ 2,610 25 $ 5,047 $ 4,832 4
% of revenues 21.6 % 15.8 % 16.9 % 14.9 %
Earnings per common
share--basic:(a)
Income from continuing
operations attributable to
Pfizer
Inc. common shareholders $ 0.43 $ 0.32 34 $ 0.65 $ 0.58 12
Discontinued operations--net of
tax 0.01 0.01 -- 0.02 0.02 --
Net income attributable to
Pfizer Inc. common shareholders $ 0.44 $ 0.33 33 $ 0.67 $ 0.61 10
Earnings per common
share--diluted:(a)
Income from continuing
operations attributable to
Pfizer
Inc. common shareholders $ 0.42 $ 0.32 31 $ 0.65 $ 0.58 12
Discontinued operations--net of
tax 0.01 0.01 -- 0.02 0.02 --
Net income attributable to
Pfizer Inc. common shareholders $ 0.43 $ 0.33 30 $ 0.67 $ 0.61 10
Cash dividends paid per common
share $ 0.22 $ 0.20 10 $ 0.44 $ 0.40 10
|
(a) EPS amounts may not add due to rounding.
Certain amounts and percentages may reflect rounding adjustments.
OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK
Our Business
Our mission is to apply science and our global resources to improve health and well-being at every stage of life. We strive to set the standard for quality, safety and value in the discovery, development and manufacturing of medicines for people and animals. Our diversified global healthcare portfolio includes human and animal biologic and small molecule medicines and vaccines, as well as nutritional products and many of the world's best-known consumer products. Every day, we work across developed and emerging markets to advance wellness, prevention, treatments and cures that challenge the most feared diseases of our time. We also 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, as well as through alliance agreements, under which we co-promote products discovered by other companies.
We anticipate filing a registration statement with the U.S. Securities and Exchange Commission (SEC) by mid-August for a potential initial public offering (IPO) of up to a 20% ownership stake in our Animal Health business, Zoetis, Inc. (Zoetis). If the IPO is successfully completed, which we are targeting for the first half of 2013, we will have a variety of options to achieve a potential full separation of Zoetis. As we continue to work toward a potential IPO and a potential full separation of Zoetis, we remain open to all alternatives to maximize the after-tax return for our shareholders. The Animal Health business continues to be presented as a continuing operation in the condensed consolidated financial statements.
On April 23, 2012, we announced that we entered into an agreement to sell our Nutrition business to Nestlé for $11.85 billion in cash. The transaction is expected to close by the first half of 2013, assuming the receipt of the required regulatory clearances and satisfaction of other closing conditions. Beginning in the second quarter of 2012, we report the operating results of the Nutrition business as Discontinued operations--net of tax in the condensed consolidated statements of income for all periods presented. The transaction also includes the sale of certain prenatal multivitamins currently commercialized by the Pfizer Consumer Healthcare business unit. The operating results of this product line are also included in Discontinued operations--net of tax for all periods presented. In addition, the assets and liabilities associated with this business are classified as Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations, as appropriate, in the condensed consolidated balance sheets.
On August 1, 2011, we completed the sale of our Capsugel business for approximately $2.4 billion in cash. The operating results associated with this business are reported as Discontinued operations--net of tax in our condensed consolidated statements of income for the three and six months ended July 3, 2011.
On January 31, 2011, we completed a tender offer for the outstanding shares of common stock of King Pharmaceuticals, Inc. (King) and acquired approximately 92.5% of the outstanding shares for approximately $3.3 billion in cash. On February 28, 2011, we acquired the remaining outstanding shares of King for approximately $300 million in cash. Commencing from January 31, 2011, our financial statements include the assets, liabilities, operating results and cash flows of King. As a result, in accordance with our domestic and international reporting periods, our condensed consolidated financial statements for the six months ended July 3, 2011 reflect approximately five months of King's U.S. operations and approximately four months of King's international operations.
Our 2012 Performance
Revenues in the second quarter of 2012 were $15.1 billion, a decrease of 9% compared to the same period in 2011, due to an operational decline of $1.0 billion, or 6%, primarily as the result of the impact of the loss of exclusivity of Lipitor in most major markets, including the U.S. on November 30, 2011, and the unfavorable impact of foreign exchange of $451 million, or 3%.
Revenues in the first six months of 2012 were $29.9 billion, a decrease of 8% compared to the same period in 2011, due to an operational decline of $2.0 billion, or 6%, primarily as the result of the aforementioned loss of exclusivity of Lipitor, and the unfavorable impact of foreign exchange of $515 million, or 2%.
The following table provides the significant impacts on revenues for the three
and six months ended July 1, 2012 compared to the same periods ended July 3,
2011:
July 1, 2012
vs.
July 3, 2011
Worldwide % Change % Change % Change
(millions of dollars) Change Worldwide U.S. International
Three Months Ended
Lyrica $ 127 14 8 18
Enbrel (Outside the U.S. and Canada) 74 8 -- 8
Celebrex 37 6 8 3
EpiPen(a) 26 39 46 8
Sutent 23 8 23 3
Premarin family 19 7 9 (8 )
Prevnar 13/Prevenar 13 95 12 -- 24
BeneFIX 17 10 20 2
Pristiq 11 7 2 31
Refacto AF/Xyntha 15 12 53 6
Vfend(b) (14 ) (7 ) -- (8 )
Genotropin (18 ) (8 ) (4 ) (9 )
Neurontin (22 ) (26 ) (33 ) (24 )
Chantix/Champix (18 ) (9 ) (7 ) (12 )
Aricept(c) (28 ) (25 ) -- (25 )
Norvasc (27 ) (7 ) 22 (8 )
Detrol/Detrol LA (25 ) (11 ) (12 ) (8 )
BMP2 (34 ) (34 ) (29 ) (100 )
Zosyn/Tazocin (21 ) (13 ) (15 ) (10 )
Prevnar/Prevenar (7-valent) (71 ) (46 ) -- (46 )
Aromasin(b) (40 ) (42 ) (57 ) (41 )
Effexor (62 ) (37 ) (56 ) (27 )
Caduet(b) (85 ) (59 ) (95 ) (22 )
Geodon/Zeldox(b) (174 ) (67 ) (77 ) (17 )
Xalatan/Xalacom(b) (82 ) (28 ) (29 ) (28 )
Lipitor(b) (1,371 ) (53 ) (79 ) (22 )
Alliance Revenue(b) (13 ) (1 ) 27 (40 )
All other biopharmaceutical products(d) 152 9 27 --
Animal Health products 30 3 7 1
Consumer Healthcare products 54 8 7 8
Six Months Ended
Lyrica $ 256 15 8 19
Enbrel (Outside the U.S. and Canada) 103 6 -- 6
Celebrex 80 7 7 6
EpiPen(a) 49 49 51 33
Sutent 47 8 24 3
Premarin family 45 9 10 --
Prevnar 13/Prevenar 13 40 2 (9 ) 18
BeneFIX 36 11 20 4
Pristiq 33 12 7 36
Refacto AF/Xyntha 30 13 19 11
Vfend(b) (31 ) (8 ) (33 ) (3 )
Genotropin (32 ) (7 ) (7 ) (7 )
Neurontin (35 ) (23 ) (32 ) (19 )
Chantix/Champix (39 ) (10 ) (4 ) (15 )
Aricept(c) (40 ) (18 ) -- (18 )
Norvasc (49 ) (7 ) 39 (8 )
Detrol/Detrol LA (55 ) (12 ) (13 ) (11 )
BMP2 (60 ) (31 ) (27 ) (100 )
Zosyn/Tazocin (72 ) (21 ) (29 ) (11 )
Prevnar/Prevenar (7-valent) (86 ) (28 ) -- (28 )
Aromasin(b) (98 ) (47 ) (84 ) (37 )
Effexor (137 ) (37 ) (58 ) (22 )
Caduet(b) (162 ) (57 ) (92 ) (15 )
Geodon/Zeldox(b) (225 ) (46 ) (53 ) (9 )
Xalatan/Xalacom(b) (247 ) (36 ) (86 ) (22 )
Lipitor(b) (2,361 ) (47 ) (75 ) (14 )
Alliance revenue(b) (61 ) (3 ) 16 (32 )
All other biopharmaceutical products(d) 331 10 24 2
Animal Health products 74 4 9 1
Consumer Healthcare products 44 3 (2 ) 7
|
(a) Legacy King product. King's operations are included in our financial statements commencing from the acquisition date of January 11, 2011.
(b) Lipitor and Caduet lost exclusivity in the U.S. in November 2011 and various other major markets in 2011 and 2012. Xalatan lost exclusivity in the U.S. in March 2011 and in the majority of European markets in January 2012. Aromasin lost exclusivity in the U.S. in April 2011, in the majority of European markets in July 2011 and in Japan in November 2011. Vfend tablets lost exclusivity in the U.S. in February 2011. Geodon lost exclusivity in the U. S. in March 2012. We lost exclusivity for Aricept 5mg and 10mg tablets, which are included in Alliance revenues, in the U.S. in November 2010 and in the majority of European markets in February and April 2012.
(c) Represents direct sales under license agreement with Eisai Co., Ltd.
(d) Includes the "All other" category included in the Revenues-Major Biopharmaceutical Products table presented in this MD&A, which includes sales of generic atorvastatin.
Income from continuing operations for the second quarter of 2012 was $3.2 billion, compared to $2.5 billion in the second quarter of 2011, and $4.9 billion in the first six months of 2012, compared to $4.7 billion in the first six months of 2011, primarily reflecting, among other items:
? purchase accounting charges that were approximately $410 million lower in the second quarter and $700 million lower in first six months of 2012 than in the same periods in 2011;
? acquisition-related costs that were approximately $260 million lower in the second quarter and $600 million lower in first six months of 2012 than in the same periods in 2011;
? asset impairment charges that were approximately $240 million lower in the second quarter of 2012 and $30 million higher in the first six months of 2012 than in the same periods in 2011 (see further discussion in the "Costs and Expenses--Other (Income)/Deductions--Net" section of this MD&A and Notes to Condensed Consolidated Financial Statements-Note 4. Other Deductions--net);
? charges that were approximately $190 million lower in the second quarter of 2012 and $60 million higher in the first six months of 2012 than in the same periods in 2011 related to our non-acquisition related cost-reduction and productivity initiatives; and
? charges for certain legal matters that were approximately $490 million higher in the second quarter and $800 million higher in the first six months of 2012 than in the same periods in 2011 (see further discussion in the "Costs and Expenses--Other (Income)/Deductions--Net" section of this MD&A and Notes to Condensed Consolidated Financial Statements-Note 4. Other Deductions--net).
Also, see "Discontinued Operations" section of this MD&A.
Our Operating Environment
U.S. Healthcare Legislation
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (together, the U.S. Healthcare Legislation), was enacted in the U.S. As explained more fully in our 2011 Annual Report on Form 10-K, this legislation has resulted in both current and longer-term impacts on us. Our 2012 financial guidance (see the "Our Financial Guidance for 2012" section of this MD&A for additional information) reflects the expected full-year impact of the U.S. Healthcare Legislation.
In each of 2012 and 2011, we recorded the following amounts as a result of the U.S. Healthcare Legislation:
? approximately $110 million and $158 million in the second quarters of 2012 and 2011, respectively, and approximately $234 million and $324 million in the first six months of 2012 and 2011, respectively, recorded as a reduction to Revenues, related to the extended and expanded rebate provisions and the Medicare "coverage gap" discount provision; and
? approximately $78 million and $69 million in the second quarters of 2012 and 2011, respectively, and approximately $181 million and $139 million in the first six months of 2012 and 2011, respectively, related to the annual fee payable to the federal government (which is payable annually through 2018 and 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.
In June 2012, the U.S. Supreme Court upheld the constitutionality of the requirement in the U.S. Healthcare Legislation for Americans to have insurance (called the individual mandate). Separately, it is possible that Congress may withhold all or a portion of the funding necessary to implement the U.S. Healthcare Legislation or may attempt to amend or repeal it. Given the extent of the possible changes and the uncertainties concerning the interpretation, implementation and timing of any such changes, the U.S. Healthcare Legislation and any amendments thereto or repeal of all or portions thereof could impact our business and results of operations in the near term and over the next several years.
The fiscal year 2013 budget proposal submitted to Congress by President Obama in February 2012 includes a provision that would reduce the base exclusivity period for a biologics product from 12 years to seven years. There was no corresponding pending bill designed to amend the U.S. Healthcare Legislation to alter the biologics provisions. In May 2012, the budget proposal was voted down in both the U.S. House of Representatives and the U.S. Senate.
Industry-Specific Challenges
The majority of our revenues come from the manufacture and sale of biopharmaceutical products. As explained more fully in our 2011 Annual Report on Form 10-K, the biopharmaceutical industry is highly competitive and we face a number of industry-specific challenges, which can significantly impact our results. These factors include, among others: the loss or expiration of intellectual property rights and the expiration of co-promotion and licensing rights, pipeline productivity and the regulatory environment, pricing and access pressures and competition among branded products.
As more fully explained in our 2011 Annual Report on Form 10-K, the loss or expiration of intellectual property rights and the expiration of co-promotion and licensing rights can have a significant adverse effect on our revenues. Our 2012 financial guidance reflects the anticipated impact in 2012 of the loss of such rights as described below (see the "Our Financial Guidance for 2012" section of this MD&A for additional information).
Our 2012 results have been and/or will be adversely impacted by the following:
? Lipitor in the U.S.--Lipitor lost exclusivity in the U.S. in November 2011.
The entry of multi-source generic competition in the U.S. began in May 2012,
with attendant increased competitive pressures. Beginning in 2012, sales of
Lipitor in the U.S. are reported in our Established Products business unit.
Lipitor in international markets--Lipitor lost exclusivity in Japan in June 2011 (with generic competition occurring in November 2011), Australia in April 2012 and the majority of European markets in March 2012 and May 2012.
? Other recent loss of exclusivity impacts--In the U.S., we lost exclusivity for Vfend tablets in February 2011, for Xalatan in March 2011 and for Geodon in March 2012. The basic U.S. patent (including the six-month pediatric exclusivity period) for Protonix expired in January 2011. The basic patent for Vfend tablets in Brazil expired in January 2011. We lost exclusivity for Aromasin in the U.S. in April 2011, in the majority of European markets in July 2011 and in Japan in November 2011. We lost exclusivity for Xalatan and Xalacom in the majority of European markets in January 2012. We lost exclusivity for Aricept in the majority of European markets in February 2012 and April 2012. Caduet lost exclusivity in the U.S. in November 2011 and in the majority of European markets in March and May 2012.
? Revatio tablet will lose exclusivity in the U.S. in September 2012, which reflects the extension of the exclusivity period from March to September 2012 as the result of a pediatric extension.
. . .
|
|