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Other (Income)/Deductions - Net (Tables)
 6 Months Ended
Jul. 01, 2018
Other Income and Expenses [Abstract]  
Schedule of Other (Income)/Deductions - Net
The following table provides components of Other (income)/deductions––net:
 
 
Three Months Ended
 
Six Months Ended
(MILLIONS OF DOLLARS)
 
July 1,
2018


July 2,
2017

 
July 1,
2018

 
July 2,
2017

Interest income(a)
 
$
(80
)
 
$
(94
)
 
$
(157
)
 
$
(175
)
Interest expense(a)
 
326

 
312

 
635

 
621

Net interest expense
 
245

 
218

 
478

 
446

Royalty-related income
 
(121
)
 
(105
)
 
(217
)
 
(191
)
Net gains on asset disposals(b)
 
(17
)
 
(34
)
 
(36
)
 
(125
)
Income from collaborations, out-licensing arrangements and sales of compound/product rights(c)
 
(174
)
 
(37
)
 
(316
)
 
(85
)
Net unrealized gains on equity securities(d)
 
(226
)
 
—

 
(337
)
 
—

Net periodic benefit costs/(credits) other than service costs(e)
 
(84
)
 
(8
)
 
(166
)
 
53

Certain legal matters, net(f)
 
(88
)
 
3

 
(107
)
 
11

Certain asset impairments(g)
 
31

 
—

 
31

 
13

Adjustments to loss on sale of HIS net assets(h)
 
(2
)
 
28

 
1

 
64

Business and legal entity alignment costs(i)
 
1

 
17

 
4

 
38

Other, net(j)
 
(115
)
 
(155
)
 
(64
)
 
(239
)
Other (income)/deductions––net
 
$
(551
)
 
$
(75
)
 
$
(728
)
 
$
(14
)

(a) 
Interest income decreased in the second quarter and first six months of 2018, primarily driven by a lower investment balance. Interest expense increased in the second quarter and first six months of 2018, primarily as a result of higher short-term interest rates, offset, in part, by refinancing activity that occurred in the fourth quarter of 2017.
(b) 
In the second quarter of 2018, primarily includes gains on fixed assets and other asset disposals of $15 million. In the first six months of 2018, includes gains on fixed assets and other asset disposals of $22 million and net gains on sales of investments in equity and debt securities of approximately $14 million. In the second quarter of 2017, primarily includes gains on sales and redemptions of investments in equity and debt securities (approximately $60 million), partially offset by a net loss related to the sale of our 40% ownership investment in Teuto, including the extinguishment of a put option for the then remaining 60% ownership interest (approximately $30 million). In the first six months of 2017, primarily includes gains on sales and redemptions of investments in equity and debt securities (approximately $102 million) and a gain on sale of property (approximately $50 million), partially offset by the net loss related to the sale of our investment in Teuto discussed above.
(c) 
Includes income from upfront and milestone payments from our collaboration partners and income from out-licensing arrangements and sales of compound/product rights. In the second quarter of 2018, primarily includes, among other things, approximately $88 million in milestone income from multiple licensees and an upfront payment to us of $75 million for the sale of an AMPA receptor potentiator for CIAS to Biogen. In the first six months of 2018, primarily includes, among other things, all of the factors discussed above for the second quarter of 2018, as well as a $75 million milestone payment received from Shire related to their first dosing of a patient in a Phase 3 clinical trial of a compound out-licensed by Pfizer to Shire for the treatment of ulcerative colitis, and a $40 million milestone payment from Merck in conjunction with the approval of ertugliflozin in the EU. For additional information, see Note 2B, Note 2C and Note 2D.
(d) 
Represents the unrealized net gains on equity securities reflecting the adoption of a new accounting standard in the first quarter of 2018. Approximately $142 million of these unrealized gains in the second quarter of 2018 and approximately $203 million of these unrealized gains in the first six months of 2018 relate to 3.2 million shares of ICU Medical stock that were received as part of the consideration for the sale of HIS net assets to ICU Medical. Prior to the adoption of the new standard, net unrealized gains and losses on virtually all equity securities with readily determinable fair values were reported in Accumulated other comprehensive income. For additional information, see Note 1B and Note 7B.
(e) 
Represents the net periodic benefit costs/(credits), excluding service costs, as a result of the adoption of a new accounting standard in the first quarter of 2018. Effective January 1, 2018, the U.S. Pfizer Consolidated Pension Plan was frozen to future benefit accruals and for the second quarter and first six months of 2018, resulted in the recognition of lower net periodic benefit costs due to the extension of the amortization period for the actuarial losses and the elimination of service costs. There was also a greater than expected gain on plan assets due to a higher plan asset base compared to the second quarter and first six months of 2017. For additional information, see Note 1B and Note 10.
(f) 
In the second quarter and first six months of 2018, primarily represents the reversal of a legal accrual where a loss was no longer deemed probable.
(g) 
In the second quarter and first six months of 2018, includes an intangible asset impairment charge related to a finite-lived developed technology right, acquired in connection with our acquisition of Anacor, for the treatment for toenail fungus marketed in the U.S. market only. The impairment charge for the second quarter and first six months of 2018 is associated with IH and reflects, among other things, updated commercial forecasts.
(h) 
In the second quarter and first six months of 2018 and 2017, represents adjustments to amounts previously recorded in 2016 to write down the HIS net assets to fair value less costs to sell related to the sale of HIS net assets to ICU Medical on February 3, 2017. For additional information, see Note 2B.
(i) 
In the second quarter and first six months of 2018 and 2017, represents expenses for changes to our infrastructure to align our commercial operations of our current segments, including costs to internally separate our businesses into distinct legal entities, as well as to streamline our intercompany supply operations to better support each business.
(j) 
In the second quarter and first six months of 2018, includes, among other things, dividend income of $76 million and $135 million, respectively, from our investment in ViiV, and charges of $23 million and $135 million, respectively, reflecting the change in the fair value of contingent consideration. The second quarter and first six months of 2018 also include a non-cash $50 million pre-tax gain on the contribution of Pfizer’s allogeneic CAR T therapy development program assets obtained from Cellectis and Servier in connection with our contribution agreement entered into with Allogene in which Pfizer obtained a 25% ownership stake in Allogene (see Note 2B), and a non-cash $17 million pre-tax gain on the cash settlement of a liability that we incurred in April 2018 upon the EU approval of Mylotarg (see Note 7E). In the second quarter and first six months of 2017, primarily includes, among other things, dividend income of $114 million and $157 million, respectively, from our investment in ViiV.
Schedule of Additional Information About Intangible Assets Impaired
The following table provides additional information about the intangible asset that was impaired during 2018 in Other (income)/deductions:
 
 
Fair Value(a)
 
Three and Six Months Ended July 1, 2018
(MILLIONS OF DOLLARS)
 
Amount
 
Level 1
 
Level 2
 
Level 3
 
Impairment
Intangible assets––Developed technology right, finite-lived(b)
 
$
35

 
$
—

 
$
—

 
$
35

 
$
31


(a) 
The fair value amount is presented as of the date of impairment, as these assets are not measured at fair value on a recurring basis.
(b) 
Reflects intangible assets written down to fair value in the second quarter and first six months of 2018. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows associated with the asset and then applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the product; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.