UNITED STATES SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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(Mark One)
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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13-5315170
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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235 East 42nd Street New York, New York
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10017
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(Address of principal executive offices)
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(Zip Code)
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(212) 733-2323
(Registrant’s telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock, $.05 par value
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New York Stock Exchange
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Floating Rate Notes due 2019
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New York Stock Exchange
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0.000% Notes due 2020
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New York Stock Exchange
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0.250% Notes due 2022
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New York Stock Exchange
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1.000% Notes due 2027
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
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(Do not check if a smaller reporting company)
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DOCUMENTS INCORPORATED BY REFERENCE
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Portions of the 2017 Annual Report to Shareholders
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Parts I, II and IV
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Portions of the Proxy Statement for the 2018 Annual Meeting of Shareholders
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Part III
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TABLE OF CONTENTS
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Page
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Pfizer Inc.
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2017 Form 10-K
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i
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DEFINED TERMS
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2017 Financial Report
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Exhibit 13 to this 2017 Form 10-K
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2017 Form 10-K
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This Annual Report on Form 10-K for the fiscal year ended December 31, 2017
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2018 Proxy Statement
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Proxy Statement for the 2018 Annual Meeting of Shareholders
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ACA
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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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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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ANDA
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Abbreviated New Drug Application
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Astellas
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Astellas Pharma US, Inc.
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BLA
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Biologics License Application
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BMS
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Bristol-Myers Squibb Company
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cGMPs
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current Good Manufacturing Practices
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CFDA
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China Food and Drug Administration
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DEA
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U.S. Drug Enforcement Agency
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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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EFPIA
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European Federation of Pharmaceutical Industries and Associations
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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, Eastern Europe, Africa, the Middle East, Central Europe and Turkey
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EU
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European Union
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Exchange Act
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Securities Exchange Act of 1934, as amended
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FCPA
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U.S. Foreign Corrupt Practices Act
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FDA
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U.S. Food and Drug Administration
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FFDCA
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U.S. Federal Food, Drug and Cosmetic Act
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HIS
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Hospira Infusion Systems
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Hospira
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Hospira, Inc.
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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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IPR&D
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In-process Research and Development
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LOE
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Loss of Exclusivity
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MCO
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Managed Care Organization
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Medivation
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Medivation, Inc.
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NDA
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New Drug Application
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NYSE
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New York Stock Exchange
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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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PGS
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Pfizer Global Supply
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PMDA
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Pharmaceuticals and Medical Device Agency in Japan
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R&D
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Research and Development
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SEC
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U.S. Securities and Exchange Commission
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Tax Cuts and Jobs Act or TCJA
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H.R.1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”
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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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Pfizer Inc.
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2017 Form 10-K
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ii
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Pfizer at a Glance
Working together for a healthier world
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~$52.5 Billion
in Revenues in 2017
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9
Products with Direct Product and/or Alliance Revenues of Greater than $1 Billion in 2017
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2
Distinct Business Segments
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Pfizer Innovative Health
(
~$31.4 Billion 2017 Revenues
)
/ Pfizer Essential Health
(
~$21.1 Billion 2017 Revenues
)
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6
Primary Therapeutic Areas in Pfizer Innovative Health
—
Internal Medicine, Vaccines, Oncology, Inflammation & Immunology, Rare Disease and
Consumer Healthcare
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4
Pfizer Essential Health Product Categories
—
Global Brands
(Legacy Established Products & Peri-LOE Products)
, Sterile Injectable Pharmaceuticals, Biosimilars and Pfizer CentreOne
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>125
Countries Where We Sell Our Products
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87
Projects in Clinical Research & Development
(1)
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~$7.7 Billion
2017 R&D Expense
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58
Manufacturing Sites Worldwide Operated by PGS
(2)
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~90,200
Employees Globally
(2)
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Pfizer Inc.
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2017 Form 10-K
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iii
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PART I
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ITEM 1.
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BUSINESS
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•
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On February 3, 2017, we completed the sale of our global infusion systems 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. HIS, which was acquired as part of the Hospira acquisition in September 2015, includes IV pumps, solutions and devices.
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•
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On December 22, 2016, for
$1,045 million
we acquired the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S., which includes the newly approved EU drug Zavicefta™ (ceftazidime-avibactam), the marketed agents Merrem™/Meronem™ (meropenem) and Zinforo™ (ceftaroline fosamil), and the clinical development assets aztreonam-avibactam and ceftaroline fosamil-avibactam.
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•
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On September 28, 2016, we acquired Medivation for approximately
$14.3 billion
in cash (
$13.9 billion
, net of cash acquired). Medivation is a biopharmaceutical company focused on developing and commercializing small molecules for oncology.
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•
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On June 24, 2016, we acquired Anacor for approximately
$4.9 billion
in cash (
$4.5 billion
net of cash acquired), plus
$698 million
debt assumed. Anacor is a biopharmaceutical company focused on novel small-molecule therapeutics derived from its boron chemistry platform.
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•
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On September 3, 2015, we acquired Hospira, a leading provider of sterile injectable drugs and infusion technologies as well as a provider of biosimilars, for approximately
$16.1 billion
in cash (
$15.7 billion
, net of cash acquired).
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Pfizer Inc.
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2017 Form 10-K
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1
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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 disease and consumer healthcare.
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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.
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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.
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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.
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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.
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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 systems net assets, representing the infusion systems net assets that we acquired as part of the Hospira transaction, HIS, to ICU Medical.
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Leading brands include:
- Prevnar 13/Prevenar 13 - Xeljanz - Eliquis - Lyrica (U.S., Japan and certain other markets) - Enbrel (outside the U.S. and Canada) - Ibrance - Xtandi - Several OTC consumer healthcare products (e.g., Advil
and
Centrum
)
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Leading brands include:
- Lipitor - Premarin family - Norvasc - Lyrica (Europe, Russia, Turkey, Israel and Central Asia
countries)
- Celebrex
- Viagra*
- Inflectra/Remsima - Several sterile injectable products |
*
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Viagra lost exclusivity in the U.S. in December 2017. Beginning in the first quarter of 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through December 2017, will be reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, total Viagra worldwide revenues will be reported in EH from 2018 forward.
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Pfizer Inc.
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2017 Form 10-K
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2
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Therapeutic Area
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Description
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Key Products
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Internal Medicine
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Includes innovative brands from two therapeutic areas, Cardiovascular Metabolic and Neuroscience and Pain, as well as regional brands.
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Lyrica
(outside Europe, Russia, Turkey, Israel and Central Asia countries),
Chantix/Champix
and
Eliquis
(jointly developed and commercialized with BMS)
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Vaccines
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Includes innovative vaccines brands across all ages—infants, adolescents and adults—in pneumococcal disease, meningitis and tick borne encephalitis, with a focus on healthcare-acquired infections and maternal health.
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Prevnar 13/Prevenar 13
(pediatric/adult),
Trumenba
and
FSME-IMMUN
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Oncology
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Includes innovative oncology brands of biologics, small molecules and immunotherapies across a wide range of cancers.
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Ibrance, Sutent, Xalkori, Inlyta
and
Xtandi
(jointly developed and commercialized with Astellas)
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Inflammation and Immunology
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Includes innovative brands for chronic immune and inflammatory diseases.
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Enbrel
(outside the U.S. and Canada),
Xeljanz
and
Eucrisa
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Rare Disease
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Includes innovative brands for a number of rare diseases, including hematology, neuroscience, and inherited metabolic disorders.
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BeneFix
,
Genotropin
, and
Refacto AF/Xyntha
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Consumer Healthcare
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Includes over-the-counter (OTC) brands with a focus on dietary supplements, pain management, gastrointestinal and respiratory and personal care. According to Euromonitor International’s retail sales data, in 2017, Pfizer’s Consumer Healthcare business was the fifth-largest branded multi-national, OTC consumer healthcare business in the world and produced two of the ten largest selling consumer healthcare brands (
Centrum
and
Advil
) in the world.
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Dietary Supplements:
Centrum
brands,
Caltrate
and
Emergen-C
Pain Management:
Advil
brands and
ThermaCare
Gastrointestinal:
Nexium 24HR/Nexium Control
and
Preparation H
Respiratory and Personal Care:
Robitussin
,
Advil Cold & Sinus
and
ChapStick
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Product Category
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Description
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Key Products
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Global Brands
—
Legacy Established Products
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Includes products that have lost patent protection (excluding Sterile Injectable Pharmaceuticals and Peri-LOE Products).
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Lipitor
,
Premarin
family and
Norvasc
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Global Brands
—
Peri-LOE Products
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Includes products that have recently lost or are anticipated to soon lose patent protection.
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Lyrica
(Europe, Russia, Turkey, Israel and Central Asia),
Viagra*
,
Celebrex
,
Pristiq
,
Zyvox
,
Vfend
,
Revatio
and
Inspra
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Sterile Injectable Pharmaceuticals
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Includes generic injectables and proprietary specialty injectables (excluding Peri-LOE Products).
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Medrol
,
Sulperazon
,
Fragmin
and
Tygacil
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Biosimilars
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Includes recombinant and monoclonal antibodies, primarily in inflammation, oncology and supportive care.
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Inflectra
/
Remsima
(biosimilar infliximab) (U.S. and certain international markets),
Nivestim
(biosimilar filgrastim) (certain European, Asian and Africa/Middle East markets) and
Retacrit
(biosimilar epoetin zeta) (certain European and Africa/Middle East markets)
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Pfizer CentreOne
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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 Inc.
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--
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*
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Viagra lost exclusivity in the U.S. in December 2017. Beginning in the first quarter of 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through December 2017, will be reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, total Viagra worldwide revenues will be reported in EH from 2018 forward.
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Pfizer Inc.
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2017 Form 10-K
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3
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•
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Biosimilars;
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•
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Inflammation and Immunology;
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•
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Metabolic Disease and Cardiovascular Risks;
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•
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Oncology;
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•
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Rare Diseases; and
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•
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Vaccines.
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Pfizer Inc.
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2017 Form 10-K
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4
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Pfizer Inc.
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2017 Form 10-K
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5
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Drug
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U.S. Basic Product Patent Expiration Year
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Major EU Basic Product Patent Expiration Year
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Japan Basic Product Patent Expiration Year
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Viagra
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2012
(1)
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2013
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2013
(1)
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Lyrica
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2018
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2014
(2)
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2022
(3)
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Chantix
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2020
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2021
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2022
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Sutent
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2021
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2021
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2024
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Ibrance
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2023
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2023
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2023
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Inlyta
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2025
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2025
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2025
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Xeljanz
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2025
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2027
(4)
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2025
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Prevnar 13/Prevenar 13
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2026
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2026
(5)
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2029
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Eucrisa
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2026
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N/A
(6)
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N/A
(6)
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Eliquis
(7)
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2026
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2026
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2026
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Xtandi
(8)
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2027
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*
(8)
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*
(8)
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Besponsa
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2027
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2023
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2028
(9)
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Xalkori
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2029
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2027
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2028
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Bavencio
(10)
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2033
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2032
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2032
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(1)
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In addition to the basic product patent covering
Viagra
, which expired in 2012,
Viagra
is covered by a U.S. method-of-treatment patent which, including the six-month pediatric exclusivity period associated with
Revatio
(which has the same active ingredient as
Viagra
), expires in 2020. As a result of a patent litigation settlement, Teva Pharmaceuticals USA, Inc. launched a generic version of
Viagra
in the U.S. in December 2017. The corresponding method-of-treatment patent covering
Viagra
in Japan expired in May 2014.
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(2)
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For
Lyrica
, regulatory exclusivity in the EU expired in July 2014.
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(3)
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Lyrica
is covered by a Japanese method-of-use patent which expires in 2022. The patent is currently subject to an invalidation action.
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(4)
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Xeljanz
EU expiry is provided by regulatory exclusivity.
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(5)
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The EU patent that covers the combination of the 13 serotype conjugates of
Prevenar
13
has been revoked following an opposition proceeding. This first instance decision has been appealed. There are other EU patents and pending applications covering the formulation and various aspects of the manufacturing process of
Prevenar
13
that remain in force.
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(6)
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Eucrisa
is not approved in the EU and Japan.
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(7)
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Eliquis
was developed and is being commercialized in collaboration with BMS.
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(8)
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Xtandi
is being developed and commercialized in collaboration with Astellas, who has exclusive commercialization rights for
Xtandi
outside the U.S.
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(9)
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Besponsa
Japan expiry is provided by regulatory exclusivity.
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(10)
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Bavencio
is being developed and commercialized in collaboration with Merck KGaA.
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Pfizer Inc.
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2017 Form 10-K
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6
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Pfizer Inc.
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2017 Form 10-K
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7
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•
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environment-related capital expenditures—
$30 million
; and
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•
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other environment-related expenses—
$142 million
.
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Pfizer Inc.
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2017 Form 10-K
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8
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Pfizer Inc.
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2017 Form 10-K
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9
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ITEM 1A.
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RISK FACTORS
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Pfizer Inc.
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2017 Form 10-K
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10
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Pfizer Inc.
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2017 Form 10-K
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11
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Pfizer Inc.
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2017 Form 10-K
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12
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Pfizer Inc.
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2017 Form 10-K
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13
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Pfizer Inc.
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2017 Form 10-K
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14
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Pfizer Inc.
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2017 Form 10-K
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15
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Pfizer Inc.
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2017 Form 10-K
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16
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Pfizer Inc.
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2017 Form 10-K
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17
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Pfizer Inc.
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2017 Form 10-K
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18
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Pfizer Inc.
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2017 Form 10-K
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19
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Pfizer Inc.
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2017 Form 10-K
|
20
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Pfizer Inc.
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2017 Form 10-K
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21
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Pfizer Inc.
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2017 Form 10-K
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22
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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ITEM 2.
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PROPERTIES
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ITEM 3.
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LEGAL PROCEEDINGS
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ITEM 4.
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MINE SAFETY DISCLOSURES
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Pfizer Inc.
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2017 Form 10-K
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23
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Name
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Age
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Position
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Ian C. Read
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64
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Chairman of the Board since December 2011 and Chief Executive Officer of Pfizer since December 2010. President and Chief Executive Officer from December 2010 until December 2011. Previously, he served as Senior Vice President and Group President of the Worldwide Biopharmaceutical Businesses, which he led from 2006 through December 2010. In that role, he oversaw five global business units—Primary Care, Specialty Care, Oncology, Established Products and Emerging Markets. Mr. Read began his career with Pfizer in 1978 as an operational auditor. He worked in Latin America through 1995, holding positions including Chief Financial Officer, Pfizer Mexico, and Country Manager, Pfizer Brazil. In 1996, he was appointed President of Pfizer’s International Pharmaceuticals Group, with responsibility for Latin America and Canada. He became Executive Vice President, Europe, in 2000, was named a Corporate Vice President in 2001, and assumed responsibility for Canada, in addition to Europe, in 2002. Mr. Read later became accountable for operations in both the Africa/Middle East region and Latin America as well. Director of Kimberly-Clark Corporation. Mr. Read serves on the Boards of Pharmaceutical Research and Manufacturers of America (PhRMA) and the Partnership of New York City. Member of the U.S.-China Business Council. Our Director since December 2010.
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Albert Bourla
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56
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Chief Operating Officer since January 2018; Group President, Pfizer Innovative Health from June 2016 until December 2017; Group President, Global Innovative Pharma Business (responsible for Vaccines, Oncology and Consumer Healthcare since 2014) from February 2016 until June 2016. President and General Manager of Established Products Business Unit from December 2010 until December 2013. Area President Europe, Africa, Asia and Pacific of Pfizer Animal Health from 2009 until November 2010. Area President Europe, Africa and Middle East of Pfizer Animal Health from 2005 until 2009.
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Frank A. D’Amelio
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60
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Executive Vice President, Business Operations and Chief Financial Officer since December 2010. Senior Vice President and Chief Financial Officer from September 2007 until December 2010. Prior to joining Pfizer, he was Senior Executive Vice President of Integration and Chief Administrative Officer of Alcatel-Lucent from November 2006 until August 2007. Prior to the Alcatel-Lucent merger, he was Chief Operating Officer of Lucent and before that Chief Financial Officer of Lucent. Director of Zoetis Inc. and of Humana Inc. and Chair of the Humana Audit Committee. He is a Director of the Independent College Fund of New Jersey.
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Mikael Dolsten
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59
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President of Worldwide Research and Development since December 2010. Senior Vice President; President of Worldwide Research and Development from May 2010 until December 2010. Senior Vice President; President of Pfizer BioTherapeutics Research & Development Group from October 2009 until May 2010. He was Senior Vice President of Wyeth and President, Wyeth Research from June 2008 until October 2009. He was a Private Equity Partner at Orbimed Advisors, LLC from January 2008 until June 2008. Director of Karyopharm Therapeutics Inc. Chairman of the Translational Advisory Board of Apple Tree Partners from 2016 to 2017.
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Charles H. Hill III
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62
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Executive Vice President, Worldwide Human Resources since December 2010. Senior Vice President, Human Resources for Worldwide Biopharmaceuticals Businesses from 2008 through December 2010. Vice President, Human Resources, Worldwide Pharmaceutical Operations from 2004 through 2008. Director of Zoetis Inc. from July 2012 until June 2013.
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Angela Hwang
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52
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Group President, Pfizer Essential Health since January 2018. Global President, Pfizer Inflammation and Immunology from January 2016 until December 2017. Regional Head, U.S. Vaccines from January 2014 until December 2015. Vice President, Emerging Markets for the Primary Care business from September 2011 until December 2013. Vice President, U.S. Brands business within Essential Health from October 2009 until August 2011.
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Rady A. Johnson
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56
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Executive Vice President, Chief Compliance and Risk Officer since December 2013. Senior Vice President and Associate General Counsel from October 2006 until December 2013.
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Douglas M. Lankler
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52
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Executive Vice President and General Counsel since December 2013. Corporate Secretary from January 2014 until February 2014. Executive Vice President, Chief Compliance and Risk Officer from February 2011 until December 2013. Executive Vice President, Chief Compliance Officer from December 2010 until February 2011. Senior Vice President and Chief Compliance Officer from January 2010 until December 2010. Senior Vice President, Deputy General Counsel and Chief Compliance Officer from August 2009 until January 2010. Senior Vice President, Associate General Counsel and Chief Compliance Officer from October 2006 until August 2009.
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Freda C. Lewis-Hall
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62
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Executive Vice President, Chief Medical Officer since December 2010. Senior Vice President, Chief Medical Officer from May 2009 until December 2010. Previously, she was Chief Medical Officer and Executive Vice President, Medicines Development at Vertex Pharmaceuticals from June 2008 until May 2009. Dr. Lewis-Hall was Senior Vice President, U.S. Pharmaceuticals, Medical Affairs for Bristol-Myers Squibb Company from 2003 until May 2008. Director of Tenet Healthcare Corporation from December 2014 to May 2017.
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Kirsten Lund-Jurgensen
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58
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Executive Vice President, President, Pfizer Global Supply since December 2016. Vice President, Innovative Health Product Portfolio Management and Consumer Operations from August 2015 until December 2016. Vice President, Vaccines, Oncology, Consumer Product Portfolio Management and Consumer Operations from January 2014 until August 2015. Vice President, Product Portfolio Management for Primary Care, Established Products and Oncology from December 2012 until December 2013. Vice President of the Primary Care and Oncology Operating Unit (Manufacturing Sites in Europe, Singapore, Canada) from October 2009 until November 2012. Vice President of the Patented Products Operating Unit (Manufacturing Sites in Europe, Singapore) from May 2008 until October 2009. A Member of the Executive Committee of the National Association of Manufacturers Board of Directors.
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|
|
Alexander R. MacKenzie
|
|
58
|
|
Executive Vice President, Chief Development Officer since June 2016. Senior Vice President, Chief Development Officer from March 2016 until June 2016. Group Senior Vice President and Head, Pharma Therapeutics Research and Development from 2010 until March 2016. Senior Vice President, Head of Worldwide Research from 2007 until 2010. Dr. MacKenzie represents Pfizer as a member of the Board of Directors of ViiV Healthcare Limited.
|
|
|
|
|
|
Laurie J. Olson
|
|
54
|
|
Executive Vice President, Strategy and Commercial Operations since July 2012. Senior Vice President - Strategy and Portfolio Management from 2011 until July 2012. Senior Vice President - Portfolio Management and Analytics from 2008 until 2010. Since joining Pfizer in 1987 as an Analyst in the Company’s marketing research organization, Ms. Olson has served in a variety of marketing leadership positions with increasing responsibility in both the Company’s U.S. and global commercial organizations.
|
|
|
|
|
|
Sally Susman
|
|
56
|
|
Executive Vice President, Corporate Affairs (formerly Policy, External Affairs and Communications) since December 2010. Senior Vice President, Policy, External Affairs and Communications from December 2009 until December 2010. Senior Vice President and Chief Communications Officer from February 2008 until December 2009. Prior to joining Pfizer, Ms. Susman held senior level positions at The Est
é
e Lauder Companies, including Executive Vice President from 2004 to January 2008. Director of WPP plc.
|
|
|
|
|
|
John D. Young
|
|
53
|
|
Group President, Pfizer Innovative Health since January 2018. Group President, Pfizer Essential Health from June 2016 until December 2017; Group President, Global Established Pharma Business from January 2014 until June 2016. President and General Manager, Pfizer Primary Care from June 2012 until December 2013. Primary Care Business Unit’s Regional President for Europe and Canada from 2009 until June 2012. U.K. Country Manager from 2007 until 2009. Director of Johnson Controls International plc.
|
Pfizer Inc.
|
2017 Form 10-K
|
24
|
PART II
|
ITEM 5.
|
MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Period
|
Total Number
of Shares
Purchased
(b)
|
|
Average Price
Paid per
Share
(b)
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plan
(a)
|
|
Approximate Dollar Value of Shares
that May Yet Be Purchased
Under the Plan
(a)
|
||||||
October 2, 2017 through October 29, 2017
|
31,838
|
|
|
$
|
35.61
|
|
|
—
|
|
|
$
|
6,355,862,076
|
|
October 30, 2017 through November 30, 2017
|
17,257
|
|
|
$
|
35.11
|
|
|
—
|
|
|
$
|
6,355,862,076
|
|
December 1, 2017 through December 31, 2017
|
15,332
|
|
|
$
|
36.09
|
|
|
—
|
|
|
$
|
16,355,862,076
|
|
Total
|
64,427
|
|
|
$
|
35.59
|
|
|
—
|
|
|
|
(a)
|
For additional information, see the Notes to Consolidated Financial Statements
––Note 12. Equity
in our 2017 Financial Report, which is incorporated by reference.
|
(b)
|
These columns reflect (i) 59,102 shares of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of awards under our long-term incentive programs; and (ii) the open market purchase by the trustee of
5,325
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.
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
Pfizer Inc.
|
2017 Form 10-K
|
25
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
Pfizer Inc.
|
2017 Form 10-K
|
26
|
PART III
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
Pfizer Inc.
|
2017 Form 10-K
|
27
|
PART IV
|
ITEM 15.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
•
|
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements
|
•
|
Consolidated Statements of Income
|
•
|
Consolidated Statements of Comprehensive Income
|
•
|
Consolidated Balance Sheets
|
•
|
Consolidated Statements of Equity
|
•
|
Consolidated Statements of Cash Flows
|
•
|
Notes to Consolidated Financial Statements
|
•
|
Quarterly Consolidated Financial Data (Unaudited)
|
|
|
|
|
Agreement and Plan of Merger, dated as of August 20, 2016, among Pfizer Inc., Montreal, Inc. and Medivation, Inc. is incorporated by reference from our Current Report on Form 8-K filed on August 22, 2016 (File No. 001-03619). (Pursuant to Item 601(b)(2) of Regulation S-K, the registrant hereby agrees to supplementally furnish to the Securities and Exchange Commission upon request any omitted schedule or exhibit to the Merger Agreement.)
|
|
|
|
|
|
Our Restated Certificate of Incorporation dated April 12, 2004, is incorporated by reference from our Quarterly Report on Form 10-Q for the period ended March 28, 2004 (File No. 001-03619).
|
|
|
|
|
|
Amendment dated May 1, 2006 to Restated Certificate of Incorporation dated April 12, 2004, is incorporated by reference from our Quarterly Report on Form 10-Q for the period ended July 2, 2006 (File No. 001-03619).
|
|
|
|
|
|
Our By-laws, as amended December 18, 2017, are incorporated by reference from our Current Report on Form 8-K filed on December 21, 2017 (File No. 001-03619).
|
|
|
|
|
|
Indenture, dated as of January 30, 2001, between us and The Chase Manhattan Bank, is incorporated by reference from our Current Report on Form 8-K filed on January 30, 2001 (File No. 001-03619).
|
|
|
|
|
|
First Supplemental Indenture, dated as of March 24, 2009, between us and The Bank of New York Mellon (successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank)), as trustee, to Indenture dated as of January 30, 2001, is incorporated by reference from our Quarterly Report on Form 10-Q for the period ended June 28, 2009 (File No. 001-03619).
|
|
|
|
|
|
Second Supplemental Indenture, dated as of June 2, 2009, between us and The Bank of New York Mellon (successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank)), as trustee, to Indenture dated as of January 30, 2001, is incorporated by reference from our Current Report on Form 8-K filed on June 3, 2009 (File No. 001-03619).
|
|
|
|
|
|
Third Supplemental Indenture, dated as of June 3, 2013, between us and The Bank of New York Mellon (successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank)), as trustee, to Indenture dated as of January 30, 2001, is incorporated by reference from our Current Report on Form 8-K filed on June 3, 2013 (File No. 001-03619).
|
|
|
|
|
|
Fourth Supplemental Indenture, dated as of May 15, 2014, between us and The Bank of New York Mellon (successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank)), as trustee, to Indenture dated as of January 30, 2001, is incorporated by reference from our Current Report on Form 8-K report filed on May 15, 2014 (File No. 001-03619).
|
|
|
|
|
Pfizer Inc.
|
2017 Form 10-K
|
28
|
|
Fifth Supplemental Indenture, dated as of October 5, 2015, between us and The Bank of New York Mellon (successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank)), as trustee, to Indenture dated as of January 30, 2001, is incorporated by reference from our Current Report on Form 8-K report filed on October 6, 2015 (File No. 001-03619).
|
|
|
|
|
|
Sixth Supplemental Indenture, dated as of June 3, 2016, between us and The Bank of New York Mellon (formerly The Bank of New York (successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank (National Association)))), as trustee, to Indenture dated as of January 30, 2001, is incorporated by reference from our Current Report on Form 8-K report filed on June 3, 2016 (File No. 001-03619).
|
|
|
|
|
|
Seventh Supplemental Indenture, dated as of November 21, 2016, between us and The Bank of New York Mellon (formerly The Bank of New York (successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank (National Association)))), as trustee, to Indenture dated as of January 30, 2001, is incorporated by reference from our Current Report on Form 8-K report filed on November 21, 2016 (File No. 001-03619).
|
|
|
|
|
|
Eighth Supplemental Indenture, dated as of March 17, 2017, among us, The Bank of New York Mellon (formerly The Bank of New York (successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank (successor to the Chase Manhattan Bank (National Association)))), as trustee, and The Bank of New York Mellon, London Branch, as paying agent, to Indenture dated as of January 30, 2001, is incorporated by reference from our Current Report on Form 8-K report filed on March 17, 2017 (File No. 001-03619).
|
|
|
|
|
|
Ninth Supplemental Indenture, dated as of March 6, 2017, among us, The Bank of New York Mellon (formerly The Bank of New York (successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank (National Association)))), as trustee, and The Bank of New York Mellon, London Branch, as paying agent and calculation agent, to Indenture dated as of January 30, 2001, is incorporated by reference from our Current Report on Form 8-K report filed on March 6, 2017 (File No. 001-03619).
|
|
|
|
|
|
Tenth Supplemental Indenture, dated as of December 19, 2017, among us, The Bank of New York Mellon (formerly The Bank of New York (successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank (National Association)))), as trustee, and The Bank of New York Mellon, London Branch, as paying agent, to Indenture dated as of January 30, 2001, is incorporated by reference from our Current Report on Form 8-K report filed on December 19, 2017 (File No. 001-03619).
|
|
|
|
|
|
Indenture, dated as of April 10, 1992, between Wyeth (formerly American Home Products Corporation) and The Bank of New York Mellon (as successor to JPMorgan Chase Bank, N.A.), as trustee, is incorporated by reference from Wyeth’s Registration Statement on Form S-3 (File No. 33-57339), filed on January 18, 1995.
|
|
|
|
|
|
Supplemental Indenture, dated as of October 13, 1992, between Wyeth and The Bank of New York Mellon (as successor to JPMorgan Chase Bank, N.A.), as trustee, is incorporated by reference from Wyeth’s Registration Statement on Form S-3 (File No. 33-57339), filed on January 18, 1995.
|
|
|
|
|
|
Fifth Supplemental Indenture, dated as of December 16, 2003, between Wyeth and The Bank of New York Mellon (as successor to JPMorgan Chase Bank, N.A.), as trustee, is incorporated by reference from Wyeth’s 2003 Annual Report on Form 10-K (File No. 001-01225).
|
|
|
Sixth Supplemental Indenture, dated as of November 14, 2005, between Wyeth and The Bank of New York Mellon (as successor to JPMorgan Chase Bank, N.A.), as trustee, is incorporated by reference from Wyeth’s Current Report on Form 8-K filed on November 15, 2005 (File No. 001-01225).
|
|
|
|
|
|
Seventh Supplemental Indenture, dated as of March 27, 2007, between Wyeth and The Bank of New York Mellon (as successor to JPMorgan Chase Bank, N.A.), as trustee, is incorporated by reference from Wyeth’s Current Report on Form 8-K filed on March 28, 2007 (File No. 001-01225).
|
|
|
|
|
|
Eighth Supplemental Indenture, dated as of October 30, 2009, between Wyeth, us and The Bank of New York Mellon (as successor to JPMorgan Chase Bank, formerly The Chase Manhattan Bank), as trustee, to Indenture dated as of April 10, 1992 (as amended on October 13, 1992), is incorporated by reference from our Current Report on Form 8-K filed on November 3, 2009 (File No. 001-03619).
|
|
|
|
|
4.18
|
|
Except as set set forth in Exhibits 4.1-17 above, the instruments defining the rights of holders of long-term debt securities of the Company and its subsidiaries have been omitted.
1
|
|
|
|
|
2001 Stock and Incentive Plan is incorporated by reference from our Proxy Statement for the 2001 Annual Meeting of Shareholders (File No. 001-03619).
|
|
|
|
|
|
Pfizer Inc. 2004 Stock Plan, as Amended and Restated is incorporated by reference from our 2011 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
Pfizer Inc. 2014 Stock Plan is incorporated by reference from our Proxy Statement for the 2014 Annual Meeting of Shareholders (File No. 001-03619).
|
|
|
|
|
*
10.4
|
|
Form of Acknowledgment and Consent and Summary of Key Terms for Stock Option Grants, RSUs and TSRUs.
|
|
|
|
1
We agree to furnish to the SEC, upon request, a copy of each instrument with respect to issuances of long-term debt of the Company and its subsidiaries.
|
Pfizer Inc.
|
2017 Form 10-K
|
29
|
|
Form of Executive Grant Letter is incorporated by reference from our 2015 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
*
10.6
|
|
Amended and Restated Consolidated Supplemental Pension Plan for United States and Puerto Rico Employees.
|
|
|
|
|
Pfizer Supplemental Savings Plan is incorporated by reference from our Quarterly Report on Form 10-Q for the period ended April 3, 2016 (File No. 001-03619).
|
|
|
|
|
|
Amendment No. 1 to the Pfizer Supplemental Savings Plan (Amended and Restated as of January 1, 2016), is incorporated by reference from our Quarterly Report on Form 10-Q for the period ended October 1, 2017 (File No. 001-03619).
|
|
|
|
|
*
10.9
|
|
Amendment No. 2 to the Pfizer Supplemental Savings Plan.
|
|
|
|
|
Pfizer Inc. Global Performance Plan is incorporated by reference from Quarterly Report on Form 10-Q for the period ended October 1, 2017 (File No. 001-03619).
|
|
|
|
|
|
Executive Annual Incentive Plan is incorporated by reference from our 2012 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
Amended and Restated Deferred Compensation Plan is incorporated by reference from our 2012 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
Amendment to Amended and Restated Deferred Compensation Plan, dated June 20, 2013, is incorporated by reference from our 2013 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
||
|
Amendment No. 2 to Amended and Restated Deferred Compensation Plan, dated April 27, 2016, is incorporated by reference from our Quarterly Report on Form 10-Q for the period ended July 3, 2016 (File No. 001-03619).
|
|
|
|
|
|
Wyeth 2005 (409A) Deferred Compensation Plan (frozen as of January 2012), together with all material Amendments, is incorporated by reference from our 2013 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
Amended and Restated Wyeth Supplemental Employee Savings Plan (effective as of January 1, 2005 and frozen as of January 2012), together with all material Amendments is incorporated by reference from our 2011 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
Amendment to Amended and Restated Wyeth Supplemental Employee Savings Plan, dated June 20, 2013, is incorporated by reference from our 2013 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
The form of Indemnification Agreement with each of our non-employee Directors is incorporated by reference from our 1996 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
The form of Indemnification Agreement with each of the Named Executive Officers identified in our 2017 Proxy Statement is incorporated by reference from our 1997 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
Letter to Frank A. D’Amelio regarding replacement pension benefit dated August 22, 2007 is incorporated by reference from our Current Report on Form 8-K filed on August 22, 2007 (File No. 001-03619).
|
|
|
|
|
|
Executive Severance Plan is incorporated by referenced from our Current Report on Form 8-K filed on February 20, 2009 (File No. 001-03619).
|
|
|
|
|
|
Annual Retainer Unit Award Plan (for Non-Employee Directors) (frozen as of March 1, 2006) as amended, is incorporated by reference from our 2008 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors, as amended, is incorporated by reference from our Quarterly Report on Form 10-Q for the period ended September 28, 2014 (File No. 001-03619).
|
|
|
|
|
|
Form of Special Award Letter Agreement is incorporated by reference from our Current Report on Form 8-K filed on October 28, 2009 (File No. 001-03619).
|
|
|
|
|
|
Offer Letter to G. Mikael Dolsten, dated April 6, 2009, is incorporated by reference from our Quarterly Report on Form 10-Q for the period ended April 3, 2011 (File No. 001-03619).
|
|
|
|
|
*
10.26
|
|
Form of Special Performance-Based Incentive Award Letter.
|
|
|
|
*
10.27
|
|
Form of Special Performance-Based Incentive Grant Letter.
|
*
12
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
|
|
*
13
|
|
Portions of the 2017 Financial Report, which, except for those sections incorporated by reference, are furnished solely for the information of the SEC and are not to be deemed “filed.”
|
|
|
|
*
21
|
|
Subsidiaries of the Company.
|
|
|
|
*
23
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
|
|
*
24
|
|
Power of Attorney (included as part of signature page).
|
|
|
|
Pfizer Inc.
|
2017 Form 10-K
|
30
|
*
31.1
|
|
Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
*
31.2
|
|
Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
*
32.1
|
|
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.
|
|
|
|
*
32.2
|
|
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.
|
|
|
|
*101.INS
|
|
XBRL Instance Document
|
|
|
|
*101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
*101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
*101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
*101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
*101.DEF
|
|
XBRL Taxonomy Extension Definition Document
|
ITEM 16.
|
FORM 10-K SUMMARY
|
Pfizer Inc.
|
2017 Form 10-K
|
31
|
|
Pfizer Inc.
|
||
|
|
|
|
Dated: February 22, 2018
|
By:
|
|
/S/ MARGARET M. MADDEN
|
|
|
|
Margaret M. Madden
Senior Vice President and Corporate Secretary
Chief Governance Counsel
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/S/ IAN C. READ
Ian C. Read
|
|
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
|
|
February 21, 2018
|
|
|
|
|
|
/S/ FRANK A. D’AMELIO
Frank A. D’Amelio
|
|
Executive Vice President, Business Operations and
Chief Financial Officer (Principal Financial Officer)
|
|
February 22, 2018
|
|
|
|
|
|
/S/ LORETTA V. CANGIALOSI
Loretta V. Cangialosi
|
|
Senior Vice President—Controller
(Principal Accounting Officer)
|
|
February 21, 2018
|
|
|
|
|
|
/S/ DENNIS A. AUSIELLO
Dennis A. Ausiello
|
|
Director
|
|
February 21, 2018
|
|
|
|
|
|
/S/ RONALD E. BLAYLOCK
Ronald E. Blaylock |
|
Director
|
|
February 22, 2018
|
|
|
|
|
|
/S/ W. DON CORNWELL
W. Don Cornwell |
|
Director
|
|
February 21, 2018
|
|
|
|
|
|
/S/ JOSEPH J. ECHEVARRIA
Joseph J. Echevarria
|
|
Director
|
|
February 21, 2018
|
|
|
|
|
|
/S/ FRANCES D. FERGUSSON
Frances D. Fergusson
|
|
Director
|
|
February 21, 2018
|
|
|
|
|
|
/S/ HELEN H. HOBBS
Helen H. Hobbs
|
|
Director
|
|
February 21, 2018
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/S/ JAMES M. KILTS
James M. Kilts
|
|
Director
|
|
February 21, 2018
|
|
|
|
|
|
/S/ SHANTANU NARAYEN
Shantanu Narayen
|
|
Director
|
|
February 22, 2018
|
|
|
|
|
|
/S/ SUZANNE NORA JOHNSON
Suzanne Nora Johnson
|
|
Director
|
|
February 21, 2018
|
|
|
|
|
|
/S/ STEPHEN W. SANGER
Stephen W. Sanger
|
|
Director
|
|
February 21, 2018
|
|
|
|
|
|
A.
|
Data Privacy.
For Participants outside the U.S.,
you acknowledge receipt of the Employee Personal Information Protection Notice, which was previously provided by your local HR. The Notice governs the collection, use and transfer of your personal information to Fidelity Stock Plan Services (or any other broker designated by Pfizer), or their respective agents, which is necessary for your participation in the Plan. A hard copy of the Notice may be obtained from Pfizer.
|
B.
|
Nature of Grant.
In accepting the 2018 Award, you acknowledge, understand and agree that:
|
i.
|
The Plan is established voluntarily by Pfizer, it is discretionary in nature and it may be modified, amended, suspended or terminated by Pfizer at any time as set forth in the Plan.
|
ii.
|
The grant of the 2018 Award is exceptional, voluntary and occasional, and does not create any contractual or other right to receive future grants of Awards, or benefits in lieu of Awards, even if Awards have been granted in the past.
|
iii.
|
All decisions with respect to future Award grants, if any, will be at the sole discretion of Pfizer.
|
iv.
|
You voluntarily participate in the Plan.
|
v.
|
The future value of the underlying shares is unknown, indeterminable and cannot be predicted with certainty.
|
vi.
|
The 2018 Award and the shares subject to the 2018 Award, and the income and value of same, are not intended to replace any pension rights or compensation.
|
vii.
|
If the underlying shares do not increase in value, the 2018 Award may have no value or may decrease in value, as applicable.
|
viii.
|
The 2018 Award and the shares subject to the 2018 Award, and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, holiday pay, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments.
|
ix.
|
For purposes of the 2018 Award, your employment or other services will be considered terminated as of the date you are no longer actively providing services to Pfizer or your Employer (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed, any applicable collective agreement or the terms of your employment agreement, if any) and subject to the terms and conditions set forth in the Points of Interest document, your right to vest in Awards under the Plan, if any, will terminate as of such date and will not be extended by any notice period (
e.g.
, your period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under local law, any applicable collective agreement or the terms of your employment agreement, if any); the Committee shall have the exclusive discretion to determine when you are no longer actively providing services for purposes of your 2018 Award (including whether you may still be considered to be providing services while on an approved leave of absence).
|
x.
|
Unless otherwise provided in the Plan or by Pfizer in its discretion, the 2018 Award and the benefits evidenced by this Agreement do not create any entitlement to have the 2018 Award or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting Pfizer’s shares.
|
xi.
|
Unless otherwise agreed with Pfizer, the 2018 Award and the shares subject to the 2018 Award, and the income and value of same, are not granted as consideration for, or in connection with, the service you may provide as a director of an Affiliate of Pfizer.
|
xii.
|
Pfizer is not providing any tax, legal or financial advice, nor is Pfizer making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying shares.
|
xiii.
|
You are hereby advised to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.
|
xiv.
|
The following provisions apply only if you provide services outside the United States:
|
a.
|
The 2018 Award and the shares subject to the 2018 Award are not part of normal or expected compensation for any purpose.
|
b.
|
No claim or entitlement to compensation or damages shall arise from forfeiture of the 2018 Award resulting from your ceasing to provide employment or other services to Pfizer or your Employer (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed, any applicable collective agreement or the terms of your employment agreement, if any). In consideration of the grant of the 2018 Award, you agree not to institute any claim against Pfizer and/or your Employer or any other Affiliate.
|
c.
|
Pfizer and/or your Employer and any other Affiliate shall not be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the 2018 Award or of any amounts due to you pursuant to the settlement of the 2018 Award or the subsequent sale of any shares acquired under the 2018 Award.
|
C.
|
No Contract of Employment.
The 2018 Award is not a contract of employment between the Company and you. You retain the right to terminate your employment with Pfizer or one of its Affiliates as applicable, and Pfizer and its Affiliates as applicable, retain the right to terminate or modify the terms of your employment, subject to any rights retained by either party under your employment agreement, if you have an employment agreement, and no loss of rights, contingent or otherwise, under this 2018 Award upon termination of employment shall be claimed by you as an element of damages in any dispute over such termination of employment.
|
D.
|
Non-transferability of 2018 Award.
The 2018 Award is not transferable by you other than by Will or the laws of descent and distribution.
|
E.
|
Rights as a Stockholder.
Neither the Participant nor any person claiming under or through the Participant shall have any rights or privileges as a stockholder of Pfizer in respect of any shares of Pfizer common stock deliverable pursuant to the 2018 Award, unless and until such shares have been issued upon settlement of the 2018 Award.
|
F.
|
Compliance with Laws and Regulations.
The 2018 Award and the obligation of Pfizer to issue or deliver shares hereunder shall be subject in all respects to (i) all applicable federal, state and local laws, rules and regulations and (ii) any registration, qualification, approvals or other requirements imposed by any government or regulatory agency or body which the Committee shall, in its discretion, determine to be necessary or applicable. Moreover, the 2018 Award may not be settled if its settlement, or the receipt of shares pursuant thereto, would be contrary to applicable law. If at any time Pfizer determines, in its discretion, that the listing, registration or qualification of shares upon any national securities exchange or under any state, federal or local law, or the consent or approval of any governmental regulatory body, is necessary or desirable, Pfizer shall not be required to deliver any certificates for shares to the Participant or any other person pursuant to this Agreement, unless and until such listing, registration, qualification, consent or approval has been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Company.
|
G.
|
Electronic Delivery and Acceptance.
Pfizer may, in its sole discretion, decide to deliver any documents related to participation in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by Pfizer, Fidelity Stock Plan Services or another third party designated by Pfizer.
|
H.
|
Severability.
The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
|
I.
|
Termination of Employment Due to Retirement.
Notwithstanding the definition of Retirement set forth above, if Pfizer receives an opinion of counsel that there has been a legal judgment and/or legal development in your jurisdiction that would likely result in the favorable retirement treatment that applies to the 2018 Award being deemed unlawful and/or discriminatory, then the Committee will not apply the favorable retirement treatment at the time of your separation from your Employer or Pfizer and your 2018 Award will be treated as it would under the rules that apply if your employment with your Employer or Pfizer ends for the reasons set forth in Section II(A) (Not Retirement Eligible) of this Agreement.
|
J.
|
Governing Law and Venue.
The 2018 Award and the provisions of this Agreement are governed by, and subject to, United States federal and New York State law, except for the body of law pertaining to conflict of laws, as provided in the Plan, and the requirements of the New York Stock Exchange. For purposes of litigating any dispute that arises under the 2018 Award or this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of New York, agree that such litigation shall be conducted in the courts of New York County, New York, or the federal courts for the United States for the Southern District of New York, where this grant is made and/or to be performed.
|
K.
|
Insider Trading Restrictions/Market Abuse Laws.
You acknowledge that you may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including the United States and your country of residence, which may affect your ability to acquire or sell shares or rights to shares (
e.g.
, the 2018 Award) under the Plan during such times as you are considered to have “inside information” regarding Pfizer (as defined by the laws in your country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable insider trading policy of Pfizer. You acknowledge that it is your responsibility to comply with any applicable restrictions, and you are advised to speak to your personal legal advisor on this matter.
|
L.
|
Foreign Asset/Account Reporting Requirements, Exchange Controls and Tax Requirements.
Your country may have certain foreign asset and/or account reporting requirements and exchange controls, which may affect your ability to acquire or hold shares under the Plan or cash received from participating in the Plan (including from any dividends received or sale proceeds arising from the sale of shares) in a brokerage or bank account outside your country. You may be required to report such accounts, assets or transactions to the tax or other authorities in your country. You also may be required to repatriate sale proceeds or other funds received as a result of your participation in the Plan to your country through a designated bank or broker and/or within a certain time after receipt. In addition, you may be subject to tax payment and/or reporting obligations in connection with any income realized under the Plan and/or from the sale of shares. You acknowledge that it is your responsibility to be compliant with all such requirements, and that you should consult your personal legal and tax advisors, as applicable, to ensure compliance.
|
M.
|
Language.
If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
|
N.
|
Additional Terms and Conditions that Apply to Grants in Certain Countries & Imposition of Other Requirements.
Any Awards granted to you under the Plan are also subject to the additional terms and conditions for your country, if any, as set forth in
Part 10 of the Points of Interest
document available on HR
On Demand
> Compensation & Stock > Stock Awards > Document Library. Moreover, if you relocate to one of the countries subject to additional terms and conditions, the additional terms and conditions for such country will apply to you to the extent that Pfizer determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. Pfizer reserves the right to impose any additional country-specific and/or other requirements on your participation in the Plan, on the 2018 Award, including requiring the immediate forced sale of shares issuable upon settlement, and on any shares acquired under the Plan to the extent Pfizer determines it is necessary or advisable for legal or administrative reasons, and to require you to accept any additional agreements or undertakings that may be necessary to accomplish the foregoing.
|
O.
|
Waiver.
You acknowledge that a waiver by Pfizer of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by yourself or any other participant.
|
Employment Change Due To:
|
Vested Stock Options
|
Unvested Stock Options
|
Unvested RSUs
|
Vested TSRUs
|
Unvested TSRUs
|
Termination of Employment
|
|
|
|
|
|
… for reasons other than death, total and permanent disability, retirement, restructuring, without cause within 24 months following a change in control, or Cause
|
… expire three months following the date of termination, but not beyond the expiration date of the grant.
|
…are forfeited on the date of termination.
|
… are forfeited on the date of termination.
|
… are settled on the Settlement Date.
|
… are forfeited on the date of termination.
|
|
|
|
|
|
|
… for Cause
|
… are forfeited on the date of termination and previously paid amounts may be subject to repayment.
|
… are forfeited on the date of termination and previously paid amounts may be subject to repayment.
|
… are forfeited on the date of termination and previously paid amounts may be subject to repayment.
|
… are forfeited on the date of termination and previously paid amounts may be subject to repayment.
|
… are forfeited on the date of termination and previously paid amounts may be subject to repayment.
|
Retirement
|
|
|
|
|
|
… may be exercised for the remainder of the full term of the grant.
|
…are forfeited if you retire
prior to the first anniversary of the date of grant.
|
… are forfeited if retirement is
prior to first anniversary of date of grant.
|
… are settled on the Settlement Date.
|
… are forfeited if retirement is
prior to first anniversary of date of grant.
|
|
|
|
|
|
|
|
|
… will continue to become exercisable according to the schedule provided in this POI document
if you retire on or after the first anniversary of the date of grant.
Generally, you will have the remainder of the stock option term to exercise the stock options.
|
…. if retirement is
on or
after the first anniversary of the date of grant,
will continue to vest and be paid according to the schedule in this POI document.
|
|
… if retirement is
on or
after the first anniversary of date of grant
, will continue to vest according to the schedule in this POI document and will be settled on the Settlement Date
.
|
|
While on approved Leave of Absence
|
… may be exercised for the remainder of the stock option term.
|
…will continue to become exercisable according to the schedule provided in this POI document.
|
... will continue to vest and be paid according to the schedule in this POI document.
|
… are settled on the Settlement Date.
|
… will continue to vest according to the schedule in this POI document and will be settled on the Settlement Date.
|
Employment Change Due To:
|
Vested Stock Options
|
Unvested Stock Options
|
Unvested RSUs
|
Vested TSRUs
|
Unvested TSRUs
|
Total and Permanent Disability and Approved for Long-Term Disability by Termination
|
… may be exercised for the remainder of the stock option term.
|
… vest as of the date of the event and immediately become exercisable for the remainder of the term.
|
… will continue to vest and be paid according to the schedule in this POI document.
|
… are settled on the Settlement Date.
|
… will continue to vest according to the schedule in this POI document and will be settled on the Settlement Date.
|
Termination of Employment Sale of Business/Plant Closing/Restructuring and
|
|
|
|
|
|
… not eligible for retirement
|
… may be exercised up to three months from the date of event, but not beyond the expiration date of the grant.
|
… vest as of the date of the event and immediately become exercisable for up to three months from the date of the event but not beyond the expiration date of the grant.
|
… a prorated portion will be paid
.
|
… are settled on the Settlement Date.
|
… a prorated portion will continue to vest according to the schedule in this POI document and are settled on the Settlement Date.
|
|
|
|
|
|
|
… eligible for retirement and the event is prior to the first anniversary of grant date
|
… not applicable.
|
… become immediately exercisable for up to three years from the date of the event but not beyond the expiration date of the grant.
|
… a prorated portion will be paid
.
|
… are settled on the Settlement Date.
|
… a prorated portion will continue to vest according to the schedule in this POI document and are settled on the Settlement Date.
|
|
|
|
|
|
|
… eligible for retirement and the event is after first anniversary of grant date
|
… may be exercised for the remainder of the full term of the grant.
|
... will continue to become exercisable, for up to the full term of the grant, according to the schedule provided in this POI document.
|
… will continue to vest and be paid according to the schedule in this POI document.
|
… are settled on the Settlement Date.
|
… will continue to vest according to the schedule in this POI document and are settled on the Settlement Date.
|
INTRODUCTION
|
|
|
1
|
PART A
|
|
ADMINISTRATIVE AND GENERAL SECTIONS APPLICABLE TO ALL PARTICIPANTS
|
A-1
|
ARTICLE 1
|
|
INTRODUCTION
|
A-1
|
|
1.1
|
Application of Part A
|
A-1
|
|
1.2
|
Legal Compliance
|
A-1
|
ARTICLE 2
|
|
DEFINITIONS
|
A-1
|
|
2.1
|
Affiliate
|
A-1
|
|
2.2
|
Associate Company
|
A-2
|
|
2.3
|
Beneficiary
|
A-2
|
|
2.4
|
Board of Directors
|
A-2
|
|
2.5
|
Business Day
|
A-2
|
|
2.6
|
Code
|
A-2
|
|
2.7
|
Commencement Date
|
A-2
|
|
2.8
|
Committee
|
A-2
|
|
2.9
|
Company
|
A-2
|
|
2.10
|
Effective Date
|
A-3
|
|
2.11
|
Eligible Employee
|
A-3
|
|
2.12
|
Employee
|
A-3
|
|
2.13
|
ERISA
|
A-3
|
|
2.14
|
Freeze Date
|
A-3
|
|
2.15
|
Grandfathered Benefits
|
A-3
|
|
2.16
|
Key Employee
|
A-3
|
|
2.17
|
Merged Plan
|
A-3
|
|
2.18
|
NonGrandfathered Benefits
|
A-4
|
|
2.19
|
Part of the Plan
|
A-4
|
|
2.20
|
Participant
|
A-4
|
|
2.21
|
PCPP
|
A-4
|
|
2.22
|
PCPP PR
|
A-4
|
|
2.23
|
Plan
|
A-4
|
|
2.24
|
Plan Year
|
A-4
|
|
2.25
|
Prior Plan
|
A-4
|
|
2.26
|
PSSP
|
A-5
|
|
2.27
|
Puerto Rico Code
|
A-5
|
|
2.28
|
Puerto Rico Participant
|
A-5
|
|
2.29
|
Regulation
|
A-5
|
|
2.30
|
Retirement Plan
|
A-5
|
|
2.31
|
Searle PR Plan
|
A-5
|
|
2.32
|
Separation from Service
|
A-5
|
|
2.33
|
Spouse
|
A-5
|
ARTICLE 3
|
|
COMMITTEES
|
A-6
|
|
3.1
|
Appointment of Committees
|
A-6
|
|
3.2
|
Duties, Powers and Responsibilities of the Committee
|
A-6
|
|
3.3
|
Delegation
|
A-6
|
|
3.4
|
Indemnification and Payment of Expenses
|
A-6
|
|
3.5
|
Claims Procedures
|
A-6
|
|
3.6
|
Statute of Limitations
|
A-7
|
ARTICLE 4
|
|
AMENDMENT OF PLAN
|
A-8
|
|
4.1
|
Amendment
|
A-8
|
|
4.2
|
Termination
|
A-8
|
|
4.3
|
Restrictions
|
A-8
|
ARTICLE 5
|
|
ABSENCE OF FUNDING
|
A-9
|
|
5.1
|
Unfunded Plan
|
A-9
|
|
5.2
|
Creation of a Rabbi Trust
|
A-9
|
ARTICLE 6
|
|
CHANGES IN ELECTED PAYMENT FORMS, DEFERRALS, AND OTHER DELAYS
|
A-9
|
|
6.1
|
Modifying a Payment Form
|
A-9
|
|
6.2
|
Mandated Six-Month Delay for Key Employees
|
A-10
|
|
6.3
|
Other Permitted Delays
|
A-10
|
|
6.4
|
Notional Transfers
|
A-11
|
ARTICLE 7
|
|
TAX WITHHOLDING AND RELATED PAYMENT ACCELERATION
|
A-11
|
|
7.1
|
Tax Reporting and Payment
|
A-11
|
|
7.2
|
De Minimus Benefits
|
A-11
|
|
7.3
|
Other Acceleration of Payment
|
A-12
|
ARTICLE 8
|
|
BENEFIT ALIENATION RULES
|
A-12
|
|
8.1
|
No Transfer or Assignment
|
A-12
|
|
8.2
|
Offset by an Associate Company
|
A-12
|
|
8.3
|
No Duplicate Benefits
|
A-12
|
ARTICLE 9
|
|
MISCELLANEOUS
|
A-13
|
|
9.1
|
Errors in Calculating Lump Sum Option Payments
|
A-13
|
|
9.2
|
Additional Payments that Cannot be Made under a Retirement Plan
|
A-13
|
|
9.3
|
Beneficiary Designation
|
A-13
|
|
9.4
|
Limitation of Participant’s Rights
|
A-13
|
|
9.5
|
Facilitation of Payment
|
A-14
|
|
9.6
|
Notices
|
A-14
|
|
9.7
|
No Limitation on Company Actions
|
A-14
|
|
9.8
|
Governing Law
|
A-14
|
|
9.9
|
Headings
|
A-14
|
|
9.10
|
Gender, Singular and Plural
|
A-14
|
|
9.11
|
Severability
|
A-14
|
|
9.12
|
Discretion of the Board of Directors and the Committee
|
A-14
|
|
9.13
|
Inability to Locate Payee
|
A-15
|
|
9.14
|
Payments to Minors and Incompetents
|
A-15
|
|
9.15
|
Legal Counsel for Plan
|
A-15
|
|
9.16
|
Currency Exchange
|
A-15
|
|
9.17
|
Miscellaneous
|
A-15
|
PART B
|
|
PROVISIONS APPLICABLE TO THE PFIZER SUB-PLAN
|
B-1
|
ARTICLE 1
|
|
INTRODUCTION
|
B-1
|
ARTICLE 2
|
|
DEFINITIONS
|
B-1
|
ARTICLE 3
|
|
ELIGIBILITY
|
B-1
|
ARTICLE 4
|
|
SUPPLEMENTAL BENEFITS
|
B-2
|
|
4.1
|
Benefit Amount
|
B-2
|
|
4.2
|
Adjustment to Benefit Amount
|
B-1
|
|
4.3
|
Pfizer Enhanced Employee Separation Program
|
B-2
|
ARTICLE 5
|
|
DISTRIBUTIONS
|
B-2
|
|
5.1
|
Grandfathered Benefits
|
B-2
|
|
5.2
|
NonGrandfathered Benefits
|
B-2
|
|
5.3
|
Transition Elections
|
B-3
|
|
5.4
|
Death
|
B-3
|
|
5.5
|
Disability
|
B-4
|
|
5.6
|
Automatic Cash Out
|
B-4
|
|
5.7
|
Deferral of Payment
|
B-4
|
|
5.8
|
In-Service Notional Transfers
|
B-5
|
PART C
|
|
TERMS APPLICABLE TO THE WARNER-LAMBERT SUB-PLAN
|
C-1
|
ARTICLE 1
|
|
INTRODUCTION
|
C-1
|
ARTICLE 2
|
|
DEFINITIONS
|
C-1
|
ARTICLE 3
|
|
ELIGIBILITY FOR SUPPLEMENTAL PENSION INCOME
|
C-3
|
ARTICLE 4
|
|
PENSION INCOME OBJECTIVE
|
C-4
|
ARTICLE 5
|
|
BASIC PENSION INCOME
|
C-5
|
ARTICLE 6
|
|
SUPPLEMENTAL PENSION INCOME
|
C-6
|
ARTICLE 7
|
|
SUPPLEMENTAL RETIREMENT PLAN INCOME
|
C-8
|
ARTICLE 8
|
|
ABSENCE OF FUNDING
|
C-9
|
ARTICLE 9
|
|
ADMINISTRATION
|
C-9
|
ARTICLE 10
|
|
MANNER OF PAYMENT OF SUPPLEMENTAL PENSION INCOME
|
C-9
|
ARTICLE 11
|
|
MISCELLANEOUS
|
C-9
|
ARTICLE 12
|
|
AMENDMENT
|
C-10
|
ARTICLE 13
|
|
EFFECT OF CERTAIN EVENTS
|
C-10
|
ARTICLE 14
|
|
LUMP SUM PAYMENT
|
C-11
|
PART D
|
|
TERMS APPLICABLE TO PHARMACIA SUB-PLAN
|
D-1
|
ARTICLE 1
|
|
INTRODUCTION
|
D-1
|
ARTICLE 2
|
|
DEFINITIONS
|
D-1
|
ARTICLE 3
|
|
ELIGIBILITY
|
D-3
|
ARTICLE 4
|
|
SUPPLEMENTAL BENEFIT
|
D-3
|
ARTICLE 5
|
|
DISTRIBUTION OF SUPPLEMENTAL BENEFIT
|
D-4
|
PART E
|
|
TERMS APPLICABLE TO WYETH SUB-PLAN
|
E-1
|
ARTICLE 1
|
|
INTRODUCTION
|
E-1
|
ARTICLE 2
|
|
DEFINITIONS
|
E-1
|
ARTICLE 3
|
|
PARTICIPATION
|
E-6
|
ARTICLE 4
|
|
PLAN FORMULA AND VESTING
|
E-7
|
ARTICLE 5
|
|
PAYMENT ELECTIONS
|
E-9
|
ARTICLE 6
|
|
DEATH BENEFITS
|
E-14
|
ARTICLE 7
|
|
NOTIONAL ROLLOVERS AT SEPARATION
|
E-17
|
APPENDIX A
|
|
EARLY COMMENCEMENT FACTORS
|
E-18
|
PART F
|
|
TERMS APPLICABLE TO THE A.L. PHARMA SUB-PLAN
|
F-1
|
ARTICLE 1
|
|
INTRODUCTION
|
F-1
|
ARTICLE 2
|
|
ELIGIBILITY AND BENEFITS
|
F-1
|
ARTICLE 3
|
|
PAYMENTS
|
F-2
|
•
|
Warner-Lambert Supplemental Pension Income Plan
|
•
|
Pharmacia Supplemental Pension Plan
|
•
|
Wyeth Supplemental Executive Retirement Plan
|
•
|
A.L. Pharma Inc. Supplemental Pension Plan;
|
•
|
Reflect the foregoing plan mergers,
|
•
|
Incorporate other previously adopted amendments to the Plan and the Merged Plans,
|
•
|
Clarify certain language in the Plan and the Merged Plans, and
|
•
|
Modify the Plan terms to reflect any additional desired changes.
|
•
|
Part A comprises administrative and general provisions applicable to all Plan Participants.
|
•
|
Parts B through F apply with respect to individuals who were Participants (or their Beneficiaries) under the applicable Merged Plan referenced herein, as in effect immediately prior to the Effective Date, as follows:
|
◦
|
Part B: Pfizer Inc Nonfunded Supplemental Retirement Plan
|
◦
|
Part C: Warner-Lambert Supplemental Pension Income Plan
|
◦
|
Part D: Pharmacia Supplemental Pension Plan
|
◦
|
Part E: Wyeth Supplemental Executive Retirement Plan
|
◦
|
Part F: A.L. Pharma Inc. Supplemental Pension Plan
|
1.1
|
Application of Part A
|
1.2
|
Legal Compliance
|
2.1
|
Affiliate
|
2.2
|
Associate Company
|
2.3
|
Beneficiary
|
2.4
|
Board of Directors
|
2.5
|
Business Day
|
2.6
|
Code
|
2.7
|
Commencement Date
|
2.8
|
Committee
|
2.9
|
Company
|
2.10
|
Effective Date
|
2.11
|
Eligible Employee
|
2.12
|
Employee
|
2.13
|
ERISA
|
2.14
|
Freeze Date
|
2.15
|
Grandfathered Benefits
|
2.16
|
Key Employee
|
2.17
|
Merged Plan
|
2.18
|
NonGrandfathered Benefits
|
2.19
|
Part of the Plan
|
2.20
|
Participant
|
2.21
|
PCPP
|
2.22
|
PCPP PR
|
2.23
|
Plan
|
2.24
|
Plan Year
|
2.25
|
Prior Plan
|
2.26
|
PSSP
|
2.27
|
Puerto Rico Code
|
2.28
|
Puerto Rico Participant
|
2.29
|
Regulation
|
2.30
|
Retirement Plan
|
2.31
|
Searle PR Plan
|
2.32
|
Separation from Service
|
2.33
|
Spouse
|
3.1
|
Appointment of Committees
|
3.2
|
Duties, Powers and Responsibilities of the Committee
|
3.3
|
Delegation
|
3.4
|
Indemnification and Payment of Expenses
|
3.5
|
Claims Procedures
|
3.6
|
Statute of Limitations
|
4.1
|
Amendment
|
4.2
|
Termination
|
4.3
|
Restrictions
|
5.1
|
Unfunded Plan
|
5.2
|
Creation of a Rabbi Trust
|
6.1
|
Modifying a Payment Form
|
6.2
|
Mandated Six-Month Delay For Key Employees
|
6.3
|
Other Permitted Delays
|
6.4
|
Notional Transfers
|
7.1
|
Tax Reporting and Payment
|
7.2
|
De Minimus Benefits
|
8.1
|
No Transfer or Assignment
|
8.2
|
Offset by an Associate Company
|
8.3
|
No Duplicate Benefits
|
9.2
|
Additional Payments that Cannot be Made under a Retirement Plan
|
Applicable Part of the Plan
|
Applicable Part of the PCPP
|
Appendix to the Applicable Part of the PCPP
|
B
|
B
|
B
|
C (NonGrandfathered Benefits)
|
C
|
K
|
D
|
D
|
F
|
9.3
|
Beneficiary Designation
|
9.4
|
Limitation of Participant’s Rights
|
9.5
|
Facilitation of Payment
|
9.6
|
Notices
|
9.7
|
No Limitation on Company Actions
|
9.8
|
Governing Law
|
9.9
|
Headings
|
9.10
|
Gender, Singular and Plural
|
9.11
|
Severability
|
9.12
|
Discretion of the Board of Directors and the Committee
|
9.13
|
Inability to Locate Payee
|
9.14
|
Payments to Minors and Incompetents
|
9.15
|
Legal Counsel for Plan
|
9.16
|
Currency Exchange
|
9.17
|
Miscellaneous
|
4.1
|
Benefit Amount
|
4.2
|
Adjustment to Benefit Amount
|
4.3
|
Pfizer Enhanced Employee Separation Program
|
5.1
|
Grandfathered Benefits.
|
5.2
|
NonGrandfathered Benefits.
|
5.3
|
Transition Elections.
|
5.4
|
Death.
|
5.5
|
Disability.
|
5.6
|
Automatic Cash Out.
|
5.7
|
Deferral of Payment.
|
5.8
|
In-Service Notional Transfers
|
(i)
|
3.36% for each year of his Service after he attains age 45, up to 10 years; plus
|
(ii)
|
2.24% for each year of his Service after he attains age 45, in excess of 10 and up to 20 years times his Average Final Compensation. No period of Service after Normal Retirement Date shall be taken into account in determining a Pension Income Objective, except as otherwise required by law.
|
Age
|
Years of Service
|
||||||||||
|
≥15
|
14
|
13
|
12
|
11
|
10
|
9
|
8
|
7
|
6
|
5
|
65
|
56.0
|
52.4
|
48.8
|
45.2
|
41.6
|
38.0
|
34.4
|
30.8
|
27.2
|
23.6
|
20.0
|
64
|
54.4
|
51.2
|
47.9
|
44.5
|
41.0
|
37.6
|
34.0
|
30.4
|
26.8
|
23.3
|
19.7
|
63
|
52.8
|
50.0
|
46.9
|
43.8
|
40.5
|
37.1
|
33.6
|
30.0
|
26.5
|
22.9
|
19.4
|
62
|
51.2
|
48.8
|
46.0
|
43.0
|
39.9
|
36.7
|
33.1
|
29.6
|
26.1
|
22.6
|
19.0
|
Retirement Age
|
|
Maximum Objective
|
|
|
|
65
|
|
56.0%
|
64
|
|
54.4%
|
63
|
|
52.8%
|
62
|
|
51.2%
|
INCUMBENT
|
POSITION
|
Bourne, James P.
|
President OTC/Shave Products – Japan
|
Corr, Peter B.
|
Vice President & President, Warner-Lambert/Parke-Davis Research & Development
|
Craig, John S.
|
Vice President & President, Adams – USA
|
Cresswell, Ronald M.
|
Senior Vice President & Chief Scientific Officer
|
De Vink, Lodewijk Jr
|
Chairman of the Board, President and Chief Executive Officer
|
Fino, Raymond M.
|
Senior Vice President, Human Resources
|
Gross, Philip M.
|
Senior Vice President, Strategic Management Processes
|
Johnson, Gregory L.
|
Senior Vice President & General Counsel
|
Larini, Ernest J.
|
Chief Financial Officer & Executive Vice President, Administration
|
Lazo, Jorge F.
|
Senior Vice President & President, Adams Sector
|
Morton, Saunders M.
|
Senior Vice President & President, Consumer Healthcare Sector
|
Oberkfell, Harold F.
|
Vice President, Knowledge Management
|
Renshaw, Maurice A.
|
Vice President & President, Parke-Davis – USA
|
Thomas, Barbara S.
|
Vice President & President, Consumer Healthcare – USA
|
Walsh, John F.
|
Vice President & President, Shaving Products Group
|
Wild, Anthony H.
|
Executive Vice President & President, Pharmaceutical Sector
|
Keelty, Richard
|
Senior Vice President, Public Affairs
|
1.
|
The portion of a Participant’s Plan Benefit which is a Grandfathered Benefit (and the procedures applicable to a Participant’s election to receive such Grandfathered Benefit, which are set forth in Section 5.2) shall be based upon the terms of the Prior Plan and the Retirement Plan in effect immediately prior to the 2005 Restatement Date, disregarding for this purpose any change or amendment to the terms of the Retirement Plan effective after October 3, 2004 that would result in any material modification, within the meaning of Section 409A of the Grandfathered Benefit.
|
2.
|
The Grandfathered Benefit of a Puerto Rico Participant shall comprise (i) the portion of his Plan Benefit that was earned and vested as of December 31, 2004 and (ii) the portion of his Plan Benefit that was earned or vested on or alter January 1, 2005, but only in the event such Puerto Rico Participant does not become employed by the Company in the United States (other than in Puerto Rico) on or after January 1, 2005.
|
3.
|
A Participant’s Grandfathered Benefit shall not be increased if the payment of the Grandfathered Benefit is made after the Participant’s Normal Retirement Date.
|
1.
|
Participants Who Are Not Retirement Eligible
. If a Participant who is not Retirement Eligible at the time of his Separation from Service has elected prior to, or in connection with, his Separation from Service the Lump-Sum Option for the payment of his Grandfathered Benefit, such Lump-Sum Option shall be paid on the later of (i) the first day of the first month following the expiration of the Payment Delay Period and (ii) the first day of the month coincident with or next following the month in which the Participant attains age 55.
|
2.
|
Participants Who Are Retirement Eligible
. If a Participant who is Retirement Eligible at the time of his Separation from Service has elected prior to, or in connection with, his Separation from Service the Lump-Sum Option for the payment of his Grandfathered Benefit, such Lump-Sum Option shall be paid on the first day of the first month following the end of the Payment Delay Period.
|
1.
|
“
Single Life Annuity
” means a Participant’s Grandfathered Benefit and/or NonGrandfathered Benefit, as applicable, payable as an annuity in equal monthly installments over the life of the Participant, commencing as of the Payment Date and terminating in the month in which the Participant dies, with no further payments thereafter.
|
2.
|
“
25, 50, 75 or 100% Joint and Survivor Annuity
” means a Participant’s actuarially reduced Grandfathered Benefit and/or NonGrandfathered Benefit, as applicable, payable as an annuity in equal monthly installments over the life of the Participant, commencing as of the Payment Date and terminating in the month in which the Participant dies, with a survivor contingent annuity for the life of the Participant’s surviving contingent annuitant, commencing in the month following the month in which the Participant died and terminating in the month in which the Participant’s surviving contingent annuitant dies, which is either 25%, 50%, 75% or 100% of the monthly payment to the Participant, as elected by the Participant. Following such contingent annuitant’s death, no further payments shall be made.
|
3.
|
“
Ten Year Certain and Life Option
” means a Participant’s actuarially reduced Grandfathered Benefit and/or NonGrandfathered Benefit, as applicable, payable in monthly installments over the life of the Participant, commencing as of the Payment Date, with a guarantee that if the Participant dies within 120 months (
i.e.
, ten years) of the applicable Payment Date, such reduced Grandfathered Benefit and/or NonGrandfathered Benefit, as applicable, shall be paid to the Participant’s Beneficiary the balance of the 120 month (
i.e.
, ten year) for guaranteed period in the month following the month in which the date of the Participant’s death occurs, or, upon the Participant’s death, if the Participant’s Beneficiary so elects with respect to the Grandfathered Benefit, the commuted value of the remaining payments shall be paid to such Beneficiary in a lump-sum amount. If the Participant survives the 120 month (
i.e.
, ten year) guaranteed period, he shall continue to receive the actuarially reduced Grandfathered Benefit and/or NonGrandfathered Benefit, as applicable, through the month in which the Participant dies.
|
4.
|
“
Lump-Sum Option
” means the actuarial equivalent of a Participant’s Grandfathered Benefit and/or NonGrandfathered Benefit, as applicable, payable in a cash lump sum on the Payment Date.
|
5.
|
“
DCP Option
” means the actuarial equivalent of a Participant’s Grandfathered Benefit and/or NonGrandfathered Benefit, as applicable (or the applicable portion thereof) that the Participant elects, in accordance with the terms of the Plan, to convert into a cash lump-sum amount to be credited in a Valid Notional Rollover to the DCP. A Participant who elects the DCP Option with respect to some or all of his Grandfathered Benefit shall be subject to the applicable terms and provisions of the Prior DCP and shall have the amount of the Valid Notional Rollover credited to the Prior DCP. A Participant who elects or contingently elects the DCP Option with respect to some or all of his NonGrandfathered Benefit shall be subject to the applicable terms and provisions of the New DCP, shall be required to make his payment elections under the New DCP at the time the DCP Option is elected and shall have the amount of the Valid Notional Rollover credited to the New DCP.
|
1.
|
For purposes of calculating the amount of the death benefit under Section 6.3 or 6.4, as applicable, the Participant shall be deemed to have been survived by a surviving Spouse of the opposite gender with a date of birth that is the same as the date of birth of the Participant.
|
2.
|
The actuarial equivalent (determined in accordance with Section 5.6(b)) of the benefit described in Section 6.3 or Section 6.4, as applicable, shall be paid to the estate of the Participant in the January following the calendar year in which the Participant’s death occurs.
|
3.
|
Any survivor benefit provided by this Section 6.6 shall be treated as a NonGrandfathered Benefit for purposes of the Plan (even if it is calculated with respect to the Participant’s Grandfathered Benefit) and shall be payable only in a lump-sum and not in any other form of payment.
|
1.
|
New Sections are added as additional definitions in Article II to read as follows and the Sections in Article II shall be renumbered as appropriate:
|
2.
|
Section 2.31 is amended to add the following language to the end thereof to read as follows:
|
3.
|
Section 3.5 is amended to add new subsection (c) to read as follows:
|
4.
|
The first sentence of Section 5.1 is amended to read as follows:
|
5.
|
New Appendix E is added to read as follows:
|
6.
|
New Appendix F is added to read as follows:
|
1.
|
Anacor Employees shall be eligible to participate in the Plan on and after September 1, 2017.
|
2.
|
Hospira Employees shall be eligible to participate in the Plan on and after January 1, 2018.
|
3.
|
Medivation Employees shall be eligible to participate in the Plan on and after January 1, 2018.
|
Award Type
|
Grant Price
|
Shares (#)
|
Dates
|
5-Year Performance Total Shareholder Return Units (“5-YR PTSRUs”)
|
[$XX.XX]
|
[###]
|
Grant Date [DATE]
Vesting Date – (See Below )
Settlement Date [DATE]
|
Award Type
|
Grant Price
|
Shares (#)
|
Dates
|
5-Year Performance Total Shareholder Return Units (“5-YR PTSRUs”)
|
[$XX.XX]
|
[###]
|
Grant Date – [DATE]
Vesting Date – See Below
Settlement Date – [DATE]
|
Restricted Stock Units (“RSUs”)
|
[$XX.XX]
|
[###]
|
Grant Date – [DATE]
Vesting Date – [DATE]
|
|
|
Year Ended December 31,
|
||||||||||||||||||
(MILLIONS OF DOLLARS, EXCEPT RATIOS)
|
|
2017
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Determination of earnings:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations before provision for taxes on income, noncontrolling interests and cumulative effect of a change in accounting principles
|
|
$
|
12,305
|
|
|
$
|
8,351
|
|
|
$
|
8,965
|
|
|
$
|
12,240
|
|
|
$
|
15,716
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Noncontrolling interests
|
|
57
|
|
|
44
|
|
|
39
|
|
|
47
|
|
|
43
|
|
|||||
Income attributable to Pfizer Inc.
|
|
12,248
|
|
|
8,307
|
|
|
8,925
|
|
|
12,192
|
|
|
15,673
|
|
|||||
Add (deduct):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Capitalized interest
|
|
(72
|
)
|
|
(61
|
)
|
|
(32
|
)
|
|
(41
|
)
|
|
(32
|
)
|
|||||
Amortization of capitalized interest
|
|
41
|
|
|
59
|
|
|
25
|
|
|
31
|
|
|
34
|
|
|||||
Equity (income)/loss from equity-method investments
|
|
(274
|
)
|
|
(49
|
)
|
|
191
|
|
|
(24
|
)
|
|
(67
|
)
|
|||||
Distributed income of equity-method investments
|
|
269
|
|
|
119
|
|
|
161
|
|
|
136
|
|
|
162
|
|
|||||
Fixed charges
|
|
1,376
|
|
|
1,285
|
|
|
1,282
|
|
|
1,435
|
|
|
1,495
|
|
|||||
Total earnings as defined
|
|
$
|
13,588
|
|
|
$
|
9,661
|
|
|
$
|
10,554
|
|
|
$
|
13,729
|
|
|
$
|
17,265
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed charges:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
(a)
|
|
$
|
1,270
|
|
|
$
|
1,186
|
|
|
$
|
1,199
|
|
|
$
|
1,360
|
|
|
$
|
1,414
|
|
Preferred stock dividends
(b)
|
|
2
|
|
|
2
|
|
|
2
|
|
|
3
|
|
|
3
|
|
|||||
Rents
(c)
|
|
105
|
|
|
97
|
|
|
81
|
|
|
72
|
|
|
78
|
|
|||||
Fixed charges
|
|
1,376
|
|
|
1,285
|
|
|
1,282
|
|
|
1,435
|
|
|
1,495
|
|
|||||
Capitalized interest
|
|
72
|
|
|
61
|
|
|
32
|
|
|
41
|
|
|
32
|
|
|||||
Total fixed charges
|
|
$
|
1,448
|
|
|
$
|
1,346
|
|
|
$
|
1,314
|
|
|
$
|
1,476
|
|
|
$
|
1,527
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of earnings to fixed charges
|
|
9.4
|
|
|
7.2
|
|
|
8.0
|
|
|
9.3
|
|
|
11.3
|
|
(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
$271 million
for
2017
;
$242 million
for
2016
;
$246 million
for
2015
;
$182 million
for
2014
; and
$222 million
for
2013
.
|
(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.
|
Pfizer Inc. 2017 Financial Report
|
|
|
|
|
2017 Financial Report
|
This Financial Report for the fiscal year ended December 31, 2017, which was filed as Exhibit 13 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2017
|
2017 Form 10-K
|
Annual Report on Form 10-K for the fiscal year ended December 31, 2017
|
AAV
|
Adeno-Associated Virus
|
ABO
|
Accumulated postretirement benefit obligation
|
ACA (Also referred to as U.S. Healthcare Legislation)
|
U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act.
|
ACIP
|
Advisory Committee on Immunization Practices
|
ALK
|
anaplastic lymphoma kinase
|
Allergan
|
Allergan plc
|
Alliance revenues
|
Revenues from alliance agreements under which we co-promote products discovered or developed by other companies or us
|
AM-Pharma
|
AM-Pharma B.V.
|
Anacor
|
Anacor Pharmaceuticals, Inc.
|
Astellas
|
Astellas Pharma U.S. Inc.
|
ASU
|
Accounting Standards Update
|
ATM-AVI
|
aztreonam-avibactam
|
Bamboo
|
Bamboo Therapeutics, Inc.
|
Baxter
|
Baxter International Inc.
|
BMS
|
Bristol-Myers Squibb Company
|
BRCA
|
BReast CAncer susceptibility gene
|
CDC
|
U.S. Centers for Disease Control and Prevention
|
Cellectis
|
Cellectis SA
|
Celltrion
|
Celltrion Inc. and Celltrion Healthcare, Co., Ltd. (collectively)
|
Citibank
|
Citibank N.A.
|
CLBP
|
chronic low back pain
|
CML
|
chronic myelogenous leukemia
|
Developed Markets
|
U.S., Western Europe, Japan, Canada, Australia, South Korea, Scandinavian countries, Finland and New Zealand
|
EEA
|
European Economic Area
|
EH
|
Essential Health
|
ELT
|
Executive Leadership Team
|
EMA
|
European Medicines Agency
|
Emerging Markets
|
Includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Eastern Europe, Africa, the Middle East, Central Europe and Turkey
|
EPS
|
earnings per share
|
EU
|
European Union
|
FASB
|
Financial Accounting Standards Board
|
FDA
|
U.S. Food and Drug Administration
|
GAAP
|
Generally Accepted Accounting Principles
|
GHD
|
growth hormone deficiency
|
GIST
|
gastrointestinal stromal tumors
|
GPD
|
Global Product Development organization
|
GS&Co.
|
Goldman, Sachs & Co.
|
HER
|
human epidermal growth factor receptor
|
HER2-
|
human epidermal growth factor receptor 2-negative
|
hGH-CTP
|
human growth hormone
|
HIS
|
Hospira Infusion Systems
|
Hisun
|
Zhejiang Hisun Pharmaceuticals Co., Ltd.
|
Hisun Pfizer
|
Hisun Pfizer Pharmaceuticals Company Limited
|
Hospira
|
Hospira, Inc.
|
HR+
|
hormone receptor-positive
|
ICU Medical
|
ICU Medical, Inc.
|
IH
|
Innovative Health
|
InnoPharma
|
InnoPharma, Inc.
|
2017 Financial Report
|
|
i
|
|
IPR&D
|
in-process research and development
|
IRC
|
Internal Revenue Code
|
IRS
|
U.S. Internal Revenue Service
|
IV
|
intravenous
|
Janssen
|
Janssen Biotech Inc.
|
J&J
|
Johnson & Johnson Corp.
|
King
|
King Pharmaceuticals, Inc.
|
LDL
|
low density lipoprotein
|
LEP
|
Legacy Established Products
|
LIBOR
|
London Interbank Offered Rate
|
Lilly
|
Eli Lilly & Company
|
LOE
|
loss of exclusivity
|
MCC
|
Merkel Cell Carcinoma
|
MCO
|
Managed Care Organization
|
MDV
|
multi-dose vial
|
Medivation
|
Medivation, Inc.
|
Merck
|
Merck & Co., Inc.
|
Moody’s
|
Moody’s Investors Service
|
NAV
|
Net asset value
|
NDA
|
new drug application
|
NovaQuest
|
NovaQuest Co-Investment Fund II, L.P. or NovaQuest Co-Investment Fund V, L.P., as applicable
|
NSCLC
|
non-small cell lung cancer
|
NYSE
|
New York Stock Exchange
|
OA
|
osteoarthritis
|
OPKO
|
OPKO Health, Inc.
|
OTC
|
over-the-counter
|
PARP
|
poly ADP ribose polymerase
|
PBM
|
Pharmacy Benefit Manager
|
PBO
|
Projected benefit obligation
|
Pharmacia
|
Pharmacia Corporation
|
PPS
|
Portfolio Performance Shares
|
PP&E
|
Property, plant & equipment
|
PSAs
|
Performance Share Awards
|
PTSRUs
|
Performance Total Shareholder Return Units
|
PTUs
|
Profit Units
|
RCC
|
renal cell carcinoma
|
recAP
|
recombinant human Alkaline Phosphatase
|
R&D
|
research and development
|
RPI
|
RPI Finance Trust
|
RSUs
|
Restricted Stock Units
|
Sandoz
|
Sandoz, Inc., a division of Novartis AG
|
Sangamo
|
Sangamo Therapeutics, Inc.
|
SEC
|
U.S. Securities and Exchange Commission
|
SGA
|
small for gestational age
|
S&P
|
Standard and Poor’s
|
SIP
|
Sterile Injectable Pharmaceuticals
|
Tax Cuts and Jobs Act or TCJA
|
H.R.1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”
|
Teuto
|
Laboratório Teuto Brasileiro S.A.
|
Teva
|
Teva Pharmaceuticals USA, Inc.
|
TSR
|
Total Shareholder Return
|
TSRUs
|
Total Shareholder Return Units
|
UC
|
urothelial carcinoma
|
U.K.
|
United Kingdom
|
U.S.
|
United States
|
VAI
|
Voluntary Action Indicated
|
VAT
|
value added tax
|
ViiV
|
ViiV Healthcare Limited
|
WRD
|
Worldwide Research and Development
|
Zoetis
|
Zoetis Inc.
|
ii
|
|
2017 Financial Report
|
|
●
|
Beginning on page
2
|
||||
|
This section provides information about the following: Financial Highlights, Our Business; Our 2017 Performance; 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 2018.
|
|
|||
●
|
Beginning on page
16
|
||||
|
This section discusses those accounting policies and estimates that we consider important in understanding our consolidated financial statements. For additional discussion of our accounting policies, see Notes to Consolidated Financial Statements—
Note 1. Basis of Presentation and Significant Accounting Policies
.
|
|
|||
●
|
Beginning on page
20
|
||||
|
This section includes a Revenues Overview section as well as the following sub-sections:
|
||||
|
Beginning on page
26
|
||||
|
This sub-section provides an overview of several of our biopharmaceutical products.
|
|
|||
|
Beginning on page
30
|
||||
|
This sub-section provides an overview of important biopharmaceutical product developments.
|
|
|||
|
Beginning on page
34
|
||||
|
This sub-section provides a discussion about our costs and expenses.
|
|
|||
|
Beginning on page
37
|
||||
|
This sub-section provides a discussion of items impacting our tax provisions.
|
|
|||
|
Beginning on page
38
|
||||
|
This sub-section provides a discussion of an alternative view of performance used by management.
|
|
|||
●
|
Beginning on page
44
|
||||
|
This section provides a discussion of
the
performance of each of our operating segments.
|
|
|||
●
|
Beginning on page
52
|
||||
|
This section provides a discussion of changes in certain components of other comprehensive income.
|
|
|||
●
|
Beginning on page
53
|
||||
|
This section provides a discussion of changes in certain balance sheet accounts, including
Accumulated other comprehensive loss
.
|
|
|||
●
|
Beginning on page
54
|
||||
|
This section provides an analysis of our consolidated cash flows for the three years ended December 31, 2017.
|
|
|||
●
|
Beginning on page
56
|
||||
|
This section provides an analysis of selected measures of our liquidity and of our capital resources as of December 31, 2017 and December 31, 2016, as well as a discussion of our outstanding debt and other commitments that existed as of December 31, 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
61
|
||||
|
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
66
|
||||
|
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 Financial Review relating to, among other things, our anticipated operating and financial performance, business plans and prospects, in-line products and product candidates, including anticipatory 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 are discussions of Financial Risk Management and Contingencies, including legal and tax matters.
|
|
2017 Financial Report
|
|
1
|
|
2017 Total Revenues––$52.5 billion
|
2017 Net Cash Flow from Operations––$16.5 billion
|
A decrease of 1% compared to 2016
|
An increase of 4% compared to 2016
|
2017 Reported Diluted EPS––$3.52
|
2017 Adjusted Diluted EPS (Non-
GAAP
)––$2.65*
|
An increase of over 100% compared to 2016
|
An increase of 11% compared to 201
6
|
*
|
For an understanding of Adjusted diluted EPS (which is a non-GAAP financial measure), including reconciliations of certain GAAP reported to non-GAAP adjusted information, see the “Non-GAAP Financial Measure (Adjusted Income)” section of this Financial Review.
|
2
|
|
2017 Financial Report
|
|
References to developed and emerging markets in this Financial Review include:
|
||
Developed markets
|
|
U.S., Western Europe, Japan, Canada, Australia, South Korea, Scandinavian countries, Finland and New Zealand
|
|
|
|
Emerging markets (include, but are not limited to)
|
|
Asia (excluding Japan and South Korea), Latin America, Eastern Europe, Africa, the Middle East, Central Europe and Turkey
|
•
|
On February 3, 2017, we completed the sale of our global infusion systems 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 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 year ended December 31, 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 year ended December 31, 2016 reflect 12 months of HIS global operations and for the year ended December 31, 2015 reflect four months of HIS U.S. operations and three months of HIS international operations. Assets and liabilities associated with HIS are presented as held for sale in the consolidated balance sheet as of December 31, 2016.
|
•
|
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. for
$1,045 million
, composed of cash and contingent consideration. 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 year ended December 31,
2017
reflect approximately 11 months 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
. The remaining consideration was paid as of
December 31, 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 year ended December 31, 2017. In accordance with our domestic and international reporting periods, our consolidated financial statements for the year ended December 31, 2016 reflect approximately three months of Medivation operations.
|
•
|
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 year ended December 31, 2017. In accordance with our domestic and international reporting periods, our consolidated financial statements for the year ended December 31, 2016 reflect approximately six months of Anacor operations.
|
•
|
On April 6, 2016, we announced that the merger agreement between Pfizer and Allergan entered into on November 22, 2015 was terminated by mutual agreement of the companies. The decision was driven by the actions announced by the U.S. Department of Treasury on April 4, 2016, which the companies concluded qualified as an “Adverse Tax Law Change” under the merger agreement. In connection with the termination of the merger agreement, on April 8, 2016 (which fell into Pfizer’s second fiscal quarter of 2016), Pfizer paid Allergan $150 million (pre-tax) for reimbursement of Allergan’s expenses associated with the terminated transaction (see the Notes to Consolidated Financial Statements––
Note 4
.
Other (Income)/Deductions
––
Net
). Pfizer and Allergan also released each other from any and all claims in connection with the merger agreement.
|
•
|
On September 3, 2015, we acquired Hospira for approximately
$16.1 billion
in cash (
$15.7 billion
, net of cash acquired). Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Hospira. In accordance with our
|
2017 Financial Report
|
|
3
|
|
*
|
LOE generally pertains to period-over-period revenue impacts for products across our portfolios experiencing patent expirations or loss of regulatory exclusivity in certain developed markets.
|
4
|
|
2017 Financial Report
|
|
(MILLIONS OF DOLLARS)
|
|
|
||
|
|
|
||
2016
Revenues
|
|
$
|
52,824
|
|
|
|
|
||
Operational growth/(decline):
|
|
|
||
Continued growth from key brands
(a)
and growth from Biosimilars
(b)
|
|
2,810
|
|
|
Increase in Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation)
|
|
450
|
|
|
Declines from Peri-LOE Products, Enbrel (driven by declines in most developed Europe markets), Viagra (IH) (in the U.S.), and our SIP and LEP portfolios, as well as a decline in Prevnar 13/Prevenar 13 (primarily in the U.S.)
|
|
(2,375
|
)
|
|
Disposition-related operational impact––February 2017 sale of HIS
(c)
|
|
(1,062
|
)
|
|
Other operational factors, net
|
|
157
|
|
|
Operational decline, net
|
|
(20
|
)
|
|
|
|
|
||
Operational revenues
|
|
52,804
|
|
|
Unfavorable impact of foreign exchange
|
|
(259
|
)
|
|
2017
Revenues
|
|
$
|
52,546
|
|
(a)
|
K
ey brands
include Ibrance and Eliquis (both globally), as well as Xeljanz and Lyrica (IH) (both primarily in the U.S.).
|
(b)
|
Growth in Biosimilars was primarily driven by Inflectra in the U.S. and developed Europe markets.
|
(c)
|
In 2017, financial results include approximately one month of HIS domestic operations and approximately two months of HIS international operations, compared to 12 months of HIS global operations in 2016.
|
(a)
|
See the Notes to Consolidated Financial Statements––
Note 4. Other (Income)/Deductions—Net.
|
(b)
|
See the “Costs and Expenses––Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this Financial Review.
|
(c)
|
See the “Costs and Expenses––Cost of Sales” section of this Financial Review.
|
(d)
|
See the “Costs and Expenses––Selling, Informational and Administrative Expenses” section of this Financial Review.
|
(e)
|
See the “Costs and Expenses––Amortization of Intangible Assets” section of this Financial Review.
|
2017 Financial Report
|
|
5
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
|
|
Product Revenues in Markets Impacted
|
||||||||||
Products
|
|
Key Dates
(a)
|
|
Markets Impacted
|
|
Year Ended December 31,
|
||||||||||
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Viagra
(b)
|
|
June 2013
May 2014 December 2017 |
|
Major European markets
Japan U.S. |
|
$
|
850
|
|
|
$
|
1,217
|
|
|
$
|
1,338
|
|
Rapamune
|
|
January 2014
June 2015 |
|
U.S.
Major European markets |
|
90
|
|
|
115
|
|
|
129
|
|
|||
Inspra
(c)
|
|
March 2014
July 2015
|
|
Major European markets
Japan
|
|
87
|
|
|
97
|
|
|
118
|
|
|||
Lyrica
(d)
|
|
July 2014
December 2018
|
|
Major European markets
U.S.
|
|
3,901
|
|
|
3,831
|
|
|
3,710
|
|
|||
Zyvox
(e)
|
|
August 2014
First half of 2015
January 2016
|
|
Japan
U.S.
Major European markets
|
|
103
|
|
|
235
|
|
|
644
|
|
|||
Enbrel
(f)
|
|
August 2015
September 2015
|
|
Major European markets
Japan
|
|
1,686
|
|
|
2,146
|
|
|
2,402
|
|
|||
Relpax
|
|
December 2015
December 2016
|
|
Major European markets
U.S.
|
|
176
|
|
|
263
|
|
|
295
|
|
|||
Vfend
|
|
July 2016
January 2016
|
|
Major European markets
Japan
|
|
150
|
|
|
299
|
|
|
349
|
|
|||
Tygacil
|
|
April 2016
|
|
U.S.
|
|
45
|
|
|
80
|
|
|
110
|
|
|||
Pristiq
(g)
|
|
March 2017
|
|
U.S.
|
|
133
|
|
|
578
|
|
|
553
|
|
(a)
|
Unless stated otherwise, “Key Dates” indicate patent-based expiration dates.
|
6
|
|
2017 Financial Report
|
|
(b)
|
As a result of a patent litigation settlement, Teva launched a generic version of Viagra in the U.S. in December 2017.
|
(c)
|
Generic versions of Inspra became available in major European markets following the March 2014 expiry of regulatory exclusivity for Inspra in most major European markets, allowing generic companies to submit applications for marketing authorizations for their generic products.
|
(d)
|
Generic versions of Lyrica became available in major European markets following the July 2014 expiry of regulatory exclusivity for Lyrica in the EU, allowing generic companies to submit applications for marketing authorizations for their generic products. The basic product patent for Lyrica in the U.S. is expected to expire in December 2018. Pfizer is currently pursuing a six-month patent-term extension for pediatric exclusivity in the U.S. with the FDA.
|
(e)
|
Pursuant to terms of a settlement agreement, certain formulations of Zyvox became subject to generic competition in the U.S. in January 2015. Other formulations of Zyvox became subject to generic competition in the U.S. in the first half of 2015.
|
(f)
|
In January 2016, an etanercept biosimilar referencing Enbrel was approved by the European Commission.
|
(g)
|
As a result of a patent litigation settlement with several generic manufacturers, generic versions of Pristiq launched in the U.S. in March 2017.
|
The following table provides information about certain of our alliance revenue products that have experienced losses of collaboration rights, showing, by product, the date of the loss of the collaboration rights, the markets impacted and the alliance revenues associated with those products in those markets:
|
||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
|
|
|
|
Alliance Revenues in
Markets Impacted
|
||||||||||
Products
|
|
Date of Loss of
Collaboration Rights
|
|
Markets Impacted
|
|
Year Ended December 31,
|
||||||||||
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Spiriva
(a)
|
|
April 2014 (U.S.), between 2012 and 2016 (Japan, certain European countries, Australia, Canada and South Korea)
|
|
U.S., Japan, certain European countries, Australia, Canada and South Korea
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
27
|
|
Rebif
(b)
|
|
End of 2015
|
|
U.S.
|
|
13
|
|
|
—
|
|
|
371
|
|
(a)
|
Our collaboration with Boehringer Ingelheim for Spiriva expired on a country-by-country basis between 2012 and 2016. On April 29, 2014, our alliance in the U.S. came to an end.
|
(b)
|
Our collaboration agreement with EMD Serono Inc. to co-promote Rebif in the U.S. expired at the end of 2015. Patent litigation brought by Biogen Idec MA Inc. against EMD Serono Inc. and Pfizer is pending in the U.S. District Court for the District of New Jersey, and EMD Serono Inc. has acknowledged that they are obligated to satisfy any award of damages.
|
We recorded the following amounts as a result of the U.S. Healthcare Legislation:
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Reduction to
Revenues
, related to the Medicare “coverage gap” discount provision
|
|
$
|
450
|
|
|
$
|
410
|
|
|
$
|
399
|
|
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
|
|
307
|
|
|
312
|
|
|
251
|
|
2017 Financial Report
|
|
7
|
|
8
|
|
2017 Financial Report
|
|
•
|
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 or biosimilar products, delay treatments, skip doses or use less effective treatments. Government financing pressures can lead to negative pricing pressure in various markets where governments take an active role in setting prices, access criteria (e.g., through public or private health technology assessments), or other means of cost control. Examples include Europe, Japan, China, Canada, South Korea and a number of other international markets. The U.S. continues to maintain competitive insurance markets, but has also seen significant increases in patient cost-sharing and growing government influence as government programs continue to grow as a source of coverage.
|
•
|
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 Financial Review.
|
•
|
Significant portions of our revenues, costs and expenses, 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 can impact our results and our financial guidance.
|
2017 Financial Report
|
|
9
|
|
•
|
In June 2016, the U.K. electorate voted in a referendum to leave the EU, which is commonly referred to as “Brexit”. 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. Formal negotiations officially started in June 2017. 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 and supply of our products.
|
•
|
On December 22, 2017, the U.S. enacted significant changes to U.S. tax law following the passage and signing of the TCJA. The TCJA is complex and significantly changes the U.S. corporate income tax system by, among other things, reducing the Federal corporate income tax rate from 35% to 21%, transitioning U.S. international taxation from a worldwide tax system to a territorial tax system and imposing a repatriation tax on deemed repatriated accumulated post-1986 earnings of foreign subsidiaries. Given the significant changes resulting from and complexities associated with the TCJA, the estimated financial impacts for 2017 as well as the estimated impact on 2018 financial guidance for the effective tax rate on adjusted income are provisional and subject to further analysis, interpretation and clarification of the TCJA, which could result in changes to these estimates during 2018. For additional information, see the “Our Financial Guidance for
2018
”, “Provision/(Benefit) for Taxes on Income” and “Analysis of Financial Condition, Liquidity and Capital Resources” sections of this Financial Review and Notes to Consolidated Financial Statements––
Note 5A
.
Tax Matters: Taxes on Income from Continuing Operations.
|
10
|
|
2017 Financial Report
|
|
|
Some additional information about our business segments as of the date of the filing of this 2017 Financial Report follows:
|
|||
|
|
|
|
|
●
|
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 disease 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 systems 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) - Enbre l (outside the 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
-
Viagra
*
- Inflectra/Remsima
-
Several sterile injectable products
|
*
|
Viagra lost exclusivity in the U.S. in December 2017. Beginning in the first quarter of 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through December 2017, will be reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, total Viagra worldwide revenues will be reported in EH from 2018 forward.
|
•
|
delivering a pipeline of differentiated therapies and vaccines with the greatest medical and commercial potential;
|
•
|
advancing our 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;
|
•
|
Oncology;
|
•
|
Rare Diseases; and
|
•
|
Vaccines.
|
2017 Financial Report
|
|
11
|
|
•
|
Research Units within our WRD organization are generally responsible for research and early-stage development assets for our IH business (assets that have not yet achieved proof-of-concept). Our Research Units are organized by therapeutic area 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 operational execution of 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.
|
12
|
|
2017 Financial Report
|
|
•
|
Over the next five years, we plan to invest approximately $5.0 billion in capital projects in the U.S., including the strengthening of our manufacturing presence in the U.S.
|
•
|
In the fourth quarter of 2017, we made a $200 million charitable contribution to the Pfizer Foundation, an organization that provides grant and investment funding to support organizations and social entrepreneurs in an effort to improve healthcare delivery.
|
•
|
We made a $500 million voluntary contribution to our U.S. pension plan in February 2018.
|
•
|
We have also allocated approximately $100 million for a special, one-time bonus to be paid to all non-executive Pfizer colleagues that is expected to be paid in the first quarter of 2018.
|
•
|
Sale of Hospira Infusion Systems Net Assets to ICU Medical, Inc. (EH)
––On February 3, 2017, we completed the sale of our global infusion systems net assets, HIS, to ICU Medical. In connection with this transaction, we recognized pre-tax losses of approximately
$55 million
in
2017
in
Other (income)/deductions––net,
representing adjustments to amounts previously recorded in 2016 to write down the HIS net assets to fair value less costs to sell. We may record additional adjustments to the loss on the sale of HIS net assets in future periods, pending final working capital adjustments, among other agreement provisions, which we do not expect to have a material impact on our consolidated financial statements.
|
•
|
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. (IH)
––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
|
2017 Financial Report
|
|
13
|
|
•
|
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 II, L.P.
––On November 1, 2016, we announced the discontinuation of the global clinical development program for bococizumab. During December 2016,
$31.3 million
was refunded to NovaQuest representing amounts NovaQuest prepaid for development costs (under the May 2016 agreement described below) that were not used for program expenses due to the discontinuation of the development program. No additional payments have been or are expected to be received from or paid to NovaQuest under this agreement, which was effectively terminated on November 18, 2016.
|
•
|
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 12 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
totaled
$72.1 million
for 2017 and
$46.6 million
for 2016. 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
totaled
$75.6 million
for 2017 and
$44.9 million
for 2016. If successful and upon approval of Ibrance in the U.S. or certain major markets in the EU for the Indication based on the applicable clinical trials, RPI will be eligible to receive a combination of approval-based fixed milestone payments of up to $250 million dependent upon results of the clinical trials and royalties on certain Ibrance sales over approximately seven years. Fixed milestone payments due upon approval will be recorded as intangible assets and amortized to
Amortization of intangible assets
over the estimated commercial life of the Ibrance product and sales-based royalties will be recorded as
Cost of sales
when incurred.
|
•
|
Acquisition of Hospira (EH)
––On September 3, 2015, we acquired Hospira, a leading provider of sterile injectable drugs and infusion technologies as well as a provider of biosimilars, for approximately
$16.1 billion
in cash (
$15.7 billion
, net of cash acquired).
|
•
|
Acquisition of a Minority Interest in AM-Pharma B.V. (IH)
––In April 2015, we acquired a minority equity interest in AM-Pharma, a privately-held Dutch biopharmaceutical company focused on the development of recAP for inflammatory diseases, and secured an exclusive option to acquire the remaining equity in the company. The option becomes exercisable after completion of a Phase II trial of recAP in the treatment of Acute Kidney Injury related to sepsis, which is currently expected in the first quarter of 2018. Under the terms of the agreement, we originally paid
$87.5 million
for both the exclusive option and the minority equity interest, which was recorded as a cost-method investment in
Long-term investments.
During the fourth quarter of 2017, we recognized a loss of
$43 million
for an impairment of our long-term investment.
|
•
|
Collaboration with OPKO Health, Inc.
––We entered into a collaborative agreement with OPKO, which closed in January 2015, to develop and commercialize OPKO’s long-acting hGH-CTP for the treatment of GHD in adults and children, as well as for the treatment of growth failure in children born SGA who fail to show catch-up growth by two years of age. hGH-CTP has the potential to reduce the required dosing frequency of human growth hormone to a single weekly injection from the current standard of one injection per day. We have received the exclusive license to commercialize hGH-CTP worldwide. OPKO will lead the clinical activities and will be responsible for funding the development programs for the key indications, which include Adult and Pediatric GHD and Pediatric SGA. We will be responsible for all development costs for additional indications, all postmarketing studies, manufacturing and commercialization activities for all indications, and we will lead the manufacturing activities related to product development. In February 2015, we made an upfront payment of
$295 million
to OPKO, which was recorded in
Research and development expenses,
and OPKO is eligible to receive up to an additional
$275 million
upon the achievement of certain regulatory milestones. OPKO is also eligible to receive royalty payments associated with the commercialization of hGH-CTP for Adult GHD, which is subject to regulatory approval. Upon the launch of hGH-CTP for Pediatric GHD, which is subject to regulatory approval, the royalties will transition to tiered gross profit sharing for both hGH-CTP and our product, Genotropin.
|
14
|
|
2017 Financial Report
|
|
•
|
Acquisition of Marketed Vaccines Business of Baxter International Inc. (IH)
––On December 1, 2014 (which fell in the first fiscal quarter of 2015 for our international operations), we acquired Baxter’s portfolio of marketed vaccines for a final purchase price of
$648 million
. The portfolio that was acquired consists of NeisVac-C and FSME-IMMUN/TicoVac. NeisVac-C is a vaccine that helps protect against meningitis caused by group C meningococcal meningitis and FSME-IMMUN/TicoVac is a vaccine that helps protect against tick-borne encephalitis.
|
•
|
Collaboration with Merck KGaA (IH)
––In November 2014, we entered into a collaborative arrangement with Merck KGaA, to jointly develop and commercialize avelumab, the proposed international non-proprietary name for the investigational anti-PD-L1 antibody (MSB0010718C), currently approved as Bavencio for metastatic MCC and for patients with locally advanced or metastatic UC in certain countries and in development as a potential treatment for multiple other types of cancer. Under the terms of the agreement, in the fourth quarter of 2014, we made an upfront payment of
$850 million
to Merck KGaA and Merck KGaA is eligible to receive regulatory and commercial milestone payments of up to approximately
$2.0 billion
. As of December 31, 2017, we made $140 million in milestone payments to Merck KGaA for approvals of avelumab received in 2017 for the MCC indication in the U.S., the EU and Japan, and for the metastatic UC indication in the U.S. Both companies jointly fund all development and commercialization costs, and split equally any profits generated from selling any anti-PD-L1 or anti-PD-1 products from this collaboration. Also, as part of the agreement, we gave Merck KGaA certain co-promotion rights for Xalkori in the U.S. and several other key markets.
|
•
|
Collaboration with Eli Lilly & Company
––In 2013, we entered into a collaboration agreement with Lilly to jointly develop and globally commercialize Pfizer
’
s tanezumab, which provides that Pfizer and Lilly will equally share product-development expenses as well as potential revenues and certain product-related costs. Following the decision by the FDA in March 2015 to lift the partial clinical hold on the tanezumab development program, we received a $200 million upfront payment from Lilly in accordance with the collaboration agreement between Pfizer and Lilly, which is recorded as deferred revenue in our consolidated balance sheet and is being recognized into
Other (income)/deductions
––
net
over a multi-year period beginning in the second quarter of 2015. Pfizer and Lilly resumed the Phase 3 chronic pain program for tanezumab in July 2015. The FDA granted Fast Track designation for tanezumab for the treatment of chronic pain in patients with OA and CLBP in June 2017. Under the collaboration agreement with Lilly, we are eligible to receive additional payments from Lilly upon the achievement of specified regulatory and commercial milestones.
|
The following table provides our financial guidance for full-year 2018
(a), (b)
:
|
|
Revenues
|
$53.5 to $55.5 billion
|
Adjusted cost of sales as a percentage of revenues
|
20.5% to 21.5%
|
Adjusted selling, informational and administrative expenses
|
$14.0 to $15.0 billion
|
Adjusted research and development expenses
|
$7.4 to $7.9 billion
|
Adjusted other (income)/deductions
|
Approximately $400 million of income
|
Effective tax rate on adjusted income
|
Approximately 17.0%
|
Adjusted diluted EPS
|
$2.90 to $3.00
|
(a)
|
The 2018 financial guidance reflects the following:
|
•
|
A full year contribution from Consumer Healthcare. Pfizer continues to expect that any decision regarding strategic alternatives for Consumer Healthcare would be made during 2018.
|
•
|
Does not assume the completion of any business development transactions not completed as of
December 31, 2017
, including any one-time upfront payments associated with such transactions.
|
•
|
Exchange rates assumed are as of mid-January 2018.
|
•
|
Reflects an anticipated negative revenue impact of
$2.0 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. Assumes no generic competition for Lyrica in the U.S. until June 2019, which is contingent upon a six-month patent-term extension granted by the FDA for pediatric exclusivity, which the company is currently pursuing.
|
•
|
Reflects the anticipated favorable impact of
$900 million
on revenues and
$0.06
on adjusted diluted EPS
as a result of favorable changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2017.
|
•
|
Guidance for the effective tax rate on Adjusted income reflects our provisional estimate of the impact of the TCJA.
|
•
|
Guidance for adjusted diluted EPS assumes diluted weighted-average shares outstanding of approximately
6.0
billion shares,
which reflects anticipated share repurchases totaling $5.0 billion in 2018
. Dilution related to share-based employee compensation programs is expected to offset by approximately half the reduction in shares associated with these anticipated share repurchases.
|
(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 Financial Review.
|
2017 Financial Report
|
|
15
|
|
•
|
A significant adverse change in legal factors or in the business climate that could affect the value of the asset. For example, a successful challenge of our patent rights would likely result in generic competition earlier than expected.
|
•
|
A significant adverse change in the extent or manner in which an asset is used. For example, restrictions imposed by the FDA or other regulatory authorities could affect our ability to manufacture or sell a product.
|
•
|
A projection or forecast that indicates losses or reduced profits associated with an asset. This could result, for example, from a change in a government reimbursement program that results in an inability to sustain projected product revenues and profitability. This also could result from the introduction of a competitor’s product that results in a significant loss of market share or the inability to achieve the previously projected revenue growth, as well as the lack of acceptance of a product by patients, physicians and payers. For IPR&D projects, this could result from, among other things, a change in outlook based on clinical trial data, a delay in the projected launch date or additional expenditures to commercialize the product.
|
16
|
|
2017 Financial Report
|
|
•
|
The income approach is a forward-looking approach to estimating fair value and relies primarily on internal forecasts. Within the income approach, the method that we use is the discounted cash flow method. We start with a forecast of all the expected net cash flows associated with the reporting unit, which includes the application of a terminal value, and then we apply a reporting unit-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 technological risk and competitive, legal and/or regulatory forces on the projections, as well as the selection of a long-term growth rate; 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.
|
•
|
The market approach is a historical approach to estimating fair value and relies primarily on external information. Within the market approach are two methods that we may use:
|
◦
|
Guideline public company method—this method employs market multiples derived from market prices of stocks of companies that are engaged in the same or similar lines of business and that are actively traded on a free and open market and the application of the identified multiples to the corresponding measure of our reporting unit’s financial performance.
|
◦
|
Guideline transaction method—this method relies on pricing multiples derived from transactions of significant interests in companies engaged in the same or similar lines of business and the application of the identified multiples to the corresponding measure of our reporting unit’s financial performance.
|
2017 Financial Report
|
|
17
|
|
(a)
|
For detailed assumptions associated with our benefit plans, see Notes to Consolidated Financial Statements—
Note 11B. Pension and Postretirement Benefit Plans and Defined Contribution Plans: Actuarial Assumptions.
|
18
|
|
2017 Financial Report
|
|
The following table illustrates the sensitivity of net periodic benefit costs and benefit obligations to a 10 basis point decline in our assumption for the discount rate, holding all other assumptions constant (in millions, pre-tax):
|
||||||
|
|
Change
|
|
Increase in 2018 Net Periodic Benefit Costs
|
|
2017 Benefit Obligations
|
Assumption
|
|
|
|
Increase
|
|
Increase
|
Discount rate
|
|
10 basis point decline
|
|
$8
|
|
$463
|
2017 Financial Report
|
|
19
|
|
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
2016
|
|
2015
|
|
17/16
|
|
16/15
|
||||||||
Revenues
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
|
$
|
48,851
|
|
|
(1
|
)
|
|
8
|
|
Cost of sales
|
|
11,240
|
|
|
12,329
|
|
|
9,648
|
|
|
(9
|
)
|
|
28
|
|
|||
% of revenues
|
|
21.4
|
%
|
|
23.3
|
%
|
|
19.7
|
%
|
|
|
|
|
|||||
Selling, informational and administrative expenses
|
|
14,784
|
|
|
14,837
|
|
|
14,809
|
|
|
—
|
|
|
—
|
|
|||
% of revenues
|
|
28.1
|
%
|
|
28.1
|
%
|
|
30.3
|
%
|
|
|
|
|
|||||
Research and development expenses
|
|
7,657
|
|
|
7,872
|
|
|
7,690
|
|
|
(3
|
)
|
|
2
|
|
|||
% of revenues
|
|
14.6
|
%
|
|
14.9
|
%
|
|
15.7
|
%
|
|
|
|
|
|||||
Amortization of intangible assets
|
|
4,758
|
|
|
4,056
|
|
|
3,728
|
|
|
17
|
|
|
9
|
|
|||
% of revenues
|
|
9.1
|
%
|
|
7.7
|
%
|
|
7.6
|
%
|
|
|
|
|
|||||
Restructuring charges and certain acquisition-related costs
|
|
487
|
|
|
1,724
|
|
|
1,152
|
|
|
(72
|
)
|
|
50
|
|
|||
% of revenues
|
|
0.9
|
%
|
|
3.3
|
%
|
|
2.4
|
%
|
|
|
|
|
|||||
Other (income)/deductions—net
|
|
1,315
|
|
|
3,655
|
|
|
2,860
|
|
|
(64
|
)
|
|
28
|
|
|||
Income from continuing operations before provision/(benefit) for taxes on income
|
|
12,305
|
|
|
8,351
|
|
|
8,965
|
|
|
47
|
|
|
(7
|
)
|
|||
% of revenues
|
|
23.4
|
%
|
|
15.8
|
%
|
|
18.4
|
%
|
|
|
|
|
|||||
Provision/(benefit) for taxes on income
|
|
(9,049
|
)
|
|
1,123
|
|
|
1,990
|
|
|
*
|
|
|
(44
|
)
|
|||
Effective tax rate
|
|
(73.5
|
)%
|
|
13.4
|
%
|
|
22.2
|
%
|
|
|
|
|
|||||
Income from continuing operations
|
|
21,353
|
|
|
7,229
|
|
|
6,975
|
|
|
*
|
|
|
4
|
|
|||
% of revenues
|
|
40.6
|
%
|
|
13.7
|
%
|
|
14.3
|
%
|
|
|
|
|
|||||
Discontinued operations—net of tax
|
|
2
|
|
|
17
|
|
|
11
|
|
|
(87
|
)
|
|
49
|
|
|||
Net income before allocation to noncontrolling interests
|
|
21,355
|
|
|
7,246
|
|
|
6,986
|
|
|
*
|
|
|
4
|
|
|||
% of revenues
|
|
40.6
|
%
|
|
13.7
|
%
|
|
14.3
|
%
|
|
|
|
|
|||||
Less: Net income attributable to noncontrolling interests
|
|
47
|
|
|
31
|
|
|
26
|
|
|
54
|
|
|
20
|
|
|||
Net income attributable to Pfizer Inc.
|
|
$
|
21,308
|
|
|
$
|
7,215
|
|
|
$
|
6,960
|
|
|
*
|
|
|
4
|
|
% of revenues
|
|
40.6
|
%
|
|
13.7
|
%
|
|
14.2
|
%
|
|
|
|
|
*
|
Indicates calculation not meaningful or result is equal to or greater than 100%.
|
20
|
|
2017 Financial Report
|
|
2017 Financial Report
|
|
21
|
|
The following table provides information about revenue deductions:
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Medicare rebates
(a)
|
|
$
|
1,316
|
|
|
$
|
1,063
|
|
|
$
|
1,002
|
|
Medicaid and related state program rebates
(a)
|
|
1,860
|
|
|
1,473
|
|
|
1,263
|
|
|||
Performance-based contract rebates
(a), (b)
|
|
3,245
|
|
|
2,560
|
|
|
2,253
|
|
|||
Chargebacks
(c)
|
|
6,047
|
|
|
5,736
|
|
|
4,961
|
|
|||
Sales allowances
(d)
|
|
5,165
|
|
|
4,623
|
|
|
4,200
|
|
|||
Sales returns and cash discounts
|
|
1,493
|
|
|
1,441
|
|
|
1,335
|
|
|||
Total
(e)
|
|
$
|
19,126
|
|
|
$
|
16,895
|
|
|
$
|
15,014
|
|
(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 managed care customers 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
2017
, associated with the following segments: IH (
$9.0 billion
); and EH (
$10.1 billion
). For
2016
, associated with the following segments: IH (
$7.1 billion
); and EH (
$9.8 billion
). For
2015
, associated with the following segments: IH (
$5.8 billion
); and EH (
$9.2 billion
).
|
•
|
an increase in performance-based contract rebates primarily due to increased sales of certain IH products to managed care customers in the U.S., and certain IH and EH products in developed Europe;
|
•
|
an increase in sales allowances as a result of sales growth, primarily in emerging markets;
|
•
|
an increase in Medicaid and related state program rebates, primarily as a result of increased sales of both IH and EH products through these programs;
|
•
|
higher chargebacks resulting from increased sales through U.S. wholesalers of certain IH products, partially offset by decreases in sterile injectable sales; and
|
•
|
an increase in Medicare rebates driven by increased sales of IH products through this channel, offset by certain EH products which have recently lost exclusivity.
|
22
|
|
2017 Financial Report
|
|
The following table provides worldwide revenues by operating segment and geography:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Worldwide
|
|
U.S.
|
|
International
|
|
Worldwide
|
|
U.S.
|
|
International
|
||||||||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
17/16
|
|
|
16/15
|
|
17/16
|
|
|
16/15
|
|
17/16
|
|
|
16/15
|
|
|||||||||
Operating Segments
(a)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
IH
|
|
$
|
31,422
|
|
|
$
|
29,197
|
|
|
$
|
26,758
|
|
|
$
|
18,460
|
|
|
$
|
16,773
|
|
|
$
|
14,446
|
|
|
$
|
12,962
|
|
|
$
|
12,424
|
|
|
$
|
12,312
|
|
|
8
|
|
|
9
|
|
10
|
|
|
16
|
|
4
|
|
|
1
|
|
EH
|
|
21,124
|
|
|
23,627
|
|
|
22,094
|
|
|
7,567
|
|
|
9,596
|
|
|
7,258
|
|
|
13,557
|
|
|
14,031
|
|
|
14,836
|
|
|
(11
|
)
|
|
7
|
|
(21
|
)
|
|
32
|
|
(3
|
)
|
|
(5
|
)
|
|||||||||
Total revenues
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
|
$
|
48,851
|
|
|
$
|
26,026
|
|
|
$
|
26,369
|
|
|
$
|
21,704
|
|
|
$
|
26,519
|
|
|
$
|
26,455
|
|
|
$
|
27,147
|
|
|
(1
|
)
|
|
8
|
|
(1
|
)
|
|
21
|
|
—
|
|
|
(3
|
)
|
(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” section of this Financial Review and Notes to Consolidated Financial Statements––
Note 18A. Segment, Geographic and Other Revenue Information: Segment Information.
|
2017 Financial Report
|
|
23
|
|
(MILLIONS OF DOLLARS)
|
|
Worldwide
|
|
U.S.
|
|
International
|
||||||
|
|
|
|
|
|
|
||||||
Disposition-related operational impact:
|
|
|
|
|
|
|
||||||
Approximately one month of HIS domestic operations and approximately two months of HIS international operations in 2017, compared to twelve months of HIS global operations in 2016 (February 2017 sale)
|
|
$
|
(1,062
|
)
|
|
$
|
(841
|
)
|
|
$
|
(221
|
)
|
|
|
|
|
|
|
|
||||||
Other operational growth/(decline):
|
|
|
|
|
|
|
||||||
Continued growth from key brands including Eliquis (globally), as well as Xeljanz and Lyrica (IH) (both primarily in the U.S.)
|
|
1,608
|
|
|
1,104
|
|
|
503
|
|
|||
Ibrance global growth: U.S. revenues increased primarily due to continued strong uptake in the metastatic breast cancer setting. International revenues increased operationally, but were negatively impacted by a one-time price adjustment to 2017 revenues related to finalizing reimbursement agreements in certain developed Europe markets.
|
|
993
|
|
|
757
|
|
|
236
|
|
|||
Increase in Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation)
|
|
450
|
|
|
450
|
|
|
—
|
|
|||
Growth from Biosimilars, primarily from Inflectra in the U.S. and developed Europe markets
|
|
209
|
|
|
115
|
|
|
94
|
|
|||
Decline from Peri-LOE Products, primarily due to expected declines in Pristiq in the U.S. as well as Lyrica (EH) and Vfend (both primarily in developed Europe markets)
|
|
(957
|
)
|
|
(448
|
)
|
|
(509
|
)
|
|||
Lower revenues for Enbrel primarily in developed Europe markets due to continued biosimilar competition
|
|
(448
|
)
|
|
—
|
|
|
(448
|
)
|
|||
Lower revenues for Viagra (IH) in the U.S. due to generic competition that began in December 2017
|
|
(359
|
)
|
|
(359
|
)
|
|
—
|
|
|||
Decline from the Sterile Injectable Pharmaceuticals portfolio, primarily due to legacy Hospira product shortages in the U.S.
|
|
(315
|
)
|
|
(460
|
)
|
|
145
|
|
|||
Decline in the Legacy Established Products portfolio primarily due to generic competition in developed markets
|
|
(188
|
)
|
|
(419
|
)
|
|
231
|
|
|||
Decline in Prevnar 13/Prevenar 13 revenues. U.S. revenues decreased primarily due to the expected decline in revenues for the adult indication in the U.S. due to a high initial capture rate of the eligible population following its successful fourth-quarter 2014 launch, which resulted in a smaller remaining “catch up” opportunity compared to 2016, partially offset by growth from the pediatric indication. International revenues increased primarily due to the favorable overall impact of timing and increased volume associated with government purchases in certain emerging markets for the pediatric indication compared with prior year, as well as from the inclusion of Prevenar 13 in additional national immunization programs in certain emerging markets for the adult and pediatric indications in the fourth of quarter 2017.
|
|
(108
|
)
|
|
(311
|
)
|
|
203
|
|
|||
Other operational factors, net
|
|
157
|
|
|
68
|
|
|
89
|
|
|||
Operational growth/(decline), net
|
|
(20
|
)
|
|
(343
|
)
|
|
323
|
|
|||
|
|
|
|
|
|
|
||||||
Unfavorable impact of foreign exchange
|
|
(259
|
)
|
|
—
|
|
|
(259
|
)
|
|||
Revenues increase/(decrease)
|
|
$
|
(278
|
)
|
|
$
|
(343
|
)
|
|
$
|
64
|
|
24
|
|
2017 Financial Report
|
|
(MILLIONS OF DOLLARS)
|
|
Worldwide
|
|
U.S.
|
|
International
|
||||||
Acquisition-related operational impact:
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
The inclusion of Xtandi alliance revenues in the U.S. (September 2016 acquisition of Medivation)
|
|
$
|
140
|
|
|
$
|
140
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
||||||
Other operational growth/(decline):
|
|
|
|
|
|
|
||||||
Continued operational growth from key brands including Ibrance, Lyrica (IH), Xeljanz, Chantix/Champix and Consumer Healthcare (all primarily in the U.S.), as well as Eliquis and Xalkori (both globally)
|
|
3,582
|
|
|
2,936
|
|
|
646
|
|
|||
Twelve months of revenues from legacy Hospira global operations in 2016, compared to four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations in 2015
|
|
3,125
|
|
|
2,229
|
|
|
896
|
|
|||
Operational growth in the legacy Pfizer Sterile Injectable Pharmaceuticals portfolio, mostly in emerging markets and the U.S.
|
|
259
|
|
|
86
|
|
|
173
|
|
|||
Decline from the Peri-LOE Products portfolio, primarily due to the loss of exclusivity and associated generic competition for certain Peri-LOE Products, primarily Zyvox in the U.S. and certain developed Europe markets as well as Lyrica in certain developed Europe markets
|
|
(954
|
)
|
|
(169
|
)
|
|
(785
|
)
|
|||
Decline in Rebif revenues in the U.S. due to the year-end 2015 expiry of the collaboration agreement to co-promote Rebif in the U.S., as well as lower revenues for Enbrel primarily in most developed Europe markets, primarily due to biosimilar competition
|
|
(571
|
)
|
|
(366
|
)
|
|
(205
|
)
|
|||
Decline in Prevnar 13/Prevenar 13 revenues, primarily driven by an expected decline in revenues for the adult indication in the U.S. due to a high initial capture rate of the eligible population following its successful fourth-quarter 2014 launch, which resulted in a smaller remaining “catch up” opportunity compared to the prior-year, as well as the unfavorable impact of the timing of government purchases for the pediatric indication
|
|
(454
|
)
|
|
(381
|
)
|
|
(74
|
)
|
|||
Other operational factors, net
|
|
328
|
|
|
190
|
|
|
138
|
|
|||
Operational growth, net
|
|
5,456
|
|
|
4,665
|
|
|
791
|
|
|||
|
|
|
|
|
|
|
||||||
Unfavorable impact of foreign exchange
|
|
(1,483
|
)
|
|
—
|
|
|
(1,483
|
)
|
|||
Revenues increase/(decrease)
|
|
$
|
3,973
|
|
|
$
|
4,665
|
|
|
$
|
(692
|
)
|
2017 Financial Report
|
|
25
|
|
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, 2016 and 2015.
|
||||||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||||||||||
PRODUCT
|
PRIMARY INDICATIONS OR CLASS
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
17/16
|
|
16/15
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Oper.
|
|
|
Total
|
|
|
Oper.
|
|
||||||
TOTAL REVENUES
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
|
$
|
48,851
|
|
|
(1
|
)
|
|
—
|
|
|
8
|
|
|
11
|
|
||
PFIZER INNOVATIVE HEALTH (IH)
(a)
|
|
$
|
31,422
|
|
|
$
|
29,197
|
|
|
$
|
26,758
|
|
|
8
|
|
|
8
|
|
|
9
|
|
|
11
|
|
||
Internal Medicine
|
|
$
|
9,684
|
|
|
$
|
8,858
|
|
|
$
|
7,611
|
|
|
9
|
|
|
10
|
|
|
16
|
|
|
17
|
|
||
Lyrica IH
(b)
|
|
Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury
|
|
4,511
|
|
|
4,165
|
|
|
3,655
|
|
|
8
|
|
|
9
|
|
|
14
|
|
|
14
|
|
|||
Eliquis alliance revenues and direct sales
|
|
Atrial fibrillation, deep vein thrombosis, pulmonary embolism
|
|
2,523
|
|
|
1,713
|
|
|
913
|
|
|
47
|
|
|
47
|
|
|
88
|
|
|
88
|
|
|||
Chantix/Champix
|
|
An aid to smoking cessation treatment in adults 18 years of age or older
|
|
997
|
|
|
842
|
|
|
671
|
|
|
18
|
|
|
18
|
|
|
26
|
|
|
27
|
|
|||
Viagra IH
(c)
|
|
Erectile dysfunction
|
|
823
|
|
|
1,181
|
|
|
1,297
|
|
|
(30
|
)
|
|
(30
|
)
|
|
(9
|
)
|
|
(9
|
)
|
|||
BMP2
|
|
Development of bone and cartilage
|
|
261
|
|
|
251
|
|
|
232
|
|
|
4
|
|
|
4
|
|
|
8
|
|
|
8
|
|
|||
Toviaz
|
|
Overactive bladder
|
|
257
|
|
|
258
|
|
|
267
|
|
|
—
|
|
|
1
|
|
|
(3
|
)
|
|
(4
|
)
|
|||
All other Internal Medicine
|
|
Various
|
|
312
|
|
|
447
|
|
|
577
|
|
|
(30
|
)
|
|
(30
|
)
|
|
(22
|
)
|
|
(22
|
)
|
|||
Vaccines
|
|
$
|
6,001
|
|
|
$
|
6,071
|
|
|
$
|
6,454
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(6
|
)
|
|
(5
|
)
|
||
Prevnar 13/Prevenar 13
|
|
Vaccines for prevention of pneumococcal disease
|
|
5,601
|
|
|
5,718
|
|
|
6,245
|
|
|
(2
|
)
|
|
(2
|
)
|
|
(8
|
)
|
|
(7
|
)
|
|||
FSME/IMMUN-TicoVac
|
|
Tick-borne encephalitis vaccine
|
|
134
|
|
|
114
|
|
|
104
|
|
|
18
|
|
|
19
|
|
|
10
|
|
|
10
|
|
|||
All other Vaccines
|
|
Various
|
|
266
|
|
|
239
|
|
|
104
|
|
|
11
|
|
|
12
|
|
|
*
|
|
|
*
|
|
|||
Oncology
|
|
$
|
6,056
|
|
|
$
|
4,563
|
|
|
$
|
2,955
|
|
|
33
|
|
|
33
|
|
|
54
|
|
|
56
|
|
||
Ibrance
|
|
Advanced breast cancer
|
|
3,126
|
|
|
2,135
|
|
|
723
|
|
|
46
|
|
|
47
|
|
|
*
|
|
|
*
|
|
|||
Sutent
|
|
Advanced and/or metastatic RCC, adjuvant RCC,
refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor
|
|
1,081
|
|
|
1,095
|
|
|
1,120
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|
1
|
|
|||
Xalkori
|
|
ALK-positive and ROS1-positive advanced NSCLC
|
|
594
|
|
|
561
|
|
|
488
|
|
|
6
|
|
|
6
|
|
|
15
|
|
|
17
|
|
|||
Xtandi alliance revenues
|
|
Advanced prostate cancer
|
|
590
|
|
|
140
|
|
|
—
|
|
|
*
|
|
|
*
|
|
|
*
|
|
|
*
|
|
|||
Inlyta
|
|
Advanced RCC
|
|
339
|
|
|
401
|
|
|
430
|
|
|
(15
|
)
|
|
(14
|
)
|
|
(7
|
)
|
|
(6
|
)
|
|||
Bosulif
|
|
Philadelphia chromosome–positive chronic myelogenous leukemia
|
|
233
|
|
|
167
|
|
|
111
|
|
|
39
|
|
|
40
|
|
|
50
|
|
|
49
|
|
|||
All other Oncology
|
|
Various
|
|
93
|
|
|
63
|
|
|
83
|
|
|
46
|
|
|
48
|
|
|
(23
|
)
|
|
(23
|
)
|
|||
Inflammation & Immunology (I&I)
|
|
$
|
3,968
|
|
|
$
|
3,928
|
|
|
$
|
3,918
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
6
|
|
||
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
|
|
2,452
|
|
|
2,909
|
|
|
3,333
|
|
|
(16
|
)
|
|
(15
|
)
|
|
(13
|
)
|
|
(6
|
)
|
|||
Xeljanz
|
|
Rheumatoid arthritis; psoriatic arthritis
|
|
1,345
|
|
|
927
|
|
|
523
|
|
|
45
|
|
|
45
|
|
|
77
|
|
|
78
|
|
|||
Eucrisa
|
|
Mild-to-moderate atopic dermatitis (eczema)
|
|
67
|
|
|
—
|
|
|
—
|
|
|
*
|
|
|
*
|
|
|
—
|
|
|
—
|
|
|||
All other I&I
|
|
Various
|
|
103
|
|
|
93
|
|
|
61
|
|
|
11
|
|
|
13
|
|
|
51
|
|
|
42
|
|
|||
Rare Disease
|
|
$
|
2,240
|
|
|
$
|
2,369
|
|
|
$
|
2,425
|
|
|
(5
|
)
|
|
(5
|
)
|
|
(2
|
)
|
|
—
|
|
||
BeneFIX
|
|
Hemophilia
|
|
604
|
|
|
712
|
|
|
752
|
|
|
(15
|
)
|
|
(15
|
)
|
|
(5
|
)
|
|
(4
|
)
|
|||
Refacto AF/Xyntha
|
|
Hemophilia
|
|
551
|
|
|
554
|
|
|
533
|
|
|
(1
|
)
|
|
—
|
|
|
4
|
|
|
8
|
|
|||
Genotropin
|
|
Replacement of human growth hormone
|
|
532
|
|
|
579
|
|
|
617
|
|
|
(8
|
)
|
|
(7
|
)
|
|
(6
|
)
|
|
(5
|
)
|
|||
Somavert
|
|
Acromegaly
|
|
254
|
|
|
232
|
|
|
218
|
|
|
9
|
|
|
9
|
|
|
6
|
|
|
8
|
|
|||
All other Rare Disease
|
|
Various
|
|
300
|
|
|
292
|
|
|
306
|
|
|
3
|
|
|
3
|
|
|
(5
|
)
|
|
—
|
|
|||
Consumer Healthcare
|
|
$
|
3,472
|
|
|
$
|
3,407
|
|
|
$
|
3,395
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
5
|
|
||
PFIZER ESSENTIAL HEALTH (EH)
(d)
|
|
$
|
21,124
|
|
|
$
|
23,627
|
|
|
$
|
22,094
|
|
|
(11
|
)
|
|
(10
|
)
|
|
7
|
|
|
11
|
|
||
Legacy Established Products (LEP)
(e)
|
|
$
|
10,894
|
|
|
$
|
11,197
|
|
|
$
|
11,745
|
|
|
(3
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|
1
|
|
||
Lipitor
|
|
Reduction of LDL cholesterol
|
|
1,915
|
|
|
1,758
|
|
|
1,860
|
|
|
9
|
|
|
11
|
|
|
(6
|
)
|
|
2
|
|
|||
Premarin family
|
|
Symptoms of menopause
|
|
977
|
|
|
1,017
|
|
|
1,018
|
|
|
(4
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|||
Norvasc
|
|
Hypertension
|
|
926
|
|
|
962
|
|
|
991
|
|
|
(4
|
)
|
|
(2
|
)
|
|
(3
|
)
|
|
1
|
|
|||
Xalatan/Xalacom
|
|
Glaucoma and ocular hypertension
|
|
335
|
|
|
363
|
|
|
399
|
|
|
(8
|
)
|
|
(8
|
)
|
|
(9
|
)
|
|
(8
|
)
|
|||
Effexor
|
|
Depression and certain anxiety disorders
|
|
297
|
|
|
278
|
|
|
288
|
|
|
7
|
|
|
8
|
|
|
(3
|
)
|
|
—
|
|
|||
Zoloft
|
|
Depression and certain anxiety disorders
|
|
291
|
|
|
304
|
|
|
374
|
|
|
(4
|
)
|
|
(2
|
)
|
|
(19
|
)
|
|
(14
|
)
|
|||
EpiPen
|
|
Epinephrine injection used in treatment of life-threatening allergic reactions
|
|
290
|
|
|
386
|
|
|
339
|
|
|
(25
|
)
|
|
(25
|
)
|
|
14
|
|
|
14
|
|
|||
Zithromax
|
|
Bacterial infections
|
|
270
|
|
|
272
|
|
|
275
|
|
|
(1
|
)
|
|
3
|
|
|
(1
|
)
|
|
1
|
|
|||
Relpax
|
|
Symptoms of migraine headache
|
|
236
|
|
|
323
|
|
|
352
|
|
|
(27
|
)
|
|
(27
|
)
|
|
(8
|
)
|
|
(8
|
)
|
|||
Xanax
|
|
Anxiety disorders
|
|
225
|
|
|
222
|
|
|
224
|
|
|
1
|
|
|
1
|
|
|
(1
|
)
|
|
1
|
|
|||
Sildenafil Citrate
|
|
Erectile dysfunction
|
|
56
|
|
|
—
|
|
|
—
|
|
|
*
|
|
|
*
|
|
|
*
|
|
|
*
|
|
|||
All other LEP
|
|
Various
|
|
5,077
|
|
|
5,313
|
|
|
5,625
|
|
|
(4
|
)
|
|
(4
|
)
|
|
(6
|
)
|
|
1
|
|
26
|
|
2017 Financial Report
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
Year Ended December 31,
|
% Change
|
|||||||||||||||||||||
PRODUCT
|
PRIMARY INDICATIONS OR CLASS
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
17/16
|
|
16/15
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Oper.
|
|
|
Total
|
|
|
Oper.
|
|
||||||
Sterile Injectable Pharmaceuticals (SIP)
(f)
|
|
$
|
5,673
|
|
|
$
|
6,014
|
|
|
$
|
3,944
|
|
|
(6
|
)
|
|
(5
|
)
|
|
52
|
|
|
56
|
|
||
Medrol
|
|
Steroid anti-inflammatory
|
|
483
|
|
|
450
|
|
|
402
|
|
|
7
|
|
|
8
|
|
|
12
|
|
|
16
|
|
|||
Sulperazon
|
|
Treatment of infections
|
|
471
|
|
|
396
|
|
|
339
|
|
|
19
|
|
|
22
|
|
|
17
|
|
|
23
|
|
|||
Fragmin
|
|
Slows blood clotting
|
|
306
|
|
|
318
|
|
|
335
|
|
|
(4
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|
—
|
|
|||
Tygacil
|
|
Tetracycline class antibiotic
|
|
260
|
|
|
274
|
|
|
304
|
|
|
(5
|
)
|
|
(5
|
)
|
|
(10
|
)
|
|
(5
|
)
|
|||
Precedex
|
|
Sedation agent in surgery or intensive care
|
|
243
|
|
|
264
|
|
|
76
|
|
|
(8
|
)
|
|
(8
|
)
|
|
*
|
|
|
*
|
|
|||
Zosyn/Tazocin
|
|
Antibiotic
|
|
194
|
|
|
146
|
|
|
144
|
|
|
32
|
|
|
32
|
|
|
1
|
|
|
3
|
|
|||
All other SIP
|
|
Various
|
|
3,715
|
|
|
4,166
|
|
|
2,343
|
|
|
(11
|
)
|
|
(10
|
)
|
|
78
|
|
|
80
|
|
|||
Peri-LOE Products
(g)
|
|
$
|
3,223
|
|
|
$
|
4,220
|
|
|
$
|
5,326
|
|
|
(24
|
)
|
|
(23
|
)
|
|
(21
|
)
|
|
(18
|
)
|
||
Celebrex
|
|
Arthritis pain and inflammation, acute pain
|
|
775
|
|
|
733
|
|
|
830
|
|
|
6
|
|
|
7
|
|
|
(12
|
)
|
|
(10
|
)
|
|||
Lyrica EH
(b)
|
|
Epilepsy, neuropathic pain and generalized anxiety disorder
|
|
553
|
|
|
801
|
|
|
1,183
|
|
|
(31
|
)
|
|
(30
|
)
|
|
(32
|
)
|
|
(29
|
)
|
|||
Vfend
|
|
Fungal infections
|
|
421
|
|
|
590
|
|
|
682
|
|
|
(29
|
)
|
|
(27
|
)
|
|
(13
|
)
|
|
(10
|
)
|
|||
Viagra EH
(c)
|
|
Erectile dysfunction
|
|
382
|
|
|
383
|
|
|
411
|
|
|
—
|
|
|
2
|
|
|
(7
|
)
|
|
(1
|
)
|
|||
Pristiq
|
|
Depression
|
|
303
|
|
|
732
|
|
|
715
|
|
|
(59
|
)
|
|
(59
|
)
|
|
2
|
|
|
4
|
|
|||
Zyvox
|
|
Bacterial infections
|
|
281
|
|
|
421
|
|
|
883
|
|
|
(33
|
)
|
|
(32
|
)
|
|
(52
|
)
|
|
(49
|
)
|
|||
Revatio
|
|
Pulmonary arterial hypertension
|
|
252
|
|
|
285
|
|
|
260
|
|
|
(12
|
)
|
|
(12
|
)
|
|
10
|
|
|
10
|
|
|||
All other Peri-LOE Products
|
|
Various
|
|
257
|
|
|
276
|
|
|
362
|
|
|
(7
|
)
|
|
(5
|
)
|
|
(24
|
)
|
|
(21
|
)
|
|||
Biosimilars
(h)
|
|
Various
|
|
$
|
531
|
|
|
$
|
319
|
|
|
$
|
63
|
|
|
67
|
|
|
66
|
|
|
*
|
|
|
*
|
|
Inflectra/Remsima
|
|
Inflammatory diseases
|
|
419
|
|
|
192
|
|
|
30
|
|
|
*
|
|
|
*
|
|
|
*
|
|
|
*
|
|
|||
All Other Biosimilars
|
|
Various
|
|
112
|
|
|
127
|
|
|
33
|
|
|
(12
|
)
|
|
(12
|
)
|
|
*
|
|
|
*
|
|
|||
Pfizer CentreOne
(i)
|
|
|
|
$
|
706
|
|
|
$
|
718
|
|
|
$
|
612
|
|
|
(2
|
)
|
|
(2
|
)
|
|
17
|
|
|
18
|
|
Hospira Infusion Systems (HIS)
(j)
|
|
Various
|
|
$
|
97
|
|
|
$
|
1,158
|
|
|
$
|
403
|
|
|
(92
|
)
|
|
(92
|
)
|
|
*
|
|
|
*
|
|
Total Lyrica
(b)
|
|
Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury
|
|
$
|
5,065
|
|
|
$
|
4,966
|
|
|
$
|
4,839
|
|
|
2
|
|
|
3
|
|
|
3
|
|
|
4
|
|
Total Viagra
(c)
|
|
Erectile dysfunction
|
|
$
|
1,204
|
|
|
$
|
1,564
|
|
|
$
|
1,708
|
|
|
(23
|
)
|
|
(22
|
)
|
|
(8
|
)
|
|
(7
|
)
|
Total Alliance revenues
|
|
Various
|
|
$
|
2,927
|
|
|
$
|
1,746
|
|
|
$
|
1,312
|
|
|
68
|
|
|
68
|
|
|
33
|
|
|
33
|
|
(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. Viagra lost exclusivity in the U.S. in December 2017. Beginning in the first quarter of 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through December 2017, will be reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore total Viagra worldwide revenues will be reported in EH from 2018 forward.
|
(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 primarily 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. Beginning in the first quarter of 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through December 2017, will be reported in EH. Therefore total Viagra worldwide revenues will be reported in EH from 2018 forward. See note (c) above.
|
(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 Inc.
|
(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.
|
*
|
Indicates calculation not meaningful or result is equal to or greater than 100%.
|
•
|
Prevnar 13/Prevenar 13
(IH) worldwide revenues
decrease
d operationally in
2017
, compared to
2016
. Foreign exchange had
a de minimis
impact on worldwide revenues in
2017
, compared to
2016
.
|
2017 Financial Report
|
|
27
|
|
•
|
Lyrica
(EH (revenues from all of Europe, Russia, Turkey, Israel and Central Asia)/IH (revenues from all other geographies)) worldwide revenues
increase
d operationally in
2017
, compared to
2016
. Foreign exchange had
an unfavorable
impact on worldwide revenues in
2017
, compared to
2016
.
|
•
|
Ibrance
(IH) worldwide revenues, most of which were recorded in the U.S.,
increase
d operationally in
2017
, compared to
2016
. The significant revenue growth reflects Ibrance class leadership among cyclin-dependent kinase inhibitors in major markets with continuous share uptake in the U.S. and launches in major international markets supported by our scientific/clinical data and continued positive patient experience. Foreign exchange had
an unfavorable
impact on worldwide revenues in
2017
, compared to
2016
.
|
•
|
Enbrel
(IH, outside the U.S. and Canada) worldwide revenues, excluding the U.S. and Canada,
decrease
d operationally in
2017
, compared to
2016
, primarily due to ongoing biosimilar competition in most developed Europe markets, which is expected to continue. Foreign exchange had
an unfavorable
impact on worldwide revenues in
2017
, compared to
2016
.
|
•
|
Lipitor
(EH) worldwide revenues
increase
d operationally in
2017
, compared to
2016
. Foreign exchange had
an unfavorable
impact on worldwide revenues in
2017
, compared to
2016
. In the U.S., revenues
decrease
d
2%
in
2017
, compared to
2016
, primarily due to lower volumes, partially offset by favorable rebates.
|
•
|
Xeljanz
(IH) worldwide revenues
increase
d operationally in
2017
, compared to
2016
. In the U.S., Xeljanz revenues
increase
d
41%
in
2017
, compared to
2016
, primarily driven by increased adoption among rheumatologists, growing awareness among patients and improvements in payer access. In our international markets, revenues
increase
d
76%
operationally in
2017
, compared to
2016
, primarily driven by continued uptake in Japan, Canada and certain emerging markets and, to a lesser extent, the impact of new launches in certain developed Europe markets. Foreign exchange had
a de minimis
impact on worldwide revenues and
an unfavorable
impact of
1%
on international revenues in
2017
, compared to
2016
.
|
•
|
Viagra
(IH (U.S. and Canada revenues)/EH (all other revenues excluding U.S. and Canada)) worldwide revenues
decrease
d operationally in
2017
, compared to
2016
. The worldwide
decrease
in
2017
, compared to
2016
, was primarily due to a
31%
decrease
in the U.S. driven by generic competition that began in December 2017. Foreign exchange had
an unfavorable
impact on worldwide revenues in
2017
, compared to
2016
.
|
•
|
BeneFIX and ReFacto AF/Xyntha
(IH)––BeneFIX worldwide revenues
decrease
d operationally in
2017
, compared to
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. Foreign exchange had
a de minimis
impact on worldwide revenues in
2017
, compared to
2016
.
|
28
|
|
2017 Financial Report
|
|
•
|
Sutent
(IH) worldwide revenues
decrease
d operationally in
2017
, compared to
2016
. The
decrease
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
2017
, compared to
2016
.
|
•
|
Chantix/Champix
(IH) worldwide revenues
increase
d operationally in
2017
, compared to
2016
. Foreign exchange had
a de minimis
impact on worldwide revenues in
2017
, compared to
2016
.
|
•
|
The
Premarin
family of products (EH) worldwide revenues
decrease
d operationally in
2017
, compared to
2016
. Foreign exchange had
a de minimis
impact on worldwide revenues in
2017
, compared to
2016
. Revenues in the U.S.
decrease
d
4%
in
2017
, compared to
2016
, primarily driven by lower volume, partially offset by a positive price impact.
|
•
|
Norvasc
(EH) worldwide revenues
decrease
d operationally in
2017
, compared to
2016
. The
decrease
was primarily driven by generic competition in Japan, pricing pressures in China and lower volumes in certain Middle Eastern markets, partially offset by increased demand in China. Foreign exchange had
an unfavorable
impact on worldwide revenues in
2017
, compared to
2016
.
|
•
|
Celebrex
(EH) worldwide revenues
increase
d operationally in
2017
, compared to
2016
. The
increase
was primarily driven by favorable pricing in the U.S. and volume growth in emerging markets, primarily China, partially offset by generic competition in the U.S. and pricing pressures in Mexico. Foreign exchange had
an unfavorable
impact on worldwide revenues in
2017
, compared to
2016
.
|
•
|
Xalkori
(IH) worldwide revenues
increase
d operationally in
2017
, compared to
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 as well as increased use in first line indication. 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
2017
, compared to
2016
.
|
•
|
Inflectra/Remsima
(EH) worldwide revenues
increase
d operationally in
2017
, compared to
2016
. The
increase
was due to the U.S. launch in the fourth quarter of 2016 and continued uptake in developed markets in Europe, partially offset by pricing pressures in developed Europe markets. Foreign exchange had
a favorable
impact on worldwide revenues in
2017
, compared to
2016
.
|
•
|
Inlyta
(IH) worldwide revenues
decrease
d operationally in
2017
, compared to
2016
, primarily due to increased competition in the U.S., Europe and Japan, partially offset by performance in key emerging markets. Foreign exchange had
an unfavorable
impact on worldwide revenues in
2017
, compared to
2016
.
|
•
|
Pristiq
(EH) worldwide revenues
decrease
d operationally in
2017
, compared to
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
2017
, compared to
2016
.
|
•
|
Zyvox
(EH) worldwide revenues
decrease
d operationally in
2017
, compared to
2016
, due to generic competition in developed international markets and the U.S. and corresponding pricing pressures, partially offset by volume growth in China. Foreign exchange had
an unfavorable
impact on worldwide revenues in
2017
, compared to
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 non-steroidal topical ointment and is the first topical prescription treatment for atopic dermatitis approved in over 10 years. Prescription volume continued to strengthen steadily throughout 2017 supported by the launch of our direct-to-consumer campaign in the third quarter of 2017.
|
•
|
Alliance revenues
(IH/EH)
increase
d operationally in
2017
, compared to
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
|
◦
|
an increase
in Xtandi alliance revenues of
$450 million
in the U.S. resulting from the September 2016 acquisition of Medivation. While 2017 revenue growth did not reflect volume growth due to higher demand through patient assistance programs (which provide free medicines to patients), we believe that the demand for patient assistance as a percentage of total demand will decrease in 2018 as compared to 2017.
|
◦
|
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
|
2017 Financial Report
|
|
29
|
|
◦
|
Bavencio
(IH) is being developed and commercialized in collaboration with Merck KGaA. Both companies jointly fund all development and commercialization costs, and split equally any profits generated from selling any anti-PD-L1 or anti-PD-1 products from this collaboration. Bavencio is currently approved in metastatic MCC in the U.S., Europe and Japan as well as received accelerated approval for second line treatment of locally advanced or metastatic UC in the U.S.
|
RECENT FDA APPROVALS
|
||
PRODUCT
|
INDICATION
|
DATE APPROVED
|
Steglatro (ertugliflozin)
|
An adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus, which is being developed in collaboration with Merck
|
December 2017
|
Segluromet (ertugliflozin and metformin)
|
An adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus who are not adequately controlled on a regimen containing ertugliflozin or metformin, or in patients who are already treated with both ertugliflozin and metformin, which is being developed in collaboration with Merck
|
December 2017
|
Steglujan (ertugliflozin and sitagliptin)
|
An adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus when treatment with both ertugliflozin and sitagliptin is appropriate, which is being developed in collaboration with Merck
|
December 2017
|
Bosulif (bosutinib)
|
Treatment of adult patients with newly-diagnosed chronic phase Philadelphia chromosome-positive Ph+ CML, which is being developed in collaboration with Avillion
|
December 2017
|
Xeljanz (tofacitinib) and Xeljanz XR
|
Xeljanz 5 mg twice daily and Xeljanz XR extended release 11 mg once daily for the treatment of adult patients with active psoriatic arthritis who have had an inadequate response or intolerance to methotrexate or other disease-modifying antirheumatic drugs
|
December 2017
|
Ixifi (PF-06438179, infliximab-qbtx)
(a)
|
A biosimilar to Remicade® (infliximab) for all eligible indications of the reference product
|
December 2017
|
Sutent (sunitinib)
|
Adjuvant treatment in adult patients at high risk of recurrent renal cell carcinoma following nephrectomy (surgical removal of the cancerous kidney)
|
November 2017
|
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 CD22-positive B-cell precursor acute lymphoblastic leukemia
|
August 2017
|
Bavencio (avelumab)
|
Treatment for patients with locally advanced or metastatic UC 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
|
(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
|
30
|
|
2017 Financial Report
|
|
PENDING U.S. NDAs AND SUPPLEMENTAL FILINGS
|
||
PRODUCT
|
PROPOSED INDICATION
|
DATE FILED*
|
lorlatinib (PF-06463922)
|
Treatment of patients with ALK-positive metastatic non-small cell lung cancer, previously treated with one or more ALK inhibitors
|
February 2018
|
Filgrastim
(a)
|
A potential biosimilar to Neupogen® (filgrastim)
|
November 2017
|
PF-05280014
(b)
|
A potential biosimilar to Herceptin® (trastuzumab)
|
August 2017
|
Xeljanz (tofacitinib)
|
Treatment of adult patients with moderately to severely active ulcerative colitis
|
July 2017
|
Retacrit
(c)
|
A potential biosimilar to Epogen® and Procrit® (epoetin alfa)
|
February 2015
|
tafamidis meglumine
(d)
|
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)
|
Neupogen® is a registered trademark of Amgen, Inc.
|
(b)
|
Herceptin
®
is a registered trademark of Genentech, Inc.
|
(c)
|
Epogen
®
is a registered U.S. trademark of Amgen Inc.; Procrit
®
is a registered U.S. trademark of J&J. 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 Oncologic Drugs Advisory Committee (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. In November 2017, Pfizer resubmitted the BLA to the FDA for Retacrit in response to the “complete response” letter. In January 2018, the FDA upgraded the status of Pfizer’s McPherson, Kansas manufacturing facility to VAI based on an October 2017 inspection. The change to VAI status will lift the compliance hold that the FDA placed on approval of Pfizer pending applications, and will permit review of the BLA for the proposed epoetin alfa biosimilar.
|
(d)
|
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.
|
2017 Financial Report
|
|
31
|
|
REGULATORY APPROVALS AND FILINGS IN THE EU AND JAPAN
|
|||
PRODUCT
|
DESCRIPTION OF EVENT
|
DATE APPROVED
|
DATE FILED*
|
lorlatinib (PF-06463922)
|
Application filed in Japan for the treatment of patients with ALK-positive metastatic non-small cell lung cancer, previously treated with one or more ALK inhibitor
|
—
|
February 2018
|
lorlatinib (PF-06463922)
|
Application filed in the EU for the treatment of patients with ALK-positive metastatic non-small cell lung cancer, previously treated with one or more ALK inhibitors
|
—
|
February 2018
|
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
CD22-positive
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 meningitidis 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
(c)
|
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
|
*
|
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.
|
(c)
|
In January 2018, the EMA’s Committee for Medicinal Products for Human Use issued an opinion recommending that ertugliflozin be granted approval for the treatment of type 2 diabetes
.
|
32
|
|
2017 Financial Report
|
|
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)
|
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 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
|
(a)
|
As noted in our February 2018 press release, we and our partner Merck KGaA, Darmstadt, Germany, announced that the Bavencio Phase 3 trial in second-line NSCLC did not meet its pre-specified primary endpoint. We are continuing to further evaluate the detailed results.
|
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 first-line treatment of patients with ALK-positive advanced non-small cell lung cancer
|
PF-04965842
|
A Janus kinase 1 (JAK1) inhibitor for the treatment of moderate-to-severe atopic dermatitis
|
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 BRCA-mutated advanced breast cancer
|
talazoparib (MDV3800)
|
An oral PARP inhibitor for the treatment of metastatic castrate resistant prostate 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.
|
2017 Financial Report
|
|
33
|
|
|
|
Year Ended December 31,
|
|
% Change
|
|||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
17/16
|
|
|
16/15
|
|||
Cost of sales
|
|
$
|
11,240
|
|
|
$
|
12,329
|
|
|
$
|
9,648
|
|
|
(9
|
)
|
|
28
|
As a percentage of
Revenues
|
|
21.4
|
%
|
|
23.3
|
%
|
|
19.7
|
%
|
|
|
|
|
•
|
the favorable impact of the sale of HIS global operations (which carried a higher cost of sales than other products) of $561 million;
|
•
|
recognition of synergies related to our cost-reduction/productivity initiatives;
|
•
|
the nonrecurring unfavorable impact of $248 million of acquired Hospira inventory, which is measured at fair value on the acquisition date and was amortized over the turn of the related inventory;
|
•
|
the favorable impact of foreign exchange of $140 million and the favorable offset of hedging gains of
$52 million
; 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,
|
•
|
$195 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.
|
•
|
the unfavorable impact of the Hospira acquisition;
|
•
|
the growth in revenues from key innovative brands as well as the growth in the legacy Pfizer Sterile Injectable Pharmaceuticals portfolio;
|
•
|
production variances driven by changes in product mix, including products which have lost exclusivity and manufacturing production issues at certain sites (up approximately $300 million);
|
•
|
an increase in costs associated with our cost-reduction/productivity initiatives including plant network strategy (approximately $200 million); and
|
•
|
the unfavorable impact of foreign exchange of 3% or approximately $410 million in
2016
.
|
•
|
an unfavorable change in product mix due to (i) the unfavorable impact of the Hospira acquisition, with products that carry a higher cost, as well as the impact of acquired Hospira inventory which was measured at fair value on the acquisition date and amortized over the turn of the related inventory; and (ii) the impact of losses of exclusivity on products which formerly had a higher gross margin;
|
•
|
the unfavorable impact of foreign exchange; and
|
•
|
the unfavorable impact of costs incurred to implement our cost-reduction/productivity initiatives (not related to acquisitions) in 2016, compared to 2015,
|
•
|
a favorable change in product mix related to legacy Pfizer products, excluding the impact of losses of exclusivity on products referred to above; and
|
•
|
non-recurring charges of $72 million related to manufacturing plant pension obligations and non-recurring charges of $72 million related to inventory impairment in Venezuela in 2015 related to the foreign currency change described in the “Global Economic Conditions—Venezuela Operations” section in this Financial Review.
|
34
|
|
2017 Financial Report
|
|
|
|
Year Ended December 31,
|
|
% Change
|
|||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
17/16
|
|
|
16/15
|
|||
Selling, informational and administrative expenses
|
|
$
|
14,784
|
|
|
$
|
14,837
|
|
|
$
|
14,809
|
|
|
—
|
|
|
—
|
As a percentage of
Revenues
|
|
28.1
|
%
|
|
28.1
|
%
|
|
30.3
|
%
|
|
|
|
|
•
|
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, reflecting the benefits of cost-reduction and productivity initiatives;
|
•
|
lower spending for certain products, primarily Prevnar 13/Prevenar 13;
|
•
|
the favorable impact of the sale of HIS global operations of $135 million; and
|
•
|
lower spending for Viagra due to the loss of exclusivity in December 2017,
|
•
|
additional investment across several of our key products, primarily Eucrisa, Ibrance and Xeljanz, as well as biosimilars, primarily related to the U.S. launch of Inflectra; and
|
•
|
an increase in charitable contributions, including a $200 million charitable contribution to the Pfizer Foundation, an organization that provides grant and investment funding to support organizations and social entrepreneurs in an effort to improve healthcare delivery.
|
•
|
an increase in the allowance for doubtful trade accounts receivable, resulting from unfavorable developments with a distributor (approximately $280 million);
|
•
|
the unfavorable impact of the Hospira acquisition; and
|
•
|
additional investment across several of our key products,
|
•
|
the non-recurrence of a $419 million charge related to the settlement of pension obligations in accordance with
an offer to certain terminated employees who are vested in their pension benefits to elect a lump-sum payment or annuity of their deferred vested pension benefits in 2015; and
|
•
|
the favorable impact of foreign exchange of 2% in 2016.
|
|
|
Year Ended December 31,
|
|
% Change
|
|||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
17/16
|
|
|
16/15
|
|||
Research and development expenses
|
|
$
|
7,657
|
|
|
$
|
7,872
|
|
|
$
|
7,690
|
|
|
(3
|
)
|
|
2
|
As a percentage of
Revenues
|
|
14.6
|
%
|
|
14.9
|
%
|
|
15.7
|
%
|
|
|
|
|
•
|
lower expenses of approximately $743 million due to the discontinuation of the global clinical development program for bococizumab in the fourth quarter of 2016 and the non-recurrence of its associated close-out costs;
|
•
|
increased costs associated with our oncology programs, primarily clinical trial spend on Medivation assets;
|
•
|
lower development funding credits of approximately $124 million primarily related to the discontinuation of the global clinical development program for bococizumab in the fourth quarter of 2016;
|
•
|
increased costs associated with our
C. difficile
vaccine program, which initiated a Phase 3 clinical study in March 2017;
|
•
|
an expense of $75 million resulting from our May 2017 agreement with Sangamo to develop and commercialize gene therapy programs for Hemophilia A; and
|
•
|
increased costs associated with late stage development programs, including Xtandi, talazoparib and tanezumab.
|
•
|
costs of approximately $260 million to close-out studies for the global clinical development program for bococizumab that was discontinued in the fourth quarter of 2016;
|
2017 Financial Report
|
|
35
|
|
•
|
the unfavorable impact of the Hospira acquisition and increased investment in legacy Hospira biosimilar and sterile injectable development programs and, to a lesser extent, the inclusion of approximately six months of legacy Anacor operations and approximately three months of legacy Medivation operations; and
|
•
|
increased costs associated with our oncology programs, primarily our avelumab alliance with Merck KGaA,
|
•
|
the non-recurrence of the
$295 million
upfront payment to OPKO in the first quarter of 2015 associated with a worldwide development and commercialization agreement; and
|
•
|
development funding of
$272 million
under which we had an obligation to perform contractual services related to certain clinical trials of bococizumab, Ibrance and rivipansel (see Notes to Consolidated Financial Statements––
Note 2C. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Research and Development and Collaboration Agreements
)
.
|
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
17/16
|
|
16/15
|
|||
Amortization of intangible assets
|
|
$
|
4,758
|
|
|
$
|
4,056
|
|
|
$
|
3,728
|
|
|
17
|
|
9
|
As a percentage of
Revenues
|
|
9.1
|
%
|
|
7.7
|
%
|
|
7.6
|
%
|
|
|
|
|
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
17/16
|
|
|
16/15
|
|
|||
Restructuring charges––acquisition-related costs
(a)
|
|
$
|
109
|
|
|
$
|
211
|
|
|
$
|
479
|
|
|
(48
|
)
|
|
(56
|
)
|
Restructuring charges––cost reduction initiatives
(b)
|
|
69
|
|
|
945
|
|
|
333
|
|
|
(93
|
)
|
|
*
|
|
|||
Restructuring charges
|
|
178
|
|
|
1,156
|
|
|
811
|
|
|
(85
|
)
|
|
43
|
|
|||
Transaction costs
|
|
4
|
|
|
127
|
|
|
123
|
|
|
(97
|
)
|
|
3
|
|
|||
Integration costs
|
|
305
|
|
|
441
|
|
|
218
|
|
|
(31
|
)
|
|
*
|
|
|||
Restructuring charges and certain acquisition-related costs
|
|
$
|
487
|
|
|
$
|
1,724
|
|
|
$
|
1,152
|
|
|
(72
|
)
|
|
50
|
|
Total additional depreciation––asset restructuring
|
|
91
|
|
|
207
|
|
|
122
|
|
|
(56
|
)
|
|
70
|
|
|||
Total implementation costs
|
|
227
|
|
|
340
|
|
|
203
|
|
|
(33
|
)
|
|
67
|
|
|||
Costs associated with acquisitions and cost-reduction/productivity initiatives
(c)
|
|
$
|
805
|
|
|
$
|
2,271
|
|
|
$
|
1,478
|
|
|
(65
|
)
|
|
54
|
|
(a)
|
Restructuring charges––acquisition-related costs include employee termination costs, exit costs and asset impairments associated with business combinations. For 2017 and 2016, restructuring charges––acquisition-related costs are primarily associated with our acquisitions of Hospira and Medivation. For 2015, restructuring charges––acquisition-related costs
primarily relate to our acquisition of Hospira.
|
(b)
|
Restructuring charges––cost reduction initiatives include employee termination costs, exit costs and asset impairments not associated with acquisitions.
|
(c)
|
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 Consolidated Financial Statements—
Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives.
|
*
|
Indicates calculation not meaningful or result is equal to or greater than 100%.
|
36
|
|
2017 Financial Report
|
|
|
|
Year Ended December 31,
|
|
% Change
|
|||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
17/16
|
|
|
16/15
|
|||
Other (income)/deductions—net
|
|
$
|
1,315
|
|
|
$
|
3,655
|
|
|
$
|
2,860
|
|
|
(64
|
)
|
|
28
|
|
|
Year Ended December 31,
|
|
% Change
|
|||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
17/16
|
|
16/15
|
|
|||
Provision/(benefit) for taxes on income
|
|
$
|
(9,049
|
)
|
|
$
|
1,123
|
|
|
$
|
1,990
|
|
|
*
|
|
(44
|
)
|
Effective tax rate on continuing operations
|
|
(73.5
|
)%
|
|
13.4
|
%
|
|
22.2
|
%
|
|
|
|
|
*
|
Indicates calculation not meaningful or result is equal to or greater than 100%.
|
•
|
the tax benefits associated with the remeasurement of deferred tax liabilities, which includes the repatriation tax on deemed repatriated accumulated post-1986 earnings of foreign subsidiaries associated with the enactment of the TCJA; and
|
•
|
a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business,
|
•
|
the 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; and
|
•
|
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.
|
2017 Financial Report
|
|
37
|
|
•
|
the 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 the non-deductibility of a foreign currency loss related to Venezuela;
|
•
|
the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business;
|
•
|
the increase 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; and
|
•
|
the benefits related to the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, requiring excess tax benefits or deficiencies of share-based compensation to be recognized as a component of the
Provision/(benefit) for taxes on income
. The net tax benefit was $89 million in 2016 (See Notes to Consolidated Financial Statements––
Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards
in Pfizer’s 2016 Financial Report),
|
•
|
the non-recurrence of tax benefits associated with certain tax initiatives.
|
•
|
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
|
38
|
|
2017 Financial Report
|
|
•
|
senior management’s annual compensation is derived, in part, using Adjusted income and Adjusted diluted earnings per share measures. Adjusted income is the performance metric utilized in the determination of bonuses under the Pfizer Inc. Executive Annual Incentive Plan that is designed to limit the bonuses payable to the Executive Leadership Team (ELT) for purposes of IRC Section 162(m). Subject to the Section 162(m) limitation, the bonuses are funded from a pool based on the performance measured by three financial metrics, including adjusted diluted earnings per share, which is derived from Adjusted income. This metric accounts for 40% of the bonus pool funding. The pool applies to the bonus plans for virtually all bonus-eligible, non-sales-force employees worldwide, including the ELT members and other members of senior management. In addition, commencing with the 2015 Performance Share Awards, adjusted operating income is one of the measures utilized to determine payout. Adjusted operating income is derived from Adjusted income.
|
2017 Financial Report
|
|
39
|
|
40
|
|
2017 Financial Report
|
|
|
|
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
|
|
$
|
52,546
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
52,546
|
|
Cost of sales
|
|
11,240
|
|
|
(47
|
)
|
|
(39
|
)
|
|
—
|
|
|
(363
|
)
|
|
10,790
|
|
||||||
Selling, informational and administrative expenses
|
|
14,784
|
|
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
(299
|
)
|
|
14,469
|
|
||||||
Research and development expenses
|
|
7,657
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
(38
|
)
|
|
7,626
|
|
||||||
Amortization of intangible assets
|
|
4,758
|
|
|
(4,565
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
193
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
487
|
|
|
—
|
|
|
(418
|
)
|
|
—
|
|
|
(69
|
)
|
|
—
|
|
||||||
Other (income)/deductions––net
|
|
1,315
|
|
|
(138
|
)
|
|
—
|
|
|
—
|
|
|
(1,876
|
)
|
|
(699
|
)
|
||||||
Income from continuing operations before provision/(benefit) for taxes on income
|
|
12,305
|
|
|
4,758
|
|
|
456
|
|
|
—
|
|
|
2,647
|
|
|
20,166
|
|
||||||
Provision/(benefit) for taxes on income
(b)
|
|
(9,049
|
)
|
|
1,331
|
|
|
173
|
|
|
—
|
|
|
11,577
|
|
|
4,033
|
|
||||||
Income from continuing operations
|
|
21,353
|
|
|
3,426
|
|
|
283
|
|
|
—
|
|
|
(8,930
|
)
|
|
16,132
|
|
||||||
Discontinued operations––net of tax
|
|
2
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
||||||
Net income attributable to noncontrolling interests
|
|
47
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
47
|
|
||||||
Net income attributable to Pfizer Inc.
|
|
21,308
|
|
|
3,426
|
|
|
283
|
|
|
(2
|
)
|
|
(8,930
|
)
|
|
16,085
|
|
||||||
Earnings per common share attributable to Pfizer Inc.––diluted
|
|
3.52
|
|
|
0.57
|
|
|
0.05
|
|
|
—
|
|
|
(1.47
|
)
|
|
2.65
|
|
|
|
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
|
|
$
|
52,824
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
52,824
|
|
Cost of sales
|
|
12,329
|
|
|
(295
|
)
|
|
(7
|
)
|
|
—
|
|
|
(397
|
)
|
|
11,630
|
|
||||||
Selling, informational and administrative expenses
|
|
14,837
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(89
|
)
|
|
14,745
|
|
||||||
Research and development expenses
|
|
7,872
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
(34
|
)
|
|
7,841
|
|
||||||
Amortization of intangible assets
|
|
4,056
|
|
|
(3,928
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
128
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
1,724
|
|
|
—
|
|
|
(778
|
)
|
|
—
|
|
|
(945
|
)
|
|
—
|
|
||||||
Other (income)/deductions––net
|
|
3,655
|
|
|
39
|
|
|
—
|
|
|
—
|
|
|
(4,423
|
)
|
|
(729
|
)
|
||||||
Income from continuing operations before provision/(benefit) for taxes on income
|
|
8,351
|
|
|
4,185
|
|
|
785
|
|
|
—
|
|
|
5,888
|
|
|
19,210
|
|
||||||
Provision/(benefit) for taxes on income
(b)
|
|
1,123
|
|
|
1,248
|
|
|
104
|
|
|
—
|
|
|
1,943
|
|
|
4,418
|
|
||||||
Income from continuing operations
|
|
7,229
|
|
|
2,937
|
|
|
682
|
|
|
—
|
|
|
3,944
|
|
|
14,792
|
|
||||||
Discontinued operations––net of tax
|
|
17
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
||||||
Net income attributable to noncontrolling interests
|
|
31
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
||||||
Net income attributable to Pfizer Inc.
|
|
7,215
|
|
|
2,937
|
|
|
682
|
|
|
(17
|
)
|
|
3,944
|
|
|
14,761
|
|
||||||
Earnings per common share attributable to Pfizer Inc.––diluted
|
|
1.17
|
|
|
0.48
|
|
|
0.11
|
|
|
—
|
|
|
0.64
|
|
|
2.40
|
|
2017 Financial Report
|
|
41
|
|
|
|
2015
|
||||||||||||||||||||||
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
|
|
$
|
48,851
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
48,851
|
|
Cost of sales
|
|
9,648
|
|
|
(413
|
)
|
|
(75
|
)
|
|
—
|
|
|
(140
|
)
|
|
9,021
|
|
||||||
Selling, informational and administrative expenses
|
|
14,809
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(484
|
)
|
|
14,324
|
|
||||||
Research and development expenses
|
|
7,690
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
(44
|
)
|
|
7,653
|
|
||||||
Amortization of intangible assets
|
|
3,728
|
|
|
(3,598
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
130
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
1,152
|
|
|
—
|
|
|
(820
|
)
|
|
—
|
|
|
(333
|
)
|
|
—
|
|
||||||
Other (income)/deductions––net
|
|
2,860
|
|
|
52
|
|
|
—
|
|
|
—
|
|
|
(3,321
|
)
|
|
(409
|
)
|
||||||
Income from continuing operations before provision/(benefit) for taxes on income
|
|
8,965
|
|
|
3,953
|
|
|
894
|
|
|
—
|
|
|
4,321
|
|
|
18,133
|
|
||||||
Provision/(benefit) for taxes on income
(b)
|
|
1,990
|
|
|
1,110
|
|
|
303
|
|
|
—
|
|
|
949
|
|
|
4,352
|
|
||||||
Income from continuing operations
|
|
6,975
|
|
|
2,843
|
|
|
591
|
|
|
—
|
|
|
3,372
|
|
|
13,781
|
|
||||||
Discontinued operations––net of tax
|
|
11
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
||||||
Net income attributable to noncontrolling interests
|
|
26
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
||||||
Net income attributable to Pfizer Inc.
|
|
6,960
|
|
|
2,843
|
|
|
591
|
|
|
(11
|
)
|
|
3,372
|
|
|
13,755
|
|
||||||
Earnings per common share attributable to Pfizer Inc.––diluted
|
|
1.11
|
|
|
0.45
|
|
|
0.09
|
|
|
—
|
|
|
0.54
|
|
|
2.20
|
|
(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
20.0%
in
2017
,
23.0%
in
2016
and
24.0%
in
2015
. The decrease in the effective tax rate on Non-GAAP Adjusted income for
2017
compared with
2016
was primarily due to tax benefits associated with the enactment of the TCJA, primarily reflecting the remeasurement of U.S. deferred tax liabilities on deemed repatriated post-1986 earnings of foreign subsidiaries that were accrued during 2017, as well as a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, partially offset by 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 decline in the effective tax rate on Non-GAAP Adjusted income in
2016
compared to
2015
was primarily due to a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, an increase in tax 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, as well as benefits related to the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, requiring excess tax benefits or deficiencies of share-based compensation to be recognized as a component of the
Provision/(benefit) for taxes on income
.
|
42
|
|
2017 Financial Report
|
|
Adjusted income, as shown above, excludes the following items:
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Purchase accounting adjustments
|
|
|
|
|
|
|
||||||
Amortization, depreciation and other
(a)
|
|
$
|
4,711
|
|
|
$
|
3,890
|
|
|
$
|
3,540
|
|
Cost of sales
|
|
47
|
|
|
295
|
|
|
413
|
|
|||
Total purchase accounting adjustments—pre-tax
|
|
4,758
|
|
|
4,185
|
|
|
3,953
|
|
|||
Income taxes
(b)
|
|
(1,331
|
)
|
|
(1,248
|
)
|
|
(1,110
|
)
|
|||
Total purchase accounting adjustments—net of tax
|
|
3,426
|
|
|
2,937
|
|
|
2,843
|
|
|||
|
|
|
|
|
|
|
||||||
Acquisition-related costs
|
|
|
|
|
|
|
||||||
Restructuring charges
(c)
|
|
109
|
|
|
211
|
|
|
479
|
|
|||
Transaction costs
(c)
|
|
4
|
|
|
127
|
|
|
123
|
|
|||
Integration costs
(c)
|
|
305
|
|
|
441
|
|
|
218
|
|
|||
Additional depreciation—asset restructuring
(d)
|
|
39
|
|
|
7
|
|
|
75
|
|
|||
Total acquisition-related costs—pre-tax
|
|
456
|
|
|
785
|
|
|
894
|
|
|||
Income taxes
(e)
|
|
(173
|
)
|
|
(104
|
)
|
|
(303
|
)
|
|||
Total acquisition-related costs—net of tax
|
|
283
|
|
|
682
|
|
|
591
|
|
|||
|
|
|
|
|
|
|
||||||
Discontinued operations
|
|
|
|
|
|
|
||||||
Total discontinued operations—net of tax, attributable to Pfizer Inc.
(f)
|
|
(2
|
)
|
|
(17
|
)
|
|
(11
|
)
|
|||
|
|
|
|
|
|
|
||||||
Certain significant items
|
|
|
|
|
|
|
||||||
Restructuring charges
(g)
|
|
69
|
|
|
945
|
|
|
333
|
|
|||
Implementation costs and additional depreciation—asset restructuring
(h)
|
|
279
|
|
|
540
|
|
|
251
|
|
|||
Certain legal matters, net
(i)
|
|
237
|
|
|
494
|
|
|
968
|
|
|||
Loss on sale and impairment on remeasurement of HIS net assets
(i)
|
|
55
|
|
|
1,712
|
|
|
—
|
|
|||
Certain asset impairments
(i)
|
|
379
|
|
|
1,426
|
|
|
787
|
|
|||
Foreign currency loss and inventory impairment related to Venezuela
(j)
|
|
—
|
|
|
—
|
|
|
878
|
|
|||
Charge related to pension settlement
(k)
|
|
—
|
|
|
—
|
|
|
491
|
|
|||
Business and legal entity alignment costs
(i)
|
|
71
|
|
|
261
|
|
|
282
|
|
|||
Net losses on early retirement of debt
(i)
|
|
999
|
|
|
312
|
|
|
—
|
|
|||
Other
(l)
|
|
556
|
|
|
197
|
|
|
332
|
|
|||
Total certain significant items—pre-tax
|
|
2,647
|
|
|
5,888
|
|
|
4,321
|
|
|||
Income taxes
(m)
|
|
(11,577
|
)
|
|
(1,943
|
)
|
|
(949
|
)
|
|||
Total certain significant items—net of tax
|
|
(8,930
|
)
|
|
3,944
|
|
|
3,372
|
|
|||
Total purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items—net of tax, attributable to Pfizer Inc.
|
|
$
|
(5,223
|
)
|
|
$
|
7,546
|
|
|
$
|
6,795
|
|
(a)
|
Included primarily in
Amortization of intangible assets
.
|
(b)
|
Included in
Provision/(benefit) 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. Income taxes recorded in 2017 do not reflect any changes associated with the enactment of the TCJA. These changes resulting from the TCJA have been reflected in the line item, Certain significant items “Income taxes”.
|
(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 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/(benefit) 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. Income taxes recorded in 2017 do not reflect any changes associated with the enactment of the TCJA. These changes resulting from the TCJA have been reflected in Certain significant items “Income taxes”. As applicable, each period may also include the impact of the remeasurement of certain deferred tax liabilities resulting from our plant network restructuring activities: in 2016, there was an unfavorable impact.
|
(f)
|
Included in
Discontinued operations––net of tax.
For all years presented, represents post-close adjustments.
|
(g)
|
Included in
Restructuring charges and certain acquisition-related costs
(see Notes to Consolidated Financial Statements—
Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
). Amounts relate to our cost-reduction and productivity initiatives not related to acquisitions.
|
2017 Financial Report
|
|
43
|
|
(h)
|
Amounts relate to our cost-reduction/productivity initiatives not related to acquisitions (see Notes to Consolidated Financial Statements—
Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
). For
2017
, included in
Cost of sales
(
$170 million
),
Selling, informational and administrative expenses
(
$71 million
) and
Research and development expenses
(
$38 million
). For
2016
, primarily all included in
Cost of sales
(
$423 million
),
Selling, informational and administrative expenses
(
$81 million
) and
Research and development expenses
(
$32 million
). For
2015
, virtually all included in
Cost of sales
(
$145 million
),
Selling, informational and administrative expenses
(
$83 million
) and
Research and development expenses
(
$19 million
).
|
(i)
|
Included in
Other (income)/deductions—net
(see the Notes to Consolidated Financial Statements—
Note 4. Other (Income)/Deductions—Net
).
|
(j)
|
In 2015, represents (i) an
$806 million
foreign currency loss included in
Other (income)/deductions––net
related to conditions in Venezuela during 2015, that had us resolve that our Venezuelan bolivar-denominated net monetary assets that are subject to revaluation were no longer expected to be settled at the Venezuelan government CENCOEX official rate of 6.30, but rather at the then SIMADI rate of 200, the lowest official rate. Those conditions included the inability to obtain significant conversions of Venezuelan bolivars related to intercompany U.S. dollar
denominated accounts, an evaluation of the effects of the implementation of a fourth-quarter 2015 operational restructuring, resulting in
36%
reduction in our labor force in Venezuela, and our expectation of the changes in Venezuela’s responses to changes in its economy; and (ii) a
$72 million
charge included in
Cost of sales
related to inventory impairment in Venezuela related to the foreign currency change described above.
|
(k)
|
In 2015, included in
Cost of sales
(
$72 million
) and
Selling, informational and administrative expenses
(
$419 million
) and
primarily represents a non-recurring charge related to settlement of pension obligations in accordance with
an offer to certain terminated employees who are vested in their pension benefits to elect a lump-sum payment or annuity of their deferred vested pension benefits.
|
(l)
|
For
2017
, included in
Cost of sales
(
$193 million
),
Selling, informational and administrative expenses
(
$229 million
) and
Other (income)/deductions––net
(
$134 million
). For
2016
, primarily included in
Cost of sales
(
$27 million
income),
Selling, informational and administrative expenses
(
$8 million
) and
Other (income)/deductions––net
(
$214 million
). For
2015
, virtually all included in
Cost of sales
(
$149 million
income) and
Other (income)/deductions––net
(
$473 million
). For
2017
, includes, among other things, (i) a charitable contribution to the Pfizer Foundation of
$200 million
, which is included in
Selling, informational and administrative expenses
; (ii)
$195 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
; (iii) an
$81 million
loss related to the sale of our 49% equity share in Hisun Pfizer, which is included in
Other (income)/deductions––net;
and (iv) 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, which is included in
Other (income)/deductions––net
. For 2016, includes, among other things,
$150 million
paid to Allergan for reimbursement of Allergan's expenses associated with the terminated transaction, which is included in
Other (income)/deductions—net
. For 2015, includes, among other things, a change in the profit deferred in inventory relating to inventory that had not been sold to third parties, which is included in
Cost of sales
(non-cash benefit of
$221 million
), losses of
$239 million
, which are included in
Other (income)/deductions––net,
and are
related to our share of an equity method investee’s charges incurred for its re-measurement of a contingent consideration liability, and charges of
$173 million
related to the write-down of assets to net realizable value, which are primarily included in
Other (income)/deductions––net
.
|
(m)
|
Included in
Provision/(benefit) 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 amount in 2017 was favorably impacted by tax benefits primarily associated with the remeasurement of deferred tax liabilities, which includes the repatriation tax on deemed repatriated accumulated post-1986 earnings of foreign subsidiaries associated with the TCJA. Given the significant changes resulting from and complexities associated with the TCJA, the estimated financial impacts for 2017 are provisional and subject to further analysis, interpretation and clarification of the TCJA, which could result in changes to these estimates during 2018. The amount in
2016
was 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. The amount in 2015 was favorably impacted by tax benefits associated with certain tax initiatives. In addition, the amount in 2015 was unfavorably impacted by a non-deductible foreign currency loss related to Venezuela and the non-deductible charge for the agreement in principle reached in February 2016 to resolve claims relating to Protonix. See Notes to Consolidated Financial Statements—
Note 5A. Tax Matters: Taxes on Income from Continuing Operations
.
|
44
|
|
2017 Financial Report
|
|
|
|
2016
|
||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Innovative Health (IH)
(a)
|
|
|
Essential Health (EH)
(a)
|
|
|
Other
(b)
|
|
|
Non-GAAP
Adjusted (c) |
|
|
Reconciling Items
(d)
|
|
|
GAAP Reported
|
|
||||||
Revenues
|
|
$
|
29,197
|
|
|
$
|
23,627
|
|
|
$
|
—
|
|
|
$
|
52,824
|
|
|
$
|
—
|
|
|
$
|
52,824
|
|
Cost of sales
|
|
4,041
|
|
|
6,273
|
|
|
1,316
|
|
|
11,630
|
|
|
699
|
|
|
12,329
|
|
||||||
% of revenue
|
|
13.8
|
%
|
|
26.5
|
%
|
|
*
|
|
|
22.0
|
%
|
|
*
|
|
|
23.3
|
%
|
||||||
Selling, informational and administrative expenses
|
|
7,248
|
|
|
3,455
|
|
|
4,042
|
|
|
14,745
|
|
|
92
|
|
|
14,837
|
|
||||||
Research and development expenses
|
|
2,940
|
|
|
1,232
|
|
|
3,669
|
|
|
7,841
|
|
|
31
|
|
|
7,872
|
|
||||||
Amortization of intangible assets
|
|
102
|
|
|
26
|
|
|
—
|
|
|
128
|
|
|
3,928
|
|
|
4,056
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,724
|
|
|
1,724
|
|
||||||
Other (income)/deductions––net
|
|
(988
|
)
|
|
(256
|
)
|
|
515
|
|
|
(729
|
)
|
|
4,384
|
|
|
3,655
|
|
||||||
Income/(loss) from continuing operations before provision/(benefit) for taxes on income
|
|
$
|
15,854
|
|
|
$
|
12,898
|
|
|
$
|
(9,542
|
)
|
|
$
|
19,210
|
|
|
$
|
(10,858
|
)
|
|
$
|
8,351
|
|
|
|
2015
|
||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Innovative Health (IH)
(a)
|
|
|
Essential Health (EH)
(a)
|
|
|
Other
(b)
|
|
|
Non-GAAP
Adjusted (c) |
|
|
Reconciling Items
(d)
|
|
|
GAAP Reported
|
|
||||||
Revenues
|
|
$
|
26,758
|
|
|
$
|
22,094
|
|
|
$
|
—
|
|
|
$
|
48,851
|
|
|
$
|
—
|
|
|
$
|
48,851
|
|
Cost of sales
|
|
3,651
|
|
|
4,891
|
|
|
479
|
|
|
9,021
|
|
|
627
|
|
|
9,648
|
|
||||||
% of revenue
|
|
13.6
|
%
|
|
22.1
|
%
|
|
*
|
|
|
18.5
|
%
|
|
*
|
|
|
19.7
|
%
|
||||||
Selling, informational and administrative expenses
|
|
6,807
|
|
|
3,573
|
|
|
3,945
|
|
|
14,324
|
|
|
485
|
|
|
14,809
|
|
||||||
Research and development expenses
|
|
2,712
|
|
|
1,032
|
|
|
3,909
|
|
|
7,653
|
|
|
37
|
|
|
7,690
|
|
||||||
Amortization of intangible assets
|
|
94
|
|
|
36
|
|
|
—
|
|
|
130
|
|
|
3,598
|
|
|
3,728
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,152
|
|
|
1,152
|
|
||||||
Other (income)/deductions––net
|
|
(1,086
|
)
|
|
(152
|
)
|
|
829
|
|
|
(409
|
)
|
|
3,269
|
|
|
2,860
|
|
||||||
Income/(loss) from continuing operations before provision/(benefit) for taxes on income
|
|
$
|
14,581
|
|
|
$
|
12,714
|
|
|
$
|
(9,162
|
)
|
|
$
|
18,133
|
|
|
$
|
(9,168
|
)
|
|
$
|
8,965
|
|
(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 revenues and costs included in our Adjusted income components (see footnote (c) below)
that are managed outside of our two operating segments and includes the following:
|
|
|
2017
|
||||||||||||||||||
|
|
Other Business Activities
|
|
|
|
|
|
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
WRD
(i)
|
|
GPD
(ii)
|
|
Corporate
(iii)
|
|
Other
Unallocated
(iv)
|
|
Total
|
||||||||||
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of sales
|
|
1
|
|
|
—
|
|
|
34
|
|
|
727
|
|
|
762
|
|
|||||
Selling, informational and administrative expenses
|
|
—
|
|
|
(1
|
)
|
|
4,208
|
|
|
37
|
|
|
4,244
|
|
|||||
Research and development expenses
|
|
2,395
|
|
|
776
|
|
|
840
|
|
|
4
|
|
|
4,014
|
|
|||||
Amortization of intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other (income)/deductions––net
|
|
(33
|
)
|
|
—
|
|
|
440
|
|
|
32
|
|
|
439
|
|
|||||
Loss from continuing operations before provision/(benefit) for taxes on income
|
|
$
|
(2,362
|
)
|
|
$
|
(775
|
)
|
|
$
|
(5,522
|
)
|
|
$
|
(799
|
)
|
|
$
|
(9,459
|
)
|
2017 Financial Report
|
|
45
|
|
|
|
2016
|
||||||||||||||||||
|
|
Other Business Activities
|
|
|
|
|
|
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
WRD
(i)
|
|
GPD
(ii)
|
|
Corporate
(iii)
|
|
Other
Unallocated
(iv)
|
|
Total
|
||||||||||
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
199
|
|
|
1,117
|
|
|
1,316
|
|
|||||
Selling, informational and administrative expenses
|
|
—
|
|
|
—
|
|
|
4,004
|
|
|
37
|
|
|
4,042
|
|
|||||
Research and development expenses
|
|
2,352
|
|
|
691
|
|
|
612
|
|
|
14
|
|
|
3,669
|
|
|||||
Amortization of intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other (income)/deductions––net
|
|
(24
|
)
|
|
—
|
|
|
676
|
|
|
(136
|
)
|
|
515
|
|
|||||
Loss from continuing operations before provision/(benefit) for taxes on income
|
|
$
|
(2,328
|
)
|
|
$
|
(691
|
)
|
|
$
|
(5,491
|
)
|
|
$
|
(1,032
|
)
|
|
$
|
(9,542
|
)
|
|
|
2015
|
||||||||||||||||||
|
|
Other Business Activities
|
|
|
|
|
|
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
WRD
(i)
|
|
GPD
(ii)
|
|
Corporate
(iii)
|
|
Other
Unallocated
(iv)
|
|
Total
|
||||||||||
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
20
|
|
|
459
|
|
|
479
|
|
|||||
Selling, informational and administrative expenses
|
|
2
|
|
|
—
|
|
|
3,860
|
|
|
84
|
|
|
3,945
|
|
|||||
Research and development expenses
|
|
2,331
|
|
|
658
|
|
|
906
|
|
|
14
|
|
|
3,909
|
|
|||||
Amortization of intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
3
|
|
|
(3
|
)
|
|
—
|
|
|||||
Other (income)/deductions––net
|
|
(77
|
)
|
|
—
|
|
|
817
|
|
|
89
|
|
|
829
|
|
|||||
Loss from continuing operations before provision/(benefit) for taxes on income
|
|
$
|
(2,255
|
)
|
|
$
|
(658
|
)
|
|
$
|
(5,607
|
)
|
|
$
|
(642
|
)
|
|
$
|
(9,162
|
)
|
(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
$165 million
and
$177 million
of Medical costs from Other Business Activities to Corporate in 2016 and
2015
, respectively, to conform to the current period presentation. We recognized a
$52 million
gain in
2017
as an offset to
Cost of sales
related to foreign currency forward-exchange contracts designated as cash flow hedges of a portion of our foreign exchange-denominated forecasted intercompany inventory sales.
|
(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).
|
46
|
|
2017 Financial Report
|
|
|
|
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
|
|
$
|
31,422
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,422
|
|
Cost of sales
|
|
4,091
|
|
|
1
|
|
|
174
|
|
|
4,265
|
|
||||
Selling, informational and administrative expenses
|
|
7,158
|
|
|
—
|
|
|
2,448
|
|
|
9,605
|
|
||||
Research and development expenses
|
|
2,566
|
|
|
3,133
|
|
|
688
|
|
|
6,387
|
|
||||
Amortization of intangible assets
|
|
129
|
|
|
—
|
|
|
—
|
|
|
129
|
|
||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other (income)/deductions––net
|
|
(863
|
)
|
|
(33
|
)
|
|
(98
|
)
|
|
(994
|
)
|
||||
Income from continuing operations before provision/(benefit) for taxes on income
|
|
18,341
|
|
|
(3,100
|
)
|
|
(3,212
|
)
|
|
12,030
|
|
|
|
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
|
|
$
|
21,124
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,124
|
|
Cost of sales
|
|
5,938
|
|
|
—
|
|
|
588
|
|
|
6,525
|
|
||||
Selling, informational and administrative expenses
|
|
3,067
|
|
|
—
|
|
|
1,797
|
|
|
4,864
|
|
||||
Research and development expenses
|
|
1,046
|
|
|
37
|
|
|
156
|
|
|
1,239
|
|
||||
Amortization of intangible assets
|
|
65
|
|
|
—
|
|
|
—
|
|
|
65
|
|
||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other (income)/deductions––net
|
|
(275
|
)
|
|
—
|
|
|
(125
|
)
|
|
(401
|
)
|
||||
Income from continuing operations before provision/(benefit) for taxes on income
|
|
11,283
|
|
|
(38
|
)
|
|
(2,415
|
)
|
|
8,831
|
|
(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 Financial Review 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 Financial Review.
|
2017 Financial Report
|
|
47
|
|
*
|
LOE generally pertains to period-over-period revenue impacts for products across our portfolios experiencing patent expirations or loss of regulatory exclusivity in certain developed markets.
|
•
|
Cost of sales
as a percentage of
Revenues
decrease
d
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.
|
•
|
The
increase
in
Cost of sales
of
1%
was primarily driven by an increase in royalty expense, mostly related to Ibrance, partially offset by a favorable change in product mix.
|
•
|
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 Viagra (which lost exclusivity in the U.S. in December 2017), partially offset by additional investment across several of our key products, primarily Eucrisa, Ibrance and Xeljanz.
|
•
|
The
decrease
in
Research and development
expenses
of
13%
primarily reflects:
|
◦
|
the discontinuation of the global clinical development program for bococizumab in the fourth quarter of 2016 and the non-recurrence of its associated close-out costs,
|
48
|
|
2017 Financial Report
|
|
◦
|
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;
|
◦
|
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
$470 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); and
|
◦
|
a
$51 million
decrease in Prezista royalties,
|
◦
|
a
$256 million
increase in dividend income from our investment in ViiV; and
|
◦
|
a
$176 million
increase in Xtandi royalty income.
|
*
|
LOE generally pertains to period-over-period revenue impacts for products across our portfolios experiencing patent expirations or loss of regulatory exclusivity in certain developed markets.
|
2017 Financial Report
|
|
49
|
|
•
|
Cost of sales
as a percentage of
Revenues
increase
d slightly due to the unfavorable impact of foreign exchange and an increase in royalty expense, partially offset by a favorable change in product mix, including an increase in alliance revenues, which have no associated cost of sales.
|
•
|
The
increase
in
Cost of sales
of
11%
was primarily driven by the unfavorable impact of foreign exchange, an increase in royalty expense and an increase in sales volumes.
|
•
|
The
increase
in
Selling, informational and administrative
expenses
of
6%
reflects an increase in the allowance for doubtful trade accounts receivable, resulting from unfavorable developments with a distributor, and additional investment across several of our key products, partially offset by the favorable impact of foreign exchange.
|
•
|
The
increase
in
Research and development
expenses
of
8%
primarily reflects:
|
◦
|
costs to close-out studies for the global clinical development program for bococizumab that was discontinued in the fourth quarter of 2016;
|
◦
|
increased costs associated with our oncology programs, primarily our avelumab alliance with Merck KGaA; and
|
◦
|
the inclusion of three months of legacy Medivation operations in 2016,
|
◦
|
the non-recurrence of the $295 million upfront payment made to OPKO in the first quarter of 2015.
|
•
|
The
unfavorable
change in
Other (income)/deductions––net
primarily reflects the unfavorable impact of foreign exchange, a net decrease in royalty income and a decrease in our equity income from a certain equity-method investment.
|
*
|
LOE generally pertains to period-over-period revenue impacts for products across our portfolios experiencing patent expirations or loss of regulatory exclusivity in certain developed markets.
|
50
|
|
2017 Financial Report
|
|
•
|
Cost of sales
as a percentage of
Revenues
increase
d
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, and the favorable impact of foreign exchange.
|
•
|
The
decrease
in
Cost of sales
of
5%
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
decrease
d
11%
primarily due to the favorable impact of the sale of HIS, lower advertising, promotional, and field force expenses, reflecting the benefits of cost-reduction and productivity initiatives
, as well as
lower expenses associated wi
th products that recently lost marketing exclusivity
, partially offset by increased spending for biosimilars, primarily related to the U.S. launch of Inflectra.
|
•
|
Research and development
expenses
decrease
d
15%
primarily due to decreased spending for biosimilars, 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 the favorable impact of foreign exchange, a gain on the redemption of an acquired bond and an increase in Inflectra royalty income, partially offset by the non-recurrence of a resolution of a contract disagreement in the first quarter of 2016.
|
*
|
LOE generally pertains to period-over-period revenue impacts for products across our portfolios experiencing patent expirations or loss of regulatory exclusivity in certain developed markets.
|
2017 Financial Report
|
|
51
|
|
(MILLIONS OF DOLLARS)
|
|
|
||
|
|
|
||
EH
Revenues
, 2015
|
|
$
|
22,094
|
|
|
|
|
||
Operational growth/(decline):
|
|
|
||
Twelve months of revenues from legacy Hospira global operations in 2016, compared to four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations in 2015
|
|
3,125
|
|
|
Decline from the Peri-LOE Products portfolio, primarily due to the loss of exclusivity and associated generic competition for certain Peri-LOE Products, primarily Zyvox in the U.S. and certain developed Europe markets as well as Lyrica in certain developed Europe markets
|
|
(954
|
)
|
|
Operational growth in the legacy Pfizer Sterile Injectable Pharmaceuticals portfolio, mostly in emerging markets and the U.S.
|
|
259
|
|
|
Other operational factors, net
|
|
(1
|
)
|
|
Operational growth, net
|
|
2,429
|
|
|
Unfavorable impact of foreign exchange
|
|
(895
|
)
|
|
EH
Revenues
increase
|
|
1,534
|
|
|
EH
Revenues,
2016
|
|
$
|
23,627
|
|
•
|
Cost of sales
as a percentage of Revenues
increase
d
4.4
percentage points primarily due to the unfavorable impact of the Hospira acquisition, the unfavorable impact of product losses of exclusivity and the unfavorable impact of foreign exchange.
|
•
|
The
increase
in
Cost of sales
of
28%
was driven by the unfavorable impact of the Hospira acquisition and the unfavorable impact of foreign exchange, partially offset by lower volumes across the Legacy Established Products portfolio and the impact of products losing exclusivity.
|
•
|
Selling, informational and administrative
expenses
decrease
d
3%
, primarily due to the favorable impact of foreign exchange, lower advertising, promotional and field force expenses, reflecting the benefits of cost-reduction and productivity initiatives, and lower general and administrative expenses, partially offset by the unfavorable impact of the Hospira acquisition.
|
•
|
Research and development
expenses
increase
d
19%
reflecting the unfavorable impact of the Hospira acquisition and increased investment primarily in legacy Hospira biosimilar and sterile injectable development programs.
|
•
|
The
favorable
change in
Other (income)/deductions––net
primarily reflects resolution of a contract disagreement, partially offset by the unfavorable impact of foreign exchange.
|
•
|
For
Foreign currency translation adjustments, net,
primarily reflects the weakening of the U.S. dollar against the euro, U.K. pound and the Canadian dollar, as well as the reclassification of amounts related to (i) the agreement to sell our 40% ownership investment in Teuto and (ii) the sale of our
49%
equity share in Hisun Pfizer. For additional information, see Notes to Consolidated Financial Statements—
Note 2D.
Acquisitions, Sale of Hospira Infusion Systems Net Assets, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment
: Equity-Method Investments.
|
•
|
For
Unrealized holding gains/(losses) on derivative financial instruments, net
and
Unrealized holding gains/(losses) on available-for-sale securities, net,
reflect the impact of fair value remeasurements and the reclassification of amounts into net income. For additional information, see Notes to Consolidated Financial Statements—
Note 7.
Financial Instruments
|
•
|
For
Benefit plans: actuarial losses, net,
primarily reflects (i) an increase in the actuarial losses due to a decrease in our discount rate assumptions; (ii) an increase in actual returns on plan assets; (iii) the amortization of changes in the pension benefit obligation previously recognized in
Other comprehensive income
; and (iv) the unfavorable impact of foreign exchange. For additional information, see Notes to Consolidated Financial Statements—
Note 11.
Pension and Postretirement Benefit Plans and Defined Contribution Plans
.
|
•
|
Foreign currency translation adjustments, net,
primarily reflects the strengthening of the U.S. dollar against the U.K. pound, Chinese renminbi, Mexican peso, and Argentine peso, partially offset by the weakening of the U.S. dollar against the Australian dollar and Japanese yen.
|
•
|
For
Unrealized holding gains/(losses) on derivative financial instruments, net
and
Unrealized holding gains/(losses) on available-for-sale securities, net,
reflects the impact of fair value remeasurements and the reclassification of amounts into net income. For additional information, see Notes to Consolidated Financial Statements—
Note 7. Financial Instruments
.
|
52
|
|
2017 Financial Report
|
|
•
|
For
Benefit plans: actuarial losses, net,
reflects the actuarial losses related primarily to a decrease in the discount rate, partially offset by (i) the amortization of changes in the pension benefit obligation previously recognized in
Other comprehensive income
, and (ii) higher actual return on plan assets as compared to the expected return on plan assets. For additional information, see Notes to Consolidated Financial Statements—
Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans
and the “Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions––Benefit Plans” section of this Financial Review.
|
•
|
For
Foreign currency translation adjustments, net,
reflects primarily the strengthening of the U.S. dollar against the euro, Brazilian real, Canadian dollar, Australian dollar, British pound, Mexican peso and Japanese yen.
|
•
|
For
Unrealized holding gains/(losses) on derivative financial instruments, net
and
Unrealized holding gains/(losses) on available-for-sale securities, net,
reflects the impact of fair value remeasurements and the reclassification of amounts into net income. For additional information, see Notes to Consolidated Financial Statements—
Note 7. Financial Instruments
.
|
•
|
For
Benefit plans: actuarial losses, net,
primarily reflects the reclassification into income of amounts related to (i) the amortization of changes in the pension benefit obligation previously recognized in
Other comprehensive income,
(ii) lower actual return on plan assets as compared to the expected return on assets, and (iii) settlement activity, as well as the impact of foreign exchange. For additional information, see Notes to Consolidated Financial Statements—
Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans
and the “Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions––Benefit Plans” section of this Financial Review.
|
•
|
For
Benefit plans: prior service (costs)/credits and other, net,
reflects a $507 million reduction in our U.S. Postretirement Plan obligation due to a plan amendment approved in June 2015 that introduced a cap on costs for certain groups within the plan, partially offset by the reclassification into income of amounts related to (i) amortization of changes in prior service costs and credits previously recognized in
Other comprehensive income
and (ii) curtailment activity. For additional information, see Notes to Consolidated Financial Statements—
Note 11. Pension and Postretirement Benefit Plans and Defined Contribution 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.
|
•
|
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.
|
•
|
For PP&E,
the change primarily reflects capital additions in the normal course of business, partially offset by depreciation during the period and reductions due to restructuring efforts.
|
•
|
For
Identifiable intangible assets, less accumulated amortization
, the change primarily reflects:
|
◦
|
amortization and impairments for the period,
|
◦
|
the EU and U.S. approvals of Besponsa;
|
◦
|
the U.S. approval of Bosulif; and
|
◦
|
the U.S., EU and Japan approvals of Bavencio.
|
2017 Financial Report
|
|
53
|
|
•
|
For
Other noncurrent assets,
the change reflects a decrease in receivables associated with our derivative financial instruments and a reduction in long-term VAT receivables, partially offset by an increase in the fair value of plan assets for pension plans in net asset positions and net increases in the normal course of business. For additional information, see Notes to Consolidated Financial Statements—
Note 11C. Pension and Postretirement Benefit Plans and Defined Contribution Plans: Obligations and Funded Status.
|
•
|
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 2017 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 Consolidated Financial Statements—
Note 11.
Pension and Postretirement Benefit Plans and Defined Contribution Plans.
|
•
|
For
Other current liabilities
, the change reflects a decrease in liabilities associated with:
|
◦
|
consideration transferred for Medivation;
|
◦
|
payments for restructuring activities and payments for liabilities related to the closeout of bococizumab clinical studies;
|
◦
|
our derivative financial instruments; and
|
◦
|
accrued interest due to lower interest rates and timing of payments,
|
◦
|
accrued rebates as a result of higher U.S. contracted sales;
|
◦
|
a liability related to Ibrance reimbursement agreements;
|
◦
|
accrued clinical grants associated with our oncology programs, primarily clinical trial spend on Xtandi, talazoparib and our
C.difficile
vaccine program; and
|
◦
|
accruals for the current portion of obligations recorded in connection with the U.S. approval of Bosulif and the EU and U.S. approvals of Besponsa.
|
•
|
For
Pension benefit obligations, net,
the decrease primarily reflects the $1.0 billion voluntary pension contribution we made in January 2017 and an increase in actual returns on plan assets, partially offset by the impact of a decrease in the discount rate used in the measurement of plan obligations.
|
•
|
For
Other noncurrent liabilities
, the change reflects a decrease in liabilities associated with:
|
◦
|
our derivative financial instruments;
|
◦
|
restructuring and deferred compensation plans; and
|
◦
|
the reversal of a contingent liability as a result of exiting our investment in Teuto (see Notes to Consolidated Financial Statements––
Note 2D. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment
:
Equity Method Investments
),
|
◦
|
an increase of
$355 million
to record obligations in connection with the EU and U.S. approvals of Besponsa and
$281 million
to record obligations in connection with the U.S. approval of Bosulif (see Notes to Consolidated Financial Statements—
Note 7E. Financial Instruments: Other Noncurrent Liabilities
);
|
◦
|
an increase in deferred revenue from milestones from Merck for the ertugliflozin collaboration agreement (see Notes to Consolidated Financial Statements––
Note 2C. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Research and Development and Collaborative Arrangement
); and
|
◦
|
other 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 Consolidated Financial Statements—
Note 12. Equity
for additional information.
|
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
17/16
|
|
|
16/15
|
|
|||
Cash provided by/(used in):
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating activities
|
|
$
|
16,470
|
|
|
$
|
15,901
|
|
|
$
|
14,688
|
|
|
4
|
|
|
8
|
|
Investing activities
|
|
(4,741
|
)
|
|
(7,811
|
)
|
|
(2,980
|
)
|
|
(39
|
)
|
|
*
|
|
|||
Financing activities
|
|
(13,035
|
)
|
|
(8,921
|
)
|
|
(10,409
|
)
|
|
46
|
|
|
(14
|
)
|
|||
Effect of exchange-rate changes on cash and cash equivalents
|
|
53
|
|
|
(215
|
)
|
|
(1,000
|
)
|
|
*
|
|
|
(79
|
)
|
|||
Net increase/(decrease) in
Cash and cash equivalents
|
|
$
|
(1,254
|
)
|
|
$
|
(1,046
|
)
|
|
$
|
298
|
|
|
20
|
|
|
*
|
|
*
|
Indicates calculation not meaningful or result is equal to or greater than 100%.
|
54
|
|
2017 Financial Report
|
|
•
|
a decrease in the provision for bad debt expense;
|
•
|
an increase in dividends from our investment in ViiV reclassified from operating to investing activities; and
|
•
|
an increase in gains from sales of available-for-sale securities,
|
•
|
a non-cash net loss on early retirement of debt under an exchange offer.
|
•
|
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
$18.4 billion
, net of cash acquired, primarily for the acquisitions of Medivation, Bamboo and Anacor in
2016
(see Notes to Consolidated Financial Statements—
Note 2A. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions
); and
|
•
|
an increase in
Other investing activities, net,
including dividends received from our investment in ViiV,
|
•
|
lower net proceeds generated from the sale of investments of
$14.7 billion
in
2017
for cash needs.
|
2017 Financial Report
|
|
55
|
|
•
|
net redemptions/proceeds from sale of investments of
$12.5 billion
in
2016
, compared to net redemptions/proceeds of investments of
$14.6 billion
in
2015
; and
|
•
|
cash paid of
$18.4 billion
, net of cash acquired, primarily for the acquisitions of Medivation, Bamboo and Anacor in
2016
compared to cash paid of
$16.5 billion
, net of cash acquired, primarily for the acquisition of Hospira and the acquisition of Baxter’s portfolio of marketed vaccines in
2015
(see Notes to Consolidated Financial Statements—
Note 2A. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions
).
|
•
|
the issuance of long-term debt of
$5.3 billion
in
2017
, compared to
$11.0 billion
in
2016
(see Notes to Consolidated Financial Statements––
Note 7D. Financial Instruments: Long-Term Debt
); and
|
•
|
$7.7 billion
cash dividends paid in
2017
, compared to
$7.3 billion
in the same period in
2016
,
|
•
|
lower repayments on long-term debt of $1.5 billion, compared to
2016
; and
|
•
|
lower proceeds raised from net short-term borrowings in 2017 of
$589 million
, compared to
2016
.
|
•
|
the issuance of long-term debt of
$11.0 billion
on June 3,
2016
and November 21,
2016
; and
|
•
|
purchases of common stock of
$5.0 billion
in
2016
, compared to
$6.2 billion
in
2015
,
|
•
|
net payments on short-term borrowings of
$714 million
in
2016
, compared to net proceeds on short-term borrowings of
$4.3 billion
in
2015
;
|
•
|
higher repayments on long-term debt of
$7.7 billion
in
2016
, compared to
$3.0 billion
in
2015
;
|
•
|
higher cash dividends paid of
$7.3 billion
in
2016
, compared to
$6.9 billion
in
2015
; and
|
•
|
lower proceeds from the exercise of stock options of
$1.0 billion
in
2016
, compared to
$1.3 billion
in
2015
.
|
•
|
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.
|
56
|
|
2017 Financial Report
|
|
The following table provides certain relevant measures of our liquidity and capital resources:
|
||||||||
|
|
As of December 31,
|
||||||
(MILLIONS OF DOLLARS, EXCEPT RATIOS AND PER COMMON SHARE DATA)
|
|
2017
|
|
|
2016
|
|
||
Selected financial assets:
|
|
|
|
|
||||
Cash and cash equivalents
(a)
|
|
$
|
1,342
|
|
|
$
|
2,595
|
|
Short-term investments
(a)
|
|
18,650
|
|
|
15,255
|
|
||
Long-term investments
(a)
|
|
7,015
|
|
|
7,116
|
|
||
|
|
27,007
|
|
|
24,967
|
|
||
Debt:
|
|
|
|
|
|
|
||
Short-term borrowings, including current portion of long-term debt
|
|
9,953
|
|
|
10,688
|
|
||
Long-term debt
|
|
33,538
|
|
|
31,398
|
|
||
|
|
43,491
|
|
|
42,085
|
|
||
Selected net financial liabilities
(b)
|
|
$
|
(16,484
|
)
|
|
$
|
(17,118
|
)
|
|
|
|
|
|
||||
Working capital
(c)
|
|
$
|
10,714
|
|
|
$
|
7,834
|
|
Ratio of current assets to current liabilities
|
|
1.35:1
|
|
|
1.25:1
|
|
||
Total Pfizer Inc. shareholders’ equity per common share
(d)
|
|
$
|
11.93
|
|
|
$
|
9.81
|
|
(a)
|
See Notes to 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 decrease in selected net financial liabilities was primarily driven by the increase in short-term investments, partially offset by 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 Financial Review.
|
(c)
|
The increase in working capital was primarily due to:
|
•
|
an increase in short-term investments primarily from the cash generated from operations;
|
•
|
a decrease in short-term borrowings resulting from less long-term debt maturing in the next 12 months;
|
•
|
an increase in inventory related to new or potential products; and
|
•
|
the net impact of foreign currency exchange,
|
•
|
the timing of accruals, cash receipts and payments in the ordinary course of business; 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).
|
2017 Financial Report
|
|
57
|
|
The following table provides the current ratings assigned by these rating agencies to our commercial paper and senior unsecured long-term debt:
|
||||||
NAME OF RATING AGENCY
|
|
Pfizer
Commercial Paper
|
|
Pfizer
Long-Term Debt
|
|
Date of Last Rating Change
|
|
Rating
|
|
Rating
|
|
||
Moody’s
(a)
|
|
P-1
|
|
A1
|
|
October 2009
|
S&P
(b)
|
|
A-1+
|
|
AA
|
|
October 2009
|
(a)
|
In September 2016, Moody's updated its credit outlook from negative outlook to stable.
|
(b)
|
In April 2016, S&P updated its credit outlook from negative watch to stable.
|
58
|
|
2017 Financial Report
|
|
|
|
|
|
Years
|
||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Total
|
|
|
2018
|
|
|
2019-2020
|
|
|
2021-2022
|
|
|
Thereafter
|
|
|||||
Long-term debt, including current portion
(a)
|
|
$
|
37,084
|
|
|
$
|
3,546
|
|
|
$
|
6,388
|
|
|
$
|
4,732
|
|
|
$
|
22,418
|
|
Interest payments on long-term debt obligations
(b)
|
|
19,269
|
|
|
1,231
|
|
|
2,352
|
|
|
2,099
|
|
|
13,587
|
|
|||||
Other long-term liabilities
(c)
|
|
3,058
|
|
|
448
|
|
|
691
|
|
|
602
|
|
|
1,317
|
|
|||||
Operating leases
|
|
1,680
|
|
|
209
|
|
|
321
|
|
|
259
|
|
|
891
|
|
|||||
Purchase obligations and other
(d)
|
|
4,524
|
|
|
1,100
|
|
|
1,139
|
|
|
1,091
|
|
|
1,194
|
|
|||||
Other taxes payable
—
deemed repatriated accumulated post-1986 earnings of foreign subsidiaries
(e)
|
|
15,200
|
|
|
—
|
|
|
2,432
|
|
|
2,432
|
|
|
10,336
|
|
|||||
Uncertain tax positions
(f)
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(a)
|
Long-term debt consists of senior unsecured notes (including fixed and floating rate, foreign currency denominated, and other notes), carried at historical proceeds, as adjusted, and capital lease obligations (see Notes to Consolidated Financial Statements—
Note 7. Financial Instruments
). Commitments under capital leases are not significant.
|
(b)
|
Our calculations of expected interest payments incorporate only current period assumptions for interest rates, foreign currency translation rates and hedging strategies (see Notes to Consolidated Financial Statements—
Note 7. Financial Instruments
), and assume that interest is accrued through the maturity date or expiration of the related instrument.
|
(c)
|
Includes expected payments relating to our unfunded U.S. supplemental (non-qualified) pension plans, postretirement plans and deferred compensation plans. Excludes amounts relating to our U.S. qualified pension plans and international pension plans, all of which have a substantial amount of plan assets, because the required funding obligations are not expected to be material and/or because such liabilities do not necessarily reflect future cash payments, as the impact of changes in economic conditions on the fair value of the pension plan assets and/or liabilities can be significant. We made a $500 million voluntary contribution to our U.S. pension plan in February 2018. Also, excludes
$5.4 billion
of liabilities related to legal matters, employee terminations and the fair value of derivative financial instruments and other, most of which do not represent contractual obligations. See also our liquidity discussion above in this “Analysis of Financial Condition, Liquidity and Capital Resources” section, as well as the Notes to Consolidated Financial Statements—
Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives, Note 7A. Financial Instruments: Fair Value Measurements, Note 11E. Pension and Postretirement Benefit Plans and Defined Contribution Plans: Cash Flows,
and
Note 17. Commitments and Contingencies.
|
(d)
|
Includes agreements to purchase goods and services that are enforceable and legally binding and includes amounts relating to advertising, information technology services, employee benefit administration services, and potential milestone payments deemed reasonably likely to occur. Also includes obligations to make guaranteed fixed annual payments over a 9-year period in connection with the U.S. and EU approvals for Besponsa ($443 million) and an obligation to make guaranteed fixed annual payments over a 10-year period for Bosulif ($416 million), both associated with research and development arrangements. For additional information, see Notes to Consolidated Financial Statements—
Note 7E. Financial Instruments: Other Noncurrent Liabilities.
Also includes
|
2017 Financial Report
|
|
59
|
|
(e)
|
Represents a $15.2 billion tax liability related to the TCJA repatriation tax for which we plan to elect payment over eight years through 2026 (with the first installment due in April 2019). Our obligations may vary as a result of changes in our uncertain tax positions and/or availability of attributes such as foreign tax and other credit carryforwards. For additional information, see Notes to Consolidated Financial Statements—
Note 5A. Tax Matters: Taxes on Income from Continuing Operations.
|
(f)
|
Includes only income tax amounts currently payable. We are unable to predict the timing of tax settlements related to our noncurrent obligations for uncertain tax positions as tax audits can involve complex issues and the resolution of those issues may span multiple years, particularly if subject to negotiation or litigation.
|
(a)
|
Represents shares purchased pursuant to an accelerated share repurchase agreement with Citibank entered into on February 2, 2017.
For additional information, see Notes to Consolidated Financial Statements––
Note 12. Equity.
|
(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.
|
(c)
|
Includes approximately
151 million
shares purchased for
$5.2 billion
pursuant to the accelerated share repurchase agreement entered into on February 9, 2015 (see Notes to Consolidated Financial Statements––
Note 12. Equity
for additi
o
nal information), as well as other share repurchases through year-end 2015.
|
60
|
|
2017 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 seven ASUs, amending the guidance and effective date, and the SEC has rescinded certain related SEC guidance.
|
|
January 1, 2018
|
|
We have substantially completed 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 $600 million to $700 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 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.
|
|
January 1, 2018.
|
|
We have completed our review of the impact of this new guidance on our consolidated financial statements. As of December 31, 2017, we have $1.2 billion in available-for-sale equity securities and approximately $222 million of restricted stock and private equity securities that will be subject to the new rules. Further, for the year ended December 31, 2017, we recognized $586 million of previously unrealized holding gains and $124 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 net unrealized gain on equity investments subject to the new rules of $462 million as of December 31, 2017 will be recorded as a cumulative effect adjustment to
Retained earnings
upon adoption on January 1, 2018
.
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 will have any substantive impact to our assessment discussed above.
|
2017 Financial Report
|
|
61
|
|
Standard/Description
|
|
Effective Date
|
|
Effect on the Financial Statements or Other Significant Matters
|
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 completed our review of the impact of this new guidance on our consolidated financial statements. Retrospective application is required. Upon adoption, we expect to reclassify approximately $378 million and $362 million of cash outflows related to debt redemption in 2017 and 2016, respectively, from operating activities to financing activities. We also expect to reclassify approximately $21 million and $28 million of cash inflows from trust-owned life insurance contracts in 2017 and 2016, respectively, from operating activities to investing activities. Cash outflows from trust-owned life insurance contracts represent benefit payments and are classified as operating activities. Lastly, we expect to reclassify cash outflows attributable to the accreted interest related to commercial paper of $63 million and $33 million in 2017 and 2016, respectively, from financing activities to 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 completed our review of the impact of this new guidance on our consolidated financial statements. Retrospective application is required. Our restricted cash balances as of December 31, 2016 were approximately $46.4 million of short-term restricted cash and $47.6 million of long-term restricted cash. Our restricted cash balances as of December 31, 2017 were approximately $36.8 million of short-term restricted cash and $75.3 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 but are currently assessing the potential implications of the recently enacted TCJA. 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 is expected to be approximately $200 million and will be recorded as a cumulative effect adjustment to reduce
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 completed our review of the impact of this new guidance on our consolidated financial statements. 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 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 this new standard.
|
62
|
|
2017 Financial Report
|
|
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 completed our review of the impact of this new guidance on our consolidated financial statements. 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 this new standard.
|
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 completed our review of the impact of this new guidance on our consolidated financial statements. 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
. Retrospective application is required. Beginning in 2018, we will capitalize only the service cost component of the net benefit costs on a prospective basis. Net benefit cost/(income) other than service costs was $114 million for the year ended December 31, 2017 and $154 million for the year ended December 31, 2016 (see Notes to Consolidated Financial Statements––
Note 11.
Pension and Postretirement Benefit Plans and Defined Contribution Plans
for further details).
|
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 completed our review of the impact of this new guidance on our consolidated financial statements. 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.
|
2017 Financial Report
|
|
63
|
|
Recently Issued Accounting Standards, Not Adopted as of December 31, 2017 (Effective January 1, 2019 and January 1, 2020)
|
||||
|
||||
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 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.
|
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 planning to early adopt this standard in the first quarter of calendar year 2018. We do not expect the adoption to have a material impact on our financial statements.
|
In February 2018, the FASB issued an update to its guidance on the
reclassification of certain tax effects from accumulated other comprehensive income
. The new guidance provides an option for us to elect to reclassify the stranded tax amounts related to the TCJA. If reclassified, the reclassification from AOCI to retained earnings for stranded tax effects would include:
1. the effect of the change in the U.S. federal corporate tax rate; and
2. other stranded tax amounts related to the application of the TCJA that we elect to reclassify, if any.
The reclassification, if elected, may be applied either retrospectively or at the beginning of the annual or interim period in which the amendments are adopted.
|
|
January 1, 2019. Earlier application is permitted.
|
|
We are evaluating the election and assessing the impact of the provisions of this new guidance on our consolidated financial statements.
|
64
|
|
2017 Financial Report
|
|
Standard/Description
|
|
Effective Date
|
|
Effect on the Financial Statements or Other Significant Matters
|
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 experience 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.
|
2017 Financial Report
|
|
65
|
|
•
|
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 received by us from regulatory authorities such as the FDA and the EMA with respect to certain of our drug applications to the satisfaction of those authorities;
|
•
|
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;
|
66
|
|
2017 Financial Report
|
|
•
|
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, debarment, 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;
|
•
|
the impact of any U.S. healthcare reform or legislation, including any repeal, substantial modification or invalidation of some 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;
|
•
|
the risk that our currently pending or future patent applications may not result in issued patents, or be granted on a timely basis, or any patent-term extensions that we seek may not be granted on a timely basis, if at all;
|
•
|
our ability to protect our patents and other intellectual property, both domestically and internationally;
|
•
|
interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates;
|
•
|
governmental laws and regulations affecting domestic and foreign operations, including, without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside the U.S. that may result from pending and possible future proposals, including further clarifications and/or interpretations of the recently passed TCJA;
|
•
|
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, including the approval and supply of our products;
|
•
|
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;
|
2017 Financial Report
|
|
67
|
|
•
|
further clarifications and/or 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 Pfizer, 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, the potential for disruption to our business and diversion of management’s attention from other aspects of our business, the possibility that such strategic alternatives will not be completed on terms that are advantageous to Pfizer, the possibility that we may be unable to realize a higher value for Pfizer Consumer Healthcare through strategic alternatives and unknown liabilities.
|
68
|
|
2017 Financial Report
|
|
2017 Financial Report
|
|
69
|
|
70
|
|
2017 Financial Report
|
|
|
|
|
Ian Read
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
|
|
Frank D’Amelio
|
|
Loretta Cangialosi
|
Principal Financial Officer
|
|
Principal Accounting Officer
|
|
|
|
February 22, 2018
|
|
|
2017 Financial Report
|
|
71
|
|
The Audit Committee
|
|
Suzanne Nora Johnson, Chair
|
W. Don Cornwell
|
Joseph J. Echevarria
|
Stephen W. Sanger
|
James C. Smith
|
|
February 22, 2018
|
72
|
|
2017 Financial Report
|
|
KPMG LLP
|
|
We have not been able to determine the specific year that KPMG and our predecessor firms began serving as the Company’s auditor, however, we are aware that KPMG and our predecessor firms have served as the Company’s auditor since at least 1942.
|
|
New York, New York
|
|
February 22, 2018
|
2017 Financial Report
|
|
73
|
|
KPMG LLP
|
New York, New York
|
|
February 22, 2018
|
74
|
|
2017 Financial Report
|
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS, EXCEPT PER COMMON SHARE DATA)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Revenues
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
|
$
|
48,851
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
||||
Cost of sales
(a)
|
|
11,240
|
|
|
12,329
|
|
|
9,648
|
|
|||
Selling, informational and administrative expenses
(a)
|
|
14,784
|
|
|
14,837
|
|
|
14,809
|
|
|||
Research and development expenses
(a)
|
|
7,657
|
|
|
7,872
|
|
|
7,690
|
|
|||
Amortization of intangible assets
|
|
4,758
|
|
|
4,056
|
|
|
3,728
|
|
|||
Restructuring charges and certain acquisition-related costs
|
|
487
|
|
|
1,724
|
|
|
1,152
|
|
|||
Other (income)/deductions––net
|
|
1,315
|
|
|
3,655
|
|
|
2,860
|
|
|||
Income from continuing operations before provision/(benefit) for taxes on income
|
|
12,305
|
|
|
8,351
|
|
|
8,965
|
|
|||
Provision/(benefit) for taxes on income
|
|
(9,049
|
)
|
|
1,123
|
|
|
1,990
|
|
|||
Income from continuing operations
|
|
21,353
|
|
|
7,229
|
|
|
6,975
|
|
|||
Discontinued operations:
|
|
|
|
|
|
|
||||||
Income from discontinued operations––net of tax
|
|
(1
|
)
|
|
16
|
|
|
17
|
|
|||
Gain/(loss) on disposal of discontinued operations––net of tax
|
|
3
|
|
|
—
|
|
|
(6
|
)
|
|||
Discontinued operations––net of tax
|
|
2
|
|
|
17
|
|
|
11
|
|
|||
Net income before allocation to noncontrolling interests
|
|
21,355
|
|
|
7,246
|
|
|
6,986
|
|
|||
Less: Net income attributable to noncontrolling interests
|
|
47
|
|
|
31
|
|
|
26
|
|
|||
Net income attributable to Pfizer Inc.
|
|
$
|
21,308
|
|
|
$
|
7,215
|
|
|
$
|
6,960
|
|
|
|
|
|
|
|
|
||||||
Earnings per common share––basic
:
|
|
|
|
|
|
|
|
|
|
|||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
3.57
|
|
|
$
|
1.18
|
|
|
$
|
1.13
|
|
Discontinued operations––net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
3.57
|
|
|
$
|
1.18
|
|
|
$
|
1.13
|
|
Earnings per common share––diluted
:
|
|
|
|
|
|
|
|
|
|
|||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
3.52
|
|
|
$
|
1.17
|
|
|
$
|
1.11
|
|
Discontinued operations––net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
3.52
|
|
|
$
|
1.17
|
|
|
$
|
1.11
|
|
|
|
|
|
|
|
|
||||||
Weighted-average shares––basic
|
|
5,970
|
|
|
6,089
|
|
|
6,176
|
|
|||
Weighted-average shares––diluted
|
|
6,058
|
|
|
6,159
|
|
|
6,257
|
|
|||
|
|
|
|
|
|
|
||||||
Cash dividends paid per common share
|
|
$
|
1.28
|
|
|
$
|
1.20
|
|
|
$
|
1.12
|
|
(a)
|
Exclusive of amortization of intangible assets, except as disclosed in
Note 1K. Basis of Presentation and Significant Accounting Policies: Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets.
|
2017 Financial Report
|
|
75
|
|
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Net income before allocation to noncontrolling interests
|
|
$
|
21,355
|
|
|
$
|
7,246
|
|
|
$
|
6,986
|
|
|
|
|
|
|
|
|
|
|
|
|||
Foreign currency translation adjustments, net
|
|
$
|
1,116
|
|
|
$
|
(815
|
)
|
|
$
|
(3,110
|
)
|
Reclassification adjustments
(a)
|
|
162
|
|
|
—
|
|
|
—
|
|
|||
|
|
1,278
|
|
|
(815
|
)
|
|
(3,110
|
)
|
|||
Unrealized holding gains/(losses) on derivative financial instruments, net
|
|
(10
|
)
|
|
(442
|
)
|
|
204
|
|
|||
Reclassification adjustments for (gains)/losses included in net income
(b)
|
|
(520
|
)
|
|
452
|
|
|
(368
|
)
|
|||
|
|
(530
|
)
|
|
10
|
|
|
(165
|
)
|
|||
Unrealized holding gains/(losses) on available-for-sale securities, net
|
|
818
|
|
|
248
|
|
|
(846
|
)
|
|||
Reclassification adjustments for (gains)/losses included in net income
(b)
|
|
(244
|
)
|
|
(118
|
)
|
|
796
|
|
|||
|
|
574
|
|
|
130
|
|
|
(50
|
)
|
|||
Benefit plans: actuarial losses, net
|
|
(212
|
)
|
|
(1,888
|
)
|
|
(37
|
)
|
|||
Reclassification adjustments related to amortization
(c)
|
|
588
|
|
|
558
|
|
|
550
|
|
|||
Reclassification adjustments related to settlements, net
(c)
|
|
117
|
|
|
127
|
|
|
671
|
|
|||
Other
|
|
(145
|
)
|
|
195
|
|
|
199
|
|
|||
|
|
348
|
|
|
(1,009
|
)
|
|
1,383
|
|
|||
Benefit plans: prior service (costs)/credits and other, net
|
|
(2
|
)
|
|
184
|
|
|
432
|
|
|||
Reclassification adjustments related to amortization
(c)
|
|
(184
|
)
|
|
(173
|
)
|
|
(160
|
)
|
|||
Reclassification adjustments related to curtailments, net
(c)
|
|
(18
|
)
|
|
(26
|
)
|
|
(32
|
)
|
|||
Other
|
|
—
|
|
|
6
|
|
|
(3
|
)
|
|||
|
|
(203
|
)
|
|
(8
|
)
|
|
237
|
|
|||
Other comprehensive income/(loss), before tax
|
|
1,468
|
|
|
(1,692
|
)
|
|
(1,705
|
)
|
|||
Tax provision/(benefit) on other comprehensive income/(loss)
(d)
|
|
(262
|
)
|
|
(174
|
)
|
|
528
|
|
|||
Other comprehensive income/(loss) before allocation to noncontrolling interests
|
|
$
|
1,730
|
|
|
$
|
(1,518
|
)
|
|
$
|
(2,232
|
)
|
|
|
|
|
|
|
|
|
|
|
|||
Comprehensive income before allocation to noncontrolling interests
|
|
$
|
23,085
|
|
|
$
|
5,728
|
|
|
$
|
4,754
|
|
Less: Comprehensive income/(loss) attributable to noncontrolling interests
|
|
62
|
|
|
28
|
|
|
(1
|
)
|
|||
Comprehensive income attributable to Pfizer Inc.
|
|
$
|
23,023
|
|
|
$
|
5,701
|
|
|
$
|
4,755
|
|
(a)
|
The foreign currency translation adjustments reclassified into
Other (income)/deductions—net
in the consolidated statement of income primarily result from sale of our
40%
ownership investment in Teuto and the sale of our
49%
equity share in Hisun Pfizer. See
Note 2D. Acquisitions, Sale of Hospira Infusion Systems Net Assets, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Equity-Method Investments.
|
(b)
|
Reclassified into
Other (income)/deductions—net
and
Cost of sales
in the 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 consolidated statements of income. For additional information, see
Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans
.
|
(d)
|
See
Note 5E. Tax Matters: Tax Provision/(Benefit) on Other Comprehensive Income/(Loss).
|
76
|
|
2017 Financial Report
|
|
|
|
As of December 31,
|
||||||
(MILLIONS, EXCEPT PREFERRED STOCK ISSUED AND PER COMMON SHARE DATA)
|
|
2017
|
|
|
2016
|
|
||
|
|
|
|
|
||||
Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
1,342
|
|
|
$
|
2,595
|
|
Short-term investments
|
|
18,650
|
|
|
15,255
|
|
||
Trade accounts receivable, less allowance for doubtful accounts: 2017—$584; 2016—$609
|
|
8,221
|
|
|
8,225
|
|
||
Inventories
|
|
7,578
|
|
|
6,783
|
|
||
Current tax assets
|
|
3,050
|
|
|
3,041
|
|
||
Other current assets
|
|
2,289
|
|
|
2,249
|
|
||
Assets held for sale
|
|
12
|
|
|
801
|
|
||
Total current assets
|
|
41,141
|
|
|
38,949
|
|
||
Long-term investments
|
|
7,015
|
|
|
7,116
|
|
||
Property, plant and equipment, less accumulated depreciation
|
|
13,865
|
|
|
13,318
|
|
||
Identifiable intangible assets, less accumulated amortization
|
|
48,741
|
|
|
52,648
|
|
||
Goodwill
|
|
55,952
|
|
|
54,449
|
|
||
Noncurrent deferred tax assets and other noncurrent tax assets
|
|
1,855
|
|
|
1,812
|
|
||
Other noncurrent assets
|
|
3,227
|
|
|
3,323
|
|
||
Total assets
|
|
$
|
171,797
|
|
|
$
|
171,615
|
|
|
|
|
|
|
||||
Liabilities and Equity
|
|
|
|
|
|
|
||
Short-term borrowings, including current portion of long-term debt: 2017—$3,546; 2016—$4,225
|
|
$
|
9,953
|
|
|
$
|
10,688
|
|
Trade accounts payable
|
|
4,656
|
|
|
4,536
|
|
||
Dividends payable
|
|
2,029
|
|
|
1,944
|
|
||
Income taxes payable
|
|
477
|
|
|
437
|
|
||
Accrued compensation and related items
|
|
2,196
|
|
|
2,487
|
|
||
Other current liabilities
|
|
11,115
|
|
|
11,023
|
|
||
Total current liabilities
|
|
30,427
|
|
|
31,115
|
|
||
|
|
|
|
|
||||
Long-term debt
|
|
33,538
|
|
|
31,398
|
|
||
Pension benefit obligations, net
|
|
5,926
|
|
|
6,406
|
|
||
Postretirement benefit obligations, net
|
|
1,504
|
|
|
1,766
|
|
||
Noncurrent deferred tax liabilities
|
|
3,900
|
|
|
30,753
|
|
||
Other taxes payable
|
|
18,697
|
|
|
4,000
|
|
||
Other noncurrent liabilities
|
|
6,149
|
|
|
6,337
|
|
||
Total liabilities
|
|
100,141
|
|
|
111,776
|
|
||
|
|
|
|
|
||||
Commitments and Contingencies
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
Preferred stock, no par value, at stated value; 27 shares authorized; issued: 2017—-524; 2016—-597
|
|
21
|
|
|
24
|
|
||
Common stock, $0.05 par value; 12,000 shares authorized; issued: 2017—-9,275; 2016—-9,230
|
|
464
|
|
|
461
|
|
||
Additional paid-in capital
|
|
84,278
|
|
|
82,685
|
|
||
Treasury stock, shares at cost: 2017—3,296; 2016—-3,160
|
|
(89,425
|
)
|
|
(84,364
|
)
|
||
Retained earnings
|
|
85,291
|
|
|
71,774
|
|
||
Accumulated other comprehensive loss
|
|
(9,321
|
)
|
|
(11,036
|
)
|
||
Total Pfizer Inc. shareholders’ equity
|
|
71,308
|
|
|
59,544
|
|
||
Equity attributable to noncontrolling interests
|
|
348
|
|
|
296
|
|
||
Total equity
|
|
71,656
|
|
|
59,840
|
|
||
Total liabilities and equity
|
|
$
|
171,797
|
|
|
$
|
171,615
|
|
2017 Financial Report
|
|
77
|
|
|
|
PFIZER INC. SHAREHOLDERS
|
|
|
|||||||||||||||||||||||||||||||||||||||||
Preferred Stock
|
|
Common Stock
|
|
|
|
Treasury Stock
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||
(MILLIONS, EXCEPT PREFERRED SHARES)
|
|
Shares
|
|
|
Stated Value
|
|
|
Shares
|
|
|
Par Value
|
|
|
Add’l
Paid-In
Capital
|
|
|
Shares
|
|
|
Cost
|
|
|
Retained Earnings
|
|
|
Accum.
Other
Comp. Loss
|
|
|
Share -
holders’
Equity
|
|
|
Non-controlling Interests
|
|
|
Total
Equity
|
|
|||||||||
Balance, January 1, 2015
|
|
717
|
|
|
$
|
29
|
|
|
9,110
|
|
|
$
|
455
|
|
|
$
|
78,977
|
|
|
(2,819
|
)
|
|
$
|
(73,021
|
)
|
|
$
|
72,176
|
|
|
$
|
(7,316
|
)
|
|
$
|
71,301
|
|
|
$
|
321
|
|
|
$
|
71,622
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,960
|
|
|
|
|
6,960
|
|
|
26
|
|
|
6,986
|
|
|||||||||||||||||
Other comprehensive income/(loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,206
|
)
|
|
(2,206
|
)
|
|
(26
|
)
|
|
(2,232
|
)
|
|||||||||||||||||
Cash dividends declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,141
|
)
|
|
|
|
(7,141
|
)
|
|
|
|
(7,141
|
)
|
||||||||||||||||||
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
(2
|
)
|
|
|
|
(2
|
)
|
||||||||||||||||||
Noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(16
|
)
|
|
(16
|
)
|
||||||||||||||||||
Share-based payment transactions
|
|
|
|
|
|
67
|
|
|
3
|
|
|
2,015
|
|
|
(1
|
)
|
|
(72
|
)
|
|
|
|
|
|
1,946
|
|
|
|
|
1,946
|
|
||||||||||||||
Purchases of common stock
|
|
|
|
|
|
|
|
|
|
|
|
(182
|
)
|
|
(6,160
|
)
|
|
|
|
|
|
(6,160
|
)
|
|
|
|
(6,160
|
)
|
|||||||||||||||||
Preferred stock conversions and redemptions
|
|
(68
|
)
|
|
(3
|
)
|
|
|
|
|
|
(3
|
)
|
|
|
|
1
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
(5
|
)
|
|||||||||||||||
Other
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
27
|
|
|
(27
|
)
|
|
—
|
|
|||||||||||
Balance, December 31, 2015
|
|
649
|
|
|
26
|
|
|
9,178
|
|
|
459
|
|
|
81,016
|
|
|
(3,003
|
)
|
|
(79,252
|
)
|
|
71,993
|
|
|
(9,522
|
)
|
|
64,720
|
|
|
278
|
|
|
64,998
|
|
|||||||||
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,215
|
|
|
|
|
7,215
|
|
|
31
|
|
|
7,246
|
|
|||||||||||||||||
Other comprehensive income/(loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,514
|
)
|
|
(1,514
|
)
|
|
(3
|
)
|
|
(1,518
|
)
|
|||||||||||||||||
Cash dividends declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,446
|
)
|
|
|
|
(7,446
|
)
|
|
|
|
|
(7,446
|
)
|
|||||||||||||||||
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
(2
|
)
|
|
|
|
|
(2
|
)
|
|||||||||||||||||
Noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(10
|
)
|
|
(10
|
)
|
||||||||||||||||||
Share-based payment transactions
|
|
|
|
|
|
52
|
|
|
3
|
|
|
1,672
|
|
|
(3
|
)
|
|
(111
|
)
|
|
|
|
|
|
1,563
|
|
|
|
|
1,563
|
|
||||||||||||||
Purchases of common stock
|
|
|
|
|
|
|
|
|
|
|
|
(154
|
)
|
|
(5,000
|
)
|
|
|
|
|
|
(5,000
|
)
|
|
|
|
(5,000
|
)
|
|||||||||||||||||
Preferred stock conversions and redemptions
|
|
(52
|
)
|
|
(2
|
)
|
|
|
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
(5
|
)
|
||||||||||||||
Other
(a)
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
||||||||||
Balance, December 31, 2016
|
|
597
|
|
|
24
|
|
|
9,230
|
|
|
461
|
|
|
82,685
|
|
|
(3,160
|
)
|
|
(84,364
|
)
|
|
71,774
|
|
|
(11,036
|
)
|
|
59,544
|
|
|
296
|
|
|
59,840
|
|
|||||||||
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,308
|
|
|
|
|
21,308
|
|
|
47
|
|
|
21,355
|
|
|||||||||||||||||
Other comprehensive income/(loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,715
|
|
|
1,715
|
|
|
14
|
|
|
1,730
|
|
|||||||||||||||||
Cash dividends declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,789
|
)
|
|
|
|
(7,789
|
)
|
|
|
|
(7,789
|
)
|
||||||||||||||||||
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
||||||||||||||||||
Noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(9
|
)
|
|
(9
|
)
|
||||||||||||||||||
Share-based payment transactions
(b)
|
|
|
|
|
|
45
|
|
|
2
|
|
|
1,597
|
|
|
15
|
|
|
(63
|
)
|
|
|
|
|
|
1,536
|
|
|
|
|
1,536
|
|
||||||||||||||
Purchases of common stock
|
|
|
|
|
|
|
|
|
|
|
|
(150
|
)
|
|
(5,000
|
)
|
|
|
|
|
|
(5,000
|
)
|
|
|
|
(5,000
|
)
|
|||||||||||||||||
Preferred stock conversions and redemptions
|
|
(73
|
)
|
|
(3
|
)
|
|
|
|
|
|
(3
|
)
|
|
—
|
|
|
1
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
(5
|
)
|
||||||||||||||
Other
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||||||||
Balance, December 31, 2017
|
|
524
|
|
|
$
|
21
|
|
|
9,275
|
|
|
$
|
464
|
|
|
$
|
84,278
|
|
|
(3,296
|
)
|
|
$
|
(89,425
|
)
|
|
$
|
85,291
|
|
|
$
|
(9,321
|
)
|
|
$
|
71,308
|
|
|
$
|
348
|
|
|
$
|
71,656
|
|
(a)
|
Represents the
$13 million
cumulative effect of the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, for certain elements of the accounting for share-based payments. For additional information, see Notes to Consolidated Financial Statements––
Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards
in Pfizer’s 2016 Financial Report
.
|
(b
)
|
2017 treasury shares include the effect of the modification for a commitment to pay
15.2 million
common-share equivalents that were scheduled for near-term settlement.
|
78
|
|
2017 Financial Report
|
|
|
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
|
|
|
|
|
|
|
||||||
Operating Activities
|
|
|
|
|
|
|
||||||
Net income before allocation to noncontrolling interests
|
|
$
|
21,355
|
|
|
$
|
7,246
|
|
|
$
|
6,986
|
|
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization
|
|
6,269
|
|
|
5,757
|
|
|
5,157
|
|
|||
Asset write-offs and impairments
|
|
634
|
|
|
1,613
|
|
|
1,119
|
|
|||
Foreign currency loss related to Venezuela
|
|
—
|
|
|
—
|
|
|
806
|
|
|||
Loss on sale of HIS net assets
|
|
55
|
|
|
1,712
|
|
|
—
|
|
|||
TCJA impact
(a)
|
|
(10,660
|
)
|
|
—
|
|
|
—
|
|
|||
Deferred taxes from continuing operations
|
|
(2,410
|
)
|
|
(700
|
)
|
|
(20
|
)
|
|||
Share-based compensation expense
|
|
840
|
|
|
691
|
|
|
669
|
|
|||
Benefit plan contributions in excess of expense
|
|
(961
|
)
|
|
(712
|
)
|
|
(617
|
)
|
|||
Other adjustments, net
|
|
50
|
|
|
208
|
|
|
(152
|
)
|
|||
Other changes in assets and liabilities, net of acquisitions and divestitures:
|
|
|
|
|
|
|
|
|
|
|||
Trade accounts receivable
|
|
259
|
|
|
(134
|
)
|
|
21
|
|
|||
Inventories
|
|
(357
|
)
|
|
365
|
|
|
(199
|
)
|
|||
Other assets
|
|
(31
|
)
|
|
(60
|
)
|
|
236
|
|
|||
Trade accounts payable
|
|
46
|
|
|
871
|
|
|
254
|
|
|||
Other liabilities
|
|
(67
|
)
|
|
(223
|
)
|
|
664
|
|
|||
Other tax accounts, net
|
|
1,446
|
|
|
(734
|
)
|
|
(235
|
)
|
|||
Net cash provided by operating activities
|
|
16,470
|
|
|
15,901
|
|
|
14,688
|
|
|||
|
|
|
|
|
|
|
||||||
Investing Activities
|
|
|
|
|
|
|
|
|
||||
Purchases of property, plant and equipment
|
|
(1,956
|
)
|
|
(1,823
|
)
|
|
(1,397
|
)
|
|||
Purchases of short-term investments
|
|
(14,596
|
)
|
|
(15,957
|
)
|
|
(28,581
|
)
|
|||
Proceeds from redemptions/sales of short-term investments
|
|
10,307
|
|
|
29,436
|
|
|
40,064
|
|
|||
Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of
three months or less
|
|
2,058
|
|
|
(4,218
|
)
|
|
5,768
|
|
|||
Purchases of long-term investments
|
|
(3,537
|
)
|
|
(8,011
|
)
|
|
(9,542
|
)
|
|||
Proceeds from redemptions/sales of long-term investments
|
|
3,594
|
|
|
11,254
|
|
|
6,929
|
|
|||
Acquisitions of businesses, net of cash acquired
|
|
(1,000
|
)
|
|
(18,368
|
)
|
|
(16,466
|
)
|
|||
Acquisitions of intangible assets
|
|
(261
|
)
|
|
(176
|
)
|
|
(99
|
)
|
|||
Other investing activities, net
(b)
|
|
650
|
|
|
51
|
|
|
344
|
|
|||
Net cash used in investing activities
|
|
(4,741
|
)
|
|
(7,811
|
)
|
|
(2,980
|
)
|
|||
|
|
|
|
|
|
|
||||||
Financing Activities
|
|
|
|
|
|
|
|
|
||||
Proceeds from short-term borrowings
|
|
8,464
|
|
|
7,472
|
|
|
5,557
|
|
|||
Principal payments on short-term borrowings
|
|
(9,990
|
)
|
|
(5,102
|
)
|
|
(3,965
|
)
|
|||
Net proceeds from/(payments on) short-term borrowings with original maturities of three months or less
|
|
1,401
|
|
|
(3,084
|
)
|
|
2,717
|
|
|||
Proceeds from issuance of long-term debt
|
|
5,274
|
|
|
10,976
|
|
|
—
|
|
|||
Principal payments on long-term debt
|
|
(6,154
|
)
|
|
(7,689
|
)
|
|
(2,990
|
)
|
|||
Purchases of common stock
|
|
(5,000
|
)
|
|
(5,000
|
)
|
|
(6,160
|
)
|
|||
Cash dividends paid
|
|
(7,659
|
)
|
|
(7,317
|
)
|
|
(6,940
|
)
|
|||
Proceeds from exercise of stock options
|
|
862
|
|
|
1,019
|
|
|
1,263
|
|
|||
Other financing activities, net
|
|
(233
|
)
|
|
(196
|
)
|
|
109
|
|
|||
Net cash used in financing activities
|
|
(13,035
|
)
|
|
(8,921
|
)
|
|
(10,409
|
)
|
|||
Effect of exchange-rate changes on cash and cash equivalents
|
|
53
|
|
|
(215
|
)
|
|
(1,000
|
)
|
|||
Net increase/(decrease) in cash and cash equivalents
|
|
(1,254
|
)
|
|
(1,046
|
)
|
|
298
|
|
|||
Cash and cash equivalents, beginning
|
|
2,595
|
|
|
3,641
|
|
|
3,343
|
|
|||
Cash and cash equivalents, end
|
|
$
|
1,342
|
|
|
$
|
2,595
|
|
|
$
|
3,641
|
|
|
||||||||||||
- Continued -
|
||||||||||||
|
2017 Financial Report
|
|
79
|
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
||||
Non-cash transactions:
|
|
|
|
|
|
|
||||||
Exchange of $1.1 billion net book value 6.50% U.K. pound-denominated bonds maturing in 2038 for $1.8 billion of new 2.735% U.K. pound-denominated bonds maturing in 2043, resulting in a debt extinguishment loss of $747 million
(c)
|
|
$
|
1,848
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Receipt of ICU Medical common stock
(b)
|
|
428
|
|
|
—
|
|
|
—
|
|
|||
Promissory note from ICU Medical
(b)
|
|
75
|
|
|
—
|
|
|
—
|
|
|||
Exchange of Hospira subsidiary debt for Pfizer debt
(d)
|
|
—
|
|
|
—
|
|
|
1,669
|
|
|||
Cash paid (received) during the period for:
|
|
|
|
|
|
|
|
|
||||
Income taxes
|
|
$
|
2,489
|
|
|
$
|
2,521
|
|
|
$
|
2,383
|
|
Interest
|
|
1,518
|
|
|
1,451
|
|
|
1,302
|
|
|||
Interest rate hedges
|
|
(199
|
)
|
|
(338
|
)
|
|
(237
|
)
|
(a)
|
As a result of the enactment of the TCJA, Pfizer’s
Provision/(benefit) for taxes on income
was favorably impacted by approximately
$10.7 billion
, primarily reflecting the remeasurement of U.S. deferred tax liabilities, which includes the repatriation tax on deemed repatriated accumulated post-1986 earnings of foreign subsidiaries. See
Note 5A. Tax Matters: Taxes on Income from Continuing Operations
for additional information.
|
(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
which was repaid in full as of December 31, 2017 and included in
Other investing activities
for the year ended December 31, 2017. For additional information, see
Note 2B
.
Acquisitions, Sale of Hospira Infusion Systems Net Assets, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Sale of Hospira Infusion Systems Net Assets to ICU Medical, Inc. (EH)
.
|
(c)
|
The
$747 million
is included in the net loss of
$846 million
upon the exchange and early retirement of the U.K. pound-denominated debt. See
Note 7D. Financial Instruments: Long-Term Debt
for additional information.
|
(d)
|
In October 2015, Pfizer exchanged
$1.7 billion
debt of its then recently acquired subsidiary, Hospira, for virtually the same amount of Pfizer debt. See
Note 7D. Financial Instruments: Long-Term Debt.
|
80
|
|
2017 Financial Report
|
|
•
|
On February 3, 2017, we completed the sale of our global infusion systems net assets, HIS, to ICU Medical, a global device manufacturer, for up to approximately
$900 million
, composed of cash and contingent cash consideration, ICU Medical common stock and seller financing. HIS includes IV pumps, solutions and devices. The operating results of HIS are included in the 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 year ended December 31, 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 year ended December 31, 2016 reflect 12 months of HIS global operations and for the year ended December 31, 2015 reflect four months of HIS U.S. operations and three months of HIS international operations. Assets and liabilities associated with HIS are presented as held for sale in the consolidated balance sheet as of December 31, 2016.
|
•
|
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. for
$1,045 million
, composed of cash and contingent consideration. 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 year ended December 31,
2017
reflect approximately 11 months 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). 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 year ended December 31, 2017. In accordance with our domestic and international reporting periods, our consolidated financial statements for the year ended December 31, 2016 reflect approximately three months of Medivation operations.
|
•
|
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 year ended December 31, 2017. In accordance with our domestic and international reporting periods, our consolidated financial statements for the year ended December 31, 2016 reflect approximately six months of Anacor operations.
|
•
|
On April 6, 2016, we announced that the merger agreement between Pfizer and Allergan entered into on November 22, 2015 was terminated by mutual agreement of the companies. The decision was driven by the actions announced by the U.S. Department of Treasury on April 4, 2016, which the companies concluded qualified as an “Adverse Tax Law Change” under the merger agreement. In connection with the termination of the merger agreement, on April 8, 2016 (which fell into Pfizer’s second fiscal quarter), Pfizer paid Allergan
$150 million
(pre-tax) for reimbursement of Allergan’s expenses associated with the terminated transaction (see
Note 4
). Pfizer and Allergan also released each other from any and all claims in connection with the merger agreement.
|
•
|
On September 3, 2015, we acquired Hospira for approximately
$16.1 billion
in cash (
$15.7 billion
, net of cash acquired). Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Hospira. In accordance with our domestic and international reporting periods, our consolidated financial statements for the year ended December 31, 2015 reflect four months of Hospira U.S. operations and three months of Hospira international operations.
|
2017 Financial Report
|
|
81
|
|
•
|
Income approach, which is based on the present value of a future stream of net cash flows.
|
•
|
Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.
|
82
|
|
2017 Financial Report
|
|
•
|
Cost approach, which is based on the cost to acquire or construct comparable assets, less an allowance for functional and/or economic obsolescence.
|
•
|
Quoted prices for identical assets or liabilities in active markets (Level 1 inputs).
|
•
|
Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (Level 2 inputs).
|
•
|
Unobservable inputs that reflect estimates and assumptions (Level 3 inputs).
|
•
|
In the U.S., we record provisions for pharmaceutical Medicare, Medicaid, and performance-based contract rebates based upon our experience ratio of rebates paid and actual prescriptions written during prior quarters. We apply the experience ratio to the respective period’s sales to determine the rebate accrual and related expense. This experience ratio is evaluated regularly to ensure that the historical trends are as current as practicable. We estimate discounts on branded prescription drug sales to Medicare Part D participants in the Medicare “coverage gap,” also known as the “doughnut hole,” based on the historical experience of beneficiary prescriptions and consideration of the utilization that is expected to result from the discount in the coverage gap. We evaluate this estimate regularly to ensure that the historical trends and future expectations are as current as practicable. For performance-based contract rebates, we also consider current contract terms, such as changes in formulary status and rebate rates.
|
•
|
Outside the U.S., the majority of our pharmaceutical sales allowances are contractual or legislatively mandated and our estimates are based on actual invoiced sales within each period, which reduces the risk of variations in the estimation process. In certain European countries, rebates are calculated on the government’s total unbudgeted pharmaceutical spending or on specific product sales thresholds, and we apply an estimated allocation factor against our actual invoiced sales to project the expected level of reimbursement. We obtain third-party information that helps us to monitor the adequacy of these accruals.
|
•
|
Provisions for pharmaceutical chargebacks (primarily reimbursements to U.S. wholesalers for honoring contracted prices to third parties) closely approximate actual as we settle these deductions generally within two to five weeks of incurring the liability.
|
•
|
Provisions for pharmaceutical sales returns are based on a calculation for each market that incorporates the following, as appropriate: local returns policies and practices; historical returns as a percentage of sales; an understanding of the reasons for past returns; estimated shelf life by product; an estimate of the amount of time between shipment and return or lag time; and any other factors that could impact the estimate of future returns, such as loss of exclusivity, product recalls or a changing competitive environment. Generally, returned products are destroyed, and customers are refunded the sales price in the form of a credit.
|
•
|
We record sales incentives as a reduction of revenues at the time the related revenues are recorded or when the incentive is offered, whichever is later. We estimate the cost of our sales incentives based on our historical experience with similar incentives programs to predict customer behavior.
|
2017 Financial Report
|
|
83
|
|
|
|
As of December 31,
|
||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
||
Reserve against
Trade accounts receivable, less allowance for doubtful accounts
|
|
$
|
1,352
|
|
|
$
|
1,154
|
|
|
|
|
|
|
||||
Other current liabilities
:
|
|
|
|
|
||||
Accrued rebates
|
|
2,674
|
|
|
2,261
|
|
||
Other accruals
|
|
512
|
|
|
509
|
|
||
|
|
|
|
|
||||
Other noncurrent liabilities
|
|
385
|
|
|
357
|
|
||
Total accrued rebates and other accruals
|
|
$
|
4,923
|
|
|
$
|
4,282
|
|
•
|
Property, plant and equipment, less accumulated depreciation
—These assets are recorded at cost and are increased by the cost of any significant improvements after purchase. Property, plant and equipment assets, other than land and construction in progress, are depreciated on a straight-line basis over the estimated useful life of the individual assets. Depreciation begins when the asset is ready for its intended use. For tax purposes, accelerated depreciation methods are used as allowed by tax laws.
|
84
|
|
2017 Financial Report
|
|
•
|
Identifiable intangible assets, less accumulated amortization
—These acquired assets are recorded at fair value. Intangible assets with finite lives
are amortized on a straight-line basis over their estimated useful lives. Intangible assets with indefinite lives that are associated with marketed products are not amortized until a useful life can be determined. Intangible assets associated with IPR&D projects are not amortized until approval is obtained in a major market, typically either the U.S. or the EU, or in a series of other countries, subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.
|
•
|
Goodwill
—Goodwill represents the excess of the consideration transferred for an acquired business over the assigned values of its net assets. Goodwill is not amortized.
|
•
|
For finite-lived intangible assets, such as developed technology rights, and for other long-lived assets, such as property, plant and equipment, whenever impairment indicators are present, we calculate the undiscounted value of the projected cash flows associated with the asset, or asset group, and compare this estimated amount to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value. In addition, in all cases of an impairment review, we re-evaluate the remaining useful lives of the assets and modify them, as appropriate.
|
•
|
For indefinite-lived intangible assets, such as Brands and IPR&D assets, when necessary, we determine the fair value of the asset and record an impairment loss, if any, for the excess of book value over fair value. In addition, in all cases of an impairment review other than for IPR&D assets, we re-evaluate whether continuing to characterize the asset as indefinite-lived is appropriate.
|
•
|
For goodwill, when necessary, we determine the fair value of each reporting unit and compare that value to its book value. If the carrying amount is found to be greater, we then determine the implied fair value of goodwill by subtracting the fair value of all the identifiable net assets other than goodwill from the fair value of the reporting unit and record an impairment loss, if any, for the excess of the book value of goodwill over the implied fair value.
|
•
|
Trading securities are carried at fair value, with changes in fair value reported in
Other (income)/deductions—net.
|
2017 Financial Report
|
|
85
|
|
•
|
Available-for-sale debt and equity securities are carried at fair value, with changes in fair value reported in
Other comprehensive income/(loss)
until realized.
|
•
|
Held-to-maturity debt securities are carried at amortized cost.
|
•
|
Private equity securities are carried at equity method or at cost method. For equity investments where we have significant influence over the financial and operating policies of the investee, we use the equity-method of accounting. Under the equity-method, we record our share of the investee’s income and expenses in
Other (income)/deductions—net
. The excess of the cost of the investment over our share of the equity of the investee as of the acquisition date is allocated to the identifiable assets of the investee, with any remaining excess amount allocated to goodwill. Such investments are initially recorded at cost, which typically does not include amounts of contingent consideration.
|
86
|
|
2017 Financial Report
|
|
2017 Financial Report
|
|
87
|
|
88
|
|
2017 Financial Report
|
|
(MILLIONS OF DOLLARS)
|
|
Amounts Recognized
as of Acquisition Date
Final
|
|
|
Working capital, excluding inventories
(a)
|
|
$
|
342
|
|
Inventories
|
|
1,901
|
|
|
PP&E
|
|
2,352
|
|
|
Identifiable intangible assets, excluding IPR&D
(b)
|
|
8,290
|
|
|
IPR&D
|
|
1,030
|
|
|
Other noncurrent assets
|
|
362
|
|
|
Long-term debt
|
|
(1,928
|
)
|
|
Benefit obligations
|
|
(117
|
)
|
|
Net income tax accounts
(c)
|
|
(3,380
|
)
|
|
Other noncurrent liabilities
|
|
(61
|
)
|
|
Total identifiable net assets
|
|
8,791
|
|
|
Goodwill
|
|
7,295
|
|
|
Net assets acquired/total consideration transferred
|
|
$
|
16,087
|
|
(a)
|
Includes cash and cash equivalents, short-term investments, accounts receivable, other current assets, assets held for sale, accounts payable and other current liabilities.
|
(b)
|
Comprised of finite-lived developed technology rights with a weighted-average life of approximately 17 years (
$7.7 billion
) and other finite-lived identifiable intangible assets with a weighted-average life of approximately 12 years (
$570 million
).
|
(c)
|
Final amounts recognized as of the acquisition date, included in
Current tax assets
(
$57 million
),
Noncurrent deferred tax assets and other noncurrent tax assets
(
$58 million
),
Income taxes payable
(
$5 million
),
Noncurrent deferred tax liabilities
(
$3.4 billion
) and
Other taxes payable
(
$101 million
, including accrued interest of
$5 million
).
|
•
|
Environmental Matters
—In the ordinary course of business, Hospira incurred liabilities for environmental matters such as remediation work, asset retirement obligations and environmental guarantees and indemnifications. The contingencies for environmental matters are not significant to Pfizer’s financial statements.
|
•
|
Legal Matters
—Hospira is involved in various legal proceedings, including product liability, patent, commercial, antitrust and environmental matters and government investigations, of a nature considered normal to its business. The contingencies arising from legal matters are not significant to Pfizer’s financial statements.
|
•
|
Tax Matters
—In the ordinary course of business, Hospira incurred liabilities for income taxes
.
Income taxes are exceptions to both the recognition and fair value measurement principles associated with the accounting for business combinations. Reserves for income tax contingencies continue to be measured under the benefit recognition model as previously used by Hospira. Net liabilities for income taxes approximate
$3.4 billion
as of the acquisition date, which included
$109 million
for uncertain tax positions. The net tax liability included the recording of additional adjustments of approximately
$3.2 billion
for the tax impact of fair value adjustments and approximately
$719 million
for income tax matters that we intend to resolve in a manner different from what Hospira had planned or intended. For example, because we planned to repatriate certain overseas funds, we provided deferred taxes on Hospira’s unremitted earnings for which no taxes had been previously provided by Hospira as it was Hospira’s intention to indefinitely reinvest those earnings.
|
•
|
the expected specific synergies and other benefits that we believe will result from combining the operations of Hospira with the operations of Pfizer;
|
•
|
any intangible assets that do not qualify for separate recognition, as well as future, as yet unidentified projects and products; and
|
•
|
the value of the going-concern element of Hospira’s existing businesses (the higher rate of return on the assembled collection of net assets versus if Pfizer had acquired all of the net assets separately).
|
2017 Financial Report
|
|
89
|
|
(MILLIONS OF DOLLARS)
|
|
December 31,
2015
|
|
|
Revenues
|
|
$
|
1,513
|
|
Net loss attributable to Pfizer Inc. common shareholders
(a)
|
|
(575
|
)
|
(a)
|
Includes purchase accounting charges related to the provisional estimated fair values recognized as of the acquisition date for (i) the fair value adjustment for acquisition-date inventory that has been sold (
$378 million
pre-tax); (ii) amortization expense related to the fair value of identifiable intangible assets acquired from Hospira (
$161 million
pre-tax); (iii) depreciation expense related to the fair value adjustment of fixed assets acquired from Hospira (
$34 million
pre-tax ); and (iv) amortization expense related to the fair value adjustment of long-term debt acquired from Hospira (
$13 million
income pre-tax), as well as restructuring and integration costs (
$556 million
pre-tax).
|
|
|
Unaudited Supplemental Pro Forma Consolidated Results
|
||
(MILLIONS OF DOLLARS, EXCEPT PER COMMON SHARE DATA)
|
|
Year Ended December 31, 2015
|
||
Revenues
|
|
$
|
52,082
|
|
Net income attributable to Pfizer Inc. common shareholders
|
|
7,669
|
|
|
Diluted EPS attributable to Pfizer Inc. common shareholders
|
|
1.23
|
|
•
|
Elimination of Hospira’s historical intangible asset amortization expense (approximately
$33 million
).
|
•
|
Additional amortization expense (approximately
$342 million
) related to the fair value of identifiable intangible assets acquired.
|
•
|
Additional depreciation expense (approximately
$52 million
) related to the fair value adjustment to PP&E acquired.
|
•
|
Adjustment related to the non-recurring fair value adjustment to acquisition-date inventory estimated to have been sold (the elimination of
$364 million
of charges).
|
•
|
Adjustment to decrease interest expense (approximately
$18 million
) related to the fair value adjustment of Hospira debt.
|
•
|
Adjustment for non-recurring acquisition-related costs directly attributable to the acquisition (the elimination of
$877 million
of charges), reflecting non-recurring charges incurred by both Hospira and Pfizer which would have been recorded in 2014 under the pro forma assumption that the Hospira acquisition was completed on January 1, 2014.
|
90
|
|
2017 Financial Report
|
|
|
|
As of December 31,
|
||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
||
Assets Held for Sale
|
|
|
|
|
||||
Inventories
|
|
$
|
—
|
|
|
$
|
377
|
|
PP&E
|
|
—
|
|
|
457
|
|
||
Identifiable intangible assets
|
|
—
|
|
|
1,319
|
|
||
Goodwill
|
|
—
|
|
|
119
|
|
||
Other assets
|
|
—
|
|
|
152
|
|
||
Less: adjustment to HIS assets for net realizable value
(a)
|
|
—
|
|
|
(1,681
|
)
|
||
Total HIS assets held for sale
|
|
—
|
|
|
743
|
|
||
Other assets held for sale
(b)
|
|
12
|
|
|
58
|
|
||
Assets held for sale
|
|
$
|
12
|
|
|
$
|
801
|
|
|
|
|
|
|
||||
Liabilities Held for Sale
|
|
|
|
|
||||
Accrued compensation and related items
|
|
$
|
—
|
|
|
$
|
54
|
|
Other liabilities
|
|
—
|
|
|
103
|
|
||
Total HIS liabilities held for sale
|
|
$
|
—
|
|
|
$
|
157
|
|
(a)
|
For
2016
, we recorded an adjustment to HIS assets for net realizable value of
$1,681 million
plus estimated costs to sell of
$31 million
for a total impairment on HIS net assets of
$1,712 million
.
|
(b)
|
Other assets held for sale consist primarily of PP&E and other assets.
|
2017 Financial Report
|
|
91
|
|
(a)
|
Represents sales to our partners of products manufactured by us.
|
(b)
|
Substantially all relates to amounts earned from our partners under co-promotion agreements. The increase in 2017 reflects an increase in alliance revenues from Eliquis and Xtandi. The increase in 2016 reflects an increase in alliance revenues from Eliquis and the inclusion of Xtandi revenues resulting from the acquisition of Medivation in September 2016, partially offset by the expiration of the Rebif co-promotion collaboration at the end of 2015.
|
(c)
|
Primarily relates to royalties earned by our partners and cost of sales associated with inventory purchased from our partners.
|
(d)
|
Represents net reimbursements to our partners for selling, informational and administrative expenses incurred.
|
(e)
|
Primarily relates to upfront payments and pre-approval milestone payments earned by our partners as well as net reimbursements. The upfront and milestone payments were as follows:
$15 million
in
2017
,
$15 million
in
2016
and
$310 million
in
2015
(primarily related to our collaboration with OPKO, see below). 2017 and 2016 also include reimbursements related to our collaboration with Lilly (see below) of
$147 million
and
$120 million
, respectively.
|
(f)
|
Primarily relates to royalties from our collaboration partners. The decrease in
2017
is due to the October 31, 2016 expiration of our
36
month royalty arrangement on sales of Enbrel in the U.S. and Canada, partially offset by a full year of royalties earned in 2017, versus a partial year in 2016, on Xtandi ex-U.S. sales.
|
92
|
|
2017 Financial Report
|
|
2017 Financial Report
|
|
93
|
|
94
|
|
2017 Financial Report
|
|
•
|
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
December 31, 2017
, we incurred approximately
$197 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
$300 million
related to this initiative. Through
December 31, 2017
, we incurred approximately
$151 million
associated with this initiative.
|
2017 Financial Report
|
|
95
|
|
The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Restructuring charges
(a)
:
|
|
|
|
|
|
|
||||||
Employee terminations
|
|
$
|
(34
|
)
|
|
$
|
940
|
|
|
$
|
489
|
|
Asset impairments
(b)
|
|
190
|
|
|
142
|
|
|
254
|
|
|||
Exit costs
|
|
21
|
|
|
74
|
|
|
68
|
|
|||
Total restructuring charges
|
|
178
|
|
|
1,156
|
|
|
811
|
|
|||
Transaction costs
(c)
|
|
4
|
|
|
127
|
|
|
123
|
|
|||
Integration costs
(d)
|
|
305
|
|
|
441
|
|
|
219
|
|
|||
Restructuring charges and certain acquisition-related costs
|
|
487
|
|
|
1,724
|
|
|
1,152
|
|
|||
Additional depreciation––asset restructuring
recorded in our
consolidated statements of income as follows
(e)
:
|
|
|
|
|
|
|
||||||
Cost of sales
|
|
91
|
|
|
201
|
|
|
117
|
|
|||
Selling, informational and administrative expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Research and development expenses
|
|
—
|
|
|
7
|
|
|
5
|
|
|||
Total additional depreciation––asset restructuring
|
|
91
|
|
|
207
|
|
|
122
|
|
|||
Implementation costs recorded in our consolidated statements of income as follows
(f)
:
|
|
|
|
|
|
|
||||||
Cost of sales
|
|
118
|
|
|
230
|
|
|
102
|
|
|||
Selling, informational and administrative expenses
|
|
71
|
|
|
81
|
|
|
82
|
|
|||
Research and development expenses
|
|
38
|
|
|
25
|
|
|
14
|
|
|||
Other (income)/deductions––net
|
|
—
|
|
|
3
|
|
|
5
|
|
|||
Total implementation costs
|
|
227
|
|
|
340
|
|
|
203
|
|
|||
Total costs associated with acquisitions and cost-reduction/productivity initiatives
|
|
$
|
805
|
|
|
$
|
2,271
|
|
|
$
|
1,478
|
|
(a)
|
In
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
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 2015, restructuring charges are largely associated with.cost-reduction and productivity initiatives not associated with acquisitions. In
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.
|
•
|
IH (
$64 million
income); EH (
$4 million
income); WRD/GPD (
$80 million
); manufacturing operations (
$115 million
); and Corporate (
$51 million
).
|
•
|
IH (
$272 million
); EH (
$158 million
); WRD/GPD (
$169 million
); manufacturing operations (
$368 million
); and Corporate (
$189 million
),
|
•
|
IH (
$85 million
); EH (
$402 million
); WRD/GPD (
$80 million
); manufacturing operations (
$80 million
); and Corporate (
$164 million
).
|
(b)
|
The asset impairment charges for
2017
are largely associated with our acquisitions of Hospira and Medivation. The asset impairment charges included in restructuring charges for 2017 and 2016 are primarily associated with abandoned assets. The asset impairment charges for
2015
are primarily associated with our acquisition of Hospira. See (a) above for additional information.
|
(c)
|
Transaction costs represent external costs for banking, legal, accounting and other similar services, which in 2017 are directly related to our acquisitions of Hospira, Anacor and Medivation. Transaction costs in 2016 are mostly related to our acquisitions of Medivation and Anacor, and the terminated transaction with Allergan. Transaction costs in 2015 represent external costs directly related to the acquisition of Hospira and the terminated transaction with Allergan and primarily include expenditures for banking, legal, accounting and other similar services.
|
(d)
|
I
ntegration 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
2017
, integration costs primarily relate to our acquisitions of Hospira and Medivation, as well as a net gain of
$12 million
related to the settlement of the Hospira U.S. qualified defined benefit pension plan (see
Note 11
). In 2016, integration costs primarily relate to our acquisition of Hospira and the terminated transaction with Allergan. Integration costs in 2015 represent external incremental costs directly related to our acquisition of Hospira.
|
(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.
|
96
|
|
2017 Financial Report
|
|
The following table provides the components of and changes in our restructuring accruals:
|
||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Employee
Termination
Costs
|
|
|
Asset
Impairment
Charges
|
|
|
Exit Costs
|
|
|
Accrual
|
|
||||
Balance, January 1, 2016
|
|
$
|
1,109
|
|
|
$
|
—
|
|
|
$
|
48
|
|
|
$
|
1,157
|
|
Provision
|
|
940
|
|
|
142
|
|
|
74
|
|
|
1,156
|
|
||||
Utilization and other
(a)
|
|
(502
|
)
|
|
(142
|
)
|
|
(86
|
)
|
|
(730
|
)
|
||||
Balance, December 31, 2016
(b)
|
|
1,547
|
|
|
—
|
|
|
36
|
|
|
1,583
|
|
||||
Provision
|
|
(34
|
)
|
|
190
|
|
|
21
|
|
|
178
|
|
||||
Utilization and other
(a)
|
|
(474
|
)
|
|
(190
|
)
|
|
9
|
|
|
(656
|
)
|
||||
Balance, December 31, 2017
(c)
|
|
$
|
1,039
|
|
|
$
|
—
|
|
|
$
|
66
|
|
|
$
|
1,105
|
|
(a)
|
Includes adjustments for foreign currency translation.
|
(b)
|
Included in
Other current liabilities
(
$863 million
) and
Other noncurrent liabilities
(
$720 million
).
|
(c)
|
Included in
Other current liabilities
(
$643 million
) and
Other noncurrent liabilities
(
$462 million
).
|
The following table provides components of
Other (income)/deductions––net
:
|
|||||||||||||
|
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Interest income
(a)
|
|
|
$
|
(391
|
)
|
|
$
|
(470
|
)
|
|
$
|
(471
|
)
|
Interest expense
(a)
|
|
|
1,270
|
|
|
1,186
|
|
|
1,199
|
|
|||
Net interest expense
|
|
|
879
|
|
|
716
|
|
|
728
|
|
|||
Foreign currency loss related to Venezuela
(b)
|
|
|
—
|
|
|
—
|
|
|
806
|
|
|||
Royalty-related income
(c)
|
|
|
(499
|
)
|
|
(905
|
)
|
|
(922
|
)
|
|||
Certain legal matters, net
(d)
|
|
|
240
|
|
|
510
|
|
|
975
|
|
|||
Net gains on asset disposals
(e)
|
|
|
(343
|
)
|
|
(171
|
)
|
|
(232
|
)
|
|||
Loss on sale and impairment on remeasurement of HIS net assets
(f)
|
|
|
55
|
|
|
1,712
|
|
|
—
|
|
|||
Certain asset impairments
(g)
|
|
|
395
|
|
|
1,447
|
|
|
818
|
|
|||
Business and legal entity alignment costs
(h)
|
|
|
71
|
|
|
261
|
|
|
282
|
|
|||
Net losses on early retirement of debt
(i)
|
|
|
999
|
|
|
312
|
|
|
—
|
|
|||
Other, net
(j)
|
|
|
(482
|
)
|
|
(227
|
)
|
|
403
|
|
|||
Other (income)/deductions––net
|
|
|
$
|
1,315
|
|
|
$
|
3,655
|
|
|
$
|
2,860
|
|
(a)
|
2017
v.
2016
––Interest income decreased primarily driven by a lower investment balance. Interest expense increased, 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. Capitalized interest expense totaled
$72 million
2017
, $
61 million
in
2016
and $
32 million
in
2015
.
|
(b)
|
In 2015, represents a foreign currency loss related to conditions in Venezuela during 2015, that had us resolve that our Venezuelan bolivar-denominated net monetary assets that are subject to revaluation were no longer expected to be settled at the Venezuelan government CENCOEX official rate of
6.3
, but rather at the then SIMADI rate of
200
, the lowest official rate. Those conditions included the inability to obtain significant conversions of Venezuelan bolivars related to intercompany U.S. dollar
denominated accounts, an evaluation of the effects of the implementation of a fourth-quarter 2015 operational restructuring, resulting in a
36%
reduction in our labor force in Venezuela, and our expectation of the changes in Venezuela’s responses to changes in its economy.
|
(c)
|
Royalty-related income
decreased
in
2017
and
2016
, primarily due to lower royalty income for Enbrel of
$470 million
in
2017
, compared to 2016, and
$54 million
in
2016
, compared to 2015, 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 increases in Xtandi royalty-related income of
$176 million
in
2017
, compared to 2016, and
$63 million
in
2016
, compared to 2015.
|
(d)
|
In
2017
, primarily includes a
$94 million
charge to resolve a class action lawsuit filed by direct purchasers relating to Celebrex, which is subject to court approval (for additional information, see
Note 17A2
), and a
$79 million
charge to reflect damages awarded by a jury in a patent matter. In
2016
, primarily includes amounts to resolve a Multi-District Litigation relating to Celebrex and Bextra 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, 2016 includes a settlement related to a patent matter. In 2015, primarily includes
$784.6 million
related to an agreement in principle reached in February 2016 and finalized in April 2016 to resolve claims alleging that Wyeth's practices relating to the calculation of Medicaid rebates for its drug, Protonix (pantoprazole sodium), between 2001 and 2006, several years before Pfizer acquired Wyeth in 2009, violated the Federal Civil False Claims Act and other laws.
|
(e)
|
In
2017
, primarily includes (i) gross realized gains on sales of available-for-sale debt securities of
$451 million
; (ii) gross realized losses on sales of available-for-sale debt securities of
$281 million
; (iii) gross realized gains on sales of available-for-sale equity securities of
$75 million
; (iv) a net loss of
$120 million
from derivative financial instruments used to hedge the foreign exchange component of the matured available-for-sale debt securities; (v) gains on sales/out-licensing of product and compound rights of
$187 million
; (vi) gains on sales of investments in private equity securities of
$80 million
; (vii) a gain on sale of property of
$52 million
; (viii) 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; and (ix) a loss of
$81 million
related to the sale of our
49%
equity share in Hisun Pfizer. Proceeds from the sale of available-for-sale securities were
$5.1 billion
in 2017.
|
2017 Financial Report
|
|
97
|
|
(f)
|
In 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 2016, represents a charge related to the write-down of the HIS net assets to fair value less estimated costs to sell. See
Note 2B
for additional information
.
|
(g)
|
In
2017
, primarily includes intangible asset impairment charges of
$337 million
, reflecting (i)
$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; (ii)
$124 million
related to developed technology rights, acquired in connection with our acquisition of Hospira, for a sterile injectable pain reliever; (iii)
$39 million
related to developed technology rights, acquired in connection with our acquisition of NextWave, for the treatment of attention deficit hyperactivity disorder; (iv)
$26 million
related to developed technology rights, acquired in connection with our acquisition of Hospira, for a generic injectable antibiotic product for the treatment of bacterial infections; and (v)
$20 million
related to other developed technology rights. The intangible asset impairment charges for
2017
are associated with EH and reflect, among other things, updated commercial forecasts and an increased competitive environment. In addition, 2017 includes a loss of
$43 million
for an impairment of our AM-Pharma B.V. long-term investment (see
Note 2E
).
|
(h)
|
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.
|
(i)
|
In 2017 and 2016, represents net losses due to the early retirement of debt, inclusive of the related termination of cross currency swaps in 2017 and inclusive of the related termination of interest rate swaps in 2016.
|
(j)
|
In 2017, includes, among other things, dividend income of
$266 million
from our investment in ViiV, and income of
$62 million
from resolution of a contract disagreement. In 2016, includes among other things,
$150 million
paid to Allergan for reimbursement of Allergan’s expenses associated with the terminated transaction (see
Note 1A
); and income of
$116 million
from resolution of a contract disagreement. In 2015, includes, among other things, (i) charges of
$194 million
related to the write-down of assets to net realizable value; (ii) charges of
$159 million
, reflecting the change in the fair value of contingent consideration liabilities; and (iii) income of
$45 million
associated with equity-method investees.
|
(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. See also
Note 1E.
|
(b)
|
Reflects intangible assets written down to fair value in
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.
|
98
|
|
2017 Financial Report
|
|
The following table provides the components of
Income from continuing operations before provision/(benefit) for taxes on income
:
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
United States
|
|
$
|
(6,879
|
)
|
|
$
|
(8,534
|
)
|
|
$
|
(6,809
|
)
|
International
|
|
19,184
|
|
|
16,886
|
|
|
15,773
|
|
|||
Income from continuing operations before provision/(benefit) for taxes on income
(
a), (b)
|
|
$
|
12,305
|
|
|
$
|
8,351
|
|
|
$
|
8,965
|
|
(a)
|
2017
v.
2016
––
The decrease in the domestic loss was primarily due to lower restructuring charges and certain acquisition-related costs, the non-recurrence of the 2016 impairment on the remeasurement of HIS net assets, lower certain asset impairments and lower certain legal matters, partially offset by higher net losses on early retirement of debt, and higher amortization of intangible assets. The increase in international income was primarily due to the non-recurrence of the 2016 impairment on the remeasurement of HIS net assets, lower restructuring charges and certain acquisition-related costs, and lower certain asset impairments.
|
(b)
|
2016
v.
2015
––
The increase in the domestic loss was primarily due to a charge related to the write-down of HIS net assets to fair value less estimated costs to sell, higher asset impairments, and higher restructuring charges and certain acquisition-related costs, partially offset by the inclusion of a full year of legacy U.S. Hospira operations as compared to four months of U.S. operations in 2015, and lower charges for legal matters. The increase in international income is primarily due to the non-recurrence of a foreign currency loss related to Venezuela partially offset by a charge related to the write-down of HIS net assets to fair value less estimated costs to sell, and higher restructuring charges and certain acquisition-related costs.
|
2017 Financial Report
|
|
99
|
|
•
|
estimated U.S. net tax benefits of
$10.7 billion
associated with the enactment of the TCJA (see discussion above), primarily reflecting:
|
◦
|
$22.8 billion
tax benefit associated with the remeasurement of U.S. deferred tax liabilities on unremitted earnings of foreign subsidiaries (see
Note 5C
);
|
◦
|
$1.6 billion
tax benefit associated with the remeasurement of other U.S. deferred tax liabilities, primarily associated with intangibles (see
Note 5C
);
|
◦
|
$12.9 billion
tax expense related to the repatriation tax on deemed repatriated accumulated pre-2017 post-1986 earnings of foreign subsidiaries;
|
◦
|
$1.0 billion
tax expense related to future taxes on global intangible low-taxed income (see
Note 5C
); and
|
◦
|
approximately
$100 million
tax benefit primarily associated with certain tax initiatives;
|
•
|
U.S. tax expense of approximately
$1.3 billion
related to the repatriation tax on deemed repatriated current year earnings of foreign subsidiaries;
|
•
|
tax benefit of approximately
$370 million
related to net losses on early retirement of debt;
|
•
|
tax benefits of approximately
$150 million
representing tax and interest resulting from the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations; and
|
•
|
the non-deductibility of a
$307 million
fee payable to the federal government as a result of the U.S. Healthcare Legislation.
|
•
|
U.S. tax expense of approximately
$1.1 billion
as a result of providing U.S. deferred income taxes on certain funds earned outside the U.S. that will not be indefinitely reinvested overseas, virtually all of which were earned in 2016 (see
Note 5C
);
|
•
|
tax benefits of approximately
$460 million
, representing tax and interest, resulting from the resolution of certain tax positions pertaining to prior years, primarily with various foreign tax authorities, and from the expiration of certain statutes of limitations;
|
•
|
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;
|
•
|
net tax benefits of
$89 million
, related to the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, requiring excess tax benefits or deficiencies of share-based compensation to be recognized as a component of the
Provision/(benefit) for taxes on income
(see Notes to Consolidated Financial Statements––
Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards
in Pfizer’s 2016 Financial Report);
|
•
|
the non-deductibility of a
$312 million
fee payable to the federal government as a result of the U.S. Healthcare Legislation; and
|
•
|
the permanent extension of the U.S. R&D tax credit, which was signed into law in December 2015.
|
•
|
U.S. tax expense of approximately
$2.1 billion
as a result of providing U.S. deferred income taxes on certain funds earned outside the U.S. that will not be indefinitely reinvested overseas, virtually all of which were earned in 2015 (see
Note 5C
);
|
•
|
tax benefits of approximately
$360 million
, representing tax and interest, resulting from the resolution of certain tax positions pertaining to prior years, primarily with various foreign tax authorities, and from the expiration of certain statutes of limitations;
|
•
|
the permanent extension of the U.S. R&D tax credit, which was signed into law in December 2015, as well as tax benefits associated with certain tax initiatives;
|
•
|
the non-deductibility of a foreign currency loss related to Venezuela;
|
•
|
the non-deductibility of a charge for the agreement in principle reached in February 2016 to resolve claims relating to Protonix; and
|
•
|
the non-deductibility of a
$251 million
fee payable to the federal government as a result of the U.S. Healthcare Legislation.
|
100
|
|
2017 Financial Report
|
|
The reconciliation of the U.S. statutory income tax rate to our effective tax rate for
Income from continuing operations
follows:
|
|||||||||
|
|
Year Ended December 31,
|
|||||||
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
U.S. statutory income tax rate
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
TCJA impact
(a)
|
|
(86.6
|
)
|
|
—
|
|
|
—
|
|
Taxation of non-U.S. operations
(b), (c), (d)
|
|
(17.0
|
)
|
|
(13.8
|
)
|
|
(9.6
|
)
|
Tax settlements and resolution of certain tax positions
(e)
|
|
(1.2
|
)
|
|
(5.5
|
)
|
|
(4.0
|
)
|
U.S. Healthcare Legislation
(e)
|
|
0.9
|
|
|
1.3
|
|
|
0.9
|
|
U.S. R&D tax credit and manufacturing deduction
(e)
|
|
(0.7
|
)
|
|
(1.0
|
)
|
|
(1.0
|
)
|
Certain legal settlements and charges
(e)
|
|
0.1
|
|
|
(2.9
|
)
|
|
3.1
|
|
All other, net
(f)
|
|
(3.9
|
)
|
|
0.3
|
|
|
(2.1
|
)
|
Effective tax rate for income from continuing operations
|
|
(73.5
|
)%
|
|
13.4
|
%
|
|
22.2
|
%
|
(a)
|
For a discussion about the enactment of the TCJA, see
Note 5A.
|
(b)
|
For taxation of non-U.S. operations, this rate impact reflects the income tax rates and relative earnings in the locations where we do business outside the U.S., together with the cost of repatriation decisions, which includes the repatriation tax on deemed repatriated current year earnings of foreign subsidiaries discussed in
Note 5A
, as well as changes in uncertain tax positions not included in the reconciling item called “Tax settlements and resolution of certain tax positions”. Specifically: (i) the jurisdictional location of earnings is a significant component of our effective tax rate each year as tax rates outside the U.S. are generally lower than the U.S. statutory income tax rate, and the rate impact of this component is influenced by the specific location of non-U.S. earnings and the level of such earnings as compared to our total earnings; (ii) the cost of repatriation decisions, and other U.S. tax implications of our foreign operations, is a significant component of our effective tax rate each year and generally offsets some of the reduction to our effective tax rate each year resulting from the jurisdictional location of earnings; and (iii) the impact of changes in uncertain tax positions not included in the reconciling item called “Tax settlements and resolution of certain tax positions” is a component of our effective tax rate each year that can result in either an increase or decrease to our effective tax rate. The jurisdictional mix of earnings, which includes the impact of the location of earnings as well as repatriation costs, can vary as a result of the repatriation decisions, as a result of operating fluctuations in the normal course of business and as a result of the extent and location of other income and expense items, such as restructuring charges, asset impairments and gains and losses on strategic business decisions. See also
Note 5A
for the components of pre-tax income and
Provision/(benefit) for taxes on income,
which is based on the location of the taxing authorities, and for information about settlements and other items impacting
Provision/(benefit) for taxes on income
.
|
(c)
|
In all periods presented, the reduction in our effective tax rate resulting from the jurisdictional location of earnings is largely due to generally lower tax rates, as well as manufacturing and other incentives associated with our subsidiaries in Puerto Rico and Singapore. 2015 and 2016 also include incentives in Costa Rica and the Dominican Republic related to the Hospira infusion systems business, which was sold to ICU Medical in February 2017. We benefit from a Puerto Rican incentive grant that expires in 2029. Under the grant, we are partially exempt from income, property and municipal taxes. In Singapore, we benefit from incentive tax rates effective through 2031 on income from manufacturing and other operations.
|
(d)
|
The favorable rate impact in
2017
also reflects lower repatriation costs associated with estimated current year income of our foreign subsidiaries. The favorable rate impact in
2016
also includes the non-recurrence of the non-deductibility of a foreign currency loss related to Venezuela. The rate impact in
2015
also includes the non-deductibility of a foreign currency loss related to Venezuela.
|
(e)
|
For a discussion about tax settlements and resolution of certain tax positions, the impact of U.S. Healthcare Legislation, the U.S. R&D tax credit and manufacturing deduction and the impact of certain legal settlements and charges, see
Note 5A.
|
(f)
|
All other, net in 2017 and 2015 primarily relates to tax benefits associated with certain tax initiatives in the normal course of business.
|
2017 Financial Report
|
|
101
|
|
The components of our deferred tax assets and liabilities, shown before jurisdictional netting, follow:
|
||||||||||||||||
|
|
2017 Deferred Tax*
|
|
2016 Deferred Tax
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
Assets
|
|
(Liabilities)
|
|
Assets
|
|
(Liabilities)
|
||||||||
Prepaid/deferred items
|
|
$
|
1,588
|
|
|
$
|
(132
|
)
|
|
$
|
2,180
|
|
|
$
|
(68
|
)
|
Inventories
|
|
224
|
|
|
(3
|
)
|
|
366
|
|
|
(47
|
)
|
||||
Intangible assets
(a)
|
|
685
|
|
|
(9,269
|
)
|
|
1,139
|
|
|
(15,172
|
)
|
||||
Property, plant and equipment
|
|
123
|
|
|
(755
|
)
|
|
92
|
|
|
(982
|
)
|
||||
Employee benefits
|
|
2,219
|
|
|
(109
|
)
|
|
3,356
|
|
|
(74
|
)
|
||||
Restructurings and other charges
|
|
226
|
|
|
(8
|
)
|
|
458
|
|
|
(2
|
)
|
||||
Legal and product liability reserves
|
|
459
|
|
|
—
|
|
|
650
|
|
|
—
|
|
||||
Net operating loss/tax credit carryforwards
(b)
|
|
4,502
|
|
|
—
|
|
|
2,957
|
|
|
—
|
|
||||
Unremitted earnings
(a), (c)
|
|
—
|
|
|
(1,067
|
)
|
|
—
|
|
|
(23,108
|
)
|
||||
State and local tax adjustments
|
|
218
|
|
|
—
|
|
|
301
|
|
|
—
|
|
||||
All other
|
|
488
|
|
|
(424
|
)
|
|
306
|
|
|
(503
|
)
|
||||
|
|
10,732
|
|
|
(11,767
|
)
|
|
11,806
|
|
|
(39,956
|
)
|
||||
Valuation allowances
|
|
(2,203
|
)
|
|
—
|
|
|
(1,949
|
)
|
|
—
|
|
||||
Total deferred taxes
|
|
$
|
8,529
|
|
|
$
|
(11,767
|
)
|
|
$
|
9,857
|
|
|
$
|
(39,956
|
)
|
Net deferred tax liability
(d)
|
|
|
|
$
|
(3,238
|
)
|
|
|
|
$
|
(30,099
|
)
|
*
|
2017 reflects the estimated remeasurement of U.S. deferred tax assets and liabilities as the result of the enactment of the TCJA. For additional information, see
Note 5A
.
|
(a)
|
The decrease in
2017
is primarily the result of the enactment of the TCJA, which includes the remeasurement of deferred tax liabilities primarily associated with intangible assets and unremitted earnings of foreign subsidiaries as well as amortization on intangible assets. For additional information, see
Note 5A.
|
(b)
|
The amounts in
2017
and
2016
are reduced for unrecognized tax benefits of
$3.4 billion
and
$3.0 billion
, respectively, where we have net operating loss carryforwards, similar tax losses, and/or tax credit carryforwards that are available, under the tax law of the applicable jurisdiction, to settle any additional income taxes that would result from the disallowance of a tax position.
|
(c)
|
The amount in 2017 primarily includes a provisional estimate on temporary differences associated with global intangible low-taxed income primarily related to basis differentials on intangibles. For additional information, see
Note 5A.
|
(d)
|
In
2017
,
Noncurrent deferred tax assets and other noncurrent tax assets
(
$0.7 billion
), and
Noncurrent deferred tax liabilities
(
$3.9 billion
). In
2016
,
Noncurrent deferred tax assets and other noncurrent tax assets
(
$654 million
), and
Noncurrent deferred tax liabilities
(
$30.8 billion
).
|
102
|
|
2017 Financial Report
|
|
•
|
Tax assets associated with uncertain tax positions primarily represent our estimate of the potential tax benefits in
one
tax jurisdiction that could result from the payment of income taxes in another tax jurisdiction. These potential benefits generally result from cooperative efforts among taxing authorities, as required by tax treaties to minimize double taxation, commonly referred to as the competent authority process. The recoverability of these assets, which we believe to be more likely than not, is dependent upon the actual payment of taxes in one tax jurisdiction and, in some cases, the successful petition for recovery in another tax jurisdiction. As of
December 31, 2017
and
2016
, we had approximately
$1.2 billion
, in each year, in assets associated with uncertain tax positions. In
2017
, these amounts were included in
Noncurrent deferred tax assets and other noncurrent tax assets
(
$1.0 billion
) and
Noncurrent deferred tax liabilities (
$118 million
). In
2016
, these amounts were included in
Noncurrent deferred tax assets and other noncurrent tax assets
(
$1.0 billion
) and
Noncurrent deferred tax liabilities (
$201 million
).
|
•
|
Tax liabilities associated with uncertain tax positions represent unrecognized tax benefits, which arise when the estimated benefit recorded in our financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. These unrecognized tax benefits relate primarily to issues common among multinational corporations. Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate.
|
(a)
|
For 2017 and 2016, primarily related to the acquisitions of Medivation and Anacor. For 2015, primarily related to the acquisition of Hospira. See also
Note 2A
.
|
(b)
|
Primarily included in
Provision/(benefit) for taxes on income.
|
(c)
|
Primarily related to effectively settling certain tax positions primarily with foreign tax authorities. See also
Note 5A.
|
(d)
|
Primarily related to cash payments and reductions of tax attributes.
|
(e)
|
Primarily related to decreases as a result of a lapse of applicable statutes of limitations.
|
(f)
|
In
2017
, included in
Income taxes payable
(
$1 million
),
Noncurrent deferred tax assets and other noncurrent tax assets
(
$123 million
),
Noncurrent deferred tax liabilities
(
$3.3 billion
) and
Other taxes payable
(
$3.2 billion
). In
2016
, included in
Income taxes payable
(
$14 million
),
Current tax assets
(
$17 million
),
Noncurrent deferred tax assets and other noncurrent tax assets
(
$184 million
),
Noncurrent deferred tax liabilities
(
$2.8 billion
) and
Other taxes payable
(
$2.8 billion
).
|
•
|
Interest related to our unrecognized tax benefits is recorded in accordance with the laws of each jurisdiction and is recorded primarily in
Provision/(benefit) for taxes on income
in our consolidated statements of income. In
2017
, we recorded a net increase in interest of
$208 million
. In
2016
, we recorded a net increase in interest of
$72 million
; and in
2015
, we recorded a net increase in interest of
$71 million
. Gross accrued interest totaled
$975 million
as of
December 31, 2017
(reflecting a decrease of approximately
$4 million
as a result of cash payments) and gross accrued interest totaled
$771 million
as of
December 31, 2016
(reflecting a decrease of approximately
$18 million
as a result of cash payments). In
2017
, this amount was included in
Other taxes payable
(
$975 million
). In
2016
, these amounts were included in
Income taxes payable
(
$4 million
), Current tax asset
s (
$13 million
) and
Other taxes payable
(
$754 million
). Accrued penalties are not significant. See also
Note 5A.
|
•
|
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 of 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.
|
2017 Financial Report
|
|
103
|
|
(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 Gain/(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, January 1, 2015
|
|
$
|
(2,689
|
)
|
|
$
|
517
|
|
|
$
|
(222
|
)
|
|
$
|
(5,654
|
)
|
|
$
|
733
|
|
|
$
|
(7,316
|
)
|
Other comprehensive income/(loss)
(a)
|
|
(3,174
|
)
|
|
(96
|
)
|
|
(5
|
)
|
|
921
|
|
|
148
|
|
|
(2,206
|
)
|
||||||
Balance, December 31, 2015
|
|
(5,863
|
)
|
|
421
|
|
|
(227
|
)
|
|
(4,733
|
)
|
|
880
|
|
|
(9,522
|
)
|
||||||
Other comprehensive income/(loss)
(a)
|
|
(797
|
)
|
|
(73
|
)
|
|
96
|
|
|
(740
|
)
|
|
(1
|
)
|
|
(1,514
|
)
|
||||||
Balance, December 31, 2016
|
|
(6,659
|
)
|
|
348
|
|
|
(131
|
)
|
|
(5,473
|
)
|
|
879
|
|
|
(11,036
|
)
|
||||||
Other comprehensive income/(loss)
(a)
|
|
$
|
1,479
|
|
|
(378
|
)
|
|
532
|
|
|
$
|
211
|
|
|
$
|
(129
|
)
|
|
$
|
1,715
|
|
||
Balance, December 31, 2017
|
|
$
|
(5,180
|
)
|
|
$
|
(30
|
)
|
|
$
|
401
|
|
|
$
|
(5,262
|
)
|
|
$
|
750
|
|
|
$
|
(9,321
|
)
|
(a)
|
Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of
$14 million
income in
2017
,
$3 million
loss in
2016
and
$26 million
loss in
2015
.
|
104
|
|
2017 Financial Report
|
|
The following table presents the financial assets and liabilities measured at fair value on a recurring basis by balance sheet categories and fair value hierarchy level as defined in
Note 1E
:
|
||||||||||||||||||||||||
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
||||||
(MILLIONS OF DOLLARS)
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
Financial assets measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Short-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Classified as trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity
(a)
|
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Classified as available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Government and agency debt—non-U.S.
|
|
12,242
|
|
|
—
|
|
|
12,242
|
|
|
7,317
|
|
|
—
|
|
|
7,317
|
|
||||||
Corporate debt
|
|
2,766
|
|
|
—
|
|
|
2,766
|
|
|
2,783
|
|
|
—
|
|
|
2,783
|
|
||||||
Government debt—U.S.
|
|
252
|
|
|
—
|
|
|
252
|
|
|
2,630
|
|
|
—
|
|
|
2,630
|
|
||||||
Agency asset-backed debt—U.S.
|
|
23
|
|
|
—
|
|
|
23
|
|
|
39
|
|
|
—
|
|
|
39
|
|
||||||
Other asset-backed debt
|
|
79
|
|
|
—
|
|
|
79
|
|
|
367
|
|
|
—
|
|
|
367
|
|
||||||
Money market funds
|
|
2,115
|
|
|
—
|
|
|
2,115
|
|
|
1,431
|
|
|
—
|
|
|
1,431
|
|
||||||
Equity
|
|
16
|
|
|
16
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
||||||
|
|
17,493
|
|
|
16
|
|
|
17,477
|
|
|
14,567
|
|
|
1
|
|
|
14,566
|
|
||||||
Total short-term investments
|
|
17,512
|
|
|
16
|
|
|
17,496
|
|
|
14,567
|
|
|
1
|
|
|
14,566
|
|
||||||
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate contracts
|
|
104
|
|
|
—
|
|
|
104
|
|
|
26
|
|
|
—
|
|
|
26
|
|
||||||
Foreign exchange contracts
|
|
234
|
|
|
—
|
|
|
234
|
|
|
540
|
|
|
—
|
|
|
540
|
|
||||||
Total other current assets
|
|
337
|
|
|
—
|
|
|
337
|
|
|
566
|
|
|
—
|
|
|
566
|
|
||||||
Long-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Classified as trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity
(a)
|
|
266
|
|
|
224
|
|
|
42
|
|
|
236
|
|
|
165
|
|
|
71
|
|
||||||
Debt
|
|
73
|
|
|
73
|
|
|
—
|
|
|
89
|
|
|
89
|
|
|
—
|
|
||||||
|
|
340
|
|
|
298
|
|
|
42
|
|
|
325
|
|
|
254
|
|
|
71
|
|
||||||
Classified as available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Government and agency debt—non-U.S.
|
|
387
|
|
|
—
|
|
|
387
|
|
|
863
|
|
|
—
|
|
|
863
|
|
||||||
Corporate debt
|
|
4,172
|
|
|
36
|
|
|
4,136
|
|
|
4,306
|
|
|
—
|
|
|
4,306
|
|
||||||
Government debt—U.S.
|
|
495
|
|
|
—
|
|
|
495
|
|
|
88
|
|
|
—
|
|
|
88
|
|
||||||
Other asset-backed debt
|
|
35
|
|
|
—
|
|
|
35
|
|
|
239
|
|
|
—
|
|
|
239
|
|
||||||
Money market funds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
||||||
Equity
|
|
1,174
|
|
|
1,174
|
|
|
—
|
|
|
539
|
|
|
539
|
|
|
—
|
|
||||||
|
|
6,264
|
|
|
1,210
|
|
|
5,054
|
|
|
6,049
|
|
|
539
|
|
|
5,510
|
|
||||||
Total long-term investments
|
|
6,603
|
|
|
1,507
|
|
|
5,096
|
|
|
6,374
|
|
|
793
|
|
|
5,581
|
|
||||||
Other noncurrent assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate contracts
|
|
477
|
|
|
—
|
|
|
477
|
|
|
599
|
|
|
—
|
|
|
599
|
|
||||||
Foreign exchange contracts
|
|
7
|
|
|
—
|
|
|
7
|
|
|
90
|
|
|
—
|
|
|
90
|
|
||||||
Total other noncurrent assets
|
|
484
|
|
|
—
|
|
|
484
|
|
|
689
|
|
|
—
|
|
|
689
|
|
||||||
Total assets
|
|
$
|
24,937
|
|
|
$
|
1,523
|
|
|
$
|
23,414
|
|
|
$
|
22,197
|
|
|
$
|
794
|
|
|
$
|
21,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Financial liabilities measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate contracts
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Foreign exchange contracts
|
|
201
|
|
|
—
|
|
|
201
|
|
|
443
|
|
|
—
|
|
|
443
|
|
||||||
Total other current liabilities
|
|
201
|
|
|
—
|
|
|
201
|
|
|
444
|
|
|
—
|
|
|
444
|
|
||||||
Other noncurrent liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate contracts
|
|
177
|
|
|
—
|
|
|
177
|
|
|
147
|
|
|
—
|
|
|
147
|
|
||||||
Foreign exchange contracts
|
|
313
|
|
|
—
|
|
|
313
|
|
|
1,075
|
|
|
—
|
|
|
1,075
|
|
||||||
Total other noncurrent liabilities
|
|
490
|
|
|
—
|
|
|
490
|
|
|
1,222
|
|
|
—
|
|
|
1,222
|
|
||||||
Total liabilities
|
|
$
|
691
|
|
|
$
|
—
|
|
|
$
|
691
|
|
|
$
|
1,666
|
|
|
$
|
—
|
|
|
$
|
1,666
|
|
(a)
|
As of
December 31, 2017
and
December 31, 2016
, equity securities of
$42 million
and
$71 million
, respectively, are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan.
|
2017 Financial Report
|
|
105
|
|
The following table presents the financial liabilities not measured at fair value on a recurring basis, including the carrying values and estimated fair values using a market approach:
|
||||||||||||||||||||||||
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
|
Carrying Value
|
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Estimated Fair Value
|
|||||||||||||||
(MILLIONS OF DOLLARS)
|
|
|
|
Total
|
|
|
Level 2
|
|
|
|
|
Total
|
|
|
Level 2
|
|
||||||||
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Long-term debt, excluding the current portion
|
|
$
|
33,538
|
|
|
$
|
37,253
|
|
|
$
|
37,253
|
|
|
$
|
31,398
|
|
|
$
|
34,896
|
|
|
$
|
34,896
|
|
•
|
Trading equity securities—quoted market prices.
|
•
|
Trading debt securities—quoted market prices.
|
•
|
Available-for-sale debt securities—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data and credit-adjusted interest rate yield curves. Receivable-backed, loan-backed, and mortgage-backed debt securities are valued by third-party models that use significant inputs derived from observable market data like prepayment rates, default rates, and recovery rates.
|
•
|
Available-for-sale equity securities—third-party pricing services that principally use a composite of observable prices.
|
•
|
Derivative assets and liabilities (financial instruments)—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data. Where applicable, these models discount future cash flow amounts using market-based observable inputs, including interest rate yield curves, and forward and spot prices for currencies. The credit risk impact to our derivative financial instruments was not significant.
|
•
|
Held-to-maturity debt securities—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data and credit-adjusted interest rate yield curves.
|
•
|
Available-for-sale money market funds—observable net asset value prices.
|
•
|
Private equity securities, excluding equity-method investments—application of the implied volatility associated with an observable biotech index to the carrying amount of our portfolio.
|
106
|
|
2017 Financial Report
|
|
•
|
Short-term borrowings and long-term debt—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data and our own credit rating.
|
At December 31, 2017, the investment securities portfolio consisted of debt securities that were virtually all investment-grade.
Information on investments in debt and equity securities at December 31, 2017 and 2016 is as follows, including, as of December 31, 2017, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to maturity debt securities:
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
Gross Unrealized
|
|
|
|
Maturities (in Years)
|
|
|
|
|
Gross Unrealized
|
|
|
|
||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Amortized Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Within 1
|
|
|
Over 1
to 5
|
|
|
Over 5
|
|
|
Total
|
|
|
Amortized Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
||||||||||||
Available-for-sale debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Government and agency debt
––
non-U.S.
|
|
$
|
12,616
|
|
|
$
|
61
|
|
|
$
|
(48
|
)
|
|
$
|
12,629
|
|
|
$
|
12,242
|
|
|
$
|
387
|
|
|
$
|
—
|
|
|
$
|
12,629
|
|
|
$
|
8,403
|
|
|
$
|
11
|
|
|
$
|
(235
|
)
|
|
$
|
8,179
|
|
Corporate debt
(b)
|
|
6,955
|
|
|
15
|
|
|
(33
|
)
|
|
6,938
|
|
|
2,766
|
|
|
2,630
|
|
|
1,542
|
|
|
6,938
|
|
|
7,162
|
|
|
16
|
|
|
(89
|
)
|
|
7,089
|
|
||||||||||||
Government debt––U.S.
|
|
765
|
|
|
—
|
|
|
(19
|
)
|
|
747
|
|
|
252
|
|
|
495
|
|
|
—
|
|
|
747
|
|
|
2,729
|
|
|
1
|
|
|
(12
|
)
|
|
2,718
|
|
||||||||||||
Agency asset-backed debt––U.S.
|
|
24
|
|
|
—
|
|
|
(1
|
)
|
|
24
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
41
|
|
|
—
|
|
|
(1
|
)
|
|
39
|
|
||||||||||||
Other asset-backed debt
(c)
|
|
114
|
|
|
—
|
|
|
—
|
|
|
114
|
|
|
79
|
|
|
32
|
|
|
3
|
|
|
114
|
|
|
607
|
|
|
1
|
|
|
(2
|
)
|
|
605
|
|
||||||||||||
Held-to-maturity debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Time deposits and other
|
|
1,091
|
|
|
—
|
|
|
—
|
|
|
1,091
|
|
|
1,087
|
|
|
—
|
|
|
4
|
|
|
1,091
|
|
|
830
|
|
|
—
|
|
|
—
|
|
|
830
|
|
||||||||||||
Government and agency debt
––
non-U.S.
|
|
770
|
|
|
—
|
|
|
—
|
|
|
770
|
|
|
770
|
|
|
—
|
|
|
—
|
|
|
770
|
|
|
412
|
|
|
—
|
|
|
—
|
|
|
412
|
|
||||||||||||
Total debt securities
|
|
$
|
22,337
|
|
|
$
|
77
|
|
|
$
|
(100
|
)
|
|
$
|
22,313
|
|
|
$
|
17,219
|
|
|
$
|
3,544
|
|
|
$
|
1,550
|
|
|
$
|
22,313
|
|
|
$
|
20,184
|
|
|
$
|
29
|
|
|
$
|
(339
|
)
|
|
$
|
19,873
|
|
Available-for-sale equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Money market funds
|
|
$
|
2,115
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,115
|
|
|
|
|
|
|
|
|
|
|
$
|
1,446
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
1,445
|
|
||||||||
Equity
|
|
728
|
|
|
586
|
|
|
(124
|
)
|
|
1,190
|
|
|
|
|
|
|
|
|
|
|
426
|
|
|
239
|
|
|
(125
|
)
|
|
540
|
|
||||||||||||||||
Total available-for-sale equity securities
|
|
$
|
2,843
|
|
|
$
|
586
|
|
|
$
|
(124
|
)
|
|
$
|
3,304
|
|
|
|
|
|
|
|
|
|
|
$
|
1,872
|
|
|
$
|
239
|
|
|
$
|
(126
|
)
|
|
$
|
1,985
|
|
(a)
|
Issued by a diverse group of corporations.
|
(b)
|
Includes receivable-backed, loan-backed, and mortgage-backed securities, all of which are in senior positions in the capital structure of the security. Receivable-backed securities are collateralized by credit cards receivables, and loan-backed securities are collateralized by senior secured obligations of a diverse pool of companies or student loans. Mortgage-backed securities are collateralized by diversified pools of residential and commercial mortgages.
|
Short-term borrowings include:
|
||||||||
|
|
As of December 31,
|
||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
2016
|
||||
Commercial paper
|
|
$
|
6,100
|
|
|
$
|
5,800
|
|
Current portion of long-term debt, principal amount
(a)
|
|
3,532
|
|
|
4,201
|
|
||
Other short-term borrowings, principal amount
(b)
|
|
320
|
|
|
673
|
|
||
Total short-term borrowings, principal amount
|
|
9,951
|
|
|
10,674
|
|
||
Net fair value adjustments related to hedging and purchase accounting
|
|
14
|
|
|
24
|
|
||
Net unamortized discounts, premiums and debt issuance costs
|
|
(12
|
)
|
|
(11
|
)
|
||
Total
Short-term borrowings, including current portion of long-term debt
, carried at historical proceeds, as adjusted
|
|
$
|
9,953
|
|
|
$
|
10,688
|
|
(a)
|
For additional information, see
Note 7D
.
|
(b)
|
Other short-term borrowings primarily include cash collateral. For additional information, see
Note 7F
.
|
2017 Financial Report
|
|
107
|
|
In 2017, we issued the following senior unsecured notes:
|
||||||||||||
Settlement Date
|
|
Maturity Date
|
|
Interest Rate
|
|
Issue Currency
|
|
Principal Amount
|
|
|||
March 6, 2017
|
|
March 2019
|
|
3-month EURIBOR+0.20% (0% floor)
|
|
|
Euro
|
|
€
|
1,250
|
|
|
|
|
March 2020
|
|
0.00
|
%
|
|
Euro
|
|
1,000
|
|
|
|
|
|
March 2022
|
|
0.25
|
%
|
|
Euro
|
|
1,000
|
|
|
|
|
|
March 2027
|
|
1.00
|
%
|
|
Euro
|
|
750
|
|
|
|
|
|
|
|
|
|
|
|
€
|
4,000
|
|
(a)
|
|
December 19, 2017
|
|
June 2043
|
|
2.735
|
%
|
|
U.K. pound
|
|
£
|
1,376
|
|
(b)
|
March 17, 2017
|
|
March 2047
|
|
4.20
|
%
|
|
U.S. dollar
|
|
$
|
1,065
|
|
(c)
|
(a)
|
The weighted-average effective interest rate for the euro notes at issuance was
0.23%
.
|
(b)
|
In December 2017, Pfizer exchanged approximately £
833 million
principal amount of the outstanding
6.50%
debt due 2038 for £
1.376 billion
principal amount of
2.735%
debt due 2043. This exchange constituted a debt extinguishment. See the following “Retirements” section for the income statement impact from the extinguishment.
|
(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.
|
108
|
|
2017 Financial Report
|
|
The following table provides the components of our senior unsecured long-term debt, including the weighted-average stated interest rate for 2017 and 2016 by maturity.
|
||||||||
|
|
As of December 31,
|
||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
||
Notes due 2018 (2.3%)
(a)
|
|
$
|
—
|
|
|
$
|
3,532
|
|
Notes due 2019 (1.3% and 1.8%)
|
|
4,848
|
|
|
3,350
|
|
||
Notes due 2020 (1.1% and 5.2%)
|
|
1,528
|
|
|
330
|
|
||
Notes due 2021 (3.5% and 3.9%)
|
|
3,550
|
|
|
4,260
|
|
||
Notes due 2022 (0.3%)
|
|
1,199
|
|
|
—
|
|
||
Notes due 2023 (4.3% and 4.3%)
|
|
1,592
|
|
|
1,592
|
|
||
Notes due 2024-2028 (3.5% and 3.9%)
|
|
6,259
|
|
|
5,360
|
|
||
Notes due 2034-2038 (5.7% and 5.9%)
|
|
4,886
|
|
|
6,102
|
|
||
Notes due 2039-2043 (5.2% and 6.4%)
|
|
5,606
|
|
|
3,745
|
|
||
Notes due 2044-2047 (4.2% and 4.2%)
|
|
3,315
|
|
|
2,250
|
|
||
Total long-term borrowings, principal amount
|
|
32,783
|
|
|
30,520
|
|
||
Net fair value adjustments related to hedging and purchase accounting
|
|
872
|
|
|
998
|
|
||
Net unamortized discounts, premiums and debt issuance costs
|
|
(125
|
)
|
|
(130
|
)
|
||
Other long-term obligations
|
|
8
|
|
|
9
|
|
||
Total long-term borrowings, carried at historical proceeds, as adjusted
|
|
$
|
33,538
|
|
|
$
|
31,398
|
|
Current portion of long-term debt, carried at historical proceeds (not included above (2.4% and 3.0%)
|
|
$
|
3,546
|
|
|
$
|
4,225
|
|
(a)
|
At December 31, 2017, the debt issuances have been reclassified to the current portion of long-term debt.
|
2017 Financial Report
|
|
109
|
|
•
|
We recognize the gains and losses on foreign exchange contracts that are designated as fair value hedges in earnings upon the recognition of the change in fair value of the hedged risk. We recognize the offsetting foreign exchange impact attributable to the hedged item also in earnings.
|
•
|
We record in
Other comprehensive income/(loss)
the effective portion of the gains or losses on foreign exchange contracts that are designated as cash flow hedges and reclassify those amounts, as appropriate, into earnings in the same period or periods during which the hedged transaction affects earnings.
|
•
|
As part of our net investment hedging program, we recognize the gain and loss impact on foreign exchange contracts designated as hedges of our net investments in earnings in three ways: over time-for the periodic net swap payments; immediately-to the extent of any change in the difference between the foreign exchange spot rate and forward rate; and upon sale or substantial liquidation of our net investments-to the extent of change in the foreign exchange spot rates. We record in
Other comprehensive income/(loss)
the foreign exchange gains and losses related to foreign exchange-denominated debt designated as a hedge of our net investments in foreign subsidiaries and reclassify those amounts into earnings upon the sale or substantial liquidation of our net investments.
|
•
|
For certain foreign exchange contracts not designated as hedging instruments, we recognize the gains and losses on foreign currency exchange contracts that are used to offset the same foreign currency assets or liabilities immediately into earnings along with the earnings impact of the items they generally offset. These contracts essentially take the opposite currency position of that reflected in the month-end balance sheet to counterbalance the effect of any currency movement.
|
•
|
We recognize the gains and losses on interest rate contracts that are designated as fair value hedges in earnings upon the recognition of the change in fair value of the hedged risk. We recognize the offsetting earnings impact of fixed-rate debt attributable to the hedged risk also in earnings.
|
(a)
|
As of December 31, 2017, the notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was
$5.1 billion
.
|
110
|
|
2017 Financial Report
|
|
The following table provides information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk:
|
||||||||||||||||||||||||
|
|
Amount of
Gains/(Losses)
Recognized in OID
(a), (b)
|
|
Amount of Gains/(Losses)
Recognized in OCI
(Effective Portion)
(a), (c)
|
|
Amount of Gains/(Losses)
Reclassified from
OCI into OID and COS
(Effective Portion)
(a), (c)
|
||||||||||||||||||
|
|
As of December 31,
|
||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||||
Derivative Financial Instruments in Cash Flow Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign exchange contracts
(d)
|
|
$
|
(6
|
)
|
|
$
|
(4
|
)
|
|
$
|
(12
|
)
|
|
$
|
(444
|
)
|
|
$
|
520
|
|
|
$
|
(451
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative Financial Instruments in Fair Value Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate contracts
|
|
(60
|
)
|
|
(181
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Hedged item gain/(loss)
|
|
60
|
|
|
181
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Foreign exchange contracts
|
|
(19
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Hedged item gain/(loss)
|
|
19
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative Financial Instruments in Net Investment Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
|
—
|
|
|
1
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign currency short-term borrowings
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
|
—
|
|
|
—
|
|
||||||
Foreign currency long-term debt
(e)
|
|
—
|
|
|
—
|
|
|
(580
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative Financial Instruments Not Designated as Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
|
(87
|
)
|
|
(105
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
All other net
|
|
—
|
|
|
—
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
(1
|
)
|
||||||
|
|
$
|
(93
|
)
|
|
$
|
(107
|
)
|
|
$
|
(591
|
)
|
|
$
|
(483
|
)
|
|
$
|
520
|
|
|
$
|
(452
|
)
|
(a)
|
OID = Other (income)/deductions—net,
included in
Other (income)/deductions—net
in the consolidated statements of income
.
COS = Cost of Sales, included in
Cost of Sales
in the consolidated statements of income. OCI = Other comprehensive income/(loss), included in the consolidated statements of comprehensive income
.
|
(b)
|
There was no significant ineffectiveness for any period presented.
|
(c)
|
For derivative financial instruments in cash flow hedge relationships, the effective portion is included in
Other comprehensive income/(loss)––Unrealized holding gains/(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/(loss)––Foreign currency translation adjustments, net.
|
(d)
|
Based on year-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax loss of
$72 million
within the next 12 months into
Cost of sales.
The maximum length of time over which we are hedging future foreign exchange cash flow relates to our
$1.9 billion
U.K. pound debt maturing in 2043.
|
(e)
|
Long-term debt includes foreign currency long-term borrowings with carrying values of
$4.8 billion
as of December 31, 2017, which are used as hedging instruments.
|
2017 Financial Report
|
|
111
|
|
The following table provides the components of
Inventories
:
|
||||||||
|
|
As of December 31,
|
||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
||
Finished goods
|
|
$
|
2,883
|
|
|
$
|
2,293
|
|
Work in process
|
|
3,908
|
|
|
3,696
|
|
||
Raw materials and supplies
|
|
788
|
|
|
793
|
|
||
Inventories
(a)
|
|
$
|
7,578
|
|
|
$
|
6,783
|
|
Noncurrent inventories not included above
(b)
|
|
$
|
683
|
|
|
$
|
683
|
|
(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, as well as an increase due to foreign exchange.
|
(b)
|
Included in
Other noncurrent assets
. There are no recoverability issues associated with these amounts.
|
The following table provides the components of
Property, plant and equipment
:
|
||||||||||
|
|
Useful Lives
|
|
As of December 31,
|
||||||
(MILLIONS OF DOLLARS)
|
|
(Years)
|
|
2017
|
|
|
2016
|
|
||
Land
|
|
-
|
|
$
|
540
|
|
|
$
|
530
|
|
Buildings
|
|
33-50
|
|
10,254
|
|
|
9,810
|
|
||
Machinery and equipment
|
|
8-20
|
|
11,902
|
|
|
11,248
|
|
||
Furniture, fixtures and other
|
|
3-12 1/2
|
|
4,661
|
|
|
4,410
|
|
||
Construction in progress
|
|
-
|
|
2,680
|
|
|
2,127
|
|
||
|
|
|
|
30,037
|
|
|
28,125
|
|
||
Less: Accumulated depreciation
|
|
|
|
16,172
|
|
|
14,807
|
|
||
Property, plant and equipment
(a)
|
|
|
|
$
|
13,865
|
|
|
$
|
13,318
|
|
(a)
|
The increase in total property, plant and equipment is primarily due to capital additions and the impact of foreign exchange, partially offset by depreciation, reductions due to restructuring efforts and disposals.
|
The following table provides the components of
Identifiable intangible assets
:
|
||||||||||||||||||||||||
|
|
December 31, 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)
|
|
$
|
89,550
|
|
|
$
|
(54,785
|
)
|
|
$
|
34,765
|
|
|
$
|
83,390
|
|
|
$
|
(49,650
|
)
|
|
$
|
33,740
|
|
Brands
|
|
2,134
|
|
|
(1,152
|
)
|
|
982
|
|
|
2,092
|
|
|
(1,032
|
)
|
|
1,060
|
|
||||||
Licensing agreements and other
|
|
1,911
|
|
|
(1,096
|
)
|
|
815
|
|
|
1,869
|
|
|
(1,005
|
)
|
|
864
|
|
||||||
|
|
93,595
|
|
|
(57,033
|
)
|
|
36,562
|
|
|
87,351
|
|
|
(51,687
|
)
|
|
35,664
|
|
||||||
Indefinite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Brands and other
|
|
6,929
|
|
|
|
|
|
6,929
|
|
|
6,883
|
|
|
|
|
|
6,883
|
|
||||||
IPR&D
(a)
|
|
5,249
|
|
|
|
|
|
5,249
|
|
|
10,101
|
|
|
|
|
|
10,101
|
|
||||||
|
|
12,179
|
|
|
|
|
|
12,179
|
|
|
16,984
|
|
|
|
|
|
16,984
|
|
||||||
Identifiable intangible assets
(b)
|
|
$
|
105,774
|
|
|
$
|
(57,033
|
)
|
|
$
|
48,741
|
|
|
$
|
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
), (iv) the
Developed technology rights
of
$364 million
recorded in connection with the U.S. approval of Bosulif (see
Note 7E
) and (v) the
Developed technology rights
of
$140 million
recorded in connection with the approvals of Bavencio (see
Note 2C
) partially offset by (vi) measurement period adjustments related to Medivation (see
Note 2A
) and (vii) impairments of
Developed technology rights
(see
Note 4
)
.
|
112
|
|
2017 Financial Report
|
|
(b)
|
The decrease in
I
dentifiable intangible assets, less accumulated amortization
,
is primarily due to (i) amortization, (ii) measurement period adjustments related to Medivation (see
Note 2A
), as well as (iii) impairments of
Developed technology rights
(see
Note 4
), partially offset by (iv) assets acquired as part of the acquisition of AstraZeneca’s small molecule anti-infectives business (see
Note 2A
), (v) the assets recorded in connection with the EU and U.S. approvals of Besponsa and in connection with the U.S. approval of Bosulif (see
Note 7E
) and (vi) the assets recorded in connection with the approvals of Bavencio (see
Note 2C
).
|
The following table provides the annual amortization expense expected for the years 2018 through 2022:
|
||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|||||
Amortization expense
|
|
$
|
4,798
|
|
|
$
|
4,592
|
|
|
$
|
3,569
|
|
|
$
|
3,474
|
|
|
$
|
3,223
|
|
2017 Financial Report
|
|
113
|
|
The following table provides the components of and changes in the carrying amount of
Goodwill
:
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
IH
|
|
|
EH
|
|
|
Total
|
|
|||
Balance, January 1, 2016
|
|
$
|
23,809
|
|
|
$
|
24,433
|
|
|
$
|
48,242
|
|
Additions
(a)
|
|
6,357
|
|
|
12
|
|
|
6,369
|
|
|||
Other
(b)
|
|
(32
|
)
|
|
(130
|
)
|
|
(162
|
)
|
|||
Balance, December 31, 2016
|
|
30,134
|
|
|
24,315
|
|
|
54,449
|
|
|||
Additions
(c)
|
|
572
|
|
|
92
|
|
|
664
|
|
|||
Other
(d)
|
|
435
|
|
|
404
|
|
|
840
|
|
|||
Balance, December 31, 2017
|
|
$
|
31,141
|
|
|
$
|
24,811
|
|
|
$
|
55,952
|
|
(a)
|
IH additions primarily relate to our acquisitions of Medivation, Anacor and Bamboo (see
Note 2A
).
|
(b)
|
Primarily reflects the impact of foreign exchange and, with respect to EH, the impact of the reclassification of
$119 million
to
Assets held for sale
during
2016
(see
Note 2B
).
|
(c)
|
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 (see
Note 2A
).
|
(d)
|
Primarily reflects the impact of foreign exchange and an adjustment of our estimate of goodwill associated with the HIS net assets sold.
|
The following table provides the annual (income)/cost and changes in
Other comprehensive income/(loss)
for our benefit plans:
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Year Ended December 31,
|
||||||||||||||||||||||||||||||||||||||||||||||
|
|
Pension Plans
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||
|
|
U.S.
Qualified
(a)
|
|
U.S.
Supplemental
(Non-Qualified)
|
|
International
|
|
Postretirement
Plans
|
||||||||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
||||||||||||
Service cost
|
|
$
|
269
|
|
|
$
|
257
|
|
|
$
|
287
|
|
|
$
|
24
|
|
|
$
|
18
|
|
|
$
|
22
|
|
|
$
|
171
|
|
|
$
|
165
|
|
|
$
|
186
|
|
|
$
|
42
|
|
|
$
|
41
|
|
|
$
|
55
|
|
Interest cost
|
|
634
|
|
|
646
|
|
|
676
|
|
|
54
|
|
|
53
|
|
|
54
|
|
|
204
|
|
|
233
|
|
|
307
|
|
|
90
|
|
|
101
|
|
|
117
|
|
||||||||||||
Expected return on plan assets
|
|
(1,005
|
)
|
|
(958
|
)
|
|
(1,089
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(345
|
)
|
|
(381
|
)
|
|
(418
|
)
|
|
(36
|
)
|
|
(34
|
)
|
|
(53
|
)
|
||||||||||||
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Actuarial losses
|
|
393
|
|
|
395
|
|
|
346
|
|
|
50
|
|
|
37
|
|
|
44
|
|
|
116
|
|
|
93
|
|
|
122
|
|
|
31
|
|
|
32
|
|
|
38
|
|
||||||||||||
Prior service cost/(credits)
|
|
3
|
|
|
5
|
|
|
(5
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|
(4
|
)
|
|
(3
|
)
|
|
(7
|
)
|
|
(182
|
)
|
|
(174
|
)
|
|
(146
|
)
|
||||||||||||
Curtailments
|
|
13
|
|
|
10
|
|
|
3
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
5
|
|
|
(19
|
)
|
|
(26
|
)
|
|
(31
|
)
|
||||||||||||
Settlements
|
|
75
|
|
|
90
|
|
|
556
|
|
|
39
|
|
|
28
|
|
|
34
|
|
|
4
|
|
|
9
|
|
|
81
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||||
Special termination benefits
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||||
Net periodic benefit costs/(income) reported in
Income
|
|
382
|
|
|
444
|
|
|
773
|
|
|
166
|
|
|
137
|
|
|
153
|
|
|
147
|
|
|
115
|
|
|
277
|
|
|
(75
|
)
|
|
(59
|
)
|
|
(21
|
)
|
||||||||||||
(Income)/cost reported in
Other comprehensive income/(loss)
(b)
|
|
141
|
|
|
253
|
|
|
(396
|
)
|
|
23
|
|
|
121
|
|
|
(143
|
)
|
|
(301
|
)
|
|
640
|
|
|
(542
|
)
|
|
(8
|
)
|
|
3
|
|
|
(540
|
)
|
||||||||||||
(Income)/cost recognized in
Comprehensive income
|
|
$
|
523
|
|
|
$
|
697
|
|
|
$
|
378
|
|
|
$
|
189
|
|
|
$
|
258
|
|
|
$
|
10
|
|
|
$
|
(154
|
)
|
|
$
|
755
|
|
|
$
|
(265
|
)
|
|
$
|
(83
|
)
|
|
$
|
(56
|
)
|
|
$
|
(560
|
)
|
(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
).
In 2015, the net periodic benefit costs included settlement losses primarily related to participants accepting the lump-sum option
made in an offer to certain plan participants to elect a lump-sum payment to settle Pfizer’s pension obligation with those participants, or to elect an early annuity.
|
114
|
|
2017 Financial Report
|
|
(b)
|
In 2017 and 2016, the changes to
Other comprehensive (income)/loss
for the international plans was impacted by foreign currency movements. For details of the changes in
Other comprehensive (income)/loss,
see the benefit plan activity in the consolidated statements of comprehensive income.
|
(a)
|
Due to the U.S. Pfizer Consolidated Pension Plan freeze effective for January 1, 2018, the average amortization period for the U.S. qualified plans and U.S. supplemental (non-qualified) plans will reflect the expected life expectancy of the plan participants, whereas prior years utilized the expected future service period of plan participants. The average amortization periods to be utilized for 2018 are 24.8 years for our U.S. qualified plans, 26.2 years for our U.S. supplemental (non-qualified) plans, 20.0 years for our international plans, and 9.7 for our postretirement plans.
|
The following table provides the weighted-average actuarial assumptions of our benefit plans:
|
||||||
(PERCENTAGES)
|
|
2017
|
|
2016
|
|
2015
|
Weighted-average assumptions used to determine benefit obligations
|
|
|
|
|
|
|
Discount rate:
|
|
|
|
|
|
|
U.S. qualified pension plans
|
|
3.8%
|
|
4.3%
|
|
4.5%
|
U.S. non-qualified pension plans
|
|
3.7%
|
|
4.2%
|
|
4.5%
|
International pension plans
|
|
2.3%
|
|
2.4%
|
|
3.1%
|
Postretirement plans
|
|
3.7%
|
|
4.2%
|
|
4.5%
|
Rate of compensation increase:
|
|
|
|
|
|
|
U.S. qualified pension plans
|
|
2.8%
|
|
2.8%
|
|
2.8%
|
U.S. non-qualified pension plans
|
|
2.8%
|
|
2.8%
|
|
2.8%
|
International pension plans
|
|
2.5%
|
|
2.6%
|
|
2.6%
|
Weighted-average assumptions used to determine net periodic benefit cost
|
|
|
|
|
|
|
Discount rate:
|
|
|
|
|
|
|
U.S. qualified pension plans
|
|
4.3%
|
|
4.5%
|
|
4.2%
|
U.S. non-qualified pension plans
|
|
4.2%
|
|
4.5%
|
|
4.0%
|
International pension plans interest cost
(a)
|
|
2.1%
|
|
2.7%
|
|
3.0%
|
International pension plans service cost
(a)
|
|
2.3%
|
|
3.0%
|
|
3.0%
|
Postretirement plans
|
|
4.2%
|
|
4.5%
|
|
4.2%
|
Expected return on plan assets:
|
|
|
|
|
|
|
U.S. qualified pension plans
|
|
8.0%
|
|
8.0%
|
|
8.3%
|
International pension plans
|
|
4.7%
|
|
5.2%
|
|
5.5%
|
Postretirement plans
|
|
8.0%
|
|
8.0%
|
|
8.3%
|
Rate of compensation increase:
|
|
|
|
|
|
|
U.S. qualified pension plans
|
|
2.8%
|
|
2.8%
|
|
2.8%
|
U.S. non-qualified pension plans
|
|
2.8%
|
|
2.8%
|
|
2.8%
|
International pension plans
|
|
2.6%
|
|
2.6%
|
|
2.7%
|
(a)
|
Effective January 1, 2016, the Company changed the approach used to measure service cost and interest costs for certain international pension plans and other postretirement benefits. In accordance with this change, the effective rate for interest on the benefit obligations and effective rate for service cost, respectively, are reported for international pension plans.
|
2017 Financial Report
|
|
115
|
|
The following table provides the healthcare cost trend rate assumptions for our U.S. postretirement benefit plans:
|
||||||
|
|
2017
|
|
|
2016
|
|
Healthcare cost trend rate assumed for next year (up to age 65)
|
|
6.1
|
%
|
|
6.3
|
%
|
Healthcare cost trend rate assumed for next year (age 65 and older)
|
|
7.0
|
%
|
|
7.4
|
%
|
Rate to which the cost trend rate is assumed to decline
|
|
4.5
|
%
|
|
4.5
|
%
|
Year that the rate reaches the ultimate trend rate
|
|
2037
|
|
|
2037
|
|
The following table provides an analysis of the changes in our benefit obligations, plan assets and funded status of our benefit plans:
|
||||||||||||||||||||||||||||||||
|
|
Year Ended December 31,
|
||||||||||||||||||||||||||||||
|
|
Pension Plans
|
|
|
|
|
||||||||||||||||||||||||||
|
|
U.S. Qualified
(a)
|
|
U.S. Supplemental
(Non-Qualified)
|
|
International
(b)
|
|
Postretirement
Plans
(c)
|
||||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||||||
Change in benefit obligation
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Benefit obligation, beginning
|
|
$
|
15,547
|
|
|
$
|
14,926
|
|
|
$
|
1,450
|
|
|
$
|
1,343
|
|
|
$
|
9,691
|
|
|
$
|
9,214
|
|
|
$
|
2,254
|
|
|
$
|
2,463
|
|
Service cost
|
|
269
|
|
|
257
|
|
|
24
|
|
|
18
|
|
|
171
|
|
|
165
|
|
|
42
|
|
|
41
|
|
||||||||
Interest cost
|
|
634
|
|
|
646
|
|
|
54
|
|
|
53
|
|
|
204
|
|
|
233
|
|
|
90
|
|
|
101
|
|
||||||||
Employee contributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
7
|
|
|
94
|
|
|
85
|
|
||||||||
Plan amendments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
(6
|
)
|
|
—
|
|
|
(177
|
)
|
||||||||
Changes in actuarial assumptions and other
|
|
1,614
|
|
|
725
|
|
|
110
|
|
|
185
|
|
|
135
|
|
|
1,273
|
|
|
(177
|
)
|
|
22
|
|
||||||||
Foreign exchange impact
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
760
|
|
|
(781
|
)
|
|
5
|
|
|
—
|
|
||||||||
Acquisitions/divestitures/other, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|
1
|
|
|
1
|
|
|
—
|
|
||||||||
Curtailments
|
|
11
|
|
|
9
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
(14
|
)
|
|
1
|
|
|
—
|
|
||||||||
Settlements
|
|
(842
|
)
|
|
(449
|
)
|
|
(98
|
)
|
|
(78
|
)
|
|
(31
|
)
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
||||||||
Special termination benefits
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
||||||||
Benefits paid
|
|
(530
|
)
|
|
(568
|
)
|
|
(45
|
)
|
|
(72
|
)
|
|
(357
|
)
|
|
(358
|
)
|
|
(280
|
)
|
|
(282
|
)
|
||||||||
Benefit obligation, ending
(d)
|
|
16,702
|
|
|
15,547
|
|
|
1,495
|
|
|
1,450
|
|
|
10,607
|
|
|
9,691
|
|
|
2,028
|
|
|
2,254
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fair value of plan assets, beginning
|
|
12,556
|
|
|
11,633
|
|
|
—
|
|
|
—
|
|
|
7,683
|
|
|
7,959
|
|
|
458
|
|
|
622
|
|
||||||||
Actual gain/(loss) on plan assets
|
|
2,005
|
|
|
939
|
|
|
—
|
|
|
—
|
|
|
811
|
|
|
693
|
|
|
39
|
|
|
44
|
|
||||||||
Company contributions
|
|
1,095
|
|
|
1,000
|
|
|
143
|
|
|
151
|
|
|
160
|
|
|
209
|
|
|
183
|
|
|
(12
|
)
|
||||||||
Employee contributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
7
|
|
|
94
|
|
|
85
|
|
||||||||
Foreign exchange impact
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
561
|
|
|
(782
|
)
|
|
—
|
|
|
—
|
|
||||||||
Acquisitions/divestitures, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||||||
Settlements
|
|
(842
|
)
|
|
(449
|
)
|
|
(98
|
)
|
|
(78
|
)
|
|
(31
|
)
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
||||||||
Benefits paid
|
|
(530
|
)
|
|
(568
|
)
|
|
(45
|
)
|
|
(72
|
)
|
|
(357
|
)
|
|
(358
|
)
|
|
(280
|
)
|
|
(282
|
)
|
||||||||
Fair value of plan assets, ending
|
|
14,284
|
|
|
12,556
|
|
|
—
|
|
|
—
|
|
|
8,863
|
|
|
7,683
|
|
|
494
|
|
|
458
|
|
||||||||
Funded status—Plan assets less than benefit obligation
|
|
$
|
(2,418
|
)
|
|
$
|
(2,990
|
)
|
|
$
|
(1,495
|
)
|
|
$
|
(1,450
|
)
|
|
$
|
(1,745
|
)
|
|
$
|
(2,008
|
)
|
|
$
|
(1,534
|
)
|
|
$
|
(1,796
|
)
|
(a)
|
The favorable change in the funded status of our U.S. qualified plans was primarily due to an increase in the actual return on assets, partially offset by plan losses resulting from the decrease in the discount rate at the end of 2017.
|
(b)
|
The favorable change in the international plans’ funded status was primarily due to an increase in the actual return on plan assets, partially offset by plan losses related to a decrease in the discount rate and unfavorable currency movements.
|
116
|
|
2017 Financial Report
|
|
(c)
|
The favorable change in the funded status of our postretirement plans was primarily due to a change to reimbursements of certain benefits provided under the plan, partially offset by plan losses resulting from the decrease in the discount rate at the end of 2017.
|
(d)
|
For the U.S. and international pension plans, the benefit obligation is the PBO. For the postretirement plans, the benefit obligation is the ABO. The ABO for all of our U.S. qualified pension plans was
$16.7 billion
in
2017
and
$15.4 billion
in
2016
. The ABO for our U.S. supplemental (non-qualified) pension plans was
$1.5 billion
in
2017
and
$1.4 billion
in
2016
. The ABO for our international pension plans was
$10.1 billion
in
2017
and
$9.3 billion
in
2016
.
|
(a)
|
Included primarily in
Other noncurrent assets
.
|
(b)
|
Included in
Accrued compensation and related items
.
|
(c)
|
Included in
Pension benefit obligations, net
and
Postretirement benefit obligations
,
net,
as appropriate.
|
(a)
|
The accumulated actuarial losses primarily represent the impact of changes in discount rates and other assumptions that result in cumulative changes in our projected benefit obligations, as well as the cumulative difference between the expected return and actual return on plan assets. These accumulated actuarial losses are recognized in
Accumulated other comprehensive loss
and are amortized into net periodic benefit costs primarily over the average remaining service period for active participants for plans that are not frozen or the expected life expectancy of plan participants for frozen plans, using the corridor approach.
|
2017 Financial Report
|
|
117
|
|
The following table provides the components of plan assets:
|
||||||||||||||||||||||||||||||||||||||||
|
|
|
|
Fair Value
(a)
|
|
|
|
|
|
Fair Value
(a)
|
|
|
||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
As of
December 31, 2017 |
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets Measured at NAV
(b)
|
|
|
As of
December 31, 2016 |
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets Measured at NAV
(b)
|
|
||||||||||||||||
U.S. qualified pension plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Cash and cash equivalents
|
|
$
|
655
|
|
|
$
|
115
|
|
|
$
|
540
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
672
|
|
|
$
|
92
|
|
|
$
|
580
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Global equity securities
|
|
4,157
|
|
|
4,118
|
|
|
38
|
|
|
1
|
|
|
—
|
|
|
3,970
|
|
|
3,943
|
|
|
27
|
|
|
—
|
|
|
—
|
|
||||||||||
Equity commingled funds
|
|
1,194
|
|
|
—
|
|
|
802
|
|
|
—
|
|
|
392
|
|
|
1,062
|
|
|
—
|
|
|
772
|
|
|
—
|
|
|
290
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Corporate debt securities
|
|
4,250
|
|
|
5
|
|
|
4,242
|
|
|
3
|
|
|
—
|
|
|
3,232
|
|
|
14
|
|
|
3,217
|
|
|
1
|
|
|
—
|
|
||||||||||
Government and agency obligations
|
|
1,316
|
|
|
—
|
|
|
1,316
|
|
|
—
|
|
|
—
|
|
|
1,060
|
|
|
—
|
|
|
1,060
|
|
|
—
|
|
|
—
|
|
||||||||||
Fixed income commingled funds
|
|
94
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
94
|
|
|
92
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
92
|
|
||||||||||
Other investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Partnership investments
(c)
|
|
1,197
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,197
|
|
|
1,093
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,093
|
|
||||||||||
Insurance contracts
|
|
215
|
|
|
—
|
|
|
215
|
|
|
—
|
|
|
—
|
|
|
235
|
|
|
—
|
|
|
235
|
|
|
—
|
|
|
—
|
|
||||||||||
Other commingled funds
(d)
|
|
1,206
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,206
|
|
|
1,140
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,140
|
|
||||||||||
Total
|
|
14,284
|
|
|
4,238
|
|
|
7,153
|
|
|
4
|
|
|
2,889
|
|
|
12,556
|
|
|
4,049
|
|
|
5,891
|
|
|
1
|
|
|
2,615
|
|
||||||||||
International pension plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Cash and cash equivalents
|
|
$
|
385
|
|
|
$
|
48
|
|
|
$
|
337
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
439
|
|
|
38
|
|
|
401
|
|
|
—
|
|
|
—
|
|
|||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Global equity securities
|
|
154
|
|
|
146
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
174
|
|
|
163
|
|
|
11
|
|
|
—
|
|
|
—
|
|
||||||||||
Equity commingled funds
|
|
2,897
|
|
|
—
|
|
|
1,594
|
|
|
—
|
|
|
1,303
|
|
|
2,490
|
|
|
—
|
|
|
1,265
|
|
|
—
|
|
|
1,224
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Corporate debt securities
|
|
588
|
|
|
—
|
|
|
588
|
|
|
—
|
|
|
—
|
|
|
489
|
|
|
—
|
|
|
474
|
|
|
—
|
|
|
15
|
|
||||||||||
Government and agency obligations
(e)
|
|
716
|
|
|
—
|
|
|
716
|
|
|
—
|
|
|
—
|
|
|
853
|
|
|
—
|
|
|
786
|
|
|
—
|
|
|
67
|
|
||||||||||
Fixed income commingled funds
|
|
2,181
|
|
|
—
|
|
|
1,340
|
|
|
—
|
|
|
841
|
|
|
1,750
|
|
|
—
|
|
|
1,174
|
|
|
—
|
|
|
576
|
|
||||||||||
Other investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Partnership investments
(c)
|
|
42
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
35
|
|
|
32
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
||||||||||
Insurance contracts
(f)
|
|
496
|
|
|
—
|
|
|
75
|
|
|
420
|
|
|
1
|
|
|
272
|
|
|
—
|
|
|
17
|
|
|
254
|
|
|
1
|
|
||||||||||
Other
(d), (f)
|
|
1,404
|
|
|
—
|
|
|
408
|
|
|
468
|
|
|
528
|
|
|
1,185
|
|
|
—
|
|
|
430
|
|
|
324
|
|
|
431
|
|
||||||||||
Total
|
|
8,863
|
|
|
194
|
|
|
5,073
|
|
|
887
|
|
|
2,709
|
|
|
7,683
|
|
|
201
|
|
|
4,558
|
|
|
578
|
|
|
2,346
|
|
||||||||||
U.S. postretirement plans
(g)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Cash and cash equivalents
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Global equity securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Equity commingled funds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Corporate debt securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Government and agency obligations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Fixed income commingled funds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Other investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Partnership investments
(c)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Insurance contracts
|
|
494
|
|
|
—
|
|
|
494
|
|
|
—
|
|
|
—
|
|
|
458
|
|
|
—
|
|
|
458
|
|
|
—
|
|
|
—
|
|
||||||||||
Other commingled funds
(d)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Total
|
|
$
|
494
|
|
|
$
|
—
|
|
|
$
|
494
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
458
|
|
|
$
|
—
|
|
|
$
|
458
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(a)
|
Fair values are determined based on valuation inputs categorized as Level 1, 2 or 3 (see
Note 1E
).
|
(b)
|
Certain investments that are measured at NAV per share (or its equivalent) have not been classified in the fair value hierarchy. The NAV amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefits plan assets.
|
(c)
|
Primarily includes investments in private equity, private debt, public equity limited partnerships, and, to a lesser extent, real estate and venture capital.
|
(d)
|
Primarily includes, for U.S. plan assets, investments in hedge funds and, to a lesser extent, real estate and, for international plan assets, investments in real estate and hedge funds.
|
(e)
|
Government and agency obligations are inclusive of repurchase agreements.
|
(f)
|
See below for a tabular analysis of the changes in Level 3 investments valued using significant unobservable inputs.
|
(g)
|
Reflects postretirement plan assets, which support a portion of our U.S. retiree medical plans.
|
118
|
|
2017 Financial Report
|
|
The following table provides an analysis of the changes in our more significant investments valued using significant unobservable inputs:
|
||||||||||||||||
|
|
Year Ended December 31,
|
||||||||||||||
|
|
International Pension Plans
|
||||||||||||||
|
|
Insurance contracts
|
|
Other
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||
Fair value, beginning
|
|
$
|
254
|
|
|
$
|
219
|
|
|
$
|
324
|
|
|
$
|
398
|
|
Actual return on plan assets:
|
|
|
|
|
|
|
|
|
|
|||||||
Assets held, ending
|
|
1
|
|
|
11
|
|
|
18
|
|
|
(1
|
)
|
||||
Assets sold during the period
|
|
—
|
|
|
—
|
|
|
1
|
|
|
6
|
|
||||
Purchases, sales and settlements, net
|
|
138
|
|
|
20
|
|
|
94
|
|
|
(18
|
)
|
||||
Exchange rate changes
|
|
27
|
|
|
4
|
|
|
30
|
|
|
(61
|
)
|
||||
Fair value, ending
|
|
$
|
420
|
|
|
$
|
254
|
|
|
$
|
468
|
|
|
$
|
324
|
|
•
|
Cash and cash equivalents: Level 1 investments may include cash, cash equivalents and foreign currency valued using exchange rates. Level 2 investments may include short-term investment funds which are commingled funds priced at a stable NAV by the administrator of the funds.
|
•
|
Equity securities: Level 1 investments may include individual securities that are valued at the closing price or last trade reported on the major market on which they are traded. Level 1 and Level 2 investments may include commingled funds that have a readily determinable fair value based on quoted prices on an exchange or a published NAV derived from the quoted prices in active markets of the underlying securities. Level 3 investments may include individual securities that are unlisted, delisted, suspended, or illiquid and are typically valued using their last available price.
|
•
|
Fixed income securities: Level 1 investments may include individual securities that are valued at the closing price or last trade reported on the major market on which they are traded. Level 2 investments may include commingled funds that have a readily determinable fair value based on observable prices of the underlying securities. Level 2 investments may include corporate bonds, government and government agency obligations and other fixed income securities valued using bid evaluation pricing models or quoted prices of securities with similar characteristics. Level 3 investments may include securities that are valued using alternative pricing sources, such as investment managers or brokers, which use proprietary pricing models that incorporate unobservable inputs.
|
•
|
Other investments: Level 1 investments may include individual securities that are valued at the closing price or last trade reported on the major market on which they are traded. Level 2 investments may include Insurance contracts which invest in interest bearing cash, U.S. government securities and corporate debt instruments.
|
2017 Financial Report
|
|
119
|
|
The following table provides the long-term target asset allocations ranges and the percentage of the fair value of plan assets for benefit plans:
|
|||||||||
|
|
As of December 31,
|
|||||||
|
|
Target
Allocation Percentage
|
|
|
Percentage of Plan Assets
|
||||
(PERCENTAGES)
|
|
2017
|
|
|
2017
|
|
|
2016
|
|
U.S. qualified pension plans
|
|
|
|
|
|
|
|||
Cash and cash equivalents
|
|
0-10%
|
|
|
4.6
|
%
|
|
5.3
|
%
|
Equity securities
|
|
35-55%
|
|
|
37.5
|
%
|
|
40.1
|
%
|
Fixed income securities
|
|
30-55%
|
|
|
39.6
|
%
|
|
34.9
|
%
|
Other investments
(a)
|
|
5-17.5%
|
|
|
18.3
|
%
|
|
19.7
|
%
|
Total
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
International pension plans
|
|
|
|
|
|
|
|||
Cash and cash equivalents
|
|
0-10%
|
|
|
4.3
|
%
|
|
5.7
|
%
|
Equity securities
|
|
25-50%
|
|
|
34.4
|
%
|
|
34.7
|
%
|
Fixed income securities
|
|
30-55%
|
|
|
39.3
|
%
|
|
40.2
|
%
|
Other investments
|
|
10-30%
|
|
|
21.9
|
%
|
|
19.4
|
%
|
Total
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
U.S. postretirement plans
|
|
|
|
|
|
|
|||
Cash and cash equivalents
|
|
0-5%
|
|
|
—
|
|
|
—
|
|
Equity securities
|
|
—
|
|
|
—
|
|
|
—
|
|
Fixed income securities
|
|
—
|
|
|
—
|
|
|
—
|
|
Other investments
|
|
95-100%
|
|
|
100
|
%
|
|
100
|
%
|
Total
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
(a)
|
Actual percentage of plan assets in Other investments for 2017 includes
$215 million
, as compared to
$235 million
in 2016, related to a group fixed annuity insurance contract that was executed by legacy Wyeth for certain members of its defined benefit plans prior to Pfizer acquiring the company in 2009, and
$253 million
in 2017, as compared to
$144 million
in 2016, related to an investment in a partnership whose primary holdings are public equity securities.
|
120
|
|
2017 Financial Report
|
|
The following table provides the expected future cash flow information related to our benefit plans:
|
||||||||||||||||
|
|
Pension Plans
|
|
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
U.S. Qualified
|
|
U.S. Supplemental
(Non-Qualified)
|
|
International
|
|
Postretirement Plans
|
|
|||||||
Expected employer contributions:
|
|
|
|
|
|
|
|
|
||||||||
2018
(a)
|
|
$
|
500
|
|
|
$
|
160
|
|
|
$
|
226
|
|
|
$
|
167
|
|
Expected benefit payments:
|
|
|
|
|
|
|
|
|
||||||||
2018
|
|
$
|
1,225
|
|
|
$
|
160
|
|
|
$
|
368
|
|
|
$
|
173
|
|
2019
|
|
1,071
|
|
|
129
|
|
|
373
|
|
|
179
|
|
||||
2020
|
|
1,087
|
|
|
128
|
|
|
385
|
|
|
181
|
|
||||
2021
|
|
1,059
|
|
|
122
|
|
|
394
|
|
|
179
|
|
||||
2022
|
|
1,032
|
|
|
123
|
|
|
401
|
|
|
173
|
|
||||
2023–2027
|
|
4,865
|
|
|
513
|
|
|
2,101
|
|
|
802
|
|
(a)
|
For the U.S. qualified plans, a
$500 million
voluntary contribution was paid in February 2018.
|
2017 Financial Report
|
|
121
|
|
(a)
|
Represents shares purchased pursuant to the accelerated share repurchase agreement with Citibank entered into on February 2, 2017. See above for additional information.
|
(b)
|
Represents shares purchased pursuant to the accelerated share repurchase agreement entered into on March 8, 2016. See above for additional information.
|
(c)
|
Includes approximately
151 million
shares purchased for
$5.2 billion
pursuant to the accelerated share repurchase agreement entered into on February 9, 2015 (see above for additional information), as well as other share repurchases through year-end 2015.
|
122
|
|
2017 Financial Report
|
|
The following table provides the components of share-based compensation expense and the associated tax benefit:
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Restricted Stock Units
|
|
$
|
301
|
|
|
$
|
299
|
|
|
$
|
306
|
|
Total Shareholder Return Units
|
|
221
|
|
|
134
|
|
|
36
|
|
|||
Portfolio Performance Shares
|
|
209
|
|
|
135
|
|
|
147
|
|
|||
Stock Options
|
|
55
|
|
|
106
|
|
|
165
|
|
|||
Performance Share Awards
|
|
47
|
|
|
13
|
|
|
11
|
|
|||
Directors’ compensation
|
|
7
|
|
|
4
|
|
|
4
|
|
|||
Share-based payment expense
|
|
840
|
|
|
691
|
|
|
669
|
|
|||
Tax benefit for share-based compensation expense
(a)
|
|
(163
|
)
|
|
(205
|
)
|
|
(198
|
)
|
|||
Share-based payment expense, net of tax
|
|
$
|
677
|
|
|
$
|
486
|
|
|
$
|
471
|
|
(a)
|
2017 includes the impact of the TCJA on income taxes.
|
(a)
|
Includes the modification for a commitment to pay
6.4 million
RSUs to approximately
9,900
employees, including senior and key management employees, for the
6.6 million
RSUs scheduled for near-term vesting. There was
no
material impact to compensation expense due to the modification.
|
(a)
|
Includes the modification for a commitment to pay
6.4 million
RSUs to approximately
9,900
employees, including senior and key management employees, for the
6.6 million
RSUs scheduled for near-term vesting. There was
no
material impact to compensation expense due to the modification.
|
2017 Financial Report
|
|
123
|
|
(a)
|
Determined using a constant dividend yield during the expected term of the option.
|
(b)
|
Determined using the interpolated yield on U.S. Treasury zero-coupon issues.
|
(c)
|
Determined using implied volatility, after consideration of historical volatility.
|
(d)
|
Determined using historical exercise and post-vesting termination patterns.
|
(a)
|
Market price of our underlying common stock less exercise price.
|
(b)
|
The number of options expected to vest takes into account an estimate of expected forfeitures.
|
124
|
|
2017 Financial Report
|
|
(a)
|
Vested and non-vested shares outstanding, but not paid as of
December 31, 2017
were
35.0 million
. Included in this amount is the modification for a commitment to pay
5.7 million
PPSs to approximately
2,800
employees, including senior and key management employees, for the
5.9 million
PPSs scheduled for near-term settlement. There was
no
material impact to compensation expense due to the modification.
|
(a)
|
Determined using a constant dividend yield during the expected term of the TSRU.
|
(b)
|
Determined using the interpolated yield on U.S. Treasury zero-coupon issues.
|
(c)
|
Determined using implied volatility, after consideration of historical volatility.
|
2017 Financial Report
|
|
125
|
|
The following table summarizes all TSRU activity during 2017:
|
|||||||||||
|
|
TSRUs
(Thousands)
|
|
|
Weighted-Average
Grant-Date
Fair Value
Per TSRU
|
|
|
Weighted-Average
Grant Price
Per TSRU
|
|
||
Nonvested, December 31, 2016
|
|
62,007
|
|
|
$
|
5.97
|
|
|
$
|
31.10
|
|
Granted
|
|
52,574
|
|
|
6.23
|
|
|
34.06
|
|
||
Vested
|
|
(5,805
|
)
|
|
6.50
|
|
|
32.25
|
|
||
Forfeited
|
|
(4,870
|
)
|
|
6.02
|
|
|
32.36
|
|
||
Nonvested, December 31, 2017
|
|
103,906
|
|
|
$
|
6.07
|
|
|
$
|
32.47
|
|
(a)
|
In
2017
, we settled
11,327,156
TSRUs with a weighted-average grant price of
$22.26
per unit. This includes the modification for a commitment to pay
7.0 million
TSRUs to approximately
150
employees, including senior and key management employees, for the
7.2 million
TSRUs scheduled for near-term settlement. There was
no
material impact to compensation expense due to the modification.
|
(b)
|
In
2017
,
46,278
TSRUs with a weighted-average grant price of
$22.65
per unit were converted into
24,602
PTUs.
|
(c)
|
This includes the modification for a commitment to pay
7.0 million
TSRUs to approximately
150
employees, including senior and key management employees, for the
7.2 million
TSRUs scheduled for near-term settlement. There was
no
material impact to compensation expense due to the modification.
|
(d)
|
The number of TSRUs expected to vest takes into account an estimate of expected forfeitures.
|
(e)
|
Includes the modification for a commitment to pay
17,000
PTUs to
a few
employees, including senior and key management employees, for the
17,000
PTUs scheduled for near-term settlement. There was
no
material impact to compensation expense due to the modification.
|
126
|
|
2017 Financial Report
|
|
The following table summarizes all PSA activity during 2017, with the shares granted representing the maximum award that could be achieved:
|
|||||||
|
|
Shares
(Thousands)
|
|
|
Weighted-Average
Intrinsic Value
Per Share
|
|
|
Nonvested, December 31, 2016
|
|
4,546
|
|
|
$
|
32.48
|
|
Granted
|
|
1,753
|
|
|
34.06
|
|
|
Vested
(a)
|
|
(1,639
|
)
|
|
35.65
|
|
|
Forfeited
|
|
(635
|
)
|
|
34.16
|
|
|
Nonvested, December 31, 2017
|
|
4,024
|
|
|
$
|
36.22
|
|
(a)
|
Includes the modification
for a commitment to pay
1.1 million
PSAs to approximately
90
employees, including senior and key management employees, for the
1.1 million
PSAs scheduled for near-term vesting. There was
no
material impact to compensation expense due to the modification.
|
(a)
|
Determined using a constant dividend yield during the expected term of the PTSRU.
|
(b)
|
Determined using the interpolated yield on U.S. Treasury zero-coupon issues.
|
(c)
|
Determined using implied volatility, after consideration of historical volatility.
|
2017 Financial Report
|
|
127
|
|
The following table provides the detailed calculation of
Earnings per common share (EPS):
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(IN MILLIONS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
EPS Numerator––Basic
|
|
|
|
|
|
|
|
|||||
Income from continuing operations
|
|
$
|
21,353
|
|
|
$
|
7,229
|
|
|
$
|
6,975
|
|
Less: Net income attributable to noncontrolling interests
|
|
47
|
|
|
31
|
|
|
26
|
|
|||
Income from continuing operations attributable to Pfizer Inc.
|
|
21,306
|
|
|
7,198
|
|
|
6,949
|
|
|||
Less: Preferred stock dividends––net of tax
|
|
1
|
|
|
1
|
|
|
1
|
|
|||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
21,305
|
|
|
7,197
|
|
|
6,948
|
|
|||
Discontinued operations––net of tax
|
|
2
|
|
|
17
|
|
|
11
|
|
|||
Less: Discontinued operations––net of tax, attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders
|
|
2
|
|
|
17
|
|
|
11
|
|
|||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
21,307
|
|
|
$
|
7,214
|
|
|
$
|
6,959
|
|
EPS Numerator––Diluted
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions
|
|
$
|
21,306
|
|
|
$
|
7,197
|
|
|
$
|
6,948
|
|
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions
|
|
2
|
|
|
17
|
|
|
11
|
|
|||
Net income attributable to Pfizer Inc. common shareholders and assumed conversions
|
|
$
|
21,308
|
|
|
$
|
7,214
|
|
|
$
|
6,960
|
|
EPS Denominator
|
|
|
|
|
|
|
|
|
||||
Weighted-average number of common shares outstanding––Basic
(a)
|
|
5,970
|
|
|
6,089
|
|
|
6,176
|
|
|||
Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements
(a)
|
|
89
|
|
|
70
|
|
|
81
|
|
|||
Weighted-average number of common shares outstanding––Diluted
|
|
6,058
|
|
|
6,159
|
|
|
6,257
|
|
|||
Stock options that had exercise prices greater than the average market price of our common stock issuable under employee compensation plans
(b)
|
|
36
|
|
|
63
|
|
|
50
|
|
(a)
|
2017 shares include the effect of the modification for a commitment to pay
15.2 million
common-share equivalents that were scheduled for near-term settlement.
|
(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.
|
128
|
|
2017 Financial Report
|
|
The future minimum rental commitments under non-cancelable operating leases follow:
|
||||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
After 2022
|
|
||||||
Lease commitments
|
|
$
|
209
|
|
|
$
|
172
|
|
|
$
|
150
|
|
|
$
|
136
|
|
|
$
|
123
|
|
|
$
|
891
|
|
•
|
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.
|
2017 Financial Report
|
|
129
|
|
130
|
|
2017 Financial Report
|
|
2017 Financial Report
|
|
131
|
|
132
|
|
2017 Financial Report
|
|
•
|
Antitrust Actions
|
•
|
Personal Injury Actions
|
2017 Financial Report
|
|
133
|
|
134
|
|
2017 Financial Report
|
|
2017 Financial Report
|
|
135
|
|
•
|
As of
December 31, 2017
, we had agreements totaling
$4.5 billion
to purchase goods and services that are enforceable and legally binding and include amounts relating to advertising, information technology services, employee benefit administration services, and potential milestone payments deemed reasonably likely to occur.
|
•
|
As of December 31, 2017, we have obligations to make guaranteed fixed annual payments over a nine-year period in connection with the U.S. and EU approvals for Besponsa (
$443 million
) and an obligation to make guaranteed fixed annual payments over a 10-year period for Bosulif (
$416 million
), both associated with R&D arrangements.
|
•
|
As of December 31, 2017, in connection with the TCJA, we have an estimated
$15.2 billion
repatriation tax liability on accumulated post-1986 earnings of foreign subsidiaries for which we plan to elect payment over eight years through 2026 and that is reported in
Other taxes payable
. Our obligations may vary as a result of changes in our uncertain tax positions and/or availability of attributes such as foreign tax and other credit carryforwards. See
Note 5A
for additional information.
|
136
|
|
2017 Financial Report
|
|
Some additional information about our business segments as of the date of the filing of this 2017 Financial Report follows:
|
||
|
|
|
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 disease 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)
-
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
-
Viagra
*
- Inflectra/Remsima
-
Several sterile injectable products
|
*
|
Viagra lost exclusivity in the U.S. in December 2017. Beginning in the first quarter of 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through December 2017, will be reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, total Viagra worldwide revenues will be reported in EH from 2018 forward.
|
•
|
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. In 2015, Medical was also responsible for regulatory inspection readiness reviews, internal audits of Pfizer-sponsored clinical trials and internal regulatory compliance processes, which are now part of the compliance function within Corporate.
|
•
|
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.
|
2017 Financial Report
|
|
137
|
|
(a)
|
Income from continuing operations before provision/(benefit) for taxes on income
. IH’s earnings in
2017
include d
ividend income of
$266 million
from our investment in ViiV. For additional information, see
Note 4.
|
(b)
|
Certain production facilities are shared. Depreciation is allocated based on estimates of physical production. Amounts here relate solely to the depreciation and amortization associated with continuing operations.
|
(c)
|
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
$165 million
and
$177 million
of costs from Other Business Activities to Corporate in
2016
and
2015
, respectively, to conform to the current period presentation.
|
(d)
|
For a description, see the “Other Costs and Business Activities” section above.
|
(e)
|
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.
|
138
|
|
2017 Financial Report
|
|
The following table provides revenues by geographic area:
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
United States
|
|
$
|
26,026
|
|
|
$
|
26,369
|
|
|
$
|
21,704
|
|
Developed Europe
(a)
|
|
8,508
|
|
|
9,306
|
|
|
9,714
|
|
|||
Developed Rest of World
(b)
|
|
6,612
|
|
|
6,729
|
|
|
6,298
|
|
|||
Emerging Markets
(c)
|
|
11,399
|
|
|
10,420
|
|
|
11,136
|
|
|||
Revenues
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
|
$
|
48,851
|
|
(a)
|
Developed Europe region includes the following markets: Western Europe, Scandinavian countries and Finland.
Revenues denominated in euros were
$6.8 billion
in
2017
,
$7.2 billion
in
2016
and
$7.4 billion
in
2015
.
|
(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, Eastern Europe, Africa, the Middle East, Central Europe and Turkey.
|
(a)
|
Developed Europe region includes the following markets: Western Europe, Scandinavian countries and Finland.
|
(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, Eastern Europe, Africa, the Middle East, Central Europe and Turkey.
|
2017 Financial Report
|
|
139
|
|
The following table provides detailed revenue information:
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
|
|
|
|
|
|
|
||||||
PFIZER INNOVATIVE HEALTH (IH)
(a)
|
|
$
|
31,422
|
|
|
$
|
29,197
|
|
|
$
|
26,758
|
|
Internal Medicine
|
|
$
|
9,684
|
|
|
$
|
8,858
|
|
|
$
|
7,611
|
|
Lyrica IH
(b)
|
|
4,511
|
|
|
4,165
|
|
|
3,655
|
|
|||
Eliquis alliance revenues and direct sales
|
|
2,523
|
|
|
1,713
|
|
|
913
|
|
|||
Chantix/Champix
|
|
997
|
|
|
842
|
|
|
671
|
|
|||
Viagra IH
(c)
|
|
823
|
|
|
1,181
|
|
|
1,297
|
|
|||
BMP2
|
|
261
|
|
|
251
|
|
|
232
|
|
|||
Toviaz
|
|
257
|
|
|
258
|
|
|
267
|
|
|||
All other Internal Medicine
|
|
312
|
|
|
447
|
|
|
577
|
|
|||
Vaccines
|
|
$
|
6,001
|
|
|
$
|
6,071
|
|
|
$
|
6,454
|
|
Prevnar 13/Prevenar 13
|
|
5,601
|
|
|
5,718
|
|
|
6,245
|
|
|||
FSME/IMMUN-TicoVac
|
|
134
|
|
|
114
|
|
|
104
|
|
|||
All other Vaccines
|
|
266
|
|
|
239
|
|
|
104
|
|
|||
Oncology
|
|
$
|
6,056
|
|
|
$
|
4,563
|
|
|
$
|
2,955
|
|
Ibrance
|
|
3,126
|
|
|
2,135
|
|
|
723
|
|
|||
Sutent
|
|
1,081
|
|
|
1,095
|
|
|
1,120
|
|
|||
Xalkori
|
|
594
|
|
|
561
|
|
|
488
|
|
|||
Xtandi alliance revenues
|
|
590
|
|
|
140
|
|
|
—
|
|
|||
Inlyta
|
|
339
|
|
|
401
|
|
|
430
|
|
|||
Bosulif
|
|
233
|
|
|
167
|
|
|
111
|
|
|||
All other Oncology
|
|
93
|
|
|
63
|
|
|
83
|
|
|||
Inflammation & Immunology (I&I)
|
|
$
|
3,968
|
|
|
$
|
3,928
|
|
|
$
|
3,918
|
|
Enbrel (Outside the U.S. and Canada)
|
|
2,452
|
|
|
2,909
|
|
|
3,333
|
|
|||
Xeljanz
|
|
1,345
|
|
|
927
|
|
|
523
|
|
|||
Eucrisa
|
|
67
|
|
|
—
|
|
|
—
|
|
|||
All other I&I
|
|
103
|
|
|
93
|
|
|
61
|
|
|||
Rare Disease
|
|
$
|
2,240
|
|
|
$
|
2,369
|
|
|
2,425
|
|
|
BeneFIX
|
|
604
|
|
|
712
|
|
|
752
|
|
|||
Refacto AF/Xyntha
|
|
551
|
|
|
554
|
|
|
533
|
|
|||
Genotropin
|
|
532
|
|
|
579
|
|
|
617
|
|
|||
Somavert
|
|
254
|
|
|
232
|
|
|
218
|
|
|||
All other Rare Disease
|
|
300
|
|
|
292
|
|
|
306
|
|
|||
Consumer Healthcare
|
|
$
|
3,472
|
|
|
$
|
3,407
|
|
|
$
|
3,395
|
|
PFIZER ESSENTIAL HEALTH (EH)
(d)
|
|
$
|
21,124
|
|
|
$
|
23,627
|
|
|
$
|
22,094
|
|
Legacy Established Products (LEP)
(e)
|
|
$
|
10,894
|
|
|
$
|
11,197
|
|
|
$
|
11,745
|
|
Lipitor
|
|
1,915
|
|
|
1,758
|
|
|
1,860
|
|
|||
Premarin family
|
|
977
|
|
|
1,017
|
|
|
1,018
|
|
|||
Norvasc
|
|
926
|
|
|
962
|
|
|
991
|
|
|||
Xalatan/Xalacom
|
|
335
|
|
|
363
|
|
|
399
|
|
|||
Effexor
|
|
297
|
|
|
278
|
|
|
288
|
|
|||
Zoloft
|
|
291
|
|
|
304
|
|
|
374
|
|
|||
EpiPen
|
|
290
|
|
|
386
|
|
|
339
|
|
|||
Zithromax
|
|
270
|
|
|
272
|
|
|
275
|
|
|||
Relpax
|
|
236
|
|
|
323
|
|
|
352
|
|
|||
Xanax
|
|
225
|
|
|
222
|
|
|
224
|
|
|||
Sildenafil Citrate
|
|
56
|
|
|
—
|
|
|
—
|
|
|||
All other LEP
|
|
5,077
|
|
|
5,313
|
|
|
5,625
|
|
|||
Sterile Injectable Pharmaceuticals (SIP)
(f)
|
|
$
|
5,673
|
|
|
$
|
6,014
|
|
|
$
|
3,944
|
|
Medrol
|
|
483
|
|
|
450
|
|
|
402
|
|
|||
Sulperazon
|
|
471
|
|
|
396
|
|
|
339
|
|
|||
Fragmin
|
|
306
|
|
|
318
|
|
|
335
|
|
|||
Tygacil
|
|
260
|
|
|
274
|
|
|
304
|
|
|||
Precedex
|
|
243
|
|
|
264
|
|
|
76
|
|
|||
Tazosyn/Zosyn
|
|
194
|
|
|
146
|
|
|
144
|
|
|||
All other SIP
|
|
3,715
|
|
|
4,166
|
|
|
2,343
|
|
140
|
|
2017 Financial Report
|
|
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|||
Peri-LOE Products
(g)
|
|
$
|
3,223
|
|
|
$
|
4,220
|
|
|
$
|
5,326
|
|
Celebrex
|
|
775
|
|
|
733
|
|
|
830
|
|
|||
Lyrica EH
(b)
|
|
553
|
|
|
801
|
|
|
1,183
|
|
|||
Vfend
|
|
421
|
|
|
590
|
|
|
682
|
|
|||
Viagra EH
(c)
|
|
382
|
|
|
383
|
|
|
411
|
|
|||
Pristiq
|
|
303
|
|
|
732
|
|
|
715
|
|
|||
Zyvox
|
|
281
|
|
|
421
|
|
|
883
|
|
|||
Revatio
|
|
252
|
|
|
285
|
|
|
260
|
|
|||
All other Peri-LOE Products
|
|
257
|
|
|
276
|
|
|
362
|
|
|||
Biosimilars
(h)
|
|
$
|
531
|
|
|
$
|
319
|
|
|
$
|
63
|
|
Inflectra/Remsima
|
|
419
|
|
|
192
|
|
|
30
|
|
|||
All other Biosimilars
|
|
112
|
|
|
127
|
|
|
33
|
|
|||
Pfizer CentreOne
(i)
|
|
$
|
706
|
|
|
$
|
718
|
|
|
$
|
612
|
|
Hospira Infusion Systems (HIS)
(j)
|
|
$
|
97
|
|
|
$
|
1,158
|
|
|
$
|
403
|
|
Revenues
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
|
$
|
48,851
|
|
|
|
|
|
|
|
|
||||||
Total Lyrica
(b)
|
|
$
|
5,065
|
|
|
$
|
4,966
|
|
|
$
|
4,839
|
|
Total Viagra
(c)
|
|
$
|
1,204
|
|
|
$
|
1,564
|
|
|
$
|
1,708
|
|
Total Alliance revenues
|
|
$
|
2,927
|
|
|
$
|
1,746
|
|
|
$
|
1,312
|
|
(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. Viagra lost exclusivity in the U.S. in December 2017. Beginning in the first quarter of 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through December 2017, will be reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore total Viagra worldwide revenues will be reported in EH from 2018 forward.
|
(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 primarily 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. Beginning in the first quarter of 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through December 2017, will be reported in EH. Therefore total Viagra worldwide revenues will be reported in EH from 2018 forward. See note (c) above.
|
(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 Inc.
|
(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.
|
2017 Financial Report
|
|
141
|
|
|
|
Quarter
|
||||||||||||||
(MILLIONS OF DOLLARS, EXCEPT PER COMMON SHARE DATA)
|
|
First
(a)
|
|
Second
|
|
Third
|
|
Fourth
|
||||||||
2017
|
|
|
|
|
|
|
|
|
||||||||
Revenues
|
|
$
|
12,779
|
|
|
$
|
12,896
|
|
|
$
|
13,168
|
|
|
$
|
13,703
|
|
Costs and expenses
(b)
|
|
8,671
|
|
|
9,010
|
|
|
9,434
|
|
|
12,640
|
|
||||
Restructuring charges and certain acquisition-related costs
|
|
157
|
|
|
70
|
|
|
149
|
|
|
110
|
|
||||
Income from continuing operations before provision/(benefit) for taxes on income
|
|
3,951
|
|
|
3,815
|
|
|
3,585
|
|
|
953
|
|
||||
Provision/(benefit) for taxes on income
(c)
|
|
821
|
|
|
739
|
|
|
727
|
|
|
(11,335
|
)
|
||||
Income from continuing operations
|
|
3,130
|
|
|
3,077
|
|
|
2,858
|
|
|
12,289
|
|
||||
Discontinued operations—net of tax
|
|
—
|
|
|
2
|
|
|
—
|
|
|
1
|
|
||||
Net income before allocation to noncontrolling interests
|
|
3,130
|
|
|
3,078
|
|
|
2,858
|
|
|
12,290
|
|
||||
Less: Net income attributable to noncontrolling interests
|
|
9
|
|
|
5
|
|
|
18
|
|
|
15
|
|
||||
Net income attributable to Pfizer Inc.
|
|
$
|
3,121
|
|
|
$
|
3,073
|
|
|
$
|
2,840
|
|
|
$
|
12,274
|
|
Earnings per common share—basic:
|
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
0.52
|
|
|
$
|
0.52
|
|
|
$
|
0.48
|
|
|
$
|
2.06
|
|
Discontinued operations—net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
0.52
|
|
|
$
|
0.52
|
|
|
$
|
0.48
|
|
|
$
|
2.06
|
|
Earnings per common share—diluted:
|
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
0.51
|
|
|
$
|
0.51
|
|
|
$
|
0.47
|
|
|
$
|
2.02
|
|
Discontinued operations—net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
0.51
|
|
|
$
|
0.51
|
|
|
$
|
0.47
|
|
|
$
|
2.02
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash dividends paid per common share
|
|
$
|
0.32
|
|
|
$
|
0.32
|
|
|
$
|
0.32
|
|
|
$
|
0.32
|
|
Stock prices
|
|
|
|
|
|
|
|
|
||||||||
High
|
|
$
|
34.75
|
|
|
$
|
34.52
|
|
|
$
|
36.21
|
|
|
$
|
37.35
|
|
Low
|
|
$
|
30.90
|
|
|
$
|
31.67
|
|
|
$
|
32.32
|
|
|
$
|
34.10
|
|
(a)
|
In accordance with our international reporting period, our consolidated statement of income for the first quarter of 2017 reflects approximately two months of the small molecule anti-infectives business acquired from Astra Zeneca.
|
(b)
|
The fourth quarter of
2017
historically reflects higher costs in
Cost of sales, Selling, informational and administrative expenses
and
Research and development expenses.
The fourth quarter of 2017 includes a net loss on early retirement of debt of
$999 million
, inclusive of the related termination of cross currency swaps.
|
(c)
|
The fourth quarter of 2017 reflects the impact of the TCJA. For additional information, see Notes to Consolidated Financial Statements
—
Note 5A. Tax Matters: Taxes on Income from Continuing Operations
.
|
142
|
|
2017 Financial Report
|
|
|
|
Quarter
|
||||||||||||||
(MILLIONS OF DOLLARS, EXCEPT PER COMMON SHARE DATA)
|
|
First
|
|
Second
(a)
|
|
Third
(b)
|
|
Fourth
|
||||||||
2016
|
|
|
|
|
|
|
|
|
||||||||
Revenues
|
|
$
|
13,005
|
|
|
$
|
13,147
|
|
|
$
|
13,045
|
|
|
$
|
13,627
|
|
Costs and expenses
(c), (d)
|
|
9,303
|
|
|
10,421
|
|
|
10,910
|
|
|
12,115
|
|
||||
Restructuring charges and certain acquisition-related costs
(e)
|
|
141
|
|
|
316
|
|
|
531
|
|
|
735
|
|
||||
Income from continuing operations before provision for taxes on income
|
|
3,561
|
|
|
2,410
|
|
|
1,604
|
|
|
777
|
|
||||
Provision for taxes on income
(f)
|
|
513
|
|
|
347
|
|
|
249
|
|
|
13
|
|
||||
Income from continuing operations
(f)
|
|
3,048
|
|
|
2,062
|
|
|
1,355
|
|
|
763
|
|
||||
Discontinued operations—net of tax
|
|
—
|
|
|
1
|
|
|
—
|
|
|
17
|
|
||||
Net income before allocation to noncontrolling interests
(f)
|
|
3,048
|
|
|
2,063
|
|
|
1,355
|
|
|
780
|
|
||||
Less: Net income attributable to noncontrolling interests
|
|
9
|
|
|
16
|
|
|
—
|
|
|
6
|
|
||||
Net income attributable to Pfizer Inc.
(f)
|
|
$
|
3,038
|
|
|
$
|
2,047
|
|
|
$
|
1,355
|
|
|
$
|
775
|
|
Earnings per common share—basic:
|
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
0.49
|
|
|
$
|
0.34
|
|
|
$
|
0.22
|
|
|
$
|
0.12
|
|
Discontinued operations—net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
0.49
|
|
|
$
|
0.34
|
|
|
$
|
0.22
|
|
|
$
|
0.13
|
|
Earnings per common share—diluted
(f)
:
|
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
0.49
|
|
|
$
|
0.33
|
|
|
$
|
0.22
|
|
|
$
|
0.12
|
|
Discontinued operations—net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
0.49
|
|
|
$
|
0.33
|
|
|
$
|
0.22
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash dividends paid per common share
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
Stock prices
|
|
|
|
|
|
|
|
|
||||||||
High
|
|
$
|
32.24
|
|
|
$
|
35.65
|
|
|
$
|
37.39
|
|
|
$
|
34.00
|
|
Low
|
|
$
|
28.25
|
|
|
$
|
30.06
|
|
|
$
|
33.30
|
|
|
$
|
29.83
|
|
(a)
|
In accordance with our domestic reporting periods, our consolidated statement of income for the second quarter of 2016 reflects five days of operating results for Anacor.
|
(b)
|
In accordance with our domestic and international reporting periods, our consolidated statement of income for the third quarter of 2016 reflects three business days of legacy Medivation operations.
|
(c)
|
The third quarter of 2016 includes a pre-tax impairment charge of
$1.4 billion
recorded in
Other (income)/deductions––net,
representing the amount by which the carrying value of HIS net assets held for sale exceeded the fair value less estimated costs to sell.
|
(d)
|
The fourth quarter of
2016
historically reflects higher costs in
Cost of sales, Selling, informational and administrative expenses
and
Research and development expenses.
The fourth quarter of 2016 includes a pre-tax impairment charge of
$290 million
recorded in
Other (income)/deductions––net,
representing the amount by which the carrying value of HIS net assets held for sale exceeded the fair value less estimated costs to sell.
|
(e)
|
The third quarter of 2016 reflects (i) restructuring charges of
$404 million
for employee termination costs, exit costs and asset impairments, which are largely associated with cost reduction and productivity initiatives not associated with acquisitions, as well as our acquisitions of Hospira and Medivation; (ii) transaction costs, such as banking, legal, accounting and other similar services, of
$54 million
, most of which are directly related to our acquisition of Medivation; and (iii) integration costs, representing external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes, of
$73 million
, primarily related to our acquisition of Hospira.
|
(f)
|
Amounts reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, requiring excess tax benefits or deficiencies for share-based compensation to be recognized as a component of the
Provision for taxes on income
. The net tax benefit was $22 million, $28 million, $35 million, and $4 million in each of the first, second, third and fourth quarters of 2016, respectively. For additional information, see Notes to Consolidated Financial Statements––
Note 1B. Adoption of New Accounting Standards
in Pfizer’s 2016 Financial Report
.
|
2017 Financial Report
|
|
143
|
|
|
|
Year Ended/As of December 31,
(a)
|
||||||||||||||||||
(MILLIONS, EXCEPT PER COMMON SHARE DATA)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|||||
Revenues
(b)
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
|
$
|
48,851
|
|
|
$
|
49,605
|
|
|
$
|
51,584
|
|
Income from continuing operations
(b)
|
|
21,353
|
|
|
7,229
|
|
|
6,975
|
|
|
9,119
|
|
|
11,410
|
|
|||||
Total assets
(b)
|
|
171,797
|
|
|
171,615
|
|
|
167,381
|
|
|
167,473
|
|
|
170,329
|
|
|||||
Long-term obligations
(b)
,
(c)
|
|
69,714
|
|
|
80,660
|
|
|
72,985
|
|
|
74,265
|
|
|
70,395
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings per common share—basic
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
3.57
|
|
|
$
|
1.18
|
|
|
$
|
1.13
|
|
|
$
|
1.43
|
|
|
$
|
1.67
|
|
Discontinued operations—net of tax
(d)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
1.56
|
|
|||||
Net income attributable to Pfizer Inc. common shareholders
(e)
|
|
$
|
3.57
|
|
|
$
|
1.18
|
|
|
$
|
1.13
|
|
|
$
|
1.44
|
|
|
$
|
3.23
|
|
Earnings per common share—diluted
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
3.52
|
|
|
$
|
1.17
|
|
|
$
|
1.11
|
|
|
$
|
1.41
|
|
|
$
|
1.65
|
|
Discontinued operations—net of tax
(d)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
1.54
|
|
|||||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
3.52
|
|
|
$
|
1.17
|
|
|
$
|
1.11
|
|
|
$
|
1.42
|
|
|
$
|
3.19
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends paid per common share
|
|
$
|
1.28
|
|
|
$
|
1.20
|
|
|
$
|
1.12
|
|
|
$
|
1.04
|
|
|
$
|
0.96
|
|
(a)
|
2017 reflects the February 3, 2017 sale of HIS to ICU Medical and the acquisition of the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside of the U.S. on December 22, 2016. 2016 and 2017 reflect the acquisition of Medivation on September 28, 2016 and the acquisition of Anacor on June 24, 2016, and 2015, 2016 and 2017 reflect the acquisition of Hospira on September 3, 2015.
|
(b)
|
All amounts reflect the June 24, 2013 disposition of Zoetis and its presentation as a discontinued operation in 2013.
|
(c)
|
Defined as
Long-term debt, Pension benefit obligations, net, Postretirement benefit obligations, net, Noncurrent deferred tax liabilities, Other taxes payable
and
Other noncurrent liabilities.
|
(d)
|
Includes the Animal Health (Zoetis) business through June 24, 2013, the date of disposal.
|
(e)
|
2017 reflects the impact of the TCJA on the
Provision/(benefit) for taxes on income
. For additional information, see Notes to Consolidated Financial Statements
—
Note 5A. Tax Matters: Taxes on Income from Continuing Operations.
|
144
|
|
2017 Financial Report
|
|
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
PFIZER
|
|
$100.0
|
|
$126.2
|
|
$132.9
|
|
$142.3
|
|
$148.7
|
|
$172.2
|
PEER GROUP
|
|
$100.0
|
|
$133.0
|
|
$149.4
|
|
$151.7
|
|
$152.5
|
|
$178.6
|
S&P 500
|
|
$100.0
|
|
$132.4
|
|
$150.5
|
|
$152.6
|
|
$170.8
|
|
$208.0
|
2017 Financial Report
|
|
145
|
SUBSIDIARIES OF THE COMPANY
|
|
The following is a list of subsidiaries of the Company as of December 31, 2017, omitting some subsidiaries which, considered in the aggregate, would not constitute a significant subsidiary.
|
|
Company
|
Where Incorporated or Organized
|
Agouron Pharmaceuticals, LLC
|
California
|
AH Robins LLC
|
Delaware
|
AHP Holdings B.V.
|
Netherlands
|
AHP Manufacturing B.V.
|
Netherlands
|
Alacer Corp.
|
California
|
Alpharma Holdings LLC
|
Delaware
|
Alpharma Pharmaceuticals LLC
|
Delaware
|
Alpharma Specialty Pharma LLC
|
Delaware
|
Alpharma USHP LLC
|
Delaware
|
American Food Industries LLC
|
Delaware
|
Anacor Pharmaceuticals, Inc.
|
Delaware
|
Ayerst-Wyeth Pharmaceuticals LLC
|
Delaware
|
Bamboo Therapeutics, Inc.
|
Delaware
|
BINESA 2002, S.L.
|
Spain
|
Bioren, LLC
|
Delaware
|
Blue Whale Re Ltd.
|
Vermont
|
C.E. Commercial Holdings C.V.
|
Netherlands
|
C.E. Commercial Investments C.V.
|
Netherlands
|
C.P. Pharmaceuticals International C.V.
|
Netherlands
|
CICL Corporation
|
Delaware
|
COC I Corporation
|
Delaware
|
Coley Pharmaceutical GmbH
|
Germany
|
Coley Pharmaceutical Group, Inc.
|
Delaware
|
Continental Pharma, Inc.
|
Belgium
|
Covx Technologies Ireland Limited
|
Ireland
|
Cyanamid de Argentina S.A.
|
Delaware
|
Cyanamid de Colombia, S.A.
|
Delaware
|
Cyanamid Inter-American Corporation
|
Delaware
|
Distribuidora Mercantil Centro Americana, S.A.
|
Delaware
|
Encysive Pharmaceuticals Inc.
|
Delaware
|
Esperion LUV Development, Inc.
|
Delaware
|
Excaliard Pharmaceuticals, Inc.
|
Delaware
|
Farminova Produtos Farmaceuticos de Inovacao, Lda.
|
Portugal
|
Farmogene Productos Farmaceuticos Lda
|
Portugal
|
Ferrosan A/S
|
Denmark
|
Ferrosan International A/S
|
Denmark
|
Ferrosan S.R.L.
|
Romania
|
FoldRx Pharmaceuticals, Inc.
|
Delaware
|
Fort Dodge Manufatura Ltda.
|
Brazil
|
G. D. Searle & Co. Limited
|
United Kingdom
|
G. D. Searle International Capital LLC
|
Delaware
|
G. D. Searle LLC
|
Delaware
|
Genetics Institute, LLC
|
Delaware
|
GenTrac, Inc.
|
Wisconsin
|
GI Europe, Inc.
|
Delaware
|
GI Japan, Inc.
|
Delaware
|
Greenstone LLC
|
Delaware
|
Haptogen Limited
|
United Kingdom
|
Hospira (China) Enterprise Management Co. Ltd.
|
People's Republic of China
|
Hospira Adelaide Pty Ltd
|
Australia
|
Hospira Aseptic Services Limited
|
United Kingdom
|
Hospira Australia Pty Ltd
|
Australia
|
Hospira Benelux BVBA
|
Belgium
|
Hospira Chile Limitada
|
Chile
|
Hospira Deutschland GmbH
|
Germany
|
Hospira Enterprises B.V.
|
Netherlands
|
Hospira France SAS
|
France
|
Hospira Healthcare B.V.
|
Netherlands
|
Hospira Healthcare Corporation
|
Canada
|
Hospira Healthcare India Private Limited
|
India
|
Hospira Holdings (S.A.) Pty Ltd
|
Australia
|
Hospira Invicta, S.A.
|
Spain
|
Hospira Ireland Holdings Unlimited Company
|
Ireland
|
Hospira Ireland Sales Limited
|
Ireland
|
Hospira Japan G.K.
|
Japan
|
Hospira Limited
|
Hong Kong
|
Hospira Malaysia Sdn Bhd
|
Malaysia
|
Hospira Nordic AB
|
Sweden
|
Hospira NZ Limited
|
New Zealand
|
Hospira Philippines, Inc.
|
Philippines
|
Hospira Portugal LDA
|
Portugal
|
Hospira Produtos Hospitalares Ltda.
|
Brazil
|
Hospira Pte. Ltd.
|
Singapore
|
Hospira Pty Limited
|
Australia
|
Hospira Puerto Rico, LLC
|
Delaware
|
Hospira Singapore Pte Ltd
|
Singapore
|
Hospira UK Limited
|
United Kingdom
|
Hospira Worldwide, LLC
|
Delaware
|
Hospira Zagreb d.o.o.
|
Croatia
|
Hospira, Inc.
|
Delaware
|
Industrial Santa Agape, S.A.
|
Guatemala
|
InnoPharma, Inc.
|
Delaware
|
International Affiliated Corporation LLC
|
Delaware
|
JMI-Daniels Pharmaceuticals, Inc.
|
Florida
|
John Wyeth & Brother Limited
|
United Kingdom
|
Kiinteistö oy Espoon Pellavaniementie 14
|
Finland
|
King Pharmaceuticals Holdings LLC
|
Delaware
|
King Pharmaceuticals LLC
|
Delaware
|
King Pharmaceuticals Research and Development, LLC
|
Delaware
|
Korea Pharma Holding Company Limited
|
Hong Kong
|
Laboratoires Pfizer, S.A.
|
Morocco
|
Laboratorios Parke Davis, S.L.
|
Spain
|
Laboratorios Pfizer Ltda.
|
Brazil
|
Laboratórios Pfizer, Lda.
|
Portugal
|
Laboratorios Wyeth LLC
|
Pennsylvania
|
Laboratorios Wyeth S.A.
|
Venezuela
|
Mayne Pharma IP Holdings (Euro) Pty Ltd
|
Australia
|
Medivation Field Solutions LLC
|
Delaware
|
Medivation LLC
|
Delaware
|
Medivation Neurology LLC
|
Delaware
|
Medivation Prostate Therapeutics LLC
|
Delaware
|
Medivation Services LLC
|
Delaware
|
Medivation Technologies LLC
|
Delaware
|
Meridian Medical Technologies Limited
|
United Kingdom
|
Meridian Medical Technologies, Inc.
|
Delaware
|
Monarch Pharmaceuticals, LLC
|
Tennessee
|
MTG Divestitures LLC
|
Delaware
|
Neusentis Limited
|
United Kingdom
|
NextWave Pharmaceuticals Incorporated
|
Delaware
|
PAH USA IN8 LLC
|
Delaware
|
Parke Davis Limited
|
Hong Kong
|
Parke Davis Productos Farmaceuticos Lda
|
Portugal
|
Parke, Davis & Company LLC
|
Michigan
|
Parkedale Pharmaceuticals, Inc.
|
Michigan
|
Parke-Davis Manufacturing Corp.
|
Delaware
|
P-D Co., LLC
|
Delaware
|
Peak Enterprises LLC
|
Delaware
|
PF Americas Holding C.V.
|
Netherlands
|
PF Asia Manufacturing B.V.
|
Netherlands
|
PF PR Holdings C.V.
|
Netherlands
|
PF PRISM C.V.
|
Netherlands
|
PF PRISM Holdings S.a.r.l.
|
Luxembourg
|
PF Prism S.á.r.l.
|
Luxembourg
|
PFE Holdings G.K.
|
Japan
|
PFE Pfizer Holdings 1 LLC
|
Delaware
|
PFE PHAC Holdings 1 LLC
|
Delaware
|
PFE Wyeth Holdings LLC
|
Delaware
|
PFE Wyeth-Ayerst (Asia) LLC
|
Delaware
|
Pfizer
|
France
|
Pfizer (China) Research and Development Co. Ltd.
|
People's Republic of China
|
Pfizer (Malaysia) Sdn Bhd
|
Malaysia
|
Pfizer (Perth) Pty Limited
|
Australia
|
Pfizer Eastern Investments B.V.
|
Netherlands
|
Pfizer Egypt S.A.E.
|
Egypt
|
Pfizer Enterprise Holdings B.V.
|
Netherlands
|
Pfizer Enterprises LLC
|
Delaware
|
Pfizer Enterprises SARL
|
Luxembourg
|
Pfizer ESP Pty Ltd
|
Australia
|
Pfizer Europe Finance B.V.
|
Netherlands
|
Pfizer Export B.V.
|
Netherlands
|
Pfizer Export Company
|
Ireland
|
Pfizer Export Holding Company B.V
|
Netherlands
|
Pfizer Finance Share Service (Dalian) Co., Ltd.
|
People's Republic of China
|
Pfizer Financial Services N.V./S.A.
|
Belgium
|
Pfizer France International Investments
|
France
|
Pfizer Free Zone Panama, S. de R.L.
|
Panama
|
Pfizer GEP, S.L.
|
Spain
|
Pfizer Global Holdings B.V.
|
Netherlands
|
Pfizer Global Supply Japan Inc.
|
Japan
|
Pfizer Global Trading
|
Ireland
|
Pfizer Group Luxembourg Sarl
|
Luxembourg
|
Pfizer Gulf FZ-LLC
|
United Arab Emirates
|
Pfizer H.C.P. Corporation
|
New York
|
Pfizer Health AB
|
Sweden
|
Pfizer Health Solutions Inc.
|
Delaware
|
Pfizer Healthcare Ireland
|
Ireland
|
Pfizer Hellas, A.E.
|
Greece
|
Pfizer Himalaya Holdings Coöperatief U.A.
|
Netherlands
|
Pfizer HK Service Company Limited
|
Hong Kong
|
Pfizer Holding France
|
France
|
Pfizer Holding Ventures
|
Ireland
|
Pfizer Holdings Corporation
|
Delaware
|
Pfizer Holdings Europe Unlimited Company
|
Ireland
|
Pfizer Holdings G.K.
|
Japan
|
Pfizer Holdings International Corporation
|
Delaware
|
Pfizer Holdings International Luxembourg (PHIL) Sarl
|
Luxembourg
|
Pfizer Holdings North America SARL
|
Luxembourg
|
Pfizer Hungary Holdings TRAE Kft.
|
Hungary
|
Pfizer Innovations AB
|
Sweden
|
Pfizer Innovations LLC
|
Russia
|
Pfizer Innovative Supply Point International BVBA
|
Belgium
|
Pfizer International LLC
|
New York
|
Pfizer International Markets Coöperatief U.A.
|
Netherlands
|
Pfizer International Operations
|
France
|
Pfizer International S. de R.L.
|
Panama
|
Pfizer International Trading (Shanghai) Limited
|
People's Republic of China
|
Pfizer Investment Capital Unlimited Company
|
Ireland
|
Pfizer Investment Co. Ltd.
|
People's Republic of China
|
Pfizer Investment Holdings S.a.r.l.
|
Luxembourg
|
Pfizer Ireland Investments Limited
|
Ireland
|
Pfizer Ireland PFE Holding 1 LLC
|
Delaware
|
Pfizer Ireland PFE Holding 2 LLC
|
Delaware
|
Pfizer Ireland Pharmaceuticals
|
Ireland
|
Pfizer Ireland Ventures Unlimited Company
|
Ireland
|
Pfizer Italia S.r.l.
|
Italy
|
Pfizer Italy Group Holding S.r.l.
|
Italy
|
Pfizer Japan Inc.
|
Japan
|
Pfizer Laboratories (Pty) Limited
|
South Africa
|
Pfizer Laboratories Limited
|
Kenya
|
Pfizer Laboratories PFE (Pty) Ltd
|
South Africa
|
Pfizer Leasing Ireland Limited
|
Ireland
|
Pfizer Leasing UK Limited
|
United Kingdom
|
Pfizer Limitada
|
Angola
|
Pfizer Limited
|
India
|
Pfizer Limited
|
Taiwan
|
Pfizer Limited
|
Uganda
|
Pfizer Limited
|
United Kingdom
|
Pfizer LLC
|
Russia
|
Pfizer Luxco Holdings SARL
|
Luxembourg
|
Pfizer Luxembourg Global Holdings S.à r.l.
|
Luxembourg
|
Pfizer Luxembourg SARL
|
Luxembourg
|
Pfizer Manufacturing Austria G.m.b.H.
|
Austria
|
Pfizer Manufacturing Belgium N.V.
|
Belgium
|
Pfizer Manufacturing Deutschland GmbH
|
Germany
|
Pfizer Manufacturing Deutschland Grundbesitz GmbH & Co. KG
|
Germany
|
Pfizer Manufacturing Holdings LLC
|
Delaware
|
Pfizer Manufacturing Ireland Unlimited Company
|
Ireland
|
Pfizer Manufacturing LLC
|
Delaware
|
Pfizer Manufacturing Services
|
Ireland
|
Pfizer MAP Holding, Inc.
|
Delaware
|
Pfizer Medical Technology Group (Belgium) N.V.
|
Belgium
|
Pfizer Medicamentos Genericos e Participacoes Ltda.
|
Brazil
|
Pfizer Mexico Luxco SARL
|
Luxembourg
|
Pfizer Mexico, S.A. de C.V.
|
Mexico
|
Pfizer Middle East for Pharmaceuticals, Animal Health and Chemicals S.A.E.
|
Egypt
|
Pfizer New Zealand Limited
|
New Zealand
|
Pfizer Norge AS
|
Norway
|
Pfizer North American Holdings Inc.
|
Delaware
|
Pfizer OTC B.V.
|
Netherlands
|
Pfizer Overseas LLC
|
Delaware
|
Pfizer Oy
|
Finland
|
Pfizer Pakistan Limited
|
Pakistan
|
Pfizer Parke Davis (Thailand) Ltd.
|
Thailand
|
Pfizer Parke Davis Sdn. Bhd.
|
Malaysia
|
Pfizer Parke Davis, Inc.
|
Philippines
|
Pfizer PFE ApS
|
Denmark
|
Pfizer PFE AsiaPac Holding B.V.
|
Netherlands
|
Pfizer PFE Australia Holding B.V.
|
Netherlands
|
Pfizer PFE Australia Pty Ltd
|
Australia
|
Pfizer PFE B.V.
|
Netherlands
|
Pfizer PFE Baltic Holdings B.V.
|
Netherlands
|
Pfizer PFE Belgium SPRL
|
Belgium
|
Pfizer PFE Brazil Holding S.à r.l.
|
Luxembourg
|
Pfizer PFE Chile Holding LLC
|
Delaware
|
Pfizer PFE CIA. Ltda.
|
Ecuador
|
Pfizer PFE Colombia Holding Corp.
|
Delaware
|
Pfizer PFE Colombia S.A.S
|
Colombia
|
Pfizer PFE Commercial Holdings LLC
|
Delaware
|
Pfizer PFE Croatia Holding B.V.
|
Netherlands
|
Pfizer PFE Eastern Investments B.V.
|
Netherlands
|
Pfizer PFE Finland Oy
|
Finland
|
Pfizer PFE France
|
France
|
Pfizer PFE Global Holdings B.V.
|
Netherlands
|
Pfizer PFE İlaçları Anonim Şirketi
|
Turkey
|
Pfizer PFE Ireland Pharmaceuticals Holding 1 B.V.
|
Netherlands
|
Pfizer PFE Italy Holdco 2 S.à r.l.
|
Luxembourg
|
Pfizer PFE Italy Holdco S.à r.l.
|
Luxembourg
|
Pfizer PFE Korlátolt Felelősségű Társaság
|
Hungary
|
Pfizer PFE Limited
|
Taiwan
|
Pfizer PFE Luxembourg S.à r.l.
|
Luxembourg
|
Pfizer PFE Mexico Holding 3 LLC
|
Delaware
|
Pfizer PFE Netherlands Holding 1 C.V.
|
Netherlands
|
Pfizer PFE New Zealand
|
New Zealand
|
Pfizer PFE New Zealand Holding B.V.
|
Netherlands
|
Pfizer PFE Norway Holding S.à r.l.
|
Luxembourg
|
Pfizer PFE Peru Holding LLC
|
Delaware
|
Pfizer PFE Peru S.R.L.
|
Peru
|
Pfizer PFE Pharmaceuticals Israel Holding LLC
|
Delaware
|
Pfizer PFE Pharmaceuticals Israel Ltd.
|
Israel
|
Pfizer PFE PILSA Holdco S.à r.l.
|
Luxembourg
|
Pfizer PFE Private Limited
|
Singapore
|
Pfizer PFE S.R.L
|
Argentina
|
Pfizer PFE Service Company Holding Coöperatief U.A.
|
Netherlands
|
Pfizer PFE Singapore Holding B.V.
|
Netherlands
|
Pfizer PFE Singapore Pte. Ltd.
|
Singapore
|
Pfizer PFE Spain B.V.
|
Netherlands
|
Pfizer PFE Spain Holding, S.L.
|
Spain
|
Pfizer PFE Sweden Holding 2 S.á.r.l.
|
Luxembourg
|
Pfizer PFE Sweden Holding S.á.r.l.
|
Luxembourg
|
Pfizer PFE Switzerland GmbH
|
Switzerland
|
Pfizer PFE Turkey Holding 1 B.V.
|
Netherlands
|
Pfizer PFE Turkey Holding 2 B.V.
|
Netherlands
|
Pfizer PFE UK Holding 4 LP
|
United Kingdom
|
Pfizer PFE US Holdings 1 LLC
|
Delaware
|
Pfizer PFE US Holdings 2 LLC
|
Delaware
|
Pfizer PFE US Holdings 3 LLC
|
Delaware
|
Pfizer PFE US Holdings 4 LLC
|
Delaware
|
Pfizer PFE US Holdings 5 LLC
|
Delaware
|
Pfizer PFE, spol. s r.o.
|
Czech Republic
|
Pfizer Pharm Algerie
|
Algeria
|
Pfizer Pharma GmbH
|
Germany
|
Pfizer Pharma PFE GmbH
|
Germany
|
Pfizer Pharmaceutical (Wuxi) Co., Ltd.
|
People's Republic of China
|
Pfizer Pharmaceutical Trading Limited Liability Company (a/k/a Pfizer Kft. or Pfizer LLC)
|
Hungary
|
Pfizer Pharmaceuticals B.V.
|
Netherlands
|
Pfizer Pharmaceuticals Global B.V.
|
Netherlands
|
Pfizer Pharmaceuticals Israel Ltd.
|
Israel
|
Pfizer Pharmaceuticals Korea Limited
|
Republic of Korea
|
Pfizer Pharmaceuticals LLC
|
Delaware
|
Pfizer Pharmaceuticals Ltd.
|
People's Republic of China
|
Pfizer Pigments Inc.
|
Delaware
|
Pfizer Polska Sp. z.o.o.
|
Poland
|
Pfizer Private Limited
|
Singapore
|
Pfizer Production LLC
|
Delaware
|
Pfizer Products Inc.
|
Connecticut
|
Pfizer Products India Private Limited
|
India
|
Pfizer Research (NC), Inc.
|
Delaware
|
Pfizer Romania SRL
|
Romania
|
Pfizer S.A.
|
Peru
|
Pfizer S.A. (Belgium)
|
Belgium
|
Pfizer S.A.S.
|
Colombia
|
Pfizer S.G.P.S. Lda.
|
Portugal
|
Pfizer S.R.L.
|
Argentina
|
Pfizer S.r.l.
|
Italy
|
Pfizer Saidal Manufacturing
|
Algeria
|
Pfizer Santé Familiale
|
France
|
Pfizer Saudi Limited
|
Saudi Arabia
|
Pfizer Seiyaku K.K.
|
Japan
|
Pfizer Service Company BVBA
|
Belgium
|
Pfizer Service Company Ireland Unlimited Company
|
Ireland
|
Pfizer Services 1
|
France
|
Pfizer Services LLC
|
Delaware
|
Pfizer Shared Services Unlimited Company
|
Ireland
|
Pfizer Shareholdings Intermediate SARL
|
Luxembourg
|
Pfizer Singapore Holding Pte. Ltd.
|
Singapore
|
Pfizer Singapore Trading Pte. Ltd.
|
Singapore
|
Pfizer Spain Holdings Coöperatief U.A.
|
Netherlands
|
Pfizer Specialties Limited
|
Nigeria
|
Pfizer SRB d.o.o.
|
Serbia
|
Pfizer Strategic Investment Holdings LLC
|
Delaware
|
Pfizer Sweden Partnership KB
|
Sweden
|
Pfizer Trading Polska sp.z.o.o.
|
Poland
|
Pfizer TRAE Holdings Kft.
|
Hungary
|
Pfizer Transactions Ireland Unlimited Company
|
Ireland
|
Pfizer Transactions LLC
|
Delaware
|
Pfizer Transactions Luxembourg SARL
|
Luxembourg
|
Pfizer Transport LLC
|
Delaware
|
Pfizer Ukraine LLC
|
Ukraine
|
Pfizer Vaccines LLC
|
Delaware
|
Pfizer Venezuela, S.A.
|
Venezuela
|
Pfizer Venture Investments LLC
|
Delaware
|
Pfizer Ventures LLC
|
Delaware
|
Pfizer Worldwide Services Unlimited Company
|
Ireland
|
Pfizer Zona Franca, S.A.
|
Costa Rica
|
Pfizer, Inc.
|
Philippines
|
Pfizer, S.A.
|
Costa Rica
|
Pfizer, S.A. de C.V.
|
Mexico
|
Pfizer, S.L.
|
Spain
|
Pfizer, spol. s r.o.
|
Czech Republic
|
Pharmacia & Upjohn Company LLC
|
Delaware
|
Pharmacia & Upjohn Company, Inc.
|
Delaware
|
Pharmacia & Upjohn LLC
|
Delaware
|
Pharmacia & Upjohn, S.A. de C.V.
|
Mexico
|
Pharmacia Brasil Ltda.
|
Brazil
|
Pharmacia Hepar LLC
|
Delaware
|
Pharmacia Holding AB
|
Sweden
|
Pharmacia Inter-American LLC
|
Pennsylvania
|
Pharmacia International B.V.
|
Netherlands
|
Pharmacia Limited
|
United Kingdom
|
Pharmacia LLC
|
Delaware
|
Pharmacia Nostrum, S.A.
|
Spain
|
Pharmacia South Africa (Pty) Ltd
|
South Africa
|
PHILCO Holdings S.à r.l.
|
Luxembourg
|
PHIVCO Corp.
|
Delaware
|
PHIVCO Holdco S.à r.l.
|
Luxembourg
|
PHIVCO Luxembourg S.à r.l.
|
Luxembourg
|
PN Mexico LLC
|
Delaware
|
PowderJect Research Limited
|
United Kingdom
|
PT. Pfizer Parke Davis
|
Indonesia
|
Purepac Pharmaceutical Holdings LLC
|
Delaware
|
Renrall LLC
|
Wyoming
|
Rinat Neuroscience Corp.
|
Delaware
|
Roerig Produtos Farmaceuticos, Lda.
|
Portugal
|
Roerig S.A.
|
Chile
|
Sao Cristovao Participacoes Ltda.
|
Brazil
|
Searle Laboratorios, Lda.
|
Portugal
|
Servicios P&U, S. de R.L. de C.V.
|
Mexico
|
Shiley LLC
|
California
|
Sinergis Farma-Produtos Farmaceuticos, Lda.
|
Portugal
|
Site Realty, Inc.
|
Delaware
|
Solinor LLC
|
Delaware
|
Sugen LLC
|
Delaware
|
Tabor LLC
|
Delaware
|
The Pfizer Incubator LLC
|
Delaware
|
Thiakis Limited
|
United Kingdom
|
Treerly Health Co., Ltd
|
People's Republic of China
|
Upjohn Laboratorios Lda.
|
Portugal
|
US Oral Pharmaceuticals Pty Ltd
|
Australia
|
Vesterålens Naturprodukter A/S
|
Denmark
|
Vesterålens Naturprodukter AB
|
Sweden
|
Vesterålens Naturprodukter AS
|
Norway
|
Vesterålens Naturprodukter OY
|
Finland
|
Vicuron Holdings LLC
|
Delaware
|
Vinci Farma, S.A.
|
Spain
|
Warner Lambert del Uruguay S.A.
|
Uruguay
|
Warner Lambert Ilac Sanayi ve Ticaret Limited Sirketi
|
Turkey
|
Warner-Lambert (Thailand) Limited
|
Thailand
|
Warner-Lambert Company AG
|
Switzerland
|
Warner-Lambert Company LLC
|
Delaware
|
Warner-Lambert Guatemala, Sociedad Anonima
|
Guatemala
|
Warner-Lambert, S.A.
|
Delaware
|
Whitehall International Inc.
|
New York
|
Whitehall Laboratories Inc.
|
Delaware
|
W-L LLC
|
Delaware
|
Wyeth (Thailand) Ltd.
|
Thailand
|
Wyeth AB
|
Sweden
|
Wyeth Australia Pty. Limited
|
Australia
|
Wyeth Ayerst Inc.
|
Delaware
|
Wyeth Ayerst S.à r.l.
|
Luxembourg
|
Wyeth Canada ULC
|
Canada
|
Wyeth Consumer Healthcare LLC
|
Pennsylvania
|
Wyeth Europa Limited
|
United Kingdom
|
Wyeth Farma, S.A.
|
Spain
|
Wyeth Holdings LLC
|
Maine
|
Wyeth Industria Farmaceutica Ltda.
|
Brazil
|
Wyeth KFT.
|
Hungary
|
Wyeth Lederle S.r.l.
|
Italy
|
Wyeth Lederle Vaccines S.A.
|
Belgium
|
Wyeth LLC
|
Delaware
|
Wyeth Pakistan Limited
|
Pakistan
|
Wyeth Pharmaceutical Co., Ltd.
|
People's Republic of China
|
Wyeth Pharmaceuticals Company
|
Puerto Rico
|
Wyeth Pharmaceuticals FZ-LLC
|
United Arab Emirates
|
Wyeth Pharmaceuticals Limited
|
Ireland
|
Wyeth Pharmaceuticals LLC
|
Delaware
|
Wyeth Puerto Rico, Inc.
|
Puerto Rico
|
Wyeth S.A.S
|
Colombia
|
Wyeth Subsidiary Illinois Corporation
|
Illinois
|
Wyeth Whitehall Export GmbH
|
Austria
|
Wyeth Whitehall SARL
|
Luxembourg
|
Wyeth-Ayerst (Asia) Limited
|
Delaware
|
Wyeth-Ayerst International LLC
|
Delaware
|
Wyeth-Ayerst Promotions Limited
|
Delaware
|
/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
|
|
|
|
|
|
February 22, 2018
|
|
|
/s/ FRANK A. D'AMELIO
|
|
|
Frank A. D'Amelio
|
|
|
Executive Vice President, Business Operations and
Chief Financial Officer
|
|
|
|
|
|
February 22, 2018
|
|
|