Pfizer Reports First-Quarter 2013 Results

(BUSINESS WIRE)--Pfizer Inc. (NYSE: PFE) reported financial results for first-quarter
2013 and updated certain components of its 2013 financial guidance to
reflect the impact of recent changes in foreign exchange rates and the
initial public offering (IPO) of a 19.8% ownership interest in Zoetis⁽¹⁾
completed on February 6, 2013, among other factors. Pfizer continues to
consolidate Zoetis⁽¹⁾, as Pfizer retains an 80.2% ownership
interest. The earnings attributable to the divested interest in Zoetis⁽¹⁾
(Net income attributable to noncontrolling interests) are
excluded from Adjusted⁽²⁾ and Reported⁽³⁾ Net
Income, effective February 7, 2013. Results and guidance are
summarized below.

2013 FINANCIAL GUIDANCE⁽⁶⁾

Revenues and expenses of Zoetis⁽¹⁾ continue to be included
in the 2013 financial guidance, except that Adjusted⁽²⁾
and Reported⁽³⁾ Diluted EPS guidance excludes the earnings
from the 19.8% divested interest effective February 7, 2013. The
financial guidance has been updated to reflect the following:

• Reported Revenues: The changes in foreign exchange rates in relation
  to the U.S. dollar from mid-January 2013 to mid-April 2013, notably
  the weakening of the Japanese yen.
• Adjusted Diluted EPS⁽²⁾: The aforementioned changes in
  foreign exchange rates ($0.04 per share) as well as the impact of the
  Zoetis⁽¹⁾ IPO ($0.02 per share) noted above.
• Reported Diluted EPS⁽³⁾: The aforementioned changes in
  foreign exchange rates and the impact of the Zoetis⁽¹⁾ IPO
  as well as the gain associated with the transfer of certain product
  rights to Pfizer’s joint venture with Zhejiang Hisun Pharmaceuticals
  (Hisun) in China and an asset impairment charge.

EXECUTIVE COMMENTARY

Ian Read, Chairman and Chief Executive Officer, stated, “As we begin
2013, we continue to generate attractive returns for our shareholders.
We are clearly seeing the benefits of the investments we’ve been making
in our innovative core, as evidenced by recent key product launches,
including Eliquis, Xeljanz and various oncology products, as well as
significant progress within our mid-to-late stage product pipeline, most
notably palbociclib. Additionally, I am very pleased with the successful
completion of the Zoetis⁽¹⁾ IPO and a related debt offering,
and with the value these actions have created thus far for Pfizer’s
shareholders. We remain focused on driving innovation and managing the
business in the context of the challenging operating environment to
ensure Pfizer remains well-positioned for long-term value creation, all
in the best interests of our shareholders.”

Frank D’Amelio, Chief Financial Officer, stated, “With our consistent
financial performance and strong cash flows, including the proceeds from
the sale of our Nutrition business in November last year and from the
IPO of a 19.8% interest in Zoetis⁽¹⁾ and a related debt
offering earlier this year, we continue to make prudent capital
allocation decisions for the benefit of our shareholders. So far this
year, we have returned approximately $8.0 billion to shareholders in
dividends and share repurchases, with significant additional capital
expected to be allocated to these activities for the remainder of the
year. Our solid performance during first-quarter 2013 was negatively
impacted by approximately $0.02 per share due to changes in foreign
exchange rates in relation to the U.S. dollar, including the devaluation
of the Venezuelan currency in February, since our initial financial
guidance was provided in January 2013.”

QUARTERLY FINANCIAL HIGHLIGHTS (First-Quarter
2013 vs. First-Quarter 2012)

• Revenues decreased $1.4 billion, or 9%, which reflects an operational
  decline of $1.3 billion, or 8%, and the unfavorable impact of foreign
  exchange of $118 million, or 1%. The operational decrease was
  primarily the result of the losses of exclusivity of Lipitor during
  second-quarter 2012 in developed Europe and Geodon in March 2012 in
  the U.S., the impact of purchasing patterns of Prevnar/Prevenar 13 in
  various markets, and certain other events, primarily within the
  Emerging Markets unit highlighted below.
• Business unit revenues were impacted by the following:
  • Primary Care: Revenues decreased 20% operationally, primarily due
    to the shift in the reporting of Lipitor revenues in developed
    Europe and Australia to the Established Products unit beginning
    January 1, 2013, as well as the loss of exclusivity and near-term
    expiration of co-promotion agreements for Aricept and Spiriva,
    respectively, partially offset by the strong performance of Lyrica
    in the U.S. and developed Europe.
  • Specialty Care: Revenues declined 11% operationally, primarily due
    to the timing of U.S. government purchases of Prevnar 13 and the
    shift in the reporting of Geodon and Revatio revenues in the U.S.
    and Xalabrands revenues in developed Europe and Australia to the
    Established Products unit beginning January 1, 2013.
  • Emerging Markets: Revenues grew 6% operationally, primarily due to
    strong volume growth in China, which was partially offset by the
    timing of government purchases of Enbrel and the Prevenar
    franchise in certain emerging markets as well as the transfer of
    certain product rights to the Pfizer-Hisun joint venture.
  • Established Products: Revenues decreased 15% operationally,
    primarily due to multi-source generic competition in the U.S. for
    Lipitor beginning in late May 2012, as well as continuing
    competitive and pricing pressures. This decrease was partially
    offset by revenues from products in certain markets that were
    shifted to the Established Products unit from other business units
    beginning January 1, 2013.
  • Consumer Healthcare: Revenues increased 12% operationally,
    primarily due to the addition of Emergen-C from the acquisition of
    Alacer Corp., as well as solid growth of key products, including
    Advil and Robitussin, partially due to a severe cold and flu
    season in the U.S.
  • Oncology: Revenues increased 31% operationally, driven by the
    recent launches of new products, most notably Inlyta and Xalkori
    in several major markets.

• Adjusted cost of sales, adjusted SI&A expenses and adjusted R&D
  expenses⁽²⁾ in the aggregate decreased $545 million, or 7%,
  primarily reflecting the benefits of cost-reduction and productivity
  initiatives, including a reduction in the field force and more
  streamlined corporate support functions and manufacturing network.
• The effective tax rate on adjusted income⁽²⁾ decreased 2.1
  percentage points, primarily due to the change in the jurisdictional
  mix of earnings and the extension of the U.S. research and development
  tax credit that was signed into law in January 2013. The first-quarter
  2013 rate reflects the full-year benefit of the 2012 research and
  development tax credit and a portion of the 2013 research and
  development tax credit.
• The diluted weighted-average shares outstanding declined by
  approximately 329 million shares, primarily due to the Company’s
  ongoing share-repurchase program.
• In addition to the aforementioned factors, first-quarter 2013 reported
  earnings were favorably impacted by lower charges related to legal
  matters, lower costs related to cost-reduction and productivity
  initiatives, and lower purchase accounting adjustments. Additionally,
  reported earnings were favorably impacted by the gain associated with
  the transfer of certain product rights to the Pfizer-Hisun joint
  venture, partially offset by less income from discontinued operations
  reflecting the divestiture of the Nutrition business in November 2012.

RECENT NOTABLE DEVELOPMENTS

Product Developments

• Eliquis was launched in the U.S., UK, Germany, Denmark and Japan for
  the reduction in the risk of stroke and systemic embolism in patients
  with nonvalvular atrial fibrillation.
• The Xeljanz U.S. field force launch meeting was held in early March.
  Additionally, Xeljanz was approved in Japan for the treatment of
  adults with rheumatoid arthritis (RA) who have had an inadequate
  response to existing therapies, such as methotrexate.
• Bosulif was granted conditional marketing authorization by the
  European Commission for use in certain patients with previously
  treated chronic myelogenous leukemia.
• Quillivant XR, the first once-daily, extended-release, liquid
  methylphenidate for attention deficit hyperactivity disorder, was
  launched in the U.S.
• The U.S. Patent and Trademark Office granted Pfizer a reissue patent
  covering Celebrex. The reissue patent will expire in December 2015,
  while the basic patent will expire in May 2014, in each case including
  six months of pediatric exclusivity. Pfizer has initiated legal
  proceedings against several generic companies to enforce the reissued
  patent.

Pipeline Developments

• The Committee for Medicinal Products for Human Use (CHMP) of the
  European Medicines Agency adopted a negative opinion for Xeljanz for
  the treatment of adult patients with moderate-to-severe active RA. The
  CHMP is of the opinion that Xeljanz does not demonstrate a favorable
  benefit:risk profile. Pfizer intends to appeal this opinion and
  immediately seek a re-examination of the opinion by the CHMP.
• Palbociclib received Breakthrough Therapy designation by the U.S. Food
  and Drug Administration (FDA) for the potential treatment of patients
  with breast cancer. Additionally, a randomized phase 3 study
  evaluating palbociclib in combination with letrozole for first-line
  treatment of post-menopausal women with ER+/HER2- advanced breast
  cancer began enrolling patients in February.
• Inotuzumab ozogamicin received Orphan Drug designation from the FDA
  for the treatment of acute lymphoblastic leukemia.

Business Development/Portfolio Review

• An IPO of a 19.8% ownership interest in Zoetis⁽¹⁾ as well
  as a related debt offering were completed. Total proceeds of
  approximately $6 billion from these transactions are being allocated
  to share repurchases, which remain the case to beat for capital
  allocation.
• Pfizer entered into a worldwide (except Japan) collaboration agreement
  with Merck & Co., Inc. to develop and commercialize ertugliflozin and
  ertugliflozin-containing fixed-dose combinations with metformin and
  Januvia^® (sitagliptin) tablets. Ertugliflozin is
  Pfizer’s investigational medicine for type 2 diabetes, with phase 3
  trials expected to begin later in 2013.

For additional details, see the attached financial schedules, product
revenue tables and disclosure notice.

DISCLOSURE NOTICE: The information contained in this earnings release
and the attachments is as of April 30, 2013. We assume no obligation to
update forward-looking statements contained in this earnings release and
the attachments as a result of new information or future events or
developments.

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

• the outcome of research and development activities, including, without
  limitation, the ability to meet anticipated clinical trial
  commencement and completion dates, regulatory submission and approval
  dates, and launch dates for product candidates, as well as the
  possibility of unfavorable clinical trial results, including
  unfavorable new clinical data and additional analyses of existing
  clinical data;
• decisions by regulatory authorities regarding whether and when to
  approve our drug applications, as well as their decisions regarding
  labeling, ingredients and other matters that could affect the
  availability or commercial potential of our products;
• the speed with which regulatory authorizations, pricing approvals and
  product launches may be achieved;
• the outcome of post-approval clinical trials, which could result in
  the loss of marketing approval for a product or changes in the
  labeling for, and/or increased or new concerns about the safety or
  efficacy of, a product that could affect its availability or
  commercial potential;
• the success of external business-development activities;
• competitive developments, including the impact on our competitive
  position of new product entrants, in-line branded products, generic
  products, private label products and product candidates that treat
  diseases and conditions similar to those treated by our in-line drugs
  and drug candidates;
• the implementation by the FDA of an abbreviated legal pathway to
  approve biosimilar products, which could subject our biologic products
  to competition from biosimilar products in the U.S., with attendant
  competitive pressures, after the expiration of any applicable
  exclusivity period and patent rights;
• the ability to meet generic and branded competition after the loss of
  patent protection for our products or competitor products;
• the ability to successfully market both new and existing products
  domestically and internationally;
• difficulties or delays in manufacturing;
• trade buying patterns;
• the impact of existing and future legislation and regulatory
  provisions on product exclusivity;
• trends toward managed care and healthcare cost containment;
• the impact of the U.S. Budget Control Act of 2011 (the Budget Control
  Act) and the deficit-reduction actions to be taken pursuant to the
  Budget Control Act in order to achieve the deficit-reduction targets
  provided for therein, and the impact of any broader deficit-reduction
  efforts;
• the possible failure of the U.S. federal government to suspend
  enforcement of the federal debt ceiling beyond May 18, 2013 or to
  increase the federal debt ceiling and any resulting inability of the
  U.S. federal government to satisfy its financial obligations,
  including under Medicare, Medicaid and other publicly funded or
  subsidized health programs;
• the impact of U.S. healthcare legislation enacted in 2010 – the
  Patient Protection and Affordable Care Act, as amended by the Health
  Care and Education Reconciliation Act - and of any modification or
  repeal of any of the provisions thereof;
• U.S. legislation or regulatory action affecting, among other things:
  pharmaceutical product pricing, reimbursement or access, including
  under Medicaid, Medicare and other publicly funded or subsidized
  health programs; the importation of prescription drugs from outside
  the U.S. at prices that are regulated by governments of various
  foreign countries; direct-to-consumer advertising and interactions
  with healthcare professionals; and the use of comparative
  effectiveness methodologies that could be implemented in a manner that
  focuses primarily on the cost differences and minimizes the
  therapeutic differences among pharmaceutical products and restricts
  access to innovative medicines;
• legislation or regulatory action in markets outside the U.S. affecting
  pharmaceutical product pricing, reimbursement or access, including, in
  particular, continued government-mandated price reductions for certain
  biopharmaceutical products in certain European and emerging market
  countries;
• the exposure of our operations outside the U.S. to possible capital
  and exchange controls, expropriation and other restrictive government
  actions, changes in intellectual property legal protections and
  remedies, as well as political unrest and unstable governments and
  legal systems;
• contingencies related to actual or alleged environmental contamination;
• claims and concerns that may arise regarding the safety or efficacy of
  in-line products and product candidates;
• any significant breakdown, infiltration, or interruption of our
  information technology systems and infrastructure;
• legal defense costs, insurance expenses, settlement costs, the risk of
  an adverse decision or settlement and the adequacy of reserves related
  to product liability, patent protection, government investigations,
  consumer, commercial, securities, antitrust, environmental and tax
  issues, ongoing efforts to explore various means for resolving
  asbestos litigation, and other legal proceedings;
• our ability to protect our patents and other intellectual property,
  both domestically and internationally;
• interest rate and foreign currency exchange rate fluctuations,
  including the impact of possible currency devaluations in countries
  experiencing high inflation rates;
• governmental laws and regulations affecting domestic and foreign
  operations, including, without limitation, tax obligations and changes
  affecting the tax treatment by the U.S. of income earned outside of
  the U.S. that may result from pending and possible future proposals;
• any significant issues involving our largest wholesaler customers,
  which account for a substantial portion of our revenues;
• the possible impact of the increased presence of counterfeit medicines
  in the pharmaceutical supply chain on our revenues and on patient
  confidence in the integrity of our medicines;
• any significant issues that may arise related to the outsourcing of
  certain operational and staff functions to third parties, including
  with regard to quality, timeliness and compliance with applicable
  legal requirements and industry standards;
• changes in U.S. generally accepted accounting principles;
• uncertainties related to general economic, political, business,
  industry, regulatory and market conditions including, without
  limitation, uncertainties related to the impact on us, our customers,
  suppliers and lenders and counterparties to our foreign-exchange and
  interest-rate agreements of challenging global economic conditions and
  recent and possible future changes in global financial markets; and
  the related risk that our allowance for doubtful accounts may not be
  adequate;
• any changes in business, political and economic conditions due to
  actual or threatened terrorist activity in the U.S. and other parts of
  the world, and related U.S. military action overseas;
• growth in costs and expenses;
• changes in our product, segment and geographic mix;
• our ability to successfully implement any strategic alternative that
  we decide to pursue with regard to our remaining approximately 80%
  ownership interest in Zoetis Inc. and the impact thereof; and
• the impact of acquisitions, divestitures, restructurings, product
  recalls and withdrawals and other unusual items, including our ability
  to realize the projected benefits of our cost-reduction and
  productivity initiatives, including those related to our research and
  development organization.

A further list and description of risks, uncertainties and other matters
can be found in our Annual Report on Form 10-K/A for the fiscal year
ended December 31, 2012 and in our reports on Form 10-Q, in each case
including in the sections thereof captioned “Forward-Looking Information
and Factors That May Affect Future Results” and “Item 1A. Risk Factors”,
and in our reports on Form 8-K.

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

This earnings release does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities, which will be made only
by prospectus.