President & CEO
to our stakeholders
It is an honor for me to lead Pfizer at this important time for both our company and the industry. I've spent my entire career at Pfizer and during this time I have seen the industry change and evolve in terms of customers' needs, regulatory standards and where growth occurs. Among these changes, one of the most important has been the increasing pressure from payers, governments and society to deliver greater value. That's why I believe there is a fundamental question facing the industry and Pfizer. Simply stated, it is: Do we have a research model that will consistently produce results that improve the lives of patients and create value for shareholders?
Pfizer is answering this fundamental question. We are taking the hard decisions that will improve the performance of our innovative core. We are focusing our R&D on human disease mechanisms in the areas where we believe we can win; we are strengthening our processes inside of research to help ensure we only bring differentiated medicines to market; we are applying rigor in how we manage our portfolio; and we are being disciplined in how we deploy capital. We are choosing the right science to create the next generation of medicines and vaccines that matter most to the people we serve and we are bringing some of the industry's best scientific minds together to solve the most difficult health challenges of our time.
In my first letter to you as Pfizer's CEO, I'll summarize our performance in 2010 and talk about the four imperatives that are driving the actions we are taking to address the challenges we face. I am optimistic about Pfizer's future because I believe we will create value in the short and long term by generating products that are innovative and science-driven, making the right capital allocation decisions, continuing to promote a culture of confidence and trust, and earning respect from society. There has never been a more dynamic or exciting period in Pfizer's history and I look forward to leading our company as we enter this new chapter.
2010: Continuing to Deliver on Our Commitments
In 2010 we met or exceeded our revenue and earnings per share goals. Pfizer had record sales of $67.8 billion, driven by an increasingly diverse portfolio of products. Our Biopharmaceutical organization, focused on prescription-only human health products, delivered $58.5 billion in sales, up 29 percent over 2009. This growth was largely driven by the addition of Wyeth's products. Our Diversified businesses, which include our Animal Health, Consumer Healthcare, Nutrition and Capsugel units, were greatly strengthened by the addition of Wyeth brands and collectively delivered $9.0 billion in sales, up 114 percent over 2009. We also stayed on track to achieve our previously announced, multiyear cost-reduction goal of approximately $4 billion to $5 billion by the end of 2012,1 achieving more than $2 billion of these cost reductions in 2010.
Pfizer's adjusted diluted earnings per share2 of $2.23 exceeded our guidance for the year. To directly enhance shareholder value, in December 2010 Pfizer's Board of Directors approved an 11 percent increase in the first-quarter 2011 dividend to 20 cents a share and in January 2011 increased the funds authorized for share buybacks to $9 billion. We expect to repurchase approximately $5 billion of common stock during 2011, with the remaining authorized amount available in 2012 and beyond.
Pfizer also met expectations in 2010 in other key performance indicators that companies in our industry are increasingly adopting. These encompass environmental sustainability, investments in treatments for neglected diseases and improvement in access to medicines.
Based on 2008 average foreign exchange rates, in comparison with the 2008 pro forma adjusted total costs (see footnote 2) of legacy Pfizer and legacy Wyeth operations, and not including the impact of the planned reduction in R&D expenditures announced in February 2011.
"Adjusted income" and its components and "adjusted diluted earnings per share (EPS)" are defined as "reported net income" and its components and "reported diluted EPS" excluding purchase-accounting adjustments, acquisitionrelated costs, discontinued operations and certain significant items. "Adjusted total costs" represents the total of "adjusted cost of sales," "adjusted SI&A expenses" and "adjusted R&D expenses," which are income statement line items prepared on the same basis as and are components of the overall "adjusted income" measure. The definitions of "reported net income" and "reported diluted EPS," certain uses by management of the "adjusted income" measure, and a reconciliation of 2010 "adjusted income" and its components and "adjusted diluted EPS" to 2010 "reported net income" and its components and "reported diluted EPS" are provided in Pfizer's Current Report on Form 8-K dated February 1, 2011. Additional information regarding our 2010 financial performance is provided in Pfizer's Annual Report on Form 10-K for the fiscal year ended December 31, 2010. These reports can be found on www.pfizer.com in the "Investors-SEC Filings" section. The "adjusted income" and its components and "adjusted diluted EPS" measures are not, and should not be viewed as, substitutes for "reported net income" and its components and "reported diluted EPS."