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
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
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DOCUMENTS INCORPORATED BY REFERENCE
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Portions of the 2018 Annual Report to Shareholders
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Parts I, II and IV
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Portions of the Proxy Statement for the 2019 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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2018 Form 10-K
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i
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DEFINED TERMS
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Pfizer Inc.
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2018 Form 10-K
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ii
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~$53.6 Billion
in Revenues in 2018
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10
Products with Direct Product and/or Alliance Revenues of Greater than $1 Billion in 2018
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2
Distinct Business Segments in 2018
—
Pfizer Innovative Health
(
~$33.4 Billion 2018 Revenues
) /
Pfizer Essential Health
(
~$20.2 Billion 2018 Revenues
)
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|
|
|
6
Primary Therapeutic Areas in Pfizer Innovative Health in 2018
—
Internal Medicine, Vaccines, Oncology, Inflammation & Immunology, Rare Disease and
Consumer Healthcare
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|
|
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4
Pfizer Essential Health Product Categories in 2018
—
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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100
Projects in Clinical Research & Development*
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~$8 Billion
2018 R&D Expense
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58
Manufacturing Sites Worldwide Operated by PGS
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~92,400
Employees Globally
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Pfizer Inc.
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2018 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 December 19, 2018, we announced that we entered into a definitive agreement with GSK under which we and GSK have agreed to combine our respective consumer healthcare businesses into a new consumer healthcare joint venture that will operate globally under the GSK Consumer Healthcare name. The joint venture is expected to be a category leader in pain relief, respiratory, vitamin and mineral supplements, digestive health, skin health and therapeutic oral health and will be the largest global OTC consumer healthcare business. In exchange for contributing our Consumer Healthcare business, we will receive a 32% equity stake in the company and GSK will own the remaining 68%. The transaction is expected to close in the second half of 2019, subject to customary closing conditions including GSK shareholder approval and required regulatory approvals.
|
•
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On February 3, 2017, we completed the sale of Pfizer’s 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 intravenous pumps, solutions and devices.
|
•
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On December 22, 2016, for
$1,040 million
we acquired the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S.
, which includes the marketed products Zavicefta™ (ceftazidime-avibactam), Merrem™/Meronem™ (meropenem) and Zinforo™ (ceftaroline fosamil), and the clinical development assets aztreonam-avibactam and ceftaroline fosamil-avibactam.
|
•
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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.
|
•
|
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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Pfizer Inc.
|
2018 Form 10-K
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1
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•
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Pfizer Biopharmaceuticals Group
- a science-based Innovative Medicines business that includes our Innovative Health business units (except Consumer Healthcare) as well as a new Hospital business unit that commercializes our global portfolio of sterile injectable and anti-infective medicines. We also incorporated our biosimilar portfolio into our Oncology and Inflammation & Immunology therapeutic areas;
|
•
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Upjohn
- an off-patent branded and generic established medicines business headquartered in China that includes 20 of our off-patent solid oral dose legacy brands, including
Lyrica
,
Lipitor
,
Norvasc, Viagra
and
Celebrex
, as well as certain generic medicines; and
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•
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Consumer Healthcare
- an over-the-counter medicines business, which we announced on December 19, 2018 will be contributed to, and combined with, GSK’s consumer healthcare business to form a new consumer healthcare joint venture.
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IH focused 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 included internal medicine, vaccines, oncology, inflammation & immunology, rare disease and consumer healthcare. |
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EH included legacy brands that have lost or will soon lose market exclusivity in both developed and emerging markets, branded generics, generic sterile injectable products, biosimilars and select branded products including anti-infectives. EH also included an R&D organization, as well as our contract manufacturing business. Through February 2, 2017, EH also included HIS.
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Leading brands included:
- Prevnar 13/Prevenar 13
-
Xeljanz
-
Eliquis
- Lyrica
(U.S., Japan and certain other markets)
-
Enbrel
(outside the U.S. and Canada)
-
Ibrance
-
Xtandi
-
Chantix/Champix
- Several OTC consumer healthcare products
(e.g.,
Centrum
and
Advil
)
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Leading brands included:
- Lipitor
- Norvasc
- Lyrica
(Europe, Russia, Turkey, Israel and Central Asia countries)
- Celebrex
- Viagra*
-
Inflectra/Remsima
- Sulperazon
-
Several sterile injectable products
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Pfizer Inc.
|
2018 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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Included innovative brands from two therapeutic areas, Cardiovascular Metabolic 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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Included innovative vaccines brands across all ages—infants, adolescents and adults—in pneumococcal disease, meningitis and tick-borne encephalitis, with a pipeline 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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Included 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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Included 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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Included 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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Included over-the-counter (OTC) brands with a focus on dietary supplements, pain management, gastrointestinal and respiratory and personal care. In 2018, according to Nicholas Hall’s retail sales data (based on moving annual total data through the third quarter of 2018), 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.
|
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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*
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On December 19, 2018, we announced that we entered into a definitive agreement with GSK under which we and GSK have agreed to combine our respective consumer healthcare businesses into a new consumer healthcare joint venture, which will operate globally under the GSK Consumer Healthcare name. Assets and liabilities associated with our Consumer Healthcare business were reclassified as held for sale in the consolidated balance sheet as of December 31, 2018. We expect to complete the transaction during the second half of 2019, subject to customary closing conditions, including GSK shareholder approval and required regulatory approvals.
For additional information, see the Notes to Consolidated Financial Statements—
Note 2
C.
Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held Investment
:
Assets and Liabilities Held for Sale
.
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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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Included 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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Included products that have recently lost or are anticipated to soon lose patent protection.
|
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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Included 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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Included recombinant and monoclonal antibodies, primarily in inflammation, oncology and supportive care.
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Inflectra
/
Remsima
(biosimilar infliximab) (U.S., Canada, the EU, Australia and certain international markets),
Nivestim/Nivestym
(biosimilar filgrastim) (U.S. and certain European, Asian and Africa/Middle East markets),
Retacrit
(biosimilar epoetin alfa-epbx/epoetin zeta) (U.S. and certain European and Africa/Middle East markets) and
Ixifi Infliximab BS for I.V. Infusion 100mg
(Japan)
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Pfizer CentreOne
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Included 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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*
|
Viagra lost exclusivity in the U.S. in December 2017. In 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through 2017, were reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, in 2018, total Viagra worldwide revenues were reported in EH.
|
Pfizer Inc.
|
2018 Form 10-K
|
3
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•
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delivering a pipeline of differentiated therapies and vaccines with the greatest medical and commercial potential;
|
•
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advancing our capabilities that can position Pfizer for long-term leadership; and
|
•
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creating new models for biomedical collaboration that will expedite the pace of innovation and productivity.
|
•
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Inflammation and Immunology
;
|
•
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Internal Medicine
;
|
•
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Oncology
;
|
•
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Rare Diseases
;
|
•
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Vaccines
; and
|
•
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Biosimilars.
|
•
|
Research Units within our WRD organization were generally responsible for research and early-stage development assets for our IH business (assets that have not yet achieved proof-of-concept).
|
•
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Our R&D organization within the EH business supported the large base of EH products and helped develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars.
|
•
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Our Global Product Development organization,
a unified center for late-stage development for our innovative products that was generally responsible for the operational execution of clinical trials for both early-stage assets in the WRD portfolio as well as late-stage assets in the Innovative portfolio. For WRD assets, GPD worked in close collaboration with the Early Clinical Development group, which has expertise in various disciplines such as Biostatistics, Clinical Pharmacology and Digital Medicine.
|
•
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Our science-based and other platform-services organizations, where a significant portion of our R&D spending occurred, provided technical expertise and other services to the various R&D projects, and were organized into science-based functions (which were part of our WRD organization), such as Pharmaceutical Sciences, Medicine Design, Regulatory and Drug Safety, and non-science-based functions, such as Facilities, Business Technology and Finance.
|
•
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WRD is renamed Worldwide Research, Development and Medical (WRDM) as we have created a new Worldwide Medical & Safety organization that incorporates the former Chief Medical Office as well as the Worldwide Safety function;
|
•
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The R&D organization within the EH business has been integrated into the WRDM, GPD and Upjohn organizations, including moving biosimilars into WRDM and GPD and realigning them with the relevant therapeutic areas (e.g., Oncology and Inflammation & Immunology);
|
•
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The Regulatory function has been moved from the WRDM organization into the GPD organization; and
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•
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Late-stage portfolio spend has been moved from IH to GPD and from EH to GPD and Upjohn.
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Pfizer Inc.
|
2018 Form 10-K
|
4
|
Pfizer Inc.
|
2018 Form 10-K
|
5
|
Drug
|
|
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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Lyrica
|
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2019
(1)
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2014
(2)
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2022
(3)
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Chantix/Champix
|
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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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2028
|
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2028
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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
|
|
2025
|
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2028
(4)
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2025
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Prevnar 13/Prevenar 13
|
|
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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2033
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(1)
|
In November 2018, the FDA granted pediatric exclusivity for Lyrica in the U.S. for an additional six months to June 2019; pediatric exclusivity applies to both the basic product patent for Lyrica and a method of treatment patent, both of which expired in the U.S. in December 2018.
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(2)
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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 or 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, which 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.
|
(10)
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Bavencio
is being developed and commercialized in collaboration with Merck KGaA.
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Pfizer Inc.
|
2018 Form 10-K
|
6
|
Pfizer Inc.
|
2018 Form 10-K
|
7
|
•
|
environment-related capital expenditures—
$33 million
; and
|
•
|
other environment-related expenses—
$162 million
.
|
Pfizer Inc.
|
2018 Form 10-K
|
8
|
Pfizer Inc.
|
2018 Form 10-K
|
9
|
ITEM 1A.
|
RISK FACTORS
|
Pfizer Inc.
|
2018 Form 10-K
|
10
|
Pfizer Inc.
|
2018 Form 10-K
|
11
|
Pfizer Inc.
|
2018 Form 10-K
|
12
|
Pfizer Inc.
|
2018 Form 10-K
|
13
|
Pfizer Inc.
|
2018 Form 10-K
|
14
|
Pfizer Inc.
|
2018 Form 10-K
|
15
|
Pfizer Inc.
|
2018 Form 10-K
|
16
|
Pfizer Inc.
|
2018 Form 10-K
|
17
|
Pfizer Inc.
|
2018 Form 10-K
|
18
|
Pfizer Inc.
|
2018 Form 10-K
|
19
|
Pfizer Inc.
|
2018 Form 10-K
|
20
|
Pfizer Inc.
|
2018 Form 10-K
|
21
|
Pfizer Inc.
|
2018 Form 10-K
|
22
|
Pfizer Inc.
|
2018 Form 10-K
|
23
|
Pfizer Inc.
|
2018 Form 10-K
|
24
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
|
ITEM 2.
|
PROPERTIES
|
ITEM 3.
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LEGAL PROCEEDINGS
|
ITEM 4.
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MINE SAFETY DISCLOSURES
|
Pfizer Inc.
|
2018 Form 10-K
|
25
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Name
|
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Age
|
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Position
|
|
|
|
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Albert Bourla
|
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57
|
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Chief Executive Officer since January 2019. Chief Operating Officer from January 2018 until December 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. Our Director since February 2018. Board member of Pharmaceutical Research and Manufacturers of America (PhRMA). Board member of the Pfizer Foundation, which promotes access to quality healthcare. Member of the Board of Directors of the Partnership for New York City and Catalyst, a global non-profit organization accelerating progress for the advancement of women into leadership.
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Frank A. D’Amelio
|
|
61
|
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Chief Financial Officer, Executive Vice President, Business Operations and Global Supply since November 2018. Executive Vice President, Business Operations and Chief Financial Officer from December 2010 until October 2018. 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. Director of the Independent College Fund of New Jersey.
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Mikael Dolsten
|
|
60
|
|
Chief Scientific Officer, President, Worldwide Research, Development and Medical since January 2019. President of Worldwide Research and Development from December 2010 until December 2018. 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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Lidia Fonseca
|
|
50
|
|
Chief Digital and Technology Officer, Executive Vice President since January 2019. Chief Information Officer and Senior Vice President of Quest Diagnostics Incorporated from 2014 to 2018. Senior Vice President of Laboratory Corporation of America Holdings from 2008 until March 2013. Director of Tegna, Inc.
|
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Michael Goettler
|
|
51
|
|
Group President, Pfizer Upjohn since January 2019. Executive Vice President from July 2018 until December 2018. Global President of Pfizer Inflammation & Immunology from January 2018 until June 2018. Global President of Pfizer Rare Disease from January 2016 until December 2017. Global Commercial Officer, Senior Vice President for Pfizer’s Global Innovative Pharma Business from January 2014 until December 2015. Regional President, Europe for Pfizer Specialty Care and the chair of the European Management Team from June 2012 until December 2013. Regional President Asia - Pacific for Specialty Care from October 2009 until June 2012. Member of the board of directors of PSI (Population Services International).
|
|
|
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Angela Hwang
|
|
53
|
|
Group President, Pfizer Biopharmaceuticals Group since January 2019. Group President, Pfizer Essential Health from January 2018 until December 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
|
|
57
|
|
Chief Compliance, Quality and Risk Officer, Executive Vice President since January 2019. Executive Vice President, Chief Compliance and Risk Officer from December 2013 until December 2018. Senior Vice President and Associate General Counsel from October 2006 until December 2013.
|
|
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Douglas M. Lankler
|
|
53
|
|
General Counsel, Executive Vice President 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
|
|
64
|
|
Chief Patient Officer, Executive Vice President since January 2019. Executive Vice President, Chief Medical Officer from December 2010 until December 2018. 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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|
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A. Rod MacKenzie
|
|
59
|
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Chief Development Officer, Executive Vice President 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.
|
|
|
|
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Dawn Rogers
|
|
54
|
|
Chief Human Resources Officer, Executive Vice President since January 2019. Executive Vice President, Worldwide Human Resources from June 2018 until December 2018. Senior Vice President, Human Resources for the Chief Operating Officer from November 2017 until May 2018. Senior Vice President of Human Resources for Pfizer Essential Health, Global Product Development, and the Legal and Compliance Divisions from 2016 until November 2017. Senior Vice President of Human Resources for the Global Innovative Pharma Business from 2013 until 2016. Senior Vice President of Human Resources for the Primary Care Business Unit from 2011 until 2013. Senior Vice President of Human Resources for Worldwide Research and Development from 2008 until 2011. Vice President of Human Resources for Pfizer's European Commercial Operations from 2006 to 2008.
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|
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Sally Susman
|
|
57
|
|
Chief Corporate Affairs Officer, Executive Vice President since January 2019. Executive Vice President, Corporate Affairs (formerly Policy, External Affairs and Communications) from December 2010 until December 2018. 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.
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John D. Young
|
|
54
|
|
Chief Business Officer, Group President since January 2019. Group President, Pfizer Innovative Health from January 2018 until December 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.
|
2018 Form 10-K
|
26
|
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 1, 2018 through October 28, 2018
|
38,477,427
|
|
|
$
|
44.25
|
|
|
38,410,129
|
|
|
$
|
7,487,879,989
|
|
October 29, 2018 through November 30, 2018
|
43,812,603
|
|
|
$
|
43.50
|
|
|
43,795,856
|
|
|
$
|
5,582,880,460
|
|
December 1, 2018 through December 31, 2018
|
32,598,112
|
|
|
$
|
43.77
|
|
|
32,559,080
|
|
|
$
|
14,157,881,147
|
|
Total
|
114,888,142
|
|
|
$
|
43.83
|
|
|
114,765,065
|
|
|
|
(a)
|
For additional information, see the Notes to Consolidated Financial Statements
––
Note 12
.
Equity
in our
2018
Financial Report, which is incorporated by reference.
|
(b)
|
In addition to the amounts purchased under our share repurchase program, these columns represent (i)
118,667
shares, primarily representing 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
4,410
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
|
Pfizer Inc.
|
2018 Form 10-K
|
27
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
Pfizer Inc.
|
2018 Form 10-K
|
28
|
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.
|
2018 Form 10-K
|
29
|
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
|
•
|
Selected Quarterly Financial Data (Unaudited)
|
Pfizer Inc.
|
2018 Form 10-K
|
30
|
|
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).
|
|
|
|
|
|
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).
|
|
|
|
|
|
Indenture, dated as of September 7, 2018, between us and The Bank of New York Mellon, as trustee, is incorporated by reference from our Current Report on Form 8-K filed on September 7, 2018 (File No. 001-03619).
|
|
|
|
|
|
First Supplemental Indenture, dated as of September 7, 2018, between us and The Bank of New York Mellon, as trustee, is incorporated by reference from our Current Report on Form 8-K filed on September 7, 2018 (File No. 001-03619).
|
|
|
|
|
4.20
|
|
Except as set forth in Exhibits 4.1-19 above, the instruments defining the rights of holders of long-term debt securities of the Company and its subsidiaries have been omitted.
2
|
|
|
|
2
We agree to furnish to the Securities and Exchange Commission, upon request, a copy of each instrument with respect to issuances of long-term debt of the Company and its subsidiaries.
|
Pfizer Inc.
|
2018 Form 10-K
|
31
|
|
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).
|
|
|
|
|
|
Form of Acknowledgment and Consent and Summary of Key Terms for Stock Option Grants, RSUs and TSRUs is incorporated by reference from our 2017 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
Form of Executive Grant Letter is incorporated by reference from our 2015 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
Pfizer Consolidated Supplemental Pension Plan for United States and Puerto Rico Employees is incorporated by reference from our 2017 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
Amendment No. 1 to the Pfizer 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).
|
|
|
|
|
|
Amendment No. 2 to the Pfizer Supplemental Savings Plan is incorporated by reference from our 2017 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
Amendment No. 3 to the Pfizer Supplemental Savings Plan is incorporated by reference from our Quarterly Report on Form 10-Q for the period ended September 30, 2018 (File No. 001-03619).
|
|
|
|
|
|
Amendment No. 4 to the Pfizer Supplemental Savings Plan.
|
|
|
|
|
|
Amendment No. 5 to the Pfizer Supplemental Savings Plan.
|
|
|
|
|
|
Pfizer Inc. Global Performance Plan is incorporated by reference from our 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 2018 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).
|
|
|
|
|
|
Pfizer Inc. Executive Severance Plan is incorporated by referenced from our Current Report on Form 8-K filed on February 20, 2009 (File No. 001-03619).
|
|
|
|
|
|
Amendment No. 1 to Pfizer Inc. Executive Severance Plan.
|
|
|
|
|
Pfizer Inc.
|
2018 Form 10-K
|
32
|
|
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).
|
|
|
|
|
|
Form of Special Performance-Based Incentive Award Letter is incorporated by reference from our 2017 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
|
Form of Special Performance-Based Incentive Grant Letter is incorporated by reference from our 2017 Annual Report on Form 10-K (File No. 001-03619).
|
|
|
|
|
*
10.33
|
|
Time Sharing Agreement, dated December 17, 2018, by and between Pfizer Inc. and Ian C. Read.
|
|
|
|
*
13
|
|
Portions of the 2018 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).
|
|
|
|
|
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.
|
2018 Form 10-K
|
33
|
|
Pfizer Inc.
|
||
|
|
|
|
Dated: February 28, 2019
|
By:
|
|
/S/ MARGARET M. MADDEN
|
|
|
|
Margaret M. Madden
Senior Vice President and Corporate Secretary
Chief Governance Counsel
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/S/ ALBERT BOURLA
Albert Bourla
|
|
Chief Executive Officer and Director
(Principal Executive Officer)
|
|
February 27, 2019
|
|
|
|
|
|
/S/ FRANK A. D’AMELIO
Frank A. D’Amelio
|
|
Chief Financial Officer, Executive Vice President, Business Operations and Global Supply
(Principal Financial Officer)
|
|
February 26, 2019
|
|
|
|
|
|
/S/ LORETTA V. CANGIALOSI
Loretta V. Cangialosi
|
|
Senior Vice President—Controller
(Principal Accounting Officer)
|
|
February 26, 2019
|
|
|
|
|
|
/S/ IAN C. READ
Ian C. Read
|
|
Executive Chairman of the Board
|
|
February 28, 2019
|
|
|
|
|
|
/S/ DENNIS A. AUSIELLO
Dennis A. Ausiello
|
|
Director
|
|
February 26, 2019
|
|
|
|
|
|
/S/ RONALD E. BLAYLOCK
Ronald E. Blaylock |
|
Director
|
|
February 27, 2019
|
|
|
|
|
|
/S/ W. DON CORNWELL
W. Don Cornwell |
|
Director
|
|
February 26, 2019
|
|
|
|
|
|
/S/ JOSEPH J. ECHEVARRIA
Joseph J. Echevarria
|
|
Director
|
|
February 26, 2019
|
|
|
|
|
|
/S/ HELEN H. HOBBS
Helen H. Hobbs
|
|
Director
|
|
February 28, 2019
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/S/ JAMES M. KILTS
James M. Kilts
|
|
Director
|
|
February 26, 2019
|
|
|
|
|
|
/S/ DAN R. LITTMAN
Dan R. Littman
|
|
Director
|
|
February 26, 2019
|
|
|
|
|
|
/S/ SHANTANU NARAYEN
Shantanu Narayen
|
|
Director
|
|
February 26, 2019
|
|
|
|
|
|
/S/ SUZANNE NORA JOHNSON
Suzanne Nora Johnson
|
|
Director
|
|
February 26, 2019
|
|
|
|
|
|
/S/ JAMES C. SMITH
James C. Smith
|
|
Director
|
|
February 26, 2019
|
|
|
|
|
|
|
|
|
Page
|
||||
|
|||||
|
|||||
DEFINITIONS AND TERMS
|
|||||
|
|||||
Definitions
|
|||||
Interpretation
|
|||||
|
|||||
|
|||||
PURCHASE AND SALE
|
|||||
|
|||||
Purchase and Sale of Purchased Assets
|
|||||
Consents; Shared Contracts
|
|||||
Excluded Assets
|
|||||
Assumption of Assumed Liabilities
|
|||||
Retained Liabilities
|
|||||
Purchase Consideration
|
|||||
Delivery of the Purchase Consideration
|
|||||
Estimated Closing Statement; Estimated Adjustment Payments
|
|||||
Post-Closing Working Capital and Net Cash Adjustments
|
|||||
Withholding
|
|||||
|
|||||
|
|||||
CLOSING
|
|||||
|
|||||
Closing
|
|||||
Restated Purchaser Articles of Association
|
|||||
|
|
|
|||
|
|
|
|||
REPRESENTATIONS AND WARRANTIES OF SELLER PARENT
|
|||||
|
|||||
Organization
|
|||||
Authority; Binding Effect
|
|||||
Conveyed Subsidiaries; Capital Structure
|
|||||
No Conflicts; Consents
|
|||||
Governmental Authorization
|
|||||
Financial Information
|
|||||
Absence of Material Changes
|
|||||
No Litigation
|
|||||
Compliance with Laws
|
|||||
Product Registrations; Manufacturing Registrations; Regulatory Compliance; Product Liability and Recalls
|
|||||
Environmental Matters
|
|||||
Material Contracts
|
|||||
Intellectual Property
|
|||||
Real Property
|
|||||
Assets
|
|||||
Taxes
|
|||||
Employee Benefits; Employees
|
|||||
Global Trade Controls; Anti-Corruption Matters
|
|||||
Brokers
|
|||||
No Other Representations or Warranties
|
|
|||||
REPRESENTATIONS AND WARRANTIES OF PURCHASER PARENT
|
|||||
|
|||||
Organization
|
|||||
Authority; Binding Effect
|
|||||
Purchaser; Purchaser Subsidiaries; Capital Structure
|
|||||
No Conflicts; Consents
|
|||||
Governmental Authorization
|
|||||
Financial Information
|
|||||
Absence of Material Changes
|
|||||
Securities Act
|
|||||
No Litigation
|
|||||
Compliance with Laws
|
|||||
Product Registrations; Manufacturing Registrations; Regulatory Compliance; Product Liability and Recalls
|
|||||
Environmental Matters
|
|||||
Material Contracts
|
|||||
Intellectual Property
|
|||||
Real Property
|
|||||
Assets
|
|||||
Taxes
|
|||||
Employee Benefits; Employees
|
|||||
Global Trade Controls; Anti-Corruption Matters
|
|||||
Brokers
|
|||||
No Other Representations or Warranties
|
|||||
|
|||||
|
|||||
COVENANTS
|
|||||
|
|
|
|||
Information and Documents
|
|||||
Conduct of Business
|
|||||
Regulatory Approvals
|
|||||
Reasonable Best Efforts; Further Assurances
|
|||||
Tax Matters
|
|||||
Employees and Employee Benefits
|
|||||
Intercompany Accounts and Arrangements
|
|||||
Access to Records and Information
|
|||||
Mail and Other Communications
|
|||||
Transfer of Business IP and Registrations
|
|||||
No Solicitation
|
|||||
Confidentiality
|
|||||
Guarantees; Letters of Credit
|
|||||
Certain Ancillary Agreements
|
|||||
Retained and Transferred Names
|
|||||
Compliance with WARN
|
|||||
Litigation Support; Non-Indemnified Claims
|
|||||
Insurance
|
|||||
Trade Notification
|
|||||
Accounts; Products Received
|
|||||
Directors’ and Officers’ Indemnification
|
|||||
Return of Assets; Transfer of Purchased Assets
|
|||||
Bulk Transfer Laws
|
Purchaser Parent Shareholder Meeting; Purchaser Parent Board Recommendation
|
|||||
Resignations
|
|||||
Remedial Action Access
|
|||||
Acknowledgements
|
|||||
|
|
|
|
|
|
|
|||||
INDEMNIFICATION
|
|||||
|
|||||
Indemnification by Seller Parent and Purchaser Parent
|
|||||
Indemnification by Purchaser
|
|||||
Indemnification Procedures
|
|||||
Expiration
|
|||||
Certain Limitations
|
|||||
Losses Net of Insurance, Etc.
|
|||||
No Right of Set-Off
|
|||||
Materiality
|
|||||
Mitigation; Other Limitations
|
|||||
Sole Remedy/Waiver
|
|||||
Indemnification Payments
|
|||||
|
|||||
|
|||||
CONDITIONS TO CLOSING
|
|||||
|
|||||
Conditions to the Obligations of the Parties
|
|||||
Conditions to the Obligations of Purchaser and Purchaser Parent
|
|||||
Conditions to the Obligations of Seller Parent
|
|||||
Frustration of Closing Conditions
|
|||||
|
|||||
|
|||||
TERMINATION
|
|||||
|
|||||
Termination
|
|||||
Effect of Termination
|
|||||
|
|||||
|
|
|
|||
MISCELLANEOUS
|
|||||
|
|||||
Notices
|
|||||
Amendment; Waiver
|
|||||
Assignment
|
|||||
Entire Agreement
|
|||||
Parties in Interest
|
|||||
Public Disclosure
|
|||||
Expenses
|
|||||
Disclosure Letters; Disclosures Modifying Other Sections of Agreement
|
|||||
No Admission
|
|||||
Governing Law; Jurisdiction
|
|||||
Counterparts
|
|||||
Headings
|
|||||
Severability
|
|||||
Rules of Construction
|
|||||
Specific Performance
|
Affiliate Status
|
|||||
Waiver of Conflicts Regarding Representation; Nonassertion of Attorney-Client Privilege
|
|||||
Translation of Currencies
|
ANNEXES
|
|
|
|
ANNEX A
|
Index of Defined Terms
|
ANNEX B-1
|
Accounting Principles
|
ANNEX B-2
|
Sample Closing Statement
|
ANNEX B-3
|
Purchaser Accounting Principles
|
ANNEX B-4
|
Sample Purchaser Closing Statement
|
ANNEX C
|
List of Antitrust Approvals
|
ANNEX D
|
PCH Split Products
|
ANNEX E-1
|
Business Key Products
|
ANNEX E-2
|
Purchaser Key Products
|
ANNEX F
|
PCH Switch Products
|
ANNEX G
|
Purchaser Parent Retained Assets
|
|
|
EXHIBITS
|
|
|
|
EXHIBIT A
|
List of instruments and documents to be delivered by Seller Parent
|
EXHIBIT B
|
List of instruments and documents to be delivered by Purchaser and Purchaser Parent
|
EXHIBIT C
|
Form of Purchaser Shareholders Agreement
|
EXHIBIT D
|
Form of Structuring Considerations Agreement
|
EXHIBIT E
|
Form of Restated Purchaser Articles of Association
|
EXHIBIT F
|
Seller Parent Draft Ancillary Agreements
|
EXHIBIT G
|
Purchaser Parent Draft Ancillary Agreements
|
|
|
Seller Disclosure Letter
|
|
Purchaser Parent Disclosure Letter
|
|
Pfizer Inc.
235 East 42nd Street
New York, NY 10017
Attn: General Counsel |
|
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attn: Edward D. Herlihy
David K. Lam
Jacob A. Kling
E-mail: EDHerlihy@wlrk.com
DKLam@wlrk.com
JAKling@wlrk.com
Fax: (212) 403-2000 |
|
GlaxoSmithKline Plc
980 Great West Road
Brentford
Middlesex
TW8 9GS
United Kingdom
Attn: General Counsel Consumer Healthcare
|
|
Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Attn: Daniel E. Wolf
Eric L. Schiele, P.C.
Claire E. James
Patrick Jacobs
E-mail: daniel.wolf@kirkland.com
eric.schiele@kirkland.com
claire.james@kirkland.com
patrick.jacobs@kirkland.com
Fax: (212) 446-4900 |
|
PFIZER INC.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Albert Bourla
|
|
|
Name:
Albert Bourla
|
|
|
Title: Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
GLAXOSMITHKLINE PLC
|
|
|
|
|
|
|
|
|
By:
|
/s/ Simon Dingemans
|
|
|
Name: Simon Dingemans
|
|
|
Title: Chief Finance Officer
|
|
GLAXOSMITHKLINE CONSUMER HEALTHCARE HOLDINGS LIMITED
|
|
|
|
|
|
|
|
|
By:
|
/s/ Simon Dingemans
|
|
|
Name: Simon Dingemans
|
|
|
Title: Director
|
•
|
The Employee’s terms and conditions of employment are subject to collective bargaining.
|
•
|
The Employee is or has been a Named Executive Officer in the Company’s Annual Proxy Statement.
|
•
|
The Employee is currently working for a Pfizer legal entity based in Puerto Rico.
|
•
|
The Employee is receiving benefits from a Company-sponsored long-term disability plan.
|
•
|
The Employee is on secondment in the United States.
|
•
|
The Employee is not paid through the U.S. payroll and/or is not eligible for U.S. benefits.
|
•
|
The Employee has been deemed ineligible through the Claims and Appeals Procedure.
|
1.
|
Section 2.32 of the PSSP is amended to read as follows:
|
1.
|
The Plan is clarified to provide that the Plan Administrator is the Executive Vice President, Worldwide Human Resources.
|
2.
|
A new Appendix A is added to the end of the Pfizer Inc. Executive Severance Plan to read as follows:
|
1.1
|
“Active Health & Insurance Continuation” means the period of time, beginning on an SSP Participant’s Termination Date, for which an SSP Participant is offered Continuing Group Health and Life Insurance Coverage in accordance with Appendix A; Section 3.
|
1.2
|
“Five Points Brochure” means the brochure prepared and describing certain enhancements available under the pension plans, savings plans, retiree medical plan and equity awards for certain eligible employees.
|
2.1.1
|
An eligible employee under the Plan shall become an SSP Participant if, on his Termination Date:
|
(a)
|
He is an eligible employee under the Plan and is not, and has not been, a “named executive officer” in the Company’s Annual Proxy Statement;
|
(b)
|
He is involuntarily terminated due to business restructuring or job elimination (which will be determined by the Plan Administrator, or its designee, in its sole and absolute discretion), or due to exhaustion of short-term disability benefits; and
|
(c)
|
His Official Notification Date is on or after December 21, 2018 and on or before August 2, 2019.
|
2.1.2
|
An eligible employee shall also be eligible to participate in the SSP under the Plan if he elected to terminate employment under the terms of the Pfizer Voluntary Early Retirement Program and his position is eliminated by June 26, 2019. The Plan Administrator, or its designee, in its sole and absolute discretion, will determine whether the position was eliminated by June 26, 2019. In the event that this determination is made after the eligible employee’s Termination Date, such SSP Participant shall be eligible for the cash severance determined under Plan only, and not the additional benefits (including Active Health & Insurance Continuation) described in Appendix A; Section 3.
|
2.2
|
Participation. An eligible employee who is determined to be eligible to participate in the SSP under the provisions of this Appendix A; Article 2 becomes an SSP Participant after the Plan Administrator receives and accepts the eligible employee’s duly executed Release Agreement within the time period specified by such agreement. The earliest date the Release Agreement may be signed is the eligible employee’s Termination Date. Participation will begin on the eighth day after the eligible employee signs the Release Agreement, provided the eligible employee has not revoked the Release Agreement during that time period. If an eligible employee dies while in active service on or after his or her Official Notification Date
|
3.1.1
|
If an eligible employee satisfies the eligibility requirements of Appendix A; Article 2. and becomes an SSP Participant, he will be entitled to cash severance in the amount determined under the Plan.
|
3.1.2
|
Continuing Group Health and Life Insurance Coverage.
|
(c)
|
Life Management Resources.
|
(d)
|
Life Insurance.
|
(a)
|
Active employee benefits end as of the Termination Date;
|
(b)
|
Eligibility for any applicable retiree medical, dental and/or life insurance benefits, if any, is determined as of the SSP Participant’s Termination Date and pursuant to the terms of the applicable plans;
|
(c)
|
The controlling conditions of any stock grants may be affected for an SSP Participant and are contained in the terms of the stock grant letters, grant agreements, points of interest for each such grant, applicable stock plan, and Five Points Brochure.
|
(e)
|
Landing fees, airport taxes and similar assessments;
|
(j)
|
An additional charge equal to 100 percent of the expenses listed in subparagraph 2(a) above.
|
(d)
|
the number, name, and relationship to the Lessee of anticipated passengers;
|
PFIZER INC.
|
|
|
|
By:/s/ JOHN D. WITZIG
|
|
Name: John D. Witzig
|
|
Title: Vice President
|
|
|
|
/s/ IAN C. READ
|
|
IAN C. READ
|
Pfizer Inc. 2018 Financial Report
|
|
|
|
|
2018 Financial Report
|
This Financial Report for the fiscal year ended December 31, 2018, which was filed as Exhibit 13 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018
|
2018 Form 10-K
|
Annual Report on Form 10-K for the fiscal year ended December 31, 2018
|
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
|
Allogene
|
Allogene Therapeutics, Inc.
|
AMPA
|
α-amino-3-hydroxy-5-methyl-4-isoxazolepropionic acid
|
Anacor
|
Anacor Pharmaceuticals, Inc.
|
AOCI
|
Accumulated Other Comprehensive Income
|
Astellas
|
Astellas Pharma Inc., Astellas US LLC and Astellas Pharma US, Inc.
|
ASU
|
Accounting Standards Update
|
ATM-AVI
|
aztreonam-avibactam
|
Avillion
|
Avillion LLP
|
Bain Capital
|
Bain Capital Private Equity and Bain Capital Life Sciences
|
Bamboo
|
Bamboo Therapeutics, Inc.
|
Biogen
|
Biogen Inc.
|
Biopharma
|
Pfizer Biopharmaceuticals Group
|
BMS
|
Bristol-Myers Squibb Company
|
BRCA
|
BReast CAncer susceptibility gene
|
CAR T
|
chimeric antigen receptor T cell
|
CDC
|
U.S. Centers for Disease Control and Prevention
|
Cellectis
|
Cellectis S.A.
|
Cerevel
|
Cerevel Therapeutics, LLC
|
CIAS
|
cognitive impairment associated with schizophrenia
|
Citibank
|
Citibank, N.A.
|
CML
|
chronic myelogenous leukemia
|
Developed Markets
|
U.S., Western Europe, Japan, Canada, South Korea, Australia, Scandinavian countries, Finland and New Zealand
|
EEA
|
European Economic Area
|
EGFR
|
epidermal growth factor receptor
|
EH
|
Essential Health
|
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
|
Exchange Act
|
Securities Exchange Act of 1934, as amended
|
FASB
|
Financial Accounting Standards Board
|
FDA
|
U.S. Food and Drug Administration
|
GAAP
|
Generally Accepted Accounting Principles
|
GIST
|
gastrointestinal stromal tumors
|
GPD
|
Global Product Development organization
|
GSK
|
GlaxoSmithKline plc
|
GS&Co.
|
Goldman, Sachs & Co. LLC
|
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.
|
IPR&D
|
in-process research and development
|
2018 Financial Report
|
|
i
|
|
IRC
|
Internal Revenue Code
|
IRS
|
U.S. Internal Revenue Service
|
IV
|
intravenous
|
Janssen
|
Janssen Biotech, Inc.
|
J&J
|
Johnson & Johnson
|
King
|
King Pharmaceuticals LLC (formerly King Pharmaceuticals, Inc.)
|
LDL
|
low density lipoprotein
|
LEP
|
Legacy Established Products
|
LIBOR
|
London Interbank Offered Rate
|
Lilly
|
Eli Lilly and Company
|
LOE
|
loss of exclusivity
|
MCC
|
Merkel Cell Carcinoma
|
MCO
|
Managed Care Organization
|
Medivation
|
Medivation, Inc.
|
Merck
|
Merck & Co., Inc.
|
Meridian
|
Meridian Medical Technologies, 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
|
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
|
PsA
|
psoriatic arthritis
|
PTSRUs
|
Performance Total Shareholder Return Units
|
PTUs
|
Profit Units
|
RA
|
rheumatoid arthritis
|
RCC
|
renal cell carcinoma
|
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
|
Servier
|
Les Laboratoires Servier SAS
|
SFJ
|
SFJ Pharmaceuticals
|
Shire
|
Shire International GmbH
|
SI&A
|
Selling, informational and administrative
|
S&P
|
Standard and Poor’s
|
SIP
|
Sterile Injectable Pharmaceuticals
|
StratCO
|
Strategy and Commercial Operations
|
Tax Cuts and Jobs Act or TCJA
|
Legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017
|
Teuto
|
Laboratório Teuto Brasileiro S.A.
|
Teva
|
Teva Pharmaceuticals USA, Inc.
|
TSR
|
Total Shareholder Return
|
TSRUs
|
Total Shareholder Return Units
|
U.K.
|
United Kingdom
|
U.S.
|
United States
|
ViiV
|
ViiV Healthcare Limited
|
WRD
|
Worldwide Research and Development
|
ii
|
|
2018 Financial Report
|
|
●
|
|
Beginning on page
2
|
||||
|
|
This section provides information about the following: Financial Highlights; Our Business; Our 2018 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 2019.
|
|
|||
●
|
|
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 the following sub-sections:
|
|
|||
|
○
|
Beginning on page
20
|
||||
|
|
This sub-section provides a high-level summary of our revenues, including revenue deductions.
|
|
|||
|
○
|
Beginning on page
22
|
||||
|
|
This sub-section provides an overview of revenues by segment and geography.
|
|
|||
|
○
|
Beginning on page
24
|
||||
|
|
This sub-section provides an overview of several of our biopharmaceutical products.
|
|
|||
|
○
|
Beginning on page
29
|
||||
|
|
This sub-section provides an overview of important biopharmaceutical product developments.
|
|
|||
|
○
|
Beginning on page
33
|
||||
|
|
This sub-section provides a discussion about our costs and expenses.
|
|
|||
|
○
|
Beginning on page
36
|
||||
|
|
This sub-section provides a discussion of items impacting our tax provisions.
|
|
|||
|
○
|
Beginning on page
37
|
||||
|
|
This sub-section provides a discussion of an alternative view of performance used by management.
|
|
|||
●
|
|
Beginning on page
42
|
||||
|
|
This section provides a discussion of
the
performance of each of our operating segments.
|
|
|||
●
|
|
Beginning on page
51
|
||||
|
|
This section provides a discussion of changes in certain components of other comprehensive income.
|
|
|||
●
|
|
Beginning on page
52
|
||||
|
|
This section provides a discussion of changes in certain balance sheet accounts, including
Accumulated other comprehensive loss
.
|
|
|||
●
|
|
Beginning on page
53
|
||||
|
|
This section provides an analysis of our consolidated cash flows for the three years ended December 31, 2018.
|
|
|||
●
|
|
Beginning on page
55
|
||||
|
|
This section provides an analysis of selected measures of our liquidity and of our capital resources as of December 31, 2018 and December 31, 2017, as well as a discussion of our outstanding debt and other commitments that existed as of December 31, 2018 and December 31, 2017. 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
59
|
||||
|
|
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
61
|
||||
|
|
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. Also included in this section are discussions of Financial Risk Management and Contingencies, including legal and tax matters.
|
|
2018 Financial Report
|
|
1
|
|
2018 Total Revenues––$53.6 billion
|
2018 Net Cash Flow from Operations––$15.8 billion
|
An increase of 2% compared to 2017
|
A decrease of 6% compared to 2017
|
2018 Reported Diluted EPS––$1.87
|
2018 Adjusted Diluted EPS (Non-
GAAP
)––$3.00*
|
A decrease of 47% compared to 2017
|
An increase of 13% compared to 201
7
|
*
|
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
|
|
2018 Financial Report
|
|
•
|
On December 19, 2018, we announced that we entered into a definitive agreement with GSK under which we and GSK have agreed to combine our respective consumer healthcare businesses into a new consumer healthcare joint venture that will operate globally under the GSK Consumer Healthcare name. The joint venture is expected to be a category leader in pain relief, respiratory, vitamin and mineral supplements, digestive health, skin health and therapeutic oral health and will be the largest global OTC consumer healthcare business. In exchange for contributing our Consumer Healthcare business, we will receive a 32% equity stake in the company
and GSK will own the remaining 68%. The transaction is expected to close in the second half of 2019, subject to customary closing conditions including GSK shareholder approval and required regulatory approvals. For additional information, see Notes to Consolidated Financial Statements––
Note 2C.
Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held Investment
: Assets and Liabilities Held for Sale
and the “Our Strategy” section of this Financial Review below.
|
•
|
On February 3, 2017, we completed the sale of Pfizer’s 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
(all of which we sold during 2018), 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. Our financial results, and EH’s operating results, for
2018
do not reflect any contribution from HIS global operations.
|
•
|
On December 22, 2016, which fell 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
$1,040 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. 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. 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
|
2018 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
|
|
2018 Financial Report
|
|
(MILLIONS OF DOLLARS)
|
|
|
||
|
|
|
||
2017
Revenues
|
|
$
|
52,546
|
|
|
|
|
||
Operational growth/(decline):
|
|
|
||
Continued growth from key brands
(a)
and from recently launched products
(b)
, as well as growth from Biosimilars
(c)
and our Consumer Healthcare business, and the impact from CentreOne
|
|
3,377
|
|
|
Declines from total Viagra
(d)
(primarily in the U.S.), the Peri-LOE Products portfolio (excluding Viagra EH
(d)
, which was impacted by the shift in the reporting of U.S. and Canada Viagra revenues to EH), the SIP portfolio (primarily in developed markets), the LEP portfolio (primarily in developed markets), Enbrel (driven by declines in most developed Europe markets) and the hemophilia portfolio (primarily in developed Europe)
|
|
(2,520
|
)
|
|
Disposition-related impact of the February 2017 sale of HIS
(e)
|
|
(97
|
)
|
|
Other operational factors, net
|
|
31
|
|
|
Operational growth, net
|
|
791
|
|
|
|
|
|
||
Operational revenues
|
|
53,337
|
|
|
Favorable impact of foreign exchange
|
|
310
|
|
|
2018
Revenues
|
|
$
|
53,647
|
|
(a)
|
K
ey brands represent Ibrance, Eliquis,
Xeljanz, Prevnar 13/Prevenar 13, Xtandi, Lyrica-IH and Chantix/Champix.
|
(b)
|
Growth from recently launched products include Eucrisa in the U.S., as well as Besponsa and Bavencio, primarily in the U.S. and developed Europe.
|
(c)
|
Growth in Biosimilars, primarily from Inflectra in certain channels in the U.S., as well as in developed Europe.
|
(d)
|
Viagra lost exclusivity in the U.S. in December 2017. In 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through 2017, were reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, in 2018, total Viagra revenues were reported in EH. Total Viagra revenues in 2017 represent the aggregate of worldwide revenues from Viagra IH and Viagra EH.
|
(e)
|
Impact on financial results for the sale of HIS in February 2017. The 2018 financial results do not reflect any contribution from HIS global operations, compared to approximately one month of HIS domestic operations and approximately two months of HIS international operations in 2017.
|
(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
” and Notes to Consolidated Financial Statements––
Note 3
.
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
.
|
(c)
|
See the “Costs and Expenses––Research and Development (R&D) Expenses” section of this Financial Review.
|
(d)
|
See the “Costs and Expenses––Selling, Informational and Administrative (SI&A) Expenses” section of this Financial Review.
|
2018 Financial Report
|
|
5
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
|
|
Product Revenues in Markets Impacted
|
||||||||||
Products
|
|
Key Dates
(a)
|
|
Markets Impacted
|
|
Year Ended December 31,
|
||||||||||
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
Viagra
(b)
|
|
June 2013
May 2014 December 2017 |
|
Major European markets
Japan U.S. |
|
$
|
274
|
|
|
$
|
850
|
|
|
$
|
1,217
|
|
Lyrica
(c)
|
|
July 2014
June 2019
|
|
Major European markets
U.S.
|
|
3,852
|
|
|
3,901
|
|
|
3,831
|
|
|||
Zyvox
(d)
|
|
August 2014
First half of 2015
January 2016
|
|
Japan
U.S.
Major European markets
|
|
62
|
|
|
103
|
|
|
235
|
|
|||
Relpax
|
|
December 2015
December 2016
|
|
Major European markets
U.S.
|
|
90
|
|
|
176
|
|
|
263
|
|
|||
Vfend
|
|
July 2016
January 2016
|
|
Major European markets
Japan
|
|
106
|
|
|
150
|
|
|
299
|
|
|||
Tygacil
|
|
April 2016
|
|
U.S.
|
|
25
|
|
|
45
|
|
|
80
|
|
|||
Pristiq
(e)
|
|
March 2017
|
|
U.S.
|
|
71
|
|
|
133
|
|
|
578
|
|
(a)
|
Unless stated otherwise, “Key Dates” indicate patent-based expiration dates.
|
(b)
|
As a result of a patent litigation settlement, Teva launched a generic version of Viagra in the U.S. in December 2017.
|
(c)
|
In November 2018, the FDA granted pediatric exclusivity for Lyrica in the U.S. for an additional six months to June 2019; pediatric exclusivity applies to both the basic product patent for Lyrica and a method of treatment patent, both of which expired in the U.S. in December 2018.
|
(d)
|
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.
|
(e)
|
As a result of a patent litigation settlement with several generic manufacturers, generic versions of Pristiq launched in the U.S. in March 2017.
|
6
|
|
2018 Financial Report
|
|
We recorded the following amounts as a result of the U.S. Healthcare Legislation:
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
Reduction to
Revenues
, related to the Medicare “coverage gap” discount provision
|
|
$
|
674
|
|
|
$
|
450
|
|
|
$
|
410
|
|
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. 2018 also reflected a favorable true-up associated with the updated 2017 invoice received from the federal government, which reflected a lower expense than what was previously estimated for invoiced periods.
|
|
184
|
|
|
307
|
|
|
312
|
|
2018 Financial Report
|
|
7
|
|
8
|
|
2018 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 the different EU Member States, 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.
|
•
|
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.
|
•
|
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. The EMA will be relocating from London, U.K. to Amsterdam, Netherlands by the scheduled date of Brexit at the end of March 2019. At present, it is still unclear whether and to what extent the U.K. will remain within or aligned to the EU system of medicines regulation, and/or what separate requirements will be imposed in the U.K. after it leaves the EU. However, both the U.K. and the EU have issued detailed guidance for the industry on how medicines, medical devices and clinical trials will be separately regulated in their respective territories in the event of a ‘hard Brexit’, meaning an outcome where no negotiated settlement is reached.
|
2018 Financial Report
|
|
9
|
|
•
|
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 U.S. Federal corporate 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.
For additional information, see the “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.
|
•
|
Biopharma—a science-based innovative medicines business that includes our Innovative Health business units (except our Consumer Healthcare business), as well as a new Hospital business unit that commercializes our global portfolio of sterile injectable and anti-infective medicines. We also incorporated our biosimilar portfolio into our Oncology and Inflammation & Immunology therapeutic areas.
|
•
|
Upjohn—an off-patent branded and generic established medicines business, headquartered in China that includes 20 of our off-patent solid oral dose legacy brands including Lyrica, Lipitor, Norvasc, Viagra and Celebrex, as well as certain generic medicines.
|
•
|
Pfizer’s Consumer Healthcare business—an over-the-counter medicines business, which we announced on December 19, 2018 will be contributed to, and combined with, GSK’s consumer healthcare business to form a new consumer healthcare joint venture, of which we will own 32%. See Notes to Consolidated Financial Statements––
Note 2C.
Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held Investment
: Assets and Liabilities Held for Sale.
|
•
|
WRD is renamed Worldwide Research, Development and Medical (WRDM) as we have created a new Worldwide Medical & Safety organization in WRD that incorporates the former Chief Medical Office as well as the Worldwide Safety function;
|
•
|
The R&D organization within the EH business has been integrated into the WRDM, GPD and Upjohn organizations, including moving biosimilars into WRDM and GPD and realigning them with the relevant therapeutic areas (e.g., Oncology and Inflammation & Immunology);
|
•
|
The Regulatory function has been moved from the WRDM organization into the GPD organization; and
|
•
|
Late-stage portfolio spend has been moved from IH to GPD and from EH to GPD and Upjohn.
|
10
|
|
2018 Financial Report
|
|
•
|
Bringing biosimilars into their therapeutic categories gives us the potential to leverage our R&D, regulatory and commercial infrastructure within the Biopharma business to more efficiently bring those assets to market;
|
•
|
Making a business unit that is solely focused on medicines that are used in hospitals can potentially bring greater focus and attention to serving those customers and developing those relationships;
|
•
|
Giving the Upjohn business more autonomy and a focus on maximizing the value of its products, particularly in emerging markets, gives it the opportunity to operate as a standalone business within Pfizer with the potential for sustainable modest growth; and
|
•
|
We believe this new structure better positions each business to achieve its growth potential as we transition to a period post-2020 where we expect higher and more sustained revenue growth due to declining LOEs and the potential of our late-stage pipeline.
|
•
|
An aging global population that is generating increased demand for innovative medicines that address patients’ unmet needs;
|
•
|
Advances in both biological science and digital technology that are enhancing the delivery of breakthrough new medicines; and
|
•
|
The increasingly significant role of hospitals in healthcare systems.
|
2018 Financial Report
|
|
11
|
|
Some additional information about our business segments as of December 31, 2018 (prior to our new 2019 commercial organizational re-alignment) follows:
|
||
|
|
|
IH focused 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 included internal medicine, vaccines, oncology, inflammation & immunology, rare disease and consumer healthcare. |
|
EH included legacy brands that have lost or will soon lose market exclusivity in both developed and emerging markets, branded generics, generic sterile injectable products, biosimilars and select branded products including anti-infectives. EH also included an R&D organization, as well as our contract manufacturing business. Through February 2, 2017, EH also included HIS.
|
Leading brands included:
- Prevnar 13/Prevenar 13 - Xeljanz - Eliquis - Lyrica (U.S., Japan and certain other markets) - Enbrel (outside the U.S. and Canada) - Ibrance - Xtandi - Chantix/Champix - Several OTC consumer healthcare products* |
|
Leading brands included:
- Lipitor - Norvasc - Lyrica (Europe, Russia, Turkey, Israel and Central Asia countries) - Celebrex - Viagra** - Inflectra/Remsima - Sulperazon - Several other sterile injectable products |
*
|
According to Nicholas Hall’s retail sales data (based on moving annual total data through the third quarter of 2018), in 2018, our 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.
|
**
|
Viagra lost exclusivity in the U.S. in December 2017. In 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through 2017, were reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, in 2018, total Viagra worldwide revenues were reported in EH.
|
•
|
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.
|
•
|
Inflammation and Immunology
;
|
•
|
Internal Medicine
;
|
•
|
Oncology
;
|
•
|
Rare Diseases
;
|
•
|
Vaccines
; and
|
•
|
Biosimilars.
|
•
|
Research Units within our WRD organization were 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 were organized by therapeutic area to enhance flexibility, cohesiveness and focus. Because of our structure, we were able to rapidly redeploy resources within a Research Unit between various projects as necessary because in many instances the workforce shares similar skills, expertise and/or focus.
|
12
|
|
2018 Financial Report
|
|
•
|
Our R&D organization within the EH business supported the large base of EH products and helped develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars.
|
•
|
Our GPD organization,
a unified center for late-stage development for our innovative products that was generally responsible for the operational execution of clinical trials for both early-stage assets in the WRD portfolio as well as late-stage assets in the Innovative portfolio. For WRD assets, GPD worked in close collaboration with the Early Clinical Development group, which has expertise in various disciplines such as Biostatistics, Clinical Pharmacology and Digital Medicine.
GPD helped enable more efficient and effective development and enhance our ability to accelerate and progress assets through our pipeline.
|
•
|
Our science-based and other platform-services organizations, where a significant portion of our R&D spending occurred, provided technical expertise and other services to the various R&D projects, and were organized into science-based functions (which were part of our WRD organization), such as Pharmaceutical Sciences, Medicine Design, 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 were 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.
|
2018 Financial Report
|
|
13
|
|
•
|
Over the five-year period from 2018 through 2022, 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. As part of this plan, in July 2018, we announced that we will increase our commitment to U.S. manufacturing with a $465 million investment to build one of the most technically advanced sterile injectable pharmaceutical production facilities in the world in Portage, Michigan. This U.S. investment will strengthen our capability to produce and supply critical, life-saving injectable medicines for patients around the world. Known as Modular Aseptic Processing, the new, multi-story, 400,000-square-foot production facility will also support the area economy by creating an estimated 450 new jobs over the next several years.
|
•
|
We made a $500 million voluntary contribution to the U.S. Pfizer Consolidated Pension Plan in February 2018.
|
•
|
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.
|
•
|
In the first quarter of 2018, we paid a special, one-time bonus to virtually all Pfizer colleagues, excluding executives, of
$119 million
in the aggregate.
|
•
|
Agreement to Form a New Consumer Healthcare Joint Venture (IH)
––On December 19, 2018, we announced that we entered into a definitive agreement with GSK under which we and GSK agreed to combine our respective consumer healthcare businesses into a new consumer healthcare joint venture that will operate globally under the GSK Consumer Healthcare name. The joint venture is expected to be a category leader in pain relief, respiratory, vitamin and mineral supplements, digestive health, skin health and therapeutic oral health and will be the largest global OTC consumer healthcare business.
|
•
|
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 income of
$1 million
in
2018
and pre-tax losses of
$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.
|
•
|
Acquisition of AstraZeneca’s Small Molecule Anti-Infectives Business (EH)
––On December 22, 2016, which fell 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
$1,040 million
, inclusive of cash paid and the fair value of contingent consideration.
|
•
|
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, and talazoparib, which was approved by the FDA in October 2018, under the trade name Talzenna, for the treatment of adults with germline BRCA-mutated HER2-negative locally advanced or metastatic breast cancer and is currently in development for other types of cancer. Xtandi is being developed and commercialized through a collaboration with Astellas. Astellas has exclusive commercialization rights for Xtandi outside the U.S.
|
•
|
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.
|
•
|
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 in December 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.
|
14
|
|
2018 Financial Report
|
|
•
|
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 with respect to this agreement, which was terminated effective as of 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 would fund up to
$200 million
in development costs related to certain Phase 3 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 13 quarters from 2016 through the second quarter of 2019 after which Pfizer will be responsible for the remaining development costs. 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
$57.6 million
for 2018,
$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 would fund up to
$300 million
in development costs related to certain Phase 3 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 until the second quarter of 2020 after which Pfizer will be responsible for the remaining cost of the trials. 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
$99.3 million
in 2018,
$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.
|
The following table provides our financial guidance for full-year 2019
(a), (b)
:
|
|
Revenues
|
$52.0 to $54.0 billion
|
Adjusted cost of sales as a percentage of revenues
|
20.8% to 21.8%
|
Adjusted selling, informational and administrative expenses
|
$13.5 to $14.5 billion
|
Adjusted research and development expenses
|
$7.8 to $8.3 billion
|
Adjusted other (income)/deductions
|
Approximately $100 million of income
|
Effective tax rate on adjusted income
|
Approximately 16.0%
|
Adjusted diluted EPS
|
$2.82 to $2.92
|
(a)
|
The
2019
financial guidance reflects the following:
|
•
|
A full year of revenue and expense contributions from Pfizer’s Consumer Healthcare business.
|
•
|
Does not assume the completion of any business development transactions not completed as of
December 31, 2018
, including any one-time upfront payments associated with such transactions.
|
•
|
Financial guidance for Adjusted other (income)/deductions and Adjusted diluted EPS now excludes the impact of gains and losses on investments in equity securities. In 2018, Pfizer’s 2018 financial results included net gains on investments in equity securities, which favorably impacted Adjusted other (income)/deductions by
$586 million
and Adjusted diluted EPS
(2)
by approximately
$0.08
in 2018. Beginning In 2019, we will exclude the gains and losses from equity securities from our measure of Adjusted income because of their inherent volatility, which we do not control and cannot predict with any level of certainty and because we do not believe that including these gains and losses assists investors in understanding our business or is reflective of our core operations and business. For example, we contributed assets related to our allogeneic CAR T therapy to Allogene and received equity securities. We will restate our Adjusted income and Adjusted diluted EPS for prior periods for consistency with our 2019 presentation.
|
•
|
Reflects an anticipated negative revenue impact of
$2.6 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.
|
•
|
Exchange rates assumed are as of mid-January 2019. Reflects the anticipated unfavorable impact of approximately
$0.9 billion
on revenues and approximately
$0.06
on adjusted diluted EPS
as a result of changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2018.
|
•
|
Guidance for adjusted diluted EPS assumes diluted weighted-average shares outstanding of approximately
5.7
billion shares,
which reflects share repurchases totaling $12.2 billion in 2018 and the weighted-average impact of an anticipated approximately $9 billion of share repurchases in 2019
, which
|
2018 Financial Report
|
|
15
|
|
(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.
|
16
|
|
2018 Financial Report
|
|
•
|
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.
|
•
|
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.
|
2018 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
|
|
2018 Financial Report
|
|
2018 Financial Report
|
|
19
|
|
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
2017
|
|
2016
|
|
18/17
|
|
17/16
|
||||||||
Revenues
|
|
$
|
53,647
|
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
|
2
|
|
|
(1
|
)
|
Cost of sales
|
|
11,248
|
|
|
11,228
|
|
|
12,322
|
|
|
—
|
|
|
(9
|
)
|
|||
% of revenues
|
|
21.0
|
%
|
|
21.4
|
%
|
|
23.3
|
%
|
|
|
|
|
|||||
Selling, informational and administrative expenses
|
|
14,455
|
|
|
14,804
|
|
|
14,844
|
|
|
(2
|
)
|
|
—
|
|
|||
% of revenues
|
|
26.9
|
%
|
|
28.2
|
%
|
|
28.1
|
%
|
|
|
|
|
|||||
Research and development expenses
|
|
8,006
|
|
|
7,683
|
|
|
7,892
|
|
|
4
|
|
|
(3
|
)
|
|||
% of revenues
|
|
14.9
|
%
|
|
14.6
|
%
|
|
14.9
|
%
|
|
|
|
|
|||||
Amortization of intangible assets
|
|
4,893
|
|
|
4,758
|
|
|
4,056
|
|
|
3
|
|
|
17
|
|
|||
% of revenues
|
|
9.1
|
%
|
|
9.1
|
%
|
|
7.7
|
%
|
|
|
|
|
|||||
Restructuring charges and certain acquisition-related costs
|
|
1,044
|
|
|
351
|
|
|
1,565
|
|
|
*
|
|
|
(78
|
)
|
|||
% of revenues
|
|
1.9
|
%
|
|
0.7
|
%
|
|
3.0
|
%
|
|
|
|
|
|||||
Other (income)/deductions—net
|
|
2,116
|
|
|
1,416
|
|
|
3,794
|
|
|
49
|
|
|
(63
|
)
|
|||
Income from continuing operations before provision/(benefit) for taxes on income
|
|
11,885
|
|
|
12,305
|
|
|
8,351
|
|
|
(3
|
)
|
|
47
|
|
|||
% of revenues
|
|
22.2
|
%
|
|
23.4
|
%
|
|
15.8
|
%
|
|
|
|
|
|||||
Provision/(benefit) for taxes on income
|
|
706
|
|
|
(9,049
|
)
|
|
1,123
|
|
|
*
|
|
|
*
|
|
|||
Effective tax rate
|
|
5.9
|
%
|
|
(73.5
|
)%
|
|
13.4
|
%
|
|
|
|
|
|||||
Income from continuing operations
|
|
11,179
|
|
|
21,353
|
|
|
7,229
|
|
|
(48
|
)
|
|
*
|
|
|||
% of revenues
|
|
20.8
|
%
|
|
40.6
|
%
|
|
13.7
|
%
|
|
|
|
|
|||||
Discontinued operations—net of tax
|
|
10
|
|
|
2
|
|
|
17
|
|
|
*
|
|
|
(87
|
)
|
|||
Net income before allocation to noncontrolling interests
|
|
11,188
|
|
|
21,355
|
|
|
7,246
|
|
|
(48
|
)
|
|
*
|
|
|||
% of revenues
|
|
20.9
|
%
|
|
40.6
|
%
|
|
13.7
|
%
|
|
|
|
|
|||||
Less: Net income attributable to noncontrolling interests
|
|
36
|
|
|
47
|
|
|
31
|
|
|
(24
|
)
|
|
54
|
|
|||
Net income attributable to Pfizer Inc.
|
|
$
|
11,153
|
|
|
$
|
21,308
|
|
|
$
|
7,215
|
|
|
(48
|
)
|
|
*
|
|
% of revenues
|
|
20.8
|
%
|
|
40.6
|
%
|
|
13.7
|
%
|
|
|
|
|
*
|
Indicates calculation not meaningful or result is equal to or greater than 100%.
|
20
|
|
2018 Financial Report
|
|
(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
2018
, associated with the following segments: IH (
$8.9 billion
); and EH (
$11.7 billion
). 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
).
|
•
|
an increase in sales allowances as a result of sales growth, primarily in international markets;
|
•
|
higher chargebacks to U.S. wholesalers of certain IH and EH products, partially offset by decreases in chargebacks as a result of decreases in sales of sterile injectable products;
|
•
|
an increase in Medicare rebates driven by increased sales of IH products through this channel; and
|
•
|
an increase in Medicaid and related state program rebates, primarily as a result of increased sales of IH products through these programs.
|
2018 Financial Report
|
|
21
|
|
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)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
18/17
|
|
|
17/16
|
|
|
18/17
|
|
|
17/16
|
|
|
18/17
|
|
17/16
|
|
|||||||||
Operating Segments
(a)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
IH
|
|
$
|
33,426
|
|
|
$
|
31,422
|
|
|
$
|
29,197
|
|
|
$
|
18,959
|
|
|
$
|
18,460
|
|
|
$
|
16,773
|
|
|
$
|
14,467
|
|
|
$
|
12,962
|
|
|
$
|
12,424
|
|
|
6
|
|
|
8
|
|
|
3
|
|
|
10
|
|
|
12
|
|
4
|
|
EH
|
|
20,221
|
|
|
21,124
|
|
|
23,627
|
|
|
6,370
|
|
|
7,567
|
|
|
9,596
|
|
|
13,851
|
|
|
13,557
|
|
|
14,031
|
|
|
(4
|
)
|
|
(11
|
)
|
|
(16
|
)
|
|
(21
|
)
|
|
2
|
|
(3
|
)
|
|||||||||
Total revenues
|
|
$
|
53,647
|
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
|
$
|
25,329
|
|
|
$
|
26,026
|
|
|
$
|
26,369
|
|
|
$
|
28,318
|
|
|
$
|
26,519
|
|
|
$
|
26,455
|
|
|
2
|
|
|
(1
|
)
|
|
(3
|
)
|
|
(1
|
)
|
|
7
|
|
—
|
|
(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.
|
22
|
|
2018 Financial Report
|
|
(MILLIONS OF DOLLARS)
|
|
Worldwide
|
|
U.S.
|
|
International
|
||||||
Operational growth/(decline):
|
|
|
|
|
|
|
||||||
Continued growth from certain key brands
(a)
|
|
$
|
2,815
|
|
|
$
|
1,150
|
|
|
$
|
1,664
|
|
Growth from Biosimilars, primarily from Inflectra in certain channels in the U.S. and developed Europe markets
|
|
217
|
|
|
147
|
|
|
69
|
|
|||
Growth from recently launched products, including Eucrisa in the U.S., as well as Besponsa and Bavencio, primarily in the U.S. and developed Europe
|
|
195
|
|
|
158
|
|
|
37
|
|
|||
Growth in our Consumer Healthcare business across all markets
|
|
107
|
|
|
26
|
|
|
81
|
|
|||
Impact from CentreOne primarily in emerging markets
|
|
45
|
|
|
(127
|
)
|
|
172
|
|
|||
Lower revenues for total Viagra
(b)
, primarily in the U.S. due to generic competition that began in December 2017
|
|
(572
|
)
|
|
(572
|
)
|
|
—
|
|
|||
Decline from the Peri-LOE Products portfolio, driven by lower revenues in developed markets (excluding Viagra EH), primarily due to expected declines in Lyrica in developed Europe and Celebrex and Pristiq in the U.S. due to generic competition
|
|
(558
|
)
|
|
(188
|
)
|
|
(371
|
)
|
|||
Impact from the SIP portfolio, driven by lower revenues in developed markets, primarily due to increased competition across the portfolio and continued legacy Hospira product shortages in the U.S.
|
|
(504
|
)
|
|
(589
|
)
|
|
86
|
|
|||
Impact from the LEP portfolio, driven by lower revenues in developed markets, primarily as a result of industry-wide pricing challenges in the U.S. and generic competition
|
|
(436
|
)
|
|
(592
|
)
|
|
156
|
|
|||
Lower revenues for Enbrel, primarily in most developed Europe markets due to continued biosimilar competition
|
|
(350
|
)
|
|
—
|
|
|
(350
|
)
|
|||
Lower revenues from the hemophilia portfolio (BeneFIX and Refacto AF/Xyntha), primarily in developed Europe
|
|
(100
|
)
|
|
(13
|
)
|
|
(88
|
)
|
|||
Impact on financial results from the sale of HIS in February 2017. 2018 does not reflect any contribution from HIS global operations, compared to approximately one month of HIS domestic operations and approximately two months of HIS international operations in the same period in 2017
|
|
(97
|
)
|
|
(64
|
)
|
|
(33
|
)
|
|||
Other operational factors, net
|
|
31
|
|
|
(34
|
)
|
|
65
|
|
|||
Operational growth/(decline), net
|
|
791
|
|
|
(698
|
)
|
|
1,489
|
|
|||
|
|
|
|
|
|
|
||||||
Favorable impact of foreign exchange
|
|
310
|
|
|
—
|
|
|
310
|
|
|||
Revenues increase/(decrease)
|
|
$
|
1,101
|
|
|
$
|
(698
|
)
|
|
$
|
1,799
|
|
(a)
|
Certain key brands represent Ibrance, Eliquis, Xeljanz, Prevnar 13/Prevenar 13, Xtandi, Lyrica––IH and Chantix/Champix. See the “Analysis of the Consolidated Statements of Income––Revenues––Selected Product Discussion" section of this Financial Review for product analysis information.
|
(b)
|
Viagra lost exclusivity in the U.S. in December 2017. In 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through 2017, were reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, in 2018, total Viagra revenues were reported in EH. Total Viagra revenues in 2017 represent the aggregate of worldwide revenues from Viagra IH and Viagra EH.
|
2018 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 certain key brands
(a)
|
|
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
|
|
(a)
|
Certain k
ey brands
represent
Eliquis (globally), as well as
Xeljanz and Lyrica - IH (both primarily in the U.S.).
|
•
|
Prevnar 13/Prevenar 13
(IH):
|
|
|
Year Ended December 31,
|
||||||||||
|
|
|
|
|
|
% Change
|
||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
Oper.
|
||
U.S.
|
|
$
|
3,360
|
|
|
$
|
3,334
|
|
|
1
|
|
|
International
|
|
2,443
|
|
|
2,268
|
|
|
8
|
|
8
|
||
Worldwide revenues
|
|
$
|
5,802
|
|
|
$
|
5,601
|
|
|
4
|
|
4
|
24
|
|
2018 Financial Report
|
|
•
|
Lyrica
(EH (revenues from all of Europe, Russia, Turkey, Israel and Central Asia)/IH (revenues from all other geographies)):
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
|
|
|
|
% Change
|
||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
|
Oper.
|
|
||
U.S.
|
|
$
|
3,594
|
|
|
$
|
3,463
|
|
|
4
|
|
|
|
|
International
|
|
1,375
|
|
|
1,601
|
|
|
(14
|
)
|
|
(15
|
)
|
||
Worldwide revenues
|
|
$
|
4,970
|
|
|
$
|
5,065
|
|
|
(2
|
)
|
|
(2
|
)
|
•
|
Ibrance
(IH):
|
|
|
Year Ended December 31,
|
||||||||||
|
|
|
|
|
|
% Change
|
||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
Oper.
|
||
U.S.
|
|
$
|
2,922
|
|
|
$
|
2,825
|
|
|
3
|
|
|
International
|
|
1,196
|
|
|
300
|
|
|
*
|
|
*
|
||
Worldwide revenues
|
|
$
|
4,118
|
|
|
$
|
3,126
|
|
|
32
|
|
32
|
2018 Financial Report
|
|
25
|
|
•
|
Eliquis alliance revenues and direct sales
(IH): Eliquis 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.
|
|
|
Year Ended December 31,
|
||||||||||
|
|
|
|
|
|
% Change
|
||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
Oper.
|
||
U.S.
|
|
$
|
1,849
|
|
|
$
|
1,418
|
|
|
30
|
|
|
International
|
|
1,585
|
|
|
1,105
|
|
|
43
|
|
40
|
||
Worldwide revenues
|
|
$
|
3,434
|
|
|
$
|
2,523
|
|
|
36
|
|
35
|
•
|
Enbrel
(IH, outside the U.S. and Canada):
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
|
|
|
|
% Change
|
||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
|
Oper.
|
|
||
U.S.
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
|
International
|
|
2,112
|
|
|
2,452
|
|
|
(14
|
)
|
|
(14
|
)
|
||
Worldwide revenues
|
|
$
|
2,112
|
|
|
$
|
2,452
|
|
|
(14
|
)
|
|
(14
|
)
|
•
|
Lipitor
(EH):
|
|
|
Year Ended December 31,
|
|||||||||||
|
|
|
|
|
|
% Change
|
|||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
|
Oper.
|
||
U.S.
|
|
$
|
110
|
|
|
$
|
161
|
|
|
(31
|
)
|
|
|
International
|
|
1,952
|
|
|
1,754
|
|
|
11
|
|
|
9
|
||
Worldwide revenues
|
|
$
|
2,062
|
|
|
$
|
1,915
|
|
|
8
|
|
|
5
|
•
|
Xeljanz
(IH):
|
|
|
Year Ended December 31,
|
||||||||||
|
|
|
|
|
|
% Change
|
||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
Oper.
|
||
U.S.
|
|
$
|
1,394
|
|
|
$
|
1,133
|
|
|
23
|
|
|
International
|
|
380
|
|
|
212
|
|
|
79
|
|
84
|
||
Worldwide revenues
|
|
$
|
1,774
|
|
|
$
|
1,345
|
|
|
32
|
|
33
|
•
|
Chantix/Champix
(IH):
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
|
|
|
|
% Change
|
||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
|
Oper.
|
|
||
U.S.
|
|
$
|
838
|
|
|
$
|
742
|
|
|
13
|
|
|
|
|
International
|
|
247
|
|
|
255
|
|
|
(3
|
)
|
|
(5
|
)
|
||
Worldwide revenues
|
|
$
|
1,085
|
|
|
$
|
997
|
|
|
9
|
|
|
8
|
|
26
|
|
2018 Financial Report
|
|
•
|
Sutent
(IH):
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
|
|
|
|
% Change
|
||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
|
Oper.
|
|
||
U.S.
|
|
$
|
357
|
|
|
$
|
374
|
|
|
(4
|
)
|
|
|
|
International
|
|
692
|
|
|
707
|
|
|
(2
|
)
|
|
(3
|
)
|
||
Worldwide revenues
|
|
$
|
1,049
|
|
|
$
|
1,081
|
|
|
(3
|
)
|
|
(4
|
)
|
•
|
Norvasc
(EH):
|
|
|
Year Ended December 31,
|
|||||||||||
|
|
|
|
|
|
% Change
|
|||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
|
Oper.
|
||
U.S.
|
|
$
|
36
|
|
|
$
|
38
|
|
|
(5
|
)
|
|
|
International
|
|
988
|
|
|
888
|
|
|
11
|
|
|
9
|
||
Worldwide revenues
|
|
$
|
1,024
|
|
|
$
|
926
|
|
|
11
|
|
|
9
|
•
|
The
Premarin
family of products (EH):
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
|
|
|
|
% Change
|
||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
|
Oper.
|
|
||
U.S.
|
|
$
|
783
|
|
|
$
|
921
|
|
|
(15
|
)
|
|
|
|
International
|
|
49
|
|
|
56
|
|
|
(12
|
)
|
|
(12
|
)
|
||
Worldwide revenues
|
|
$
|
832
|
|
|
$
|
977
|
|
|
(15
|
)
|
|
(15
|
)
|
•
|
Xtandi alliance revenues
(IH): Xtandi is being developed and commercialized through a collaboration with Astellas. The two companies share equally in the gross profits (losses) related to U.S. net sales of Xtandi. Subject to certain exceptions, Pfizer and Astellas also share equally all Xtandi commercialization costs attributable to the U.S. market. Pfizer and Astellas also share certain development and other collaboration expenses, and Pfizer receives tiered royalties as a percentage of international Xtandi net sales (recorded in
Other (income)/deductions—net
).
|
|
|
Year Ended December 31,
|
||||||||||
|
|
|
|
|
|
% Change
|
||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
Oper.
|
||
U.S.
|
|
$
|
699
|
|
|
$
|
590
|
|
|
18
|
|
|
International
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
||
Worldwide revenues
|
|
$
|
699
|
|
|
$
|
590
|
|
|
18
|
|
18
|
•
|
Celebrex
(EH):
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
|
|
|
|
% Change
|
||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
2017
|
|
Total
|
|
|
Oper.
|
|
||||
U.S.
|
|
$
|
65
|
|
|
$
|
164
|
|
|
(60
|
)
|
|
|
|
International
|
|
621
|
|
|
611
|
|
|
2
|
|
|
—
|
|
||
Worldwide revenues
|
|
$
|
686
|
|
|
$
|
775
|
|
|
(11
|
)
|
|
(13
|
)
|
2018 Financial Report
|
|
27
|
|
•
|
Inflectra/Remsima
(EH):
|
|
|
Year Ended December 31,
|
||||||||||
|
|
|
|
|
|
% Change
|
||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
2017
|
|
Total
|
|
Oper.
|
||||
U.S.
|
|
$
|
259
|
|
|
$
|
118
|
|
|
*
|
|
|
International
|
|
383
|
|
|
301
|
|
|
27
|
|
23
|
||
Worldwide revenues
|
|
$
|
642
|
|
|
$
|
419
|
|
|
53
|
|
50
|
•
|
Viagra
(EH): Viagra
lost exclusivity in the U.S. in December 2017. In 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through 2017, are reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, in 2018, total Viagra revenues are reported in EH.
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
|
|
|
|
% Change
|
||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
|
Oper.
|
|
||
U.S.
|
|
$
|
217
|
|
|
$
|
789
|
|
|
(73
|
)
|
|
|
|
International
|
|
419
|
|
|
416
|
|
|
1
|
|
|
—
|
|
||
Worldwide revenues
|
|
$
|
636
|
|
|
$
|
1,204
|
|
|
(47
|
)
|
|
(47
|
)
|
•
|
Sulperazon
(EH):
|
|
|
Year Ended December 31,
|
||||||||||
|
|
|
|
|
|
% Change
|
||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
Total
|
|
Oper.
|
||
U.S.
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
International
|
|
613
|
|
|
471
|
|
|
30
|
|
27
|
||
Worldwide revenues
|
|
$
|
613
|
|
|
$
|
471
|
|
|
30
|
|
27
|
•
|
Xalkori
(IH):
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
|
|
|
|
% Change
|
||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
2017
|
|
Total
|
|
Oper.
|
||||||
U.S.
|
|
$
|
158
|
|
|
$
|
223
|
|
|
(29
|
)
|
|
|
|
International
|
|
366
|
|
|
371
|
|
|
(1
|
)
|
|
(4
|
)
|
||
Worldwide revenues
|
|
$
|
524
|
|
|
$
|
594
|
|
|
(12
|
)
|
|
(14
|
)
|
•
|
Inlyta
(IH):
|
|
|
Year Ended December 31,
|
||||||||||||
|
|
|
|
|
|
% Change
|
||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
2017
|
|
Total
|
|
|
Oper.
|
|
||||
U.S.
|
|
$
|
119
|
|
|
$
|
126
|
|
|
(5
|
)
|
|
|
|
International
|
|
178
|
|
|
213
|
|
|
(16
|
)
|
|
(16
|
)
|
||
Worldwide revenues
|
|
$
|
298
|
|
|
$
|
339
|
|
|
(12
|
)
|
|
(12
|
)
|
28
|
|
2018 Financial Report
|
|
•
|
Eucrisa
(IH):
|
|
|
Year Ended December 31,
|
||||||||||
|
|
|
|
|
|
% Change
|
||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
2017
|
|
Total
|
|
Oper.
|
||||
U.S.
|
|
$
|
147
|
|
|
$
|
67
|
|
|
*
|
|
|
International
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
||
Worldwide revenues
|
|
$
|
147
|
|
|
$
|
67
|
|
|
*
|
|
*
|
•
|
Alliance revenues
(IH/EH):
|
|
|
Year Ended December 31,
|
||||||||||
|
|
|
|
|
|
% Change
|
||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
2017
|
|
Total
|
|
Oper.
|
||||
U.S.
|
|
$
|
2,576
|
|
|
$
|
2,037
|
|
|
26
|
|
|
International
|
|
1,263
|
|
|
890
|
|
|
42
|
|
37
|
||
Worldwide revenues
|
|
$
|
3,838
|
|
|
$
|
2,927
|
|
|
31
|
|
30
|
◦
|
Bavencio
(IH) is being developed and commercialized in collaboration with Merck KGaA.
Both companies jointly fund the majority of development and commercialization costs, and split equally any profits generated from selling any products containing avelumab from this collaboration.
Bavencio is currently approved in metastatic MCC in the U.S., Europe and Japan and selected other markets, as well as in second line treatment of locally advanced or metastatic urothelial carcinoma in the U.S.
|
RECENT FDA APPROVALS
|
||
PRODUCT
|
INDICATION
|
DATE APPROVED
|
Daurismo (glasdegib)
|
Treatment of newly-diagnosed acute myeloid leukemia in adult patients who are 75 years or older or who have comorbidities that preclude use of intensive induction chemotherapy
|
November 2018
|
Lorbrena (lorlatinib)
|
Treatment of patients with ALK-positive metastatic NSCLC whose disease has progressed on crizotinib and at least one other ALK inhibitor for metastatic disease; or whose disease has progressed on alectinib or ceritinib as the first ALK inhibitor therapy for metastatic disease
|
November 2018
|
Talzenna (talazoparib)
|
Treatment of adult patients with deleterious or suspected deleterious germline BRCA-mutated (gBRCAm) human epidermal growth factor receptor 2 (HER2)-negative locally advanced or metastatic breast cancer
|
October 2018
|
Vizimpro (dacomitinib)
|
First-line treatment of patients with metastatic non-small cell lung cancer with epidermal growth factor receptor exon 19 deletion or exon 21 L858R substitution mutations as detected by an FDA-approved test, which is being developed in collaboration with SFJ
|
September 2018
|
Nivestym (filgrastim-aafi)
(a)
|
A biosimilar to Neupogen
®
(filgrastim) for all eligible indications of the reference product
|
July 2018
|
Xtandi (enzalutamide)
|
Treatment of men with non-metastatic castration-resistant prostate cancer, which is being developed through a collaboration with Astellas
|
July 2018
|
Xeljanz (tofacitinib)
|
Treatment of adult patients with moderately to severely active ulcerative colitis
|
May 2018
|
Retacrit (epoetin alfa-epbx)
(b)
|
A biosimilar to Epogen® and Procrit® (epoetin alfa) for all indications of the reference product
|
May 2018
|
(a)
|
Neupogen
®
is a registered trademark of Amgen Inc.
|
(b)
|
Epogen® is a registered U.S. trademark of Amgen Inc.; Procrit® is a registered U.S. trademark of J&J.
|
2018 Financial Report
|
|
29
|
|
PENDING U.S. NDAs AND SUPPLEMENTAL FILINGS
|
||
PRODUCT
|
PROPOSED INDICATION
|
DATE FILED*
|
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
|
February 2019
|
PF-06410293
(a)
|
A potential biosimilar to Humira® (adalimumab)
|
January 2019
|
tafamidis meglumine
|
Treatment of transthyretin amyloid cardiomyopathy
|
January 2019
|
tafamidis free acid
|
Treatment of transthyretin amyloid cardiomyopathy
|
January 2019
|
PF-05280586
(b)
|
A potential biosimilar to Rituxan
®
(rituximab)
|
September 2018
|
PF-06439535
(c)
|
A potential biosimilar to Avastin
®
(bevacizumab)
|
August 2018
|
PF-05280014
(d)
|
A potential biosimilar to Herceptin
®
(trastuzumab)
|
August 2017
|
tafamidis meglumine
(e)
|
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)
|
Humira
®
is a registered trademark of AbbVie Biotechnology Ltd.
|
(b)
|
Rituxan
®
is a registered trademark of Biogen MA Inc.
|
(c)
|
Avastin
®
is a registered trademark of Genentech, Inc.
|
(d)
|
Herceptin
®
is a registered trademark of Genentech, Inc. In April 2018, we received a “complete response” letter from the FDA with respect to our biologics license application (BLA) for PF-05280014, our proposed biosimilar to trastuzumab, which was submitted for all indications of the reference product. The FDA highlighted the need for additional technical information, which does not relate to safety or clinical data submitted in the application. In October 2018, the FDA acknowledged for review our BLA resubmission.
|
(e)
|
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 this 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 has completed study B3461028, a global Phase 3 study to support a potential new indication in transthyretin cardiomyopathy, which includes patients with wild type and variant transthyretin. This study has achieved its primary endpoint, and we are working with the FDA to identify next steps.
|
REGULATORY APPROVALS AND FILINGS IN THE EU AND JAPAN
|
|||
PRODUCT
|
DESCRIPTION OF EVENT
|
DATE APPROVED
|
DATE FILED*
|
Zirabev
(a)
|
Application approved in the EU for a biosimilar to Avastin
®
(bevacizumab) for the treatment of metastatic carcinoma of the colon or rectum, metastatic breast cancer, unresectable advanced, metastatic or recurrent NSCLC, advanced and/or metastatic renal cell cancer and persistent, recurrent, or metastatic carcinoma of the cervix
|
February 2019
|
—
|
Vyndaqel (tafamidis free acid)
|
Application filed in the EU for the treatment of adult symptomatic transthyretin cardiomyopathy
|
—
|
January 2019
|
Bavencio (avelumab)
|
Application filed in Japan for Bavencio (avelumab) in combination with Inlyta (axitinib) for the first-line treatment of advanced renal cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany
|
—
|
January 2019
|
Vizimpro (dacomitinib)
|
Application approved in Japan for the treatment of patients with locally advanced or metastatic non-small cell lung cancer with EGFR mutations, which is being developed in collaboration with SFJ
|
January 2019
|
—
|
PF-06410293
(b)
|
Application filed in the EU for a potential biosimilar to Humira
®
(adalimumab)
|
—
|
November 2018
|
tafamidis meglumine
|
Application filed in Japan for treatment of transthyretin amyloid cardiomyopathy
|
—
|
November 2018
|
Xtandi (enzalutamide)
|
Application approved in the EU for treatment of adult men with high-risk non-metastatic castration-resistant prostate cancer, which is being developed through a collaboration with Astellas
|
October 2018
|
—
|
Trastuzumab BS for IV Infusion 60mg/150mg “Pfizer”
(c)
|
Application approved in Japan for a biosimilar to Herceptin
®
(trastuzumab)
|
September 2018
|
—
|
Lorbrena (lorlatinib)
|
Application approved in Japan for the treatment of patients with ALK-positive metastatic non-small cell lung cancer, previously treated with one or more ALK inhibitor
|
September 2018
|
—
|
PF-05280586
(d)
|
Application filed in the EU for a potential biosimilar to Rituxan
®
(rituximab)
|
—
|
August 2018
|
Xeljanz (tofacitinib)
|
Application approved in the EU for the treatment of adult patients with moderately to severely active ulcerative colitis who have had an inadequate response, lost response, or were intolerant to either conventional therapy or a biologic agent
|
July 2018
|
—
|
Trazimera
(c)
|
Application approved in the EU for a biosimilar to Herceptin
®
(trastuzumab) for the treatment of human epidermal growth factor (HER2) overexpressing breast cancer and HER2 overexpressing metastatic gastric or gastroesophageal junction adenocarcinoma
|
July 2018
|
—
|
Infliximab BS for IV Infusion 100mg “Pfizer”
(e)
|
Application approved in Japan for a biosimilar to Remicade
®
(infliximab)
|
July 2018
|
—
|
Xeljanz (tofacitinib)
|
Application approved in the EU for Xeljanz in combination with methotrexate for the treatment of active PsA in adult patients who have had an inadequate response or who have been intolerant to a prior disease-modifying antirheumatic drug therapy
|
June 2018
|
—
|
talazoparib
|
Application filed in the EU for the treatment of patients with germline BRCA-mutated advanced breast cancer
|
—
|
June 2018
|
Xeljanz (tofacitinib)
|
Application approved in Japan for the treatment of ulcerative colitis
|
May 2018
|
—
|
crisaborole
|
Application filed in the EU for the treatment of mild-to-moderate atopic dermatitis
|
—
|
May 2018
|
30
|
|
2018 Financial Report
|
|
REGULATORY APPROVALS AND FILINGS IN THE EU AND JAPAN
(cont’d.)
|
|||
PRODUCT
|
DESCRIPTION OF EVENT
|
DATE APPROVED
|
DATE FILED*
|
Mylotarg (gemtuzumab ozogamicin)
|
Application approved in the EU for treatment of patients age 15 years and above with previously untreated, de novo, CD33-positive acute myeloid leukemia, except acute promyelocytic leukemia
|
April 2018
|
—
|
Bosulif (bosutinib)
|
Application approved in the EU for the treatment of adults with newly diagnosed chronic phase Philadelphia chromosome-positive chronic myelogenous leukemia (Ph+ CML), which is being developed in collaboration with Avillion
|
April 2018
|
—
|
dacomitinib
(f)
|
Application filed in the EU for the first-line treatment of patients with locally advanced or metastatic non-small cell lung cancer with EGFR activating mutations, which is being developed in collaboration with SFJ
|
—
|
March 2018
|
Steglatro (ertugliflozin)
|
Approval in the EU as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus:
•
as monotherapy in patients for whom the use of metformin is considered inappropriate due to intolerance or contraindications; and
•
in addition to other medicinal products for the treatment of diabetes, which is being developed in collaboration with Merck
|
March 2018
|
—
|
Segluromet (ertugliflozin and metformin)
|
Approval in the EU as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus:
•
in patients not adequately controlled on their maximally tolerated dose of metformin alone;
•
in patients on their maximally tolerated doses of metformin in addition to other medicinal products for the treatment of diabetes; and
•
in patients already being treated with the combination of ertugliflozin and metformin as separate tablets, which is being developed in collaboration with Merck
|
March 2018
|
—
|
Steglujan (ertugliflozin and sitagliptin)
|
Approval in the EU as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus:
•
when metformin and/or a sulphonylurea (SU) and one of the monocomponents of Steglujan do not provide adequate glycaemic control; and
•
in patients already being treated with the combination of ertugliflozin and sitagliptin as separate tablets, which is being developed in collaboration with Merck
|
March 2018
|
—
|
Xeljanz (tofacitinib)
|
Application filed in the EU for modified release 11mg tablet for RA
|
—
|
March 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
|
*
|
For applications in the EU, the dates set forth in this column are the dates on which the EMA validated our submissions.
|
(a)
|
Avastin
®
is a registered trademark of Genentech, Inc.
|
(b)
|
Humira
®
is a registered trademark of AbbVie Biotechnology Ltd.
|
(c)
|
Herceptin
®
is a registered trademark of Genentech, Inc.
|
(d)
|
Rituxan
®
is a registered trademark of Biogen MA Inc.
|
(e)
|
Remicade
®
is a registered Japan 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.
|
(f)
|
In February 2019, the EMA’s Committee for Medicinal Products for Human Use adopted a positive opinion recommending marketing authorization for dacomitinib, as monotherapy, for the first-line treatment of adult patients with locally advanced or metastatic NSCLC with EGFR-activating mutations.
|
2018 Financial Report
|
|
31
|
|
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 (ex-U.S./Japan)
|
Bavencio (avelumab)
|
A monoclonal antibody that inhibits PD-L1, in combination with Talzenna (talazoparib), in patients with previously untreated advanced 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 stage IIIb/IV non-small cell lung
cancer, which is being developed in collaboration with Merck KGaA, Germany |
Bavencio (avelumab)
|
A monoclonal antibody that inhibits PD-L1 for 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 |
Daurismo (glasdegib)
|
A smoothened inhibitor, in combination with azacitidine,
for the treatment of acute myeloid leukemia
|
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
|
Lorbrena (lorlatinib)
|
A next generation ALK/ROS1 tyrosine kinase inhibitor for the first-line treatment of patients with ALK-positive advanced non-small cell lung cancer
|
Xeljanz (tofacitinib)
|
Treatment of ankylosing spondylitis
|
Xtandi (enzalutamide)
|
Treatment of non-metastatic hormone-sensitive prostate cancer, which is being developed through a collaboration with Astellas
|
Xtandi (enzalutamide)
|
Treatment of metastatic hormone-sensitive prostate cancer, which is being developed through a collaboration with Astellas
|
Talzenna (talazoparib)
|
An oral PARP inhibitor, in combination with Xtandi (enzalutamide), for the treatment of metastatic castration-resistant prostate cancer
|
NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT
|
|
CANDIDATE
|
PROPOSED INDICATION
|
aztreonam-avibactam
(PF-06947387)
|
A beta lactam/beta lactamase inhibitor for the treatment of complicated intra-abdominal infections, hospital acquired pneumonia/ventilator associated pneumonia
|
fidanacogene elaparvovec (PF-06838435)
|
An investigational gene therapy for the treatment of hemophilia B
|
PF-06482077
|
A 20-Valent pneumococcal conjugate vaccine for the prevention of invasive pneumococcal disease and pneumonia caused by
Streptococcus pneumoniae
serotypes covered by the vaccine in adults 18 years of age and older
|
PF-06651600
|
A Janus kinase 3 (JAK3) inhibitor for the treatment of patients with moderate to severe alopecia areata
|
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 disease
|
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
|
tanezumab
|
An anti-nerve growth factor monoclonal antibody for the treatment of pain, which is being developed in collaboration with Lilly
|
32
|
|
2018 Financial Report
|
|
|
|
Year Ended December 31,
|
|
% Change
|
|||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
18/17
|
|
17/16
|
|
|||
Cost of sales
|
|
$
|
11,248
|
|
|
$
|
11,228
|
|
|
$
|
12,322
|
|
|
—
|
|
(9
|
)
|
As a percentage of
Revenues
|
|
21.0
|
%
|
|
21.4
|
%
|
|
23.3
|
%
|
|
|
|
|
|
•
|
increased sales volumes primary related to key products within our product portfolio;
|
•
|
higher costs across the SIP portfolio, as a result of the complexity of high quality product manufacture across the legacy Hospira plants, which was partially offset by decreases in other costs across various markets;
|
•
|
an increase in royalty expenses based on the mix of products sold; and
|
•
|
the unfavorable impact of hedging activity on intercompany inventory of
$65 million
,
|
•
|
lower volumes from the SIP portfolio, in developed markets, primarily due to increased competition across the SIP portfolio and continued legacy Hospira product shortages in the U.S.;
|
•
|
the non-recurrence of $195 million in inventory losses, overhead costs, and incremental costs related to the period in 2017 during which our Puerto Rico plants were not operational due to hurricanes;
|
•
|
the favorable impact of foreign exchange of
$153 million
;
|
•
|
the non-recurrence of charges related to a product recall that occurred in 2017; and
|
•
|
the favorable impact of the sale of HIS of $35 million.
|
•
|
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 2017 during which our Puerto Rico plants were not operational, and incremental costs, all of which resulted from the hurricanes in Puerto Rico.
|
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
18/17
|
|
|
17/16
|
|
|||
Selling, informational and administrative expenses
|
|
$
|
14,455
|
|
|
$
|
14,804
|
|
|
$
|
14,844
|
|
|
(2
|
)
|
|
—
|
|
As a percentage of
Revenues
|
|
26.9
|
%
|
|
28.2
|
%
|
|
28.1
|
%
|
|
|
|
|
•
|
lower advertising, promotional and field force expenses, as well as general and administrative expenses, reflecting the benefits of cost-reduction and productivity initiatives;
|
•
|
the non-recurrence of a $200 million charitable contribution to the Pfizer Foundation;
|
•
|
decreased investment across several of our key products, primarily Viagra and Enbrel; and
|
2018 Financial Report
|
|
33
|
|
•
|
lower healthcare reform expenses as a result of a true up of the prior year amount,
|
•
|
additional investment across several of our key products, primarily, Xeljanz, Ibrance, Eucrisa and Prevnar 13/Prevenar 13.
|
•
|
additional investments in China; and
|
•
|
a special, one-time bonus paid to virtually all Pfizer colleagues, excluding executives, of
$119 million
, in the aggregate, in the first quarter of 2018.
|
•
|
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.
|
|
|
Year Ended December 31,
|
|
% Change
|
|||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
18/17
|
|
17/16
|
|
|||
Research and development expenses
|
|
$
|
8,006
|
|
|
$
|
7,683
|
|
|
$
|
7,892
|
|
|
4
|
|
(3
|
)
|
As a percentage of
Revenues
|
|
14.9
|
%
|
|
14.6
|
%
|
|
14.9
|
%
|
|
|
|
|
•
|
increased costs associated with our Phase 3 clinical trials related to our JAK1 inhibitor (which was initiated in December 2017) and the
C. difficile
vaccine program (which was initiated in March 2017) as well as increased spending for our 20 valent pneumococcal conjugate vaccine candidate;
|
•
|
increased costs associated with the Bavencio program; and
|
•
|
an increase in the value of the portfolio performance share grants reflecting changes in the price of Pfizer’s common stock, as well as management’s assessment of the probability that the specified performance criteria will be achieved,
|
•
|
decreased spending for biosimilars as several programs have reached completion; and
|
•
|
the impact of our decision to end internal neuroscience discovery and early development efforts.
|
•
|
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.
|
34
|
|
2018 Financial Report
|
|
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
18/17
|
|
17/16
|
|||
Amortization of intangible assets
|
|
$
|
4,893
|
|
|
$
|
4,758
|
|
|
$
|
4,056
|
|
|
3
|
|
17
|
As a percentage of
Revenues
|
|
9.1
|
%
|
|
9.1
|
%
|
|
7.7
|
%
|
|
|
|
|
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
18/17
|
|
|
17/16
|
|
|||
Restructuring charges––acquisition-related costs
(a)
|
|
$
|
37
|
|
|
$
|
105
|
|
|
$
|
207
|
|
|
(64
|
)
|
|
(49
|
)
|
Restructuring charges/(credits)––cost reduction initiatives
(b)
|
|
745
|
|
|
(75
|
)
|
|
849
|
|
|
*
|
|
|
*
|
|
|||
Restructuring charges
|
|
782
|
|
|
30
|
|
|
1,055
|
|
|
*
|
|
|
(97
|
)
|
|||
Transaction costs
(c)
|
|
1
|
|
|
4
|
|
|
127
|
|
|
(62
|
)
|
|
(97
|
)
|
|||
Integration costs
(c)
|
|
260
|
|
|
317
|
|
|
383
|
|
|
(18
|
)
|
|
(17
|
)
|
|||
Restructuring charges and certain acquisition-related costs
|
|
1,044
|
|
|
351
|
|
|
1,565
|
|
|
*
|
|
|
(78
|
)
|
|||
Net periodic benefit costs
(d)
|
|
146
|
|
|
136
|
|
|
159
|
|
|
8
|
|
|
(15
|
)
|
|||
Total additional depreciation––asset restructuring
|
|
50
|
|
|
91
|
|
|
207
|
|
|
(45
|
)
|
|
(56
|
)
|
|||
Total implementation costs
|
|
194
|
|
|
227
|
|
|
340
|
|
|
(15
|
)
|
|
(33
|
)
|
|||
Costs associated with acquisitions and cost-reduction/productivity initiatives
(e)
|
|
$
|
1,434
|
|
|
$
|
805
|
|
|
$
|
2,271
|
|
|
78
|
|
|
(65
|
)
|
(a)
|
Restructuring charges––acquisition-related costs include employee termination costs, asset impairments and other exit costs associated with business combinations. Charges for
2018
were primarily due to asset write downs, partially offset by the reversal of previously recorded accruals for employee termination costs related to our acquisition of Hospira. Restructuring charges for 2017 were primarily due to asset write-downs, partially offset by the reversal of previously recorded accruals for employee termination costs. For 2017 and 2016, restructuring charges––acquisition-related costs were mainly related to our acquisitions of Hospira and Medivation.
|
(b)
|
Restructuring (credits)/charges––cost reduction initiatives relate to employee termination costs, asset impairments and other exit costs not associated with acquisitions. For 2018, the charges were primarily related to employee termination costs and asset write downs. The employee termination costs are associated with our improvements to operational effectiveness as part of the realignment of our organizational structure effective at the beginning of 2019. For 2017, the credits are mostly related to the reversal of previously recorded accruals for employee termination costs, partially offset by asset write downs.
|
(c)
|
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)
|
For additional information, see Notes to Consolidated Financial Statements—
Note 1B
.
Basis of Presentation and Significant Accounting Policies
:
Adoption of New Accounting Standards in 2018
and
Note 3.
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
.
|
(e)
|
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,
Selling, informational and administrative expenses
and/or
Other (income)/deductions––net
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%.
|
2018 Financial Report
|
|
35
|
|
|
|
Year Ended December 31,
|
|
% Change
|
|||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
18/17
|
|
17/16
|
|
|||
Other (income)/deductions—net
|
|
$
|
2,116
|
|
|
$
|
1,416
|
|
|
$
|
3,794
|
|
|
49
|
|
(63
|
)
|
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
18/17
|
|
17/16
|
|||
Provision/(benefit) for taxes on income
|
|
$
|
706
|
|
|
$
|
(9,049
|
)
|
|
$
|
1,123
|
|
|
*
|
|
*
|
Effective tax rate on continuing operations
|
|
5.9
|
%
|
|
(73.5
|
)%
|
|
13.4
|
%
|
|
|
|
|
*
|
Indicates calculation not meaningful or result is equal to or greater than 100%.
|
•
|
the non-recurrence of a $10.7 billion tax benefit recorded in 2017 to reflect the enactment of the TCJA,
|
•
|
tax benefits related to the TCJA, including certain current year tax initiatives as well as favorable adjustments to the provisional estimate of the impact of the legislation, reported and disclosed within the applicable measurement period, in accordance with guidance issued by the SEC;
|
•
|
the favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business; as well as
|
•
|
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.
|
•
|
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 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; and
|
36
|
|
2018 Financial Report
|
|
•
|
the non-recurrence of tax 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.
|
•
|
senior management receives a monthly analysis of our operating results that is prepared on an Adjusted income and Adjusted diluted earnings per share basis;
|
•
|
our annual budgets are prepared on an Adjusted income and Adjusted diluted earnings per share basis; and
|
•
|
senior management’s annual compensation is derived, in part, using Adjusted income and Adjusted diluted earnings per share measures. The bonus plans for virtually all bonus-eligible, non-sales-force employees worldwide, including the Executive Leadership Team members and other members of senior management, 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. In addition, Adjusted operating income, which is derived from Adjusted income, is one of the measures utilized to determine payout for performance share awards.
|
2018 Financial Report
|
|
37
|
|
38
|
|
2018 Financial Report
|
|
|
|
2018
|
||||||||||||||||||||||
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
|
|
$
|
53,647
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
53,647
|
|
Cost of sales
|
|
11,248
|
|
|
3
|
|
|
(10
|
)
|
|
—
|
|
|
(110
|
)
|
|
11,130
|
|
||||||
Selling, informational and administrative expenses
|
|
14,455
|
|
|
2
|
|
|
(2
|
)
|
|
—
|
|
|
(222
|
)
|
|
14,232
|
|
||||||
Research and development expenses
|
|
8,006
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
(47
|
)
|
|
7,962
|
|
||||||
Amortization of intangible assets
|
|
4,893
|
|
|
(4,612
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
281
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
1,044
|
|
|
—
|
|
|
(299
|
)
|
|
—
|
|
|
(745
|
)
|
|
—
|
|
||||||
Other (income)/deductions––net
|
|
2,116
|
|
|
(182
|
)
|
|
(7
|
)
|
|
—
|
|
|
(3,181
|
)
|
|
(1,253
|
)
|
||||||
Income from continuing operations before provision/(benefit) for taxes on income
|
|
11,885
|
|
|
4,786
|
|
|
318
|
|
|
—
|
|
|
4,305
|
|
|
21,294
|
|
||||||
Provision/(benefit) for taxes on income
(b)
|
|
706
|
|
|
915
|
|
|
54
|
|
|
—
|
|
|
1,625
|
|
|
3,301
|
|
||||||
Income from continuing operations
|
|
11,179
|
|
|
3,871
|
|
|
264
|
|
|
—
|
|
|
2,680
|
|
|
17,994
|
|
||||||
Discontinued operations––net of tax
|
|
10
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
||||||
Net income attributable to noncontrolling interests
|
|
36
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36
|
|
||||||
Net income attributable to Pfizer Inc.
|
|
11,153
|
|
|
3,871
|
|
|
264
|
|
|
(10
|
)
|
|
2,680
|
|
|
17,958
|
|
||||||
Earnings per common share attributable to Pfizer Inc.––diluted
|
|
1.87
|
|
|
0.65
|
|
|
0.04
|
|
|
—
|
|
|
0.45
|
|
|
3.00
|
|
2018 Financial Report
|
|
39
|
|
|
|
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
|
|
11,228
|
|
|
(47
|
)
|
|
(39
|
)
|
|
—
|
|
|
(363
|
)
|
|
10,778
|
|
||||||
Selling, informational and administrative expenses
|
|
14,804
|
|
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
(299
|
)
|
|
14,489
|
|
||||||
Research and development expenses
|
|
7,683
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
(38
|
)
|
|
7,653
|
|
||||||
Amortization of intangible assets
|
|
4,758
|
|
|
(4,565
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
193
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
351
|
|
|
—
|
|
|
(426
|
)
|
|
—
|
|
|
75
|
|
|
—
|
|
||||||
Other (income)/deductions––net
|
|
1,416
|
|
|
(138
|
)
|
|
9
|
|
|
—
|
|
|
(2,020
|
)
|
|
(733
|
)
|
||||||
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
|
|
12,322
|
|
|
(295
|
)
|
|
(7
|
)
|
|
—
|
|
|
(397
|
)
|
|
11,622
|
|
||||||
Selling, informational and administrative expenses
|
|
14,844
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(89
|
)
|
|
14,751
|
|
||||||
Research and development expenses
|
|
7,892
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
(34
|
)
|
|
7,861
|
|
||||||
Amortization of intangible assets
|
|
4,056
|
|
|
(3,928
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
128
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
1,565
|
|
|
—
|
|
|
(716
|
)
|
|
—
|
|
|
(849
|
)
|
|
—
|
|
||||||
Other (income)/deductions––net
|
|
3,794
|
|
|
39
|
|
|
(62
|
)
|
|
—
|
|
|
(4,519
|
)
|
|
(748
|
)
|
||||||
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
|
|
(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
15.5%
in
2018
,
20.0%
in
2017
and
23.0%
in
2016
. The decrease in the effective tax rate on Non-GAAP Adjusted income for
2018
compared with
2017
was primarily due to tax benefits associated with the December 2017 enactment of the TCJA, a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, as well as an 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. The decline in the effective tax rate on Non-GAAP Adjusted income in
2017
compared to
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.
|
40
|
|
2018 Financial Report
|
|
Adjusted income, as shown above, excludes the following items:
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
Purchase accounting adjustments
|
|
|
|
|
|
|
||||||
Amortization, depreciation and other
(a)
|
|
$
|
4,789
|
|
|
$
|
4,711
|
|
|
$
|
3,890
|
|
Cost of sales
|
|
(3
|
)
|
|
47
|
|
|
295
|
|
|||
Total purchase accounting adjustments—pre-tax
|
|
4,786
|
|
|
4,758
|
|
|
4,185
|
|
|||
Income taxes
(b)
|
|
(915
|
)
|
|
(1,331
|
)
|
|
(1,248
|
)
|
|||
Total purchase accounting adjustments—net of tax
|
|
3,871
|
|
|
3,426
|
|
|
2,937
|
|
|||
|
|
|
|
|
|
|
||||||
Acquisition-related costs
|
|
|
|
|
|
|
||||||
Restructuring charges
(c)
|
|
37
|
|
|
105
|
|
|
207
|
|
|||
Transaction costs
(c)
|
|
1
|
|
|
4
|
|
|
127
|
|
|||
Integration costs
(c)
|
|
260
|
|
|
317
|
|
|
383
|
|
|||
Net periodic benefit costs/(credits) other than service costs
(d)
|
|
7
|
|
|
(9
|
)
|
|
62
|
|
|||
Additional depreciation—asset restructuring
(e)
|
|
12
|
|
|
39
|
|
|
7
|
|
|||
Total acquisition-related costs—pre-tax
|
|
318
|
|
|
456
|
|
|
785
|
|
|||
Income taxes
(f)
|
|
(54
|
)
|
|
(173
|
)
|
|
(104
|
)
|
|||
Total acquisition-related costs—net of tax
|
|
264
|
|
|
283
|
|
|
682
|
|
|||
|
|
|
|
|
|
|
||||||
Discontinued operations
|
|
|
|
|
|
|
||||||
Total discontinued operations—net of tax, attributable to Pfizer Inc.
(g)
|
|
(10
|
)
|
|
(2
|
)
|
|
(17
|
)
|
|||
|
|
|
|
|
|
|
||||||
Certain significant items
|
|
|
|
|
|
|
||||||
Restructuring charges/(credits)
––
cost reduction initiatives
(h)
|
|
745
|
|
|
(75
|
)
|
|
849
|
|
|||
Implementation costs and additional depreciation—asset restructuring
(i)
|
|
232
|
|
|
279
|
|
|
540
|
|
|||
Certain legal matters, net
(j)
|
|
157
|
|
|
237
|
|
|
494
|
|
|||
Loss on sale and impairment on remeasurement of HIS net assets
(j)
|
|
(1
|
)
|
|
55
|
|
|
1,712
|
|
|||
Certain asset impairments
(j)
|
|
3,101
|
|
|
379
|
|
|
1,426
|
||||
Business and legal entity alignment costs
(j)
|
|
4
|
|
|
71
|
|
|
261
|
|
|||
Net losses on early retirement of debt
(i)
|
|
3
|
|
|
999
|
|
|
312
|
|
|||
Other
(k)
|
|
65
|
|
|
700
|
|
|
294
|
|
|||
Total certain significant items—pre-tax
|
|
4,305
|
|
|
2,647
|
|
|
5,888
|
|
|||
Income taxes
(l)
|
|
(1,625
|
)
|
|
(11,577
|
)
|
|
(1,943
|
)
|
|||
Total certain significant items—net of tax
|
|
2,680
|
|
|
(8,930
|
)
|
|
3,944
|
|
|||
Total purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items—net of tax, attributable to Pfizer Inc.
|
|
$
|
6,805
|
|
|
$
|
(5,223
|
)
|
|
$
|
7,546
|
|
(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. Restructuring charges in 2018 were
primarily due to asset write downs, partially offset by the reversal of previously recorded accruals for employee termination costs related to our acquisition of Hospira.
Restructuring charges for 2017 were primarily due to asset write-downs, partially offset by the reversal of previously recorded accruals for employee termination costs. For 2017 and 2016, restructuring charges––acquisition-related costs were mainly related to our acquisitions of Hospira and Medivation. 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)
|
Amounts for the 2017 and 2016 represent the net periodic benefit costs/(credits), excluding service costs, reclassified to
Other (income)/deductions––net
as a result of the retrospective adoption of a new accounting standard in the first quarter of 2018. For additional information, see Notes to Consolidated Financial Statements—
Note 1B.
Basis of Presentation and Significant Accounting Policies
:
Adoption of New Accounting Standards in 2018
.
The credits for full-year 2017 included a net settlement gain, partially offset by accelerated amortization of actuarial losses and prior service costs upon the settlement of the remaining obligation associated with the Hospira U.S. qualified defined benefit pension plan.
|
(e)
|
Primarily included in C
ost of sales.
Represents the impact of changes in estimated useful lives of assets involved in restructuring actions related to acquisitions
.
|
(f)
|
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
|
2018 Financial Report
|
|
41
|
|
(g)
|
Included in
Discontinued operations––net of tax.
For all years presented, represents post-close adjustments.
|
(h)
|
Amounts relate to employee termination costs, asset impairments and other exit costs not associated with acquisitions, which are 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
).
For 2018,
the charges were primarily related to employee termination costs and asset write downs. The employee termination costs are associated with our improvements to operational effectiveness as part of the realignment of our organizational structure effective at the beginning of 2019.
For 2017, the credits were mostly related to the reversal of previously recorded accruals for employee termination costs, partially offset by asset write downs.
|
(i)
|
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
2018
, included in
Cost of sales
(
$121 million
),
Selling, informational and administrative expenses
(
$72 million
) and
Research and development expenses
(
$39 million
). 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 included in
Cost of sales
(
$423 million
),
Selling, informational and administrative expenses
(
$81 million
) and
Research and development expenses
(
$32 million
).
|
(j)
|
Included in
Other (income)/deductions—net
(see the Notes to Consolidated Financial Statements—
Note 4. Other (Income)/Deductions—Net
).
|
(k)
|
For
2018
, included in
Cost of sales
(
$10 million
income),
Selling, informational and administrative expenses
(
$151 million
),
Research and development expenses
(
$8 million
) and
Other (income)/deductions––net
(
$83 million
income). For
2017
, included in
Cost of sales
(
$193 million
),
Selling, informational and administrative expenses
(
$229 million
) and
Other (income)/deductions––net
(
$278 million
). For
2016
, primarily included in
Cost of sales
(
$27 million
income),
Selling, informational and administrative expenses (
$8 million
) and
Other (income)/deductions––net
(
$311 million
). For
2018
, includes, among other things, (i) a non-cash
$343 million
pre-tax gain in
Other (income)/deductions––net
associated with our transaction with Bain Capital to create a new biopharmaceutical company, Cerevel, to continue development of a portfolio of clinical and preclinical stage neuroscience assets primarily targeting disorders of the central nervous system, (ii) a
$119 million
charge, in the aggregate, in
Selling, informational and administrative expenses
for a special, one-time bonus paid to virtually all Pfizer colleagues, excluding executives, which was one of several actions taken by us after evaluating the expected positive net impact of the December 2017 enactment of the legislation commonly referred to as the TCJA, (iii) $59 million of incremental costs associated with the design, planning and implementation of the new organizational structure, effective in the beginning of 2019, and primarily include consulting, legal, tax, and advisory services and (iv) a non-cash
$50 million
pre-tax gain in
Other (income)/deductions––net
as a result of the contribution of our allogeneic chimeric antigen receptor T cell therapy development program assets in connection with our contribution agreement entered into with Allogene (see Notes to Consolidated Financial Statements—
Note 2B.
Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held Investment
: Divestitures
). For 2017 includes, among other things, (i) a charitable contribution to the Pfizer Foundation of
$200 million
, which is included in Selling, i
nformational 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, all of which resulted from hurricanes in Puerto Rico in 2017 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 then
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
.
|
(l)
|
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 2018 was favorably impacted primarily by tax benefits related to the TCJA, including certain current year tax initiatives as well as adjustments to the provisional estimate of the legislation, reported and disclosed within the applicable measurement period, in accordance with guidance issued by the SEC. 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. 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. See Notes to Consolidated Financial Statements—
Note 5A.
Tax Matters
: Taxes on Income from Continuing Operations
.
|
42
|
|
2018 Financial Report
|
|
The following tables provide revenue and cost information by reportable operating segment and a reconciliation of that information to our consolidated statements of income:
|
||||||||||||||||||||||||
|
|
2018
|
||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Innovative Health (IH)
(a)
|
|
|
Essential Health (EH)
(a)
|
|
|
Other
(b)
|
|
|
Non-GAAP
Adjusted (c) |
|
|
Reconciling Items
(d)
|
|
|
GAAP Reported
|
|
||||||
Revenues
|
|
$
|
33,426
|
|
|
$
|
20,221
|
|
|
$
|
—
|
|
|
$
|
53,647
|
|
|
$
|
—
|
|
|
$
|
53,647
|
|
Cost of sales
|
|
4,140
|
|
|
6,056
|
|
|
934
|
|
|
11,130
|
|
|
118
|
|
|
11,248
|
|
||||||
% of revenue
|
|
12.4
|
%
|
|
29.9
|
%
|
|
*
|
|
|
20.7
|
%
|
|
*
|
|
|
21.0
|
%
|
||||||
Selling, informational and administrative expenses
|
|
6,961
|
|
|
2,612
|
|
|
4,659
|
|
|
14,232
|
|
|
223
|
|
|
14,455
|
|
||||||
Research and development expenses
|
|
2,866
|
|
|
937
|
|
|
4,160
|
|
|
7,962
|
|
|
43
|
|
|
8,006
|
|
||||||
Amortization of intangible assets
|
|
219
|
|
|
62
|
|
|
—
|
|
|
281
|
|
|
4,612
|
|
|
4,893
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,044
|
|
|
1,044
|
|
||||||
Other (income)/deductions––net
|
|
(1,017
|
)
|
|
(158
|
)
|
|
(78
|
)
|
|
(1,253
|
)
|
|
3,369
|
|
|
2,116
|
|
||||||
Income/(loss) from continuing operations before provision/(benefit) for taxes on income
|
|
$
|
20,258
|
|
|
$
|
10,712
|
|
|
$
|
(9,676
|
)
|
|
$
|
21,294
|
|
|
$
|
(9,409
|
)
|
|
$
|
11,885
|
|
|
|
2017
|
||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Innovative Health (IH)
(a)
|
|
|
Essential Health (EH)
(a)
|
|
|
Other
(b)
|
|
|
Non-GAAP
Adjusted (c) |
|
|
Reconciling Items
(d)
|
|
|
GAAP Reported
|
|
||||||
Revenues
|
|
$
|
31,422
|
|
|
$
|
21,124
|
|
|
$
|
—
|
|
|
$
|
52,546
|
|
|
$
|
—
|
|
|
$
|
52,546
|
|
Cost of sales
|
|
4,091
|
|
|
5,937
|
|
|
750
|
|
|
10,778
|
|
|
449
|
|
|
11,228
|
|
||||||
% of revenue
|
|
13.0
|
%
|
|
28.1
|
%
|
|
*
|
|
|
20.5
|
%
|
|
*
|
|
|
21.4
|
%
|
||||||
Selling, informational and administrative expenses
|
|
6,727
|
|
|
2,898
|
|
|
4,864
|
|
|
14,489
|
|
|
316
|
|
|
14,804
|
|
||||||
Research and development expenses
|
|
2,544
|
|
|
1,052
|
|
|
4,057
|
|
|
7,653
|
|
|
31
|
|
|
7,683
|
|
||||||
Amortization of intangible assets
|
|
129
|
|
|
65
|
|
|
—
|
|
|
193
|
|
|
4,565
|
|
|
4,758
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
351
|
|
|
351
|
|
||||||
Other (income)/deductions––net
|
|
(878
|
)
|
|
(287
|
)
|
|
432
|
|
|
(733
|
)
|
|
2,150
|
|
|
1,416
|
|
||||||
Income/(loss) from continuing operations before provision/(benefit) for taxes on income
|
|
$
|
18,809
|
|
|
$
|
11,460
|
|
|
$
|
(10,104
|
)
|
|
$
|
20,166
|
|
|
$
|
(7,861
|
)
|
|
$
|
12,305
|
|
|
|
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
|
|
4,049
|
|
|
6,272
|
|
|
1,301
|
|
|
11,622
|
|
|
699
|
|
|
12,322
|
|
||||||
% of revenue
|
|
13.9
|
%
|
|
26.5
|
%
|
|
*
|
|
|
22.0
|
%
|
|
*
|
|
|
23.3
|
%
|
||||||
Selling, informational and administrative expenses
|
|
6,957
|
|
|
3,296
|
|
|
4,499
|
|
|
14,751
|
|
|
92
|
|
|
14,844
|
|
||||||
Research and development expenses
|
|
2,921
|
|
|
1,237
|
|
|
3,703
|
|
|
7,861
|
|
|
31
|
|
|
7,892
|
|
||||||
Amortization of intangible assets
|
|
102
|
|
|
26
|
|
|
—
|
|
|
128
|
|
|
3,928
|
|
|
4,056
|
|
||||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,565
|
|
|
1,565
|
|
||||||
Other (income)/deductions––net
|
|
(998
|
)
|
|
(269
|
)
|
|
519
|
|
|
(748
|
)
|
|
4,543
|
|
|
3,794
|
|
||||||
Income/(loss) from continuing operations before provision/(benefit) for taxes on income
|
|
$
|
16,166
|
|
|
$
|
13,065
|
|
|
$
|
(10,021
|
)
|
|
$
|
19,210
|
|
|
$
|
(10,858
|
)
|
|
$
|
8,351
|
|
*
|
Indicates calculation not meaningful or result is equal to or greater than 100%.
|
(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.
|
2018 Financial Report
|
|
43
|
|
(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:
|
|
|
2018
|
||||||||||||||||||
|
|
Other Business Activities
|
|
|
|
|
|
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
WRD
(i)
|
|
GPD
(ii)
|
|
Corporate
(iii)
|
|
Other
Unallocated
(iv)
|
|
Total
|
||||||||||
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
168
|
|
|
767
|
|
|
934
|
|
|||||
Selling, informational and administrative expenses
|
|
—
|
|
|
—
|
|
|
3,958
|
|
|
701
|
|
|
4,659
|
|
|||||
Research and development expenses
|
|
2,341
|
|
|
788
|
|
|
957
|
|
|
73
|
|
|
4,160
|
|
|||||
Amortization of intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other (income)/deductions––net
|
|
(148
|
)
|
|
(5
|
)
|
|
13
|
|
|
62
|
|
|
(78
|
)
|
|||||
Loss from continuing operations before provision/(benefit) for taxes on income
|
|
$
|
(2,193
|
)
|
|
$
|
(784
|
)
|
|
$
|
(5,096
|
)
|
|
$
|
(1,603
|
)
|
|
$
|
(9,676
|
)
|
|
|
2017
|
||||||||||||||||||
|
|
Other Business Activities
|
|
|
|
|
|
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
WRD
(i)
|
|
GPD
(ii)
|
|
Corporate
(iii)
|
|
Other
Unallocated
(iv)
|
|
Total
|
||||||||||
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
32
|
|
|
718
|
|
|
750
|
|
|||||
Selling, informational and administrative expenses
|
|
—
|
|
|
(1
|
)
|
|
4,159
|
|
|
706
|
|
|
4,864
|
|
|||||
Research and development expenses
|
|
2,402
|
|
|
783
|
|
|
823
|
|
|
50
|
|
|
4,057
|
|
|||||
Amortization of intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other (income)/deductions––net
|
|
(42
|
)
|
|
(5
|
)
|
|
439
|
|
|
40
|
|
|
432
|
|
|||||
Loss from continuing operations before provision/(benefit) for taxes on income
|
|
$
|
(2,361
|
)
|
|
$
|
(777
|
)
|
|
$
|
(5,452
|
)
|
|
$
|
(1,514
|
)
|
|
$
|
(10,104
|
)
|
|
|
2016
|
||||||||||||||||||
|
|
Other Business Activities
|
|
|
|
|
|
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
WRD
(i)
|
|
GPD
(ii)
|
|
Corporate
(iii)
|
|
Other
Unallocated
(iv)
|
|
Total
|
||||||||||
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
198
|
|
|
1,103
|
|
|
1,301
|
|
|||||
Selling, informational and administrative expenses
|
|
—
|
|
|
—
|
|
|
3,957
|
|
|
542
|
|
|
4,499
|
|
|||||
Research and development expenses
|
|
2,359
|
|
|
690
|
|
|
612
|
|
|
41
|
|
|
3,703
|
|
|||||
Amortization of intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other (income)/deductions––net
|
|
(28
|
)
|
|
(2
|
)
|
|
681
|
|
|
(131
|
)
|
|
519
|
|
|||||
Loss from continuing operations before provision/(benefit) for taxes on income
|
|
$
|
(2,332
|
)
|
|
$
|
(688
|
)
|
|
$
|
(5,448
|
)
|
|
$
|
(1,554
|
)
|
|
$
|
(10,021
|
)
|
(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 operational execution of clinical trials for both early-stage assets in the WRD portfolio as well as late-stage assets in the Innovative portfolio. 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), 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, as well as certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments. Effective in the first quarter of 2018, certain costs for StratCO, which were previously reported in the operating results of our operating segments and Corporate, are reported in Other Unallocated. For additional information, see note (iv) below.
|
44
|
|
2018 Financial Report
|
|
(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). In connection with the StratCO reporting change, in 2017 we reclassified approximately
$468 million
of costs from IH, approximately
$176 million
of costs from EH and approximately
$70 million
of costs from Corporate to Other unallocated costs to conform to the current period presentation, and in 2016, we reclassified approximately
$312 million
of costs from IH, approximately
$167 million
of costs from EH and approximately
$43 million
of costs from Corporate to Other unallocated costs to conform to the current period presentation.
|
|
|
2018
|
||||||||||||
|
|
|
|
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
|
|
$
|
33,426
|
|
|
|
|
|
|
|
|
$
|
33,426
|
|
Cost of sales
|
|
4,140
|
|
|
—
|
|
|
142
|
|
|
4,282
|
|
||
Selling, informational and administrative expenses
|
|
6,961
|
|
|
—
|
|
|
2,708
|
|
|
9,669
|
|
||
Research and development expenses
|
|
2,866
|
|
|
3,097
|
|
|
938
|
|
|
6,901
|
|
||
Amortization of intangible assets
|
|
219
|
|
|
|
|
|
(4
|
)
|
|
215
|
|
||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
||
Other (income)/deductions––net
|
|
(1,017
|
)
|
|
(152
|
)
|
|
(672
|
)
|
|
(1,841
|
)
|
||
Income/(loss) from continuing operations before provision/(benefit) for taxes on income
|
|
20,258
|
|
|
(2,945
|
)
|
|
(3,112
|
)
|
|
14,201
|
|
|
|
2018
|
||||||||||||
|
|
|
|
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
|
|
$
|
20,221
|
|
|
|
|
|
|
|
|
$
|
20,221
|
|
Cost of sales
|
|
6,056
|
|
|
—
|
|
|
792
|
|
|
6,849
|
|
||
Selling, informational and administrative expenses
|
|
2,612
|
|
|
—
|
|
|
1,952
|
|
|
4,563
|
|
||
Research and development expenses
|
|
937
|
|
|
32
|
|
|
92
|
|
|
1,061
|
|
||
Amortization of intangible assets
|
|
62
|
|
|
|
|
|
4
|
|
|
66
|
|
||
Restructuring charges and certain acquisition-related costs
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
||
Other (income)/deductions––net
|
|
(158
|
)
|
|
—
|
|
|
(192
|
)
|
|
(351
|
)
|
||
Income/(loss) from continuing operations before provision/(benefit) for taxes on income
|
|
10,712
|
|
|
(32
|
)
|
|
(2,648
|
)
|
|
8,032
|
|
(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 R&D 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.
|
2018 Financial Report
|
|
45
|
|
(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.
|
*
|
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.
|
(a)
|
Certain key brands represent Ibrance, Eliquis, Xeljanz, Prevnar 13/Prevenar 13, Xtandi, Lyrica––IH and Chantix/Champix. See the “Analysis of the Consolidated Statements of Income––Revenues––Selected Product Discussion" section of this Financial Review for product analysis information.
|
•
|
Cost of sales
as a percentage of
Revenues
decrease
d
0.6
percentage points, primarily driven by the favorable impact of foreign exchange.
|
•
|
The
increase
in
Cost of sales
of
1%
was primarily driven by an increase in royalty expenses based on the mix of products sold and an increase in sales volumes for various key products within our product portfolio, partially offset by the favorable impact of foreign exchange.
|
•
|
The
increase
in
Selling, informational and administrative
expenses
of
3%
was primarily driven by additional investment across several of our key products, primarily Xeljanz, Ibrance, Eucrisa and Prevnar 13/Prevenar 13 (pediatric indication), partially offset by a reduction related to Viagra as a result of the reclassification of Viagra IH to EH and lower healthcare reform expenses.
|
•
|
The
increase
in
Research and development
expenses
of
13%
primarily reflects:
|
◦
|
increased costs associated with the Bavencio program; and
|
46
|
|
2018 Financial Report
|
|
◦
|
increased costs associated with our Phase 3 clinical trials related to our JAK1 inhibitor (which was initiated in December 2017) and the
C. difficile
vaccine program (which was initiated in March 2017) as well as increased spending for our 20 valent pneumococcal conjugate vaccine candidate.
|
•
|
The
favorable
change in
Other (income)/deductions––net
primarily reflects a
$116 million
increase in income from collaborations, out-licensing arrangements and sales of compound/product rights,
partially offset by a
$13 million
decrease in dividend income from our investment in ViiV.
|
*
|
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.
|
(a)
|
Key brands
represent Eliquis (globally), as well as Xeljanz and Lyrica
––
IH (both primarily in the U.S.).
|
2018 Financial Report
|
|
47
|
|
•
|
Cost of sales
as a percentage of
Revenues
decrease
d 0.9 percentage points primarily driven by a favorable change in product mix, including an increase in alliance revenues, 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
3%
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 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,
|
◦
|
our oncology programs, including clinical trial spend on 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.
|
48
|
|
2018 Financial Report
|
|
(MILLIONS OF DOLLARS)
|
|
|
||
EH
Revenues
, 2017
|
|
$
|
21,124
|
|
|
|
|
||
Operational growth/(decline):
|
|
|
||
Decline from the Peri-LOE Products portfolio, driven by lower revenues in developed markets (excluding Viagra EH), primarily due to expected declines in Lyrica in developed Europe and Celebrex and Pristiq in the U.S. due to generic competition
|
|
(558
|
)
|
|
Impact from the SIP portfolio, driven by lower revenues in developed markets, primarily due to increased competition across the portfolio and continued legacy Hospira product shortages in the U.S.
|
|
(504
|
)
|
|
Impact from the LEP portfolio, driven by lower revenues in developed markets, primarily as a result of industry-wide pricing challenges in the U.S. and generic competition
|
|
(436
|
)
|
|
Impact on financial results for the sale of HIS in February 2017. 2018 does not reflect any contribution from HIS global operations, compared to approximately one month of HIS domestic operations and approximately two months of HIS international operations in 2017
|
|
(97
|
)
|
|
Positive impact of Viagra, mostly driven by the shift in the reporting of U.S. and Canada Viagra revenues from IH to EH in 2018 (due to the loss of exclusivity of Viagra in the U.S. in December 2017), partially offset by lower revenues in developed Europe markets (previously reported in EH)
|
|
251
|
|
|
Growth from Biosimilars, primarily from Inflectra in certain channels in the U.S. and developed Europe markets
|
|
217
|
|
|
Impact from CentreOne primarily in emerging markets
|
|
45
|
|
|
Operational decline, net
|
|
(1,082
|
)
|
|
Favorable impact of foreign exchange
|
|
180
|
|
|
EH
Revenues
decrease
|
|
(903
|
)
|
|
EH
Revenues
, 2018
|
|
$
|
20,221
|
|
•
|
Cost of sales
as a percentage of
Revenues
increase
d
1.8
percentage points, primarily due to:
|
◦
|
higher sales volume of Inflectra in the U.S. and developed Europe, and higher Pfizer CentreOne sales volumes, both of which carry higher product costs; and
|
◦
|
lower sales volumes and margins as a result of product losses of exclusivity and generic competition in developed markets,
|
◦
|
lower sales volumes in the SIP portfolio, which carries a higher cost to produce, in developed markets, primarily due to increased competition across the SIP portfolio and continued legacy Hospira product shortages in the U.S.;
|
◦
|
the favorable impact of foreign exchange; and
|
◦
|
the non-recurrence of charges related to a product recall that occurred in 2017.
|
•
|
The
increase
in
Cost of sales
of
2%
was primarily due to:
|
◦
|
higher sales volumes of Inflectra in the U.S. and developed Europe, and higher Pfizer CentreOne sales volumes, both of which carry higher product costs; and
|
◦
|
lower sales volumes in the SIP portfolio, which carries a higher cost to produce, in developed markets, primarily due to increased competition across the SIP portfolio and continued legacy Hospira product shortages in the U.S.,
|
◦
|
lower sales volumes as a result of product losses of exclusivity and generic competition in developed markets; and
|
◦
|
the non-recurrence of charges related to a product recall that occurred in 2017.
|
•
|
Selling, informational and administrative
expenses
decrease
d
10%
mainly due to 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 additional investments in China
.
|
•
|
Research and development
expenses
decrease
d
11%
, primarily
due to decreased spending for biosimilars as several programs have reached completion.
|
•
|
The
unfavorable
change in
Other (income)/deductions––net
primarily reflects the non-recurrence of income from resolution of a contract disagreement, the non-recurrence of a gain on the redemption of an acquired bond in 2017 and the unfavorable impact of foreign exchange, partially offset by an increase in income from collaborations, out-licensing arrangements and sales of compound/product rights.
|
2018 Financial Report
|
|
49
|
|
*
|
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
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:
|
50
|
|
2018 Financial Report
|
|
◦
|
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
12%
, 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 with 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 postmarketing 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.
|
•
|
For
Foreign currency translation adjustments, net,
primarily reflects the strengthening of the U.S. dollar against the euro, U.K. pound and Chinese renminbi.
|
•
|
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 re-measurements and the reclassification of amounts into income. For additional information, see Notes to Consolidated Financial Statements—
Note 1B.
Basis of Presentation and Significant Accounting Policies
:
Adoption of New Accounting Standards in 2018
and Notes to Consolidated Financial Statements—
Note 7. Financial Instruments.
|
•
|
For
Benefit plans: actuarial losses, net,
primarily reflects (i) an increase due to the cumulative effect adjustment as of January 1, 2018 resulting from the adoption of a new accounting standard related to certain tax effects from AOCI; (ii) a decrease in actual returns on plan assets; (iii) an increase in our discount rate assumptions; (iv) the amortization of changes in the pension benefit obligation previously recognized in
Other comprehensive income
; and (v) the favorable impact of foreign exchange. For additional information, see Notes to Consolidated Financial Statements—
Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2018
and
Note 11.
Pension and Postretirement Benefit Plans and Defined Contribution Plans
.
|
•
|
For
Tax provision/(benefit) on other comprehensive income/(loss),
reflect the reclassification of the stranded tax amounts related to the TCJA from AOCI to
Retained earnings,
which was recorded in the first quarter of 2018. For additional information, see Notes to Consolidated Financial Statements—
Note 1B. Basis of Presentation and Significant Accounting Policies––Adoption of New Accounting Standards
and Notes to Consolidated Financial Statements—
Note 5E.
Tax Matters
: Tax Provision/(Benefit) on Other Comprehensive Income/(Loss).
|
•
|
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 2F. Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held 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 re-measurements 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 re-measurements 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,
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.
|
2018 Financial Report
|
|
51
|
|
•
|
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 increases for certain products to meet targeted levels in the normal course of business, primarily for inventory build for supply recovery, new product launches and the movement of products within our manufacturing network.
|
•
|
For
Other current assets,
the change reflects an increase in receivables associated with derivative financial instruments, partially offset by the receipt of a milestone payment related to the first marketing authorization for ertugliflozin (see Notes to Consolidated Financial Statements—
Note 2E. Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held Investment: Research and Development and Collaborative Arrangements
).
|
•
|
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 asset impairments largely associated with cost reduction initiatives not associated with acquisitions (see Notes to Consolidated Financial Statements—
Note 3
.
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
).
|
•
|
For
Identifiable intangible assets, less accumulated amortization
, the change primarily reflects amortization for the period and intangible asset impairment charges (see Notes to Consolidated Financial Statements—
Note 4. Other (Income)/Deductions-Net
), partially offset by an intangible asset recorded in connection with the EU approval of Mylotarg (see Notes to Consolidated Financial Statements—
Note 10A.
Identifiable Intangible Assets and Goodwill
:
Identifiable Intangible Assets
).
|
•
|
For
Trade accounts payable,
the change reflects the timing of purchases and payments in the normal course of business.
|
•
|
For
Other current liabilities
, the change reflects an increase in liabilities associated with:
|
◦
|
payments and accruals in the normal course of business;
|
◦
|
reclassifications from noncurrent liabilities; and
|
◦
|
accruals for restructuring activities associated with our Organizing for Growth initiative (see Notes to Consolidated Financial Statements—
Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost Reduction/Productivity Initiatives)
;
|
◦
|
payments for contingent consideration obligations;
|
◦
|
payments to settle certain legal and product liability obligations;
|
◦
|
payables related to derivative financial instruments; and
|
◦
|
payments 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 (see Notes to Consolidated Financial Statements—
Note 7E.
Financial Instruments
: Other Noncurrent Liabilities
)
.
|
•
|
For
Pension benefit obligations, net
, the decrease primarily reflects the $500 million voluntary pension contribution we made to the U.S. Pfizer Consolidated Pension Plan in February 2018 and the impact of an increase in the discount rate used in the measurement of plan obligations, partially offset by a decrease in actual returns on plan assets.
|
•
|
For
Other noncurrent liabilities
, the change reflects an increase in liabilities associated with:
|
◦
|
an increase in payables, associated with derivative financial instruments;
|
◦
|
an increase in liabilities associated with the sale-leaseback of our New York headquarters (see the “Analysis of Financial Condition, Liquidity and Capital Resources—
Selected Measures of Liquidity and Capital Resources
—Contractual Obligations” section of this Financial Review for additional information); and
|
◦
|
a change in the fair value of contingent consideration (see Notes to Consolidated Financial Statements—
Note 4
.
Other (Income)/Deductions—Net
),
|
52
|
|
2018 Financial Report
|
|
◦
|
reclassifications to current liabilities.
|
•
|
For
Treasury stock,
the change reflects open market share repurchases of
$8.2 billion
in 2018, as well as
$4.0 billion
paid to Citibank in March 2018 pursuant to the terms of an accelerated share repurchase agreement. See Notes to Consolidated Financial Statements—
Note 12A. Equity: Common Stock
for additional information.
|
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
18/17
|
|
|
17/16
|
|
|||
Cash provided by/(used in):
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating activities
|
|
$
|
15,827
|
|
|
$
|
16,802
|
|
|
$
|
16,192
|
|
|
(6
|
)
|
|
4
|
|
Investing activities
|
|
4,525
|
|
|
(4,740
|
)
|
|
(7,791
|
)
|
|
*
|
|
|
(39
|
)
|
|||
Financing activities
|
|
(20,441
|
)
|
|
(13,350
|
)
|
|
(9,228
|
)
|
|
53
|
|
|
45
|
|
|||
Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents
|
|
(116
|
)
|
|
53
|
|
|
(215
|
)
|
|
*
|
|
|
*
|
|
|||
Net decrease in
Cash and cash equivalents and restricted cash and cash equivalents
|
|
$
|
(205
|
)
|
|
$
|
(1,235
|
)
|
|
$
|
(1,041
|
)
|
|
(83
|
)
|
|
19
|
|
*
|
Indicates calculation not meaningful or result is equal to or greater than 100%.
|
•
|
non-recurrence of a non-cash net loss on early retirement of debt under an exchange offer in 2017;
|
•
|
unrealized net gains on equity securities resulting from the adoption of a new accounting standard on January 1, 2018 related to financial assets and liabilities (see Notes to Consolidated Financial Statements—
Note 1B.
Basis of Presentation and Significant Accounting Policies
:
Adoption of New Accounting Standards in 2018
);
|
•
|
a decrease in debt extinguishment costs in 2018 related to early retirement of debt under an exchange offer in 2017, which have been reclassified from operating to financing activities in 2018 and 2017 in accordance with our implementation of a new accounting standard on January 1, 2018 related to the classification of debt prepayment and extinguishment costs (see Notes to Consolidated Financial Statements—
Note 1B.
Basis of Presentation and Significant Accounting Policies
:
Adoption of New Accounting Standards in 2018
);
|
•
|
a non-cash gain associated with our transaction with Bain Capital to create a new biopharmaceutical company to continue development of a portfolio of clinical and preclinical stage neuroscience assets (see Notes to Consolidated Financial Statements––
Note 2B.
Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held Investment
: Divestitures
); and
|
•
|
a non-cash gain on the contribution of Pfizer’s allogeneic CAR T developmental program assets, in connection with our contribution agreement with Allogene (see Notes to Consolidated Financial Statements—
Note 2B.
Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held Investment
: Divestitures
),
|
•
|
decreases in net realized gains on sales of investments in debt and equity securities;
|
•
|
net losses on foreign exchange contracts hedging a portion of our forecasted intercompany inventory sales (that fixes the cost of inventory later sold to customers); and
|
•
|
a decrease in gains on the sale of property, plant and equipment.
|
2018 Financial Report
|
|
53
|
|
•
|
a decrease in the provision for bad debt expense;
|
•
|
an increase in dividends from our investment in ViiV reclassified from operating to investing activities;
|
•
|
an increase in gains from sales of available-for-sale securities; and
|
•
|
an increase in gains on the sale of property, plant and equipment,
|
•
|
a non-cash net loss on early retirement of debt under an exchange offer.
|
•
|
an increase in net proceeds generated from the sale of investments of
$8.6 billion
in
2018
for cash needs; and
|
•
|
a decrease in cash used for acquisitions, net of cash acquired of
$1.0 billion
due to the acquisition of the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business and substantially all of the remaining consideration for the Medivation acquisition in
2017
(see Notes to Consolidated Financial Statements—
Note 2A. Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held Investment: Acquisitions
).
|
•
|
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, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held 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.
|
•
|
$2.3 billion
less proceeds raised from short-term borrowings in
2018
, compared to
2017
; and
|
•
|
higher purchases of common stock of
$7.2 billion
,
|
•
|
lower repayments on long-term debt of
$2.6 billion
.
|
•
|
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
,
|
54
|
|
2018 Financial Report
|
|
•
|
lower repayments on long-term debt of
$1.5 billion
, compared to
2016
; and
|
•
|
lower net repayments on short-term borrowings in 2017 of
$619 million
, compared to
2016
.
|
•
|
the working capital requirements of our operations, including our R&D activities;
|
•
|
investments in our business;
|
•
|
dividend payments and potential increases in the dividend rate;
|
•
|
share repurchases;
|
•
|
the cash requirements associated with our cost-reduction/productivity initiatives;
|
•
|
paying down outstanding debt;
|
•
|
contributions to our pension and postretirement plans; and
|
•
|
business-development activities.
|
(a)
|
See Notes to Consolidated Financial Statements––
Note 7. Financial Instruments
for a description of certain assets held and for a description of credit risk related to our financial instruments held.
|
(b)
|
The
increase
in selected net financial liabilities was primarily driven by the decrease in long-term investments used for cash needs, partially offset by the repayment of 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. For additional information, see the “Credit Ratings” section of this Financial Review.
|
(c)
|
The
increase
in working capital was primarily due to:
|
•
|
the reclassification to assets and liabilities held for sale in connection with our pending consumer business joint venture with GSK (see Notes to Consolidated Financial Statements––
Note 2
C.
Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held Investment
:
Assets and Liabilities Held for Sale
)
;
|
•
|
a decrease in short-term borrowings as a result of repayments of commercial paper;
|
•
|
an increase in inventory related to increases for certain products to meet targeted levels in the normal course of business, primarily for inventory build for supply recovery, new product launches and the movement of products within our manufacturing network; and
|
•
|
the timing of accruals, cash receipts and payments in the ordinary course of business,
|
•
|
a decrease in S
hort-term investments
mainly driven by the financing requirements for share repurchase activities, dividend payments, capital expenditures and debt repayment, partially offset by operating cash flow generation, cash from employee stock option exercises and reclassification of long-term to short-term investments;
|
•
|
an increase in income taxes payable primarily related to the reclassification of the first federal installment of the repatriation tax previously recorded in noncurrent liabilities and the timing of accruals in certain major markets in the ordinary course of business; and
|
•
|
the net impact of foreign currency exchange.
|
(d)
|
Represents total Pfizer Inc. shareholders’ equity divided by the actual number of common shares outstanding (which excludes treasury stock).
|
2018 Financial Report
|
|
55
|
|
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
|
|
Outlook
|
|
Date of Last Rating Change
|
|
Rating
|
|
Rating
|
|
|
|||
Moody’s
|
|
P-1
|
|
A1
|
|
Stable
|
|
October 2009
|
S&P
|
|
A-1+
|
|
AA
|
|
Stable
|
|
October 2009
|
56
|
|
2018 Financial Report
|
|
|
|
|
|
Years
|
||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Total
|
|
|
2019
|
|
|
2020-2021
|
|
|
2022-2023
|
|
|
Thereafter
|
|
|||||
Long-term debt, including current portion
(a)
|
|
$
|
37,684
|
|
|
$
|
4,776
|
|
|
$
|
5,935
|
|
|
$
|
4,067
|
|
|
$
|
22,907
|
|
Interest payments on long-term debt obligations
(b)
|
|
20,680
|
|
|
1,443
|
|
|
2,518
|
|
|
2,330
|
|
|
14,389
|
|
|||||
Other long-term liabilities
(c)
|
|
2,798
|
|
|
414
|
|
|
611
|
|
|
549
|
|
|
1,224
|
|
|||||
Operating leases
(d)
|
|
3,317
|
|
|
300
|
|
|
462
|
|
|
515
|
|
|
2,040
|
|
|||||
Purchase obligations and other
(e)
|
|
3,722
|
|
|
1,322
|
|
|
1,294
|
|
|
337
|
|
|
769
|
|
|||||
Other taxes payable
—
deemed repatriated accumulated post-1986 earnings of foreign subsidiaries
(f)
|
|
11,000
|
|
|
800
|
|
|
1,775
|
|
|
1,775
|
|
|
6,650
|
|
|||||
Uncertain tax positions
(g)
|
|
19
|
|
|
19
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(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. Also, excludes
$4.6 billion
of liabilities related to the fair value of derivative financial instruments, legal matters and employee terminations, among other liabilities, 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.
Contingencies and Certain Commitments
.
|
(d)
|
Includes future minimum rental commitments under non-cancelable operating leases. These amounts include an agreement we entered in April 2018 to lease space in an office building in New York City. We will relocate our global headquarters to this property with occupancy expected beginning in 2022. Our future minimum rental commitment under this 20-year lease is approximately
$1.7 billion
. In July 2018, we completed the sale of our current headquarters buildings. We also agreed to lease these properties from the buyer while we complete our relocation.
|
(e)
|
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 the next 8 years in connection with the U.S. and EU approvals for Besponsa (
$422 million
) and an obligation to make guaranteed fixed annual payments over the next 9 years for Bosulif (
$240 million
), both associated with R&D arrangements. For additional information, see Notes to Consolidated Financial Statements—
Note 7E. Financial Instruments: Other Noncurrent Liabilities.
Also includes consideration of
$175 million
paid in January 2019 related to our purchase of AstraZeneca’s small molecule anti-infective business. For additional information, see Notes to Consolidated Financial Statements—
Note 2A. Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held Investment: Acquisitions
.
|
(f)
|
Represents estimated cash payments related to the TCJA repatriation tax for which we plan to elect, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, 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
and
Note 5C. Tax Matters: Deferred Taxes.
|
(g)
|
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.
|
2018 Financial Report
|
|
57
|
|
(a)
|
Represents shares purchased pursuant to an accelerated share repurchase agreement with Citibank entered into on March 12, 2018, as well as other share repurchases. For additional information, see Notes to Consolidated Financial Statements––
Note 12
. Equity.
|
(b)
|
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.
|
(c)
|
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.
|
58
|
|
2018 Financial Report
|
|
Recently Issued Accounting Standards, Not Adopted as of December 31, 2018
|
||||
Standard/Description
|
|
Effective Date
|
|
Effect on the Financial Statements or Other Significant Matters
|
In February 2016, the FASB issued new guidance on accounting for
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. Since its issuance, the FASB has issued several ASUs, including amending the guidance to offer an additional transition method.
|
|
January 1, 2019.
|
|
We have substantially completed our review of the impact of this new guidance. We will adopt this standard in the first quarter of fiscal 2019 utilizing the modified retrospective method, and therefore no adjustments will be made to amounts in our prior period financial statements. We expect to recognize approximately $1.5 billion of additional assets and corresponding liabilities on our balance sheet as of the beginning of fiscal 2019 and will record any cumulative effect of adopting the new standard as an adjustment to the opening balance of
Retained Earnings.
We do not expect that this adjustment to
Retained Earnings
at adoption will have a material impact on our consolidated financial statements. We have also assessed 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 have designed new global processes, technological solutions and related controls 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.
|
|
We do not have any investments with features subject to this standard and do not expect this new guidance to have a material impact 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.
|
|
We do not have any financial instruments with features subject to this standard and do not expect this new guidance to have a material impact on our consolidated financial statements.
|
In June 2018, the FASB issued new guidance to simplify the accounting for
share-based payments to nonemployees
by aligning it with the accounting for share-based payments to employees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date.
|
|
January 1, 2019.
|
|
We do not have any share-based awards issued to nonemployees and do not expect this new guidance to have a material impact on our consolidated financial statements.
|
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. This standard includes our financial instruments, such as accounts receivable, and investments that are generally of high credit quality.
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 conditions, plus the use of reasonable supportable forecast information.
|
2018 Financial Report
|
|
59
|
|
Standard/Description
|
|
Effective Date
|
|
Effect on the Financial Statements or Other Significant Matters
|
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 do not expect this new guidance to have a material impact on our consolidated financial statements.
|
In August 2018, the FASB issued new guidance related to
customers’ accounting for implementation costs incurred in a cloud computing arrangement that is considered a service contract
. The new guidance aligns the requirements for capitalizing implementation costs in such arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new guidance can be adopted either prospectively or retrospectively.
|
|
January 1, 2020. Earlier application is permitted.
|
|
We are assessing the impact of the provisions of this new guidance on our consolidated financial statements. We do not expect this new guidance to have a material impact on our consolidated financial statements.
|
In November 2018, the FASB issued new guidance clarifying the interaction between the accounting guidance for
collaboration agreements and revenue from contracts with customers
.
|
|
January 1, 2020. Earlier application is permitted
|
|
We have assessed the impact of the provisions of this new guidance and do not expect it will have a material impact on our consolidated financial statements.
|
60
|
|
2018 Financial Report
|
|
•
|
the outcome of R&D activities, including, without limitation, the ability to meet anticipated pre-clinical or clinical endpoints, commencement and/or completion dates for our pre-clinical or clinical trials, regulatory submission dates, regulatory approval dates and/or launch dates, as well as the possibility of unfavorable pre-clinical and clinical trial results, including the possibility of unfavorable new clinical data and further analyses of existing clinical data;
|
•
|
the risk we may not be able to successfully address all of the comments received from regulatory authorities such as the FDA or the EMA, or obtain approval from regulators, which will depend on myriad factors, including such regulator making a determination as to whether a product’s benefits outweigh its known risks and a determination of the product’s efficacy; regulatory decisions impacting labeling, manufacturing processes, safety and/or other matters; and recommendations by technical or advisory committees, such as the Advisory Committee on Immunization Practices, that may impact the use of our vaccines;
|
•
|
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, changes in product labeling, and/or new or increased concerns about the side effects or efficacy of, a product that could affect its availability or commercial potential;
|
•
|
the success of external business-development activities, including the ability to identify and execute on potential business development opportunities, the ability to satisfy the conditions to closing of announced transactions in the anticipated time frame or at all, the ability to realize the anticipated benefits of any such transactions, and the potential need to obtain additional equity or debt financing to pursue these opportunities which could result in increased leverage and impact our credit ratings;
|
•
|
competitive developments, including the impact on our competitive position of new product entrants, in-line branded products, generic products, private label products, biosimilars and product candidates that treat diseases and conditions similar to those treated by our in-line drugs and drug candidates;
|
•
|
the implementation by the FDA and regulatory authorities in many 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;
|
2018 Financial Report
|
|
61
|
|
•
|
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, and access challenges for our biosimilar products where our product may not receive appropriate formulary access or remains in a disadvantaged position relative to the innovator product;
|
•
|
the ability to meet competition from generic, branded and biosimilar products after the loss or expiration of patent protection for our products or competitor products;
|
•
|
the ability to successfully market both new and existing products domestically and internationally;
|
•
|
difficulties or delays in manufacturing, including delays caused by natural events, such as hurricanes; supply shortages at our facilities; and legal or regulatory actions, such as warning letters, suspension of manufacturing, seizure of product, injunctions, debarment, voluntary recall of a product or failure to secure product approvals;
|
•
|
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 favorable 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 replacement, repeal, 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; general budget control actions; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; revisions to reimbursement of biopharmaceuticals under government programs; restrictions on U.S. 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, economic conditions, 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, such as claims that our patents are invalid and/or do not cover the product of the generic drug manufacturer or where one or more third parties seeks damages and/or injunctive relief to compensate for alleged infringement of its patents by our commercial or other activities, 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 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 or regulatory requirements and industry standards;
|
62
|
|
2018 Financial Report
|
|
•
|
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;
|
•
|
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 us, our customers, suppliers and lenders and counterparties to our foreign-exchange and interest-rate agreements of challenging global economic conditions and recent and possible future changes in global financial markets; the related risk that our allowance for doubtful accounts may not be adequate; and the risks related to volatility of our income due to changes in the market value of equity investments;
|
•
|
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, including the reorganization of our commercial operations into three businesses effective at the beginning of the company’s 2019 fiscal year, any other corporate strategic initiatives, and cost-reduction and productivity initiatives, each of which requires upfront costs but may fail to yield anticipated benefits and may result in unexpected costs or organizational disruption;
|
•
|
the impact of product recalls, withdrawals and other unusual items;
|
•
|
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 acquisitions, including, among other things, the ability to realize the anticipated benefits of those acquisitions, including the possibility that the expected cost savings and/or accretion from certain of those acquisitions 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 certain acquired products; significant transaction costs; and unknown liabilities; and
|
•
|
risks and uncertainties related to our proposed transaction with GSK to combine our respective consumer healthcare businesses into a new consumer healthcare joint venture, including, among other things, risks related to the satisfaction of the conditions to closing the transaction (including the failure to obtain necessary regulatory and GSK shareholder approvals) in the anticipated timeframe or at all and the possibility that the transaction does not close, risks related to the ability to realize the anticipated benefits of the transaction, including the possibility that the expected benefits and cost synergies from the proposed transaction will not be realized or will not be realized within the expected time period, the risk that the businesses will not be integrated successfully, the possibility that a future separation of the joint venture may not occur, disruption from the transaction making it more difficult to maintain business and operational relationships, negative effects of the announcement or the consummation of the proposed transaction on the market price of Pfizer’s common stock and on Pfizer’s operating results, significant transaction costs, unknown liabilities, the risk of litigation and/or regulatory actions related to the proposed transaction, other business effects, including the effects of industry, market, economic, political or regulatory conditions, future exchange and interest rates, changes in tax and other laws, regulations, rates and policies, future business combinations or disposals and competitive developments.
|
2018 Financial Report
|
|
63
|
|
64
|
|
2018 Financial Report
|
|
2018 Financial Report
|
|
65
|
|
|
|
|
Albert Bourla
|
|
|
Chief Executive Officer
|
|
|
|
|
|
Frank D’Amelio
|
|
Loretta Cangialosi
|
Principal Financial Officer
|
|
Principal Accounting Officer
|
|
|
|
February 28, 2019
|
|
|
66
|
|
2018 Financial Report
|
|
The Audit Committee
|
|
Suzanne Nora Johnson, Chair
|
Dennis A. Ausiello
|
Joseph J. Echevarria
|
James C. Smith
|
|
February 28, 2019
|
2018 Financial Report
|
|
67
|
|
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 28, 2019
|
68
|
|
2018 Financial Report
|
|
KPMG LLP
|
New York, New York
|
|
February 28, 2019
|
2018 Financial Report
|
|
69
|
|
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS, EXCEPT PER COMMON SHARE DATA)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
Revenues
|
|
$
|
53,647
|
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
||||
Cost of sales
(a)
|
|
11,248
|
|
|
11,228
|
|
|
12,322
|
|
|||
Selling, informational and administrative expenses
(a)
|
|
14,455
|
|
|
14,804
|
|
|
14,844
|
|
|||
Research and development expenses
(a)
|
|
8,006
|
|
|
7,683
|
|
|
7,892
|
|
|||
Amortization of intangible assets
|
|
4,893
|
|
|
4,758
|
|
|
4,056
|
|
|||
Restructuring charges and certain acquisition-related costs
|
|
1,044
|
|
|
351
|
|
|
1,565
|
|
|||
Other (income)/deductions––net
|
|
2,116
|
|
|
1,416
|
|
|
3,794
|
|
|||
Income from continuing operations before provision/(benefit) for taxes on income
|
|
11,885
|
|
|
12,305
|
|
|
8,351
|
|
|||
Provision/(benefit) for taxes on income
|
|
706
|
|
|
(9,049
|
)
|
|
1,123
|
|
|||
Income from continuing operations
|
|
11,179
|
|
|
21,353
|
|
|
7,229
|
|
|||
Discontinued operations:
|
|
|
|
|
|
|
||||||
Income from discontinued operations––net of tax
|
|
10
|
|
|
(1
|
)
|
|
16
|
|
|||
Gain on disposal of discontinued operations––net of tax
|
|
—
|
|
|
3
|
|
|
—
|
|
|||
Discontinued operations––net of tax
|
|
10
|
|
|
2
|
|
|
17
|
|
|||
Net income before allocation to noncontrolling interests
|
|
11,188
|
|
|
21,355
|
|
|
7,246
|
|
|||
Less: Net income attributable to noncontrolling interests
|
|
36
|
|
|
47
|
|
|
31
|
|
|||
Net income attributable to Pfizer Inc.
|
|
$
|
11,153
|
|
|
$
|
21,308
|
|
|
$
|
7,215
|
|
|
|
|
|
|
|
|
||||||
Earnings per common share––basic
:
|
|
|
|
|
|
|
|
|
|
|||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
1.90
|
|
|
$
|
3.57
|
|
|
$
|
1.18
|
|
Discontinued operations––net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
1.90
|
|
|
$
|
3.57
|
|
|
$
|
1.18
|
|
Earnings per common share––diluted
:
|
|
|
|
|
|
|
|
|
|
|||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
1.86
|
|
|
$
|
3.52
|
|
|
$
|
1.17
|
|
Discontinued operations––net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
1.87
|
|
|
$
|
3.52
|
|
|
$
|
1.17
|
|
|
|
|
|
|
|
|
||||||
Weighted-average shares––basic
|
|
5,872
|
|
|
5,970
|
|
|
6,089
|
|
|||
Weighted-average shares––diluted
|
|
5,977
|
|
|
6,058
|
|
|
6,159
|
|
(a)
|
Exclusive of amortization of intangible assets, except as disclosed in
Note 1L. Basis of Presentation and Significant Accounting Policies: Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets.
|
70
|
|
2018 Financial Report
|
|
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
Net income before allocation to noncontrolling interests
|
|
$
|
11,188
|
|
|
$
|
21,355
|
|
|
$
|
7,246
|
|
|
|
|
|
|
|
|
|
|
|
|||
Foreign currency translation adjustments, net
|
|
$
|
(799
|
)
|
|
$
|
1,116
|
|
|
$
|
(815
|
)
|
Reclassification adjustments
(a)
|
|
(22
|
)
|
|
162
|
|
|
—
|
|
|||
|
|
(821
|
)
|
|
1,278
|
|
|
(815
|
)
|
|||
Unrealized holding gains/(losses) on derivative financial instruments, net
|
|
220
|
|
|
(10
|
)
|
|
(442
|
)
|
|||
Reclassification adjustments for (gains)/losses included in net income
(b)
|
|
27
|
|
|
(520
|
)
|
|
452
|
|
|||
|
|
247
|
|
|
(530
|
)
|
|
10
|
|
|||
Unrealized holding gains/(losses) on available-for-sale securities, net
|
|
(185
|
)
|
|
818
|
|
|
248
|
|
|||
Reclassification adjustments for (gains)/losses included in net income
(b)
|
|
124
|
|
|
(244
|
)
|
|
(118
|
)
|
|||
Reclassification adjustments for unrealized gains included in
Retained earnings
(c)
|
|
(462
|
)
|
|
—
|
|
|
—
|
|
|||
|
|
(522
|
)
|
|
574
|
|
|
130
|
|
|||
Benefit plans: actuarial losses, net
|
|
(649
|
)
|
|
(212
|
)
|
|
(1,888
|
)
|
|||
Reclassification adjustments related to amortization
|
|
242
|
|
|
588
|
|
|
558
|
|
|||
Reclassification adjustments related to settlements, net
|
|
142
|
|
|
117
|
|
|
127
|
|
|||
Other
|
|
112
|
|
|
(145
|
)
|
|
195
|
|
|||
|
|
(153
|
)
|
|
348
|
|
|
(1,009
|
)
|
|||
Benefit plans: prior service (costs)/credits and other, net
|
|
(9
|
)
|
|
(2
|
)
|
|
184
|
|
|||
Reclassification adjustments related to amortization
|
|
(181
|
)
|
|
(184
|
)
|
|
(173
|
)
|
|||
Reclassification adjustments related to curtailments, net
|
|
(19
|
)
|
|
(18
|
)
|
|
(26
|
)
|
|||
Other
|
|
2
|
|
|
—
|
|
|
6
|
|
|||
|
|
(207
|
)
|
|
(203
|
)
|
|
(8
|
)
|
|||
Other comprehensive income/(loss), before tax
|
|
(1,457
|
)
|
|
1,468
|
|
|
(1,692
|
)
|
|||
Tax provision/(benefit) on other comprehensive income/(loss)
(d)
|
|
518
|
|
|
(262
|
)
|
|
(174
|
)
|
|||
Other comprehensive income/(loss) before allocation to noncontrolling interests
|
|
$
|
(1,975
|
)
|
|
$
|
1,730
|
|
|
$
|
(1,518
|
)
|
|
|
|
|
|
|
|
|
|
|
|||
Comprehensive income before allocation to noncontrolling interests
|
|
$
|
9,214
|
|
|
$
|
23,085
|
|
|
$
|
5,728
|
|
Less: Comprehensive income attributable to noncontrolling interests
|
|
16
|
|
|
62
|
|
|
28
|
|
|||
Comprehensive income attributable to Pfizer Inc.
|
|
$
|
9,198
|
|
|
$
|
23,023
|
|
|
$
|
5,701
|
|
(a)
|
For the year ended December 31, 2017, the foreign currency translation adjustments reclassified into
Other (income)/deductions—net
in the consolidated statement of income primarily result from the sale of our
40%
ownership investment in Teuto and the sale of our
49%
equity share in Hisun Pfizer. See
Note 2F. Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held 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)
|
For additional information, see
Note 1B
.
Basis of Presentation and Significant Accounting Policies
:
Adoption of New Accounting Standards in 2018
.
|
(d)
|
See
Note 5E. Tax Matters: Tax Provision/(Benefit) on Other Comprehensive Income/(Loss).
|
2018 Financial Report
|
|
71
|
|
|
|
As of December 31,
|
||||||
(MILLIONS, EXCEPT PREFERRED STOCK ISSUED AND PER COMMON SHARE DATA)
|
|
2018
|
|
|
2017
|
|
||
|
|
|
|
|
||||
Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
1,139
|
|
|
$
|
1,342
|
|
Short-term investments
|
|
17,694
|
|
|
18,650
|
|
||
Trade accounts receivable, less allowance for doubtful accounts: 2018—$541; 2017—$584
|
|
8,025
|
|
|
8,221
|
|
||
Inventories
|
|
7,508
|
|
|
7,578
|
|
||
Current tax assets
|
|
3,374
|
|
|
3,050
|
|
||
Other current assets
|
|
2,461
|
|
|
2,289
|
|
||
Assets held for sale
|
|
9,725
|
|
|
12
|
|
||
Total current assets
|
|
49,926
|
|
|
41,141
|
|
||
Long-term investments
|
|
2,767
|
|
|
7,015
|
|
||
Property, plant and equipment, less accumulated depreciation
|
|
13,385
|
|
|
13,865
|
|
||
Identifiable intangible assets, less accumulated amortization
|
|
35,211
|
|
|
48,741
|
|
||
Goodwill
|
|
53,411
|
|
|
55,952
|
|
||
Noncurrent deferred tax assets and other noncurrent tax assets
|
|
1,924
|
|
|
1,855
|
|
||
Other noncurrent assets
|
|
2,799
|
|
|
3,227
|
|
||
Total assets
|
|
$
|
159,422
|
|
|
$
|
171,797
|
|
|
|
|
|
|
||||
Liabilities and Equity
|
|
|
|
|
|
|
||
Short-term borrowings, including current portion of long-term debt: 2018—$4,776; 2017—$3,546
|
|
$
|
8,831
|
|
|
$
|
9,953
|
|
Trade accounts payable
|
|
4,674
|
|
|
4,656
|
|
||
Dividends payable
|
|
2,047
|
|
|
2,029
|
|
||
Income taxes payable
|
|
1,265
|
|
|
477
|
|
||
Accrued compensation and related items
|
|
2,397
|
|
|
2,196
|
|
||
Other current liabilities
|
|
10,753
|
|
|
11,115
|
|
||
Liabilities held for sale
|
|
1,890
|
|
|
—
|
|
||
Total current liabilities
|
|
31,858
|
|
|
30,427
|
|
||
|
|
|
|
|
||||
Long-term debt
|
|
32,909
|
|
|
33,538
|
|
||
Pension benefit obligations, net
|
|
5,272
|
|
|
5,926
|
|
||
Postretirement benefit obligations, net
|
|
1,338
|
|
|
1,504
|
|
||
Noncurrent deferred tax liabilities
|
|
3,700
|
|
|
3,900
|
|
||
Other taxes payable
|
|
14,737
|
|
|
18,697
|
|
||
Other noncurrent liabilities
|
|
5,850
|
|
|
6,149
|
|
||
Total liabilities
|
|
95,664
|
|
|
100,141
|
|
||
|
|
|
|
|
||||
Commitments and Contingencies
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
Preferred stock, no par value, at stated value; 27 shares authorized; issued: 2018—-478; 2017—-524
|
|
19
|
|
|
21
|
|
||
Common stock, $0.05 par value; 12,000 shares authorized; issued: 2018—-9,332; 2017—-9,275
|
|
467
|
|
|
464
|
|
||
Additional paid-in capital
|
|
86,253
|
|
|
84,278
|
|
||
Treasury stock, shares at cost: 2018—3,615; 2017—-3,296
|
|
(101,610
|
)
|
|
(89,425
|
)
|
||
Retained earnings
|
|
89,554
|
|
|
85,291
|
|
||
Accumulated other comprehensive loss
|
|
(11,275
|
)
|
|
(9,321
|
)
|
||
Total Pfizer Inc. shareholders’ equity
|
|
63,407
|
|
|
71,308
|
|
||
Equity attributable to noncontrolling interests
|
|
351
|
|
|
348
|
|
||
Total equity
|
|
63,758
|
|
|
71,656
|
|
||
Total liabilities and equity
|
|
$
|
159,422
|
|
|
$
|
171,797
|
|
72
|
|
2018 Financial Report
|
|
|
|
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, 2016
|
|
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
|
|
|||||||||
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,153
|
|
|
|
|
11,153
|
|
|
36
|
|
|
11,188
|
|
|||||||||||||||||
Other comprehensive income/(loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,955
|
)
|
|
(1,955
|
)
|
|
(20
|
)
|
|
(1,975
|
)
|
|||||||||||||||||
Cash dividends declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,060
|
)
|
|
|
|
(8,060
|
)
|
|
|
|
(8,060
|
)
|
||||||||||||||||||
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
||||||||||||||||||
Noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(12
|
)
|
|
(12
|
)
|
||||||||||||||||||
Share-based payment transactions
|
|
|
|
|
|
57
|
|
|
3
|
|
|
1,977
|
|
|
(12
|
)
|
|
13
|
|
|
|
|
|
|
1,993
|
|
|
|
|
1,993
|
|
||||||||||||||
Purchases of common stock
|
|
|
|
|
|
|
|
|
|
|
|
(307
|
)
|
|
(12,198
|
)
|
|
|
|
|
|
(12,198
|
)
|
|
|
|
(12,198
|
)
|
|||||||||||||||||
Preferred stock conversions and redemptions
|
|
(46
|
)
|
|
(2
|
)
|
|
|
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
(4
|
)
|
||||||||||||||
Other
(c)
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
1,172
|
|
|
|
|
1,172
|
|
|
—
|
|
|
1,172
|
|
||||||||||||||
Balance, December 31, 2018
|
|
478
|
|
|
$
|
19
|
|
|
9,332
|
|
|
$
|
467
|
|
|
$
|
86,253
|
|
|
(3,615
|
)
|
|
$
|
(101,610
|
)
|
|
$
|
89,554
|
|
|
$
|
(11,275
|
)
|
|
$
|
63,407
|
|
|
$
|
351
|
|
|
$
|
63,758
|
|
(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. These common share equivalents were paid in the first quarter of 2018.
|
(c
)
|
Primarily represents the cumulative effect of the adoption of new accounting standards in the first quarter of 2018 for revenues, financial assets and liabilities, income tax accounting, and the reclassification of certain tax effects from
Accumulated other comprehensive income
. 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 2018 Financial Report.
|
2018 Financial Report
|
|
73
|
|
|
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
|
|
|
|
|
|
|
||||||
Operating Activities
|
|
|
|
|
|
|
||||||
Net income before allocation to noncontrolling interests
|
|
$
|
11,188
|
|
|
$
|
21,355
|
|
|
$
|
7,246
|
|
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization
|
|
6,384
|
|
|
6,269
|
|
|
5,757
|
|
|||
Asset write-offs and impairments
|
|
3,398
|
|
|
634
|
|
|
1,613
|
|
|||
Loss on sale of HIS net assets
|
|
(1
|
)
|
|
55
|
|
|
1,712
|
|
|||
TCJA impact
(a)
|
|
(596
|
)
|
|
(10,660
|
)
|
|
—
|
|
|||
Deferred taxes from continuing operations
|
|
(2,205
|
)
|
|
(2,410
|
)
|
|
(700
|
)
|
|||
Share-based compensation expense
|
|
949
|
|
|
840
|
|
|
691
|
|
|||
Benefit plan contributions in excess of expense
|
|
(1,095
|
)
|
|
(961
|
)
|
|
(712
|
)
|
|||
Other adjustments, net
|
|
(1,268
|
)
|
|
344
|
|
|
487
|
|
|||
Other changes in assets and liabilities, net of acquisitions and divestitures:
|
|
|
|
|
|
|
||||||
Trade accounts receivable
|
|
(644
|
)
|
|
259
|
|
|
(134
|
)
|
|||
Inventories
|
|
(717
|
)
|
|
(357
|
)
|
|
365
|
|
|||
Other assets
|
|
(16
|
)
|
|
7
|
|
|
(47
|
)
|
|||
Trade accounts payable
|
|
431
|
|
|
46
|
|
|
871
|
|
|||
Other liabilities
|
|
98
|
|
|
(67
|
)
|
|
(223
|
)
|
|||
Other tax accounts, net
|
|
(78
|
)
|
|
1,446
|
|
|
(734
|
)
|
|||
Net cash provided by operating activities
|
|
15,827
|
|
|
16,802
|
|
|
16,192
|
|
|||
|
|
|
|
|
|
|
||||||
Investing Activities
|
|
|
|
|
|
|
|
|
||||
Purchases of property, plant and equipment
|
|
(2,042
|
)
|
|
(1,956
|
)
|
|
(1,823
|
)
|
|||
Purchases of short-term investments
|
|
(11,677
|
)
|
|
(14,596
|
)
|
|
(15,957
|
)
|
|||
Proceeds from redemptions/sales of short-term investments
|
|
17,581
|
|
|
10,302
|
|
|
29,414
|
|
|||
Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less
|
|
(3,917
|
)
|
|
2,058
|
|
|
(4,218
|
)
|
|||
Purchases of long-term investments
|
|
(1,797
|
)
|
|
(3,537
|
)
|
|
(8,011
|
)
|
|||
Proceeds from redemptions/sales of long-term investments
|
|
6,244
|
|
|
3,579
|
|
|
11,268
|
|
|||
Acquisitions of businesses, net of cash acquired
|
|
—
|
|
|
(1,000
|
)
|
|
(18,368
|
)
|
|||
Acquisitions of intangible assets
|
|
(154
|
)
|
|
(261
|
)
|
|
(176
|
)
|
|||
Other investing activities, net
(b)
|
|
288
|
|
|
671
|
|
|
80
|
|
|||
Net cash provided by/(used in) investing activities
|
|
4,525
|
|
|
(4,740
|
)
|
|
(7,791
|
)
|
|||
|
|
|
|
|
|
|
||||||
Financing Activities
|
|
|
|
|
|
|
|
|
||||
Proceeds from short-term borrowings
|
|
3,711
|
|
|
8,464
|
|
|
7,472
|
|
|||
Principal payments on short-term borrowings
|
|
(4,437
|
)
|
|
(9,947
|
)
|
|
(5,093
|
)
|
|||
Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less
|
|
(1,617
|
)
|
|
1,422
|
|
|
(3,060
|
)
|
|||
Proceeds from issuance of long-term debt
|
|
4,974
|
|
|
5,274
|
|
|
10,976
|
|
|||
Principal payments on long-term debt
|
|
(3,566
|
)
|
|
(6,154
|
)
|
|
(7,689
|
)
|
|||
Purchases of common stock
|
|
(12,198
|
)
|
|
(5,000
|
)
|
|
(5,000
|
)
|
|||
Cash dividends paid
|
|
(7,978
|
)
|
|
(7,659
|
)
|
|
(7,317
|
)
|
|||
Proceeds from exercise of stock options
|
|
1,259
|
|
|
862
|
|
|
1,019
|
|
|||
Other financing activities, net
|
|
(588
|
)
|
|
(611
|
)
|
|
(536
|
)
|
|||
Net cash used in financing activities
|
|
(20,441
|
)
|
|
(13,350
|
)
|
|
(9,228
|
)
|
|||
Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents
|
|
(116
|
)
|
|
53
|
|
|
(215
|
)
|
|||
Net decrease in cash and cash equivalents and restricted cash and cash equivalents
|
|
(205
|
)
|
|
(1,235
|
)
|
|
(1,041
|
)
|
|||
Cash and cash equivalents and restricted cash and cash equivalents, beginning
|
|
1,431
|
|
|
2,666
|
|
|
3,707
|
|
|||
Cash and cash equivalents and restricted cash and cash equivalents, end
|
|
$
|
1,225
|
|
|
$
|
1,431
|
|
|
$
|
2,666
|
|
|
||||||||||||
- Continued -
|
||||||||||||
|
74
|
|
2018 Financial Report
|
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
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
|
|
|
—
|
|
|||
Equity investment in Cerevel Therapeutics, Inc. in exchange for Pfizer’s portfolio of clinical and preclinical neuroscience assets
(b)
|
|
343
|
|
|
—
|
|
|
—
|
|
|||
Equity investment in Allogene received in exchange for Pfizer's allogeneic CAR T developmental program assets
(b)
|
|
92
|
|
|
—
|
|
|
—
|
|
|||
Cash paid (received) during the period for:
|
|
|
|
|
|
|
|
|
||||
Income taxes
|
|
$
|
3,655
|
|
|
$
|
2,489
|
|
|
$
|
2,521
|
|
Interest
|
|
1,311
|
|
|
1,518
|
|
|
1,451
|
|
|||
Interest rate hedges
|
|
(38
|
)
|
|
(199
|
)
|
|
(338
|
)
|
(a)
|
As a result of the enactment of the TCJA in December 2017, Pfizer’s
Provision/(benefit) for taxes on income
(i) for the year ended December 31, 2017 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 and (ii) for the year ended December 31, 2018 was favorably impacted by approximately
$600 million
, primarily related to certain tax initiatives associated with the TCJA, as well as favorable adjustments to the provisional estimates of the legislation. See
Note 5A. Tax Matters: Taxes on Income from Continuing Operations
for additional information.
|
(b)
|
For additional information, see
Note 2B. Acquisitions, Divestitures, Assets and Liabilities Held for Sale, Licensing Arrangements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Privately Held Investment: Divestitures
.
|
(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.
|
2018 Financial Report
|
|
75
|
|
•
|
On December 19, 2018, we announced that we entered into a definitive agreement with GSK under which we and GSK have agreed to combine our respective consumer healthcare businesses into a new consumer healthcare joint venture, which will operate globally under the GSK Consumer Healthcare name. Assets and liabilities associated with our Consumer Healthcare business were reclassified as held for sale in the consolidated balance sheet as of December 31, 2018. We expect to complete the transaction during the second half of 2019, subject to customary closing conditions, including GSK shareholder approval and required regulatory approvals.
|
•
|
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 (all of which we sold during 2018) 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. Our financial results, and EH’s operating results, for
2018
do not reflect any contribution from HIS global operations.
|
•
|
On December 22, 2016, which fell 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
$1,040 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. 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. 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
Note 4
). Pfizer and Allergan also released each other from any and all claims in connection with the merger agreement.
|
76
|
|
2018 Financial Report
|
|
•
|
certain equity investments to be measured at fair value with changes in fair value now recognized in net income. However, equity investments that do not have readily determinable fair values may be measured 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;
|
•
|
a qualitative assessment of equity investments without readily determinable fair values to identify impairment; and
|
•
|
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.
|
•
|
Permits hedge accounting for risk components in hedging relationships involving nonfinancial risk and interest rate risk;
|
•
|
Changes the guidance for designating fair value hedges of interest rate risk and for measuring the change in fair value of the hedged item in fair value hedges of interest rate risk;
|
•
|
No longer requires the separate measurement and reporting of hedge ineffectiveness, but requires the income statement presentation of the earnings effect of the hedging instrument with the earnings effect of the hedged item;
|
•
|
Permits us to exclude the portion of the change in fair value of a currency swap that is attributable to a cross-currency basis spread from the assessment of hedge effectiveness; and
|
•
|
Simplifies hedge effectiveness testing.
|
2018 Financial Report
|
|
77
|
|
•
|
debt prepayment and extinguishment costs, resulting in an increase in
Operating activities
––
Other adjustments, net
and a decrease in
Financing activities
––
Other financing activities, net
of
$7 million
for the year ended
December 31, 2018
; and
|
•
|
accreted interest on the settlement of commercial paper debt instruments, resulting in a decrease in
Operating activities
––
Other adjustments, net
, and an increase in
Financing activities
––
Other financing activities, net
of
$83 million
for the year ended
December 31, 2018
.
|
78
|
|
2018 Financial Report
|
|
Adoption of the standards impacted our consolidated balance sheet as follows:
|
||||||||||||||||||||||||
|
|
|
|
Effect of New Accounting Standards Higher/(Lower)
|
|
|
||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
As Previously Reported Balance at December 31, 2017
|
|
|
Revenues
|
|
|
Financial Assets and Liabilities
|
|
|
Income Tax Accounting
|
|
|
Reclassification of Certain Tax Effects from AOCI
|
|
|
Balance at January 1, 2018
|
|
||||||
Trade accounts receivable
|
|
$
|
8,221
|
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,234
|
|
Inventories
|
|
7,578
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,567
|
|
||||||
Current tax assets
|
|
3,050
|
|
|
(11
|
)
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
3,036
|
|
||||||
Noncurrent deferred tax assets and other noncurrent tax assets
|
|
1,855
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,838
|
|
||||||
Other noncurrent assets
|
|
3,227
|
|
|
—
|
|
|
—
|
|
|
(204
|
)
|
|
—
|
|
|
3,023
|
|
||||||
Other current liabilities
|
|
11,115
|
|
|
(123
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,992
|
|
||||||
Noncurrent deferred tax liabilities
|
|
3,900
|
|
|
106
|
|
|
—
|
|
|
(18
|
)
|
|
—
|
|
|
3,988
|
|
||||||
Other noncurrent liabilities
|
|
6,149
|
|
|
(459
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,690
|
|
||||||
Retained earnings
|
|
85,291
|
|
|
450
|
|
|
419
|
|
|
(189
|
)
|
|
495
|
|
|
86,466
|
|
||||||
Accumulated other comprehensive loss
|
|
(9,321
|
)
|
|
—
|
|
|
(419
|
)
|
|
—
|
|
|
(495
|
)
|
|
(10,235
|
)
|
2018 Financial Report
|
|
79
|
|
Adoption of the standards related to the classification of certain transactions in the statements of cash flows and the presentation of restricted cash in the statement of cash flows impacted our consolidated statement of cash flows as follows:
|
||||||||||||||||
|
|
2017
|
||||||||||||||
|
|
|
|
Effect of New Accounting Standards Inflow/(Outflow)
|
|
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
As Previously Reported
|
|
|
Cash Flow Classification
|
|
|
Restricted Cash
|
|
|
As Restated
|
|
||||
Operating Activities
|
|
|
|
|
|
|
|
|
||||||||
Other adjustments, net
|
|
$
|
50
|
|
|
$
|
294
|
|
|
$
|
—
|
|
|
$
|
344
|
|
Other changes in assets and liabilities, net of acquisitions and divestitures––Other assets
|
|
(31
|
)
|
|
—
|
|
|
38
|
|
|
7
|
|
||||
Investing Activities
|
|
|
|
|
|
|
|
|
||||||||
Proceeds from redemptions/sales of short-term investments
|
|
10,307
|
|
|
—
|
|
|
(5
|
)
|
|
10,302
|
|
||||
Proceeds from redemptions/sales of long-term investments
|
|
3,594
|
|
|
—
|
|
|
(14
|
)
|
|
3,579
|
|
||||
Other investing activities, net
|
|
650
|
|
|
21
|
|
|
—
|
|
|
671
|
|
||||
Financing Activities
|
|
|
|
|
|
|
|
|
||||||||
Principal payments on short-term borrowings
|
|
(9,990
|
)
|
|
43
|
|
|
—
|
|
|
(9,947
|
)
|
||||
Net proceeds from short-term borrowings with original maturities of three months or less
|
|
1,401
|
|
|
20
|
|
|
—
|
|
|
1,422
|
|
||||
Other financing activities, net
|
|
(233
|
)
|
|
(378
|
)
|
|
—
|
|
|
(611
|
)
|
||||
Net decrease in cash and cash equivalents and restricted cash and cash equivalents
|
|
(1,254
|
)
|
|
—
|
|
|
19
|
|
|
(1,235
|
)
|
||||
Cash and cash equivalents and restricted cash and cash equivalents, beginning
|
|
2,595
|
|
|
—
|
|
|
70
|
|
|
2,666
|
|
||||
Cash and cash equivalents and restricted cash and cash equivalents, ending
|
|
1,342
|
|
|
—
|
|
|
89
|
|
|
1,431
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
2016
|
||||||||||||||
|
|
|
|
Effect of New Accounting Standards Inflow/(Outflow)
|
|
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
As Previously Reported
|
|
|
Cash Flow Classification
|
|
|
Restricted Cash
|
|
|
As Restated
|
|
||||
Operating Activities
|
|
|
|
|
|
|
|
|
||||||||
Other adjustments, net
|
|
$
|
208
|
|
|
$
|
278
|
|
|
$
|
—
|
|
|
$
|
487
|
|
Other changes in assets and liabilities, net of acquisitions and divestitures––Other assets
|
|
(60
|
)
|
|
—
|
|
|
13
|
|
|
(47
|
)
|
||||
Investing Activities
|
|
|
|
|
|
|
|
|
||||||||
Proceeds from redemptions/sales of short-term investments
|
|
29,436
|
|
|
—
|
|
|
(22
|
)
|
|
29,414
|
|
||||
Proceeds from redemptions/sales of long-term investments
|
|
11,254
|
|
|
—
|
|
|
14
|
|
|
11,268
|
|
||||
Other investing activities, net
|
|
51
|
|
|
28
|
|
|
—
|
|
|
80
|
|
||||
Financing Activities
|
|
|
|
|
|
|
|
|
||||||||
Principal payments on short-term borrowings
|
|
(5,102
|
)
|
|
9
|
|
|
—
|
|
|
(5,093
|
)
|
||||
Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less
|
|
(3,084
|
)
|
|
24
|
|
|
—
|
|
|
(3,060
|
)
|
||||
Other financing activities, net
|
|
(196
|
)
|
|
(340
|
)
|
|
—
|
|
|
(536
|
)
|
||||
Net decrease in cash and cash equivalents and restricted cash and cash equivalents
|
|
(1,046
|
)
|
|
—
|
|
|
5
|
|
|
(1,041
|
)
|
||||
Cash and cash equivalents and restricted cash and cash equivalents, beginning
|
|
3,641
|
|
|
—
|
|
|
65
|
|
|
3,707
|
|
||||
Cash and cash equivalents and restricted cash and cash equivalents, ending
|
|
2,595
|
|
|
—
|
|
|
70
|
|
|
2,666
|
|
80
|
|
2018 Financial Report
|
|
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheet that sum to the total of the same amounts shown in the consolidated statements of cash flows:
|
||||||||
(MILLIONS OF DOLLARS)
|
|
December 31, 2018
|
|
|
December 31,
2017 |
|
||
Cash and cash equivalents
|
|
$
|
1,139
|
|
|
$
|
1,342
|
|
Restricted cash and cash equivalents in
Short-term investments
|
|
32
|
|
|
—
|
|
||
Restricted cash and cash equivalents in
Long-term investments
|
|
55
|
|
|
—
|
|
||
Restricted cash and cash equivalents in
Other current assets
|
|
—
|
|
|
14
|
|
||
Restricted cash and cash equivalents in
Other noncurrent assets
|
|
—
|
|
|
75
|
|
||
Total cash and cash equivalents and restricted cash and cash equivalents shown in the consolidated balance sheets
|
|
$
|
1,225
|
|
|
$
|
1,431
|
|
2018 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.
|
•
|
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).
|
•
|
Customers
––Our biopharmaceutical products are sold principally to wholesalers but we also sell directly to retailers, hospitals, clinics, government agencies and pharmacies, and, in the case of our vaccine products in the U.S., we primarily sell directly to the CDC, wholesalers, individual provider offices, retail pharmacies and integrated delivery networks. Our consumer healthcare customers include retailers and, to a lesser extent, wholesalers and distributors.
|
•
|
Our Sales Contracts
––Sales on credit are typically under short-term contracts. Collections are based on market payment cycles common in various markets, with shorter cycles in the U.S. Sales
are adjusted for sales allowances, chargebacks, rebates and sales returns and cash discounts. Sales returns occur due to loss of exclusivity, product recalls or a changing competitive environment.
|
•
|
Deductions from Revenues
––
Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized. Such variable consideration represents chargebacks, rebates, sales allowances and sales returns. These deductions represent estimates of the related obligations and, as such, knowledge and judgment is required when estimating the impact of these revenue deductions on gross sales for a reporting period.
|
•
|
In the U.S., we sell our products to distributors and hospitals under our sales contracts. However, we also have contracts with managed care or pharmacy benefit managers and legislatively mandated contracts with the federal and state governments under which we provide rebates to them based on medicines utilized by the lives they cover. We record provisions for Medicare, Medicaid, and performance-based contract pharmaceutical 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
|
82
|
|
2018 Financial Report
|
|
•
|
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 amounts incurred, 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.
|
2018 Financial Report
|
|
83
|
|
•
|
$394 million
(pre-tax) for collaborative arrangements where upfront, pre-approval and regulatory approval milestone payments received from our collaboration partners are recognized in
Other (income)/deductions—net
over a reduced period. Under the new standard, the income from upfront and pre-approval milestone payments due to us is typically recognized over the development period for the collaboration when our performance obligation, in addition to granting a license, is to provide R&D services to our collaboration partners, and major regulatory approval milestones are typically recognized immediately when earned as the related development period has ended. The income from upfront and milestone payments is typically recognized immediately as earned if our performance obligation, in addition to granting a license, is only for commercialization activities. Under the old standard, this income was recognized over the combined development and estimated commercialization (including co-promotion) period for the collaboration products.
|
•
|
$82 million
(pre-tax) for collaborative arrangements where we manufacture products for our collaboration partners and recognize
Revenues
and
Cost of sales
for product shipments at an earlier point in time. Under the new standard, revenue is recognized when we transfer control of the products to our collaboration partners. Under the old standard, revenue was recognized when our collaboration partners sell the products and transfer title to their third party customers.
|
•
|
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.
|
•
|
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.
|
•
|
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.
|
84
|
|
2018 Financial Report
|
|
•
|
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.
|
•
|
Available-for-sale debt 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. For additional information, see
Note 1B.
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.
|
2018 Financial Report
|
|
85
|
|
86
|
|
2018 Financial Report
|
|
2018 Financial Report
|
|
87
|
|
88
|
|
2018 Financial Report
|
|
2018 Financial Report
|
|
89
|
|
|
|
As of December 31,
|
||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
||
Assets Held for Sale
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
32
|
|
|
$
|
—
|
|
Trade accounts receivable, less allowance for doubtful accounts
|
|
532
|
|
|
—
|
|
||
Inventories
|
|
538
|
|
|
—
|
|
||
Other current assets
|
|
56
|
|
|
—
|
|
||
PP&E
|
|
675
|
|
|
—
|
|
||
Identifiable intangible assets, less accumulated amortization
|
|
5,763
|
|
|
—
|
|
||
Goodwill
|
|
1,972
|
|
|
—
|
|
||
Noncurrent deferred tax assets and other noncurrent tax assets
|
|
54
|
|
|
—
|
|
||
Other noncurrent assets
|
|
57
|
|
|
—
|
|
||
Total Consumer assets held for sale
|
|
9,678
|
|
|
—
|
|
||
Other assets held for sale
(a)
|
|
46
|
|
|
12
|
|
||
Assets held for sale
|
|
$
|
9,725
|
|
|
$
|
12
|
|
|
|
|
|
|
||||
Liabilities Held for Sale
|
|
|
|
|
||||
|
|
|
|
|
||||
Trade accounts payable
|
|
$
|
406
|
|
|
$
|
—
|
|
Income taxes payable
|
|
39
|
|
|
—
|
|
||
Accrued compensation and related items
|
|
93
|
|
|
—
|
|
||
Other current liabilities
|
|
353
|
|
|
—
|
|
||
Pension benefit obligations, net
|
|
39
|
|
|
—
|
|
||
Postretirement benefit obligations, net
|
|
33
|
|
|
—
|
|
||
Noncurrent deferred tax liabilities
|
|
870
|
|
|
—
|
|
||
Other noncurrent liabilities
|
|
56
|
|
|
—
|
|
||
Total Consumer liabilities held for sale
|
|
$
|
1,890
|
|
|
$
|
—
|
|
(a)
|
Other assets held for sale consist of PP&E.
|
90
|
|
2018 Financial Report
|
|
(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 increases in 2018 and 2017 reflect increases in alliance revenues from Eliquis and Xtandi.
|
(c)
|
Primarily relates to amounts paid to collaboration partners for their share of net sales or profits earned in collaboration arrangements where we are the principal in the transaction, 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:
$50 million
in
2018
,
$15 million
in
2017
and
$15 million
in
2016
. Our collaboration with Lilly (see below) also includes reimbursements of
$98 million
in 2018,
$147 million
in 2017 and
$120 million
in 2016.
|
(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.
|
2018 Financial Report
|
|
91
|
|
92
|
|
2018 Financial Report
|
|
2018 Financial Report
|
|
93
|
|
•
|
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.
|
94
|
|
2018 Financial Report
|
|
(a)
|
The asset impairment charges for
2018
are largely associated with cost reduction initiatives not associated with acquisitions. 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. See (b) below for additional information.
|
(b)
|
In
2018
,
restructuring charges were primarily related to employee termination costs and asset write downs. The employee termination costs are associated with our improvements to operational effectiveness as part of the realignment of our organizational structure effective at the beginning of 2019
. In
2017
, restructuring charges are primarily associated with our acquisitions of Hospira and Medivation, partially offset by credits associated with cost-reduction and productivity initiatives not associated with acquisitions that mostly related to the reversal of previously recorded accruals for employee termination costs resulting from revisions of our severance benefit estimates. 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. 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 (
$176 million
charge
); EH (
$31 million
charge
); WRD/GPD (
$135 million
charge
); manufacturing operations (
$403 million
charge
); and Corporate (
$38 million
charge
).
|
•
|
IH (
$83 million
credit
); EH (
$6 million
credit
); WRD/GPD (
$19 million
charge
); manufacturing operations (
$89 million
charge
); and Corporate (
$12 million
charge
),
|
•
|
IH (
$255 million
charge
); EH (
$155 million
charge
); WRD/GPD (
$145 million
charge
); manufacturing operations (
$328 million
charge
); and Corporate (
$172 million
charge
).
|
(c)
|
Transaction costs represent external costs for banking, legal, accounting and other similar services, which in 2017 were directly related to our acquisitions of Hospira, Anacor and Medivation.Transaction costs in 2016 were mostly related to our acquisitions of Medivation and Anacor, and the terminated transaction with Allergan.
|
(d)
|
Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes. In
2018
, integration costs were primarily related to our acquisition of Hospira. In
2017
, integration costs primarily related 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 related to our acquisition of Hospira and the terminated transaction with Allergan.
|
(e)
|
In
2018
, primarily represents the net pension curtailments and settlements included in
Other (income)/deductions––net
upon the adoption of a new accounting standard in the first quarter of 2018. In 2017, primarily represents the net pension curtailments and settlements, partially offset by net periodic benefit credits, excluding service costs, related to our acquisition of Hospira, both of which were reclassified to
Other (income)/deductions––net
as a result of the retrospective adoption of a new accounting standard in the first quarter of 2018. These credits included a net settlement gain, partially offset by accelerated amortization of actuarial losses and prior service costs upon the settlement of the remaining obligation associated with the Hospira U.S. qualified defined benefit pension plan. In 2016, primarily represents the net pension curtailments and settlements as well as the accelerated amortization of unrecognized loss and prior service costs related to our acquisition of Hospira, which were reclassified to
Other (income)/deductions––net
as a result of the retrospective adoption of a new accounting standard in the first quarter of 2018. For additional information, see
Note 1B
and
Note 11
.
|
(f)
|
Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.
|
(g)
|
Implementation costs represent external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.
|
(a)
|
Includes adjustments for foreign currency translation.
|
(b)
|
Included in
Other current liabilities
(
$643 million
) and
Other noncurrent liabilities
(
$462 million
).
|
(c)
|
Included in
Other current liabilities
(
$823 million
) and
Other noncurrent liabilities
(
$428 million
).
|
2018 Financial Report
|
|
95
|
|
The following table provides components of
Other (income)/deductions––net
:
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
Interest income
(a)
|
|
$
|
(333
|
)
|
|
$
|
(391
|
)
|
|
$
|
(470
|
)
|
Interest expense
(a)
|
|
1,316
|
|
|
1,270
|
|
|
1,186
|
|
|||
Net interest expense
|
|
983
|
|
|
879
|
|
|
716
|
|
|||
Royalty-related income
(b)
|
|
(495
|
)
|
|
(499
|
)
|
|
(905
|
)
|
|||
Net (gains)/losses on asset disposals
(c)
|
|
(71
|
)
|
|
45
|
|
|
(51
|
)
|
|||
Net gains recognized during the period on investments in equity securities
(d)
|
|
(586
|
)
|
|
(224
|
)
|
|
(18
|
)
|
|||
Net realized (gains)/losses on sales of investments in debt securities
(e)
|
|
141
|
|
|
(45
|
)
|
|
(35
|
)
|
|||
Income from collaborations, out-licensing arrangements and sales of compound/product rights
(f)
|
|
(488
|
)
|
|
(217
|
)
|
|
(108
|
)
|
|||
Net periodic benefit costs/(credits) other than service costs
(g)
|
|
(288
|
)
|
|
101
|
|
|
139
|
|
|||
Certain legal matters, net
(h)
|
|
157
|
|
|
240
|
|
|
510
|
|
|||
Certain asset impairments
(i)
|
|
3,115
|
|
|
395
|
|
|
1,447
|
|
|||
Loss on sale and impairment on remeasurement of HIS net assets
(j)
|
|
(1
|
)
|
|
55
|
|
|
1,712
|
|
|||
Business and legal entity alignment costs
(k)
|
|
4
|
|
|
71
|
|
|
261
|
|
|||
Net losses on early retirement of debt
(l)
|
|
3
|
|
|
999
|
|
|
312
|
|
|||
Other, net
(m)
|
|
(357
|
)
|
|
(383
|
)
|
|
(186
|
)
|
|||
Other (income)/deductions––net
|
|
$
|
2,116
|
|
|
$
|
1,416
|
|
|
$
|
3,794
|
|
(a)
|
2018
v.
2017
––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 refinancing activity that occurred in the fourth quarter of 2017.
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
$73 million
in
2018
, $
72 million
in
2017
and $
61 million
in
2016
.
|
(b)
|
Royalty-related income
decreased
in
2017
, primarily due to lower royalty income for Enbrel of
$470 million
in
2017
, compared to 2016, 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
.
|
(c)
|
In 2018, primarily includes a realized gain on sale of property of
$60 million
. In
2017
, primarily includes an
$81 million
realized loss related to the sale of our then
49%
-owned equity-method investment in Hisun Pfizer and a realized 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 then remaining
60%
ownership interest, partially offset by a realized gain on sale of property of
$52 million
. In 2016, primarily includes realized gains on sales of property and other assets.
|
(d)
|
The net gains on investments in equity securities in
2018
, include unrealized net gains on equity securities of
$477 million
, reflecting the adoption of a new accounting standard in the first quarter of 2018. Net gains in
2018
were primarily driven by unrealized gains of
$466 million
related to our investment in Allogene. Prior to the adoption of a new accounting standard in the first quarter of 2018, net unrealized gains and losses on virtually all equity securities with readily determinable fair values were reported in
Accumulated other comprehensive income
. For additional information, see
Note 1B,
Note 2B
and
Note 7B
.
|
(e)
|
In 2018, primarily includes gross realized losses on sales of available-for-sale debt securities of
$402 million
and a net
loss
of
$18 million
from derivative financial instruments used to hedge the foreign exchange component of the matured available-for-sale debt securities, partially offset by gross realized gains on sales of available-for-sale debt securities of
$280 million
. Proceeds from the sale of available-for-sale debt securities were
$5.7 billion
in 2018.
|
(f)
|
Includes income from upfront and milestone payments from our collaboration partners and income from out-licensing arrangements and sales of compound/product rights. In
2018
, primarily includes, among other things, (i) approximately
$118 million
in milestone income from multiple licensees, (ii)
$110 million
in milestone payments received from Shire, of which
$75 million
was received in the first quarter of 2018 related to their first dosing of a patient in a Phase 3 clinical trial for the treatment of ulcerative colitis and
$35 million
was received from Shire in the third quarter of 2018 related to their first dosing of a patient in a Phase 3 clinical trial for the treatment of Crohn’s disease, (iii) an upfront payment to us and a recognized milestone totaling
$85 million
for the sale of an AMPA receptor potentiator for CIAS to Biogen, (iv)
$62 million
in gains related to sales of compound/product rights and (v) a
$40 million
milestone payment from Merck in conjunction with the approval of ertugliflozin in the EU. For additional information, see
Note 2B, Note 2C,
Note 2D
and
Note 2E
. In 2017, primarily includes, among other things,
$101 million
in milestone payments received from multiple licensees and an
$85 million
gain related to sales of compound/product rights. In 2016, primarily includes, among other things, a
$50 million
gain related to sales of compound/product rights and
$33 million
in milestone payments received from multiple licensees.
|
(g)
|
Represents the net periodic benefit costs/(credits), excluding service costs, as a result of the adoption of a new accounting standard in the first quarter of 2018. Effective January 1, 2018, the U.S. Pfizer Consolidated Pension Plan was frozen to future benefit accruals and for
2018
, resulted in the recognition of lower net periodic benefit costs due to the extension of the amortization period for the actuarial losses. There was also a greater than expected gain on plan assets due to a higher plan asset base compared to 2017. For additional information, see
Note 1B
and
Note 11
.
|
(h)
|
In
2018
, primarily includes legal reserves for certain pending legal matters, partially offset by the reversal of a legal accrual where a loss was no longer deemed probable. In 2017, primarily includes a
$94 million
charge to resolve a class action lawsuit filed by direct purchasers relating to Celebrex, which was approved by the court in April 2018, 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.
|
(i)
|
In
2018
, primarily includes intangible asset impairment charges of
$3.1 billion
, mainly composed of (i)
$2.6 billion
related to EH developed technology rights,
$242 million
related to EH licensing agreements and
$80 million
related to EH IPR&D, all of which relate to our acquisition of Hospira, for generic sterile injectable products associated with various indications; (ii)
$117 million
related to a multi-antigen vaccine IPR&D program for adults undergoing elective spinal fusion surgery; (iii)
$31 million
related to an IH developed technology right, acquired in connection with our acquisition of Anacor, for the treatment for toenail fungus market marketed in the U.S. market only; and (iv)
$17 million
of other IPR&D assets acquired in connection with our acquisition of Innopharma.
In 2018,
|
96
|
|
2018 Financial Report
|
|
(j)
|
In 2018 and 2017, represents adjustments to amounts previously recorded in 2016 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 on February 3, 2017. 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.
|
(k)
|
Represents expenses for changes to our infrastructure to align our commercial operations that existed through December 31, 2018, 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.
|
(l)
|
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.
|
(m)
|
In
2018
, includes (i) a non-cash
$343 million
pre-tax gain associated with our transaction with Bain Capital to create a new biopharmaceutical company, Cerevel, to continue development of a portfolio of clinical and preclinical stage neuroscience assets primarily targeting disorders of the central nervous system (see
Note 2B
), (ii) dividend income of
$253 million
from our investment in ViiV, (iii) a non-cash
$50 million
pre-tax gain on the contribution of Pfizer’s allogeneic CAR T therapy development program assets obtained from Cellectis and Servier in connection with our contribution agreement entered into with Allogene in which Pfizer obtained a
25%
ownership stake in Allogene (see
Note 2B
), and (iv) a non-cash
$17 million
pre-tax gain on the cash settlement of a liability that we incurred in April 2018 upon the EU approval of Mylotarg (see
Note 7E
), partially offset by charges of
$207 million
, reflecting the change in the fair value of contingent consideration and
$59 million
of incremental costs associated with the design, planning and implementation of the new organizational structure, effective in the beginning of 2019, and primarily include consulting, legal, tax, and advisory services. 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.
|
(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
2018
. 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.
|
2018 Financial Report
|
|
97
|
|
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)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
United States
|
|
$
|
(4,403
|
)
|
|
$
|
(6,879
|
)
|
|
$
|
(8,534
|
)
|
International
|
|
16,288
|
|
|
19,184
|
|
|
16,886
|
|
|||
Income from continuing operations before provision/(benefit) for taxes on income
(
a), (b)
|
|
$
|
11,885
|
|
|
$
|
12,305
|
|
|
$
|
8,351
|
|
(a)
|
2018
v.
2017
––
The decrease in the domestic loss was primarily due to lower interest expense paid to certain foreign subsidiaries, lower net losses on the retirement of debt, higher net gains on investments in equity securities and increased revenue related to Eliquis, partially offset by higher certain asset impairments and lower revenue for Viagra and the SIP portfolio. The decrease in international income was primarily related to lower interest income received primarily from intercompany borrowings from Pfizer Inc. and higher charges related to certain cost reduction initiatives, partially offset by increased revenue related to Ibrance and Eliquis.
|
(b)
|
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.
|
(a)
|
The 2018 current tax benefit and deferred tax expense primarily relate to the utilization of tax credit carryforwards against the repatriation tax liability associated with the enactment of the TCJA. See discussion below and
Note 5C
.
|
98
|
|
2018 Financial Report
|
|
•
|
estimated U.S. net tax benefits of approximately
$600 million
associated with the enactment of the TCJA (see discussion above), primarily reflecting:
|
◦
|
approximately
$500 million
of tax benefits associated primarily with certain current year tax initiatives;
|
◦
|
approximately
$100 million
of tax benefits associated with adjustments to our provisional accounting for the tax effects of the TCJA, reported and disclosed within the applicable measurement period, in accordance with guidance issued by the SEC, primarily consisting of:
|
◦
|
$160 million
of tax benefits related to the repatriation tax on deemed repatriated accumulated earnings of foreign subsidiaries; and
|
◦
|
$140 million
of tax benefits associated with the remeasurement of other U.S. deferred tax liabilities,
|
◦
|
$200 million
of tax expense related to future taxes on global intangible low-taxed income;
|
•
|
tax benefits of approximately
$700 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
|
•
|
tax benefits of approximately
$740 million
related to certain asset impairments.
|
•
|
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;
|
•
|
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.
|
2018 Financial Report
|
|
99
|
|
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,
|
|||||||
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
U.S. statutory income tax rate
|
|
21.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
TCJA impact
(a)
|
|
(5.0
|
)
|
|
(86.6
|
)
|
|
—
|
|
Taxation of non-U.S. operations
(b), (c), (d)
|
|
(6.1
|
)
|
|
(17.0
|
)
|
|
(13.8
|
)
|
Tax settlements and resolution of certain tax positions
(e)
|
|
(5.8
|
)
|
|
(1.2
|
)
|
|
(5.5
|
)
|
U.S. Healthcare Legislation
(e), (f)
|
|
(0.4
|
)
|
|
0.9
|
|
|
1.3
|
|
U.S. R&D tax credit and manufacturing deduction
(e)
|
|
(0.7
|
)
|
|
(0.7
|
)
|
|
(1.0
|
)
|
Certain legal settlements and charges
(e)
|
|
(0.1
|
)
|
|
0.1
|
|
|
(2.9
|
)
|
All other, net
(g)
|
|
3.1
|
|
|
(3.9
|
)
|
|
0.3
|
|
Effective tax rate for income from continuing operations
|
|
5.9
|
%
|
|
(73.5
|
)%
|
|
13.4
|
%
|
(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, for 2017, includes the repatriation tax on deemed repatriated 2017 earnings of foreign subsidiaries discussed in
Note 5A
, changes in uncertain tax positions not included in the reconciling item called “Tax settlements and resolution of certain tax positions,” as well as changes in valuation allowances. Specifically: (i) the jurisdictional location of earnings is a significant component of our effective tax rate each year, 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 lower tax rates in certain jurisdictions, as well as manufacturing and other incentives associated with our subsidiaries in Puerto Rico and Singapore. 2016 also includes 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 impacts in
2018
and
2017
also reflect lower repatriation costs associated with the estimated 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.
|
(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)
|
The favorable rate impact in 2018 is a result of the updated 2017 invoice received from the federal government, which reflected a lower expense than what was previously estimated for invoiced periods, as well as certain tax initiatives.
|
(g)
|
All other, net in 2018 is primarily due to routine business operations and the non-recurrence of tax benefits associated with certain tax initiatives. 2017 primarily relates to tax benefits associated with certain tax initiatives in the normal course of business.
|
The components of our deferred tax assets and liabilities, shown before jurisdictional netting, follow:
|
||||||||||||||||
|
|
2018 Deferred Tax*
|
|
2017 Deferred Tax*
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
Assets
|
|
(Liabilities)
|
|
Assets
|
|
(Liabilities)
|
||||||||
Prepaid/deferred items
|
|
$
|
1,655
|
|
|
$
|
(325
|
)
|
|
$
|
1,837
|
|
|
$
|
(132
|
)
|
Inventories
|
|
280
|
|
|
(10
|
)
|
|
405
|
|
|
(3
|
)
|
||||
Intangible assets
(a)
|
|
532
|
|
|
(7,620
|
)
|
|
685
|
|
|
(10,808
|
)
|
||||
Property, plant and equipment
|
|
160
|
|
|
(1,011
|
)
|
|
124
|
|
|
(755
|
)
|
||||
Employee benefits
|
|
2,292
|
|
|
(134
|
)
|
|
2,346
|
|
|
(109
|
)
|
||||
Restructurings and other charges
|
|
266
|
|
|
—
|
|
|
240
|
|
|
(8
|
)
|
||||
Legal and product liability reserves
|
|
415
|
|
|
—
|
|
|
480
|
|
|
—
|
|
||||
Net operating loss/tax credit carryforwards
(b), (c)
|
|
2,512
|
|
|
—
|
|
|
4,502
|
|
|
—
|
|
||||
Unremitted earnings
|
|
—
|
|
|
(83
|
)
|
|
—
|
|
|
(85
|
)
|
||||
State and local tax adjustments
|
|
264
|
|
|
—
|
|
|
178
|
|
|
—
|
|
||||
All other
|
|
200
|
|
|
(274
|
)
|
|
492
|
|
|
(424
|
)
|
||||
|
|
8,576
|
|
|
(9,456
|
)
|
|
11,289
|
|
|
(12,325
|
)
|
||||
Valuation allowances
|
|
(2,068
|
)
|
|
—
|
|
|
(2,203
|
)
|
|
—
|
|
||||
Total deferred taxes
|
|
$
|
6,508
|
|
|
$
|
(9,456
|
)
|
|
$
|
9,086
|
|
|
$
|
(12,325
|
)
|
Net deferred tax liability
(d)
|
|
|
|
$
|
(2,948
|
)
|
|
|
|
$
|
(3,238
|
)
|
*
|
For 2018 and 2017, the deferred tax assets and liabilities associated with global intangible low-taxed income are included in the relevant categories above. See
Note 5A
. 2018 excludes deferred tax assets and liabilities associated with fully dedicated consumer healthcare subsidiaries. For additional information, see
Note 2C
.
|
100
|
|
2018 Financial Report
|
|
(a)
|
The decrease in
2018
is primarily the result of amortization of intangible assets and certain impairment charges.
|
(b)
|
The decrease in 2018 is primarily a result of the utilization of tax credit carryforwards against the repatriation tax liability associated with the enactment of the TCJA. See
Note 5A
.
|
(c)
|
The amounts in
2018
and
2017
are reduced for unrecognized tax benefits of
$3.3 billion
and
$3.4 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.
|
(d)
|
In
2018
,
Noncurrent deferred tax assets and other noncurrent tax assets
(
$0.8 billion
), and
Noncurrent deferred tax liabilities
(
$3.7 billion
). In
2017
,
Noncurrent deferred tax assets and other noncurrent tax assets
(
$0.7 billion
), and
Noncurrent deferred tax liabilities
(
$3.9 billion
).
|
•
|
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, 2018
we had approximately
$1.1 billion
in assets associated with uncertain tax positions. These amounts were included in
Noncurrent deferred tax assets and other noncurrent tax assets
(
$1.0 billion
) and
Noncurrent deferred tax liabilities (
$128 million
). As of
December 31, 2017
, we had approximately
$1.2 billion
in assets associated with uncertain tax positions. These amounts were included in
Noncurrent deferred tax assets and other noncurrent tax assets
(
$1.0 billion
) and
Noncurrent deferred tax liabilities (
$118 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. 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.
|
2018 Financial Report
|
|
101
|
|
(e)
|
Primarily related to decreases as a result of a lapse of applicable statutes of limitations.
|
(f)
|
In
2018
, included in
Income taxes payable
(
$11 million
),
Current tax assets
(
$1 million
),
Noncurrent deferred tax assets and other noncurrent tax assets
(
$47 million
),
Noncurrent deferred tax liabilities
(
$3.2 billion
) and
Other taxes payable
(
$3.0 billion
). 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
).
|
•
|
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
2018
, we recorded a net increase in interest of
$103 million
. In
2017
, we recorded a net increase in interest of
$208 million
; and in
2016
, we recorded a net increase in interest of
$72 million
. Gross accrued interest totaled
$1.1 billion
as of
December 31, 2018
(reflecting a decrease of approximately
$16 million
as a result of cash payments) and gross accrued interest totaled
$975 million
as of
December 31, 2017
(reflecting a decrease of approximately
$4 million
as a result of cash payments). In
2018
, this amount was included in
Income taxes payable
(
$6 million
) and
Other taxes payable
(
$1.1 billion
). In
2017
, this amount was included in
Other taxes payable
(
$975 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 2011-2015 are currently under audit. Tax years 2016-2018 are open, but not under audit. All other tax years are closed.
|
•
|
With respect to Hospira, the federal income tax audit of tax year 2014 through short-year 2015 was effectively settled in the second quarter of 2018. All other tax years are closed.
|
•
|
With respect to Anacor and Medivation, the open tax years are not considered material to Pfizer.
|
(a)
|
Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely.
|
(b)
|
For additional information on the adoption of a new accounting standard related to reclassification of certain tax effects from AOCI, see
Note 1B.
|
(c)
|
For additional information on the adoption of a new accounting standard related to financial assets and liabilities, see
Note 1B
.
|
102
|
|
2018 Financial Report
|
|
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, 2016
|
|
$
|
(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
|
)
|
||||||
Other comprehensive income/(loss) due to the adoption of new accounting standards
(b)
|
|
(2
|
)
|
|
(1
|
)
|
|
(416
|
)
|
|
(637
|
)
|
|
144
|
|
|
(913
|
)
|
||||||
Other comprehensive income/(loss)
(a)
|
|
(893
|
)
|
|
198
|
|
|
(53
|
)
|
|
(128
|
)
|
|
(166
|
)
|
|
(1,041
|
)
|
||||||
Balance, December 31, 2018
|
|
$
|
(6,075
|
)
|
|
$
|
167
|
|
|
$
|
(68
|
)
|
|
$
|
(6,027
|
)
|
|
$
|
728
|
|
|
$
|
(11,275
|
)
|
(a)
|
Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of
$20 million
loss in
2018
,
$14 million
income in
2017
and
$3 million
loss in
2016
.
|
(b)
|
Amounts represent the cumulative effect adjustments as of January 1, 2018 from the adoption of new accounting standards related to (i) financial assets and liabilities and (ii) the reclassification of certain tax effects from AOCI. For additional information, see
Note 1B.
|
2018 Financial Report
|
|
103
|
|
The following table presents the financial assets and liabilities measured at fair value using a market approach on a recurring basis by balance sheet categories and fair value hierarchy level as defined in
Note 1E
:
|
||||||||||||||||||||||||
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
||||||
Financial assets measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Short-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Classified as equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
|
$
|
1,571
|
|
|
$
|
—
|
|
|
$
|
1,571
|
|
|
$
|
2,115
|
|
|
$
|
—
|
|
|
$
|
2,115
|
|
Equity
(a)
|
|
29
|
|
|
17
|
|
|
11
|
|
|
35
|
|
|
16
|
|
|
19
|
|
||||||
|
|
1,600
|
|
|
17
|
|
|
1,583
|
|
|
2,150
|
|
|
16
|
|
|
2,134
|
|
||||||
Classified as available-for-sale debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Government and agency—non-U.S.
|
|
9,609
|
|
|
—
|
|
|
9,609
|
|
|
12,242
|
|
|
—
|
|
|
12,242
|
|
||||||
Corporate and other
|
|
5,482
|
|
|
—
|
|
|
5,482
|
|
|
3,120
|
|
|
—
|
|
|
3,120
|
|
||||||
|
|
15,091
|
|
|
—
|
|
|
15,091
|
|
|
15,362
|
|
|
—
|
|
|
15,362
|
|
||||||
Total short-term investments
|
|
16,691
|
|
|
17
|
|
|
16,674
|
|
|
17,512
|
|
|
16
|
|
|
17,496
|
|
||||||
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate contracts
|
|
97
|
|
|
—
|
|
|
97
|
|
|
104
|
|
|
—
|
|
|
104
|
|
||||||
Foreign exchange contracts
|
|
477
|
|
|
—
|
|
|
477
|
|
|
234
|
|
|
—
|
|
|
234
|
|
||||||
Total other current assets
|
|
574
|
|
|
—
|
|
|
574
|
|
|
337
|
|
|
—
|
|
|
337
|
|
||||||
Long-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Classified as equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity
(a)
|
|
1,223
|
|
|
1,193
|
|
|
30
|
|
|
1,440
|
|
|
1,398
|
|
|
42
|
|
||||||
Classified as trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity
|
|
50
|
|
|
50
|
|
|
—
|
|
|
73
|
|
|
73
|
|
|
—
|
|
||||||
|
|
1,273
|
|
|
1,243
|
|
|
30
|
|
|
1,514
|
|
|
1,472
|
|
|
42
|
|
||||||
Classified as available-for-sale debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Government and agency—non-U.S.
|
|
94
|
|
|
—
|
|
|
94
|
|
|
387
|
|
|
—
|
|
|
387
|
|
||||||
Corporate and other
|
|
397
|
|
|
—
|
|
|
397
|
|
|
4,702
|
|
|
36
|
|
|
4,667
|
|
||||||
|
|
491
|
|
|
—
|
|
|
491
|
|
|
5,090
|
|
|
36
|
|
|
5,054
|
|
||||||
Total long-term investments
|
|
1,764
|
|
|
1,243
|
|
|
521
|
|
|
6,603
|
|
|
1,507
|
|
|
5,096
|
|
||||||
Other noncurrent assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate contracts
|
|
335
|
|
|
—
|
|
|
335
|
|
|
477
|
|
|
—
|
|
|
477
|
|
||||||
Foreign exchange contracts
|
|
232
|
|
|
—
|
|
|
232
|
|
|
7
|
|
|
—
|
|
|
7
|
|
||||||
Total other noncurrent assets
|
|
566
|
|
|
—
|
|
|
566
|
|
|
484
|
|
|
—
|
|
|
484
|
|
||||||
Total assets
|
|
$
|
19,595
|
|
|
$
|
1,260
|
|
|
$
|
18,335
|
|
|
$
|
24,937
|
|
|
$
|
1,523
|
|
|
$
|
23,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Financial liabilities measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate contracts
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Foreign exchange contracts
|
|
78
|
|
|
—
|
|
|
78
|
|
|
201
|
|
|
—
|
|
|
201
|
|
||||||
Total other current liabilities
|
|
82
|
|
|
—
|
|
|
82
|
|
|
201
|
|
|
—
|
|
|
201
|
|
||||||
Other noncurrent liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate contracts
|
|
378
|
|
|
—
|
|
|
378
|
|
|
177
|
|
|
—
|
|
|
177
|
|
||||||
Foreign exchange contracts
|
|
564
|
|
|
—
|
|
|
564
|
|
|
313
|
|
|
—
|
|
|
313
|
|
||||||
Total other noncurrent liabilities
|
|
942
|
|
|
—
|
|
|
942
|
|
|
490
|
|
|
—
|
|
|
490
|
|
||||||
Total liabilities
|
|
$
|
1,024
|
|
|
$
|
—
|
|
|
$
|
1,024
|
|
|
$
|
691
|
|
|
$
|
—
|
|
|
$
|
691
|
|
(a)
|
As of
December 31, 2018
, short-term equity securities of
$11 million
and long-term equity securities of
$29 million
are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan.
As of
December 31, 2017
, short-term equity securities of
$19 million
and long-term equity securities of
$42 million
are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan.
|
104
|
|
2018 Financial Report
|
|
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, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
|
|
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
|
|
$
|
32,909
|
|
|
$
|
35,260
|
|
|
$
|
35,260
|
|
|
$
|
33,538
|
|
|
$
|
37,253
|
|
|
$
|
37,253
|
|
•
|
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.
|
•
|
Equity securities—quoted market prices and observable net asset value 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.
|
•
|
Money market funds—observable net asset value prices.
|
2018 Financial Report
|
|
105
|
|
At December 31, 2018 and 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, 2018 and December 31, 2017 is as follows, including, as of December 31, 2018, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities: |
||||||||||||||||||||||||||||||||||||||||||||||||
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
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
––
non-U.S.
|
|
$
|
9,754
|
|
|
$
|
7
|
|
|
$
|
(58
|
)
|
|
$
|
9,703
|
|
|
$
|
9,609
|
|
|
$
|
94
|
|
|
$
|
—
|
|
|
$
|
9,703
|
|
|
$
|
12,616
|
|
|
$
|
61
|
|
|
$
|
(48
|
)
|
|
$
|
12,629
|
|
Corporate and other
(a)
|
|
5,905
|
|
|
—
|
|
|
(27
|
)
|
|
5,878
|
|
|
5,482
|
|
|
394
|
|
|
3
|
|
|
5,878
|
|
|
7,859
|
|
|
15
|
|
|
(52
|
)
|
|
7,823
|
|
||||||||||||
Held-to-maturity debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Time deposits and other
|
|
668
|
|
|
—
|
|
|
—
|
|
|
668
|
|
|
610
|
|
|
24
|
|
|
35
|
|
|
668
|
|
|
1,091
|
|
|
—
|
|
|
—
|
|
|
1,091
|
|
||||||||||||
Government and agency
––
non-U.S.
|
|
592
|
|
|
—
|
|
|
—
|
|
|
592
|
|
|
592
|
|
|
—
|
|
|
—
|
|
|
592
|
|
|
770
|
|
|
—
|
|
|
—
|
|
|
770
|
|
||||||||||||
Total debt securities
|
|
$
|
16,920
|
|
|
$
|
8
|
|
|
$
|
(85
|
)
|
|
$
|
16,842
|
|
|
$
|
16,293
|
|
|
$
|
512
|
|
|
$
|
38
|
|
|
$
|
16,842
|
|
|
$
|
22,337
|
|
|
$
|
77
|
|
|
$
|
(100
|
)
|
|
$
|
22,313
|
|
Available-for-sale equity securities
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Money market funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,115
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,115
|
|
||||||||||||||||
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
728
|
|
|
586
|
|
|
(124
|
)
|
|
1,190
|
|
||||||||||||||||||||
Total available-for-sale equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,843
|
|
|
$
|
586
|
|
|
$
|
(124
|
)
|
|
$
|
3,304
|
|
(a)
|
Primarily issued by a diverse group of corporations.
|
(b)
|
Upon the 2018 adoption of a new accounting standard related to financial assets and liabilities, available-for-sale equity securities were classified as equity securities. For additional information see
Note 1B
.
|
The following table presents the net unrealized gains and losses for the period that relate to equity securities still held at the reporting date, calculated as follows:
|
||||
(MILLIONS OF DOLLARS)
|
|
December 31, 2018
|
|
|
Net gains recognized during the period on investments in equity securities
(a)
|
|
$
|
586
|
|
Less: Net gains recognized during the period on equity securities sold during the period
|
|
(109
|
)
|
|
Net unrealized gains during the reporting period on equity securities still held at the reporting date
|
|
$
|
477
|
|
(a)
|
The net gains on investments in equity securities are reported in
Other (income)/deductions
––
net
and, for
2018
, include unrealized net gains on equity securities reflecting the adoption of a new accounting standard in the first quarter of 2018. For additional information, see
Note 4
.
|
Short-term borrowings include:
|
||||||||
|
|
As of December 31,
|
||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
2017
|
||||
Commercial paper
|
|
$
|
3,100
|
|
|
$
|
6,100
|
|
Current portion of long-term debt, principal amount
(a)
|
|
4,781
|
|
|
3,532
|
|
||
Other short-term borrowings, principal amount
(b)
|
|
966
|
|
|
320
|
|
||
Total short-term borrowings, principal amount
|
|
8,847
|
|
|
9,951
|
|
||
Net fair value adjustments related to hedging and purchase accounting
|
|
(5
|
)
|
|
14
|
|
||
Net unamortized discounts, premiums and debt issuance costs
|
|
(11
|
)
|
|
(12
|
)
|
||
Total
Short-term borrowings, including current portion of long-term debt
, carried at historical proceeds, as adjusted
|
|
$
|
8,831
|
|
|
$
|
9,953
|
|
(a)
|
For additional information, see
Note 7D
.
|
(b)
|
Other short-term borrowings primarily include cash collateral. For additional information, see
Note 7F
.
|
106
|
|
2018 Financial Report
|
|
In 2018, we issued the following senior unsecured notes:
|
||||||
(MILLIONS OF DOLLARS)
|
|
|
|
|
||
Maturity Date
|
|
Interest Rate
|
|
Principal
|
||
September 2021
|
|
3.000% notes
(a)
|
|
$
|
1,000
|
|
September 2023
|
|
Floating rate notes (LIBOR plus 0.33%)
(b)
|
|
300
|
|
|
September 2023
|
|
3.200% notes
(a)
|
|
1,000
|
|
|
September 2028
|
|
3.600% notes
(a)
|
|
1,000
|
|
|
September 2038
|
|
4.100% notes
(a)
|
|
700
|
|
|
September 2048
|
|
4.200% notes
(a)
|
|
1,000
|
|
|
Total long-term debt issued
(c)
|
|
$
|
5,000
|
|
(a)
|
Fixed rate notes may be redeemed by us at any time, in whole, or in part, at varying redemption prices plus accrued and unpaid interest.
|
(b)
|
Floating rate notes may not be redeemed by their terms prior to maturity.
|
(c)
|
The weighted-average effective interest rate for the notes at issuance was
3.56%
.
|
2018 Financial Report
|
|
107
|
|
The following table provides the components of our senior unsecured long-term debt, including the weighted-average stated interest rate for 2018 and 2017 by maturity:
|
||||||||
|
|
As of December 31,
|
||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
||
Notes due 2019 (1.3%)
(a)
|
|
$
|
—
|
|
|
$
|
4,848
|
|
Notes due 2020 (1.2% and 1.1%)
|
|
1,474
|
|
|
1,528
|
|
||
Notes due 2021 (3.4% and 3.5%)
|
|
4,459
|
|
|
3,550
|
|
||
Notes due 2022 (0.3%)
|
|
1,145
|
|
|
1,199
|
|
||
Notes due 2023 (3.6% and 4.3%)
|
|
2,892
|
|
|
1,592
|
|
||
Notes due 2024 (4.4%)
|
|
1,500
|
|
|
1,500
|
|
||
Notes due 2026-2028 (3.3% and 3.2%)
|
|
5,718
|
|
|
4,759
|
|
||
Notes due 2034 (6.5%)
|
|
750
|
|
|
750
|
|
||
Notes due 2036-2039 (6.0% and 6.2%)
|
|
7,301
|
|
|
6,636
|
|
||
Notes due 2040-2044 (3.8%)
|
|
4,004
|
|
|
4,106
|
|
||
Notes due 2046-2048 (4.2%)
|
|
3,315
|
|
|
2,315
|
|
||
Total long-term debt, principal amount
|
|
32,558
|
|
|
32,783
|
|
||
Net fair value adjustments related to hedging and purchase accounting
|
|
479
|
|
|
872
|
|
||
Net unamortized discounts, premiums and debt issuance costs
|
|
(136
|
)
|
|
(125
|
)
|
||
Other long-term debt
|
|
7
|
|
|
8
|
|
||
Total long-term debt, carried at historical proceeds, as adjusted
|
|
$
|
32,909
|
|
|
$
|
33,538
|
|
Current portion of long-term debt, carried at historical proceeds (not included above (1.3% and 2.4%))
|
|
$
|
4,776
|
|
|
$
|
3,546
|
|
(a)
|
At December 31, 2018, the debt issuances have been reclassified to the current portion of long-term debt.
|
108
|
|
2018 Financial Report
|
|
•
|
Generally, 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. Upon the adoption of the new standard in 2018, for certain foreign exchange contracts, we exclude an amount from the assessment of hedge effectiveness and recognize that excluded amount through an amortization approach. We also recognize the offsetting foreign exchange impact attributable to the hedged item in earnings.
|
•
|
Generally, we record in
Other comprehensive income/(loss)
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. Upon the adoption of the new standard in 2018, for certain foreign exchange contracts, we exclude an amount from the assessment of hedge effectiveness and recognize that excluded amount through an amortization approach.
|
•
|
Upon the adoption of the new standard in 2018, for foreign exchange contracts, we exclude an amount from the assessment of hedge effectiveness and recognize that excluded amount through an amortization approach. 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. Historically, as part of our net investment hedging program, we recognized 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.
|
•
|
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 also recognize the offsetting earnings impact of fixed-rate debt attributable to the hedged risk in earnings.
|
2018 Financial Report
|
|
109
|
|
The following table provides the fair value of the derivative financial instruments and the related notional amounts presented between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:
|
||||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
|
|
|
|
Fair Value
|
|
|
|
Fair Value
|
||||||||||||||||
|
|
Notional
|
|
Asset
|
|
Liability
|
|
Notional
|
|
Asset
|
|
Liability
|
||||||||||||
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
(a)
|
|
$
|
22,984
|
|
|
$
|
654
|
|
|
$
|
586
|
|
|
$
|
18,723
|
|
|
$
|
179
|
|
|
$
|
459
|
|
Interest rate contracts
|
|
11,145
|
|
|
432
|
|
|
383
|
|
|
12,430
|
|
|
581
|
|
|
178
|
|
||||||
|
|
|
|
1,085
|
|
|
968
|
|
|
|
|
760
|
|
|
637
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
|
$
|
15,154
|
|
|
55
|
|
|
55
|
|
|
$
|
14,300
|
|
|
62
|
|
|
54
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total
|
|
|
|
$
|
1,140
|
|
|
$
|
1,024
|
|
|
|
|
$
|
822
|
|
|
$
|
691
|
|
(a)
|
As of
December 31, 2018
, the notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was
$5.8 billion
.
|
(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)
|
For 2017, there is no significant ineffectiveness.
|
(c)
|
For derivative financial instruments in cash flow hedge relationships, the gains and losses are 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
gain
of
$156 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
$1.8 billion
U.K. pound debt maturing in 2043.
|
(e)
|
Short-term borrowings include foreign currency short-term borrowings with carrying values of
$1.4 billion
as of
December 31, 2018
, which are used as hedging instruments in net investment hedges. Long-term debt includes foreign currency long-term borrowings with carrying values of
$3.2 billion
as of
December 31, 2018
, which are used as hedging instruments in net investment hedges.
|
110
|
|
2018 Financial Report
|
|
The following table provides the total amount of each income and expense line in which the results of fair value or cash flow hedges are recorded:
|
||||
(MILLIONS OF DOLLARS)
|
|
December 31, 2018
|
|
|
Cost of sales
|
|
$
|
11,248
|
|
Other (income)/deductions—net
|
|
2,116
|
|
(a)
|
The change from
December 31, 2017
primarily reflects the reclassification of
$538 million
to
Assets held for sale
during the fourth quarter of 2018 (see
Note 2C)
and a decrease due to foreign exchange, partially offset by increases for certain products to meet targeted levels in the normal course of business, primarily for inventory build for supply recovery, new product launches and the movement of products within our manufacturing network.
|
(b)
|
Included in
Other noncurrent assets
. There are no recoverability issues associated with these amounts.
|
2018 Financial Report
|
|
111
|
|
The following table provides the components of
Property, plant and equipment
:
|
||||||||||
|
|
Useful Lives
|
|
As of December 31,
|
||||||
(MILLIONS OF DOLLARS)
|
|
(Years)
|
|
2018
|
|
|
2017
|
|
||
Land
|
|
-
|
|
$
|
500
|
|
|
$
|
540
|
|
Buildings
|
|
33-50
|
|
9,920
|
|
|
10,254
|
|
||
Machinery and equipment
|
|
8-20
|
|
11,871
|
|
|
11,902
|
|
||
Furniture, fixtures and other
|
|
3-12 1/2
|
|
4,693
|
|
|
4,661
|
|
||
Construction in progress
|
|
-
|
|
2,992
|
|
|
2,680
|
|
||
|
|
|
|
29,977
|
|
|
30,037
|
|
||
Less: Accumulated depreciation
|
|
|
|
16,591
|
|
|
16,172
|
|
||
Property, plant and equipment
(a)
|
|
|
|
$
|
13,385
|
|
|
$
|
13,865
|
|
(a)
|
The decrease in total property, plant and equipment is primarily due to depreciation, the reclassification of
$675 million
to
Assets held for sale
during the fourth quarter of 2018 (see
Note 2C
), reductions due to asset impairments largely associated with cost reduction initiatives not associated with acquisitions (see
Note 3
), and the impact of foreign exchange, partially offset by capital additions.
|
The following table provides the components of
Identifiable intangible assets
:
|
||||||||||||||||||||||||
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
(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)
|
|
$
|
89,430
|
|
|
$
|
(58,895
|
)
|
|
$
|
30,535
|
|
|
$
|
89,550
|
|
|
$
|
(54,785
|
)
|
|
$
|
34,765
|
|
Brands
(a)
|
|
923
|
|
|
(708
|
)
|
|
215
|
|
|
2,134
|
|
|
(1,152
|
)
|
|
982
|
|
||||||
Licensing agreements and other
|
|
1,436
|
|
|
(1,140
|
)
|
|
296
|
|
|
1,911
|
|
|
(1,096
|
)
|
|
815
|
|
||||||
|
|
91,788
|
|
|
(60,743
|
)
|
|
31,045
|
|
|
93,595
|
|
|
(57,033
|
)
|
|
36,562
|
|
||||||
Indefinite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Brands and other
(a)
|
|
1,994
|
|
|
|
|
|
1,994
|
|
|
6,929
|
|
|
|
|
|
6,929
|
|
||||||
IPR&D
(a)
|
|
2,171
|
|
|
|
|
|
2,171
|
|
|
5,249
|
|
|
|
|
|
5,249
|
|
||||||
|
|
4,165
|
|
|
|
|
|
4,165
|
|
|
12,179
|
|
|
|
|
|
12,179
|
|
||||||
Identifiable intangible assets
(b)
|
|
$
|
95,954
|
|
|
$
|
(60,743
|
)
|
|
$
|
35,211
|
|
|
$
|
105,774
|
|
|
$
|
(57,033
|
)
|
|
$
|
48,741
|
|
(a)
|
The changes in the gross carrying amount of
Developed technology rights, Brands, Brands and other
and
IPR&D
primarily reflect (i) the reclassification of
$6.1 billion
of
Brands
and
Brands and other
to
Assets held for sale
during the fourth quarter of 2018 (see
Note 2C
), (ii) the transfer of
$2.7 billion
from
IPR&D
to
Developed technology rights
to reflect the approval of Xtandi in the U.S. for the treatment of men with non-metastatic castration-resistant prostate cancer, which is being developed through a collaboration with Astellas (see
Note 2A
), (iii)
$240 million
of
Developed technology rights
recorded in connection with the EU approval of Mylotarg (see
Note 7E
), as well as impairments of $
2.9 billion
of
Developed technology rights
(
see Note 4)
.
|
(b)
|
The decrease in
I
dentifiable intangible assets, less accumulated amortization
,
is primarily due to the reclassification of
$5.8 billion
of intangible assets, net, (
$6.3 billion
total gross carrying amount) to
Assets held for sale
during the fourth quarter of 2018 (see
Note 2C
) and amortization and impairments, partially offset by additions, mainly consisting of
$240 million
of
Developed technology rights
recorded in connection with the EU approval of Mylotarg (see
Note 7E
).
|
112
|
|
2018 Financial Report
|
|
The following table provides the annual amortization expense expected for the years 2019 through 2023:
|
||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|||||
Amortization expense
|
|
$
|
4,581
|
|
|
$
|
3,552
|
|
|
$
|
3,467
|
|
|
$
|
3,217
|
|
|
$
|
2,920
|
|
The following table provides the components of and changes in the carrying amount of
Goodwill
:
|
||||||||||||
(MILLIONS OF DOLLARS)
|
|
IH
|
|
|
EH
|
|
|
Total
|
|
|||
Balance, January 1, 2017
|
|
$
|
30,134
|
|
|
$
|
24,315
|
|
|
$
|
54,449
|
|
Additions
(a)
|
|
572
|
|
|
92
|
|
|
664
|
|
|||
Other
(b)
|
|
435
|
|
|
404
|
|
|
840
|
|
|||
Balance, December 31, 2017
|
|
31,141
|
|
|
24,811
|
|
|
55,952
|
|
|||
Other
(c)
|
|
(2,264
|
)
|
|
(277
|
)
|
|
(2,541
|
)
|
|||
Balance, December 31, 2018
|
|
$
|
28,877
|
|
|
$
|
24,534
|
|
|
$
|
53,411
|
|
(a)
|
IH additions primarily represent measurement period adjustments related to our Medivation acquisition, and EH additions relate to our acquisition of AstraZeneca’s small molecule anti-infectives business (see
Note 2A
).
|
(b)
|
Primarily reflects the impact of foreign exchange and an adjustment of our estimate of goodwill associated with the HIS net assets sold.
|
(c)
|
Primarily reflects the impact of the reclassification of $
2.0 billion
to
Assets held for sale
during the fourth quarter of 2018 (see
Note 2C),
foreign exchange and the contribution of the allogeneic CAR T developmental program assets and operations to Allogene that constituted a business for accounting purposes (see
Note 2B
).
|
2018 Financial Report
|
|
113
|
|
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)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
||||||||||||
Service cost
(b)
|
|
$
|
—
|
|
|
$
|
269
|
|
|
$
|
257
|
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
18
|
|
|
$
|
136
|
|
|
$
|
171
|
|
|
$
|
165
|
|
|
$
|
39
|
|
|
$
|
42
|
|
|
$
|
41
|
|
Interest cost
|
|
598
|
|
|
634
|
|
|
646
|
|
|
55
|
|
|
54
|
|
|
53
|
|
|
212
|
|
|
204
|
|
|
233
|
|
|
72
|
|
|
90
|
|
|
101
|
|
||||||||||||
Expected return on plan assets
|
|
(1,040
|
)
|
|
(1,005
|
)
|
|
(958
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(360
|
)
|
|
(345
|
)
|
|
(381
|
)
|
|
(37
|
)
|
|
(36
|
)
|
|
(34
|
)
|
||||||||||||
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Actuarial losses
(b)
|
|
120
|
|
|
393
|
|
|
395
|
|
|
13
|
|
|
50
|
|
|
37
|
|
|
101
|
|
|
116
|
|
|
93
|
|
|
7
|
|
|
31
|
|
|
32
|
|
||||||||||||
Prior service cost/(credits)
|
|
2
|
|
|
3
|
|
|
5
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(4
|
)
|
|
(4
|
)
|
|
(3
|
)
|
|
(178
|
)
|
|
(182
|
)
|
|
(174
|
)
|
||||||||||||
Curtailments
|
|
12
|
|
|
13
|
|
|
10
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
(4
|
)
|
|
—
|
|
|
(2
|
)
|
|
(17
|
)
|
|
(19
|
)
|
|
(26
|
)
|
||||||||||||
Settlements
|
|
113
|
|
|
75
|
|
|
90
|
|
|
26
|
|
|
39
|
|
|
28
|
|
|
4
|
|
|
4
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||||
Special termination benefits
|
|
6
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||||||||||
Net periodic benefit costs/(income) reported in
Income
(c)
|
|
(189
|
)
|
|
382
|
|
|
444
|
|
|
103
|
|
|
166
|
|
|
137
|
|
|
84
|
|
|
147
|
|
|
115
|
|
|
(111
|
)
|
|
(75
|
)
|
|
(59
|
)
|
||||||||||||
(Income)/cost reported in
Other comprehensive income/(loss)
(d)
|
|
361
|
|
|
141
|
|
|
253
|
|
|
(189
|
)
|
|
23
|
|
|
121
|
|
|
84
|
|
|
(301
|
)
|
|
640
|
|
|
105
|
|
|
(8
|
)
|
|
3
|
|
||||||||||||
(Income)/cost recognized in
Comprehensive income
|
|
$
|
171
|
|
|
$
|
523
|
|
|
$
|
697
|
|
|
$
|
(86
|
)
|
|
$
|
189
|
|
|
$
|
258
|
|
|
$
|
168
|
|
|
$
|
(154
|
)
|
|
$
|
755
|
|
|
$
|
(6
|
)
|
|
$
|
(83
|
)
|
|
$
|
(56
|
)
|
(a)
|
In the second quarter of 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
Other (income)/deductions
—
net
(see
Note 3
).
|
(b)
|
Effective January 1, 2018, we froze
two
significant defined benefit pension plans to future benefit accruals in the U.S. and U.K. and as a result, service costs for those plans are eliminated. In addition, due to the plan freeze, the average amortization period for the U.S. qualified plans and U.S. supplemental (non-qualified) plans was extended to the expected life expectancy of the plan participants, whereas the average amortization period in prior years utilized the expected future service period of plan participants.
|
(c)
|
We adopted a new accounting standard on January 1, 2018 that requires the net periodic pension and postretirement benefit costs other than service costs be presented in
Other (income)/deductions––net
on the consolidated statements of income. For additional information, see
Note 1B
and
Note 4
.
|
(d)
|
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 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
2019
are
24.2
years for our U.S. qualified plans,
25.3
years for our U.S. supplemental (non-qualified) plans,
20
years for our international plans, and
9.3
years for our postretirement plans.
|
114
|
|
2018 Financial Report
|
|
The following table provides the weighted-average actuarial assumptions of our benefit plans:
|
||||||
(PERCENTAGES)
|
|
2018
|
|
2017
|
|
2016
|
Weighted-average assumptions used to determine benefit obligations
|
|
|
|
|
|
|
Discount rate:
|
|
|
|
|
|
|
U.S. qualified pension plans
|
|
4.4%
|
|
3.8%
|
|
4.3%
|
U.S. non-qualified pension plans
|
|
4.3%
|
|
3.7%
|
|
4.2%
|
International pension plans
|
|
2.5%
|
|
2.3%
|
|
2.4%
|
Postretirement plans
|
|
4.3%
|
|
3.7%
|
|
4.2%
|
Rate of compensation increase:
|
|
|
|
|
|
|
U.S. qualified pension plans
(a)
|
|
—
|
|
2.8%
|
|
2.8%
|
U.S. non-qualified pension plans
(a)
|
|
—
|
|
2.8%
|
|
2.8%
|
International pension plans
|
|
1.4%
|
|
2.5%
|
|
2.6%
|
Weighted-average assumptions used to determine net periodic benefit cost
|
|
|
|
|
|
|
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 interest cost
(b)
|
|
2.0%
|
|
2.1%
|
|
2.7%
|
International pension plans service cost
(b)
|
|
2.3%
|
|
2.3%
|
|
3.0%
|
Postretirement plans
|
|
3.7%
|
|
4.2%
|
|
4.5%
|
Expected return on plan assets:
|
|
|
|
|
|
|
U.S. qualified pension plans
|
|
7.5%
|
|
8.0%
|
|
8.0%
|
International pension plans
|
|
4.4%
|
|
4.7%
|
|
5.2%
|
Postretirement plans
|
|
7.5%
|
|
8.0%
|
|
8.0%
|
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%
|
(a)
|
Effective January 1, 2018, we froze the defined benefit plans to future benefit accruals in the U.S. and members’ accrued benefits to that date no longer increase in line with future compensation increases. The rate of compensation increase is therefore no longer an assumption used to determine the benefit obligation.
|
(b)
|
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.
|
2018 Financial Report
|
|
115
|
|
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)
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||||||
Change in benefit obligation
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Benefit obligation, beginning
|
|
$
|
16,702
|
|
|
$
|
15,547
|
|
|
$
|
1,495
|
|
|
$
|
1,450
|
|
|
$
|
10,607
|
|
|
$
|
9,691
|
|
|
$
|
2,028
|
|
|
$
|
2,254
|
|
Service cost
|
|
—
|
|
|
269
|
|
|
—
|
|
|
24
|
|
|
136
|
|
|
171
|
|
|
39
|
|
|
42
|
|
||||||||
Interest cost
|
|
598
|
|
|
634
|
|
|
55
|
|
|
54
|
|
|
212
|
|
|
204
|
|
|
72
|
|
|
90
|
|
||||||||
Employee contributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
6
|
|
|
102
|
|
|
94
|
|
||||||||
Plan amendments
|
|
(22
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
2
|
|
|
2
|
|
|
—
|
|
||||||||
Changes in actuarial assumptions and other
|
|
(1,219
|
)
|
|
1,614
|
|
|
(152
|
)
|
|
110
|
|
|
(169
|
)
|
|
135
|
|
|
(122
|
)
|
|
(177
|
)
|
||||||||
Foreign exchange impact
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(457
|
)
|
|
760
|
|
|
(4
|
)
|
|
5
|
|
||||||||
Acquisitions/divestitures/other, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
26
|
|
|
—
|
|
|
1
|
|
||||||||
Curtailments
|
|
11
|
|
|
11
|
|
|
1
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
||||||||
Settlements
|
|
(391
|
)
|
|
(842
|
)
|
|
(72
|
)
|
|
(98
|
)
|
|
(34
|
)
|
|
(31
|
)
|
|
—
|
|
|
—
|
|
||||||||
Special termination benefits
|
|
6
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
|
—
|
|
||||||||
Benefits paid
|
|
(546
|
)
|
|
(530
|
)
|
|
(58
|
)
|
|
(45
|
)
|
|
(373
|
)
|
|
(357
|
)
|
|
(249
|
)
|
|
(280
|
)
|
||||||||
Benefit obligation, ending
(d)
|
|
15,141
|
|
|
16,702
|
|
|
1,280
|
|
|
1,495
|
|
|
9,952
|
|
|
10,607
|
|
|
1,870
|
|
|
2,028
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fair value of plan assets, beginning
|
|
14,284
|
|
|
12,556
|
|
|
—
|
|
|
—
|
|
|
8,863
|
|
|
7,683
|
|
|
494
|
|
|
458
|
|
||||||||
Actual gain/(loss) on plan assets
|
|
(796
|
)
|
|
2,005
|
|
|
—
|
|
|
—
|
|
|
(77
|
)
|
|
811
|
|
|
(22
|
)
|
|
39
|
|
||||||||
Company contributions
|
|
500
|
|
|
1,095
|
|
|
129
|
|
|
143
|
|
|
209
|
|
|
160
|
|
|
145
|
|
|
183
|
|
||||||||
Employee contributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
6
|
|
|
102
|
|
|
94
|
|
||||||||
Foreign exchange impact
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(380
|
)
|
|
561
|
|
|
—
|
|
|
—
|
|
||||||||
Acquisitions/divestitures, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
—
|
|
||||||||
Settlements
|
|
(391
|
)
|
|
(842
|
)
|
|
(72
|
)
|
|
(98
|
)
|
|
(34
|
)
|
|
(31
|
)
|
|
—
|
|
|
—
|
|
||||||||
Benefits paid
|
|
(546
|
)
|
|
(530
|
)
|
|
(58
|
)
|
|
(45
|
)
|
|
(373
|
)
|
|
(357
|
)
|
|
(249
|
)
|
|
(280
|
)
|
||||||||
Fair value of plan assets, ending
|
|
13,051
|
|
|
14,284
|
|
|
—
|
|
|
—
|
|
|
8,215
|
|
|
8,863
|
|
|
469
|
|
|
494
|
|
||||||||
Funded status—Plan assets less than benefit obligation
|
|
$
|
(2,089
|
)
|
|
$
|
(2,418
|
)
|
|
$
|
(1,280
|
)
|
|
$
|
(1,495
|
)
|
|
$
|
(1,738
|
)
|
|
$
|
(1,745
|
)
|
|
$
|
(1,401
|
)
|
|
$
|
(1,534
|
)
|
(a)
|
The favorable change in the funded status of our U.S. qualified plans was primarily due to an increase in the discount rate at the end of 2018, partially offset by a decrease in actual return on plan assets.
|
(b)
|
The favorable change in the international plans’ funded status was primarily due to favorable currency movements, partially offset by a decrease in the actual return on plan assets.
|
(c)
|
The favorable change in the funded status of our postretirement plans was primarily due to an increase in the discount rate at the end of 2018, partially offset by a decrease in actual return on plan assets.
|
(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
$15.1 billion
in
2018
and
$16.7 billion
in
2017
. The ABO for our U.S. supplemental (non-qualified) pension plans was
$1.3 billion
in
2018
and
$1.5 billion
in
2017
. The ABO for our international pension plans was
$9.5 billion
in
2018
and
$10.1 billion
in
2017
.
|
116
|
|
2018 Financial Report
|
|
The following table provides information as to how the funded status is recognized in our consolidated balance sheets:
|
||||||||||||||||||||||||||||||||
|
|
As of December 31,
|
||||||||||||||||||||||||||||||
|
|
Pension Plans
|
|
|
|
|
||||||||||||||||||||||||||
|
|
U.S. Qualified
|
|
U.S. Supplemental
(Non-Qualified) |
|
International
|
|
Postretirement
Plans |
||||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||||||
Noncurrent assets
(a)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
401
|
|
|
$
|
454
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Current liabilities
(b)
|
|
(1
|
)
|
|
—
|
|
|
(167
|
)
|
|
(160
|
)
|
|
(28
|
)
|
|
(26
|
)
|
|
(29
|
)
|
|
(31
|
)
|
||||||||
Noncurrent liabilities
(c)
|
|
(2,088
|
)
|
|
(2,418
|
)
|
|
(1,113
|
)
|
|
(1,336
|
)
|
|
(2,111
|
)
|
|
(2,172
|
)
|
|
(1,371
|
)
|
|
(1,504
|
)
|
||||||||
Funded status
|
|
$
|
(2,089
|
)
|
|
$
|
(2,418
|
)
|
|
$
|
(1,280
|
)
|
|
$
|
(1,495
|
)
|
|
$
|
(1,738
|
)
|
|
$
|
(1,745
|
)
|
|
$
|
(1,401
|
)
|
|
$
|
(1,534
|
)
|
(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 PBO, 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.
|
2018 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, 2018 |
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets Measured at NAV
(b)
|
|
|
As of
December 31, 2017 |
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets Measured at NAV
(b)
|
|
||||||||||||||||
U.S. qualified pension plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Cash and cash equivalents
|
|
$
|
443
|
|
|
$
|
53
|
|
|
$
|
390
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
655
|
|
|
$
|
115
|
|
|
$
|
540
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Global equity securities
|
|
3,156
|
|
|
3,119
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
4,157
|
|
|
4,118
|
|
|
38
|
|
|
1
|
|
|
—
|
|
||||||||||
Equity commingled funds
|
|
933
|
|
|
—
|
|
|
634
|
|
|
—
|
|
|
299
|
|
|
1,194
|
|
|
—
|
|
|
802
|
|
|
—
|
|
|
392
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Corporate debt securities
|
|
4,654
|
|
|
1
|
|
|
4,650
|
|
|
3
|
|
|
—
|
|
|
4,250
|
|
|
5
|
|
|
4,242
|
|
|
3
|
|
|
—
|
|
||||||||||
Government and agency obligations
|
|
1,391
|
|
|
—
|
|
|
1,391
|
|
|
—
|
|
|
—
|
|
|
1,316
|
|
|
—
|
|
|
1,316
|
|
|
—
|
|
|
—
|
|
||||||||||
Fixed income commingled funds
|
|
96
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
96
|
|
|
94
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
94
|
|
||||||||||
Other investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Partnership investments
(c)
|
|
1,165
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,165
|
|
|
1,197
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,197
|
|
||||||||||
Insurance contracts
|
|
192
|
|
|
—
|
|
|
192
|
|
|
—
|
|
|
—
|
|
|
215
|
|
|
—
|
|
|
215
|
|
|
—
|
|
|
—
|
|
||||||||||
Other commingled funds
(d)
|
|
1,021
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,021
|
|
|
1,206
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,206
|
|
||||||||||
Total
|
|
$
|
13,051
|
|
|
$
|
3,173
|
|
|
$
|
7,294
|
|
|
$
|
3
|
|
|
$
|
2,581
|
|
|
$
|
14,284
|
|
|
$
|
4,238
|
|
|
$
|
7,153
|
|
|
$
|
4
|
|
|
$
|
2,889
|
|
International pension plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Cash and cash equivalents
|
|
$
|
246
|
|
|
$
|
39
|
|
|
$
|
208
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
385
|
|
|
$
|
48
|
|
|
$
|
337
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Global equity securities
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
154
|
|
|
146
|
|
|
8
|
|
|
—
|
|
|
—
|
|
||||||||||
Equity commingled funds
|
|
1,876
|
|
|
—
|
|
|
1,413
|
|
|
—
|
|
|
463
|
|
|
2,897
|
|
|
—
|
|
|
1,594
|
|
|
—
|
|
|
1,303
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Corporate debt securities
|
|
727
|
|
|
—
|
|
|
727
|
|
|
—
|
|
|
—
|
|
|
588
|
|
|
—
|
|
|
588
|
|
|
—
|
|
|
—
|
|
||||||||||
Government and agency obligations
(e)
|
|
1,305
|
|
|
—
|
|
|
1,305
|
|
|
—
|
|
|
—
|
|
|
716
|
|
|
—
|
|
|
716
|
|
|
—
|
|
|
—
|
|
||||||||||
Fixed income commingled funds
|
|
1,770
|
|
|
—
|
|
|
1,007
|
|
|
—
|
|
|
762
|
|
|
2,181
|
|
|
—
|
|
|
1,340
|
|
|
—
|
|
|
841
|
|
||||||||||
Other investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Partnership investments
(c)
|
|
57
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
53
|
|
|
42
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
35
|
|
||||||||||
Insurance contracts
(f)
|
|
759
|
|
|
—
|
|
|
74
|
|
|
684
|
|
|
1
|
|
|
496
|
|
|
—
|
|
|
75
|
|
|
420
|
|
|
1
|
|
||||||||||
Other
(d), (f)
|
|
1,473
|
|
|
—
|
|
|
71
|
|
|
382
|
|
|
1,020
|
|
|
1,404
|
|
|
—
|
|
|
408
|
|
|
468
|
|
|
528
|
|
||||||||||
Total
|
|
$
|
8,215
|
|
|
$
|
40
|
|
|
$
|
4,809
|
|
|
$
|
1,065
|
|
|
$
|
2,300
|
|
|
$
|
8,863
|
|
|
$
|
194
|
|
|
$
|
5,073
|
|
|
$
|
887
|
|
|
$
|
2,709
|
|
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
|
|
469
|
|
|
—
|
|
|
469
|
|
|
—
|
|
|
—
|
|
|
494
|
|
|
—
|
|
|
494
|
|
|
—
|
|
|
—
|
|
||||||||||
Other commingled funds
(d)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Total
|
|
$
|
469
|
|
|
$
|
—
|
|
|
$
|
469
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
494
|
|
|
$
|
—
|
|
|
$
|
494
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(a)
|
Fair values are determined based on valuation inputs categorized as Level 1, 2 or 3 (see
Note 1
E).
|
(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
|
|
2018 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)
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
Fair value, beginning
|
|
$
|
420
|
|
|
$
|
254
|
|
|
$
|
468
|
|
|
$
|
324
|
|
Actual return on plan assets:
|
|
|
|
|
|
|
|
|
|
|||||||
Assets held, ending
|
|
1
|
|
|
1
|
|
|
15
|
|
|
18
|
|
||||
Assets sold during the period
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Purchases, sales, and settlements, net
|
|
188
|
|
|
138
|
|
|
(31
|
)
|
|
94
|
|
||||
Transfer into/(out of) Level 3
|
|
107
|
|
|
—
|
|
|
(51
|
)
|
|
—
|
|
||||
Exchange rate changes
|
|
(31
|
)
|
|
27
|
|
|
(20
|
)
|
|
30
|
|
||||
Fair value, ending
|
|
$
|
684
|
|
|
$
|
420
|
|
|
$
|
382
|
|
|
$
|
468
|
|
•
|
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.
|
2018 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)
|
|
2018
|
|
|
2018
|
|
|
2017
|
|
U.S. qualified pension plans
|
|
|
|
|
|
|
|||
Cash and cash equivalents
|
|
0-10%
|
|
|
3.4
|
%
|
|
4.6
|
%
|
Equity securities
|
|
35-55%
|
|
|
31.3
|
%
|
|
37.5
|
%
|
Fixed income securities
|
|
28-53%
|
|
|
47.1
|
%
|
|
39.6
|
%
|
Other investments
(a)
|
|
5-20%
|
|
|
18.2
|
%
|
|
18.3
|
%
|
Total
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
International pension plans
|
|
|
|
|
|
|
|||
Cash and cash equivalents
|
|
0-10%
|
|
|
3.0
|
%
|
|
4.3
|
%
|
Equity securities
|
|
20-40%
|
|
|
22.9
|
%
|
|
34.4
|
%
|
Fixed income securities
|
|
35-60%
|
|
|
46.3
|
%
|
|
39.3
|
%
|
Other investments
|
|
10-35%
|
|
|
27.9
|
%
|
|
21.9
|
%
|
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
2018
includes
$192 million
, as compared to
$215 million
in
2017
, 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
$177 million
in
2018
, as compared to
$253 million
in
2017
, related to an investment in a partnership whose primary holdings are public equity securities.
|
120
|
|
2018 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:
|
|
|
|
|
|
|
|
|
||||||||
2019
|
|
$
|
11
|
|
|
$
|
167
|
|
|
$
|
177
|
|
|
$
|
160
|
|
Expected benefit payments:
|
|
|
|
|
|
|
|
|
||||||||
2019
|
|
$
|
1,387
|
|
|
$
|
167
|
|
|
$
|
354
|
|
|
$
|
166
|
|
2020
|
|
1,089
|
|
|
121
|
|
|
372
|
|
|
171
|
|
||||
2021
|
|
1,058
|
|
|
114
|
|
|
380
|
|
|
171
|
|
||||
2022
|
|
1,020
|
|
|
113
|
|
|
385
|
|
|
168
|
|
||||
2023
|
|
1,018
|
|
|
103
|
|
|
387
|
|
|
165
|
|
||||
2024–2028
|
|
4,837
|
|
|
445
|
|
|
2,068
|
|
|
777
|
|
2018 Financial Report
|
|
121
|
|
(
a)
|
Represents shares purchased pursuant to the accelerated share repurchase agreement with Citibank entered into on March 12, 2018, as well as other share repurchases. See above for additional information.
|
(b)
|
Represents shares purchased pursuant to the accelerated share repurchase agreement with Citibank entered into on February 2, 2017. See above for additional information.
|
(c)
|
Represents shares purchased pursuant to the accelerated share repurchase agreement entered into on March 8, 2016. See above for additional information.
|
122
|
|
2018 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)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
TSRUs
(a)
|
|
$
|
302
|
|
|
$
|
221
|
|
|
$
|
134
|
|
RSUs
|
|
286
|
|
|
301
|
|
|
299
|
|
|||
PPSs
|
|
276
|
|
|
209
|
|
|
135
|
|
|||
PSAs
|
|
62
|
|
|
47
|
|
|
13
|
|
|||
Stock options
|
|
12
|
|
|
55
|
|
|
106
|
|
|||
Directors’ compensation
|
|
10
|
|
|
7
|
|
|
4
|
|
|||
Share-based payment expense
|
|
949
|
|
|
840
|
|
|
691
|
|
|||
Tax benefit for share-based compensation expense
(b)
|
|
(180
|
)
|
|
(163
|
)
|
|
(205
|
)
|
|||
Share-based payment expense, net of tax
|
|
$
|
769
|
|
|
$
|
677
|
|
|
$
|
486
|
|
(a)
|
Includes
$7.0 million
of expense for PTSRUs.
|
(b)
|
2018 and 2017 include the impact of the TCJA on income taxes.
|
(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.
|
2018 Financial Report
|
|
123
|
|
The following table summarizes all TSRU activity during 2018:
|
|||||||||||
|
|
TSRUs
(Thousands)
|
|
|
Weighted-Average
Grant-Date
Fair Value
Per TSRU
|
|
|
Weighted-Average
Grant Price
Per TSRU
|
|
||
Nonvested, December 31, 2017
|
|
103,906
|
|
|
$
|
6.07
|
|
|
$
|
32.47
|
|
Granted
|
|
47,755
|
|
|
7.42
|
|
|
35.75
|
|
||
Vested
(a)
|
|
(7,203
|
)
|
|
6.67
|
|
|
34.49
|
|
||
Forfeited
|
|
(5,512
|
)
|
|
6.55
|
|
|
33.88
|
|
||
Nonvested, December 31, 2018
|
|
138,945
|
|
|
$
|
6.48
|
|
|
$
|
33.44
|
|
(a)
|
Includes the modification of approximately
1.7 million
TSRUs to approximately
260
employees, including management employees, in connection with our Organizing for Growth initiative. The terms were modified to permit the vesting upon termination. The impact to compensation expense was immaterial.
|
(a)
|
In
2018
, we settled
7,643,846
TSRUs with a weighted-average grant price of
$23.13
per unit.
|
(b)
|
In
2018
,
2,809,652
TSRUs with a weighted-average grant price of
$27.86
per unit were converted into
1,408,622
PTUs.
|
(c)
|
Includes the modification of approximately
1.7 million
TSRUs to approximately
260
employees, including management employees, in connection with our Organizing for Growth initiative. The terms were modified to permit the vesting upon termination. The impact to compensation expense was immaterial.
|
(d)
|
The number of TSRUs expected to vest takes into account an estimate of expected forfeitures.
|
124
|
|
2018 Financial Report
|
|
The following table summarizes all RSU activity during 2018:
|
|||||||
|
|
Shares
(Thousands)
|
|
|
Weighted-Average
Grant-Date Fair Value
Per Share
|
|
|
Nonvested, December 31, 2017
|
|
22,241
|
|
|
$
|
32.64
|
|
Granted
|
|
9,083
|
|
|
35.90
|
|
|
Vested
(a)
|
|
(3,701
|
)
|
|
34.02
|
|
|
Reinvested dividend equivalents
|
|
974
|
|
|
38.96
|
|
|
Forfeited
|
|
(1,321
|
)
|
|
33.85
|
|
|
Nonvested, December 31, 2018
|
|
27,276
|
|
|
$
|
33.70
|
|
(a)
|
Includes the modification of approximately
150 thousand
RSUs to approximately
140
employees, including management employees, in connection with our Organizing for Growth initiative. The terms were modified to permit vesting upon termination. The impact to the compensation expense was immaterial.
|
(a)
|
2018 includes modification of approximately
150 thousand
RSUs to approximately
140
employees, including management employees, in connection with our Organizing for Growth initiative. The terms were modified to permit vesting upon termination. The impact to the compensation expense was immaterial. 2017 includes the modification for a commitment to pay approximately
6.4 million
RSUs to approximately
9,900
employees, including senior and key management employees, for
6.6 million
RSUs. These shares were paid in the first quarter of 2018.
|
(a)
|
Includes the modification of approximately
200 thousand
PPSs to approximately
140
employees, including management employees, in connection with our Organizing for Growth initiative. The terms were modified to permit the vesting upon termination. The impact to compensation expense was immaterial.
|
(b)
|
Vested and non-vested shares outstanding, but not paid as of
December 31, 2018
were
33.9 million
.
|
(a)
|
Includes the modification of approximately
200 thousand
PPSs to approximately
140
employees, including management employees, in connection with our Organizing for Growth initiative. The terms were modified to permit the vesting upon termination. The impact to compensation expense was immaterial.
|
2018 Financial Report
|
|
125
|
|
(a)
|
Includes the modification of a few PSAs to a few employees, including management employees, in connection with our Organizing for Growth initiative. The terms were modified to permit the vesting upon termination. The impact to compensation expense was immaterial.
|
(a)
|
Includes the 2018 modification of a few PSAs to a few employees, including management employees, in connection with our Organizing for Growth initiative. The terms were modified to permit the vesting upon termination. The impact to compensation expense was immaterial.
Includes the 2017 modification
for a commitment to pay
1.1 million
PSAs to approximately
90
employees, including senior and key management employees, for
1.1 million
PSAs. These shares were paid in the first quarter of 2018.
|
(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.
|
126
|
|
2018 Financial Report
|
|
The following table summarizes all stock option activity during 2018:
|
|||||||||||||
|
|
Shares
(Thousands)
|
|
|
Weighted-Average
Exercise Price
Per Share
|
|
|
Weighted-Average
Remaining Contractual Term
(Years)
|
|
Aggregate
Intrinsic Value
(a)
(Millions)
|
|
||
Outstanding, December 31, 2017
|
|
150,757
|
|
|
$
|
27.27
|
|
|
|
|
|
||
Granted
|
|
1,372
|
|
|
35.74
|
|
|
|
|
|
|||
Exercised
|
|
(47,740
|
)
|
|
26.59
|
|
|
|
|
|
|||
Forfeited
|
|
(219
|
)
|
|
33.96
|
|
|
|
|
|
|||
Expired
|
|
(379
|
)
|
|
24.69
|
|
|
|
|
|
|||
Outstanding, December 31, 2018
(b)
|
|
103,791
|
|
|
27.69
|
|
|
4.4
|
|
$
|
1,657
|
|
|
Vested and expected to vest, December 31, 2018
(c
)
|
|
103,621
|
|
|
27.68
|
|
|
4.4
|
|
1,655
|
|
||
Exercisable, December 31, 2018
|
|
100,078
|
|
|
$
|
27.47
|
|
|
4.2
|
|
$
|
1,619
|
|
(a)
|
Market price of our underlying common stock less exercise price.
|
(b)
|
Includes the modification of approximately
190 thousand
stock options to a few employees, including management employees, in connection with our Organizing for Growth initiative. The terms were modified to permit a longer exercise term after termination.
|
(c)
|
The number of options expected to vest takes into account an estimate of expected forfeitures.
|
The following table provides the detailed calculation of
Earnings per common share
(EPS)
:
|
||||||||||||
|
|
Year Ended December 31,
|
||||||||||
(IN MILLIONS)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
EPS Numerator––Basic
|
|
|
|
|
|
|
|
|||||
Income from continuing operations
|
|
$
|
11,179
|
|
|
$
|
21,353
|
|
|
$
|
7,229
|
|
Less: Net income attributable to noncontrolling interests
|
|
36
|
|
|
47
|
|
|
31
|
|
|||
Income from continuing operations attributable to Pfizer Inc.
|
|
11,143
|
|
|
21,306
|
|
|
7,198
|
|
|||
Less: Preferred stock dividends––net of tax
|
|
1
|
|
|
1
|
|
|
1
|
|
|||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
11,142
|
|
|
21,305
|
|
|
7,197
|
|
|||
Discontinued operations––net of tax
|
|
10
|
|
|
2
|
|
|
17
|
|
|||
Less: Discontinued operations––net of tax, attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders
|
|
10
|
|
|
2
|
|
|
17
|
|
|||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
11,152
|
|
|
$
|
21,307
|
|
|
$
|
7,214
|
|
EPS Numerator––Diluted
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions
|
|
$
|
11,143
|
|
|
$
|
21,306
|
|
|
$
|
7,197
|
|
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions
|
|
10
|
|
|
2
|
|
|
17
|
|
|||
Net income attributable to Pfizer Inc. common shareholders and assumed conversions
|
|
$
|
11,153
|
|
|
$
|
21,308
|
|
|
$
|
7,214
|
|
EPS Denominator
|
|
|
|
|
|
|
|
|
||||
Weighted-average number of common shares outstanding––Basic
(a)
|
|
5,872
|
|
|
5,970
|
|
|
6,089
|
|
|||
Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements
(a)
|
|
105
|
|
|
89
|
|
|
70
|
|
|||
Weighted-average number of common shares outstanding––Diluted
|
|
5,977
|
|
|
6,058
|
|
|
6,159
|
|
|||
Stock options that had exercise prices greater than the average market price of our common stock issuable under employee compensation plans
(b)
|
|
2
|
|
|
36
|
|
|
63
|
|
|||
Cash dividends declared per share
|
|
$
|
1.38
|
|
|
$
|
1.30
|
|
|
$
|
1.22
|
|
(a)
|
2017 includes the effect of the modification for a commitment to pay
15.2 million
common-share equivalents that were scheduled for near-term settlement. These common share equivalents were paid in the first quarter of 2018.
|
(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.
|
2018 Financial Report
|
|
127
|
|
The future minimum rental commitments under non-cancelable operating leases follow:
|
||||||||||||||||||||||||
(MILLIONS OF DOLLARS)
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
After 2023
|
|
||||||
Lease commitments
|
|
$
|
300
|
|
|
$
|
252
|
|
|
$
|
210
|
|
|
$
|
267
|
|
|
$
|
248
|
|
|
$
|
2,040
|
|
•
|
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 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 jurisdictions.
|
128
|
|
2018 Financial Report
|
|
2018 Financial Report
|
|
129
|
|
130
|
|
2018 Financial Report
|
|
2018 Financial Report
|
|
131
|
|
•
|
Antitrust Actions
|
•
|
Personal Injury Actions
|
132
|
|
2018 Financial Report
|
|
•
|
Personal Injury Actions
|
•
|
Mississippi Attorney General Government Investigation
|
2018 Financial Report
|
|
133
|
|
134
|
|
2018 Financial Report
|
|
2018 Financial Report
|
|
135
|
|
•
|
As of
December 31, 2018
, we had agreements totaling
$3.7 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, 2018
, we have obligations to make guaranteed fixed annual payments over an
eight
-year period in connection with the U.S. and EU approvals for Besponsa (
$422 million
) and an obligation to make guaranteed fixed annual payments over a
nine
-year period for Bosulif (
$240 million
), both associated with R&D arrangements.
|
•
|
As of
December 31, 2018
, in connection with the TCJA, we have an estimated
$15 billion
repatriation tax liability on accumulated post-1986 earnings of foreign subsidiaries for which we plan to elect, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, payment over eight years through 2026. The first installment, due in April 2019, is reported in
Income taxes payable
and the remaining installments are reported in
Other taxes payable
in our consolidated balance sheet as of December 31, 2018. 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
|
|
2018 Financial Report
|
|
|
|
|
IH focused 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 included internal medicine, vaccines, oncology, inflammation & immunology, rare disease and consumer healthcare.
|
|
EH included legacy brands that have lost or will soon lose market exclusivity in both developed and emerging markets, branded generics, generic sterile injectable products, biosimilars and select branded products including anti-infectives. EH also included an R&D organization, as well as our contract manufacturing business. Through February 2, 2017, EH also included HIS.
|
Leading brands included:
-
Prevnar 13/Prevenar 13
-
Xeljanz
-
Eliquis
-
Lyrica
(U.S., Japan and certain other markets)
-
Enbrel
(outside the U.S. and Canada)
-
Ibrance
-
Xtandi
-
Chantix/Champix
- Several OTC consumer healthcare products (e.g.,
Centrum
and
Advil
)
|
|
Leading brands included:
-
Lipitor
- Norvasc
- Lyrica
(Europe, Russia, Turkey, Israel and Central Asia countries)
-
Celebrex
-
Viagra*
- Inflectra/Remsima
- Sulperazon
-
Several other sterile injectable products
|
*
|
Viagra lost exclusivity in the U.S. in December 2017. In 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through 2017, were reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, in 2018, total Viagra worldwide revenues were reported in EH.
|
•
|
Effective in the first quarter of 2018, certain costs for Pfizer’s StratCO group, which were previously reported in the operating results of our operating segments and Corporate, are reported in Other Unallocated. StratCO costs primarily include headcount costs, vendor costs and data costs largely in support of Pfizer’s commercial operations. The majority of the StratCO costs reflect additional amounts that our operating segments would have incurred had each segment operated as a standalone company during the periods presented. The reporting change was made to streamline accountability and speed decision making. In 2017, we reclassified approximately
$468 million
of costs from IH, approximately
$176 million
of costs from EH and approximately
$70 million
of costs from Corporate to Other unallocated costs to conform to the current period presentation, and in 2016, we reclassified approximately
$312 million
of costs from IH, approximately
$167 million
of costs from EH and approximately
$43 million
of costs from Corporate to Other unallocated costs to conform to the current period presentation.
|
•
|
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 operational execution of clinical trials for both early-stage assets in the WRD portfolio as well as late-stage assets in the Innovative portfolio. 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), 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, as well as certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments. Effective in the first quarter of 2018, certain costs for StratCO, which were previously reported in the operating results of our operating segments and Corporate, are reported in Other Unallocated. For additional information, see note below on Other unallocated costs.
|
•
|
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). In connection with the StratCO reporting change, in 2017, we reclassified approximately
$468 million
of costs from IH, approximately
$176 million
of costs from EH and approximately
$70 million
of costs from Corporate to Other unallocated costs to conform to the current period presentation, and in 2016, we reclassified approximately
$312 million
of costs from IH, approximately
$167 million
of costs from EH and approximately
$43 million
of costs from Corporate to Other unallocated costs to conform to the current period presentation.
|
•
|
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
|
2018 Financial Report
|
|
137
|
|
(a)
|
Income from continuing operations before provision/(benefit) for taxes on income
. IH’s earnings
include d
ividend income from our investment in ViiV of
$253 million
in
2018
and
$266 million
in
2017
. 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)
|
In connection with the StratCO reporting change, in 2017, we reclassified approximately
$468 million
of costs from IH, approximately
$176 million
of costs from EH and approximately
$70 million
of costs from Corporate to Other unallocated costs, and in 2016, we reclassified approximately
$312 million
of costs from IH, approximately
$167 million
of costs from EH and approximately
$43 million
of costs from Corporate to Other unallocated costs to conform to the current period presentation.
|
(d)
|
Other business activities includes the costs managed by our WRD and GPD organizations.
|
(e)
|
For a description, see the “Other Costs and Business Activities” section above.
|
(f)
|
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
|
|
2018 Financial Report
|
|
The following table provides revenues by geographic area:
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
(MILLIONS OF DOLLARS)
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
United States
|
$
|
25,329
|
|
|
$
|
26,026
|
|
|
$
|
26,369
|
|
Developed Europe
(a)
|
9,116
|
|
|
8,508
|
|
|
9,306
|
|
|||
Developed Rest of World
(b)
|
6,551
|
|
|
6,612
|
|
|
6,729
|
|
|||
Emerging Markets
(c)
|
12,651
|
|
|
11,399
|
|
|
10,420
|
|
|||
Revenues
|
$
|
53,647
|
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
(a)
|
Developed Europe region includes the following markets: Western Europe, Scandinavian countries and Finland.
Revenues denominated in euros were
$7.3 billion
in
2018
,
$6.8 billion
in
2017
and
$7.2 billion
in
2016
.
|
(b)
|
Developed Rest of World region includes the following markets: Japan, Canada, South Korea, Australia 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, South Korea, Australia 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.
|
2018 Financial Report
|
|
139
|
|
The following table provides detailed revenue information for several of our major products:
|
||||||||||||||
(MILLIONS OF DOLLARS)
|
|
|
|
Year Ended December 31,
|
||||||||||
PRODUCT
|
|
PRIMARY INDICATION OR CLASS
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
TOTAL REVENUES
|
|
|
|
$
|
53,647
|
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
PFIZER INNOVATIVE HEALTH (IH)
(a)
|
|
$
|
33,426
|
|
|
$
|
31,422
|
|
|
$
|
29,197
|
|
||
Internal Medicine
|
|
$
|
9,996
|
|
|
$
|
9,684
|
|
|
$
|
8,858
|
|
||
Lyrica IH
(b)
|
|
Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury
|
|
4,622
|
|
|
4,511
|
|
|
4,165
|
|
|||
Eliquis alliance revenues and direct sales
|
|
Atrial fibrillation, deep vein thrombosis, pulmonary embolism
|
|
3,434
|
|
|
2,523
|
|
|
1,713
|
|
|||
Chantix/Champix
|
|
An aid to smoking cessation treatment in adults 18 years of age or older
|
|
1,085
|
|
|
997
|
|
|
842
|
|
|||
BMP2
|
|
Development of bone and cartilage
|
|
279
|
|
|
261
|
|
|
251
|
|
|||
Toviaz
|
|
Overactive bladder
|
|
271
|
|
|
257
|
|
|
258
|
|
|||
Viagra IH
(c)
|
|
Erectile dysfunction
|
|
—
|
|
|
823
|
|
|
1,181
|
|
|||
All other Internal Medicine
|
|
Various
|
|
306
|
|
|
312
|
|
|
447
|
|
|||
Vaccines
|
|
$
|
6,332
|
|
|
$
|
6,001
|
|
|
$
|
6,071
|
|
||
Prevnar 13/Prevenar 13
|
|
Vaccines for prevention of pneumococcal disease
|
|
5,802
|
|
|
5,601
|
|
|
5,718
|
|
|||
FSME/IMMUN-TicoVac
|
|
Tick-borne encephalitis vaccine
|
|
184
|
|
|
134
|
|
|
114
|
|
|||
Trumenba
|
|
Meningococcal Group B vaccine
|
|
116
|
|
|
88
|
|
|
84
|
|
|||
All other Vaccines
|
|
Various
|
|
230
|
|
|
177
|
|
|
155
|
|
|||
Oncology
|
|
$
|
7,202
|
|
|
$
|
6,056
|
|
|
$
|
4,563
|
|
||
Ibrance
|
|
Advanced breast cancer
|
|
4,118
|
|
|
3,126
|
|
|
2,135
|
|
|||
Sutent
|
|
Advanced and/or metastatic RCC, adjuvant RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor
|
|
1,049
|
|
|
1,081
|
|
|
1,095
|
|
|||
Xtandi alliance revenues
|
|
Castration-resistant prostate cancer
|
|
699
|
|
|
590
|
|
|
140
|
|
|||
Xalkori
|
|
ALK-positive and ROS1-positive advanced NSCLC
|
|
524
|
|
|
594
|
|
|
561
|
|
|||
Inlyta
|
|
Advanced RCC
|
|
298
|
|
|
339
|
|
|
401
|
|
|||
Bosulif
|
|
Philadelphia chromosome–positive chronic myelogenous leukemia
|
|
296
|
|
|
233
|
|
|
167
|
|
|||
All other Oncology
|
|
Various
|
|
219
|
|
|
93
|
|
|
63
|
|
|||
Inflammation & Immunology (I&I)
|
|
$
|
4,080
|
|
|
$
|
3,968
|
|
|
$
|
3,928
|
|
||
Enbrel (Outside the U.S. and Canada)
|
|
RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis
|
|
2,112
|
|
|
2,452
|
|
|
2,909
|
|
|||
Xeljanz
|
|
RA, PsA, ulcerative colitis
|
|
1,774
|
|
|
1,345
|
|
|
927
|
|
|||
Eucrisa
|
|
Mild-to-moderate atopic dermatitis (eczema)
|
|
147
|
|
|
67
|
|
|
—
|
|
|||
All other I&I
|
|
Various
|
|
46
|
|
|
103
|
|
|
93
|
|
|||
Rare Disease
|
|
$
|
2,211
|
|
|
$
|
2,240
|
|
|
$
|
2,369
|
|
||
Genotropin
|
|
Replacement of human growth hormone
|
|
558
|
|
|
532
|
|
|
579
|
|
|||
BeneFIX
|
|
Hemophilia
|
|
554
|
|
|
604
|
|
|
712
|
|
|||
Refacto AF/Xyntha
|
|
Hemophilia
|
|
514
|
|
|
551
|
|
|
554
|
|
|||
Somavert
|
|
Acromegaly
|
|
267
|
|
|
254
|
|
|
232
|
|
|||
All other Rare Disease
|
|
Various
|
|
318
|
|
|
300
|
|
|
292
|
|
|||
Consumer Healthcare
|
|
|
|
$
|
3,605
|
|
|
$
|
3,472
|
|
|
$
|
3,407
|
|
PFIZER ESSENTIAL HEALTH (EH)
(d)
|
|
$
|
20,221
|
|
|
$
|
21,124
|
|
|
$
|
23,627
|
|
||
Legacy Established Products (LEP)
(e)
|
|
$
|
10,540
|
|
|
$
|
10,894
|
|
|
$
|
11,197
|
|
||
Lipitor
|
|
Reduction of LDL cholesterol
|
|
2,062
|
|
|
1,915
|
|
|
1,758
|
|
|||
Norvasc
|
|
Hypertension
|
|
1,024
|
|
|
926
|
|
|
962
|
|
|||
Premarin family
|
|
Symptoms of menopause
|
|
832
|
|
|
977
|
|
|
1,017
|
|
|||
Xalatan/Xalacom
|
|
Glaucoma and ocular hypertension
|
|
318
|
|
|
335
|
|
|
363
|
|
|||
Effexor
|
|
Depression and certain anxiety disorders
|
|
311
|
|
|
297
|
|
|
278
|
|
|||
EpiPen
|
|
Epinephrine injection used in treatment of life-threatening allergic reactions
|
|
303
|
|
|
290
|
|
|
386
|
|
|||
Zoloft
|
|
Depression and certain anxiety disorders
|
|
298
|
|
|
291
|
|
|
304
|
|
|||
Zithromax
|
|
Bacterial infections
|
|
290
|
|
|
270
|
|
|
272
|
|
|||
Xanax
|
|
Anxiety disorders
|
|
223
|
|
|
225
|
|
|
222
|
|
|||
Sildenafil Citrate
|
|
Erectile dysfunction
|
|
56
|
|
|
56
|
|
|
—
|
|
|||
All other LEP
|
|
Various
|
|
4,822
|
|
|
5,313
|
|
|
5,636
|
|
140
|
|
2018 Financial Report
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
Year Ended December 31,
|
||||||||||
PRODUCT
|
|
PRIMARY INDICATION OR CLASS
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|||
Sterile Injectable Pharmaceuticals (SIP)
(f)
|
|
$
|
5,214
|
|
|
$
|
5,673
|
|
|
$
|
6,014
|
|
||
Sulperazon
|
|
Treatment of infections
|
|
613
|
|
|
471
|
|
|
396
|
|
|||
Medrol
|
|
Steroid anti-inflammatory
|
|
427
|
|
|
483
|
|
|
450
|
|
|||
Fragmin
|
|
Slows blood clotting
|
|
293
|
|
|
306
|
|
|
318
|
|
|||
Tygacil
|
|
Tetracycline class antibiotic
|
|
249
|
|
|
260
|
|
|
274
|
|
|||
Zosyn/Tazocin
|
|
Antibiotic
|
|
229
|
|
|
194
|
|
|
146
|
|
|||
Precedex
|
|
Sedation agent in surgery or intensive care
|
|
213
|
|
|
243
|
|
|
264
|
|
|||
All other SIP
|
|
Various
|
|
3,191
|
|
|
3,715
|
|
|
4,166
|
|
|||
Peri-LOE Products
(g)
|
|
$
|
2,944
|
|
|
$
|
3,223
|
|
|
$
|
4,220
|
|
||
Celebrex
|
|
Arthritis pain and inflammation, acute pain
|
|
686
|
|
|
775
|
|
|
733
|
|
|||
Viagra EH
(c)
|
|
Erectile dysfunction
|
|
636
|
|
|
382
|
|
|
383
|
|
|||
Vfend
|
|
Fungal infections
|
|
392
|
|
|
421
|
|
|
590
|
|
|||
Lyrica EH
(b)
|
|
Epilepsy, neuropathic pain and generalized anxiety disorder
|
|
347
|
|
|
553
|
|
|
801
|
|
|||
Zyvox
|
|
Bacterial infections
|
|
236
|
|
|
281
|
|
|
421
|
|
|||
Revatio
|
|
Pulmonary arterial hypertension
|
|
227
|
|
|
252
|
|
|
285
|
|
|||
Pristiq
|
|
Depression
|
|
206
|
|
|
303
|
|
|
732
|
|
|||
All other Peri-LOE Products
|
|
Various
|
|
213
|
|
|
257
|
|
|
276
|
|
|||
Biosimilars
(h)
|
|
Various
|
|
$
|
769
|
|
|
$
|
531
|
|
|
$
|
319
|
|
Inflectra/Remsima
|
|
Inflammatory diseases
|
|
642
|
|
|
419
|
|
|
192
|
|
|||
All other Biosimilars
|
|
Various
|
|
127
|
|
|
112
|
|
|
127
|
|
|||
Pfizer CentreOne
(i)
|
|
|
|
$
|
755
|
|
|
$
|
706
|
|
|
$
|
718
|
|
Hospira Infusion Systems (HIS)
(j)
|
|
Various
|
|
$
|
—
|
|
|
$
|
97
|
|
|
$
|
1,158
|
|
Total Lyrica
(b)
|
|
Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury
|
|
$
|
4,970
|
|
|
$
|
5,065
|
|
|
$
|
4,966
|
|
Total Viagra
(c)
|
|
Erectile dysfunction
|
|
$
|
636
|
|
|
$
|
1,204
|
|
|
$
|
1,564
|
|
Total Alliance revenues
|
|
Various
|
|
$
|
3,838
|
|
|
$
|
2,927
|
|
|
$
|
1,746
|
|
(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 lost exclusivity in the U.S. in December 2017. In 2018, revenues for Viagra in the U.S. and Canada, which were reported in IH through 2017, were reported in EH (which reported all other Viagra revenues excluding the U.S. and Canada through 2017). Therefore, in 2018, total Viagra worldwide revenues were reported in EH. Total Viagra revenues in 2017 and 2016 represented the aggregate of worldwide revenues from Viagra IH and Viagra EH.
|
(d)
|
The EH business encompasses Legacy Established Products, Sterile Injectable Pharmaceuticals, Peri-LOE Products, Biosimilars, Pfizer CentreOne and HIS (through February 2, 2017).
|
(e)
|
Legacy Established Products primarily include products that have lost patent protection (excluding Sterile Injectable Pharmaceuticals and Peri-LOE Products). In the fourth quarter of 2017, we sold our equity share in Hisun Pfizer. As a result, effective in the first quarter of 2018, Hisun Pfizer-related revenues, previously reported in emerging markets within All Other LEP and All Other SIP, are reported in emerging markets within Pfizer CentreOne.
|
(f)
|
Sterile Injectable Pharmaceuticals includes branded and generic injectables (excluding Peri-LOE Products). In the fourth quarter of 2017, we sold our equity share in Hisun Pfizer. As a result, effective in the first quarter of 2018, Hisun Pfizer-related revenues, previously reported in emerging markets within All Other LEP and All Other SIP, are reported in emerging markets within Pfizer CentreOne.
|
(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; and worldwide revenues for Celebrex, Pristiq, Zyvox, Vfend, Revatio and Inspra; and in 2018, Viagra revenues for all countries (and Viagra revenues for all countries other than the U.S. and Canada in 2017 and 2016), 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 in the U.S. and Retacrit (biosimilar epoetin zeta) in the U.S. and 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. In the fourth quarter of 2017, we sold our equity share in Hisun Pfizer. As a result, effective in the first quarter of 2018, Hisun Pfizer-related revenues, previously reported in emerging markets within All Other LEP and All Other SIP, are reported in emerging markets within Pfizer CentreOne.
|
(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.
|
2018 Financial Report
|
|
141
|
|
142
|
|
2018 Financial Report
|
|
|
|
Quarter
|
||||||||||||||
(MILLIONS OF DOLLARS, EXCEPT PER COMMON SHARE DATA)
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
||||||||
2018
|
|
|
|
|
|
|
|
|
||||||||
Revenues
|
|
$
|
12,906
|
|
|
$
|
13,466
|
|
|
$
|
13,298
|
|
|
$
|
13,976
|
|
Costs and expenses
(a)
|
|
8,736
|
|
|
8,895
|
|
|
9,035
|
|
|
14,051
|
|
||||
Restructuring charges and certain acquisition-related costs
(b)
|
|
43
|
|
|
44
|
|
|
85
|
|
|
872
|
|
||||
Income/(loss) from continuing operations before provision for taxes on income/(loss)
|
|
4,127
|
|
|
4,527
|
|
|
4,177
|
|
|
(946
|
)
|
||||
Provision/(benefit) for taxes on income/(loss)
(c)
|
|
556
|
|
|
648
|
|
|
66
|
|
|
(563
|
)
|
||||
Income/(loss) from continuing operations
|
|
3,571
|
|
|
3,879
|
|
|
4,111
|
|
|
(383
|
)
|
||||
Discontinued operations—net of tax
|
|
(1
|
)
|
|
—
|
|
|
11
|
|
|
—
|
|
||||
Net income/(loss) before allocation to noncontrolling interests
|
|
3,570
|
|
|
3,879
|
|
|
4,122
|
|
|
(383
|
)
|
||||
Less: Net income attributable to noncontrolling interests
|
|
9
|
|
|
7
|
|
|
8
|
|
|
11
|
|
||||
Net income/(loss) attributable to Pfizer Inc.
|
|
$
|
3,561
|
|
|
$
|
3,872
|
|
|
$
|
4,114
|
|
|
$
|
(394
|
)
|
Earnings/(loss) per common share—basic:
|
|
|
|
|
|
|
|
|
||||||||
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
0.60
|
|
|
$
|
0.66
|
|
|
$
|
0.70
|
|
|
$
|
(0.07
|
)
|
Discontinued operations—net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income/(loss) attributable to Pfizer Inc. common shareholders
|
|
$
|
0.60
|
|
|
$
|
0.66
|
|
|
$
|
0.70
|
|
|
$
|
(0.07
|
)
|
Earnings/(loss) per common share—diluted:
|
|
|
|
|
|
|
|
|
||||||||
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
0.59
|
|
|
$
|
0.65
|
|
|
$
|
0.69
|
|
|
$
|
(0.07
|
)
|
Discontinued operations—net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income/(loss) attributable to Pfizer Inc. common shareholders
|
|
$
|
0.59
|
|
|
$
|
0.65
|
|
|
$
|
0.69
|
|
|
$
|
(0.07
|
)
|
(a)
|
The fourth quarter of
2018
historically reflects higher costs in
Cost of sales, Selling, informational and administrative expenses
and
Research and development expenses.
The fourth quarter of
2018
includes
$3.1 billion
in certain asset impairments
recorded in
Other (income)/deductions––net
. For additional information, see Notes to Consolidated Financial Statements—
Note 4
.
Other (Income)/Deductions—Net
.
|
(b)
|
In the fourth quarter of 2018, includes restructuring charges that were primarily related to employee termination costs and asset write downs. The employee termination costs are associated with our improvements to operational effectiveness as part of the realignment of our organizational structure effective at the beginning of 2019. For additional information, see Notes to Consolidated Financial Statements—
Note 3.
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
.
|
(c)
|
The third and fourth quarters of 2018 reflect the impact of
t
he 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
.
|
2018 Financial Report
|
|
143
|
|
|
|
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)
|
|
8,744
|
|
|
9,011
|
|
|
9,469
|
|
|
12,665
|
|
||||
Restructuring charges and certain acquisition-related costs
|
|
84
|
|
|
70
|
|
|
114
|
|
|
84
|
|
||||
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
|
|
(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
.
|
144
|
|
2018 Financial Report
|
|
|
|
Year Ended/As of December 31,
(a)
|
||||||||||||||||||
(MILLIONS, EXCEPT PER COMMON SHARE DATA)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|||||
Revenues
|
|
$
|
53,647
|
|
|
$
|
52,546
|
|
|
$
|
52,824
|
|
|
$
|
48,851
|
|
|
$
|
49,605
|
|
Income from continuing operations
|
|
11,179
|
|
|
21,353
|
|
|
7,229
|
|
|
6,975
|
|
|
9,119
|
|
|||||
Total assets
|
|
159,422
|
|
|
171,797
|
|
|
171,615
|
|
|
167,381
|
|
|
167,473
|
|
|||||
Long-term obligations
(b)
|
|
63,807
|
|
|
69,714
|
|
|
80,660
|
|
|
72,985
|
|
|
74,265
|
|
|||||
Earnings per common share—basic
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
1.90
|
|
|
$
|
3.57
|
|
|
$
|
1.18
|
|
|
$
|
1.13
|
|
|
$
|
1.43
|
|
Discontinued operations—net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|||||
Net income attributable to Pfizer Inc. common shareholders
(c)
|
|
$
|
1.90
|
|
|
$
|
3.57
|
|
|
$
|
1.18
|
|
|
$
|
1.13
|
|
|
$
|
1.44
|
|
Earnings per common share—diluted
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
1.86
|
|
|
$
|
3.52
|
|
|
$
|
1.17
|
|
|
$
|
1.11
|
|
|
$
|
1.41
|
|
Discontinued operations—net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|||||
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
1.87
|
|
|
$
|
3.52
|
|
|
$
|
1.17
|
|
|
$
|
1.11
|
|
|
$
|
1.42
|
|
Cash dividends declared per common share
|
|
$
|
1.38
|
|
|
$
|
1.30
|
|
|
$
|
1.22
|
|
|
$
|
1.14
|
|
|
$
|
1.06
|
|
(a)
|
2017 reflects the February 3, 2017 sale of HIS to ICU Medical. 2017 and 2018 reflect 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, 2017 and 2018 reflect the acquisition of Medivation on September 28, 2016 and the acquisition of Anacor on June 24, 2016, and 2015, 2016, 2017 and 2018 reflect the acquisition of Hospira on September 3, 2015.
|
(b)
|
Defined as
Long-term debt, Pension benefit obligations, net, Postretirement benefit obligations, net, Noncurrent deferred tax liabilities, Other taxes payable
and
Other noncurrent liabilities.
|
(c)
|
2018 and 2017 reflect 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.
|
2018 Financial Report
|
|
145
|
|
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
PFIZER
|
|
$100.0
|
|
$105.3
|
|
$112.8
|
|
$117.8
|
|
$136.4
|
|
$170.3
|
PEER GROUP
|
|
$100.0
|
|
$112.4
|
|
$114.1
|
|
$114.7
|
|
$134.3
|
|
$145.4
|
S&P 500
|
|
$100.0
|
|
$113.7
|
|
$115.2
|
|
$129.0
|
|
$157.2
|
|
$150.3
|
146
|
|
2018 Financial Report
|
|
Company Name
|
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 Pharmaceuticals LLC
|
Delaware
|
American Food Industries LLC
|
Delaware
|
Anacor Pharmaceuticals, Inc.
|
Delaware
|
Ayerst-Wyeth Pharmaceuticals LLC
|
Delaware
|
Bamboo Therapeutics, Inc.
|
Delaware
|
Bioren, LLC
|
Delaware
|
Blue Whale Re Ltd.
|
Vermont
|
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
|
Distribuidora Mercantil Centro Americana, S.A.
|
Delaware
|
Encysive Pharmaceuticals Inc.
|
Delaware
|
Excaliard Pharmaceuticals, Inc.
|
Delaware
|
Farminova Produtos Farmaceuticos de Inovacao, 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
|
HBAF Ltd.
|
Bahamas
|
Hospira (China) Enterprise Management Co. Ltd.
|
People’s Republic of China
|
Hospira Adelaide Pty Ltd
|
Australia
|
Hospira Australia Pty Ltd
|
Australia
|
Hospira Benelux BVBA
|
Belgium
|
Hospira Enterprises B.V.
|
Netherlands
|
Hospira France SAS
|
France
|
Hospira Holdings (S.A.) Pty Ltd
|
Australia
|
Hospira Ireland Holdings Unlimited Company
|
Ireland
|
Hospira Ireland Sales Limited
|
Ireland
|
Hospira Limited
|
Hong Kong
|
Hospira NZ Limited
|
New Zealand
|
Hospira Philippines, Inc.
|
Philippines
|
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
|
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, Inc.
|
Delaware
|
Monarch Pharmaceuticals, LLC
|
Tennessee
|
MTG Divestitures LLC
|
Delaware
|
Neusentis Limited
|
United Kingdom
|
PAH USA IN8 LLC
|
Delaware
|
Parke Davis Limited
|
Hong Kong
|
Parke, Davis & Company LLC
|
Michigan
|
Parkedale Pharmaceuticals, Inc.
|
Michigan
|
P-D Co., LLC
|
Delaware
|
Peak Enterprises LLC
|
Delaware
|
PF Asia Manufacturing B.V.
|
Netherlands
|
PF Consumer Healthcare 1 LLC
|
Delaware
|
PF Consumer Healthcare B.V.
|
Netherlands
|
PF Consumer Healthcare Canada ULC
|
Canada
|
PF Consumer Healthcare New Zealand Limited
|
New Zealand
|
PF Healthcare Australia Pty Ltd
|
Australia
|
PF OFG (Thailand) Limited
|
Thailand
|
PF OFG Australia Pty Ltd
|
Australia
|
PF OFG HELLAS L.T.D.
|
Greece
|
PF OFG Hong Kong Limited
|
Hong Kong
|
PF OFG New Zealand ULC
|
New Zealand
|
PF OFG South Korea 1 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 Ltd
|
Australia
|
Pfizer (Thailand) Limited
|
Thailand
|
Pfizer (Wuhan) Research and Development Co. Ltd.
|
People’s Republic of China
|
Pfizer AB
|
Sweden
|
Pfizer Africa & Middle East for Pharmaceuticals, Veterinarian Products & Chemicals S.A.E.
|
Egypt
|
Pfizer Afrique de L'Ouest
|
Senegal
|
Pfizer AG
|
Switzerland
|
Pfizer Anti-Infectives AB
|
Sweden
|
Pfizer ApS
|
Denmark
|
Pfizer AS
|
Norway
|
Pfizer Asia Manufacturing Pte. Ltd.
|
Singapore
|
Pfizer Asia Pacific Pte Ltd.
|
Singapore
|
Pfizer Atlantic Holdings S.a.r.l.
|
Luxembourg
|
Pfizer Australia Holdings B.V.
|
Netherlands
|
Pfizer Australia Holdings Pty Limited
|
Australia
|
Pfizer Australia Investments Pty Ltd
|
Australia
|
Pfizer Australia Pty Ltd
|
Australia
|
Pfizer B.V.
|
Netherlands
|
Pfizer Baltic Holdings B.V.
|
Netherlands
|
Pfizer Biofarmacêutica, Sociedade Unipessoal Lda
|
Portugal
|
Pfizer Biologics (Hangzhou) Co. Ltd
|
People’s Republic of China
|
Pfizer Biologics Ireland Holdings Limited
|
Ireland
|
Pfizer Biotech Corporation
|
Taiwan
|
Pfizer Bolivia S.A.
|
Bolivia
|
Pfizer Brazil Holding SARL
|
Luxembourg
|
Pfizer Canada ULC
|
Canada
|
Pfizer CentreSource Asia Pacific Pte. Ltd.
|
Singapore
|
Pfizer Chile S.A.
|
Chile
|
Pfizer Cia. Ltda.
|
Ecuador
|
Pfizer Colombia Spinco I LLC
|
Pennsylvania
|
Pfizer Commercial Holdings Coöperatief U.A.
|
Netherlands
|
Pfizer Commercial Holdings TRAE Kft.
|
Hungary
|
Pfizer Commercial TRAE Trading Kft.
|
Hungary
|
Pfizer Consumer Healthcare AB
|
Sweden
|
Pfizer Consumer Healthcare GmbH
|
Germany
|
Pfizer Consumer Healthcare Limited
|
United Kingdom
|
Pfizer Consumer Manufacturing Italy S.r.l.
|
Italy
|
Pfizer Corporation Austria Gesellschaft m.b.H.
|
Austria
|
Pfizer Corporation Hong Kong Limited
|
Hong Kong
|
Pfizer Corporation S. de R.L.
|
Panama
|
Pfizer Croatia d.o.o.
|
Croatia
|
Pfizer Deutschland GmbH
|
Germany
|
Pfizer Development LP
|
United Kingdom
|
Pfizer Development Services (UK) Limited
|
United Kingdom
|
Pfizer Domestic Ventures Limited
|
Jersey
|
Pfizer Dominicana, S.R.L
|
Dominican Republic
|
Pfizer East India B.V.
|
Netherlands
|
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
|
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 India Private Limited
|
India
|
Pfizer Healthcare Ireland
|
Ireland
|
Pfizer Hellas, A.E.
|
Greece
|
Pfizer Himalaya Holdings Coöperatief U.A.
|
Netherlands
|
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 Hungary Holdings TRAE Kft.
|
Hungary
|
Pfizer Ilaclari Limited Sirketi
|
Turkey
|
Pfizer Innovations AB
|
Sweden
|
Pfizer Innovations LLC
|
Russia
|
Pfizer Innovative Supply Point International BVBA
|
Belgium
|
Pfizer International LLC
|
New York
|
Pfizer International Markets B.V.
|
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 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 Limited
|
India
|
Pfizer Limited
|
Taiwan
|
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 OFG Germany GmbH
|
Germany
|
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 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 CIA. Ltda.
|
Ecuador
|
Pfizer PFE Colombia Holding LLC
|
Delaware
|
Pfizer PFE Colombia S.A.S
|
Colombia
|
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 Limited
|
Taiwan
|
Pfizer PFE Luxembourg S.à r.l.
|
Luxembourg
|
Pfizer PFE Mexico Holding 3 LLC
|
Delaware
|
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 Service Company Holding B.V.
|
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 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 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 Enterprises Global Management Co.,Ltd.
|
People’s Republic of China
|
Pfizer Pharmaceutical Trading Limited Liability Company (a/k/a Pfizer Kft. or Pfizer LLC)
|
Hungary
|
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 Pharmaceuticals Tunisie Sarl
|
Tunisia
|
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 R&D Holding B.V.
|
Netherlands
|
Pfizer R&D Japan G.K.
|
Japan
|
Pfizer R&D UK Limited
|
United Kingdom
|
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 Spain Holdings B.V.
|
Netherlands
|
Pfizer Specialties Limited
|
Nigeria
|
Pfizer SRB d.o.o.
|
Serbia
|
Pfizer Strategic Investment Holdings LLC
|
Delaware
|
Pfizer Trading Polska sp.z.o.o.
|
Poland
|
Pfizer TRAE Holdings Kft.
|
Hungary
|
Pfizer Transactions LLC
|
Delaware
|
Pfizer Tunisie SA
|
Tunisia
|
Pfizer Vaccines LLC
|
Delaware
|
Pfizer Venezuela, S.A.
|
Venezuela
|
Pfizer Venture Investments LLC
|
Delaware
|
Pfizer Ventures (US) 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 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
|
PHILCO Holdings S.à r.l.
|
Luxembourg
|
PHIVCO Corp.
|
Delaware
|
PHIVCO Holdco S.à r.l.
|
Luxembourg
|
PHIVCO Luxembourg S.à r.l.
|
Luxembourg
|
PIMB OFG Spain Holding, S.L.
|
Spain
|
PT. Pfizer Indonesia
|
Indonesia
|
Renrall LLC
|
Wyoming
|
Rinat Neuroscience Corp.
|
Delaware
|
Roerig S.A.
|
Chile
|
Searle Laboratorios, Lda.
|
Portugal
|
Servicios P&U, S. de R.L. de C.V.
|
Mexico
|
Shiley LLC
|
California
|
Sinergis Farma-Produtos Farmaceuticos, Lda.
|
Portugal
|
Solinor LLC
|
Delaware
|
Sugen LLC
|
Delaware
|
Tabor LLC
|
Delaware
|
Treerly Health Co., Ltd
|
People’s Republic of China
|
Upjohn Global Holdings B.V.
|
Netherlands
|
Upjohn Laboratorios Lda.
|
Portugal
|
Upjohn South Africa (Pty) Ltd.
|
South Africa
|
Upjohn US 1 LLC
|
Delaware
|
Upjohn US 2 LLC
|
Delaware
|
Vesterålens Naturprodukter A/S
|
Denmark
|
Vesterålens Naturprodukter AB
|
Sweden
|
Vesterålens Naturprodukter AS
|
Norway
|
Vesterålens Naturprodukter OY
|
Finland
|
Vicuron Holdings LLC
|
Delaware
|
Warner Lambert del Uruguay S.A.
|
Uruguay
|
Warner-Lambert Company AG
|
Switzerland
|
Warner-Lambert Company LLC
|
Delaware
|
Whitehall International Inc.
|
New York
|
W-L LLC
|
Delaware
|
Wyeth (Asia) Limited
|
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 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 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 India Private Limited
|
India
|
Wyeth Pharmaceuticals LLC
|
Delaware
|
Wyeth Puerto Rico, Inc.
|
Puerto Rico
|
Wyeth Subsidiary Illinois Corporation
|
Illinois
|
Wyeth Whitehall Export GmbH
|
Austria
|
Wyeth-Ayerst (Asia) Limited
|
Delaware
|
Wyeth-Ayerst International LLC
|
Delaware
|
Wyeth-Ayerst Promotions Limited
|
Delaware
|
/s/ ALBERT BOURLA
|
|
|
Albert Bourla
|
|
|
Chief Executive Officer
|
|
/s/ FRANK A. D'AMELIO
|
|
|
Frank A. D'Amelio
|
|
|
Chief Financial Officer, Executive Vice President,
Business Operations and Global Supply
|
|
/s/ ALBERT BOURLA
|
|
|
Albert Bourla
|
|
|
Chief Executive Officer
|
|
|
|
|
|
February 28, 2019
|
|
|
/s/ FRANK A. D'AMELIO
|
|
|
Frank A. D'Amelio
|
|
|
Chief Financial Officer, Executive Vice President,
Business Operations and Global Supply
|
||
|
|
|
February 28, 2019
|
|
|