EX-99 2 pfe-12312019xex99.htm EXHIBIT 99 Exhibit
Exhibit 99

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PFIZER REPORTS FOURTH-QUARTER AND FULL-YEAR 2019 RESULTS
PROVIDES 2020 FINANCIAL GUIDANCE
Full-Year 2019 Revenues of $51.8 Billion, Reflecting 1% Operational Decline; Excluding the Impact from Consumer Healthcare(1), Revenues Increased 2% Operationally
8% Operational Growth from Biopharma, Primarily Driven by Ibrance, Eliquis, Xeljanz and Vyndaqel as well as 14% Operational Growth in Emerging Markets
16% Operational Decline from Upjohn, Primarily Due to U.S. Loss of Exclusivity of Lyrica in 2019
Fourth-Quarter 2019 Revenues of $12.7 Billion, Reflecting 8% Operational Decline; Excluding the Impact from Consumer Healthcare(1), Revenues Declined 1% Operationally
9% Operational Growth from Biopharma; 32% Operational Decline from Upjohn
Full-Year 2019 Reported Diluted EPS(2) of $2.87, Adjusted Diluted EPS(3) of $2.95; Fourth-Quarter 2019 Reported LPS(2) of $0.06, Adjusted Diluted EPS(3) of $0.55
Provides Full-Year 2020 Financial Guidance for Total Company(4), New Pfizer(5) and Upjohn(6) 
Total Company(4) Revenue Guidance of $48.5 to $50.5 Billion, Adjusted Diluted EPS(3) of $2.82 to $2.92 (Assumes Full-Year 2020 Contribution from Biopharma and Upjohn and No 2020 Share Repurchases)
Midpoint of New Pfizer(5) Revenue Guidance Range Implies 8% Operational Growth Compared to 2019
NEW YORK, NY, Tuesday, January 28, 2020 – Pfizer Inc. (NYSE: PFE) reported financial results for fourth-quarter and full-year 2019 and provided 2020 financial guidance.
Results for the fourth quarter and the full year of 2019 and 2018(7) are summarized below.
OVERALL RESULTS
 
 
 
 
 
 
 
 
 
($ in millions, except
per share amounts)
Fourth-Quarter
 
 
Full-Year
 
2019
2018
Change
 
 
2019
2018
Change
Revenues
$ 12,688

$ 13,976

(9%)
 
 
$ 51,750

$ 53,647

(4%)
Reported Net Income/(Loss)(2)
(337
)
(394
)
(14%)
 
 
16,273

11,153

46%
Reported Diluted EPS/(LPS)(2)
(0.06
)
(0.07
)
(9%)
 
 
2.87

1.87

54%
Adjusted Income(3)
3,108

3,749

(17%)
 
 
16,733

17,477

(4%)
Adjusted Diluted EPS(3)
0.55

0.63

(13%)
 
 
2.95

2.92

1%
 
 
 
 
 
 
 
 
 
REVENUES
 
 
 
 
 
 
 
 
 
 
 
($ in millions)
Fourth-Quarter
 
 
Full-Year
 
2019
2018
% Change
 
 
2019
2018
% Change
 
Total
Oper.
 
 
Total
Oper.
Biopharma
$ 10,532

$ 9,820

7%
9%
 
 
$ 39,419

$ 37,558

5%
8%
Upjohn
2,156

3,182

(32%)
(32%)
 
 
10,233

12,484

(18%)
(16%)
Consumer Healthcare(1)

974

(100%)
(100%)
 
 
2,098

3,605

(42%)
(40%)
Total Company
$ 12,688

$ 13,976

(9%)
(8%)
 
 
$ 51,750

$ 53,647

(4%)
(1%)
 
 
 
 
 
 
 
 
 
 
 

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Acquisitions and the contribution of Pfizer’s Consumer Healthcare business to the GSK Consumer Healthcare joint venture (JV) that were completed during 2019 impacted financial results in the periods presented(1). Some amounts in this press release may not add due to rounding. All percentages have been calculated using unrounded amounts. References to operational variances pertain to period-over-period growth rates that exclude the impact of foreign exchange(8).
2020 FINANCIAL GUIDANCE(9) 
2020 financial guidance for Total Company(4) is presented below. Total Company(4) financial guidance reflects a full year of revenue and expense contributions from Biopharma and Upjohn.
 
 
Revenues
$48.5 to $50.5 billion
Adjusted Cost of Sales(3) as a Percentage of Revenues
19.9% to 20.9%
Adjusted SI&A Expenses(3)
$12.0 to $13.0 billion
Adjusted R&D Expenses(3)
$8.1 to $8.5 billion
Adjusted Other (Income)/Deductions(3)
Approximately $800 million of income
Effective Tax Rate on Adjusted Income(3)
Approximately 15.0%
Adjusted Diluted EPS(3)
$2.82 to $2.92
 
 
Financial guidance for Adjusted diluted EPS(3) assumes no share repurchases in 2020.
A reconciliation of Pfizer’s full-year 2019 revenues to 2019 revenues excluding the partial-year revenue contribution from the Consumer Healthcare(1) segment is presented below. Also presented below is a comparison of full-year 2019 results excluding the revenue contribution from the Consumer Healthcare(1) segment to Pfizer’s 2020 Total Company(4) financial guidance for revenues and Adjusted diluted EPS(3) at 2019 foreign exchange rates and at mid-January 2020 foreign exchange rates.
 
 
 
 
 
 
 
 
Full-Year
2019 Results
2019 Revenues Generated from Consumer Healthcare(1) Segment
2019 Results Excluding Consumer Healthcare(1) Revenues
2020 Financial Guidance at 2019 FX Rates
Impact of Mid-January 2020 FX Rates Compared to 2019 FX Rates
2020 Total Company(4) Financial Guidance
 
 
 
 
 
 
 
Revenues ($ in billions)
$51.8
($2.1)
$49.7
$48.7 to $50.7
($0.2)
$48.5 to $50.5
Adjusted Diluted EPS(3)
$2.95
$2.95
$2.84 to $2.94
($0.01)
$2.82 to $2.92
 
 
 
 
 
 
 
Upon the closing of the Consumer Healthcare JV transaction(1) in third-quarter 2019, Pfizer deconsolidated its Consumer Healthcare segment, which resulted in a shift from recording revenue and expense contributions from the Consumer Healthcare segment to Pfizer recording its pro rata share of the earnings generated by the Consumer Healthcare JV(1) in Adjusted other (income)/deductions(3) on a one-quarter lag. Therefore, full-year 2019 revenues reflect seven months of Consumer Healthcare segment domestic operations and eight months of Consumer Healthcare segment international operations. Full-year 2019 Adjusted diluted EPS(3) likewise reflects seven

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months of domestic segment operations and eight months of international segment operations as well as Pfizer’s pro rata share of two months of the Consumer Healthcare JV’s earnings generated in third-quarter 2019, which were recorded in Pfizer’s Adjusted other (income)/deductions(3) in fourth-quarter 2019.
2020 financial guidance for Total Company(4) Adjusted other (income)/deductions(3) and Adjusted diluted EPS(3) reflects Pfizer’s share of the JV’s earnings that were generated in fourth-quarter 2019 (to be recorded by Pfizer in first-quarter 2020) as well as Pfizer’s share of the JV’s projected earnings during the first three quarters of 2020.
Shift from Biopharma to Upjohn of Meridian Medical Technologies (Meridian) and the Pfizer-Mylan Strategic Collaboration in Japan (Mylan-Japan)(10) 
Beginning in 2020, Upjohn began managing Pfizer’s Meridian subsidiary, the manufacturer of EpiPen and other auto-injector products, and the Mylan-Japan collaboration for generic drugs in Japan (established in 2012). As a result, revenues and expenses associated with Meridian and Mylan-Japan will be reported in Pfizer’s Upjohn business beginning in first-quarter 2020. In 2019, revenues from Meridian and Mylan-Japan were recorded in Pfizer’s Biopharma business and totaled $598 million, flat operationally, compared with full-year 2018.
2020 Financial Guidance for New Pfizer(5) 
 
 
Revenues
$40.7 to $42.3 billion
Adjusted IBT Margin(11)
Approximately 37.0%
Adjusted Diluted EPS(3)
$2.25 to $2.35
Operating Cash Flow
$11.0 to $12.0 billion
 
 
A reconciliation of the updated 2020 financial guidance for New Pfizer(5) to the 2020 preliminary financial targets provided in July 2019 is presented below (columns may not add due to rounding).
 
 
 
 
 
 
 
 
($ billions, except per share amounts and percentages)
Financial Targets Provided in July 2019

(at Mid-January 2019 FX Rates)
Operational Improvements Since July 2019
Guidance Reflecting Operational Improvements Since July 2019
Impact of Shift in Reporting of Meridian and Mylan-Japan to Upjohn
Guidance Excluding Meridian and Mylan-Japan
Impact of Mid-January 2020 FX Rates vs. Mid-January 2019 FX Rates
2020 New Pfizer(5) Financial Guidance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
Approx $40.0
$1.8 to $3.3
$41.8 to $43.3
($0.6)
$41.2 to $42.7
($0.6)
$40.7 to $42.3
Adjusted
IBT Margin(11)
Mid-30%s
200 bps
Approx 37.0%
--
Approx 37.0%
--
Approx 37.0%
Adjusted Diluted EPS(3)
--
--
$2.31 to $2.41
($0.02)
$2.29 to $2.39
($0.05)
$2.25 to $2.35
Operating
Cash Flow
$11.0 to $12.0
$0.4
$11.4 to $12.4
($0.2)
$11.2 to $12.2
($0.2)
$11.0 to $12.0
 
 
 
 
 
 
 
 
The midpoint of the revenue guidance range implies 8% volume-driven operational growth compared to full-year 2019 Biopharma revenues, adjusted to exclude the 2019 revenue contribution from Meridian and Mylan-Japan.

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2020 Financial Guidance for Upjohn(6) 
2020 financial guidance for Upjohn(6) now reflects the inclusion of revenues and expenses associated with Meridian and Mylan-Japan, which were previously recorded in Pfizer’s Biopharma business. Except for the shift of Meridian and Mylan-Japan from Biopharma to Upjohn, there are no operational changes to Upjohn’s 2020 financial guidance(6) compared with the preliminary financial targets that were provided in July 2019.
 
 
Revenues
$8.0 to $8.5 billion
Adjusted EBITDA(12)
$3.8 to $4.2 billion
 
 
A reconciliation of the updated 2020 financial guidance for Upjohn(6) to the 2020 preliminary financial targets provided in July 2019 is presented below (columns may not add due to rounding).
 
 
 
 
 
 
 
($ in billions)
Financial Targets Provided in July 2019

(at Mid-January 2019 FX Rates)
Guidance Unchanged Since July 2019
Impact of Shift in Reporting of Meridian and Mylan-Japan to Upjohn
Guidance Including Meridian and Mylan-Japan
Impact of Mid-January 2020 FX Rates Compared to Mid-January 2019 FX Rates
2020 Upjohn(6) Financial Guidance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$7.5 to $8.0
$7.5 to $8.0
$0.6
$8.1 to $8.6
($0.1)
$8.0 to $8.5
Adjusted EBITDA(12)
$3.8 to $4.1
$3.8 to $4.1
$0.1
$3.9 to $4.3
($0.1)
$3.8 to $4.2
 
 
 
 
 
 
 
The midpoint of the revenue guidance range implies 23% operational decline compared to full-year 2019 Upjohn revenues, adjusted to include Meridian and Mylan-Japan.
CAPITAL ALLOCATION
During full-year 2019, Pfizer returned $16.9 billion directly to shareholders, through a combination of:
$8.0 billion of dividends, composed of quarterly dividends of $0.36 per share of common stock; and
$8.9 billion of share repurchases, composed of $2.1 billion of open-market share repurchases in first-quarter 2019 and a $6.8 billion accelerated share repurchase agreement executed in February 2019 and completed in August 2019.
The full-year 2019 diluted weighted-average shares used to calculate earnings per common share was 5,675 million shares, a reduction of 302 million shares compared to full-year 2018.
As of January 28, 2020, Pfizer’s remaining share repurchase authorization was $5.3 billion. No share repurchases are currently planned in 2020.

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EXECUTIVE COMMENTARY
Dr. Albert Bourla, Pfizer’s Chairman and Chief Executive Officer, stated, “2019 was a busy year, highlighted by solid financial performance, shareholder-friendly capital allocation, the strengthening of our pipeline as well as the formation of the Consumer Healthcare JV with GSK. We also announced a definitive agreement to combine Upjohn and Mylan to create a new global pharmaceutical company, Viatris, marking an important milestone in Pfizer’s evolution toward becoming a more focused, global leader in innovative medicines.
“2020 is expected to be an exciting year for Pfizer with the close of the Upjohn-Mylan transaction anticipated by mid-year, leaving New Pfizer positioned to deliver revenue and Adjusted diluted EPS(3) growth that is expected to be among the industry leaders. New Pfizer will be a smaller, science-based company with a singular focus on innovation while also continuing to allocate significant capital directly to shareholders, primarily through dividends.
“For New Pfizer, we expect important clinical data readouts across our early-, mid- and late-stage pipeline. In the first half of 2020, we expect to report pivotal top-line results for the JADE Compare study for abrocitinib (PF-04965842), our Janus kinase-1 (JAK1) inhibitor for moderate-to-severe atopic dermatitis (AD), for three Phase 3 trials of PF-06482077, our 20-valent pneumococcal conjugate vaccine candidate in adults aged 18 and older, and for Xeljanz in ankylosing spondylitis, in addition to the potentially registration-enabling Phase 2 ANCHOR study evaluating the combination of Braftovi, Mektovi and cetuximab for the first-line treatment of BRAFV600E-mutant metastatic colorectal cancer. We also expect data in the first half of 2020 for promising earlier-stage opportunities, including proof-of-concept readouts for PF-06939926, our mini-dystrophin gene therapy candidate for Duchenne muscular dystrophy, for PF-06928316, our prophylactic vaccine candidate for the prevention of respiratory syncytial virus infection, and for PF-06700841, an investigational topical TYK2/JAK1 dual inhibitor for psoriasis and AD.
“In the second half of 2020, we look forward to top-line results for the Phase 3 PENELOPE-B study of Ibrance in early-stage breast cancer as well as for proof-of-concept readouts for PF-06651600, our dual JAK3/TEC inhibitor as a potential treatment for vitiligo, for PF-06700841 for potential treatment of psoriatic arthritis (PsA), and for PF-06826647, our investigational TYK2 inhibitor for psoriasis. In addition, we now expect the Phase 3 PALLAS study of Ibrance in early-stage breast cancer to complete in early 2021. In 2020, we are focused on accelerating the pipeline and building on the business momentum that we generated in 2019,” Dr. Bourla concluded.
Frank D’Amelio, Chief Financial Officer and Executive Vice President, Business Operations and Global Supply, stated, “I am pleased with our 2019 financial results, which met or exceeded all components of our financial guidance. Our Biopharma business generated 8% operational revenue growth, driven by strong growth from Ibrance, Eliquis, Xeljanz and Vyndaqel/Vyndamax. As expected, the Upjohn business declined 16% operationally, primarily reflecting the U.S. loss of exclusivity of Lyrica in July 2019. Excluding Lyrica in the U.S. and the

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impact of other recent product losses of exclusivity, Upjohn revenues declined 3% operationally in 2019. We also returned $16.9 billion directly to shareholders through share repurchases and dividends, demonstrating our continued commitment to returning capital to our shareholders.
“Today we also provided 2020 financial guidance for Total Company(4), New Pfizer(5) and Upjohn(6). The midpoint of the revenue guidance range for New Pfizer(5) implies 8% operational growth and reflects anticipated continued strong growth from certain in-line brands such as Ibrance, Eliquis, Xeljanz, Xtandi and Inlyta, from recent and expected product launches such as Vyndaqel/Vyndamax, Braftovi, Mektovi and oncology biosimilars as well as from emerging markets. Since July 2019, several of the aforementioned products have performed better than we had anticipated and have generated strong momentum that we expect to continue in 2020. The midpoint of the revenue guidance range for Upjohn(6) implies a 23% operational decline, primarily reflecting expected declines for products that have recently lost marketing exclusivity and lower revenues from China due to the geographic expansion of the volume-based procurement (VBP) program to all Chinese provinces in 2020. Importantly, the financial guidance for Upjohn(6) remains unchanged on an operational basis from the preliminary financial targets that were provided in July 2019,” Mr. D’Amelio concluded.
QUARTERLY FINANCIAL HIGHLIGHTS (Fourth-Quarter 2019 vs. Fourth-Quarter 2018)
Fourth-quarter 2019 revenues totaled $12.7 billion, a decrease of $1.3 billion, or 9%, compared to the prior-year quarter, reflecting an operational decline of $1.1 billion, or 8%, as well as the unfavorable impact of foreign exchange of $158 million, or 1%.
Biopharma Revenue Highlights
Fourth-quarter 2019 Biopharma revenues totaled $10.5 billion, up 9% operationally, primarily driven by:
Eliquis globally, up 22% operationally, primarily driven by continued increased adoption in non-valvular atrial fibrillation as well as oral anti-coagulant market share gains;
Vyndaqel/Vyndamax global revenues were $213 million, driven by:
the U.S. launches of Vyndaqel in May 2019 and Vyndamax in September 2019 for the treatment of transthyretin amyloid cardiomyopathy (ATTR-CM); and
180% operational growth in international markets, primarily driven by the March 2019 launch of the ATTR-CM indication in Japan and continued uptake for the transthyretin amyloid polyneuropathy indication in developed Europe;

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Ibrance globally, up 15% operationally, primarily driven by:
14% growth in the U.S., primarily driven by cyclin-dependent kinase (CDK) class market share growth and Ibrance’s continued CDK market share leadership in its approved metastatic breast cancer indications; and
17% operational growth in international markets, reflecting continued strong uptake following launches primarily in certain emerging markets;
the Hospital business in the U.S. and emerging markets, collectively up 8% operationally, primarily driven by continued growth from anti-infective products in China as well as the November 2018 U.S. launch of Panzyga and U.S. revenue growth from Pfizer CentreOne, Pfizer’s contract manufacturing business;
Prevenar 13 in emerging markets, up 27% operationally, primarily reflecting the overall favorable impact of timing associated with government purchases for the pediatric indication compared with the prior-year quarter, as well as continued pediatric uptake in China;
Inlyta in the U.S., up 249%, primarily driven by increased uptake resulting from the second-quarter 2019 U.S. Food and Drug Administration (FDA) approvals for combinations of certain immune checkpoint inhibitors plus Inlyta for the first-line treatment of patients with advanced renal cell carcinoma (RCC);
Xeljanz globally, up 11% operationally, primarily driven by:
44% operational growth in international markets, reflecting continued uptake in the rheumatoid arthritis (RA) indication as well as from the recent launch of the ulcerative colitis (UC) indication in certain developed markets; and
1% growth in the U.S., reflecting continued volume growth from the 2018 launches of the UC and PsA indications offset by higher rebating from new commercial contracts; and
Xtandi in the U.S., up 29%, primarily driven by continued uptake in the metastatic and non-metastatic castration-resistant prostate cancer indications,
partially offset primarily by lower revenues for:
Enbrel internationally, down 18% operationally, primarily reflecting continued biosimilar competition in most developed Europe markets; and
Prevnar 13 in the U.S., down 7%, reflecting the continued decline in revenues for the adult indication due to a declining “catch up” opportunity compared to the prior-year quarter.

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Upjohn Revenue Highlights
Fourth-quarter 2019 Upjohn revenues totaled $2.2 billion, down 32% operationally, primarily driven by the expected significant volume declines for Lyrica in the U.S. due to multi-source generic competition that began in July 2019. Excluding the unfavorable impact of Lyrica in the U.S. and other recent product losses of exclusivity, fourth-quarter 2019 revenues for Upjohn declined 6% operationally.
Fourth-quarter 2019 Upjohn revenues in China declined 1% operationally, primarily driven by declines for Lipitor and Norvasc in provinces where the VBP program has been implemented, partially offset by products not impacted by the VBP implementation, including Celebrex and Viagra, as well as operational growth from Lipitor and Norvasc in provinces were VBP had not been implemented.
GAAP Reported(2) Income Statement Highlights
SELECTED TOTAL COMPANY REPORTED COSTS AND EXPENSES(2) 
 
 
 
 
 
 
 
 
 
 
 
($ in millions)
Fourth-Quarter
 
 
Full-Year
 
2019
2018
% Change
 
 
2019
2018
% Change
 
Total
Oper.
 
 
Total
Oper.
Cost of Sales(2)
$ 2,608

$ 3,075

(15%)
(17%)
 
 
$ 10,219

$ 11,248

(9%)
(7%)
Percent of Revenues
20.6
%
22.0
%
N/A
N/A
 
 
19.7
%
21.0
%
N/A
N/A
SI&A Expenses(2)
 4,240

 4,007

6%
7%
 
 
 14,350

 14,455

(1%)
1%
R&D Expenses(2)
 2,822

 2,457

15%
15%
 
 
 8,650

 8,006

8%
9%
Total
$ 9,670

$ 9,539

1%
1%
 
 
$ 33,218

$ 33,709

(1%)
 
 
 
 
 
 
 
 
 
 
 
(Gain) on Completion of Consumer Healthcare JV Transaction(1)
1


*
*
 
 

($8,086
)

*
*
Other (Income)/Deductions––net(2)
3,041

3,259

(7%)
(6%)
 
 
3,578

2,116

69%
73%
Effective Tax Rate on Reported Income(2)
*

*

 
 
 
 
7.8
%
5.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
* Indicates calculation not meaningful.
Fourth-quarter and full-year 2019 Cost of Sales(2), SI&A Expenses(2) and R&D Expenses(2) were favorably impacted by the July 31, 2019 completion of the Consumer Healthcare JV transaction with GSK(1).
Pfizer recorded lower other deductions––net(2) in fourth-quarter 2019 compared with the prior-year quarter, primarily driven by:
lower asset impairment charges of $2.7 billion in fourth-quarter 2019, primarily related to Eucrisa, which was acquired in connection with Pfizer’s 2016 acquisition of Anacor Pharmaceuticals, Inc., compared to asset impairment charges of $3.1 billion in fourth-quarter 2018, primarily associated with generic sterile injectable products acquired in connection with Pfizer’s 2015 acquisition of Hospira, Inc.;
higher net gains on investments in equity securities;
lower business and legal entity alignment costs; and

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lower net realized losses on sales of investments in debt securities,
partially offset primarily by:
higher charges for certain legal matters;
higher pension and other post-retirement benefit costs; and
higher net interest expense.
Pfizer’s effective tax rate on Reported income(2) for fourth-quarter 2019 compared to the prior-year quarter was favorably impacted primarily by:
benefits related to certain tax initiatives associated with the implementation of our new organizational structure; and
a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business,
partially offset primarily by:
a decrease in tax benefits associated with the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities; and
the non-recurrence of certain tax initiatives and favorable adjustments recorded in 2018 to the provisional estimate of the legislation in the U.S. commonly referred to as the Tax Cuts and Jobs Act.
In addition to the aforementioned factors impacting Pfizer’s effective tax rate on Reported income(2) for fourth-quarter 2019, Pfizer’s full-year 2019 effective tax rate on Reported income(2) compared to the prior year was impacted primarily by:
a tax benefit related to the settlement of a U.S. Internal Revenue Service audit for multiple tax years,
partially offset primarily by:
the tax expense associated with the $8.1 billion pre-tax gain recorded in third-quarter 2019 related to the completion of the Consumer Healthcare JV transaction with GSK(1).

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Adjusted(3) Income Statement Highlights
SELECTED TOTAL COMPANY ADJUSTED COSTS AND EXPENSES(3) 
 
 
 
 
 
 
 
 
 
 
 
($ in millions)
Fourth-Quarter
 
 
Full-Year
 
2019
2018
% Change
 
 
2019
2018
% Change
 
Total
Oper.
 
 
Total
Oper.
Adjusted Cost of Sales(3)
$ 2,600

$ 3,044

(15%)
(17%)
 
 
$ 10,030

$ 11,130

(10%)
(7%)
Percent of Revenues
20.5
%
21.8
%
N/A
N/A
 
 
19.4
%
20.7
%
N/A
N/A
Adjusted SI&A Expenses(3)
 4,070

 3,968

3%
4%
 
 
 14,041

 14,232

(1%)
1%
Adjusted R&D Expenses(3)
 2,530

 2,436

4%
4%
 
 
 7,988

 7,962

1%
Total
$ 9,200

$ 9,448

(3%)
(3%)
 
 
$ 32,059

$ 33,325

(4%)
(2%)
 
 
 
 
 
 
 
 
 
 
 
Adjusted Other (Income)/Deductions––net(3)
($97
)
$15

*
*
 
 
($300
)
($667
)
(55%)
(67%)
Effective Tax Rate on Adjusted Income(3)
11.3
%
15.4
%
 
 
 
 
15.0
%
15.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Fourth-quarter 2019 diluted weighted-average shares outstanding used to calculate Adjusted(3) diluted EPS declined by 281 million shares compared to the prior-year quarter primarily due to Pfizer’s share repurchase program, reflecting the impact of share repurchases during 2018 and 2019, partially offset by dilution related to share-based employee compensation programs.
A full reconciliation of Reported(2) to Adjusted(3) financial measures and associated footnotes can be found starting on page 25 of this press release.
FULL-YEAR REVENUE SUMMARY (Full-Year 2019 vs. Full-Year 2018)
Full-year 2019 revenues totaled $51.8 billion, a decrease of $1.9 billion, or 4%, compared to full-year 2018, reflecting an operational decline of $545 million, or 1%, and the unfavorable impact of foreign exchange of $1.4 billion, or 3%.
Biopharma Revenue Highlights
Full-year 2019 Biopharma revenues totaled $39.4 billion, up 8% operationally, primarily driven by:
continued uptake for Ibrance, Eliquis, Xeljanz and Vyndaqel/Vyndamax globally;
Prevenar 13 in emerging markets; and
Inlyta in the U.S.,
partially offset primarily by lower revenues for:
Enbrel internationally; and
Prevnar 13 in the U.S.

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Upjohn Revenue Highlights
Full-year 2019 Upjohn revenues totaled $10.2 billion, down 16% operationally, primarily driven by Lyrica in the U.S. due to multi-source generic competition that began in July 2019 and Viagra in the U.S. due to increased generic competition following its December 2017 patent expiration. Excluding the unfavorable impact of Lyrica in the U.S. and other recent product losses of exclusivity, full-year 2019 revenues for Upjohn declined 3% operationally.
Full-year 2019 Upjohn revenues in China grew 7% operationally, primarily driven by products not impacted by the VBP implementation, including Viagra, Celebrex, Zoloft and Lyrica, as well as by Lipitor and Norvasc in provinces where the VBP program had not been implemented, partially offset by revenue declines for Lipitor and Norvasc in provinces impacted by the March 2019 VBP program implementation.
Consumer Healthcare Revenue Highlights
Full-year 2019 revenues for Consumer Healthcare totaled $2.1 billion, down 40% operationally, reflecting the July 31, 2019 completion of the Consumer Healthcare JV transaction with GSK(1).
RECENT NOTABLE DEVELOPMENTS (Since October 29, 2019)
Product Developments
Abrilada/Amsparity (biosimilar adalimumab)
In December 2019, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) adopted a positive opinion recommending the approval of Amsparity as a biosimilar to Humira®(13) (adalimumab) for the treatment of certain patients with RA, juvenile idiopathic arthritis, axial spondyloarthritis, PsA, psoriasis, hidradenitis suppurativa, Crohn’s disease, UC, uveitis, and pediatric plaque psoriasis. The CHMP’s opinion is now under review by the European Commission (EC) with a final decision expected in the coming months. Pfizer does not currently plan to commercialize Amsparity in the EU should it be approved by the EC due to unfavorable market conditions.
In November 2019, Pfizer announced that the FDA has approved Abrilada (adalimumab-afzb) as a biosimilar to Humira®(13) (adalimumab), for the treatment of certain patients with RA, juvenile idiopathic arthritis, PsA, ankylosing spondylitis, adult Crohn’s disease, UC and plaque psoriasis. Pfizer is working to make Abrilada available to U.S. patients as soon as feasible based on the terms of its agreement with AbbVie. Current plans are to launch Abrilada in 2023.

- 11 -




Bavencio (avelumab)
In January 2020, EMD Serono, the biopharmaceutical business of Merck KGaA, Darmstadt, Germany in the U.S. and Canada, and Pfizer announced that the Phase 3 JAVELIN Bladder 100 study met its primary endpoint of overall survival (OS) at a planned interim analysis. In this study, patients with previously untreated locally advanced or metastatic urothelial carcinoma whose disease did not progress on induction chemotherapy and who were randomized to receive first-line maintenance therapy with Bavencio and best supportive care (BSC) lived significantly longer than those who received BSC only. A statistically significant improvement in OS was demonstrated in the Bavencio arm in each of the co-primary populations: all randomized patients and patients with PD-L1–positive tumors. The safety profile for Bavencio in the trial was consistent with that in the JAVELIN monotherapy clinical development program. The results of this study will be submitted for presentation at an upcoming medical congress and shared with the FDA and other health authorities.
In November 2019, EMD Serono and Pfizer announced topline results of the Phase 3 JAVELIN Gastric 100 study evaluating avelumab as first-line maintenance therapy following induction chemotherapy in patients with unresectable, locally advanced or metastatic HER2-negative gastric or gastroesophageal junction cancer versus continuation of chemotherapy or BSC. While the study showed clinical activity for avelumab in this setting, it did not meet the primary endpoints of superior OS compared with the standard of care in the overall intent-to-treat population or the PD-L1–positive population. No new safety signals were observed, and the safety profile for avelumab in this trial was consistent with that observed in the overall JAVELIN clinical development program. The results of this study will be submitted for presentation at an upcoming medical congress.
Braftovi (encorafenib) -- In December 2019, Pfizer announced that the FDA accepted and granted priority review to the company’s supplemental New Drug Application (sNDA) for Braftovi in combination with Erbitux®(14) (cetuximab) based on results from the Phase 3 BEACON CRC trial, which evaluated the efficacy and safety of Braftovi in combination with Erbitux with or without Mektovi (binimetinib) in patients with advanced BRAFV600E-mutant metastatic colorectal cancer (mCRC), following one or two lines of therapy. The sNDA has a Prescription Drug User Fee Act goal date for a decision by the FDA in April 2020.
Eliquis (apixaban) -- In December 2019, the Bristol-Myers Squibb-Pfizer alliance announced results at the American Society of Hematology Annual Meeting (ASH Conference) for retrospective real-world data analyses reporting outcomes on the safety and effectiveness of Eliquis compared to low molecular weight heparin (LMWH) or warfarin for the treatment of venous thromboembolism (VTE) in patients with active cancer. Results from the primary analysis showed that Eliquis use was associated with lower rates of major bleeding, clinically-relevant non-major (CRNM) bleeding and recurrent VTE compared to LMWH. Eliquis was also associated with a lower rate of recurrent VTE and similar rates of major bleeding and CRNM bleeding compared to warfarin. In a second oral presentation at the ASH Conference, results from a subgroup

- 12 -




analysis of the primary study were highlighted based on different levels of risk for developing recurrent VTE. Study findings were generally consistent with the primary analysis.
Vyndaqel (tafamidis) -- In December 2019, Pfizer announced that the CHMP of the EMA adopted a positive opinion recommending the approval of Vyndaqel, a once-daily 61 mg oral capsule, for the treatment of wild-type or hereditary transthyretin amyloidosis in adult patients with cardiomyopathy. The CHMP’s opinion is now under review by the EC with a final decision expected in coming months.
Xeljanz (tofacitinib)
In December 2019, Pfizer announced that the FDA approved Xeljanz XR extended-release 11 mg and 22 mg tablets for the once-daily treatment of adult patients with moderately to severely active UC, after an inadequate response or intolerance to TNF blockers.
In November 2019, Pfizer announced that the CHMP of the EMA adopted a final opinion following the re-evaluation of the benefit/risk of the three approved indications of Xeljanz in the European Union (EU). This re-evaluation was initiated following Pfizer’s initial announcement regarding the increased occurrence of pulmonary embolism and an increase in overall mortality with Xeljanz 10 mg twice daily found in an ongoing postmarketing requirement study (A3921133) in RA patients 50 years of age or older with at least one cardiovascular risk factor. The CHMP opinion was forwarded to the EC which is expected to issue, by the end of January 2020 or in February 2020, a final legally binding decision applicable in all EU Member States. The EMA recommended that Xeljanz should be used with caution in patients at high risk of blood clots. In addition, maintenance doses of 10 mg twice daily are not recommended in patients with UC who are at high risk of blood clots unless there is no suitable alternative treatment. Five mg twice daily should not be exceeded for RA or PsA. Patients should be advised of the risk of VTE and should seek immediate medical treatment if symptoms develop during treatment. Further, the EMA is recommending that, due to increased risk of infections, patients older than 65 years of age should be treated with Xeljanz only when there is no suitable alternative treatment. The recommendations in this final CHMP opinion replace the provisional measures put in place at the start of the review in May 2019 which contraindicated the 10 mg twice daily dose of Xeljanz for patients at high risk of blood clots in the lungs. The CHMP is recommending removal of that contraindication. The changes come into force when the EC issues its decision.
In November 2019, Pfizer presented positive results from a Phase 3 investigational study of tofacitinib in children and adolescents aged two to less than 18 with polyarticular juvenile idiopathic arthritis (pa-JIA) during a late-breaking oral presentation at the American College of Rheumatology/Association of Rheumatology Professionals Annual Meeting. The trial met its primary endpoint showing that in patients with pa-JIA, the occurrence of disease flare in patients treated with tofacitinib was significantly lower than patients treated with placebo at week 44. The most common adverse events in this study in any treatment group were upper respiratory tract infection, headache, nasopharyngitis, nausea, pyrexia,

- 13 -




disease progression, vomiting and pa-JIA. There were no cases of death, major adverse cardiovascular events, malignancies, thrombosis, opportunistic infection or tuberculosis. Pfizer intends to submit regulatory applications for this indication in 2020.
Xtandi (enzalutamide) -- In December 2019, Astellas Pharma Inc. and Pfizer announced that the FDA approved a sNDA for Xtandi for the treatment of patients with metastatic castration-sensitive prostate cancer (mCSPC). In 2019, it is estimated that just over 40,000 men in the U.S. are living with mCSPC, a form of prostate cancer that has spread to other parts of the body and still responds to a medical or surgical treatment that lowers testosterone.
Pipeline Developments
A comprehensive update of Pfizer’s development pipeline was published today and is now available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of Pfizer’s research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.
PF-07055480 (SB-525) -- In December 2019, in a poster presentation at the ASH Conference, Sangamo Therapeutics, Inc. and Pfizer presented updated follow-up results from the Phase 1/2 Alta study evaluating investigational SB-525 gene therapy in patients with severe hemophilia A. The data showed that SB-525 was generally well tolerated and demonstrated sustained increased Factor VIII levels following treatment with SB-525 through to 44 weeks, the extent of follow-up for the longest treated patient in the 3e13 vg/kg dose cohort. In addition, the manufacturing technology transfer and the transfer of the Investigational New Drug application to Pfizer were completed in fourth-quarter 2019.
Corporate Developments
In December 2019, Pfizer and Theravance Biopharma Ireland Limited, a subsidiary of Theravance Biopharma, Inc. (Theravance Biopharma) announced that the companies have entered into a global license agreement for Theravance Biopharma’s preclinical program for skin-targeted, locally-acting pan-Janus kinase (JAK) inhibitors that can be rapidly metabolized. The compounds in this program target validated pro-inflammatory pathways and are specifically designed to possess skin-selective activity with minimal systemic exposure. Under the terms of the agreement, Theravance Biopharma received an upfront cash payment of $10 million and is eligible to receive up to an additional $240 million in development and sales milestone payments from Pfizer. In addition, Theravance Biopharma will be eligible to receive royalties on worldwide net sales of any potential products emerging from the program.
In December 2019, Pfizer and Mylan N.V. (Mylan) announced that Ian Read, Pfizer’s former Chairman and Chief Executive Officer, and James Kilts, a Pfizer director since 2007, will join the board of directors of Viatris, the company to be formed by the planned combination of Mylan and Upjohn, upon completion of the

- 14 -




transaction, which is anticipated to occur in mid-2020. As previously announced, upon the completion of the transaction, Robert J. Coury will serve as the Executive Chairman of the Viatris board and Michael Goettler, current Group President, Upjohn, will serve as Chief Executive Officer and board member. Also, as previously announced, Ian Read retired from Pfizer’s board on December 31, 2019. James Kilts will cease being a member of Pfizer’s board immediately upon the closing of the transaction.
In December 2019, Pfizer announced plans to host an Investor Day to showcase the company’s mid-to-late-stage R&D pipeline progress and commercial momentum across its Biopharma businesses, to be held on Tuesday, March 31, 2020 at its global headquarters in New York, NY. Pfizer business executives and scientific leadership will provide updates on the company’s progress in advancing its R&D pipeline, specifically on product candidates with blockbuster potential that are expected to launch by 2025.

- 15 -




For additional details, see the attached financial schedules, product revenue tables and disclosure notice.
(1)
The following acquisitions and divestitures impacted financial results for the periods presented:
On July 31, 2019, Pfizer and GlaxoSmithKline plc (GSK) completed a transaction that combined the two companies’ respective consumer healthcare businesses into a joint venture (JV), operating under the GSK Consumer Healthcare name. In exchange for contributing its Consumer Healthcare business to the JV, Pfizer received a 32% equity stake in the JV and GSK owns the remaining 68% of the JV. Upon the closing of the transaction, Pfizer deconsolidated its Consumer Healthcare business and recognized a pre-tax gain of $8.1 billion ($5.4 billion net of tax) in third-quarter 2019, reflecting the difference in the fair value of Pfizer’s 32% equity stake in the JV and the carrying value of its Consumer Healthcare business. In accordance with Pfizer’s domestic and international reporting periods(7), Pfizer’s financial results, and our Consumer Healthcare segment’s operating results, for full-year 2019 reflect seven months of Consumer Healthcare segment domestic operations and eight months of Consumer Healthcare segment international operations. Pfizer records its share of earnings from the Consumer Healthcare JV on a quarterly basis on a one-quarter lag in Other (income)/deductions––net commencing from August 1, 2019. Therefore, Pfizer recorded its share of two months of the JV’s earnings generated in third-quarter 2019 in Pfizer’s operating results in fourth-quarter 2019.
On July 30, 2019, Pfizer announced the successful completion of its acquisition of Array BioPharma Inc. (Array). Array’s portfolio included the approved combined use of Braftovi (encorafenib) and Mektovi (binimetinib) for the treatment of BRAFV600E- or BRAFV600K- mutant unresectable or metastatic melanoma.
On July 1, 2019, Pfizer announced the successful completion of its acquisition of the privately held clinical-stage biotechnology company, Therachon Holding AG.
(2)
Revenues is defined as revenues in accordance with U.S. generally accepted accounting principles (GAAP). Reported net income/(loss) is defined as net income/(loss) attributable to Pfizer Inc. in accordance with U.S. GAAP. Reported diluted earnings per share (EPS) and reported loss per share (LPS) are defined as diluted EPS or LPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.
(3)
Adjusted income and its components and Adjusted diluted EPS are defined as reported U.S. GAAP net income/(loss)(2) and its components and reported diluted EPS/(LPS)(2) excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items (some of which may recur, such as gains on the completion of joint venture transactions, restructuring charges, legal

- 16 -




charges or net gains and losses on investments in equity securities, but which management does not believe are reflective of ongoing core operations). 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 as, and therefore components of, the overall Adjusted income measure. As described in the Financial Review––Non-GAAP Financial Measure (Adjusted Income) section of Pfizer’s 2018 Financial Report, which was filed as Exhibit 13 to Pfizer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, management uses Adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. Because Adjusted income is an important internal measurement for Pfizer, management believes that investors’ understanding of our performance is enhanced by disclosing this performance measure. Pfizer reports Adjusted income, certain components of Adjusted income, and Adjusted diluted EPS in order to portray the results of the company’s major operations––the discovery, development, manufacture, marketing and sale of prescription medicines and vaccines––prior to considering certain income statement elements. See the accompanying reconciliations of certain GAAP Reported to Non-GAAP Adjusted information for the fourth quarter and full year of 2019 and 2018. 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.
(4)
Financial guidance for Total Company reflects a full-year 2020 contribution from Biopharma and Upjohn, the current construct of the company, and excludes any impact from the pending Upjohn combination with Mylan.
(5)
Financial guidance for New Pfizer reflects a full-year 2020 pro forma view of the company assuming the pending Upjohn combination with Mylan was completed at the beginning of 2020. Therefore, New Pfizer reflects contributions from the Biopharma business as it is presently being managed, which excludes contributions from Pfizer’s Meridian subsidiary and the Pfizer-Mylan strategic collaboration in Japan (Mylan-Japan). Pfizer’s Meridian subsidiary and Mylan-Japan were managed by Pfizer’s Biopharma business in 2019. Financial guidance for New Pfizer also includes the full-year effect of the following items that assume the completion of the Upjohn combination with Mylan:
$12 billion of net proceeds from Upjohn to be retained by Pfizer, which Pfizer will use to repay its own existing indebtedness; and
other transaction-related items, such as income from transition services agreements between Pfizer and Viatris.
In addition, 2020 financial guidance for New Pfizer Adjusted IBT Margin(11) and Adjusted diluted EPS(3) reflects Pfizer’s share of the earnings generated by the Consumer Healthcare JV(1) in fourth-quarter 2019

- 17 -




(to be recorded by Pfizer in first-quarter 2020) as well as Pfizer’s share of the JV’s projected earnings during the first three quarters of 2020.
(6)
Financial guidance for Upjohn assumes a full-year 2020 contribution from the Upjohn business as it is presently being managed, which includes contributions from Pfizer’s Meridian subsidiary and the Pfizer-Mylan strategic collaboration in Japan (Mylan-Japan). Pfizer’s Meridian subsidiary and Mylan-Japan were managed by Pfizer’s Biopharma business in 2019.
(7)
Pfizer’s fiscal year-end for international subsidiaries is November 30 while Pfizer’s fiscal year-end for U.S. subsidiaries is December 31. Therefore, Pfizer’s fourth quarter and full year for U.S. subsidiaries reflects the three and twelve months ending on December 31, 2019 and December 31, 2018 while Pfizer’s fourth quarter and full year for subsidiaries operating outside the U.S. reflects the three and twelve months ending on November 30, 2019 and November 30, 2018.
(8)
References to operational variances in this press release pertain to period-over-period growth rates that exclude the impact of foreign exchange. The operational variances are determined by multiplying or dividing, as appropriate, the current period U.S. dollar results by the current period average foreign exchange rates and then multiplying or dividing, as appropriate, those amounts by the prior-year period average foreign exchange rates. Although exchange rate changes are part of Pfizer’s business, they are not within Pfizer’s control. Exchange rate changes, however, can mask positive or negative trends in the business; therefore, Pfizer believes presenting operational variances provides useful information in evaluating the results of its business.
(9)
Pfizer does not provide guidance for GAAP Reported financial measures (other than revenues) or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP Reported financial measures on a forward-looking basis because it is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gains and losses, acquisition-related expenses, net gains or losses on investments in equity securities and potential future asset impairments without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP Reported results for the guidance period.
The 2020 financial guidance for Total Company reflects the following:
Does not assume the completion of any business development transactions not completed as of December 31, 2019, including any one-time upfront payments associated with such transactions.
Includes Pfizer’s pro rata share of the Consumer Healthcare JV(1) anticipated earnings, which is recorded in Adjusted other (income)/deductions(3) on a one-quarter lag. Therefore, 2020 financial guidance for Adjusted other (income)/deductions(3) and Adjusted diluted EPS(3) reflects Pfizer’s share

- 18 -




of the JV’s earnings that were generated in fourth-quarter 2019 (to be recorded by Pfizer in first-quarter 2020) as well as Pfizer’s share of the JV’s projected earnings during first three quarters of 2020.
Reflects an anticipated negative revenue impact of $2.4 billion due to recent and expected generic and biosimilar competition for certain products that have recently lost or are anticipated to soon lose patent protection.
Exchange rates assumed are as of mid-January 2020. Reflects the anticipated unfavorable impact of approximately $0.2 billion on revenues and approximately $0.01 on Adjusted diluted EPS(3) as a result of changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2019.
Guidance for Adjusted diluted EPS(3) assumes diluted weighted-average shares outstanding of approximately 5.65 billion shares, which assumes no share repurchases in 2020.
(10)
Pfizer, Upjohn and Mylan are in the process of negotiating the terms on which Pfizer would transfer the Meridian business and/or certain Pfizer assets that currently form part of the Mylan-Japan collaboration to Viatris following the completion of the proposed combination of Upjohn and Mylan. There can be no assurance that any agreement or transaction will result from these negotiations and if the parties are unsuccessful in their efforts to negotiate the terms of such potential transactions, the Meridian business and/or the Pfizer assets that currently form part of the Mylan-Japan collaboration will remain with Pfizer.
(11)
Adjusted income(3) before tax margin (Adjusted IBT margin) is defined as revenue less the sum of Adjusted cost of sales(3), Adjusted SI&A expenses(3), Adjusted R&D expenses(3), Adjusted amortization of intangible assets(3) and Adjusted other (income)/deductions(3) as a percentage of revenue. Adjusted IBT Margin is presented because management believes this performance measure supplements investors’ and other readers’ understanding and assessment of the financial performance of New Pfizer(5). Adjusted IBT margin is not, and should not be viewed as, a substitute for U.S. GAAP income before tax margin.
(12)
Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) is defined as reported U.S. GAAP net income/(loss)(2), and its components, adjusted for interest expense, provision/(benefit) for taxes on income/(loss) and depreciation and amortization, further adjusted to exclude purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items (some of which may recur, such as gains on the completion of joint venture transactions, restructuring charges, legal charges or net gains and losses on investments in equity securities, but which management does not believe are reflective of ongoing core operations). Adjusted EBITDA is presented because management believes this performance measure supplements investors’ and other readers’ understanding and assessment of the

- 19 -




financial performance of Upjohn. Adjusted EBITDA as defined is not a measurement of financial performance under GAAP, and should not be considered as an alternative to net income/(loss)(2) or cash flow from operations determined in accordance with GAAP.
(13)
Humira® is a registered U.S. trademark of AbbVie Biotechnology Ltd.
(14)
Erbitux® is a registered trademark of ImClone LLC.
Contacts:
Media
 
Investors
 
 
Patricia Kelly
212.733.3810
Chuck Triano
212.733.3901
 
 
 
Ryan Crowe
212.733.8160
 
 
 
Bryan Dunn
212.733.8917

- 20 -


PFIZER INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME(1) 
(UNAUDITED)
(millions, except per common share data)


 
 
Fourth-Quarter
 
% Incr. /
 
Full-Year
 
% Incr. /
 
 
2019

 
2018

 
(Decr.)
 
2019

 
2018

 
(Decr.)
Revenues
 
$
12,688

 
$
13,976

 
(9)
 
$
51,750

 
$
53,647

 
(4)
Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales (2), (3)
 
2,608

 
3,075

 
(15)
 
10,219

 
11,248

 
(9)
Selling, informational and administrative expenses(2), (3)
 
4,240

 
4,007

 
6
 
14,350

 
14,455

 
(1)
Research and development expenses(1), (2), (3)
 
2,822

 
2,457

 
15
 
8,650

 
8,006

 
8
Amortization of intangible assets(3)
 
1,032

 
1,253

 
(18)
 
4,610

 
4,893

 
(6)
Restructuring charges and certain acquisition-related costs(4)
 
452

 
872

 
(48)
 
747

 
1,044

 
(28)
(Gain) on completion of Consumer Healthcare JV transaction(1)
 
1

 

 
*
 
(8,086
)
 

 
*
Other (income)/deductions––net(5)
 
3,041

 
3,259

 
(7)
 
3,578

 
2,116

 
69
Income/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss)
 
(1,508
)
 
(946
)
 
59
 
17,682

 
11,885

 
49
Provision/(benefit) for taxes on income/(loss)(6)
 
(1,181
)
 
(563
)
 
*
 
1,384

 
706

 
96
Income/(loss) from continuing operations
 
(326
)
 
(383
)
 
(15)
 
16,298

 
11,179

 
46
Discontinued operations––net of tax
 

 

 
 
4

 
10

 
(61)
Net income/(loss) before allocation to noncontrolling interests
 
(326
)
 
(383
)
 
(15)
 
16,302

 
11,188

 
46
Less: Net income attributable to noncontrolling interests
 
10

 
11

 
(7)
 
29

 
36

 
(18)
Net income/(loss) attributable to Pfizer Inc.
 
$
(337
)
 
$
(394
)
 
(14)
 
$
16,273

 
$
11,153

 
46
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings/(loss) per common share––basic:
 
 
 
 
 
 
 
 
 
 
 
 
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders
 
$
(0.06
)
 
$
(0.07
)
 
(11)
 
$
2.92

 
$
1.90

 
54
Discontinued operations––net of tax
 

 

 
 

 

 
Net income/(loss) attributable to Pfizer Inc. common shareholders
 
$
(0.06
)
 
$
(0.07
)
 
(10)
 
$
2.92

 
$
1.90

 
54
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings/(loss) per common share––diluted(7):
 
 
 
 
 
 
 
 
 
 
 
 
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders
 
$
(0.06
)
 
$
(0.07
)
 
(10)
 
$
2.87

 
$
1.86

 
54
Discontinued operations––net of tax
 

 

 
 

 

 
Net income/(loss) attributable to Pfizer Inc. common shareholders
 
$
(0.06
)
 
$
(0.07
)
 
(9)
 
$
2.87

 
$
1.87

 
54
Weighted-average shares used to calculate earnings/(loss) per common share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
5,535

 
5,788

 
 
 
5,569

 
5,872

 
 
Diluted(7)
 
5,631

 
5,912

 
 
 
5,675

 
5,977

 
 
*
Indicates calculation not meaningful or result is equal to or greater than 100%.
See end of tables for notes (1) through (7).
Amounts may not add due to rounding. All percentages have been calculated using unrounded amounts.


- 21 -


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

(1)
The financial statements present the three and twelve months ended December 31, 2019 and December 31, 2018. Subsidiaries operating outside the U.S. are included for the three and twelve months ended November 30, 2019 and November 30, 2018.
On July 31, 2019, we completed the transaction in which we and GlaxoSmithKline plc (GSK) combined our respective consumer healthcare businesses into a new consumer healthcare joint venture that operates globally under the GSK Consumer Healthcare name. In exchange for contributing our Consumer Healthcare business to the joint venture, we received a 32% equity stake in the new company and GSK owns the remaining 68%. Upon the closing of the transaction, we deconsolidated our Consumer Healthcare business and recognized a pre-tax gain of $8.1 billion ($5.4 billion, net of tax) in our fiscal third quarter of 2019 in (Gain) on completion of Consumer Healthcare JV transaction for the difference in the fair value of our 32% equity stake in the new company and the carrying value of our Consumer Healthcare business. In accordance with our domestic and international reporting periods, our financial results, and our Consumer Healthcare segment’s operating results, for full-year 2019 reflect seven months of Consumer Healthcare segment domestic operations and eight months of Consumer Healthcare segment international operations. We record our share of earnings from the Consumer Healthcare joint venture on a quarterly basis on a one-quarter lag in Other (income)/deductions––net commencing from August 1, 2019. Therefore, we recorded our share of two months of the joint venture’s earnings generated in the third quarter of 2019 in our operating results in the fourth quarter of 2019. See footnote (5) below.
The financial results of Array BioPharma Inc. (Array) are included in our consolidated financial statements commencing from the acquisition date of July 30, 2019.
The financial results of Therachon Holding AG (Therachon) are included in our consolidated financial statements commencing from the acquisition date of July 1, 2019. Therefore, in accordance with our international reporting period, our financial results for the fourth quarter of 2019 reflect three months and for full-year 2019 reflect five months of Therachon operations. In connection with this asset acquisition, we recorded a charge of $337 million in Research and development expenses in our fiscal third quarter of 2019.
Certain amounts in the consolidated statements of income and associated notes may not add due to rounding. All percentages have been calculated using unrounded amounts.
(2)
Exclusive of amortization of intangible assets, except as discussed in footnote (3) below.
(3)
Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets, as these intangible assets benefit multiple business functions. Amortization expense related to intangible assets that are associated with a single function is included in Cost of sales, Selling, informational and administrative expenses and/or Research and development expenses, as appropriate.
(4)
Restructuring charges and certain acquisition-related costs include the following:
 
 
Fourth-Quarter
 
Full-Year
(MILLIONS OF DOLLARS)
 
2019


2018

 
2019

 
2018

Restructuring charges/(credits)––acquisition-related costs(a)
 
$
4

 
$
33

 
$
(192
)
 
$
37

Restructuring charges––cost reduction initiatives(b)
 
419

 
782

 
565

 
745

Restructuring charges
 
423

 
814

 
373

 
782

Transaction costs(c)
 
(1
)
 

 
63

 
1

Integration costs and other(d)
 
30

 
58

 
311

 
260

Restructuring charges and certain acquisition-related costs
 
$
452

 
$
872

 
$
747

 
$
1,044

(a)
Restructuring charges/(credits)acquisition-related costs include employee termination costs, asset impairments and other exit costs associated with business combinations. Credits for full-year 2019 were mostly due to the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of a U.S. Internal Revenue Service (IRS) audit for multiple tax years. See footnote (6) below. Charges for the fourth quarter of 2018 were primarily due to asset write downs related to our acquisition of Hospira, Inc. (Hospira), and charges for full-year 2018 were mainly due to asset write downs, partially offset by the reversal of previously recorded accruals for employee termination costs related to our acquisition of Hospira.

- 22 -


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

(b)
Restructuring charges––cost reduction initiatives relate to employee termination costs, asset impairments and other exit costs not associated with acquisitions. For the fourth quarter and full-year 2019, the charges were mostly related to employee termination costs. For the fourth quarter and full-year 2018, the charges were mostly related to employee termination costs and asset write downs.
(c)
Transaction costs represent external costs for banking, legal, accounting and other similar services. For full-year 2019, transaction costs relate to our acquisition of Array.
(d)
Integration costs and other represent external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs. In the fourth quarter of 2019, integration costs and other were primarily related to our acquisition of Hospira, and for full-year 2019, integration costs and other were mostly related to our acquisitions of Array and Hospira. In the fourth quarter and full-year 2018, integration costs and other were primarily related to our acquisition of Hospira.
(5)
Other (income)/deductions––net includes the following:
 

Fourth-Quarter

Full-Year
(MILLIONS OF DOLLARS)

2019


2018


2019


2018

Interest income(a)

$
(41
)

$
(93
)

$
(226
)

$
(333
)
Interest expense(a)

415


370


1,574


1,316

Net interest expense

374


276


1,348


983

Royalty-related income(b)

(173
)

(135
)

(648
)

(495
)
Net (gains)/loss on asset disposals(c)

1


(52
)

(31
)

(71
)
Net gains recognized during the period on investments in equity securities(d)

(301
)

(126
)

(454
)

(586
)
Net realized losses on sales of investments in debt securities



121




141

Income from collaborations, out-licensing arrangements and sales of compound/product rights(e)

(45
)

(30
)

(168
)

(488
)
Net periodic benefit costs/(credits) other than service costs

174


(57
)

64


(288
)
Certain legal matters, net(f)

471


227


554


157

Certain asset impairments(g)

2,655


3,076


2,843


3,115

Business and legal entity alignment costs(h)

(5
)

58


338


63

Net losses on early retirement of debt(i)





138


3

GSK Consumer Healthcare JV equity (income)/loss(j)
 
(17
)
 

 
(17
)
 

Other, net(k)

(94
)

(99
)

(388
)

(417
)
Other (income)/deductions––net

$
3,041


$
3,259


$
3,578


$
2,116

(a)
Interest income decreased in the fourth quarter and full-year 2019, primarily driven by a lower investment balance. Interest expense increased in the fourth quarter and full-year 2019, mainly as a result of an increased commercial paper balance due to the acquisition of Array, as well as the retirement of lower-coupon debt and the issuance of new debt with a higher coupon than the debt outstanding for the comparative periods.
(b)
The increase in royalty-related income for full-year 2019 is primarily due to a one-time favorable resolution in the second quarter of 2019 of a legal dispute for $82 million.
(c)
The fourth quarter and full-year 2018 primarily included a realized gain on sale of property of $60 million.
(d)
The fourth quarter of 2019 includes, among other things, unrealized gains of $184 million and full-year 2019 includes, among other things, unrealized gains of $295 million related to investments in Cortexyme, Inc. and SpringWorks Therapeutics, Inc. Gains in the fourth quarter and full-year 2018 were mostly driven by unrealized gains of $466 million, related to our investment in Allogene Therapeutics, Inc.
(e)
Includes income from upfront and milestone payments from our collaboration partners and income from out-licensing arrangements and sales of compound/product rights.
(f)
In the fourth quarter and full-year 2019, primarily includes legal reserves for certain pending legal matters. In the fourth quarter of 2018, primarily included legal reserves for certain pending legal matters. In full-year 2018, primarily included legal reserves for certain pending legal matters, partially offset by the reversal of a legal accrual where a loss was no longer deemed probable.
(g)
In the fourth quarter and full-year 2019, primarily includes an intangible asset impairment charge of $2.6 billion, related to Eucrisa, a Biopharma finite-lived developed technology right acquired in connection with our

- 23 -


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

acquisition of Anacor Pharmaceuticals, Inc., and reflects updated commercial forecasts mainly reflecting competitive pressures. In full-year 2019, also includes intangible asset impairment charges of $181 million, $90 million of which represents in-process research and development (IPR&D) related to a pre-clinical stage asset from our acquisition of Bamboo Therapeutics, Inc. for gene therapies for the potential treatment of patients with certain rare diseases. In the fourth quarter and full-year 2018, primarily included intangible asset impairment charges of $3.1 billion, mainly composed of (i) $2.6 billion related to developed technology rights, $242 million related to licensing agreements and $80 million related to IPR&D, all of which related to our acquisition of Hospira, for generic sterile injectable products associated with various indications and (ii) $117 million related to a multi-antigen vaccine IPR&D program for adults undergoing elective spinal fusion surgery. In 2018, the intangible asset impairment charges associated with the generic sterile injectable products reflect, among other things, updated commercial forecasts, reflecting an increased competitive environment as well as higher manufacturing costs, largely stemming from manufacturing and supply issues. The intangible asset impairment charge for the multi-antigen vaccine IPR&D program was the result of the Phase 2b trial reaching futility at a pre-planned interim analysis.
(h)
In the fourth quarter of 2018 and full-year 2018 and 2019, mainly represents incremental costs associated with the design, planning and implementation of our new organizational structure, effective in the beginning of 2019, and primarily includes consulting, legal, tax and advisory services.
(i)
In full-year 2019, represents net losses due to the early retirement of debt in the first quarter of 2019, inclusive of the related termination of cross-currency swaps.
(j)
For additional information, see footnote (1) above.
(k)
The fourth quarter of 2019 includes, among other things, dividend income of $36 million from our investment in ViiV Healthcare Limited (ViiV). Full-year 2019 includes, among other things, (i) dividend income of $220 million from our investment in ViiV, (ii) charges of $152 million for external incremental costs, such as transaction costs and costs to separate our Consumer Healthcare business into a separate legal entity, associated with the formation of the GSK Consumer Healthcare joint venture and (iii) $50 million of income from insurance recoveries related to Hurricane Maria. The fourth quarter of 2018 included, among other things, credits of $51 million, reflecting the change in the fair value of contingent consideration, and dividend income of $27 million from our investment in ViiV. Full-year 2018 included, among other things, (i) a non-cash $343 million pre-tax gain associated with our transaction with Bain Capital Private Equity and Bain Capital Life Sciences to create a new biopharmaceutical company, Cerevel Therapeutics, LLC, to continue development of a portfolio of clinical and pre-clinical stage neuroscience assets primarily targeting disorders of the central nervous system, (ii) dividend income of $253 million from our investment in ViiV, (iii) a non-cash $50 million pre-tax gain on the contribution of Pfizer’s allogeneic chimeric antigen receptor T cell therapy development program assets obtained from Cellectis S.A. and Les Laboratoires Servier SAS in connection with our contribution agreement entered into with Allogene Therapeutics, Inc., (iv) a non-cash $17 million pre-tax gain on the cash settlement of a liability that we incurred in April 2018 upon the European Union approval of Mylotarg, (v) charges of $207 million, reflecting the change in the fair value of contingent consideration, and (vi) charges of $112 million for external incremental costs, such as transaction costs and costs to separate our Consumer Healthcare business into a separate legal entity, associated with the formation of the GSK Consumer Healthcare joint venture.
(6)
The Provision/(benefit) for taxes on income/(loss) for fourth-quarter and full-year 2019 was favorably impacted by benefits related to certain tax initiatives associated with the implementation our new organizational structure, as well as the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business. Full-year 2019 was also unfavorably impacted by the tax expense associated with the gain related to the completion of the Consumer Healthcare joint venture transaction with GSK and favorably impacted by a benefit of $1.4 billion, representing tax and interest, resulting from the favorable settlement of a U.S. IRS audit for multiple tax years, as well as the tax benefit recorded as a result of additional guidance issued by the U.S. Department of Treasury related to the legislation commonly referred to as the U.S. Tax Cuts and Jobs Act (TCJA). The Provision/(benefit) for taxes on income/(loss) for fourth-quarter and full-year 2018 was favorably impacted primarily by (i) adjustments to the provisional estimate recorded as we finalized our accounting related to the tax effects of the TCJA, in accordance with guidance issued by the U.S. Securities and Exchange Commission, (ii) the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, as well as (iii) the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations.
(7)
For fourth-quarter 2019, we used basic weighted average shares of 5,535 million and for fourth quarter 2018, we used basic weighted average shares of 5,788 million (excluding common-share equivalents) to calculate GAAP Reported Loss per common share––diluted on Net loss attributable to Pfizer Inc.

- 24 -


PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION(1) 
CERTAIN LINE ITEMS - (UNAUDITED)
(millions of dollars, except per common share data)

 
 
Fourth-Quarter 2019
 
 
GAAP Reported(2)
 
Purchase Accounting Adjustments
 
Acquisition-Related Items(3)
 
Discontinued Operations
 
Certain Significant Items(4)
 
Non-GAAP Adjusted(5)
Revenues
 
$
12,688

 
$

 
$

 
$

 
$

 
$
12,688

Cost of sales(6), (7)
 
2,608

 
5

 

 

 
(12
)
 
2,600

Selling, informational and administrative expenses(6), (7)
 
4,240

 

 

 

 
(170
)
 
4,070

Research and development expenses(1), (6), (7)
 
2,822

 
1

 

 

 
(294
)
 
2,530

Amortization of intangible assets(7)
 
1,032

 
(961
)
 

 

 

 
70

Restructuring charges and certain acquisition-related costs
 
452

 

 
(33
)
 

 
(419
)
 

(Gain) on completion of Consumer Healthcare JV transaction(1)
 
1

 

 

 

 
(1
)
 

Other (income)/deductions––net(8)
 
3,041

 
(21
)
 

 

 
(3,118
)
 
(97
)
Income/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss)
 
(1,508
)
 
976

 
33

 

 
4,014

 
3,515

Provision/(benefit) for taxes on income/(loss)
 
(1,181
)
 
163

 
(10
)
 

 
1,426

 
398

Income/(loss) from continuing operations
 
(326
)
 
813

 
43

 

 
2,588

 
3,118

Discontinued operations––net of tax
 

 

 

 

 

 

Net income attributable to noncontrolling interests
 
10

 

 

 

 

 
10

Net income/(loss) attributable to Pfizer Inc.
 
(337
)
 
813

 
43

 

 
2,588

 
3,108

Earnings/(loss) per common share attributable to Pfizer Inc.––diluted(9)
 
(0.06
)
 
0.14

 
0.01

 

 
0.46

 
0.55

 
 
Full-Year Ended December 31, 2019
 
 
GAAP Reported(2)
 
Purchase Accounting Adjustments
 
Acquisition-Related Items(3)
 
Discontinued Operations
 
Certain Significant Items(4)
 
Non-GAAP Adjusted(5)
Revenues
 
$
51,750

 
$

 
$

 
$

 
$

 
$
51,750

Cost of sales(6), (7)
 
10,219

 
19

 

 

 
(208
)
 
10,030

Selling, informational and administrative expenses(6), (7)
 
14,350

 
2

 
(2
)
 

 
(309
)
 
14,041

Research and development expenses(1), (6), (7)
 
8,650

 
4

 

 

 
(666
)
 
7,988

Amortization of intangible assets(7)
 
4,610

 
(4,339
)
 

 

 

 
271

Restructuring charges and certain acquisition-related costs
 
747

 

 
(183
)
 

 
(565
)
 

(Gain) on completion of Consumer Healthcare JV transaction(1)
 
(8,086
)
 

 

 

 
8,086

 

Other (income)/deductions––net(8)
 
3,578

 
(21
)
 

 

 
(3,858
)
 
(300
)
Income/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss)
 
17,682

 
4,333

 
185

 

 
(2,481
)
 
19,720

Provision/(benefit) for taxes on income/(loss)
 
1,384

 
848

 
59

 

 
667

 
2,958

Income/(loss) from continuing operations
 
16,298

 
3,485

 
126

 

 
(3,148
)
 
16,762

Discontinued operations––net of tax
 
4

 

 

 
(4
)
 

 

Net income attributable to noncontrolling interests
 
29

 

 

 

 

 
29

Net income/(loss) attributable to Pfizer Inc.
 
16,273

 
3,485

 
126

 
(4
)
 
(3,148
)
 
16,733

Earnings/(loss) per common share attributable to Pfizer Inc.––diluted
 
2.87

 
0.61

 
0.02

 

 
(0.55
)
 
2.95

See end of tables for notes (1) through (9).
Amounts may not add due to rounding.

- 25 -


PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION(1) 
CERTAIN LINE ITEMS - (UNAUDITED)
(millions of dollars, except per common share data)

 
 
Fourth-Quarter 2018
 
 
GAAP Reported(2)
 
Purchase Accounting Adjustments
 
Acquisition-Related Items(3)
 
Discontinued Operations
 
Certain Significant Items(4)
 
Non-GAAP Adjusted(5)
Revenues
 
$
13,976

 
$

 
$

 
$

 
$

 
$
13,976

Cost of sales(6), (7)
 
3,075

 
5

 
(2
)
 

 
(34
)
 
3,044

Selling, informational and administrative expenses(6), (7)
 
4,007

 
1

 
(2
)
 

 
(38
)
 
3,968

Research and development expenses(6), (7)
 
2,457

 

 

 

 
(21
)
 
2,436

Amortization of intangible assets(7)
 
1,253

 
(1,184
)
 

 

 

 
69

Restructuring charges and certain acquisition-related costs
 
872

 

 
(90
)
 

 
(782
)
 

(Gain) on completion of Consumer Healthcare JV transaction
 

 

 

 

 

 

Other (income)/deductions––net(8)
 
3,259

 
56

 
(3
)
 

 
(3,297
)
 
15

Income/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss)
 
(946
)
 
1,121

 
97

 

 
4,172

 
4,443

Provision/(benefit) for taxes on income/(loss)
 
(563
)
 
180

 
14

 

 
1,052

 
683

Income/(loss) from continuing operations
 
(383
)
 
941

 
83

 

 
3,120

 
3,760

Discontinued operations––net of tax
 

 

 

 

 

 

Net income attributable to noncontrolling interests
 
11

 

 

 

 

 
11

Net income/(loss) attributable to Pfizer Inc.
 
(394
)
 
941

 
83

 

 
3,120

 
3,749

Earnings/(loss) per common share attributable to Pfizer Inc.––diluted(9)
 
(0.07
)
 
0.16

 
0.01

 

 
0.53

 
0.63

 
 
Full-Year Ended December 31, 2018
 
 
GAAP Reported(2)
 
Purchase Accounting Adjustments
 
Acquisition-Related Items(3)
 
Discontinued Operations
 
Certain Significant Items(4)
 
Non-GAAP Adjusted(5)
Revenues
 
$
53,647

 
$

 
$

 
$

 
$

 
$
53,647

Cost of sales(6), (7)
 
11,248

 
3

 
(10
)
 

 
(110
)
 
11,130

Selling, informational and administrative expenses(6), (7)
 
14,455

 
2

 
(2
)
 

 
(222
)
 
14,232

Research and development expenses(6), (7)
 
8,006

 
3

 

 

 
(47
)
 
7,962

Amortization of intangible assets(7)
 
4,893

 
(4,612
)
 

 

 

 
281

Restructuring charges and certain acquisition-related costs
 
1,044

 

 
(299
)
 

 
(745
)
 

(Gain) on completion of Consumer Healthcare JV transaction
 

 

 

 

 

 

Other (income)/deductions––net(8)
 
2,116

 
(182
)
 
(7
)
 

 
(2,595
)
 
(667
)
Income/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss)
 
11,885

 
4,786

 
318

 

 
3,719

 
20,709

Provision/(benefit) for taxes on income/(loss)
 
706

 
915

 
54

 

 
1,520

 
3,196

Income/(loss) from continuing operations
 
11,179

 
3,871

 
264

 

 
2,199

 
17,513

Discontinued operations––net of tax
 
10

 

 

 
(10
)
 

 

Net income attributable to noncontrolling interests
 
36

 

 

 

 

 
36

Net income/(loss) attributable to Pfizer Inc.
 
11,153

 
3,871

 
264

 
(10
)
 
2,199

 
17,477

Earnings/(loss) per common share attributable to Pfizer Inc.––diluted
 
1.87

 
0.65

 
0.04

 

 
0.37

 
2.92

See end of tables for notes (1) through (9).
Amounts may not add due to rounding.

- 26 -


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS - (UNAUDITED)

(1)
In 2018, Pfizer’s Non-GAAP Adjusted results included net gains on investments in equity securities, which favorably impacted full-year 2018 Adjusted Other (Income)/Deductions by $586 million and Adjusted Diluted EPS by $0.08.
Beginning in 2019, Pfizer excludes net gains and losses on investments in equity securities from Non-GAAP Adjusted results because of their inherent volatility, which is outside of Pfizer management’s control and cannot be predicted with any level of certainty. Additionally, Pfizer management does not believe that including these gains and losses assists investors in understanding Pfizer's business or is reflective of its core operations. Non-GAAP Adjusted financial results for fourth-quarter and full-year 2018 have been revised from previously reported amounts to conform with the 2019 presentation. See Note (4) below for additional information.
On July 31, 2019, we completed the transaction in which we and GlaxoSmithKline plc (GSK) combined our respective consumer healthcare businesses into a new consumer healthcare joint venture that operates globally under the GSK Consumer Healthcare name. In exchange for contributing our Consumer Healthcare business to the joint venture, we received a 32% equity stake in the new company and GSK owns the remaining 68%. Upon the closing of the transaction, we deconsolidated our Consumer Healthcare business and recognized a pre-tax gain of $8.1 billion ($5.4 billion net of tax) in our fiscal third quarter of 2019 in (Gain) on completion of Consumer Healthcare JV transaction for the difference in the fair value of our 32% equity stake in the new company and the carrying value of our Consumer Healthcare business. In accordance with our domestic and international reporting periods, our financial results, and our Consumer Healthcare segment’s operating results, for full-year 2019 reflect seven months of Consumer Healthcare segment domestic operations and eight months of Consumer Healthcare segment international operations. We record our share of earnings from the Consumer Healthcare joint venture on a quarterly basis on a one-quarter lag in Other (income)/deductions––net commencing from August 1, 2019. Therefore, we recorded our share of two months of the joint venture’s earnings generated in the third quarter of 2019 in our operating results in the fourth quarter of 2019. For the non-GAAP measure of Adjusted Earnings, see footnote (5) below, our share of certain charges recognized by the joint venture primarily related to restructuring activities and business combination accounting are excluded from the measure. The gain generated from the contribution of our Consumer Healthcare business was also excluded from Adjusted Income.
The financial results of Array BioPharma Inc. (Array) are included in our consolidated financial statements commencing from the acquisition date of July 30, 2019.
The financial results of Therachon Holding AG (Therachon) are included in our consolidated financial statements commencing from the acquisition date of July 1, 2019. Therefore, in accordance with our international reporting period, our financial results for the fourth quarter of 2019 reflect three months and for full-year 2019 reflect five months of Therachon operations. In connection with this asset acquisition, we recorded a charge of $337 million in Research and development expenses in our fiscal third quarter of 2019.
Certain amounts in the reconciliation of GAAP reported to Non-GAAP adjusted information and associated notes may not add due to rounding.
(2)
The financial statements present the three and twelve months ended December 31, 2019 and December 31, 2018. Subsidiaries operating outside the U.S. are included for the three and twelve months ended November 30, 2019 and November 30, 2018.
(3)
Acquisition-related items include the following:
 
 
Fourth-Quarter
 
Full-Year
(MILLIONS OF DOLLARS)
 
2019

 
2018

 
2019

 
2018

Restructuring charges/(credits)(a)
 
$
4

 
$
33

 
$
(192
)
 
$
37

Transaction costs(b)
 
(1
)
 

 
63

 
1

Integration costs and other(c)
 
30

 
58

 
311

 
260

Net periodic benefit costs other than service costs
 

 
3

 

 
7

Additional depreciation––asset restructuring(d)
 
1

 
4

 
3

 
12

Total acquisition-related items––pre-tax
 
33

 
97

 
185

 
318

Income taxes(e)
 
10

 
(14
)
 
(59
)
 
(54
)
Total acquisition-related items––net of tax
 
$
43

 
$
83

 
$
126

 
$
264

(a)
Includes employee termination costs, asset impairments and other exit costs associated with business combinations. Credits for full-year 2019 were mostly due to the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of a U.S. Internal Revenue Service (IRS) audit for multiple tax years. See footnote (4)(j) below. Charges for the fourth quarter of 2018 were primarily due to asset write downs related to our acquisition of Hospira, Inc. (Hospira), and charges for full-year 2018 were mainly due

- 27 -


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS - (UNAUDITED)

to asset write downs, partially offset by the reversal of previously recorded accruals for employee termination costs related to our acquisition of Hospira. All of these items are included in Restructuring charges and certain acquisition-related costs.
(b)
Transaction costs represent external costs for banking, legal, accounting and other similar services. For full-year 2019, transaction costs relate to our acquisition of Array. All of these items are included in Restructuring charges and certain acquisition-related costs.
(c)
Integration costs and other represent external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs. In the fourth quarter of 2019, integration costs and other were primarily related to our acquisition of Hospira, and for full-year 2019, integration costs and other were mostly related to our acquisitions of Array and Hospira. In the fourth quarter and full-year 2018, integration costs and other were primarily related to our acquisition of Hospira. All of these costs and charges are included in Restructuring charges and certain acquisition-related costs.
(d)
Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions related to acquisitions. In the fourth quarter and full-year 2019, primarily included in Selling, informational and administrative expenses. In the fourth quarter and full-year 2018, included in Cost of sales and Selling, informational and administrative expenses.
(e)
Included in Provision/(benefit) for taxes on income/(loss). Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. Full-year 2019 includes the impact of the non-taxable reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of a U.S. IRS audit for multiple tax years. See footnote (4)(j) below.
(4)
Certain significant items include the following:
 
 
Fourth-Quarter
 
Full-Year
(MILLIONS OF DOLLARS)
 
2019

 
2018

 
2019

 
2018

Restructuring charges––cost reduction initiatives(a)
 
$
419

 
$
782

 
$
565

 
$
745

Implementation costs and additional depreciation––asset restructuring(b)
 
59

 
68

 
194

 
232

Certain legal matters, net(c)
 
471

 
227

 
543

 
157

Certain asset impairments(d)
 
2,648

 
3,070

 
2,798

 
3,101

Business and legal entity alignment costs(e)
 
142

 
58

 
495

 
63

Net gains recognized during the period on investments in equity securities(f)
 
(276
)
 
(126
)
 
(415
)
 
(586
)
(Gain) on completion of Consumer Healthcare JV transaction(g)
 
1

 

 
(8,086
)
 

Net losses on early retirement of debt(h)
 

 

 
138

 
3

Other(i)
 
550

 
94

 
1,289

 
4

Total certain significant items––pre-tax
 
4,014

 
4,172

 
(2,481
)
 
3,719

Income taxes(j)
 
(1,426
)
 
(1,052
)
 
(667
)
 
(1,520
)
Total certain significant items––net of tax
 
$
2,588

 
$
3,120

 
$
(3,148
)
 
$
2,199

(a)
Restructuring charges––cost reduction initiatives relate to employee termination costs, asset impairments and other exit costs not associated with acquisitions, which are included in Restructuring charges and certain acquisition-related costs. For the fourth quarter and full-year 2019, the charges were mostly related to employee termination costs. For the fourth quarter and full-year 2018, the charges were mostly related to employee termination costs and asset write downs.
(b)
Relates to our cost-reduction and productivity initiatives not related to acquisitions. Included in Cost of sales ($24 million), Selling, informational and administrative expenses ($26 million) and Research and development expenses ($9 million) for the fourth quarter of 2019. Included in Cost of sales ($90 million), Selling, informational and administrative expenses ($74 million) and Research and development expenses ($30 million) for full-year 2019. Included in Cost of sales ($30 million), Selling, informational and administrative expenses ($21 million) and Research and development expenses ($17 million) for the fourth quarter of 2018. Included in Cost of sales ($121 million), Selling, informational and administrative expenses ($72 million) and Research and development expenses ($39 million) for full-year 2018.
(c)
Included in Other (income)/deductions––net. In the fourth quarter and full-year 2019, primarily includes legal reserves for certain pending legal matters. In the fourth quarter of 2018, primarily includes legal reserves for

- 28 -


PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS - (UNAUDITED)

certain pending legal matters. In full-year 2018, primarily includes legal reserves for certain pending legal matters, partially offset by the reversal of a legal accrual where a loss was no longer deemed probable.
(d)
Included in Other (income)/deductions––net. In the fourth quarter and full-year 2019, primarily includes an intangible asset impairment charge of $2.6 billion related to Eucrisa, a Biopharma finite-lived developed technology right acquired in connection with our acquisition of Anacor Pharmaceuticals, Inc., and reflects updated commercial forecasts mainly reflecting competitive pressures. In full-year 2019, also includes intangible asset impairment charges of $181 million, $90 million of which represents in-process research and development (IPR&D) related to a pre-clinical stage asset from our acquisition of Bamboo Therapeutics, Inc. for gene therapies for the potential treatment of patients with certain rare diseases. In the fourth quarter and full-year 2018, primarily includes intangible asset impairment charges of $3.1 billion, mainly composed of (i) $2.6 billion related to developed technology rights, $242 million related to licensing agreements and $80 million related to IPR&D, all of which relate to our acquisition of Hospira, for generic sterile injectable products associated with various indications and (ii) $117 million related to a multi-antigen vaccine IPR&D program for adults undergoing elective spinal fusion surgery. In 2018, the intangible asset impairment charges associated with the generic sterile injectable products reflect, among other things, updated commercial forecasts, reflecting an increased competitive environment as well as higher manufacturing costs, largely stemming from manufacturing and supply issues. The intangible asset impairment charge for the multi-antigen vaccine IPR&D program was the result of the Phase 2b trial reaching futility at a pre-planned interim analysis.
(e)
In the fourth quarter of 2019, primarily included in Cost of sales ($15 million) and Selling, informational and administrative expenses ($128 million) and mostly represents separation costs associated with our planned Upjohn transaction with Mylan, and mainly includes consulting, legal, tax and advisory services. In full-year 2019, primarily included in Cost of sales ($15 million), Selling, informational and administrative expenses ($139 million) and Other (income)/deductions––net ($338 million) and represents (i) incremental costs associated with the design, planning and implementation of our new organizational structure, effective in the beginning of 2019, and primarily includes consulting, legal, tax and advisory services and (ii) separation costs associated with our planned Upjohn transaction with Mylan and mainly includes consulting, legal, tax and advisory services. In the fourth quarter and full-year 2018, primarily included in Other (income)/deductions––net and mainly represents incremental costs associated with the design, planning and implementation of our new organizational structure, effective in the beginning of 2019, and primarily includes consulting, legal, tax and advisory services.
(f)
Included in Other (income)/deductions––net. The fourth quarter of 2019 includes, among other things, unrealized gains of $184 million and full-year 2019 includes, among other things, unrealized gains of $295 million related to investments in Cortexyme, Inc. and SpringWorks Therapeutics, Inc. Gains in the fourth quarter and full-year 2018 were mostly driven by unrealized gains of $466 million related to our investment in Allogene Therapeutics, Inc.
(g)
Included in (Gain) on completion of Consumer Healthcare JV transaction. See note (1) above.
(h)
Included in Other (income)/deductions––net. In full-year 2019, represents net losses due to the early retirement of debt in the first quarter of 2019, inclusive of the related termination of cross-currency swaps.
(i)
For the fourth quarter of 2019, included in Cost of sales ($27 million income), Selling, informational and administrative expenses ($16 million), Research and development expenses ($282 million) and Other (income)/deductions––net ($279 million). For full-year 2019, included in Cost of sales ($103 million), Selling, informational and administrative expenses ($96 million), Research and development expenses ($632 million) and Other (income)/deductions––net ($457 million). In the fourth quarter of 2018, included in Cost of sales ($4 million), Selling, informational and administrative expenses ($17 million), Research and development expenses ($4 million) and Other (income)/deductions––net ($69 million). In full-year 2018, included in Cost of sales ($10 million income), Selling, informational and administrative expenses ($151 million), Research and development expenses ($8 million) and Other (income)/deductions––net ($143 million income). The fourth quarter and full-year 2019 include, among other things, (i) an upfront license fee payment of $250 million to Akcea Therapeutics, Inc., which was recorded in Research and development expenses and (ii) charges of $112 million recorded in Other (income)/deductions––net representing our pro rata share of primarily restructuring and business combination accounting charges recorded by the Consumer Healthcare joint venture. See footnote (1) above. Full-year 2019 also includes, among other things, (i) a $337 million charge in Research and development expenses related to our acquisition of Therachon, (ii) a $99 million charge in Cost of sales related to rivipansel, primarily for inventory manufactured for expected future sale and (iii) charges of $240 million, primarily in Selling, informational and administrative expenses ($87 million) and Other (income)/deductions––net ($152 million), for external incremental costs, such as transaction costs and costs to separate our Consumer Healthcare business into a separate legal entity associated with the formation of the GSK Consumer Healthcare joint venture. Full-year 2018 includes, among other things, (i) a non-cash $343 million pre-tax gain in Other (income)/deductions––net

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PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS - (UNAUDITED)

associated with our transaction with Bain Capital Private Equity and Bain Capital Life Sciences to create a new biopharmaceutical company, Cerevel Therapeutics, LLC, to continue development of a portfolio of clinical and pre-clinical stage neuroscience assets primarily targeting disorders of the central nervous system, (ii) a $119 million charge, in the aggregate, in Selling, informational and administrative expenses for a special, one-time bonus paid to virtually all Pfizer colleagues, excluding executives, which was one of several actions taken by us after evaluating the expected positive net impact of the December 2017 enactment of the legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017 (TCJA) and (iii) a non-cash $50 million pre-tax gain in Other (income)/deductions––net as a result of the contribution of our allogeneic chimeric antigen receptor T cell therapy development program assets in connection with our asset contribution agreement entered into with Allogene Therapeutics, Inc.
(j)
Included in Provision/(benefit) for taxes on income/(loss). Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. Also included is the effect of certain U.S. tax consequences. The fourth-quarter and full-year 2019 were favorably impacted by the benefits related to certain tax initiatives associated with the implementation of our new organizational structure. Full-year 2019 was unfavorably impacted by the tax expense associated with the gain related to the completion of the Consumer Healthcare joint venture transaction with GSK and favorably impacted by a benefit of $1.4 billion, representing tax and interest, resulting from the favorable settlement of a U.S. IRS audit for multiple tax years, as well as the tax benefit recorded as a result of additional guidance issued by the U.S. Department of Treasury related to the TCJA. The fourth quarter and full-year 2018 were favorably impacted primarily by tax benefits related to the TCJA, including certain 2018 tax initiatives as well as adjustments to the provisional estimate of the legislation, reported and disclosed within the applicable measurement period, in accordance with guidance issued by the U.S. Securities and Exchange Commission.
(5)
Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. Despite the importance of these measures to management in goal setting and performance measurement (as described in the Financial Review––Non-GAAP Financial Measure (Adjusted Income) section of Pfizer’s 2018 Financial Report, which was filed as Exhibit 13 to Pfizer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018), Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, are limited in their usefulness to investors. Because of their non-standardized definitions, Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS (unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of similar measures of other companies. Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS are presented solely to permit investors to more fully understand how management assesses performance.
(6)
Exclusive of amortization of intangible assets, except as discussed in footnote (7) below.
(7)
Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense related to intangible assets that are associated with a single function is included in Cost of sales, Selling, informational and administrative expenses and/or Research and development expenses, as appropriate.

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PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS - (UNAUDITED)

(8)
Non-GAAP Adjusted Other (income)/deductions––net includes the following:
 
 
Fourth-Quarter
 
Full-Year
(MILLIONS OF DOLLARS)
 
2019

 
2018

 
2019

 
2018

Interest income
 
$
(41
)
 
$
(93
)
 
$
(226
)
 
$
(333
)
Interest expense
 
421

 
377

 
1,596

 
1,344

Net interest expense
 
380

 
283

 
1,370

 
1,011

Royalty-related income
 
(173
)
 
(135
)
 
(648
)
 
(495
)
Net (gains)/losses on asset disposals
 
1


(52
)

(31
)

(71
)
Net gains recognized during the period on investments in equity securities
 
(25
)
 

 
(39
)
 

Net realized losses on sales of investments in debt securities
 

 
121

 

 
141

Income from collaborations, out-licensing arrangements and sales of compound/product rights
 
(45
)
 
(30
)
 
(168
)
 
(464
)
Net periodic benefit costs/(credits) other than service costs
 
20

 
(102
)
 
(109
)
 
(435
)
Certain legal matters, net
 

 

 
12

 

Certain asset impairments
 
7

 
6

 
46

 
15

GSK Consumer Healthcare JV equity (income)/loss
 
(129
)
 

 
(129
)