Pfizer Reports Fourth-Quarter and Full-Year 2011 Results; Updates 2012 Financial Guidance

  • Fourth-Quarter 2011 Revenues of $16.7 Billion; Full-Year 2011 Revenues of $67.4 Billion
  • Fourth-Quarter 2011 Adjusted Diluted EPS(1) of $0.50, Reported Diluted EPS(2) of $0.19; Full-Year 2011 Adjusted Diluted EPS(1) of $2.31, Reported Diluted EPS(2) of $1.27
  • Achieves Full-Year 2011 Financial Guidance; Updates 2012 Financial Guidance Primarily to Reflect Unfavorable Changes in Foreign Exchange Rates From Mid-October 2011 to Mid-January 2012
  • Returned $15.2 Billion to Shareholders in 2011, including the Repurchase of $9.0 Billion of Common Stock and the Payment of $6.2 Billion in Dividends

NEW YORK--(BUSINESS WIRE)--Jan 31, 2012 - Pfizer Inc. (NYSE: PFE):

 
($ in millions, except per share amounts)
    Fourth-Quarter(3)   Year-to-Date(3)
    2011   2010   Change   2011   2010   Change
Reported Revenues   $ 16,746   $ 17,354   (4 %)   $ 67,425   $ 67,057   1 %
Adjusted Income(1)     3,863     3,744   3 %     18,217     17,885   2 %
Adjusted Diluted EPS(1)     0.50     0.47   6 %     2.31     2.22   4 %
Reported Net Income(2)     1,439     2,890   (50 %)     10,009     8,257   21 %
Reported Diluted EPS(2)     0.19     0.36   (47 %)     1.27     1.02   25 %
                                     
See end of text prior to tables for notes.

 

 
Pfizer Inc. (NYSE: PFE) today reported financial results for fourth-quarter and full-year 2011. Fourth-quarter 2011 revenues were $16.7 billion, a decrease of 4% compared with $17.4 billion in the year-ago quarter, which reflects an operational decline of $765 million, or 5%, and the favorable impact of foreign exchange of $157 million, or 1%. For fourth-quarter 2011, U.S. revenues were $6.3 billion, a decrease of 12% compared with the year-ago quarter. International revenues were $10.4 billion, an increase of 3% compared with the prior-year quarter, which reflects 1% operational growth and a 2% favorable impact of foreign exchange. U.S. revenues represented 38% of total revenues in fourth-quarter 2011 compared with 41% in the year-ago quarter, while international revenues represented 62% of total revenues in fourth-quarter 2011 compared with 59% in the year-ago quarter.

Full-year 2011 revenues were $67.4 billion, an increase of 1% compared with $67.1 billion in full-year 2010, which reflects an operational decline of $1.6 billion, or 2%, and the favorable impact of foreign exchange of $1.9 billion, or 3%. For full-year 2011, U.S. revenues were $26.9 billion, a decrease of 7% compared with full-year 2010. International revenues were $40.5 billion, an increase of 6% compared with the prior-year, which reflects 1% operational growth and a 5% favorable impact of foreign exchange. U.S. revenues represented 40% of total revenues in full-year 2011 compared with 43% in full-year 2010, while international revenues represented 60% of total revenues in full-year 2011 compared with 57% in full-year 2010.

Financial Performance

 

    Fourth-Quarter Revenues
($ in millions) Favorable/(Unfavorable)

 

  2011   2010   Change     Foreign

Exchange

 

  Operational
                       
Primary Care(4)   $ 5,411   $ 5,886   (8 %)     1 %   (9 %)
Specialty Care(5)     3,820     4,014   (5 %)     2 %   (7 %)
Emerging Markets(6)     2,264     2,368   (4 %)     (2 %)   (2 %)
Established Products(7)     2,300     2,414   (5 %)     2 %   (7 %)
Oncology(8)     341     369   (8 %)     2 %   (10 %)
Biopharmaceutical     14,136     15,051   (6 %)     1 %   (7 %)
                       
Animal Health(9)     1,106     976   13 %     --     13 %
Consumer Healthcare(10)     817     758   8 %     --     8 %
Nutrition(11)     598     492   22 %     2 %   20 %
Other(12)     89     77   16 %     --     16 %
                       
Total   $ 16,746   $ 17,354   (4 %)     1 %   (5 %)
                       
See end of text prior to tables for notes.

 

 
Business Highlights

Primary Care(4) unit revenues were favorably impacted primarily by foreign exchange, growth from Celebrex, Lyrica, Pristiq and Spiriva, among others, and the addition of $93 million, or 2%, from legacy King products, while negatively impacted by the loss of exclusivity of Lipitor and Caduet in the U.S. in November 2011, Lipitor in various other developed markets during 2010, as well as Aricept in the U.S. in November 2010. Taken together, these losses of exclusivity reduced Primary Care(4) unit revenues by $775 million, or 13%, in comparison with fourth-quarter 2010.

Specialty Care(5) unit revenues were positively impacted by foreign exchange and growth in Enbrel in developed markets and Prevenar (7-valent) in Japan. U.S. Prevnar 13 revenues in fourth-quarter 2011 were lower than in the prior-year quarter primarily because most patients eligible to receive the Prevnar 13 catch-up dose have already been vaccinated. Specialty Care(5) unit revenues were also negatively impacted by the loss of exclusivity of Vfend and Xalatan in the U.S. in February and March 2011, respectively. Collectively, these losses of exclusivity reduced Specialty Care(5) unit revenues by $205 million, or 5%, in comparison with fourth-quarter 2010.

Emerging Markets(6) unit revenues were impacted by several factors. Volume growth was more than offset by the negative impact of foreign exchange and increased pricing pressures as well as by certain other events, including changes in institutional purchase patterns in Turkey and Brazil, currency devaluation in Venezuela as well as the loss of exclusivity of Lipitor in Brazil and Mexico in 2010. These losses of exclusivity reduced Emerging Markets(6) unit revenues by $29 million, or 1%, in comparison with fourth-quarter 2010.

Established Products(7) unit revenues were mainly impacted by the loss of exclusivity of Effexor XR, Protonix and Zosyn in the U.S., which taken together reduced Established Products(7) unit revenues by $208 million, or 9%, in comparison with fourth-quarter 2010. Additionally, fourth-quarter 2011 revenues were negatively impacted in comparison with fourth-quarter 2010 by the entry of multi-source generic competition in the U.S. following the end of the 180-day exclusivity period for donepezil (Aricept) in May 2011. These declines were partially offset by $150 million, or 6%, from the addition of legacy King products, as well as by foreign exchange and by revenue from our agreement granting Watson Pharmaceuticals, Inc. the exclusive right to sell the authorized generic version of Lipitor in the U.S. Total revenues from established products in both the Established Products(7) and Emerging Markets(6) units were $3.3 billion, with $954 million generated in emerging markets.

Animal Health(9) unit revenues increased by 13%, in comparison with the same quarter last year, primarily due to the addition of legacy King products as well as strong performance in the global livestock portfolio. The Consumer Healthcare(10) unit generated revenue growth of 8% in comparison with fourth-quarter 2010, primarily driven by the non-recurrence of the temporary voluntary withdrawal of Centrum in Europe in third-quarter 2010 and by increased sales of core brands, including Advil, Caltrate and Robitussin. Nutrition(11) unit revenues increased 22% in comparison with the same quarter last year. This performance was driven by increased demand for premium products, new product launches and overall strength in the China, Hong Kong and Middle East markets, in addition to foreign exchange.

Adjusted Expenses(1), Adjusted Income(1) and Adjusted Diluted EPS(1) Highlights

 

    Fourth-Quarter Costs and Expenses
($ in millions) (Favorable)/Unfavorable

 

  2011   2010   Change     Foreign

Exchange

 

  Operational
                       
Adjusted Cost of Sales (1)   $ 3,362     $ 3,655     (8 %)     (14 %)   6 %
As a Percent of Revenues     20.1 %     21.1 %   N/A     N/A   N/A
Adjusted SI&A Expenses(1)     5,347       5,710     (6 %)     1 %   (7 %)
Adjusted R&D Expenses(1)     2,327       2,794     (17 %)     --     (17 %)
                       
Adjusted Total Costs(13)   $ 11,036     $ 12,159     (9 %)     (4 %)   (5 %)
                       
See end of text prior to tables for notes.

 

 
Adjusted total costs(13) were $11.0 billion in fourth-quarter 2011, a decrease of 9% compared with $12.2 billion in fourth-quarter 2010. Excluding the favorable impact of foreign exchange of $481 million, or 4%, adjusted total costs(13) decreased 5%, primarily reflecting the benefit of cost-reduction and productivity initiatives, particularly in the research and development organization. Savings were also generated in fourth-quarter 2011 by reductions in the U.S. field force and declines in promotional spending in response to product losses of exclusivity. These savings were partially offset by the addition of costs from legacy King operations and the inclusion of the U.S. healthcare reform fee. Adjusted cost of sales(1) was unfavorably impacted by the addition of legacy King operations, the Puerto Rico excise tax, as well as a shift in geographic and business mix.

In fourth-quarter 2011, the effective tax rate on adjusted income(1) was approximately 30.2% compared with approximately 25.8% in fourth-quarter 2010. The increase was primarily due to the change in the jurisdictional mix of earnings and the extension of the U.S. research and development credit that was signed into law in December 2010. In full-year 2011, the effective tax rate on adjusted income(1) was approximately 29.5% compared with approximately 29.7% in full-year 2010. The decrease was primarily due to the change in the jurisdictional mix of earnings.

The diluted weighted-average shares outstanding for fourth-quarter 2011 was 7.7 billion shares, a reduction of approximately 361 million shares compared with fourth-quarter 2010. The diluted weighted-average shares outstanding for full-year 2011 was 7.9 billion shares, a reduction of approximately 204 million shares compared with full-year 2010. These share declines were primarily due to the Company's ongoing share repurchase program.

As a result of the aforementioned factors, fourth-quarter 2011 adjusted income(1) was $3.9 billion, an increase of 3% compared with $3.7 billion in the year-ago quarter, and adjusted diluted EPS(1) was $0.50, an increase of 6% compared with $0.47 in the year-ago quarter. Additionally, full-year 2011 adjusted income(1) was $18.2 billion, an increase of 2% compared with $17.9 billion in full-year 2010, and adjusted diluted EPS(1) was $2.31, an increase of 4% compared with $2.22 in full-year 2010.

Reported Net Income(2) and Reported Diluted EPS(2) Highlights

In addition to the aforementioned factors, fourth-quarter and full-year 2011 reported earnings in comparison with the same periods in 2010 were unfavorably impacted by the non-recurrence of a 2010 favorable settlement with the U.S. Internal Revenue Service related to issues the Company was appealing regarding the audits of the Pfizer Inc. and Pharmacia tax returns for multiple years as well as by charges recorded in 2011 related to hormone therapy litigation and higher charges associated with cost-reduction and productivity initiatives. These factors were partially offset by lower acquisition-related costs and the non-recurrence of charges recorded in 2010 for asbestos litigation. Full-year 2011 reported earnings were also favorably impacted by lower purchase accounting adjustments as well as lower impairment charges related to certain intangible assets acquired in connection with the Wyeth acquisition and by the $1.3 billion (after-tax) gain on the sale of Capsugel(14) in third-quarter 2011.

The effective tax rate on reported results was approximately 34.9% in fourth-quarter 2011. In fourth-quarter 2010, Pfizer reached the aforementioned settlement with the U.S. Internal Revenue Service, which reduced its unrecognized tax benefits, and recorded a corresponding tax benefit to its income tax provision in fourth-quarter 2010, resulting in a favorable impact on net income. In full-year 2011, the effective tax rate on reported results was approximately 31.5% compared with approximately 11.5% in full-year 2010. The increases in both periods were primarily due to the non-recurrence of that settlement, partially offset by the decrease and jurisdictional mix of certain impairment charges related to assets acquired in connection with the Wyeth acquisition as well as a change in the jurisdictional mix of earnings.

As a result of all these factors, fourth-quarter 2011 reported net income(2) was $1.4 billion, a decrease of 50% compared with $2.9 billion in the prior-year quarter, and reported diluted EPS(2) was $0.19, a decrease of 47% compared with $0.36 in the prior-year quarter. Additionally, full-year 2011 reported net income(2) was $10.0 billion, an increase of 21% compared with $8.3 billion in full-year 2010, and reported diluted EPS(2) was $1.27, an increase of 25% compared with $1.02 in full-year 2010.

Executive Commentary

Ian Read, Chairman and Chief Executive Officer, stated, “Overall, 2011 was a year of setting new direction and focus for Pfizer. I am pleased with our 2011 financial performance, which was achieved in the face of a challenging global market and product losses of exclusivity of approximately $5 billion. We also made significant progress regarding capital allocation for the benefit of our shareholders during 2011.”

“In 2011, we advanced our pipeline and improved the rigor and productivity of our research and development (R&D) efforts, while also changing the culture within the R&D organization to be more accountable and results-driven. With the steady cadence of new product launches, marketing submissions and approvals, and positive late-stage clinical data presentations, we are clearly seeing the benefits of our investments and new approach. Prevnar/Prevenar 13 for adults, tofacitinib, Xalkori, Inlyta (axitinib) and Eliquis are well positioned to be important new product opportunities that may enhance the performance of our business. Additionally, we have a next wave of compounds that have shown promise in early and mid-stage studies, and we look forward to progressing them through the pipeline. Each of these compounds represents a potential valuable, new treatment option for patients.”

“As we begin 2012, we remain intently focused on generating attractive returns for our shareholders. We will continue to fix the innovative core in order to enhance our post-proof-of-concept portfolio of compounds in high-priority disease areas and successfully launch additional novel products. We will also continue executing on our strategic decisions, including exploring value-creating alternatives for our Animal Health and Nutrition businesses, allocating our capital in the best interests of our shareholders and continuing to rigorously manage our expenses. We are committed to repurchasing approximately $5 billion of our common stock this year under our recently authorized $10 billion share repurchase program and paying over $6 billion in dividends. We remain on-track with our timeline of finalizing strategic decisions for the Animal Health and Nutrition businesses this year and continue to expect that any separation of these businesses from Pfizer will occur between July 2012 and July 2013. I am excited with the opportunities afforded to Pfizer this year and look forward to continuing the significant progress we've made,” concluded Mr. Read.

Frank D'Amelio, Chief Financial Officer, stated, “We achieved or exceeded each of the components of our 2011 financial guidance, including exceeding our reported revenues and adjusted diluted EPS(1) guidance ranges. In addition, we achieved our cost-reduction target associated with the Wyeth integration one year earlier than anticipated, generating more than $4.0 billion in reductions on an operational basis in comparison with the 2008 combined costs of Pfizer and Wyeth. For 2012, we have reduced our reported revenues and adjusted diluted EPS(1) guidance ranges, primarily to reflect changes in foreign exchange rates from mid-October 2011 to mid-January 2012. We are also providing for the first time a 2012 guidance range for adjusted cost of sales(1) as a percentage of revenues and have lowered our guidance range for adjusted SI&A expenses(1).”

“Further, regarding capital allocation, the strength of our balance sheet and operating cash flow enabled us to return $15.2 billion to our shareholders in 2011 through $6.2 billion in dividends and $9.0 billion from the repurchase of 459 million shares,” Mr. D'Amelio continued.

2012 Financial Guidance(15)

For full-year 2012, Pfizer's financial guidance, at current exchange rates(16), is summarized below.

Reported Revenues     $60.5 to $62.5 billion (previously $62.2 to $64.7 billion)

 

Adjusted Cost of Sales(1) as a Percentage of Revenues     20.5% to 21.5%
Adjusted SI&A Expenses(1)     $17.0 to $18.0 billion (previously $17.5 to $18.5 billion)

 

Adjusted R&D Expenses(1)     $6.5 to $7.0 billion
Adjusted Other (Income)/Deductions(1)     Approximately $1.0 billion
Effective Tax Rate on Adjusted Income(1)     Approximately 29%
Reported Diluted EPS(2)     $1.37 to $1.52 (previously $1.58 to $1.73)

 

Adjusted Diluted EPS(1)     $2.20 to $2.30 (previously $2.25 to $2.35)

 

Operating Cash Flow     At least $19.0 billion
       
For additional details, please see the attached financial schedules, product revenue tables, supplemental information and disclosure notice.

(1) "Adjusted Income" and its components and "Adjusted Diluted Earnings Per Share (EPS)" are defined as reported net income(2) and its components and reported diluted EPS(2) excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items. Adjusted Cost of Sales, Adjusted Selling, Informational and Administrative (SI&A) expenses, Adjusted Research and Development (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 October 2, 2011, 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 2011 and 2010 and full-year 2011 and 2010 adjusted income and its components and adjusted diluted EPS to reported net income(2) and its components and reported diluted EPS(2), as well as reconciliations of full-year 2012 guidance for adjusted income and adjusted diluted EPS to full-year 2012 guidance for reported net income(2) and reported diluted EPS(2), 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. generally accepted accounting principles (GAAP) net income and its components and diluted EPS.

(2) “Reported Net Income” is defined as net income attributable to Pfizer Inc. in accordance with U.S. GAAP. “Reported Diluted EPS” is defined as reported diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.

(3) In all periods presented, the results from the Capsugel(14) business, as well as the gain on the sale of Capsugel in third-quarter 2011, are reflected in a single line, Discontinued operations - net of tax, until the completion of the sale on August 1, 2011. Additionally, due to the acquisition of King Pharmaceuticals, Inc. (King), legacy King operations are reflected in the 2011 results beginning January 31, 2011. Therefore, in accordance with Pfizer's domestic and international reporting periods, the results for full-year 2011 reflect approximately eleven months of King's U.S. operations and approximately ten months of King's international operations. Legacy King operations are not reflected in the results for full-year 2010.

(4) 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, cardiovascular (excluding pulmonary arterial hypertension), diabetes, erectile dysfunction, genitourinary, major depressive disorder, pain, respiratory and smoking cessation. Examples of products in this unit include, but are not limited to, Celebrex, Chantix/Champix, 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(7) unit.

(5) 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: anti-infectives, endocrine disorders, hemophilia, inflammation, multiple sclerosis, ophthalmology, pulmonary arterial hypertension, specialty neuroscience and vaccines. Examples of products in this unit include, but are not limited to, BeneFIX, Enbrel, Genotropin, Geodon, the Prevnar/Prevenar franchise, Rebif, ReFacto, Revatio, Xalatan, Xyntha 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(7) unit.

(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 and South Korea), Latin America, Middle East, Africa, Central and Eastern Europe and Turkey.

(7) 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. Typically, products are transferred to this unit in the beginning of the fiscal year following losing patent protection or marketing exclusivity. In certain situations, products may be transferred to this unit at a different point than the beginning of the fiscal year following 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, Protonix, Relpax and Zosyn/Tazocin.

(8) 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, Torisel and Xalkori. 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(7) unit.

(9) Animal Health includes worldwide revenues from products and services to prevent and treat disease in livestock and companion animals, including, but not limited to, vaccines, parasiticides and anti-infectives. The Company is exploring strategic alternatives for Animal Health, which may include, among others, a full or partial separation from Pfizer through a spin-off, sale or other transaction.

(10) 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: GI-topicals, nutritionals, pain management and respiratory. Examples of products in Consumer Healthcare include, but are not limited to, Advil, Caltrate, Centrum, ChapStick and Robitussin.

(11) Nutrition generally includes revenues from a full line of infant and toddler nutritional products sold outside the U.S. and Canada. 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. The Company is exploring strategic alternatives for Nutrition, which may include, among others, a full or partial separation from Pfizer through a spin-off, sale or other transaction.

(12) Other includes revenues generated primarily from Pfizer Centersource.

(13) Represents the total of Adjusted Cost of Sales(1), Adjusted SI&A expenses(1) and Adjusted R&D expenses(1).

(14) Capsugel provided capsule products and related services to the pharmaceutical and associated healthcare industries. On August 1, 2011, Pfizer completed the sale of Capsugel to an affiliate of Kohlberg Kravis Roberts & Co. L.P.

(15) Does not assume the completion of any business-development transactions not completed as of December 31, 2011, including any one-time upfront payments associated with such transactions. Also excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of December 31, 2011.

(16) The current exchange rates assumed in connection with the 2012 financial guidance are the mid-January 2012 exchange rates.

Posted: January 2012


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