DELAWARE
(State of Incorporation)
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13-5315170
(I.R.S. Employer Identification No.)
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YES X
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NO ___
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YES X
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NO ___
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YES ____
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NO X
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Page
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Condensed Consolidated Statements of Income for the three and nine months ended October 1, 2017 and October 2, 2016
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Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 1, 2017 and October 2, 2016
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Condensed Consolidated Balance Sheets as of October 1, 2017 and December 31, 2016
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Condensed Consolidated Statements of Cash Flows for the nine months ended October 1, 2017 and October 2, 2016
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2016 Financial Report
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Financial Report for the fiscal year ended December 31, 2016, which was filed as Exhibit 13 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2016
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2016 Form 10-K
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Annual Report on Form 10-K for the fiscal year ended December 31, 2016
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AAV
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Adeno-Associated Virus
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ACA (Also referred to as U.S. Healthcare Legislation)
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U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act
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ACIP
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Advisory Committee on Immunization Practices
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ALK
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anaplastic lymphoma kinase
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Allergan
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Allergan plc
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Alliance revenues
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Revenues from alliance agreements under which we co-promote products discovered or developed by other companies or us
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Anacor
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Anacor Pharmaceuticals, Inc.
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Astellas
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Astellas Pharma U.S., Inc.
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ASU
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Accounting Standards Update
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ATM-AVI
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aztreonam-avibactam
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Avillion
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Avillion LLP
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Bamboo
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Bamboo Therapeutics, Inc.
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BMS
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Bristol-Myers Squibb Company
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CDC
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U.S. Centers for Disease Control and Prevention
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Cellectis
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Cellectis SA
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Citibank
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Citibank N.A.
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cGMPs
|
current Good Manufacturing Practices
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Developed Markets
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U.S., Western Europe, Japan, Canada, Australia, South Korea, Scandinavian countries, Finland and New Zealand
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EEA
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European Economic Area
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EH
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Essential Health
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EMA
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European Medicines Agency
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Emerging Markets
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Includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Africa, Eastern Europe, Central Europe, the Middle East and Turkey
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EPS
|
earnings per share
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EU
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European Union
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EURIBOR
|
Euro Interbank Offered Rate
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Exchange Act
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Securities Exchange Act of 1934, as amended
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FASB
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Financial Accounting Standards Board
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FDA
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U.S. Food and Drug Administration
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GAAP
|
Generally Accepted Accounting Principles
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GIST
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gastrointestinal stromal tumors
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GPD
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Global Product Development
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HER2-
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human epidermal growth factor receptor 2-negative
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HIS
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Hospira Infusion Systems
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Hisun
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Zhejiang Hisun Pharmaceuticals Co., Ltd.
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Hisun Pfizer
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Hisun Pfizer Pharmaceuticals Company Limited
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Hospira
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Hospira, Inc.
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HR+
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hormone receptor-positive
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ICU Medical
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ICU Medical, Inc.
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IH
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Innovative Health
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InnoPharma
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InnoPharma, Inc.
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IPR&D
|
in-process research and development
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IRS
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U.S. Internal Revenue Service
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IV
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intravenous
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Janssen
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Janssen Biotech Inc.
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King
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King Pharmaceuticals, Inc.
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LDL
|
low density lipoprotein
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LEP
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Legacy Established Products
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LIBOR
|
London Interbank Offered Rate
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Lilly
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Eli Lilly & Company
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LOE
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loss of exclusivity
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MCO
|
Managed Care Organization
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MD&A
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Medivation
|
Medivation, Inc.
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Merck
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Merck & Co., Inc.
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Meridian
|
Meridian Medical Technologies, Inc.
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Moody’s
|
Moody’s Investors Service
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NDA
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new drug application
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NovaQuest
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NovaQuest Co-Investment Fund V, L.P.
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NSCLC
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non-small cell lung cancer
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NYSE
|
New York Stock Exchange
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OPKO
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OPKO Health, Inc.
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OTC
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over-the-counter
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PBM
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Pharmacy Benefit Manager
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Pharmacia
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Pharmacia Corporation
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PP&E
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Property, plant & equipment
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Quarterly Report on Form 10-Q
|
Quarterly Report on Form 10-Q for the quarterly period ended October 1, 2017
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RCC
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renal cell carcinoma
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R&D
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research and development
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RPI
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RPI Finance Trust
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Sandoz
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Sandoz, Inc., a division of Novartis AG
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Sangamo
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Sangamo Therapeutics, Inc.
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SEC
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U.S. Securities and Exchange Commission
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SFJ
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SFJ Pharmaceuticals Group
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SIP
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Sterile Injectable Pharmaceuticals
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S&P
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Standard and Poor’s
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Teuto
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Laboratório Teuto Brasileiro S.A.
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U.K.
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United Kingdom
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U.S.
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United States
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ViiV
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ViiV Healthcare Limited
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WRD
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Worldwide Research and Development
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Zoetis
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Zoetis Inc.
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Three Months Ended
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Nine Months Ended
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||||||||||||
(MILLIONS, EXCEPT PER COMMON SHARE DATA)
|
|
October 1,
2017 |
|
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October 2,
2016 |
|
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October 1,
2017 |
|
|
October 2,
2016 |
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||||
Revenues
|
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$
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13,168
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|
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$
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13,045
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|
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$
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38,843
|
|
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$
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39,196
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Costs and expenses:
|
|
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||||||||
Cost of sales(a)
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2,847
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|
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3,085
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7,980
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|
|
9,111
|
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||||
Selling, informational and administrative expenses(a)
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3,500
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|
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3,559
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10,233
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|
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10,414
|
|
||||
Research and development expenses(a)
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1,859
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|
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1,881
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|
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5,346
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|
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5,360
|
|
||||
Amortization of intangible assets
|
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1,177
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|
|
968
|
|
|
3,571
|
|
|
2,934
|
|
||||
Restructuring charges and certain acquisition-related costs
|
|
149
|
|
|
531
|
|
|
377
|
|
|
988
|
|
||||
Other (income)/deductions––net
|
|
51
|
|
|
1,417
|
|
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(16
|
)
|
|
2,815
|
|
||||
Income from continuing operations before provision for taxes on income
|
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3,585
|
|
|
1,604
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|
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11,351
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7,575
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|
||||
Provision for taxes on income(b)
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727
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|
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249
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|
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2,287
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|
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1,109
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|
||||
Income from continuing operations(b)
|
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2,858
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|
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1,355
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9,064
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|
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6,465
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|
||||
Discontinued operations––net of tax
|
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—
|
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—
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1
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|
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—
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||||
Net income before allocation to noncontrolling interests(b)
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2,858
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|
|
1,355
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|
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9,066
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|
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6,465
|
|
||||
Less: Net income attributable to noncontrolling interests
|
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18
|
|
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—
|
|
|
32
|
|
|
25
|
|
||||
Net income attributable to Pfizer Inc.(b)
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$
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2,840
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|
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$
|
1,355
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|
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$
|
9,034
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|
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$
|
6,440
|
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per common share––basic(b):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
0.48
|
|
|
$
|
0.22
|
|
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$
|
1.51
|
|
|
$
|
1.06
|
|
Discontinued operations––net of tax
|
|
—
|
|
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—
|
|
|
—
|
|
|
—
|
|
||||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
0.48
|
|
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$
|
0.22
|
|
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$
|
1.51
|
|
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$
|
1.06
|
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per common share––diluted(b):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
0.47
|
|
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$
|
0.22
|
|
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$
|
1.49
|
|
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$
|
1.04
|
|
Discontinued operations––net of tax
|
|
—
|
|
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—
|
|
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—
|
|
|
—
|
|
||||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
0.47
|
|
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$
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0.22
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|
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$
|
1.49
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|
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$
|
1.04
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|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares––basic
|
|
5,951
|
|
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6,066
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|
|
5,972
|
|
|
6,095
|
|
||||
Weighted-average shares––diluted(b)
|
|
6,041
|
|
|
6,150
|
|
|
6,057
|
|
|
6,175
|
|
||||
Cash dividends paid per common share
|
|
$
|
0.32
|
|
|
$
|
0.30
|
|
|
$
|
0.96
|
|
|
$
|
0.90
|
|
(a)
|
Excludes amortization of intangible assets, except as disclosed in Note 9A. Identifiable Intangible Assets and Goodwill: Identifiable Intangible Assets.
|
(b)
|
Amounts for the three and nine months ended October 2, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016. For additional information, see Note 1B. Basis of Presentation and Significant Accounting Policies––Adoption of New Accounting Standards.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||||
Net income before allocation to noncontrolling interests
|
|
$
|
2,858
|
|
|
$
|
1,355
|
|
|
$
|
9,066
|
|
|
$
|
6,465
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustments, net
|
|
878
|
|
|
417
|
|
|
1,352
|
|
|
998
|
|
||||
Reclassification adjustments(a)
|
|
(3
|
)
|
|
—
|
|
|
110
|
|
|
—
|
|
||||
|
|
875
|
|
|
417
|
|
|
1,461
|
|
|
998
|
|
||||
Unrealized holding losses on derivative financial instruments, net
|
|
(50
|
)
|
|
(126
|
)
|
|
(149
|
)
|
|
(970
|
)
|
||||
Reclassification adjustments for realized (gains)/losses(b)
|
|
56
|
|
|
150
|
|
|
(393
|
)
|
|
280
|
|
||||
|
|
6
|
|
|
24
|
|
|
(542
|
)
|
|
(690
|
)
|
||||
Unrealized holding gains on available-for-sale securities, net
|
|
384
|
|
|
261
|
|
|
698
|
|
|
740
|
|
||||
Reclassification adjustments for realized gains(b)
|
|
(278
|
)
|
|
(112
|
)
|
|
(181
|
)
|
|
(129
|
)
|
||||
|
|
106
|
|
|
149
|
|
|
518
|
|
|
611
|
|
||||
Benefit plans: actuarial losses, net
|
|
(103
|
)
|
|
(82
|
)
|
|
(41
|
)
|
|
(101
|
)
|
||||
Reclassification adjustments related to amortization(c)
|
|
140
|
|
|
140
|
|
|
448
|
|
|
418
|
|
||||
Reclassification adjustments related to settlements, net(c)
|
|
38
|
|
|
28
|
|
|
89
|
|
|
76
|
|
||||
Other
|
|
(76
|
)
|
|
69
|
|
|
(111
|
)
|
|
51
|
|
||||
|
|
(1
|
)
|
|
155
|
|
|
384
|
|
|
444
|
|
||||
Benefit plans: prior service (costs)/credits and other, net
|
|
—
|
|
|
95
|
|
|
(2
|
)
|
|
182
|
|
||||
Reclassification adjustments related to amortization(c)
|
|
(46
|
)
|
|
(45
|
)
|
|
(138
|
)
|
|
(127
|
)
|
||||
Reclassification adjustments related to curtailments, net(c)
|
|
(3
|
)
|
|
(8
|
)
|
|
(14
|
)
|
|
(14
|
)
|
||||
Other
|
|
1
|
|
|
6
|
|
|
2
|
|
|
12
|
|
||||
|
|
(48
|
)
|
|
48
|
|
|
(151
|
)
|
|
54
|
|
||||
Other comprehensive income, before tax
|
|
938
|
|
|
793
|
|
|
1,669
|
|
|
1,417
|
|
||||
Tax provision/(benefit) on other comprehensive income(d)
|
|
(80
|
)
|
|
116
|
|
|
(218
|
)
|
|
111
|
|
||||
Other comprehensive income before allocation to noncontrolling interests
|
|
$
|
1,018
|
|
|
$
|
677
|
|
|
$
|
1,888
|
|
|
$
|
1,306
|
|
|
|
|
|
|
|
|
|
|
||||||||
Comprehensive income before allocation to noncontrolling interests
|
|
$
|
3,876
|
|
|
$
|
2,031
|
|
|
$
|
10,953
|
|
|
$
|
7,771
|
|
Less: Comprehensive income attributable to noncontrolling interests
|
|
19
|
|
|
—
|
|
|
48
|
|
|
24
|
|
||||
Comprehensive income attributable to Pfizer Inc.
|
|
$
|
3,857
|
|
|
$
|
2,032
|
|
|
$
|
10,906
|
|
|
$
|
7,747
|
|
(a)
|
The foreign currency translation adjustments reclassified into Other (income)/deductions—net in the condensed consolidated statements of income primarily result from sale of our 40% ownership investment in Teuto. See Note 2D. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments.
|
(b)
|
Reclassified into Other (income)/deductions—net and Cost of sales in the condensed consolidated statements of income. For additional information on amounts reclassified into Cost of sales, see Note 7F. Financial Instruments: Derivative Financial Instruments and Hedging Activities.
|
(c)
|
Generally reclassified, as part of net periodic pension cost, into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate, in the condensed consolidated statements of income. For additional information, see Note 10. Pension and Postretirement Benefit Plans.
|
(d)
|
See Note 5C. Tax Matters: Tax Provision/(Benefit) on Other Comprehensive Income.
|
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
December 31,
2016 |
|
||
|
|
(Unaudited)
|
|
|
||||
Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
2,779
|
|
|
$
|
2,595
|
|
Short-term investments
|
|
14,146
|
|
|
15,255
|
|
||
Trade accounts receivable, less allowance for doubtful accounts: 2017—$590; 2016—$609
|
|
10,002
|
|
|
8,225
|
|
||
Inventories
|
|
7,925
|
|
|
6,783
|
|
||
Current tax assets
|
|
3,263
|
|
|
3,041
|
|
||
Other current assets
|
|
2,158
|
|
|
2,249
|
|
||
Assets held for sale
|
|
16
|
|
|
801
|
|
||
Total current assets
|
|
40,291
|
|
|
38,949
|
|
||
Long-term investments
|
|
7,311
|
|
|
7,116
|
|
||
Property, plant and equipment, less accumulated depreciation: 2017—$15,906; 2016—$14,807
|
|
13,505
|
|
|
13,318
|
|
||
Identifiable intangible assets, less accumulated amortization
|
|
49,721
|
|
|
52,648
|
|
||
Goodwill
|
|
56,078
|
|
|
54,449
|
|
||
Noncurrent deferred tax assets and other noncurrent tax assets
|
|
1,858
|
|
|
1,812
|
|
||
Other noncurrent assets
|
|
3,388
|
|
|
3,323
|
|
||
Total assets
|
|
$
|
172,151
|
|
|
$
|
171,615
|
|
|
|
|
|
|
||||
Liabilities and Equity
|
|
|
|
|
|
|
||
Short-term borrowings, including current portion of long-term debt: 2017—$3,072; 2016—$4,225
|
|
$
|
9,448
|
|
|
$
|
10,688
|
|
Trade accounts payable
|
|
3,480
|
|
|
4,536
|
|
||
Dividends payable
|
|
1,909
|
|
|
1,944
|
|
||
Income taxes payable
|
|
1,003
|
|
|
437
|
|
||
Accrued compensation and related items
|
|
1,932
|
|
|
2,487
|
|
||
Other current liabilities
|
|
10,446
|
|
|
11,023
|
|
||
Total current liabilities
|
|
28,217
|
|
|
31,115
|
|
||
|
|
|
|
|
||||
Long-term debt
|
|
34,503
|
|
|
31,398
|
|
||
Pension benefit obligations, net
|
|
5,531
|
|
|
6,406
|
|
||
Postretirement benefit obligations, net
|
|
1,687
|
|
|
1,766
|
|
||
Noncurrent deferred tax liabilities
|
|
30,411
|
|
|
30,753
|
|
||
Other taxes payable
|
|
4,304
|
|
|
4,000
|
|
||
Other noncurrent liabilities
|
|
6,388
|
|
|
6,337
|
|
||
Total liabilities
|
|
111,041
|
|
|
111,776
|
|
||
|
|
|
|
|
||||
Commitments and Contingencies
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
Preferred stock
|
|
22
|
|
|
24
|
|
||
Common stock
|
|
463
|
|
|
461
|
|
||
Additional paid-in capital
|
|
83,827
|
|
|
82,685
|
|
||
Treasury stock
|
|
(89,421
|
)
|
|
(84,364
|
)
|
||
Retained earnings
|
|
75,043
|
|
|
71,774
|
|
||
Accumulated other comprehensive loss
|
|
(9,164
|
)
|
|
(11,036
|
)
|
||
Total Pfizer Inc. shareholders’ equity
|
|
60,770
|
|
|
59,544
|
|
||
Equity attributable to noncontrolling interests
|
|
340
|
|
|
296
|
|
||
Total equity
|
|
61,110
|
|
|
59,840
|
|
||
Total liabilities and equity
|
|
$
|
172,151
|
|
|
$
|
171,615
|
|
|
|
Nine Months Ended
|
||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||
Operating Activities
|
|
|
|
|
||||
Net income before allocation to noncontrolling interests(a)
|
|
$
|
9,066
|
|
|
$
|
6,465
|
|
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:
|
|
|
|
|
|
|
||
Depreciation and amortization
|
|
4,695
|
|
|
4,208
|
|
||
Asset write-offs and impairments
|
|
326
|
|
|
1,146
|
|
||
Loss on sale of HIS net assets
|
|
52
|
|
|
1,422
|
|
||
Deferred taxes from continuing operations
|
|
241
|
|
|
(1,335
|
)
|
||
Share-based compensation expense
|
|
595
|
|
|
532
|
|
||
Benefit plan contributions in excess of expense
|
|
(1,042
|
)
|
|
(775
|
)
|
||
Other adjustments, net
|
|
(561
|
)
|
|
68
|
|
||
Other changes in assets and liabilities, net of acquisitions and divestitures(a)
|
|
(3,644
|
)
|
|
(1,582
|
)
|
||
Net cash provided by operating activities(a)
|
|
9,728
|
|
|
10,151
|
|
||
|
|
|
|
|
||||
Investing Activities
|
|
|
|
|
|
|
||
Purchases of property, plant and equipment
|
|
(1,256
|
)
|
|
(1,134
|
)
|
||
Purchases of short-term investments
|
|
(6,469
|
)
|
|
(15,170
|
)
|
||
Proceeds from redemptions/sales of short-term investments
|
|
5,783
|
|
|
20,685
|
|
||
Net proceeds from redemptions/sales of short-term investments with original maturities of three months or less
|
|
2,758
|
|
|
6,485
|
|
||
Purchases of long-term investments
|
|
(2,526
|
)
|
|
(4,771
|
)
|
||
Proceeds from redemptions/sales of long-term investments
|
|
2,417
|
|
|
6,915
|
|
||
Acquisitions of businesses, net of cash acquired
|
|
(1,000
|
)
|
|
(17,679
|
)
|
||
Acquisitions of intangible assets
|
|
(188
|
)
|
|
(96
|
)
|
||
Other investing activities, net
|
|
519
|
|
|
60
|
|
||
Net cash provided by/(used in) investing activities
|
|
38
|
|
|
(4,704
|
)
|
||
|
|
|
|
|
||||
Financing Activities
|
|
|
|
|
|
|
||
Proceeds from short-term borrowings
|
|
7,003
|
|
|
6,397
|
|
||
Principal payments on short-term borrowings
|
|
(7,691
|
)
|
|
(3,321
|
)
|
||
Net proceeds from/(payments on) short-term borrowings with original maturities of three months or less
|
|
555
|
|
|
(963
|
)
|
||
Proceeds from issuance of long-term debt
|
|
5,273
|
|
|
5,031
|
|
||
Principal payments on long-term debt
|
|
(4,474
|
)
|
|
(4,317
|
)
|
||
Purchases of common stock
|
|
(5,000
|
)
|
|
(5,000
|
)
|
||
Cash dividends paid
|
|
(5,750
|
)
|
|
(5,496
|
)
|
||
Proceeds from exercise of stock options
|
|
656
|
|
|
946
|
|
||
Other financing activities, net(a)
|
|
(223
|
)
|
|
(192
|
)
|
||
Net cash used in financing activities(a)
|
|
(9,650
|
)
|
|
(6,915
|
)
|
||
Effect of exchange-rate changes on cash and cash equivalents
|
|
67
|
|
|
(79
|
)
|
||
Net increase/(decrease) in cash and cash equivalents
|
|
184
|
|
|
(1,547
|
)
|
||
Cash and cash equivalents, beginning
|
|
2,595
|
|
|
3,641
|
|
||
Cash and cash equivalents, end
|
|
$
|
2,779
|
|
|
$
|
2,094
|
|
|
|
|
|
|
|
|
||
Supplemental Cash Flow Information
|
|
|
|
|
||||
Non-cash transactions:
|
|
|
|
|
||||
Receipt of ICU Medical common stock(b)
|
|
$
|
428
|
|
|
$
|
—
|
|
Promissory note from ICU Medical(b)
|
|
75
|
|
|
—
|
|
||
Cash paid (received) during the period for:
|
|
|
|
|
|
|
||
Income taxes
|
|
$
|
1,424
|
|
|
$
|
1,430
|
|
Interest
|
|
1,101
|
|
|
1,177
|
|
||
Interest rate hedges
|
|
(183
|
)
|
|
(356
|
)
|
(a)
|
Amounts for the three and nine months ended October 2, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016. For additional information, see Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards.
|
(b)
|
In connection with the sale of HIS net assets to ICU Medical, on February 3, 2017, Pfizer received 3.2 million newly issued shares of ICU Medical common stock initially valued at $428 million and a promissory note in the amount of $75 million. For additional information, see Note 2B. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement and Equity-Method Investments: Sale of Hospira Infusion Systems Net Assets.
|
•
|
On February 3, 2017, we completed the sale of our global infusion therapy net assets, HIS, to ICU Medical. The operating results of HIS are included in our condensed consolidated statement of income and EH’s operating results through February 2, 2017 and, therefore, our financial results, and EH’s operating results, for the third quarter of 2017 do not reflect any contribution from HIS global operations, while our financial results, and EH’s operating results, for the third quarter of 2016 reflect three months of HIS global operations. Our financial results, and EH’s operating results, for the first nine months of 2017 reflect approximately one month of HIS domestic operations and approximately two months of HIS international operations, while our financial results, and EH’s operating results, for the first nine months of 2016 reflect nine months of HIS global operations. Assets and liabilities associated with HIS are presented as held for sale in the condensed consolidated balance sheet as of December 31, 2016. The HIS assets held for sale are reported in Assets held for sale and HIS liabilities held for sale are reported in Other current liabilities.
|
•
|
On December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations, we acquired the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of this business, and, in accordance with our international reporting period, our financial results, EH’s operating results, and cash flows for the third quarter and first nine months of 2017 reflect approximately three months and eight months, respectively, of the small molecule anti-infectives business acquired from AstraZeneca.
|
•
|
On September 28, 2016, we acquired Medivation for $81.50 per share. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Medivation. Therefore, Medivation operations are reflected in our financial results, IH’s operating results, and cash flows for the third quarter and first nine months of 2017. In accordance with our domestic and international reporting periods, our consolidated financial statements for the third quarter and first nine months of 2016 reflect three business days of Medivation operations, which were immaterial.
|
•
|
On June 24, 2016, we acquired Anacor for $99.25 per share. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Anacor. Therefore, Anacor operations are reflected in our financial results, IH’s operating results, and cash flows for the third quarter and first nine months of 2017. In accordance with our domestic and international reporting periods, our consolidated financial statements for the third quarter and first nine months of 2016 reflect approximately three months of Anacor operations.
|
•
|
In connection with acquisition activity, we typically incur costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and
|
•
|
In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems.
|
•
|
Optimization of our manufacturing plant network to support IH and EH products and pipelines. During 2017-2019, we expect to incur costs of approximately $800 million related to this initiative. Through October 1, 2017, we incurred approximately $122 million associated with this initiative.
|
•
|
Activities in non-manufacturing related areas, which include further centralization of our corporate and platform functions, as well as other activities where opportunities are identified. During 2017-2019, we expect to incur costs of approximately $200 million related to this initiative. Through October 1, 2017, we incurred approximately $131 million associated with this initiative.
|
The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:
|
||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||||
Restructuring charges(a):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Employee terminations
|
|
$
|
(20
|
)
|
|
$
|
347
|
|
|
$
|
9
|
|
|
$
|
464
|
|
Asset impairments(b)
|
|
101
|
|
|
27
|
|
|
126
|
|
|
45
|
|
||||
Exit costs
|
|
10
|
|
|
29
|
|
|
16
|
|
|
64
|
|
||||
Total restructuring charges
|
|
91
|
|
|
404
|
|
|
150
|
|
|
574
|
|
||||
Transaction costs(c)
|
|
(14
|
)
|
|
54
|
|
|
4
|
|
|
114
|
|
||||
Integration costs(d)
|
|
73
|
|
|
74
|
|
|
224
|
|
|
300
|
|
||||
Restructuring charges and certain acquisition-related costs
|
|
149
|
|
|
531
|
|
|
377
|
|
|
988
|
|
||||
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(e):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales
|
|
39
|
|
|
46
|
|
|
74
|
|
|
145
|
|
||||
Research and development expenses
|
|
—
|
|
|
1
|
|
|
—
|
|
|
5
|
|
||||
Total additional depreciation––asset restructuring
|
|
39
|
|
|
47
|
|
|
74
|
|
|
151
|
|
||||
Implementation costs recorded in our condensed consolidated statements of income as follows(f):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales
|
|
26
|
|
|
46
|
|
|
77
|
|
|
127
|
|
||||
Selling, informational and administrative expenses
|
|
22
|
|
|
23
|
|
|
46
|
|
|
56
|
|
||||
Research and development expenses
|
|
9
|
|
|
8
|
|
|
26
|
|
|
17
|
|
||||
Other (income)/deductions––net
|
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
||||
Total implementation costs
|
|
57
|
|
|
78
|
|
|
150
|
|
|
202
|
|
||||
Total costs associated with acquisitions and cost-reduction/productivity initiatives
|
|
$
|
245
|
|
|
$
|
655
|
|
|
$
|
601
|
|
|
$
|
1,341
|
|
(a)
|
In the third quarter and first nine months of 2017, restructuring charges are primarily associated with our acquisitions of Hospira and Medivation, as well as cost-reduction and productivity initiatives not associated with acquisitions. In the third quarter and first nine months of 2016, restructuring charges are largely associated with cost-reduction and productivity initiatives not associated with acquisitions, as well as our acquisitions of Hospira and Medivation. In the third quarter and first nine months ended October 1, 2017, Employee terminations primarily include revisions of our estimates of severance benefits. Employee termination costs are generally recorded when the actions are probable and estimable and include accrued severance benefits, pension and postretirement benefits, many of which may be paid out during periods after termination.
|
•
|
For the third quarter of 2017, IH ($4 million); EH ($1 million); WRD/GPD ($15 million); manufacturing operations ($47 million); and Corporate ($25 million).
|
•
|
For the first nine months of 2017, IH ($10 million); EH ($9 million income); WRD/GPD ($29 million); manufacturing operations ($70 million); and Corporate ($51 million).
|
•
|
For the third quarter of 2016, IH ($148 million); EH ($28 million); WRD/GPD ($52 million); manufacturing operations ($108 million); and Corporate ($67 million).
|
•
|
For the first nine months of 2016, IH ($162 million); EH ($19 million); WRD/GPD ($104 million); manufacturing operations ($181 million); and Corporate ($107 million).
|
(b)
|
The asset impairment charges for the third quarter and the first nine months of 2017 are largely associated with our acquisitions of Hospira and Medivation.
|
(c)
|
Transaction costs represent external costs for banking, legal, accounting and other similar services, which in the third quarter of 2017 reflect the reversal of an accrual related to the acquisition of Medivation. Transaction costs for the first nine months of 2017 are directly related to our acquisitions of Hospira, Anacor and Medivation. Transaction costs in the third quarter of 2016 were mostly related to the Medivation acquisition, and in the first nine months of 2016, were mostly related to the Medivation and Anacor acquisitions, and our terminated transaction with Allergan.
|
(d)
|
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. In the third quarter and first nine months of 2017, integration costs primarily relate to our acquisitions of Hospira and Medivation. The first nine months of 2017 also include a net gain of $12 million related to the settlement of the Hospira U.S. qualified defined benefit pension plan (see Note 10). In the third quarter of 2016, integration
|
(e)
|
Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.
|
(f)
|
Implementation costs represent external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.
|
(a)
|
Included in Other current liabilities ($863 million) and Other noncurrent liabilities ($720 million).
|
(b)
|
Includes adjustments for foreign currency translation.
|
(c)
|
Included in Other current liabilities ($533 million) and Other noncurrent liabilities ($650 million).
|
The following table provides components of Other (income)/deductions––net:
|
||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||||
Interest income(a)
|
|
$
|
(99
|
)
|
|
$
|
(123
|
)
|
|
$
|
(275
|
)
|
|
$
|
(357
|
)
|
Interest expense(a)
|
|
320
|
|
|
291
|
|
|
940
|
|
|
889
|
|
||||
Net interest expense
|
|
220
|
|
|
168
|
|
|
666
|
|
|
532
|
|
||||
Royalty-related income(b)
|
|
(140
|
)
|
|
(233
|
)
|
|
(331
|
)
|
|
(695
|
)
|
||||
Certain legal matters, net(c)
|
|
183
|
|
|
(40
|
)
|
|
194
|
|
|
494
|
|
||||
Net gains on asset disposals(d)
|
|
(155
|
)
|
|
(47
|
)
|
|
(349
|
)
|
|
(81
|
)
|
||||
Loss on sale and impairment on remeasurement of HIS net assets(e)
|
|
(12
|
)
|
|
1,422
|
|
|
52
|
|
|
1,422
|
|
||||
Certain asset impairments(f)
|
|
130
|
|
|
133
|
|
|
143
|
|
|
1,080
|
|
||||
Business and legal entity alignment costs(g)
|
|
16
|
|
|
69
|
|
|
54
|
|
|
180
|
|
||||
Other, net(h)
|
|
(191
|
)
|
|
(55
|
)
|
|
(445
|
)
|
|
(117
|
)
|
||||
Other (income)/deductions––net
|
|
$
|
51
|
|
|
$
|
1,417
|
|
|
$
|
(16
|
)
|
|
$
|
2,815
|
|
(a)
|
Interest income decreased in the third quarter and first nine months of 2017, primarily driven by a lower investment balance. Interest expense increased in the third quarter and first nine months of 2017, primarily as a result of higher short-term interest rates, offset, in part, by the retirement of high-coupon debt and the issuance of new low-coupon debt.
|
(b)
|
Royalty-related income decreased in the third quarter and first nine months of 2017, primarily due to lower royalty income for Enbrel of $139 million and $414 million, respectively, resulting from the expiration on October 31, 2016 of the 36-month royalty period under the collaboration agreement for Enbrel in the U.S. and Canada (the collaboration period under the agreement expired on October 31, 2013), partially offset by the addition of Xtandi royalty-related income of $73 million and $160 million, respectively.
|
(c)
|
In the third quarter and first nine months of 2017, primarily includes a $94 million charge to resolve a class action lawsuit filed by direct purchasers relating to Celebrex, which is subject to the negotiation of a final settlement agreement and court approval, and a $79 million charge to reflect damages awarded by a jury in a patent matter. In the first nine months of 2016, primarily includes amounts to resolve a Multi-District Litigation relating to Celebrex and Bextra that was pending against the Company in New York federal court for $486 million, partially offset by the reversal of a legal accrual where a loss was no longer deemed probable. In addition, the first nine months of 2016 includes a settlement related to a patent matter.
|
(d)
|
In the third quarter of 2017, primarily includes gains on sales/out-licensing of product and compound rights (approximately $71 million) and gains on sales and redemptions of investments in equity and debt securities (approximately $66 million). In the first nine months of 2017, primarily includes gains on sales and redemptions of investments in equity and debt securities (approximately $183 million), gains on sales/out-licensing of product and compound rights (approximately $141 million) and a gain on sale of property (approximately $52 million), partially offset by a net loss related to the sale of our 40% ownership investment in Teuto, including the extinguishment of a put option for the remaining 60% ownership interest (approximately $30 million). In the first nine months of 2016, includes gains on sales/out-licensing of product and compound rights (approximately $49 million).
|
(e)
|
In the third quarter and first nine months of 2017, represents adjustments to amounts previously recorded to write down the HIS net assets to fair value less costs to sell related to the sale of HIS net assets to ICU Medical. In the third quarter and first nine months of 2016, represents a charge related to the write-down of the HIS net assets to fair value less estimated costs to sell.
|
(f)
|
In the third quarter and first nine months of 2017, primarily includes an intangible asset impairment charge of $127 million related to developed technology rights, acquired in connection with our acquisition of Hospira, for a generic sterile injectable product for the treatment of edema associated with certain conditions. The intangible asset impairment charge for the third quarter and first nine months of 2017 is associated with EH and reflects, among other things, updated commercial forecasts and an increased competitive environment. In the third quarter of 2016, primarily includes intangible asset impairment charges of $126 million, reflecting $97 million of sterile injectable IPR&D compounds acquired in connection with our acquisition of InnoPharma and $29 million of other IPR&D assets acquired in connection with our acquisition of King in 2011. The intangible asset impairment charges for the third quarter of 2016 are associated with the following: EH ($97 million) and IH ($29 million). In the first nine months of 2016, primarily includes intangible asset impairment charges of $767 million, reflecting (i) $331 million related to developed technology rights for a generic injectable antibiotic product for the treatment of bacterial infections; and (ii) $265 million related to an IPR&D compound for the treatment of anemia, both acquired in connection with our acquisition of Hospira; (iii) $97 million of sterile injectable IPR&D compounds acquired in connection with our acquisition of InnoPharma; and (iv) $74 million of other IPR&D assets, $45 million of which were acquired in connection with our acquisition of Hospira and $29 million of which were acquired in connection with our acquisition of King in 2011. The intangible asset impairment charges for the first nine months of 2016 are associated with the following: EH ($738 million) and IH ($29 million). In addition, the first nine months of 2016 includes an impairment loss of $211 million related to Pfizer’s 49%-owned equity-method investment with Hisun in China, Hisun Pfizer, and an impairment loss of $50 million related to Pfizer’s 40%-owned equity-method investment in Teuto. For additional information concerning Hisun Pfizer and Teuto, see Note 2D.
|
(g)
|
In the third quarter and first nine months of 2017 and 2016, represents expenses for changes to our infrastructure to align our commercial operations, including costs to internally separate our businesses into distinct legal entities, as well as to streamline our intercompany supply operations to better support each business.
|
(h)
|
In the third quarter and first nine months of 2017, includes, among other things, dividend income of $54 million and $211 million, respectively, from our investment in ViiV, and income of $62 million from resolution of a contract disagreement. In the first nine months of 2016, includes, among other things, $150 million paid to Allergan for reimbursement of Allergan’s expenses associated with the terminated transaction and income of $116 million from resolution of a contract disagreement.
|
(a)
|
The fair value amount is presented as of the date of impairment, as these assets are not measured at fair value on a recurring basis.
|
(b)
|
Reflects intangible assets written down to fair value in the third quarter of 2017. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows associated with the asset and then applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the product; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
|
•
|
an unfavorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business,
|
•
|
the non-recurrence of the unfavorable tax effects of an impairment charge related to the write-down of the HIS net assets to fair value less estimated costs to sell, mainly related to goodwill, which is not deductible for tax purposes, and the jurisdictional mix of intangible assets.
|
•
|
the non-recurrence of benefits related to the final resolution of an agreement in principle reached in February 2016 and finalized in April 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our initial assessment in 2015 of the likelihood of prevailing on the technical merits of our tax position;
|
•
|
the non-recurrence of benefits associated with our Venezuela operations; as well as
|
•
|
a decrease in benefits associated with the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations,
|
•
|
the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business; as well as
|
•
|
the non-recurrence of the unfavorable tax effects of an impairment charge related to the write-down of HIS net assets to fair value less estimated costs to sell, mainly related to goodwill, which is not deductible for tax purposes, and the jurisdictional mix of intangible assets.
|
•
|
With respect to Pfizer, the IRS has issued a Revenue Agent’s Report (RAR) for tax years 2009-2010. We are not in agreement with the RAR and are currently appealing certain disputed issues. Tax years 2011-2013 are currently under audit. Tax years 2014-2017 are open, but not under audit. All other tax years are closed.
|
•
|
With respect to Hospira, the federal income tax audit for tax years 2012-2013 was effectively settled in the third quarter of 2017. The IRS is currently auditing tax year 2014 through short-year 2015. All other tax years are closed. The tax years under audit for Hospira are not considered material to Pfizer.
|
•
|
With respect to Anacor and Medivation, the open tax years are not considered material to Pfizer.
|
The following table provides the components of Tax provision/(benefit) on other comprehensive income:
|
||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||||
Foreign currency translation adjustments, net(a)
|
|
$
|
(62
|
)
|
|
$
|
—
|
|
|
$
|
(192
|
)
|
|
$
|
(15
|
)
|
Unrealized holding losses on derivative financial instruments, net
|
|
28
|
|
|
—
|
|
|
30
|
|
|
(192
|
)
|
||||
Reclassification adjustments for realized (gains)/losses
|
|
(29
|
)
|
|
32
|
|
|
(169
|
)
|
|
81
|
|
||||
|
|
(1
|
)
|
|
32
|
|
|
(139
|
)
|
|
(112
|
)
|
||||
Unrealized holding gains on available-for-sale securities, net
|
|
37
|
|
|
40
|
|
|
93
|
|
|
106
|
|
||||
Reclassification adjustments for realized gains
|
|
(49
|
)
|
|
(14
|
)
|
|
(45
|
)
|
|
(16
|
)
|
||||
|
|
(12
|
)
|
|
26
|
|
|
47
|
|
|
90
|
|
||||
Benefit plans: actuarial losses, net
|
|
(37
|
)
|
|
(31
|
)
|
|
(15
|
)
|
|
(39
|
)
|
||||
Reclassification adjustments related to amortization
|
|
60
|
|
|
47
|
|
|
152
|
|
|
140
|
|
||||
Reclassification adjustments related to settlements, net
|
|
22
|
|
|
10
|
|
|
30
|
|
|
27
|
|
||||
Other
|
|
(33
|
)
|
|
14
|
|
|
(46
|
)
|
|
5
|
|
||||
|
|
11
|
|
|
40
|
|
|
121
|
|
|
133
|
|
||||
Benefit plans: prior service (costs)/credits and other, net
|
|
—
|
|
|
35
|
|
|
—
|
|
|
66
|
|
||||
Reclassification adjustments related to amortization
|
|
(17
|
)
|
|
(17
|
)
|
|
(50
|
)
|
|
(47
|
)
|
||||
Reclassification adjustments related to curtailments, net
|
|
(1
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|
(5
|
)
|
||||
Other
|
|
1
|
|
|
2
|
|
|
1
|
|
|
1
|
|
||||
|
|
(17
|
)
|
|
18
|
|
|
(55
|
)
|
|
15
|
|
||||
Tax provision/(benefit) on other comprehensive income
|
|
$
|
(80
|
)
|
|
$
|
116
|
|
|
$
|
(218
|
)
|
|
$
|
111
|
|
(a)
|
Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely.
|
The following table provides the changes, net of tax, in Accumulated other comprehensive loss:
|
||||||||||||||||||||||||
|
|
Net Unrealized Gains/(Losses)
|
|
Benefit Plans
|
|
|
||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Foreign Currency Translation Adjustments
|
|
|
Derivative Financial Instruments
|
|
|
Available-For-Sale Securities
|
|
|
Actuarial Gains/(Losses)
|
|
|
Prior Service (Costs)/Credits and Other
|
|
|
Accumulated Other Comprehensive Income/(Loss)
|
|
||||||
Balance, December 31, 2016
|
|
$
|
(6,659
|
)
|
|
$
|
348
|
|
|
$
|
(131
|
)
|
|
$
|
(5,473
|
)
|
|
$
|
879
|
|
|
$
|
(11,036
|
)
|
Other comprehensive income/(loss)(a)
|
|
1,638
|
|
|
(403
|
)
|
|
470
|
|
|
263
|
|
|
(96
|
)
|
|
1,872
|
|
||||||
Balance, October 1, 2017
|
|
$
|
(5,021
|
)
|
|
$
|
(55
|
)
|
|
$
|
339
|
|
|
$
|
(5,210
|
)
|
|
$
|
783
|
|
|
$
|
(9,164
|
)
|
(a)
|
Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of $16 million income for the first nine months of 2017.
|
The following table provides additional information about certain of our financial assets and liabilities:
|
||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
December 31,
2016 |
|
||
Selected financial assets measured at fair value on a recurring basis(a)
|
|
|
|
|
||||
Trading funds and securities(b)
|
|
$
|
347
|
|
|
$
|
325
|
|
Available-for-sale debt securities(c)
|
|
16,598
|
|
|
18,632
|
|
||
Money market funds
|
|
1,824
|
|
|
1,445
|
|
||
Available-for-sale equity securities(c)
|
|
1,032
|
|
|
540
|
|
||
Derivative financial instruments in a receivable position(d):
|
|
|
|
|
|
|
||
Interest rate swaps
|
|
630
|
|
|
625
|
|
||
Foreign currency swaps
|
|
92
|
|
|
79
|
|
||
Foreign currency forward-exchange contracts
|
|
110
|
|
|
551
|
|
||
|
|
20,631
|
|
|
22,198
|
|
||
Other selected financial assets
|
|
|
|
|
|
|
||
Held-to-maturity debt securities, carried at amortized cost(c), (e)
|
|
1,464
|
|
|
1,242
|
|
||
Restricted stock and private equity securities, carried at cost or at equity-method(e)
|
|
719
|
|
|
735
|
|
||
|
|
2,183
|
|
|
1,977
|
|
||
Total selected financial assets
|
|
$
|
22,815
|
|
|
$
|
24,175
|
|
Selected financial liabilities measured at fair value on a recurring basis(a)
|
|
|
|
|
|
|
||
Derivative financial instruments in a liability position(f):
|
|
|
|
|
|
|
||
Interest rate swaps
|
|
$
|
154
|
|
|
$
|
148
|
|
Foreign currency swaps
|
|
710
|
|
|
1,374
|
|
||
Foreign currency forward-exchange contracts
|
|
309
|
|
|
143
|
|
||
|
|
1,173
|
|
|
1,665
|
|
||
Other selected financial liabilities
|
|
|
|
|
|
|
||
Short-term borrowings:
|
|
|
|
|
||||
Principal amount
|
|
9,460
|
|
|
10,674
|
|
||
Net fair value adjustments related to hedging and purchase accounting
|
|
2
|
|
|
24
|
|
||
Net unamortized discounts, premiums and debt issuance costs
|
|
(15
|
)
|
|
(11
|
)
|
||
Total short-term borrowings, carried at historical proceeds, as adjusted(e)
|
|
9,448
|
|
|
10,688
|
|
||
Long-term debt:
|
|
|
|
|
||||
Principal amount
|
|
33,671
|
|
|
30,529
|
|
||
Net fair value adjustments related to hedging and purchase accounting
|
|
981
|
|
|
998
|
|
||
Net unamortized discounts, premiums and debt issuance costs
|
|
(149
|
)
|
|
(130
|
)
|
||
Total long-term debt, carried at historical proceeds, as adjusted(g)
|
|
34,503
|
|
|
31,398
|
|
||
|
|
43,951
|
|
|
42,085
|
|
||
Total selected financial liabilities
|
|
$
|
45,124
|
|
|
$
|
43,750
|
|
(a)
|
We use a market approach in valuing financial instruments on a recurring basis. All of our financial assets and liabilities measured at fair value on a recurring basis use Level 2 inputs in the calculation of fair value, except 5% that use Level 1 inputs.
|
(b)
|
As of October 1, 2017, trading funds and securities are composed of $274 million of trading equity funds and $74 million of trading debt funds. As of December 31, 2016, trading funds and securities are composed of $236 million of trading equity funds and $89 million of trading debt funds. As of October 1, 2017 and December 31, 2016, trading equity funds of $63 million and $71 million, respectively, are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan.
|
(c)
|
Gross unrealized gains and losses are not significant, except as of October 1, 2017, available-for-sale equity securities’ unrealized gains are $406 million and unrealized losses are $119 million.
|
(d)
|
Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency forward-exchange contracts with fair values of $40 million as of October 1, 2017; and foreign currency forward-exchange contracts with fair values of $162 million as of December 31, 2016.
|
(e)
|
The differences between the estimated fair values and carrying values of held-to-maturity debt securities, restricted stock and private equity securities at cost, and short-term borrowings not measured at fair value on a recurring basis were not significant as of October 1, 2017 or December 31, 2016. The fair value measurements of our held-to-maturity debt securities and our short-term borrowings are based on Level 2 inputs, using a market approach. The fair value measurements of our private equity securities carried at cost are based on Level 3 inputs.
|
(f)
|
Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency forward-exchange contracts with fair values of $60 million as of October 1, 2017; and foreign currency swaps with fair values of $269 million and foreign currency forward-exchange contracts with fair values of $113 million as of December 31, 2016.
|
(g)
|
The fair value of our long-term debt (not including the current portion of long-term debt) was $39.0 billion as of October 1, 2017 and $34.9 billion as of December 31, 2016. The fair value measurements for our long-term debt are based on Level 2 inputs, using a market approach. Long-term debt includes foreign currency long-term borrowings with fair values of $4.7 billion as of October 1, 2017, which are used as hedging instruments.
|
(a)
|
As of October 1, 2017, derivative instruments at fair value include interest rate swaps ($97 million), foreign currency swaps ($86 million) and foreign currency forward-exchange contracts ($105 million) and, as of December 31, 2016, include interest rate swaps ($26 million), foreign currency swaps ($43 million) and foreign currency forward-exchange contracts ($497 million).
|
(b)
|
As of October 1, 2017, derivative instruments at fair value include interest rate swaps ($532 million), foreign currency swaps ($6 million) and foreign currency forward-exchange contracts ($5 million) and, as of December 31, 2016, include interest rate swaps ($599 million), foreign currency swaps ($36 million) and foreign currency forward-exchange contracts ($54 million).
|
(c)
|
As of October 1, 2017, derivative instruments at fair value include foreign currency forward-exchange contracts ($276 million) and interest rate swaps ($1 million) and, as of December 31, 2016, include interest rate swaps ($1 million), foreign currency swaps ($300 million) and foreign currency forward-exchange contracts ($143 million).
|
(d)
|
As of October 1, 2017, derivative instruments at fair value include interest rate swaps ($153 million), foreign currency swaps ($710 million) and foreign currency forward-exchange contracts ($33 million) and, as of December 31, 2016, include interest rate swaps ($147 million) and foreign currency swaps ($1.1 billion).
|
The following table provides the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
|
||||||||||||||||||||
|
|
Years
|
|
October 1,
2017 |
|
|||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Within 1
|
|
|
Over 1
to 5
|
|
|
Over 5
to 10
|
|
|
Over 10
|
|
|
Total
|
|
|||||
Available-for-sale debt securities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate debt(a)
|
|
$
|
2,741
|
|
|
$
|
2,591
|
|
|
$
|
1,525
|
|
|
$
|
17
|
|
|
$
|
6,874
|
|
Western European, Asian, and other government debt(b)
|
|
6,071
|
|
|
268
|
|
|
—
|
|
|
—
|
|
|
6,339
|
|
|||||
Western European, Scandinavian and other government agency debt(b)
|
|
1,955
|
|
|
42
|
|
|
—
|
|
|
—
|
|
|
1,998
|
|
|||||
Supranational debt(b)
|
|
387
|
|
|
195
|
|
|
—
|
|
|
—
|
|
|
582
|
|
|||||
Government National Mortgage Association and other U.S. government guaranteed asset-backed securities
|
|
42
|
|
|
424
|
|
|
—
|
|
|
—
|
|
|
466
|
|
|||||
Other asset-backed debt(c)
|
|
161
|
|
|
61
|
|
|
3
|
|
|
—
|
|
|
226
|
|
|||||
U.S. government debt
|
|
—
|
|
|
112
|
|
|
—
|
|
|
—
|
|
|
112
|
|
|||||
Held-to-maturity debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Time deposits and other
|
|
1,133
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
1,137
|
|
|||||
Western European government debt(b)
|
|
326
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
326
|
|
|||||
Total debt securities
|
|
$
|
12,818
|
|
|
$
|
3,694
|
|
|
$
|
1,532
|
|
|
$
|
18
|
|
|
$
|
18,061
|
|
(a)
|
Issued by a diverse group of corporations, with a significant concentration in the technology sector, virtually all of which are investment-grade.
|
(b)
|
Issued by governments, government agencies or supranational entities, as applicable, all of which are high quality.
|
(c)
|
Includes receivable-backed, loan-backed, and mortgage-backed securities, all of which are high quality and in senior positions in the capital structure of the security. Receivable-backed securities are collateralized by credit cards receivables, loan-backed securities are collateralized by senior secured obligations of a diverse pool of companies or student loans, and mortgage-backed securities are collateralized by diversified pools of residential and commercial mortgages.
|
The following table provides the amounts of senior unsecured long-term debt issued in the first quarter of 2017:
|
||||||||||
|
|
|
|
Principal
|
||||||
|
|
|
|
As of October 1, 2017
|
||||||
(MILLIONS)
|
|
Maturity Date
|
|
Euro
|
|
|
U.S. Dollar
|
|
||
3-month EURIBOR + 0.20% floating rate notes (0% floor)
|
|
March 6, 2019
|
|
€
|
1,250
|
|
|
$
|
1,479
|
|
0.00% euro notes(a)
|
|
March 6, 2020
|
|
1,000
|
|
|
1,183
|
|
||
0.25% euro notes(a)
|
|
March 6, 2022
|
|
1,000
|
|
|
1,183
|
|
||
1.00% euro notes(a)
|
|
March 6, 2027
|
|
750
|
|
|
887
|
|
||
Total euro long-term debt issued in the first quarter of 2017(b)
|
|
|
|
€
|
4,000
|
|
|
$
|
4,732
|
|
4.20% notes(c)
|
|
March 17, 2047
|
|
|
|
1,065
|
|
|||
Total long-term debt issued in the first quarter of 2017(d)
|
|
|
|
|
|
$
|
5,797
|
|
(a)
|
Redeemable at any time, in whole, or in part, at our option prior to 30 to 90 days of maturity date at the comparable German government bond rate, plus 0.15%; plus, in each case, accrued and unpaid interest. The fixed rate euro notes are also redeemable at our option, in whole, or in part, within 30 to 90 days of maturity date.
|
(b)
|
The weighted-average effective interest rate for the euro notes at issuance was 0.23%.
|
(c)
|
The notes, issued in U.S. dollars in Taiwan, are redeemable, at our option, in whole but not in part, on each March 17 on or after March 17, 2020.
|
(d)
|
The aggregate amount at issuance date was $5,279 million. The increase in the amount since the date of issuance is due to foreign currency exchange.
|
The following table provides the maturity schedule of our Long-term debt outstanding as of October 1, 2017:
|
||||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
After 2021
|
|
Total
|
||||||||||||
Maturities
|
|
$
|
481
|
|
|
$
|
4,825
|
|
|
$
|
1,534
|
|
|
$
|
4,502
|
|
|
$
|
23,162
|
|
|
$
|
34,503
|
|
The following table provides information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk:
|
||||||||||||||||||||||||
|
|
Three Months Ended
|
||||||||||||||||||||||
|
|
Amount of
Gains/(Losses)
Recognized in OID(a), (b), (c)
|
|
Amount of
Gains/(Losses)
Recognized in OCI
(Effective Portion)(a), (d)
|
|
Amount of
Gains/(Losses)
Reclassified from
OCI into OID and COS
(Effective Portion)(a), (d)
|
||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||||||
Derivative Financial Instruments in Cash Flow Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign currency swaps
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
218
|
|
|
$
|
87
|
|
|
$
|
148
|
|
|
$
|
(39
|
)
|
Foreign currency forward-exchange contracts
|
|
1
|
|
|
2
|
|
|
(269
|
)
|
|
(212
|
)
|
|
(204
|
)
|
|
(111
|
)
|
||||||
Derivative Financial Instruments in Net Investment Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward-exchange contracts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative Financial Instruments Not Designated as Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward-exchange contracts
|
|
33
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Foreign currency swaps
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency long-term debt
|
|
—
|
|
|
—
|
|
|
(166
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
All other net
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
$
|
34
|
|
|
$
|
18
|
|
|
$
|
(216
|
)
|
|
$
|
(126
|
)
|
|
$
|
(55
|
)
|
|
$
|
(150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Nine Months Ended
|
||||||||||||||||||||||
|
|
Amount of
Gains/(Losses)
Recognized in OID(a), (b), (c)
|
|
Amount of
Gains/(Losses)
Recognized in OCI
(Effective Portion)(a), (d)
|
|
Amount of
Gains/(Losses)
Reclassified from
OCI into OID and COS
(Effective Portion)(a), (d)
|
||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||||||
Derivative Financial Instruments in Cash Flow Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign currency swaps
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
455
|
|
|
$
|
(204
|
)
|
|
$
|
419
|
|
|
$
|
(165
|
)
|
Foreign currency forward-exchange contracts
|
|
(5
|
)
|
|
1
|
|
|
(604
|
)
|
|
(770
|
)
|
|
(26
|
)
|
|
(118
|
)
|
||||||
Derivative Financial Instruments in Net Investment Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward-exchange contracts
|
|
—
|
|
|
1
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative Financial Instruments Not Designated as Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward-exchange contracts
|
|
(111
|
)
|
|
(49
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Foreign currency swaps
|
|
(1
|
)
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency short-term borrowings
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
|
—
|
|
|
—
|
|
||||||
Foreign currency long-term debt
|
|
—
|
|
|
—
|
|
|
(518
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
All other net
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
||||||
|
|
$
|
(117
|
)
|
|
$
|
(56
|
)
|
|
$
|
(666
|
)
|
|
$
|
(1,014
|
)
|
|
$
|
394
|
|
|
$
|
(283
|
)
|
(a)
|
OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the condensed consolidated statements of income. COS = Cost of sales, included in Cost of sales in the condensed consolidated statements of income.
|
(b)
|
Includes gains and losses attributable to derivative instruments designated and qualifying as fair value hedges (primarily interest rate swaps), as well as the offsetting gains and losses attributable to the hedged items in such hedging relationships.
|
(c)
|
There was no significant ineffectiveness for any period presented.
|
(d)
|
For derivative financial instruments in cash flow hedge relationships, the effective portion is included in Other comprehensive income––Unrealized holding losses on derivative financial instruments, net. For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the effective portion is included in Other comprehensive income––Foreign currency translation adjustments, net.
|
(a)
|
The change from December 31, 2016 reflects the build of inventory primarily for and in advance of new or potential product launches and increases to meet targeted levels for certain products in the normal course of business, including those related to demand.
|
(b)
|
Included in Other noncurrent assets. There are no recoverability issues associated with these amounts.
|
The following table provides the components of Identifiable intangible assets:
|
||||||||||||||||||||||||
|
|
October 1, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Identifiable
Intangible
Assets, less
Accumulated
Amortization
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Identifiable
Intangible
Assets, less
Accumulated
Amortization
|
|
||||||
Finite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Developed technology rights(a)
|
|
$
|
89,585
|
|
|
$
|
(53,960
|
)
|
|
$
|
35,625
|
|
|
$
|
83,390
|
|
|
$
|
(49,650
|
)
|
|
$
|
33,740
|
|
Brands
|
|
2,135
|
|
|
(1,127
|
)
|
|
1,008
|
|
|
2,092
|
|
|
(1,032
|
)
|
|
1,060
|
|
||||||
Licensing agreements and other
|
|
1,930
|
|
|
(1,071
|
)
|
|
859
|
|
|
1,869
|
|
|
(1,005
|
)
|
|
864
|
|
||||||
|
|
93,650
|
|
|
(56,158
|
)
|
|
37,492
|
|
|
87,351
|
|
|
(51,687
|
)
|
|
35,664
|
|
||||||
Indefinite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Brands and other
|
|
6,937
|
|
|
|
|
|
6,937
|
|
|
6,883
|
|
|
|
|
|
6,883
|
|
||||||
IPR&D(a)
|
|
5,292
|
|
|
|
|
|
5,292
|
|
|
10,101
|
|
|
|
|
|
10,101
|
|
||||||
|
|
12,229
|
|
|
|
|
|
12,229
|
|
|
16,984
|
|
|
|
|
|
16,984
|
|
||||||
Identifiable intangible assets(b)
|
|
$
|
105,879
|
|
|
$
|
(56,158
|
)
|
|
$
|
49,721
|
|
|
$
|
104,335
|
|
|
$
|
(51,687
|
)
|
|
$
|
52,648
|
|
(a)
|
The changes in the gross carrying amount of Developed technology rights and IPR&D primarily reflect (i) the transfer of $4.8 billion from IPR&D to Developed technology rights to reflect the approval of Eucrisa, (ii) the Developed technology rights and IPR&D acquired as part of the acquisition of AstraZeneca’s small molecule anti-infectives business (see Note 2A), (iii) the Developed technology rights of $371 million recorded in connection with the EU and U.S. approvals of Besponsa (see Note 7E), partially offset by (iv) measurement period adjustments related to Medivation (see Note 2A) and (v) impairments of Developed technology rights (see Note 4).
|
(b)
|
The decrease in Identifiable intangible assets, less accumulated amortization, is primarily due to amortization, measurement period adjustments related to Medivation (see Note 2A), as well as impairments of Developed technology rights (see Note 4), partially offset by assets acquired as part of the acquisition of AstraZeneca’s small molecule anti-infectives business (see Note 2A) and the assets recorded in connection with the EU and U.S. approvals of Besponsa (see Note 7E).
|
The following table provides the components of and changes in the carrying amount of Goodwill:
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
IH
|
|
EH
|
|
Total
|
||||||
Balance, December 31, 2016
|
|
$
|
30,134
|
|
|
$
|
24,315
|
|
|
$
|
54,449
|
|
Additions(a)
|
|
572
|
|
|
92
|
|
|
664
|
|
|||
Other(b)
|
|
491
|
|
|
475
|
|
|
966
|
|
|||
Balance, October 1, 2017
|
|
$
|
31,197
|
|
|
$
|
24,882
|
|
|
$
|
56,078
|
|
(a)
|
IH additions primarily represent measurement period adjustments related to our Medivation acquisition, and EH additions relate to our acquisition of AstraZeneca’s small molecule anti-infectives business, which are subject to change until we complete the valuation of assets acquired and liabilities assumed (see Note 2A).
|
(b)
|
Primarily reflects the impact of foreign exchange and an adjustment of our estimate of goodwill associated with the HIS net assets sold.
|
(a)
|
In April 2017, we settled the remaining obligation associated with the Hospira U.S. qualified defined benefit pension plan. We purchased a group annuity contract on behalf of the remaining plan participants with a third-party insurance provider. As a result, we were relieved of the $156 million net pension benefit obligation and recorded a pretax settlement gain of $41 million, partially offset by the recognition of actuarial losses and prior service costs upon plan settlement of approximately $30 million in Restructuring charges and certain acquisition-related costs during the second quarter of 2017 (see Note 3).
|
|
|
Pension Plans
|
|
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
U.S. Qualified
|
|
U.S. Supplemental (Non-Qualified)
|
|
International
|
|
Postretirement Plans
|
||||||||
Contributions from our general assets for the nine months ended October 1, 2017
|
|
$
|
1,095
|
|
|
$
|
121
|
|
|
$
|
134
|
|
|
$
|
158
|
|
Expected contributions from our general assets during 2017(a)
|
|
$
|
1,095
|
|
|
$
|
146
|
|
|
$
|
170
|
|
|
$
|
204
|
|
(a)
|
Contributions expected to be made for 2017 are inclusive of amounts contributed during the nine months ended October 1, 2017, including the $1.0 billion voluntary contribution that was made in January 2017 for the U.S. qualified plans, which was considered pre-funding for future anticipated mandatory contributions and is also expected to reduce Pension Benefit Guaranty Corporation variable rate premiums. The U.S. supplemental (non-qualified) pension plan, international pension plan and the postretirement plan contributions from our general assets include direct employer benefit payments.
|
The following table provides the detailed calculation of Earnings per common share (EPS):
|
||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(IN MILLIONS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||||
EPS Numerator––Basic
|
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations(a)
|
|
$
|
2,858
|
|
|
$
|
1,355
|
|
|
$
|
9,064
|
|
|
$
|
6,465
|
|
Less: Net income attributable to noncontrolling interests
|
|
18
|
|
|
—
|
|
|
32
|
|
|
25
|
|
||||
Income from continuing operations attributable to Pfizer Inc.(a)
|
|
2,840
|
|
|
1,355
|
|
|
9,032
|
|
|
6,440
|
|
||||
Less: Preferred stock dividends––net of tax
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Income from continuing operations attributable to Pfizer Inc. common shareholders(a)
|
|
2,839
|
|
|
1,355
|
|
|
9,032
|
|
|
6,439
|
|
||||
Discontinued operations––net of tax
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Net income attributable to Pfizer Inc. common shareholders(a)
|
|
$
|
2,839
|
|
|
$
|
1,355
|
|
|
$
|
9,033
|
|
|
$
|
6,439
|
|
EPS Numerator––Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions(a)
|
|
$
|
2,840
|
|
|
$
|
1,355
|
|
|
$
|
9,032
|
|
|
$
|
6,440
|
|
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Net income attributable to Pfizer Inc. common shareholders and assumed conversions(a)
|
|
$
|
2,840
|
|
|
$
|
1,355
|
|
|
$
|
9,034
|
|
|
$
|
6,440
|
|
EPS Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average number of common shares outstanding––Basic
|
|
5,951
|
|
|
6,066
|
|
|
5,972
|
|
|
6,095
|
|
||||
Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements(a)
|
|
89
|
|
|
84
|
|
|
85
|
|
|
80
|
|
||||
Weighted-average number of common shares outstanding––Diluted(a)
|
|
6,041
|
|
|
6,150
|
|
|
6,057
|
|
|
6,175
|
|
||||
Stock options that had exercise prices greater than the average market price of our common stock issuable under employee compensation plans(a), (b)
|
|
47
|
|
|
38
|
|
|
47
|
|
|
60
|
|
(a)
|
Amounts for the third quarter and first nine months ended October 2, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, that requires, when applying the treasury stock method for shares that could be repurchased, that the assumed proceeds no longer include the amount of excess tax benefit (see Note 1B).
|
(b)
|
These common stock equivalents were outstanding for the periods presented, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.
|
•
|
Patent litigation, which typically involves challenges to the coverage and/or validity of patents on various products, processes or dosage forms. We are the plaintiff in the vast majority of these actions. An adverse outcome in actions in which we are the plaintiff could result in loss of patent protection for a drug, a significant loss of revenues from that drug or impairment of the value of associated assets.
|
•
|
Product liability and other product-related litigation, which can include personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, among others, often involves highly complex issues relating to medical causation, label warnings and reliance on those warnings, scientific evidence and findings, actual, provable injury and other matters.
|
•
|
Commercial and other matters, which can include merger-related and product-pricing claims and environmental claims and proceedings, can involve complexities that will vary from matter to matter.
|
•
|
Government investigations, which often are related to the extensive regulation of pharmaceutical companies by national, state and local government agencies in the U.S. and in other countries.
|
•
|
Personal Injury Actions
|
•
|
Antitrust Actions
|
•
|
Antitrust Actions
|
•
|
Personal Injury Actions
|
Some additional information about our business segments follows:
|
||
IH Segment
|
|
EH Segment
|
IH focuses on developing and commercializing novel, value-creating medicines and vaccines that significantly improve patients’ lives, as well as products for consumer healthcare.
Key therapeutic areas include internal medicine, vaccines, oncology, inflammation & immunology, rare diseases and consumer healthcare. |
|
EH includes legacy brands that have lost or will soon lose market exclusivity in both developed and emerging markets, branded generics, generic sterile injectable products, biosimilars, select branded products including anti-infectives and, through February 2, 2017, HIS. EH also includes an R&D organization, as well as our contract manufacturing business.
|
Leading brands include: - Prevnar 13/Prevenar 13 - Xeljanz - Eliquis - Lyrica (U.S., Japan and certain other markets) - Enbrel (outside the U.S. and Canada) - Viagra (U.S. and Canada) - Ibrance - Xtandi - Several OTC consumer healthcare products (e.g., Advil and Centrum) |
|
Leading brands include:
- Lipitor
- Premarin family
- Norvasc
- Lyrica (Europe, Russia, Turkey, Israel and Central Asia countries)
- Celebrex
- Inflectra/Remsima
- Several sterile injectable products
|
•
|
WRD, which is generally responsible for research projects for our IH business until proof-of-concept is achieved and then for transitioning those projects to the IH segment via the GPD organization for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRD organization also has responsibility for certain science-based and other platform-services organizations, which provide technical expertise and other services to the various R&D projects, including EH R&D projects. WRD is also responsible for facilitating all regulatory submissions and interactions with regulatory agencies, including all safety-event activities.
|
•
|
GPD, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios. GPD also provides technical support and other services to Pfizer R&D projects.
|
•
|
Corporate, representing platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement) and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments. Effective in the first quarter of 2017, Corporate also includes the costs associated with our Pfizer Medical organization (Medical), previously reported as part of Other Business Activities. Medical is responsible for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, and partnerships with global public health and medical associations.
|
•
|
Other unallocated costs, representing overhead expenses associated with our manufacturing and commercial operations that are not directly assessed to an operating segment, as business unit (segment) management does not manage these costs (which include manufacturing variances associated with production).
|
•
|
Certain transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and PP&E; (ii) acquisition-related costs, where we incur costs for executing the transaction, integrating the acquired operations and restructuring the combined company; and (iii) certain significant items, representing substantive and/or unusual, and in some cases recurring, items (such as restructuring or legal charges) that are evaluated on an individual basis by management and that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. Such items can include, but are not limited to, non-acquisition-related restructuring costs, as well as costs incurred for legal settlements, asset impairments and disposals of assets or businesses, including, as applicable, any associated transition activities.
|
The following table provides selected income statement information by reportable segment:
|
||||||||||||||||
|
|
Three Months Ended
|
||||||||||||||
|
|
Revenues
|
|
Earnings(a)
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||||
Reportable Segments:
|
|
|
|
|
|
|
|
|
||||||||
IH
|
|
$
|
8,118
|
|
|
$
|
7,332
|
|
|
$
|
4,875
|
|
|
$
|
4,187
|
|
EH
|
|
5,050
|
|
|
5,712
|
|
|
2,765
|
|
|
3,128
|
|
||||
Total reportable segments
|
|
13,168
|
|
|
13,045
|
|
|
7,640
|
|
|
7,315
|
|
||||
Other business activities(b), (c)
|
|
—
|
|
|
—
|
|
|
(759
|
)
|
|
(753
|
)
|
||||
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate(c)
|
|
—
|
|
|
—
|
|
|
(1,382
|
)
|
|
(1,537
|
)
|
||||
Purchase accounting adjustments(c)
|
|
—
|
|
|
—
|
|
|
(1,154
|
)
|
|
(966
|
)
|
||||
Acquisition-related costs(c)
|
|
—
|
|
|
—
|
|
|
(155
|
)
|
|
(280
|
)
|
||||
Certain significant items(d)
|
|
—
|
|
|
—
|
|
|
(449
|
)
|
|
(1,969
|
)
|
||||
Other unallocated
|
|
—
|
|
|
—
|
|
|
(156
|
)
|
|
(206
|
)
|
||||
|
|
$
|
13,168
|
|
|
$
|
13,045
|
|
|
$
|
3,585
|
|
|
$
|
1,604
|
|
|
||||||||||||||||
|
|
Nine Months Ended
|
||||||||||||||
|
|
Revenues
|
|
Earnings(a)
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||||
Reportable Segments:
|
|
|
|
|
|
|
|
|
||||||||
IH
|
|
$
|
23,204
|
|
|
$
|
21,471
|
|
|
$
|
14,190
|
|
|
$
|
12,470
|
|
EH
|
|
15,639
|
|
|
17,725
|
|
|
8,558
|
|
|
9,985
|
|
||||
Total reportable segments
|
|
38,843
|
|
|
39,196
|
|
|
22,748
|
|
|
22,454
|
|
||||
Other business activities(b), (c)
|
|
—
|
|
|
—
|
|
|
(2,205
|
)
|
|
(2,096
|
)
|
||||
Reconciling Items:
|
|
|
|
|
|
|
|
|
||||||||
Corporate(c)
|
|
—
|
|
|
—
|
|
|
(3,948
|
)
|
|
(4,217
|
)
|
||||
Purchase accounting adjustments(c)
|
|
—
|
|
|
—
|
|
|
(3,527
|
)
|
|
(3,103
|
)
|
||||
Acquisition-related costs(c)
|
|
—
|
|
|
—
|
|
|
(347
|
)
|
|
(598
|
)
|
||||
Certain significant items(d)
|
|
—
|
|
|
—
|
|
|
(797
|
)
|
|
(4,112
|
)
|
||||
Other unallocated
|
|
—
|
|
|
—
|
|
|
(573
|
)
|
|
(753
|
)
|
||||
|
|
$
|
38,843
|
|
|
$
|
39,196
|
|
|
$
|
11,351
|
|
|
$
|
7,575
|
|
(a)
|
Income from continuing operations before provision for taxes on income. IH’s earnings in the third quarter and first nine months of 2017 include dividend income of $54 million and $211 million, respectively, from our investment in ViiV. For additional information, see Note 4.
|
(b)
|
Other business activities includes the costs managed by our WRD and GPD organizations. Effective in the first quarter of 2017, Medical, previously reported as part of Other Business Activities, was reclassified to Corporate. We have reclassified approximately $33 million and $94 million of costs from Other Business Activities to Corporate in the third quarter and first nine months of 2016, respectively, to conform to the current period presentation.
|
(c)
|
For a description, see the “Other Costs and Business Activities” section above.
|
(d)
|
Certain significant items are substantive and/or unusual, and in some cases recurring, items (such as restructuring or legal charges) that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis.
|
(a)
|
Developed Europe region includes the following markets: Western Europe, Scandinavian countries and Finland. Revenues denominated in euros were $1.7 billion in both the third quarter of 2017 and 2016, and $5.0 billion and $5.3 billion in the first nine months of 2017 and 2016, respectively.
|
(b)
|
Developed Rest of World region includes the following markets: Japan, Canada, Australia, South Korea and New Zealand.
|
(c)
|
Emerging Markets region includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Africa, Eastern Europe, Central Europe, the Middle East and Turkey.
|
The following table provides detailed revenue information:
|
||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||||
PFIZER INNOVATIVE HEALTH (IH)(a)
|
|
$
|
8,118
|
|
|
$
|
7,332
|
|
|
$
|
23,204
|
|
|
$
|
21,471
|
|
Internal Medicine
|
|
$
|
2,455
|
|
|
$
|
2,243
|
|
|
$
|
7,245
|
|
|
$
|
6,557
|
|
Lyrica IH(b)
|
|
1,150
|
|
|
1,049
|
|
|
3,382
|
|
|
3,107
|
|
||||
Eliquis alliance revenues and direct sales
|
|
644
|
|
|
449
|
|
|
1,813
|
|
|
1,225
|
|
||||
Chantix/Champix
|
|
240
|
|
|
198
|
|
|
727
|
|
|
631
|
|
||||
Viagra IH(c)
|
|
206
|
|
|
297
|
|
|
711
|
|
|
897
|
|
||||
BMP2
|
|
79
|
|
|
63
|
|
|
198
|
|
|
175
|
|
||||
Toviaz
|
|
62
|
|
|
60
|
|
|
187
|
|
|
191
|
|
||||
All other Internal Medicine
|
|
75
|
|
|
128
|
|
|
228
|
|
|
330
|
|
||||
Vaccines
|
|
$
|
1,649
|
|
|
$
|
1,641
|
|
|
$
|
4,385
|
|
|
$
|
4,576
|
|
Prevnar 13/Prevenar 13
|
|
1,522
|
|
|
1,536
|
|
|
4,069
|
|
|
4,302
|
|
||||
FSME/IMMUN-TicoVac
|
|
43
|
|
|
33
|
|
|
119
|
|
|
102
|
|
||||
All other Vaccines
|
|
85
|
|
|
72
|
|
|
197
|
|
|
172
|
|
||||
Oncology
|
|
$
|
1,616
|
|
|
$
|
1,104
|
|
|
$
|
4,551
|
|
|
$
|
3,206
|
|
Ibrance
|
|
878
|
|
|
550
|
|
|
2,410
|
|
|
1,492
|
|
||||
Sutent
|
|
276
|
|
|
260
|
|
|
805
|
|
|
823
|
|
||||
Xalkori
|
|
146
|
|
|
140
|
|
|
442
|
|
|
415
|
|
||||
Xtandi alliance revenues
|
|
150
|
|
|
2
|
|
|
422
|
|
|
2
|
|
||||
Inlyta
|
|
84
|
|
|
95
|
|
|
256
|
|
|
304
|
|
||||
Bosulif
|
|
57
|
|
|
43
|
|
|
163
|
|
|
121
|
|
||||
All other Oncology
|
|
26
|
|
|
15
|
|
|
54
|
|
|
49
|
|
||||
Inflammation & Immunology (I&I)
|
|
$
|
1,000
|
|
|
$
|
960
|
|
|
$
|
2,863
|
|
|
$
|
2,907
|
|
Enbrel (Outside the U.S. and Canada)
|
|
613
|
|
|
701
|
|
|
1,818
|
|
|
2,201
|
|
||||
Xeljanz
|
|
348
|
|
|
235
|
|
|
935
|
|
|
649
|
|
||||
Eucrisa
|
|
15
|
|
|
—
|
|
|
33
|
|
|
—
|
|
||||
All other I&I
|
|
23
|
|
|
24
|
|
|
78
|
|
|
57
|
|
||||
Rare Disease
|
|
$
|
569
|
|
|
$
|
585
|
|
|
$
|
1,637
|
|
|
$
|
1,768
|
|
BeneFIX
|
|
151
|
|
|
176
|
|
|
453
|
|
|
543
|
|
||||
Refacto AF/Xyntha
|
|
140
|
|
|
140
|
|
|
409
|
|
|
408
|
|
||||
Genotropin
|
|
136
|
|
|
147
|
|
|
375
|
|
|
425
|
|
||||
Somavert
|
|
65
|
|
|
59
|
|
|
182
|
|
|
173
|
|
||||
All other Rare Disease
|
|
77
|
|
|
64
|
|
|
218
|
|
|
219
|
|
||||
Consumer Healthcare
|
|
$
|
829
|
|
|
$
|
798
|
|
|
$
|
2,522
|
|
|
$
|
2,457
|
|
PFIZER ESSENTIAL HEALTH (EH)(d)
|
|
$
|
5,050
|
|
|
$
|
5,712
|
|
|
$
|
15,639
|
|
|
$
|
17,725
|
|
Legacy Established Products (LEP)(e)
|
|
$
|
2,681
|
|
|
$
|
2,708
|
|
|
$
|
7,995
|
|
|
$
|
8,373
|
|
Lipitor
|
|
491
|
|
|
422
|
|
|
1,341
|
|
|
1,294
|
|
||||
Premarin family
|
|
238
|
|
|
244
|
|
|
711
|
|
|
751
|
|
||||
Norvasc
|
|
226
|
|
|
238
|
|
|
684
|
|
|
714
|
|
||||
EpiPen
|
|
82
|
|
|
110
|
|
|
253
|
|
|
300
|
|
||||
Xalatan/Xalacom
|
|
83
|
|
|
91
|
|
|
241
|
|
|
273
|
|
||||
Effexor
|
|
76
|
|
|
70
|
|
|
215
|
|
|
207
|
|
||||
Zoloft
|
|
78
|
|
|
72
|
|
|
215
|
|
|
228
|
|
||||
Zithromax
|
|
61
|
|
|
56
|
|
|
202
|
|
|
203
|
|
||||
Relpax
|
|
50
|
|
|
83
|
|
|
193
|
|
|
248
|
|
||||
Xanax
|
|
58
|
|
|
55
|
|
|
164
|
|
|
163
|
|
||||
All other LEP
|
|
1,237
|
|
|
1,268
|
|
|
3,776
|
|
|
3,992
|
|
||||
Sterile Injectable Pharmaceuticals (SIP)(f)
|
|
$
|
1,273
|
|
|
$
|
1,461
|
|
|
$
|
4,270
|
|
|
$
|
4,481
|
|
Medrol
|
|
109
|
|
|
102
|
|
|
352
|
|
|
330
|
|
||||
Sulperazon
|
|
114
|
|
|
102
|
|
|
345
|
|
|
304
|
|
||||
Fragmin
|
|
79
|
|
|
80
|
|
|
221
|
|
|
240
|
|
||||
Tygacil
|
|
60
|
|
|
69
|
|
|
192
|
|
|
203
|
|
||||
Precedex
|
|
51
|
|
|
64
|
|
|
182
|
|
|
199
|
|
||||
All other SIP
|
|
860
|
|
|
1,044
|
|
|
2,977
|
|
|
3,206
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||||
Peri-LOE Products(g)
|
|
$
|
794
|
|
|
$
|
1,023
|
|
|
$
|
2,398
|
|
|
$
|
3,224
|
|
Celebrex
|
|
212
|
|
|
194
|
|
|
564
|
|
|
550
|
|
||||
Lyrica EH(b)
|
|
134
|
|
|
191
|
|
|
428
|
|
|
623
|
|
||||
Vfend
|
|
97
|
|
|
140
|
|
|
305
|
|
|
459
|
|
||||
Viagra EH(c)
|
|
102
|
|
|
89
|
|
|
285
|
|
|
286
|
|
||||
Pristiq
|
|
69
|
|
|
174
|
|
|
230
|
|
|
546
|
|
||||
Zyvox
|
|
68
|
|
|
94
|
|
|
220
|
|
|
334
|
|
||||
Revatio
|
|
58
|
|
|
73
|
|
|
189
|
|
|
213
|
|
||||
All other Peri-LOE Products
|
|
55
|
|
|
68
|
|
|
176
|
|
|
214
|
|
||||
Biosimilars(h)
|
|
$
|
141
|
|
|
$
|
83
|
|
|
$
|
367
|
|
|
$
|
228
|
|
Inflectra/Remsima
|
|
112
|
|
|
49
|
|
|
284
|
|
|
130
|
|
||||
All other Biosimilars
|
|
28
|
|
|
34
|
|
|
82
|
|
|
97
|
|
||||
Pfizer CentreOne(i)
|
|
$
|
161
|
|
|
$
|
156
|
|
|
$
|
514
|
|
|
$
|
540
|
|
Hospira Infusion Systems (HIS)(j)
|
|
$
|
—
|
|
|
$
|
281
|
|
|
$
|
97
|
|
|
$
|
879
|
|
Revenues
|
|
$
|
13,168
|
|
|
$
|
13,045
|
|
|
$
|
38,843
|
|
|
$
|
39,196
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Lyrica(b)
|
|
$
|
1,285
|
|
|
$
|
1,240
|
|
|
$
|
3,810
|
|
|
$
|
3,730
|
|
Total Viagra(c)
|
|
$
|
308
|
|
|
$
|
387
|
|
|
$
|
996
|
|
|
$
|
1,183
|
|
Total Alliance revenues
|
|
$
|
741
|
|
|
$
|
419
|
|
|
$
|
2,112
|
|
|
$
|
1,155
|
|
(a)
|
The IH business encompasses Internal Medicine, Vaccines, Oncology, Inflammation & Immunology, Rare Disease and Consumer Healthcare. Through December 31, 2016, includes Duavive/Duavee and Viviant (recorded in All other Internal Medicine in 2016), which were transferred from Innovative Health to Essential Health effective January 1, 2017 (recorded in All other LEP (EH) beginning January 1, 2017), in order to align these products with our management of the women’s health portfolio within EH.
|
(b)
|
Lyrica revenues from all of Europe, Russia, Turkey, Israel and Central Asia countries are included in Lyrica EH. All other Lyrica revenues are included in Lyrica IH. Total Lyrica revenues represent the aggregate of worldwide revenues from Lyrica IH and Lyrica EH.
|
(c)
|
Viagra revenues from the U.S. and Canada are included in Viagra IH. All other Viagra revenues are included in Viagra EH. Total Viagra revenues represent the aggregate of worldwide revenues from Viagra IH and Viagra EH.
|
(d)
|
The EH business encompasses Legacy Established Products, Sterile Injectable Pharmaceuticals, Peri-LOE Products, Biosimilars, Pfizer CentreOne and HIS (through February 2, 2017) and includes all legacy Hospira commercial operations.
|
(e)
|
Legacy Established Products primarily include products that have lost patent protection (excluding Sterile Injectable Pharmaceuticals and Peri-LOE Products). Effective January 1, 2017, All other LEP includes Duavive/Duavee and Viviant, which were transferred from Innovative Health (recorded in All other Internal Medicine (IH) in 2016), in order to align these products with our management of the women’s health portfolio within EH. See note (a) above.
|
(f)
|
Sterile Injectable Pharmaceuticals include generic injectables and proprietary specialty injectables (excluding Peri-LOE Products).
|
(g)
|
Peri-LOE Products include products that have recently lost or are anticipated to soon lose patent protection. These products include: Lyrica in Europe, Russia, Turkey, Israel and Central Asia; Viagra in all countries (excluding the U.S. and Canada); and worldwide revenues for Celebrex, Pristiq, Zyvox, Vfend, Revatio and Inspra.
|
(h)
|
Biosimilars include Inflectra/Remsima (biosimilar infliximab) in the U.S. and certain international markets, Nivestim (biosimilar filgrastim) in certain European, Asian and Africa/Middle Eastern markets and Retacrit (biosimilar epoetin zeta) in certain European and Africa/Middle Eastern markets.
|
(i)
|
Pfizer CentreOne includes revenues from our contract manufacturing and active pharmaceutical ingredient sales operation, including sterile injectables contract manufacturing, and revenues related to our manufacturing and supply agreements, including with Zoetis.
|
(j)
|
HIS (through February 2, 2017) includes Medication Management Systems products composed of infusion pumps and related software and services, as well as IV Infusion Products, including large volume IV solutions and their associated administration sets.
|
●
|
Beginning on page 48
|
||||
|
This section provides information about the following: Our Business; our performance during the third quarter and first nine months of 2017 and 2016; Our Operating Environment; the Global Economic Environment; Our Strategy; Our Business Development Initiatives, such as acquisitions, dispositions, licensing and collaborations; and Our Financial Guidance for 2017.
|
|
|||
●
|
Beginning on page 61
|
||||
|
This section includes a Revenues Overview section as well as the following sub-sections:
|
|
|||
|
Beginning on page 65
|
||||
|
This sub-section provides revenue information for several of our major biopharmaceutical products.
|
|
|||
|
Beginning on page 66
|
||||
|
This sub-section provides an overview of several of our biopharmaceutical products.
|
|
|||
|
Beginning on page 70
|
||||
|
This sub-section provides an overview of important biopharmaceutical product developments.
|
|
|||
|
Beginning on page 74
|
||||
|
This sub-section provides a discussion about our costs and expenses.
|
|
|||
|
Beginning on page 77
|
||||
|
This sub-section provides a discussion of items impacting our tax provisions.
|
|
|||
|
Beginning on page 77
|
||||
|
This sub-section provides a discussion of an alternative view of performance used by management.
|
|
|||
●
|
Beginning on page 83
|
||||
|
This section provides a discussion of the performance of each of our operating segments.
|
|
|||
●
|
Beginning on page 91
|
||||
|
This section provides a discussion of changes in certain components of other comprehensive income.
|
|
|||
●
|
Beginning on page 91
|
||||
|
This section provides a discussion of changes in certain balance sheet accounts.
|
|
|||
●
|
Beginning on page 93
|
||||
|
This section provides an analysis of our cash flows for the first nine months of 2017 and 2016.
|
|
|||
●
|
Beginning on page 94
|
||||
|
This section provides an analysis of selected measures of our liquidity and of our capital resources as of October 1, 2017 and December 31, 2016, as well as a discussion of our outstanding debt and other commitments that existed as of October 1, 2017 and December 31, 2016. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer’s future activities.
|
|
|||
●
|
Beginning on page 98
|
||||
|
This section discusses accounting standards that we have recently adopted, as well as those that recently have been issued, but not yet adopted.
|
|
|||
●
|
Beginning on page 102
|
||||
|
This section provides a description of the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements presented in this MD&A, relating to, among other things, our anticipated operating and financial performance, business plans and prospects, in-line products and product candidates, including anticipated regulatory submissions, data read-outs, approvals, performance, timing of exclusivity and potential benefits of Pfizer’s products and product candidates, strategic reviews, capital allocation, business-development plans, manufacturing and products supply and plans relating to share repurchases and dividends. Also included in this section is a discussion of legal proceedings and contingencies.
|
|
(a)
|
Excludes amortization of intangible assets, except as disclosed in Notes to Condensed Consolidated Financial Statements––Note 9A. Identifiable Intangible Assets and Goodwill:Identifiable Intangible Assets.
|
(b)
|
Amounts for the three and nine months ended October 2, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant Accounting Policies––Adoption of New Accounting Standards.
|
•
|
On February 3, 2017, we completed the sale of Pfizer’s global infusion therapy net assets, HIS, to ICU Medical for up to approximately $900 million, composed of cash and contingent cash consideration, ICU Medical common stock and seller financing. At closing, we received 3.2 million newly issued shares of ICU Medical common stock, which we initially valued at approximately $428 million, a promissory note in the amount of $75 million and net cash of approximately $200 million before customary adjustments for net working capital. In addition, we are entitled to receive a contingent amount of up to an additional $225 million in cash based on ICU Medical’s achievement of certain cumulative performance targets for the combined company through December 31, 2019. The operating results of HIS are included in our condensed consolidated statement of income and EH’s operating results through February 2, 2017 and, therefore, our financial results, and EH’s
|
•
|
On December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations, we acquired the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S. The total fair value of the consideration transferred for this business was approximately $555 million in cash plus contingent consideration of $490 million. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of this business, and, in accordance with our international reporting period, our financial results, EH’s operating results, and cash flows for the third quarter and first nine months of 2017 reflect approximately three months and eight months, respectively, of the small molecule anti-infectives business acquired from AstraZeneca.
|
•
|
On September 28, 2016, we acquired Medivation for $81.50 per share. The total fair value of consideration transferred for Medivation was approximately $14.3 billion in cash ($13.9 billion, net of cash acquired). Of this consideration, approximately $365 million was not paid as of December 31, 2016, and was recorded in Other current liabilities. Substantially all of the remaining consideration was paid as of October 1, 2017. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Medivation. Therefore, Medivation operations are reflected in our financial results, IH’s operating results, and cash flows for the third quarter and first nine months of 2017. In accordance with our domestic and international reporting periods, our consolidated financial statements for the third quarter and first nine months of 2016 reflect three business days of Medivation operations, which were immaterial.
|
•
|
On June 24, 2016, we acquired Anacor for $99.25 per share. The total fair value of consideration transferred for Anacor was approximately $4.9 billion in cash ($4.5 billion, net of cash acquired), plus $698 million debt assumed. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Anacor. Therefore, Anacor operations are reflected in our financial results, IH’s operating results, and cash flows for the third quarter and first nine months of 2017. In accordance with our domestic and international reporting periods, our consolidated financial statements for the third quarter and first nine months of 2016 reflect approximately three months of Anacor operations.
|
(MILLIONS OF DOLLARS)
|
|
Three Months
|
|
|
Nine Months
|
|
||
|
|
|
|
|
||||
Revenues, for the three months and nine months ended October 2, 2016
|
|
$
|
13,045
|
|
|
$
|
39,196
|
|
|
|
|
|
|
|
|||
Disposition-related operational impact––February 2017 sale of HIS(a)
|
|
(280
|
)
|
|
(783
|
)
|
||
|
|
|
|
|
|
|||
Other operational growth/(decline)
|
|
|
|
|
||||
Continued growth from key brands(b) and growth from Biosimilars
|
|
806
|
|
|
2,245
|
|
||
Growth in Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation)
|
|
148
|
|
|
420
|
|
||
Declines from Peri-LOE Products, Enbrel (driven by declines in most developed Europe markets), Prevnar 13/Prevenar 13 (driven by declines in the U.S.), and Viagra (IH) (primarily in the U.S.), as well as a decline in our SIP portfolio, and for the first nine months of 2017, also includes a decline in the LEP portfolio
|
|
(598
|
)
|
|
(1,951
|
)
|
||
Other operational factors, net
|
|
102
|
|
|
87
|
|
||
Operational growth, net
|
|
178
|
|
|
19
|
|
||
|
|
|
|
|
||||
Operational revenues
|
|
13,222
|
|
|
39,215
|
|
||
Unfavorable impact of foreign exchange
|
|
(54
|
)
|
|
(372
|
)
|
||
Revenues, for the three months and nine months ended October 1, 2017
|
|
$
|
13,168
|
|
|
$
|
38,843
|
|
(a)
|
In the third quarter of 2017, financial results do not reflect any contribution from HIS global operations, compared to the inclusion of three months of HIS global operations in the same period in 2016. In the first nine months of 2017, financial results include approximately one month of HIS domestic operations and approximately two months of HIS international operations, compared to nine months of HIS global operations in the same period in 2016.
|
(b)
|
Key brands include Ibrance and Eliquis (globally) as well as Lyrica (IH) and Xeljanz (both primarily in the U.S.).
|
(MILLIONS OF DOLLARS)
|
|
Three Months
|
|
|
Nine Months
|
|
||
|
|
|
|
|
||||
Income from continuing operations before provision for taxes on income, for the three months and nine months ended October 2, 2016
|
|
$
|
1,604
|
|
|
$
|
7,575
|
|
|
|
|
|
|
||||
Favorable/(Unfavorable) change in revenues
|
|
123
|
|
|
(353
|
)
|
||
|
|
|
|
|
||||
Favorable/(Unfavorable) changes:
|
|
|
|
|
||||
Nonrecurrence of 2016 impairment on remeasurement of HIS net assets and lower loss on sale of HIS(a)
|
|
1,434
|
|
|
1,369
|
|
||
Lower Cost of sales(b)
|
|
238
|
|
|
1,130
|
|
||
Lower certain asset impairments(a)
|
|
3
|
|
|
937
|
|
||
Lower Restructuring charges and certain acquisition-related costs(c)
|
|
381
|
|
|
611
|
|
||
(Higher)/lower certain legal matters, net(a)
|
|
(223
|
)
|
|
300
|
|
||
Higher net gains on asset disposals(a)
|
|
108
|
|
|
268
|
|
||
Higher dividend income(a)
|
|
54
|
|
|
204
|
|
||
Lower Selling, information and administrative expenses(d)
|
|
59
|
|
|
181
|
|
||
Lower business and legal entity alignment costs(a)
|
|
53
|
|
|
126
|
|
||
Higher Amortization of intangible assets(e)
|
|
(209
|
)
|
|
(637
|
)
|
||
Lower royalty-related income(a)
|
|
(93
|
)
|
|
(363
|
)
|
||
|
|
|
|
|
||||
All other items, net
|
|
52
|
|
|
4
|
|
||
Income from continuing operations before provision for taxes on income, for the three months and nine months ended October 1, 2017
|
|
$
|
3,585
|
|
|
$
|
11,351
|
|
(a)
|
See the Notes to Condensed Consolidated Financial Statements––Note 4. Other (Income)/Deductions—Net.
|
(b)
|
See the “Costs and Expenses––Cost of Sales” section of this MD&A.
|
(c)
|
See the “Costs and Expenses––Restructuring Charges and Certain Acquisition-Related Costs and Cost-Reduction/Productivity Initiatives” section of this MD&A.
|
(d)
|
See the “Costs and Expenses––Selling, Informational and Administrative Expenses” section of this MD&A.
|
(e)
|
See the “Costs and Expenses––Amortization of Intangible Assets” section of this MD&A.
|
•
|
$157 million in the third quarter of 2017 and $143 million in the third quarter of 2016, and $296 million in the first nine months of 2017 and $302 million in the first nine months of 2016, recorded as a reduction to Revenues related to the Medicare “coverage gap” discount provision; and
|
•
|
$87 million in the third quarter of 2017 and $95 million in the third quarter of 2016, and $218 million in the first nine months of 2017 and $219 million in the first nine months of 2016, recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs.
|
•
|
Governments, corporations, and insurance companies, which provide insurance benefits to patients, have implemented increases in cost-sharing and restrictions on access to medicines, potentially causing patients to switch to generic products, delay treatments, skip doses or use less effective treatments. Government financing pressures can lead to negative pricing
|
•
|
We continue to monitor developments regarding government and government agency receivables in several European markets, including Greece, where economic conditions remain challenging and uncertain. For further information about our Accounts Receivable, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this MD&A.
|
•
|
Significant portions of our revenues and earnings, as well as our substantial international net assets, are exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk in part through operational means, including managing same-currency revenues in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk also is managed through the use of derivative financial instruments and foreign currency debt. As we operate in multiple foreign currencies, including the euro, the Japanese yen, the Chinese renminbi, the U.K. pound, the Canadian dollar and approximately 100 other currencies, changes in those currencies relative to the U.S. dollar will impact our revenues and expenses. If the U.S. dollar were to weaken against another currency, assuming all other variables remained constant, our revenues would increase, having a positive impact on earnings, and our overall expenses would increase, having a negative impact on earnings. Conversely, if the U.S. dollar were to strengthen against another currency, assuming all other variables remained constant, our revenues would decrease, having a negative impact on earnings, and our overall expenses would decrease, having a positive impact on earnings. Therefore, significant changes in foreign exchange rates, including those changes resulting from the volatility following the U.K. referendum in which voters approved the exit from the EU, can impact our results and our financial guidance.
|
•
|
In June 2016, the U.K. electorate voted in a referendum to leave the EU, which is commonly referred to as “Brexit”. In January 2017, the U.K. Prime Minister announced a 12-point plan of negotiating objectives and confirmed that the U.K. government will not seek continued membership in the EU single market. In March 2017, the U.K. government formally notified the European Council of its intention to leave the EU after it triggered Article 50 of the Lisbon Treaty to begin the two-year negotiation process establishing the terms of the exit and outlining the future relationship between the U.K. and the EU. This process continues to be highly complex and the end result of these negotiations may pose certain implications to our research, commercial and general business operations in the U.K. and the EU, including the approval of our products.
|
Some additional information about our business segments follows:
|
||||
|
IH Segment
|
|
|
EH Segment
|
●
|
IH focuses on developing and commercializing novel, value-creating medicines and vaccines that significantly improve patients’ lives, as well as products for consumer healthcare.
Key therapeutic areas include internal medicine, vaccines, oncology, inflammation & immunology, rare diseases and consumer healthcare.
|
|
●
|
EH includes legacy brands that have lost or will soon lose market exclusivity in both developed and emerging markets, branded generics, generic sterile injectable products, biosimilars, select branded products including anti-infectives and, through February 2, 2017, HIS. EH also includes an R&D organization, as well as our contract manufacturing business.
|
●
|
We expect that the IH biopharmaceutical portfolio of innovative, largely patent-protected, in-line and newly launched products will be sustained by ongoing investments to develop promising assets and targeted business development in areas of focus to help ensure a pipeline of highly-differentiated product candidates in areas of unmet medical need. The assets managed by IH are science-driven, highly differentiated and generally require a high-level of engagement with healthcare providers and consumers.
|
|
●
|
EH is expected to generate strong consistent cash flow by providing patients around the world with access to effective, lower-cost, high-value treatments. EH leverages our biologic development, regulatory and manufacturing expertise to seek to advance its biosimilar development portfolio. Additionally, EH leverages capabilities in formulation development and manufacturing expertise to help advance its generic sterile injectables portfolio. EH may also engage in targeted business development to further enable its commercial strategies.
|
●
|
IH will have continued focus on R&D productivity and pipeline strength while maximizing the value of our recently launched brands and in-line portfolio. Our acquisitions of Anacor and Medivation expanded our pipeline in the high priority therapeutic areas of inflammation and immunology and oncology.
|
|
●
|
For EH, we continue to invest in growth drivers and manage the portfolio to extract additional value while seeking opportunities for operating efficiencies. This strategy includes active management of our portfolio; maximizing growth of core product segments; acquisitions to strengthen core areas of our portfolio further, such as our recent acquisition of AstraZeneca’s small molecule anti-infectives business; and divestitures to increase focus on our core strengths. In line with this strategy, on February 3, 2017, we completed the sale of Pfizer’s global infusion therapy net assets, representing the infusion systems net assets that we acquired as part of the Hospira transaction, HIS, to ICU Medical.
|
|
Leading brands include: - Prevnar 13/Prevenar 13 - Xeljanz - Eliquis - Lyrica (U.S., Japan and certain other markets) - Enbrel (outside the U.S. and Canada) - Viagra (U.S. and Canada) - Ibrance - Xtandi - Several OTC consumer healthcare products (e.g., Advil and
Centrum)
|
|
|
Leading brands include: - Lipitor - Premarin family - Norvasc - Lyrica (Europe, Russia, Turkey, Israel and Central Asia
countries)
- Celebrex - Inflectra/Remsima - Several sterile injectable products |
•
|
Biosimilars;
|
•
|
Inflammation and Immunology;
|
•
|
Metabolic Disease and Cardiovascular Risks;
|
•
|
Neuroscience;
|
•
|
Oncology;
|
•
|
Rare Diseases; and
|
•
|
Vaccines.
|
•
|
Research Units within our WRD organization are generally responsible for research assets for our IH business (assets that have not yet achieved proof-of-concept). Our Research Units are organized in a variety of ways (by therapeutic area or combinations of therapeutic areas, by discipline, by location, etc.) to enhance flexibility, cohesiveness and focus. Because of our structure, we can rapidly redeploy resources within a Research Unit between various projects as necessary because the workforce shares similar skills, expertise and/or focus.
|
•
|
Our R&D organization within the EH business supports the large base of EH products and is expected to develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars.
|
•
|
Our GPD organization is a unified center for late-stage development for our innovative products and is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios. GPD is expected to enable more efficient and effective development and enhance our ability to accelerate and progress assets through our pipeline. GPD combines certain previously separate development-related functions from the IH business and the WRD organization to achieve a development capability that is expected to deliver high-quality, efficient, and well-executed clinical programs by enabling greater speed, greater cost efficiencies, and reduced complexity across our development portfolio. GPD also provides technical support and other services to Pfizer R&D projects.
|
•
|
Our science-based and other platform-services organizations, where a significant portion of our R&D spending occurs, provide technical expertise and other services to the various R&D projects, and are organized into science-based functions (which are part of our WRD organization), such as Pharmaceutical Sciences, Medicinal Chemistry, Regulatory and Drug Safety, and non-science-based functions, such as Facilities, Business Technology and Finance. As a result, within each of these functions, we are able to migrate resources among projects, candidates and/or targets in any therapeutic area and in most phases of development, allowing us to react quickly in response to evolving needs.
|
•
|
Sale of Hospira Infusion Systems Net Assets to ICU Medical, Inc. (EH)––On February 3, 2017, we completed the sale of our global infusion therapy net assets, HIS, to ICU Medical. In connection with this transaction, we recognized pre-tax income of approximately $12 million in the third quarter of 2017 and pre-tax losses of approximately $52 million in the first
|
•
|
Acquisition of AstraZeneca’s Small Molecule Anti-Infectives Business (EH)––On December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations, we acquired the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S. The total fair value of the consideration transferred for this business was approximately $555 million in cash plus the fair value of contingent consideration of $490 million.
|
•
|
Acquisition of Medivation, Inc. (IH)––On September 28, 2016, we acquired Medivation for $81.50 per share. The total fair value of consideration transferred for Medivation was approximately $14.3 billion in cash ($13.9 billion, net of cash acquired). Medivation’s portfolio includes Xtandi (enzalutamide), an androgen receptor inhibitor that blocks multiple steps in the androgen receptor signaling pathway within tumor cells. Xtandi is being developed and commercialized through a collaboration with Astellas. Astellas has exclusive commercialization rights for Xtandi outside the U.S. In addition, Medivation has a development-stage oncology asset in its pipeline, talazoparib, which is currently in a Phase 3 study for the treatment of BRCA-mutated breast cancer.
|
•
|
Acquisition of Bamboo Therapeutics, Inc. (R&D)––On August 1, 2016, we acquired all the remaining equity in Bamboo, a privately-held biotechnology company, focused on developing gene therapies for the potential treatment of patients with certain rare diseases relating to neuromuscular conditions and those affecting the central nervous system, for $150 million, plus potential milestone payments of up to $495 million contingent upon the progression of key assets through development, regulatory approval and commercialization. We previously purchased a minority stake in Bamboo in the first quarter of 2016 for a payment of approximately $43 million. This acquisition provides us with several clinical and pre-clinical assets that complement our rare disease portfolio, an advanced recombinant AAV vector design and production technology, and a fully functional Phase I/II gene therapy manufacturing facility.
|
•
|
Acquisition of Anacor Pharmaceuticals, Inc. (IH)––On June 24, 2016, we acquired Anacor for $99.25 per share. The total fair value of consideration transferred for Anacor was approximately $4.9 billion in cash ($4.5 billion net of cash acquired) plus $698 million debt assumed. Anacor’s crisaborole, a non-steroidal topical PDE-4 inhibitor with anti-inflammatory properties, was approved by the FDA on December 14, 2016 under the trade name Eucrisa, for the treatment of mild-to-moderate atopic dermatitis in patients two years of age and older, commonly referred to as a type of eczema. Anacor also holds the rights to Kerydin, a topical treatment for onychomycosis (toenail fungus) that is distributed and commercialized by Sandoz in the U.S.
|
•
|
Research and Development Arrangement with NovaQuest Co-Investment Fund V, L.P.––In April 2016, Pfizer entered into an agreement with NovaQuest under which NovaQuest will fund up to $200 million in development costs related to certain Phase III clinical trials of Pfizer’s rivipansel compound and Pfizer will use commercially reasonable efforts to develop and obtain regulatory approvals for such compound. NovaQuest’s development funding is expected to cover up to 100% of the development costs and will be received over approximately twelve quarters from 2016 to 2019. As there is a substantive and genuine transfer of risk to NovaQuest, the development funding is recognized by us as an obligation to perform contractual services and therefore is a reduction of Research and development expenses as incurred. The reduction to Research and development expenses for the third quarter of 2017 totaled $16.8 million and for the first nine months of 2017 totaled $48.8 million. The reduction to Research and development expenses for the third quarter of 2016 totaled $14.5 million and for the first nine months of 2016 totaled $29.5 million. Following potential regulatory approval, NovaQuest will be eligible to receive a combination of fixed milestone payments of up to approximately $267 million in total, based on achievement of first commercial sale and certain levels of cumulative net sales as well as royalties on rivipansel net sales over approximately eight years. Fixed sales-based milestone payments will be recorded as intangible assets and amortized to Amortization of intangible assets over the estimated commercial life of the rivipansel product and royalties on net sales will be recorded as Cost of sales when incurred.
|
•
|
Research and Development Arrangement with RPI Finance Trust––In January 2016, Pfizer entered into an agreement with RPI, a subsidiary of Royalty Pharma, under which RPI will fund up to $300 million in development costs related to certain Phase III clinical trials of Pfizer’s Ibrance (palbociclib) product primarily for adjuvant treatment of hormone receptor positive early breast cancer (the Indication). RPI’s development funding is expected to cover up to 100% of the costs primarily for the applicable clinical trials through 2021. As there is a substantive and genuine transfer of risk to RPI, the development funding is recognized by us as an obligation to perform contractual services and therefore is a reduction of Research and development expenses as incurred. The reduction to Research and development expenses for the third quarter of 2017 totaled $27.6 million and for the first nine months of 2017 totaled $54.4 million. The reduction to Research and development expenses for the third quarter of 2016 totaled $11.0 million and for the first nine months of 2016 totaled $32.7 million. If successful and upon approval of Ibrance in the U.S. or certain major markets in the EU for the Indication based
|
•
|
Approval of Besponsa––In August 2017, the U.S. approved Besponsa (inotuzumab ozogamicin) and in June 2017, the EU approved Besponsa as monotherapy for the treatment of adults with relapsed or refractory CD22-positive B-cell precursor acute lymphoblastic leukemia. In connection with the U.S. approval, we incurred an obligation to make guaranteed fixed annual payments over a nine-year period aggregating $296 million related to a research and development arrangement. As a result, we have recorded the estimated net present value of $248 million as an intangible asset in Developed technology rights, and we have recorded $233 million in Other noncurrent liabilities and $15 million in Other current liabilities as of October 1, 2017. In connection with the EU approval, we incurred an obligation to make guaranteed fixed annual payments over a nine-year period aggregating $148 million related to a research and development arrangement. As a result, we have recorded the estimated net present value of $123 million as an intangible asset in Developed technology rights, and we have recorded $117 million in Other noncurrent liabilities and $6 million in Other current liabilities as of October 1, 2017.
|
Pfizer’s updated 2017 financial guidance is presented below(a), (b):
|
|
Revenues
|
$52.4 to $53.1 billion
|
|
(previously $52.0 to $54.0 billion)
|
Adjusted cost of sales as a percentage of revenues
|
20.0% to 20.5%
|
|
(previously 20.0% to 21.0%)
|
Adjusted selling, informational and administrative expenses
|
$14.0 to $14.5 billion
|
|
(previously $13.7 to $14.7 billion)
|
Adjusted research and development expenses
|
$7.5 to $7.8 billion
|
|
(previously $7.5 to $8.0 billion)
|
Adjusted other (income)/deductions
|
Approximately $500 million of income
|
(previously approximately $200 million of income)
|
|
Effective tax rate on adjusted income
|
Approximately 23.0%
|
Adjusted diluted EPS
|
$2.58 to $2.62
|
(previously $2.54 to $2.60)
|
(a)
|
The 2017 financial guidance reflects the following:
|
•
|
Does not assume the completion of any business development transactions not completed as of October 1, 2017, including any one-time upfront payments associated with such transactions.
|
•
|
Exchange rates assumed are a blend of the actual exchange rates in effect through September 2017 and mid-October 2017 exchange rates for the remainder of the year.
|
•
|
Reflects an anticipated negative revenue impact of $2.3 billion due to recent and expected generic and biosimilar competition for certain products that have recently lost or are anticipated to soon lose patent protection.
|
•
|
Reflects the anticipated negative impact of $0.1 billion on revenues and $0.01 on adjusted diluted EPS as a result of unfavorable changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2016.
|
•
|
Guidance for adjusted diluted EPS assumes diluted weighted-average shares outstanding of between 6.0 and 6.1 billion shares, which reflects the impact of our $5.0 billion accelerated share repurchase agreement executed in February 2017 and completed in May 2017.
|
(b)
|
For an understanding of Adjusted income and its components and Adjusted diluted EPS (all of which are non-GAAP financial measures), see the “Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A.
|
The following tables provide worldwide revenues by operating segment and by geography:
|
|||||||||||||||||||||||||||||||||
|
|
Three Months Ended
|
|||||||||||||||||||||||||||||||
|
|
Worldwide
|
|
U.S.
|
|
International
|
|
World-wide
|
|
U.S.
|
|
Inter-national
|
|||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Oct 1,
2017 |
|
|
Oct 2, 2016
|
|
|
Oct 1, 2017
|
|
|
Oct 2, 2016
|
|
|
Oct 1, 2017
|
|
|
Oct 2, 2016
|
|
|
% Change in Revenues
|
|||||||||||||
Operating Segments(a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
IH
|
|
$
|
8,118
|
|
|
$
|
7,332
|
|
|
$
|
4,777
|
|
|
$
|
4,244
|
|
|
$
|
3,341
|
|
|
$
|
3,088
|
|
|
11
|
|
|
13
|
|
|
8
|
|
EH
|
|
5,050
|
|
|
5,712
|
|
|
1,756
|
|
|
2,286
|
|
|
3,294
|
|
|
3,426
|
|
|
(12
|
)
|
|
(23
|
)
|
|
(4
|
)
|
||||||
Total revenues
|
|
$
|
13,168
|
|
|
$
|
13,045
|
|
|
$
|
6,534
|
|
|
$
|
6,530
|
|
|
$
|
6,634
|
|
|
$
|
6,515
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
|||||||||||||||||||||||||||||||||
|
|
Nine Months Ended
|
|||||||||||||||||||||||||||||||
|
|
Worldwide
|
|
U.S.
|
|
International
|
|
World-wide
|
|
U.S.
|
|
Inter-national
|
|||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Oct 1, 2017
|
|
|
Oct 2, 2016
|
|
|
Oct 1, 2017
|
|
|
Oct 2, 2016
|
|
|
Oct 1, 2017
|
|
|
Oct 2, 2016
|
|
|
% Change in Revenues
|
|||||||||||||
Operating Segments(a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
IH
|
|
$
|
23,204
|
|
|
$
|
21,471
|
|
|
$
|
13,708
|
|
|
$
|
12,308
|
|
|
$
|
9,496
|
|
|
$
|
9,163
|
|
|
8
|
|
|
11
|
|
|
4
|
|
EH
|
|
15,639
|
|
|
17,725
|
|
|
5,808
|
|
|
7,253
|
|
|
9,831
|
|
|
10,472
|
|
|
(12
|
)
|
|
(20
|
)
|
|
(6
|
)
|
||||||
Total revenues
|
|
$
|
38,843
|
|
|
$
|
39,196
|
|
|
$
|
19,516
|
|
|
$
|
19,561
|
|
|
$
|
19,327
|
|
|
$
|
19,636
|
|
|
(1
|
)
|
|
—
|
|
|
(2
|
)
|
(a)
|
IH = the Innovative Health segment; and EH = the Essential Health segment. For additional information about each operating segment, see the “Our Strategy––Commercial Operations” and “Analysis of Operating Segment Information” sections of this MD&A and Notes to Condensed Consolidated Financial Statements––Note 13A. Segment, Geographic and Other Revenue Information: Segment Information.
|
(a)
|
Rebates are product-specific and, therefore, for any given year are impacted by the mix of products sold.
|
(b)
|
Performance-based contract rebates include contract rebates with MCOs within the U.S., including health maintenance organizations and PBMs, who receive rebates based on the achievement of contracted performance terms and claims under these contracts. Outside the U.S., performance-based contract rebates include rebates to wholesalers/distributors based on achievement of contracted performance for specific products or sales milestones.
|
(c)
|
Chargebacks primarily represent reimbursements to U.S. wholesalers for honoring contracted prices to third parties.
|
(d)
|
Sales allowances primarily represent price reductions that are contractual or legislatively mandated outside the U.S., discounts and distribution fees.
|
(e)
|
For the three months ended October 1, 2017, associated with the following segments: IH ($2.4 billion) and EH ($2.5 billion). For the three months ended October 2, 2016, associated with the following segments: IH ($1.8 billion); and EH ($2.4 billion). For the nine months ended October 1, 2017, associated with the following segments: IH ($6.4 billion) and EH ($7.5 billion). For the nine months ended October 2, 2016, associated with the following segments: IH ($5.1 billion) and EH ($7.2 billion).
|
•
|
an increase in performance-based contract rebates primarily due to sales to managed care customers in the U.S., as well as higher rebates in certain markets outside the U.S.;
|
•
|
an increase in sales allowances primarily in markets outside the U.S.;
|
•
|
an increase in chargebacks from certain IH products, partially offset by decreases across several EH products; and
|
•
|
an increase in Medicaid and related state program rebates, primarily as a result of updated estimates of sales related to these programs.
|
The following table provides revenue information for several of our major products. As described in Note 1A, acquisitions and divestitures have impacted our results of operations in 2017 and 2016.
|
||||||||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
|
|
% Change(a)
|
|
|
|
% Change(a)
|
||||||||||||||
PRODUCT
|
|
PRIMARY INDICATIONS OR CLASS
|
|
Oct 1,
2017 |
|
Total
|
|
|
Oper.
|
|
Oct 1,
2017 |
|
Total
|
|
|
Oper.
|
|
|||||
TOTAL REVENUES
|
|
|
|
$
|
13,168
|
|
|
1
|
|
|
1
|
|
|
$
|
38,843
|
|
|
(1
|
)
|
|
—
|
|
PFIZER INNOVATIVE HEALTH (IH)(b)
|
|
$
|
8,118
|
|
|
11
|
|
|
11
|
|
|
$
|
23,204
|
|
|
8
|
|
|
9
|
|
||
Internal Medicine
|
|
$
|
2,455
|
|
|
9
|
|
|
10
|
|
|
$
|
7,245
|
|
|
10
|
|
|
11
|
|
||
Lyrica IH(c)
|
|
Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury
|
|
1,150
|
|
|
10
|
|
|
11
|
|
|
3,382
|
|
|
9
|
|
|
9
|
|
||
Eliquis alliance revenues and direct sales
|
|
Atrial fibrillation, deep vein thrombosis, pulmonary embolism
|
|
644
|
|
|
43
|
|
|
43
|
|
|
1,813
|
|
|
48
|
|
|
49
|
|
||
Chantix/Champix
|
|
An aid to smoking cessation treatment in adults 18 years of age or older
|
|
240
|
|
|
21
|
|
|
22
|
|
|
727
|
|
|
15
|
|
|
15
|
|
||
Viagra IH(d)
|
|
Erectile dysfunction
|
|
206
|
|
|
(31
|
)
|
|
(31
|
)
|
|
711
|
|
|
(21
|
)
|
|
(21
|
)
|
||
BMP2
|
|
Development of bone and cartilage
|
|
79
|
|
|
24
|
|
|
24
|
|
|
198
|
|
|
13
|
|
|
13
|
|
||
Toviaz
|
|
Overactive bladder
|
|
62
|
|
|
4
|
|
|
5
|
|
|
187
|
|
|
(2
|
)
|
|
—
|
|
||
All other Internal Medicine
|
|
Various
|
|
75
|
|
|
(41
|
)
|
|
(41
|
)
|
|
228
|
|
|
(31
|
)
|
|
(31
|
)
|
||
Vaccines
|
|
$
|
1,649
|
|
|
1
|
|
|
—
|
|
|
$
|
4,385
|
|
|
(4
|
)
|
|
(4
|
)
|
||
Prevnar 13/Prevenar 13
|
|
Vaccines for prevention of pneumococcal disease
|
|
1,522
|
|
|
(1
|
)
|
|
(1
|
)
|
|
4,069
|
|
|
(5
|
)
|
|
(5
|
)
|
||
FSME/IMMUN-TicoVac
|
|
Tick-borne encephalitis vaccine
|
|
43
|
|
|
31
|
|
|
29
|
|
|
119
|
|
|
17
|
|
|
19
|
|
||
All other Vaccines
|
|
Various
|
|
85
|
|
|
17
|
|
|
16
|
|
|
197
|
|
|
14
|
|
|
17
|
|
||
Oncology
|
|
$
|
1,616
|
|
|
46
|
|
|
46
|
|
|
$
|
4,551
|
|
|
42
|
|
|
43
|
|
||
Ibrance
|
|
Advanced breast cancer
|
|
878
|
|
|
60
|
|
|
59
|
|
|
2,410
|
|
|
61
|
|
|
62
|
|
||
Sutent
|
|
Advanced and/or metastatic RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor
|
|
276
|
|
|
6
|
|
|
6
|
|
|
805
|
|
|
(2
|
)
|
|
(1
|
)
|
||
Xalkori
|
|
ALK-positive and ROS1-positive advanced NSCLC
|
|
146
|
|
|
4
|
|
|
4
|
|
|
442
|
|
|
6
|
|
|
8
|
|
||
Xtandi alliance revenues
|
|
Advanced prostate cancer
|
|
150
|
|
|
*
|
|
|
*
|
|
|
422
|
|
|
*
|
|
|
*
|
|
||
Inlyta
|
|
Advanced RCC
|
|
84
|
|
|
(12
|
)
|
|
(10
|
)
|
|
256
|
|
|
(16
|
)
|
|
(14
|
)
|
||
Bosulif
|
|
Philadelphia chromosome–positive chronic myelogenous leukemia
|
|
57
|
|
|
34
|
|
|
35
|
|
|
163
|
|
|
35
|
|
|
36
|
|
||
All other Oncology
|
|
Various
|
|
26
|
|
|
74
|
|
|
76
|
|
|
54
|
|
|
10
|
|
|
11
|
|
||
Inflammation & Immunology (I&I)
|
|
$
|
1,000
|
|
|
4
|
|
|
4
|
|
|
$
|
2,863
|
|
|
(1
|
)
|
|
—
|
|
||
Enbrel (Outside the U.S. and Canada)
|
|
Rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis
|
|
613
|
|
|
(13
|
)
|
|
(13
|
)
|
|
1,818
|
|
|
(17
|
)
|
|
(16
|
)
|
||
Xeljanz
|
|
Rheumatoid arthritis
|
|
348
|
|
|
48
|
|
|
49
|
|
|
935
|
|
|
44
|
|
|
44
|
|
||
Eucrisa
|
|
Mild to moderate atopic dermatitis (eczema)
|
|
15
|
|
|
*
|
|
|
*
|
|
|
33
|
|
|
*
|
|
|
*
|
|
||
All other I&I
|
|
Various
|
|
23
|
|
|
(3
|
)
|
|
1
|
|
|
78
|
|
|
35
|
|
|
36
|
|
||
Rare Disease
|
|
$
|
569
|
|
|
(3
|
)
|
|
(3
|
)
|
|
$
|
1,637
|
|
|
(7
|
)
|
|
(6
|
)
|
||
BeneFIX
|
|
Hemophilia
|
|
151
|
|
|
(14
|
)
|
|
(14
|
)
|
|
453
|
|
|
(17
|
)
|
|
(16
|
)
|
||
Refacto AF/Xyntha
|
|
Hemophilia
|
|
140
|
|
|
—
|
|
|
(1
|
)
|
|
409
|
|
|
—
|
|
|
3
|
|
||
Genotropin
|
|
Replacement of human growth hormone
|
|
136
|
|
|
(7
|
)
|
|
(6
|
)
|
|
375
|
|
|
(12
|
)
|
|
(10
|
)
|
||
Somavert
|
|
Acromegaly
|
|
65
|
|
|
11
|
|
|
10
|
|
|
182
|
|
|
6
|
|
|
7
|
|
||
All other Rare Disease
|
|
Various
|
|
77
|
|
|
21
|
|
|
21
|
|
|
218
|
|
|
(1
|
)
|
|
1
|
|
||
Consumer Healthcare
|
|
$
|
829
|
|
|
4
|
|
|
4
|
|
|
$
|
2,522
|
|
|
3
|
|
|
3
|
|
||
PFIZER ESSENTIAL HEALTH (EH)(e)
|
|
$
|
5,050
|
|
|
(12
|
)
|
|
(11
|
)
|
|
$
|
15,639
|
|
|
(12
|
)
|
|
(11
|
)
|
||
Legacy Established Products (LEP)(f)
|
|
$
|
2,681
|
|
|
(1
|
)
|
|
—
|
|
|
$
|
7,995
|
|
|
(5
|
)
|
|
(3
|
)
|
||
Lipitor
|
|
Reduction of LDL cholesterol
|
|
491
|
|
|
16
|
|
|
18
|
|
|
1,341
|
|
|
4
|
|
|
6
|
|
||
Premarin family
|
|
Symptoms of menopause
|
|
238
|
|
|
(2
|
)
|
|
(2
|
)
|
|
711
|
|
|
(5
|
)
|
|
(5
|
)
|
||
Norvasc
|
|
Hypertension
|
|
226
|
|
|
(5
|
)
|
|
(3
|
)
|
|
684
|
|
|
(4
|
)
|
|
(1
|
)
|
||
EpiPen
|
|
Epinephrine injection used in treatment of life-threatening allergic reactions
|
|
82
|
|
|
(25
|
)
|
|
(25
|
)
|
|
253
|
|
|
(16
|
)
|
|
(15
|
)
|
||
Xalatan/Xalacom
|
|
Glaucoma and ocular hypertension
|
|
83
|
|
|
(9
|
)
|
|
(8
|
)
|
|
241
|
|
|
(12
|
)
|
|
(12
|
)
|
||
Effexor
|
|
Depression and certain anxiety disorders
|
|
76
|
|
|
8
|
|
|
9
|
|
|
215
|
|
|
4
|
|
|
5
|
|
||
Zoloft
|
|
Depression and certain anxiety disorders
|
|
78
|
|
|
9
|
|
|
11
|
|
|
215
|
|
|
(6
|
)
|
|
(4
|
)
|
||
Zithromax
|
|
Bacterial infections
|
|
61
|
|
|
10
|
|
|
11
|
|
|
202
|
|
|
(1
|
)
|
|
3
|
|
||
Relpax
|
|
Symptoms of migraine headache
|
|
50
|
|
|
(39
|
)
|
|
(39
|
)
|
|
193
|
|
|
(22
|
)
|
|
(22
|
)
|
||
Xanax
|
|
Anxiety disorders
|
|
58
|
|
|
5
|
|
|
4
|
|
|
164
|
|
|
1
|
|
|
2
|
|
||
All other LEP
|
|
Various
|
|
1,237
|
|
|
(2
|
)
|
|
(1
|
)
|
|
3,776
|
|
|
(5
|
)
|
|
(4
|
)
|
||
Sterile Injectable Pharmaceuticals (SIP)(g)
|
|
$
|
1,273
|
|
|
(13
|
)
|
|
(12
|
)
|
|
$
|
4,270
|
|
|
(5
|
)
|
|
(4
|
)
|
||
Medrol
|
|
Steroid anti-inflammatory
|
|
109
|
|
|
7
|
|
|
7
|
|
|
352
|
|
|
7
|
|
|
7
|
|
||
Sulperazon
|
|
Treatment of infections
|
|
114
|
|
|
11
|
|
|
13
|
|
|
345
|
|
|
14
|
|
|
18
|
|
||
Fragmin
|
|
Slows blood clotting
|
|
79
|
|
|
(1
|
)
|
|
(1
|
)
|
|
221
|
|
|
(8
|
)
|
|
(6
|
)
|
||
Tygacil
|
|
Tetracycline class antibiotic
|
|
60
|
|
|
(12
|
)
|
|
(12
|
)
|
|
192
|
|
|
(5
|
)
|
|
(5
|
)
|
||
Precedex
|
|
Sedation agent in surgery or intensive care
|
|
51
|
|
|
(21
|
)
|
|
(20
|
)
|
|
182
|
|
|
(8
|
)
|
|
(9
|
)
|
||
All other SIP
|
|
Various
|
|
860
|
|
|
(18
|
)
|
|
(17
|
)
|
|
2,977
|
|
|
(7
|
)
|
|
(6
|
)
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
|
|
% Change(a)
|
|
|
|
% Change(a)
|
||||||||||||||
PRODUCT
|
|
PRIMARY INDICATIONS OR CLASS
|
|
Oct 1,
2017 |
|
Total
|
|
|
Oper.
|
|
Oct 1,
2017 |
|
Total
|
|
|
Oper.
|
|
|||||
Peri-LOE Products(h)
|
|
$
|
794
|
|
|
(22
|
)
|
|
(22
|
)
|
|
$
|
2,398
|
|
|
(26
|
)
|
|
(24
|
)
|
||
Celebrex
|
|
Arthritis pain and inflammation, acute pain
|
|
212
|
|
|
9
|
|
|
11
|
|
|
564
|
|
|
3
|
|
|
4
|
|
||
Lyrica EH(c)
|
|
Epilepsy, neuropathic pain and generalized anxiety disorder
|
|
134
|
|
|
(30
|
)
|
|
(31
|
)
|
|
428
|
|
|
(31
|
)
|
|
(29
|
)
|
||
Vfend
|
|
Fungal infections
|
|
97
|
|
|
(31
|
)
|
|
(29
|
)
|
|
305
|
|
|
(33
|
)
|
|
(32
|
)
|
||
Viagra EH(d)
|
|
Erectile dysfunction
|
|
102
|
|
|
14
|
|
|
16
|
|
|
285
|
|
|
—
|
|
|
3
|
|
||
Pristiq
|
|
Depression
|
|
69
|
|
|
(61
|
)
|
|
(61
|
)
|
|
230
|
|
|
(58
|
)
|
|
(58
|
)
|
||
Zyvox
|
|
Bacterial infections
|
|
68
|
|
|
(28
|
)
|
|
(27
|
)
|
|
220
|
|
|
(34
|
)
|
|
(33
|
)
|
||
Revatio
|
|
Pulmonary arterial hypertension
|
|
58
|
|
|
(20
|
)
|
|
(20
|
)
|
|
189
|
|
|
(11
|
)
|
|
(11
|
)
|
||
All other Peri-LOE Products
|
|
Various
|
|
55
|
|
|
(19
|
)
|
|
(17
|
)
|
|
176
|
|
|
(17
|
)
|
|
(15
|
)
|
||
Biosimilars(i)
|
|
Various
|
|
$
|
141
|
|
|
70
|
|
|
67
|
|
|
$
|
367
|
|
|
61
|
|
|
63
|
|
Inflectra/Remsima
|
|
Inflammatory diseases
|
|
112
|
|
|
*
|
|
|
*
|
|
|
284
|
|
|
*
|
|
|
*
|
|
||
All other Biosimilars
|
|
Various
|
|
28
|
|
|
(16
|
)
|
|
(18
|
)
|
|
82
|
|
|
(15
|
)
|
|
(14
|
)
|
||
Pfizer CentreOne(j)
|
|
|
|
$
|
161
|
|
|
3
|
|
|
3
|
|
|
$
|
514
|
|
|
(5
|
)
|
|
(5
|
)
|
Hospira Infusion Systems (HIS)(k)
|
|
Various
|
|
$
|
—
|
|
|
*
|
|
|
*
|
|
|
$
|
97
|
|
|
(89
|
)
|
|
(89
|
)
|
Total Lyrica(c)
|
|
Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury
|
|
$
|
1,285
|
|
|
4
|
|
|
5
|
|
|
$
|
3,810
|
|
|
2
|
|
|
3
|
|
Total Viagra(d)
|
|
Erectile dysfunction
|
|
$
|
308
|
|
|
(20
|
)
|
|
(20
|
)
|
|
$
|
996
|
|
|
(16
|
)
|
|
(15
|
)
|
Total Alliance revenues
|
|
Various
|
|
$
|
741
|
|
|
77
|
|
|
78
|
|
|
$
|
2,112
|
|
|
83
|
|
|
84
|
|
(a)
|
As compared to the three and nine months ended October 2, 2016.
|
(b)
|
The IH business encompasses Internal Medicine, Vaccines, Oncology, Inflammation & Immunology, Rare Disease and Consumer Healthcare. Through December 31, 2016, includes Duavive/Duavee and Viviant (recorded in All other Internal Medicine in 2016), which were transferred from Innovative Health to Essential Health effective January 1, 2017 (recorded in All other LEP (EH) beginning January 1, 2017), in order to align these products with our management of the women’s health portfolio within EH.
|
(c)
|
Lyrica revenues from all of Europe, Russia, Turkey, Israel and Central Asia countries are included in Lyrica EH. All other Lyrica revenues are included in Lyrica IH. Total Lyrica revenues represent the aggregate of worldwide revenues from Lyrica IH and Lyrica EH.
|
(d)
|
Viagra revenues from the U.S. and Canada are included in Viagra IH. All other Viagra revenues are included in Viagra EH. Total Viagra revenues represent the aggregate of worldwide revenues from Viagra IH and Viagra EH.
|
(e)
|
The EH business encompasses Legacy Established Products, Sterile Injectable Pharmaceuticals, Peri-LOE Products, Biosimilars, Pfizer CentreOne and HIS (through February 2, 2017) and includes all legacy Hospira commercial operations.
|
(f)
|
Legacy Established Products primarily include products that have lost patent protection (excluding Sterile Injectable Pharmaceuticals and Peri-LOE Products). Effective January 1, 2017, All other LEP includes Duavive/Duavee and Viviant, which were transferred from Innovative Health (recorded in All other Internal Medicine (IH) in 2016), in order to align these products with our management of the women’s health portfolio within EH. See note (b) above.
|
(g)
|
Sterile Injectable Pharmaceuticals include generic injectables and proprietary specialty injectables (excluding Peri-LOE Products).
|
(h)
|
Peri-LOE Products include products that have recently lost or are anticipated to soon lose patent protection. These products include: Lyrica in Europe, Russia, Turkey, Israel and Central Asia; Viagra in all countries (excluding the U.S. and Canada); and worldwide revenues for Celebrex, Pristiq, Zyvox, Vfend, Revatio and Inspra.
|
(i)
|
Biosimilars include Inflectra/Remsima (biosimilar infliximab) in the U.S. and certain international markets, Nivestim (biosimilar filgrastim) in certain European, Asian and Africa/Middle Eastern markets and Retacrit (biosimilar epoetin zeta) in certain European and Africa/Middle Eastern markets.
|
(j)
|
Pfizer CentreOne includes revenues from our contract manufacturing and active pharmaceutical ingredient sales operation, including sterile injectables contract manufacturing, and revenues related to our manufacturing and supply agreements, including with Zoetis.
|
(k)
|
HIS (through February 2, 2017) includes Medication Management Systems products composed of infusion pumps and related software and services, as well as IV Infusion Products, including large volume IV solutions and their associated administration sets.
|
*
|
Indicates calculation not meaningful.
|
•
|
Prevnar 13/Prevenar 13 (IH) worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
|
•
|
Lyrica (EH (revenues from all of Europe, Russia, Turkey, Israel and Central Asia)/IH (revenues from all other geographies)) worldwide revenues increased operationally in the third quarter and the first nine months of 2017, compared to the same periods in 2016. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
|
•
|
Ibrance (IH) worldwide revenues, most of which were recorded in the U.S., increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. The significant revenue growth reflects our scientific/clinical data, continued positive patient experience as well as Ibrance being the class leader among cyclin-dependent kinase inhibitors in major markets. Foreign exchange had a favorable impact on worldwide revenues in the third quarter of 2017 and had an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
|
•
|
Enbrel (IH, outside the U.S. and Canada) worldwide revenues, excluding the U.S. and Canada, decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, primarily due to on-going biosimilar competition in most developed Europe markets, which is expected to continue. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
|
•
|
Lipitor (EH) worldwide revenues increased operationally in the third quarter and the first nine months of 2017, compared to the same periods in 2016. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter of 2017 and first nine months of 2017, compared to the same periods in 2016. In the U.S., revenues increased more than 100% in the third quarter of 2017 and 11% in the first nine months of 2017, compared to the same periods in 2016, primarily due to favorable rebates.
|
•
|
Viagra (IH (U.S. and Canada revenues)/EH (all other revenues excluding U.S. and Canada)) worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. The decrease in the third quarter of 2017, compared to the same period in 2016, was primarily due to wholesaler destocking in advance of anticipated generic competition in the U.S. beginning in December 2017. The decrease in the first nine months of 2017, compared to the same period in 2016, was primarily due to lower market growth. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter of 2017 and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
|
•
|
Xeljanz (IH) worldwide revenues increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. In the U.S., Xeljanz revenues increased 44% in the third quarter of 2017 and 40% in the first nine months of 2017, compared to the same periods in 2016, primarily driven by increased adoption among rheumatologists, growing awareness among patients and improvements in payer access. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter of 2017 and had a de minimis impact in the first nine months of 2017, compared to the same periods in 2016.
|
•
|
BeneFIX and ReFacto AF/Xyntha (IH)––BeneFIX worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, primarily as a result of erosion of market share in the U.S. and European countries due to increasing adoption of extended half-life treatment options as well as a price decrease in the U.K. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
|
•
|
Sutent (IH) worldwide revenues increased operationally in the third quarter of 2017 and decreased operationally in the first nine months of 2017, compared to the same periods in 2016. The increase in the third quarter of 2017 was primarily driven by increased performance in certain emerging markets. The decrease in the first nine months of 2017 was primarily due to competitive pressure in the U.S. and Europe and cost containment measures in certain developed international markets, partially offset by increased performance in certain emerging markets. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter of 2017 and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
|
•
|
Chantix/Champix (IH) worldwide revenues increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter of 2017 and a de minimis impact in the first nine months of 2017, compared to the same periods in 2016.
|
•
|
The Premarin family of products (EH) worldwide revenues decreased operationally in the third quarter of 2017 and first nine months of 2017, compared to the same periods in 2016. Revenues in the U.S. decreased 2% in the third quarter and 5% in the first nine months of 2017, compared to the same periods in 2016, primarily driven by lower volume, partially offset by a positive price impact.
|
•
|
Norvasc (EH) worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. Results for the third quarter of 2017 and first nine months of 2017 were impacted by generic competition in Japan, lower volumes in certain Middle Eastern markets and pricing pressures in China, partially offset by demand in China. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
|
•
|
Celebrex (EH) worldwide revenues increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016. The increase in the third quarter of 2017, compared to the same period in 2016, was primarily
|
•
|
Xalkori (IH) worldwide revenues increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, as a result of a steady increase in diagnostic rates for the ALK gene mutation across key markets outside the U.S., which has led to more patients being treated. This increase was partially offset by volume declines in the U.S. and Japan due to competitive pressure, partially mitigated by the March 2016 FDA approval of the supplemental NDA to treat patients with metastatic NSCLC whose tumors are ROS1-positive as detected by an FDA-approved test. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter of 2017 and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
|
•
|
Inflectra/Remsima (EH) worldwide revenues increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, due to continued uptake in developed markets in Europe, and the U.S. launch in the fourth quarter of 2016, partially offset by pricing pressures in Europe. Foreign exchange had a favorable impact on worldwide revenues in the third quarter of 2017 and an unfavorable impact in the first nine months of 2017, compared to the same periods in 2016.
|
•
|
Inlyta (IH) worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, primarily due to increased competition in the U.S. and Europe, partially offset by performance in key emerging markets. Foreign exchange had an unfavorable impact on worldwide revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
|
•
|
Pristiq (EH) worldwide revenues decreased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, primarily due to loss of exclusivity in the U.S. in March 2017. Foreign exchange had a de minimis impact on worldwide revenues in the third quarter and first nine months of 2017, compared to the same periods in 2016.
|
•
|
Eucrisa (IH) is approved in the U.S. for the treatment of mild to moderate atopic dermatitis for patients two years of age and older. The FDA approved Eucrisa on December 14, 2016, and Eucrisa was launched in the U.S. late in the first quarter of 2017. Eucrisa is a novel non-steroidal topical ointment and is the first topical prescription treatment for atopic dermatitis approved in over 10 years. Prescription volume continued to strengthen through the third quarter of 2017 supported by the launch of our direct-to-consumer campaign.
|
•
|
Alliance revenues (IH/EH) increased operationally in the third quarter and first nine months of 2017, compared to the same periods in 2016, mainly due to:
|
◦
|
an increase in Eliquis alliance revenues due to higher demand resulting from increased market penetration of novel oral anticoagulants and market share gains; and
|
◦
|
the inclusion of Xtandi alliance revenues of $150 million in the third quarter of 2017 and $422 million in the first nine months of 2017 in the U.S. resulting from the September 2016 acquisition of Medivation. We expect patient assistance program (which provides free medicines to patients) utilization as a percentage of total demand to normalize as we move into next year.
|
◦
|
Eliquis (IH) has been jointly developed and is commercialized by Pfizer and BMS. Pfizer funds between 50% and 60% of all development costs depending on the study. Profits and losses are shared equally on a global basis, except in certain countries where Pfizer commercializes Eliquis and pays BMS compensation based on a percentage of net sales. We have full commercialization rights in certain smaller markets. BMS supplies the product to us at cost plus a percentage of the net sales to end-customers in these markets. Eliquis is part of the Novel Oral Anticoagulant (NOAC) market; the agents in this class were developed as alternative treatment options to warfarin in appropriate patients.
|
◦
|
Xtandi (IH) is being developed and commercialized through a collaboration with Astellas. The two companies share equally in the gross profits (losses) related to U.S. net sales of Xtandi. Subject to certain exceptions, Pfizer and Astellas also share equally all Xtandi commercialization costs attributable to the U.S. market. Pfizer and Astellas also share certain development and other collaboration expenses and Pfizer receives tiered royalties as a percentage of international Xtandi net sales (recorded in Other (income)/deductions—net).
|
•
|
delivering a pipeline of differentiated therapies with the greatest scientific and commercial promise;
|
•
|
innovating new capabilities that can position Pfizer for long-term leadership; and
|
•
|
creating new models for biomedical collaboration that will expedite the pace of innovation and productivity.
|
•
|
Biosimilars;
|
•
|
Inflammation and Immunology;
|
•
|
Metabolic Disease and Cardiovascular Risks;
|
•
|
Neuroscience;
|
•
|
Oncology
|
•
|
Rare Diseases; and
|
•
|
Vaccines.
|
RECENT FDA APPROVALS
|
||
PRODUCT
|
INDICATION
|
DATE APPROVED
|
Lyrica (pregabalin)
|
Extended-release tablets CV as once-daily therapy for the management of neuropathic pain associated with diabetic peripheral neuropathy and the management of post-herpetic neuralgia
|
October 2017
|
Mylotarg (gemtuzumab ozogamicin)
|
Treatment of adults with newly diagnosed CD33-positive acute myeloid leukemia (AML), and adults and children 2 years and older with relapsed or refractory CD33-positive AML
|
September 2017
|
Besponsa (inotuzumab ozogamicin)
|
Treatment of adults with relapsed or refractory B-cell precursor acute lymphoblastic leukemia
|
August 2017
|
Bavencio (avelumab)
|
Treatment for patients with locally advanced or metastatic urothelial carcinoma with disease progression on or after platinum-based therapy, which is being developed in collaboration with Merck KGaA, Germany
|
May 2017
|
Bavencio (avelumab)
|
Treatment of adults and pediatric patients 12 years and older with metastatic Merkel cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany
|
March 2017
|
Eucrisa (crisaborole)
|
A non-steroidal topical anti-inflammatory PDE-4 inhibitor for the treatment of mild-to-moderate atopic dermatitis
|
December 2016
|
PENDING U.S. NDAs AND SUPPLEMENTAL FILINGS
|
||
PRODUCT
|
PROPOSED INDICATION
|
DATE FILED*
|
PF-05280014(a)
|
A potential biosimilar to Herceptin® (trastuzumab)
|
August 2017
|
Bosulif (bosutinib)
|
Treatment of patients with newly diagnosed chronic phase Philadelphia chromosome-positive chronic myeloid leukemia, which is being developed in collaboration with Avillion
|
August 2017
|
Xeljanz (tofacitinib)
|
Treatment of adult patients with moderately to severely active ulcerative colitis
|
July 2017
|
Sutent (sunitinib)(b)
|
Adjuvant treatment in adult patients at high risk of recurrent renal cell carcinoma following nephrectomy
|
May 2017
|
Xeljanz (tofacitinib)(c)
|
Treatment of adult patients with active psoriatic arthritis
|
May 2017
|
PF-06438179(d)
|
A potential biosimilar to Remicade® (infliximab)
|
April 2017
|
ertugliflozin
|
Treatment of type 2 diabetes, which is being developed in collaboration with Merck
|
March 2017
|
Retacrit(e)
|
A potential biosimilar to Epogen® and Procrit® (epotein alfa)
|
February 2015
|
tafamidis meglumine(f)
|
Treatment of transthyretin familial amyloid polyneuropathy
|
February 2012
|
*
|
The dates set forth in this column are the dates on which the FDA accepted our submissions.
|
(a)
|
Herceptin® is a registered trademark of Genentech, Inc.
|
(b)
|
In September 2017, the FDA’s Oncologic Drug Advisory Committee (ODAC) voted six in favor and six against the benefit-risk profile for Sutent as adjuvant treatment of adult patients at high risk of recurrent renal cell carcinoma after nephrectomy (surgical removal of the cancer-containing kidney).
|
(c)
|
In August 2017, the FDA’s Arthritis Advisory Committee voted ten to one to recommend approval of the proposed dose of tofacitinib for the treatment of adult patients with active psoriatic arthritis.
|
(d)
|
Remicade® is a registered trademark of Janssen. In February 2016, we divested the rights for development and commercialization of PF-06438179, a potential biosimilar to Remicade® (infliximab) in the 28 countries that form the EEA to Sandoz, which was a condition to the European Commission’s approval of the Hospira transaction. We retain commercialization rights to PF-06438179 in all countries outside of the EEA.
|
(e)
|
Epogen® is a registered U.S. trademark of Amgen Inc.; Procrit® is a registered U.S. trademark of Johnson & Johnson. In October 2015, we received a “complete response” letter from the FDA with respect to our biologics license application (BLA) for Retacrit, our proposed biosimilar to epoetin alfa, which was submitted for all indications of the reference product. In December 2016, we completed the resubmission of the BLA to the FDA for Retacrit in response to the “complete response” letter. In May 2017, the FDA’s ODAC voted to recommend Retacrit for approval. In June 2017, we received a “complete response” letter from the FDA, relating to matters noted in a Warning Letter issued in February 2017 following a routine inspection of the company’s facility in McPherson, Kansas in 2016. This facility was listed as the potential manufacturing site in the BLA for the proposed epoetin alfa biosimilar. The issues noted in the Warning Letter do not relate specifically to the manufacture of epoetin alfa. No additional clinical data was requested at this time and we continue to work closely with the FDA on next steps.
|
(f)
|
In May 2012, the FDA’s Peripheral and Central Nervous System Drugs Advisory Committee voted that the tafamidis meglumine data provide substantial evidence of efficacy for a surrogate endpoint that is reasonably likely to predict a clinical benefit. In June 2012, the FDA issued a “complete response” letter with respect to the tafamidis NDA. The FDA has requested the completion of a second efficacy study, and also has asked for additional information on the data within the current tafamidis NDA. Pfizer initiated study B3461028 in December 2013, a global Phase 3 study to support a potential new indication in transthyretin cardiomyopathy, which includes transthyretin familial amyloid cardiomyopathy (TTR-FAC) and wild-type cardiomyopathy (WT-CM). We anticipate results from this study in 2018, and continue to work with the FDA to identify next steps.
|
REGULATORY APPROVALS AND FILINGS IN THE EU AND JAPAN
|
|||
PRODUCT
|
DESCRIPTION OF EVENT
|
DATE APPROVED
|
DATE FILED*
|
Xeljanz (tofacitinib)
|
Application filed in the EU for treatment of psoriatic arthritis
|
—
|
September 2017
|
Ibrance (palbociclib)
|
Approval in Japan for Ibrance in combination with endocrine therapy for the treatment of HR+, HER2- inoperable or recurrent breast cancer
|
September 2017
|
—
|
Bavencio (avelumab)
|
Approval in Japan for the treatment of curatively unresectable Merkel cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany
|
September 2017
|
—
|
Bavencio (avelumab)
|
Approval in the EU for the treatment of adult patients with metastatic Merkel cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany
|
September 2017
|
—
|
Xeljanz (tofacitinib)
|
Application filed in the EU for the treatment of ulcerative colitis
|
—
|
August 2017
|
Bosulif (bosutinib)
|
Application filed in the EU for the treatment of patients with newly diagnosed chronic phase Philadelphia chromosome-positive chronic myeloid leukemia, which is being developed in collaboration with Avillion
|
—
|
August 2017
|
PF-06438179(a)
|
Application filed in Japan for a potential biosimilar to Remicade® (infliximab)
|
—
|
August 2017
|
PF-05280014(b)
|
Application filed in the EU for a potential biosimilar to Herceptin® (trastuzumab)
|
—
|
July 2017
|
Besponsa (inotuzumab ozogamicin)
|
Approval in the EU for the treatment of adult patients with relapsed or refractory B-cell precursor acute lymphoblastic leukemia
|
June 2017
|
—
|
Trumenba
|
Approval in the EU for a prophylactic vaccine for active immunization to prevent invasive disease caused by Neisseria meningtidis serogroup B in individuals 10 years of age and older
|
May 2017
|
—
|
Xalkori (crizotinib)
|
Approval in Japan for the treatment of ROS1-positive non-small cell lung cancer
|
May 2017
|
—
|
Xeljanz (tofacitinib)
|
Application filed in Japan for the treatment of ulcerative colitis
|
—
|
May 2017
|
Sutent (sunitinib)
|
Application filed in the EU for the adjuvant treatment in adult patients at high risk of recurrent renal cell carcinoma following nephrectomy
|
—
|
April 2017
|
inotuzumab ozogamicin
|
Application filed in Japan for the treatment of acute lymphoblastic leukemia
|
—
|
April 2017
|
Xeljanz (tofacitinib)
|
Approval in the EU for Xeljanz in combination with methotrexate for the treatment of moderate to severe active rheumatoid arthritis in adult patients who have responded inadequately to, or who are intolerant to one or more disease-modifying antirheumatic drugs. Xeljanz can be given as monotherapy in case of intolerance to methotrexate or when treatment with methotrexate is inappropriate
|
March 2017
|
—
|
ertugliflozin
|
Application filed in the EU for the treatment of type 2 diabetes, which is being developed in collaboration with Merck
|
—
|
February 2017
|
Mylotarg (gemtuzumab ozogamicin)
|
Application filed in the EU for the treatment of acute myeloid leukemia
|
—
|
December 2016
|
Ibrance (palbociclib)
|
Approval in the EU for palbociclib in combination with
endocrine therapy for the treatment of HR+, HER2- advanced or
metastatic breast cancer, as well as for the treatment of recurrent
advanced breast cancer
|
November 2016
|
—
|
*
|
For applications in the EU, the dates set forth in this column are the dates on which the EMA validated our submissions.
|
(a)
|
Remicade® is a registered trademark of Janssen. In February 2016, we divested the rights for development and commercialization of PF-06438179, a potential biosimilar to Remicade® (infliximab) in the 28 countries that form the EEA to Sandoz, which was a condition to the European Commission’s approval of the Hospira transaction. We retain commercialization rights to PF-06438179 in all countries outside of the EEA.
|
(b)
|
Herceptin® is a registered trademark of Genentech, Inc.
|
LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS
FOR IN-LINE AND IN-REGISTRATION PRODUCTS
|
|
PRODUCT
|
PROPOSED INDICATION
|
Bavencio (avelumab)
|
A monoclonal antibody that inhibits PD-L1, in combination with Inlyta (axitinib), a tyrosine kinase inhibitor,
for the first-line treatment of advanced renal cell carcinoma, which is being developed in collaboration with
Merck KGaA, Germany
|
Bavencio (avelumab)
|
A monoclonal antibody that inhibits PD-L1 for the first-line treatment of stage IIIb/IV non-small cell lung
cancer, which is being developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab)
|
A monoclonal antibody that inhibits PD-L1 for treatment of stage IIIb/IV non-small cell lung cancer that has progressed after a platinum-containing doublet, which is being developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab)
|
A monoclonal antibody that inhibits PD-L1 for treatment of platinum-resistant/refractory ovarian cancer,
which is being developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab)
|
A monoclonal antibody that inhibits PD-L1 for the first-line treatment of ovarian cancer, which is being
developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab)
|
A monoclonal antibody that inhibits PD-L1 for maintenance treatment, in the first-line setting, for patients
with urothelial cancer, which is being developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab)
|
A monoclonal antibody that inhibits PD-L1 for maintenance treatment of advanced or metastatic gastric/
gastro-esophageal junction cancers, which is being developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab)
|
A monoclonal antibody that inhibits PD-L1 for the third-line treatment of advanced or metastatic gastric/
gastro-esophageal junction cancers, which is being developed in collaboration with Merck KGaA, Germany
|
Bavencio (avelumab)
|
A monoclonal antibody that inhibits PD-L1 for treatment of locally advanced squamous cell carcinoma of the
head and neck, which is being developed in collaboration with Merck KGaA, Germany
|
Inlyta (axitinib)
|
Adjuvant treatment of renal cell carcinoma, which is being developed in collaboration with SFJ
|
Ibrance (palbociclib)
|
Treatment of HER2+ advanced breast cancer, in collaboration with the Alliance Foundation Trials, LLC
|
Ibrance (palbociclib)
|
Treatment of high-risk early breast cancer, in collaboration with the German Breast Group
|
Ibrance (palbociclib)
|
Treatment of HR+ early breast cancer, in collaboration with the Alliance Foundation Trials, LLC, and the Austrian Breast Colorectal Cancer Study Group
|
Xtandi (enzalutamide)
|
Treatment of non-metastatic castration resistant prostate cancer
|
Xtandi (enzalutamide)
|
Treatment of non-metastatic high risk hormone-sensitive prostate cancer
|
Xtandi (enzalutamide)
|
Treatment of metastatic hormone-sensitive prostate cancer
|
Vyndaqel (tafamidis meglumine)
|
Adult symptomatic transthyretin cardiomyopathy
|
NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT
|
|
CANDIDATE
|
PROPOSED INDICATION
|
dacomitinib
|
A pan-human epidermal growth factor receptor (HER) tyrosine kinase inhibitor for the first-line treatment of patients with advanced non-small cell lung cancer with estimated glomerular filtration rate (eGFR) activating mutations, which is being developed in collaboration with SFJ
|
lorlatinib (PF-06463922)
|
A next generation ALK/ROS1 tyrosine kinase inhibitor for the treatment of patients with ALK-positive metastatic non-small cell lung cancer, previously treated with one or more ALK inhibitors
|
PF-06425090
|
A prophylactic vaccine for active immunization to prevent clostridium difficile colitis
|
PF-05280586(a)
|
A potential biosimilar to Rituxan® (rituximab)
|
PF-06439535(b)
|
A potential biosimilar to Avastin® (bevacizumab)
|
PF-06410293(c)
|
A potential biosimilar to Humira® (adalimumab)
|
rivipansel (GMI-1070)
|
A pan-selectin inhibitor for the treatment of vaso-occlusive crisis in hospitalized individuals with sickle cell disease, which was licensed from GlycoMimetics Inc.
|
somatrogon (PF-06836922)
|
A long-acting hGH-CTP for the treatment of growth hormone deficiency in children, which is being developed in collaboration with OPKO
|
somatrogon (PF-06836922)
|
A long-acting hGH-CTP for the treatment of growth hormone deficiency in adults, which is being developed
in collaboration with OPKO
|
talazoparib (MDV3800)
|
An oral PARP inhibitor for the treatment of patients with germline breast cancer susceptibility gene BRCA mutated advanced breast cancer
|
tanezumab
|
An anti-nerve growth factor monoclonal antibody for the treatment of pain, which is being developed in collaboration with Lilly
|
(a)
|
Rituxan® is a registered trademark of Biogen MA Inc.
|
(b)
|
Avastin® is a registered trademark of Genentech, Inc.
|
(c)
|
Humira® is a registered trademark of AbbVie Biotechnology Ltd.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change
|
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change
|
|
||||
Cost of sales
|
|
$
|
2,847
|
|
|
$
|
3,085
|
|
|
(8
|
)
|
|
$
|
7,980
|
|
|
$
|
9,111
|
|
|
(12
|
)
|
As a percentage of Revenues
|
|
21.6
|
%
|
|
23.6
|
%
|
|
|
|
20.5
|
%
|
|
23.2
|
%
|
|
|
•
|
the favorable impact of the sale of HIS global operations (which carried a higher cost of sales than other products) of $152 million in the third quarter of 2017, and $433 million in the first nine months of 2017;
|
•
|
the favorable impact of foreign exchange of $223 million and the favorable offset of hedging gains of $66 million, both in the first nine months of 2017;
|
•
|
the nonrecurring unfavorable impact of $4 million in the third quarter of 2016 and $216 million in the first nine months of 2016 of acquired Hospira inventory, which is measured at fair value on the acquisition date and was amortized over the turn of the related inventory;
|
•
|
recognition of synergies related to our cost-reduction/productivity initiatives; and
|
•
|
a favorable change in product mix, including an operational decline in the SIP portfolio and the favorability attributed to products that have lost exclusivity,
|
•
|
$55 million in inventory losses, overhead costs related to the period in which our Puerto Rico plants were not operational, and incremental costs to date, all of which resulted from the recent hurricanes in Puerto Rico.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
|
||||
Selling, informational and administrative expenses
|
|
$
|
3,500
|
|
|
$
|
3,559
|
|
|
(2
|
)
|
|
$
|
10,233
|
|
|
$
|
10,414
|
|
|
(2
|
)
|
As a percentage of Revenues
|
|
26.6
|
%
|
|
27.3
|
%
|
|
|
|
26.3
|
%
|
|
26.6
|
%
|
|
|
•
|
lower advertising, promotional and field force expenses, reflecting the benefits of cost-reduction and productivity initiatives, and lower expenses associated with products that recently lost marketing exclusivity;
|
•
|
the favorable impact of the sale of HIS global operations of $39 million;
|
•
|
lower spending for certain products, primarily Prevnar 13/Prevenar 13; and
|
•
|
the favorable impact of foreign exchange of $11 million,
|
•
|
additional investment across several of our key products, primarily Eucrisa, Ibrance and Xtandi; and
|
•
|
increased spending for biosimilars, primarily related to the U.S. launch of Inflectra.
|
•
|
the non-recurrence of an allowance for doubtful trade accounts receivable of approximately $265 million, resulting from unfavorable developments with a distributor that was recorded in the first quarter of 2016;
|
•
|
lower advertising, promotional and field force expenses associated with products that recently lost marketing exclusivity and certain other expenses related to disputes in the ordinary course of business;
|
•
|
lower spending for certain products, primarily Prevnar 13/Prevenar 13;
|
•
|
the favorable impact of the sale of HIS global operations of $95 million; and
|
•
|
the favorable impact of foreign exchange of $78 million,
|
•
|
additional investment across several of our key products, primarily Eucrisa, Ibrance, Xtandi and Xeljanz;
|
•
|
increased spending for biosimilars, primarily related to the U.S. launch of Inflectra; and
|
•
|
an increase in charitable contributions.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
|
||||
Research and development expenses
|
|
$
|
1,859
|
|
|
$
|
1,881
|
|
|
(1
|
)
|
|
$
|
5,346
|
|
|
$
|
5,360
|
|
|
—
|
|
As a percentage of Revenues
|
|
14.1
|
%
|
|
14.4
|
%
|
|
|
|
13.8
|
%
|
|
13.7
|
%
|
|
|
|
•
|
lower expenses due to the discontinuation of the global clinical development program for bococizumab in the fourth quarter of 2016;
|
•
|
the close-out of certain post-marketing clinical trials; and
|
•
|
the favorable impact of the sale of HIS global operations,
|
•
|
increased costs associated with our oncology programs, primarily clinical trial spend on Medivation assets, as well as, in the third quarter of 2017, increased costs associated with our immuno-oncology development programs;
|
•
|
lower development funding credits primarily related to the discontinuation of the global clinical development program for bococizumab in the fourth quarter of 2016;
|
•
|
an expense of $75 million resulting from our May 2017 agreement with Sangamo to develop and commercialize gene therapy programs for Hemophilia A;
|
•
|
increased costs associated with our C. difficile vaccine program, which initiated a Phase 3 clinical study in March 2017; and
|
•
|
increased costs associated with our tanezumab development program.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
||||
Amortization of intangible assets
|
|
$
|
1,177
|
|
|
$
|
968
|
|
|
22
|
|
$
|
3,571
|
|
|
$
|
2,934
|
|
|
22
|
As a percentage of Revenues
|
|
8.9
|
%
|
|
7.4
|
%
|
|
|
|
9.2
|
%
|
|
7.5
|
%
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
|
||||
Restructuring charges
|
|
$
|
91
|
|
|
$
|
404
|
|
|
(77
|
)
|
|
$
|
150
|
|
|
$
|
574
|
|
|
(74
|
)
|
Transaction costs
|
|
(14
|
)
|
|
54
|
|
|
*
|
|
|
4
|
|
|
114
|
|
|
(97
|
)
|
||||
Integration costs
|
|
73
|
|
|
74
|
|
|
(1
|
)
|
|
224
|
|
|
300
|
|
|
(26
|
)
|
||||
Restructuring charges and certain acquisition-related costs
|
|
149
|
|
|
531
|
|
|
(72
|
)
|
|
377
|
|
|
988
|
|
|
(62
|
)
|
||||
Total additional depreciation—asset restructuring
|
|
39
|
|
|
47
|
|
|
(17
|
)
|
|
74
|
|
|
151
|
|
|
(51
|
)
|
||||
Total implementation costs
|
|
57
|
|
|
78
|
|
|
(27
|
)
|
|
150
|
|
|
202
|
|
|
(26
|
)
|
||||
Costs associated with acquisitions and cost-reduction/productivity initiatives(a)
|
|
$
|
245
|
|
|
$
|
655
|
|
|
(63
|
)
|
|
$
|
601
|
|
|
$
|
1,341
|
|
|
(55
|
)
|
(a)
|
Comprises Restructuring charges and certain acquisition-related costs as well as costs associated with our cost-reduction/productivity initiatives included in Cost of sales, Research and development expenses and/or Selling, informational and administrative expenses, as appropriate. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
||||
Other (income)/deductions––net
|
|
$
|
51
|
|
|
$
|
1,417
|
|
|
(96
|
)%
|
|
$
|
(16
|
)
|
|
$
|
2,815
|
|
|
*
|
*
|
Calculation not meaningful.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
||||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
||||
Provision for taxes on income
|
|
$
|
727
|
|
|
$
|
249
|
|
|
*
|
|
$
|
2,287
|
|
|
$
|
1,109
|
|
|
*
|
Effective tax rate on continuing operations
|
|
20.3
|
%
|
|
15.5
|
%
|
|
|
|
20.1
|
%
|
|
14.6
|
%
|
|
|
*
|
Calculation not meaningful.
|
•
|
senior management receives a monthly analysis of our operating results that is prepared on an Adjusted income and Adjusted diluted earnings per share basis;
|
•
|
our annual budgets are prepared on an Adjusted income and Adjusted diluted earnings per share basis; and
|
•
|
senior management’s annual compensation is derived, in part, using Adjusted income and Adjusted diluted earnings per share measures. See the “Non-GAAP Financial Measure (Adjusted Income)––General Description of Non-GAAP Financial Measure (Adjusted Income)” section of our 2016 Financial Report for additional information.
|
|
|
Three Months Ended October 1, 2017
|
||||||||||||||||||||||
IN MILLIONS, EXCEPT PER COMMON SHARE DATA
|
|
GAAP Reported
|
|
|
Purchase Accounting Adjustments(a)
|
|
|
Acquisition-Related Costs(a)
|
|
|
Discontinued Operations(a)
|
|
|
Certain Significant Items(a)
|
|
|
Non-GAAP Adjusted
|
|
||||||
Revenues
|
|
$
|
13,168
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,168
|
|
Cost of sales
|
|
2,847
|
|
|
(28
|
)
|
|
(26
|
)
|
|
—
|
|
|
(92
|
)
|
|
2,699
|
|
||||||
Selling, informational and administrative expenses
|
|
3,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(22
|
)
|
|
3,478
|
|
||||||
Research and development expenses
|
|
1,859
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
1,851
|
|
||||||
Amortization of intangible assets
|
|
1,177
|
|
|
(1,120
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
149
|
|
|
—
|
|
|
(129
|
)
|
|
—
|
|
|
(21
|
)
|
|
—
|
|
||||||
Other (income)/deductions––net
|
|
51
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
(305
|
)
|
|
(261
|
)
|
||||||
Income from continuing operations before provision for taxes on income
|
|
3,585
|
|
|
1,154
|
|
|
155
|
|
|
—
|
|
|
449
|
|
|
5,343
|
|
||||||
Provision for taxes on income(b)
|
|
727
|
|
|
306
|
|
|
72
|
|
|
—
|
|
|
161
|
|
|
1,267
|
|
||||||
Income from continuing operations
|
|
2,858
|
|
|
848
|
|
|
83
|
|
|
—
|
|
|
288
|
|
|
4,077
|
|
||||||
Discontinued operations––net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net income attributable to noncontrolling interests
|
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
||||||
Net income attributable to Pfizer Inc.
|
|
2,840
|
|
|
848
|
|
|
83
|
|
|
—
|
|
|
288
|
|
|
4,059
|
|
||||||
Earnings per common share attributable to Pfizer Inc.––diluted
|
|
0.47
|
|
|
0.14
|
|
|
0.01
|
|
|
—
|
|
|
0.05
|
|
|
0.67
|
|
|
|
Nine Months Ended October 1, 2017
|
||||||||||||||||||||||
IN MILLIONS, EXCEPT PER COMMON SHARE DATA
|
|
GAAP Reported
|
|
|
Purchase Accounting Adjustments(a)
|
|
|
Acquisition-Related Costs(a)
|
|
|
Discontinued Operations(a)
|
|
|
Certain Significant Items(a)
|
|
|
Non-GAAP Adjusted
|
|
||||||
Revenues
|
|
$
|
38,843
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38,843
|
|
Cost of sales
|
|
7,980
|
|
|
(45
|
)
|
|
(38
|
)
|
|
—
|
|
|
(168
|
)
|
|
7,729
|
|
||||||
Selling, informational and administrative expenses
|
|
10,233
|
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(67
|
)
|
|
10,151
|
|
||||||
Research and development expenses
|
|
5,346
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
|
5,326
|
|
||||||
Amortization of intangible assets
|
|
3,571
|
|
|
(3,438
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
133
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
377
|
|
|
—
|
|
|
(309
|
)
|
|
—
|
|
|
(68
|
)
|
|
—
|
|
||||||
Other (income)/deductions––net
|
|
(16
|
)
|
|
(35
|
)
|
|
—
|
|
|
—
|
|
|
(468
|
)
|
|
(519
|
)
|
||||||
Income from continuing operations before provision for taxes on income
|
|
11,351
|
|
|
3,527
|
|
|
347
|
|
|
—
|
|
|
797
|
|
|
16,023
|
|
||||||
Provision for taxes on income(b)
|
|
2,287
|
|
|
990
|
|
|
137
|
|
|
—
|
|
|
263
|
|
|
3,677
|
|
||||||
Income from continuing operations
|
|
9,064
|
|
|
2,537
|
|
|
211
|
|
|
—
|
|
|
534
|
|
|
12,345
|
|
||||||
Discontinued operations––net of tax
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||||
Net income attributable to noncontrolling interests
|
|
32
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
||||||
Net income attributable to Pfizer Inc.
|
|
9,034
|
|
|
2,537
|
|
|
211
|
|
|
(1
|
)
|
|
534
|
|
|
12,313
|
|
||||||
Earnings per common share attributable to Pfizer Inc.––diluted
|
|
1.49
|
|
|
0.42
|
|
|
0.03
|
|
|
—
|
|
|
0.09
|
|
|
2.03
|
|
|
|
Three Months Ended October 2, 2016
|
||||||||||||||||||||||
IN MILLIONS, EXCEPT PER COMMON SHARE DATA
|
|
GAAP Reported
|
|
|
Purchase Accounting Adjustments(a)
|
|
|
Acquisition-Related Costs(a)
|
|
|
Discontinued Operations(a)
|
|
|
Certain Significant Items(a)
|
|
|
Non-GAAP Adjusted
|
|
||||||
Revenues
|
|
$
|
13,045
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,045
|
|
Cost of sales
|
|
3,085
|
|
|
(32
|
)
|
|
(3
|
)
|
|
—
|
|
|
(93
|
)
|
|
2,957
|
|
||||||
Selling, informational and administrative expenses
|
|
3,559
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(23
|
)
|
|
3,531
|
|
||||||
Research and development expenses
|
|
1,881
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
1,873
|
|
||||||
Amortization of intangible assets
|
|
968
|
|
|
(936
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
531
|
|
|
—
|
|
|
(277
|
)
|
|
—
|
|
|
(254
|
)
|
|
—
|
|
||||||
Other (income)/deductions––net
|
|
1,417
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
(1,590
|
)
|
|
(168
|
)
|
||||||
Income from continuing operations before provision for taxes on income
|
|
1,604
|
|
|
966
|
|
|
280
|
|
|
—
|
|
|
1,969
|
|
|
4,819
|
|
||||||
Provision for taxes on income(b), (c)
|
|
249
|
|
|
366
|
|
|
73
|
|
|
—
|
|
|
370
|
|
|
1,058
|
|
||||||
Income from continuing operations(c)
|
|
1,355
|
|
|
600
|
|
|
207
|
|
|
—
|
|
|
1,599
|
|
|
3,761
|
|
||||||
Discontinued operations––net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net income attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net income attributable to Pfizer Inc.(c)
|
|
1,355
|
|
|
600
|
|
|
207
|
|
|
—
|
|
|
1,599
|
|
|
3,761
|
|
||||||
Earnings per common share attributable to Pfizer Inc.––diluted(c)
|
|
0.22
|
|
|
0.10
|
|
|
0.03
|
|
|
—
|
|
|
0.26
|
|
|
0.61
|
|
|
|
Nine Months Ended October 2, 2016
|
||||||||||||||||||||||
IN MILLIONS, EXCEPT PER COMMON SHARE DATA
|
|
GAAP Reported
|
|
|
Purchase Accounting Adjustments(a)
|
|
|
Acquisition-Related Costs(a)
|
|
Discontinued Operations(a)
|
|
|
Certain Significant Items(a)
|
|
|
Non-GAAP Adjusted
|
|
|||||||
Revenues
|
|
$
|
39,196
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
39,196
|
|
Cost of sales
|
|
9,111
|
|
|
(284
|
)
|
|
(3
|
)
|
|
—
|
|
|
(240
|
)
|
|
8,584
|
|
||||||
Selling, informational and administrative expenses
|
|
10,414
|
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
(59
|
)
|
|
10,342
|
|
||||||
Research and development expenses
|
|
5,360
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(24
|
)
|
|
5,336
|
|
||||||
Amortization of intangible assets
|
|
2,934
|
|
|
(2,841
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
94
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
988
|
|
|
—
|
|
|
(595
|
)
|
|
—
|
|
|
(393
|
)
|
|
—
|
|
||||||
Other (income)/deductions––net
|
|
2,815
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
(3,395
|
)
|
|
(547
|
)
|
||||||
Income from continuing operations before provision for taxes on income
|
|
7,575
|
|
|
3,103
|
|
|
598
|
|
|
—
|
|
|
4,112
|
|
|
15,388
|
|
||||||
Provision for taxes on income(b), (c)
|
|
1,109
|
|
|
962
|
|
|
47
|
|
|
—
|
|
|
1,377
|
|
|
3,496
|
|
||||||
Income from continuing operations(c)
|
|
6,465
|
|
|
2,141
|
|
|
550
|
|
|
—
|
|
|
2,735
|
|
|
11,892
|
|
||||||
Discontinued operations––net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net income attributable to noncontrolling interests
|
|
25
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
||||||
Net income attributable to Pfizer Inc.(c)
|
|
6,440
|
|
|
2,141
|
|
|
550
|
|
|
—
|
|
|
2,735
|
|
|
11,867
|
|
||||||
Earnings per common share attributable to Pfizer Inc.––diluted(c)
|
|
1.04
|
|
|
0.35
|
|
|
0.09
|
|
|
—
|
|
|
0.44
|
|
|
1.92
|
|
(a)
|
For details of adjustments, see “Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income” below.
|
(b)
|
The effective tax rate on Non-GAAP Adjusted income was 23.7% in the third quarter of 2017, compared with 22.0% in the third quarter of 2016. The increase was primarily due to an unfavorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business. The effective tax rate on Non-GAAP Adjusted income was 22.9% in the first nine months of 2017, compared with 22.7% in the first nine months of 2016. The increase was primarily due to a decrease in benefits associated with the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations, partially offset by a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.
|
(c)
|
GAAP Reported and Non-GAAP Adjusted amounts for the three and nine months ended October 2, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, requiring: (i) excess tax benefits or deficiencies (including tax benefits of dividend equivalents) of share-based compensation to be recognized as a component of the Provision for taxes on income (the net tax benefit was $35 million in the third quarter of 2016 and $85 million in the first nine months of 2016) and (ii) in the diluted net earnings per share calculation, when applying the treasury stock method for shares that could be repurchased, the assumed proceeds no longer include the amount of excess tax benefit. For additional information, see Notes to Consolidated Financial Statements––Note 1B. Adoption of New Accounting Standards in Pfizer’s 2016 Financial Report.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
||||
Purchase accounting adjustments
|
|
|
|
|
|
|
|
|
||||||||
Amortization, depreciation and other(a)
|
|
$
|
1,126
|
|
|
$
|
934
|
|
|
$
|
3,482
|
|
|
$
|
2,819
|
|
Cost of sales
|
|
28
|
|
|
32
|
|
|
45
|
|
|
284
|
|
||||
Total purchase accounting adjustments––pre-tax
|
|
1,154
|
|
|
966
|
|
|
3,527
|
|
|
3,103
|
|
||||
Income taxes(b)
|
|
(306
|
)
|
|
(366
|
)
|
|
(990
|
)
|
|
(962
|
)
|
||||
Total purchase accounting adjustments––net of tax
|
|
848
|
|
|
600
|
|
|
2,537
|
|
|
2,141
|
|
||||
Acquisition-related costs
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Restructuring charges(c)
|
|
70
|
|
|
150
|
|
|
82
|
|
|
181
|
|
||||
Transaction costs(c)
|
|
(14
|
)
|
|
54
|
|
|
4
|
|
|
114
|
|
||||
Integration costs(c)
|
|
73
|
|
|
73
|
|
|
224
|
|
|
300
|
|
||||
Additional depreciation––asset restructuring(d)
|
|
26
|
|
|
3
|
|
|
38
|
|
|
3
|
|
||||
Total acquisition-related costs––pre-tax
|
|
155
|
|
|
280
|
|
|
347
|
|
|
598
|
|
||||
Income taxes(e)
|
|
(72
|
)
|
|
(73
|
)
|
|
(137
|
)
|
|
(47
|
)
|
||||
Total acquisition-related costs––net of tax
|
|
83
|
|
|
207
|
|
|
211
|
|
|
550
|
|
||||
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total discontinued operations––net of tax, attributable to Pfizer Inc.(f)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Certain significant items
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Restructuring charges(g)
|
|
21
|
|
|
254
|
|
|
68
|
|
|
393
|
|
||||
Implementation costs and additional depreciation––asset restructuring(h)
|
|
69
|
|
|
122
|
|
|
185
|
|
|
350
|
|
||||
Certain legal matters, net(i)
|
|
183
|
|
|
(40
|
)
|
|
191
|
|
|
506
|
|
||||
Loss on sale and impairment on remeasurement of HIS net assets(i)
|
|
(12
|
)
|
|
1,422
|
|
|
52
|
|
|
1,422
|
|
||||
Certain asset impairments(i)
|
|
127
|
|
|
126
|
|
|
127
|
|
|
1,073
|
|
||||
Business and legal entity alignment costs(i)
|
|
16
|
|
|
69
|
|
|
54
|
|
|
180
|
|
||||
Other(j)
|
|
45
|
|
|
17
|
|
|
119
|
|
|
189
|
|
||||
Total certain significant items––pre-tax
|
|
449
|
|
|
1,969
|
|
|
797
|
|
|
4,112
|
|
||||
Income taxes(k)
|
|
(161
|
)
|
|
(370
|
)
|
|
(263
|
)
|
|
(1,377
|
)
|
||||
Total certain significant items––net of tax
|
|
288
|
|
|
1,599
|
|
|
534
|
|
|
2,735
|
|
||||
Total purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items––net of tax, attributable to Pfizer Inc.
|
|
$
|
1,219
|
|
|
$
|
2,406
|
|
|
$
|
3,280
|
|
|
$
|
5,426
|
|
(a)
|
Included primarily in Amortization of intangible assets.
|
(b)
|
Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate.
|
(c)
|
Included in Restructuring charges and certain acquisition-related costs. Restructuring charges include employee termination costs, asset impairments and other exit costs associated with business combinations. Transaction costs represent external costs 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. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.
|
(d)
|
Included in Cost of sales. Represents the impact of changes in estimated useful lives of assets involved in restructuring actions related to acquisitions.
|
(e)
|
Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. The nine months ended October 2, 2016 were unfavorably impacted by the remeasurement of certain deferred tax liabilities resulting from plant network restructuring activities.
|
(f)
|
Included in Discontinued operations––net of tax.
|
(g)
|
Amounts relate to our cost-reduction/productivity initiatives not related to acquisitions. Included in Restructuring charges and certain acquisition-related costs (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives).
|
(h)
|
Amounts relate to our cost-reduction/productivity initiatives not related to acquisitions (see Notes to Condensed Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives). For the three months ended October 1, 2017, included in Cost of sales ($38 million), Selling, informational and administrative expenses ($22 million) and Research and development expenses ($9 million). For the three months ended October 2, 2016, virtually all included in Cost of sales ($89 million), Selling, informational and administrative expenses ($23 million) and Research and development expenses ($8 million). For the nine months ended October 1, 2017, included in Cost of sales ($113 million), Selling, informational and administrative
|
(i)
|
Included in Other (income)/deductions—net (see Notes to Condensed Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net).
|
(j)
|
For the three months ended October 1, 2017, included in Cost of sales ($54 million) and Other (income)/deductions––net ($9 million income. For the three months ended October 2, 2016, included in Cost of sales ($4 million) and Other (income)/deductions––net ($13 million). For the nine months ended October 1, 2017, included in Cost of sales ($55 million), Selling, informational and administrative expenses ($21 million) and Other (income)/deductions––net ($43 million). For the nine months ended October 2, 2016, included in Cost of sales ($29 million income), Selling, informational and administrative expenses ($3 million), Research and development expenses ($2 million) and Other (income)/deductions––net ($213 million). In the three months and nine months ended October 1, 2017, includes $55 million in inventory losses, overhead costs related to the period in which our Puerto Rico plants were not operational, and incremental costs to date, all of which resulted from the recent hurricanes in Puerto Rico and are included in Cost of sales. For the nine months ended October 1, 2017, includes a net loss of $30 million related to the sale of our 40% ownership investment in Teuto, including the extinguishment of a put option for the remaining 60% ownership interest. For the nine months ended October 2, 2016, primarily includes $150 million paid to Allergan for reimbursement of Allergan’s expenses associated with the terminated transaction.
|
(k)
|
Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. The third quarter of 2016 was unfavorably impacted by the tax effects of an impairment charge related to the write-down of the HIS net assets to fair value less estimated costs to sell, mainly related to goodwill, which is not deductible for tax purposes, and the jurisdictional mix of intangible assets. The first nine months of 2016 were favorably impacted by benefits related to the final resolution of an agreement in principle reached in February 2016 and finalized in April 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our initial assessment in 2015 of the likelihood of prevailing on the technical merits of our tax position, as well as benefits associated with our Venezuela operations, partially offset by the unfavorable tax effects of the impairment charge related to the write-down of the HIS net assets to fair value less estimated costs to sell, mainly related to goodwill, which is not deductible for tax purposes, and the jurisdictional mix of intangible assets.
|
|
|
Nine Months Ended October 1, 2017
|
||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Innovative Health (IH)(a)
|
|
|
Essential Health (EH)(a)
|
|
|
Other(b)
|
|
|
Non-GAAP
Adjusted(c) |
|
|
Reconciling Items(d)
|
|
|
GAAP Reported
|
|
||||||
Revenues
|
|
$
|
23,204
|
|
|
$
|
15,639
|
|
|
$
|
—
|
|
|
$
|
38,843
|
|
|
$
|
—
|
|
|
$
|
38,843
|
|
Cost of sales
|
|
2,912
|
|
|
4,319
|
|
|
497
|
|
|
7,729
|
|
|
252
|
|
|
7,980
|
|
||||||
% of revenue
|
|
12.6
|
%
|
|
27.6
|
%
|
|
*
|
|
|
19.9
|
%
|
|
*
|
|
|
20.5
|
%
|
||||||
Selling, informational and administrative expenses
|
|
4,914
|
|
|
2,212
|
|
|
3,026
|
|
|
10,151
|
|
|
82
|
|
|
10,233
|
|
||||||
Research and development expenses
|
|
1,709
|
|
|
755
|
|
|
2,862
|
|
|
5,326
|
|
|
20
|
|
|
5,346
|
|
||||||
Amortization of intangible assets
|
|
90
|
|
|
43
|
|
|
—
|
|
|
133
|
|
|
3,438
|
|
|
3,571
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
377
|
|
|
377
|
|
||||||
Other (income)/deductions––net
|
|
(611
|
)
|
|
(248
|
)
|
|
341
|
|
|
(519
|
)
|
|
503
|
|
|
(16
|
)
|
||||||
Income/(loss) from continuing operations before provision for taxes on income
|
|
$
|
14,190
|
|
|
$
|
8,558
|
|
|
$
|
(6,725
|
)
|
|
$
|
16,023
|
|
|
$
|
(4,671
|
)
|
|
$
|
11,351
|
|
|
|
Third Quarter of 2016
|
||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Innovative Health (IH)(a)
|
|
|
Essential Health (EH)(a)
|
|
|
Other(b)
|
|
|
Non-GAAP
Adjusted(c) |
|
|
Reconciling Items(d)
|
|
|
GAAP Reported
|
|
||||||
Revenues
|
|
$
|
7,332
|
|
|
$
|
5,712
|
|
|
$
|
—
|
|
|
$
|
13,045
|
|
|
$
|
—
|
|
|
$
|
13,045
|
|
Cost of sales
|
|
1,039
|
|
|
1,546
|
|
|
372
|
|
|
2,957
|
|
|
128
|
|
|
3,085
|
|
||||||
% of revenue
|
|
14.2
|
%
|
|
27.1
|
%
|
|
*
|
|
|
22.7
|
%
|
|
*
|
|
|
23.6
|
%
|
||||||
Selling, informational and administrative expenses
|
|
1,647
|
|
|
813
|
|
|
1,071
|
|
|
3,531
|
|
|
28
|
|
|
3,559
|
|
||||||
Research and development expenses
|
|
671
|
|
|
292
|
|
|
911
|
|
|
1,873
|
|
|
8
|
|
|
1,881
|
|
||||||
Amortization of intangible assets
|
|
25
|
|
|
7
|
|
|
—
|
|
|
32
|
|
|
936
|
|
|
968
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
531
|
|
|
531
|
|
||||||
Other (income)/deductions––net
|
|
(237
|
)
|
|
(73
|
)
|
|
142
|
|
|
(168
|
)
|
|
1,584
|
|
|
1,417
|
|
||||||
Income/(loss) from continuing operations before provision for taxes on income
|
|
$
|
4,187
|
|
|
$
|
3,128
|
|
|
$
|
(2,496
|
)
|
|
$
|
4,819
|
|
|
$
|
(3,215
|
)
|
|
$
|
1,604
|
|
|
|
Nine Months Ended October 2, 2016
|
||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Innovative Health (IH)(a)
|
|
|
Essential Health (EH)(a)
|
|
|
Other(b)
|
|
|
Non-GAAP
Adjusted(c) |
|
|
Reconciling Items(d)
|
|
|
GAAP Reported
|
|
||||||
Revenues
|
|
$
|
21,471
|
|
|
$
|
17,725
|
|
|
$
|
—
|
|
|
$
|
39,196
|
|
|
$
|
—
|
|
|
$
|
39,196
|
|
Cost of sales
|
|
2,930
|
|
|
4,677
|
|
|
977
|
|
|
8,584
|
|
|
527
|
|
|
9,111
|
|
||||||
% of revenue
|
|
13.6
|
%
|
|
26.4
|
%
|
|
*
|
|
|
21.9
|
%
|
|
*
|
|
|
23.2
|
%
|
||||||
Selling, informational and administrative expenses
|
|
4,947
|
|
|
2,435
|
|
|
2,960
|
|
|
10,342
|
|
|
72
|
|
|
10,414
|
|
||||||
Research and development expenses
|
|
1,815
|
|
|
876
|
|
|
2,645
|
|
|
5,336
|
|
|
23
|
|
|
5,360
|
|
||||||
Amortization of intangible assets
|
|
74
|
|
|
20
|
|
|
—
|
|
|
94
|
|
|
2,841
|
|
|
2,934
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
988
|
|
|
988
|
|
||||||
Other (income)/deductions––net
|
|
(764
|
)
|
|
(267
|
)
|
|
484
|
|
|
(547
|
)
|
|
3,362
|
|
|
2,815
|
|
||||||
Income/(loss) from continuing operations before provision for taxes on income
|
|
$
|
12,470
|
|
|
$
|
9,985
|
|
|
$
|
(7,066
|
)
|
|
$
|
15,388
|
|
|
$
|
(7,813
|
)
|
|
$
|
7,575
|
|
(a)
|
Amounts represent the revenues and costs managed by each of our operating segments. The expenses generally include only those costs directly attributable to the operating segment.
|
(b)
|
Other comprises the costs included in our Adjusted income components (see footnote (c) below) that are managed outside of our two operating segments and includes the following:
|
|
|
Third Quarter of 2017
|
||||||||||||||||||
|
|
Other Business Activities
|
|
|
|
|||||||||||||||
(MILLIONS OF DOLLARS)
|
|
WRD(i)
|
|
|
GPD(ii)
|
|
|
Corporate(iii)
|
|
|
Other Unallocated(iv)
|
|
|
Total
|
|
|||||
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
28
|
|
|
142
|
|
|
170
|
|
|||||
Selling, informational and administrative expenses
|
|
—
|
|
|
—
|
|
|
993
|
|
|
23
|
|
|
1,016
|
|
|||||
Research and development expenses
|
|
568
|
|
|
193
|
|
|
194
|
|
|
8
|
|
|
964
|
|
|||||
Amortization of intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other (income)/deductions––net
|
|
(2
|
)
|
|
—
|
|
|
167
|
|
|
(18
|
)
|
|
147
|
|
|||||
Loss from continuing operations before provision for taxes on income
|
|
$
|
(566
|
)
|
|
$
|
(193
|
)
|
|
$
|
(1,382
|
)
|
|
$
|
(156
|
)
|
|
$
|
(2,297
|
)
|
|
|
Nine Months Ended October 1, 2017
|
||||||||||||||||||
|
|
Other Business Activities
|
|
|
|
|
||||||||||||||
(MILLIONS OF DOLLARS)
|
|
WRD(i)
|
|
|
GPD(ii)
|
|
|
Corporate(iii)
|
|
|
Other Unallocated(iv)
|
|
|
Total
|
|
|||||
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
500
|
|
|
497
|
|
|||||
Selling, informational and administrative expenses
|
|
—
|
|
|
(1
|
)
|
|
2,995
|
|
|
31
|
|
|
3,026
|
|
|||||
Research and development expenses
|
|
1,674
|
|
|
560
|
|
|
616
|
|
|
12
|
|
|
2,862
|
|
|||||
Amortization of intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other (income)/deductions––net
|
|
(29
|
)
|
|
—
|
|
|
339
|
|
|
31
|
|
|
341
|
|
|||||
Loss from continuing operations before provision for taxes on income
|
|
$
|
(1,645
|
)
|
|
$
|
(559
|
)
|
|
$
|
(3,948
|
)
|
|
$
|
(573
|
)
|
|
$
|
(6,725
|
)
|
|
|
Third Quarter of 2016
|
||||||||||||||||||
|
|
Other Business Activities
|
|
|
|
|
||||||||||||||
(MILLIONS OF DOLLARS)
|
|
WRD(i)
|
|
|
GPD(ii)
|
|
|
Corporate(iii)
|
|
|
Other Unallocated(iv)
|
|
|
Total
|
|
|||||
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
104
|
|
|
268
|
|
|
372
|
|
|||||
Selling, informational and administrative expenses
|
|
—
|
|
|
1
|
|
|
1,073
|
|
|
(3
|
)
|
|
1,071
|
|
|||||
Research and development expenses
|
|
575
|
|
|
172
|
|
|
169
|
|
|
(5
|
)
|
|
911
|
|
|||||
Amortization of intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other (income)/deductions––net
|
|
5
|
|
|
—
|
|
|
191
|
|
|
(54
|
)
|
|
142
|
|
|||||
Loss from continuing operations before provision for taxes on income
|
|
$
|
(580
|
)
|
|
$
|
(173
|
)
|
|
$
|
(1,537
|
)
|
|
$
|
(206
|
)
|
|
$
|
(2,496
|
)
|
|
|
Nine Months Ended October 2, 2016
|
||||||||||||||||||
|
|
Other Business Activities
|
|
|
|
|
||||||||||||||
(MILLIONS OF DOLLARS)
|
|
WRD(i)
|
|
|
GPD(ii)
|
|
|
Corporate(iii)
|
|
|
Other Unallocated(iv)
|
|
|
Total
|
|
|||||
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
194
|
|
|
783
|
|
|
977
|
|
|||||
Selling, informational and administrative expenses
|
|
—
|
|
|
1
|
|
|
2,910
|
|
|
48
|
|
|
2,960
|
|
|||||
Research and development expenses
|
|
1,629
|
|
|
487
|
|
|
523
|
|
|
6
|
|
|
2,645
|
|
|||||
Amortization of intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other (income)/deductions––net
|
|
(22
|
)
|
|
—
|
|
|
590
|
|
|
(83
|
)
|
|
484
|
|
|||||
Loss from continuing operations before provision for taxes on income
|
|
$
|
(1,608
|
)
|
|
$
|
(488
|
)
|
|
$
|
(4,217
|
)
|
|
$
|
(753
|
)
|
|
$
|
(7,066
|
)
|
(i)
|
WRD—the R&D expenses managed by our WRD organization, which is generally responsible for research projects for our IH business until proof-of-concept is achieved and then for transitioning those projects to the IH segment via the GPD organization for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRD organization also has responsibility for certain science-based and other platform-services organizations, which provide technical expertise and other services to the various R&D projects, including EH R&D projects. WRD is also responsible for facilitating all regulatory submissions and interactions with regulatory agencies, including all safety-event activities.
|
(ii)
|
GPD––the costs associated with our GPD organization, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios. GPD also provides technical support and other services to Pfizer R&D projects.
|
(iii)
|
Corporate—the costs associated with Corporate, representing platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement) and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments. Effective in the first quarter of 2017, Corporate also includes the costs associated with our Pfizer Medical organization (Medical), previously reported as part of Other Business Activities. Medical is responsible for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, and partnerships with global public health and medical associations. We have reclassified approximately $33 million and $94 million of Medical costs from Other Business Activities to Corporate in the third quarter and first nine months of 2016, respectively, to conform to the current period presentation.
|
(iv)
|
Other Unallocated—other unallocated costs, representing overhead expenses associated with our manufacturing and commercial operations that are not directly assessed to an operating segment, as business unit (segment) management does not manage these costs (which include manufacturing variances associated with production).
|
|
|
Nine Months Ended October 1, 2017
|
||||||||||||||
|
|
|
|
Estimated Other Costs Associated with IH(ii)
|
|
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
Innovative Health Non-GAAP Adjusted(i), (iii)
|
|
|
Estimated WRD/GPD(ii)
|
|
|
Estimated Corporate/Other Unallocated(ii)
|
|
|
Innovative Health with Estimated Other Costs Associated with
Innovative Health Non-GAAP Adjusted(ii), (iii) |
|
||||
Revenues
|
|
$
|
23,204
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23,204
|
|
Cost of sales
|
|
2,912
|
|
|
—
|
|
|
68
|
|
|
2,980
|
|
||||
Selling, informational and administrative expenses
|
|
4,914
|
|
|
(1
|
)
|
|
1,688
|
|
|
6,601
|
|
||||
Research and development expenses
|
|
1,709
|
|
|
2,220
|
|
|
575
|
|
|
4,504
|
|
||||
Amortization of intangible assets
|
|
90
|
|
|
—
|
|
|
—
|
|
|
90
|
|
||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other (income)/deductions––net
|
|
(611
|
)
|
|
(29
|
)
|
|
(84
|
)
|
|
(725
|
)
|
||||
Income from continuing operations before provision for taxes on income
|
|
14,190
|
|
|
(2,190
|
)
|
|
(2,246
|
)
|
|
9,754
|
|
|
|
Nine Months Ended October 1, 2017
|
||||||||||||||
|
|
|
|
Estimated Other Costs Associated with EH(ii)
|
|
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
Essential Health
Non-GAAP Adjusted(i), (iii) |
|
|
Estimated WRD/GPD(ii)
|
|
|
Estimated Corporate/Other Unallocated(ii)
|
|
|
Essential Health with Estimated Other Costs Associated with
Essential Health Non-GAAP Adjusted(ii), (iii) |
|
||||
Revenues
|
|
$
|
15,639
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,639
|
|
Cost of sales
|
|
4,319
|
|
|
—
|
|
|
429
|
|
|
4,749
|
|
||||
Selling, informational and administrative expenses
|
|
2,212
|
|
|
—
|
|
|
1,338
|
|
|
3,550
|
|
||||
Research and development expenses
|
|
755
|
|
|
15
|
|
|
53
|
|
|
823
|
|
||||
Amortization of intangible assets
|
|
43
|
|
|
—
|
|
|
—
|
|
|
43
|
|
||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other (income)/deductions––net
|
|
(248
|
)
|
|
—
|
|
|
(104
|
)
|
|
(353
|
)
|
||||
Income from continuing operations before provision for taxes on income
|
|
8,558
|
|
|
(15
|
)
|
|
(1,716
|
)
|
|
6,827
|
|
(i)
|
Amount represents the revenues and costs managed by each of our operating segments. The expenses generally include only those costs directly attributable to the operating segment. See note (a) above for more information.
|
(ii)
|
Represents costs not assessed to an operating segment, as business unit (segment) management does not manage these costs. For a description of these other costs and business activities, see note (b) above.
|
•
|
WRD/GPD––The information provided for WRD and GPD was substantially all derived from our estimates of the costs incurred in connection with the R&D projects associated with each operating segment.
|
•
|
Corporate/Other Unallocated––The information provided for Corporate and Other Unallocated was derived mainly using proportional allocation methods based on global, regional or country revenues or global, regional or country headcount, as well as certain cost metrics, as appropriate, such as those derived from research and development and manufacturing costs, and, to a lesser extent, specific identification and estimates. Management believes that the allocations of Corporate and Other Unallocated costs are reasonable.
|
(iii)
|
See note (c) below for an explanation of our Non-GAAP Adjusted financial measure.
|
(c)
|
See the “Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A for a definition of these “Adjusted Income” components.
|
(d)
|
Includes costs associated with (i) purchase accounting adjustments; (ii) acquisition-related costs; and (iii) certain significant items, which are substantive and/or unusual, and in some cases recurring, items (such as restructuring or legal charges), that are evaluated on an individual basis by management. For additional information about these reconciling items and/or our Non-GAAP adjusted measure of performance, see the “Non-GAAP Financial Measure (Adjusted Income)” section of this MD&A.
|
(MILLIONS OF DOLLARS)
|
|
|
||
IH Revenues, for the three months ended October 2, 2016
|
|
$
|
7,332
|
|
|
|
|
||
Operational growth/(decline):
|
|
|
||
Continued growth from key brands including Ibrance and Eliquis globally, as well as Lyrica and Xeljanz, both primarily in the U.S.
|
|
751
|
|
|
Growth in Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation)
|
|
148
|
|
|
Lower revenues for Viagra in the U.S. primarily due to wholesaler destocking in advance of anticipated generic competition beginning in December 2017
|
|
(91
|
)
|
|
Lower revenues for Enbrel, primarily in most developed Europe markets due to continued biosimilar competition
|
|
(89
|
)
|
|
Decline in Prevnar 13/Prevenar 13 revenues. U.S. revenues decreased primarily due to the continued decline in revenues for the Adult indication due to a smaller remaining “catch up” opportunity compared to the prior-year quarter, partially offset by growth from the pediatric indication. International revenues increased primarily due to the favorable overall impact of timing of government purchases in certain emerging markets and the launch of Prevenar 13 in China for the pediatric indication.
|
|
(16
|
)
|
|
Other operational factors, net
|
|
95
|
|
|
Operational growth, net
|
|
799
|
|
|
|
|
|
||
Unfavorable impact of foreign exchange
|
|
(13
|
)
|
|
IH Revenues increase
|
|
786
|
|
|
IH Revenues, for the three months ended October 1, 2017
|
|
$
|
8,118
|
|
•
|
Cost of sales as a percentage of Revenues decreased 0.8 percentage points, primarily driven by a favorable change in product mix, including an increase in alliance revenue, which have no associated cost of sales, partially offset by an increase in royalty expense, mostly related to Ibrance, and the unfavorable impact of foreign exchange.
|
•
|
The increase in Cost of sales of 4% was primarily driven by an increase in royalty expense, mostly related to Ibrance, and the unfavorable impact of foreign exchange, partially offset by a favorable change in product mix.
|
•
|
The increase in Selling, informational and administrative expenses of 5% was primarily driven by additional investment across several of our key products, primarily Eucrisa, Ibrance and Xtandi. The increase was partially offset by lower spending for certain other products, primarily Prevnar 13/Prevenar 13, and the favorable impact of foreign exchange.
|
•
|
The decrease in Research and development expenses of 5% primarily reflects:
|
◦
|
the discontinuation of the global clinical development program for bococizumab in the fourth quarter of 2016,
|
◦
|
our oncology programs, primarily clinical trial spend on legacy Medivation assets and our immuno-oncology development programs;
|
◦
|
our C. difficile vaccine program, which initiated a Phase 3 clinical study in March 2017; and
|
◦
|
our tanezumab development program.
|
•
|
The favorable change in Other (income)/deductions––net primarily reflects:
|
◦
|
the addition of $73 million in Xtandi royalty income;
|
◦
|
a $54 million increase in dividend income from our investment in ViiV; and
|
◦
|
a $50 million milestone payment received for an out-licensed product,
|
◦
|
lower royalty income for Enbrel of $139 million, resulting from the expiration on October 31, 2016 of the 36-month royalty period under the collaboration agreement for Enbrel in the U.S. and Canada (the collaboration period under the agreement expired on October 31, 2013).
|
(MILLIONS OF DOLLARS)
|
|
|
||
EH Revenues, for the three months ended October 2, 2016
|
|
$
|
5,712
|
|
|
|
|
||
Disposition-related operational impact:
|
|
|
||
Financial results in the third quarter of 2017 do not reflect any contribution from HIS global operations, compared to the inclusion of three months of HIS global operations in the same period in 2016 (February 2017 sale)
|
|
(280
|
)
|
|
|
|
|
||
Other operational growth/(decline):
|
|
|
||
Decline from Peri-LOE Products, including declines in Pristiq in the U.S., which lost marketing exclusivity in the U.S. in March 2017, as well as Lyrica and Vfend, both primarily in developed Europe
|
|
(220
|
)
|
|
Decline from the Sterile Injectable Pharmaceuticals portfolio, primarily due to legacy Hospira product shortages in the U.S.
|
|
(182
|
)
|
|
Growth from Biosimilars
|
|
55
|
|
|
Other operational factors, net
|
|
6
|
|
|
Operational decline, net
|
|
(621
|
)
|
|
|
|
|
||
Unfavorable impact of foreign exchange
|
|
(41
|
)
|
|
EH Revenues decrease
|
|
(662
|
)
|
|
EH Revenues, for the three months ended October 1, 2017
|
|
$
|
5,050
|
|
•
|
Cost of sales as a percentage of Revenues increased 1.6 percentage points primarily due to cost increases reflecting the shift to EH of certain legacy Hospira costs that were previously unallocated to EH as a result of harmonizing the Hospira cost policy, and the impact of product losses of exclusivity, partially offset by the favorable impact of the sale of HIS, which had a higher cost of sales than the other EH products.
|
•
|
The decrease in Cost of sales of 6% was primarily due to:
|
◦
|
the favorable impact of the sale of HIS, which had a higher cost of sales than the other EH products;
|
◦
|
a net decrease in royalty expense and, to a lesser extent,
|
◦
|
lower volumes driven by, among other things, the Sterile Injectable Pharmaceuticals (SIP) portfolio, primarily due to legacy Hospira product shortages in the U.S.,
|
◦
|
cost increases reflecting the shift to EH of certain legacy Hospira costs that were previously unallocated to EH as a result of harmonizing the Hospira cost policy.
|
•
|
Selling, informational and administrative expenses decreased 11%, mainly due to lower advertising, promotional and field force expenses, reflecting the benefits of cost-reduction and productivity initiatives, and lower expenses associated with products that recently lost marketing exclusivity, as well as the favorable impact of the sale of HIS, partially offset by increased spending for biosimilars, primarily related to the U.S. launch of Inflectra.
|
•
|
Research and development expenses decreased 15%, primarily due to the close-out of certain post-marketing clinical trials and the favorable impact of the sale of HIS.
|
•
|
The favorable change in Other (income)/deductions––net primarily reflects income from resolution of a contract disagreement and the favorable impact of foreign exchange.
|
(MILLIONS OF DOLLARS)
|
|
|
||
IH Revenues, for the nine months ended October 2, 2016
|
|
$
|
21,471
|
|
|
|
|
||
Operational growth/(decline):
|
|
|
||
Continued growth from key brands including Ibrance and Eliquis globally, as well as Lyrica and Xeljanz, both primarily in the U.S.
|
|
2,102
|
|
|
Growth in Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation)
|
|
420
|
|
|
Lower revenues for Enbrel, primarily in most developed Europe markets due to continued biosimilar competition
|
|
(353
|
)
|
|
Decline in Prevnar 13/Prevenar 13 revenues. U.S. revenues decreased primarily due to the continued decline in revenues for the Adult indication due to a smaller remaining “catch up” opportunity compared to the first nine months of 2016, partially offset by growth from the pediatric indication. International revenues increased primarily due to the favorable overall impact of timing of government purchases in certain emerging markets and the launch of Prevenar 13 in China for the pediatric indication.
|
|
(213
|
)
|
|
Lower revenues for Viagra in the U.S. primarily due to lower market growth
|
|
(186
|
)
|
|
Other operational factors, net
|
|
113
|
|
|
Operational growth, net
|
|
1,883
|
|
|
|
|
|
||
Unfavorable impact of foreign exchange
|
|
(150
|
)
|
|
IH Revenues increase
|
|
1,733
|
|
|
IH Revenues, for the nine months ended October 1, 2017
|
|
$
|
23,204
|
|
•
|
Cost of sales as a percentage of Revenues decreased 1.1 percentage points primarily driven by a favorable change in product mix, including an increase in alliance revenue, which have no associated cost of sales, partially offset by an increase in royalty expense, mostly related to Ibrance.
|
•
|
The decrease in Cost of sales of 1% was primarily driven by favorable product mix and the favorable impact of foreign exchange, partially offset by an increase in royalty expense, mostly related to Ibrance.
|
•
|
The decrease in Selling, informational and administrative expenses of 1% was primarily driven by the non-recurrence of an allowance for doubtful trade accounts receivable, resulting from unfavorable developments with a distributor that was recorded in the first quarter of 2016, lower spending for certain products, primarily Prevnar 13/Prevenar 13, and the favorable impact of foreign exchange, partially offset by additional investment across several of our key products, primarily Eucrisa, Ibrance, Xtandi and Xeljanz.
|
•
|
The decrease in Research and development expenses of 6% primarily reflects:
|
◦
|
the discontinuation of the global clinical development program for bococizumab in the fourth quarter of 2016,
|
◦
|
increased costs associated with:
|
▪
|
our oncology programs, including clinical trial spend on legacy Medivation assets;
|
▪
|
our C. difficile vaccine program, which initiated a Phase 3 clinical study in March 2017; and
|
▪
|
our tanezumab development program; and
|
◦
|
an expense of $28 million, representing IH’s portion of the $75 million expense resulting from our May 2017 agreement with Sangamo to develop and commercialize gene therapy programs for Hemophilia A.
|
•
|
The unfavorable change in Other (income)/deductions––net primarily reflects:
|
◦
|
lower royalty income for Enbrel of $414 million, resulting from the expiration on October 31, 2016 of the 36-month royalty period under the collaboration agreement for Enbrel in the U.S. and Canada (the collaboration period under the agreement expired on October 31, 2013),
|
◦
|
an increase of $204 million in dividend income from our investment in ViiV;
|
◦
|
the addition of $160 million of Xtandi royalty income; and
|
◦
|
a $50 million milestone payment received for an out-licensed product.
|
(MILLIONS OF DOLLARS)
|
|
|
||
EH Revenues, for the nine months ended October 2, 2016
|
|
$
|
17,725
|
|
|
|
|
||
Disposition-related operational impact:
|
|
|
||
Approximately one month of HIS domestic operations and approximately two months of HIS international operations in the first nine months of 2017, compared to nine months of HIS global operations in the same period in 2016 (February 2017 sale)
|
|
(783
|
)
|
|
|
|
|
||
Other operational growth/(decline):
|
|
|
||
Decline from Peri-LOE Products, including declines in Pristiq in the U.S., which lost marketing exclusivity in the U.S. in March 2017, as well as Lyrica and Vfend, both primarily in developed Europe
|
|
(779
|
)
|
|
Decline in the Legacy Established Products portfolio
|
|
(250
|
)
|
|
Decline from the Sterile Injectable Pharmaceuticals portfolio, primarily due to legacy Hospira product shortages in the U.S.
|
|
(169
|
)
|
|
Growth from Biosimilars
|
|
143
|
|
|
Other operational factors, net
|
|
(26
|
)
|
|
Operational decline, net
|
|
(1,864
|
)
|
|
|
|
|
||
Unfavorable impact of foreign exchange
|
|
(222
|
)
|
|
EH Revenues decrease
|
|
(2,086
|
)
|
|
EH Revenues, for the nine months ended October 1, 2017
|
|
$
|
15,639
|
|
•
|
Cost of sales as a percentage of Revenues increased 1.2 percentage points, primarily due to cost increases reflecting the shift to EH of certain legacy Hospira costs that were previously unallocated to EH as a result of harmonizing the Hospira cost policy, and the impact of product losses of exclusivity, partially offset by the favorable impact of the sale of HIS, which had a higher cost of sales than the other EH products, and the favorable impact of foreign exchange.
|
•
|
The decrease in Cost of sales of 8% primarily reflects;
|
◦
|
the favorable impact of the sale of HIS, which had a higher cost of sales than the other EH products;
|
◦
|
the favorable impact of foreign exchange;
|
◦
|
a net decrease in royalty expense and, to a lesser extent,
|
◦
|
lower volumes driven by, among other things, the SIP portfolio, primarily due to legacy Hospira product shortages in the U.S.,
|
◦
|
cost increases reflecting the shift to EH of certain legacy Hospira costs that were previously unallocated to EH as a result of harmonizing the Hospira cost policy.
|
•
|
Selling, informational and administrative expenses decreased 9% primarily due to lower advertising, promotional, and field force expenses associated with products that recently lost marketing exclusivity and certain other expenses related to disputes in the ordinary course of business, as well as the favorable impact of the sale of HIS and the favorable impact of foreign exchange, partially offset by increased spending for biosimilars, primarily related to the U.S. launch of Inflectra.
|
•
|
Research and development expenses decreased 14%, primarily due to the close-out of certain post-marketing clinical trials and the favorable impact of the sale of HIS.
|
•
|
The unfavorable change in Other (income)/deductions––net primarily reflects the non-recurrence of a resolution of a contract disagreement in the first quarter of 2016, partially offset by a gain on the redemption of an acquired bond.
|
•
|
For Foreign currency translation adjustments, net, for the third quarter of 2017, primarily reflects the weakening of the U.S. dollar against the euro, Canadian dollar and Australian dollar; for the first nine months of 2017, primarily reflects the weakening of the U.S. dollar against the euro, Canadian dollar, Swedish krona and the Australian dollar. For the first nine months of 2017, also includes the reclassification of amounts related to the agreement to sell our 40% ownership investment in Teuto. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 2D. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement and Equity-Method Investments: Equity-Method Investments.
|
•
|
For Unrealized holding losses on derivative financial instruments, net and Unrealized holding gains on available-for-sale securities, net, reflect the impact of fair value remeasurements and the reclassification of realized amounts into income. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 7. Financial Instruments.
|
•
|
For Benefit plans: actuarial losses, net, for the third quarter and first nine months of 2017, primarily reflects (i) the amortization of changes in the pension benefit obligation previously recognized in Other comprehensive income; (ii) the unfavorable impact of foreign exchange; and (iii) an increase in actuarial losses due to an interim remeasurement. The first nine months of 2017 also reflects the remeasurement gain due to the settlement of the Hospira U.S. qualified defined benefit plan. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit Plans.
|
•
|
For Trade accounts receivable, less allowance for doubtful accounts, the change reflects the timing of sales and collections in the normal course of business.
|
•
|
For Inventories, the change reflects the build of inventory primarily for and in advance of new or potential product launches and increases to meet targeted levels for certain products in the normal course of business, including those related to demand.
|
•
|
For Other current assets, the change reflects a decrease in receivables associated with our derivative financial instruments, as well as the timing of receipt and payments in the normal course of business, partially offset by an increase in VAT receivable balances due to a change in our supply chain.
|
•
|
For PP&E, the change primarily reflects depreciation during the period and reductions due to restructuring efforts, partially offset by capital additions in the normal course of business.
|
•
|
For Identifiable intangible assets, less accumulated amortization, the change primarily reflects amortization for the period, partially offset by intangible assets recorded in connection with the EU and U.S. approvals of Besponsa. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 7E. Financial Instruments: Other Noncurrent Liabilities.
|
•
|
For Other noncurrent assets, the change reflects a decrease in receivables associated with our derivative financial instruments, partially offset by net increases in the normal course of business.
|
•
|
For Trade accounts payable, the change reflects the timing of purchases and payments in the normal course of business, including the impact of efforts to improve working capital efficiencies.
|
•
|
For Accrued compensation and related items, the decrease reflects normal bonus payments made to employees and a reduction related to the termination of a Hospira U.S. qualified defined benefit pension plan, partially offset by current year’s accruals. For additional information, see Notes to Condensed Consolidated Financial Statements—Note 10. Pension and Postretirement Benefit Plans.
|
•
|
For Other current liabilities, the change reflects a decrease in liabilities associated with:
|
◦
|
payment for consideration transferred for Medivation;
|
◦
|
payments for restructuring activities and payments for liabilities related to the closeout of bococizumab clinical studies; and
|
◦
|
our derivative financial instruments,
|
◦
|
an accrual for net funds due to ICU Medical for net economic benefit payments (see Notes to Condensed Consolidated Financial Statements––Note 2B. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement and Equity-Method Investments: Sale of Hospira Infusion Systems Net Assets to ICU Medical, Inc. (EH)); and
|
◦
|
the impact of timing of payments in the normal course of business.
|
•
|
For Pension benefit obligations, net, the decrease primarily reflects the $1.0 billion voluntary pension contribution in January 2017 and payments to plan participants.
|
•
|
For Other noncurrent liabilities, the change reflects a decrease in liabilities associated with:
|
◦
|
an increase in reclassification of short-term liabilities;
|
◦
|
our derivative financial instruments; and
|
◦
|
the reversal of a contingent liability as a result of exiting our investment in Teuto (see Notes to Condensed Consolidated Financial Statements––Note 2D. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement and Equity-Method Investments: Equity Method Investments),
|
◦
|
an increase of $351 million to record obligations in connection with the EU and U.S. approvals of Besponsa (see Notes to Condensed Consolidated Financial Statements—Note 7E. Financial Instruments: Other Noncurrent Liabilities);
|
◦
|
an increase in deferred revenue from a milestone payment received from Merck for the ertugliflozin collaboration agreement (see Notes to Condensed Consolidated Financial Statements––Note 2C. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement and Equity-Method Investments: Collaboration Arrangement); and
|
◦
|
accruals in the normal course of business.
|
•
|
For Treasury stock, the change reflects $5 billion paid to Citibank in February 2017 pursuant to the terms of an accelerated share repurchase agreement. See Notes to Condensed Consolidated Financial Statements—Note 12. Commitments and Contingencies for additional information.
|
|
|
Nine Months Ended
|
|
|
|||||||
(MILLIONS OF DOLLARS)
|
|
October 1,
2017 |
|
|
October 2,
2016 |
|
|
%
Change |
|
||
Cash provided by/(used in):
|
|
|
|
|
|
|
|||||
Operating activities(a)
|
|
$
|
9,728
|
|
|
$
|
10,151
|
|
|
(4
|
)
|
Investing activities
|
|
38
|
|
|
(4,704
|
)
|
|
*
|
|
||
Financing activities(a)
|
|
(9,650
|
)
|
|
(6,915
|
)
|
|
40
|
|
||
Effect of exchange-rate changes on cash and cash equivalents
|
|
67
|
|
|
(79
|
)
|
|
*
|
|
||
Net increase/(decrease) in Cash and cash equivalents
|
|
$
|
184
|
|
|
$
|
(1,547
|
)
|
|
*
|
|
*
|
Calculation not meaningful.
|
(a)
|
Amounts for the nine months ended October 2, 2016 have been revised from previously reported amounts to reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, that requires that cash flows present (i) excess tax benefits as Other tax accounts, net as part of operating activities, rather than financing activities on a prospective basis beginning in the year of adoption, and (ii) cash paid by us when directly withholding shares for tax-withholding purposes as a cash outflow from financing activities, rather than operating activities and is reflected in the year of adoption. The year-to-date excess tax benefit was $87 million in the first nine months of 2016. For cash paid by us for withholding purposes, $134 million for the first nine months of 2016 is presented as financing activities in the condensed consolidated statement of cash flows (see Notes to Consolidated Financial Statements—Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards).
|
•
|
a decrease in cash used for acquisitions—cash paid of $1.0 billion, net of cash acquired, primarily for the acquisition of AstraZeneca’s small molecule anti-infectives business in 2017 and substantially all of the remaining consideration for the Medivation acquisition, compared to cash paid of $17.7 billion, net of cash acquired, primarily for the acquisitions of Medivation, Bamboo and Anacor in 2016 (see Notes to Condensed Consolidated Financial Statements—Note 2A. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Collaborative Arrangement and Equity-Method Investments: Acquisitions); and
|
•
|
an increase in Other investing activities, net, including dividends received from an equity-method investment,
|
•
|
less net proceeds generated from the sale of investments of $12.2 billion in 2017 for cash needs.
|
•
|
$2.2 billion less proceeds raised from net short-term borrowings in the first nine months of 2017, compared to the first nine months of 2016; and
|
•
|
$5.8 billion cash dividends paid in the first nine months of 2017, compared to $5.5 billion in the same period in 2016,
|
•
|
the issuance of long-term debt of $5.3 billion in the first nine months of 2017, compared to $5.0 billion in the same period in 2016 (see Notes to Condensed Consolidated Financial Statements––Note 7D. Financial Instruments: Long-Term Debt).
|
•
|
the working capital requirements of our operations, including our R&D activities;
|
•
|
investments in our business;
|
•
|
dividend payments and potential increases in the dividend rate;
|
•
|
share repurchases;
|
•
|
the cash requirements associated with our cost-reduction/productivity initiatives;
|
•
|
paying down outstanding debt;
|
•
|
contributions to our pension and postretirement plans; and
|
•
|
business-development activities.
|
(a)
|
See Notes to Condensed Consolidated Financial Statements––Note 7. Financial Instruments for a description of certain assets held and for a description of credit risk related to our financial instruments held.
|
(b)
|
The increase in selected net financial liabilities is primarily driven by (i) our decrease in short-term investments, the proceeds of which were used for various cash needs and (ii) the net increase in long-term debt. We retain a strong financial liquidity position as a result of our net cash provided by operating activities, our high-quality financial asset portfolio and access to capital markets. Both Moody’s and S&P rating agencies maintained our strong investment-grade corporate debt rating subsequent to the acquisitions of Medivation and Anacor. For additional information, see the “Credit Ratings” section of this MD&A.
|
(c)
|
The increase in working capital is primarily due to the timing of accruals, cash receipts and payments in the ordinary course of business, a decline in short-term borrowings and an increase in inventory related to new or potential products, partially offset by a decline in short-term investments used for various cash needs and the sale of HIS assets to ICU Medical.
|
(d)
|
Represents total Pfizer Inc. shareholders’ equity divided by the actual number of common shares outstanding (which excludes treasury stock).
|
(a)
|
In September 2016, Moody’s updated their credit outlook from negative outlook to stable.
|
(b)
|
In April 2016, S&P updated their credit outlook from negative watch to stable.
|
(a)
|
Represents shares purchased pursuant to an accelerated share repurchase agreement with Citibank. For additional information, see Notes to Condensed Consolidated Financial Statements––Note 12. Commitments and Contingencies and “Unregistered Sales of Equity Securities and Use of Proceeds––Issuer Purchases of Equity Securities” in Part II, Item 2 of this Quarterly Report on Form 10-Q.
|
(b)
|
Represents shares purchased pursuant to an accelerated share repurchase agreement entered into on March 8, 2016. For additional information, see Notes to Consolidated Financial Statements––Note 12. Equity in our 2016 Financial Report.
|
The following table provides a brief description of recently issued accounting standards, not yet adopted:
|
||||
Standard/Description
|
|
Effective Date
|
|
Effect on the Financial Statements or Other Significant Matters
|
In May 2014, the FASB issued amended guidance related to revenue from contracts with customers. The new guidance introduces a new principles-based framework for revenue recognition and disclosure. Since its issuance the FASB has issued six ASUs, amending the guidance and effective date, and the SEC has rescinded certain related SEC guidance; the most recent of these changes was issued in December 2016.
|
|
January 1, 2018.
|
|
We have made substantial progress in completing our review of the impact of this guidance across our various business arrangements and revenue-related activities, and do not expect the adoption of this standard to have a material impact on our reported Revenues in our consolidated financial statements, revenue recognition processes, or our internal controls. We are reviewing our disclosures for revenue recognition and do not anticipate significant changes will be needed to conform with the disclosure requirements of the new guidance.
The interpretation and applicability of the new revenue recognition standard to collaboration arrangements in certain industries is still being assessed. We expect that milestone payments received in our collaboration agreements, which are recorded in Other (income)/deductions––net, and currently amortized over the life of the agreement, will, for many arrangements, be amortized over the remaining development period or sooner, if there is a distinct and separable licensing component. We are required to apply the new rules to existing contracts as if the new principles had always existed, and therefore, upon adoption, we expect to record a cumulative effect adjustment to Retained earnings as of the adoption date in the range of $350 million to $550 million to accelerate what would have been future income under the current rules into prior periods. The financial statement impact on pre-tax income is expected to be less than $100 million in any future annual period.
We continue to monitor additional changes, modifications, clarifications or interpretations undertaken by the FASB, which may impact our current conclusions. In addition, we continue to monitor other changes, such as changes in our business, new collaboration arrangements, business combinations, etc., which may impact our current conclusions prior to the adoption date.
|
Standard/Description
|
|
Effective Date
|
|
Effect on the Financial Statements or Other Significant Matters
|
In January 2016, the FASB issued an update to its guidance on recognition and measurement of financial assets and liabilities.
Among other things, the new guidance makes the following targeted changes to existing guidance:
1. Requires certain equity investments to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.
2. Requires a qualitative assessment of equity investments without readily determinable fair values to identify impairment.
3. Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements.
In September 2017, the FASB issued a proposed amendment to this new standard which is intended to clarify certain aspects of the guidance.
|
|
January 1, 2018.
|
|
We have substantially completed our review of the impact of this new guidance on our consolidated financial statements, and will continue to assess events which may occur prior to adoption. As of October 1, 2017, we have $1.0 billion in available-for-sale equity securities and approximately $273 million of restricted stock and private equity securities which will be subject to the new rules. Further, for the nine months ended October 1, 2017, we recognized $406 million of previously unrealized holding gains and $119 million of previously unrealized losses on available-for-sale equity securities in Other comprehensive income, which would have been recorded to Other (income)/ deductions––net under the new rules. The impact of adoption will be recorded as a cumulative effect adjustment to Retained earnings. We expect the adoption of this new accounting standard may increase the volatility of our income in future periods due to changes in the fair value of equity investments. We do not expect that the proposed amendment, as currently drafted, will have any substantive impact to our assessment discussed above. We continue to monitor changes, modifications, clarifications or interpretations undertaken by the FASB, which may impact our current conclusions.
|
In August 2016, the FASB issued new guidance on the classification of certain transactions in the Statement of Cash Flows.
|
|
January 1, 2018. Earlier application is permitted.
|
|
We have substantially completed our review and will continue to assess events which may occur prior to adoption. Retrospective application is required. Upon adoption, we expect to reclassify approximately $362 million of cash outflows related to debt redemption in 2016 from operating activities to financing activities. We also expect to reclassify approximately $32 million of cash inflows from trust-owned life insurance contracts in 2016 from operating activities to investing activities. Cash outflows from trust-owned life insurance contracts represent benefit payments and are classified as operating activities. In addition, although there is no impact on the presented historical comparative financial statements, the new guidance may impact the classification of certain cash flows related to contingent consideration in a business acquisition, depending on the ultimate settlement amount of the reported contingency liability.
|
In October 2016, the FASB issued new guidance on the presentation of restricted cash in the Statement of Cash Flows.
|
|
January 1, 2018. Earlier application is permitted.
|
|
We have substantially completed our review and will continue to assess events which may occur prior to adoption. Retrospective application is required. Our restricted cash balances as of the end of 2016 were approximately $18.1 million of short-term restricted cash and $45.3 million of long-term restricted cash. Our restricted cash balances as of October 1, 2017 were approximately $6.4 million of short-term restricted cash and $68.7 million of long-term restricted cash.
|
In October 2016, the FASB issued an update to its guidance on income tax accounting. The new guidance replaces the prohibition against recognizing current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party with a requirement to do so, unless the asset transferred is inventory.
|
|
January 1, 2018.
|
|
We have substantially completed our review and will continue to assess events which may occur prior to adoption. Our analysis of the standard indicates that our estimate of the impact to our consolidated financial statements, using current assumptions, is not material. However, while we currently do not have any specific plans, we cannot predict intercompany asset transfers other than inventory that may occur in the future, as they are dependent on economic and operational factors that may change over time.
For example, an acquisition might cause us to realign legal entities and to transfer assets between entities as we integrate an acquired company into Pfizer. We anticipate that after adoption, our effective tax rate could be impacted by the immediate recognition of the tax consequences of intercompany asset transfers other than inventory. The impact of adoption will be recorded as a cumulative effect adjustment to Retained Earnings.
|
In January 2017, the FASB issued new guidance to clarify the definition of a business. The new guidance provides a new framework for determining whether business development transactions should be accounted for as acquisitions (or disposals) of assets or businesses. If the fair value of the gross assets acquired is concentrated in a single identifiable asset, the transaction will not qualify for treatment as a business. The new guidance also requires that to be considered a business, a set of integrated activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs, without regard as to whether a market participant could replace missing elements. In addition, the new guidance narrows the definition of the term “output” to make it consistent with how outputs are described in the updated revenue recognition guidance.
|
|
January 1, 2018. Earlier application is permitted.
|
|
We have substantially completed our review and will continue to assess events which may occur prior to adoption. The new accounting standard is applicable on a prospective basis upon adoption and therefore has no impact on completed transactions. We expect that subsequent to our anticipated adoption date of January 1, 2018, fewer transactions will be accounted for as business acquisitions (decreasing the amount of goodwill incurred and potentially increasing IPR&D expense) or disposals of a business. We will continue to monitor for changes in our business, and business combination or other transactions which might close after adoption and be impacted by these new standards.
|
Standard/Description
|
|
Effective Date
|
|
Effect on the Financial Statements or Other Significant Matters
|
In February 2017, the FASB issued amended guidance related to the derecognition of nonfinancial assets.
|
|
January 1, 2018. Earlier application is permitted.
|
|
We have substantially completed our review and will continue to assess events which may occur prior to adoption. The new guidance applies to the full or partial sale or transfer of nonfinancial assets, including intangible assets, real estate and inventory, under which the gain or loss is the difference between the consideration received and the carrying value of the asset. The new guidance does not impact out-licensing arrangements. We are not expecting a material impact on existing transactions. We will continue to monitor for changes in our business and transactions which might be impacted by these new standards. The impact of adoption, if any, will be recorded as a cumulative effect adjustment to Retained Earnings.
|
In March 2017, the FASB issued guidance on the presentation of net periodic pension and postretirement benefit cost. Under the new rules, entities that sponsor defined benefit plans will present net benefit cost as follows:
1. Service cost will be included in the same income statement line items where other employee compensation costs are reported.
2. The other components of net benefit cost will be presented outside of income from operations, if such a subtotal is presented.
3. Only the service cost component will be capitalized, when applicable (for example, as a cost of inventory, internal-use software, or a self-constructed fixed asset).
If a separate line item is used to present the other components of net benefit cost, it should have an appropriate description. If a separate line item or items is not used, the line item or items in the income statement where the other components of net benefit cost are included must be disclosed.
|
|
January 1, 2018.
|
|
We have made substantial progress in completing our review of the impact of this new guidance. We anticipate that upon adoption, the net benefit costs other than service costs will be reclassified to Other (income)/deductions-net from their current classification within Cost of sales, Selling, informational and administrative expenses, and Research and development expenses. We expect to adopt the practical expedient which allows us to ignore capitalized pension expense in the retrospective adjustments in our Statements of Income. Net benefit cost/(income) other than service costs was $154 million for the year ended December 31, 2016 and $89 million for the nine months ended October 1, 2017 (see Notes to Condensed Consolidated Financial Statements––Note 10. Pension and Postretirement Benefits for further details). We are still assessing the impact on our results of operations for business segment reporting, changes in accounting processes, such as inventory standard costing methodologies, and policies.
Effective January 1, 2018, future accruals under the Pfizer Consolidated Pension Plan (our largest U.S. defined benefit plan), will freeze, and the Pfizer defined contribution savings plan will provide additional annual contributions to those previously accruing benefits under the Pfizer Consolidated Pension Plan. This change will result in elimination of future service costs for the plan.
|
In May 2017, the FASB issued new guidance on the accounting for modifications of share-based payment awards. The new guidance clarifies that changes in the terms or conditions of a share-based payment award be accounted for as a modification unless all the following conditions are met:
1.
The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified.
2.
The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.
3.
The modification does not change the classification of the award as an equity instrument or a liability instrument.
|
|
January 1, 2018. Early application is permitted, including in interim periods.
|
|
We have substantially completed our review and will continue to assess events that may occur prior to adoption. The new accounting standard is applicable on a prospective basis upon adoption and therefore has no impact on completed transactions. The impact of adopting this guidance will be dependent upon whether we make any future modifications of share-based payment awards, and we have no plans to modify share-based payment awards at this time.
|
In February 2016, the FASB issued an update to its guidance on leases. The new ASU provides guidance for both lessee and lessor accounting models. Among other things, the new guidance requires that a right of use asset and a lease liability be recognized for leases with a duration of greater than one year.
|
|
January 1, 2019. Earlier application is permitted.
|
|
We have made substantial progress in completing our review of the impact of this new guidance. We anticipate recognition of at least $2 billion of additional assets and corresponding liabilities on our balance sheet. We are currently assessing the potential impact of embedded leases on our consolidated financial statements, given our manufacturing outsourcing, service arrangements and other agreements. In connection with this guidance we will need to design new global processes and technological solutions to provide the appropriate financial accounting and disclosure data. We continue to monitor changes, modifications, clarifications or interpretations undertaken by the FASB, which may impact our conclusions.
|
In March 2017, the FASB issued new guidance that shortens the amortization period for certain callable debt securities held at a premium. The new guidance requires the premium to be amortized to the earliest call date.
|
|
January 1, 2019. Early application is permitted, including in interim periods, so long as any adjustments are reflected as of the beginning of the fiscal year that includes the interim period in which the guidance is applied.
|
|
We are assessing the impact of the provisions of this new guidance on our consolidated financial statements.
|
Standard/Description
|
|
Effective Date
|
|
Effect on the Financial Statements or Other Significant Matters
|
In July 2017, the FASB issued new guidance on accounting for certain financial instruments with characteristics of liabilities and equity, and accounting for certain financial instruments with down round features (a feature in a financial instrument that reduces the strike price of an issued financial instrument if the issuer sells shares of its stock for an amount less than the currently stated strike price of the issued financial instrument or issues an equity-linked financial instrument with a strike price below the currently stated strike price of the issued financial instrument).
|
|
January 1, 2019. Earlier application is permitted.
|
|
We are assessing the impact of the provisions of this new guidance on our consolidated financial statements.
|
In August 2017, the FASB issued new guidance making targeted improvements to accounting for hedging activities. The objective of this amendment is to improve financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements, and also to simplify the application of hedge accounting guidance.
|
|
January 1, 2019. Early adoption is permitted, including in interim periods.
|
|
We are assessing the impact of the provisions of this new guidance on our consolidated financial statements and, pending our final review, we may consider early adoption.
|
In June 2016, the FASB issued new guidance on accounting for credit losses of financial instruments. The new guidance replaces the probable initial recognition threshold for incurred loss estimates in current GAAP with a methodology that reflects expected credit loss estimates.
|
|
January 1, 2020. Earlier application is permitted as of fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.
|
|
We are assessing the impact of the provisions of this new guidance on our consolidated financial statements. Previously, when credit losses were measured under GAAP, an entity generally only considered past events and current conditions in measuring the incurred loss. The new guidance requires us to identify, analyze, document and support new methodologies for quantifying expected credit loss estimates for our financial instruments, using information such as historical estimates and current economic environmental conditions, plus the use of reasonable supportable forecast information.
|
In January 2017, the FASB issued new guidance for goodwill impairment testing. The new guidance eliminates the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under the new guidance the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, although it cannot exceed the total amount of goodwill allocated to that reporting unit.
|
|
January 1, 2020. Earlier application is permitted.
|
|
We have not yet completed our review of the impact of this new guidance on our consolidated financial statements. However, we do not expect this new guidance to have a material impact on our consolidated financial statements.
|
•
|
the outcome of research and development activities including, without limitation, the ability to meet anticipated pre-clinical and clinical trial commencement and completion dates, regulatory submission and approval dates, and launch dates for product candidates, as well as the possibility of unfavorable pre-clinical and 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; decisions by regulatory authorities regarding labeling, ingredients and other matters that could affect the availability or commercial potential of our products; and uncertainties regarding our ability to address the comments in complete response letters received by us with respect to certain of our drug applications to the satisfaction of the FDA;
|
•
|
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;
|
•
|
risks associated with preliminary, early stage or interim data, including the risk that final results of studies for which preliminary, early stage or interim data have been provided and/or additional clinical trials may be different from (including less favorable than) the preliminary, early stage or interim data results and may not support further clinical development of the applicable product candidate or indication;
|
•
|
the success of external business-development activities, including the ability to satisfy the conditions to closing of announced transactions in the anticipated time frame or at all or to realize the anticipated benefits of such transactions;
|
•
|
competitive developments, including the impact on our competitive position of new product entrants, in-line branded products, generic products, private label products, biosimilars 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 and regulatory authorities in certain other countries of an abbreviated legal pathway to approve biosimilar products, which could subject our biologic products to competition from biosimilar products, with attendant competitive pressures, after the expiration of any applicable exclusivity period and patent rights;
|
•
|
risks related to our ability to develop and launch biosimilars, including risks associated with “at risk” launches, defined as the marketing of a product by Pfizer before the final resolution of litigation (including any appeals) brought by a third party alleging that such marketing would infringe one or more patents owned or controlled by the third party;
|
•
|
the ability to meet competition from generic, branded and biosimilar products after the loss or expiration 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, including delays caused by natural events, such as hurricanes; supply shortages at our facilities; and legal or regulatory actions, such as warning letters, suspension of manufacturing, seizure of product, injunctions or voluntary recall of a product;
|
•
|
trade buying patterns;
|
•
|
the impact of existing and future legislation and regulatory provisions on product exclusivity;
|
•
|
trends toward managed care and healthcare cost containment, and our ability to obtain or maintain timely or adequate pricing or formulary placement for our products;
|
•
|
the impact of any significant spending reductions or cost controls affecting Medicare, Medicaid or other publicly funded or subsidized health programs or changes in the tax treatment of employer-sponsored health insurance that may be implemented, and/or any significant additional taxes or fees that may be imposed on the pharmaceutical industry as part of any broad deficit-reduction effort;
|
•
|
the impact of any U.S. healthcare reform or legislation, including any repeal, substantial modification or invalidation of any or all of the provisions of the U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act;
|
•
|
U.S. federal or state legislation or regulatory action and/or policy efforts affecting, among other things, pharmaceutical product pricing, reimbursement or access, including under Medicaid, Medicare and other publicly funded or subsidized health programs; patient out-of-pocket costs for medicines, manufacturer prices and/or price increases that could result in new mandatory rebates and discounts or other pricing restrictions; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; restrictions on direct-to-consumer advertising; limitations on interactions with healthcare professionals; or 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 for our products 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 reductions in prices and access restrictions for certain biopharmaceutical products to control costs in those markets;
|
•
|
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, unstable governments and legal systems and inter-governmental disputes;
|
•
|
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 and settlement costs;
|
•
|
the risk of an adverse decision or settlement and the adequacy of reserves related to legal proceedings, including patent litigation, product liability and other product-related litigation, including personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, commercial, environmental, government investigations, employment and other legal proceedings, including various means for resolving asbestos litigation, as well as tax issues;
|
•
|
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 and the volatility following the U.K. referendum in which voters approved the exit from the EU;
|
•
|
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 the U.S. that may result from pending and possible future proposals;
|
•
|
any significant issues involving our largest wholesale distributors, 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;
|
•
|
the end result of any negotiations between the U.K. government and the EU regarding the terms of the U.K.’s exit from the EU, which could have implications on our research, commercial and general business operations in the U.K. and the EU;
|
•
|
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;
|
•
|
any significant issues that may arise related to our joint ventures and other third-party business arrangements;
|
•
|
changes in U.S. generally accepted accounting principles;
|
•
|
changes in interpretations of existing laws and regulations, or changes in laws and regulations, in the U.S. and other countries;
|
•
|
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;
|
•
|
the impact of purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items;
|
•
|
the impact of acquisitions, divestitures, restructurings, internal reorganizations, product recalls, withdrawals and other unusual items, including our ability to realize the projected benefits of our cost-reduction and productivity initiatives and of the internal separation of our commercial operations into our current operating structure;
|
•
|
the risk of an impairment charge related to our intangible assets, goodwill or equity-method investments;
|
•
|
risks related to internal control over financial reporting;
|
•
|
risks and uncertainties related to our acquisitions of Hospira, Anacor, Medivation and AstraZeneca’s small molecule anti-infectives business, including, among other things, the ability to realize the anticipated benefits of those acquisitions, including the possibility that expected cost savings related to the acquisition of Hospira and accretion related to the acquisitions of Hospira, Anacor and Medivation will not be realized or will not be realized within the expected time frame; the risk that the businesses will not be integrated successfully; disruption from the transactions making it more difficult to maintain business and operational relationships; risks related to our ability to grow revenues for Xtandi and expand Xtandi into the non-metastatic castration-resistant prostate cancer setting; significant transaction costs; and unknown liabilities; and
|
•
|
risks and uncertainties related to our evaluation of strategic alternatives for our Consumer Healthcare business, including, among other things, the ability to realize the anticipated benefits of any strategic alternatives we may pursue for our Consumer Healthcare business, including the potential for disruption to our business resulting from the evaluation of strategic alternatives for Pfizer Consumer Healthcare; the possibility that we may not be able to realize a higher value for Pfizer Consumer Healthcare through strategic alternatives; and unknown liabilities.
|
Period
|
|
Total Number of
Shares Purchased(b)
|
|
|
Average Price
Paid per Share(b)
|
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plan
|
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan(a)
|
|
||
July 3, 2017 through July 30, 2017
|
|
12,102
|
|
|
$
|
33.46
|
|
|
—
|
|
|
$
|
6,355,862,076
|
|
July 31, 2017 through August 27, 2017
|
|
51,568
|
|
|
$
|
33.03
|
|
|
—
|
|
|
$
|
6,355,862,076
|
|
August 28, 2017 through October 1, 2017
|
|
33,579
|
|
|
$
|
34.06
|
|
|
—
|
|
|
$
|
6,355,862,076
|
|
Total
|
|
97,249
|
|
|
$
|
33.44
|
|
|
—
|
|
|
|
(a)
|
Our October 2014 $11 billion share-purchase plan was exhausted in the first quarter of 2017. In December 2015, the Board of Directors authorized an $11 billion share repurchase program, and share repurchases commenced thereunder in the first quarter of 2017. On February 2, 2017, we entered into an accelerated share repurchase agreement with Citibank to repurchase $5 billion of our common stock. Pursuant to the terms of the agreement, on February 6, 2017, we paid $5 billion to Citibank and received an initial delivery of approximately 126 million shares of our common stock from Citibank at a price of $31.73 per share, which represented, based on the closing price of our common stock on the NYSE on February 2, 2017, approximately 80% of the notional amount of the accelerated share repurchase agreement. On May 16, 2017, the accelerated share repurchase agreement with Citibank was completed, which, per the terms of the agreement, resulted in Citibank owing us a certain number of shares of Pfizer common stock. Pursuant to the agreement’s settlement terms, we received an additional 24 million shares of our common stock from Citibank on May 19, 2017. The average price paid for all of the shares delivered under the accelerated share repurchase agreement was $33.31 per share. The common stock received is included in Treasury Stock. This agreement was entered into pursuant to our previously announced share repurchase authorization. At October 1, 2017, our remaining share-purchase authorization was approximately $6.4 billion.
|
(b)
|
These columns reflect the following transactions during the third fiscal quarter of 2017: (i) the surrender to Pfizer of 91,487 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees; (ii) the surrender to Pfizer of 100 shares of common stock to satisfy tax withholding obligations in connection with the vesting of performance share awards issued to employees; (iii) the surrender of 16 shares of common stock to satisfy withholding obligations in connection with the settlement of total shareholder return units; and (iv) the open market purchase by the trustee of 5,646 shares of common stock in connection with the reinvestment of dividends paid on common stock held in trust for employees who were granted performance share awards and who deferred receipt of such awards.
|
|
-
|
Amendment No. 1 to the Pfizer Supplemental Savings Plan
|
|
|
-
|
Pfizer Inc. Global Performance Plan
|
|
|
-
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
|
-
|
Accountants’ Acknowledgment.
|
|
|
-
|
Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
-
|
Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
-
|
Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
-
|
Certification by the Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
Exhibit 101:
|
|
|
|
EX-101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
EX-101.SCH
EX-101.CAL
EX-101.LAB
EX-101.PRE
EX-101.DEF
|
|
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation Linkbase
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
XBRL Taxonomy Extension Definition Document
|
|
|
Pfizer Inc.
|
|
|
(Registrant)
|
|
|
|
|
|
|
Dated:
|
November 9, 2017
|
/s/ Loretta V. Cangialosi
|
|
|
Loretta V. Cangialosi, Senior Vice President and
Controller
(Principal Accounting Officer and
Duly Authorized Officer)
|
1.
|
Section 6.6 is amended to read as follows:
|
2.
|
New Appendix D is added to read as follows:
|
1.
|
Legacy Anacor Employees active on September 1, 2017 shall be eligible to participate in the Plan on and after September 1, 2017. Rules for the crediting of years of service for Legacy Anacor Employees are set forth in the Qualified Plan in Article XXIX.
|
2.
|
The definition of Regular Earnings under the Plan shall have the meaning as set forth in the Qualified Plan, except that for clarification purposes, with respect to Legacy Anacor Employees who are eligible to defer their bonus under the Pfizer Deferred Compensation Plan, the limitations on the definition of Regular Earnings for any Legacy Anacor Employee set forth in Article XXIX of the Qualified Plan shall also include any deferred bonuses.
|
(a)
|
“Affiliate” shall mean (i) any Person that directly, or through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company or (ii) any entity in which the Company has a significant equity interest, as determined by the Committee, and (iii) the employees of such entity or Person are eligible to participate in the Plan, as determined by the Committee.
|
(b)
|
“Award” shall mean any cash incentive award granted pursuant to the provisions of the Plan.
|
(c)
|
“Board” shall mean the Board of Directors of the Company.
|
(d)
|
“Cause” shall include, but not be limited to, a termination of employment for significant breach of Company policy, inadequate work performance due to intentional or deliberate misconduct or intentional or deliberate failure to act, destruction of Company property, commission of unlawful acts against or reflecting on the Company, or similar occurrences. The Committee, or its designee, the Executive Vice President of Worldwide Human Resources or the Senior Vice President, Total Rewards, or its or his or her respective successors, in its or his or her sole and absolute discretion, shall determine whether a termination of employment is for “Cause.”
|
(e)
|
“CEO” shall mean the Chief Executive Officer of the Company.
|
(f)
|
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
|
(g)
|
“Committee” shall mean the Compensation Committee of the Board or such other persons or committee to whom it has delegated any authority, as may be appropriate.
|
(h)
|
“Company” shall mean Pfizer Inc., a Delaware corporation.
|
(i)
|
“EAIP” shall mean the Pfizer Inc. Executive Annual Incentive Plan.
|
(j)
|
“Eligible Earnings” shall mean:
|
1)
|
For Group 1 Countries: a Participant’s daily earnings (as well as any lump-sum payment made in lieu of a merit increase) adjusted for any portion of the year in which the Participant was not eligible for the Plan.
|
2)
|
For Group 2 Countries: a Participant’s base salary as of the immediately preceding December 31st unless there is a change in status as a full-time or part-time Employee.
|
3)
|
For Participants in the ELTI Program: a Participant’s local base salary midpoint for each month over the course of the Performance Period adjusted for any portion of the year in which the Participant was not eligible under the Plan, or to reflect a change in salary grade.
|
(k)
|
“ELTI Program” shall mean the Company’s Executive Long-Term Incentive Program.
|
(l)
|
“Employee” shall mean any employee of the Company or any Affiliate. For any and all purposes under this Plan, the term “Employee” shall not include a person hired as an independent contractor, leased employee, consultant or a person otherwise
|
(m)
|
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
|
(n)
|
“Executive Leadership Team” shall mean the team of executives of the Company reporting directly to the CEO of the Company, and including the CEO.
|
(o)
|
“Group 1 and Group 2 Countries” shall mean the countries as set forth in Appendix A hereto.
|
(p)
|
“IFW” shall mean an Incident Final Warning issued by the Company or an Affiliate to the Employee.
|
(q)
|
“Incentive Pool” shall mean the fund underlying the Plan from which payment of Awards are made.
|
(r)
|
“Incentive Award Opportunity” shall mean the total potential cash compensation opportunity underlying an Award for a Performance Period ranging from zero to two times (0%-200%) a Participant’s Incentive Target Percentage.
|
(s)
|
“Incentive Target Percentage” shall mean the targeted level of compensation underlying an Award granted to a Participant for a Performance Period, expressed as a percentage of the Participant’s Eligible Earnings (for Participants in the ELTI Program, the local base salary midpoint earned during the Performance Period).
|
(t)
|
“Incentive Target Amount” shall mean the targeted level of compensation underlying an Award granted to a Participant for a Performance Period, expressed as a fixed value.
|
(u)
|
“Involuntary Termination” shall mean a termination of an Employee’s employment with the Company or an Affiliate by the Company or Affiliate. For purposes of this Plan only, an Involuntary Termination shall include “Terminations Due to Curtailments or Cessations of Operations, Reorganizations, Position Eliminations, or Job Restructurings Due to a Change in Required Competencies or Qualification for Position” and terminations due to failure to return to work following the expiration of short-term disability benefits because either the employee remains physically or mentally unable to return to work or because his or her position is filled while he or she is on an approved disability leave of absence.
|
(v)
|
“Key Employee” means an Employee treated as a “specified employee” as of his or her Separation from Service under Code Section 409A(a)(2)(B)(i), i.e., a key employee (as defined in Code Section 416(i) without regard to paragraph (5) thereof) of the Company or its Affiliates if the Company’s stock is publicly traded on an established securities market or otherwise. Key Employees shall be determined under rules adopted by the Company in accordance with Section 409A. Notwithstanding the foregoing, the Executive Vice President, Worldwide Human Resources or the Senior Vice President, Total Rewards, or the successor or the designee of either, may, under the alternative permissible methods allowable under Section 409A, adopt an alternative identification and effective date for purposes of determining which employees are Key Employees.
|
(w)
|
“Participant” shall mean an Employee who is selected by the Committee or the Board from time to time in their sole discretion to receive an Award under the Plan.
|
(x)
|
“Performance Period” shall mean one calendar year during which any performance goals specified by the Committee with respect to any Awards to be granted under the Plan are to be measured.
|
(y)
|
“Performance-Related Termination” shall mean an involuntary termination of employment because the Employee does not meet the performance or other essential requirements of his or her job. The determination of whether the Employee’s termination is a Performance-Related Termination shall be made by the Executive Vice President, Worldwide Human Resources, or the Senior Vice President, Total Rewards, or his or her respective successors or the designee of either, in his or her sole and absolute discretion.
|
(z)
|
“Person” shall mean any individual, corporation, partnership, association, limited liability company, joint-stock company, trust, unincorporated organization or government or political subdivision thereof.
|
(aa)
|
“Retirement” shall mean having attained a minimum age of 55 and a minimum of 10 years of service at the time of a Participant’s separation from the Company, unless determined otherwise, and which shall also constitute a Separation from Service for United States Participants, or as determined under local law for all other Participants.
|
(bb)
|
“Section 409A” shall mean Section 409A of the Code and the regulations and other guidance issued thereunder by the U.S. Treasury or Internal Revenue Service.
|
(cc)
|
“Senior Leadership Council” shall mean that group of executives designated by the Company as members of the Senior Leadership Council.
|
(ee)
|
“Target Incentive Award” shall mean the targeted level of cash compensation underlying an Award granted to a Participant for a Performance Period, calculated in accordance with Section 5 of the Plan.
|
(ff)
|
“Termination Due to Curtailments or Cessations of Operations, Reorganizations, Position Eliminations, or Job Restructurings Due to a Change in Required Competencies or Qualification for Position” shall mean an involuntary termination as the direct result of curtailment or cessation of operations, reorganization or position elimination, or job restructuring due to a change in required competencies or qualification for the position. The determination of whether a curtailment or cessation of operations, reorganization or position elimination, job restructuring or change in competencies or qualifications has occurred
|
(gg)
|
“Compliance Written Warning” shall mean a Written Warning Letter resulting from a Compliance investigation issued by the Company or an Affiliate to an Employee.
|
(a)
|
Any Employee shall be eligible to be selected as a Participant; however, only those Employees identified as Participants by the Committee or its designee, with respect to a Performance Period shall participate in the Plan for such Performance Period. Any Employee newly hired by the Company after October 1 shall not become eligible to participate in the Plan until the January 1 immediately following his or her hire date, except as waived by the Committee or their designee in its or their sole and absolute discretion. An Employee may only participate in one annual cash incentive plan sponsored by the Company or any Affiliate with respect to a Performance Period. As such, any Employee who is a participant in a sales incentive program or another cash incentive plan with respect to a Performance Period is not eligible to participate in the Plan.
|
(b)
|
Any Employee that is eligible to receive an award under the EAIP for any Performance Period shall (i) participate in this Plan with respect to the determination and funding of the Incentive Pool, and (ii) for the avoidance of doubt, shall only receive one cash incentive award during a Performance Period which shall be subject to the additional terms and conditions set forth in the EAIP plan document and related materials so that such awards remain “performance-based” compensation in accordance with Section 162(m) of the Code. To the extent that there are any conflicts between this Plan and the terms of the EAIP, the EAIP will prevail.
|
(c)
|
Effective as of January 1, 2016, any Employee who is performing services in the U.S. or Puerto Rico and is eligible to receive an award for a Performance Period who is issued a Compliance Written Warning during such Performance Period, may not receive an Award in excess of the lesser of (i) Ninety percent (90%) of his or her Target Incentive Award, or (ii) Ninety percent (90%) of his or her award prior to consideration of the Participant’s performance as set forth in Section 5(a)(4). Effective as of January 1, 2016, any Employee who is performing services in the U.S. or Puerto Rico and is eligible to receive an award for a Performance Period who is issued an IFW during such Performance Period, may not receive an Award in
|
1)
|
The initial funding of the Incentive Pool is equal to the sum of the Target Incentive Awards for all Participants for the Performance Period.
|
2)
|
The final funding of the Incentive Pool is determined by the Committee, in its discretion, based on the Company’s performance against pre-set annual goals for the following financial measures (i) revenue, (ii) adjusted diluted earnings per share (EPS), and (iii) cash flow from operations.
|
3)
|
Once the final pool funding is determined, Incentive Pool dollars are allocated to the business unit, division or function in which a Participant worked during the Performance Period based on the achievement of pre-set annual goals for the business unit, division or function, and as determined by the CEO.
|
4)
|
A Participant’s actual Award is determined based on his or her Target Incentive Award, adjusted by the funding factors stated above and further adjusted to reflect the specific business unit, division or country performance, as well as the Participant’s performance against objectives for the Performance Period, as assessed by the Participant’s manager in accordance with procedures, guidelines and/or metrics established by the Committee, or its designee, from time to time.
|
5)
|
A Participant’s Target Incentive Award is calculated as set forth below:
|
i.
|
Group 1 Countries: the sum of the product of a Participant’s Eligible Earnings for each month during the calendar year that the Participant is eligible to participate in the Plan, multiplied by the Incentive Target Percentage for the Participant’s salary grade in the respective month.
|
ii.
|
Group 2 Countries: the product of a Participant’s Eligible Earnings as of the immediately preceding December 31st, multiplied by the Incentive Target Percentage in effect on December 31st for the Participant’s salary grade, pro-rated for the number of months during the calendar year in which he or she is eligible to participate in the Plan.
|
iii.
|
For Participants in the ELTI Program: the product of the local base salary midpoint for the portion of each month during the Performance Period in which he or she is eligible to participate in the Plan (adjusted for changes in grades, Incentive Target Percentages or eligibility, as applicable), multiplied by the Incentive Target Percentage for the Participant’s salary grade in the respective month.
|
Group 1 Countries
(Accumulation Of Monthly Daily Earnings and Targets)
|
||||
AUS
|
AUSTRALIA
|
|
KAZ
|
KAZAKHSTAN
|
AUT
|
AUSTRIA
|
|
KOR
|
KOREA, REPUBLIC OF
|
ZAE
|
AZERBAIJAN
|
|
LVA
|
LATVIA
|
BLR
|
BELARUS
|
|
LTU
|
LITHUANIA
|
BEL
|
BELGIUM
|
|
LUX
|
LUXEMBOURG
|
BIH
|
BOSNIA & HERZEGOVINA
|
|
MYS
|
MALAYSIA
|
BOL
|
BOLIVIA
|
|
MEX
|
MEXICO
|
BRA
|
BRAZIL
|
|
NLD
|
NETHERLANDS
|
BGR
|
BULGARIA
|
|
NZL
|
NEW ZEALAND
|
CAN
|
CANADA
|
|
NIC
|
NICARAGUA
|
CHL
|
CHILE
|
|
NOR
|
NORWAY
|
CHN
|
CHINA
|
|
PAK
|
PAKISTAN
|
COL
|
COLOMBIA
|
|
PHL
|
PHILIPPINES
|
CYP
|
CYPRUS
|
|
POL
|
POLAND
|
HRV
|
CROATIA
|
|
PRT
|
PORTUGAL
|
CZE
|
CZECH REPUBLIC
|
|
ROU
|
ROMANIA
|
DNK
|
DENMARK
|
|
RUS
|
RUSSIAN FEDERATION
|
DOM
|
DOMINICAN REPUBLIC
|
|
SRB
|
SERBIA
|
SLV
|
EL SALVADOR
|
|
SGP
|
SINGAPORE
|
EST
|
ESTONIA
|
|
SVK
|
SLOVAKIA
|
FIN
|
FINLAND
|
|
SVN
|
SLOVENIA
|
FRA
|
FRANCE
|
|
ESP
|
SPAIN
|
GEO
|
GEORGIA
|
|
SWE
|
SWEDEN
|
DEU
|
GERMANY
|
|
CHE
|
SWITZERLAND
|
GRC
|
GREECE
|
|
TWN
|
TAIWAN
|
HND
|
HONDURAS
|
|
THA
|
THAILAND
|
HKG
|
HONG KONG
|
|
TUR
|
TURKEY
|
HUN
|
HUNGARY
|
|
UKR
|
UKRAINE
|
IND
|
INDIA
|
|
GBR
|
UNITED KINGDOM
|
IDN
|
INDONESIA
|
|
USA
|
UNITED STATES
|
IRL
|
IRELAND
|
|
VEN
|
VENEZUELA
|
ISR
|
ISRAEL
|
|
VNM
|
VIET NAM
|
ITA
|
ITALY
|
|
|
|
JPN
|
JAPAN
|
|
|
|
Group 2 Countries
(December 31 Salary and Target)
|
|
DZA
|
ALGERIA
|
ARG
|
ARGENTINA
|
BHR
|
BAHRAIN
|
CMR
|
CAMEROON
|
CRI
|
COSTA RICA
|
IVC
|
COTE D'IVOIRE (IVORY COAST)
|
ECU
|
ECUADOR
|
EGY
|
EGYPT
|
GHA
|
GHANA
|
GTM
|
GUATEMALA
|
IRN
|
IRAN (ISLAMIC REPUBLIC OF)
|
IRQ
|
IRAQ
|
JOR
|
JORDAN
|
KEN
|
KENYA
|
KWT
|
KUWAIT
|
LBN
|
LEBANON
|
LBY
|
LIBYAN ARAB JAMAHIRIYA
|
MAR
|
MOROCCO
|
NGA
|
NIGERIA
|
OMN
|
OMAN
|
PAN
|
PANAMA
|
PRY
|
PARAGUAY
|
PER
|
PERU
|
QAT
|
QATAR
|
SAU
|
SAUDI ARABIA
|
SEN
|
SENEGAL
|
ZAF
|
SOUTH AFRICA
|
SDN
|
SUDAN
|
SYR
|
SYRIAN ARAB REPUBLIC
|
TUN
|
TUNISIA
|
ARE
|
UNITED ARAB EMIRATES
|
URY
|
URUGUAY
|
YEM
|
YEMEN
|
|
|
Nine Months Ended
|
|
|
Year Ended December 31,
|
|||||||||||||||||||
(MILLIONS OF DOLLARS, EXCEPT RATIOS)
|
|
October 1,
2017 |
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Determination of earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from continuing operations before provision for taxes on income, noncontrolling interests and cumulative effect of a change in accounting principles
|
|
$
|
11,351
|
|
|
$
|
8,351
|
|
|
$
|
8,965
|
|
|
$
|
12,240
|
|
|
$
|
15,716
|
|
|
$
|
11,242
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Noncontrolling interests
|
|
43
|
|
|
44
|
|
|
39
|
|
|
47
|
|
|
43
|
|
|
47
|
|
||||||
Income attributable to Pfizer Inc.
|
|
11,308
|
|
|
8,307
|
|
|
8,925
|
|
|
12,192
|
|
|
15,673
|
|
|
11,195
|
|
||||||
Add (deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Capitalized interest
|
|
(55
|
)
|
|
(61
|
)
|
|
(32
|
)
|
|
(41
|
)
|
|
(32
|
)
|
|
(41
|
)
|
||||||
Amortization of capitalized interest
|
|
40
|
|
|
59
|
|
|
25
|
|
|
31
|
|
|
34
|
|
|
36
|
|
||||||
Equity (income)/loss from equity-method investments
|
|
(214
|
)
|
|
(49
|
)
|
|
191
|
|
|
(24
|
)
|
|
(67
|
)
|
|
(105
|
)
|
||||||
Distributed income of equity method investments
|
|
211
|
|
|
119
|
|
|
161
|
|
|
136
|
|
|
162
|
|
|
85
|
|
||||||
Fixed charges
|
|
1,015
|
|
|
1,285
|
|
|
1,282
|
|
|
1,435
|
|
|
1,495
|
|
|
1,627
|
|
||||||
Total earnings as defined
|
|
$
|
12,305
|
|
|
$
|
9,661
|
|
|
$
|
10,554
|
|
|
$
|
13,729
|
|
|
$
|
17,265
|
|
|
$
|
12,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense(a)
|
|
$
|
940
|
|
|
$
|
1,186
|
|
|
$
|
1,199
|
|
|
$
|
1,360
|
|
|
$
|
1,414
|
|
|
$
|
1,522
|
|
Preferred stock dividends(b)
|
|
1
|
|
|
2
|
|
|
2
|
|
|
3
|
|
|
3
|
|
|
4
|
|
||||||
Rents(c)
|
|
73
|
|
|
97
|
|
|
81
|
|
|
72
|
|
|
78
|
|
|
101
|
|
||||||
Fixed charges
|
|
1,015
|
|
|
1,285
|
|
|
1,282
|
|
|
1,435
|
|
|
1,495
|
|
|
1,627
|
|
||||||
Capitalized interest
|
|
55
|
|
|
61
|
|
|
32
|
|
|
41
|
|
|
32
|
|
|
41
|
|
||||||
Total fixed charges
|
|
$
|
1,070
|
|
|
$
|
1,346
|
|
|
$
|
1,314
|
|
|
$
|
1,476
|
|
|
$
|
1,527
|
|
|
$
|
1,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Ratio of earnings to fixed charges
|
|
11.5
|
|
|
7.2
|
|
|
8.0
|
|
|
9.3
|
|
|
11.3
|
|
|
7.7
|
|
(a)
|
Interest expense includes amortization of debt premium, discount and other debt costs. Interest expense does not include interest related to tax matters (primarily uncertain tax positions) of $196 million for the first nine months of 2017; $242 million for 2016; $246 million for 2015; $182 million for 2014; $222 million for 2013; and $265 million for 2012.
|
(b)
|
Preferred stock dividends related to our Series A convertible perpetual preferred stock held by an employee stock ownership plan trust.
|
(c)
|
Rents included in the computation consist of one-third of rental expense, which we believe to be a conservative estimate of an interest factor in our leases, which are not material.
|
/s/ IAN C. READ
|
|
|
Ian C. Read
|
|
|
Chairman and Chief Executive Officer
|
|
/s/ FRANK A. D'AMELIO
|
|
|
Frank A. D'Amelio
|
|
|
Executive Vice President, Business Operations and Chief Financial Officer
|
|
/s/ IAN C. READ
|
|
|
Ian C. Read
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
|
|
November 9, 2017
|
|
|
/s/ FRANK A. D'AMELIO
|
|
|
Frank A. D'Amelio
|
|
|
Executive Vice President, Business Operations and
Chief Financial Officer
|
|
|
|
|
|
November 9, 2017
|
|
|