Pfizer Reports Second-Quarter 2009 Results; Increases Full-Year 2009 Adjusted Diluted EPS(1) Guidance

  • Second-Quarter 2009 Revenues of $11.0 Billion
  • Second-Quarter 2009 Reported Diluted EPS(2) of $0.34, Adjusted Diluted EPS(1) of $0.48
  • Continues to Execute on Financial and Strategic Commitments While Achieving Significant Milestones in Connection with the Pending Wyeth Acquisition
  • Increases 2009 Guidance for Adjusted Diluted EPS(1) to a Range of $1.90 to $2.00 from $1.85 to $1.95

NEW YORK--(BUSINESS WIRE)--Jul 22, 2009 - Pfizer Inc. (NYSE: PFE):

                   
($ in millions, except per share amounts)
    Second-Quarter   Year-to-Date
      2009     2008     Change   2009     2008     Change
Reported Revenues   $ 10,984     $ 12,129     (9 %)   $ 21,851     $ 23,977     (9 %)
Reported Net Income(2)     2,261     2,776     (19 %)   4,990     5,560     (10 %)
Reported Diluted EPS(2)     0.34     0.41     (17 %)   0.74     0.82     (10 %)
Adjusted Income(1)     3,249     3,698     (12 %)   6,916     7,797     (11 %)
Adjusted Diluted EPS(1)     0.48     0.55     (13 %)   1.03     1.15     (10 %)
                                 
See end of text prior to tables for notes.

Pfizer Inc. (NYSE: PFE) today reported financial results for second-quarter 2009. Revenues were $11.0 billion, a decrease of 9% compared with the year-ago quarter and flat on a constant currency basis. Foreign exchange unfavorably impacted revenues by approximately $1.1 billion or 9%. For second-quarter 2009, U.S. revenues were $4.5 billion, a decrease of 5% compared with the year-ago quarter. International revenues were $6.5 billion, a decrease of 12% compared with the prior-year quarter, and reflected operational growth of 2%, which was more than offset by the unfavorable impact of foreign exchange of 14%. U.S. revenues represented 41% of the total compared with 39% in the year-ago quarter, while international revenues represented 59% of the total compared with 61% in the year-ago quarter.

For first-half 2009, revenues were $21.9 billion, a decrease of 9% compared with the same period in 2008 and a decrease of 2% on a constant currency basis. Foreign exchange unfavorably impacted revenues by approximately $1.7 billion or 7%. U.S. revenues were $9.5 billion, a decrease of 7% compared with first-half 2008. International revenues were $12.4 billion, a decrease of 10% compared with the same period last year, and reflected operational growth of 2%, which was more than offset by the unfavorable impact of foreign exchange of 12%. U.S. revenues represented 43% of the total and international revenues represented 57% of the total, comparable with first-half 2008. In addition to foreign exchange, other factors that negatively impacted first-half 2009 revenues in comparison with first-half 2008 included the loss of U.S. exclusivity for Zyrtec in January 2008 and Camptosar in February 2008, the loss of exclusivity in Japan for Norvasc in July 2008, as well as the revenue declines for Lipitor, as a result of continued intense competition, and for Chantix/Champix, mainly due to label changes.

Business Revenues

Effective January 1, 2009, Pfizer expanded its operating model within the Pharmaceutical business to include five customer-focused units, in addition to its Animal Health business. During second-quarter 2009, all Pharmaceutical units and Animal Health generated revenue growth on a constant currency basis with the exception of the Established Products unit, which manages a portfolio of products that have generally lost patent protection or marketing exclusivity and that have an expected decline in revenues at this stage in their lifecycle.

     
    Second-Quarter
($ in millions)     2009       2008     Change     Foreign

Exchange

 

  Operational
Primary Care(3)   $ 5,135     $ 5,487     (6 %)     (7 %)   1 %
Specialty Care(4)     1,416       1,485     (5 %)     (7 %)   2 %
Oncology(5)     352       384     (8 %)     (12 %)   4 %
Established Products(6)     1,634       2,038     (20 %)     (7 %)   (13 %)
Emerging Markets(7)     1,526       1,659     (8 %)     (17 %)   9 %
                           
Total Pharmaceutical     10,063       11,053     (9 %)     (9 %)   --  
                           
Animal Health(8)     648       715     (9 %)     (11 %)   2 %
Other(9)     273       361     (24 %)     (5 %)   (19 %)
                           
Total   $ 10,984     $ 12,129     (9 %)     (9 %)   --  
                           
See end of text prior to tables for notes.

 

Primary Care revenues for second-quarter 2009 were $5.1 billion, a 6% decline compared with $5.5 billion in the year-ago quarter. Operational growth of 1%, primarily driven by the strong international performance of Lyrica, was more than offset by the unfavorable impact of foreign exchange.

Specialty Care revenues for second-quarter 2009 were $1.4 billion, a 5% decrease compared with $1.5 billion in the same period last year. Operational growth of 2%, largely driven by the solid U.S performance of certain products, including Revatio and Geodon, was more than offset by the unfavorable impact of foreign exchange.

Oncology revenues for second-quarter 2009 were $352 million, an 8% decrease compared with $384 million in the prior-year quarter. Operational growth of 4%, due primarily to the strong performance in international markets of Sutent and Aromasin, was more than offset by the unfavorable impact of foreign exchange.

Established Products revenues for second-quarter 2009 were $1.6 billion, a 20% decline compared with $2.0 billion in the year-ago quarter, comprised of a 13% operational decline and a 7% foreign exchange decline. Since the products in this unit generally have lost patent protection or marketing exclusivity, revenues have declined. This unit was created in 2008 with the goal of recapturing value for these products in developed market geographies by progressively slowing the erosion of, and ultimately stabilizing, revenue and profit from established products. Supporting initiatives within the unit include programs designed to expand patient and payor access to this portfolio, to develop product enhancements, to expand the portfolio and to increase promotional efforts for targeted products.

Emerging Markets revenues for second-quarter 2009 were $1.5 billion, an 8% decrease compared with $1.7 billion in second-quarter 2008. These revenues include the revenue from both established products and patent-protected products sold in emerging markets. Operational growth of 9%, largely attributable to double-digit growth in high-priority countries, notably China and Turkey, was more than offset by the unfavorable impact of foreign exchange.

Animal Health revenues for second-quarter 2009 were $648 million, a 9% decline compared with $715 million in the year-ago quarter. Operational growth of 2%, primarily driven by the solid performance in emerging markets and for certain new products worldwide, was more than offset by the negative impact of foreign exchange.

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

For second-quarter 2009, Pfizer posted reported net income(2) of $2.3 billion, a decline of 19% compared with $2.8 billion in the prior-year quarter, and reported diluted EPS(2) of $0.34, a decline of 17% compared with $0.41 in the prior-year quarter. For first-half 2009, Pfizer posted reported net income(2) of $5.0 billion, a decline of 10% compared with $5.6 billion in first-half 2008, and reported diluted EPS(2) of $0.74, a decline of 10% compared with $0.82 in the prior-year period. Results were unfavorably impacted by foreign exchange and an increase in the effective tax rate as well as costs incurred in connection with the pending Wyeth acquisition. These factors were partially offset by savings from cost-reduction initiatives, lower costs associated with those initiatives and lower in-process research and development charges in 2009. The increase in the effective tax rate on reported results to approximately 26% in second-quarter 2009 from approximately 1% in second-quarter 2008, and to approximately 27% in first-half 2009 from approximately 12% in first-half 2008, was primarily due to the increased tax cost associated with certain business decisions executed to finance the pending Wyeth acquisition as well as favorable income tax adjustments in 2008.

Adjusted Income(1) and Adjusted Diluted EPS(1)

Second-quarter 2009 adjusted income(1) was $3.2 billion, a decrease of 12% compared with $3.7 billion in the year-ago quarter, and adjusted diluted EPS(1) was $0.48, a decrease of 13% compared with $0.55 in the year-ago quarter. First-half 2009 adjusted income(1) was $6.9 billion, a decrease of 11% compared with $7.8 billion in first-half 2008, and adjusted diluted EPS(1) was $1.03, a decrease of 10% compared with $1.15 in the year-ago period. Both adjusted income(1) and adjusted diluted EPS(1) were negatively impacted by foreign exchange and an increase in the effective tax rate on adjusted income(1) to approximately 28% in second-quarter 2009 from approximately 20% in second-quarter 2008, and to approximately 29% in first-half 2009 from approximately 21% in first-half 2008, primarily due to the increased tax cost associated with certain business decisions executed to finance the pending Wyeth acquisition as well as a favorable income tax adjustment in 2008. These factors were partially offset by savings from cost-reduction initiatives.

In second-quarter 2009, adjusted cost of sales(1) as a percentage of revenues was 15.4% compared with 16.9% in second-quarter 2008. This improvement reflects the benefits from cost-reduction initiatives and foreign exchange. Excluding the impact of foreign exchange, adjusted cost of sales(1) as a percentage of revenues was 16.2% in second-quarter 2009.

Adjusted selling, informational and administrative (SI&A) expenses(1) were $3.3 billion in second-quarter 2009, a decrease of 12% compared with $3.7 billion in the prior-year quarter. The decrease was due to the favorable impact of cost-reduction initiatives, as well as foreign exchange which reduced second-quarter 2009 adjusted SI&A expenses(1) by $253 million compared with the year-ago quarter.

Adjusted research and development (R&D) expenses(1) were $1.7 billion in second-quarter 2009, a decrease of 11% compared with $1.9 billion in the prior-year period. The decrease was due to the favorable impact of cost-reduction initiatives, as well as foreign exchange which reduced second-quarter 2009 adjusted R&D expenses(1) by $68 million compared with the year-ago quarter.

Overall, operational improvements resulting from cost-reduction initiatives decreased adjusted total costs(10) by approximately $410 million or 5% in second-quarter 2009 compared with the prior-year period, and foreign exchange decreased adjusted total costs(10) by $585 million or 8%. The operational improvements were driven partially by the reduction in workforce to approximately 76,500 at the end of second-quarter 2009, a decline of 3,750 compared with the end of the first-quarter 2009, and a decline of 10,100 since the beginning of 2008, as well as manufacturing and research and development site exits. Throughout the remainder of 2009, a portion of the operational cost reductions achieved in first-half 2009 is expected to be reinvested to further execute strategies, primarily in emerging markets and established products, and to support the late-stage development portfolio.

Executive Commentary

“Our results this quarter demonstrate our ability to continue to deliver solid operational performance despite a challenging and dynamic economic and operating environment. On a constant currency basis, all of our Pharmaceutical units and Animal Health generated revenue growth during the quarter, with the exception of the Established Products unit, which manages a portfolio of products that have an expected decline in revenues at this stage of their lifecycle,” stated Jeff Kindler, Chairman and Chief Executive Officer.

Kindler continued, “Additionally, significant progress was made in connection with our pending Wyeth acquisition by achieving several key milestones, including approval of the acquisition by the European Commission, which included our commitment to divest certain animal health assets in the EU; the submission of regulatory filings in other important international markets; the approval of the acquisition by Wyeth shareholders; and further development of our post-closing integration plans. At the same time, we remain focused on meeting our commitments - generating revenues consistent with our expectations and continuing to streamline our cost structure.”

Frank D'Amelio, Chief Financial Officer, stated, “We remain committed to delivering on our 2009 financial goals and today, are increasing our guidance for adjusted diluted EPS(1) to a range of $1.90 to $2.00 from a range of $1.85 to $1.95 as well as narrowing our revenue guidance to a range of $45.0 to $46.0 billion from a range of $44.0 to $46.0 billion. We are also improving our guidance on many of our expense line items. Additionally, we've made substantial progress on our cost-reduction initiative with an operational decrease of approximately $740 million in adjusted total costs(10) realized during first-half 2009, a portion of which we expect will fund increased activity in support of business opportunities, primarily in emerging markets and established products, and in support of our late-stage development portfolio, among other things, during second-half 2009. In connection with the pending Wyeth acquisition, we replaced our bridge loan facility with permanent financing and are making substantial progress in planning for a successful and rapid integration of Wyeth following the closing.”

Financial Guidance

For full-year 2009, Pfizer's financial guidance, at current exchange rates(11) has been updated and is summarized below. Guidance for adjusted diluted EPS(1) has been increased to a range of $1.90 to $2.00 from $1.85 to $1.95 and guidance for reported revenues has been narrowed to a range of $45.0 to $46.0 billion from a range of $44.0 to $46.0 billion. Guidance for reported diluted EPS(2) has increased to a range of $1.30 to $1.45 from a range of $1.20 to $1.35, primarily due to lower than anticipated costs to be incurred in 2009 in connection with our cost-reduction initiatives. In addition, guidance for other line items, adjusted SI&A expenses(1), adjusted R&D expenses(1) and adjusted other (income)/deductions(1), has been either narrowed or improved as detailed below. We continue to expect to achieve net savings compared to 2008 adjusted total costs(10) of $2 billion by the end of 2011 at 2008 foreign exchange rates.

     
    2009 Guidance(12)
Reported Revenues   $45.0 to $46.0 billion (previously $44.0 to $46.0 billion)

 

Adjusted Cost of Sales(1) as a Percentage of Revenues   14.5% to 15.5%
Adjusted SI&A Expenses(1)   $13.4 to $13.8 billion (previously $13.5 to $14.0 billion)

 

Adjusted R&D Expenses(1)   $7.0 to $7.4 billion (previously $7.1 to $7.5 billion)

 

Adjusted Other (Income)/Deductions(1)   ($600 to $700 million) (previously ($500 to $700 million))

 

Effective Tax Rate on Adjusted Income(1)   Approximately 30%

 

Reported Diluted EPS(2)   $1.30 to $1.45 (previously $1.20 to $1.35)

 

Adjusted Diluted EPS(1)   $1.90 to $2.00 (previously $1.85 to $1.95)

 

     

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 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 March 29, 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 second-quarter 2009 and 2008 and first-half 2009 and 2008 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 2009 adjusted income and adjusted diluted EPS guidance to full-year 2009 reported net income(2) and reported diluted EPS(2) guidance, 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.

 

 
(2)   “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.

 

 
(3)   The Primary Care business unit includes revenues from human pharmaceutical products primarily prescribed by primary-care physicians, and may include, but is 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 business unit include, but are not limited to, Lipitor, Lyrica, Celebrex and Viagra. All revenues for such products are allocated to the Primary Care business unit, except those generated in emerging markets(7), and those that are managed by the Established Products(6) business unit.
 
(4)   The Specialty Care business unit includes revenues from human pharmaceutical products primarily prescribed by physicians who are specialists, and may include, but is 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 business unit include, but are not limited to, Xalatan, Zyvox, Geodon and Genotropin. All revenues for such products are allocated to the Specialty Care business unit, except those generated in emerging markets(7), and those that are managed by the Established Products(6) business unit.
 
(5)   The Oncology business unit includes revenues from human oncology and oncology-related products. Examples of products in this business unit include, but are not limited to, Sutent and Aromasin. All revenues for such products are allocated to the Oncology business unit, except those generated in emerging markets(7), and those that are managed by the Established Products(6) business unit.

 

 
(6)   The Established Products business unit generally includes revenues from human 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(7). Examples of products in this business unit include, but are not limited to, Norvasc, Relpax, Medrol and Arthrotec.
 
(7)   The Emerging Markets business unit includes revenues from all human 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.
 
(8)   The Animal Health business includes revenues from products to treat livestock and companion animals.
 
(9)   Includes Consumer Healthcare business-transition activity, Capsugel and Pfizer Centersource.
 
(10)   Represents the total of Adjusted Cost of Sales(1), Adjusted SI&A expenses(1) and Adjusted R&D expenses(1).
 
(11)   Current exchange rates approximate rates at the time of the second-quarter 2009 earnings press release (July 2009).
 
(12)   Does not assume the completion of any business-development transactions not completed as of June 28, 2009, and excludes the potential effects of litigation-related matters not substantially resolved as of June 28, 2009, as we do not forecast those matters. However, reported diluted EPS(2) full-year 2009 financial guidance does reflect certain costs incurred and expected to be incurred in connection with the pending Wyeth acquisition. These costs include, but are not limited to, transaction costs, pre-integration costs and financing costs.

 

     
 
PFIZER INC. AND SUBSIDIARY COMPANIES

 

CONSOLIDATED STATEMEN

Posted: July 2009


View comments

Hide
(web5)