News Details

NEW YORK--(BUSINESS WIRE)--Pfizer Inc. (NYSE:PFE) reported financial results for third-quarter 2014. At the beginning of fiscal year 2014, the company began managing its commercial operations through a new global commercial structure consisting of three operating segments: the Global Innovative Pharmaceutical segment (GIP)⁽³⁾; the Global Vaccines, Oncology and Consumer Healthcare segment (VOC)⁽³⁾; and the Global Established Pharmaceutical segment (GEP)⁽³⁾. Financial results for each of these segments are presented in the Operating Segment Information section. As a result of the full disposition of Zoetis Inc. (Zoetis) on June 24, 2013, the financial results of the Animal Health business are reported as a discontinued operation in the consolidated statements of income for the first nine months of 2013. Some amounts in this press release may not add due to rounding. All percentages have been calculated using unrounded amounts. Results are summarized below.

2014 FINANCIAL GUIDANCE⁽⁵⁾

The ranges for certain components of the financial guidance have been updated as set forth below.

EXECUTIVE COMMENTARY

Ian Read, Chairman and Chief Executive Officer, stated, “Our key in-line products continued to perform well with our most recent product launches exhibiting further momentum during the quarter. We also generated solid revenue growth in emerging markets and see these geographies as continuing to offer attractive growth opportunities for the company. Regarding our development pipeline, we were pleased that the U.S. Food and Drug Administration (FDA) accepted our breast cancer compound, palbociclib, for review and also granted it Priority Review status. We believe palbociclib may represent a significant advancement for the treatment of women with advanced breast cancer. Within our Vaccines business, we received a positive recommendation from the U.S. Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices (ACIP) for the use of Prevnar 13 in adults aged 65 and over while our marketing application for our meningitis B vaccine candidate, to be branded Trumenba, is under regulatory review in the U.S. with Priority Review status. In addition, we announced that our vaccine candidate in development for C. difficile was granted Fast Track designation by the FDA.”

“We remain strategically focused on driving increased innovation and enhancing our global competitive position both in terms of operational and financial efficiencies and remain opportunistic regarding business development that can enhance or accelerate our strategy. Given our continued strong financial position, I see Pfizer as well positioned to potentially allocate capital for the benefit of shareholders across multiple financial and strategic opportunities,” Mr. Read concluded.

Frank D’Amelio, Chief Financial Officer, stated, “Overall, I am pleased with our third-quarter 2014 financial results despite the continued negative impact from product losses of exclusivity and the termination of certain co-promotion collaborations. We updated certain components of our 2014 financial guidance to reflect our performance to date, recent changes in foreign exchange rates and our outlook for the remainder of the year, which continues to include the anticipated negative impact from multi-source generic competition for Celebrex in the U.S. beginning in December 2014.”

“Additionally, the board of directors last week authorized a new $11 billion share repurchase program, to be utilized over time, in addition to the $1.3 billion of authorization remaining under the company’s current share repurchase program. We continue to expect to repurchase approximately $5 billion of our shares this year, with $4.2 billion repurchased through October 27. We continue to expect these 2014 repurchases and planned repurchases to reduce total shares outstanding by approximately 100 million shares by the end of the year after factoring in actual and projected dilution related to employee compensation programs,” Mr. D'Amelio concluded.

QUARTERLY FINANCIAL HIGHLIGHTS (Third-Quarter 2014 vs. Third-Quarter 2013)

• Reported revenues⁽¹⁾ decreased $281 million, or 2%, which reflects an operational decline of $270 million, or 2%, and the unfavorable impact of foreign exchange, which was negligible ($11 million). The operational decline was primarily due to the expiration of the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada, the ongoing termination of the Spiriva collaboration in certain countries as well as the loss of exclusivity and subsequent multi-source generic competition for Detrol LA in the U.S. and other product losses of exclusivity in certain markets. Revenues in developed markets were favorably impacted by the growth of certain key products, including Lyrica, Prevnar, Eliquis, Xeljanz, Xalkori, Inlyta, as well as Nexium 24HR primarily in the U.S. as a result of its recent launch. Additionally, revenues in emerging markets increased 9% operationally, including strong operational growth from Prevenar as well as from Lipitor, primarily in China.
• GEP⁽³⁾ revenues decreased 6% operationally, primarily due to the loss of exclusivity and subsequent launch of multi-source generic competition for Detrol LA in the U.S. in January 2014, Viagra in most major European markets in June 2013 as well as Aricept in Canada in December 2013. Additionally, the co-promotion collaboration for Spiriva has terminated in most countries, including the U.S. in April 2014, or has entered its final year in other major markets, which, per the terms of the collaboration agreement, has resulted in a decline in Pfizer’s share of Spiriva revenues. These declines were partially offset by the strong performance of Lyrica in Europe, Lipitor in emerging markets, primarily in China, as well as various other branded products in emerging markets.
• GIP⁽³⁾ revenues declined 4% operationally, primarily due to the expiration of the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada on October 31, 2013; for a 36-month period thereafter, Pfizer is entitled to royalty payments that have been and are expected to continue to be significantly less than the share of Enbrel profits prior to the expiration of the co-promotion term, and those royalty payments are and will be included in Other (income)/deductions–net rather than in Revenues. This decline was partially offset by strong operational growth from Lyrica, primarily in the U.S. and Japan, as well as the performance of recently launched products, including Eliquis and Xeljanz globally.
• VOC⁽³⁾ revenues increased 13% operationally, reflecting the following:

• Adjusted cost of sales, adjusted SI&A expenses and adjusted R&D expenses⁽²⁾ in the aggregate increased $166 million operationally, or 2%, primarily reflecting:

• The effective tax rate on adjusted income⁽²⁾ declined 0.8 percentage points to 26.8% from 27.6%. This decline was primarily due to a favorable change in the jurisdictional mix of earnings.
• The diluted weighted-average shares outstanding declined by 253 million shares compared to the prior-year quarter, due to the company’s ongoing share repurchase program.
• In addition to the aforementioned factors, third-quarter 2014 reported earnings were primarily impacted by the following:

Favorable impacts:

Unfavorable impact:

RECENT NOTABLE DEVELOPMENTS

Product Developments

• Prevnar 13/Prevenar 13

• Eliquis

• Embeda -- Pfizer announced in October that the FDA approved an updated label for Embeda (morphine sulfate and naltrexone hydrochloride) extended-release capsules, for oral use, to include abuse-deterrence studies. Embeda is indicated for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. Pfizer expects Embeda will be available in the U.S. in early 2015.
• Xalkori (crizotinib) -- Pfizer and Merck & Co. Inc., known as MSD outside the U.S. and Canada, through a subsidiary, announced that they have entered into an agreement to explore the therapeutic potential of the combination of Pfizer’s crizotinib with Merck’s anti-PD-1 antibody pembrolizumab (Keytruda), in a Phase 1b clinical study evaluating the safety and tolerability of the combination in patients with ALK-positive advanced or metastatic non-small cell lung cancer (NSCLC). A multi-center, open-label clinical study, to be conducted by Pfizer, is expected to begin in 2015.

Pipeline Developments

• Palbociclib (PD-0332991) -- Pfizer announced in October that the FDA accepted for filing Pfizer's New Drug Application (NDA) with Priority Review seeking approval for palbociclib, in combination with letrozole, as a first-line treatment for postmenopausal women with estrogen receptor positive (ER+), human epidermal growth factor receptor 2 negative (HER2-) advanced breast cancer who have not received previous systemic treatment for their advanced disease. The NDA is based on the final results of PALOMA-1, a randomized, Phase 2 clinical trial comparing the combination of palbociclib plus letrozole versus letrozole alone in this population of patients. The FDA’s Priority Review designation accelerates the review time from 10 months to a goal of six months from the day of filing acceptance and is given to drugs that may offer major advances in treatment or may provide a treatment where no adequate therapy exists. The PDUFA date for this NDA is April 13, 2015.
• rLP2086 (Meningococcal Serogroup B Bivalent Recombinant Lipoprotein vaccine candidate)

• Bococizumab (PF-04950615, proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitor) -- Pfizer increased the target number of patients to be enrolled into its two cardiovascular outcomes trials for bococizumab from 18,300 to approximately 26,000. This expansion was undertaken to help ensure timely completion of these trials. While difficult to predict the exact timing for the completion of these event-driven trials, Pfizer believes primary completion of its studies will be in line with other PCSK9 cardiovascular outcome trials being conducted by certain other companies.
• PF-05082566 (4-1BB / CD-137 antibody candidate) -- Pfizer and Kyowa Hakko Kirin announced in September that they have entered into an agreement to explore the therapeutic potential of the combination of Pfizer’s PF-05082566, an investigational, fully humanized monoclonal antibody that stimulates signaling through 4-1BB (CD-137), a protein involved in regulation of immune cell activation, proliferation and survival, with Kyowa Hakko Kirin’s anti-CCR4 antibody mogamulizumab, which suppresses some of the immune cells that shield the tumor from the immune system, in a Phase 1b clinical study evaluating the safety and tolerability of the combination in patients with solid tumors. Under the terms of the agreement, Pfizer and Kyowa Hakko Kirin will co-fund the clinical study, which will be conducted by Pfizer. This study is expected to establish a recommended dose regimen and assess the safety and preliminary efficacy of the combination. This study is expected to begin in 2015 and the results will determine the future clinical development of the combination.
• PF-06425090 (Clostridium difficile (C. difficile) vaccine candidate) -- Pfizer announced in August that the FDA granted Fast Track designation to the company’s investigational C. difficile vaccine candidate. Currently in Phase 2 clinical development, the vaccine candidate is designed to prevent C. difficile-associated disease, which can include life-threatening diarrhea and pseudomembranous colitis. The FDA’s Fast Track approach is a process designed to facilitate the development and expedite the review of new drugs and vaccines intended to treat or prevent serious conditions and address an unmet medical need.
• PF-06290510 (Staphylococcus aureus (S. aureus) vaccine candidate) -- In October, Pfizer presented data from a Phase 1/Phase 2 study evaluating the safety, tolerability and immunogenicity of a single-dose of its investigational 4-antigen S. aureus vaccine candidate in healthy adults. The study results demonstrated that PF-06290510 was well tolerated in the 456 healthy adults 18 to 64 years old who randomly received a single intramuscular injection of PF-06290510 or placebo. The study also showed rapid rises in functional antibody titers against S. aureus that were maintained through at least 12 months. PF-06290510, currently in Phase 2 clinical trials, was granted Fast Track designation by the FDA in February 2014.
• Remoxy (oxycodone extended-release capsules CII) -- Pfizer in October notified Pain Therapeutics, Inc. that Pfizer has decided to discontinue its agreement to develop and commercialize Remoxy, an investigational extended-release oral formulation of oxycodone. Pfizer will return all rights, including responsibility for regulatory activities, to Pain Therapeutics, Inc. Pfizer and Pain Therapeutics, Inc. will work together for an orderly transition of Remoxy to Pain Therapeutics, Inc. Pfizer will continue ongoing activities under the agreement for the next six months until the scheduled termination date.

Corporate Developments

• Pfizer announced in July that it has entered into a definitive agreement to acquire Baxter International Inc.'s (Baxter) portfolio of marketed vaccines for $635 million. As part of the transaction, Pfizer will also acquire a portion of Baxter’s facility in Orth, Austria, where these vaccines are manufactured. Baxter’s portfolio of marketed vaccines consists of NeisVac-C and FSME-Immun/TicoVac. NeisVac-C is a vaccine that helps protect against meningitis caused by group C meningococcal meningitis and FSME-Immun/TicoVac is a vaccine that helps protect against tick-borne encephalitis. The transaction is subject to customary closing conditions as well as regulatory approvals in several markets, including some countries in the European Union, and is expected to be completed by the end of 2014.
• In September, Pfizer completed its acquisition of the pharmaceutical development company, InnoPharma, Inc. for an upfront cash payment of $225 million and up to $135 million of contingent milestone payments.

Please find Pfizer’s press release and associated financial tables, including reconciliations of certain GAAP reported to non-GAAP adjusted information, at the following hyperlink:

http://www.pfizer.com/system/files/presentation/Q3_2014_PFE_Earnings_Press_Release_dijf3lskdf0k.pdf

(Note: If clicking on the above link does not open up a new web page, you may need to cut and paste the above URL into your browser's address bar.)

For additional details, see the associated financial schedules and product revenue tables attached to the press release located at the hyperlink referred to above and the attached disclosure notice.

• Does not assume the completion of any business development transactions not completed as of September 28, 2014, including any one-time upfront payments associated with such transactions.
• Excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of September 28, 2014.
• Exchange rates assumed are a blend of the actual exchange rates in effect through September 28, 2014 and the mid-October 2014 exchange rates for the remainder of the year. Does not include the impact of a potential devaluation of the Venezuelan bolivar or any other currency.
• Guidance for the effective tax rate on adjusted income⁽²⁾ does not assume renewal of the U.S. research and development (R&D) tax credit. The renewal of the R&D tax credit is not anticipated to have a material impact on the effective tax rate on adjusted income⁽²⁾.
• Assumes diluted weighted-average shares outstanding of approximately 6.4 billion shares.
• Revenues and cost of sales from the transitional manufacturing and supply agreements with Zoetis have been excluded from the applicable Adjusted components of the financial guidance.
• Reconciliation of the 2014 Adjusted Income⁽²⁾ and Adjusted Diluted EPS⁽²⁾ guidance to the 2014 Reported Net Income Attributable to Pfizer Inc. and Reported Diluted EPS Attributable to Pfizer Inc. common shareholders guidance:

DISCLOSURE NOTICE: The information contained in this earnings release and the attachments is as of October 28, 2014. We assume no obligation to update forward-looking statements contained in this earnings release and the attachments as a result of new information or future events or developments.

This earnings release and the attachments contain forward-looking statements about our future operating and financial performance, business plans and prospects, in-line products and product candidates, strategic reviews, capital allocation, business-development plans, and plans relating to share repurchases and dividends, among other things, that involve substantial risks and uncertainties. You can identify these statements by the fact that they use future dates or use words such as “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” “goal,” “objective,” “aim” and other words and terms of similar meaning. Among the factors that could cause actual results to differ materially from past results and future plans and projected future results are the following:

• the outcome of research and development activities, including, without limitation, the ability to meet anticipated clinical trial commencement and completion dates, regulatory submission and approval dates, and launch dates for product candidates, as well as the possibility of unfavorable clinical trial results, including unfavorable new clinical data and additional analyses of existing clinical data;
• decisions by regulatory authorities regarding whether and when to approve our drug applications, which will depend on the assessment by such regulatory authorities of the benefit-risk profile suggested by the totality of the efficacy and safety information submitted; and decisions by regulatory authorities regarding labeling, ingredients and other matters that could affect the availability or commercial potential of our products;
• the speed with which regulatory authorizations, pricing approvals and product launches may be achieved;
• the outcome of post-approval clinical trials, which could result in the loss of marketing approval for a product or changes in the labeling for, and/or increased or new concerns about the safety or efficacy of, a product that could affect its availability or commercial potential;
• the success of external business-development activities, including the ability to satisfy the conditions to closing of announced transactions in the anticipated timeframe or at all;
• competitive developments, including the impact on our competitive position of new product entrants, in-line branded products, generic products, private label products and product candidates that treat diseases and conditions similar to those treated by our in-line drugs and drug candidates;
• the implementation by the FDA of an abbreviated legal pathway to approve biosimilar products, which could subject our biologic products to competition from biosimilar products in the U.S., with attendant competitive pressures, after the expiration of any applicable exclusivity period and patent rights;
• the ability to meet generic and branded competition after the loss of patent protection for our products or competitor products;
• the ability to successfully market both new and existing products domestically and internationally;
• difficulties or delays in manufacturing;
• trade buying patterns;
• the impact of existing and future legislation and regulatory provisions on product exclusivity;
• trends toward managed care and healthcare cost containment;
• the impact of the U.S. Budget Control Act of 2011 (the Budget Control Act) and the deficit-reduction actions to be taken pursuant to the Budget Control Act in order to achieve the deficit-reduction targets provided for therein, and the impact of any broader deficit-reduction efforts;
• the impact of U.S. healthcare legislation enacted in 2010—the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act—and of any modification or repeal of any of the provisions thereof;
• U.S. federal or state legislation or regulatory action affecting, among other things: pharmaceutical product pricing, reimbursement or access, including under Medicaid, Medicare and other publicly funded or subsidized health programs; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; direct-to-consumer advertising and interactions with healthcare professionals; and the use of comparative effectiveness methodologies that could be implemented in a manner that focuses primarily on the cost differences and minimizes the therapeutic differences among pharmaceutical products and restricts access to innovative medicines; as well as pricing pressures as a result of highly competitive insurance markets;
• legislation or regulatory action in markets outside the U.S. affecting pharmaceutical product pricing, reimbursement or access, including, in particular, continued government-mandated price reductions for certain biopharmaceutical products in certain European and emerging market countries and Japan and government-imposed access restrictions in certain countries;
• the exposure of our operations outside the U.S. to possible capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, as well as political unrest and unstable governments and legal systems;
• contingencies related to actual or alleged environmental contamination;
• claims and concerns that may arise regarding the safety or efficacy of in-line products and product candidates;
• any significant breakdown, infiltration, or interruption of our information technology systems and infrastructure;
• legal defense costs, insurance expenses, settlement costs, the risk of an adverse decision or settlement and the adequacy of reserves related to product liability, patent protection, government investigations, consumer, commercial, securities, antitrust, environmental and tax issues, ongoing efforts to explore various means for resolving asbestos litigation, and other legal proceedings;
• our ability to protect our patents and other intellectual property, both domestically and internationally;
• interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates;
• governmental laws and regulations affecting domestic and foreign operations, including, without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside of the U.S. that may result from pending and possible future proposals;
• any significant issues involving our largest wholesaler customers, which account for a substantial portion of our revenues;
• the possible impact of the increased presence of counterfeit medicines in the pharmaceutical supply chain on our revenues and on patient confidence in the integrity of our medicines;
• any significant issues that may arise related to the outsourcing of certain operational and staff functions to third parties, including with regard to quality, timeliness and compliance with applicable legal requirements and industry standards;
• changes in U.S. generally accepted accounting principles;
• uncertainties related to general economic, political, business, industry, regulatory and market conditions including, without limitation, uncertainties related to the impact on us, our customers, suppliers and lenders and counterparties to our foreign-exchange and interest-rate agreements of challenging global economic conditions and recent and possible future changes in global financial markets; and the related risk that our allowance for doubtful accounts may not be adequate;
• any changes in business, political and economic conditions due to actual or threatened terrorist activity in the U.S. and other parts of the world, and related U.S. military action overseas;
• growth in costs and expenses;
• changes in our product, segment and geographic mix; and
• the impact of acquisitions, divestitures, restructurings, internal reorganizations, product recalls and withdrawals and other unusual items, including our ability to realize the projected benefits of our cost-reduction and productivity initiatives, including those related to our research and development organization, and of the internal separation of our commercial operations into three new global businesses.

A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and in our subsequent reports on Form 10-Q, in each case including in the sections thereof captioned “Forward-Looking Information and Factors That May Affect Future Results” and “Item 1A. Risk Factors”, and in our subsequent reports on Form 8-K.

The operating segment information provided in this earnings release and the attachments does not purport to represent the revenues, costs and income from continuing operations before provision for taxes on income that each of our operating segments would have reported had each segment operated as a standalone company during the periods presented.

This earnings release may include discussion of certain clinical studies relating to various in-line products and/or product candidates. These studies typically are part of a larger body of clinical data relating to such products or product candidates, and the discussion herein should be considered in the context of the larger body of data.