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

3 Months Ended

Apr. 02, 2023

Restructuring and Related Activities [Abstract]

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

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

A. Transforming to a More Focused Company Program

In 2019, we announced that we would be incurring costs associated with our Transforming to a More Focused Company Program, a multi-year effort to ensure our cost base aligns appropriately with our operating structure following Pfizer’s transformation into a more focused, innovative science-based global biopharmaceutical business. This program includes activities to (i) restructure our corporate enabling functions to appropriately support our operating structure; (ii) transform our commercial go-to-market model; and (iii) optimize our manufacturing network and R&D operations.

The activities associated with transforming our commercial go-to-market model are substantially complete. Activities associated with restructuring our corporate enabling functions and optimizing our manufacturing network and R&D operations are ongoing and are expected to be substantially completed by the end of 2023. The costs to restructure our corporate enabling functions, and to optimize our R&D operations and reduce cycle times, as well as to further prioritize our internal R&D portfolio, primarily include severance and implementation costs. The costs to optimize our manufacturing network largely include severance, implementation costs, product transfer costs, site exit costs, and accelerated depreciation.

From the start of this program in the fourth quarter of 2019 through April 2, 2023, we incurred costs of $3.5 billion, of which $1.4 billion ($1.1 billion of restructuring charges) is associated with Biopharma. We have incurred approximately 85% of total expected costs to date, and we expect the remaining costs to be substantially incurred through 2023.

B. Key Activities

The following summarizes costs and credits for acquisitions and cost-reduction/productivity initiatives:
	Three Months Ended
(MILLIONS)	April 2, 2023		April 3, 2022
Restructuring charges/(credits):
Employee terminations	$	(36)	$	25
Asset impairments	(10)		8
Exit costs/(credits)	2		11
Restructuring charges/(credits)(a)	(44)		43
Transaction costs(b)	—		6
Integration costs and other(c)	52		142
Restructuring charges and certain acquisition-related costs	9		192
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net	(5)		(6)
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income, mainly in Cost of sales(d)	18		9
Implementation costs recorded in our condensed consolidated statements of income as follows(e):
Cost of sales	15		12
Selling, informational and administrative expenses	59		74
Research and development expenses	11		—
Total implementation costs	85		85
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	107	$	280

(a)Primarily represents cost reduction initiatives. Restructuring charges/(credits) associated with Biopharma: credits of $28 million for the three months ended April 2, 2023 and credits of $4 million for the three months ended April 3, 2022.

(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 that was recognized as post-closing compensation expense.

(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, 2022(a)	$	1,196	$	—	$	8	$	1,204
Provision/(credit)	(36)		(10)		2		(44)
Utilization and other(b)	(420)		10		(1)		(411)
Balance, April 2, 2023(c)	$	740	$	—	$	9	$	750

(a)Included in Other current liabilities ($991 million) and Other noncurrent liabilities ($213 million).

(b)Includes adjustments for foreign currency translation.

(c)Included in Other current liabilities ($548 million) and Other noncurrent liabilities ($202 million).