Pfizer Reports Fourth-Quarter and Full-Year 2009 Results; Provides 2010 Financial Guidance and 2012 Financial Targets

Fourth-Quarter 2009 Revenues of $16.5 Billion; Full-Year 2009 Revenues of $50.0 Billion Fourth-Quarter 2009 Reported Diluted EPS(1) of $0.10, Adjusted Diluted EPS(2) of $0.49; Full-Year 2009 Reported Diluted EPS(1) of $1.23, Adjusted Diluted EPS(2) of $2.02 Achieves Full-Year 2009 Revenue and Adjusted Diluted EPS(2) Guidance Provides Full-Year 2010 Financial Guidance; Provides Updated 2012 Financial Targets

Pfizer Reports Fourth-Quarter and Full-Year 2009 Results; Provides 2010 Financial Guidance and 2012 Financial Targets
  • Fourth-Quarter 2009 Revenues of $16.5 Billion; Full-Year 2009 Revenues of $50.0 Billion
  • Fourth-Quarter 2009 Reported Diluted EPS(1) of $0.10, Adjusted Diluted EPS(2) of $0.49; Full-Year 2009 Reported Diluted EPS(1) of $1.23, Adjusted Diluted EPS(2) of $2.02
  • Achieves Full-Year 2009 Revenue and Adjusted Diluted EPS(2) Guidance
  • Provides Full-Year 2010 Financial Guidance; Provides Updated 2012 Financial Targets 
    ($ in millions, except per share amounts)

NEW YORK, N.Y., Wednesday, February 3, 2010 – Pfizer Inc. (NYSE: PFE) today reported financial results for fourth-quarter and full-year 2009.  On October 15, 2009, Pfizer completed the acquisition of Wyeth and, consequently, fourth-quarter and full-year 2009 results include the legacy Wyeth operations from the acquisition date through Pfizer’s domestic and international year-ends (see note 16).  Fourth-quarter 2009 revenues were $16.5 billion, an increase of 34% compared with $12.3 billion in the year-ago quarter.  Revenues for fourth-quarter 2009 compared with the year-ago quarter were favorably impacted by $3.3 billion, or 27%, due to the addition of the legacy Wyeth products, $419 million, or 3%, due to legacy Pfizer products, and $469 million, or 4%, due to foreign exchange.   For fourth-quarter 2009, U.S. revenues were $7.4 billion, an increase of 42% compared with the year-ago quarter.  International revenues were $9.1 billion, an increase of 28% compared with the prior-year quarter, and reflected 21% operational growth and a 7% favorable impact of foreign exchange.  U.S. revenues represented 45% compared with 42% of the total in the year-ago quarter, while international revenues represented 55% compared with 58% of the total in fourth-quarter 2008.  

For full-year 2009, revenues were $50.0 billion, an increase of 4% compared with $48.3 billion in the same period in 2008.  For full-year 2009, revenues were favorably impacted by approximately $3.3 billion, or 7%, due to the addition of the legacy Wyeth products, $247 million, or 1%, due to legacy Pfizer products, and unfavorably impacted by $1.8 billion, or 4%, due to foreign exchange.   U.S. revenues were $21.7 billion, an increase of 7% compared with full-year 2008.  International revenues were $28.3 billion, an increase of 1% compared with last year, and reflected 8% operational growth and a 7% unfavorable impact of foreign exchange.  U.S. revenues represented 43% compared with 42% of the total last year, and international revenues represented 57% compared with 58% of the total in 2008.  

Business Revenues
Since the close of the Wyeth acquisition, Pfizer has operated two distinct commercial organizations: Biopharmaceutical and Diversified.  Biopharmaceutical includes the Primary Care, Specialty Care, Established Products, Emerging Markets and Oncology customer-focused units, while Diversified includes Animal Health, Consumer Healthcare, Capsugel and Nutrition.

Fourth-Quarter

For fourth-quarter 2009, revenues from Biopharmaceutical were $14.6 billion, an increase of 30% compared with $11.2 billion in the year-ago quarter.  Operationally, revenues increased $2.9 billion, or 26%, of which $2.5 billion, or 22%, was attributable to legacy Wyeth products, primarily Premarin in the Primary Care unit, Enbrel and Prevnar in the Specialty Care unit, Effexor in the Established Products unit as well as Enbrel and Prevenar in the Emerging Markets unit.  Additionally, the favorable impact of foreign exchange increased revenues by 4% or $419 million.

For fourth-quarter 2009, revenues from Diversified were $1.8 billion, an increase of 83% compared with $1.0 billion in the year-ago quarter.  Operationally, revenues increased $778 million, or 78%, of which $764 million, or 77%, was attributable to legacy Wyeth products, primarily Centrum, Advil and Robitussin in Consumer Healthcare and certain Nutrition products.  Additionally, the favorable impact of foreign exchange increased revenues by 5% or $45 million.

Reported Net Income(1)  and Reported Diluted EPS(1) 
For fourth-quarter 2009, Pfizer posted reported net income(1) of $767 million, an increase of 188% compared with $266 million in the prior-year quarter, and reported diluted EPS(1) of $0.10, an increase of 150% compared with $0.04 in the prior-year quarter.  Results for fourth-quarter 2009 compared with the same period in 2008 were favorably impacted by increased revenues as well as the non-recurrence of the pre-tax and after-tax charge of $2.3 billion in the year-ago quarter related to the resolution of certain investigations concerning Bextra and various other products in addition to the favorable impact of lower costs incurred in connection with our cost-reduction initiatives in 2009.  These factors were largely offset by significant purchase accounting adjustments and acquisition-related costs associated with the Wyeth acquisition.  In addition, the effective tax rate in fourth-quarter 2009 was favorably impacted by the tax benefits related to the sale of one of our biopharmaceutical companies, Vicuron Pharmaceuticals, Inc., and the jurisdictional mix of certain expenses incurred in connection with the acquisition of Wyeth.  The fourth-quarter 2008 effective tax rate was negatively impacted by the unfavorable tax implications of the aforementioned charge related to Bextra and various other products.

For full-year 2009, Pfizer posted reported net income(1) of $8.6 billion, an increase of 7% compared with $8.1 billion last year, and reported diluted EPS(1) of $1.23, an increase of 3% compared with $1.20 in 2008.  These results were impacted by increased revenues and the aforementioned fourth-quarter factors as well as the non-recurrence of a $640 million after-tax charge related to the resolution of certain litigation involving the Company’s non-steroidal anti-inflammatory pain medicines in third-quarter 2008.  These factors were partially offset by the unfavorable impact of foreign exchange and higher net interest expense.  Additionally, the effective tax rate on reported results increased to approximately 20% in full-year 2009 from approximately 17% in full-year 2008, primarily due to the increased tax cost associated with certain business decisions executed to finance the Wyeth acquisition. 

Additionally, reported diluted EPS(1) in fourth-quarter and full-year 2009 was impacted by the increased number of shares outstanding in comparison with the corresponding periods in 2008 resulting primarily from shares issued to partially fund the Wyeth acquisition.

Adjusted Income(2) and Adjusted Diluted EPS(2)
Fourth-quarter 2009 adjusted income(2) was $3.8 billion, a decrease of 13% compared with $4.4 billion in the year-ago quarter, and adjusted diluted EPS(2) was $0.49, a decrease of 25% compared with $0.65 in the year-ago quarter.  For full-year 2009, adjusted income(2) was $14.2 billion, a decrease of 13% compared with $16.4 billion in full-year 2008, and adjusted diluted EPS(2) was $2.02, a decrease of 17% compared with $2.42 in the prior year. Both adjusted income(2) and adjusted diluted EPS(2) were favorably impacted by higher revenues and negatively impacted by increased expenses, primarily due to the addition of the legacy Wyeth operations and increased investment in high-growth and in-line product opportunities, as well as higher net interest expense and an increase in the effective tax rate on adjusted income(2)

The effective tax rate on adjusted income(2) increased to approximately 28% in fourth-quarter 2009 from approximately 24% in fourth-quarter 2008, and to approximately 30% in full-year 2009 from approximately 22% in full-year 2008, primarily due to the increased tax cost associated with certain business decisions executed to finance the Wyeth acquisition.  In addition, the effective tax rate on adjusted income(2) for full-year 2008 was positively impacted by a favorable income tax adjustment.
 
Additionally, adjusted diluted EPS(2)  in fourth-quarter and full-year 2009 was impacted by the increased number of shares outstanding in comparison with the corresponding periods in 2008 resulting primarily from shares issued to partially fund the Wyeth acquisition.

In fourth-quarter 2009, adjusted cost of sales(2) as a percentage of revenues was 17.5% compared with 11.7% in fourth-quarter 2008.  For full-year 2009, adjusted cost of sales(2) as a percentage of revenues was 15.4% compared with 14.6% in full-year 2008.  These increases primarily reflect the change in the mix of products and businesses as a result of the Wyeth acquisition.  Excluding the impact of foreign exchange, adjusted cost of sales(2) as a percentage of revenues was 14.4% in fourth-quarter 2009 and 14.8% in full-year 2009. 

Adjusted SI&A expenses(2) were $5.3 billion in fourth-quarter 2009, an increase of 52% compared with $3.5 billion in the prior-year quarter.  Adjusted SI&A expenses(2) were $14.7 billion in full-year 2009, an increase of 4% compared with $14.0 billion in the prior year.  These increases were attributable to the addition of the legacy Wyeth operations and increased investment in high-growth and in-line product opportunities.  Foreign exchange increased fourth-quarter 2009 adjusted SI&A expenses(2) by $135 million compared with the year-ago quarter, and decreased full-year 2009 adjusted SI&A expenses(2) by $385 million compared with full-year 2008.

Adjusted R&D expenses(2) were $2.8 billion in fourth-quarter 2009, an increase of 27% compared with $2.2 billion in the prior-year period.  For full-year 2009, adjusted R&D expenses(2) were $7.7 billion, an increase of 3% compared with $7.5 billion in the prior year. These increases were attributable to the addition of the legacy Wyeth operations, continued investment in the late-stage development portfolio and business-development transactions in the Established Products unit.  Foreign exchange increased fourth-quarter 2009 adjusted R&D expenses(2) by $17 million compared with the year-ago quarter, and decreased full-year 2009 adjusted R&D expenses(2) by $145 million compared with full-year 2008.

Overall, foreign exchange increased adjusted total costs(13) by $720 million, or 10%, in fourth-quarter 2009 compared with the prior-year period.  For full-year 2009, foreign exchange decreased adjusted total costs(13) by $520 million, or 2%, compared with the prior year.

As announced in January 2009, Pfizer implemented a cost-reduction program that is expected to achieve cost savings of approximately $3 billion, at 2008 average foreign exchange rates, compared with 2008 adjusted total costs(13) of $28.6 billion.  Approximately $1 billion of these savings is anticipated to be reinvested in the business, resulting in an expected $2 billion net cost reduction.  Additionally, as a result of the Wyeth acquisition, Pfizer expects to generate synergies of approximately $4 billion, which is expected to result in $2 to $3 billion in net cost savings after reinvestment in the business.  In the aggregate, Pfizer expects to generate gross cost reductions of approximately $7 billion, resulting in net cost reductions of approximately $4 to $5 billion, by the end of 2012, at 2008 average foreign exchange rates, in comparison with the 2008 pro-forma adjusted total costs(13) of Pfizer and the former Wyeth operations.  For full-year 2009, operational improvements resulting from the Pfizer stand-alone cost-reduction initiatives resulted in a decrease in adjusted total costs(13) of approximately $200 million, despite significant fourth-quarter 2009 investment in many high-growth and in-line product opportunities, including business-development transactions in the Established Products unit and incremental promotional efforts in the U.S. and emerging markets, among other items.  The operational improvements were driven partially by the reduction in workforce as well as manufacturing and research and development site exits.  At the closing of the Wyeth acquisition, the combined workforce totaled approximately 120,700, an increase from the Pfizer stand-alone workforce of approximately 75,100.  As of year-end 2009, the workforce was approximately 116,500, a decline of 4,200 since the closing on October 15, 2009. 

Executive Commentary  
“During the fourth quarter, we closed the Wyeth acquisition and immediately began the integration of our operations, advancing the transformation of the company,” stated Jeff Kindler, Chairman and Chief Executive Officer. “We are pleased with the rapid pace of the integration and our ability to quickly realize the benefits of our combined organization.”

“Our results this quarter clearly demonstrate the ability of our colleagues to remain focused and deliver solid operational performance, while working to close the Wyeth acquisition and to ensure a successful integration,” Kindler continued.  “We remain excited about our more diverse in-line product and pipeline portfolio, which we expect will result in improved opportunities for the company in 2010 and beyond.”

Frank D’Amelio, Chief Financial Officer, stated, “Our 2010 financial guidance and 2012 financial targets balance the achievement of our projected cost reductions, including from the integration of Wyeth, with the expected increased investment to drive longer-term, top and bottom line performance.   These goals reflect our continued confidence in the business and our ability to capitalize on near- to mid-term growth opportunities through a meaningful reallocation of investment.  Additionally, our 2012 targets assume a modest level of planned business-development activities.” 

2010 Financial Guidance
For full-year 2010, Pfizer’s financial guidance, at current exchange rates(14), is summarized below.

  2010 Guidance(15)
Reported Revenues $67.0 to $69.0 billion
Adjusted Cost of Sales(2) as a Percentage of Revenues 19.0% to 20.0%
Adjusted SI&A Expenses(2) $19.0 to $20.0 billion
Adjusted R&D Expenses(2) $9.1 to $9.6 billion
Adjusted Other (Income)/Deductions(2) $1.2 to $1.4 billion
Effective Tax Rate on Adjusted Income(2) Approximately 30%
Reported Diluted EPS(1) $0.95 to $1.10
Adjusted Diluted EPS(2)  $2.10 to $2.20

2012 Financial Targets
Pfizer has also provided financial targets for 2012.  Given the longer-term nature of these targets, they are subject to greater variability and less certainty as a result of potential material impacts related to foreign exchange fluctuations, macroeconomic activity including inflation, industry-specific challenges including changes to government healthcare policy, among others.  In comparison with the targets previously provided on January 26, 2009, these updated targets reflect the impact of the completed and pending divestitures of Animal Health assets as required by regulatory authorities in connection with their approvals of the Wyeth acquisition, the shift in revenues for human immunodeficiency virus (HIV) products to the joint venture with GlaxoSmithKline plc (ViiV Healthcare Limited) and the elimination of Relistor revenues due to Wyeth’s return of its rights to the licensor, which in the aggregate reduced the revenue target by approximately $1.5 billion. 

For 2012, at current exchange rates(14), Pfizer is targeting reported revenue between $66.0 to $68.5 billion, reported diluted EPS(1) between $1.58 and $1.73 and adjusted diluted EPS(2)  between $2.25 and $2.35.  Adjusted R&D expenses(2) are targeted to be between $8.0 to $8.5 billion,  adjusted operating margin(2) is projected to be in a range of the high 30%s to low 40%s and adjusted other (income)/deductions(2) are targeted to be between $1.0 billion and $1.2 billion in deductions.  The effective tax rate on adjusted income(1) is targeted at approximately 30% while the operating cash flow is expected to be at least $19.0 billion.

For additional details, please see the attached financial schedules, product revenue tables, supplemental information and disclosure notice.

  1. "Reported Net Income" is defined as net income attributable to Pfizer Inc. in accordance with U.S. generally accepted accounting principles.  "Reported Diluted EPS" is defined as reported diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. generally accepted accounting principles.
  2. "Adjusted income" and its components and "adjusted diluted earnings per share (EPS)" are defined as reported net income(1) and its components and reported diluted EPS(1) excluding purchase-accounting adjustments, acquisition-related costs, discontinued operations and certain significant items.  Adjusted Cost of Sales, Adjusted SI&A expenses, Adjusted R&D expenses and Adjusted Other (Income)/Deductions are income statement line items prepared on the same basis, and therefore, components of the overall adjusted income measure.  As described under Adjusted Income in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of Pfizer's Form 10-Q for the fiscal quarter ended September 27, 2009, management uses adjusted income, among other factors, to set performance goals and to measure the performance of the overall company.  We believe that investors' understanding of our performance is enhanced by disclosing this measure. Reconciliations of fourth-quarter 2009 and 2008 and full-year 2009 and 2008 adjusted income and its components and adjusted diluted EPS to reported net income(1) and its components and reported diluted EPS(1), as well as reconciliations of full-year 2010 guidance and 2012 targets for adjusted income and adjusted diluted EPS to full-year 2010 guidance and 2012 targets for reported net income(1) and reported diluted EPS(1), are provided in the materials accompanying this report. The adjusted income and its components and adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS.
  3. The Primary Care unit includes revenues from human pharmaceutical products primarily prescribed by primary-care physicians, and may include, but are not limited to, products in the following therapeutic and disease areas: Alzheimer's disease, anxiety, cardiovascular (excluding pulmonary arterial hypertension), diabetes, pain, genitourinary, obesity, osteoporosis and respiratory.  Examples of products in this unit include, but are not limited to, Celebrex, Lipitor, Lyrica, Premarin, Pristiq and Viagra.  All revenues for such products are allocated to the Primary Care unit, except those generated in emerging markets(6) and those that are managed by the Established Products(5) unit.
  4. The Specialty Care unit includes revenues from human pharmaceutical products primarily prescribed by physicians who are specialists, and may include, but are not limited to, products in the following therapeutic and disease areas: antibacterials, antifungals, antivirals, bone, inflammation, gastrointestinal, growth hormones, multiple sclerosis, ophthalmology, pulmonary arterial hypertension and psychosis.  Examples of products in this unit include, but are not limited to, Enbrel, Genotropin, Geodon, Prevnar, Xalatan and Zyvox.  All revenues for such products are allocated to the Specialty Care unit, except those generated in emerging markets(6) and those that are managed by the Established Products(5) unit.
  5. The Established Products unit generally includes revenues from human prescription pharmaceutical products that have lost patent protection or marketing exclusivity in certain countries and/or regions. In certain situations, products may be transferred to this unit before losing patent protection or marketing exclusivity in order to maximize their value.  This unit also excludes revenues generated in emerging markets(6).  Examples of products in this unit include, but are not limited to, Arthrotec, Effexor, Medrol, Norvasc and Relpax.
  6. The Emerging Markets unit includes revenues from all human prescription pharmaceutical products sold in emerging markets, including, but not limited to, Asia (excluding Japan), Latin America, Middle East, Africa, Central and Eastern Europe, Russia and Turkey.
  7. The Oncology unit includes revenues from human oncology and oncology-related products.  Examples of products in this unit include, but are not limited to, Aromasin, Sutent and Torisel.  All revenues for such products are allocated to the Oncology unit, except those generated in emerging markets(6) and those that are managed by the Established Products(5) unit.
  8. Animal Health includes worldwide revenues from products to prevent and treat disease in livestock and companion animals, including vaccines, paraciticides and anti-infectives.
  9. Consumer Healthcare generally includes worldwide revenues from non-prescription medicines and vitamins and may include, but are not limited to, products in the following therapeutic categories: pain management, nutritionals, respiratory and GI-topicals.  Examples of products in Consumer Healthcare include Advil, Centrum, Caltrate, ChapStick and Robitussin.
  10. Capsugel generally includes worldwide revenues from capsule products and services for the pharmaceutical and associated healthcare industries. 
  11. Nutrition generally includes revenues from a full line of infant and toddler nutritional products sold outside of North America.  Examples of products in Nutrition include, but are not limited to, the S-26 and SMA product lines as well as formula for infants with special nutritional needs.
  12. Includes revenues generated from business-transition activity in connection with the sale of Pfizer’s former Consumer Healthcare business in December 2006, as well as from Pfizer Centersource.
  13. Represents the total of Adjusted Cost of Sales(2), Adjusted SI&A expenses(2) and Adjusted R&D expenses(2).
  14. Current exchange rates approximate rates in effect at about the time of the fourth-quarter 2009 earnings press release (late January 2010).
  15. This guidance does not assume the completion of any business-development transactions not completed as of December 31, 2009.  This guidance also excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of December 31, 2009, as well as the potential impact of healthcare reform in the U.S.
  16. Results of operations include the results of the legacy Wyeth operations from the closing of the acquisition on October 15, 2009 through year-end in accordance with Pfizer's international and domestic year-ends.  Therefore, the results include approximately two-and-a-half months of the fourth calendar quarter of 2009 in the case of Wyeth’s U.S. operations and one-and-a-half months of the fourth calendar quarter of 2009 in the case of Wyeth’s international operations.  

For a full copy of the Earnings release, including financial tables click here: http://www.pfizer.com/news/press_releases/pfizer_press_releases.jsp?rssUrl=http://mediaroom.pfizer.com/portal/site/pfizer/index.jsp?ndmViewId=news_view&ndmConfigId=1020733&newsId=20100203005875&newsLang=en



 

Published: 4th February 2010.


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