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

6 Months Ended

Jul. 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 continue our efforts to ensure our cost base and support model align appropriately with this 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 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 $1.2 billion, with 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 July 3, 2022, we incurred costs of $2.5 billion, of which $987 million ($800 million of restructuring charges) is associated with Biopharma.

B. Key Activities


The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits:
	Three Months Ended				Six Months Ended
(MILLIONS)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Restructuring charges/(credits):
Employee terminations	$	110	$	(4)	$	135	$	19
Asset impairments	20		2		28		(3)
Exit costs/(credits)	18		(3)		29		(3)
Restructuring charges/(credits)(a)	147		(5)		191		12
Transaction costs(b)	36		—		42		—
Integration costs and other(c)	6		4		148		8
Restructuring charges and certain acquisition-related costs	189		(1)		381		21
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net	—		4		(6)		12
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(d):
Cost of sales	7		27		15		34
Selling, informational and administrative expenses	—		16		—		16

Total additional depreciation––asset restructuring	7		43		15		49
Implementation costs recorded in our condensed consolidated statements of income as follows(e):
Cost of sales	15		10		27		21
Selling, informational and administrative expenses	134		80		208		144


Total implementation costs	149		90		235		166
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	345	$	137	$	625	$	248

(a)Primarily represents cost reduction initiatives. Restructuring charges/(credits) associated with Biopharma: charges of $50 million and $46 million for the three and six months ended July 3, 2022, respectively, and credits of $4 million and charges of $1 million for the three and six months ended July 4, 2021, respectively.

(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 three and six months ended July 3, 2022, integration costs and other were mostly related to our acquisition of Arena, including $138 million in payments to Arena employees in the first quarter of 2022 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	135		28		29		191
Utilization and other(b)	(244)		(28)		(78)		(349)
Balance, July 3, 2022(c)	$	904	$	—	$	8	$	913

(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 ($794 million) and Other noncurrent liabilities ($119 million).