Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

3 Months Ended

Apr. 03, 2022

Restructuring and Related Activities [Abstract]

Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

A. Transforming to a More Focused Company Program

With the formation of the Consumer Healthcare JV in 2019 and the spin-off of our Upjohn Business in the fourth quarter of 2020, Pfizer has transformed into a focused, global leader in science-based innovative medicines and vaccines. We have undertaken efforts to ensure our cost base and support model align appropriately with our new operating structure. While certain direct costs transferred to the Consumer Healthcare JV, and to the Upjohn Business in connection with the spin-off, there are indirect costs which did not transfer. This program is primarily composed of the following three initiatives:

•We are taking steps to restructure our corporate enabling functions to appropriately support our business, R&D and PGS platform functions. We expect costs, primarily related to restructuring our corporate enabling functions, to total $1.8 billion, with substantially all costs to be cash expenditures. Actions include, among others, changes in location of certain activities, expanded use and co-location of centers of excellence and shared services, and increased use of digital technologies. The associated actions and the specific costs will primarily include severance and benefit plan impacts, exit costs as well as associated implementation costs.

•In addition, we are transforming our commercial go-to market model in the way we engage patients and physicians. We expect costs of $1.1 billion, with substantially all costs to be cash expenditures. Actions include, among others, centralization of certain activities and enhanced use of digital technologies. The costs for this effort primarily include severance and associated implementation costs.

•We are also optimizing our manufacturing network under this program and incurring one-time costs for cost-reduction initiatives related to our manufacturing operations. We expect to incur costs of $800 million, with approximately 25% of the costs to be non-cash. The costs for this effort include, among other things, severance costs, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.

The program costs discussed above are expected to be incurred primarily from 2020 through 2022, and may be rounded and represent approximations.

From the start of this program in the fourth quarter of 2019 through April 3, 2022, we incurred costs of $2.3 billion, of which $875 million is associated with Biopharma ($20 million in 2022, $712 million in 2021, $79 million in 2020 and $64 million in 2019).

B. Key Activities


The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits:
	Three Months Ended
(MILLIONS)		April 3, 2022		April 4, 2021
Restructuring charges/(credits):
Employee terminations		$	25	$	22
Asset impairments		8		(5)
Exit costs/(credits)		11		—
Restructuring charges/(credits)(a)		43		17
Transaction costs(b)		6		—
Integration costs and other(c)		142		5
Restructuring charges and certain acquisition-related costs		192		22
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net		(6)		8




Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income, mainly in Cost of sales(d)		9		6
Implementation costs recorded in our condensed consolidated statements of income as follows(e):
Cost of sales		12		11
Selling, informational and administrative expenses		74		64


Total implementation costs		85		75
Total costs associated with acquisitions and cost-reduction/productivity initiatives		$	280	$	111

(a)Primarily represents cost reduction initiatives.

(b)Represents external costs for banking, legal, accounting and other similar services.

(c)Represents 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 first quarter of 2022, integration costs and other were mostly related to our acquisition of Arena, including $138 million in payments to Arena employees for the fair value of previously unvested long-term incentive awards. See Note 2A.

(d)Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.

(e)Represents external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.


The following summarizes the components and changes in restructuring accruals:
(MILLIONS)	Employee Termination Costs		Asset Impairment Charges		Exit Costs		Accrual
Balance, December 31, 2021(a)	$	1,014	$	—	$	57	$	1,071
Provision	25		8		11		43
Utilization and other(b)	(95)		(8)		(59)		(163)
Balance, April 3, 2022(c)	$	943	$	—	$	9	$	952

(a)Included in Other current liabilities ($816 million) and Other noncurrent liabilities ($255 million).

(b)Includes adjustments for foreign currency translation.

(c)Included in Other current liabilities ($812 million) and Other noncurrent liabilities ($140 million).