UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended OctoberJuly 3, 20212022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
COMMISSION FILE NUMBER 1-3619
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PFIZER INC.
(Exact name of registrant as specified in its charter)
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Delaware | 13-5315170 |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
235 East 42nd Street, New York, New York 10017
(Address of principal executive offices) (zip code)
(212) 733-2323
(Registrant’s telephone number)
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Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $.05 par value | | PFE | | New York Stock Exchange |
0.250% Notes due 2022 | | PFE22 | | New York Stock Exchange |
1.000% Notes due 2027 | | PFE27 | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated filer x Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
At November 8, 2021,August 5, 2022, 5,612,866,5985,612,351,809 shares of the issuer’s voting common stock were outstanding.
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Item 2. | |
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Item 3. | |
Defaults Upon Senior Securities | N/A |
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Item 4. | |
Mine Safety Disclosures | N/A |
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Item 5. | |
Other Information | N/A |
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N/A = Not Applicable | |
Unless the context requires otherwise, references to “Pfizer,” “the Company,” “we,” “us” or “our” in this Form 10-Q (defined below) refer to Pfizer Inc. and its subsidiaries. Pfizer’s fiscal quarter-end for subsidiaries operating outside the U.S. is as of and for the three and ninesix months ended AugustMay 29, 20212022 and August 23, 2020,May 30, 2021, and for U.S. subsidiaries is as of and for the three and ninesix months ended OctoberJuly 3, 20212022 and September 27, 2020.July 4, 2021. References to “Notes” in this Form 10-Q are to the notesNotes to the condensedCondensed or consolidated financial statementsConsolidated Financial Statements in this Form 10-Q or in our 20202021 Form 10-K. We also have used several other terms in this Form 10-Q, most of which are explained or defined:defined below:
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20202021 Form 10-K | Annual Report on Form 10-K for the fiscal year ended December 31, 20202021 |
ACIP | Advisory Committee on Immunization Practices |
ALK | anaplastic lymphoma kinase |
Alliance revenues | Revenues from alliance agreements under which we co-promote products discovered or developed by other companies or us |
AllogeneArena | Allogene Therapeutics, Inc. |
Array | Array BioPharma Inc. |
Arvinas | Arvinas,Arena Pharmaceuticals, Inc. |
Astellas | Astellas Pharma Inc., Astellas US LLC and Astellas Pharma US, Inc. |
ATTR-CM | transthyretin amyloid cardiomyopathy |
Biohaven | Biohaven Pharmaceutical Holding Company Ltd. |
BioNTech | BioNTech SE |
Biopharma | Pfizer Biopharmaceuticals Group |
BLA | Biologics License Application |
BMS | Bristol-Myers Squibb Company |
BNT162b2 | Pfizer BioNTech COVID-19 Vaccine |
ComirnatyBNT162b2* | Pfizer-BioNTech COVID-19 Vaccine, also known as Comirnaty |
BOD | Board of Directors |
CDC | U.S. Centers for Disease Control and Prevention |
CGRP | calcitonin gene-related peptide |
CMA | conditional marketing authorizationauthorisation |
Comirnaty* | Pfizer-BioNTech COVID-19 Vaccine, also known as BNT162b2 |
Consumer Healthcare JV | GSK Consumer Healthcare JV |
COVID-19 | novel coronavirus disease of 2019 |
Developed Europe | Includes the following markets: Western Europe, Scandinavian countries and Finland |
Developed Markets | Includes the following markets: U.S., Developed Europe, Japan, Canada, South Korea, Australia, Canada and New Zealand |
Developed Rest of World | Includes the following markets: Japan, Canada, South Korea, Australia, Canada and New Zealand |
EC | European Commission |
EMA | European Medicines Agency |
Emerging Markets | Includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Central Europe, Eastern Europe, the Middle East, Africa and Turkey |
EPS | earnings per share |
EU | European Union |
EUA | emergency use authorization |
Exchange Act | Securities Exchange Act of 1934, as amended |
FDA | U.S. Food and Drug Administration |
FFDCA | U.S. Federal Food, Drug and Cosmetic Act |
Form 10-Q | This Quarterly Report on Form 10-Q for the quarterly period ended OctoberJuly 3, 20212022 |
GAAP | Generally Accepted Accounting Principles |
GIST | gastrointestinal stromal tumors |
GPD | Global Product Development organization |
GSK | GlaxoSmithKline plc |
Haleon | Haleon plc |
HIPAA | Health Insurance Portability and Accountability Act of 1996 |
Hospira | Hospira, Inc. |
IPR&D | in-process research and development |
IRS | U.S. Internal Revenue Service |
JAK | Janus kinase |
JV | joint venture |
King | King Pharmaceuticals LLC (formerly King Pharmaceuticals, Inc.) |
LIBOR | London Interbank Offered Rate |
Lilly | Eli Lilly & Company |
LOE | loss of exclusivity |
MCO | managed care organization |
mCRC | metastatic colorectal cancer |
mCRPC | metastatic castration-resistant prostate cancer |
mCSPC | metastatic castration-sensitive prostate cancer |
MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Meridian | Meridian Medical Technologies, Inc. |
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MTMMeridian | mark-to-marketMeridian Medical Technologies, Inc. |
mRNA | messenger ribonucleic acid |
MSA | Manufacturing Supply Agreement |
Mylan | Mylan N.V. |
Mylan-Japan collaboration | a pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan that terminated on December 21, 2020 |
Myovant | Myovant Sciences Ltd. |
NDA | New Drug Application |
nmCRPC | non-metastatic castration-resistant prostate cancer |
NSCLC | non-small cell lung cancer |
OPKO | OPKO Health, Inc. |
OTC | over-the-counter |
PaxlovidPaxlovid* | PF-07321332 (SARS-CoV-2 3CL protease inhibitor (oral anti-viral));an oral COVID-19 treatment (nirmatrelvir [PF-07321332] tablets and ritonavir tablets) |
PBMPC1 | pharmacy benefit manager |
PDUFA | Prescription Drug User Fee ActPfizer CentreOne |
PGS | Pfizer Global Supply |
Pharmacia | Pharmacia Corporation |
PRAC | Pharmacovigilance Risk Assessment Committee |
PsA | psoriatic arthritis |
QTD | Quarter-to-date or three months ended |
RA | rheumatoid arthritis |
RCC | renal cell carcinoma |
R&D | research and development |
ReViral | ReViral Ltd. |
Sandoz | Sandoz, Inc., a division of Novartis AG |
SEC | U.S. Securities and Exchange Commission |
SI&AsNDA | selling, informational and administrativesupplemental new drug application |
TSAs | transition service arrangements |
UC | ulcerative colitis |
U.K. | United Kingdom |
U.S. | United States |
Upjohn Business | Pfizer’s former global, primarily off-patent branded and generics business, which included a portfolio of 20 globally recognized solid oral dose brands, including Lipitor, Lyrica, Norvasc, Celebrex and Viagra, as well as a U.S.-based generics platform, Greenstone, that was spun-off on November 16, 2020 and combined with Mylan to create Viatris |
Valneva | Valneva SE |
Viatris | Viatris Inc. |
ViiV | ViiV Healthcare Limited |
WRDM | Worldwide Research, Development and Medical |
YTD | Year-to-date or ninesix months ended |
*This Form 10-Q includes discussion of the COVID-19 vaccine that Pfizer has co-developed with BioNTech (BNT162b2) and our oral COVID-19 treatment (Paxlovid). The vaccine may be referred to by its brand name, Comirnaty (approved under a BLA in the U.S.), or as BNT162b2 (authorized under EUA in the U.S.). The vaccine is FDA-approved to prevent COVID-19 in individuals 12 years of age and older. In addition, Comirnaty/BNT162b2 is authorized for emergency use by the FDA for individuals 6 months of age and older, as a third dose for certain immunocompromised individuals 5 years of age and older, as a booster dose for individuals 5 years of age and older and as a second booster dose for individuals 50 years of age and older and for certain immunocompromised individuals 12 years of age and older. Paxlovid is authorized for emergency use by the FDA under an EUA for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients (12 years of age and older weighing at least 40 kg [88 lbs]) with positive results of direct SARS CoV-2 viral testing, and who are at high-risk for progression to severe COVID-19, including hospitalization or death. The emergency uses are only authorized for the duration of the declaration that circumstances exist justifying the authorization of emergency use of the medical product under Section 564(b)(1) of the FFDCA unless the declaration is terminated or authorization revoked sooner. The FDA has issued EUAs to certain other companies for products intended for the prevention or treatment of COVID-19 and may continue to do so during the duration of the Declaration. See the EUA Fact Sheets at www.cvdvaccine-us.com and www.covid19oralrx.com.
This Form 10-Q includes 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. In addition, clinical trial data are subject to differing interpretations, and, even when we view data as sufficient to support the safety and/or effectiveness of a product candidate or a new indication for an in-line product, regulatory authorities may not share our views and may require additional data or may deny approval altogether.
Some amounts in this Form 10-Q may not add due to rounding. All percentages have been calculated using unrounded amounts. All trademarks mentioned are the property of their owners.
The information contained on our website, our Facebook, Instagram, YouTube and LinkedIn pages or our Twitter accounts, or any third-party website, is not incorporated by reference into this Form 10-Q.
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PART I. FINANCIAL INFORMATION |
ITEM 1. FINANCIAL STATEMENTS
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| | | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | October 3, 2021 | | September 27, 2020 | | October 3, 2021 | | September 27, 2020 | (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
Revenues | Revenues | | $ | 24,094 | | | $ | 10,277 | | | $ | 57,653 | | | $ | 30,224 | | Revenues | | $ | 27,742 | | | $ | 18,899 | | | $ | 53,402 | | | $ | 33,415 | |
Costs and expenses: | Costs and expenses: | | Costs and expenses: | |
Cost of sales(a) | Cost of sales(a) | | 9,973 | | | 2,007 | | | 21,232 | | | 5,773 | | Cost of sales(a) | | 8,648 | | | 6,996 | | | 18,632 | | | 11,153 | |
Selling, informational and administrative expenses(a) | Selling, informational and administrative expenses(a) | | 2,905 | | | 2,658 | | | 8,617 | | | 7,858 | | Selling, informational and administrative expenses(a) | | 3,048 | | | 2,923 | | | 5,642 | | | 5,700 | |
Research and development expenses(a) | Research and development expenses(a) | | 3,447 | | | 2,300 | | | 7,920 | | | 6,050 | | Research and development expenses(a) | | 2,815 | | | 2,239 | | | 5,116 | | | 4,233 | |
Acquired in-process research and development expenses(b) | | Acquired in-process research and development expenses(b) | | 1 | | | 219 | | | 356 | | | 238 | |
Amortization of intangible assets | Amortization of intangible assets | | 981 | | | 862 | | | 2,784 | | | 2,579 | | Amortization of intangible assets | | 822 | | | 917 | | | 1,657 | | | 1,776 | |
Restructuring charges and certain acquisition-related costs | Restructuring charges and certain acquisition-related costs | | 646 | | | 2 | | | 668 | | | 417 | | Restructuring charges and certain acquisition-related costs | | 189 | | | (1) | | | 381 | | | 21 | |
(Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | (6) | | |
| Other (income)/deductions––net | Other (income)/deductions––net | | (1,696) | | | 1,878 | | | (3,697) | | | 1,114 | | Other (income)/deductions––net | | 772 | | | (1,343) | | | 1,122 | | | (2,347) | |
Income from continuing operations before provision/(benefit) for taxes on income | Income from continuing operations before provision/(benefit) for taxes on income | | 7,836 | | | 570 | | | 20,128 | | | 6,438 | | Income from continuing operations before provision/(benefit) for taxes on income | | 11,447 | | | 6,949 | | | 20,497 | | | 12,641 | |
Provision/(benefit) for taxes on income | Provision/(benefit) for taxes on income | | (331) | | | (347) | | | 1,518 | | | 434 | | Provision/(benefit) for taxes on income | | 1,570 | | | 1,123 | | | 2,742 | | | 1,931 | |
Income from continuing operations | Income from continuing operations | | 8,167 | | | 917 | | | 18,610 | | | 6,004 | | Income from continuing operations | | 9,877 | | | 5,825 | | | 17,756 | | | 10,710 | |
| Income/(loss) from discontinued operations––net of tax | | (9) | | | 560 | | | 24 | | | 2,334 | | |
Discontinued operations––net of tax | | Discontinued operations––net of tax | | 34 | | | (236) | | | 26 | | | (235) | |
| Net income before allocation to noncontrolling interests | Net income before allocation to noncontrolling interests | | 8,159 | | | 1,477 | | | 18,633 | | | 8,338 | | Net income before allocation to noncontrolling interests | | 9,911 | | | 5,589 | | | 17,781 | | | 10,475 | |
Less: Net income attributable to noncontrolling interests | Less: Net income attributable to noncontrolling interests | | 12 | | | 8 | | | 47 | | | 25 | | Less: Net income attributable to noncontrolling interests | | 6 | | | 26 | | | 12 | | | 35 | |
Net income attributable to Pfizer Inc. common shareholders | Net income attributable to Pfizer Inc. common shareholders | | $ | 8,146 | | | $ | 1,469 | | | $ | 18,586 | | | $ | 8,313 | | Net income attributable to Pfizer Inc. common shareholders | | $ | 9,906 | | | $ | 5,563 | | | $ | 17,769 | | | $ | 10,440 | |
| Earnings per common share––basic: | Earnings per common share––basic: | | | | | | | | | Earnings per common share––basic: | | | | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders | Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 1.45 | | | $ | 0.16 | | | $ | 3.32 | | | $ | 1.08 | | Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 1.76 | | | $ | 1.04 | | | $ | 3.17 | | | $ | 1.91 | |
Income/(loss) from discontinued operations––net of tax | | — | | | 0.10 | | | — | | | 0.42 | | |
Discontinued operations––net of tax | | Discontinued operations––net of tax | | 0.01 | | | (0.04) | | | — | | | (0.04) | |
Net income attributable to Pfizer Inc. common shareholders | Net income attributable to Pfizer Inc. common shareholders | | $ | 1.45 | | | $ | 0.26 | | | $ | 3.32 | | | $ | 1.50 | | Net income attributable to Pfizer Inc. common shareholders | | $ | 1.77 | | | $ | 0.99 | | | $ | 3.17 | | | $ | 1.87 | |
| Earnings per common share––diluted: | Earnings per common share––diluted: | | | | | | | | | Earnings per common share––diluted: | | | | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders | Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 1.42 | | | $ | 0.16 | | | $ | 3.26 | | | $ | 1.06 | | Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 1.73 | | | $ | 1.02 | | | $ | 3.09 | | | $ | 1.88 | |
Income/(loss) from discontinued operations––net of tax | | — | | | 0.10 | | | — | | | 0.42 | | |
Discontinued operations––net of tax | | Discontinued operations––net of tax | | 0.01 | | | (0.04) | | | — | | | (0.04) | |
Net income attributable to Pfizer Inc. common shareholders | Net income attributable to Pfizer Inc. common shareholders | | $ | 1.42 | | | $ | 0.26 | | | $ | 3.27 | | | $ | 1.48 | | Net income attributable to Pfizer Inc. common shareholders | | $ | 1.73 | | | $ | 0.98 | | | $ | 3.10 | | | $ | 1.84 | |
| Weighted-average shares––basic | Weighted-average shares––basic | | 5,609 | | | 5,557 | | | 5,597 | | | 5,552 | | Weighted-average shares––basic | | 5,593 | | | 5,598 | | | 5,605 | | | 5,591 | |
Weighted-average shares––diluted | Weighted-average shares––diluted | | 5,725 | | | 5,633 | | | 5,688 | | | 5,622 | | Weighted-average shares––diluted | | 5,712 | | | 5,678 | | | 5,735 | | | 5,670 | |
(a)Exclusive of amortization of intangible assets, except as disclosed inassets.
(b)See Note 9 in this Form 10-Q and Note 1L in our 2020 Form 10-K.1D.
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| | | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | September 27, 2020 | | October 3, 2021 | | September 27, 2020 | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
Net income before allocation to noncontrolling interests | Net income before allocation to noncontrolling interests | | $ | 8,159 | | | $ | 1,477 | | | $ | 18,633 | | | $ | 8,338 | | Net income before allocation to noncontrolling interests | | $ | 9,911 | | | $ | 5,589 | | | $ | 17,781 | | | $ | 10,475 | |
| Foreign currency translation adjustments, net | Foreign currency translation adjustments, net | | (866) | | | 1,403 | | | (366) | | | (27) | | Foreign currency translation adjustments, net | | (1,268) | | | 36 | | | (1,631) | | | 501 | |
| Unrealized holding gains/(losses) on derivative financial instruments, net | Unrealized holding gains/(losses) on derivative financial instruments, net | | 213 | | | (372) | | | 179 | | | (661) | | Unrealized holding gains/(losses) on derivative financial instruments, net | | 651 | | | (248) | | | 854 | | | (35) | |
Reclassification adjustments for (gains)/losses included in net income(a) | Reclassification adjustments for (gains)/losses included in net income(a) | | 48 | | | 143 | | | 286 | | | (25) | | Reclassification adjustments for (gains)/losses included in net income(a) | | (144) | | | (21) | | | (357) | | | 238 | |
| | | 261 | | | (230) | | | 464 | | | (685) | | | | 507 | | | (270) | | | 497 | | | 203 | |
Unrealized holding gains/(losses) on available-for-sale securities, net | Unrealized holding gains/(losses) on available-for-sale securities, net | | (266) | | | 239 | | | (128) | | | 231 | | Unrealized holding gains/(losses) on available-for-sale securities, net | | (486) | | | 59 | | | (620) | | | 138 | |
Reclassification adjustments for (gains)/losses included in net income(b) | Reclassification adjustments for (gains)/losses included in net income(b) | | 9 | | | (85) | | | (172) | | | (25) | | Reclassification adjustments for (gains)/losses included in net income(b) | | 255 | | | 61 | | | 487 | | | (181) | |
| | | | (257) | | | 155 | | | (300) | | | 205 | | | | (232) | | | 120 | | | (132) | | | (43) | |
| Reclassification adjustments related to amortization of prior service costs and other, net | Reclassification adjustments related to amortization of prior service costs and other, net | | (39) | | | (45) | | | (119) | | | (134) | | Reclassification adjustments related to amortization of prior service costs and other, net | | (31) | | | (39) | | | (68) | | | (79) | |
Reclassification adjustments related to curtailments of prior service costs and other, net | Reclassification adjustments related to curtailments of prior service costs and other, net | | (59) | | | — | | | (59) | | | — | | Reclassification adjustments related to curtailments of prior service costs and other, net | | 1 | | | (1) | | | (10) | | | (5) | |
Other | | 2 | | | (3) | | | (3) | | | 1 | | |
| | | | (97) | | | (47) | | | (181) | | | (133) | | | | (30) | | | (41) | | | (78) | | | (84) | |
Other comprehensive income/(loss), before tax | Other comprehensive income/(loss), before tax | | (959) | | | 1,280 | | | (382) | | | (640) | | Other comprehensive income/(loss), before tax | | (1,023) | | | (155) | | | (1,344) | | | 577 | |
Tax provision/(benefit) on other comprehensive income/(loss) | Tax provision/(benefit) on other comprehensive income/(loss) | | (65) | | | (19) | | | (44) | | | (311) | | Tax provision/(benefit) on other comprehensive income/(loss) | | (55) | | | (63) | | | (115) | | | 21 | |
Other comprehensive income/(loss) before allocation to noncontrolling interests | Other comprehensive income/(loss) before allocation to noncontrolling interests | | $ | (894) | | | $ | 1,299 | | | $ | (338) | | | $ | (329) | | Other comprehensive income/(loss) before allocation to noncontrolling interests | | $ | (968) | | | $ | (92) | | | $ | (1,228) | | | $ | 556 | |
| Comprehensive income/(loss) before allocation to noncontrolling interests | Comprehensive income/(loss) before allocation to noncontrolling interests | | $ | 7,265 | | | $ | 2,776 | | | $ | 18,296 | | | $ | 8,009 | | Comprehensive income/(loss) before allocation to noncontrolling interests | | $ | 8,943 | | | $ | 5,498 | | | $ | 16,553 | | | $ | 11,031 | |
Less: Comprehensive income/(loss) attributable to noncontrolling interests | Less: Comprehensive income/(loss) attributable to noncontrolling interests | | 9 | | | 11 | | | 48 | | | 16 | | Less: Comprehensive income/(loss) attributable to noncontrolling interests | | — | | | 28 | | | 6 | | | 38 | |
Comprehensive income/(loss) attributable to Pfizer Inc. | Comprehensive income/(loss) attributable to Pfizer Inc. | | $ | 7,256 | | | $ | 2,766 | | | $ | 18,248 | | | $ | 7,993 | | Comprehensive income/(loss) attributable to Pfizer Inc. | | $ | 8,943 | | | $ | 5,469 | | | $ | 16,546 | | | $ | 10,992 | |
(a)Reclassified into Other (income)/deductions—net and Cost of sales. See Note 7E.
(b)Reclassified into Other (income)/deductions—net.
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| (MILLIONS) | (MILLIONS) | | October 3, 2021 | | December 31, 2020 | (MILLIONS) | | July 3, 2022 | | December 31, 2021 |
| | | (Unaudited) | | | | | (Unaudited) | | |
Assets | Assets | | Assets | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 1,966 | | | $ | 1,784 | | Cash and cash equivalents | | $ | 1,780 | | | $ | 1,944 | |
Short-term investments | Short-term investments | | 27,730 | | | 10,437 | | Short-term investments | | 31,524 | | | 29,125 | |
Trade accounts receivable, less allowance for doubtful accounts: 2021—$494; 2020—$508 | | 11,897 | | | 7,930 | | |
Trade accounts receivable, less allowance for doubtful accounts: 2022—$461; 2021—$492 | | Trade accounts receivable, less allowance for doubtful accounts: 2022—$461; 2021—$492 | | 15,155 | | | 11,479 | |
Inventories | Inventories | | 8,640 | | | 8,046 | | Inventories | | 10,454 | | | 9,059 | |
Current tax assets | Current tax assets | | 3,877 | | | 3,264 | | Current tax assets | | 2,583 | | | 4,266 | |
Other current assets | Other current assets | | 3,790 | | | 3,605 | | Other current assets | | 5,970 | | | 3,820 | |
Total current assets | Total current assets | | 57,900 | | | 35,067 | | Total current assets | | 67,466 | | | 59,693 | |
Equity-method investments | Equity-method investments | | 16,349 | | | 16,856 | | Equity-method investments | | 14,799 | | | 16,472 | |
Long-term investments | Long-term investments | | 5,248 | | | 3,406 | | Long-term investments | | 4,163 | | | 5,054 | |
Property, plant and equipment, less accumulated depreciation: 2021—$15,403; 2020—$14,812 | | 14,436 | | | 13,900 | | |
Property, plant and equipment, less accumulated depreciation: 2022—$14,969; 2021—$15,074 | | Property, plant and equipment, less accumulated depreciation: 2022—$14,969; 2021—$15,074 | | 15,244 | | | 14,882 | |
Identifiable intangible assets | Identifiable intangible assets | | 26,306 | | | 28,471 | | Identifiable intangible assets | | 29,065 | | | 25,146 | |
Goodwill | Goodwill | | 49,489 | | | 49,577 | | Goodwill | | 49,891 | | | 49,208 | |
Noncurrent deferred tax assets and other noncurrent tax assets | Noncurrent deferred tax assets and other noncurrent tax assets | | 2,755 | | | 2,383 | | Noncurrent deferred tax assets and other noncurrent tax assets | | 7,002 | | | 3,341 | |
Other noncurrent assets | Other noncurrent assets | | 6,705 | | | 4,569 | | Other noncurrent assets | | 7,659 | | | 7,679 | |
| Total assets | Total assets | | $ | 179,188 | | | $ | 154,229 | | Total assets | | $ | 195,290 | | | $ | 181,476 | |
| Liabilities and Equity | Liabilities and Equity | | | | | Liabilities and Equity | | | | |
Short-term borrowings, including current portion of long-term debt: 2021—$2,663; 2020—$2,002 | | $ | 3,629 | | | $ | 2,703 | | |
Short-term borrowings, including current portion of long-term debt: 2022—$1,276; 2021—$1,636 | | Short-term borrowings, including current portion of long-term debt: 2022—$1,276; 2021—$1,636 | | $ | 5,990 | | | $ | 2,241 | |
Trade accounts payable | Trade accounts payable | | 4,698 | | | 4,309 | | Trade accounts payable | | 6,208 | | | 5,578 | |
Dividends payable | Dividends payable | | 2,191 | | | 2,162 | | Dividends payable | | 2,245 | | | 2,249 | |
Income taxes payable | Income taxes payable | | 4,496 | | | 1,049 | | Income taxes payable | | 3,350 | | | 1,266 | |
Accrued compensation and related items | Accrued compensation and related items | | 2,571 | | | 3,058 | | Accrued compensation and related items | | 1,997 | | | 3,332 | |
Deferred revenues | Deferred revenues | | 3,529 | | | 1,113 | | Deferred revenues | | 3,804 | | | 3,067 | |
Other current liabilities | Other current liabilities | | 20,690 | | | 11,527 | | Other current liabilities | | 23,816 | | | 24,939 | |
| Total current liabilities | Total current liabilities | | 41,803 | | | 25,920 | | Total current liabilities | | 47,410 | | | 42,671 | |
| Long-term debt | Long-term debt | | 36,250 | | | 37,133 | | Long-term debt | | 34,294 | | | 36,195 | |
Pension benefit obligations | Pension benefit obligations | | 3,676 | | | 4,766 | | Pension benefit obligations | | 3,030 | | | 3,489 | |
Postretirement benefit obligations | Postretirement benefit obligations | | 627 | | | 645 | | Postretirement benefit obligations | | 227 | | | 235 | |
Noncurrent deferred tax liabilities | Noncurrent deferred tax liabilities | | 328 | | | 4,063 | | Noncurrent deferred tax liabilities | | 558 | | | 349 | |
Other taxes payable | Other taxes payable | | 11,336 | | | 11,560 | | Other taxes payable | | 10,990 | | | 11,331 | |
Other noncurrent liabilities | Other noncurrent liabilities | | 9,201 | | | 6,669 | | Other noncurrent liabilities | | 11,311 | | | 9,743 | |
Total liabilities | Total liabilities | | 103,221 | | | 90,756 | | Total liabilities | | 107,821 | | | 104,013 | |
| Commitments and Contingencies | Commitments and Contingencies | | 0 | | 0 | Commitments and Contingencies | | 0 | | 0 |
| | Common stock | Common stock | | 473 | | | 470 | | Common stock | | 476 | | | 473 | |
Additional paid-in capital | Additional paid-in capital | | 89,973 | | | 88,674 | | Additional paid-in capital | | 91,183 | | | 90,591 | |
| Treasury stock | Treasury stock | | (111,359) | | | (110,988) | | Treasury stock | | (113,939) | | | (111,361) | |
Retained earnings | Retained earnings | | 102,252 | | | 90,392 | | Retained earnings | | 116,608 | | | 103,394 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (5,649) | | | (5,310) | | Accumulated other comprehensive loss | | (7,119) | | | (5,897) | |
Total Pfizer Inc. shareholders’ equity | Total Pfizer Inc. shareholders’ equity | | 75,691 | | | 63,238 | | Total Pfizer Inc. shareholders’ equity | | 87,208 | | | 77,201 | |
Equity attributable to noncontrolling interests | Equity attributable to noncontrolling interests | | 275 | | | 235 | | Equity attributable to noncontrolling interests | | 261 | | | 262 | |
Total equity | Total equity | | 75,967 | | | 63,473 | | Total equity | | 87,469 | | | 77,462 | |
Total liabilities and equity | Total liabilities and equity | | $ | 179,188 | | | $ | 154,229 | | Total liabilities and equity | | $ | 195,290 | | | $ | 181,476 | |
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
| | | PFIZER INC. SHAREHOLDERS | | | | PFIZER INC. SHAREHOLDERS | |
| | Preferred Stock | | Common Stock | | Treasury 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, July 4, 2021 | | — | | | $ | — | | | 9,450 | | | $ | 472 | | | $ | 89,336 | | | (3,851) | | | $ | (111,356) | | | $ | 96,346 | | | $ | (4,758) | | | $ | 70,042 | | | $ | 273 | | | $ | 70,315 | | |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | | 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, April 3, 2022 | | Balance, April 3, 2022 | | | 9,494 | | | $ | 476 | | | $ | 90,844 | | | (3,903) | | | $ | (113,931) | | | $ | 111,193 | | | $ | (6,157) | | | $ | 82,424 | | | $ | 261 | | | $ | 82,685 | |
Net income | Net income | | 8,146 | | | 8,146 | | | 12 | | | 8,159 | | Net income | | | | 9,906 | | | 9,906 | | | 6 | | | 9,911 | |
Other comprehensive income/(loss), net of tax | Other comprehensive income/(loss), net of tax | | (891) | | | (891) | | | (3) | | | (894) | | Other comprehensive income/(loss), net of tax | | | | (963) | | | (963) | | | (5) | | | (968) | |
Cash dividends declared, per share: $0.39 | | |
Cash dividends declared, per share: $0.80 | | Cash dividends declared, per share: $0.80 | | | |
Common stock | Common stock | | (2,192) | | | (2,192) | | | (2,192) | | Common stock | | | | (4,489) | | | (4,489) | | | (4,489) | |
Preferred stock | | — | | | — | | |
Noncontrolling interests | | — | | | (8) | | | (8) | | |
| Share-based payment transactions | Share-based payment transactions | | 13 | | | 1 | | | 637 | | | — | | | (3) | | | (1) | | | 634 | | | 634 | | Share-based payment transactions | | | 2 | | | — | | | 339 | | | — | | | (8) | | | (2) | | | 330 | | | 330 | |
Purchases of common stock | Purchases of common stock | | — | | | — | | | — | | | — | | Purchases of common stock | | | | — | | | — | | | — | | | — | |
Preferred stock conversions and redemptions | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
| Other | Other | | — | | | — | | | — | | | (47) | | | (47) | | | 1 | | | (46) | | Other | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Balance, October 3, 2021 | | — | | | $ | — | | | 9,462 | | | $ | 473 | | | $ | 89,973 | | | (3,851) | | | $ | (111,359) | | | $ | 102,252 | | | $ | (5,649) | | | $ | 75,691 | | | $ | 275 | | | $ | 75,967 | | |
Balance, July 3, 2022 | | Balance, July 3, 2022 | | | 9,496 | | | $ | 476 | | | $ | 91,183 | | | (3,903) | | | $ | (113,939) | | | $ | 116,608 | | | $ | (7,119) | | | $ | 87,208 | | | $ | 261 | | | $ | 87,469 | |
| | | PFIZER INC. SHAREHOLDERS | | | | PFIZER INC. SHAREHOLDERS | |
| | Preferred Stock | | Common Stock | | Treasury 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, June 28, 2020 | | — | | | $ | — | | | 9,394 | | | $ | 470 | | | $ | 87,886 | | | (3,840) | | | $ | (110,978) | | | $ | 93,946 | | | $ | (6,983) | | | $ | 64,342 | | | $ | 228 | | | $ | 64,570 | | |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | | 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, April 4, 2021 | | Balance, April 4, 2021 | | | 9,445 | | | $ | 472 | | | $ | 89,002 | | | (3,851) | | | $ | (111,349) | | | $ | 95,158 | | | $ | (4,664) | | | $ | 68,620 | | | $ | 245 | | | $ | 68,865 | |
Net income | Net income | | 1,469 | | | 1,469 | | | 8 | | | 1,477 | | Net income | | | | 5,563 | | | 5,563 | | | 26 | | | 5,589 | |
Other comprehensive income/(loss), net of tax | Other comprehensive income/(loss), net of tax | | 1,296 | | | 1,296 | | | 3 | | | 1,299 | | Other comprehensive income/(loss), net of tax | | | | (94) | | | (94) | | | 2 | | | (92) | |
Cash dividends declared, per share: $0.38 | | |
Cash dividends declared, per share: $0.78 | | Cash dividends declared, per share: $0.78 | | | |
Common stock | Common stock | | (2,113) | | | (2,113) | | | (2,113) | | Common stock | | | | (4,293) | | | (4,293) | | | (4,293) | |
Preferred stock | | — | | | — | | |
Noncontrolling interests | | — | | | (1) | | | (1) | | |
| Share-based payment transactions | Share-based payment transactions | | 3 | | | — | | | 275 | | | — | | | (2) | | | 273 | | | 273 | | Share-based payment transactions | | | 5 | | | — | | | 334 | | | — | | | (7) | | | (76) | | | 251 | | | 251 | |
Purchases of common stock | Purchases of common stock | | — | | | — | | | — | | | — | | Purchases of common stock | | | | — | | | — | | | — | | | — | |
Preferred stock conversions and redemptions | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
| Other | Other | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | | Other | | | | — | | | — | | | — | | | (7) | | | (6) | | | — | | | (6) | |
Balance, September 27, 2020 | | — | | | $ | — | | | 9,397 | | | $ | 470 | | | $ | 88,161 | | | (3,840) | | | $ | (110,980) | | | $ | 93,302 | | | $ | (5,687) | | | $ | 65,267 | | | $ | 236 | | | $ | 65,503 | | |
| Balance, July 4, 2021 | | Balance, July 4, 2021 | | | 9,450 | | | $ | 472 | | | $ | 89,336 | | | (3,851) | | | $ | (111,356) | | | $ | 96,346 | | | $ | (4,758) | | | $ | 70,042 | | | $ | 273 | | | $ | 70,315 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | PFIZER INC. SHAREHOLDERS | | | | |
| | | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | | | | | 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, 2022 | | | | | | 9,471 | | | $ | 473 | | | $ | 90,591 | | | (3,851) | | | $ | (111,361) | | | $ | 103,394 | | | $ | (5,897) | | | $ | 77,201 | | | $ | 262 | | | $ | 77,462 | |
Net income | | | | | | | | | | | | | | | | 17,769 | | | | | 17,769 | | | 12 | | | 17,781 | |
Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | (1,223) | | | (1,223) | | | (6) | | | (1,228) | |
Cash dividends declared, per share: $0.80 | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | | | | | | | | | | | | | | (4,489) | | | | | (4,489) | | | | | (4,489) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Share-based payment transactions | | | | | | 25 | | | 2 | | | 588 | | | (12) | | | (578) | | | (66) | | | | | (53) | | | | | (53) | |
Purchases of common stock | | | | | | | | | | | | (39) | | | (2,000) | | | | | | | (2,000) | | | | | (2,000) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | | | | | | | | 3 | | | — | | | — | | | — | | | | | 3 | | | (7) | | | (4) | |
Balance, July 3, 2022 | | | | | | 9,496 | | | $ | 476 | | | $ | 91,183 | | | (3,903) | | | $ | (113,939) | | | $ | 116,608 | | | $ | (7,119) | | | $ | 87,208 | | | $ | 261 | | | $ | 87,469 | |
|
| | | | | | PFIZER INC. SHAREHOLDERS | | | | |
| | | | Common Stock | | | | Treasury Stock | | | | | | | | | | |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | | | | | 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, 2021 | | | | | | 9,407 | | | $ | 470 | | | $ | 88,674 | | | (3,840) | | | $ | (110,988) | | | $ | 90,392 | | | $ | (5,310) | | | $ | 63,238 | | | $ | 235 | | | $ | 63,473 | |
Net income | | | | | | | | | | | | | | | | 10,440 | | | | | 10,440 | | | 35 | | | 10,475 | |
Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | 552 | | | 552 | | | 3 | | | 556 | |
Cash dividends declared, per share: $0.78 | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | | | | | | | | | | | | | | (4,377) | | | | | (4,377) | | | | | (4,377) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Share-based payment transactions | | | | | | 43 | | | 2 | | | 662 | | | (11) | | | (368) | | | (76) | | | | | 221 | | | | | 221 | |
Purchases of common stock | | | | | | | | | | | | — | | | — | | | | | | | — | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other | | | | | | | | | | — | | | — | | | — | | | (33) | | | | | (33) | | | — | | | (33) | |
Balance, July 4, 2021 | | | | | | 9,450 | | | $ | 472 | | | $ | 89,336 | | | (3,851) | | | $ | (111,356) | | | $ | 96,346 | | | $ | (4,758) | | | $ | 70,042 | | | $ | 273 | | | $ | 70,315 | |
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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, 2021 | | — | | | $ | — | | | 9,407 | | | $ | 470 | | | $ | 88,674 | | | (3,840) | | | $ | (110,988) | | | $ | 90,392 | | | $ | (5,310) | | | $ | 63,238 | | | $ | 235 | | | $ | 63,473 | |
Net income | | | | | | | | | | | | | | | | 18,586 | | | | | 18,586 | | | 47 | | | 18,633 | |
Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | (338) | | | (338) | | | — | | | (338) | |
Cash dividends declared, per share: $1.17 | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | | | | | | | | | | | | | | (6,569) | | | | | (6,569) | | | | | (6,569) | |
Preferred stock | | | | | | | | | | | | | | | | | | | | — | | | | | — | |
Noncontrolling interests | | | | | | | | | | | | | | | | | | | | — | | | (8) | | | (8) | |
Share-based payment transactions | | | | | | 56 | | | 3 | | | 1,300 | | | (11) | | | (371) | | | (77) | | | | | 855 | | | | | 855 | |
Purchases of common stock | | | | | | | | | | | | — | | | — | | | | | | | — | | | | | — | |
Preferred stock conversions and redemptions | | — | | | — | | | | | | | — | | | — | | | — | | | | | | | — | | | | | — | |
Other | | | | | | | | | | — | | | — | | | — | | | (81) | | | | | (81) | | | 1 | | | (79) | |
Balance, October 3, 2021 | | — | | | $ | — | | | 9,462 | | | $ | 473 | | | $ | 89,973 | | | (3,851) | | | $ | (111,359) | | | $ | 102,252 | | | $ | (5,649) | | | $ | 75,691 | | | $ | 275 | | | $ | 75,967 | |
|
| | 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, 2020 | | 431 | | | $ | 17 | | | 9,369 | | | $ | 468 | | | $ | 87,428 | | | (3,835) | | | $ | (110,801) | | | $ | 91,397 | | | $ | (5,367) | | | $ | 63,143 | | | $ | 303 | | | $ | 63,447 | |
Net income | | | | | | | | | | | | | | | | 8,313 | | | | | 8,313 | | | 25 | | | 8,338 | |
Other comprehensive income/(loss), net of tax | | | | | | | | | | | | | | | | | | (319) | | | (319) | | | (9) | | | (329) | |
Cash dividends declared, per share: $1.14 | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock | | | | | | | | | | | | | | | | (6,408) | | | | | (6,408) | | | | | (6,408) | |
Preferred stock | | | | | | | | | | | | | | | | — | | | | | — | | | | | — | |
Noncontrolling interests | | | | | | | | | | | | | | | | | | | | — | | | (81) | | | (81) | |
Share-based payment transactions | | | | | | 28 | | | 1 | | | 748 | | | (6) | | | (210) | | | | | | | 539 | | | | | 539 | |
Purchases of common stock | | | | | | | | | | | | — | | | — | | | | | | | — | | | | | — | |
Preferred stock conversions and redemptions | | (431) | | | (17) | | | | | | | (15) | | | 1 | | | 31 | | | | | | | (1) | | | | | (1) | |
Other | | | | | | | | | | — | | | — | | | — | | | — | | | | | — | | | (1) | | | (1) | |
Balance, September 27, 2020 | | — | | | $ | — | | | 9,397 | | | $ | 470 | | | $ | 88,161 | | | (3,840) | | | $ | (110,980) | | | $ | 93,302 | | | $ | (5,687) | | | $ | 65,267 | | | $ | 236 | | | $ | 65,503 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | Nine Months Ended | | | Six Months Ended |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | September 27, 2020 | (MILLIONS) | | July 3, 2022 | | July 4, 2021 |
Operating Activities | Operating Activities | | | | | Operating Activities | | | | |
Net income before allocation to noncontrolling interests | Net income before allocation to noncontrolling interests | | $ | 18,633 | | | $ | 8,338 | | Net income before allocation to noncontrolling interests | | $ | 17,781 | | | $ | 10,475 | |
Income from discontinued operations—net of tax | | 24 | | | 2,334 | | |
Discontinued operations—net of tax | | Discontinued operations—net of tax | | 26 | | | (235) | |
Net income from continuing operations before allocation to noncontrolling interests | Net income from continuing operations before allocation to noncontrolling interests | | 18,610 | | | 6,004 | | Net income from continuing operations before allocation to noncontrolling interests | | 17,756 | | | 10,710 | |
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: | Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: | | | | | Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: | | | | |
Depreciation and amortization | Depreciation and amortization | | 3,914 | | | 3,573 | | Depreciation and amortization | | 2,362 | | | 2,515 | |
Asset write-offs and impairments | Asset write-offs and impairments | | 115 | | | 989 | | Asset write-offs and impairments | | 58 | | | 55 | |
Gain on completion of Consumer Healthcare JV transaction, net of cash conveyed | | — | | | (6) | | |
| Deferred taxes from continuing operations | Deferred taxes from continuing operations | | (3,702) | | | (735) | | Deferred taxes from continuing operations | | (3,461) | | | 137 | |
| Share-based compensation expense | Share-based compensation expense | | 687 | | | 468 | | Share-based compensation expense | | 373 | | | 393 | |
Benefit plan contributions in excess of expense/income | Benefit plan contributions in excess of expense/income | | (1,933) | | | (760) | | Benefit plan contributions in excess of expense/income | | (146) | | | (779) | |
Other adjustments, net | Other adjustments, net | | (1,848) | | | (313) | | Other adjustments, net | | 1,270 | | | (1,305) | |
Other changes in assets and liabilities, net of acquisitions and divestitures | Other changes in assets and liabilities, net of acquisitions and divestitures | | 10,816 | | | (2,856) | | Other changes in assets and liabilities, net of acquisitions and divestitures | | (3,496) | | | 4,102 | |
Net cash provided by operating activities from continuing operations | Net cash provided by operating activities from continuing operations | | 26,660 | | | 6,364 | | Net cash provided by operating activities from continuing operations | | 14,717 | | | 15,828 | |
Net cash provided by operating activities from discontinued operations | | 6 | | | 2,414 | | |
Net cash provided by/(used in) operating activities from discontinued operations | | Net cash provided by/(used in) operating activities from discontinued operations | | (5) | | | 9 | |
Net cash provided by operating activities | Net cash provided by operating activities | | 26,666 | | | 8,778 | | Net cash provided by operating activities | | 14,711 | | | 15,837 | |
| Investing Activities | Investing Activities | | | | | Investing Activities | | | | |
Purchases of property, plant and equipment | Purchases of property, plant and equipment | | (1,718) | | | (1,413) | | Purchases of property, plant and equipment | | (1,394) | | | (1,091) | |
Purchases of short-term investments | Purchases of short-term investments | | (26,280) | | | (9,309) | | Purchases of short-term investments | | (18,937) | | | (15,982) | |
Proceeds from redemptions/sales of short-term investments | Proceeds from redemptions/sales of short-term investments | | 15,852 | | | 8,397 | | Proceeds from redemptions/sales of short-term investments | | 20,151 | | | 7,572 | |
Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less | Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less | | (7,152) | | | 671 | | Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less | | (3,153) | | | (505) | |
Purchases of long-term investments | Purchases of long-term investments | | (861) | | | (284) | | Purchases of long-term investments | | (1,324) | | | (100) | |
Proceeds from redemptions/sales of long-term investments | Proceeds from redemptions/sales of long-term investments | | 569 | | | 648 | | Proceeds from redemptions/sales of long-term investments | | 226 | | | 297 | |
| Acquisition of business, net of cash acquired | | Acquisition of business, net of cash acquired | | (6,225) | | | — | |
Other investing activities, net | Other investing activities, net | | (370) | | | 160 | | Other investing activities, net | | (91) | | | (72) | |
Net cash provided by/(used in) investing activities from continuing operations | Net cash provided by/(used in) investing activities from continuing operations | | (19,960) | | | (1,129) | | Net cash provided by/(used in) investing activities from continuing operations | | (10,746) | | | (9,880) | |
Net cash provided by/(used in) investing activities from discontinued operations | Net cash provided by/(used in) investing activities from discontinued operations | | — | | | (11,472) | | Net cash provided by/(used in) investing activities from discontinued operations | | — | | | (3) | |
Net cash provided by/(used in) investing activities | Net cash provided by/(used in) investing activities | | (19,960) | | | (12,601) | | Net cash provided by/(used in) investing activities | | (10,746) | | | (9,884) | |
| Financing Activities | Financing Activities | | | | | Financing Activities | | | | |
Proceeds from short-term borrowings | Proceeds from short-term borrowings | | — | | | 12,352 | | Proceeds from short-term borrowings | | 4,012 | | | — | |
Principal payments on short-term borrowings | | (1) | | | (17,449) | | |
| Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less | Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less | | 265 | | | 1,624 | | Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less | | 379 | | | (499) | |
Proceeds from issuance of long-term debt | | 997 | | | 5,222 | | |
| Principal payments on long-term debt | Principal payments on long-term debt | | (1,001) | | | (2,511) | | Principal payments on long-term debt | | (1,609) | | | — | |
| Purchases of common stock | | Purchases of common stock | | (2,000) | | | — | |
Cash dividends paid | Cash dividends paid | | (6,540) | | | (6,328) | | Cash dividends paid | | (4,493) | | | (4,355) | |
Other financing activities, net | Other financing activities, net | | (185) | | | (166) | | Other financing activities, net | | (347) | | | (509) | |
Net cash provided by/(used in) financing activities from continuing operations | | (6,465) | | | (7,257) | | |
Net cash provided by/(used in) financing activities from discontinued operations | | — | | | 11,395 | | |
| Net cash provided by/(used in) financing activities | Net cash provided by/(used in) financing activities | | (6,465) | | | 4,138 | | Net cash provided by/(used in) financing activities | | (4,058) | | | (5,364) | |
Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents | Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents | | (32) | | | (39) | | Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents | | (67) | | | 5 | |
Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents | Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents | | 209 | | | 277 | | Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents | | (159) | | | 593 | |
Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period | Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period | | 1,825 | | | 1,350 | | Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period | | 1,983 | | | 1,825 | |
Cash and cash equivalents and restricted cash and cash equivalents, at end of period | Cash and cash equivalents and restricted cash and cash equivalents, at end of period | | $ | 2,034 | | | $ | 1,627 | | Cash and cash equivalents and restricted cash and cash equivalents, at end of period | | $ | 1,824 | | | $ | 2,418 | |
Supplemental Cash Flow Information | Supplemental Cash Flow Information | | | | | Supplemental Cash Flow Information | | | | |
| Cash paid/(received) during the period for: | Cash paid/(received) during the period for: | | | | | Cash paid/(received) during the period for: | | | | |
Income taxes | Income taxes | | $ | 2,943 | | | $ | 2,445 | | Income taxes | | $ | 3,098 | | | $ | 2,188 | |
Interest paid | Interest paid | | 1,205 | | | 1,297 | | Interest paid | | 771 | | | 798 | |
Interest rate hedges | Interest rate hedges | | (26) | | | (45) | | Interest rate hedges | | (10) | | | (67) | |
| Non-cash transaction: | Non-cash transaction: | | Non-cash transaction: | |
Right-of-use assets obtained in exchange for lease liabilities | Right-of-use assets obtained in exchange for lease liabilities | | $ | 1,552 | | | $ | 157 | | Right-of-use assets obtained in exchange for lease liabilities | | $ | 242 | | | $ | 1,204 | |
See Accompanying Notes.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation and Significant Accounting Policies
A. Basis of Presentation
We prepared these condensed consolidated financial statements in conformity with U.S. GAAP, consistent in all material respects with those applied in our 20202021 Form 10-K, except as disclosed in Note 1C.10-K. As permitted under the SEC requirements for interim reporting, certain footnotes or other financial information have been condensed or omitted.
These financial statements include all normal and recurring adjustments that are considered necessary for the fair statement of results for the interim periods presented. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our 20202021 Form 10-K. Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.
Pfizer’s fiscal quarter-end for subsidiaries operating outside the U.S. is as of and for the three and ninesix months ended AugustMay 29, 20212022 and August 23, 2020,May 30, 2021, and for U.S. subsidiaries is as of and for the three and ninesix months ended OctoberJuly 3, 2022 and July 4, 2021.
At the beginning of our fiscal fourth quarter of 2021, we reorganized our commercial operations and September 27, 2020.began to manage our commercial operations through a new global structure consisting of 2 operating segments, each led by a single manager: Biopharma, our innovative science-based biopharmaceutical business, and PC1, our global contract development and manufacturing organization and a leading supplier of specialty active pharmaceutical ingredients. Biopharma is the only reportable segment. See Note 17A in our 2021 Form 10-K and Note 13 below.
Business development activities completed in 2021 and 2022 impacted financial results in the periods presented. Discontinued operations in the periods presented relate to the previously divested Meridian subsidiary and post-closing adjustments for other previously divested businesses. See NoteNotes 1A and 2B in our 20202021 Form 10-K, and Note 2. On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan to form Viatris. For additional information, see Note 2B in our 2020 Form 10-K. On December 21, 2020, which fell in Pfizer’s international first quarter of 2021, Pfizerbelow.
We have made certain reclassification adjustments to conform prior-period amounts to the current presentation for discontinued operations, acquired IPR&D expenses and Viatris completed the termination of the Mylan-Japan collaboration pursuant to an agreement dated November 13, 2020, and we transferred related inventories and operations that were part of the Mylan-Japan collaboration to Viatris. As a result, the financial position and results of operations of the Upjohn Business and the Mylan-Japan collaboration are presented as discontinued operations. Prior-period information has been restated to reflect our current organization structure.segment reporting.
B. New Accounting Standard Adopted in 20212022
On January 1, 2021,2022, we early adopted a new accounting standard for income tax that eliminates certain exceptionscontract assets and contract liabilities acquired in a business combination. Under the new standard, acquired contract assets and contract liabilities are required to be recognized and measured by the guidance related toacquirer on the approach for intraperiod tax allocation, the methodology for calculating income taxesacquisition date in an interim period and the recognition of deferred tax liabilities for outside basis differences. Theaccordance with Accounting Standards Codification 606. This new guidance also simplifies aspectsgenerally results in the acquirer recognizing contract assets and contract liabilities at the same amounts that were recorded by the acquiree. Previously, these amounts were recognized by the acquirer at fair value as of the accounting for franchise taxesacquisition date. We adopted this new standard on a prospective basis and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this guidance did not have a materialthere was no impact onto our condensed consolidated financial statements.
For information on new accounting standards adopted in 2020, see Note 1B in our 2020 Form 10-K.
C. Change in Accounting Principle
In the first quarter of 2021, we adopted a change in accounting principle to a more preferable policy under U.S. GAAP to immediately recognize actuarial gains and losses arising from the remeasurement of our pension and postretirement plans (MTM Accounting).Under the prior policy, we deferred recognition of these gains and losses in Accumulated other comprehensive loss. The accumulated actuarial gains/losses outside of a “corridor” were then amortized into net periodic benefit costs over the average remaining service period or the average life expectancy of participants. This change has been applied to all pension and postretirement plans on a retrospective basis for all prior periods presented, and as of January 1, 2020, resulted in a cumulative effect decrease to Retained earnings of $6.3 billion, with a corresponding offset to Accumulated other comprehensive loss. Each time a pension or postretirement plan is remeasured, the actuarial gain or loss is recognized immediately and classified as Other (income)/deductions––net.
We believe that MTM Accounting is a more preferable policy as it provides improved transparency of results and performance, better alignment with fair value accounting principles and a better reflection of current economic and interest rate trends on plan investments and assumptions and the actuarial impact of plan remeasurements.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
The impacts of the adjustments on our condensed consolidated financial statements are summarized as follows: |
| | Three Months Ended |
| | October 3, 2021 | | September 27, 2020 |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | Previous Accounting Principle | | Impact of Change | | As Reported | | Previous Accounting Principle | | Impact of Change | | As Adjusted |
Condensed Consolidated Statements of Income: | | | | | | | | | | | | |
Other (income)/deductions––net | | $ | (641) | | | $ | (1,055) | | | $ | (1,696) | | | $ | 889 | | | $ | 989 | | | $ | 1,878 | |
Income from continuing operations before provision/(benefit) for taxes on income | | 6,782 | | | 1,055 | | | 7,836 | | | 1,559 | | | (989) | | | 570 | |
Provision/(benefit) for taxes on income | | (561) | | | 230 | | | (331) | | | (104) | | | (243) | | | (347) | |
Income/(loss) from discontinued operations––net of tax | | (9) | | | — | | | (9) | | | 539 | | | 21 | | | 560 | |
Net income before allocation to noncontrolling interests | | 7,334 | | | 825 | | | 8,159 | | | 2,202 | | | (724) | | | 1,477 | |
Net income attributable to Pfizer Inc. common shareholders | | 7,322 | | | 825 | | | 8,146 | | | 2,194 | | | (724) | | | 1,469 | |
Earnings per common share––basic: | | | | | | | | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 1.30 | | | $ | 0.15 | | | $ | 1.45 | | | $ | 0.30 | | | $ | (0.13) | | | $ | 0.16 | |
Income/(loss) from discontinued operations––net of tax | | — | | | — | | | — | | | 0.10 | | | — | | | 0.10 | |
Net income attributable to Pfizer Inc. common shareholders | | 1.30 | | | 0.15 | | | 1.45 | | | 0.39 | | | (0.13) | | | 0.26 | |
Earnings per common share––diluted: | | | | | | | | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 1.27 | | | $ | 0.15 | | | $ | 1.42 | | | $ | 0.29 | | | $ | (0.13) | | | $ | 0.16 | |
Income/(loss) from discontinued operations––net of tax | | — | | | — | | | — | | | 0.10 | | | — | | | 0.10 | |
Net income attributable to Pfizer Inc. common shareholders | | 1.27 | | | 0.15 | | | 1.42 | | | 0.39 | | | (0.13) | | | 0.26 | |
Condensed Consolidated Statements of Comprehensive Income: | | | | | | | | | | | | |
Foreign currency translation adjustments, net | | $ | (961) | | | $ | 95 | | | $ | (866) | | | $ | 1,609 | | | $ | (206) | | | $ | 1,403 | |
Benefit plans: actuarial gains/(losses), net | | 836 | | | (836) | | | — | | | (1,211) | | | 1,211 | | | — | |
Reclassification adjustments related to amortization | | 74 | | | (74) | | | — | | | 67 | | | (67) | | | — | |
Reclassification adjustments related to settlements, net | | 139 | | | (139) | | | — | | | 174 | | | (174) | | | — | |
Other | | 95 | | | (95) | | | — | | | (206) | | | 206 | | | — | |
Tax provision/(benefit) on other comprehensive income/(loss) | | (89) | | | 23 | | | (65) | | | (262) | | | 243 | | | (19) | |
| | | | | | |
| | | | | | | | | | | | |
|
| | Nine Months Ended |
| | October 3, 2021 | | September 27, 2020 |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | Previous Accounting Principle | | Impact of Change | | As Reported | | Previous Accounting Principle | | Impact of Change | | As Adjusted |
Condensed Consolidated Statements of Income: | | | | | | | | | | | | |
Other (income)/deductions––net | | $ | (2,414) | | | $ | (1,283) | | | $ | (3,697) | | | $ | 232 | | | $ | 881 | | | $ | 1,114 | |
Income from continuing operations before provision/(benefit) for taxes on income | | 18,845 | | | 1,283 | | | 20,128 | | | 7,320 | | | (881) | | | 6,438 | |
Provision/(benefit) for taxes on income | | 1,237 | | | 281 | | | 1,518 | | | 647 | | | (213) | | | 434 | |
Income/(loss) from discontinued operations––net of tax | | 24 | | | — | | | 24 | | | 2,374 | | | (40) | | | 2,334 | |
Net income before allocation to noncontrolling interests | | 17,631 | | | 1,002 | | | 18,633 | | | 9,046 | | | (709) | | | 8,338 | |
Net income attributable to Pfizer Inc. common shareholders | | 17,584 | | | 1,002 | | | 18,586 | | | 9,022 | | | (709) | | | 8,313 | |
Earnings per common share––basic: | | | | | | | | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 3.14 | | | $ | 0.18 | | | $ | 3.32 | | | $ | 1.20 | | | $ | (0.12) | | | $ | 1.08 | |
Income/(loss) from discontinued operations––net of tax | | — | | | — | | | — | | | 0.43 | | | (0.01) | | | 0.42 | |
Net income attributable to Pfizer Inc. common shareholders | | 3.14 | | | 0.18 | | | 3.32 | | | 1.62 | | | (0.13) | | | 1.50 | |
Earnings per common share––diluted: | | | | | | | | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 3.08 | | | $ | 0.18 | | | $ | 3.26 | | | $ | 1.18 | | | $ | (0.12) | | | $ | 1.06 | |
Income/(loss) from discontinued operations––net of tax | | — | | | — | | | — | | | 0.42 | | | (0.01) | | | 0.42 | |
Net income attributable to Pfizer Inc. common shareholders | | 3.09 | | | 0.18 | | | 3.27 | | | 1.60 | | | (0.13) | | | 1.48 | |
|
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | Nine Months Ended |
| | October 3, 2021 | | September 27, 2020 |
(MILLIONS) | | Previous Accounting Principle | | Impact of Change | | As Reported | | Previous Accounting Principle | | Impact of Change | | As Adjusted |
Condensed Consolidated Statements of Comprehensive Income: | | | | | | | | | | | | |
Foreign currency translation adjustments, net | | $ | (354) | | | $ | (11) | | | $ | (366) | | | $ | 96 | | | $ | (123) | | | $ | (27) | |
Benefit plans: actuarial gains/(losses), net | | 881 | | | (881) | | | — | | | (1,372) | | | 1,372 | | | — | |
Reclassification adjustments related to amortization | | 222 | | | (222) | | | — | | | 200 | | | (200) | | | — | |
Reclassification adjustments related to settlements, net | | 162 | | | (162) | | | — | | | 240 | | | (240) | | | — | |
Other | | (11) | | | 11 | | | — | | | (123) | | | 123 | | | — | |
Tax provision/(benefit) on other comprehensive income/(loss) | | (20) | | | (24) | | | (44) | | | (527) | | | 215 | | | (311) | |
Condensed Consolidated Statements of Cash Flows: | | | | | | | | | | | | |
Deferred taxes from continuing operations | | $ | (3,983) | | | $ | 281 | | | $ | (3,702) | | | $ | (522) | | | $ | (213) | | | $ | (735) | |
Benefit plan contributions in excess of expense/income | | (650) | | | (1,283) | | | (1,933) | | | (1,642) | | | 881 | | | (760) | |
| | | | | | | | | | | | |
| | October 3, 2021 | | December 31, 2020 |
(MILLIONS) | | Previous Accounting Principle | | Impact of Change | | As Reported | | Previous Accounting Principle | | Impact of Change | | As Adjusted |
Condensed Consolidated Balance Sheets: | | | | | | | | | | | | |
Noncurrent deferred tax assets and other noncurrent tax assets | | $ | 3,012 | | | $ | (257) | | | $ | 2,755 | | | $ | 2,383 | | | $ | — | | | $ | 2,383 | |
Other noncurrent assets | | 6,687 | | | 18 | | | 6,705 | | | 4,569 | | | — | | | 4,569 | |
Pension benefit obligations | | 3,677 | | | — | | | 3,676 | | | 4,766 | | | — | | | 4,766 | |
Retained earnings | | 101,250 | | | 1,002 | | | 102,252 | | | 96,770 | | | (6,378) | | | 90,392 | |
Accumulated other comprehensive loss | | (4,408) | | | (1,241) | | | (5,649) | | | (11,688) | | | 6,378 | | | (5,310) | |
| | | | | | | | | | | | |
D. Revenues and Trade Accounts Receivable
Revenue Recognition––We record revenues from product sales when there is a transfer of control of the product from us to the customer. We typically determine transfer of control based on when the product is shipped or delivered and title passes to the customer. For certain contracts, the finished product may temporarily be stored at our or our third-party subcontractors’ locations under a bill-and-hold arrangement. Revenue is recognized on bill-and-hold arrangements at the point in time when the customer obtains control of the product and all of the following criteria have been met: the arrangement is substantive; the product is identified separately as belonging to the customer; the product is ready for physical transfer to the customer; and we do not have the ability to use the product or direct it to another customer. In determining when the customer obtains control of the product, we consider certain indicators, including whether we have a present right to payment from the customer, whether title and/or significant risks and rewards of ownership have transferred to the customer and whether customer acceptance has been received.
Customers––Our prescription pharmaceutical products, with the exception of Paxlovid, are sold principally to wholesalers, but we also sell directly to retailers, hospitals, clinics, government agencies and pharmacies. We principally sell Paxlovid to government agencies. In the U.S., we primarily sell our vaccine products directly to the federal government, CDC, wholesalers, individual provider offices, retail pharmacies and integrated delivery networks. Outside the U.S., we primarily sell our vaccines to government and non-government institutions.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Deductions from Revenues––Our accruals for Medicare, Medicaid and related state program and performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts are as follows:
| (MILLIONS) | (MILLIONS) | | October 3, 2021 | | December 31, 2020 | (MILLIONS) | | July 3, 2022 | | December 31, 2021 |
Reserve against Trade accounts receivable, less allowance for doubtful accounts | Reserve against Trade accounts receivable, less allowance for doubtful accounts | | $ | 996 | | | $ | 861 | | Reserve against Trade accounts receivable, less allowance for doubtful accounts | | $ | 1,057 | | | $ | 1,077 | |
Other current liabilities: | Other current liabilities: | | Other current liabilities: | |
Accrued rebates | Accrued rebates | | 3,470 | | | 3,017 | | Accrued rebates | | 3,875 | | | 3,811 | |
Other accruals | Other accruals | | 470 | | | 436 | | Other accruals | | 458 | | | 528 | |
Other noncurrent liabilities | Other noncurrent liabilities | | 503 | | | 399 | | Other noncurrent liabilities | | 386 | | | 433 | |
Total accrued rebates and other sales-related accruals | Total accrued rebates and other sales-related accruals | | $ | 5,439 | | | $ | 4,712 | | Total accrued rebates and other sales-related accruals | | $ | 5,776 | | | $ | 5,850 | |
Trade Accounts Receivable––Trade accounts receivable are stated at their net realizable value. The allowance for credit losses reflects our best estimate of expected credit losses of the receivables portfolio determined on the basis of historical experience, current information, and forecasts of future economic conditions. In developing the estimate for expected credit losses, trade accounts receivables are segmented into pools of assets depending on market (U.S. versus international), delinquency status, and customer type (high risk versus low risk and government versus non-government), and fixed reserve percentages are established for each pool of trade accounts receivables.
In determining the reserve percentages for each pool of trade accounts receivables, we considered our historical experience with certain customers and customer types, regulatory and legal environments, country and political risk, and other relevant current and future forecasted macroeconomic factors. These credit risk indicators are monitored on a quarterly basis to determine whether there have been any changes in the economic environment that would indicate the established reserve percentages should be adjusted, and are considered on a regional basis to reflect more geographic-specific metrics. Additionally, write-offs and recoveries of customer receivables are tracked against collections on a quarterly basis to determine whether the reserve percentages remain appropriate. When management becomes aware of certain customer-specific factors that impact credit risk,
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
specific allowances for these known troubled accounts are recorded. Trade accounts receivable are written off after all reasonable means to collect the full amount (including litigation, where appropriate) have been exhausted.
During the three and ninesix months ended OctoberJuly 3, 20212022 and September 27, 2020,July 4, 2021, additions to the allowance for credit losses, write-offs and recoveries of customer receivables were not material to our condensed consolidated financial statements. For additional information on our trade accounts receivable, see Note 1G1H in our 20202021 Form 10-K.
D. Acquired In-Process Research and Development Expenses
In the first quarter of 2022, we began reporting acquired IPR&D expense as a separate line item in our consolidated statements of income. Acquired in-process research and development expenses includes costs incurred in connection with (a) all upfront and milestone payments on collaboration and in-license agreements, including premiums on equity securities and (b) asset acquisitions of acquired IPR&D. These costs were previously recorded in Research and development expenses. Prior periods have been revised to conform to the current period presentation. When we acquire net assets that do not constitute a business, as defined in U.S. GAAP, no goodwill is recognized and acquired IPR&D is expensed. The fair value of IPR&D acquired in connection with a business combination is recorded on the balance sheet as Identifiable intangible assets. See Notes 1E and 10 in our2021 Form 10-K.
Note 2.Acquisition, Discontinued Operations, Equity-Method Investment and Collaborative Arrangement
A. Acquisition
Arena––On March 11, 2022, we acquired Arena, a clinical stage company, for $100 per share in cash. The total fair value of the consideration transferred was $6.6 billion ($6.2 billion, net of cash acquired). In addition, $138 million in payments to Arena employees for the fair value of previously unvested long-term incentive awards was recognized as post-closing compensation expense and recorded in Restructuring charges and certain acquisition-related costs (see Note 3).
Arena’s portfolio includes development-stage therapeutic candidates in gastroenterology, dermatology, and cardiology, including etrasimod, an oral, selective sphingosine 1-phosphate (S1P) receptor modulator currently in development for a range of immuno-inflammatory diseases including UC, Crohn’s disease, atopic dermatitis, eosinophilic esophagitis, and alopecia areata. In connection with this acquisition, we provisionally recorded: (i) $5.5 billion in Identifiable intangible assets, consisting of $5.0 billion of IPR&D and $460 million of indefinite-lived Licensing agreements and other, (ii) $1.0 billion of Goodwill and (iii) $510 million of net deferred tax liabilities. The allocation of the consideration transferred to the assets acquired and the liabilities assumed has not yet been finalized.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
B. Discontinued Operations
Meridian––On December 31, 2021, we completed the sale of our Meridian subsidiary. In the three and six months ended July 3, 2022, the amounts recorded under the interim TSAs and MSA were not material.
Upjohn Separation and Combination with Mylan
Mylan––On November 16, 2020, we completed the spin-off and the combination of the Upjohn Business with Mylan to form Viatris. See Note 1A.
In connection with this transaction, Pfizer and Viatris entered into various agreements to effect the separation and combination and to provide a framework for our relationship after the combination, including a separation and distribution agreement, interim operating models, including agency arrangements, manufacturing and supply agreements (MSAs), transition service agreements (TSAs),MSAs, TSAs, a tax matters agreement, and an employee matters agreement, among others. The interim agency operating model arrangements primarily include billings, collections and remittance of rebates that we are performing on a transitional basis on behalf of Viatris. Under the MSAs, Pfizer or Viatris, as the case may be, manufactures, labels and packages products for the other party. In the three and nine months ended October 3, 2021, the amounts recorded under the abovethese agreements were not material to our consolidated results of operations.operations in the three and six months ended July 3, 2022 and July 4, 2021. Net amounts due from Viatris under the above agreements were approximately $197$272 million as of OctoberJuly 3, 20212022 and $401$53 million as of December 31, 2020.2021. The cash flows associated with the above agreements are included in Net cash provided by operating activities from continuing operations, except for a $277 million payment to Viatris made in the first quarter of 2021 pursuant to terms of the separation agreement, which is reported in Other financing activities, net.
Discontinued operations—net of tax for the three and six months ended July 4, 2021 reflects pre-tax loss from discontinued operations of $346 million and $337 million, respectively, and primarily includes pre-disposal operations related to our former Meridian subsidiary including a $345 million pre-tax expense to resolve a Multi-District Litigation relating to EpiPen against the Company in the U.S. District Court for the District of Kansas (prior to presenting Meridian as discontinued operations, this EpiPen litigation amount was recorded as a payable to Viatrisincluded in Other current liabilities(income)/deductions––net). as of December 31, 2020. In addition, PfizerFor the three and Mylan had pre-existing arms-length commercial agreements, which are continuing with Viatris and are not material to Pfizer’s consolidated financial statements.
The operating results of the Upjohn Business and the Mylan-Japan collaboration are reported assix months ended July 3, 2022, Income/(loss) from discontinued operations––net of tax.
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Components of Income/(loss) from discontinued operations––net of tax: |
| | Three Months Ended(a) | | Nine Months Ended(a) |
(MILLIONS) | | October 3, 2021 | | September 27, 2020 | | October 3, 2021 | | September 27, 2020 |
Revenues | | $ | — | | | $ | 1,854 | | | $ | 27 | | | $ | 5,737 | |
Costs and expenses: | | | | | | | | |
Cost of sales | | 4 | | | 526 | | | 18 | | | 1,425 | |
Selling, informational and administrative expenses | | 2 | | | 359 | | | (1) | | | 1,061 | |
Research and development expenses | | — | | | 60 | | | 1 | | | 165 | |
Amortization of intangible assets | | — | | | 37 | | | — | | | 109 | |
Restructuring charges and certain acquisition-related costs | | — | | | 1 | | | — | | | 18 | |
Other (income)/deductions––net | | 5 | | | 233 | | | 6 | | | 304 | |
Pre-tax income/(loss) from discontinued operations | | (10) | | | 639 | | | 3 | | | 2,654 | |
Provision/(benefit) for taxes on income | | (2) | | | 79 | | | (21) | | | 320 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Income/(loss) from discontinued operations––net of tax | | $ | (9) | | | $ | 560 | | | $ | 24 | | | $ | 2,334 | |
(a)In the third quarter of 2021, Income/(loss) from discontinuedDiscontinued operations—net of tax reflects pre-tax income from discontinued operations of $34 million and $24 million, respectively, and relates to post-closing adjustments directly related to our discontinued operations, including adjustments for legal and tax related matters. In the first nine months of 2021, Income/(loss) from discontinued operations—net of tax includes the operations of the Mylan-Japan collaboration, which terminated during Pfizer’s international first quarter of 2021, and post-closing adjustments directly related to our discontinued operations, including adjustmentspreviously divested businesses primarily for tax benefits and legal related matters. In the three and nine months ended September 27, 2020, Income/(loss) from discontinued operations—net of tax relates to the Upjohn Business and the Mylan-Japan collaboration and includes the change in accounting principle in the first quarter of 2021 to MTM Accounting, which has been applied on a retrospective basis for all prior periods presented. See Note 1C. In the three and nine months ended September 27, 2020, Income/(loss) from discontinued operations—net of tax includes interest expense of $76 million associated with the U.S. dollar and Euro denominated senior unsecured notes issued by Upjohn Inc. and Upjohn Finance B.V. in the second quarter of 2020 and charges of $144 million related to the remeasurement of Euro debt issued by Upjohn Finance B.V. in the second quarter of 2020.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
B.C. Equity-Method Investment
Formation of Consumer Healthcare JV
JV––
On July 31, 2019, we completed a transaction in which we and GSK combined our respective consumer healthcare businesses into a new JV that operatesoperated globally under the GSK Consumer Healthcare name. In exchange for the contribution of our consumer healthcare business to the JV, we received a 32% equity stake in the new company and GSK ownsowned the remaining 68%.
We are accountinghave accounted for our interest in the Consumer Healthcare JV as an equity-method investment. The carrying value of our investment in the Consumer Healthcare JV is $16.1$14.6 billion as of OctoberJuly 3, 20212022 and $16.7$16.3 billion as of December 31, 20202021 and is reported as a private equity investment in Equity-method investments as of OctoberJuly 3, 20212022 and December 31, 2020.2021. The Consumer Healthcare JV is a foreign investee whose reporting currency is the U.K. pound, and therefore we translate its financial statements into U.S. dollars and recognize the impact of foreign currency translation adjustments in the carrying value of our investment and in other comprehensive income. The decrease in the value of our investment from December 31, 20202021 is primarily due to $549 million$1.7 billion in pre-tax foreign currency translation adjustments (see Note 6), as well as dividends totaling approximately $295$354 million, partially offset by our share of the JV’s earnings. We record our share of earnings from the Consumer Healthcare JV on a quarterly basis on a one-quarter lag in Other (income)/deductions––net. Our total share of the JV’s earnings generated in the first quarter of 2022, which we recorded in our operating results in the second quarter of 2022, was $150 million. Our total share of the JV’s earnings generated in the fourth quarter of 2021 and first quarter of 2022, which we recorded in our operating results in the first six months of 2022, was $335 million. Our total share of the JV’s earnings generated in the first quarter of 2021, which we recorded in our operating results in the thirdsecond quarter of 2021, was $106$148 million. Our total share of the JV’s earnings generated in the fourth quarter of 2020 and first six monthsquarter of 2021, which we recorded in our operating results in the first ninesix months of 2021, was $324 million. Our total share of the JV’s earnings generated in the second quarter of 2020, which we recorded in our operating results in the third quarter of 2020, was $166 million. Our total share of the JV’s earnings generated in the fourth quarter of 2019 and first six months of 2020, which we recorded in our operating results in the first nine months of 2020, was $306$218 million. The total amortization and adjustment of basis differences resulting from the excess of the initial fair value of our investment over the underlying equity in the carrying value of the net assets of the JV is included in Other (income)/deductions––net and was not material to our results of operations in the periods presented. See Note 4.
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| | | | |
Summarized financial information for our equity method investee, the Consumer Healthcare JV, for the three and nine months ending June 30, 2021, the most recent period available, and for the three and nine months ending June 30, 2020, is as follows: | | |
| | Three Months Ended | | Nine Months Ended | | |
(MILLIONS) | | June 30, 2021 | | June 30, 2020 | | June 30, 2021 | | June 30, 2020 | | |
Net sales | | $ | 3,152 | | | $ | 2,927 | | | $ | 9,428 | | | $ | 9,618 | | | |
Cost of sales | | (1,180) | | | (1,061) | | | (3,536) | | | (4,266) | | | |
Gross profit | | $ | 1,972 | | | $ | 1,866 | | | $ | 5,892 | | | $ | 5,352 | | | |
Income from continuing operations | | 348 | | | 524 | | | 1,064 | | | 995 | | | |
Net income | | 348 | | | 524 | | | 1,064 | | | 995 | | | |
Income attributable to shareholders | | 330 | | | 518 | | | 1,012 | | | 959 | | | |
C. CollaborationPFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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Summarized financial information for our equity method investee, the Consumer Healthcare JV, for the three and six months ending March 31, 2022, the most recent period available, and for the three and six months ending March 31, 2021, is as follows: |
| | Three Months Ended | | Six Months Ended | | |
(MILLIONS) | | March 31, 2022 | | March 31, 2021 | | March 31, 2022 | | March 31, 2021 | | |
Net sales | | $ | 3,526 | | | $ | 3,180 | | | $ | 6,945 | | | $ | 6,275 | | | |
Cost of sales | | (1,322) | | | (1,169) | | | (2,634) | | | (2,356) | | | |
Gross profit | | $ | 2,204 | | | $ | 2,011 | | | $ | 4,312 | | | $ | 3,919 | | | |
Income from continuing operations | | 487 | | | 483 | | | 1,077 | | | 716 | | | |
Net income | | 487 | | | 483 | | | 1,077 | | | 716 | | | |
Income attributable to shareholders | | 468 | | | 461 | | | 1,046 | | | 682 | | | |
In connection with GSK’s previously announced planned demerger of at least 80% of GSK’s 68% equity interest in the Consumer Healthcare JV, in March 2022 the Consumer Healthcare JV completed its offering of a total aggregate principal amount of $8.75 billion in U.S. dollar-denominated senior notes of various maturities, €2.35 billion in euro-denominated senior notes of various maturities and £700 million in U.K. pound-denominated senior notes of various maturities (collectively, the “notes”). The notes were guaranteed by GSK generally up to and excluding the date of the demerger (the “Guarantee Assumption Date”). We agreed to indemnify GSK for 32% (representing our pro rata equity interest in the Consumer Healthcare JV) of any amount payable by GSK pursuant to its guarantee of the notes. Our indemnity was provided solely for the benefit of GSK. Neither we nor any of our subsidiaries is an issuer or guarantor of any of the notes.
Following its issuance of the notes in March 2022, which fell in our international second quarter of 2022, the Consumer Healthcare JV loaned to us and GSK the net proceeds received from the notes on a pro rata equity ownership basis, for which we received a loan of £2.9 billion ($3.7 billion as of the end of our second quarter of 2022), at an interest rate of 1.365% per annum payable semi-annually in arrears.
On July 18, 2022, GSK completed its demerger of the Consumer Healthcare JV which became Haleon, an independent, publicly traded company listed on the London Stock Exchange that holds the joint Consumer Healthcare business of GSK and Pfizer following the demerger. In conjunction with the demerger, we received £3.5 billion ($4.2 billion) in dividends from the JV in July 2022, which decreased the carrying value of our investment. Simultaneous with the receipt of the dividends, we repaid the loan from the JV. GSK similarly received pro rata dividends and simultaneously repaid its pro rata loan from the JV. In conjunction with these transactions, our indemnification of GSK’s guarantee discussed above was terminated. We continue to own 32% of Haleon after the transactions related to the demerger and continue to account for our interest in Haleon as an equity-method investment.
D. Collaborative Arrangement
Collaboration with Arvinas
Biohaven––On July 22,In November 2021, we announcedentered into a global collaboration and license agreement and related sublicense agreement with ArvinasBiohaven and certain of its subsidiaries to developcommercialize rimegepant and commercialize ARV-471, an investigational oral PROTAC® (PROteolysis TArgeting Chimera) estrogen receptor protein degrader. The estrogen receptor is a well-known disease driver in most breast cancers. Underzavegepant for the termstreatment and prevention of migraines outside of the collaboration agreement,U.S., subject to regulatory approval. Biohaven will continue to lead R&D globally and we madehave the exclusive right to commercialization globally, outside of the U.S. Upon the closing of the transaction on January 4, 2022, we paid Biohaven $500 million, including an upfront payment to Arvinas of $650$150 million and an equity investment of $350 million. We recognized $263 million for the upfront payment and premium paid on our equity investment in July 2021, which was recorded to ResearchAcquired in-process research and development expenses. On September 13, 2021, we made a $350 million equity investment in Arvinas, receiving approximately 3.5 million newly issued shares of Arvinas common stock, priced at a 30% premium to the 30-day volume weighted average price on July 20, 2021, representing an equity ownership stake by Pfizer of approximately 7% as of September 13, 2021. ArvinasBiohaven is also eligible to receive up to $400$740 million in approval milestonesnon-U.S. commercialization milestone payments, in addition to tiered double-digit royalties on net sales outside of the U.S. In addition to the milestone payments and uproyalties above, we will also reimburse Biohaven for the portion of certain additional milestone payments and royalties due to $1 billionthird parties in commercial milestones. The companies will equally share worldwide development costs, commercialization expenses and profits.accordance with preexisting Biohaven agreements, which are attributed to ex-U.S. sales.
Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
A. Transforming to a More Focused Company Program
With the formation of the Consumer Healthcare JV in 2019 and the spin-off of our Upjohn Business in the fourth quarter of 2020, Pfizer has transformed into a focused, global leader in science-based innovative medicines and vaccines. We havecontinue our efforts to ensure our cost base and support model align appropriately with this operating structure. While certain direct costs
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
undertaken efforts to ensure our cost base and support model align appropriately with our new operating structure. While certain direct costs transferred to the Consumer Healthcare JV, and to the Upjohn Business in connection with the spin-off, there are indirect costs which did not transfer. This program is primarily composed of the following three initiatives:
•We are taking steps to restructure our corporate enabling functions to appropriately support our business, R&D and PGS platform functions. We expect costs, primarily related to restructuring our corporate enabling functions, to total $1.6$1.8 billion, with substantially all costs to be cash expenditures. Actions include, among others, changes in location of certain activities, expanded use and co-location of centers of excellence and shared services, and increased use of digital technologies. The associated actions and the specific costs will primarily include severance and benefit plan impacts, exit costs as well as associated implementation costs.
•In addition, we are transforming our commercial go-to market model in the way we engage patients and physicians. We expect costs of $1.1$1.2 billion, with substantially all costs to be cash expenditures. Actions include, among others, centralization of certain activities and enhanced use of digital technologies. The costs for this effort primarily include severance and associated implementation costs.
•We are also optimizing our manufacturing network under this program and incurring certain legacyone-time costs for cost-reduction initiatives related to our manufacturing business.operations. We expect to incur costs of $500$800 million, with approximately 20%25% of the costs to be non-cash. The costs for this effort include, among other things, severance costs, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.
The program costs discussed above are expected to be incurred primarily from 2020 through 2022, and may be rounded and represent approximations.
From the start of this program in the fourth quarter of 2019 through OctoberJuly 3, 2021,2022, we incurred costs of $2.0 billion.$2.5 billion, of which $987 million ($800 million of restructuring charges) is associated with Biopharma.
B. Key Activities
| The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits, which are composed primarily of the Transforming to a More Focused Company program: | |
The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits: | | The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits: |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | September 27, 2020 | | October 3, 2021 | | September 27, 2020 | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
Restructuring charges/(credits): | Restructuring charges/(credits): | | | | | | | | | Restructuring charges/(credits): | | | | | | | | |
Employee terminations | Employee terminations | | $ | 630 | | | $ | (15) | | | $ | 649 | | | $ | 340 | | Employee terminations | | $ | 110 | | | $ | (4) | | | $ | 135 | | | $ | 19 | |
Asset impairments | Asset impairments | | 10 | | | 20 | | | 9 | | | 43 | | Asset impairments | | 20 | | | 2 | | | 28 | | | (3) | |
Exit costs/(credits) | Exit costs/(credits) | | 3 | | | (11) | | | — | | | (10) | | Exit costs/(credits) | | 18 | | | (3) | | | 29 | | | (3) | |
Restructuring charges/(credits)(a) | Restructuring charges/(credits)(a) | | 643 | | | (5) | | | 657 | | | 374 | | Restructuring charges/(credits)(a) | | 147 | | | (5) | | | 191 | | | 12 | |
Transaction costs(b) | Transaction costs(b) | | — | | | — | | | — | | | 14 | | Transaction costs(b) | | 36 | | | — | | | 42 | | | — | |
Integration costs and other(c) | Integration costs and other(c) | | 3 | | | 7 | | | 11 | | | 29 | | Integration costs and other(c) | | 6 | | | 4 | | | 148 | | | 8 | |
Restructuring charges and certain acquisition-related costs | Restructuring charges and certain acquisition-related costs | | 646 | | | 2 | | | 668 | | | 417 | | Restructuring charges and certain acquisition-related costs | | 189 | | | (1) | | | 381 | | | 21 | |
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net(d) | Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net(d) | | (63) | | | — | | | (51) | | | 2 | | Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net(d) | | — | | | 4 | | | (6) | | | 12 | |
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(e): | | | | | | | | | |
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(d): | | Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(d): | | | | | | | | |
Cost of sales | Cost of sales | | 23 | | | 4 | | | 64 | | | 14 | | Cost of sales | | 7 | | | 27 | | | 15 | | | 34 | |
Selling, informational and administrative expenses | Selling, informational and administrative expenses | | 8 | | | — | | | 23 | | | — | | Selling, informational and administrative expenses | | — | | | 16 | | | — | | | 16 | |
Research and development expenses | | — | | | — | | | — | | | (3) | | |
| Total additional depreciation––asset restructuring | Total additional depreciation––asset restructuring | | 31 | | | 4 | | | 87 | | | 10 | | Total additional depreciation––asset restructuring | | 7 | | | 43 | | | 15 | | | 49 | |
Implementation costs recorded in our condensed consolidated statements of income as follows(f): | | | | | | | | | |
Implementation costs recorded in our condensed consolidated statements of income as follows(e): | | Implementation costs recorded in our condensed consolidated statements of income as follows(e): | | | | | | | | |
Cost of sales | Cost of sales | | 8 | | | 9 | | | 29 | | | 27 | | Cost of sales | | 15 | | | 10 | | | 27 | | | 21 | |
Selling, informational and administrative expenses | Selling, informational and administrative expenses | | 142 | | | 36 | | | 287 | | | 114 | | Selling, informational and administrative expenses | | 134 | | | 80 | | | 208 | | | 144 | |
Research and development expenses | | — | | | 1 | | | 1 | | | 2 | | |
| | Total implementation costs | Total implementation costs | | 151 | | | 47 | | | 316 | | | 142 | | Total implementation costs | | 149 | | | 90 | | | 235 | | | 166 | |
Total costs associated with acquisitions and cost-reduction/productivity initiatives | Total costs associated with acquisitions and cost-reduction/productivity initiatives | | $ | 764 | | | $ | 52 | | | $ | 1,020 | | | $ | 571 | | Total costs associated with acquisitions and cost-reduction/productivity initiatives | | $ | 345 | | | $ | 137 | | | $ | 625 | | | $ | 248 | |
(a)Primarily represents cost reduction initiatives. Restructuring charges/(credits) associated with Biopharma: charges of $50 million and $46 million for the three and six months ended July 3, 2022, respectively, and credits of $4 million and charges of $1 million for the three and six months ended July 4, 2021, respectively.
(b)Represents external costs for banking, legal, accounting and other similar services.
(c)Represents external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(d)(c)AmountsRepresents external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs. In the three and ninesix months ended September 27, 2020 includeJuly 3, 2022, integration costs and other were mostly related to our acquisition of Arena, including $138 million in payments to Arena employees in the impactfirst quarter of a change in accounting principle.2022 for the fair value of previously unvested long-term incentive awards. See Note 1C.2A.
(e)(d)Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.
(f)(e)Represents external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.
| The following summarizes the components and changes in restructuring accruals: | The following summarizes the components and changes in restructuring accruals: | The following summarizes the components and changes in restructuring accruals: |
(MILLIONS) | (MILLIONS) | | Employee Termination Costs | | Asset Impairment Charges | | Exit Costs | | Accrual | (MILLIONS) | | Employee Termination Costs | | Asset Impairment Charges | | Exit Costs | | Accrual |
Balance, December 31, 2020(a) | | $ | 782 | | | $ | — | | | $ | 15 | | | $ | 798 | | |
Balance, December 31, 2021(a) | | Balance, December 31, 2021(a) | | $ | 1,014 | | | $ | — | | | $ | 57 | | | $ | 1,071 | |
Provision | Provision | | 649 | | | 9 | | | — | | | 657 | | Provision | | 135 | | | 28 | | | 29 | | | 191 | |
Utilization and other(b) | Utilization and other(b) | | (306) | | | (9) | | | (5) | | | (319) | | Utilization and other(b) | | (244) | | | (28) | | | (78) | | | (349) | |
Balance, October 3, 2021(c) | | $ | 1,125 | | | $ | — | | | $ | 10 | | | $ | 1,135 | | |
Balance, July 3, 2022(c) | | Balance, July 3, 2022(c) | | $ | 904 | | | $ | — | | | $ | 8 | | | $ | 913 | |
(a)Included in Other current liabilities ($628816 million) and Other noncurrent liabilities ($169255 million).
(b)Includes adjustments for foreign currency translation.
(c)Included in Other current liabilities ($860794 million) and Other noncurrent liabilities ($275119 million).
Note 4. Other (Income)/Deductions—Net
| Components of Other (income)/deductions––net include: | Components of Other (income)/deductions––net include: | Components of Other (income)/deductions––net include: |
| | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | September 27, 2020 | | October 3, 2021 | | September 27, 2020 | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
Interest income | Interest income | | $ | (10) | | | $ | (15) | | | $ | (21) | | | $ | (68) | | Interest income | | $ | (30) | | | $ | (13) | | | $ | (44) | | | $ | (12) | |
Interest expense | Interest expense | | 325 | | | 345 | | | 975 | | | 1,102 | | Interest expense | | 293 | | | 316 | | | 614 | | | 651 | |
Net interest expense | Net interest expense | | 315 | | | 330 | | | 954 | | | 1,034 | | Net interest expense | | 263 | | | 303 | | | 571 | | | 639 | |
Royalty-related income | Royalty-related income | | (261) | | | (214) | | | (649) | | | (524) | | Royalty-related income | | (217) | | | (212) | | | (389) | | | (388) | |
Net (gains)/losses on asset disposals | Net (gains)/losses on asset disposals | | (1) | | | (2) | | | (99) | | | — | | Net (gains)/losses on asset disposals | | — | | | (58) | | | (1) | | | (98) | |
Net (gains)/losses recognized during the period on equity securities(a) | Net (gains)/losses recognized during the period on equity securities(a) | | (400) | | | 70 | | | (1,601) | | | (408) | | Net (gains)/losses recognized during the period on equity securities(a) | | 541 | | | (800) | | | 1,241 | | | (1,200) | |
Income from collaborations, out-licensing arrangements and sales of compound/product rights(b) | Income from collaborations, out-licensing arrangements and sales of compound/product rights(b) | | (65) | | | (30) | | | (317) | | | (245) | | Income from collaborations, out-licensing arrangements and sales of compound/product rights(b) | | (5) | | | (21) | | | (14) | | | (252) | |
Net periodic benefit costs/(credits) other than service costs(c) | Net periodic benefit costs/(credits) other than service costs(c) | | (1,132) | | | 1,043 | | | (1,635) | | | 749 | | Net periodic benefit costs/(credits) other than service costs(c) | | 295 | | | (237) | | | 12 | | | (503) | |
Certain legal matters, net(d) | Certain legal matters, net(d) | | 38 | | | (17) | | | 458 | | | 5 | | Certain legal matters, net(d) | | 19 | | | 24 | | | 98 | | | 74 | |
Certain asset impairments(e) | | — | | | 900 | | | — | | | 900 | | |
| Consumer Healthcare JV equity method (income)/loss(f)(c) | Consumer Healthcare JV equity method (income)/loss(f)(c) | | (105) | | | (103) | | | (307) | | | (196) | | Consumer Healthcare JV equity method (income)/loss(f)(c) | | (149) | | | (140) | | | (334) | | | (202) | |
Other, net | Other, net | | (84) | | | (99) | | | (501) | | | (202) | | Other, net | | 26 | | | (201) | | | (62) | | | (417) | |
Other (income)/deductions––net | Other (income)/deductions––net | | $ | (1,696) | | | $ | 1,878 | | | $ | (3,697) | | | $ | 1,114 | | Other (income)/deductions––net | | $ | 772 | | | $ | (1,343) | | | $ | 1,122 | | | $ | (2,347) | |
(a)The gainslosses in the thirdsecond quarter and first ninesix months of 20212022 include, among other things, unrealized gainslosses of $420$432 million and $1.5 billion,$776 million, respectively, related to investments in BioNTech and Cerevel Therapeutics LLC. The losses in the third quarter of 2020 included, among other things, unrealized losses of $131 million related to our investment in Allogene.Holdings, Inc. (Cerevel). The gains in the second quarter and first ninesix months of 20202021 included, among other things, unrealized gains of $397$917 million and $1.0 billion, respectively, related to our investments in AllogeneBioNTech and BioNTech.Cerevel.
(b)The first ninesix months of 2021 includes,included, among other things, $188 million of net collaboration income from BioNTech in the first quarter of 2021 related to the COVID-19 vaccine. The first nine months of 2020 mainly included, among other things, (i) an upfront payment to us of $75 million from our sale of our CK1 assets to Biogen, Inc., (ii) $40 million of milestone income from Puma Biotechnology, Inc. related to Neratinib regulatory approvals in the EU and (iii) $30 million of milestone income from Lilly related to the first commercial sale in the U.S. of LOXO-292 for the treatment of RET fusion-positive NSCLC.Comirnaty.
(c)Amounts include the impact of a change in accounting principle. See Notes 1C and 10.
(d)The first nine months of 2021 primarily includes an amount to resolve a Multi-District Litigation relating to EpiPen pending against the Company in the U.S. District Court for the District of Kansas for $345 million, which remains subject to court approval. See Note 12A5.
(e)The third quarter and first nine months of 2020 included intangible asset impairment charges of $900 million related to IPR&D assets for unapproved indications of certain cancer medicines, acquired in our Array acquisition, and reflected, among other things, updated commercial forecasts.
(f)See Note 2B2C.
Note 5. Tax Matters
A. Taxes on Income from Continuing Operations
Our effective tax rate for continuing operations was (4.2)%13.7% for the thirdsecond quarter of 2022, compared to 16.2% for the second quarter of 2021, compared to (60.9)% for the third quarter of 2020, and was 7.5%13.4% for the first ninesix months of 2022, compared to 15.3% for the first six months of 2021. The lower effective tax rates for the second quarter and first six months of 2022, compared to the second quarter and first six months of 2021, compared to 6.7% for the first nine months of 2020.
The negative effective tax rate for the third quarter of 2021 waswere primarily a result of certain initiatives executed in the third quarter of 2021 associated with our investment in the Consumer Healthcare JV with GSK based on estimates and assumptions
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
that we believe to be reasonable. The negative effective tax rate for the third quarter of 2020 was primarily a result of benefits associated with certain intangible asset impairments (see Note 4(e)). The increase in the effective tax rate for the first nine months of 2021, compareddue to the first nine months of 2020, was due to thefavorable change in the jurisdictional mix of earnings primarily related to Comirnaty and the non-recurrenceas a result of benefits associated with certain intangible asset impairments, partially offset by certain initiatives executedoperating fluctuations in the third quarternormal course of 2021 associated with our investment in the Consumer Healthcare JV with GSK.business.
We elected, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, to pay our initial estimated $15 billion repatriation tax liability on accumulated post-1986 foreign earnings over eight years through 2026. The thirdfourth annual installment of this liability was paid by its April 15, 202118, 2022 due date. The fourthfifth annual installment is due April 15, 202218, 2023 and is reported in current Income taxes payableas of OctoberJuly 3, 2021. 2022. The remaining liability is reported in noncurrent Other taxes
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
payable. Our obligations may vary as a result of changes in our uncertain tax positions and/or availability of attributes such as foreign tax and other credit carryforwards.
B. Tax Contingencies
We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation.
The U.S. is one of our major tax jurisdictions, and we are regularly audited by the IRS. With respect to Pfizer, the IRS has issued Revenue Agent’s Reports (RARs) for tax years 2011-2013 and 2014-2015. We are not in agreement with the RARs and are currently appealing certain disputed issues. Tax years 2016-2018 are currently under audit. Tax years 2019-20212019-2022 are open but not under audit. All other tax years are closed. In addition to the open audit years in the U.S., we have open audit years in certain major international tax jurisdictions dating back to 2011.
For additional information, see Note 5D in our 20202021 Form 10-K.
C. Tax Provision/(Benefit) on Other Comprehensive Income/(Loss)
| Components of Tax provision/(benefit) on other comprehensive income/(loss) include: | Components of Tax provision/(benefit) on other comprehensive income/(loss) include: | Components of Tax provision/(benefit) on other comprehensive income/(loss) include: |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | September 27, 2020 | | October 3, 2021 | | September 27, 2020 | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
Foreign currency translation adjustments, net(a) | Foreign currency translation adjustments, net(a) | | $ | (32) | | | $ | 10 | | | $ | (30) | | | $ | (167) | | Foreign currency translation adjustments, net(a) | | $ | (114) | | | $ | (19) | | | $ | (185) | | | $ | 2 | |
Unrealized holding gains/(losses) on derivative financial instruments, net | Unrealized holding gains/(losses) on derivative financial instruments, net | | 21 | | | (43) | | | 28 | | | (126) | | Unrealized holding gains/(losses) on derivative financial instruments, net | | 98 | | | (51) | | | 130 | | | 7 | |
Reclassification adjustments for (gains)/losses included in net income | Reclassification adjustments for (gains)/losses included in net income | | 13 | | | 7 | | | 48 | | | (13) | | Reclassification adjustments for (gains)/losses included in net income | | (3) | | | 1 | | | (26) | | | 35 | |
| | 34 | | | (37) | | | 76 | | | (139) | | | 95 | | | (50) | | | 105 | | | 43 | |
Unrealized holding gains/(losses) on available-for-sale securities, net | Unrealized holding gains/(losses) on available-for-sale securities, net | | (33) | | | 30 | | | (16) | | | 29 | | Unrealized holding gains/(losses) on available-for-sale securities, net | | (61) | | | 7 | | | (78) | | | 17 | |
Reclassification adjustments for (gains)/losses included in net income | Reclassification adjustments for (gains)/losses included in net income | | 1 | | | (11) | | | (22) | | | (3) | | Reclassification adjustments for (gains)/losses included in net income | | 32 | | | 8 | | | 61 | | | (23) | |
| | (32) | | | 19 | | | (37) | | | 26 | | | (29) | | | 15 | | | (17) | | | (5) | |
| Reclassification adjustments related to amortization of prior service costs and other, net | Reclassification adjustments related to amortization of prior service costs and other, net | | (22) | | | (11) | | | (39) | | | (32) | | Reclassification adjustments related to amortization of prior service costs and other, net | | (7) | | | (8) | | | (16) | | | (17) | |
Reclassification adjustments related to curtailments of prior service costs and other, net | Reclassification adjustments related to curtailments of prior service costs and other, net | | (14) | | | — | | | (14) | | | — | | Reclassification adjustments related to curtailments of prior service costs and other, net | | — | | | (1) | | | (2) | | | (1) | |
Other | | — | | | (1) | | | (1) | | | 1 | | |
| | | (36) | | | (11) | | | (54) | | | (31) | | | (8) | | | (8) | | | (18) | | | (18) | |
Tax provision/(benefit) on other comprehensive income/(loss) | Tax provision/(benefit) on other comprehensive income/(loss) | | $ | (65) | | | $ | (19) | | | $ | (44) | | | $ | (311) | | Tax provision/(benefit) on other comprehensive income/(loss) | | $ | (55) | | | $ | (63) | | | $ | (115) | | | $ | 21 | |
(a)Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that we intend to hold indefinitely.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests
| The following summarizes the changes, net of tax, in Accumulated other comprehensive loss: | The following summarizes the changes, net of tax, in Accumulated other comprehensive loss: | The following summarizes the changes, net of tax, in Accumulated other comprehensive loss: |
| | | Net Unrealized Gains/(Losses) | | Benefit Plans | | | | | Net Unrealized Gains/(Losses) | | | Benefit Plans | | |
(MILLIONS) | (MILLIONS) | | Foreign Currency Translation Adjustments | | Derivative Financial Instruments | | Available-For-Sale Securities | | | Prior Service (Costs)/Credits and Other | | Accumulated Other Comprehensive Income/(Loss) | (MILLIONS) | | Foreign Currency Translation Adjustments | | Derivative Financial Instruments | | Available-For-Sale Securities | | | Prior Service (Costs)/Credits and Other | | Accumulated Other Comprehensive Income/(Loss) |
Balance, December 31, 2020(a) | | $ | (5,450) | | | $ | (428) | | | $ | 116 | | | | $ | 452 | | | $ | (5,310) | | |
Balance, December 31, 2021 | | Balance, December 31, 2021 | | $ | (6,172) | | | $ | 119 | | | $ | (220) | | | | $ | 377 | | | $ | (5,897) | |
Other comprehensive income/(loss)(b)(a) | Other comprehensive income/(loss)(b)(a) | | (336) | | | 388 | | | (262) | | | | (127) | | | (338) | | Other comprehensive income/(loss)(b)(a) | | (1,440) | | | 392 | | | (116) | | | | (59) | | | (1,223) | |
| Balance, October 3, 2021 | | $ | (5,787) | | | $ | (40) | | | $ | (146) | | | | $ | 325 | | | $ | (5,649) | | |
Balance, July 3, 2022 | | Balance, July 3, 2022 | | $ | (7,612) | | | $ | 511 | | | $ | (336) | | | | $ | 318 | | | $ | (7,119) | |
(a)Amounts include the impact of a change in accounting principle. See Note 1C.
(b)Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests. Foreign currency translation adjustments include net losses related to our equity method investment in the Consumer Healthcare JV (see Note 2B2C) and net gains related to the impact of our net investment hedging program.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 7. Financial Instruments
A. Fair Value Measurements
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis and Fair Value Hierarchy, using a Market Approach:
| | | October 3, 2021 | | | December 31, 2020 | | July 3, 2022 | | | December 31, 2021 |
(MILLIONS) | (MILLIONS) | | Total | | Level 1 | | Level 2 | | | Total | | Level 1 | | Level 2 | (MILLIONS) | | Total | | Level 1 | | Level 2 | | | Total | | Level 1 | | Level 2 |
Financial assets: | Financial assets: | | | | | | | | | | | | | | Financial assets: | | | | | | | | | | | | | |
Short-term investments | Short-term investments | | | | Short-term investments | | | |
Classified as equity securities with readily determinable fair values: | | | | |
Equity securities with readily determinable fair values: | | Equity securities with readily determinable fair values: | | | |
Money market funds | Money market funds | | $ | 2,367 | | | $ | — | | | $ | 2,367 | | | | $ | 567 | | | $ | — | | | $ | 567 | | Money market funds | | $ | 4,373 | | | $ | — | | | $ | 4,373 | | | | $ | 5,365 | | | $ | — | | | $ | 5,365 | |
| Classified as available-for-sale debt securities: | | | | |
Available-for-sale debt securities: | | Available-for-sale debt securities: | | | |
Government and agency—non-U.S. | Government and agency—non-U.S. | | 16,826 | | | — | | | 16,826 | | | | 7,719 | | | — | | | 7,719 | | Government and agency—non-U.S. | | 21,758 | | | — | | | 21,758 | | | | 17,318 | | | — | | | 17,318 | |
Government and agency—U.S. | Government and agency—U.S. | | 4,881 | | | — | | | 4,881 | | | | 982 | | | — | | | 982 | | Government and agency—U.S. | | 2,839 | | | — | | | 2,839 | | | | 4,050 | | | — | | | 4,050 | |
Corporate and other | Corporate and other | | 1,181 | | | — | | | 1,181 | | | | 1,008 | | | — | | | 1,008 | | Corporate and other | | 1,024 | | | — | | | 1,024 | | | | 647 | | | — | | | 647 | |
| | 22,887 | | | — | | | 22,887 | | | | 9,709 | | | — | | | 9,709 | | | 25,621 | | | — | | | 25,621 | | | | 22,014 | | | — | | | 22,014 | |
Total short-term investments | Total short-term investments | | 25,254 | | | — | | | 25,254 | | | | 10,276 | | | — | | | 10,276 | | Total short-term investments | | 29,994 | | | — | | | 29,994 | | | | 27,379 | | | — | | | 27,379 | |
Other current assets | Other current assets | | | | | | | | | | | | | | Other current assets | | | | | | | | | | | | | |
Derivative assets: | Derivative assets: | | | | Derivative assets: | | | |
Interest rate contracts | Interest rate contracts | | 6 | | | — | | | 6 | | | | 18 | | | — | | | 18 | | Interest rate contracts | | 8 | | | — | | | 8 | | | | 4 | | | — | | | 4 | |
Foreign exchange contracts | Foreign exchange contracts | | 478 | | | — | | | 478 | | | | 234 | | | — | | | 234 | | Foreign exchange contracts | | 1,322 | | | — | | | 1,322 | | | | 704 | | | — | | | 704 | |
Total other current assets | Total other current assets | | 484 | | | — | | | 484 | | | | 251 | | | — | | | 251 | | Total other current assets | | 1,331 | | | — | | | 1,331 | | | | 709 | | | — | | | 709 | |
Long-term investments | Long-term investments | | | | | | | | | | | | | | Long-term investments | | | | | | | | | | | | | |
Classified as equity securities with readily determinable fair values(a) | | 4,165 | | | 4,141 | | | 25 | | | | 2,809 | | | 2,776 | | | 32 | | |
Equity securities with readily determinable fair values(a) | | Equity securities with readily determinable fair values(a) | | 3,041 | | | 3,028 | | | 13 | | | | 3,876 | | | 3,849 | | | 27 | |
| Classified as available-for-sale debt securities: | | | | |
Available-for-sale debt securities: | | Available-for-sale debt securities: | | | |
Government and agency—non-U.S. | Government and agency—non-U.S. | | 425 | | | — | | | 425 | | | | 6 | | | — | | | 6 | | Government and agency—non-U.S. | | 305 | | | — | | | 305 | | | | 465 | | | — | | | 465 | |
Government and agency—U.S. | Government and agency—U.S. | | 9 | | | — | | | 9 | | | | 121 | | | — | | | 121 | | Government and agency—U.S. | | — | | | — | | | — | | | | 6 | | | — | | | 6 | |
Corporate and other | Corporate and other | | — | | | — | | | — | | | | — | | | — | | | — | | Corporate and other | | 74 | | | — | | | 74 | | | | 50 | | | — | | | 50 | |
| | 434 | | | — | | | 434 | | | | 128 | | | — | | | 128 | | | 379 | | | — | | | 379 | | | | 521 | | | — | | | 521 | |
Total long-term investments | Total long-term investments | | 4,600 | | | 4,141 | | | 459 | | | | 2,936 | | | 2,776 | | | 160 | | Total long-term investments | | 3,420 | | | 3,028 | | | 392 | | | | 4,397 | | | 3,849 | | | 548 | |
Other noncurrent assets | Other noncurrent assets | | | | | | | | | | | | | | Other noncurrent assets | | | | | | | | | | | | | |
Derivative assets: | Derivative assets: | | | | Derivative assets: | | | |
Interest rate contracts | Interest rate contracts | | 18 | | | — | | | 18 | | | | 117 | | | — | | | 117 | | Interest rate contracts | | — | | | — | | | — | | | | 16 | | | — | | | 16 | |
Foreign exchange contracts | Foreign exchange contracts | | 219 | | | — | | | 219 | | | | 5 | | | — | | | 5 | | Foreign exchange contracts | | 562 | | | — | | | 562 | | | | 242 | | | — | | | 242 | |
Total derivative assets | Total derivative assets | | 236 | | | — | | | 236 | | | | 122 | | | — | | | 122 | | Total derivative assets | | 562 | | | — | | | 562 | | | | 259 | | | — | | | 259 | |
Insurance contracts(b) | Insurance contracts(b) | | 762 | | | — | | | 762 | | | | 693 | | | — | | | 693 | | Insurance contracts(b) | | 665 | | | — | | | 665 | | | | 808 | | | — | | | 808 | |
Total other noncurrent assets | Total other noncurrent assets | | 998 | | | — | | | 998 | | | | 814 | | | — | | | 814 | | Total other noncurrent assets | | 1,227 | | | — | | | 1,227 | | | | 1,067 | | | — | | | 1,067 | |
Total assets | Total assets | | $ | 31,336 | | | $ | 4,141 | | | $ | 27,195 | | | | $ | 14,278 | | | $ | 2,776 | | | $ | 11,501 | | Total assets | | $ | 35,972 | | | $ | 3,028 | | | $ | 32,944 | | | | $ | 33,552 | | | $ | 3,849 | | | $ | 29,703 | |
| Financial liabilities: | Financial liabilities: | | | | Financial liabilities: | | | |
Other current liabilities | Other current liabilities | | | | Other current liabilities | | | |
Derivative liabilities: | Derivative liabilities: | | | | Derivative liabilities: | | | |
| Foreign exchange contracts | Foreign exchange contracts | | $ | 346 | | | $ | — | | | $ | 346 | | | | $ | 501 | | | $ | — | | | $ | 501 | | Foreign exchange contracts | | $ | 432 | | | $ | — | | | $ | 432 | | | | $ | 476 | | | $ | — | | | $ | 476 | |
Total other current liabilities | Total other current liabilities | | 346 | | | — | | | 346 | | | | 501 | | | — | | | 501 | | Total other current liabilities | | 432 | | | — | | | 432 | | | | 476 | | | — | | | 476 | |
Other noncurrent liabilities | Other noncurrent liabilities | | | | | | | | | | | | | | Other noncurrent liabilities | | | | | | | | | | | | | |
Derivative liabilities: | Derivative liabilities: | | | | Derivative liabilities: | | | |
| Interest rate contracts | | Interest rate contracts | | 206 | | | — | | | 206 | | | | — | | | — | | | — | |
Foreign exchange contracts | Foreign exchange contracts | | 477 | | | — | | | 477 | | | | 599 | | | — | | | 599 | | Foreign exchange contracts | | 653 | | | — | | | 653 | | | | 405 | | | — | | | 405 | |
Total other noncurrent liabilities | Total other noncurrent liabilities | | 477 | | | — | | | 477 | | | | 599 | | | — | | | 599 | | Total other noncurrent liabilities | | 859 | | | — | | | 859 | | | | 405 | | | — | | | 405 | |
Total liabilities | Total liabilities | | $ | 823 | | | $ | — | | | $ | 823 | | | | $ | 1,100 | | | $ | — | | | $ | 1,100 | | Total liabilities | | $ | 1,291 | | | $ | — | | | $ | 1,291 | | | | $ | 881 | | | $ | — | | | $ | 881 | |
(a)Long-term equity securities of $191$144 million as of OctoberJuly 3, 20212022 and $190$194 million as of December 31, 20202021 were held in restricted trusts for U.S. non-qualified employee benefit plans.
(b)Includes life insurance policies held in restricted trusts for U.S. non-qualified employee benefit plans. The underlying invested assets in these contracts are marketable securities, which are carried at fair value, with changes in fair value recognized in Other (income)/deductions—net (see Note 4).
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Carrying values and estimated fair values using a market approach: |
| | October 3, 2021 | | | | December 31, 2020 |
(MILLIONS) | | Carrying Value | | Estimated Fair Value at Level 2 | | | | Carrying Value | | Estimated Fair Value at Level 2 |
Financial Liabilities | | | | | | | | | | |
Long-term debt, excluding the current portion | | $ | 36,250 | | | $ | 42,228 | | | | | $ | 37,133 | | | $ | 45,533 | |
Basis––The carrying value of Long-term debt, excluding the current portion was $34 billion as of July 3, 2022 and $36 billion as of December 31, 2021. The estimated fair value of such debt, using a market approach and Level 2 inputs, was $34 billion as of July 3, 2022 and $42 billion as of December 31, 2021.The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities, long-term receivables and short-term borrowings not measured at fair value on a recurring basis were not significant as of OctoberJuly 3, 20212022 and December 31, 2020.2021. The fair value measurements of our held-to-maturity debt securities and short-term borrowings are based on Level 2 inputs. The fair value measurements of our long-term receivables and private equity securities are based on Level 3 inputs.
B. Investments
Total Short-Term, Long-Term and Equity-Method Investments
| The following summarizes our investments by classification type: | The following summarizes our investments by classification type: | The following summarizes our investments by classification type: |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | December 31, 2020 | (MILLIONS) | | July 3, 2022 | | December 31, 2021 |
Short-term investments | Short-term investments | | | | | Short-term investments | | | | |
Equity securities with readily determinable fair values(a) | Equity securities with readily determinable fair values(a) | | $ | 2,367 | | | $ | 567 | | Equity securities with readily determinable fair values(a) | | $ | 4,373 | | | $ | 5,365 | |
Available-for-sale debt securities | Available-for-sale debt securities | | 22,887 | | | 9,709 | | Available-for-sale debt securities | | 25,621 | | | 22,014 | |
Held-to-maturity debt securities | Held-to-maturity debt securities | | 2,476 | | | 161 | | Held-to-maturity debt securities | | 1,530 | | | 1,746 | |
Total Short-term investments | Total Short-term investments | | $ | 27,730 | | | $ | 10,437 | | Total Short-term investments | | $ | 31,524 | | | $ | 29,125 | |
| Long-term investments | Long-term investments | | Long-term investments | |
Equity securities with readily determinable fair values | Equity securities with readily determinable fair values | | $ | 4,165 | | | $ | 2,809 | | Equity securities with readily determinable fair values | | $ | 3,041 | | | $ | 3,876 | |
| Available-for-sale debt securities | Available-for-sale debt securities | | 434 | | | 128 | | Available-for-sale debt securities | | 379 | | | 521 | |
Held-to-maturity debt securities | Held-to-maturity debt securities | | 32 | | | 37 | | Held-to-maturity debt securities | | 39 | | | 34 | |
Private equity securities at cost(b) | Private equity securities at cost(b) | | 616 | | | 432 | | Private equity securities at cost(b) | | 705 | | | 623 | |
Total Long-term investments | Total Long-term investments | | $ | 5,248 | | | $ | 3,406 | | Total Long-term investments | | $ | 4,163 | | | $ | 5,054 | |
Equity-method investments | Equity-method investments | | 16,349 | | | 16,856 | | Equity-method investments | | 14,799 | | | 16,472 | |
Total long-term investments and equity-method investments | Total long-term investments and equity-method investments | | $ | 21,596 | | | $ | 20,262 | | Total long-term investments and equity-method investments | | $ | 18,962 | | | $ | 21,526 | |
Held-to-maturity cash equivalents | Held-to-maturity cash equivalents | | $ | 467 | | | $ | 89 | | Held-to-maturity cash equivalents | | $ | 225 | | | $ | 268 | |
(a)As of OctoberJuly 3, 20212022 and December 31, 2020,2021, includes money market funds primarily invested in U.S. Treasury and government debt.
(b)Represent investments in the life sciences sector.
Debt Securities
| At October 3, 2021, our debt investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows: | |
At July 3, 2022, our investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows: | | At July 3, 2022, our investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows: |
| | October 3, 2021 | | December 31, 2020 | | July 3, 2022 | | December 31, 2021 |
| | | Gross Unrealized | | Maturities (in Years) | | | Gross Unrealized | | | | Gross Unrealized | | Maturities (in Years) | | | Gross Unrealized | |
(MILLIONS) | (MILLIONS) | | Amortized Cost | | Gains | | Losses | | Fair Value | | Within 1 | | Over 1 to 5 | | Over 5 | | | Amortized Cost | | Gains | | Losses | | Fair Value | (MILLIONS) | | Amortized Cost | | Gains | | Losses | | Fair Value | | Within 1 | | Over 1 to 5 | | Over 5 | | | Amortized Cost | | Gains | | Losses | | Fair Value |
Available-for-sale debt securities | Available-for-sale debt securities | | | | | | | | | | | | | | | | | | | | | | | Available-for-sale debt securities | | | | | | | | | | | | | | | | | | | | | | |
Government and agency––non-U.S. | Government and agency––non-U.S. | | $ | 17,414 | | | $ | 16 | | | $ | (179) | | | $ | 17,251 | | | $ | 16,826 | | | $ | 425 | | | $ | — | | | $ | 7,593 | | | $ | 136 | | | $ | (4) | | | $ | 7,725 | | Government and agency––non-U.S. | | $ | 22,445 | | | $ | 36 | | | $ | (419) | | | $ | 22,062 | | | $ | 21,758 | | | $ | 305 | | | $ | — | | | $ | 18,032 | | | $ | 13 | | | $ | (263) | | | $ | 17,783 | |
Government and agency––U.S. | Government and agency––U.S. | | 4,890 | | | — | | | (1) | | | 4,889 | | | 4,881 | | | 9 | | | — | | | 1,104 | | | — | | | (1) | | | 1,103 | | Government and agency––U.S. | | 2,840 | | | — | | | (1) | | | 2,839 | | | 2,839 | | | — | | | — | | | 4,056 | | | — | | | (1) | | | 4,055 | |
Corporate and other | Corporate and other | | 1,185 | | | — | | | (4) | | | 1,181 | | | 1,181 | | | — | | | — | | | 1,006 | | | 2 | | | — | | | 1,008 | | Corporate and other | | 1,098 | | | 2 | | | (2) | | | 1,098 | | | 1,024 | | | 74 | | | — | | | 698 | | | — | | | (1) | | | 697 | |
Held-to-maturity debt securities | Held-to-maturity debt securities | | Held-to-maturity debt securities | |
Time deposits and other | Time deposits and other | | 986 | | | — | | | — | | | 986 | | | 959 | | | 16 | | | 11 | | | 283 | | | — | | | — | | | 283 | | Time deposits and other | | 913 | | | — | | | — | | | 913 | | | 878 | | | 23 | | | 11 | | | 947 | | | — | | | — | | | 947 | |
Government and agency––non-U.S. | Government and agency––non-U.S. | | 1,988 | | | — | | | — | | | 1,988 | | | 1,984 | | | 4 | | | 1 | | | 5 | | | — | | | — | | | 5 | | Government and agency––non-U.S. | | 881 | | | — | | | — | | | 881 | | | 876 | | | 3 | | | 1 | | | 1,102 | | | — | | | — | | | 1,102 | |
Total debt securities | Total debt securities | | $ | 26,463 | | | $ | 16 | | | $ | (183) | | | $ | 26,297 | | | $ | 25,830 | | | $ | 454 | | | $ | 12 | | | $ | 9,991 | | | $ | 138 | | | $ | (5) | | | $ | 10,124 | | Total debt securities | | $ | 28,177 | | | $ | 38 | | | $ | (422) | | | $ | 27,794 | | | $ | 27,376 | | | $ | 406 | | | $ | 12 | | | $ | 24,835 | | | $ | 14 | | | $ | (265) | | | $ | 24,584 | |
Any expected credit losses to these portfolios would be immaterial to our financial statements.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Equity Securities
| The following presents the calculation of the portion of unrealized (gains)/losses that relates to equity securities, excluding equity-method investments, held at the reporting date: | The following presents the calculation of the portion of unrealized (gains)/losses that relates to equity securities, excluding equity-method investments, held at the reporting date: | The following presents the calculation of the portion of unrealized (gains)/losses that relates to equity securities, excluding equity-method investments, held at the reporting date: |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | September 27, 2020 | | October 3, 2021 | | September 27, 2020 | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
Net (gains)/losses recognized during the period on equity securities(a) | | $ | (400) | | | $ | 70 | | | $ | (1,601) | | | $ | (408) | | |
Net (gains)/losses recognized during the period on equity securities(a) | | Net (gains)/losses recognized during the period on equity securities(a) | | $ | 541 | | | $ | (800) | | | $ | 1,241 | | | $ | (1,200) | |
Less: Net (gains)/losses recognized during the period on equity securities sold during the period | Less: Net (gains)/losses recognized during the period on equity securities sold during the period | | (78) | | | 2 | | | (83) | | | (16) | | Less: Net (gains)/losses recognized during the period on equity securities sold during the period | | (68) | | | 24 | | | (79) | | | (5) | |
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b) | Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b) | | $ | (322) | | | $ | 68 | | | $ | (1,518) | | | $ | (391) | | Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b) | | $ | 610 | | | $ | (823) | | | $ | 1,320 | | | $ | (1,196) | |
(a)Reported in Other (income)/deductions––net. See Note 4.
(b)Included in net unrealized gains(gains)/losses are observable price changes on equity securities without readily determinable fair values. As of OctoberJuly 3, 2021,2022, there were cumulative impairments and downward adjustments of $95$108 million and upward adjustments of $151$194 million. Impairments, downward and upward adjustments were not significant in the thirdsecond quarter and first ninesix months of 20212022 and 2020.2021.
C. Short-Term Borrowings
| Short-term borrowings include: | Short-term borrowings include: | Short-term borrowings include: |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | December 31, 2020 | (MILLIONS) | | July 3, 2022 | | December 31, 2021 |
Commercial paper | | $ | 100 | | | $ | 556 | | |
| Current portion of long-term debt, principal amount | Current portion of long-term debt, principal amount | | 2,664 | | | 2,004 | | Current portion of long-term debt, principal amount | | $ | 1,251 | | | $ | 1,636 | |
Other short-term borrowings, principal amount(a) | Other short-term borrowings, principal amount(a) | | 866 | | | 145 | | Other short-term borrowings, principal amount(a) | | 4,714 | | | 605 | |
Total short-term borrowings, principal amount | Total short-term borrowings, principal amount | | 3,630 | | | 2,705 | | Total short-term borrowings, principal amount | | 5,965 | | | 2,241 | |
Net fair value adjustments related to hedging and purchase accounting | | Net fair value adjustments related to hedging and purchase accounting | | 25 | | | — | |
| Net unamortized discounts, premiums and debt issuance costs | | (1) | | | (2) | | |
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted | Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted | | $ | 3,629 | | | $ | 2,703 | | Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted | | $ | 5,990 | | | $ | 2,241 | |
(a)IncludesAs of July 3, 2022, primarily includes $3.7 billion related to the Consumer Healthcare JV loan (see Note 2C), and cash collateral (see Note 7F). As of December 31, 2021, primarily includes cash collateral. SeeNote 7F.
D. Long-Term Debt
New Issuance
| | | | | | | | | | | | | | |
In the third quarter of 2021, we issued the following senior unsecured notes at an effective interest rate of 1.79%: |
(MILLIONS) | | | | Principal |
Interest Rate | | Maturity Date | | As of October 3, 2021 |
1.750%(a)
| | August 18, 2031 | | $ | 1,000 | |
(a)The notes may be redeemed by us at any time, in whole, or in part, at a redemption price plus accrued and unpaid interest. | The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt: | The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt: | The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt: |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | December 31, 2020 | (MILLIONS) | | July 3, 2022 | | December 31, 2021 |
Total long-term debt, principal amount | Total long-term debt, principal amount | | $ | 34,975 | | | $ | 35,774 | | Total long-term debt, principal amount | | $ | 33,352 | | | $ | 34,948 | |
Net fair value adjustments related to hedging and purchase accounting | Net fair value adjustments related to hedging and purchase accounting | | 1,470 | | | 1,562 | | Net fair value adjustments related to hedging and purchase accounting | | 1,125 | | | 1,438 | |
Net unamortized discounts, premiums and debt issuance costs | Net unamortized discounts, premiums and debt issuance costs | | (200) | | | (207) | | Net unamortized discounts, premiums and debt issuance costs | | (185) | | | (195) | |
Other long-term debt | Other long-term debt | | 4 | | | 4 | | Other long-term debt | | 2 | | | 4 | |
Total long-term debt, carried at historical proceeds, as adjusted | Total long-term debt, carried at historical proceeds, as adjusted | | $ | 36,250 | | | $ | 37,133 | | Total long-term debt, carried at historical proceeds, as adjusted | | $ | 34,294 | | | $ | 36,195 | |
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above) | | $ | 2,663 | | | $ | 2,002 | | |
|
E. Derivative Financial Instruments and Hedging Activities
Foreign Exchange Risk
Risk––A significant portion of our revenues, earnings and net investments in foreign affiliates is exposed to changes in foreign exchange rates. WeWhere foreign exchange risk is not offset by other exposures, we manage our foreign exchange risk principally through the use of derivative financial instruments and
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
foreign currency debt. These financial instruments serve to mitigate the impact on net income as a result of remeasurement into another currency, or against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions.
The derivative financial instruments primarily hedge or offset exposures in the euro, U.K. pound, Japanese yen, and Canadian dollar. We hedgedollar, and include a portion of our forecasted foreign exchange-denominated intercompany inventory sales denominated in euro, Japanese yen, Canadian dollar, Chinese renminbi, U.K. pound and Australian dollar forhedged up to two years. We may seek to protect against possible declines in the reported net investments of our foreign business entities.
Interest Rate Risk
Risk––Our interest-bearing investments and borrowings are subject to interest rate risk. Depending on market conditions, we may change the profile of our outstanding debt or investments by entering into derivative financial instruments like interest rate swaps, either to hedge or offset the exposure to changes in the fair value of hedged items with fixed interest rates, or to convert variable rate debt or investments to fixed rates. The derivative financial instruments primarily hedge U.S. dollar fixed-rate debt.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations): |
| | October 3, 2021 | | December 31, 2020 |
| | | | Fair Value | | | | Fair Value |
(MILLIONS) | | Notional | | Asset | | Liability | | Notional | | Asset | | Liability |
Derivatives designated as hedging instruments: | | | | | | | | | | | | |
Foreign exchange contracts(a) | | $ | 27,798 | | | $ | 568 | | | $ | 743 | | | $ | 24,369 | | | $ | 145 | | | $ | 1,005 | |
Interest rate contracts | | 1,250 | | | 24 | | | — | | | 1,950 | | | 135 | | | — | |
| | | | 592 | | | 743 | | | | | 280 | | | 1,005 | |
Derivatives not designated as hedging instruments: | | | | | | | | | | | | |
Foreign exchange contracts | | $ | 24,150 | | | 129 | | | 81 | | | $ | 15,063 | | | 94 | | | 95 | |
Total | | | | $ | 720 | | | $ | 823 | | | | | $ | 373 | | | $ | 1,100 | |
(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.9 billion as of October 3, 2021 and $5.0 billion as of December 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk exposures (including those reported as part of discontinued operations): |
| | Gains/(Losses) Recognized in OID(a) | | Gains/(Losses) Recognized in OCI(a) | | Gains/(Losses) Reclassified from OCI into OID and COS(a) |
| | Three Months Ended |
(MILLIONS) | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 |
Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts(b) | | $ | — | | | $ | — | | | $ | 204 | | | $ | (379) | | | $ | (59) | | | $ | (149) | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 10 | | | 7 | | | 10 | | | 7 | |
Derivative Financial Instruments in Fair Value Hedge Relationships: | | | | | | | | | | | | |
Interest rate contracts | | (5) | | | (9) | | | — | | | — | | | — | | | — | |
Hedged item | | 5 | | | 9 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts | | — | | | — | | | 177 | | | (257) | | | — | | | — | |
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(c) | | — | | | — | | | 19 | | | 9 | | | 26 | | | 38 | |
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d) | | | | | | | | | | | | |
Foreign currency short-term borrowings | | — | | | — | | | 25 | | | — | | | — | | | — | |
Foreign currency long-term debt | | — | | | — | | | 19 | | | (72) | | | — | | | — | |
Derivative Financial Instruments Not Designated as Hedges: | | | | | | | | | | | | |
Foreign exchange contracts | | (74) | | | 255 | | | — | | | — | | | — | | | — | |
All other net(c) | | — | | | — | | | — | | | — | | | — | | | — | |
| | $ | (74) | | | $ | 255 | | | $ | 453 | | | $ | (692) | | | $ | (21) | | | $ | (104) | |
| | | | | | | | | | | | |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | Gains/(Losses) Recognized in OID(a) | | Gains/(Losses) Recognized in OCI(a) | | Gains/(Losses) Reclassified from OCI into OID and COS(a) |
| | Nine Months Ended |
(MILLIONS) | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 |
Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts(b) | | $ | — | | | $ | — | | | $ | 147 | | | $ | (721) | | | $ | (314) | | | $ | (23) | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 31 | | | 49 | | | 28 | | | 48 | |
Derivative Financial Instruments in Fair Value Hedge Relationships: | | | | | | | | | | | | |
Interest rate contracts | | (6) | | | 383 | | | — | | | — | | | — | | | — | |
Hedged item | | 6 | | | (383) | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts | | — | | | — | | | 332 | | | (17) | | | — | | | — | |
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(c) | | — | | | — | | | 54 | | | 185 | | | 82 | | | 122 | |
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d) | | | | | | | | | | | | |
Foreign currency short-term borrowings | | — | | | — | | | 52 | | | 8 | | | — | | | — | |
Foreign currency long-term debt | | — | | | — | | | 66 | | | (69) | | | — | | | — | |
Derivative Financial Instruments Not Designated as Hedges: | | | | | | | | | | | | |
Foreign exchange contracts | | (97) | | | 205 | | | — | | | — | | | — | | | — | |
All other net(c) | | — | | | — | | | 1 | | | 12 | | | 1 | | | (1) | |
| | $ | (97) | | | $ | 205 | | | $ | 683 | | | $ | (553) | | | $ | (204) | | | $ | 147 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations): |
| | July 3, 2022 | | December 31, 2021 |
| | | | Fair Value | | | | Fair Value |
(MILLIONS) | | Notional | | Asset | | Liability | | Notional | | Asset | | Liability |
Derivatives designated as hedging instruments: | | | | | | | | | | | | |
Foreign exchange contracts(a) | | $ | 31,576 | | | $ | 1,642 | | | $ | 711 | | | $ | 29,576 | | | $ | 787 | | | $ | 717 | |
Interest rate contracts | | 2,250 | | | 8 | | | 206 | | | 2,250 | | | 21 | | | — | |
| | | | 1,650 | | | 917 | | | | | 808 | | | 717 | |
Derivatives not designated as hedging instruments: | | | | | | | | | | | | |
Foreign exchange contracts | | $ | 25,929 | | | 243 | | | 375 | | | $ | 21,419 | | | 160 | | | 164 | |
Total | | | | $ | 1,893 | | | $ | 1,291 | | | | | $ | 968 | | | $ | 881 | |
(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.6 billion as of July 3, 2022 and $4.8 billion as of December 31, 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk exposures (including those reported as part of discontinued operations): |
| | Gains/(Losses) Recognized in OID(a) | | Gains/(Losses) Recognized in OCI(a) | | Gains/(Losses) Reclassified from OCI into OID and COS(a) |
| | Three Months Ended |
(MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts(b) | | $ | — | | | $ | — | | | $ | 624 | | | $ | (258) | | | $ | 119 | | | $ | 13 | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 27 | | | 9 | | | 25 | | | 8 | |
Derivative Financial Instruments in Fair Value Hedge Relationships: | | | | | | | | | | | | |
Interest rate contracts | | (66) | | | 26 | | | — | | | ��� | | | — | | | — | |
Hedged item | | 66 | | | (26) | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts | | — | | | — | | | 674 | | | 1 | | | — | | | — | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 59 | | | 36 | | | 33 | | | 26 | |
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d) | | | | | | | | | | | | |
Foreign currency short-term borrowings | | — | | | — | | | — | | | (11) | | | — | | | — | |
Foreign currency long-term debt | | — | | | — | | | 48 | | | (8) | | | — | | | — | |
Derivative Financial Instruments Not Designated as Hedges: | | | | | | | | | | | | |
Foreign exchange contracts | | (394) | | | (65) | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | $ | (394) | | | $ | (65) | | | $ | 1,432 | | | $ | (230) | | | $ | 177 | | | $ | 47 | |
|
|
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | Gains/(Losses) Recognized in OID(a) | | Gains/(Losses) Recognized in OCI(a) | | Gains/(Losses) Reclassified from OCI into OID and COS(a) |
| | Six Months Ended |
(MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
Derivative Financial Instruments in Cash Flow Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts(b) | | $ | — | | | $ | — | | | $ | 811 | | | $ | (56) | | | $ | 314 | | | $ | (255) | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | 43 | | | 21 | | | 43 | | | 18 | |
Derivative Financial Instruments in Fair Value Hedge Relationships: | | | | | | | | | | | | |
Interest rate contracts | | (222) | | | (1) | | | — | | | — | | | — | | | — | |
Hedged item | | 222 | | | 1 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Derivative Financial Instruments in Net Investment Hedge Relationships: | | | | | | | | | | | | |
Foreign exchange contracts | | — | | | — | | | 933 | | | 155 | | | — | | | — | |
Amount excluded from effectiveness testing and amortized into earnings(c) | | — | | | — | | | (15) | | | 35 | | | 63 | | | 55 | |
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d) | | | | | | | | | | | | |
Foreign currency short-term borrowings | | — | | | — | | | 26 | | | 27 | | | — | | | — | |
Foreign currency long-term debt | | — | | | — | | | 70 | | | 48 | | | — | | | — | |
Derivative Financial Instruments Not Designated as Hedges: | | | | | | | | | | | | |
Foreign exchange contracts | | (413) | | | (23) | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | |
| | $ | (413) | | | $ | (23) | | | $ | 1,868 | | | $ | 230 | | | $ | 421 | | | $ | (182) | |
(a)OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the condensed consolidated statements of income. COS = Cost of Sales, included in Cost of sales in the condensed consolidated statements of income. OCI = Other comprehensive income/(loss), included in the condensed consolidated statements of comprehensive income.
(b)The amounts reclassified from OCI into COS were:
•a net lossgain of $18$68 million in the thirdsecond quarter of 2021;2022;
•a net gain of $102 million in the first six months of 2022;
•a net loss of $94$31 million in the first nine monthssecond quarter of 2021;
•a net gain of $34 million in the third quarter of 2020; and
•a net gainloss of $184$76 million in the first ninesix months of 2020.2021.
The remaining amounts were reclassified from OCI into OID. Based on quarter-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax gain of $202$725 million within the next 12 months into income. The maximum length of time over which we are hedging our exposure to the variability in future foreign exchange cash flows is approximately 2221 years and relates to foreign currency debt.
(c)The amounts reclassified from OCI were reclassified into OID.
(d)Short-term borrowings and long-term debt include foreign currency borrowings, which are used in net investment hedges. The short-term borrowingsborrowings’ carrying value as of October 3,December 31, 2021 was $1.2$1.1 billion. The long-term debt carrying values as of OctoberJuly 3, 20212022 and December 31, 20202021 were $862$774 million and $2.1 billion,$844 million, respectively.
| The following summarizes cumulative basis adjustments for fair value hedges to our long-term debt: | |
The following summarizes cumulative basis adjustments to our debt in fair value hedges: | | The following summarizes cumulative basis adjustments to our debt in fair value hedges: |
| | October 3, 2021 | | December 31, 2020 | | July 3, 2022 | | December 31, 2021 |
| | | Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount | | | Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount | | | Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount | | | Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount |
(MILLIONS) | (MILLIONS) | | Carrying Amount of Hedged Assets/Liabilities(a) | | Active Hedging Relationships | | Discontinued Hedging Relationships | | Carrying Amount of Hedged Assets/Liabilities(a) | | Active Hedging Relationships | | Discontinued Hedging Relationships | (MILLIONS) | | Carrying Amount of Hedged Assets/Liabilities(a) | | Active Hedging Relationships | | Discontinued Hedging Relationships | | Carrying Amount of Hedged Assets/Liabilities(a) | | Active Hedging Relationships | | Discontinued Hedging Relationships |
| Short-term borrowings, including current portion of long-term debt | | Short-term borrowings, including current portion of long-term debt | | $ | — | | | $ | — | | | $ | 22 | | | $ | — | | | $ | — | | | $ | — | |
| Long-term debt | Long-term debt | | $ | 1,241 | | | $ | 18 | | | $ | 1,178 | | | $ | 2,016 | | | $ | 117 | | | $ | 1,149 | | Long-term debt | | $ | 2,234 | | | $ | (206) | | | $ | 1,081 | | | $ | 2,233 | | | $ | 16 | | | $ | 1,154 | |
(a)Carrying amounts exclude the cumulative amount of fair value hedging adjustments.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
F. Credit Risk
A significant portion of our trade accounts receivable balances are due from wholesalers and governments. For additional information on our trade accounts receivables with significant customers, see Note 13B13C below and Note 17B17C in our 20202021 Form 10-K.
As of OctoberJuly 3, 2021,2022, the largest investment exposures in our portfolio represent primarily sovereign debt instruments issued by France, Germany, Canada, the U.S., Canada, Germany, Japan, U.K., France, Australia, Sweden, Denmark, Switzerland and Finland.
the U.K.
With respect to our derivative financial instrument agreements with financial institutions, we do not expect to incur a significant loss from failure of any counterparty. Derivative financial instruments are executed under International Swaps and Derivatives Association (ISDA) master agreements with credit-support annexes that contain zero threshold provisions requiring collateral to be exchanged daily depending on levels of exposure. As a result, there are no significant concentrations of credit risk with any individual financial institution. As of OctoberJuly 3, 2021,2022, the aggregate fair value of these derivative financial instruments that are in a net payable position was $357$362 million, for which we have posted collateral of $357$414 million with a corresponding amount reported in Short-term investments. As of OctoberJuly 3, 2021,2022, the aggregate fair value of our derivative financial instruments that are in a net receivable position was $246$739 million, for which we have received collateral of $236$755 million with a corresponding amount reported in Short-term borrowings, including current portion of long-term debt.
Note 8. Other Financial Information
A. Inventories
| The following summarizes the components of Inventories: | The following summarizes the components of Inventories: | The following summarizes the components of Inventories: |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | December 31, 2020 | (MILLIONS) | | July 3, 2022 | | December 31, 2021 |
Finished goods | Finished goods | | $ | 3,280 | | | $ | 2,878 | | Finished goods | | $ | 3,219 | | | $ | 3,641 | |
Work-in-process | Work-in-process | | 4,469 | | | 4,430 | | Work-in-process | | 5,194 | | | 4,424 | |
Raw materials and supplies | Raw materials and supplies | | 891 | | | 738 | | Raw materials and supplies | | 2,041 | | | 994 | |
Inventories(a) | Inventories(a) | | $ | 8,640 | | | $ | 8,046 | | Inventories(a) | | $ | 10,454 | | | $ | 9,059 | |
Noncurrent inventories not included above(b) | Noncurrent inventories not included above(b) | | $ | 935 | | | $ | 890 | | Noncurrent inventories not included above(b) | | $ | 943 | | | $ | 939 | |
(a)The changeincrease from December 31, 20202021 primarily reflects higher inventory levels for Paxlovid, and increases for certain products including inventory build for new product launches (primarily Comirnaty),due to network strategy and supply recovery, and network strategy, partially offset by decreases due to market demand.
(b)Included in Other noncurrent assets. There are no recoverability issues for these amounts.
B. Other Current Liabilities
Other current liabilities includes, among other things, amounts payable to BioNTech for the gross profit split for Comirnaty, which totaled $7.8$7.9 billion as of OctoberJuly 3, 20212022 and $25 million$9.7 billion as of December 31, 2020.2021.
Note 9. Identifiable Intangible Assets
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the components of Identifiable intangible assets: |
| | October 3, 2021 | | December 31, 2020 |
(MILLIONS) | | 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) | | $ | 74,144 | | | $ | (53,472) | | | $ | 20,673 | | | $ | 73,545 | | | $ | (50,902) | | | $ | 22,643 | |
Brands | | 922 | | | (799) | | | 123 | | | 922 | | | (774) | | | 148 | |
Licensing agreements and other | | 2,284 | | | (1,273) | | | 1,011 | | | 2,292 | | | (1,186) | | | 1,106 | |
| | | | | | | | | | | | |
| | 77,350 | | | (55,544) | | | 21,807 | | | 76,759 | | | (52,862) | | | 23,896 | |
Indefinite-lived intangible assets | | | | | | | | | | | | |
Brands | | 827 | | | | | 827 | | | 827 | | | | | 827 | |
IPR&D | | 3,100 | | | | | 3,100 | | | 3,175 | | | | | 3,175 | |
Licensing agreements and other | | 573 | | | | | 573 | | | 573 | | | | | 573 | |
| | 4,500 | | | | | 4,500 | | | 4,575 | | | | | 4,575 | |
Identifiable intangible assets(b) | | $ | 81,850 | | | $ | (55,544) | | | $ | 26,306 | | | $ | 81,334 | | | $ | (52,862) | | | $ | 28,471 | |
A. Identifiable Intangible Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the components of Identifiable intangible assets: |
| | July 3, 2022 | | December 31, 2021 |
(MILLIONS) | | 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 | | $ | 73,097 | | | $ | (54,903) | | | $ | 18,193 | | | $ | 73,346 | | | $ | (53,732) | | | $ | 19,614 | |
Brands | | 922 | | | (824) | | | 98 | | | 922 | | | (807) | | | 115 | |
Licensing agreements and other | | 2,296 | | | (1,352) | | | 945 | | | 2,284 | | | (1,299) | | | 985 | |
| | | | | | | | | | | | |
| | 76,315 | | | (57,079) | | | 19,236 | | | 76,552 | | | (55,838) | | | 20,714 | |
Indefinite-lived intangible assets | | | | | | | | | | | | |
Brands | | 827 | | | | | 827 | | | 827 | | | | | 827 | |
IPR&D(a) | | 8,029 | | | | | 8,029 | | | 3,092 | | | | | 3,092 | |
Licensing agreements and other(a) | | 973 | | | | | 973 | | | 513 | | | | | 513 | |
| | 9,829 | | | | | 9,829 | | | 4,432 | | | | | 4,432 | |
Identifiable intangible assets(a), (b) | | $ | 86,144 | | | $ | (57,079) | | | $ | 29,065 | | | $ | 80,984 | | | $ | (55,838) | | | $ | 25,146 | |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(a)The increase in the gross carrying amount primarily reflects $500 millionamounts mainly reflect the impact of capitalized Comirnaty sales milestones to BioNTech.the acquisition of Arena. See Note 2A.
(b)The decreaseincrease is primarily due to amortization,the acquisition of Arena, partially offset by the capitalization of the Comirnaty milestones described above.amortization expense.
AmortizationB. Goodwill
Total amortization | | | | | | | | | | | | | | | | |
The following summarizes the changes in the carrying amount of Goodwill: |
(MILLIONS) | | | | | | | | | | Total(a) |
Balance, January 1, 2022 | | | | | | | | | | $ | 49,208 | |
Additions(b) | | | | | | | | | | 1,033 | |
Other(c) | | | | | | | | | | (350) | |
Balance, July 3, 2022 | | | | | | | | | | $ | 49,891 | |
(a)All goodwill is assigned within the Biopharma reportable segment.
(b)Additions relate to our acquisition of finite-lived intangible assets was $993 million forArena. See Note 2A.
(c)Other represents the third quarterimpact of 2021 and $873 million for the third quarter of 2020, and $2.8 billion for the first nine months of 2021 and $2.6 billion for the first nine months of 2020.foreign exchange.
Note 10. Pension and Postretirement Benefit Plans
As discussed in Note 1C, we adopted a change in accounting principle to a more preferable policy under U.S. GAAP to immediately recognize actuarial gains and losses arising from the remeasurement of pension and postretirement plans. This change has been applied to all pension and postretirement plans on a retrospective basis for all prior periods presented.
| The following summarizes the components of net periodic benefit cost/(credit), including in 2020 costs/(credits) reported as part of discontinued operations: | |
The following summarizes the components of net periodic benefit cost/(credit): | | The following summarizes the components of net periodic benefit cost/(credit): | |
| | | | Pension Plans | | | |
| | | | U.S. | | International | | Postretirement Plans | |
| | | Three Months Ended | |
(MILLIONS) | | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 | |
Service cost | | Service cost | | $ | — | | | $ | — | | | $ | 30 | | | $ | 33 | | | $ | 7 | | | $ | 9 | | |
Interest cost | | Interest cost | | 118 | | | 114 | | | 41 | | | 37 | | | 7 | | | 7 | | |
Expected return on plan assets | | Expected return on plan assets | | (245) | | | (261) | | | (77) | | | (82) | | | (12) | | | (10) | | |
Amortization of prior service cost/(credit) | | Amortization of prior service cost/(credit) | | — | | | — | | | — | | | — | | | (31) | | | (39) | | |
Actuarial (gains)/losses(a) | | Actuarial (gains)/losses(a) | | 490 | | | 2 | | | — | | | — | | | — | | | — | | |
Curtailments | | Curtailments | | — | | | — | | | — | | | (1) | | | (1) | | | — | | |
Special termination benefits | | Special termination benefits | | 1 | | | 4 | | | — | | | — | | | — | | | — | | |
Net periodic benefit cost/(credit) reported in income | | Net periodic benefit cost/(credit) reported in income | | $ | 365 | | | $ | (142) | | | $ | (6) | | | $ | (14) | | | $ | (30) | | | $ | (32) | | |
| | | | | Pension Plans | | | | | Pension Plans | | | |
| | | U.S. | | International | | Postretirement Plans | | | U.S. | | International | | Postretirement Plans | |
| | Three Months Ended | | Six Months Ended | |
(MILLIONS) | (MILLIONS) | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 | |
Service cost | Service cost | | $ | — | | | $ | — | | | $ | 32 | | | $ | 36 | | | $ | 9 | | | $ | 10 | | Service cost | | $ | — | | | $ | — | | | $ | 60 | | | $ | 66 | | | $ | 15 | | | $ | 18 | | |
Interest cost | Interest cost | | 114 | | | 139 | | | 37 | | | 40 | | | 7 | | | 13 | | Interest cost | | 236 | | | 227 | | | 82 | | | 73 | | | 14 | | | 14 | | |
Expected return on plan assets | Expected return on plan assets | | (261) | | | (251) | | | (83) | | | (79) | | | (10) | | | (9) | | Expected return on plan assets | | (490) | | | (521) | | | (156) | | | (164) | | | (23) | | | (20) | | |
Amortization of prior service credits | Amortization of prior service credits | | — | | | (1) | | | — | | | (1) | | | (39) | | | (43) | | Amortization of prior service credits | | 1 | | | (1) | | | — | | | (1) | | | (68) | | | (77) | | |
| Actuarial (gains)/losses(a) | | Actuarial (gains)/losses(a) | | 424 | | | (45) | | | — | | | — | | | — | | | — | | |
Curtailments | Curtailments | | — | | | — | | | — | | | — | | | (64) | | | — | | Curtailments | | — | | | — | | | — | | | (1) | | | (14) | | | — | | |
Actuarial (gains)/losses(a) | | (836) | | | 1,212 | | | — | | | — | | | — | | | — | | |
Special termination benefits | Special termination benefits | | — | | | — | | | — | | | — | | | — | | | — | | Special termination benefits | | 7 | | | 12 | | | — | | | — | | | 1 | | | 1 | | |
Net periodic benefit cost/(credit) reported in income | Net periodic benefit cost/(credit) reported in income | | $ | (983) | | | $ | 1,099 | | | $ | (14) | | | $ | (3) | | | $ | (96) | | | $ | (30) | | Net periodic benefit cost/(credit) reported in income | | $ | 178 | | | $ | (329) | | | $ | (14) | | | $ | (26) | | | $ | (76) | | | $ | (64) | | |
| | | Pension Plans | | | |
| | U.S. | | International | | Postretirement Plans | |
| Nine Months Ended | |
(MILLIONS) | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 | |
Service cost | | $ | — | | | $ | — | | | $ | 98 | | | $ | 108 | | | $ | 27 | | | $ | 29 | | |
Interest cost | | 341 | | | 419 | | | 110 | | | 122 | | | 22 | | | 38 | | |
Expected return on plan assets | | (782) | | | (754) | | | (246) | | | (238) | | | (29) | | | (27) | | |
Amortization of prior service credits | | (1) | | | (3) | | | (1) | | | (2) | | | (116) | | | (129) | | |
| Curtailments | | — | | | — | | | (1) | | | — | | | (64) | | | — | | |
Actuarial (gains)/losses(a) | | (881) | | | 1,369 | | | — | | | 2 | | | — | | | — | | |
Special termination benefits | | 12 | | | 1 | | | — | | | — | | | 1 | | | — | | |
Net periodic benefit cost/(credit) reported in income | | $ | (1,312) | | | $ | 1,033 | | | $ | (40) | | | $ | (7) | | | $ | (160) | | | $ | (89) | | |
(a)Mainly reflects interim actuarial remeasurement gainslosses in 2021,2022, primarily due to favorabledriven by unfavorable plan asset performance, andpartially offset by gains due to an increase in the discount rate, and interim actuarial remeasurement losses in 2020, primarily due to a reduction in the discount rate.interest rates.
The components of net periodic benefit cost/(credit) other than the service cost component are primarily included in Other (income)/deductions––net (see Note 4).
For the ninesix months ended OctoberJuly 3, 2021,2022, we contributed $127$134 million, $259$89 million, and $35$11 million to our U.S. Pension Plans, International Pension Plans, and Postretirement Plans, respectively, from our general assets, which include direct employer benefit payments.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 11. Earnings Per Common Share Attributable to Pfizer Inc. Common Shareholders
| The following presents the detailed calculation of EPS: | The following presents the detailed calculation of EPS: | The following presents the detailed calculation of EPS: |
| | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | September 27, 2020 | | October 3, 2021 | | September 27, 2020 | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
EPS Numerator––Basic | EPS Numerator––Basic | | | | | | | | | EPS Numerator––Basic | | | | | | | | |
Income from continuing operations attributable to Pfizer Inc. | | $ | 8,155 | | | $ | 909 | | | $ | 18,563 | | | $ | 5,979 | | |
Less: Preferred stock dividends––net of tax | | — | | | — | | | — | | | — | | |
| Income from continuing operations attributable to Pfizer Inc. common shareholders | Income from continuing operations attributable to Pfizer Inc. common shareholders | | 8,155 | | | 909 | | | 18,563 | | | 5,979 | | Income from continuing operations attributable to Pfizer Inc. common shareholders | | $ | 9,871 | | | $ | 5,799 | | | $ | 17,743 | | | $ | 10,675 | |
Income/(loss) from discontinued operations––net of tax | | (9) | | | 560 | | | 24 | | | 2,334 | | |
Discontinued operations––net of tax | | Discontinued operations––net of tax | | 34 | | | (236) | | | 26 | | | (235) | |
| Net income attributable to Pfizer Inc. common shareholders | Net income attributable to Pfizer Inc. common shareholders | | $ | 8,146 | | | $ | 1,469 | | | $ | 18,586 | | | $ | 8,313 | | Net income attributable to Pfizer Inc. common shareholders | | $ | 9,906 | | | $ | 5,563 | | | $ | 17,769 | | | $ | 10,440 | |
EPS Numerator––Diluted | EPS Numerator––Diluted | | | | | | | | | EPS Numerator––Diluted | | | | | | | | |
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions | Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions | | $ | 8,155 | | | $ | 909 | | | $ | 18,563 | | | $ | 5,979 | | Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions | | $ | 9,871 | | | $ | 5,799 | | | $ | 17,743 | | | $ | 10,675 | |
Income/(loss) from discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions | | (9) | | | 560 | | | 24 | | | 2,334 | | |
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions | | Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions | | 34 | | | (236) | | | 26 | | | (235) | |
Net income attributable to Pfizer Inc. common shareholders and assumed conversions | Net income attributable to Pfizer Inc. common shareholders and assumed conversions | | $ | 8,146 | | | $ | 1,469 | | | $ | 18,586 | | | $ | 8,313 | | Net income attributable to Pfizer Inc. common shareholders and assumed conversions | | $ | 9,906 | | | $ | 5,563 | | | $ | 17,769 | | | $ | 10,440 | |
EPS Denominator | EPS Denominator | | | | | | | | | EPS Denominator | | | | | | | | |
Weighted-average number of common shares outstanding––Basic | Weighted-average number of common shares outstanding––Basic | | 5,609 | | | 5,557 | | | 5,597 | | | 5,552 | | Weighted-average number of common shares outstanding––Basic | | 5,593 | | | 5,598 | | | 5,605 | | | 5,591 | |
Common-share equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements | | 116 | | | 76 | | | 91 | | | 70 | | |
Common-share equivalents: stock options and stock issuable under employee compensation plans | | Common-share equivalents: stock options and stock issuable under employee compensation plans | | 119 | | | 80 | | | 130 | | | 79 | |
Weighted-average number of common shares outstanding––Diluted | Weighted-average number of common shares outstanding––Diluted | | 5,725 | | | 5,633 | | | 5,688 | | | 5,622 | | Weighted-average number of common shares outstanding––Diluted | | 5,712 | | | 5,678 | | | 5,735 | | | 5,670 | |
Anti-dilutive common stock equivalents(a) | Anti-dilutive common stock equivalents(a) | | — | | | 7 | | | 3 | | | 5 | | Anti-dilutive common stock equivalents(a) | | 1 | | | 5 | | | — | | | 4 | |
(a)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.
Note 12. Contingencies and Certain Commitments
We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business, including tax and legal contingencies. The following outlines our legal contingencies. For a discussion of our tax contingencies, see Note 5B.
A. Legal Proceedings
Our legal contingencies include, but are not limited to, the following:
•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 product, a significant loss of revenues from thata product or impairment of the value of associated assets. We are the plaintiff in the majority of these actions.
•Product liability and other product-related litigation related to current or former products, which can include personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, among others, and 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 asserted or unasserted matters, which can include acquisition-, licensing-, intellectual property-, collaboration- or co-promotion-related and product-pricing claims and environmental claims and proceedings, and can involve complexities that will vary from matter to matter.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
•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.
Certain of these contingencies could result in increased expenses and/or losses, including damages, royalty payments, fines and/or civil penalties, which could be substantial, and/or criminal charges.
We believe that our claims and defenses in matters in which we are a defendant are substantial, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
outcome of matters, which could have a material adverse effect on our results of operations and/or our cash flows in the period in which the amounts are accrued or paid.
We have accrued for losses that are both probable and reasonably estimable. Substantially all of our contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments, which result from a complex series of judgments about future events and uncertainties, are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.
Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions. For proceedings under environmental laws to which a governmental authority is a party, we have adopted a disclosure threshold of $1 million in potential or actual governmental monetary sanctions.
The principal pending matters to which we are a party are discussed below. In determining whether a pending matter is a principal matter, we consider both quantitative and qualitative factors to assess materiality, such as, among others, the amount of damages and the nature of other relief sought, if specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be, or is, a class action and, if not certified, our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; whether related actions have been transferred to multidistrict litigation; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters in which we are the plaintiff, we consider, among other things, the financial significance of the product protected by the patent(s) at issue. Some of the matters discussed below include those which management believes that the likelihood of possible loss in excess of amounts accrued is remote.
A1. Legal Proceedings––Patent Litigation
We are involved in suits relating to our patents, including but not limited to, those discussed below. Most involve claims by generic drug manufacturers that patents covering our products (or those of our collaboration/licensing partners to which we have licenses or co-promotion rights and to which we may or may not be a party), processes or dosage forms are invalid and/or do not cover the product of the generic drug manufacturer. Also, counterclaims, as well as various independent actions, have been filed alleging that our assertions of, or attempts to enforce, patent rights with respect to certain products constitute unfair competition and/or violations of antitrust laws. In addition to the challenges to the U.S. patents that are discussed below, patent rights to certain of our products or those of our collaboration/licensing partners are being challenged in various other jurisdictions. For example, someSome of our collaboration or licensing partners face challenges to the validity of their patent rights in non-U.S. jurisdictions. For example, in April 2022, the U.K. High Court issued a judgment finding invalid a BMS patent related to Eliquis due to expire in 2026. BMS is seeking permission to appeal the High Court’s decision. Additional challenges remain pending in other jurisdictions. Also, for example, in July 2022, CureVac AG (CureVac) brought a patent infringement action against BioNTech and certain of its subsidiaries in the German Regional Court alleging that Comirnaty infringes 3 German utility model patents and 1 expired European patent. Additional challenges involving Comirnaty patents may be filed against us and/or BioNTech in other jurisdictions in the future. Adverse decisions in these matters could have a material adverse effect on our results of operations.We are also party to patent damages suits in various jurisdictions pursuant to which generic drug manufacturers, payers, governments or other parties are seeking damages from us for allegedly causing delay of generic entry.
We also are often involved in other proceedings, such as inter partes review, post-grant review, re-examination or opposition proceedings, before the U.S. Patent and Trademark Office, the European Patent Office, or other foreign counterparts relating to our intellectual property or the intellectual property rights of others. Also, if one of our patents is found to be invalid by such proceedings, generic or competitive products could be introduced into the market resulting in the erosion of sales of our existing products. For example, several of the patents in our pneumococcal vaccine portfolio werehave been challenged in inter partes review and post-grant review proceedings in the U.S. Patent and Trademark Office. In 2017, the Patent Trial and Appeal Board (PTAB) initiated proceedings with respect to 2 of our pneumococcal vaccine patents. However, the PTAB declined to initiate proceedings as to two other pneumococcal vaccine patents; those 2 patents, and 1 otheraddition, another patent werewas challenged in federal court in Delaware. InDelaware; and that case was settled in September 2021 Pfizer and a challenger entered into a settlement and license agreement, resolving all worldwide legal proceedings involving that challenger, relatedon terms not material to our pneumococcal vaccine patents.the company. Other challenges to pneumococcal vaccine patents remain pending at the PTABPatent Trial and Appeal Board and outside the U.S. The invalidation of any of the patents in our pneumococcal portfolio could potentially allow additional competitor vaccines, if approved, to enter the marketplace earlier than anticipated. In the event that any of the patents are found valid and infringed, a competitor’s vaccine, if approved, might be prohibited from entering the market or a competitor might be required to pay us a royalty.
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
could potentially allow additional competitor vaccines into the marketplace. In the event that any of the patents are found valid and infringed, a competitor’s vaccine might be prohibited from entering the market or a competitor might be required to pay us a royalty.
We are also subject to patent litigation pursuant to which one or more third parties seek damages and/or injunctive relief to compensate for alleged infringement of its patents by our commercial or other activities. For example, our Hospira subsidiaries are involved in patent and patent-related disputes over their attempts to bring generic pharmaceutical and biosimilar products to market. If one of our marketed products is found to infringe valid patent rights of a third party, such third party may be awarded significant damages or royalty payments, or we may be prevented from further sales of that product. Such damages may be enhanced as much as three-fold if we or one of our subsidiaries is found to have willfully infringed valid patent rights of a third party.
Actions In Which We Are The Plaintiff
EpiPen
In 2010, King, which we acquired in 2011 and is a wholly-owned subsidiary, brought a patent-infringement action against Sandoz in the U.S. District Court for the District of New Jersey in connection with Sandoz’s abbreviated new drug application (ANDA) filed with the FDA seeking approval to market an epinephrine injectable product. Sandoz is challenging patents, which expire in 2025, covering the next-generation autoinjector for use with epinephrine that is sold under the EpiPen brand name. We expect that the outcome of this matter will not be material to us.
Xeljanz (tofacitinib)
Beginning in 2017, we brought patent-infringement actions against several generic manufacturers that filed separate ANDAs with the FDA seeking approval to market their generic versions of tofacitinib tablets in one or both of 5 mg and 10 mg dosage strengths, and in both immediate and extended release forms. To date, we have settled actions with several manufacturers on terms not material to us. The remaining actions continue in the U.S. District Court for the District of Delaware as described below.
In 2018, we brought a separate patent infringement action against Teva Pharmaceuticals USA, Inc. (Teva) asserting the infringement and validity of our patent covering extended release formulations of tofacitinib that was challenged by Teva in its ANDA seeking approval to market a generic version of tofacitinib 11 mg extended release tablets. In September 2021, we settled the case against Teva on terms not material to us.
In January 2021, we brought a separate patent-infringement action against Aurobindo Pharma Limited (Aurobindo) asserting the infringement and validity of the patent covering the active ingredient expiring in December 2025 and the patent covering a polymorphic form of tofacitinib expiring in 2023, which Aurobindo challenged in its ANDA seeking approval to market a generic version of tofacitinib 5 mg and 10 mg tablets.
In October 2021, we brought a separate patent-infringement action against Sinotherapeutics Inc. (Sinotherapeutics) asserting the infringement and validity of our patent covering extended release formulations of tofacitinib that was challenged by Sinotherapeutics in its ANDA seeking approval to market a generic version of tofacitinib 11 mg extended release tablets.
In February 2022, we brought a separate patent-infringement action against Slayback Pharma LLC (Slayback) asserting the infringement and validity of our compound patent covering the active ingredient that was challenged by Slayback in its ANDA seeking approval to market a generic version of tofacitinib oral solution 1 mg/mL. In May 2022, we settled our action against Slayback on terms not material to us.
In June 2022, we brought a separate patent infringement action against MSN Laboratories Private Ltd. (MSN) asserting the infringement and validity of our compound patent covering the active agreement that was challenged by MSN in its ANDAs seeking approval to market generic versions of tofacitinib immediate release tablets (5 mg, 10 mg) and oral solution 1 mg/mL.
Inlyta (axitinib)
In 2019, Glenmark Pharmaceuticals LimitedLtd. (Glenmark) notified us that it had filed an ANDA with the FDA seeking approval to market a generic version of Inlyta. Glenmark asserts the invalidity and non-infringement of the crystalline form patent for Inlyta that expires in 2030. In 2019, we filed suit against Glenmark in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the crystalline form patent for Inlyta.
Ibrance (palbociclib)
In 2019, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Ibrance capsules. The companies asserted the invalidity and non-infringement of 2 composition of matter patents, one of which expires in 2023 and one of which expires in 2027, as a result of a U.S. Patent Term Extension certificate issued in January 2021, and a method of use patent covering palbociclib, which expires in 2023. In 2019, we brought patent infringement actions against each of the generic filers in various federal courts, asserting the validity and infringement of the patents challenged by the generic companies. In August 2021, the litigation concluded without settlements or a court decision.
Beginning in September 2020, we received correspondence from several generic companies notifying us that they would seek approval to market generic versions of Ibrance capsules. The generic companies assert the invalidity and non-infringement of our crystalline form patent which expires in 2034. Beginning in October 2020, we brought patent infringement actions against each of these generic companies in various federal courts, asserting the validity and infringement of the crystalline form patent. We have settled with certain of these generic companies on terms not material to us, and we dismissed the company.patent infringement actions against the remaining generic companies.
Beginning in January 2021, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Ibrance tablets. The generic companies are challenging some or all of the following patents: (i) the
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composition of matter patent expiring in 2027; (ii) the composition of matter patent expiring in 2023; (iii) the method of use patent expiring in 2023; (iv) the crystalline form patent expiring in 2034; and (v) a tablet formulation patent expiring in 2036. We brought patent infringement actions against each of the generic filers in various federal courts, asserting the validity and infringement of the patents challenged by the generic companies. We have settled with one of these generic companies on terms not material to us, and we dismissed the patent infringement actions relating to the crystalline form of patent, the composition of matter patent expiring in 2023, and the method of use patent against the generic companies that had challenged these patents.
Eucrisa
Beginning in September 2021, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Eucrisa. The companies assert the invalidity and non-infringement of a composition of
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matter patent expiring in 2026, two method of use patents expiring in 2027, and one other method of use patent expiring in 2030. In September 2021, we brought patent infringement actions against the generic filers in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the patents challenged by the generic companies.
MatterActions in Which We are the Defendant
Comirnaty
In March 2022, Alnylam Pharmaceuticals, Inc. (Alnylam) filed a complaint in the U.S. District Court for the District of Delaware against Pfizer and Pharmacia & Upjohn Co. LLC, our wholly owned subsidiary, alleging that Comirnaty infringes U.S. Patent No. 11,246,933, which was issued in February 2022, and seeking unspecified monetary damages. In July 2022, Alnylam filed a second complaint in the U.S. District Court for the District of Delaware against Pfizer, Pharmacia & Upjohn Co. LLC, BioNTech and BioNTech Manufacturing GmbH, alleging that Comirnaty infringes U.S. Patent No. 11,382,979, which was issued in July 2022, and seeking unspecified monetary damages.
Paxlovid
In June 2022, Enanta Pharmaceuticals, Inc. filed a complaint in the U.S. District Court for the District of Massachusetts against Pfizer alleging that the active ingredient in Paxlovid, nirmatrelvir, infringes U.S. Patent No. 11,358,953, which was issued in June 2022, and seeking unspecified monetary damages.
Matters Involving OurPfizer and its Collaboration/Licensing Partners
Eliquis
In 2017, NaN generic companies sent BMS Paragraph-IV certification letters informing BMS that they had filed ANDAs seeking approval of generic versions of Eliquis, challenging the validity and infringement of one or more of the 3 patents listed in the Orange Book for Eliquis. NaN of the patents expired in December 2019 and the remaining patents currently are set to expire in 2026 and 2031. Eliquis has been jointly developed and is being commercialized by BMS and Pfizer. BMS and Pfizer filed patent-infringement actions against all generic filers in the U.S. District Court for the District of Delaware and the U.S. District Court for the District of West Virginia, asserting that each of the generic companies’ proposed products would infringe each of the patent(s) that each generic filer challenged. Some generic filers challenged only the 2031 patent, some challenged both the 2031 and 2026 patent, and one generic company challenged all 3 patents. In August 2020, the U.S. District Court for the District of Delaware ruled that both the 2026 patent and the 2031 patent are valid and infringed by the proposed generic products. In August and September 2020, the generic filers appealed the District Court’s decision to the U.S. Court of Appeals for the Federal Circuit. Prior to the August 2020 ruling, we and BMS settled with certain of the companies on terms not material to us, and we and BMS may settle with other generic companies in the future. In September 2021, the U.S. Court of Appeals for the Federal Circuit affirmed the District Court’s decision.
Comirnaty
In July 2022, Pfizer, BioNTech and BioNTech Manufacturing GmbH filed a declaratory judgment complaint against CureVac in the U.S. District Court for the District of Massachusetts seeking a judgment of non-infringement for the following 3 patents relating to Comirnaty: U.S. Patent Nos. 11,135,312, 11,149,278, and 11,241,493.
A2. Legal Proceedings––Product Litigation
We are defendants in numerous cases, including but not limited to those discussed below, related to our pharmaceutical and other products. Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss.
Asbestos
Between 1967 and 1982, Warner-Lambert owned American Optical Corporation (American Optical), which manufactured and sold respiratory protective devices and asbestos safety clothing. In connection with the sale of American Optical in 1982, Warner-Lambert agreed to indemnify the purchaser for certain liabilities, including certain asbestos-related and other claims. Warner-Lambert was acquired by Pfizer in 2000 and is a wholly owned subsidiary of Pfizer. Warner-Lambert is actively engaged in the defense of, and will continue to explore various means of resolving, these claims.
Numerous lawsuits against American Optical, Pfizer and certain of its previously owned subsidiaries are pending in various federal and state courts seeking damages for alleged personal injury from exposure to products allegedly containing asbestos and other allegedly hazardous materials sold by Pfizer and certain of its previously owned subsidiaries.
There also are a small number of lawsuits pending in various federal and state courts seeking damages for alleged exposure to asbestos in facilities owned or formerly owned by Pfizer or its subsidiaries.
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Effexor
Beginning in 2011, actions, including purported class actions, were filed in various federal courts against Wyeth and, in certain of the actions, affiliates of Wyeth and certain other defendants relating to Effexor XR, which is the extended-release formulation of Effexor. The plaintiffs in each of the class actions seek to represent a class consisting of all persons in the U.S. and its territories who directly purchased, indirectly purchased or reimbursed patients for the purchase of Effexor XR or generic Effexor XR from any of the defendants from June 14, 2008 until the time the defendants’ allegedly unlawful conduct ceased. The plaintiffs in all of the actions allege delay in the launch of generic Effexor XR in the U.S. and its territories, in violation of federal antitrust laws and, in certain of the actions, the antitrust, consumer protection and various other laws of certain states, as the result of Wyeth fraudulently obtaining and improperly listing certain patents for Effexor XR in the Orange Book, enforcing certain patents for Effexor XR and entering into a litigation settlement agreement with a generic drug manufacturer with respect to Effexor XR. Each of the plaintiffs seeks treble damages (for itself in the individual actions or on behalf of the putative class
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in the purported class actions) for alleged price overcharges for Effexor XR or generic Effexor XR in the U.S. and its territories since June 14, 2008. All of these actions have been consolidated in the U.S. District Court for the District of New Jersey.
In 2014, the District Court dismissed the direct purchaser plaintiffs’ claims based on the litigation settlement agreement, but declined to dismiss the other direct purchaser plaintiff claims. In 2015, the District Court entered partial final judgments as to all settlement agreement claims, including those asserted by direct purchasers and end-payer plaintiffs, which plaintiffs appealed to the U.S. Court of Appeals for the Third Circuit. In 2017, the U.S. Court of Appeals for the Third Circuit reversed the District Court’s decisions and remanded the claims to the District Court.
Lipitor
Beginning in 2011, purported class actions relating to Lipitor were filed in various federal courts against, among others, Pfizer, certain Pfizer affiliates, and, in most of the actions, Ranbaxy Laboratories Ltd. (Ranbaxy) and certain Ranbaxy affiliates. The plaintiffs in these various actions seek to represent nationwide, multi-state or statewide classes consisting of persons or entities who directly purchased, indirectly purchased or reimbursed patients for the purchase of Lipitor (or, in certain of the actions, generic Lipitor) from any of the defendants from March 2010 until the cessation of the defendants’ allegedly unlawful conduct (the Class Period). The plaintiffs allege delay in the launch of generic Lipitor, in violation of federal antitrust laws and/or state antitrust, consumer protection and various other laws, resulting from (i) the 2008 agreement pursuant to which Pfizer and Ranbaxy settled certain patent litigation involving Lipitor and Pfizer granted Ranbaxy a license to sell a generic version of Lipitor in various markets beginning on varying dates, and (ii) in certain of the actions, the procurement and/or enforcement of certain patents for Lipitor. Each of the actions seeks, among other things, treble damages on behalf of the putative class for alleged price overcharges for Lipitor (or, in certain of the actions, generic Lipitor) during the Class Period. In addition, individual actions have been filed against Pfizer, Ranbaxy and certain of their affiliates, among others, that assert claims and seek relief for the plaintiffs that are substantially similar to the claims asserted and the relief sought in the purported class actions described above. These various actions have been consolidated for pre-trial proceedings in a Multi-District Litigation in the U.S. District Court for the District of New Jersey.
In September 2013 and 2014, the District Court dismissed with prejudice the claims of the direct purchasers. In October and November 2014, the District Court dismissed with prejudice the claims of all other Multi-District Litigation plaintiffs. All plaintiffs have appealed the District Court’s orders dismissing their claims with prejudice to the U.S. Court of Appeals for the Third Circuit. In addition, the direct purchaser class plaintiffs appealed the order denying their motion to amend the judgment and for leave to amend their complaint to the Court of Appeals. In 2017, the Court of Appeals reversed the District Court’s decisions and remanded the claims to the District Court.
Also, in 2013, the State of West Virginia filed an action in West Virginia state court against Pfizer and Ranbaxy, among others, that asserts claims and seeks relief on behalf of the State of West Virginia and residents of that state that are substantially similar to the claims asserted and the relief sought in the purported class actions described above.
EpiPen (Direct Purchaser)
In February 2020, a lawsuit was filed in the U.S. District Court for the District of Kansas against Pfizer, its current and former affiliates King and Meridian, and various Mylan entities, on behalf of a purported U.S. nationwide class of direct purchaser plaintiffs who purchased EpiPen devices directly from the defendants. Plaintiffs in this action generally allege that Pfizer and Mylan conspired to delay market entry of generic EpiPen through the settlement of patent litigation regarding EpiPen, and thereby delayed market entry of generic EpiPen in violation of federal antitrust law. Plaintiffs seek treble damages for alleged overcharges for EpiPen since 2011. In July 2021, the District Court granted defendants’ motion to dismiss the direct purchaser complaint, without prejudice. In September 2021, plaintiffs filed an amended complaint. In August 2022, the District Court granted Pfizer’s motion to dismiss the complaint.
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Nexium 24HR and Protonix
A number of individual and multi-plaintiff lawsuits have been filed against Pfizer, certain of its subsidiaries and/or other pharmaceutical manufacturers in various federal and state courts alleging that the plaintiffs developed kidney-related injuries purportedly as a result of the ingestion of certain proton pump inhibitors. The cases against Pfizer involve Protonix and/or Nexium 24HR and seek compensatory and punitive damages and, in some cases, treble damages, restitution or disgorgement. In 2017, the federal actions were ordered transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the District of New Jersey. As part of our Consumer Healthcare JV transaction with GSK, the JV has agreed to assume, and to indemnify Pfizer for, liabilities arising out of such litigation to the extent related to Nexium 24HR.
Docetaxel
•Personal Injury Actions
A number of lawsuits have been filed against Hospira and Pfizer in various federal and state courts alleging that plaintiffs who were treated with Docetaxel developed permanent hair loss. The significant majority of the cases also name other defendants, including the manufacturer of the branded product, Taxotere. Plaintiffs seek compensatory and punitive damages.
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In 2016, the federal cases were transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the Eastern District of Louisiana.
•Mississippi Attorney General Government Action
In 2018, the Attorney General of Mississippi filed a complaint in Mississippi state court against the manufacturer of the branded product and 8 other manufacturers including Pfizer and Hospira, alleging, with respect to Pfizer and Hospira, a failure to warn about a risk of permanent hair loss in violation of the Mississippi Consumer Protection Act. The action seeks civil penalties and injunctive relief.
Array Securities Litigation
In 2017, 2 purported class actions were filed in the U.S. District Court for the District of Colorado alleging that Array, which we acquired in 2019 and is our wholly owned subsidiary, and certain of its former officers violated federal securities laws in connection with certain disclosures made, or omitted, by Array regarding the NRAS-mutant melanoma program. In 2018, the actions were consolidated into a single proceeding. In March 2021, the parties reached an agreement in principle to resolve the litigation on terms not material to Pfizer.
Zantac
A number of lawsuits have been filed against Pfizer in various federal and state courts alleging that plaintiffs developed various types of cancer, or face an increased risk of developing cancer, purportedly as a result of the ingestion of Zantac. The significant majority of these cases also name other defendants that have historically manufactured and/or sold Zantac. Pfizer has not sold Zantac since 2006, and only sold an OTC version of the product. Plaintiffs seek compensatory and punitive damages.
In February 2020, the federal actions were transferred for coordinated pre-trial proceedings to a Multi-District Litigation in the U.S. District Court for the Southern District of Florida. Plaintiffs in the Multi-District Litigation have filed against Pfizer and many other defendants a master personal injury complaint, asserting a consolidated consumer class action complaint alleging, among other things, claims under consumer protection statutes of all 50 states, and a medical monitoring complaint seeking to certify medical monitoring classes under the laws of 13 states. Plaintiffs previously had filed a consolidated third-party payor class action complaint alleging violation of the RICO statute and seeking reimbursement for payments made for the prescription version of Zantac, but the Multi-District Litigation court dismissed that complaint; Plaintiffs have appealed the dismissal to the U.S. Court of Appeals for the Eleventh Circuit. In addition, (i) Pfizer has received service of 2 Canadian class action complaints naming Pfizer and other defendants, and seeking compensatory and punitive damages for personal injury and economic loss, allegedly arising from the defendants’ sale of Zantac in Canada; and (ii) the State of New Mexico and the Mayor and City Council of Baltimore separately filed civil actions against Pfizer and many other defendants in state court, alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in those jurisdictions. In April 2021, a Judicial Council Coordinated Proceeding was created in the Superior Court of California in Alameda County to coordinate personal injury actions against Pfizer and other defendants filed in California state court.
Chantix
Beginning in August 2021, a number of putative class actions have been filed against Pfizer in various U.S. federal courts following Pfizer’s voluntary recall of Chantix due to the presence of a nitrosamine, N-nitroso-varenicline. Plaintiffs assert that they suffered economic harm purportedly as a result of purchasing Chantix or generic varenicline medicines sold by Pfizer. Plaintiffs seek to represent nationwide and state-specific classes and seek various remedies, including damages and medical monitoring. Similar putative class actions have been filed in Canada and Israel, where the product brand is Champix.
A3. Legal Proceedings––Commercial and Other Matters
Monsanto-Related Matters
In 1997, Monsanto Company (Former Monsanto) contributed certain chemical manufacturing operations and facilities to a newly formed corporation, Solutia Inc. (Solutia), and spun off the shares of Solutia. In 2000, Former Monsanto merged with Pharmacia & Upjohn Company to form Pharmacia. Pharmacia then transferred its agricultural operations to a newly created subsidiary, named Monsanto Company (New Monsanto), which it spun off in a two-stage process that was completed in 2002. Pharmacia was acquired by Pfizer in 2003 and is a wholly owned subsidiary of Pfizer.
In connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities related to Pharmacia’s former agricultural business. New Monsanto has defended and/or is defending Pharmacia
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in connection with various claims and litigation arising out of, or related to, the agricultural business, and has been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.
In connection with its spin-off in 1997, Solutia assumed, and agreed to indemnify Pharmacia for, liabilities related to Former Monsanto’s chemical businesses. As the result of its reorganization under Chapter 11 of the U.S. Bankruptcy Code, Solutia’s
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indemnification obligations relating to Former Monsanto’s chemical businesses are primarily limited to sites that Solutia has owned or operated. In addition, in connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities primarily related to Former Monsanto’s chemical businesses, including, but not limited to, any such liabilities that Solutia assumed. Solutia’s and New Monsanto’s assumption of, and agreement to indemnify Pharmacia for, these liabilities apply to pending actions and any future actions related to Former Monsanto’s chemical businesses in which Pharmacia is named as a defendant, including, without limitation, actions asserting environmental claims, including alleged exposure to polychlorinated biphenyls. Solutia and/or New Monsanto are defending Pharmacia in connection with various claims and litigation arising out of, or related to, Former Monsanto’s chemical businesses, and have been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.
Environmental Matters
In 2009, we submitted a revised site-wide feasibility study with regard to the Wyeth Holdings Corporation (formerly, American Cyanamid Company) discontinued industrial chemical facility in Bound Brook, New Jersey. In 2011, Wyeth Holdings Corporation executed an Administrative Settlement Agreement and Order on Consent for Removal Action (the 2011 Administrative Settlement Agreement) with the U.S. Environmental Protection Agency (EPA) with regard to the Bound Brook facility. In accordance with the 2011 Administrative Settlement Agreement, we completed construction of an interim remedy. In 2012, the EPA issued a final remediation plan for the Bound Brook facility’s main plant area. In 2013, Wyeth Holdings Corporation (now Wyeth Holdings LLC) entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the main plant area and to perform a focused feasibility study for 2 adjacent lagoons. In 2015, the U.S., on behalf of the EPA, filed a complaint and consent decree with the federal District Court for the District of New Jersey that allows Wyeth Holdings LLC to complete the design and to implement the remedy for the main plant area. The consent decree (which supersedes the 2011 Administrative Settlement Agreement) was entered by the District Court in 2015. In 2018, the EPA issued a final remediation plan for the 2 adjacent lagoons. In 2019, Wyeth Holdings LLC entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the lagoons. In September 2021, the U.S., on behalf of the EPA, filed a complaint and consent decree with the federal District Court for the District of New Jersey, which the court approved in November 2021, that will allow Wyeth Holdings LLC to complete the design and implement the remedy for the 2 adjacent lagoons.
We have accrued for the estimated costs of the site remedies for the Bound Brook facility.
We are a party to a number of other proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, and other state, local or foreign laws in which the primary relief sought is the cost of past and/or future remediation.
Contracts with Iraqi Ministry of Health
In 2017, a number of U.S. service members, civilians, and their families brought a complaint in the U.S. District Court for the District of Columbia against a number of pharmaceutical and medical devices companies, including Pfizer and certain of its subsidiaries, alleging that the defendants violated the U.S. Anti-Terrorism Act. The complaint alleges that the defendants provided funding for terrorist organizations through their sales practices pursuant to pharmaceutical and medical device contracts with the Iraqi Ministry of Health, and seeks monetary relief. In July 2020, the District Court granted defendants’ motions to dismiss and dismissed all of plaintiffs’ claims. The plaintiffs are appealingIn January 2022, the Court of Appeals reversed the District Court’s decision. In February 2022, the defendants filed for en banc review of the Court of Appeals’ decision.
Allergan Complaint for Indemnity
In 2019, Pfizer was named as a defendant in a complaint, along with King, filed by Allergan Finance LLC (Allergan) in the Supreme Court of the State of New York, asserting claims for indemnity related to Kadian, which was owned for a short period by King in 2008, prior to Pfizer's acquisition of King in 2010. This suit was voluntarily discontinued without prejudice in January 2021.
Breach of Contract––Xalkori/Lorbrena
We are a defendant in a breach of contract action brought by New York University (NYU) in the Supreme Court of the State of New York (Supreme Court). NYU alleges that it is entitled to royalties on Pfizer’s sales ofXalkori under the terms of a Research and License Agreement between NYU and Sugen, Inc. Sugen, Inc. was acquired by Pharmacia in August 1999, and Pharmacia was acquired by Pfizer in 2003 and is a wholly owned subsidiary of Pfizer. The action was originally filed in 2013. In 2015, the Supreme Court dismissed the action and, in 2017, the New York State Appellate Division reversed the decision and remanded the proceedings to the Supreme Court. In January 2020, the Supreme Court denied both parties’ summary judgment motions.Viatris Securities Litigation
In October 2020, NYU2021, a putative class action was filed a separate breachin the Court of contract action against Pfizer alleging that it is entitled to royaltiesCommon Pleas of Allegheny County, Pennsylvania on salesbehalf of Lorbrena underformer Mylan N.V. shareholders who received Viatris common stock in exchange for Mylan shares in connection with the termsspin-off of the same NYU-Sugen, Inc. ResearchUpjohn Business and Licensing Agreement.its combination with Mylan (the Transactions). Viatris, Pfizer, and certain of each
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company’s current and former officers, directors and employees are named as defendants. The complaint alleges that the defendants violated certain provisions of the Securities Act of 1933 in connection with certain disclosures made in or omitted from the registration statement and related prospectus issued in connection with the Transactions. Plaintiff seeks damages, costs and expenses and other equitable and injunctive relief.
A4. Legal Proceedings––Government Investigations
We are subject to extensive regulation by government agencies in the U.S., other developed markets and multiple emerging markets in which we operate. Criminal charges, substantial fines and/or civil penalties, limitations on our ability to conduct business in applicable jurisdictions, corporate integrity or deferred prosecution agreements, as well as reputational harm and increased public interest in the matter could result from government investigations in the U.S. and other jurisdictions in which we do business. These matters often involve government requests for information on a voluntary basis or through subpoenas after which the government may seek additional information through follow-up requests or additional subpoenas. In addition, in a qui tam lawsuit in which the government declines to intervene, the relator may still pursue a suit for the recovery of civil damages and penalties on behalf of the government. Among the investigations by government agencies are the matters discussed below.
Greenstone Investigations
•U.S. Department of Justice Antitrust Division Investigation
Since July 2017, the U.S. Department of Justice's Antitrust Division has been investigating our former Greenstone generics business. We believe this is related to an ongoing broader antitrust investigation of the generic pharmaceutical industry. We have produced records relating to this investigation.
•State Attorneys General and Multi-District Generics Antitrust Litigation
In April 2018, Greenstone received requests for information from the Antitrust Department of the Connecticut Office of the Attorney General. In May 2019, Attorneys General of more than 40 states plus the District of Columbia and Puerto Rico filed a complaint against a number of pharmaceutical companies, including Greenstone and Pfizer. The matter has been consolidated with a Multi-District Litigation in the Eastern District of Pennsylvania. As to Greenstone and Pfizer, the complaint alleges anticompetitive conduct in violation of federal and state antitrust laws and state consumer protection laws. In June 2020, the State Attorneys General filed a new complaint against a large number of companies, including Greenstone and Pfizer, making similar allegations, but concerning a new set of drugs. This complaint was transferred to the Multi-District Litigation in July 2020. The Multi-District Litigation also includes civil complaints filed by private plaintiffs and state counties against Pfizer, Greenstone and a significant number of other defendants asserting allegations that generally overlap with those asserted by the State Attorneys General.
Subpoena relating to Manufacturing of Quillivant XR
In October 2018, we received a subpoena from the U.S. Attorney’s Office for the Southern District of New York (SDNY) seeking records relating to our relationship with another drug manufacturer and its production and manufacturing of drugs including, but not limited to, Quillivant XR. We have produced records pursuant to the subpoena.
Government Inquiries relating to Meridian Medical Technologies
In February 2019, we received a civil investigative demand from the U.S. Attorney’s Office for the SDNY. The civil investigative demand seeks records and information related to alleged quality issues involving the manufacture of auto-injectors at ourthe Meridian site. In August 2019, we received a HIPAA subpoena from the U.S. Attorney’s Office for the Eastern District of Missouri seeking similar records and information. We are producing records in response to these requests.
U.S. Department of Justice/SEC Inquiry relating to Russian Operations
In June 2019, we received an informal request from the U.S. Department of Justice’s Foreign Corrupt Practices Act (FCPA) Unit seeking documents relating to our operations in Russia. In September 2019, we received a similar request from the SEC’s FCPA Unit. We have produced records pursuant to these requests.
Docetaxel––Mississippi Attorney General Government Investigation
See Legal Proceedings––Product Litigation––Docetaxel––Mississippi Attorney General Government Investigation above for information regarding a government investigation related to Docetaxel marketing practices.
U.S. Department of Justice Inquiries relating to India Operations
In March 2020, we received an informal request from the U.S. Department of Justice's Consumer Protection Branch seeking documents relating to our manufacturing operations in India, including at our former facility located at Irrungattukottai in India. In April 2020, we received a similar request from the U.S. Attorney’s Office for the SDNY regarding a civil investigation concerning operations at our facilities in India. We are producing records pursuant to these requests.
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U.S. Department of Justice/SEC Inquiry relating to China Operations
In June 2020, we received an informal request from the U.S. Department of Justice's FCPA Unit seeking documents relating to our operations in China. In August 2020, we received a similar request from the SEC’s FCPA Unit. We are producing records pursuant to these requests.
Zantac––State of New Mexico and Mayor and City Council of Baltimore Civil Actions
See Note 12A2. Contingencies and Certain Commitments: Legal Proceedings––Product Litigation––Zantac above for information regarding civil actions separately filed by the State of New Mexico and the Mayor and City Council of Baltimore alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in those jurisdictions.
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A5. Legal Proceedings––Matters Resolved During the First Nine Months of 2021
During the first nine months of 2021, certain matters, including the matter discussed below, were resolved or became the subject of definitive settlement agreements or settlement agreements-in-principle.
EpiPen
Beginning in 2017, purported class actions were filed in various federal courts by indirect purchasers of EpiPen against Pfizer, and/or its affiliates King and Meridian, and/or various entities affiliated with Mylan, and Mylan former Chief Executive Officer, Heather Bresch. The plaintiffs in these actions represent U.S. nationwide classes comprising persons or entities who paid for any portion of the end-user purchase price of an EpiPen between 2009 until the cessation of the defendants’ allegedly unlawful conduct. Against Pfizer and/or its affiliates, plaintiffs in these actions generally allege that Pfizer’s and/or its affiliates’ settlement of patent litigation regarding EpiPen delayed market entry of generic EpiPen in violation of federal and various state antitrust laws. At least one lawsuit also alleges that Pfizer and/or Mylan violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO). Plaintiffs also filed various federal antitrust, state consumer protection and unjust enrichment claims against, and relating to conduct attributable solely to, Mylan and/or its affiliates regarding EpiPen. Plaintiffs seek treble damages for alleged overcharges for EpiPen since 2011. In 2017, all of these indirect purchase actions were consolidated for coordinated pre-trial proceedings in a Multi-District Litigation in the U.S. District Court for the District of Kansas with other EpiPen-related actions against Mylan and/or its affiliates to which Pfizer, King and Meridian are not parties.In July 2021, Pfizer and plaintiffs filed a stipulation of settlement to resolve the Multi-District Litigation for $345 million. The settlement is subject to court approval, and the payment has been made in accordance with the terms of the settlement agreement.
B. Guarantees and Indemnifications
In the ordinary course of business and in connection with the sale of assets and businesses and other transactions, we often indemnify our counterparties against certain liabilities that may arise in connection with the transaction or that are related to events and activities prior to or following a transaction. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we may be required to reimburse the loss. These indemnifications are generally subject to various restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of OctoberJuly 3, 2021,2022, the estimated fair value of these indemnification obligations wasis not significant.material to Pfizer. See Note 2C for a description of the March 2022 indemnity provided by Pfizer to GSK in connection with the issuance of notes by the Consumer Healthcare JV. In conjunction with the completion of GSK’s demerger transactions in July 2022, GSK’s guarantee and our related indemnification of GSK’s guarantee were terminated.
In addition, in connection with our entry into certain agreements and other transactions, our counterparties may agreebe obligated to indemnify us. For example, in November 2020, we and Mylan completed the transaction to spin-off our Upjohn Business and combine it with Mylan to form Viatris. As part of the transaction and as previously disclosed, each of Viatris and Pfizer has agreed to assume, and to indemnify Pfizerthe other for, liabilities arising out of certain matters. Also, our global agreement with BioNTech to co-develop a mRNA-based coronavirus vaccine program aimed at preventing COVID-19 infection, includes certain indemnity provisions pursuant to which each of BioNTech and Pfizer has agreed to indemnify the other for certain liabilities that may arise in connection with certain third-party claims relating to Comirnaty.
We have also guaranteed the long-term debt of certain companies that we acquired whichand that now are now subsidiaries of Pfizer. See Note 7D.
C. Contingent Consideration for Acquisitions
We may be required to make payments to sellers for certain prior business combinations that are contingent upon future events or outcomes. For additional information, see Note 1D1E in our 20202021 Form 10-K.
Note 13. Product,Segment, Geographic and Other Revenue Information
A. GeographicSegment Information
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The following summarizes revenues by geographic area: |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS) | | October 3, 2021 | | September 27, 2020 | | % Change | | October 3, 2021 | | September 27, 2020 | | % Change |
United States | | $ | 7,079 | | | $ | 5,425 | | | 30 | | | $ | 22,269 | | | $ | 15,827 | | | 41 | |
Developed Europe | | 6,221 | | | 1,864 | | | 234 | | | 13,836 | | | 5,437 | | | 154 | |
Developed Rest of World | | 4,498 | | | 1,065 | | | 322 | | | 8,617 | | | 2,974 | | | 190 | |
Emerging Markets | | 6,296 | | | 1,923 | | | 227 | | | 12,930 | | | 5,986 | | | 116 | |
Revenues | | $ | 24,094 | | | $ | 10,277 | | | 134 | | | $ | 57,653 | | | $ | 30,224 | | | 91 | |
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We manage our commercial operations through 2 operating segments: Biopharma and PC1. The Biopharma and PC1 segments are each led by a single manager. Biopharma is the only reportable segment. Biopharma is a science-based medicines business that includes six therapeutic areas – Vaccines, Hospital, Oncology, Internal Medicine, Rare Disease, and Inflammation & Immunology. The Hospital therapeutic area commercializes our global portfolio of sterile injectable and anti-infective medicines, as well as an oral COVID-19 treatment.WeEach operating segment has responsibility for its commercial activities. Regional commercial organizations market, distribute and sell our collaboration partner, BioNTech, have entered into agreements toproducts and are supported by global platform functions that are responsible for the research, development, manufacturing and supply pre-specified doses of Comirnaty with multipleour products and global corporate enabling functions. Biopharma receives its R&D services from WRDM and GPD. These services include IPR&D projects for new investigational products and additional indications for in-line products. Each operating segment has a geographic footprint across developed and emerging nations aroundmarkets. Our chief operating decision maker uses the worldrevenues and earnings of the operating segments, among other factors, for performance evaluation and resource allocation.
Other Costs and Business Activities––Certain pre-tax costs are continuingnot allocated to deliver dosesour operating segment results, such as costs associated with: (i) R&D and medical expenses managed by our WRDM and GPD organizations, (ii) corporate enabling functions and other corporate costs, (iii) overhead costs primarily associated with our manufacturing operations, (iv) our share of Comirnaty under such agreements. We currently sellearnings from the Comirnaty vaccine directly to governmentConsumer Healthcare JV, as well as (v) all amortization of intangible assets, acquisition-related items, and government sponsored customers. This includes supply agreements entered intocertain significant items representing substantive and/or unusual, and in November 2020 and February and May 2021 with the European Commission (EC)some cases recurring, items that are evaluated on an
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
individual basis by management and that, either as a result of their nature or size, would not be expected to occur as part of our normal business on behalfa regular basis. Beginning in the first quarter of 2022, acquisition-related items may now include purchase accounting impacts that previously would have been included as part of a reconciling item entitled “Purchase accounting adjustments” that we no longer separately present, such as: (i) the different EU member statesincremental charge to cost of sales from the sale of acquired inventory that was written up to fair value, (ii) depreciation related to the increase/decrease in fair value of acquired fixed assets, (iii) amortization related to the increase in fair value of acquired debt and certain(iv) the fair value changes for contingent consideration. The operating results of PC1, our global contract development and manufacturing organization, are included in Other business activities.
Segment Assets––We manage our assets on a total company basis, not by operating segment, as our operating assets are shared or commingled. Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment. Total assets were $195 billion as of July 3, 2022 and $181 billion as of December 31, 2021.
Selected Income Statement Information
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The following provides selected income statement information by reportable segment: |
| | Three Months Ended | | Six Months Ended |
| | Revenues | | Earnings(a) | | Revenues | | Earnings(a) |
(MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
Reportable Segment: | | | | | | | | | | | | | | | | |
Biopharma | | $ | 27,425 | | | $ | 18,463 | | | $ | 17,223 | | | $ | 9,816 | | | $ | 52,748 | | | $ | 32,588 | | | $ | 30,662 | | | $ | 18,199 | |
Other business activities(b) | | 317 | | | 437 | | | (3,441) | | | (2,524) | | | 655 | | | 827 | | | (5,917) | | | (4,571) | |
Reconciling Items: | | | | | | | | | | | | | | | | |
Amortization of intangible assets | | — | | | — | | | (822) | | | (928) | | | — | | | — | | | (1,657) | | | (1,798) | |
Acquisition-related items | | — | | | — | | | (82) | | | (34) | | | — | | | — | | | (269) | | | 27 | |
Certain significant items(c) | | — | | | — | | | (1,431) | | | 618 | | | — | | | — | | | (2,322) | | | 784 | |
| | $ | 27,742 | | | $ | 18,899 | | | $ | 11,447 | | | $ | 6,949 | | | $ | 53,402 | | | $ | 33,415 | | | $ | 20,497 | | | $ | 12,641 | |
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(a)Income from continuing operations before provision/(benefit) for taxes on income. Biopharma’s earnings include dividend income from our investment in ViiV of $69 million in the second quarter of 2022 and $62 million in the second quarter of 2021, and $125 million in the first six months of 2022 and $89 million in the first six months of 2021.
(b)Other business activities include revenues and costs associated with PC1, as well as costs that we do not allocate to our operating segments, per above. Included in earnings in the second quarter and first six months of 2022 is a $450 million write-off to Cost of sales of inventory related to COVID-19 products that have exceeded or are expected to exceed their approved shelf-lives prior to being used.
(c)Certain significant items are substantive and/or unusual, and in some cases recurring, items (as noted above). For earnings in the second quarter and first six months of 2022, includes, among other countries. Each EU member state submits its own Comirnaty vaccine order to usitems, net losses on equity securities of $539 million and is responsible for payment pursuant to terms$1.2 billion, respectively, recorded in Other (income)/deductions––net. For earnings in the second quarter and first six months of the supply agreements negotiated by the EC.2021, includes, among other items, net gains on equity securities of $798 million and $1.2 billion, respectively, recorded in Other (income)/deductions––net.
B. Geographic Information
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The following summarizes revenues by geographic area: |
| | Three Months Ended | | Six Months Ended |
(MILLIONS) | | July 3, 2022 | | July 4, 2021 | | % Change | | July 3, 2022 | | July 4, 2021 | | % Change |
United States | | $ | 11,222 | | | $ | 7,515 | | | 49 | | | $ | 20,140 | | | $ | 15,046 | | | 34 | |
Developed Europe | | 5,480 | | | 4,577 | | | 20 | | | 11,569 | | | 7,615 | | | 52 | |
Developed Rest of World | | 5,034 | | | 2,997 | | | 68 | | | 8,320 | | | 4,120 | | | 102 | |
Emerging Markets | | 6,006 | | | 3,810 | | | 58 | | | 13,373 | | | 6,634 | | | 102 | |
Revenues | | $ | 27,742 | | | $ | 18,899 | | | 47 | | | $ | 53,402 | | | $ | 33,415 | | | 60 | |
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C. Other Revenue Information
Significant Customers
Customers––For information on our significant wholesale customers, see Note 17B17C in our 20202021 Form 10-K. Additionally, revenues from the U.S. government represented 10%26% and 12%22% of total revenues for the three and ninesix months ended OctoberJuly 3, 2021,2022, respectively, and primarily represent sales of Comirnaty.Comirnaty and Paxlovid. Accounts receivable from the U.S. government represented 8% of total trade accounts receivable as of October 3, 2021, and primarily relate to sales of Comirnaty.
Significant Product Revenues
The following provides detailed revenue information for several of our major products:
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(MILLIONS) | | | | Three Months Ended | | Nine Months Ended |
PRODUCT | | PRIMARY INDICATION OR CLASS | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 |
TOTAL REVENUES(a) | | | | $ | 24,094 | | | $ | 10,277 | | | $ | 57,653 | | | $ | 30,224 | |
Vaccines | | | | $ | 14,583 | | | $ | 1,717 | | | $ | 28,711 | | | $ | 4,574 | |
Comirnaty direct sales and alliance revenues | | Active immunization to prevent COVID-19 | | 12,977 | | | — | | | 24,277 | | | — | |
Prevnar family(b) | | Pneumococcal disease | | 1,447 | | | 1,534 | | | 3,971 | | | 4,100 | |
FSME/IMMUN-TicoVac | | Tick-borne encephalitis disease | | 47 | | | 77 | | | 161 | | | 170 | |
Nimenrix | | Meningococcal ACWY disease | | 51 | | | 50 | | | 145 | | | 180 | |
Trumenba | | Meningococcal B disease | | 52 | | | 48 | | | 102 | | | 85 | |
All other Vaccines | | Various | | 10 | | | 8 | | | 55 | | | 39 | |
Oncology | | | | $ | 3,085 | | | $ | 2,761 | | | $ | 9,091 | | | $ | 7,843 | |
Ibrance | | HR-positive/HER2-negative metastatic breast cancer | | 1,381 | | | 1,357 | | | 4,039 | | | 3,955 | |
Xtandi alliance revenues | | mCRPC, nmCRPC, mCSPC | | 309 | | | 266 | | | 879 | | | 741 | |
Inlyta | | Advanced RCC | | 256 | | | 195 | | | 742 | | | 559 | |
Sutent | | Advanced and/or metastatic RCC, adjuvant RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor | | 142 | | | 202 | | | 537 | | | 616 | |
Bosulif | | Philadelphia chromosome–positive chronic myelogenous leukemia | | 136 | | | 111 | | | 395 | | | 324 | |
Xalkori | | ALK-positive and ROS1-positive advanced NSCLC | | 116 | | | 122 | | | 371 | | | 409 | |
Ruxience(c) | | Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis | | 124 | | | 59 | | | 343 | | | 78 | |
Retacrit(c) | | Anemia | | 110 | | | 102 | | | 322 | | | 278 | |
Zirabev(c) | | Treatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer | | 96 | | | 48 | | | 311 | | | 63 | |
Lorbrena | | ALK-positive metastatic NSCLC | | 67 | | | 55 | | | 193 | | | 142 | |
Aromasin | | Post-menopausal early and advanced breast cancer | | 56 | | | 35 | | | 159 | | | 107 | |
Besponsa | | Relapsed or refractory B-cell acute lymphoblastic leukemia | | 50 | | | 44 | | | 145 | | | 134 | |
Braftovi | | In combination with Mektovi for metastatic melanoma in patients with a BRAFV600E/K mutation and, in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant mCRC after prior therapy | | 47 | | | 42 | | | 136 | | | 116 | |
Bavencio alliance revenues | | Locally advanced or metastatic urothelial carcinoma; metastatic Merkel cell carcinoma; immunotherapy and tyrosine kinase inhibitor combination for patients with advanced RCC | | 54 | | | 21 | | | 122 | | | 51 | |
Mektovi | | In combination with Braftovi for metastatic melanoma in patients with a BRAFV600E/K mutation | | 41 | | | 34 | | | 112 | | | 103 | |
All other Oncology | | Various | | 98 | | | 69 | | | 286 | | | 167 | |
Internal Medicine | | | | $ | 2,097 | | | $ | 2,085 | | | $ | 7,093 | | | $ | 6,695 | |
Eliquis direct sales and alliance revenues | | Nonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism | | 1,346 | | | 1,114 | | | 4,470 | | | 3,686 | |
Premarin family | | Symptoms of menopause | | 148 | | | 168 | | | 420 | | | 471 | |
Chantix/Champix | | An aid to smoking cessation treatment in adults 18 years of age or older | | 7 | | | 223 | | | 409 | | | 728 | |
BMP2 | | Development of bone and cartilage | | 71 | | | 70 | | | 186 | | | 197 | |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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(MILLIONS) | | | | Three Months Ended | | Nine Months Ended |
PRODUCT | | PRIMARY INDICATION OR CLASS | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 |
Toviaz | | Overactive bladder | | 56 | | | 59 | | | 174 | | | 183 | |
Pristiq | | Depression | | 43 | | | 40 | | | 144 | | | 124 | |
All other Internal Medicine | | Various | | 426 | | | 411 | | | 1,291 | | | 1,305 | |
Hospital(a) | | | | $ | 2,367 | | | $ | 1,790 | | | $ | 6,968 | | | $ | 5,741 | |
Sulperazon | | Bacterial infections | | 181 | | | 143 | | | 515 | | | 432 | |
Medrol | | Anti-inflammatory glucocorticoid | | 109 | | | 87 | | | 320 | | | 295 | |
Zavicefta | | Bacterial infections | | 107 | | | 49 | | | 306 | | | 143 | |
EpiPen | | Epinephrine injection used in treatment of life-threatening allergic reactions | | 78 | | | 75 | | | 225 | | | 234 | |
Fragmin | | Treatment/prevention of venous thromboembolism | | 74 | | | 60 | | | 223 | | | 178 | |
Vfend | | Fungal infections | | 51 | | | 52 | | | 204 | | | 201 | |
Zithromax | | Bacterial infections | | 66 | | | 25 | | | 198 | | | 218 | |
Tygacil | | Bacterial infections | | 56 | | | 33 | | | 153 | | | 115 | |
Precedex | | Sedation agent in surgery or intensive care | | 50 | | | 55 | | | 147 | | | 211 | |
Zyvox | | Bacterial infections | | 41 | | | 51 | | | 144 | | | 176 | |
IVIg Products(d) | | Various | | 99 | | | 88 | | | 311 | | | 271 | |
Pfizer CentreOne(e) | | Various | | 521 | | | 242 | | | 1,348 | | | 618 | |
All other Anti-infectives | | Various | | 355 | | | 301 | | | 1,081 | | | 936 | |
All other Hospital | | Various | | 577 | | | 529 | | | 1,794 | | | 1,713 | |
Inflammation & Immunology (I&I) | | $ | 1,094 | | | $ | 1,173 | | | $ | 3,200 | | | $ | 3,299 | |
Xeljanz | | RA, PsA, UC, active polyarticular course juvenile idiopathic arthritis | | 610 | | | 654 | | | 1,734 | | | 1,741 | |
Enbrel (Outside the U.S. and Canada) | | RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis | | 283 | | | 321 | | | 888 | | | 1,005 | |
Inflectra/Remsima(c) | | Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis | | 172 | | | 162 | | | 485 | | | 471 | |
All other I&I | | Various | | 28 | | | 35 | | | 93 | | | 83 | |
Rare Disease | | | | $ | 869 | | | $ | 752 | | | $ | 2,588 | | | $ | 2,071 | |
Vyndaqel/Vyndamax | | ATTR-cardiomyopathy and polyneuropathy | | 501 | | | 351 | | | 1,454 | | | 859 | |
BeneFIX | | Hemophilia B | | 104 | | | 107 | | | 328 | | | 337 | |
Genotropin | | Replacement of human growth hormone | | 95 | | | 107 | | | 284 | | | 316 | |
Refacto AF/Xyntha | | Hemophilia A | | 69 | | | 92 | | | 235 | | | 272 | |
Somavert | | Acromegaly | | 70 | | | 67 | | | 203 | | | 198 | |
All other Rare Disease | | Various | | 30 | | | 27 | | | 84 | | | 89 | |
Total Alliance revenues | | | | $ | 2,068 | | | $ | 1,250 | | | $ | 5,718 | | | $ | 4,036 | |
Total Biosimilars(c) | | | | $ | 575 | | | $ | 424 | | | $ | 1,663 | | | $ | 1,001 | |
Total Sterile Injectable Pharmaceuticals(f) | | $ | 1,443 | | | $ | 1,192 | | | $ | 4,306 | | | $ | 3,826 | |
government represented 23% of total trade accounts receivable as of July 3, 2022, and primarily relate to sales of Comirnaty and Paxlovid.Significant Product Revenues
The following provides detailed revenue information for several of our major products:
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(MILLIONS) | | | | Three Months Ended | | Six Months Ended |
PRODUCT | | PRIMARY INDICATION OR CLASS | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
TOTAL REVENUES(a) | | | | $ | 27,742 | | | $ | 18,899 | | | $ | 53,402 | | | $ | 33,415 | |
PFIZER BIOPHARMACEUTICALS GROUP (BIOPHARMA)(a), (b) | | $ | 27,425 | | | $ | 18,463 | | | $ | 52,748 | | | $ | 32,588 | |
Vaccines | | | | $ | 10,459 | | | $ | 9,234 | | | $ | 25,399 | | | $ | 14,127 | |
Comirnaty direct sales and alliance revenues | | Active immunization to prevent COVID-19 | | 8,848 | | | 7,838 | | | 22,075 | | | 11,300 | |
Prevnar family(c) | | Pneumococcal disease | | 1,429 | | | 1,241 | | | 2,994 | | | 2,524 | |
Nimenrix | | Meningococcal ACWY disease | | 65 | | | 49 | | | 142 | | | 95 | |
FSME-IMMUN/TicoVac | | Tick-borne encephalitis disease | | 68 | | | 61 | | | 110 | | | 114 | |
All other Vaccines | | Various | | 49 | | | 46 | | | 78 | | | 94 | |
Hospital(a) | | | | $ | 9,714 | | | $ | 1,745 | | | $ | 12,905 | | | $ | 3,630 | |
Paxlovid | | COVID-19 infection (high risk population) | | 8,115 | | | — | | | 9,585 | | | — | |
Sulperazon | | Bacterial infections | | 210 | | | 141 | | | 420 | | | 334 | |
Ig Portfolio(d) | | Various | | 125 | | | 107 | | | 232 | | | 212 | |
Zavicefta | | Bacterial infections | | 100 | | | 104 | | | 204 | | | 198 | |
Zithromax | | Bacterial infections | | 54 | | | 43 | | | 180 | | | 132 | |
Medrol | | Anti-inflammatory glucocorticoid | | 79 | | | 112 | | | 155 | | | 211 | |
Fragmin | | Treatment/prevention of venous thromboembolism | | 72 | | | 77 | | | 142 | | | 149 | |
Vfend | | Fungal infections | | 54 | | | 72 | | | 119 | | | 153 | |
All other Anti-infectives | | Various | | 367 | | | 474 | | | 749 | | | 929 | |
All other Hospital | | Various | | 537 | | | 613 | | | 1,120 | | | 1,314 | |
Oncology | | | | $ | 3,088 | | | $ | 3,145 | | | $ | 6,055 | | | $ | 6,007 | |
Ibrance | | HR-positive/HER2-negative metastatic breast cancer | | 1,320 | | | 1,404 | | | 2,557 | | | 2,657 | |
Xtandi alliance revenues | | mCRPC, nmCRPC, mCSPC | | 290 | | | 303 | | | 558 | | | 570 | |
Inlyta | | Advanced RCC | | 274 | | | 257 | | | 508 | | | 486 | |
Zirabev(e) | | Treatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer | | 138 | | | 129 | | | 286 | | | 215 | |
Bosulif | | Philadelphia chromosome–positive chronic myelogenous leukemia | | 156 | | | 136 | | | 284 | | | 259 | |
Xalkori | | ALK-positive and ROS1-positive advanced NSCLC | | 118 | | | 120 | | | 244 | | | 255 | |
Ruxience(e) | | Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis | | 113 | | | 120 | | | 237 | | | 218 | |
Retacrit(e) | | Anemia | | 106 | | | 103 | | | 221 | | | 212 | |
Sutent | | Advanced and/or metastatic RCC, adjuvant RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor | | 97 | | | 194 | | | 211 | | | 394 | |
Lorbrena | | ALK-positive metastatic NSCLC | | 77 | | | 66 | | | 149 | | | 126 | |
Bavencio alliance revenues | | Locally advanced or metastatic urothelial carcinoma; metastatic Merkel cell carcinoma; immunotherapy and tyrosine kinase inhibitor combination for patients with advanced RCC | | 58 | | | 37 | | | 125 | | | 68 | |
Aromasin | | Post-menopausal early and advanced breast cancer | | 59 | | | 51 | | | 121 | | | 103 | |
Besponsa | | Relapsed or refractory B-cell acute lymphoblastic leukemia | | 58 | | | 45 | | | 109 | | | 95 | |
Braftovi | | In combination with Mektovi for metastatic melanoma in patients with a BRAFV600E/K mutation and, in combination with Erbitux® (cetuximab)(f), for the treatment of BRAFV600E -mutant mCRC after prior therapy | | 51 | | | 42 | | | 98 | | | 89 | |
Trazimera(e) | | HER-positive breast cancer and metastatic stomach cancers | | 46 | | | 41 | | | 98 | | | 87 | |
Mektovi | | In combination with Braftovi for metastatic melanoma in patients with a BRAFV600E/K mutation | | 44 | | | 36 | | | 84 | | | 71 | |
All other Oncology | | Various | | 82 | | | 60 | | | 163 | | | 102 | |
Internal Medicine | | | | $ | 2,405 | | | $ | 2,403 | | | $ | 4,846 | | | $ | 4,997 | |
Eliquis alliance revenues and direct sales | | Nonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism | | 1,745 | | | 1,481 | | | 3,537 | | | 3,124 | |
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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(MILLIONS) | | | | Three Months Ended | | Six Months Ended |
PRODUCT | | PRIMARY INDICATION OR CLASS | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
Premarin family | | Symptoms of menopause | | 115 | | | 128 | | | 217 | | | 271 | |
BMP2 | | Development of bone and cartilage | | 75 | | | 66 | | | 142 | | | 115 | |
Toviaz | | Overactive bladder | | 45 | | | 62 | | | 99 | | | 119 | |
Chantix/Champix | | An aid to smoking cessation treatment in adults 18 years of age or older | | 1 | | | 184 | | | 4 | | | 401 | |
All other Internal Medicine | | Various | | 424 | | | 482 | | | 846 | | | 966 | |
Rare Disease | | | | $ | 909 | | | $ | 895 | | | $ | 1,872 | | | $ | 1,720 | |
Vyndaqel/Vyndamax | | ATTR-cardiomyopathy and polyneuropathy | | 552 | | | 501 | | | 1,164 | | | 953 | |
BeneFIX | | Hemophilia B | | 113 | | | 112 | | | 225 | | | 225 | |
Genotropin | | Replacement of human growth hormone | | 91 | | | 109 | | | 171 | | | 189 | |
Somavert | | Acromegaly | | 64 | | | 68 | | | 132 | | | 133 | |
Refacto AF/Xyntha | | Hemophilia A | | 64 | | | 77 | | | 129 | | | 165 | |
All other Rare Disease | | Various | | 25 | | | 29 | | | 50 | | | 55 | |
Inflammation & Immunology (I&I) | | | | $ | 850 | | | $ | 1,041 | | | $ | 1,671 | | | $ | 2,107 | |
Xeljanz | | RA, PsA, UC, active polyarticular course juvenile idiopathic arthritis, ankylosing spondylitis | | 430 | | | 586 | | | 802 | | | 1,124 | |
Enbrel (Outside the U.S. and Canada) | | RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis | | 257 | | | 286 | | | 537 | | | 605 | |
Inflectra(e) | | Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis | | 137 | | | 136 | | | 272 | | | 313 | |
All other I&I | | Various | | 25 | | | 33 | | | 60 | | | 65 | |
PFIZER CENTREONE(b) | | | | $ | 317 | | | $ | 437 | | | $ | 655 | | | $ | 827 | |
Total Alliance revenues | | | | $ | 2,317 | | | $ | 1,880 | | | $ | 4,631 | | | $ | 3,650 | |
Total Biosimilars(e) | | | | $ | 580 | | | $ | 559 | | | $ | 1,185 | | | $ | 1,089 | |
Total Sterile Injectable Pharmaceuticals(g) | | $ | 1,286 | | | $ | 1,381 | | | $ | 2,617 | | | $ | 2,863 | |
(a)On November 16, 2020,December 31, 2021, we completed the spin-off and the combinationsale of our Upjohn Business with MylanMeridian subsidiary. Prior to form Viatris. See Note 1A.its sale, Meridian was managed as part of the Hospital therapeutic area. Beginning in the fourth quarter of 2020,2021, the financial results of Meridian were reflected as discontinued operations. Prior-period financial information has been restated, as appropriate. See Note 1A.
(b)At the beginning of our Meridian subsidiary,fiscal fourth quarter of 2021, we reorganized our commercial operations and began to manage our commercial operations through a new global structure consisting of 2 operating segments, each led by a single manager: Biopharma, our innovative science-based biopharmaceutical business, and PC1. PC1, which was previously included in our former Upjohn operating segment, are reported inhad been managed within the Hospital therapeutic area, for all periods presented.
(b)Prevnar family include revenues from Prevnar 13/Prevenar 13 (pediatric and adult) and Prevnar 20 (adult).
(c)Biosimilars are highly similar versions of approved and authorized biological medicines and primarily include revenues from Inflectra/Remsima, Ruxience, Retacrit and Zirabev.
(d)Intravenous immunoglobulin (IVIg) products include the revenues from Panzyga, Octagam and Cutaquig.
(e)Pfizer CentreOne includes revenues from our contract manufacturing, including certain Comirnaty-related manufacturing activities performed on behalf of BioNTech ($18755 million and $274$101 million for the thirdsecond quarter and the first ninesix months of 2021, respectively)2022, respectively, and $87 million for both the second quarter and the first six months of 2021), and revenues from our active pharmaceutical ingredient sales operation, as well as revenues related to our manufacturing and supply agreements with former legacy Pfizer businesses/partnerships, including but not limited to, transitional manufacturing and supply agreements with Viatris following the spin-off of the Upjohn Business. We have revised prior-period information to conform to the current management structure.
(c)Prevnar family include revenues from Prevnar 13/Prevenar 13 (pediatric and adult) and Prevnar 20/Apexxnar (adult).
(d)Immunoglobulin (Ig) portfolio includes the revenues from Panzyga, Octagam and Cutaquig.
(e)Biosimilars are highly similar versions of approved and authorized biological medicines and primarily include revenues from Zirabev, Inflectra, Ruxience, Retacrit and Trazimera.
(f)Erbitux® is a registered trademark of ImClone LLC.
(g)Total Sterile Injectable Pharmaceuticals represents the total of all branded and generic injectable products in the Hospital therapeutic area, including anti-infective sterile injectable pharmaceuticals.
Remaining Performance Obligations––Contracted revenue expected to be recognized from remaining performance obligations for firm orders in long-term contracts to supply Comirnaty to our customers totaled approximately $24 billion as of July 3, 2022, which includes amounts received in advance and deferred, as well as amounts that will be invoiced as we deliver these products to our customers in future periods. Of this amount, we expect to recognize revenue of approximately $12 billion in 2022, $12 billion in 2023 and $200 million in 2024. Remaining performance obligations exclude arrangements with an original expected contract duration of less than one year.
Deferred Revenues
Revenues––Our deferred revenues primarily relate to advance payments received or receivable in connection with contracts that we entered into during 2021 and 2020 withfrom various government or government sponsored customers in international markets for supply of Comirnaty.Comirnaty and Paxlovid. The deferred revenues associatedrelated to Comirnaty and Paxlovid total $3.9 billion as of July 3, 2022, with the advance payments$3.7 billion and $198 million recorded in current and noncurrent liabilities, respectively. The deferred revenues related to Comirnaty total $3.7$3.3 billion as of October 3, 2021 and $957 million as of December 31, 2020,2021, with $3.4$3.0 billion and $264$249 million recorded in current liabilities and noncurrent liabilities, respectively as of October 3, 2021, and $957 million recorded in current liabilitiesrespectively. There were no deferred revenues associated with Paxlovid as of December 31, 2020.2021. The increase in the Comirnaty and Paxlovid deferred revenues during the first ninesix months of 20212022 was primarily the result of additional advance payments received as we entered
PFIZER INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
payments received as we entered into new or amended contracts, or as we invoiced customers inincluding new advance of vaccine deliveriespayments received for Paxlovid contracts, less amounts recognized in Revenues as we delivered dosesthe products to our customers.customers and the impact of foreign exchange. During the thirdsecond quarter and first ninesix months of 2021,2022, we recognized revenue of $136$800 million and $950 million,$2.4 billion, respectively, that was included in the balance of Comirnaty deferred revenues as of December 31, 2020.2021. The Comirnaty and Paxlovid deferred revenues as of OctoberJuly 3, 20212022 will be recognized in Revenues proportionately as we deliver dosestransfer control of the vaccineproducts to our customers and satisfy our performance obligation under the contracts, with the amounts included in current liabilities expected to be recognized in Revenues within the next 12 months, and the amounts included in noncurrent liabilities expected to be recognized in Revenues in the fourthlast six months of 2023 and in the first quarter of 2024. Deferred revenues associated with contracts for other products were not significant as of July 3, 2022 and in 2023.or December 31, 2021.
ITEM 2. MANAGEMENTS’SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK
Our Business and Strategy
Most of our revenues come from the manufacture and sale of biopharmaceutical products. With the formation of the Consumer Healthcare JV in 2019 and the completion of the spin-off and combination of our Upjohn Business with Mylan in November 2020, Pfizer has transformed into a focused, global leader in science-based innovative medicines and vaccines. We operate as a single operating segment engaged in the discovery, development, manufacturing, marketing, sale and distribution of biopharmaceutical products worldwide. The financial results of the Upjohn Business and the Mylan-Japan collaboration are reflected as discontinued operations. Prior-period information has been restated to reflect our current organization structure. We expect to incur costs of approximately $700 million in connection with separating Upjohn, of which approximately 75% has been incurred since inception and through the third quarter of 2021. These charges include costs and expenses related to separation of legal entities and transaction costs.
For additional information about our business, strategy and operating environment, see the Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2020 Form 10-K.
References to operational variances pertain to period-over-period changes that exclude the impact of foreign exchange rates. Although foreign exchange rate changes are part of our business, they are not within our control and since they can mask positive or negative trends in the business, we believe presenting operational variances excluding these foreign exchange changes provides useful information to evaluate our results.
Our Business and Strategy
We apply science and our global resources to bring therapies to people that extend and significantly improve their lives through the discovery, development, manufacture, marketing, sale and distribution of biopharmaceutical products worldwide. At the beginning of our fiscal fourth quarter of 2021, we reorganized our commercial operations and began to manage our commercial operations through a new global structure consisting of two operating segments: Biopharma and PC1. Biopharma is the only reportable segment. See Note 1A. We expect to incur costs of approximately $700 million in connection with separating Upjohn, of which approximately 80% has been incurred since inception and through the second quarter of 2022. These charges include costs and expenses related to separation of legal entities and transaction costs.
Beginning in our third fiscal quarter of 2022, we are making several additionalorganizational changes to further transform our operations. These changes include establishing a new commercial structure within Biopharma that is designed to better support Comirnaty and Paxlovid in a potential full commercial setting while optimizing our performance across three broad therapeutic areas:
•Primary Care will consist of our COVID-19 products (currently Comirnaty and Paxlovid), as well as the Internal Medicine and Vaccines product portfolios, including potential future mRNA products.
•Specialty Care will consist of our Inflammation & Immunology, Rare Disease and Hospital (excluding Paxlovid) product portfolios.
•Oncology will consist of our Oncology product portfolio.
We are currently evaluating what impacts these organizational changesmay have on our financial reporting.
For additional information about our business, strategy and operating environment, see the Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2021 Form 10-K.
Our Business Development Initiatives
We are committed to strategically capitalizing on growth opportunities, primarily by advancing our own product pipeline and maximizing the value of our existing products, as well asbut also through various business development activities.
Our significant recent business development activities include:
Collaboration with Biohaveninclude the transactions discussed in ––In November 2021, we entered into a collaboration and license agreement and related sublicense agreement with Biohaven Pharmaceutical Holding Company Ltd., Biohaven Pharmaceutical Ireland DAC and Bioshin LTD. (collectively, Biohaven) pursuant to which we will acquire rights to commercialize rimegepant and zavegepant for the treatment and prevention of migraines outside of the U.S., subject to regulatory approval. Rimegepant is currently commercialized in the U.S. under the brand name Nurtec®Note 2 ODT, with certain applications pending outside ofand the U.S. Biohaven will continue to lead R&D globally and we have the exclusive right to commercialization globally, outside of the U.S. Under the financial terms of the transaction agreements, we will make an upfront payment of $500 million, consisting of $150 million cash and $350 million in the purchase of Biohaven equity. Biohaven is also eligible to receive up to $740 million in non-U.S. commercialization milestones, in addition to tiered double-digit royalties on net sales outside of the U.S. In addition to the milestones and royalties above, we will also reimburse Biohaven for the portion of certain additional milestones and royalties due to third parties in accordance with preexisting agreements, which are attributed to ex-U.S. sales. The transaction is subject to customary closing conditions, including completion of review under applicable antitrust laws.
Agreement with Altaris Capital Partners, LLC (Altaris)––In November 2021, we entered into an agreement with Altaris, a healthcare investment firm based in New York, for Altaris to purchase Meridian. Meridian was acquired by Pfizer in 2011 as part of the King Pharmaceuticals acquisition and has maintained relative operational autonomy since that time. Meridian’s operations, which generate approximately $300 million in annual revenues, consist of manufacturing and distributing medical countermeasures used by the U.S. Department of Defense, Emergency Medical Services, Homeland Security and foreign ministries of health and defense, as well as rescue auto-injectors for the emergency treatment of allergic reactions including anaphylaxis. The transaction is expected to close in the coming months, subject to customary closing conditions including the receipt of regulatory approvals.following:
Acquisition of TrilliumGlobal Blood Therapeutics, Inc.(Trillium) (GBT)––In August 2021,2022, we and TrilliumGBT announced that the companies entered into a definitivean agreement under which we will acquire Trillium,GBT, a clinical stage immuno-oncologybiopharmaceutical company developing innovative therapies fordedicated to the treatmentdiscovery, development and delivery of cancer. We currently hold a 2% ownership investment in Trillium.life-changing treatments that provide hope to underserved patient communities, starting with sickle cell disease. Under the terms of the agreement, we will acquire all outstanding shares of TrilliumGBT for $68.50 per share in cash for a total enterprise value of approximately $5.4 billion, including debt and net of cash acquired. The proposed transaction is subject to customary closing conditions, including receipt of regulatory approvals and approval by GBT’s stockholders.
Acquisition of ReViral––In June 2022, which falls in our international third quarter of 2022, we completed our acquisition of ReViral, a privately held, clinical-stage biopharmaceutical company focused on discovering, developing and commercializing novel antiviral therapeutics that target respiratory syncytial virus, for a total consideration of up to $525 million, including an upfront payment of $425 million upon closing and an additional $100 million contingent upon future development milestones.
Acquisition of Biohaven––In May 2022, we and Biohaven announced that the companies entered into an agreement under which we will acquire Biohaven, the maker of Nurtec® ODT (rimegepant), an innovative dual-acting migraine therapy approved for both acute treatment and episodic prevention of migraine in adults. Under the terms of the agreement, we will acquire all outstanding common shares of Biohaven not already owned by us for $18.50$148.50 per share, in cash, or an aggregate purchase pricecash. The proposed transaction includes the acquisition of Biohaven’s CGRP programs, including rimegepant, zavegepant and a portfolio of five pre-clinical CGRP assets. Biohaven common shareholders, including Pfizer, will also receive 0.5 of a share of New Biohaven, a new publicly traded company that will retain Biohaven’s non-CGRP development stage pipeline compounds, per Biohaven common share. Pfizer will pay transaction consideration totaling approximately $2.2 billion. The acquisition is expected$11.6 billion in cash. Pfizer will also make payments at closing to close insettle Biohaven’s third party debt and for the fourth quarterredemption of 2021 or first halfall outstanding shares of 2022, subject to customary closing conditions, including regulatory approvals.Biohaven’s redeemable preferred stock.
CollaborationThis agreement follows on the November 2021 collaboration for the commercialization of rimegepant and zavegepant outside the U.S., in connection with Arvinas, Inc. (Arvinas)––In July 2021, we announced a global collaboration with Arvinaswhich Pfizer acquired 2.6% of Biohaven’s common stock. New Biohaven will also have the right to developreceive tiered royalties from Pfizer on any annual net sales of rimegepant and commercialize ARV-471, an investigational oral PROTAC® (PROteolysis TArgeting Chimera) estrogen receptor protein degrader. See Note 2 for additional information.
Acquisitionzavegepant in the U.S. in excess of Amplyx Pharmaceuticals, Inc.(Amplyx)––In April 2021, we announced that we acquired Amplyx, a privately-held company dedicated$5.25 billion. The proposed transaction is subject to the developmentcompletion of therapies for debilitatingthe New Biohaven spin-off transaction and life-threatening diseases that affect people with compromised immune systems. Amplyx’s lead compound, Fosmanogepix (APX001), is a novel investigational asset in Phase 2 development forother customary closing conditions. All required antitrust clearances have been received. The companies expect the treatment of invasive fungal infections.transaction to close by early 2023.
For a discussion of recent significant business development activities, see Note 2. For a description of the more significant recent transactions through February 25, 2021,24, 2022, the filing date of our 20202021 Form 10-K, see Note 2 in our 20202021 Form 10-K.
Our ThirdSecond Quarter 20212022 and First NineSix Months of 20212022 Performance
Revenues
Revenues
––Revenues increased $13.8$8.8 billion, or 134%47%, in the thirdsecond quarter of 20212022 to $24.1$27.7 billion from $10.3$18.9 billion in the thirdsecond quarter of 2020,2021, reflecting an operational increase of $13.4$10.1 billion, or 130%53%, as well as a favorable impact of foreign exchange of $421 million, or 4%. Excluding direct sales and alliance revenues of Comirnaty of $13.0 billion, revenues increased 7% operationally, reflecting strong growth in Eliquis, Vyndaqel/Vyndamax, Inlyta, Xtandi, Biosimilars and the Hospital therapeutic area, partially offset by declines in Chantix/Champix, Prevnar family, Sutent, Xeljanz and Enbrel.
Revenues increased $27.4 billion, or 91%, in the first nine months of 2021 to $57.7 billion from $30.2 billion in the first nine months of 2020, reflecting an operational increase of $26.1 billion, or 86%, as well as a favorableunfavorable impact of foreign exchange of $1.3 billion, or 4%7%. The operational increase was primarily driven by growth from Paxlovid and Comirnaty. Excluding direct salesthe impact of Paxlovid and alliance revenues of Comirnaty, of $24.3 billion, revenues increased 8%1% operationally, reflecting strong growth in Eliquis, the Prevnar family and Vyndaqel/Vyndamax, Inlyta, Xtandi, Biosimilars and the Hospital therapeutic area, partially offset by declines in Chantix/Champix, Xeljanz and Sutent.
Revenues increased $20.0 billion, or 60%, in the first six months of 2022 to $53.4 billion from $33.4 billion in the first six months of 2021, reflecting an operational increase of $22.0 billion, or 66%, as well as an unfavorable impact of foreign exchange of $2.0 billion, or 6%. The operational increase was primarily driven by growth from Comirnaty and Paxlovid. Excluding the impact of Comirnaty and Paxlovid, revenues increased 1% operationally, reflecting strong growth in Eliquis, the Prevnar family, EnbrelVyndaqel/Vyndamax and Biosimilars, partially offset by declines in Chantix/Champix, Xeljanz and Sutent.
See the Analysis of the Condensed Consolidated Statements of Income––Revenues by Geography and Revenues––Selected Product Discussion sections for more information, including a discussion of key drivers of our revenue performance. For information regarding the primary indications or class of certain products, see Note 13B.13C.
Income from Continuing Operations Before Provision/(Benefit) for Taxes on Income
––The increases in Income from continuing operations before provision/(benefit) for taxes on income of $7.3$4.5 billion in the thirdsecond quarter of 20212022 and $13.7$7.9 billion in the first ninesix months of 2021,2022, compared to the same periods in 2020,2021, respectively, were primarily attributable to:to (i) higher revenues, partially offset by (ii) increases in Cost of sales, (iii)net periodic benefit creditslosses on equity securities in 2021the second quarter and first six months of 2022 versus net periodic benefit costs in 2020, (iii) net gains on equity securities in the thirdsecond quarter and first six months of 2021, (iv) increases in Research and development expenses, (v) net periodic benefit costs associated with pension and other postretirement plans incurred in the second quarter and first six months of 2022 versus net losses on equity securitiesperiodic benefit credits recognized in the thirdsecond quarter of 2020, and higher net gains on equity securities in the first ninesix months of 2021 and (iv) the non-recurrence of certain asset impairment charges(vi) increases in 2020, partially offset by (v) increases in: Cost of sales, Research and development expenses, Selling, informational and administrative expenses and Restructuring charges and certain acquisition-related costs.
See the Analysis of the Condensed Consolidated Statements of Income within this MD&A and Note 4 for additional information.
For information on our tax provision and effective tax rate, see the Provision/(Benefit) for Taxes on Income section within MD&A and Note 5.
Our Operating Environment
We, like other businesses in our industry, are subject to certain industry-specific challenges. These include, among others, the topics listed below, as well as in the Item 1. Business––Government Regulation and inPrice Constraints and Item 1A. Risk Factors sections,and the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment section of the MD&Aof our 20202021 Form 10-K.
Intellectual Property Rights and Collaboration/Licensing Rights
––The loss, expiration or invalidation of intellectual property rights, patent litigation settlements with manufacturers and the expiration of co-promotion and licensing rights can have a material adverse effect on our revenues. Certain of our products have experienced patent-based expirations or loss of regulatory exclusivity in certain markets in the last few years, and we expect certain products to face significantly increased generic competition over the next few years. Examples of products experiencing recent expirations of their basic product patent are Chantix in the U.S. in November 2020 and Sutent in the U.S. in August 2021. While additional patent expiries will continue, we expect a moderate impact of reduced revenues due to patent expiries from 20212022 through 2025. Further, legal or regulatory action by various stakeholders or governments could potentially result in us not seeking intellectual property protection for or agreeing not to enforce or being restricted from enforcing intellectual property related to our products. For example, in May 2021, the Brazilian Supreme Court voted to invalidate Article 40 of
Brazil’s Patent Law, which guaranteed a minimum 10-year patent term from patent grant, and to give retroactive effect to such decision. We continue to vigorously defend our patent rights against infringement, and we will continue to support efforts that strengthen worldwide recognition of patent rights while taking necessary steps to help ensure appropriate patient access.
For additional information on patent rights we consider most significant in relation to our business as a whole, see the Item 1. Business––Patents and Other Intellectual Property Rights section of our 20202021 Form 10-K. For a discussion of recent developments with respect to patent litigation, see Note 12A1.
Regulatory Environment/Pricing and Access––Government and Other Payer Group Pressures
The pricing of medicines and vaccines by pharmaceutical manufacturers and the cost of healthcare, which includes medicines, vaccines, medical services and hospital services, continues to be important to payers, governments, patients, and other stakeholders. Federal and state governments and––Governments globally, as well as private third-party payers in the U.S. continue to take action to manage the utilization of drugs and cost of drugs, including increasingly employing formularies to control costs by taking into account discounts in connection with decisions about formulary inclusion or favorable formulary placement. We consider a number of factors impacting the pricing of our medicines and vaccines. Within the U.S., we often engage with patients, doctors and healthcare plans. We also often provide significant discounts from the list price to insurers, including PBMs and MCOs. The price that patients pay in the U.S. for prescribed medicines and vaccines is ultimately set by healthcare providers and insurers. Governments globally may use a variety of measures to control costs, including, among others, proposing
pricing reform or legislation, employing formularies to control costs, cross country collaboration and procurement, price cuts, mandatory rebates, health technology assessments, forced localization as a condition of market access, “international reference pricing” (i.e., the practice of a country linking its regulated medicine prices to those of other countries), quality consistency evaluation processes and volume-based procurement. In the U.S., we expect to see continued focus by Congress and the Biden Administration on regulating pricing resulting in legislative and regulatory efforts designed to control costs. Congress is currently considering a budget reconciliation package that includes drug pricing changes to Medicare Part B and D. We anticipate that these and similar initiatives will continue to increase pricing and access pressures globally. In the U.S., we recently implemented a policy that will help improve contract pharmacy integrity. The U.S. Department of Health and Human Services (HHS) has sent letters to numerous manufacturers that have also implemented contract pharmacy integrity initiatives expressing the view that their programs are in violation of the 340B statute, and referring those programs for potential enforcement action. We believe that our program is consistent with the statute. Additional legal or legislative developments with respect to the 340B program may have an adverse impact on our integrity initiative, and we may face enforcement action or penalties, depending upon such developments. For additional information, see the Item 1. Business––Pricing Pressures and Managed Care Organizations and ––Government Regulation and Price Constraints sections in our 20202021 Form 10-K and the Overview of Our Performance, Operating Environment, Strategy and Outlook––Our Operating Environment section of the MD&A in our 2021 Form 10-K.
Product Supply
––We periodically encounter supply delays, disruptions and shortages, including due to a voluntary recall of a product. In July and August, Pfizer recalled 16 lots of Chantix in the U.S. due to the presence of a nitrosamine, N-nitroso-varenicline, at or above the FDA interim acceptable intake limit. In September 2021, Pfizer expanded its voluntary recall in the U.S. to include all lots of Chantix. We currently also have a voluntary recall across multiple markets and a global pause in shipments of Chantix. Nitrosamines are impurities common in water and foods and everyone is exposed to some level of nitrosamines.product recalls. In response to requests from various regulatory authorities, manufacturers across the pharmaceutical industry, including Pfizer, have beenare evaluating their product portfolios for the potential for the presence or formation of nitrosamines. This has led to recalls, including our voluntary recall of Chantix in 2021 and additional voluntary recalls initiated for other products in 2022 due to the presence of nitrosamines in pharmaceuticalabove the applicable acceptable intake limit, and may lead to additional recalls or other market actions for Pfizer products. We are currently undertaking an evaluation of our entire portfolio. For information on our Chantix recall in 2021 and risks related to product manufacturing, see the Item 1A. Risk Factors––Product Manufacturing, Sales and Marketing Risks section of our 20202021 Form 10-K.
The Global Economic Environment
In addition to the industry-specific factors discussed above, we, like other businesses of our size and global extent of activities, are exposed to the economic cycle.cycles. For additional information, please see the Overview of Our Performance, Operating Environment, Strategy and Outlook––The Global Economic Environment section of the MD&A of our 20202021 Form 10-K.
COVID-19 PandemicRussia/Ukraine Conflict––Our global operations may be impacted by certain factors in the global economic environment including impacts of political or civil unrest or military action, including the armed conflict between Russia and Ukraine. Consistent with our commitment to putting patients first, we are maintaining the supply of medicines to Russia, including the provision of needed medicines to patients already enrolled in clinical trials. Effective March 14, 2022, Pfizer is donating the equivalent of profits of our Russian subsidiary to causes that provide direct humanitarian support to the people of Ukraine, in addition to the company’s ongoing efforts to support the humanitarian response in the region. Our first down payment of $5 million is going to eight global and local non-governmental organizations to support humanitarian relief and response efforts. We will continue to divert these profits to the Ukrainian relief efforts until peace is achieved. Additionally, we are not initiating new clinical trials in Russia, have stopped recruiting new patients in our ongoing clinical trials in the country, and halted all new investments with local suppliers intended to build manufacturing capacity in Russia. For both the six months ended July 3, 2022 and the fiscal year ended December 31, 2021, the business of our Russia and Ukraine subsidiaries represented less than 1% of our consolidated revenues and assets, and while we are monitoring the effects of the armed conflict between Russia and Ukraine, the situation continues to evolve and the long-term implications, including the broader economic consequences of the conflict, are difficult to predict at this time. While as of now, we do not anticipate any significant negative impacts on our business from this conflict, continued regional instability, geopolitical shifts, potential additional sanctions and other restrictive measures against Russia, neighboring countries or allies of Russia, and any retaliatory measures taken by Russia, neighboring countries or allies of Russia, in response to such measures could adversely affect the global macroeconomic environment, our operations, currency exchange rates and financial markets, which could in turn adversely impact our business and results of operations.
COVID-19 Pandemic––The continuation of the COVID-19 pandemic has impacted our business, operations and financial condition and results.
Our Response to COVID-19
We are committedPfizer is continuing to confrontinghelp lead the public health challenge posed byglobal effort to confront the COVID-19 pandemic by collaborating with industry partners,advancing a vision for industry-wide collaboration while continuing to make significant investments in breakthrough science and global regulators and academic institutions to develop potential approaches to prevent and treat COVID-19. We have made some important advances, including, among others:manufacturing.
•COVID-19 Vaccine Development ProgramComirnaty/BNT162b2:
◦The FDA has approved Comirnaty in the U.S.We have collaborated with BioNTech to prevent COVID-19 in individuals 16 years of age and older asjointly develop Comirnaty/BNT162b2, a two-dose primary series (30 µg per dose). Comirnaty is the first COVID-19mRNA-based coronavirus vaccine to be granted approval byhelp prevent COVID-19. For additional information, see the FDA and had previously been available to this patient population in the U.S. under an EUA since December 2020. The vaccine remains available to individuals 12 to 15 years old under an EUA granted by the FDA in May 2021. Emergency use and distributionProduct Developments section of this product is subject to the conditions set forth in the EUA, and only for the duration of the declaration by the Department of Health & Human Services that circumstances exist justifying authorization of emergency use of drugs
and biological products during the COVID-19 pandemic under Section 564 of the U.S. Federal Food, Drug and Cosmetic Act (the Declaration), or until revocation of the EUA by the FDA. The FDA has issued EUAs to certain other companies for products intended for the prevention or treatment of COVID-19 and may continue to do so during the duration of the Declaration. In September 2021, the FDA authorized for emergency use a booster dose of Comirnaty/BNT162b2 for individuals 65 years of age and older, individuals 18 through 64 years of age at high risk of severe COVID-19, and individuals 18 through 64 years of age with frequent institutional or occupational exposure to SARS-CoV-2. In addition, in October 2021, the FDA authorized for emergency use a booster dose to eligible individuals who have completed primary vaccination with a different authorized COVID-19 vaccine. The FDA also authorized BNT162b2 (10 µg per dose) for emergency use for children 5 through 11 years of age. In November 2021, we and BioNTech submitted a request to the FDA to amend the EUA of a booster dose of Comirnaty/BNT162b2 to include all individuals 18 years of age and older. Comirnaty/BNT162b2 has been granted an approval or a temporary authorization in many other countries around the world in populations varying by country.MD&A. We continue to evaluate our vaccine including for potential maternal and additional pediatric indications, and the short- and long-term safety and efficacy of Comirnaty. We are also studying vaccinesmonovalent, bivalent and variant-adapted vaccine candidates to potentially help prevent COVID-19 caused by new and emerging variants or an updatedof concern, as well as a next-generation mRNA vaccine as needed.candidate.
◦The companies have entered into agreements to supply pre-specified doses of Comirnaty in 2022 with multiple developed and emerging countries around the world and are continuing to deliver doses of Comirnaty to governments under such
agreements. We also signed agreements with multiple countries to supply Comirnaty doses in 2022 and beyond2023 and are currently negotiating similar potential agreements with multiple other countries.
◦As of November 2, 2021,countries as well. Additionally, we forecasted approximately $36.0 billion in revenues in 2021 fromwill continue our efforts to help ensure equitable access to Comirnaty with gross profit to be split evenly with BioNTech, reflecting approximately 2.3 billion doses that are expected to be delivered in fiscal 2021 based on expected ordering patterns through the end of December 2021 for the U.S. and through the end of November 2021 for the rest of the world. Pfizer and BioNTech continue to expect to manufacture 3 billion doses in total by the end of December 2021. The difference between the number of doses expected to contribute to 2021 revenues versus the number of doses expected to be manufactured by year-end relates to anticipated international deliveries in December 2021, which will be recorded as revenue in 2022 due to our international fiscal calendar, and, to a lesser extent, doses expected to be produced but not yet delivered as of December 31, 2021. We anticipate delivering at least two billion doses to low- and middle-income countries by the end of 2022 - at least countries—one billion to beof which were delivered in 2021 and one billionapproximately 460 million of which were delivered in 2022, with the possibilityfirst half of 2022. Certain of the aforementioned doses to increase those deliveries if more orderslow- and middle-income countries are placed by these countries for 2022. One billion of these doses will bebeing supplied to the U.S. government at a not-for-profit price to be donated to the world’s poorest nations at no chargenations.
◦As of July 28, 2022, we forecasted approximately $32 billion of revenues for Comirnaty in 2022, with gross profit to those countries.be split evenly with BioNTech, which includes doses expected to be delivered in fiscal 2022, primarily under contracts signed as of mid-July 2022.
•COVID-19 Protease InhibitorsPaxlovid:
◦In JulyDecember 2021, the FDA authorized the emergency use of Paxlovid, a novel oral COVID-19 treatment, for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients (12 years of age and older weighing at least 40 kg [88 lbs]) with positive results of direct SARS-CoV-2 viral testing, and who are at high risk for progression to severe COVID-19, including hospitalization or death. Paxlovid has been granted an authorization or approval in many other countries. In June 2022, we initiatedsubmitted an NDA to the PhaseFDA for approval of Paxlovid for the treatment of COVID-19 in both vaccinated and unvaccinated individuals who are at high risk for progression to severe illness from COVID-19 consistent with the current EUA. For additional information, see the Product Developments section of this MD&A.
◦We continue to evaluate Paxlovid in other populations, including in non-hospitalized, symptomatic, pediatric patients with a confirmed diagnosis of COVID-19 who are at risk of progression to severe disease (Phase 2/3 EPIC-HRstudy, EPIC-PEDS (Evaluation of Protease Inhibition for COVID-19 in High-RiskPediatric Patients)). We also plan to study Paxlovid in those who are immunocompromised, hospitalized with severe COVID-19 and at increased risk for poor outcomes due to evaluate the efficacy, safety and tolerabilitydisease, or who are pregnant. In June 2022, we announced that due to a very low rate of Paxlovid (PF-07321332; ritonavir), an investigational, novel oral antiviral therapeutic for COVID-19, which is a SARS-CoV2-3CL protease inhibitor and is co-administered with a low dose of ritonavir,hospitalization or death observed in non-hospitalized, high-risk adult participants with COVID-19.In August 2021,the standard-risk patient population, we initiatedceased enrollment into the pivotal Phase 2/3 EPIC-SR (Evaluation of Protease Inhibition for COVID-19 in Standard-Risk Patients) study to evaluateevaluating the use of Paxlovid (PF-07321332; ritonavir) in patients with a confirmed diagnosis of SARS-CoV-2 infection who are at standard risk (i.e., low risk of hospitalization or death). In September 2021, we initiatedfor developing severe COVID-19. Pfizer had previously announced that the Phase 2/3 EPIC-PEP (Evaluation of Protease Inhibitionprimary endpoint for COVID-19 in Post-Exposure Prophylaxis) study to evaluate Paxlovid (PF-07321332; ritonavir) for the prevention of COVID-19 infection in adults living in the same household as someone with a confirmed COVID-19 infection. In November 2021, Pfizer announced the scheduled interim analysis of EPIC-HR, which showed an 89% reduction in risk of COVID-19-related hospitalization or death from any cause compared to placebo in patients treated within three days of symptom onset (primary endpoint). Pfizer plans to submit the data as part of its ongoing rolling submission to the FDA for EUA as soon as possible. EPIC-SR was not met.
◦We have also entered into agreements to supply pre-specified courses of treatmentPaxlovid to multiple countries, such as the U.S. and U.K., as well as an agreement with several countries and are currently in negotiations with other marketsUNICEF to supply low- and middle-income countries. Through the product, if authorized or approved.first half of 2022, we produced 30 million treatment courses, and we have capacity to meet the demand for Paxlovid in a flexible manner going forward.
◦In September 2021, the National InstituteAs of Allergy and Infectious Disease initiated a studyJuly 28, 2022, we forecasted approximately $22 billion of our intravenously administered investigational protease inhibitorrevenues for COVID-19, PF-07304814,Paxlovid in 2022, which is a SARS-CoV2-3CL protease inhibitor,includes treatment courses expected to be delivered in adults hospitalized with COVID-19,fiscal 2022, primarily relating to supply contracts signed or committed as part of the National Institutes of Health’s Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV)-3 program.mid-July 2022.
Despite our significant investments and efforts, any of our ongoing development programs related to COVID-19 may not be successful as the risk of failure is significant, and there can be no certainty these efforts will yield a successful product or that costs will ultimately be recouped.
Impact of COVID-19 on Our Business and Operations
As part of our on-going monitoring and assessment, we have made certain assumptions regarding the pandemic for purposes of our operational planning and financial projections, including assumptions regarding the duration, severity and the global macroeconomic impact of the pandemic, as well as COVID-19 vaccine and oral COVID-19 treatment revenues, supply and contracts, which remain dynamic. Despite careful tracking and planning, we are unable to accurately predict the extent of the impact of the pandemic on our business, operations and financial condition and results due to the uncertainty of future developments. We are focused on all aspects of our business and are implementing measures aimed at mitigating issues where possible, including by using digital technology to assist in operations for our commercial, manufacturing, R&D and corporate enabling functions globally.
As discussed in our 20202021 Form 10-K, apart from our introduction of Comirnaty/BNT162b2 and Paxlovid, our business and operations were impacted in 2020 by the pandemic in various ways; certain of those impacts have continued in 2021.2022. For additional detail and discussion on the impact of the COVID-19 pandemic on certain of our products, sales and marketing, supply chain and clinical trials, see the Analysis of the Condensed Consolidated Statements of Income—Revenues by Geographyand and Revenues—Selected Product Discussion sections within this MD&A. In 2021, engagement with healthcare professionals has started to return to pre-pandemic levels&A and we continue to reviewthe Overview of Our Performance, Operating Environment, Strategy and assess epidemiological data to inform in-person engagements with healthcare professionals and to ensureOutlook—The Global Economic Environment—COVID-19 Pandemic section of the safetyMD&A of our colleagues, customers and communities. As part of our commitment to engaging our customers in the manner they prefer, we are also taking a hybrid approach of virtual and in person engagements and are seeing customer response to both approaches. During the pandemic, we adapted our promotional platform by amplifying our digital capabilities to reach healthcare professionals and customers to provide critical education and information, including increasing the scale of our remote engagement. Also, in 2021 we have continued not to see a significant disruption to our supply chain to date, and all of our manufacturing sites globally have continued to operate at or near normal levels. However, we are seeing an increase in overall demand in the industry for certain components and raw materials potentially constraining available supply, which could have a future impact on our business. We are continuing to monitor and implement mitigation strategies in an effort to reduce any potential impact.Form 10-K.
We will continue to pursue efforts to maintain the continuity of our operations while monitoring for new developments related to the pandemic. Future developments could result in additional favorable or unfavorable impacts on our business, operations or financial condition and results. If we experience significant disruption in our manufacturing or supply chains or significant disruptions in clinical trials or other operations, or if demand for our products is significantly reduced as a result of the COVID-19 pandemic, or if demand for our COVID-19 vaccine or oral COVID-19 treatment is reduced or no longer exists, we could experience a material adverse impact on our business, operations and financial condition and results.
For additional information, please see the Item 1A. Risk Factors—COVID-19 Pandemic section and the Overview of Our Performance, Operating Environment, Strategy and Outlook section of the MD&A of our 20202021 Form 10-K.
SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
For a description of our significant accounting policies, see Note 1 in our 20202021 Form 10-K. Of these policies, the following are considered critical to an understanding of our consolidated financial statements as they require the application of the most subjective and the most complex judgments: Acquisitions (Note 1D1E); Fair Value (Note 1E1F); Revenues (Note 1G1H); Asset Impairments (Note 1L1M); Tax Assets and Liabilities and Income Tax Contingencies (Note 1P1Q); Pension and Postretirement Benefit Plans (Note 1Q1R); and Legal and Environmental Contingencies (Note 1R1S).
For a discussion about the critical accounting estimates and assumptions impacting our consolidated financial statements, see the Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions section within MD&A in our 20202021 Form 10-K. See also Note 1C1D in our 20202021 Form 10-K for a discussion about the risks associated with estimates and assumptions.
For a discussion of a recently adopted accounting standard, a change in accounting principle related to our pension and postretirement plans, and significant accounting policies, see NotesNote 1B 1C and. For a discussion of presentation changes for Acquired in-process research and development expenses, see Note 1D.
ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Revenues by Geography
| The following presents worldwide revenues by geography: | The following presents worldwide revenues by geography: | The following presents worldwide revenues by geography: |
| | Three Months Ended | | Three Months Ended |
| | | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national | | | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national |
(MILLIONS) | (MILLIONS) | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 | | % Change in Revenues | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 | | % Change in Revenues |
Operating segments: | | Operating segments: | | | | | | | | | | | | | | |
Biopharma | | Biopharma | | $ | 27,425 | | | $ | 18,463 | | | $ | 11,136 | | | $ | 7,380 | | | $ | 16,289 | | | $ | 11,083 | | | 49 | | | 51 | | | 47 | |
Pfizer CentreOne | | Pfizer CentreOne | | 317 | | | 437 | | | 86 | | | 136 | | | 230 | | | 301 | | | (27) | | | (36) | | | (23) | |
Total revenues | Total revenues | | $ | 24,094 | | | $ | 10,277 | | | $ | 7,079 | | | $ | 5,425 | | | $ | 17,014 | | | $ | 4,852 | | | 134 | | | 30 | | | 251 | | Total revenues | | $ | 27,742 | | | $ | 18,899 | | | $ | 11,222 | | | $ | 7,515 | | | $ | 16,519 | | | $ | 11,384 | | | 47 | | | 49 | | | 45 | |
| | | Nine Months Ended | | Six Months Ended |
| | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national | | Worldwide | | U.S. | | International | | World-wide | | U.S. | | Inter-national |
(MILLIONS) | (MILLIONS) | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 | | % Change in Revenues | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 | | % Change in Revenues |
Operating segments: | | Operating segments: | | | | | | | | | | | | |
Biopharma | | Biopharma | | $ | 52,748 | | | $ | 32,588 | | | $ | 19,952 | | | $ | 14,757 | | | $ | 32,795 | | | $ | 17,830 | | | 62 | | | 35 | | | 84 | |
Pfizer CentreOne | | Pfizer CentreOne | | 655 | | | 827 | | | 188 | | | 288 | | | 467 | | | 539 | | | (21) | | | (35) | | | (13) | |
Total revenues | Total revenues | | $ | 57,653 | | | $ | 30,224 | | | $ | 22,269 | | | $ | 15,827 | | | $ | 35,384 | | | $ | 14,396 | | | 91 | | | 41 | | | 146 | | Total revenues | | $ | 53,402 | | | $ | 33,415 | | | $ | 20,140 | | | $ | 15,046 | | | $ | 33,262 | | | $ | 18,369 | | | 60 | | | 34 | | | 81 | |
Second Quarter of 20212022 vs. ThirdSecond Quarter of 20202021
| | | | | | | | | | | | | | | | | | | | |
The following provides an analysis of the worldwide change in revenues by geographic areas in the third quarter of 2021: |
| | Three Months Ended October 3, 2021 |
(MILLIONS) | | Worldwide | | U.S. | | International |
Operational growth/(decline): | | | | | | |
Growth from Comirnaty, Eliquis, Vyndaqel/Vyndamax, Inlyta, Xtandi, Ibrance outside the U.S., Biosimilars and the Hospital therapeutic area, partially offset by declines from Prevnar family and Xeljanz. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | $ | 13,695 | | | $ | 1,877 | | | $ | 11,818 | |
Lower revenues for Chantix/Champix, Sutent and Enbrel: •The decrease in Chantix/Champix was driven by the voluntary recall across multiple markets and the global pause in shipments of Chantix due to the presence of N-nitroso-varenicline above an acceptable level of intake set by various global regulators, the ultimate timing for resolution of which may vary by country •The decrease in Sutent primarily reflects lower volume demand in the U.S. resulting from its loss of exclusivity in August 2021 •The decrease for Enbrel internationally primarily reflects continued biosimilar competition, which is expected to continue | | (319) | | | (220) | | | (99) | |
Other operational factors, net | | 19 | | | (3) | | | 22 | |
Operational growth/(decline), net | | 13,395 | | | 1,654 | | | 11,741 | |
| | | | | | |
Favorable impact of foreign exchange | | 421 | | | — | | | 421 | |
Revenues increase/(decrease) | | $ | 13,817 | | | $ | 1,654 | | | $ | 12,162 | |
| | | | | | | | | | | | | | | | | | | | |
The following provides an analysis of the change in worldwide revenues by geographic areas in the second quarter of 2022: |
| | Three Months Ended July 3, 2022 |
(MILLIONS) | | Worldwide | | U.S. | | International |
Operational growth/(decline): | | | | | | |
Worldwide growth from Paxlovid, Comirnaty, Eliquis, Prevnar family, Vyndaqel/Vyndamax, Inlyta and Biosimilars, partially offset by worldwide declines from Xeljanz, Ibrance and Xtandi. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | $ | 10,486 | | | $ | 3,972 | | | $ | 6,514 | |
Decline from PC1. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | (109) | | | (49) | | | (60) | |
Lower revenues for Chantix/Champix and Sutent: •The decrease in Chantix/Champix was driven by the ongoing global pause in shipments of Chantix due to the presence of N-nitroso-varenicline above an acceptable level of intake set by various global regulators, the ultimate timing for resolution of which may vary by country •The decrease for Sutent primarily reflects lower volume demand in the U.S. and Europe following its loss of exclusivity in August 2021 and January 2022, respectively | | (273) | | | (177) | | | (97) | |
Other operational factors, net | | (1) | | | (39) | | | 37 | |
Operational growth, net | | 10,103 | | | 3,707 | | | 6,395 | |
| | | | | | |
Unfavorable impact of foreign exchange | | (1,260) | | | — | | | (1,260) | |
Revenues increase/(decrease) | | $ | 8,842 | | | $ | 3,707 | | | $ | 5,135 | |
Emerging markets revenues increased $4.4$2.2 billion, or 227%58%, in the thirdsecond quarter of 20212022 to $6.3$6.0 billion from $1.9$3.8 billion in the thirdsecond quarter of 2020,2021, reflecting an operational increase of $4.3$2.4 billion, or 222%63%, and a favorablean unfavorable impact from foreign exchange of approximately 5%6%. The operational increase in emerging markets was primarily driven by revenuesgrowth from Comirnaty and growth from certain products in the Hospital therapeutic area and Eliquis.
First NineSix Months of 2022 vs. First Six Months of 2021 vs. First Nine Months of 2020
| The following provides an analysis of the worldwide change in revenues by geographic areas in the first nine months of 2021: | |
The following provides an analysis of the worldwide change in revenues by geographic areas in the first six months of 2022: | | The following provides an analysis of the worldwide change in revenues by geographic areas in the first six months of 2022: |
| | Nine Months Ended October 3, 2021 | | Six Months Ended July 3, 2022 |
(MILLIONS) | (MILLIONS) | | Worldwide | | U.S. | | International | (MILLIONS) | | Worldwide | | U.S. | | International |
Operational growth/(decline): | Operational growth/(decline): | | | | | | | Operational growth/(decline): | | | | | | |
Growth from Comirnaty, Eliquis, Vyndaqel/Vyndamax, Inlyta, Xtandi, Ibrance outside the U.S., Biosimilars and the Hospital therapeutic area, partially offset by declines from Prevnar family and Xeljanz. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | $ | 26,647 | | | $ | 6,776 | | | $ | 19,871 | | |
Lower revenues for Chantix/Champix, Enbrel and Sutent: •The decrease in Chantix/Champix was driven by the voluntary recall across multiple markets and the global pause in shipments of Chantix due to the presence of N-nitroso-varenicline above an acceptable level of intake set by various global regulators, the ultimate timing for resolution of which may vary by country and the negative impact of the COVID-19 pandemic resulting in a decline in patient visits to doctors for preventive health purposes •The decrease for Enbrel internationally primarily reflects continued biosimilar competition, which is expected to continue •The decrease in Sutent primarily reflects lower volume demand in the U.S. resulting from its loss of exclusivity in August 2021, as well as continued erosion as a result of increased competition in certain international developed markets | | (562) | | | (320) | | | (241) | | |
Worldwide growth from Comirnaty, Paxlovid, Eliquis, Prevnar family, Vyndaqel/Vyndamax, Inlyta and Biosimilars, partially offset by worldwide declines from Xeljanz, Ibrance and Xtandi. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | Worldwide growth from Comirnaty, Paxlovid, Eliquis, Prevnar family, Vyndaqel/Vyndamax, Inlyta and Biosimilars, partially offset by worldwide declines from Xeljanz, Ibrance and Xtandi. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | $ | 22,854 | | | $ | 5,736 | | | $ | 17,117 | |
Decline from PC1. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | Decline from PC1. See the Analysis of the Condensed Consolidated Statements of Income––Revenues––Selected Product Discussion within MD&A for additional analysis | | (152) | | | (100) | | | (52) | |
Lower revenues for Chantix/Champix and Sutent: •The decrease in Chantix/Champix was driven by the ongoing global pause in shipments of Chantix due to the presence of N-nitroso-varenicline above an acceptable level of intake set by various global regulators, the ultimate timing for resolution of which may vary by country •The decrease for Sutent primarily reflects lower volume demand in the U.S. and Europe following its loss of exclusivity in August 2021 and January 2022, respectively | | Lower revenues for Chantix/Champix and Sutent: •The decrease in Chantix/Champix was driven by the ongoing global pause in shipments of Chantix due to the presence of N-nitroso-varenicline above an acceptable level of intake set by various global regulators, the ultimate timing for resolution of which may vary by country •The decrease for Sutent primarily reflects lower volume demand in the U.S. and Europe following its loss of exclusivity in August 2021 and January 2022, respectively | | (568) | | | (381) | | | (187) | |
Other operational factors, net | Other operational factors, net | | 2 | | | (14) | | | 15 | | Other operational factors, net | | (108) | | | (160) | | | 53 | |
Operational growth/(decline), net | Operational growth/(decline), net | | 26,087 | | | 6,442 | | | 19,644 | | Operational growth/(decline), net | | 22,026 | | | 5,094 | | | 16,931 | |
| Favorable impact of foreign exchange | | 1,342 | | | — | | | 1,342 | | |
Unfavorable impact of foreign exchange | | Unfavorable impact of foreign exchange | | (2,038) | | | — | | | (2,038) | |
Revenues increase/(decrease) | Revenues increase/(decrease) | | $ | 27,429 | | | $ | 6,442 | | | $ | 20,987 | | Revenues increase/(decrease) | | $ | 19,988 | | | $ | 5,094 | | | $ | 14,893 | |
Emerging markets revenues increased $6.9$6.7 billion, or 116%102%, in the first ninesix months of 20212022 to $12.9$13.4 billion from $6.0$6.6 billion in the first ninesix months of 2020,2021, reflecting an operational increase of $6.7$7.2 billion, or 113%108%, and a favorablean unfavorable impact from foreign exchange of approximately 3%7%. The operational increase in emerging markets was primarily driven by revenuesgrowth from Comirnaty and growth from certain products in the Hospital therapeutic area and Eliquis.Paxlovid.
Revenue Deductions
––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. These deductions represent estimates of related obligations and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on gross sales for a reporting period. Historically, adjustments to these estimates to reflect actual results or updated expectations, have not been material to our overall business and generally have been less than 1% of revenues. Product-specific rebates, however, can have a significant impact on year-over-year individual product revenue growth trends.
| The following presents information about revenue deductions: | The following presents information about revenue deductions: | The following presents information about revenue deductions: |
| | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | September 27, 2020 | | October 3, 2021 | | September 27, 2020 | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | July 3, 2022 | | July 4, 2021 |
Medicare rebates | Medicare rebates | | $ | 175 | | | $ | 163 | | | $ | 546 | | | $ | 489 | | Medicare rebates | | $ | 186 | | | $ | 182 | | | $ | 387 | | | $ | 371 | |
Medicaid and related state program rebates | Medicaid and related state program rebates | | 252 | | | 252 | | | 904 | | | 832 | | Medicaid and related state program rebates | | 225 | | | 306 | | | 466 | | | 652 | |
Performance-based contract rebates | Performance-based contract rebates | | 883 | | | 616 | | | 2,424 | | | 1,886 | | Performance-based contract rebates | | 862 | | | 788 | | | 1,667 | | | 1,541 | |
Chargebacks | Chargebacks | | 1,618 | | | 1,127 | | | 4,567 | | | 3,190 | | Chargebacks | | 1,797 | | | 1,518 | | | 3,534 | | | 2,949 | |
Sales allowances | Sales allowances | | 1,218 | | | 904 | | | 3,575 | | | 2,790 | | Sales allowances | | 1,367 | | | 1,211 | | | 2,571 | | | 2,354 | |
Sales returns and cash discounts | Sales returns and cash discounts | | 267 | | | 229 | | | 727 | | | 668 | | Sales returns and cash discounts | | 328 | | | 235 | | | 598 | | | 459 | |
Total | Total | | $ | 4,414 | | | $ | 3,291 | | | $ | 12,743 | | | $ | 9,855 | | Total | | $ | 4,765 | | | $ | 4,240 | | | $ | 9,223 | | | $ | 8,326 | |
Revenue deductions are primarily a function of product sales volume, mix of products sold, contractual or legislative discounts and rebates.
For information on our accruals for revenue deductions, including the balance sheet classification of these accruals, see Note 1D.1C.
Revenues––Selected Product Discussion
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | | | Revenue | | % Change | | |
Product | | Period | | Global Revenues | | Region | | Oct. 3, 2021 | | Sept. 27, 2020 | | Total | | Oper. | | Operational Results Commentary |
Comirnaty(a) | | QTD | | $12,977
* | | U.S. | | $ | 1,586 | | | $ | — | | | * | | | | Driven by global uptake, following a growing number of regulatory approvals and temporary authorizations. |
Int’l. | | 11,391 | | | — | | | * | | * | |
Worldwide | | $ | 12,977 | | | $ | — | | | * | | * | |
YTD | $24,277
* | U.S. | | $ | 5,657 | | | $ | — | | | * | | | |
Int’l. | | 18,619 | | | — | | | * | | * | |
Worldwide | | $ | 24,277 | | | $ | — | | | * | | * | |
Eliquis | QTD | $1,346
Up 19%
(operationally) | U.S. | | $ | 629 | | | $ | 557 | | | 13 | | | | | Global growth driven primarily by continued increased adoption in non-valvular atrial fibrillation and oral anti-coagulant market share gains. YTD was also impacted by a favorable adjustment related to the Medicare “coverage gap” provision resulting from lower than previously expected discounts in prior periods. |
Int’l. | | 717 | | | 557 | | | 29 | | | 25 | | |
Worldwide | | $ | 1,346 | | | $ | 1,114 | | | 21 | | | 19 | | |
YTD | $4,470
Up 19%
(operationally) | U.S. | | $ | 2,440 | | | $ | 2,084 | | | 17 | | | | |
Int’l. | | 2,030 | | | 1,602 | | | 27 | | | 21 | | |
Worldwide | | $ | 4,470 | | | $ | 3,686 | | | 21 | | | 19 | | |
Ibrance | QTD | $1,381
Up 1% (operationally) | U.S. | | $ | 883 | | | $ | 909 | | | (3) | | | | | Growth driven primarily by accelerating demand internationally as the delays in diagnosis and treatment initiations caused by COVID-19 show signs of recovery across several international markets, partially offset by a decline in the U.S., driven by an increase in the proportion of patients accessing Ibrance through our Patient Assistance Program. |
Int’l. | | 498 | | | 448 | | | 11 | | | 9 | | |
Worldwide | | $ | 1,381 | | | $ | 1,357 | | | 2 | | | 1 | | |
YTD | $4,039
Up 1%
(operationally) | U.S. | | $ | 2,539 | | | $ | 2,689 | | | (6) | | | | |
Int’l. | | 1,500 | | | 1,266 | | | 18 | | | 14 | | |
Worldwide | | $ | 4,039 | | | $ | 3,955 | | | 2 | | | 1 | | |
Prevnar family | QTD | $1,447
Down 7%
(operationally) | U.S. | | $ | 850 | | | $ | 868 | | | (2) | | | | | Decline primarily resulting from: •continued impact of the lower remaining unvaccinated eligible adult population in the U.S. and the June 2019 change to the ACIP recommendation for the Prevnar 13 adult indication to shared clinical decision-making; and •the adult indication in the U.S. due to the ongoing prioritization of primary and booster vaccination campaigns for COVID-19 by U.S. health authorities, and a later start to the flu season compared to the prior year. This decline was partially offset by: •U.S. growth in the pediatric indication, driven by government purchasing patterns. YTD was also impacted by: •a decline, primarily in developed Europe, reflecting significantly increased adult demand in the prior year in Germany and certain other markets resulting from greater vaccine awareness for respiratory illnesses due to the COVID-19 pandemic. |
Int’l. | | 596 | | | 665 | | | (10) | | | (13) | |
Worldwide | | $ | 1,447 | | | $ | 1,534 | | | (6) | | | (7) | |
YTD | $3,971
Down 4%
(operationally) | U.S. | | $ | 2,130 | | | $ | 2,143 | | | (1) | | | | |
Int’l. | | 1,841 | | | 1,957 | | | (6) | | | (8) | | |
Worldwide | | $ | 3,971 | | | $ | 4,100 | | | (3) | | | (4) | | |
Biopharma | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | | | | | Revenue | | % Change | | |
Product | | Period | | Global Revenues | | Region | | July 3, 2022 | | July 4, 2021 | | Total | | Oper. | | Operational Results Commentary |
Comirnaty(a) | | QTD | | $8,848
Up 20%
(operationally) | | U.S. | | $ | 1,080 | | | $ | 2,034 | | | (47) | | | | | Driven by strong operational growth in international markets, led by increased sales of doses to serve emerging markets and increased deliveries to certain international developed markets, partially offset by a slower pace of deliveries to the U.S. and Canada. |
Int’l. | | 7,768 | | | 5,804 | | | 34 | | | 43 | |
Worldwide | | $ | 8,848 | | | $ | 7,838 | | | 13 | | | 20 | |
YTD | $22,075
* (operationally) | U.S. | | $ | 3,395 | | | $ | 4,072 | | | (17) | | | | |
Int’l. | | 18,681 | | | 7,228 | | | * | | * | |
Worldwide | | $ | 22,075 | | | $ | 11,300 | | | 95 | | | * | |
Paxlovid | QTD | $8,115
*
| U.S. | | $ | 4,455 | | | $ | — | | | * | | | | Driven by the U.S. launch under emergency use authorization in December 2021 and international launches in late 2021 and early 2022 following regulatory approvals or emergency use authorizations. |
Int’l. | | 3,660 | | — | | | * | | * | |
Worldwide | | $ | 8,115 | | $ | — | | | * | | * | |
YTD | $9,585
*
| U.S. | | $ | 5,470 | | | $ | — | | | * | | | |
Int’l. | | 4,115 | | | — | | | * | | * | |
Worldwide | | $ | 9,585 | | | $ | — | | | * | | * | |
Eliquis | QTD | $1,745
Up 23%
(operationally) | U.S. | | $ | 1,064 | | | $ | 831 | | | 28 | | | | | Global growth driven primarily by continued oral anti-coagulant adoption and market share gains in non-valvular atrial fibrillation, particularly in the U.S. and certain markets in Europe, as well as favorable changes in channel mix in the U.S.
In addition, YTD performance was negatively impacted by the non-recurrence of an $80 million favorable adjustment related to the Medicare “coverage gap” provision recorded in the first quarter of 2021. |
Int’l. | | 681 | | | 650 | | | 5 | | | 16 | |
Worldwide | | $ | 1,745 | | | $ | 1,481 | | | 18 | | | 23 | |
YTD | $3,537
Up 17%
(operationally) | U.S. | | $ | 2,144 | | | $ | 1,812 | | | 18 | | | | |
Int’l. | | 1,394 | | | 1,312 | | | 6 | | | 15 | | |
Worldwide | | $ | 3,537 | | | $ | 3,124 | | | 13 | | | 17 | | |
Prevnar family | QTD | $1,429
Up 18%
(operationally) | U.S. | | $ | 906 | | | $ | 642 | | | 41 | | | | | Growth primarily driven by the adult indications in the U.S. due to strong stocking and patient demand following the launch of Prevnar 20 for the adult population, partially offset by unfavorable timing of government and private purchasing of Prevnar 13 for the pediatric indication globally.
In addition, YTD international performance was negatively impacted by competitive pressures in China for the pediatric indication and timing of government purchasing for the adult indication. |
Int’l. | 523 | | 599 | | (13) | | (7) | |
Worldwide | $ | 1,429 | | $ | 1,241 | | 15 | | 18 | |
YTD | $2,994
Up 21%
(operationally) | U.S. | | $ | 1,920 | | | $ | 1,280 | | | 50 | | | | |
Int’l. | | 1,074 | | | 1,244 | | | (14) | | | (10) | | |
Worldwide | | $ | 2,994 | | | $ | 2,524 | | | 19 | | | 21 | | |
Ibrance | QTD | $1,320
Down 3% (operationally) | U.S. | | $ | 868 | | | $ | 862 | | | 1 | | | | | QTD decline primarily driven by prior-year quarter clinical trial purchases in international developed markets, partially offset by modest growth in the U.S. despite continued increase in the proportion of patients accessing Ibrance through the Patient Assistance Program.
YTD decline largely due to a continued increase in the proportion of patients accessing Ibrance through the U.S. Patient Assistance Program and prior-year quarter clinical trial purchases in international developed markets, partially offset by higher volumes in emerging markets. |
Int’l. | | 452 | | 542 | | | (17) | | | (8) | |
Worldwide | | $ | 1,320 | | $ | 1,404 | | | (6) | | | (3) | |
YTD | $2,557
Down 1%
(operationally) | U.S. | | $ | 1,621 | | | $ | 1,656 | | | (2) | | | | |
Int’l. | | 936 | | | 1,002 | | | (7) | | | 1 | | |
Worldwide | | $ | 2,557 | | | $ | 2,657 | | | (4) | | | (1) | | |
Vyndaqel/ Vyndamax | QTD | $552
Up 16%
(operationally) | U.S. | | $ | 296 | | | $ | 225 | | | 32 | | | | | Growth largely driven by continued strong uptake of the ATTR-CM indication, primarily in developed Europe and the U.S., partially offset by a planned price decrease which recently went into effect in Japan. |
Int’l. | | 256 | | 276 | | | (7) | | | 3 | | |
Worldwide | | $ | 552 | | $ | 501 | | | 10 | | | 16 | | |
YTD | | $1,164
Up 28%
(operationally) | | U.S. | | $ | 561 | | | $ | 430 | | | 30 | | | | |
| Int’l. | | 603 | | | 523 | | | 15 | | | 26 | | |
| Worldwide | | $ | 1,164 | | | $ | 953 | | | 22 | | | 28 | | |
Xeljanz | QTD | | $430
Down 24%
(operationally) | | U.S. | | $ | 254 | | | $ | 390 | | | (35) | | | | | Driven primarily by declines in net price due to unfavorable changes in channel mix, decreased prescription volumes globally resulting from ongoing shifts in prescribing patterns related to JAK class label changes, and unfavorable wholesaler inventory buying patterns in the U.S. |
| Int’l. | 176 | | 195 | | | (10) | | | (2) | |
| Worldwide | $ | 430 | | $ | 586 | | | (27) | | | (24) | |
YTD | $802
Down 26%
(operationally) | | U.S. | | $ | 457 | | | $ | 722 | | | (37) | | | | |
| Int’l. | | 345 | | | 402 | | | (14) | | | (8) | | |
| Worldwide | | $ | 802 | | | $ | 1,124 | | | (29) | | | (26) | | |
| (MILLIONS) | (MILLIONS) | | Revenue | | % Change | | (MILLIONS) | | Revenue | | % Change | |
Product | Product | | Period | | Global Revenues | | Region | | Oct. 3, 2021 | | Sept. 27, 2020 | | Total | | Oper. | | Operational Results Commentary | Product | | Period | | Global Revenues | | Region | | July 3, 2022 | | July 4, 2021 | | Total | | Oper. | | Operational Results Commentary |
Xeljanz | | QTD | | $610
Down 7%
(operationally) | | U.S. | | $ | 410 | | | $ | 469 | | | (13) | | | Decline driven by the U.S., reflecting the negative impact of a review by the FDA which resulted in a Drug Safety Communication related to Xeljanz and two competitors’ arthritis medicines in the same drug class, as well as an unfavorable change in channel mix toward lower-priced channels and continued investments to improve formulary positioning and unlock access to additional patient lives. This decline was partially offset by operational growth internationally mainly driven by continued uptake in the UC indication in certain developed markets. | |
Int’l. | 201 | | | 185 | | | 8 | | | 7 | | | |
Worldwide | $ | 610 | | | $ | 654 | | | (7) | | | (7) | | | |
YTD | td,734
Down 1%
(operationally) | U.S. | | $ | 1,132 | | | $ | 1,213 | | | (7) | | | | |
| | 602 | | | 528 | | | 14 | | | 11 | | | |
| $ | 1,734 | | | $ | 1,741 | | | — | | (1) | | | |
Vyndaqel/ Vyndamax | QTD | $501
Up 42%
(operationally) | U.S. | $ | 228 | | | $ | 158 | | | 44 | | | | | Growth primarily driven by continued strong uptake of the ATTR-CM indication in the U.S., developed Europe and Japan. | |
| | | 193 | | 41 | | 40 | | |
| $ | 351 | | 43 | | 42 | | |
| $ | 658 | | $ | 431 | | | 53 | | | | |
| 429 | | | 86 | | | 78 | | | |
$ | 859 | | | 69 | | | 66 | | | |
Xtandi | Xtandi | $ | 266 | | | 16 | | | | | Growth primarily driven by strong demand across the mCRPC, nmCRPC and mCSPC indications. | Xtandi | | QTD | | td90
Down 4%
(operationally) | | U.S. | | $ | 290 | | | $ | 303 | | | (4) | | | Decline largely due to channel mix and fluctuating enrollment rates in the Xtandi Patient Assistance Program, partially offset by recent demand growth and an increase in new patient starts across the mCRPC, nmCRPC, and mCSPC indications. |
— | | — | Int’l. | | — | | | — | | | — | | — | |
$ | 266 | | 16 | | 16 | | Worldwide | | $ | 290 | | | $ | 303 | | | (4) | | | (4) | | |
$ | 741 | | | 19 | | | | YTD | $558
Down 2%
(operationally) | U.S. | | $ | 558 | | | $ | 570 | | | (2) | | | | |
— | | | — | | — | | | | — | | | — | | | — | | — | |
$ | 741 | | | 19 | | | 19 | | | | $ | 558 | | | $ | 570 | | | (2) | | | (2) | | |
Inlyta | Inlyta | $ | 124 | | | 22 | | | Growth primarily reflects continued adoption in the U.S. and developed Europe of combinations of certain immune checkpoint inhibitors and Inlyta for the first-line treatment of patients with advanced RCC. | Inlyta | QTD | td74
Up 11%
(operationally) | U.S. | $ | 162 | | | $ | 155 | | | 5 | | | | | Growth primarily reflects continued adoption in emerging markets and developed Europe of combinations of certain immune checkpoint inhibitors and Inlyta for the first-line treatment of patients with advanced RCC. |
71 | | | 47 | | | 43 | | | | | | 102 | | | 9 | | | 20 | |
$ | 195 | | | 31 | | | 30 | | | | $ | 257 | | | 6 | | | 11 | |
$ | 372 | | | 20 | | | | | $ | 302 | | $ | 296 | | | 2 | | | | |
187 | | | 57 | | | 51 | | | | 190 | | | 8 | | | 17 | | |
$ | 559 | | | 33 | | | 31 | | | $ | 486 | | | 4 | | | 8 | | |
Biosimilars | Biosimilars | $ | 260 | | | 50 | | | Growth primarily driven by recent oncology monoclonal antibody biosimilar launches and continued growth from Retacrit in the U.S. | Biosimilars | $ | 363 | | | 10 | | | | | Growth mainly driven by oncology biosimilars primarily due to strong U.S. growth of Zirabev and Retacrit.
In addition, YTD performance was negatively impacted by decreases in Inflectra globally as a result of competitive pressures for certain biosimilars. |
164 | | | 13 | | | 9 | | | 195 | | | (8) | | | (1) | |
$ | 424 | | | 36 | | | 34 | | | $ | 559 | | | 4 | | | 7 | |
$ | 588 | | | 84 | | | | | | $ | 691 | | | 21 | | | |
414 | | | 41 | | | 32 | | | 398 | | | (13) | | | (6) | | |
$ | 1,001 | | | 66 | | | 62 | | | $ | 1,089 | | | 9 | | | 11 | | |
Hospital | $ | 765 | | | 7 | | | Growth primarily driven by Pfizer CentreOne, our contract manufacturing operation, reflecting certain Comirnaty-related manufacturing activities performed on behalf of BioNTech and manufacturing of legacy Upjohn products for Viatris under manufacturing and supply agreements, as well as growth from international markets, primarily driven by the anti-infectives portfolio. | |
1,025 | | | 51 | | | 46 | | | |
$ | 1,790 | | | 32 | | | 29 | | | |
$ | 2,485 | | | 3 | | | |
3,256 | | | 36 | | | 30 | | | |
$ | 5,741 | | | 21 | | | 18 | | | |
Pfizer CentreOne
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(MILLIONS) | | | | | | | | Revenue | | % Change | | |
Operating Segment | | Period | | Global Revenues | | Region | | July 3, 2022 | | July 4, 2021 | | Total | | Oper. | | Operational Results Commentary |
PC1 | | QTD | | $317
Down 25%
(operationally) | | U.S. | | $ | 86 | | | $ | 136 | | | (36) | | | | | Decline primarily driven by lower manufacturing of divested products under manufacturing and supply agreements and lower COVID-19 manufacturing activities performed on behalf of customers, including, with respect to the second quarter, Comirnaty supply to BioNTech. |
| Int’l. | 230 | | | 301 | | | (23) | | | (20) | | |
| Worldwide | $ | 317 | | | $ | 437 | | | (27) | | | (25) | | |
| YTD | | $655
Down 18%
(operationally) | | U.S. | | $ | 188 | | | $ | 288 | | | (35) | | | | |
Int’l. | | 467 | | | 539 | | | (13) | | | (10) | | |
| Worldwide | | $ | 655 | | | $ | 827 | | | (21) | | | (18) | | |
(a)Comirnaty includes direct sales and alliance revenues related to sales of the Pfizer-BioNTech COVID-19 vaccine, which are recorded within our Vaccines therapeutic area. It does not include revenues for certain Comirnaty-related manufacturing activities performed on behalf of BioNTech, which are included in the Pfizer CentreOnePC1 contract development and manufacturing operation within the Hospital area.operation. Revenues related to these manufacturing activities totaled $187$55 million and $274$101 million for the thirdsecond quarter and the first ninesix months of 2021, respectively.2022, respectively, and $87 million for both the second quarter and the first six months of 2021.
* Calculation isIndicates calculation not meaningful or results are equal to or greater than 100%.meaningful.
See the Item 1. Business—Patents and Other Intellectual Property Rights section of our 20202021 Form 10-K for information regarding the expiration of various patent rights, Note 12 for a discussion of recent developments concerning patent and product litigation relating to certain of the products discussed above, and Note 13B13C for information regarding the primary indications or class of the selected products discussed.
Product Developments
A comprehensive update of Pfizer’s development pipeline was published as of November 2, 2021July 28, 2022 and is available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of our research and a list of compounds in
development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.
The following provides information as of the date of this filing about significant marketing application-related regulatory actions by, and filings pending with, the FDA and regulatory authorities in the EU and Japan.
The table below includes only approvals for products that have occurred in the last twelve months and generally does not include approvals that may have occurred prior to that time. The table includes filings with regulatory decisions pending (even if the filing occurred outside of the last twelve-month period).
| | | | | | | | | | | | | | |
PRODUCT | DISEASE AREA | APPROVED/FILED* |
U.S. | EU | JAPAN |
Comirnaty/BNT162b2 (PF-07302048)(a) | Immunization to prevent COVID-19 (16 years of age and older) | BLA Aug. 2021 | CMA Dec. 2020 | Approved Feb. 2021 |
Immunization to prevent COVID-19 (12-15 years of age) | EUAsBLA
MayJuly
20212022
| CMA May 2021 | Approved May 2021 |
Immunization to prevent COVID-19 (booster, adults)(booster) | EUA Sep. 2021 | CMA Oct. 2021 | Approved Nov. 2021 |
Immunization to prevent COVID-19 (5-11 years of age) | EUA Oct. 2021 | Filed
Oct.
2021
| FiledCMA
Nov. 2021 |
Bavencio
(avelumab)(b)
| First-line maintenance urothelial cancer |
| Approved Jan. 2021
| Approved
Feb.
20212022
|
Nyvepria (pegfilgrastim-apgf)Immunization to prevent COVID-19 (6 months through 4 years of age) | Neutropenia in patients undergoing cancer chemotherapy (biosimilar) |
EUA
June 2022 | ApprovedFiled
Nov.July
2020
| |
Braftovi (encorafenib)(c)2022
| Second or third-line BRAFv600E-mutant mCRC (combination with Erbitux® (cetuximab))
|
|
| ApprovedFiled
Nov.July
20202022
|
Braftovi (encorafenib) and Mektovi (binimetinib)(c)
| Second or third-line BRAFV600E-mutant mCRC (combination with Erbitux® (cetuximab))
| | | Approved
Nov.
2020
|
Xtandi
(enzalutamide)(d)
| mCSPC | | Approved
April
2021
|
|
Cibinqo (abrocitinib)(e) | Atopic dermatitis | FiledApproved
Oct.Jan.
20202022
| FiledApproved
Oct.Dec.
20202021
| Approved Sep. 2021 |
Xeljanz (tofacitinib)(e)
| Ankylosing spondylitis | FiledApproved
Aug.Dec.
20202021
| FiledApproved
Feb.Nov.
2021 | |
Myfembree (relugolix fixed dose combination)(f)(b) | Uterine fibroids (combination with estradiol and norethindrone acetate) | Approved May 2021 | | |
Endometriosis (combination with estradiol and norethindrone acetate) | FiledApproved
Sep.Aug.
20212022
| | |
LorbrenaLorbrena/Lorviqua
(lorlatinib) | First- lineFirst-line ALK-positive NSCLC | Approved Mar. 2021 | FiledApproved
Feb.Jan.
20212022
| FiledApproved
Dec.Nov.
20202021
|
somatrogonNgenla
(PF-06836922)(somatrogon)(g)(c)
| Pediatric growth hormone deficiency | Filed Jan. 2021 | FiledApproved
Feb. 20212022
| FiledApproved
Jan. 20212022
|
Prevnar 2020/Apexxnar (Vaccine)(h)(d) | Immunization to prevent invasive and non-invasive pneumococcal infections (adults) | Approved June 2021 | FiledApproved
Feb. 20212022
| |
TicoVac (Vaccine) | Immunization to prevent tick-borne encephalitis | Approved Aug. 2021 | | |
Paxlovid(e)(nirmatrelvir [PF-07321332]; ritonavir) | COVID-19 infection (high risk population) | EUA Dec. 2021 | CMA Jan. 2022 | Approved Feb. 2022 |
Vydura (rimegepant)(f) | Acute migraine | | Approved Apr. 2022 | |
Migraine prevention | | Approved Apr. 2022 | |
*For the U.S., the filing date is the date on which the FDA accepted our submission. For the EU, the filing date is the date on which the EMA validated our submission.
(a)Being developed in collaboration with BioNTech. Prior to BLA, Comirnaty/BNT162b2 for ages 16 and up was available pursuant to an EUA fromis approved by the FDA on December 11, 2020. A booster dose received EUA from the FDA on September 22, 2021 for individuals 6512 years and older (30-µg, 2-dose primary series) and is FDA authorized to provide: (i) a 3-µg, 3-dose primary series to individuals 6 months through 4 years of age, (ii) a 10-µg, 2-dose primary series to individuals 5-11 years of age, (iii) a third 10-µg primary series dose to individuals 5-11 years of age with certain kinds of immunocompromise, (iv) a 30-µg, 2-dose primary series to individuals 12 years of age and older, (iv) a third 30-µg primary series dose to individuals 18 through 6412 years of age at high riskand older with certain kinds of severe COVID-19, andimmunocompromise, (v) a single 10-µg booster dose to individuals 18 through 645-11 years of age who have completed a primary series with frequent institutional or occupational exposure to SARS-CoV-2. In addition, in October 2021, the FDA authorized for emergency useComirnaty/BNT162b2, (vi) a 30-µg, first booster dose to eligible individuals 12 years of age and older who have completed a primary series with Comirnaty/BNT162b2, (vii) a 30-µg, first booster dose to individuals 18 years of age and older who have completed primary vaccination with a different authorized or approved COVID-19 vaccine (booster schedule based on labeling information of vaccine used for primary series), (viii) a 30-µg, second booster dose to individuals 50 years of age and older who have received a first booster dose of any authorized or approved COVID-19 vaccine and (ix) a 30-µg, second booster dose to individuals 12 years of age and older with certain kinds of immunocompromise and who have received a first booster dose of any authorized or approved COVID-19 vaccine. AComirnaty/BNT162b2 has been granted CMA by the EC to prevent COVID-19 in people aged 5 years and older. The vaccine is administered as a 2-dose series, 3 weeks apart. Adults and adolescents from the age of 12 are given 30-µg per dose; children aged 5 to 11 years are given 10-µg per dose. In addition, the CMA has been expanded to include a booster dose received conditional marketing authorization from(third dose) at least 3 months after the second dose in individuals 12 years of age and older. A third primary course dose may be administered at least 28 days after the second dose to people aged 5 years and older with a severely weakened immune system. In July 2022, Pfizer and BioNTech completed a submission to the EMA for an Omicron-adapted bivalent COVID-19 vaccine candidate, based on October 5, 2021 and approval in Japan on November 10, 2021the BA.1 sub-lineage, for 18individuals 12 years of age and older. In November 2021, weJapan, Comirnaty/BNT162b2 has been granted exceptional approval by the Ministry of Health, Labour and BioNTech submittedWelfare to prevent infections caused by SARS-CoV-2 in people aged 5 years and older. The vaccine is administered as a request2-dose series, 3 weeks apart. Adults and adolescents from the age of 12 are given 30-µg per dose; children aged 5 to 11 years are given 10-µg per dose. In addition, the FDAexceptional approval has been expanded to amend the EUA ofinclude a booster dose of Comirnaty/BNT162b2 to include all(third dose) at least 5 months after the second dose in individuals 1812 years of age and older.
(b)Being developed in collaboration with Merck KGaA, Germany.Myovant. In June 2022, the FDA accepted for review a sNDA for Myfembree (relugolix 40 mg, estradiol 1 mg, and norethindrone acetate 0.5 mg) proposing updates to Myfembree’s U.S. Prescribing Information based on safety and efficacy data from the Phase 3 LIBERTY randomized withdrawal study in premenopausal women with heavy menstrual bleeding associated with uterine fibroids for up to two years. The PDUFA goal date for this sNDA is January 29, 2023.
(c)Erbitux® is a registered trademark of ImClone LLC. In the EU, we are developing in collaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono Pharmaceutical Co., Ltd.
(d)Being developed in collaboration with Astellas.
(e)In July 2021, the FDA notified the company that it will not meet the PDUFA goal dates for the New Drug Application for abrocitinib and the supplemental New Drug Application for Xeljanz/Xeljanz XR (tofacitinib). The FDA cited its ongoing review of Pfizer's post-marketing safety study, ORAL Surveillance, evaluating tofacitinib in rheumatoid arthritis patients, as a factor for the extensions.In October 2021, the EMA’s Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending the approval of abrocitinib to treat moderate to severe atopic dermatitis in adults who are candidates for systemic therapy. The CHMP also adopted a positive opinion recommending an extension to the existing indications for Xeljanz (tofacitinib) to include the treatment of adults with active ankylosing spondylitis who have responded inadequately to conventional therapy.
(f)Being developed in collaboration with Myovant.
(g)Being developed in collaboration with OPKO. In January 2022, Pfizer and OPKO received a Complete Response Letter (CRL) from the FDA for the BLA for somatrogon. Discussions are ongoing with the FDA regarding the CRL and how to best address their concerns.
(d)In October 2021, the CDC’s ACIP voted to recommend Prevnar 20 for routine use in adults. Specifically, the ACIP voted to recommend the following: (i) adults 65 years of age or older who have not previously received a pneumococcal conjugate vaccine or whose previous vaccination history is unknown should receive a pneumococcal conjugate vaccine
(either (either pneumococcal 20-valent conjugate vaccine (PCV20) or pneumococcal 15-valent conjugate vaccine (PCV15)). If PCV15 is used, this should be followed by a dose of pneumococcal polysaccharide vaccine (PPSV23); and (ii) adults aged 19 years of age or older with certain underlying medical conditions or other risk factors who have not previously received a pneumococcal conjugate vaccine or whose previous vaccination history is unknown should receive a pneumococcal conjugate vaccine (either PCV20 or PCV15). If PCV15 is used, this should be followed by a dose of PPSV23. The recommendations will be forwarded to the director of the CDC and the U.S. Department of Health and Human Services for review and following approval, the recommendations arewere published in the Morbidity and Mortality Weekly Report.Report on January 28, 2022. The publication also notes “for adults who have received pneumococcal conjugate vaccine (PCV13) but have not completed their recommended pneumococcal vaccine series with PPSV23, one dose of Prevnar 20 may be used if PPSV23 is not available.”
(e)In October 2021, PfizerJanuary 2022, the EMA approved the CMA of Paxlovid for treating COVID-19 in adults who do not require supplemental oxygen and Lilly discontinuedwho are at increased risk of the global clinical development program for tanezumab,disease becoming severe. In June 2022, we announced the submission of an investigational nerve growth factor inhibitor. This decision was made following receipt of a Complete Response Letter fromNDA to the FDA for approval of Paxlovid for the tanezumab applicationtreatment of COVID-19 in osteoarthritis (OA)both vaccinated and unvaccinated individuals who are at high risk for progression to severe illness from COVID-19.
(f)Under a negative opinioncommercialization arrangement with Biohaven.
In December 2021, in light of the results from the completed required postmarketing safety study of Xeljanz, ORAL Surveillance (A3921133), the U.S. label for Xeljanz was revised. In addition, at the request of the EC, the PRAC of the EMA has adopted by the EMA's Committeea referral procedure under Article 20 of Regulation (EC) No 726/2004 to assess safety information relating to oral JAK inhibitors authorized for Medicinal Products for Human Use on inflammatory diseases, including Xeljanz and Cibinqo, which is ongoing. For additional information, see Item 1A. Risk Factors—Post-Authorization/Approval Data andthe tanezumab Marketing Authorization Application in OA. Product Development sections of our 2021 Form 10-K.
In September 2021,China, the FDA issued a Drug Safety Communication (DSC) related to Xeljanz/Xeljanz XR and two competitors’ arthritis medicinesfollowing products received regulatory approvals in the same drug class, based on its completed review of the ORAL Surveillance trial. The DSC stated that the FDA will require revisions to the Boxed Warningslast twelve months: Cresemba for each of these medicines to include information about the risks of serious heart-related events,fungal infection and Besponsa for second line acute lymphoblastic leukemia, both in December 2021; Paxlovid for COVID-19 infection in February 2022; Cibinqo for atopic dermatitis in April 2022; Lorbrena for non-small cell lung cancer blood clots,(first line and death. In addition, the DSC indicates the FDA’s intention to limit approved uses of these products to certain patients who have not responded or cannot tolerate one or more tumor necrosis factor (TNF) blockers.second line therapy) in April 2022.
The following provides information about additional indications and new drug candidates in late-stage development:
| | | | | | | | |
| PRODUCT/CANDIDATE | PROPOSED DISEASE AREA |
LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS FOR IN-LINE AND IN-REGISTRATION PRODUCTS | Bavencio (avelumab)(a)
| First-line NSCLCPRODUCT/CANDIDATE | PROPOSED DISEASE AREA |
| Ibrance (palbociclib)(b)(a) | ER+/HER2+ metastatic breast cancer |
| Xtandi (enzalutamide)(c)(b) | Non-metastatic high-risk castration sensitive prostate cancer |
| Talzenna (talazoparib) | Combination with Xtandi (enzalutamide) for first-line mCRPC |
| Combination with Xtandi (enzalutamide) for DNA Damage Repair (DDR)-deficient mCSPC |
| PF-06482077 (Vaccine) | Immunization to prevent invasive and non-invasive pneumococcal infections (pediatric) |
| somatrogon (PF-06836922)(d)(c) | Adult growth hormone deficiency |
| Braftovi (encorafenib) and Erbitux® (cetuximab)(e)(d) | First-line BRAFv600E-mutant mCRC |
| Myfembree (relugolix fixed dose combination)(f)(e) | Combination with estradiol and norethindrone acetate for contraceptive efficacy |
| Braftovi (encorafenib) and Mektovi (binimetinib) and Keytruda® (pembrolizumab)(g)(f) | BRAFv600E-mutant metastatic or unresectable locally advanced melanoma |
| Paxlovid (nirmatrelvir [PF-07321332]; ritonavir) | ComirnatyCOVID-19 infection (/BNT162b2pediatric)
(PF-07302048)(h)
| Immunization to prevent COVID-19 (children 2 to <5 years of age) |
Immunization to prevent COVID-19 (infants 6 months to <24 months) |
Immunization to prevent COVID-19 (maternal) |
| | |
NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT | | aztreonam-avibactam (PF-06947387) | Treatment of infections caused by Gram-negative bacteria |
| fidanacogene elaparvovec (PF-06838435)(i)(g) | Hemophilia B |
| giroctocogene fitelparvovec (PF-07055480)(j)(h) | Hemophilia A |
| PF-06425090 (Vaccine)(i) | Immunization to prevent primary clostridioides difficile infection |
| PF-06886992 (Vaccine) | Immunization to prevent serogroups meningococcal infection (adolescent and young adults) |
| PF-06928316 (Vaccine) | Immunization to prevent respiratory syncytial virus infection (maternal) |
| Immunization to prevent respiratory syncytial virus infection (older adults) |
PF-07265803 | Dilated cardiomyopathy due to Lamin A/C gene mutation |
ritlecitinib (PF-06651600) | Alopecia areata |
| sasanlimab (PF-06801591) | Combination with Bacillus Calmette-Guerin for non-muscle-invasive bladder cancer |
| fordadistrogene movaparvovec (PF-06939926) | Duchenne muscular dystrophy |
| marstacimab (PF-06741086) | Hemophilia |
| Elranatamabelranatamab (PF-06863135)(j)
| Multiple myeloma triple-class refractory |
Multiple myeloma double-class exposed |
Newly diagnosed multiple myeloma |
| Omicron-based mRNA vaccine(k) | Multiple Myeloma Double-Class ExposedImmunization to prevent COVID-19 (adults) |
| Paxlovid (PF-07321332; ritonavir)Etrasimod (PF-07915503) | Ulcerative colitis (moderately to severely active) |
| COVID-19 Infection (VLA15 (PF-07307405)high risk population)(l)
|
COVID-19 Infection (low risk population)
|
COVID-19 Infection (post exposure prophylaxis) Immunization to prevent Lyme Disease |
(a)Being developed in collaboration with Merck KGaA, Germany.The Alliance Foundation Trials, LLC.
(b)Being developed in collaboration with the Alliance Foundation Trial.Astellas.
(c)Being developed in collaboration with Astellas.OPKO.
(d)Being developed in collaboration with OPKO.
(e)Erbitux® is a registered trademark of ImClone LLC. In the EU, we are developing in collaboration with the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono Pharmaceutical Co., Ltd.
(f)(e)Being developed in collaboration with Myovant.
(g)(f)Keytruda® is a registered trademark of Merck Sharp & Dohme Corp.
(h)Being developed In the EU, we are developing in collaboration with BioNTech.the Pierre Fabre Group. In Japan, we are developing in collaboration with Ono Pharmaceutical Co., Ltd.
(i)(g)Being developed in collaboration with Spark Therapeutics, Inc.
(j)(h)Being developed in collaboration with Sangamo Therapeutics, Inc.
(i)In March 2022, Pfizer announced results from the CLOVER trial (Clostridium difficile Vaccine Efficacy Trial), a pivotal Phase 3 study evaluating its Clostridioides difficile (C. difficile) vaccine candidate (PF-06425090) in the prevention of C. difficile infection (CDI). Initial analyses of two protocol defined secondary endpoints indicated a favorable benefit in reducing CDI severity and 100% vaccine efficacy in preventing medically attended CDI, although the trial did not meet its pre-specified primary endpoint of prevention of primary CDI. Safety reviews indicated that the investigational vaccine was safe and well tolerated. Pfizer is evaluating next steps for the program in coordination with regulatory agencies.
(j)Multiple myeloma triple-class refractory is currently in a Phase 2 registration-enabling study.
(k)Being developed in collaboration with BioNTech.
(l)Being developed in collaboration with Valneva SE.
In April 2022, Pfizer shared top-line results from the Paxlovid Phase 2/3 EPIC-PEP (Evaluation of Protease Inhibition for COVID-19 in Post-Exposure Prophylaxis) study in adults living in the same household as someone with a confirmed COVID-19 infection observing a risk reduction of 32% and 37% in adults who received Paxlovid for five and ten days, respectively, to prevent infection. These results, however, were not statistically significant and, as such, the primary endpoint of reducing the risk of confirmed and symptomatic COVID-19 infection in adults who had been exposed to the virus through a household contact was not met. In June 2022, an updated analysis from 1,153 patients enrolled in Paxlovid EPIC-SR (Evaluation of Protease Inhibition for COVID-19 in Standard Risk Patients) through December 2021 showed a non-significant 51% relative risk reduction (secondary endpoint, treatment arm: 5/576; placebo: 10/569). The primary endpoint in the EPIC-SR study also was not met. A sub-group analysis of 721 vaccinated adults with at least one risk factor for progression to severe COVID-19 showed a non-significant 57% relative risk reduction in hospitalization or death (treatment arm: 3/361; placebo: 7/360). Additional analyses of secondary endpoint data showed that treatment with Paxlovid resulted in a nominally significant 62% decrease in COVID-19-related medical visits per day across all patients, relative to placebo (p=0.0228). Types of medical visits included trips to the emergency room, urgent care, hospital admissions, and telehealth calls, among others. An additional pre-specified descriptive analysis showed a 72% reduction in the average number of days in hospital among Paxlovid-treated patients versus placebo in EPIC-SR. Other not statistically significant findings included no Paxlovid-treated patients admitted to the intensive care unit, compared to three in the placebo group, and no deaths in patients who received Paxlovid with one death in the placebo group. Due to a very low rate of hospitalization or death observed in the standard-risk patient population, Pfizer decided to cease enrollment into EPIC-SR and include available data in the NDA submission to the FDA to support the use of Paxlovid in appropriate individuals at high risk of progression to severe illness. For additional information on Paxlovid, please see the COVID-19 Pandemic section of this MD&A.
In August 2022, we announced that an interim futility analysis of the global Phase 3 trial, REALM-DCM, designed to evaluate the efficacy and safety of PF-07265803 in patients with symptomatic dilated cardiomyopathy (DCM) due to a mutation of the gene encoding the lamin A/C protein (LMNA), indicated the trial is unlikely to meet its primary endpoint upon completion. Based on these results, the Phase 3 trial and further development of PF-07265803 will be discontinued. This decision is not based on safety concerns.
For additional information about our R&D organization, see the Item 1. Business—Research and Development section of our 20202021 Form 10-K.
COSTS AND EXPENSES
| Costs and expenses follow: | | | Three Months Ended | Nine Months Ended | | Three Months Ended | Six Months Ended |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | September 27, 2020 | | % Change | | October 3, 2021 | | September 27, 2020 | | % Change | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | % Change | | July 3, 2022 | | July 4, 2021 | | % Change |
Cost of sales | Cost of sales | | $ | 9,973 | | | $ | 2,007 | | | * | | $ | 21,232 | | | $ | 5,773 | | | * | Cost of sales | | $ | 8,648 | | | $ | 6,996 | | | 24 | | | $ | 18,632 | | | $ | 11,153 | | | 67 | |
Percentage of Revenues | Percentage of Revenues | | 41.4 | % | | 19.5 | % | | 36.8 | % | | 19.1 | % | | Percentage of Revenues | | 31.2 | % | | 37.0 | % | | 34.9 | % | | 33.4 | % | |
Selling, informational and administrative expenses | Selling, informational and administrative expenses | | 2,905 | | | 2,658 | | | 9 | | | 8,617 | | | 7,858 | | | 10 | | Selling, informational and administrative expenses | | 3,048 | | | 2,923 | | | 4 | | | 5,642 | | | 5,700 | | | (1) | |
Research and development expenses | Research and development expenses | | 3,447 | | | 2,300 | | | 50 | | | 7,920 | | | 6,050 | | | 31 | | Research and development expenses | | 2,815 | | | 2,239 | | | 26 | | | 5,116 | | | 4,233 | | | 21 | |
Acquired in-process research and development expenses | | Acquired in-process research and development expenses | | 1 | | | 219 | | | (100) | | | 356 | | | 238 | | | 50 | |
Amortization of intangible assets | Amortization of intangible assets | | 981 | | | 862 | | | 14 | | | 2,784 | | | 2,579 | | | 8 | | Amortization of intangible assets | | 822 | | | 917 | | | (10) | | | 1,657 | | | 1,776 | | | (7) | |
Restructuring charges and certain acquisition-related costs | Restructuring charges and certain acquisition-related costs | | 646 | | | 2 | | | * | | 668 | | | 417 | | | 60 | | Restructuring charges and certain acquisition-related costs | | 189 | | | (1) | | | * | | 381 | | | 21 | | | * |
Other (income)/deductions—net | Other (income)/deductions—net | | (1,696) | | | 1,878 | | | * | | (3,697) | | | 1,114 | | | * | Other (income)/deductions—net | | 772 | | | (1,343) | | | * | | 1,122 | | | (2,347) | | | * |
* Indicates calculation not meaningful or results are equal to or greater than 100%. | |
* Indicates calculation not meaningful. | | * Indicates calculation not meaningful. |
Cost of Sales
Cost of sales increased $8.0$1.7 billion in the thirdsecond quarter and $15.5$7.5 billion in the first ninesix months of 2021,2022, primarily due to:
•the impact of Comirnaty, which includes a charge for the 50% gross profit split with BioNTech and applicable royalty expenses;
•increased sales volumesthe impact of other products, driven mostly by Pfizer CentreOne;Paxlovid; and
•a $450 million write-off of inventory related to COVID-19 products that have exceeded or are expected to exceed their approved shelf-lives prior to being used,
partially offset by:
•the unfavorablefavorable impact of foreign exchange and hedging activity on intercompany inventory.rates.
The increasedecrease in Cost of sales as a percentage of revenues in the thirdsecond quarter of 2021, compared to the same period in 2020,2022 was primarily due to allfavorable changes in sales mix, including significant sales of Paxlovid, as well as the factors discussed above, in addition to the unfavorablefavorable impact of the voluntary recallforeign exchange rates, and global pause in shipments of Chantix, partially offset by an increase in alliance revenues, which have no associated cost of sales.sales, partially offset by the impact of Comirnaty and the inventory write-offs related to COVID-19 products as discussed above.
The increase in Cost of sales as a percentage of revenues in the first ninesix months of 2021, compared to the same period in 2020,2022 was primarily due to allthe impact of Comirnaty and the factorsinventory write-off related to COVID-19 products as discussed above, partially offset by favorable changes in sales mix, including significant sales of Paxlovid, as well as the favorable impact of foreign exchange rates, and an increase in alliance revenues, which have no associated cost of sales.
Selling, Informational and Administrative (SI&A) Expenses
SI&A expenses increased $248$125 million in the thirdsecond quarter of 2021, mostly due to:
•an increase in external, incremental costs directly related to implementing our cost-reduction/productivity initiatives; and
•increased product-related spending across multiple therapeutic areas and other costs associated with activity that is closer to pre-pandemic levels as compared to the prior-year quarter.
SI&A expenses increased $759 million in the first nine months of 2021,2022, mostly due to:
•increased product-related spending across multiple therapeutic areason Paxlovid and other costs associated with activity that is closer to pre-pandemic levels as compared to the prior-year period;
•an increase in external, incremental costs directly related to implementing our cost-reduction/productivity initiatives;
•costs related to Comirnaty driven byand a higher provision for healthcare reform fees based on sales;sales of Paxlovid and Comirnaty,
partially offset by:
•the unfavorable impact of foreign exchange; and
•an increase to expense resulting from the increasea decrease in our liability to be paid to participants of our supplemental savings plan,plan.
partially offset by:
•lower spending on Chantix following the loss of patent protectionSI&A expenses decreased $59 million in the U.S. in November 2020.
Research and Development (R&D) Expenses
R&D expenses increased $1.1 billion in the third quarter primarilyfirst six months of 2022, mainly due to:
•an upfront payment relateda decrease in our liability to the global collaboration agreement with Arvinasbe paid to develop and commercialize ARV-471; and
•increased investments across multiple therapeutic areas, including additional spending related to the development and at-risk manufacturingparticipants of the COVID-19 anti-viral programs.
R&D expenses increased $1.9 billion in the first nine months of 2021, primarily due to:
•increased investments across multiple therapeutic areas, including additional spending related to the development and at-risk manufacturing of the COVID-19 anti-viral programs;our supplemental savings plan;
•the upfront payment related to the global collaboration agreement with Arvinas to develop and commercialize ARV-471;
•a charge for IPR&D related to an asset acquisition completed in the second quarterfavorable impact of 2021; 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 specific performance criteria will be achieved,
partially offset by:
•the non-recurrence of 2020 upfront payments to Valneva and BioNTech;foreign exchange; and
•lower spending across the Inflammation & Immunology and Internal medicine portfolios.Medicine therapeutic areas,
partially offset by:
•increased spending on Paxlovid and Comirnaty and a higher provision for healthcare reform fees based on sales of Paxlovid and Comirnaty.
Research and Development (R&D) Expenses
R&D expenses increased $576 million in the second quarter and $883 million in the first six months of 2022, primarily driven by increased investments across multiple late-stage clinical programs, including development costs and at-risk manufacturing related to programs to prevent and treat COVID-19, as well as costs to develop recently acquired assets.
Acquired In-Process Research and Development (IPR&D) Expenses
Acquired IPR&D expenses decreased $218 million in the second quarter of 2022, primarily reflecting the acquisition of Amplyx Pharmaceuticals Inc. (Amplyx) in the second quarter of 2021, and no transactions giving rise to acquired IPR&D expenses in the second quarter of 2022.
Acquired IPR&D expenses increased $118 million in the first six months of 2022, largely due to:
•an upfront payment to Biohaven and a premium paid on our equity investment in Biohaven; and
•a premium paid on our equity investment in BioNTech to develop a potential mRNA vaccine against shingles,
partially offset by:
•the acquisition of Amplyx in the second quarter of 2021.
Amortization of Intangible Assets
Amortization of intangible assets increased $120decreased $95 million in the thirdsecond quarter and $204$119 million in the first ninesix months of 2021,2022, primarily as a result of lower amortization of capitalized Comirnaty sales milestones to BioNTech.
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
Transforming to a More Focused Company Program
––For a description of our program, as well as the anticipated and actual costs, see Note 3. The program savings discussed below may be rounded and represent approximations. In connection with restructuring our corporate enabling functions, we expect gross cost savings of $1.0 billion, or net cost savings, excluding merit and inflation growth and certain real estate cost increases, of $700 million, to be achieved primarily from 2021 through 2022. In connection with transforming our marketing strategy, we expect net cost savings of $1.3$1.4 billion, to be achieved primarily from 2022 through 2024. In connection with manufacturing network optimization, including legacy cost reduction initiatives, we expect net cost savings of $300$550 million to be achieved primarily from 2020 through 2022.2023.
Certain qualifying costs for this program were recorded in the first threetwo quarters of 20212022 and 20202021 and are reflected as Certain Significant Items and excluded from our non-GAAP measure of Adjusted Income. See the Non-GAAP Financial Measure: Adjusted Income section of this MD&A.
In addition to this program, we continuously monitor our operations for cost reduction and/or productivity opportunities, especially in light of the losses of exclusivity and the expiration of collaborative arrangements for various products.
Other (Income)/Deductions—Net
Other income—net increased $3.6 billion in the third quarter of 2021, mainly due to:The period-over-period changes were primarily driven by:
•net losses on equity securities in the second quarter and first six months of 2022 versus net gains recognized in the second quarter and first six months of 2021; and
•net periodic benefit costs recorded in the second quarter and first six months of 2022 versus net periodic benefit credits recorded in the thirdsecond quarter of 2021 versus net periodic benefit costs recorded in the third quarter of 2020;
•the non-recurrence of certain asset impairment charges that were incurred in the third quarter of 2020; and
•net gains on equity securities in the third quarter of 2021 versus net losses on equity securities recognized in the third quarter of 2020.
Other income—net increased $4.8 billion in the first ninesix months of 2021, mainly due to:
•net periodic benefit credits recorded in the first nine months of 2021 versus net periodic benefit costs recorded in the first nine months of 2020;
•higher net gains on equity securities; and
•the non-recurrence of certain asset impairment charges that were incurred in the first nine months of 2020.2021.
See Note 4 for additional information.
PROVISION/(BENEFIT) FOR TAXES ON INCOME
| | | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Six Months Ended |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | September 27, 2020 | | % Change | | October 3, 2021 | | September 27, 2020 | | % Change | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | % Change | | July 3, 2022 | | July 4, 2021 | | % Change |
Provision/(benefit) for taxes on income | Provision/(benefit) for taxes on income | | $ | (331) | | | $ | (347) | | | (5) | | | $ | 1,518 | | | $ | 434 | | | * | Provision/(benefit) for taxes on income | | $ | 1,570 | | | $ | 1,123 | | | 40 | | | $ | 2,742 | | | $ | 1,931 | | | 42 | |
Effective tax rate on continuing operations | Effective tax rate on continuing operations | | (4.2) | % | | (60.9) | % | | 7.5 | % | | 6.7 | % | | | Effective tax rate on continuing operations | | 13.7 | % | | 16.2 | % | | 13.4 | % | | 15.3 | % | | |
* Indicates calculation not meaningful or results are equal to or greater than 100%. | |
|
For information about our effective tax rate and the events and circumstances contributing to the changes between periods, as well as details about discrete elements that impacted our tax provisions, see Note 5.
DISCONTINUED OPERATIONS
For information about our discontinued operations, see Note 2A2B.
NON-GAAP FINANCIAL MEASURE: ADJUSTED INCOME
Adjusted income is an alternative measure of performance used by management to evaluate our overall performance in conjunction with otheras a supplement to our GAAP reported performance measures. As such, we believe that investors’ understanding of our performance is enhanced by disclosing this measure. We use Adjusted income, certain components of Adjusted income and Adjusted diluted EPS to present the results of our major operations––the discovery, development, manufacture, marketing, sale and distribution of biopharmaceutical products worldwide––prior to considering certain income statement elements as follows:
| | | | | | | | | | | | | | |
Measure | | Definition | | Illustrative UseRelevance of Metrics to Our Business Performance |
Adjusted income | | Net income attributable to Pfizer Inc. common shareholders(a) before the impact of purchase accounting for acquisitions,amortization of intangible assets, certain acquisition-related items, discontinued operations and certain significant items | | •Monthly managerial analysis of our operating resultsProvides investors useful information to: ◦evaluate the normal recurring operational activities, and our annual budgets are prepared using these non-GAAP measurestheir components, on a comparable year-over-year basis ◦assist in modeling expected future performance on a normalized basis •Senior management’s compensation is determined, in part, using these non-GAAP measuresProvides investors insight into the way we manage our budgeting and forecasting, how we evaluate and manage our recurring operations and how we reward and compensate our senior management(b) |
Adjusted cost of sales, Adjusted selling, informational and administrative expenses, Adjusted research and development expenses Adjusted amortization of intangible assets and Adjusted other (income)/deductions––net | | Cost of sales, Selling, informational and administrative expenses, Research and development expenses Amortization of intangible assets and Other (income)/deductions––net (a), each before the impact of purchase accounting for acquisitions,amortization of intangible assets, certain acquisition-related items, discontinued operations and certain significant items, which are components of the Adjusted income measure | |
Adjusted diluted EPS | | EPS attributable to Pfizer Inc. common shareholders––diluted(a) before the impact of purchase accounting for acquisitions,amortization of intangible assets, certain acquisition-related items, discontinued operations and certain significant items | |
(a)Most directly comparable GAAP measure.
(b)The short-term incentive plans for substantially all non-sales-force employees worldwide are funded from a pool based on our performance, measured in significant part byversus three budgeted metrics, one of which is Adjusted diluted EPS (as defined for annual incentive compensation purposes), which is derived from Adjusted income and accounts for 40% of the bonus pool funding.funding tied to financial performance. Additionally, the payout for Performance Share Awardsperformance share awards is determined in part by Adjusted net income, which is derived from Adjusted income. Starting withBeginning in the 2020first quarter of 2022, we no longer exclude any expenses for acquired IPR&D from our non-GAAP Adjusted results but we continue to exclude certain of these expenses for our financial results for annual incentive compensation purposes. The bonus pool funding, which is largely based on financial performance, year and consistent with shareholder feedback received in 2019, the Compensation Committee of the BOD approved adding anis adjusted by our R&D pipeline achievement factor to the existing short-term incentive financial metrics.performance, as measured by four metrics, and performance against certain of our environmental, social and governance (ESG) metrics, and may be further modified by our Compensation Committee’s assessment of other factors.
Adjusted income and its components and Adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by GAAP and, therefore, are limited in their usefulness to investors. Because of their non-standardized definitions, they may not be comparable to the calculation of similar measures of other companies and are presented solely to permit investors to more fully understand how management assesses performance. A limitation of these measures is that they provide a view of our operations without including all events during a period, and do not provide a comparable view of our performance to peers. These measures are not, and should not be viewed as, substitutes for their most directly comparable GAAP measures of Net income attributable to Pfizer Inc. common shareholders, components of Net income attributable to Pfizer Inc. common shareholders and EPS attributable to Pfizer Inc. common shareholders—diluted, respectively. See the accompanying reconciliations of certain GAAP reported to non-GAAP adjusted information for the third quarter and first nine months of 2021 and 2020 below.
We also recognize that, as internal measures of performance, these measures have limitations, and we do not restrict our performance-management process solely to these measures. We also use other tools designed to achieve the highest levels of performance. For example, our R&D organization has productivity targets, upon which its effectiveness is measured. In
addition, total shareholder return, both on an absolute basis and relative to a publicly traded pharmaceutical index, plays a significant role in determining payouts under certain of our incentive compensation plans.
Purchase Accounting AdjustmentsBeginning in the first quarter of 2022, our reconciliation of certain GAAP reported to non-GAAP adjusted information is updated to reflect the following, and prior-period information has been revised to conform to the current period presentation:
Adjusted Income and Adjusted Diluted EPS
Acquired IPR&D—Non-GAAP Adjusted financial measures include expenses for all acquired IPR&D costs incurred in connection with upfront and milestone payments on collaboration and in-license agreements, including premiums on equity securities, as well as asset acquisitions of acquired IPR&D. Previously, certain of these items were excluded from our non-GAAP adjusted results. Acquired IPR&D expenses that previously would have been excluded from non-GAAP Adjusted income excludes certain significant purchase accounting impacts resulting from business combinationsbut are now included in both GAAP Reported income and non-GAAP Adjusted income: (i) had no impact in the second quarter of 2022, (ii) were approximately $339 million pre-tax ($276 million, net of tax), or $0.05 per share, in the first six months of 2022 and (iii) were approximately $186 million for both pre-tax and net asset acquisitions. These impacts can includeof tax, or $0.03 per share, in both the incremental chargesecond quarter and first six months of 2021.
Amortization of Intangible Assets—We began excluding all amortization of intangibles from non-GAAP Adjusted income, compared to costexcluding only amortization of sales from the sale of acquired inventory that was written up to fair value, amortizationintangibles related to large mergers or acquisitions under the increaseprior methodology, and presenting it as a separate reconciling line. Previously, the adjustment under the prior methodology was included as part of
a reconciling line entitled “Purchase accounting adjustments” that we no longer separately present. The impact of this policy change resulted in fair valuebenefits of $0.02 and $0.03 on Adjusted diluted EPS in the acquired finite-lived intangible assets,second quarter and to a much lesser extent, depreciation related tofirst six months of 2022, respectively, and $0.03 and $0.04 in the increase/decrease in fair valuesecond quarter and first six months of the acquired fixed assets, amortization related to the increase in fair value of acquired debt, and the fair value changes for contingent consideration. Therefore, the 2021, respectively.
Acquisition-Related Items—Adjusted income measure includes the revenues earned upon the sale of the acquired products without considering the acquisition cost of those products.
Acquisition-Related Items
Adjusted income excludescontinues to exclude certain acquisition-related items, which are comprised of transaction, integration, restructuring charges and additional depreciation costs for business combinations because these costs are unique to each transaction and represent costs that were incurred to restructure and integrate businesses as a result of an acquisition. We have made no adjustments for resulting synergies. Beginning in the first quarter of 2022, acquisition-related items may now include purchase accounting impacts that previously would have been included as part of a reconciling line entitled “Purchase accounting adjustments” that we no longer separately present, such as: (i) the incremental charge to cost of sales from the sale of acquired inventory that was written up to fair value, (ii) depreciation related to the increase/decrease in fair value of acquired fixed assets, (iii) amortization related to the increase in fair value of acquired debt and (iv) the fair value changes for contingent consideration.
Discontinued Operations
—Adjusted income excludescontinues to exclude the results of discontinued operations, as well as any related gains or losses on the disposal of such operations. We believe that this presentation is meaningful to investors because, while we review our therapeutic areas and product lines for strategic fit with our operations, we do not build or run our business with the intent to discontinue parts of our business. Restatements due to discontinued operations do not impact compensation or change the Adjusted income measure for the compensation in respect of the restated periods, but are presented for consistency across all periods.
Certain Significant Items
—Adjusted income excludescontinues to exclude certain significant items representing substantive and/or unusual items that are evaluated individually on a quantitative and qualitative basis. Certain significant items may be highly variable and difficult to predict. Furthermore, in some cases it is reasonably possible that they could reoccur in future periods. For example, although major non-acquisition-related cost-reduction/productivitycost-reduction programs are specific to an event or goal with a defined term, we may have subsequent programs based on reorganizations of the business, cost-reduction/cost productivity or in response to LOE or economic conditions. Legal charges to resolve litigation are also related to specific cases, which are facts and circumstances specific and, in some cases, may also be the result of litigation matters at acquired companies that were inestimable, not probable or unresolved at the date of acquisition. Gains and losses on equity securities, and pension and postretirement actuarial remeasurement gains and losses have a very high degree of inherent market volatility, which we do not control and cannot predict with any level of certainty and because we do not believe including these gains and losses assists investors in understanding our business or is reflective of our core operations and business. Unusual items represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be non-recurring; or items that relate to products we no longer sell. For
See the Reconciliations of GAAP Reported to Non-GAAP Adjusted information—Certain Line Items below for a non-inclusive list of certain significant items seeand the Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income below.
Beginning in 2021, we exclude pension and postretirement actuarial remeasurement gains and losses from our measure of Adjusted income because of their inherent market volatility, which we do not control and cannot predict with any level of certainty and because we do not believe including these gains and losses assists investors in understanding our business or is reflective of our core operations and business.
Also, see theNon-GAAP Financial Measure: Adjusted Income section of thewithin MD&A of our 20202021 Form 10-K for additional information.
Reconciliations of GAAP Reported to Non-GAAP Adjusted Information––Certain Line Items
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended October 3, 2021 |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
Revenues | | $ | 24,094 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 24,094 | |
Cost of sales | | 9,973 | | | 6 | | | — | | | — | | | (42) | | | 9,937 | |
Selling, informational and administrative expenses | | 2,905 | | | (1) | | | — | | | — | | | (173) | | | 2,732 | |
Research and development expenses | | 3,447 | | | 1 | | | — | | | — | | | (708) | | | 2,740 | |
Amortization of intangible assets | | 981 | | | (813) | | | — | | | — | | | — | | | 169 | |
Restructuring charges and certain acquisition-related costs | | 646 | | | — | | | (1) | | | — | | | (645) | | | — | |
(Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | | | — | |
Other (income)/deductions––net | | (1,696) | | | (47) | | | — | | | — | | | 1,174 | | | (569) | |
Income from continuing operations before provision/(benefit) for taxes on income | | 7,836 | | | 852 | | | 1 | | | — | | | 395 | | | 9,084 | |
Provision/(benefit) for taxes on income(b) | | (331) | | | 127 | | | 2 | | | — | | | 1,587 | | | 1,385 | |
Income from continuing operations | | 8,167 | | | 725 | | | (1) | | | — | | | (1,192) | | | 7,699 | |
Income/(loss) from discontinued operations––net of tax | | (9) | | | — | | | — | | | 9 | | | — | | | — | |
Net income attributable to noncontrolling interests | | 12 | | | — | | | — | | | — | | | — | | | 12 | |
Net income attributable to Pfizer Inc. common shareholders | | 8,146 | | | 725 | | | (1) | | | 9 | | | (1,192) | | | 7,687 | |
Earnings per common share attributable to Pfizer Inc. common shareholders––diluted | | 1.42 | | | 0.13 | | | — | | | — | | | (0.21) | | | 1.34 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended October 3, 2021 |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
Revenues | | $ | 57,653 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 57,653 | |
Cost of sales | | 21,232 | | | 17 | | | — | | | — | | | (138) | | | 21,112 | |
Selling, informational and administrative expenses | | 8,617 | | | (2) | | | — | | | — | | | (432) | | | 8,183 | |
Research and development expenses | | 7,920 | | | 4 | | | — | | | — | | | (899) | | | 7,026 | |
Amortization of intangible assets | | 2,784 | | | (2,338) | | | — | | | — | | | — | | | 446 | |
Restructuring charges and certain acquisition-related costs | | 668 | | | — | | | (3) | | | — | | | (666) | | | — | |
(Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | | | — | |
Other (income)/deductions––net | | (3,697) | | | (31) | | | — | | | — | | | 1,984 | | | (1,744) | |
Income from continuing operations before provision/(benefit) for taxes on income | | 20,128 | | | 2,349 | | | 3 | | | — | | | 151 | | | 22,631 | |
Provision/(benefit) for taxes on income(b) | | 1,518 | | | 482 | | | 3 | | | — | | | 1,549 | | | 3,551 | |
Income from continuing operations | | 18,610 | | | 1,868 | | | — | | | — | | | (1,398) | | | 19,080 | |
Income/(loss) from discontinued operations––net of tax | | 24 | | | — | | | — | | | (24) | | | — | | | — | |
Net income attributable to noncontrolling interests | | 47 | | | — | | | — | | | — | | | — | | | 47 | |
Net income attributable to Pfizer Inc. common shareholders | | 18,586 | | | 1,868 | | | — | | | (24) | | | (1,398) | | | 19,033 | |
Earnings per common share attributable to Pfizer Inc. common shareholders––diluted | | 3.27 | | | 0.33 | | | — | | | — | | | (0.25) | | | 3.35 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended July 3, 2022 |
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | Cost of sales(a) | | Selling, informational and administrative expenses(a) | | Other (income)/deductions––net(a) | | Net income attributable to Pfizer Inc. common shareholders(a) | | Earnings per common share attributable to Pfizer Inc. common shareholders––diluted |
GAAP reported | | $ | 8,648 | | | $ | 3,048 | | | $ | 772 | | | $ | 9,906 | | | $ | 1.73 | |
Amortization of intangible assets | | — | | — | | — | | 822 | | |
Acquisition-related items(b) | | 5 | | (2) | | (13) | | 82 | | |
Discontinued operations(c) | | — | | — | | — | | (34) | | |
Certain significant items: | | | | | | |
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(d) | | (22) | | (134) | | — | | 272 | | |
| | | | | | |
(Gains)/losses on equity securities | | — | | — | | (539) | | 539 | | |
Actuarial valuation and other pension and postretirement plan (gains)/losses | | — | | — | | (490) | | 490 | | |
Other(e) | | (6) | | (13) | | (107) | | 130 | | |
Income tax provision—non-GAAP items | | | | | (551) | | |
Non-GAAP adjusted | | $ | 8,625 | | $ | 2,900 | | $ | (377) | | $ | 11,656 | | $ | 2.04 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 27, 2020 |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
Revenues | | $ | 10,277 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 10,277 | |
Cost of sales | | 2,007 | | | 5 | | | — | | | — | | | (24) | | | 1,989 | |
Selling, informational and administrative expenses | | 2,658 | | | (1) | | | — | | | — | | | (95) | | | 2,562 | |
Research and development expenses | | 2,300 | | | 1 | | | — | | | — | | | (3) | | | 2,298 | |
Amortization of intangible assets | | 862 | | | (789) | | | — | | | — | | | — | | | 73 | |
Restructuring charges and certain acquisition-related costs | | 2 | | | — | | | (11) | | | — | | | 9 | | | — | |
(Gain) on completion of Consumer Healthcare JV transaction | | — | | | — | | | — | | | — | | | — | | | — | |
Other (income)/deductions––net | | 1,878 | | | (4) | | | — | | | — | | | (2,271) | | | (397) | |
Income from continuing operations before provision/(benefit) for taxes on income | | 570 | | | 787 | | | 11 | | | — | | | 2,384 | | | 3,752 | |
Provision/(benefit) for taxes on income(b) | | (347) | | | 190 | | | 3 | | | — | | | 596 | | | 441 | |
Income from continuing operations | | 917 | | | 596 | | | 9 | | | — | | | 1,789 | | | 3,311 | |
Income/(loss) from discontinued operations––net of tax | | 560 | | | — | | | — | | | (560) | | | — | | | — | |
Net income attributable to noncontrolling interests | | 8 | | | — | | | — | | | — | | | — | | | 8 | |
Net income attributable to Pfizer Inc. common shareholders | | 1,469 | | | 596 | | | 9 | | | (560) | | | 1,789 | | | 3,303 | |
Earnings per common share attributable to Pfizer Inc. common shareholders––diluted | | 0.26 | | | 0.11 | | | — | | | (0.10) | | | 0.32 | | | 0.59 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 27, 2020 |
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | | GAAP Reported | | Purchase Accounting Adjustments(a) | | Acquisition-Related Items(a) | | Discontinued Operations(a) | | Certain Significant Items(a) | | Non-GAAP Adjusted |
Revenues | | $ | 30,224 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 30,224 | |
Cost of sales | | 5,773 | | | 14 | | | — | | | — | | | (86) | | | 5,701 | |
Selling, informational and administrative expenses | | 7,858 | | | (1) | | | — | | | — | | | (318) | | | 7,540 | |
Research and development expenses | | 6,050 | | | 4 | | | — | | | — | | | (242) | | | 5,812 | |
Amortization of intangible assets | | 2,579 | | | (2,365) | | | — | | | — | | | — | | | 214 | |
Restructuring charges and certain acquisition-related costs | | 417 | | | — | | | (46) | | | — | | | (371) | | | — | |
(Gain) on completion of Consumer Healthcare JV transaction | | (6) | | | — | | | — | | | — | | | 6 | | | — | |
Other (income)/deductions––net | | 1,114 | | | (89) | | | — | | | — | | | (2,126) | | | (1,101) | |
Income from continuing operations before provision/(benefit) for taxes on income | | 6,438 | | | 2,437 | | | 46 | | | — | | | 3,137 | | | 12,057 | |
Provision/(benefit) for taxes on income(b) | | 434 | | | 546 | | | 11 | | | — | | | 719 | | | 1,710 | |
Income from continuing operations | | 6,004 | | | 1,891 | | | 35 | | | — | | | 2,417 | | | 10,347 | |
Income/(loss) from discontinued operations––net of tax | | 2,334 | | | — | | | — | | | (2,334) | | | — | | | — | |
Net income attributable to noncontrolling interests | | 25 | | | — | | | — | | | — | | | — | | | 25 | |
Net income attributable to Pfizer Inc. common shareholders | | 8,313 | | | 1,891 | | | 35 | | | (2,334) | | | 2,417 | | | 10,322 | |
Earnings per common share attributable to Pfizer Inc. common shareholders––diluted | | 1.48 | | | 0.34 | | | 0.01 | | | (0.42) | | | 0.43 | | | 1.84 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended July 3, 2022 |
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | Cost of sales(a) | | Selling, informational and administrative expenses(a) | | Other (income)/deductions––net(a) | | Net income attributable to Pfizer Inc. common shareholders(a) | | Earnings per common share attributable to Pfizer Inc. common shareholders––diluted |
GAAP reported | | $ | 18,632 | | | $ | 5,642 | | | $ | 1,122 | | | $ | 17,769 | | | $ | 3.10 | |
Amortization of intangible assets | | — | | — | | — | | 1,657 | | |
Acquisition-related items(b) | | 8 | | (3) | | (39) | | 269 | | |
Discontinued operations(c) | | — | | — | | — | | (24) | | |
Certain significant items: | | | | | | |
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(d) | | (42) | | (208) | | — | | 394 | | |
| | | | | | |
(Gains)/losses on equity securities | | — | | — | | (1,237) | | 1,237 | | |
Actuarial valuation and other pension and postretirement plan (gains)/losses | | — | | — | | (418) | | 418 | | |
Other(e) | | (17) | | (35) | | (211) | | 273 | | |
Income tax provision—Non-GAAP items | | | | | (999) | | |
Non-GAAP adjusted | | $ | 18,582 | | $ | 5,396 | | $ | (783) | | $ | 20,993 | | $ | 3.66 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended July 4, 2021 |
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | Cost of sales(a) | | Selling, informational and administrative expenses(a) | | Other (income)/deductions––net(a) | | Net income attributable to Pfizer Inc. common shareholders(a) | | Earnings per common share attributable to Pfizer Inc. common shareholders––diluted |
GAAP reported | | $ | 6,996 | | | $ | 2,923 | | | $ | (1,343) | | | $ | 5,563 | | | $ | 0.98 | |
Amortization of intangible assets | | — | | | (10) | | | — | | | 928 | | | |
Acquisition-related items | | 6 | | | (1) | | | (37) | | | 34 | | | |
Discontinued operations(c) | | — | | | — | | | — | | | 346 | | | |
Certain significant items: | | | | | | | | | | |
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(d) | | (37) | | | (96) | | | — | | | 129 | | | |
| | | | | | | | | | |
(Gains)/losses on equity securities | | — | | | — | | | 798 | | | (798) | | | |
Actuarial valuation and other pension and postretirement plan (gains)/losses | | — | | | — | | | (6) | | | 6 | | | |
Other(e) | | (16) | | | (39) | | | 13 | | | 44 | | | |
Income tax provision—non-GAAP items | | | | | | | | (230) | | | |
Non-GAAP adjusted | | $ | 6,949 | | | $ | 2,778 | | | $ | (576) | | | $ | 6,023 | | | $ | 1.06 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended July 4, 2021 |
Data presented will not (in all cases) aggregate to totals. (MILLIONS, EXCEPT PER COMMON SHARE DATA) | | Cost of sales(a) | | Selling, informational and administrative expenses(a) | | Other (income)/deductions––net(a) | | Net income attributable to Pfizer Inc. common shareholders(a) | | Earnings per common share attributable to Pfizer Inc. common shareholders––diluted |
GAAP reported | | $ | 11,153 | | | $ | 5,700 | | | $ | (2,347) | | | $ | 10,440 | | | $ | 1.84 | |
Amortization of intangible assets | | — | | (19) | | (1) | | 1,798 | | |
Acquisition-related items | | 11 | | (1) | | 16 | | (27) | | |
Discontinued operations(c) | | — | | — | | — | | 337 | | |
Certain significant items: | | | | | | |
Restructuring charges/(credits) and implementation costs and additional depreciation—asset restructuring(d) | | (55) | | (160) | | — | | 234 | | |
| | | | | | |
(Gains)/losses on equity securities | | — | | — | | 1,197 | | (1,197) | | |
Actuarial valuation and other pension and postretirement plan (gains)/losses | | — | | — | | 33 | | (33) | | |
Other(e) | | (34) | | (99) | | (74) | | 211 | | |
Income tax provision—Non-GAAP items | | | | | (390) | | |
Non-GAAP adjusted | | $ | 11,076 | | $ | 5,421 | | $ | (1,177) | | $ | 11,375 | | $ | 2.01 | |
(a)For details of adjustments, see Details of Income Statement Items Included inthat reconcile GAAP Reported but Excludedto non-GAAP Adjusted balances are shown pre-tax. Our effective tax rates for GAAP reported income from Non-GAAP Adjusted Incomecontinuing operations were: 13.7% and 13.4% in the three and six months ended July 3, 2022, respectively, and 16.2% and 15.3% in the three and six months ended July 4, 2021, respectively. See Note 5. Our effective tax rates on non-GAAP adjusted income were: 15.4% and 15.1% in the three and six months ended July 3, 2022, respectively, and 17.1% and 16.3% in the three and six months ended July 4, 2021, respectively.
(b)Acquisition-related items in the three and six months ended July 3, 2022 primarily represent integration and other costs for the acquisition of Arena in March 2022. See Note 2A.
(b)The effective tax rate on Non-GAAP Adjusted income was 15.3% in the third quarter of 2021, compared to 11.8% in the third quarter of 2020. The effective tax rate on Non-GAAP Adjusted income was 15.7% in the first nine months of 2021, compared to 14.2% in the first nine months of 2020. The increases were due to a change in the jurisdictional mix of earnings, primarily related to Comirnaty.
Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
(MILLIONS) | | Oct. 3, 2021 | | Sept. 27, 2020 | | Oct. 3, 2021 | | Sept. 27, 2020 |
Purchase accounting adjustments | | | | | | | | |
Amortization, depreciation and other(a) | | $ | 859 | | | $ | 792 | | | $ | 2,367 | | | $ | 2,451 | |
Cost of sales | | (6) | | | (5) | | | (17) | | | (14) | |
Total purchase accounting adjustments––pre-tax | | 852 | | | 787 | | | 2,349 | | | 2,437 | |
Income taxes(b) | | (127) | | | (190) | | | (482) | | | (546) | |
Total purchase accounting adjustments––net of tax | | 725 | | | 596 | | | 1,868 | | | 1,891 | |
Acquisition-related items | | | | | | | | |
Restructuring charges/(credits)(c) | | (2) | | | 4 | | | (9) | | | 3 | |
Transaction costs(c) | | — | | | — | | | — | | | 14 | |
Integration costs and other(c) | | 3 | | | 7 | | | 11 | | | 29 | |
| | | | | | | | |
| | | | | | | | |
Total acquisition-related items––pre-tax | | 1 | | | 11 | | | 3 | | | 46 | |
Income taxes(b) | | (2) | | | (3) | | | (3) | | | (11) | |
Total acquisition-related items––net of tax | | (1) | | | 9 | | | — | | | 35 | |
Discontinued operations | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Income/(loss) from discontinued operations––net of tax(d) | | 9 | | | (560) | | | (24) | | | (2,334) | |
Certain significant items | | | | | | | | |
Restructuring charges/(credits)––cost reduction initiatives(e) | | 645 | | | (9) | | | 666 | | | 371 | |
Implementation costs and additional depreciation––asset restructuring(f) | | 181 | | | 50 | | | 403 | | | 153 | |
Net (gains)/losses on asset disposals(g) | | 1 | | | — | | | (57) | | | — | |
Net (gains)/losses recognized during the period on equity securities(g) | | (400) | | | 73 | | | (1,597) | | | (429) | |
Certain legal matters, net(g) | | 64 | | | (17) | | | 438 | | | 5 | |
Certain asset impairments(g) | | — | | | 900 | | | — | | | 900 | |
Business and legal entity alignment costs(h) | | 31 | | | 63 | | | 156 | | | 212 | |
Actuarial valuation and other pension and postretirement plan (gains)/losses(i) | | (899) | | | 1,230 | | | (932) | | | 1,306 | |
(Gain) on completion of Consumer Healthcare JV transaction(j) | | — | | | — | | | — | | | (6) | |
Other(k) | | 772 | | | 94 | | | 1,075 | | | 624 | |
Total certain significant items––pre-tax | | 395 | | | 2,384 | | | 151 | | | 3,137 | |
Income taxes(l) | | (1,587) | | | (596) | | | (1,549) | | | (719) | |
Total certain significant items––net of tax | | (1,192) | | | 1,789 | | | (1,398) | | | 2,417 | |
| | | | | | | | |
| | | | | | | | |
Total purchase accounting adjustments, acquisition-related items, discontinued operations and certain significant items––net of tax, attributable to Pfizer Inc. | | $ | (460) | | | $ | 1,834 | | | $ | 446 | | | $ | 2,009 | |
(a)Included primarily in Amortization of intangible assets.
(b)Included in Provision/(benefit) for taxes on income. Includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying the applicable tax rate.
(c)Included in Restructuring chargesRelates to the previously divested Meridian subsidiary and certain acquisition-related costs. See Note 3.
(d)Included in Income/(loss) from discontinued operations––net of tax. post-closing adjustments for other previously divested businesses. See Note 2A.2B.
(e)(d)Includes 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 Note 3.
(f)Relatesrelated to our cost-reduction and productivity initiatives not related to acquisitions (seeassociated with acquisitions. See Note 33.
(e)). For the thirdsecond quarter of 2021,2022, the total Other (income)/deductions––net adjustment of $107 million primarily included inincludes charges of $55 million mostly representing our equity-method accounting pro rata share of costs of preparing for separation from GSK recorded by the GSK Consumer Healthcare JV, and charges of $19 million for certain legal matters. For the first six months of 2022, the total Cost of salesOther (income)/deductions––net ($31 million)adjustment of $211 million primarily includes charges for certain legal matters of $98 million and charges of $61 million mostly representing our equity-method accounting pro rata share of restructuring charges and costs of preparing for separation from GSK recorded by the GSK Consumer Healthcare JV. For the first six months of 2021, amounts in Selling, informational and administrative expenses ($150 million). For the first nine months of 2021,$99 million primarily included in Cost of sales ($93 million) and Selling, informational and administrative expenses ($310 million). For the third quarter of 2020, primarily included in Cost of sales ($13 million) and Selling, informational and administrative expenses ($36 million). For the first nine months of 2020, primarily included in Cost of sales ($40 million) and Selling, informational and administrative expenses ($114 million).
(g)Included in Other (income)/deductions—net. See Note 4.
(h)Mainly representsinclude costs for consulting, legal, tax and advisory services associated with thea non-recurring internal reorganization of legal entities. For the third quarter of 2021, primarily included in Cost of sales ($11 million) and Selling, informational and administrative expenses ($20 million), and for the first ninesix months of 2021, primarily included in Cost of sales ($43 million) and Selling, informational and administrative expenses ($107 million). For the third quarter of 2020, primarily included in Cost of sales ($12 million) and Selling, informational and administrative expenses ($50 million),and for the first nine months of 2020, primarily included in Cost of sales ($42 million), Selling, informational and administrative expenses ($157 million) and Research and development expenses ($13 million).
(i)Included in Other (income)/deductions––net. Primarily includes pension plan interim actuarial remeasurement pre-tax gains of $836 million in the third quarter of 2021 and $881 million in the first nine months of 2021, and pension plan interim actuarial remeasurement pre-tax losses of $1.2 billion in the third quarter of 2020 and $1.3 billion in the first nine months of 2020. See Note 1C.
(j)Included in (Gain) on completion of Consumer Healthcare JV transaction. See Note 2B.
(k)For the third quarter of 2021, primarily included in Research and development expenses ($707 million) andtotal Other (income)/deductions––net ($61 million). For the first nine monthsadjustment of 2021,$74 million primarily included in Selling, informational and administrative expenses ($15 million), Research and development expenses ($892 million)and Other (income)/deductions––net ($165 million). For the third quarter of 2020, primarily included in Other (income)/deductions––net ($86 million). For the first nine months of 2020, primarily included in Selling, informational and administrative expenses ($46 million), Research and development expenses ($231 million) and Other (income)/deductions––net ($343 million). Among other things, the third quarter and first nine months of 2021 include an upfront payment of $650 million to Arvinas, which was recorded to Research and development expenses, and the first nine months of 2021 include a charge of $186 million for IPR&D related to an asset acquisition completed in the second quarter of 2021. Also, the third quarter of 2021 includes charges of $55$81 million and the first nine months of 2021 include charges of $136 million recorded in Other (income)/deductions––net, primarilyrepresenting our equity-method accounting pro rata share of accountingrestructuring charges related to restructuring costs and costs of preparing for separation from GSK that were recorded by the GSK Consumer Healthcare JV. Among other things, theThe second quarter and first ninesix months of 2020 included (i) charges of $297 million recorded in Other (income)/deductions––net, primarilyrepresenting our pro rata share of restructuring2022 and business combination accounting charges recorded by the Consumer Healthcare JV, partially offset by gains from the divestiture of certain of the JV’s brands recorded by the Consumer Healthcare JV, and our write-off and amortization of equity method basis differences primarily related to those brand divestitures and to inventory and (ii) upfront payments of $130 million to Valneva and $72 million to BioNTech, which were recorded to2021 include insignificant reconciling amounts for Research and development expenses.
(l)expensesIncluded in Provision/(benefit) for taxes on income. Includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying the applicable tax rate. The third quarter and first nine months of 2021 were favorably impacted by benefits associated with certain initiatives executed in the third quarter of 2021 associated with our investment in the Consumer Healthcare JV with GSK (see Note 5A). The third quarter and first nine months of 2020 were favorably impacted by benefits associated with certain intangible asset impairment charges (see Note 4).
ANALYSIS OF THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows from Continuing Operations
| | | | Nine Months Ended | | | | | Six Months Ended | | |
(MILLIONS) | (MILLIONS) | | October 3, 2021 | | September 27, 2020 | | | Drivers of change | (MILLIONS) | | July 3, 2022 | | July 4, 2021 | | | Drivers of change |
Cash provided by/(used in): | Cash provided by/(used in): | | | | | | | | Cash provided by/(used in): | | | | | | | |
Operating activities from continuing operations | Operating activities from continuing operations | | $ | 26,660 | | | $ | 6,364 | | | | The change is driven primarily by higher net income and advance payments in 2021 for Comirnaty recorded in deferred revenue and the impact of timing of receipts and payments in the ordinary course of business, including a $7.8 billion accrual for the gross profit split due to BioNTech, partially offset by a non-cash change in Other Adjustments, net, primarily resulting from an increase in unrealized gains on equity securities. | Operating activities from continuing operations | | $ | 14,717 | | | $ | 15,828 | | | | The change was driven primarily by (i) a decrease in the change in amounts due to BioNTech for the gross profit split for Comirnaty and a decrease in the change in deferred revenues (see Notes 8 and 13C), as well as (ii) the impact of timing of receipts and payments in the ordinary course of business, partially offset by (iii) higher net income adjusted for non-cash items, including an increase from non-cash unrealized losses on equity securities recognized in 2022, compared to unrealized gains recognized in 2021. |
Investing activities from continuing operations | Investing activities from continuing operations | | $ | (19,960) | | | $ | (1,129) | | | | The change is driven mainly by a $17.0 billion increase in purchases of short-term investments with original maturities of greater than three months and a $7.8 billion increase in net purchases of short-term investments with original maturities of three months or less, partially offset by a $7.5 billion increase in redemptions of short-term investments with original maturities of greater than three months. | Investing activities from continuing operations | | $ | (10,746) | | | $ | (9,880) | | | | The change was driven mainly by $6.2 billion cash paid for the acquisition of Arena, net of cash acquired, a $3.0 billion increase in purchases of short-term investments with original maturities of greater than three months, a $2.6 billion increase in net purchases of short-term investments with original maturities of three months or less, and a $1.2 billion increase in purchases of long-term investments, partially offset by a $12.6 billion increase in redemptions of short-term investments with original maturities of greater than three months. |
Financing activities from continuing operations | Financing activities from continuing operations | | $ | (6,465) | | | $ | (7,257) | | | | The change is driven mostly by a $5.1 billion net reduction in repayments of short-term borrowings with maturities of greater than three months and a $1.5 billion reduction in repayments of long-term debt, partially offset by a $4.2 billion decrease in proceeds from issuances of long-term debt and a $1.4 billion net decrease in proceeds from short-term borrowings with maturities of three months or less. | Financing activities from continuing operations | | $ | (4,058) | | | $ | (5,364) | | | | The change was driven mostly by $4.0 billion proceeds from short-term borrowings, largely reflecting the loan from the Consumer Healthcare JV (see Note 2C), and an $879 million net increase in proceeds from short-term borrowings with original maturities of three months or less, partially offset by $2.0 billion purchases of the Company’s common stock in 2022 and a $1.6 billion increase in repayments of long-term debt. |
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Cash Flows from Discontinued Operations
Cash flows from discontinued operations primarily relate to our former Upjohn Business and the Mylan-Japan collaborationpreviously divested businesses (see Note 2A2B). In 2020, investing and financing activities from discontinued operations primarily reflect investments in money market funds with proceeds from issuances of long-term debt.
ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK
We rely largely on operating cash flows, short-term investments or commercial paper borrowings and long-term debt to provide for our liquidity requirements. We strive to improve cash inflows through working capital efficiencies. Due to our significant operating cash flows, which is a key strength of our liquidity and capital resources and our primary funding source, as well as our financial assets, access to capital markets, revolving credit agreements, and available lines of
credit, and revolving credit agreements, we believe that we have, and will maintain, the ability to meet our liquidity needs to support ongoing operations, our capital allocation objectives, and our contractual and other obligations for the foreseeable future. We have takenFor additional information, including information about off-balance sheet arrangements, see the Analysis of Financial Condition, Liquidity, Capital Resources and will continue to take a conservative approach toMarket Risk section within MD&A in our financial investments2021 Form 10-K. For information about the sources and monitoringuses of our liquidity position in response tofunds, as well as our operating cash flows, see our condensed consolidated statements of cash flows, condensed consolidated balance sheets, condensed consolidated statements of equity, and the Analysis of the Condensed Consolidated Statements of Cash Flows within MD&A. For information on our money market changes. Ourfunds, available-for sale-debt securities and long-term debt, investments consist primarily of high-quality, highly liquid, well-diversified available-for-sale debt securities.
see
Note 7.
Debt Capacity––Lines of Credit
We have available lines of credit and revolving credit agreements with a group of banks and other financial intermediaries. We typically maintain cash and cash equivalent balances and short-term investments which, together with our available revolving credit facilities, are in excess of our commercial paper and other short-term borrowings. As of OctoberJuly 3, 20212022, we had access to a $7 billion committed U.S. revolving credit facility expiring in 2025.2026, which may be used for general corporate purposes including to support our commercial paper borrowings. In addition to the U.S. revolving credit facility, our lenders have provided us an additional $377$527 million in lines of credit, of which $336$495 million expire within one year. Essentially all lines of credit were unused as of OctoberJuly 3, 2021.2022.
Selected MeasuresCapital Allocation Framework
Our capital allocation framework is primarily devised to facilitate (i) the achievement of Liquiditymedical breakthroughs through R&D investments and Capital Resources
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The following presents certain relevant measures of our liquidity and capital resources: |
(MILLIONS, EXCEPT RATIOS) | | October 3, 2021 | | December 31, 2020 |
Selected financial assets(a): | | | | |
Cash and cash equivalents | | $ | 1,966 | | | $ | 1,784 | |
Short-term investments | | 27,730 | | | 10,437 | |
Long-term investments, excluding private equity securities at cost | | 4,632 | | | 2,973 | |
| | 34,328 | | | 15,195 | |
Debt: | | | | |
Short-term borrowings, including current portion of long-term debt | | 3,629 | | | 2,703 | |
Long-term debt | | 36,250 | | | 37,133 | |
| | 39,878 | | | 39,835 | |
Selected net financial liabilities | | $ | (5,551) | | | $ | (24,641) | |
Working capital(b) | | $ | 16,097 | | | $ | 9,147 | |
Ratio of current assets to current liabilities | | 1.39:1 | | 1.35:1 |
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business development activities and (ii) returning capital to shareholders through dividends and share repurchases. See the Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2021 Form 10-K. In April 2022, our BOD declared a dividend of $0.40 per share, paid on June 10, 2022, to shareholders of record at the close of business on May 13, 2022. In June 2022, our BOD declared a dividend of $0.40 per share, payable on September 6, 2022, to shareholders of record at the close of business on July 29, 2022.(a)In the first quarter of 2022, we purchased 39 million shares of our common stock at a cost of $2.0 billion under our publicly announced share purchase plan. We did not purchase shares in the second quarter of 2022. See Note 712 in our 2021 Form 10-K and Unregistered Sales of Equity Securities and Use of Proceeds in Part II, Item 2 for a description of certain assets held and for a description of credit risk related tomore information. At July 3, 2022, our financial instruments held.
(b)The increase in working capitalremaining share-purchase authorization was primarily driven by an increase in short-term investments due to operating cash flow generation, partially offset by the timing of accruals, cash receipts and payments in the ordinary course of business and capital expenditures.approximately $3.3 billion.
In August 2021,keeping with Pfizer’s transformation into a more focused, global leader in science-based innovative medicines and vaccines, we completedintend to exit our 32% ownership interest in Haleon in a public offering of $1 billion aggregate principal amount of senior unsecured sustainability notes. We are using the net proceeds to finance or refinance, in whole or in part as follows: R&D expenses related to our COVID-19 vaccine, capital expenditures in connectiondisciplined manner, with the manufacture and distributionobjective of COVID-19 vaccines and other projects that have environmental and/or social benefits. For additional information, seemaximizing value for our shareholders. See Note 7D2C.
Off-Balance Sheet Arrangements
For information about the sources and uses of our funds, see the Analysis of the Condensed Consolidated Statements of Cash Flows section within MD&A.
For information about credit ratings, LIBOR, global economic conditions, and market risk,off-balance sheet arrangements, see the Analysis of Financial Condition, Liquidity, Capital Resources and Market Risk—Selected Measures of Liquidity and Capital ResourcesRisk sectionwithin MD&A in our 20202021 Form 10-K.
Off-Balance Sheet Arrangements
In the ordinary course of business and in connection with the sale of assets and businesses and other transactions, we often indemnify our counterparties against certain liabilities that may arise in connection with the transaction or that are related to events and activities. For more information on guarantees and indemnifications, see Note 12B.
Additionally, certainIn March 2022, in connection with GSK’s previously announced planned demerger, the Consumer Healthcare JV issued notes of $8.75 billion, €2.35 billion and £700 million with various maturities. GSK guaranteed the notes and we agreed to indemnify GSK for 32% of any amount payable by GSK. In conjunction with the completion of GSK’s demerger transactions in July 2022, GSK’s guarantee and our co-promotion or license agreements give our licensors or partners the rights to negotiate for, or in some cases to obtain under certain financial conditions, co-promotion or other rights in specified countries with respect to certainrelated indemnification of our products.
GSK’s guarantee were terminated.
Share-Purchase Plans and Accelerated Share Repurchase Agreements
At October 3, 2021, our remaining share-purchase authorization was approximately $5.3 billion, with no repurchases in the first nine months of 2021. See Note 122C.
Global Economic Conditions
Beginning in our 2020 Form 10-K forsecond quarter of 2022, our operations in Turkey function in a hyperinflationary economy. The impact to Pfizer is not considered material. For more information onabout global economic conditions, see the Overview of Our Performance, Operating Environment, Strategy and Outlook—The Global Economic Environment section within this MD&A.
For additional information about our publicly announced share-purchase plans.diverse sources of funds, global economic conditions, and information about credit ratings, market risk and LIBOR, see the
Dividends on Common Stock
In SeptemberAnalysis of Financial Condition, Liquidity, Capital Resources and Market Risk sectionwithin MD&A in our 2021 our BOD declared a dividend of $0.39 per share, payable on December 6, 2021, to shareholders of record at the close of business on November 5, 2021. Our current and projected dividends provide a return to shareholders while maintaining sufficient capital to invest in growing our business. Our dividends are not restricted by debt covenants. While the dividend level remains a decision of Pfizer’s BOD and will continue to be evaluated in the context of future business performance, we currently believe that we can support future annual dividend increases, barring significant unforeseen events.Form 10-K.
NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standard
See Note 1B.
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Recently Issued Accounting Standard,Standards, Not Adopted as of OctoberJuly 3, 20212022 |
Standard/Description | | Effective Date | | Effect on the Financial Statements |
Reference rate reform provides temporary optional expedients and exceptions to the guidance for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued after 2021 because of reference rate reform. The new guidance provides the following optional expedients: 1.Simplify accounting analyses under current U.S. GAAP for contract modifications. 2.Simplify the assessment of hedge effectiveness and allow hedging relationships affected by reference rate reform to continue. 3.Allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform. | | Elections can be adopted prospectively at any time through December 31, 2022. | | We are assessing the impact, of the provisions ofbut currently do not expect this new guidance to have a material impact on our consolidated financial statements. |
Accounting for contract assets and contract liabilities from contracts with customersIn June 2022, the FASB issued requires contract assets and contract liabilities acquired infinal guidance to clarify that a business combination to be recognized and measured by the acquirer contractual restriction on the acquisition date in accordance with ASC 606. This new guidance will generally result in the acquirer recognizing contract assets and contract liabilities at the same amounts that were recorded by the acquiree. Previously, these amounts were recognized by the acquirer at fair value assale of an equity security is not considered part of the acquisition date.unit of account of the equity security and, therefore, is not considered when measuring fair value. Recognizing a contractual sale restriction as a separate unit of account is not permitted.
| | January 1, 2024, with early adoption permitted. | | January 1, 2023. Early adoption is permitted. | | We are assessing the impact, but currently do not expect this new guidance to have a material impact on our consolidated financial statements. |
FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS
This Form 10-Q contains forward-looking statements. We also provide forward-looking statements in other materials we release to the public, as well as public oral statements. Given their forward-looking nature, these statements involve substantial risks, uncertainties and potentially inaccurate assumptions.
We have tried, wherever possible, to identify such statements by using words such as “will,” “may,” “could,” “likely,” “ongoing,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “assume,” “target,” “forecast,” “guidance,” “goal,” “objective,” “aim,” “seek”“seek,” “potential,” “hope” and other words and terms of similar meaning or by using future dates.
We include forward-looking information in our discussion of the following, among other topics:
•our anticipated operating and financial performance, reorganizations, business plans, strategy and prospects;
•expectations for our product pipeline, in-line products and product candidates, including anticipated regulatory submissions, data read-outs, study starts, approvals, clinical trial results and other developing data, revenue contribution, growth, performance, timing of exclusivity and potential benefits;
•strategic reviews, capital allocation objectives, dividends and share repurchases;
•plans for and prospects of our acquisitions, dispositions and other business development activities, and our ability to successfully capitalize on these opportunities;
•sales, expenses, interest rates, foreign exchange rates and the outcome of contingencies, such as legal proceedings;
•expectations for impact of or changes to existing or new government regulations or laws;
•our ability to anticipate and respond to macroeconomic, geopolitical, health and industry trends, pandemics, acts of war and other large-scale crises; and
•manufacturing and product supply.
In particular, forward-looking information in this Form 10-Q includes statements relating to specific future actions and effects, including, among others, the expected benefits of the organizational changes to further transform our operations, including establishing a new commercial structure within Biopharma, our efforts to respond to COVID-19, including our development of a vaccine to help prevent COVID-19plans and our investigational protease inhibitors,expectations regarding Comirnaty and Paxlovid, and any potential future vaccines or treatments; the forecasted revenue, contributiondemand, manufacturing and supply of Comirnaty and the potential number of doses that we and BioNTech believe can be manufactured;Paxlovid; our expectations regarding the impact of COVID-19 on our business; the expected impact of patent expiries and competition from generic manufacturers; the expected pricing pressures on our products and the anticipated impact to our business; the availability of raw materials for 2022; the expected charges and/or costs in connection with the spin-off of the Upjohn Business and its combination with Mylan; the benefits expected from our business development transactions; our anticipated liquidity position; the anticipated costs and savings from certain of our initiatives, including our Transforming to a More Focused Company program; anticipated study starts;and our planned capital spending; and the expectations for our quarterly dividend payments.spending.
Given their nature, we cannot assure that any outcome expressed in these forward-looking statements will be realized in whole or in part. Actual outcomes may vary materially from past results and those anticipated, estimated, implied or projected. These forward-looking statements may be affected by underlying assumptions that may prove inaccurate or incomplete, or by known or unknown risks and uncertainties, including those described in this section and in the Item 1A. Risk Factors section in our 20202021 Form 10-K.
Therefore, you are cautioned not to unduly rely on forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law. You are advised, however, to consult any further disclosures we make on related subjects.
Some of the factors that could cause actual results to differ are identified below, as well as those discussed in the Item 1A. Risk Factors section in our 20202021 Form 10-K and within this MD&A. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. The occurrence of any of the risks identified below, or in the Item 1A. Risk Factors section in our 20202021 Form 10-K or within this MD&A, or other risks currently unknown, could have a material adverse effect on our business, financial condition or results, of operations, or we may be required to increase our accruals for contingencies. It is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties:
Risks Related to Our Business, Industry and Operations, and Business Development:Development
•the outcome of R&D activities, including, 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, and/or regulatory approval and/or launch dates; the possibility of unfavorable pre-clinical and clinical trial results, including the possibility of unfavorable new pre-clinical or clinical data andand/or further analyses of existing pre-clinical or clinical data; the risk that pre-clinical and clinical trial data are subject to differing interpretations and assessments, including during the peer review/publication process, in the scientific community generally, and by regulatory authorities; and whether and when additional data from our pipeline programs will be published in scientific journal publications, and if so, when and with what modifications and interpretations;
•our ability to successfully address comments received from regulatory authorities such as the FDA or the EMA, or obtain approval for new products and indications from regulators on a timely basis or at all; regulatory decisions impacting labeling, including the scope of indicated patient populations, product dosage, manufacturing processes, safety and/or other matters, including decisions relating to emerging developments regarding potential product impurities; the impact of recommendations by technical or advisory committees; and the timing of pricing approvals and product launches;
•claims and concerns that may arise regarding the safety or efficacy of in-line products and product candidates, including claims and concerns that may arise from the outcome of post-approval clinical trials, which could impact marketing approval, product labeling, and/or availability or commercial potential, including uncertainties regarding the commercial or other impact of the results of the Xeljanz ORAL Surveillance (A3921133) study or any potential actions by regulatory authorities based on analysis of ORAL Surveillance or other data, including on other Janus kinase (JAK)JAK inhibitors in our portfolio;
•the success and impact 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 in the anticipated time frame or at all; the potential need for and impact of additional equity or debt financing to pursue these opportunities, which could result in increased leverage and/or a downgrade of our credit ratings; challenges integrating the businesses and operations; disruption to business and operations relationships; risks related to growing revenues for certain acquired products; significant transaction costs; and unknown liabilities;
•competition, including from new product entrants, in-line branded products, generic products, private label products, biosimilars and product candidates that treat or prevent diseases and conditions similar to those treated or intended to be prevented by our in-line products and product candidates;
•the ability to successfully market both new and existing products, including biosimilars;
•difficulties or delays in manufacturing, sales or marketing; supply disruptions, shortages or stock-outs at our facilities or our third party suppliers’ facilities;third-party facilities that we rely on; and legal or regulatory actions;
•the impact of public health outbreaks, epidemics or pandemics (such as the COVID-19 pandemic), including the impact of vaccine mandates where applicable, on our business, operations and financial condition and results, including impacts on our employees, manufacturing, supply chain, sales and marketing, R&D and clinical trials;
•risks and uncertainties related to our efforts to develop and commercialize a vaccine to help prevent COVID-19 and potential treatments foran oral COVID-19 treatment, as well as challenges related to their manufacturing, supply and distribution;
•risks related to our ability to achieve our revenue forecasts for Comirnaty and Paxlovid or any potential future COVID-19 vaccines or treatments, including, among other things, whether and when additional supply or purchase agreements will be reached, the risk that demand for any products may be reduced or no longer exist and the possibility that COVID-19 will diminish in severity or prevalence or disappear entirely, which may lead to reduced revenues or excess inventory;
•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;
•interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates;
•any significant issues involving our largest wholesale distributors or government customers, which account for a substantial portion of our revenues;
•the impact of the increased presence of counterfeit medicines or vaccines in the pharmaceutical supply chain;
•any significant issues related to the outsourcing of certain operational and staff functions to third parties; and any significant issues related to our JVs and other third-party business arrangements;
•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, such as inflation, and recent and possible future changes in global financial markets;
•any changes in business, political and economic conditions due to actual or threatened terrorist activity, geopolitical instability, civil unrest or military action;
•the impact of product recalls, withdrawals and other unusual items, including uncertainties related to regulator-directed risk evaluations and assessments;assessments, including our ongoing evaluation of our product portfolio for the potential presence or formation of nitrosamines;
•trade buying patterns;
•the risk of an impairment charge related to our intangible assets, goodwill or equity-method investments;
•the impact of, and risks and uncertainties related to, restructurings and internal reorganizations, as well as 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;
Risks Related to Government Regulation and Legal Proceedings:Proceedings
•the impact of any U.S. healthcare reform or legislation or 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;
•U.S. federal or state legislation or regulatory action and/or policy efforts affecting, among other things, pharmaceutical product pricing, intellectual property, reimbursement or access or restrictions on U.S. direct-to-consumer advertising; limitations on interactions with healthcare professionals and other industry stakeholders; as well as pricing pressures for our products as a result of highly competitive insurance markets;
•legislation or regulatory action in markets outside of the U.S., including China, affecting pharmaceutical product pricing, intellectual property, 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 globally 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 the impact of political unrest or civil unrest or military action, including the ongoing conflict between Russia and Ukraine and the continued economic consequences, unstable governments and legal systems and inter-governmental disputes;
•legal defense costs, insurance expenses, settlement costs and contingencies, including those related to actual or alleged environmental contamination;
•the risk and impact of an adverse decision or settlement and the adequacy of reserves related to legal proceedings;
•the risk and impact of tax related litigation;
•governmental laws and regulations affecting our operations, including, without limitation, changes in laws and regulations or their interpretation, including, among others, changes in tax laws and regulations internationally and in the U.S., including, among others, anypotential adoption of global minimum taxation requirements and potential changes to the existing tax law by the current U.S. Presidential administration and Congress increasing the corporate tax rate and/or the tax rate on foreign earnings;Congress;
Risks Related to Intellectual Property, Technology and Security:Security
•any significant breakdown or interruption of our information technology systems and infrastructure;infrastructure (including cloud services);
•any business disruption, theft of confidential or proprietary information, extortion or integrity compromise resulting from a cyberattack;cyber-attack or other malfeasance by third parties, including, but not limited to, nation states, employees, business partners or others;
•the risk that our currently pending or future patent applications may not be granted on a timely basis or at all, or any patent-term extensions that we seek may not be granted on a timely basis, if at all; and
•our ability to protect our patents and other intellectual property, includingsuch as against claims of invalidity that could result in LOE, including challenges faced by our collaboration or licensing partners to the validity of their patent rights, asserted and/or unasserted intellectual property claims and in response to any pressure, or legal or regulatory action by, various stakeholders or governments that could potentially result in us not seeking intellectual property protection for or agreeing not to enforce or being restricted from enforcing intellectual property related to our products, including our vaccine to help prevent COVID-19 and potential treatments for COVID-19.our oral COVID-19 treatment.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item is incorporated by reference from the discussion in the Analysis of Financial Condition, Liquidity, Capital Resources and Market Risk—Selected Measures of Liquidity and Capital Resources—Market Risk section within MD&A of our 20202021 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be disclosed in our periodic reports filed with the SEC.
During our most recent fiscal quarter, there has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION |
ITEM 1. LEGAL PROCEEDINGS
Certain legal proceedings in which we are involved are discussed in Note 12A.
ITEM 1A. RISK FACTORS
We refer to the “OurOverview of Our Performance, Operating Environment”, “TheEnvironment, Strategy and Outlook—Our Operating Environment and —The Global Economic Environment”, “COVID-19 Pandemic”Environment sections and “Forward-Lookingthe Forward-Looking Information and Factors That May Affect Future Results” sectionsResults section of the MD&A of this Form 10-Q and to Part I, Item 1A, “Risk Factors” of our 20202021 Form 10-K and to the Item 1A. Risk Factors section of our 2021 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following summarizes purchases of our common stock during the thirdsecond quarter of 2021:2022:
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Period | | Total Number of Shares Purchased(a) | | Average Price Paid per Share(a) | | Total Number of Shares Purchased as Part of Publicly Announced Plan | | Approximate Value of Shares That May Yet Be Purchased Under the Plan(b) |
July 5 through August 1, 2021 | | 2,792 | | | $ | 39.78 | | | — | | | $ | 5,292,881,709 | |
August 2 through August 29, 2021 | | 40,687 | | | $ | 43.01 | | | — | | | $ | 5,292,881,709 | |
August 30 through October 3, 2021 | | 24,743 | | | $ | 45.01 | | | — | | | $ | 5,292,881,709 | |
Total | | 68,222 | | | $ | 43.60 | | | — | | | |
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Period | | Total Number of Shares Purchased(a) | | Average Price Paid per Share(a) | | Total Number of Shares Purchased as Part of Publicly Announced Plan | | Approximate Value of Shares That May Yet Be Purchased Under the Plan(b) |
April 4 through May 1, 2022 | | 22,946 | | | $ | 52.51 | | | — | | | $ | 3,292,882,444 | |
May 2 through May 29, 2022 | | 50,629 | | | $ | 49.77 | | | — | | | $ | 3,292,882,444 | |
May 30 through July 3, 2022 | | 77,399 | | | $ | 52.00 | | | — | | | $ | 3,292,882,444 | |
Total | | 150,974 | | | $ | 51.33 | | | — | | | |
(a)Represents (i) 65,860149,013 shares of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of awards under our long-term incentive programs and (ii) the open market purchase by the trustee of 2,3621,961 shares of common stock in connection with the reinvestment of dividends paid on common stock held in trust for employees who deferred receipt of performance share awards.
(b)See the Analysis of Financial Condition, Liquidity, Capital Resources and Market Risk—Capital Allocation Framework section within the MD&A of this Form 10-Q and Note 12 in our 20202021 Form 10-K.
ITEM 6. EXHIBITS
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| | - | Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | - | Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | - | 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. |
| | - | 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. |
| Exhibit 101: | | |
| EX-101.INS | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| EX-101.SCH EX-101.CAL EX-101.LAB EX-101.PRE EX-101.DEF | | Inline XBRL Taxonomy Extension Schema Inline XBRL Taxonomy Extension Calculation Linkbase Inline XBRL Taxonomy Extension Label Linkbase Inline XBRL Taxonomy Extension Presentation Linkbase Inline XBRL Taxonomy Extension Definition Document |
| Exhibit 104 | | Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | Pfizer Inc. |
| | (Registrant) |
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Dated: | November 12, 2021August 10, 2022 | /s/ Jennifer B. Damico |
| | Jennifer B. Damico Senior Vice President and
Controller (Principal Accounting Officer and Duly Authorized Officer) |