Wyeth Reports Earnings Results for the 2009 Second Quarter and First Half and Raises Full Year 2009 Guidance
- 2009 Second Quarter Reported Diluted Earnings per Share Increased 13% to $0.94, and Diluted Earnings per Share, Excluding Certain Significant Items, Increased 8% to $0.98 - Worldwide Net Revenue Decreased 4% for the 2009 Second Quarter and Increased 2%, Excluding the Impact of Foreign Exchange, Driven by Increases of 24% for Prevnar, 21% for Enbrel (outside the U.S. and Canada) and 9% for Nutritionals - Guidance for the 2009 Full Year Diluted Earnings per Share, Excluding Certain Significant Items, Raised to a Range of $3.48 to $3.58 - Wyeth Stockholders Approve Merger with Pfizer; 98% of Votes Cast in Favor of Merger; Closing Expected at the End of the Third Quarter or during the Fourth Quarter of 2009
MADISON, N.J., July 23 /PRNewswire-FirstCall/ -- Wyeth
(NYSE:WYE) today reported results for the 2009
second quarter and first half ended June 30, 2009. Worldwide net
revenue decreased 4% to $5.7 billion for the 2009 second quarter
and decreased 5% to $11.1 billion for the 2009 first half.
Excluding the unfavorable impact of foreign exchange, worldwide net
revenue increased 2% for the 2009 second quarter and first
half.
"Wyeth's results reflect the ongoing strength of our
biotechnology and vaccine franchises Enbrel and Prevnar and our
Nutritionals products, all of which performed strongly around the
world," said Bernard Poussot, Chairman, President and Chief
Executive Officer. "Execution of our medical innovation strategy
led to positive revenue growth in constant dollar terms. Diluted
earnings per share, excluding certain significant items, increased
8%. Based on this outcome we are raising full year earnings
guidance. We remain focused on delivering strong performance as we
work with Pfizer toward the successful integration of our two
companies."
Product Highlights for the 2009 Second Quarter and First
Half
The following table presents worldwide net revenue from Wyeth's
principal products for the 2009 second quarter and first half
together with the percentage changes from the comparable periods in
the prior year, both as reported and excluding the impact of
foreign exchange (FX):
(UNAUDITED)
------------------------------------------------------------
Three Months Ended 6/30/2009 Six Months Ended 6/30/2009
----------------------------- ----------------------------
Increase/ Increase/
(Decrease) (Decrease)
Principal $ in Increase/ Excluding $ in Increase/ Excluding
Products Millions (Decrease) FX Millions (Decrease) FX
--------- -------- -------- --------- -------- --------- ---------
Effexor $772 (25)% (22)% $1,591 (22)% (19)%
Prevnar 783 13% 24% 1,538 10% 21%
Enbrel
Outside U.S.
and Canada 736 6% 21% 1,363 5% 22%
Alliance
Revenue -
U.S. and
Canada 304 7% 7% 544 (11)% (11)%
Nutritionals 436 1% 9% 851 1% 11%
Zosyn/Tazocin 304 (5)% - 614 (7)% (2)%
Premarin
family 257 (5)% (3)% 503 (8)% (7)%
Hemophilia
family(1) 248 (1)% 9% 454 (7)% 3%
Protonix
family(2) 237 4% 4% 452 17% 17%
Centrum 171 (7)% - 334 (10)% (3)%
Advil 162 (2)% 2% 321 (5)% (1)%
(1) Hemophilia family net revenue for the 2009 second quarter and first
half included revenue from BENEFIX of $154 and $284, respectively,
and REFACTO/XYNTHA of $94 and $170, respectively.
(2) PROTONIX family net revenue for the 2009 second quarter and first
half included revenue from the Company's own generic version of $150
and $273, respectively, and the branded product of $87 and $179,
respectively.
2009 Second Quarter Results
Net revenue decreased 4% for the 2009 second quarter and
increased 2%, excluding the impact of foreign exchange, as compared
with the 2008 second quarter. The 2% increase, excluding the impact
of foreign exchange, was primarily due to higher sales of Wyeth's
key pharmaceutical franchises PREVNAR , ENBREL (outside the U.S.
and Canada) and Nutritional products, along with higher sales of
PRISTIQ , TYGACIL , TORISEL and the Hemophilia family and higher
Enbrel alliance revenue. These increases were partially offset by
decreased sales of EFFEXOR due primarily to increased generic
competition in international markets. Excluding the impact of
foreign exchange, net revenue for the 2009 second quarter for the
Pharmaceuticals, Consumer Healthcare and Animal Health segments
increased 3%, 2% and 1%, respectively.
Gross margin, excluding certain significant items, as a
percentage of net revenue, increased 0.7 percentage points to 73.2%
for the 2009 second quarter from 72.5% for the 2008 second
quarter.
Selling, general and administrative expenses, excluding certain
significant items, decreased 9% for the 2009 second quarter versus
the 2008 second quarter and decreased 4%, excluding the impact of
foreign exchange. This decrease, excluding the impact of foreign
exchange, was primarily due to cost savings related to the
Company's productivity initiatives, which were partially offset by
increased pension expense.
Research and development expenses, excluding certain significant
items, increased 7% for the 2009 second quarter versus the 2008
second quarter and increased 8%, excluding the impact of foreign
exchange. The increase was primarily due to increased clinical
trial spending, including oncology projects and Prevnar 13 adult,
as well as costs related to a recently announced in-licensing
transaction.
Interest expense, net was $83.0 million for the 2009 second
quarter as compared with $18.7 million for the 2008 second quarter.
This change was primarily due to the significant reduction in
interest rates around the world and the resulting decrease in
interest income earned on our investments offset, in part, by the
increase in our 2009 second quarter investment balances as compared
with the 2008 second quarter.
Other income, net for the 2009 second quarter was composed
primarily of royalty income and income associated with our foreign
exchange hedging program.
The Company's tax rate for the 2009 second quarter, excluding
certain significant items, decreased to 29.3% from 30.5% in the
2008 second quarter. The decrease in the 2009 second quarter tax
rate was primarily due to the renewal of the U.S. research and
development tax credit, which was renewed by Congress in the fourth
quarter of 2008, and increased profit in tax favorable
jurisdictions.
Net income and diluted earnings per share for the 2009 second
quarter were $1,272.0 million and $0.94, respectively, compared
with $1,122.1 million and $0.83, respectively, for the 2008 second
quarter. The 2009 second quarter results included charges of $66.1
million ($52.0 million after-tax or $0.04 per share-diluted)
related to the Company's productivity initiatives and costs
associated with the merger, as discussed in the Notes to Results of
Operations below. The 2008 second quarter results included net
charges of $155.2 million ($110.5 million after-tax or $0.08 per
share-diluted) related to the Company's productivity initiatives.
Net income and diluted earnings per share, excluding these certain
significant items, for the 2009 second quarter were $1,324.1
million and $0.98, respectively, compared with $1,232.6 million and
$0.91, respectively, for the 2008 second quarter.
2009 First Half Results
Net revenue decreased 5% for the 2009 first half and increased
2%, excluding the impact of foreign exchange, as compared with the
2008 first half. The 2% increase, excluding the impact of foreign
exchange, was primarily due to higher sales of Wyeth's key
pharmaceutical franchises Prevnar, Enbrel (outside the U.S. and
Canada) and Nutritional products, along with higher sales of
Pristiq, the Protonix family, Tygacil and Torisel. These increases
were partially offset by decreased sales of Effexor due primarily
to increased generic competition in international markets and lower
Enbrel alliance revenue. Excluding the impact of foreign exchange,
net revenue for the 2009 first half for the Pharmaceuticals and
Animal Health segments increased 2% and 6%, respectively, while
Consumer Healthcare was comparable to the 2008 first half.
Gross margin, as a percentage of net revenue, excluding certain
significant items, increased 1.2 percentage points to 74.3% for the
2009 first half from 73.1% for the 2008 first half. The increase
was primarily due to the impact of foreign exchange rates and
favorable manufacturing variances during the 2009 first half.
Selling, general and administrative expenses, excluding certain
significant items, decreased 7% for the 2009 first half versus the
2008 first half and were comparable to the 2008 first half,
excluding the impact of foreign exchange, as cost savings related
to the Company's productivity initiatives were offset by increased
pension expense.
Research and development expenses, excluding certain significant
items, were comparable for the 2009 first half versus the 2008
first half and increased 2%, excluding the impact of foreign
exchange. The increase, excluding the impact of foreign exchange,
was primarily due to increased clinical trial spending, including
oncology projects and Prevnar 13 adult.
Interest expense, net was $148.3 million for the 2009 first half
as compared with interest income, net of $8.8 million for the 2008
first half. This change was primarily due to the significant
reduction in interest rates around the world and the resulting
decrease in interest income earned on our investments offset, in
part, by the increase in our 2009 first half investment balances as
compared with the 2008 first half.
Other income, net for the 2009 first half was composed primarily
of income associated with our foreign exchange hedging program and
royalty income.
The Company's tax rate for the 2009 first half, excluding
certain significant items, decreased to 28.8% from 30.8% in the
2008 first half. The decrease in the 2009 first half tax rate was
primarily due to the renewal of the U.S. research and development
tax credit, which was renewed by Congress in the fourth quarter of
2008, and increased profit in tax favorable jurisdictions.
Net income and diluted earnings per share for the 2009 first
half were $2,470.2 million and $1.83, respectively, compared with
$2,319.0 million and $1.72, respectively, for the 2008 first half.
The 2009 first half results included charges of $165.1 million
($133.8 million after-tax or $0.10 per share-diluted) related to
the Company's productivity initiatives and costs associated with
the merger, as discussed in the Notes to Results of Operations
below. The 2008 first half results included net charges of $236.2
million ($180.1 million after-tax or $0.13 per share-diluted)
related to the Company's productivity initiatives. Net income and
diluted earnings per share, excluding these certain significant
items, for the 2009 first half were $2,604.0 million and $1.93,
respectively, compared with $2,499.1 million and $1.85,
respectively, for the 2008 first half.
2009 Guidance
Based on the 2009 first half results and outlook for the
remainder of 2009 and assuming trends in foreign exchange rates
continue, the Company has raised its 2009 full year guidance for
diluted earnings per share, excluding certain significant items, to
a range of $3.48 to $3.58. We consider our productivity initiatives
and costs associated with the merger to be certain significant
items.
Merger with Pfizer
The merger agreement with Pfizer received the required approval
of shareholders at Wyeth's Annual Meeting on July 20, 2009. Over 98
percent of votes cast and approximately 78 percent of the
outstanding shares were voted in favor of the Pfizer merger. The
transaction is expected to close at the end of the third quarter or
during the fourth quarter of 2009.
Results of Operations
The comparative results of operations are as follows:
(In thousands except per share amounts)
(UNAUDITED)
------------------------------------------
Three Months Ended Six Months Ended
--------------------- ----------------------
6/30/2009 6/30/2008 6/30/2009 6/30/2008
--------- --------- --------- ---------
Net Revenue $5,695,160 $5,945,358 $11,072,133 $11,656,007
Cost of Goods Sold 1,564,961 1,683,937 2,945,852 3,245,950
Selling, General and
Administrative
Expenses 1,598,518 1,832,500 3,190,327 3,554,713
Research and
Development Expenses 885,305 836,067 1,658,425 1,675,444
Interest (Income)
Expense, Net 83,013 18,685 148,325 (8,771)
Other Income, Net (242,901) (44,677) (365,512) (188,162)
-------- ------- -------- --------
Income before Income
Taxes 1,806,264 1,618,846 3,494,716 3,376,833
Provision for Income
Taxes 534,245 496,752 1,024,537 1,057,792
------- ------- --------- ---------
Net Income $1,272,019 $1,122,094 $2,470,179 $2,319,041
========== ========== ========== ==========
Basic Earnings per
Share $0.95 $0.84 $1.85 $1.74
===== ===== ===== =====
Average Number of Common
Shares Outstanding
during Each
Period - Basic 1,333,435 1,332,682 1,332,544 1,333,945
Diluted Earnings per
Share $0.94 $0.83 $1.83 $1.72
===== ===== ===== =====
Average Number of Common
Shares Outstanding
during Each
Period - Diluted 1,356,071 1,359,496 1,355,189 1,359,903
See Notes to Results of Operations.
Results of Operations - As Adjusted
Wyeth has prepared the following presentation of its results of
operations for the three and six months ended June 30, 2009 and
2008, adjusted to exclude charges related to our productivity
initiatives and merger-related expenses, which are considered
certain significant items for the 2009 and 2008 second quarter and
first half.
The comparative results of operations - as adjusted are as follows:
(In thousands except per share amounts)
(UNAUDITED) - AS ADJUSTED
-----------------------------------------------------
Three Months Ended Six Months Ended
--------------------- ----------------------
6/30/2009 6/30/2008 6/30/2009 6/30/2008
--------- --------- --------- ---------
Net Revenue $5,695,160 $5,945,358 $11,072,133 $11,656,007
Cost of Goods Sold 1,527,358 1,636,296 2,841,681 3,132,381
Selling, General and
Administrative
Expenses 1,571,271 1,730,949 3,130,666 3,352,588
Research and
Development Expenses 884,069 830,059 1,657,171 1,650,323
Interest (Income)
Expense, Net 83,013 18,685 148,325 (8,771)
Other Income, Net (242,901) (44,677) (365,512) (83,507)
-------- ------- -------- -------
Income before Income
Taxes 1,872,350 1,774,046 3,659,802 3,612,993
Provision for Income
Taxes 548,295 541,472 1,055,777 1,113,862
------- ------- --------- ---------
Net Income $1,324,055 $1,232,574 $2,604,025 $2,499,131
========== ========== ========== ==========
Basic Earnings per
Share $0.99 $0.92 $1.95 $1.87
===== ===== ===== =====
Average Number of Common
Shares Outstanding
during Each
Period - Basic 1,333,435 1,332,682 1,332,544 1,333,945
Diluted Earnings per
Share $0.98 $0.91 $1.93 $1.85
===== ===== ===== =====
Average Number of Common
Shares Outstanding
during Each
Period - Diluted 1,356,071 1,359,496 1,355,189 1,359,903
See Notes to Results of Operations.
Notes to Results of Operations
1. The average number of common shares outstanding for diluted earnings
per share is higher than for basic earnings per share due to the
assumed conversion of the Company's outstanding convertible senior
debentures, outstanding stock options, deferred contingent common stock
awards, performance share awards, restricted stock awards and
convertible preferred stock into common stock equivalents using the
treasury stock method. For purposes of calculating diluted earnings
per share, interest expense, net of capitalized interest and taxes
related to the Company's outstanding convertible senior debentures, is
added back to reported net income, and the additional shares of common
stock (assuming conversion) are included in total shares outstanding.
Interest expense, net of capitalized interest and taxes related to
these debentures, was $2,485 and $5,440 for the 2009 second quarter and
first half, respectively, compared with $6,765 and $13,836 for the 2008
second quarter and first half, respectively. Pursuant to the right of
the holders to require the Company to repurchase their convertible
senior debentures, on July 15, 2009, the Company announced the
repurchase of $765,139, or 97.1% of the outstanding principal amount of
these debentures. In addition, the Company redeemed all of its
outstanding shares of convertible preferred stock on July 15, 2009.
2. Other (income) expense, net included net hedging income for the 2009
second quarter and first half of $64,812 and $139,098, respectively,
compared with net hedging expense of $45,257 and $71,906 for the 2008
second quarter and first half, respectively. Other (income) expense,
net also included royalty income for the 2009 second quarter and first
half of $144,942 and $178,564, respectively, compared with $112,231 and
$167,989 for the 2008 second quarter and first half, respectively. The
2009 second quarter and first half included a one-time royalty receipt
of $108,500. The 2008 second quarter and first half included a
one-time royalty milestone receipt of $60,000 related to the previously
divested SYNVISC product line. Further, Other (income) expense, net
included pre-tax gains from product divestitures of $4,196 and $29,351
for the 2009 second quarter and first half, respectively, compared with
$10,143 and $33,201 for the 2008 second quarter and first half,
respectively.
3. Certain significant items related to our productivity initiatives and
the proposed merger with Pfizer have been excluded from the results of
operations - as adjusted for the 2009 and 2008 second quarter and first
half as follows:
Productivity Initiatives
(UNAUDITED)
-----------------------------------------
Three Months Ended Six Months Ended
------------------- -------------------
(In thousands except per
Share amounts) 6/30/2009 6/30/2008 6/30/2009 6/30/2008
-------------------------- --------- --------- --------- ---------
Cost of Goods Sold $37,603 $47,641 $104,171 $113,569
Selling, General and
Administrative Expenses 6,026 101,551 11,190 202,125
Research and Development
Expenses 1,236 6,008 1,254 25,121
----- ----- ----- ------
Total Productivity Initiatives
Charges(a) 44,865 155,200 116,615 340,815
Other Income, Net(b) - - - (104,655)
------- -------- -------- --------
Net Productivity Initiatives
Charges $44,865 $155,200 $116,615 $236,160
======= ======== ======== ========
Net Productivity Initiatives
Charges, After-Tax $30,815 $110,480 $85,375 $180,090
======= ======== ======= ========
Decrease in Diluted Earnings
per Share $0.02 $0.08 $0.06 $0.13
===== ===== ===== =====
(a) 2009 second quarter and first half charges were primarily
accelerated depreciation charges and other plant-related costs as
well as severance and other employee-related costs associated with
a reduction in workforce. 2008 second quarter and first half
charges were primarily severance and other employee-related costs
associated with a reduction in workforce.
(b) Other income, net for the 2008 first half represents the net
gain on the sale of a manufacturing facility in Japan.
Merger-Related Expenses
The 2009 second quarter and first half results included
merger-related charges of $21,221 ($0.02 per share-diluted) and
$48,471 ($0.04 per share-diluted), respectively, which are recorded
in selling, general and administrative expenses, and are associated
with the proposed merger with Pfizer.
Wyeth calculates net income, excluding certain significant
items, by excluding the after-tax effect of items considered by
management to be unusual from the net income reported under
generally accepted accounting principles (GAAP). Wyeth's management
uses this measure to manage and evaluate the Company's performance
and believes it is appropriate to disclose this non-GAAP measure to
assist investors with analyzing business performance and trends.
Wyeth's management believes that excluding these items from the
Company's results provides a more appropriate view of the Company's
operations for the accounting periods presented. These measures
should not be considered in isolation or as a substitute for the
results of operations and diluted earnings per share prepared in
accordance with GAAP.
(4) The following table presents worldwide net revenue by
reportable segment, together with the percentage changes from the
comparable periods in the prior year, as reported and excluding the
impact of foreign exchange (FX):
(UNAUDITED)
--------------------------------------------------------
Three Months Ended 6/30/2009 Six Months Ended 6/30/2009
---------------------------- --------------------------
Net Revenue by Increase Increase
Reportable $ in Excluding $ in Excluding
Segment Millions Decrease FX Millions Decrease FX
-------------- -------- -------- -------- -------- -------- ---------
Pharmaceuticals $4,779 (4)% 3% $9,267 (5)% 2%
Consumer
Healthcare 631 (5)% 2% 1,244 (7)% -
Animal Health 285 (9)% 1% 561 (5)% 6%
------ ------ ------ ------ ------ ------
Consolidated
Total $5,695 (4)% 2% $11,072 (5)% 2%
====== ====== ====== ====== ====== ======
Wyeth is one of the world's largest research-driven
pharmaceutical and health care products companies. It is a leader
in the discovery, development, manufacturing and marketing of
pharmaceuticals, vaccines, biotechnology products, nutritionals and
non-prescription medicines that improve the quality of life for
people worldwide. The Company's major divisions include Wyeth
Pharmaceuticals, Wyeth Consumer Healthcare and Fort Dodge Animal
Health.
The statements in this press release that are not historical
facts, including our revised 2009 financial guidance, are
forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by such statements. In particular,
if the assumptions underlying our revised 2009 financial guidance
are not met, our actual results could differ materially from our
guidance. In addition, the statements on the related conference
call regarding development and regulatory timelines for our
pipeline products are subject to risks and uncertainties related to
both the timing and success of regulatory submissions and review
and decisions by regulatory authorities, including the possibility
that regulatory authorities will not agree with our assessments of
clinical data or the sufficiency of regulatory submissions, will
require additional clinical trials or other data, will take longer
to review our submissions than we expect, or will determine not to
approve our applications. Other risks and uncertainties that could
cause actual results to differ materially from those expressed or
implied by forward-looking statements include, among others, risks
related to our proposed merger with Pfizer, including satisfaction
of the conditions of the proposed merger on the proposed timeframe
or at all, contractual restrictions on the conduct of our business
included in the merger agreement, and the potential for loss of key
personnel, disruption in key business activities or any impact on
our relationships with third parties as a result of the
announcement of the proposed merger; the inherent uncertainty of
the timing and success of, and expense associated with, research,
development, regulatory approval and commercialization of our
products and pipeline products; government cost-containment
initiatives; restrictions on third-party payments for our products;
substantial competition in our industry, including from branded and
generic products; emerging data on our products and pipeline
products; the importance of strong performance from our principal
products and our anticipated new product introductions; the highly
regulated nature of our business; product liability, intellectual
property and other litigation risks and environmental liabilities;
the outcome of government investigations; uncertainty regarding our
intellectual property rights and those of others; difficulties
associated with, and regulatory compliance with respect to,
manufacturing of our products; risks associated with our strategic
relationships; global economic conditions; interest and currency
exchange rate fluctuations and volatility in the credit and
financial markets; changes in generally accepted accounting
principles; trade buying patterns; the impact of legislation and
regulatory compliance; risks and uncertainties associated with
global operations and sales; and other risks and uncertainties,
including those detailed from time to time in our periodic reports
filed with the Securities and Exchange Commission, including our
current reports on Form 8-K, quarterly reports on Form 10-Q and
annual report on Form 10-K, particularly the discussion under the
caption "Item 1A, RISK FACTORS" in our Annual Report on Form 10-K
for the year ended December 31, 2008, which was filed with the
Securities and Exchange Commission on February 27, 2009. The
forward-looking statements in this press release are qualified by
these risk factors. We assume no obligation to publicly update any
forward-looking statements, whether as a result of new information,
future developments or otherwise.
The Company will hold a conference call with research analysts
at 8:00 a.m. Eastern Daylight Time today. The purpose of the call
is to review the financial results of the Company for the 2009
second quarter and first half. Interested investors and others may
listen to the call live or on a delayed basis through the Internet
webcast, which may be accessed by visiting the Company's Internet
Web site at www.wyeth.com and clicking on the "Investor Relations"
hyperlink.
Also, for recent announcements and additional information,
including product sales information, please refer to the Company's
Internet Web site.
Source: Wyeth
CONTACT: Media: Douglas Petkus, +1-973-660-5218, or Investors:
Justin
Victoria, +1-973-660-5340, both of Wyeth
Web Site: http://www.wyeth.com/
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