EX-99 2 a50457010ex99.htm EXHIBIT 99 a50457010ex99.htm
Exhibit 99
 
PFIZER REPORTS THIRD-QUARTER 2012 RESULTS

§
Third-Quarter 2012 Revenues of $14.0 Billion, excluding Discontinued Operations Revenues of $564 Million from the Nutrition(1) Business

§
Third-Quarter 2012 Adjusted Diluted EPS(2) of $0.53 and Reported Diluted EPS(3) of $0.43, Both Reflecting Previously Announced $0.02 Reduction Related to the Over-the-Counter Nexium Agreement

§
Narrows Ranges for 2012 Financial Guidance Components
 
§
Board of Directors Authorizes New $10 Billion Share Repurchase Program Upon Sale of the Nutrition(1) Business

§
Repurchased $1.8 Billion of Common Stock in Third-Quarter 2012;  Repurchased $5.9 Billion through October 31, 2012
 
($ in millions, except per share amounts)
               
   
Third-Quarter
 
Year-to-Date
   
2012
 
2011(4)
 
Change
 
2012
 
2011(4)
 
Change
Reported Revenues
  $ 13,976     $ 16,609     (16%)   $ 43,918     $ 49,118     (11%)
Adjusted Income(2)
    3,949       4,696     (16%)     12,964       14,055     (8%)
Adjusted Diluted EPS(2)
    0.53       0.60     (12%)     1.72       1.77     (3%)
Reported Net Income(3)
    3,208       3,738     (14%)     8,255       8,570     (4%)
Reported Diluted EPS(3)
    0.43       0.48     (10%)     1.09       1.08     1%
                                         
See end of text prior to tables for notes.

NEW YORK, N.Y., Thursday, November 1, 2012 – Pfizer Inc. (NYSE: PFE) today reported financial results for third-quarter 2012.  Third-quarter 2012 revenues were $14.0 billion, a decrease of 16% compared with $16.6 billion in the year-ago quarter, which reflects an operational decline of $1.9 billion, or 12%, and the unfavorable impact of foreign exchange of $699 million, or 4%.

For third-quarter 2012, U.S. revenues were $5.6 billion, a decrease of 18% compared with the year-ago quarter.  This decrease was primarily the result of the loss of exclusivity of Lipitor on November 30, 2011.  International revenues were $8.3 billion, a decrease of 14% compared with the prior-year quarter, mainly due to the losses of exclusivity of Lipitor in developed Europe during second-quarter 2012 and the unfavorable impact of foreign exchange.  U.S. revenues represented 40% of total revenues in third-quarter 2012 compared with 41% in the year-ago quarter, while international revenues represented 60% of total revenues in third-quarter 2012 compared with 59% in the year-ago quarter.
 
 
1

 
 
Financial Performance(5)
   
Third-Quarter Revenues
($ in millions)
Favorable/(Unfavorable)
 
2012
 
2011
 
Change
   
Foreign
Exchange
 
Operational
                           
Primary Care
  $ 3,610     $ 5,948     (39%)     (2%)   (37%)
Specialty Care
    3,406       3,799     (10%)     (5%)   (5%)
Established Products
    2,383       2,230     7%     (4%)   11%
Emerging Markets
    2,389       2,438     (2%)     (8%)   6%
Oncology
    329       332     (1%)     (5%)   4%
Biopharmaceutical
    12,117       14,747     (18%)     (4%)   (14%)
                               
Animal Health
    1,017       1,041     (2%)     (6%)   4%
Consumer Healthcare
    780       767     2%     (4%)   6%
Other(6)
    62       54     15%     (4%)   19%
                               
Total
  $ 13,976     $ 16,609     (16%)     (4%)   (12%)
                               
See end of text prior to tables for notes.

Business Commentary
Primary Care unit revenues decreased 37% operationally in comparison with the same period last year, primarily due to the losses of exclusivity of Lipitor in the U.S. in November 2011, developed Europe during second-quarter 2012 and Japan in June 2011, as well as the resulting shift in the reporting of U.S. and Japan Lipitor revenues to the Established Products unit beginning January 1, 2012. These factors negatively impacted Primary Care unit revenues by approximately $2.0 billion, or 34%, operationally. Collectively, the decline in revenues for Lipitor and for certain other Primary Care unit products that lost exclusivity in various markets in 2012 and 2011, as well as the resulting shift in the reporting of certain product revenues to the Established Products unit, reduced Primary Care unit revenues by approximately $2.4 billion, or 40%, in comparison with third-quarter 2011. The impact of these declines was slightly offset by continued strong operational growth of Lyrica and Celebrex in developed markets and Viagra in the U.S.

 
2

 
 
Specialty Care unit revenues declined 5% operationally in comparison with third-quarter 2011. Revenues were positively impacted by the operational growth of Enbrel, Rebif and Benefix, and negatively impacted by the decline in the Prevnar/Prevenar franchise, primarily in the U.S. and developed Europe, as the pediatric catch-up dose opportunity in third-quarter 2011 was no longer available in third-quarter 2012 since all eligible patients have been vaccinated. Additionally, utilization of Prevnar/Prevenar in adults remains minimal at this time. Specialty Care unit revenues were also negatively impacted by approximately $260 million, or 7%, in comparison with third-quarter 2011 by the losses of exclusivity of Xalatan in developed Europe in January 2012 and Geodon in the U.S. in March 2012.

Established Products unit revenues increased 11% operationally in comparison with the prior-year period, primarily reflecting the inclusion of $320 million of U.S. and Japan branded Lipitor revenues in third-quarter 2012, as well as launches of generic versions of other Pfizer branded primary care and specialty care products.  These increases were partially offset by the continuing decline of revenues of certain products that previously lost exclusivity and the impact of ongoing pricing pressures, primarily in South Korea and developed Europe.  Total revenues from established products in both the Established Products and Emerging Markets units were $3.4 billion, with $1.0 billion generated in emerging markets.

Emerging Markets unit revenues grew 6% operationally in comparison with third-quarter 2011, primarily due to volume growth in China, Mexico and Russia as a result of more targeted promotional efforts for key innovative and established products, including Lipitor, Norvasc and Lyrica.  Growth was partially offset by the timing of government purchases of Prevenar 13 in Turkey in comparison with the year-ago period.  
 
 
3

 
 
Animal Health unit revenues increased 4% operationally in comparison with the same quarter last year, largely due to increased demand across the companion animal and global livestock portfolios in key geographies.  Consumer Healthcare unit revenues increased 6% operationally in comparison with third-quarter 2011, primarily due to the addition of products from the acquisitions of Ferrosan Consumer Health in December 2011 and Alacer Corp. in February 2012.
 
Adjusted Expenses(2), Adjusted Income(2) and Adjusted Diluted EPS(2) Highlights
   
Third-Quarter Selected Costs and Expenses
($ in millions)
(Favorable)/Unfavorable
 
2012
 
2011
 
Change
   
Foreign
Exchange
 
Operational
                           
Adjusted Cost of Sales(2)
  $ 2,565     $ 3,057     (16%)     (9%)   (7%)
As a Percent of Revenues
    18.4%       18.4%     N/A     N/A   N/A
Adjusted SI&A Expenses(2)
    3,729       4,397     (15%)     (4%)   (11%)
Adjusted R&D Expenses(2)
    1,935       2,023     (4%)     (1%)   (3%)
                               
Total
  $ 8,229     $ 9,477     (13%)     (5%)   (8%)
                               
See end of text prior to tables for notes.

Adjusted cost of sales(2), adjusted SI&A expenses(2) and adjusted R&D expenses(2) in the aggregate were $8.2 billion in third-quarter 2012, a decrease of 13% compared with $9.5 billion in third-quarter 2011.  Excluding the favorable impact of foreign exchange of $440 million, or 5%, these costs decreased 8%, primarily reflecting the benefits of cost-reduction and productivity initiatives, as well as the impact of lower revenues.  Savings in adjusted R&D expenses(2) were generated in third-quarter 2012 by the discontinuation of certain therapeutic areas and R&D programs in connection with our previously announced initiatives, which were partially offset by a $250 million payment to AstraZeneca to obtain the exclusive global over-the-counter rights to Nexium.  Lower adjusted SI&A expenses(2) compared with the year-ago period reflect a reduction in the field force and a decrease in promotional spending, both partially in response to product losses of exclusivity, and more streamlined corporate support functions, as well as the favorable impact of foreign exchange.  Adjusted cost of sales(2) and adjusted cost of sales(2) as a percent of revenues were favorably impacted by the benefits generated from the ongoing cost-reduction and productivity initiatives to streamline the manufacturing network and by foreign exchange, while unfavorably impacted by the decline in revenues contributing to a shift in geographic and business mix.  Additionally, lower adjusted cost of sales(2) compared with the same period last year reflects reduced manufacturing volumes given the aforementioned products that lost exclusivity in various markets.
 
 
4

 
 
In third-quarter 2012, the effective tax rate on adjusted income(2) was 28.3%, compared with 31.2% in the third-quarter 2011.  The third-quarter 2012 rate reflects the favorable impact of the change in the jurisdictional mix of earnings, as well as the resolution of foreign audits pertaining to multiple tax years, partially offset by the unfavorable impact of the expiration of the U.S. research and development tax credit.

The diluted weighted-average shares outstanding for third-quarter 2012 were 7.5 billion shares, a reduction of approximately 302 million shares compared with third-quarter 2011.  This decline was primarily due to the Company’s ongoing share-repurchase program.

As a result of the aforementioned factors, third-quarter 2012 adjusted income(2) was $3.9 billion, a decrease of 16% compared with $4.7 billion in the year-ago quarter, and adjusted diluted EPS(2) was $0.53, a decrease of 12% compared with $0.60 in third-quarter 2011.

Reported Net Income(3) and Reported Diluted EPS(3) Highlights
In addition to the aforementioned factors, third-quarter 2012 reported earnings in comparison with the same period in 2011 were favorably impacted by lower purchase accounting adjustments, lower costs related to cost-reduction and productivity initiatives, lower acquisition-related costs and lower impairment charges.   Third-quarter 2012 reported earnings in comparison with the year-ago quarter were unfavorably impacted by a $491 million charge resulting from an agreement-in-principle with the U.S. Department of Justice to resolve an investigation into Wyeth’s historical promotional practices in connection with Rapamune, higher costs associated with the potential separation of the Animal Health business, as well as the non-recurrence of the gain on the sale of Capsugel(4) recorded in third-quarter 2011.
 
 
5

 
 
In third-quarter 2012, the effective tax rate on reported results was favorably impacted by a settlement with the U.S. Internal Revenue Service related to audits for multiple tax years.  The settlement resulted in a favorable impact on net income of $1.1 billion representing tax and interest. The effective tax rate on reported results was also favorably impacted by the resolution of foreign audits as mentioned above and the change in jurisdictional mix of earnings, partially offset by the unfavorable impact of the non-deductibility of the aforementioned charge related to Rapamune, as well as the expiration of the U.S. research and development tax credit.

As a result of all these factors, third-quarter 2012 reported net income(3) was $3.2 billion, a decrease of 14% compared with $3.7 billion in the prior-year quarter, and reported diluted EPS(3) was $0.43, a decrease of 10% compared with $0.48 in third-quarter 2011.

Executive Commentary  
Ian Read, Chairman and Chief Executive Officer, stated, “Overall, our results this quarter reflect continued product losses of exclusivity, most notably Lipitor in all major markets. Despite a challenging and dynamic environment, worldwide revenues from many of our key medicines, including Enbrel, Celebrex and Lyrica, continued to grow operationally. Additionally, we continued to perform well in emerging markets, most notably in China, given the breadth of our portfolio and focused investment.”

 “With regard to our innovative core, I am very pleased with the recent U.S. Food and Drug Administration approval of Bosulif (bosutinib) for chronic myelogenous leukemia, as well as approval of Inlyta (axitinib) for advanced renal cell carcinoma and conditional marketing authorization of  Xalkori (critzotinib) for advanced non-small cell lung cancer, both in the EU.  I also look forward to regulatory action for tofacitinib in moderate-to-severe rheumatoid arthritis and Eliquis (apixaban) in atrial fibrillation in the U.S., EU and Japan, as well as Bosulif in key international markets.”

“Additionally, we filed a registration statement with the Securities and Exchange Commission for the potential initial public offering of a minority stake in our Animal Health business, Zoetis.  Given our demonstrated ability to advance our strategic initiatives, I believe we are well-positioned to deliver attractive returns for our shareholders over time,”   Mr. Read concluded.

 
6

 
 
Frank D’Amelio, Chief Financial Officer, stated, “Given our financial performance to date, we are narrowing the ranges for certain components of our 2012 financial guidance. Further, the Board of Directors has authorized a new $10 billion share repurchase program to be utilized over time, upon the sale of the Nutrition(1) business to Nestlé, which we now expect to close in the next few months. This new program is in addition to the $4.1 billion authorization remaining under our current share repurchase program. So far this year, we have repurchased approximately $5.9 billion, or 255.1 million shares, of our common stock.”

2012 Financial Guidance(7)
Pfizer’s financial guidance, at current exchange rates(8), is summarized below.  Since the Nutrition(1) business is presented as a discontinued operation, the full-year results of that business only impact the Reported Diluted EPS(3) and operating cash flow components of our 2012 financial guidance.
 
Reported Revenues
$58.0 to $59.0 billion
(previously $58.0 to $60.0 billion)
Adjusted Cost of Sales(2) as a Percentage of Revenues
18.7% to 19.2%
 (previously 19.5% to 20.5%)
Adjusted SI&A Expenses(2)
$16.3 to $16.8 billion
(previously $16.3 to $17.3 billion)
Adjusted R&D Expenses(2)
$7.0 to $7.25 billion
(previously $6.75 to $7.25 billion)
Adjusted Other (Income)/Deductions(2)
Approximately $900 million
(previously approximately $1.0 billion)
Effective Tax Rate on Adjusted Income(2)
Approximately 29%
Reported Diluted EPS(3)
$1.30 to $1.38
(previously $1.21 to $1.36)
Adjusted Diluted EPS(2)
$2.14 to $2.17
(previously $2.12 to $2.22)
Operating Cash Flow
Approximately $18.5 billion
(previously approximately $19.0 billion)

 
7

 
 
For additional details, please see the attached financial schedules, product revenue tables, supplemental information and disclosure notice.
 
(1)
On April 23, 2012, Pfizer announced that it entered into an agreement to sell the Nutrition business to Nestlé.  The transaction is expected to close in the next few months, assuming the receipt of the required regulatory clearances and the satisfaction of other closing conditions.  As a result of Pfizer’s decision to divest this business, the operating results of the Nutrition business are reported as Discontinued Operations – net of tax in the consolidated statements of income for all periods.

(2)
"Adjusted Income" and its components and "Adjusted Diluted Earnings Per Share (EPS)" are defined as reported U.S. generally accepted accounting principles (GAAP) net income(3) and its components and reported diluted EPS(3) excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items.  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, and, therefore, components of the overall adjusted income measure.  As described under Adjusted Income in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of Pfizer's Form 10-Q for the fiscal quarter ended July 1, 2012, management uses adjusted income, among other factors, to set performance goals and to measure the performance of the overall company.  We believe that investors' understanding of our performance is enhanced by disclosing this measure.   Reconciliations of certain GAAP reported to non-GAAP adjusted information for the third quarter and first nine months of 2012 and 2011, as well as reconciliations of full-year 2012 guidance for adjusted income and adjusted diluted EPS to full-year 2012 guidance for reported net income(3) and reported diluted EPS(3), are provided in the materials accompanying this report. 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.
 
(3)
“Reported Net Income” is defined as net income attributable to Pfizer Inc. in accordance with U.S. GAAP. “Reported Diluted EPS” is defined as reported diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.

(4)
On August 1, 2011, Pfizer completed the sale of Capsugel to an affiliate of Kohlberg Kravis Roberts & Co. L.P.  The operating results associated with Capsugel and the gain on the sale of Capsugel are reported as Discontinued operations – net of tax in the consolidated statements of income for the three and nine months ended October 2, 2011.  Additionally, due to the acquisition of King Pharmaceuticals, Inc. (King), legacy King operations are reflected in the results beginning January 31, 2011.  Therefore, in accordance with Pfizer’s domestic and international reporting periods, the operating results for the first nine months of 2011 reflect approximately eight months of King’s U.S. operations and approximately seven months of King’s international operations.
 
 
8

 
 
(5)
For a description of each business unit, see Note 13A to Pfizer’s condensed consolidated financial statements included in Pfizer’s Form 10-Q for the fiscal quarter ended July 1, 2012.

(6)
Other includes revenues generated primarily from Pfizer CentreSource, Pfizer’s contract manufacturing and bulk pharmaceutical chemical sales organization.

(7)
The 2012 financial guidance includes the revenues and expenses related to the Nutrition business, which is reflected as a discontinued operation, but does not include the gain on the pending sale of the Nutrition business. Does not assume the completion of any business-development transactions not completed as of September 30, 2012, including any one-time upfront payments associated with such transactions. Also excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of September 30, 2012, except for charges for such matters that have been recorded during the first nine months of 2012.

(8)
The current exchange rates assumed in connection with the 2012 financial guidance are a blend of the actual exchange rates in effect during the first nine months of 2012 and the mid-October 2012 exchange rates for the remainder of the year.


Contacts:
     
 
Media
 
Investors
 
 
Joan Campion
212.733.2798
Suzanne Harnett
212.733.8009
     
Jennifer Davis
212.733.0717
 
 
9

 
 
PFIZER INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME(a)
(UNAUDITED)
(millions, except per common share data)
 
    Third Quarter  
% Incr. /
 
Nine Months
 
% Incr. /
   
2012
 
2011
 
(Decr.)
 
2012
 
2011
 
(Decr.)
Revenues
  $ 13,976     $ 16,609     (16)   $ 43,918     $ 49,118     (11)
Costs and expenses:
                                       
Cost of sales(b)
    2,665       3,409     (22)     8,162       10,449     (22)
Selling, informational and administrative expenses(b)
    3,847       4,457     (14)     11,801       13,635     (13)
Research and development expenses(b)
    1,981       2,176     (9)     5,734       6,487     (12)
Amortization of intangible assets(c)
    1,228       1,389     (12)     3,939       4,138     (5)
Restructuring charges and certain acquisition-related costs
    302       1,090     (72)     1,089       2,458     (56)
Other deductions--net
    962       547     76     3,283       1,802     82
Income from continuing operations before provision/(benefit)
                                       
for taxes on income
    2,991       3,541     (16)     9,910       10,149     (2)
Provision/(benefit) for taxes on income
    (119 )     1,216     (110)     1,882       3,167     (41)
Income from continuing operations
    3,110       2,325     34     8,028       6,982     15
Discontinued operations:
                                       
Income from discontinued operations--net of tax
    104       96     8     249       303     (18)
Gain on sale of discontinued operations--net of tax
    -       1,328     (100)     -       1,316     (100)
Discontinued operations--net of tax
    104       1,424     (93)     249       1,619     (85)
                                         
Net income before allocation to noncontrolling interests
    3,214       3,749     (14)     8,277       8,601     (4)
Less: Net income attributable to noncontrolling interests
    6       11     (45)     22       31     (29)
Net income attributable to Pfizer Inc.
  $ 3,208     $ 3,738     (14)   $ 8,255     $ 8,570     (4)
                                         
Earnings per common share--basic:(d)
                                       
Income from continuing operations attributable to
                                       
Pfizer Inc. common shareholders
  $ 0.42     $ 0.30     40   $ 1.07     $ 0.88     22
Discontinued operations--net of tax
    0.01       0.18     (94)     0.03       0.21     (86)
Net income attributable to Pfizer Inc. common shareholders
  $ 0.43     $ 0.48     (10)   $ 1.10     $ 1.09     1
                                         
Earnings per common share--diluted:(d)
                                       
Income from continuing operations attributable to
                                       
Pfizer Inc. common shareholders
  $ 0.41     $ 0.30     37   $ 1.06     $ 0.88     20
Discontinued operations--net of tax
    0.01       0.18     (94)     0.03       0.20     (85)
Net income attributable to Pfizer Inc. common shareholders
  $ 0.43     $ 0.48     (10)   $ 1.09     $ 1.08     1
                                   
Weighted-average shares used to calculate earnings per common share:
                                     
Basic
    7,436       7,770           7,483       7,877      
Diluted
    7,508       7,810           7,550       7,925      
 
(a)
The above financial statements present the three and nine months ended September 30, 2012 and October 2, 2011. Subsidiaries operating outside the United States are included for the three and nine months ended August 26, 2012 and August 28, 2011.
 
 
   
 
Beginning in the second quarter of 2012, as a result of our decision to sell the Nutrition business, we report the operating results of the Nutrition business as Discontinued operations: Income from discontinued operations--net of tax for all periods presented.
 
 
   
 
On August 1, 2011, we completed the sale of our Capsugel business and recognized a gain on the sale in Discontinued operations: Gain on sale of discontinued operations--net of tax for the three and nine months ended October 2, 2011. The operating results of this business are reported as Discontinued operations: Income from discontinued operations--net of tax for the three and nine months ended October 2, 2011.
 
 
 
On January 31, 2011, we completed a tender offer for the outstanding shares of common stock of King Pharmaceuticals, Inc. (King) and, commencing from that date, our financial statements include the assets, liabilities, operating results and cash flows of King. As a result, and in accordance with our domestic and international reporting periods, our operating results for the nine months ended October 2, 2011 reflect approximately eight months of King’s U.S. operations and approximately seven months of King’s international operations.
 
 
 
Certain amounts and percentages may reflect rounding adjustments.
   
         
 
See Supplemental Information that accompanies these materials for additional details.
   
         
 
The financial results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results which could ultimately be achieved for the full year.
 
 
   
(b)
Exclusive of amortization of intangible assets, except as discussed in footnote (c) below.
   
         
(c)
Amortization expense related to 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 acquired intangible assets that are associated with a single function is included in  Cost of sales, Selling, informational and administrative expenses or Research and development expenses, as appropriate.
 
 
(d)
EPS amounts may not add due to rounding.
   
 
 
10

 
 
PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars, except per common share data)
 
   
Quarter Ended September 30, 2012
 
         
Purchase
 
Acquisition-
     
Certain
     
   
GAAP
 
Accounting
 
Related
 
Discontinued
 
Significant
 
Non-GAAP
   
Reported(1)
 
Adjustments
 
Costs(2)
 
Operations
 
Items(3)
 
Adjusted(a)
Revenues
  $ 13,976     $ -     $ -     $ -     $ -     $ 13,976  
Cost of sales(b)
    2,665       2       (78 )     -       (24 )     2,565  
Selling, informational and administrative expenses(b)
    3,847       (2 )     (3 )     -       (113 )     3,729  
Research and development expenses(b)
    1,981       1       -       -       (47 )     1,935  
Amortization of intangible assets(c)
    1,228       (1,186 )     -       -       -       42  
Restructuring charges and certain acquisition-related costs
    302       -       (149 )     -       (153 )     -  
Other deductions--net
    962       45       -       -       (821 )     186  
Income from continuing operations before provision/(benefit) for taxes on income
    2,991       1,140       230       -       1,158       5,519  
Provision/(benefit) for taxes on income
    (119 )     327       40       -       1,316       1,564  
Income from continuing operations
    3,110       813       190       -       (158 )     3,955  
Discontinued operations--net of tax
    104       -       -       (104 )     -       -  
Net income attributable to noncontrolling interests
    6       -       -       -       -       6  
Net income attributable to Pfizer Inc.
    3,208       813       190       (104 )     (158 )     3,949  
Earnings per common share attributable to Pfizer Inc.--diluted(d)
    0.43       0.11       0.03       (0.01 )     (0.02 )     0.53  
                                                 
                                                 
                                                 
                                                 
   
Nine Months Ended September 30, 2012
 
           
Purchase
 
Acquisition-
     
Certain
       
   
GAAP
 
Accounting
 
Related
 
Discontinued
 
Significant
 
Non-GAAP
   
Reported(1)
 
Adjustments
 
Costs(2)
 
Operations
 
Items(3)
 
Adjusted(a)
Revenues
  $ 43,918     $ -     $ -     $ -     $ -     $ 43,918  
Cost of sales(b)
    8,162       (9 )     (214 )     -       (51 )     7,888  
Selling, informational and administrative expenses (b)
    11,801       4       (8 )     -       (174 )     11,623  
Research and development expenses(b)
    5,734       3       (5 )     -       (386 )     5,346  
Amortization of intangible assets(c)
    3,939       (3,763 )     -       -       -       176  
Restructuring charges and certain acquisition-related costs
    1,089       -       (423 )     -       (666 )     -  
Other deductions--net
    3,283       15       -       -       (2,644 )     654  
Income from continuing operations before provision/(benefit) for taxes on income
    9,910       3,750       650       -       3,921       18,231  
Provision/(benefit) for taxes on income
    1,882       1,025       161       -       2,177       5,245  
Income from continuing operations
    8,028       2,725       489       -       1,744       12,986  
Discontinued operations--net of tax
    249       -       -       (249 )     -       -  
Net income attributable to noncontrolling interests
    22       -       -       -       -       22  
Net income attributable to Pfizer Inc.
    8,255       2,725       489       (249 )     1,744       12,964  
Earnings per common share attributable to Pfizer Inc.--diluted(d)
    1.09       0.36       0.06       (0.03 )     0.23       1.72  
 
(a)
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, we stress that 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, have limits in their usefulness to investors. Because of the 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.
                           
(b)
Exclusive of amortization of intangible assets, except as discussed in footnote (c) below.
                           
(c)
Amortization expense related to 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 acquired intangible assets that are associated with a single function is included in Cost of sales, Selling, informational and administrative expenses or Research and development expenses, as appropriate.
 
 
(d)
EPS amounts may not add due to rounding.
                   
                           
See end of tables for notes (1), (2) and (3).
                   
                           
Certain amounts may reflect rounding adjustments.
                   
 
 
11

 
 
PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars, except per common share data)
 
   
Quarter Ended October 2, 2011
 
         
Purchase
 
Acquisition-
       
Certain
     
   
GAAP
 
Accounting
 
Related
 
Discontinued
 
Significant
 
Non-GAAP
   
Reported(1)
 
Adjustments
 
Costs(2)
 
Operations
 
Items(3)
 
Adjusted(a)
Revenues
  $ 16,609     $ -     $ -     $ -     $ -     $ 16,609  
Cost of sales(b)
    3,409       (286 )     (68 )     -       2       3,057  
Selling, informational and administrative expenses(b)
    4,457       (9 )     (18 )     -       (33 )     4,397  
Research and development expenses(b)
    2,176       3       (6 )     -       (150 )     2,023  
Amortization of intangible assets(c)
    1,389       (1,352 )     -       -       -       37  
Restructuring charges and certain acquisition-related costs
    1,090       -       (202 )     -       (888 )     -  
Other deductions--net
    547       (53 )     -       -       (240 )     254  
Income from continuing operations before provision/(benefit) for taxes on income
    3,541       1,697       294       -       1,309       6,841  
Provision/(benefit) for taxes on income
    1,216       445       54       -       419       2,134  
Income from continuing operations
    2,325       1,252       240       -       890       4,707  
Discontinued operations--net of tax(d)
    1,424       -       -       (1,424 )     -       -  
Net income attributable to noncontrolling interests
    11       -       -       -       -       11  
Net income attributable to Pfizer Inc.
    3,738       1,252       240       (1,424 )     890       4,696  
Earnings per common share attributable to Pfizer Inc.--diluted(e)
    0.48       0.16       0.03       (0.18 )     0.11       0.60  
                                                 
                                                 
                                                 
                                                 
   
Nine Months Ended October 2, 2011
 
           
Purchase
 
Acquisition-
         
Certain
       
   
GAAP
 
Accounting
 
Related
 
Discontinued
 
Significant
 
Non-GAAP
   
Reported(1)
 
Adjustments
 
Costs(2)
 
Operations
 
Items(3)
 
Adjusted(a)
Revenues
  $ 49,118     $ -     $ -     $ -     $ -     $ 49,118  
Cost of sales(b)
    10,449       (1,081 )     (410 )     -       (7 )     8,951  
Selling, informational and administrative expenses(b)
    13,635       (6 )     (41 )     -       (39 )     13,549  
Research and development expenses(b)
    6,487       -       (9 )     -       (398 )     6,080  
Amortization of intangible assets(c)
    4,138       (4,039 )     -       -       -       99  
Restructuring charges and certain acquisition-related costs
    2,458       -       (996 )     -       (1,462 )     -  
Other deductions--net
    1,802       (71 )     -       -       (1,269 )     462  
Income from continuing operations before provision/(benefit) for taxes on income
    10,149       5,197       1,456       -       3,175       19,977  
Provision/(benefit) for taxes on income
    3,167       1,345       320       -       1,059       5,891  
Income from continuing operations
    6,982       3,852       1,136       -       2,116       14,086  
Discontinued operations--net of tax(d)
    1,619       -       -       (1,619 )     -       -  
Net income attributable to noncontrolling interests
    31       -       -       -       -       31  
Net income attributable to Pfizer Inc.
    8,570       3,852       1,136       (1,619 )     2,116       14,055  
Earnings per common share attributable to Pfizer Inc.--diluted(e)
    1.08       0.49       0.14       (0.20 )     0.27       1.77  
 
(a)
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, we stress that 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, have limits in their usefulness to investors. Because of the 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.
   
(b)
Exclusive of amortization of intangible assets, except as discussed in footnote (c) below.
   
(c)
Amortization expense related to 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 acquired intangible assets that are associated with a single function is included in Cost of sales, Selling, informational and administrative expenses or Research and development expenses, as appropriate.
 
 
(d)
On August 1, 2011, we completed the sale of our Capsugel business. The gain recognized related to the sale of this business, as well as the operating results of this business, are included in GAAP Reported Discontinued operations—net of tax.
   
(e)
EPS amounts may not add due to rounding.
                   
                           
See end of tables for notes (1), (2) and (3).
                   
                           
Certain amounts may reflect rounding adjustments.
                   
 
 
12

 
 
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS*
(UNAUDITED)
 
1)
The financial statements present the three and nine months ended September 30, 2012 and October 2, 2011. Subsidiaries operating outside the United States are included for the three and nine months ended August 26, 2012 and August 28, 2011.
   
 
Beginning in the second quarter of 2012, as a result of our decision to sell the Nutrition business, we report the operating results of the Nutrition business as Discontinued operations: Income from discontinued operations--net of tax for all periods presented.
 
 
 
On August 1, 2011, we completed the sale of our Capsugel business and recognized a gain on the sale in Discontinued operations: Gain on sale of discontinued operations--net of tax for the three and nine months ended October 2, 2011. The operating results of this business are reported as Discontinued operations: Income from discontinued operations--net of tax for the three and nine months ended October 2, 2011.
 
 
 
On January 31, 2011, we completed a tender offer for the outstanding shares of common stock of King Pharmaceuticals, Inc. (King) and, commencing from that date, our financial statements include the assets, liabilities, operating results and cash flows of King. As a result, and in accordance with our domestic and international reporting periods, our operating results for the nine months ended October 2, 2011 reflect approximately eight months of King’s U.S. operations and approximately seven months of King’s international operations.
 
2)  Acquisition-related costs include the following:                        
                             
       
Third Quarter
   
Nine Months
 
   
(millions of dollars)
    2012       2011       2012       2011  
                                     
   
Transaction costs(a)
  $ -     $ 5     $ 1     $ 28  
   
Integration costs(a)
    87       184       295       562  
   
Restructuring charges(a)
    62       13       127       406  
   
Additional depreciationasset restructuring(b)
    81       92       227       460  
   
Total acquisition-related costs--pre-tax
    230       294       650       1,456  
   
Income taxes(c)
    (40 )     (54 )     (161 )     (320 )
   
Total acquisition-related costs--net of tax
  $ 190     $ 240     $ 489     $ 1,136  
 
 
(a)
Transaction costs represent external costs directly related to acquired businesses and primarily include expenditures for banking, legal, accounting and other similar services. Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes. Restructuring charges include employee termination costs, asset impairments and other exit costs associated with business combinations. The sum of these costs and charges is included in Restructuring charges and certain acquisition-related costs.
   
 
 
(b)
Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions related to acquisitions. Included in Cost of sales ($78 million) and Selling, informational and administrative expenses ($3 million) for the three months ended September 30, 2012. Included in Cost of sales ($214 million), Selling, informational and administrative expenses ($8 million) and Research and development expenses ($5 million) for the nine months ended September 30, 2012. Included in Cost of sales ($68 million), Selling, informational and administrative expenses ($18 million) and Research and development expenses ($6 million) for the three months ended October 2, 2011. Included in Cost of sales ($410 million), Selling, informational and administrative expenses ($41 million) and Research and development expenses ($9 million) for the nine months ended October 2, 2011.
   
 
 
(c)
Included in Provision/(benefit) for taxes on income.
 
3) Certain significant items include the following:                        
                           
       
Third Quarter
   
Nine Months
 
   
(millions of dollars)
    2012       2011       2012       2011  
                                     
   
Restructuring charges(a)
  $ 153     $ 888     $ 666     $ 1,462  
   
Implementation costs and additional depreciation  asset restructuring(b)
    111       183       486       437  
   
Certain legal matters(c)
    725       132       1,983       657  
   
Certain asset impairment charges(d)
    54       106       543       595  
   
Costs associated with the potential separation of the Animal Health business(e)
    100       8       191       8  
   
Other
    15       (8 )     52       16  
   
Total certain significant items--pre-tax
    1,158       1,309       3,921       3,175  
   
Income taxes(f)
    (1,316 )     (419 )     (2,177 )     (1,059 )
   
Total certain significant items--net of tax
  $ (158 )   $ 890     $ 1,744     $ 2,116  
 
 
(a)
Included in Restructuring charges and certain acquisition-related costs, primarily related to our cost-reduction and productivity initiatives.
                               
 
(b)
Primarily related to our cost-reduction and productivity initiatives. Included in Cost of Sales ($19 million), Selling, informational and administrative expenses ($45 million) and Research and development expenses ($47 million) for the three months ended September 30, 2012. Included in Cost of Sales ($23 million), Selling, informational and administrative expenses ($77 million) and Research and development expenses ($386 million) for the nine months ended September 30, 2012. Included in Selling, informational and administrative expenses ($33 million) and Research and development expenses ($150 million) for the three months ended October 2, 2011. Included in Selling, informational and administrative expenses ($39 million) and Research and development expenses ($398 million) for the nine months ended October 2, 2011.
   
 
 
(c)
Included in Other deductions–net. In the third quarter of 2012, primarily includes a $491 million charge resulting from an agreement-in-principle with the U.S. Department of Justice to resolve an investigation into Wyeth’s historical promotional practices in connection with Rapamune. In the first nine months of 2012, primarily includes the aforementioned $491 million charge related to Rapamune, a $450 million settlement of a lawsuit by Brigham Young University related to Celebrex, and charges for hormone-replacement therapy litigation. In 2011, primarily includes charges for hormone-replacement therapy litigation.
 
 
13

 
 
 
(d)
Primarily included in Other deductionsnet. In the first nine months of 2012, primarily includes certain intangible assets acquired in connection with our acquisitions of Wyeth and King, including in-process research and development (IPR&D) intangible assets. In the third quarter and first nine months of 2011, primarily includes certain intangible assets acquired in connection with our acquisition of Wyeth, including IPR&D intangible assets.
                               
 
(e)
Costs incurred in connection with the potential initial public offering of a minority stake in our Animal Health business, Zoetis, Inc. Includes expenditures for banking, legal, accounting and similar services related to the potential transaction, as well as costs incurred associated with the potential separation of Animal Health employees, net assets and activities from Pfizer, such as consulting and systems costs. Included in Selling, informational and administrative expenses ($68 million) and Other deductionsnet ($32 million) for the three months ended September 30, 2012. Included in Selling, informational and administrative expenses ($98 million) and Other deductionsnet ($93 million) for the nine months ended September 30, 2012. Included in Selling, informational and administrative expenses for the three and nine months ended October 2, 2011.
                               
 
(f)
Included in Provision/(benefit) for taxes on income. Includes a settlement with the U.S. IRS related to audits for multiple tax years that favorably impacted GAAP Reported net income by $1.1 billion, representing tax and interest, for the three and nine months ended September 30, 2012.
                               
*
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, we stress that 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, have limits in their usefulness to investors. Because of the 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.
 
 
14

 
 
PFIZER INC.
BUSINESS REVENUES(1)
FIRST NINE MONTHS OF 2012 AND 2011
(UNAUDITED)
(millions of dollars)
 
   
2012
 
2011
 
Change
 
Foreign
Exchange
 
Operational
Primary Care
  $ 11,725     $ 17,259     (32%)   (1%)   (31%)
Specialty Care
    10,483       11,425     (8%)   (2%)   (6%)
Established Products
    7,865       6,914     14%   (2%)   16%
Emerging Markets
    7,308       7,031     4%   (6%)   10%
Oncology
    940       982     (4%)   (3%)   (1%)
Biopharmaceutical
    38,321       43,611     (12%)   (2%)   (10%)
                             
Animal Health
    3,128       3,078     2%   (4%)   6%
Consumer Healthcare
    2,276       2,218     3%   (2%)   5%
Other
    193       211     (9%)   (1%)   (8%)
                             
Total
  $ 43,918     $ 49,118     (11%)   (2%)   (9%)
 
(1)
For a description of each business unit, see Note 13A to Pfizer's condensed consolidatedfinancial statements included in Pfizer's Form 10-Q for the fiscal quarter ended July 1, 2012.
 
 
15

 
 
PFIZER INC.
ADJUSTED SELECTED COSTS AND EXPENSES(1)
FIRST NINE MONTHS OF 2012 AND 2011
(UNAUDITED)
 
($ in millions)
(Favorable)/Unfavorable
 
2012
 
2011
 
% Change
Foreign
Exchange
Operational
                         
Adjusted Cost of Sales(1)
  $ 7,888     $ 8,951     (12%)   (8%)   (4%)
As a Percent of Revenues
    18.0%       18.2%     N/A   N/A   N/A
Adjusted SI&A Expenses(1)
    11,623       13,549     (14%)   (2%)   (12%)
Adjusted R&D Expenses(1)
    5,346       6,080     (12%)   (1%)   (11%)
                             
Total
  $ 24,857     $ 28,580     (13%)   (4%)   (9%)
 
(1)
Adjusted cost of sales, Adjusted selling, informational and administrative (SI&A) expenses and Adjusted research and development (R&D) expenses are defined as the corresponding reported U.S. generally accepted accounting principles (GAAP) income statement line items excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items. Reconciliations of certain GAAP reported to non-GAAP adjusted information for the third quarter and first nine months of 2012 and 2011 are provided in the materials accompanying this report. These adjusted income statement line item measures are not, and should not be viewed as, substitutes for the corresponding U.S. GAAP line items.
 
 
16

 
 
PFIZER INC.
REVENUES
THIRD QUARTER 2012 and 2011
(UNAUDITED)
(millions of dollars)
 
 
 
WORLDWIDE
 
UNITED STATES
 
TOTAL INTERNATIONAL(a)
                                                                   
   
2012
   
2011
   
% Change
 
2012
   
2011
   
% Change
 
2012
   
2011
   
% Change
               
Total
 
Oper.
             
Total
             
Total
 
Oper.
TOTAL REVENUES
  $ 13,976     $ 16,609       (16 %)     (12 %)   $ 5,627     $ 6,879       (18 %)   $ 8,349     $ 9,730       (14 %)     (7 %)
REVENUES FROM BIOPHARMACEUTICAL PRODUCTS:
  $ 12,117     $ 14,747       (18 %)     (14 %)   $ 4,769     $ 6,019       (21 %)   $ 7,348     $ 8,728       (16 %)     (9 %)
Lipitor(b)
    749       2,602       (71 %)     (70 %)     192       1,470       (87 %)     557       1,132       (51 %)     (48 %)
Lyrica
    1,036       961       8 %     14 %     430       379       13 %     606       582       4 %     14 %
Enbrel (Outside the U.S. and Canada)
    893       957       (7 %)     4 %     -       -       -       893       957       (7 %)     4 %
Prevnar 13/Prevenar 13
    868       1,006       (14 %)     (12 %)     440       454       (3 %)     428       552       (22 %)     (19 %)
Celebrex
    676       643       5 %     7 %     438       405       8 %     238       238       -       6 %
Viagra
    517       493       5 %     9 %     287       244       18 %     230       249       (8 %)     -  
Norvasc
    319       350       (9 %)     (6 %)     13       5       160 %     306       345       (11 %)     (9 %)
Zyvox
    328       321       2 %     7 %     158       154       3 %     170       167       2 %     11 %
Sutent
    294       298       (1 %)     7 %     82       78       5 %     212       220       (4 %)     7 %
Premarin family
    262       267       (2 %)     (1 %)     237       241       (2 %)     25       26       (4 %)     3 %
Genotropin
    212       215       (1 %)     5 %     59       46       28 %     153       169       (9 %)     (2 %)
Xalatan/Xalacom
    181       277       (35 %)     (29 %)     9       9       -       172       268       (36 %)     (31 %)
BeneFIX
    201       178       13 %     18 %     96       76       26 %     105       102       3 %     12 %
Detrol/Detrol LA
    176       213       (17 %)     (15 %)     112       136       (18 %)     64       77       (17 %)     (10 %)
Vfend
    187       171       9 %     17 %     21       -       100 %     166       171       (3 %)     3 %
Chantix/Champix
    146       156       (6 %)     (3 %)     62       68       (9 %)     84       88       (5 %)     1 %
Pristiq
    152       146       4 %     6 %     120       119       1 %     32       27       19 %     32 %
Refacto AF/Xyntha
    150       140       7 %     17 %     28       32       (13 %)     122       108       13 %     25 %
Revatio
    135       140       (4 %)     1 %     78       80       (3 %)     57       60       (5 %)     6 %
Zoloft
    129       139       (7 %)     (3 %)     17       15       13 %     112       124       (10 %)     (5 %)
Medrol
    113       127       (11 %)     (7 %)     24       33       (27 %)     89       94       (5 %)     1 %
Zosyn/Tazocin
    109       149       (27 %)     (24 %)     39       75       (48 %)     70       74       (5 %)     1 %
Effexor
    107       165       (35 %)     (31 %)     37       52       (29 %)     70       113       (38 %)     (31 %)
Geodon/Zeldox
    57       263       (78 %)     (76 %)     26       217       (88 %)     31       46       (33 %)     (21 %)
Zithromax/Zmax
    89       93       (4 %)     (1 %)     3       4       (25 %)     86       89       (3 %)     1 %
Prevnar/Prevenar (7-valent)
    81       98       (17 %)     10 %     -       -       -       81       98       (17 %)     10 %
Fragmin
    91       95       (4 %)     4 %     11       9       22 %     80       86       (7 %)     3 %
Relpax
    92       86       7 %     11 %     56       47       19 %     36       39       (8 %)     2 %
Rapamune
    92       96       (4 %)     1 %     49       47       4 %     43       49       (12 %)     (2 %)
Cardura
    79       92       (14 %)     (9 %)     2       1       100 %     77       91       (15 %)     (9 %)
Aricept(c)
    71       117       (39 %)     (34 %)     -       -       -       71       117       (39 %)     (34 %)
Tygacil
    82       76       8 %     15 %     37       38       (3 %)     45       38       18 %     34 %
EpiPen
    67       59       14 %     14 %     52       47       11 %     15       12       25 %     23 %
Xanax XR
    66       77       (14 %)     (6 %)     13       13       -       53       64       (17 %)     (7 %)
BMP2
    58       83