NEW YORK--(BUSINESS WIRE)-- Pfizer Inc. (NYSE: PFE) reported financial results for fourth-quarter and full-year 2013. As a result of the full disposition of Zoetis⁽³⁾ on June 24, 2013, the financial results of the Animal Health business are reported as a discontinued operation in the consolidated statements of income for full-year 2013, and fourth-quarter and full-year 2012. Results and guidance are summarized below.

* Calculation not meaningful.

2014 FINANCIAL GUIDANCE⁽⁶⁾

Pfizer's 2014 financial guidance is summarized below.

EXECUTIVE COMMENTARY

Ian Read, Chairman and Chief Executive Officer, stated, “The just-completed year was highlighted by solid financial performance and shareholder-friendly capital allocation, a strengthening of our innovative core as well as the formation of our new commercial structure designed to enable each business to have a sharper focus on its distinct market opportunities and challenges.”

“We enter 2014 with confidence in the competitive positioning of our commercial businesses, the prospects for our recently launched products and the strength of our research pipeline. We remain focused on those areas and opportunities we believe will continue to create value for our shareholders, and we seek to identify additional opportunities that will strengthen our innovative and established pharmaceutical businesses as well as our Consumer business. We will focus on advancing science and innovation to deliver new therapies in areas with unmet need and ensuring our shareholders' capital is allocated toward the most attractive opportunities for value creation.”

Mr. Read continued, “During 2014, we expect to report on several, important clinical data readouts for our mid- and late-stage pipeline compounds. In the near term, we expect to report top-line results for the Phase 2 study for palbociclib in patients with post-menopausal, ER-positive, advanced breast cancer and for the CAPiTA study for Prevnar 13 in adults age 65 and older. In addition, we anticipate data presentations at upcoming medical conferences of Phase 2b data for bococizumab, our PCSK9 inhibitor for LDL cholesterol reduction, and Phase 2a data for our staphylococcus aureus vaccine. During the second quarter, we anticipate reporting top-line results for two pivotal Phase 3 studies for Xeljanz in psoriasis.”

“We see attractive opportunities globally to deliver value to patients, payors and other stakeholders through a combination of innovative, established and over-the-counter pharmaceutical products. I believe we have the business structure, leadership team and financial capability firmly in place to facilitate our continued success,” Mr. Read concluded.

Frank D’Amelio, Chief Financial Officer, stated, “For full-year 2013, I am pleased with our financial performance, our strategic accomplishments and our ability to continue delivering shareholder value through prudent capital allocation. Regarding our financial performance, we achieved or exceeded all elements of our 2013 financial guidance despite an operating environment that remains challenging. We completed two important strategic initiatives in 2013: the separation of our Animal Health business through the disposition of Zoetis⁽³⁾, and the formation of the new commercial structure that was successfully implemented at the start of 2014. Finally, we delivered significant shareholder value through share repurchases and dividends. With our strong operating cash flow as well as the proceeds generated from the separations of our Nutrition and Animal Health businesses, we repurchased $16.3 billion of our common stock in 2013. As a result of those share repurchases as well as Pfizer common stock tendered in the Zoetis⁽³⁾ exchange offer, we reduced the number of shares of outstanding common stock by approximately one billion, or 13%, in 2013 compared to year-end 2012. In addition, we paid $6.6 billion in dividends. In total, we returned approximately $23 billion to shareholders through share repurchases and dividends in 2013.”

“We are also providing our 2014 financial guidance, including ranges for adjusted revenues⁽²⁾ of $49.2 to $51.2 billion and for adjusted diluted EPS⁽²⁾ of $2.20 to $2.30. Our guidance for adjusted revenues⁽²⁾reflects the anticipated negative impact of approximately $3.0 billion due to recent and expected product losses of exclusivity, as well as the expiration and near-term termination of certain collaboration agreements that continue to significantly negatively impact alliance revenue, partially offset by anticipated revenue growth from certain other products. We expect adjusted R&D expenses⁽²⁾ to be between $6.4 billion and $6.9 billion, which reflects the late-2013 and early-2014 initiations of Phase 3 clinical programs for certain pipeline compounds. Lastly, our reported⁽¹⁾ and adjusted⁽²⁾ diluted EPS guidance reflects anticipated share repurchases totaling approximately $5 billion this year. These planned repurchases will more than offset the potential dilution related to employee compensation programs,” concluded Mr. D’Amelio.

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

• Reported revenues⁽¹⁾ decreased $333 million, or 2%, which reflects operational growth of $64 million, or 1%, and the unfavorable impact of foreign exchange of $397 million, or 3%. The operational increase was primarily due to the strong growth of Lyrica, Inlyta and Xalkori globally, Enbrel outside of North America, as well as Celebrex, Eliquis and Xeljanz, primarily in the U.S. In addition, fourth-quarter 2013 reported revenues⁽¹⁾ included $65 million from the transitional manufacturing and supply agreements with Zoetis⁽³⁾. Revenues were negatively impacted primarily by the expiration on October 31, 2013 of the collaboration agreement for Enbrel in North America, continued erosion for branded Lipitor in developed Europe and certain other developed markets, the ongoing expiration of the Spiriva collaboration in certain countries, other product losses of exclusivity in certain markets, decreased government purchases of Prevnar in certain emerging markets, and various other events.
• Business unit revenues were impacted by the following:
  • Primary Care: Revenues declined 8% 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 certain other product losses of exclusivity in various markets, including Viagra in most major European markets in June 2013 and Lyrica in Canada in February 2013, and the termination of the co-promotion agreement for Aricept in Japan in December 2012. Additionally, in the U.S. and certain European countries, the co-promotion collaboration for Spiriva is in its final year, which, per the terms of the collaboration agreement, has resulted in a decline in Pfizer’s share of Spiriva revenues; the agreement has terminated in certain other countries. These declines were partially offset by the strong operational performance of Lyrica in developed markets as well as Celebrex, Eliquis and Premarin, primarily in the U.S.
  • Specialty Care: Revenues decreased 5% operationally, primarily due to the expiration of the collaboration agreement for Enbrel in North America on October 31, 2013; for a 36-month period thereafter, Pfizer is entitled to royalty payments that are expected to be significantly less than the share of Enbrel profits prior to the expiration of the collaboration agreement, and those royalty payments are and will be included in Other (income)/deductions–net rather than in Revenues. Revenues were also negatively impacted by 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. These declines were partially offset by the growth of Prevnar, Enbrel outside of North America as well as Xeljanz and the hemophilia portfolio (BeneFIX and ReFacto AF/Xyntha) in the U.S.
  • Emerging Markets: Revenues grew 9% operationally, primarily due to volume growth in China, most notably for Lipitor, which was partially offset by the impact of the transfer of certain product rights to the Pfizer-Hisun joint venture in first-quarter 2013. Revenues were also negatively impacted by decreased government purchases of Prevnar as well as government cost-containment measures in certain other emerging markets.
  • Established Products: Revenues increased 6% operationally. This performance was driven by the favorable impact of revenues from products in certain markets that were shifted to the Established Products unit from other business units beginning January 1, 2013, including Lipitor, Caduet and Xalbrands in developed Europe and Australia and Geodon in the U.S., as well as the contribution from the collaboration with Mylan Inc. to market generic drugs in Japan. Revenues were unfavorably impacted by the continued erosion of branded Lipitor in Japan due to generic competition and additional generic competition for Metaxalone/Skelaxin in the U.S.
  • Consumer Healthcare: Revenues increased 2% operationally, primarily due to strong emerging markets growth for core supplement products, including Centrum and Caltrate, as a result of several recent product launches and increased promotional activities in those markets, as well as growth of Emergen-C in the U.S. due to additional promotional activities. This growth was partially offset by a decline in revenues for pain management products in the U.S., primarily due to increased competition resulting from the return to the market of certain competing analgesic brands.
  • Oncology: Revenues increased 29% operationally, driven by the continued solid uptake of new products, most notably Inlyta and Xalkori in several major markets. Inlyta’s market share is stable in the U.S. and continues to increase in international developed markets as physician and patient feedback remains positive both in terms of efficacy and tolerability, and as pricing and reimbursement are being granted in additional developed Europe markets. Revenues were negatively impacted by the performance of Sutent due to increased competitive pressures in certain international developed markets as well as government cost-containment measures in certain European markets.

• Adjusted cost of sales, adjusted SI&A expenses and adjusted R&D expenses⁽²⁾ in the aggregate were flat operationally. Overall, they decreased $291 million, or 3%, primarily reflecting the favorable impact of foreign exchange and the benefits of cost-reduction and productivity initiatives, partially offset by higher adjusted cost of sales⁽²⁾ on an operational basis due to an unfavorable shift in product mix and adjusted SI&A expenses⁽²⁾ to support several new product launches.
• The effective tax rate on adjusted income⁽²⁾ declined 2.0 percentage points to 27.7% from 29.7%. This decline was primarily due to an increase in tax benefits compared to fourth-quarter 2012 related to audit settlements with foreign jurisdictions for multiple years and the extension of the U.S. research and development tax credit that was signed into law in January 2013, partially offset by a change in the jurisdictional mix of earnings.
• The diluted weighted-average shares outstanding declined by approximately 862 million shares, due to the company’s ongoing share repurchase program and the impact of the Zoetis⁽³⁾ exchange offer, which was completed on June 24, 2013.
• In addition to the aforementioned factors, fourth-quarter 2013 reported earnings were significantly unfavorably impacted by the non-recurrence of income from discontinued operations attributable to the company’s Animal Health and Nutrition businesses, including the gain on the sale of the Nutrition business, in the year-ago quarter. Reported earnings were favorably impacted by a lower effective tax rate, lower charges related to asset impairments and legal matters, and lower acquisition-related expenses. The effective tax rate on reported income⁽¹⁾ decreased in fourth-quarter 2013 in comparison with the year-ago quarter primarily due to an increase in tax benefits related to an audit settlement with the U.S. Internal Revenue Service as well as audit settlements with foreign jurisdictions for multiple years.

FULL-YEAR FINANCIAL HIGHLIGHTS (Full-Year 2013 vs. Full-Year 2012)

• Reported revenues⁽¹⁾ decreased $3.1 billion, or 6%, which reflects an operational decline of $1.9 billion, or 4%, and the unfavorable impact of foreign exchange of $1.2 billion, or 2%. In addition to the aforementioned factors that negatively impacted fourth-quarter 2013 revenues, full-year 2013 revenues were negatively impacted by erosion of branded Lipitor in the U.S. and decreased government purchases of Enbrel in certain emerging markets. Revenues were positively impacted by the operational growth of Lyrica, Celebrex, Inlyta and Xalkori globally, Eliquis and Xeljanz in the U.S., as well as the contribution from the collaboration with Mylan Inc. to market generic drugs in Japan. In addition, reported revenues⁽¹⁾ in full-year 2013 included $132 million from the transitional manufacturing and supply agreements with Zoetis⁽³⁾.
• Adjusted cost of sales, adjusted SI&A expenses and adjusted R&D expenses⁽²⁾ in the aggregate decreased $1.5 billion, or 5%, primarily reflecting the benefits of cost-reduction and productivity initiatives, the non-recurrence of a $250 million payment included in adjusted R&D expenses⁽²⁾ in third-quarter 2012 to obtain the exclusive global over-the-counter rights to Nexium, and the favorable impact of foreign exchange, partially offset by higher adjusted cost of sales⁽²⁾ on an operational basis due to an unfavorable shift in product mix and adjusted SI&A expenses⁽²⁾ to support several new product launches.
• The effective tax rate on adjusted income⁽²⁾ declined 1.2 percentage points to 27.5% from 28.7%. This decline was primarily due to an increase in tax benefits compared to 2012 related to audit settlements with foreign jurisdictions for multiple years and the extension of the U.S. research and development tax credit that was signed into law in January 2013.
• The diluted weighted-average shares outstanding declined by approximately 613 million shares, due to the company’s ongoing share repurchase program and the partial-year impact of the Zoetis⁽³⁾exchange offer, which was completed on June 24, 2013.
• In addition to the aforementioned factors, full-year 2013 reported earnings were impacted by the following:

Favorable impacts:

• the gain associated with the full disposition of Zoetis⁽³⁾ in second-quarter 2013;

• income from a litigation settlement in second-quarter 2013 with Teva Pharmaceuticals Industries Ltd. and Sun Pharmaceutical Industries Ltd. for patent-infringement damages resulting from their “at-risk” launches of generic Protonix in the U.S.;
• the gain associated with the transfer of certain product rights to Pfizer’s joint venture with Zhejiang Hisun Pharmaceuticals (Hisun) in China in first-quarter 2013; and
• lower charges related to other legal matters, lower acquisition-related costs and lower expenses related to cost-reduction and productivity initiatives.

Unfavorable impacts:

• the non-recurrence in full-year 2013 of the income from discontinued operations attributable to the company’s Nutrition business in 2012, including the gain on the sale of the Nutrition business in fourth-quarter 2012;
• the non-recurrence after June 24, 2013 of the income from discontinued operations attributable to the company’s Animal Health business in 2012;
• higher asset impairments and related charges; and
• a higher effective tax rate. The effective tax rate on reported income⁽¹⁾ increased primarily due to a decrease in tax benefits related to certain audit settlements in multiple jurisdictions covering various periods and a change in the jurisdictional mix of earnings.

RECENT NOTABLE DEVELOPMENTS

Product Developments

• Viagra -- Pfizer settled its litigation against Teva Pharmaceuticals, USA Inc. (Teva) relating to Pfizer’s patent covering the use of Viagra to treat erectile dysfunction, which expires in April 2020 (including pediatric exclusivity). As a result of the settlement, Teva will be allowed to launch a generic version of Viagra in the U.S. on December 11, 2017, or earlier under certain circumstances. Teva will pay Pfizer a royalty for a license to produce its generic version. The terms of the settlement agreement are otherwise confidential.
• Xalkori -- The U.S. Food and Drug Administration (FDA) granted regular approval for the treatment of patients with metastatic ALK-positive non-small cell lung cancer (NSCLC) as detected by an FDA-approved test. Xalkori was previously granted accelerated approval in August 2011 due to the critical need for new agents for people living with ALK-positive NSCLC.
• Xeljanz
  • The FDA approved a supplemental New Drug Application (sNDA) to include additional patient-reported outcomes data in the label for adults with moderately to severely active rheumatoid arthritis. These additional data show improvement in patients receiving Xeljanz based on health-related outcome measures reported by patients.
  • The top-line results were announced from the first two (OPT Compare and OPT Retreatment) of five Phase 3 clinical trials in adults with moderate-to-severe chronic plaque psoriasis. In OPT Compare, Xeljanz met the primary endpoint of non-inferiority to high-dose Enbrel at the 10 mg twice-daily (BID) dose, but did not at the 5 mg BID dose. In OPT Retreatment, Xeljanz met the primary efficacy endpoints at the 5 and 10 mg BID doses by demonstrating that a greater proportion of patients continuing Xeljanz treatment maintained their response during the treatment-withdrawal phase compared to patients who switched to placebo. Additionally, among patients who lost an adequate response, many were able to recapture their response upon retreatment with Xeljanz. No new safety signals were observed in these two studies.

• Eliquis -- The FDA accepted for review an sNDA for Eliquis for the treatment of deep vein thrombosis (DVT) and pulmonary embolism (PE), and for the reduction in the risk of recurrent DVT and PE. The Prescription Drug User Fee Act (PDUFA) goal date for a decision by the FDA is August 25, 2014. Additionally, the European Medicines Agency accepted for review an application for Eliquis for the treatment of DVT and PE, and prevention of recurrent DVT and PE.
• Duavee -- The FDA approved Duavee (0.45 mg/20 mg tablets), a novel therapy for women with a uterus, for the treatment of moderate-to-severe vasomotor symptoms associated with menopause and the prevention of postmenopausal osteoporosis. Duavee is expected to be available in the U.S. in February 2014.
• Embeda -- The FDA approved a Prior Approval Supplement for Embeda Extended Release Capsules CII. The Prior Approval Supplement included an update to the Embeda manufacturing process that addressed the pre-specified stability requirement that led to the voluntary recall of Embeda from the market in March 2011. Pfizer anticipates product availability beginning in the second quarter of 2014.
• Remoxy -- Pfizer will continue the development program for Remoxy Extended-Release Capsules CII. Having achieved technical milestones related to manufacturing and following guidance received from the FDA in 2013, Pfizer is proceeding with the additional clinical studies and other actions required to address the Complete Response Letter received in June 2011. As previously disclosed, the complete response submission is not expected to occur prior to mid-2015.
• Lipitor Over-the-Counter (OTC) -- A Phase 3 "actual use" trial intended to simulate the OTC use of atorvastatin calcium 10 mg began enrolling patients.

Pipeline Developments

• Palbociclib
  • A Phase 3 trial (PENELOPE-B) in early-stage breast cancer began enrolling patients. This is a randomized global study that will evaluate palbociclib in combination with endocrine therapy versus placebo plus endocrine therapy in prolonging investigator-assessed, invasive disease-free survival in women with hormone receptor positive (HR+), human epidermal growth factor receptor 2 negative (HER2-) early-stage breast cancer with high risk of relapse after neoadjuvant chemotherapy. This trial is sponsored by the German Breast Group, a leading cooperative group with extensive experience conducting clinical trials in breast cancer, in collaboration with Pfizer.
  • Pfizer entered into an agreement with GSK to explore the anti-cancer efficacy and the safety of GSK’s trametinib (GSK1120212) combined with palbociclib in a Phase I/II study in patients with advanced/metastatic melanoma. The two companies will collaborate on the study, which GSK will conduct.

• Dacomitinib -- Pfizer announced top-line results from two Phase 3 studies of dacomitinib in patients with previously treated advanced NSCLC. Neither study met its primary endpoint. In the ARCHER 1009 trial, dacomitinib did not demonstrate statistically significant improvement in progression-free survival (PFS) when compared with erlotinib and in the BR.26 trial, dacomitinib did not prolong overall survival versus placebo. A third Phase 3 trial, ARCHER 1050, is ongoing and evaluating PFS of dacomitinib in treatment-naïve patients with EGFR-mutant advanced NSCLC; results are expected in 2015.
• ALO-02 -- Pfizer announced top-line results from a Phase 3 study of ALO-02 (oxycodone hydrochloride and naltrexone hydrochloride extended-release capsules) in patients with moderate-to-severe chronic low back pain. In this study, ALO-02 met the primary efficacy endpoint, demonstrating a statistically significant difference from placebo in the mean change in the daily average pain numerical rating scale scores from baseline to the final two weeks of the double-blind treatment period.
• Tafamidis -- Pfizer initiated a global Phase 3 program for tafamidis in transthyretin cardiomyopathy (TTR-CM), the first study of its kind in this rare, progressive and universally fatal disease. Tafamidis is approved for the treatment of transthyretin familial amyloid polyneuropathy (TTR-FAP) in the European Union and Japan under the trade name Vyndaqel.
• Bococizumab (RN316) -- The Phase 3 program was initiated for this PCSK9 monoclonal antibody to lower LDL cholesterol. This is a global program expected to involve more than 22,000 patients, which includes multiple lipid-lowering studies as well as two cardiovascular outcomes studies. This program includes the broadest range of high-risk patients including a focus on patients in greatest need of LDL-lowering.
• Ertugliflozin -- Pfizer in collaboration with Merck initiated a Phase 3 program for this SGLT2 inhibitor for the treatment of type 2 diabetes.
• Tanezumab -- Pfizer entered into a collaboration agreement with Eli Lilly & Company (Lilly) to jointly develop and globally commercialize tanezumab, which provides that Pfizer and Lilly will equally share product-development expenses as well as potential revenues and certain product-related costs. The tanezumab program currently is subject to a partial clinical hold by the FDA pending submission of nonclinical data to the FDA. Pfizer now anticipates submitting that data by the end of 2014.

Other Developments

• Pfizer successfully implemented its previously announced plans to internally separate its commercial operations into three businesses at the start of the 2014 fiscal year. The company remains on track to provide greater financial transparency for each of these businesses beginning with first-quarter 2014 financial results.

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

• Does not assume the completion of any business development transactions not completed as of December 31, 2013, including any one-time upfront payments associated with such transactions.
• Excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of December 31, 2013.
• Exchange rates assumed are as of mid-January 2014.
• Assumes diluted weighted-average shares outstanding of approximately 6.4 billion shares.
• Revenues and cost of sales from the transitional manufacturing and supply agreements with Zoetis⁽³⁾ have been excluded from the applicable Adjusted components of the financial guidance.
• Reconciliation of the 2014 Adjusted Income⁽²⁾ and Adjusted Diluted EPS⁽²⁾ guidance to the 2014 Reported Net Income Attributable to Pfizer Inc. and Reported Diluted EPS Attributable to Pfizer Inc. common shareholders guidance: