Exhibit 99
Pfizer Reports Third-Quarter 2007 Results; Reconfirms 2007 and 2008
Revenue and Adjusted Diluted EPS(1) Guidance
-- Third-Quarter 2007 Reported Diluted EPS of $0.11 Represents a
Decline of 76% Compared to the Same Period Last Year and
Includes Charges of $0.31 ($2.8 Billion Pre-Tax) Related to a
Decision to Exit Exubera
-- Adjusted Diluted EPS(1) of $0.58 for the Third-Quarter 2007
Represents an Increase of 7% Compared to the Same Period a
Year Ago
-- New Products(3) Posted Significant Growth in Revenues; Overall
Third-Quarter 2007 Revenues were Adversely Impacted by Loss of
U.S. Exclusivity for Norvasc and Zoloft
-- Worldwide Lipitor Revenues were $3.2 Billion in the Third
Quarter of 2007 Compared to $3.3 Billion in the Third Quarter
of 2006
NEW YORK--(BUSINESS WIRE)--October 18, 2007--Pfizer:
($ in millions, except per-share amounts)
Third Quarter Year to Date
---------------------- ----------------------
2007 2006 Change 2007 2006 Change
------- ------- ------ ------- ------- ------
Reported Revenues $11,990 $12,280 (2%) $35,548 $35,768 (1%)
Reported Net Income 761 3,362 (77%) 5,420 9,888 (45%)
Reported Diluted EPS 0.11 0.46 (76%) 0.78 1.35 (42%)
Adjusted Income(1) 3,963 3,922 1% 11,711 11,935 (2%)
Adjusted Diluted EPS(1) 0.58 0.54 7% 1.68 1.63 3%
Pfizer Inc posted third-quarter 2007 revenues of $12.0 billion, a
2% decline from the same period last year. The Company's reported net
income was $761 million in the third quarter of 2007, a decrease of
77% from the same period last year, primarily reflecting pre-tax
charges of $2.8 billion related to the decision to exit Exubera, our
inhaled insulin product to treat diabetes. Adjusted income(1) for the
third quarter of 2007 increased 1% to $4.0 billion compared to the
third quarter of 2006.
"We are encouraged by our operating results in the third quarter,
and we remain on track to achieve our full-year 2007 revenues and
adjusted diluted EPS(1) goals. Meanwhile, we made an important
decision regarding Exubera, a product for which we initially had high
expectations," said Jeff Kindler, Chairman and Chief Executive
Officer. "Despite our best efforts, Exubera has failed to gain the
acceptance of patients and physicians. We have therefore concluded
that further investment in this product is unwarranted."
"We will work with physicians to transition Exubera patients to
other treatment options in the next three months. We remain committed
to investing significant resources in the development of new and
innovative medicines to manage diabetes, including monitoring
inhalation technologies and other innovative delivery systems for
insulin and other medicines."
Frank D'Amelio, Chief Financial Officer, added, "The Exubera
pre-tax charges of $2.8 billion related primarily to the write-off of
assets associated with this product, as well as the accrual of other
exit costs. More specifically, these charges are comprised of
approximately $1.1 billion of intangible assets, $661 million of
inventory, $454 million of fixed assets and $584 million of other exit
costs."
Commenting on the financial performance in the just-ended quarter,
Mr. Kindler said, "We are achieving our operational goals in the face
of major revenue losses due to patent expirations in the U.S. Most of
our new products(3) along with the favorable impact of foreign
exchange are contributing significantly toward offsetting these losses
as evidenced by our year-to-date results."
Mr. Kindler continued, "While optimizing revenues from our in-line
products(2) and generating strong growth from our new products(3), we
remain focused on driving a series of fundamental changes in the
Company to improve our performance and achieve a lower, more flexible
cost base. We are making substantial progress on these priorities. For
example, our reduction in adjusted selling, informational and
administrative expenses(1) this year is expected to exceed our
previous forecast on a constant currency basis(8)."
"However, we need to deliver better results, continue to
make tough decisions about allocating our capital wisely, and bring
more new products to the market as quickly as possible. Doing all of
this will put Pfizer on the right course and build value for our
shareholders."
Financial Results
In the third quarter of 2007, Pfizer posted revenues of $12.0
billion, a decline of 2% from $12.3 billion in the same period last
year. This decline reflects the loss of U.S. exclusivity for Zoloft in
June 2006 (with generic competition entering the market in August
2006) and for Norvasc in March 2007, six months earlier than expected.
Both products were major contributors to revenue last year. Further,
the decline in revenues was also the result of a one-time reversal of
a sales deduction accrual recorded in the third quarter of 2006
related to a favorable development in a pricing dispute in the U.S.
These adverse factors were substantially offset by revenues from new
products(3) and the favorable impact of foreign exchange of
approximately $300 million.
Revenues in the first nine months of 2007 were $35.5 billion, a
decline of 1% from $35.8 billion in the same period in the previous
year, primarily a result of the loss of U.S. exclusivity for Zoloft
and Norvasc, once again largely offset by the revenues from new
products(3) and the favorable impact of foreign exchange of
approximately $860 million.
Reported net income in the third quarter of 2007 was $761 million
compared with $3.4 billion in the third quarter of 2006, a decline of
77%. Reported diluted EPS of $0.11 in the third quarter of 2007
declined 76% from $0.46 in the prior year period. In addition to the
$2.8 billion of pre-tax charges related to Exubera, loss of U.S.
exclusivity for Zoloft and Norvasc, and the one-time reversal of a
sales deduction accrual of about $170 million recorded in the third
quarter of 2006, the decrease in both reported net income and reported
diluted EPS reflects increased restructuring and implementation
expenses associated with our cost-reduction initiatives, and the
non-recurrence of prior year income from discontinued operations as a
result of the divestiture of our former Consumer Healthcare business
in December 2006. The impact of these factors was partially offset by
the growth in revenues from new products(3), lower operating expenses,
increased interest income, and the favorable impact of foreign
exchange. Reported diluted EPS was also favorably impacted by our
share purchase program.
Adjusted income(1) of $4.0 billion in the third quarter of 2007
increased 1% over the same period last year, while adjusted diluted
EPS(1) of $0.58 increased 7% from $0.54 in 2006, primarily as a result
of the revenue items previously discussed as well as lower operating
expenses, increased interest income, and the favorable impact of
foreign exchange. Adjusted diluted EPS(1) was also favorably impacted
by our share purchase program. Through the first nine months of 2007,
we purchased $7.5 billion of our stock as part of our previously
announced plan to repurchase up to $10.0 billion of our stock in 2007.
Product Performance
($ in millions, except percentages)
Third Quarter Year to Date
---------------------- ----------------------
2007 2006 Change 2007 2006 Change
------- ------- ------ ------- ------- ------
In-Line Products(2) $ 9,341 $ 9,318 -- $27,516 $26,859 2%
New Products(3) 931 500 86% 2,458 1,065 131%
------- ------- ------- -------
Total In-Line and New
Products(4) 10,272 9,818 5% 29,974 27,924 7%
Loss of Exclusivity
Products(5) 764 1,667 (54%) 2,748 5,493 (50%)
------- ------- ------- -------
Total Pharmaceutical 11,036 11,485 (4%) 32,722 33,417 (2%)
Animal Health 636 562 13% 1,854 1,656 12%
Other(6) 318 233 36% 972 695 40%
------- ------- ------- -------
Total Revenues $11,990 $12,280 (2%) $35,548 $35,768 (1%)
======= ======= ======= =======
(2) (3) (4) (5) (6) See end of text prior to tables for notes.
Pharmaceuticals
Worldwide pharmaceutical revenues for the third quarter of 2007
were down 4% from the same quarter a year ago. In-line and new
products(4) revenues increased 5% in the third quarter of 2007
compared to the same period in 2006. Revenues for products that lost
U.S. marketing exclusivity in 2006 and 2007, Zoloft and Norvasc,
declined 54% in the third quarter of 2007 compared to last year.
Lipitor revenues in the third quarter of 2007 were $3.2 billion, a
5% decline from the same period in 2006. In the U.S., Lipitor revenues
declined 13%, while revenues in international markets rose 9%, due
primarily to the favorable impact of foreign exchange and, to a lesser
extent, operating growth. We estimate full-year 2007 worldwide Lipitor
revenues to be 3% to 5% lower than 2006. The U.S. statin market in
particular continues to be highly competitive, with both branded and
generic competition in an increasingly cost-sensitive environment. We
continue to respond to this competition with an integrated
multi-channel effort.
Celebrex revenues rose 8% to $577 million in the third quarter of
2007 compared to the same period last year. In the U.S., we are
continuing to focus on our direct-to-consumer advertising campaign
aimed at further stimulating patient interest and initiating a
valuable dialogue between patients and physicians.
Lyrica revenues grew 37% to $465 million in the third quarter of
2007 compared to the same period last year. Lyrica's growth continues
to be fueled by strong efficacy as well as high patient and physician
satisfaction in the marketplace. Lyrica was approved in the U.S. in
June 2007 for the management of fibromyalgia, one of the most common
chronic, widespread pain conditions, and was launched for this
indication in July 2007.
Chantix, our treatment to aid smoking cessation, continued its
strong performance with revenues of $241 million in the third quarter
of 2007 compared to $33 million in the third quarter of 2006. Within
the last month, we launched a direct-to-consumer campaign in the U.S.
aimed at further increasing awareness of Chantix and how it can help
smokers who want to quit.
Animal Health
Third-quarter 2007 revenues increased 13% to $636 million,
compared to $562 million in the same period last year. For the first
nine months of 2007, revenues increased 12% to $1.9 billion compared
to $1.7 billion in the same period last year. The increase in both
periods is largely attributed to strong product performance in the
companion animal and international livestock businesses; the
acquisition of Embrex, a company with a unique vaccine delivery system
that vaccinates chicks while inside their eggs; and the favorable
impact of foreign exchange.
Expenses
In the third quarter of 2007, adjusted cost of sales(1) as a
percentage of revenues was 15.1%, compared to 15.4% in the third
quarter of 2006 despite adverse geographic and product mix as compared
to the same period a year ago. This reflects our ongoing cost-base
reduction efforts. "Given ongoing pressures associated with geographic
and product mix, we now forecast adjusted cost of sales(1) to be about
15.5% of revenues for the full-year of 2007 versus our previous
estimate of 15.0%," said Mr. D'Amelio.
Adjusted Selling, Informational and Administrative (SI&A)
expenses(1) of $3.6 billion in the third quarter of 2007 decreased 1%
compared to the third quarter of 2006, due primarily to savings from
our cost-reduction initiatives, partially offset by the unfavorable
impact of foreign exchange. We previously projected adjusted SI&A
expenses(1) for the full-year 2007 to decrease by more than $500
million absent the impact of foreign exchange relative to the
full-year 2006. We now project a year-over-year decrease in adjusted
SI&A expenses(1) of about $600 million on a constant currency basis(8)
as the benefits of our cost-reduction initiatives are materializing.
Adjusted research and development (R&D) expenses(1) were $1.7
billion in the third quarter of 2007, a decrease of 5% compared to the
third quarter of 2006, due primarily to the realization of savings
associated with our cost-reduction initiatives and the non-recurrence
of a licensing payment in the prior year partially offset by the
unfavorable impact of foreign exchange. We continue to project the
full-year 2007 adjusted R&D expenses(1) to be approximately $7.5
billion.
Financial Guidance
Our financial guidance for full-year 2007, at current exchange
rates(7) except as otherwise noted, is summarized below and compared
to prior communications.
We have raised the lower end of the ranges for revenues and
adjusted diluted EPS(1). In addition, as a result of progress in our
cost-reduction initiatives, we now expect adjusted SI&A expenses(1) to
decrease about $100 million more than our previous guidance. We have
also changed our guidance on adjusted cost of sales(1) as a percent of
revenues from 15.0% to 15.5%, largely due to geographic and product
mix. Further, given the charges we recorded related to Exubera, we
have decreased our guidance on reported diluted EPS. Guidance
regarding adjusted R&D expenses(1), the effective tax rate on adjusted
income(1), and cash flows from operations remains consistent with
prior communications.
Previous Guidance Current Guidance
- ----------------------------------------------------------------------
Revenues $47.0 to $48.0 billion $47.5 to $48.0 billion
- ----------------------------------------------------------------------
Adjusted Cost of
Sales(1) as a Approx. 15.0% Approx. 15.5%
Percentage of
Revenues
- ----------------------------------------------------------------------
Decrease of greater than Decrease of about $600
Adjusted SI&A $500 million versus 2006 million versus 2006 on
Expenses(1) on a constant currency a constant currency
basis(8) -- Approx. basis(8) -- Approx.
$15.2 billion $15.1 billion
- ----------------------------------------------------------------------
Adjusted R&D
Expenses(1) Approx. $7.5 billion Approx. $7.5 billion
- ----------------------------------------------------------------------
Effective Tax
Rate on Adjusted
Income(1) 22.0% 22.0%
- ----------------------------------------------------------------------
Reported Diluted
EPS $1.30 to $1.41 $1.01 to $1.10
- ----------------------------------------------------------------------
Adjusted Diluted
EPS(1) $2.08 to $2.15 $2.10 to $2.15
- ----------------------------------------------------------------------
Cash Flows from
Operations $12.0 to $13.0 billion $12.0 to $13.0 billion
- ----------------------------------------------------------------------
Our financial guidance for full-year 2008, at current exchange
rates(7) except as otherwise noted, is summarized below.
Previous Guidance Current Guidance
- ----------------------------------------------------------------------
Revenues $46.5 to $48.5 billion $46.5 to $48.5 billion
- ----------------------------------------------------------------------
At least $1.5 to $2.0
Adjusted Total At least $1.5 to $2.0 billion lower than 2006
Costs(9) billion lower than 2006 on a constant currency
basis(8)
- ----------------------------------------------------------------------
Effective Tax Rate
on Adjusted
Income(1) 22.0% to 22.5% 22.0% to 22.5%
- ----------------------------------------------------------------------
Reported Diluted EPS $1.75 to $1.93 $1.75 to $1.93
- ----------------------------------------------------------------------
Adjusted Diluted
EPS(1) $2.31 to $2.45 $2.31 to $2.45
- ----------------------------------------------------------------------
Cash Flows from
Operations $18.0 to $19.0 billion $18.0 to $19.0 billion
- ----------------------------------------------------------------------
For additional details, please see the attached financial
schedules, product revenue tables, supplemental financial information,
and Disclosure Notice.
(1) "Adjusted income" and its components and "adjusted diluted
earnings per share (EPS)" are defined as reported net income and its
components and reported diluted EPS excluding purchase-accounting
adjustments, acquisition-related costs, discontinued operations and
certain significant items. Adjusted Cost of Sales, Adjusted SI&A
expenses and Adjusted R&D expenses are income statement line items
prepared on the same basis and therefore, components of the overall
Adjusted Income measure. As described under Adjusted Income in the
Management's Discussion and Analysis of Financial Condition and
Results of Operations section of Pfizer's Form 10-Q for the quarterly
period ended July 1, 2007, management uses adjusted income, among
other factors, to set performance goals and to measure the performance
of the overall company. We believe that investors' understanding of
our performance is enhanced by disclosing this measure.
Reconciliations of third-quarter and nine-month 2007 and 2006 adjusted
income and its components and adjusted diluted EPS to reported net
income and its components and reported diluted EPS, as well as
reconciliations of full-year 2007 and 2008 adjusted income and
adjusted diluted EPS guidance to full-year 2007 and 2008 reported net
income and reported diluted EPS guidance, are provided in the
materials accompanying this report. The adjusted income and its
components and adjusted diluted EPS measures are not, and should not
be viewed as, substitutes for U.S. GAAP net income and diluted EPS.
(2) Represents worldwide revenues for all pharmaceutical products,
excluding revenues included in notes (3) and (5).
(3) Represents worldwide revenues for pharmaceutical products
launched in the U.S. since 2005: Chantix, Eraxis, Exubera, Lyrica,
Macugen, Revatio, Selzentry, Sutent, and Zmax.
(4) Total worldwide pharmaceutical revenues excluding the revenues
of major products that have lost exclusivity in the U.S. in 2006 and
2007 as described in note (5). See the table accompanying this report.
(5) Represents worldwide revenues for pharmaceutical products that
have lost exclusivity in the U.S. in 2006 and 2007: Zoloft and
Norvasc.
(6) Includes Consumer Healthcare business transition activity,
Capsugel and Pfizer Centersource.
(7) Current exchange rates approximate rates at the time of our
third quarter earnings press release (October 2007).
(8) Constant currency basis means that the applicable projected
financial measure is based upon the actual foreign exchange rates in
effect during 2006.
(9) Represents primarily the total of Adjusted Cost of Sales(1),
Adjusted SI&A expenses(1) and Adjusted R&D expenses(1).
PFIZER INC AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(millions of dollars, except per common share data)
Third Quarter % Incr. Nine Months % Incr.
----------------- / ----------------- /
2007 2006 (Decr.) 2007 2006 (Decr.)
----------------- ------- ----------------- -------
Revenues $11,990 $12,280 (2) $35,548 $35,768 (1)
Costs and expenses:
Cost of sales (a) 4,618 1,962 135 8,614 5,423 59
Selling,
informational and
administrative
expenses (a) 3,768 3,751 - 10,973 11,027 -
Research and
development
expenses (a) 1,999 1,902 5 5,829 5,187 12
Amortization of
intangible assets 774 798 (3) 2,372 2,446 (3)
Acquisition-
related in-
process research
and development
charges - - * 283 513 (45)
Restructuring
charges and
acquisition-
related costs 455 249 83 2,318 816 184
Other (income)/
deductions--net (260) (343) (24) (1,149) (958) 20
-------- -------- -------- --------
Income from
continuing
operations before
(benefit)/
provision for
taxes on income
and minority
interests 636 3,961 (84) 6,308 11,314 (44)
(Benefit)/provision
for taxes on
income (161) 717 * 800 1,769 (55)
Minority interests 1 5 (72) 6 10 (41)
-------- -------- -------- --------
Income from
continuing
operations 796 3,239 (75) 5,502 9,535 (42)
-------- -------- -------- --------
Discontinued
operations:
Income from
discontinued
operations--net
of tax - 120 * - 330 *
Gains/(losses) on
sales of
discontinued
operations--net
of tax (35) 3 * (82) 23 *
-------- -------- -------- --------
Discontinued
operations--net of
tax (35) 123 * (82) 353 *
-------- -------- -------- --------
Net income $ 761 $ 3,362 (77) $ 5,420 $ 9,888 (45)
======== ======== ======== ========
Earnings per common
share - basic:
Income from
continuing
operations $ 0.12 $ 0.45 (73) $ 0.79 $ 1.31 (40)
Discontinued
operations--net
of tax (0.01) 0.02 * (0.01) 0.05 *
-------- -------- -------- --------
Net income $ 0.11 $ 0.47 (77) $ 0.78 $ 1.36 (43)
======== ======== ======== ========
Earnings per common
share - diluted:
Income from
continuing
operations $ 0.12 $ 0.44 (73) $ 0.79 $ 1.30 (39)
Discontinued
operations--net
of tax (0.01) 0.02 * (0.01) 0.05 *
-------- -------- -------- --------
Net income $ 0.11 $ 0.46 (76) $ 0.78 $ 1.35 (42)
======== ======== ======== ========
Weighted-average
shares used to
calculate earnings
per common share:
Basic 6,875 7,228 6,964 7,275
======== ======== ======== ========
Diluted 6,894 7,251 6,986 7,306
======== ======== ======== ========
(a) Exclusive of amortization of intangible assets, except as
discussed in footnote 5 below.
* Calculation not meaningful.
Certain amounts and percentages may reflect rounding adjustments.
1. The above financial statements present the three-month and nine-
month periods ended September 30, 2007, and October 1, 2006.
Subsidiaries operating outside the United States are included for
the three-month and nine-month periods ended August 26, 2007, and
August 27, 2006.
2. The financial results for the three-month and nine-month periods
ended September 30, 2007, are not necessarily indicative of the
results which ultimately might be achieved for the current year.
3. The financial results for the three-month and nine-month periods
ended September 30, 2007, include charges associated with the
impairment of Exubera assets and the decision to exit and stop
additional investment in the product. These charges include
approximately $1.1 billion of intangible assets, $661 million of
inventory, $454 million of fixed assets, and $584 million of
other exit costs. The charges are included in Cost of sales ($2.6
billion), Selling, informational and administrative expenses ($83
million), Research and development expenses ($131 million) and
Revenues ($10 million for an estimate of customer returns).
4. As required, the estimated value of Acquisition-related in-process
research and development charges (IPR&D) is expensed at
acquisition date. In 2007, we expensed $283 million of IPR&D,
primarily related to our acquisitions of BioRexis Pharmaceutical
Corp. and Embrex, Inc. in the first quarter. In 2006, we expensed
$513 million of IPR&D, primarily related to our acquisition of
Rinat Neuroscience Corp. in the second quarter.
5. Amortization expense related to acquired intangible assets that
contribute to our ability to sell, manufacture, research, market
and distribute our products are included in Amortization of
intangible assets as they benefit multiple business functions.
Amortization expense related to acquired intangible assets that
are associated with a single function are included in Cost of
sales, Selling, informational and administrative expenses or
Research and development expenses, as appropriate.
6. Discontinued operations--net of tax is primarily related to our
former Consumer Healthcare business, sold in December 2006 for
approximately $16.6 billion.
7. Provision for taxes on income in the third quarter of 2007
includes a tax benefit ($681 million) relating to charges
associated with Exubera. Provision for taxes on income in the
third quarter of 2006 includes a downward adjustment ($124
million) of charges recorded in 2005 attributable to the
repatriation of foreign earnings in accordance with the American
Jobs Creation Act of 2004 and the first quarter of 2006 includes
$217 million of one-time tax benefits associated with favorable
tax legislation and $441 million related to the resolution of
certain tax positions.
PFIZER INC AND SUBSIDIARY COMPANIES
RECONCILIATION OF REPORTED NET INCOME AND ITS COMPONENTS AND REPORTED
DILUTED EPS
TO ADJUSTED INCOME AND ITS COMPONENTS AND ADJUSTED DILUTED EPS
(UNAUDITED)
(millions of dollars, except per common share data)
Quarter Ended September 30, 2007
-------------------------------------------------------
Purchase Acqui- Discon- Certain
Accounting sition- tinued Signi-
Adjust- Related Oper- ficant
Reported ments Costs ations(2) Items(3) Adjusted
-------- ---------- ------- --------- -------- --------
Revenues $ 11,990 $ - $ - $ - $ (40) $ 11,950
Costs and
expenses:
Cost of sales
(a) 4,618 (14) - - (2,794) 1,810
Selling,
informational
and
administrative
expenses (a) 3,768 3 - - (133) 3,638
Research and
development
expenses (a) 1,999 (8) - - (261) 1,730
Amortization
of intangible
assets 774 (745) - - (1) 28
Acquisition-
related in-
process R&D
charges - - - - - -
Restructuring
charges and
acquisition-
related costs 455 - (18) - (437) -
Other (income)/
deductions--
net (260) (3) - - (56) (319)
-------- ---------- ------- --------- -------- --------
Income from
continuing
operations
before
(benefit)/
provision for
taxes on
income and
minority
interests 636 767 18 - 3,642 5,063
(Benefit)/
provision for
taxes on
income (161) 208 5 - 1,047 1,099
Minority
interests 1 - - - - 1
-------- ---------- ------- --------- -------- --------
Income from
continuing
operations 796 559 13 - 2,595 3,963
-------- ---------- ------- --------- -------- --------
Discontinued
operations:
Income from
discontinued
operations--
net of tax - - - - - -
Gains/(losses)
on sales of
discontinued
operations--
net of tax (35) - - 35 - -
-------- ---------- ------- --------- -------- --------
Discontinued
operations--
net of tax (35) - - 35 - -
-------- ---------- ------- --------- -------- --------
Net income $ 761 $ 559 $ 13 $ 35 $ 2,595 $ 3,963
======== ========== ======= ========= ======== ========
Earnings per
common share
- diluted:
Income from
continuing
operations $ 0.12 $ 0.08 $ - $ - $ 0.38 $ 0.58
Discontinued
operations--
net of tax (0.01) - - 0.01 - -
-------- ---------- ------- --------- -------- --------
Net income $ 0.11 $ 0.08 $ - $ 0.01 $ 0.38 $ 0.58
======== ========== ======= ========= ======== ========
Nine Months Ended September 30, 2007
-------------------------------------------------------
Purchase Acqui- Discon- Certain
Accounting sition- tinued Signi-
Adjust- Related Oper- ficant
Reported ments Costs ations(2) Items(3) Adjusted
-------- ---------- ------- --------- -------- --------
Revenues $ 35,548 $ - $ - $ - $ (134) $ 35,414
Costs and
expenses:
Cost of sales
(a) 8,614 (49) - - (3,138) 5,427
Selling,
informational
and
administrative
expenses (a) 10,973 9 - - (294) 10,688
Research and
development
expenses (a) 5,829 (22) - - (423) 5,384
Amortization
of intangible
assets 2,372 (2,292) - - - 80
Acquisition-
related in-
process R&D
charges 283 (283) - - - -
Restructuring
charges and
acquisition-
related costs 2,318 - (51) - (2,267) -
Other
(income)/
deductions--
net (1,149) (20) - - 16 (1,153)
-------- ---------- ------- --------- -------- --------
Income from
continuing
operations
before
provision for
taxes on
income and
minority
interests 6,308 2,657 51 - 5,972 14,988
Provision for
taxes on
income 800 654 15 - 1,802 3,271
Minority
interests 6 - - - - 6
-------- ---------- ------- --------- -------- --------
Income from
continuing
operations 5,502 2,003 36 - 4,170 11,711
-------- ---------- ------- --------- -------- --------
Discontinued
operations:
Income from
discontinued
operations--
net of tax - - - - - -
Gains/(losses)
on sales of
discontinued
operations--
net of tax (82) - - 82 - -
-------- ---------- ------- --------- -------- --------
Discontinued
operations--
net of tax (82) - - 82 - -
-------- ---------- ------- --------- -------- --------
Net income $ 5,420 $ 2,003 $ 36 $ 82 $ 4,170 $ 11,711
======== ========== ======= ========= ======== ========
Earnings per
common share
- diluted:
Income from
continuing
operations $ 0.79 $ 0.28 $ 0.01 $ - $ 0.60 $ 1.68
Discontinued
operations--
net of tax (0.01) - - 0.01 - -
-------- ---------- ------- --------- -------- --------
Net income $ 0.78 $ 0.28 $ 0.01 $ 0.01 $ 0.60 $ 1.68
======== ========== ======= ========= ======== ========
(a) Exclusive of amortization of intangible assets, except as
discussed in note 1.
See end of tables for notes.
Certain amounts may reflect rounding adjustments.
PFIZER INC AND SUBSIDIARY COMPANIES
RECONCILIATION OF REPORTED NET INCOME AND ITS COMPONENTS AND REPORTED
DILUTED EPS
TO ADJUSTED INCOME AND ITS COMPONENTS AND ADJUSTED DILUTED EPS
(UNAUDITED)
(millions of dollars, except per common share data)
Quarter Ended October 1, 2006
-------------------------------------------------------
Purchase Acqui- Discon- Certain
Accounting sition- tinued Signi-
Adjust- Related Oper- ficant
Reported ments Costs ations(2) Items(3) Adjusted
-------- ---------- ------- --------- -------- --------
Revenues $ 12,280 $ - $ - $ - $ - $ 12,280
Costs and
expenses:
Cost of sales
(a) 1,962 (26) - - (49) 1,887
Selling,
informational
and
administrative
expenses (a) 3,751 3 - - (63) 3,691
Research and
development
expenses (a) 1,902 (7) - - (70) 1,825
Amortization
of intangible
assets 798 (769) - - 1 30
Acquisition-
related in-
process R&D
charges - - - - - -
Restructuring
charges and
acquisition-
related costs 249 - (4) - (245) -
Other
(income)/
deductions--
net (343) (4) - - 85 (262)
-------- ---------- ------- --------- -------- --------
Income from
continuing
operations
before
provision for
taxes on
income and
minority
interests 3,961 803 4 - 341 5,109
Provision for
taxes on
income 717 237 - - 228 1,182
Minority
interests 5 - - - - 5
-------- ---------- ------- --------- -------- --------
Income from
continuing
operations 3,239 566 4 - 113 3,922
-------- ---------- ------- --------- -------- --------
Discontinued
operations:
Income from
discontinued
operations--
net of tax 120 - - (120) - -
Gains/(losses)
on sales of
discontinued
operations--
net of tax 3 - - (3) - -
-------- ---------- ------- --------- -------- --------
Discontinued
operations--
net of tax 123 - - (123) - -
-------- ---------- ------- --------- -------- --------
Net income $ 3,362 $ 566 $ 4 $ (123) $ 113 $ 3,922
======== ========== ======= ========= ======== ========
Earnings per
common share
- diluted:
Income from
continuing
operations $ 0.44 $ 0.08 $ - $ - $ 0.02 $ 0.54
Discontinued
operations--
net of tax 0.02 - - (0.02) - -
-------- ---------- ------- --------- -----------------
Net income $ 0.46 $ 0.08 $ - $ (0.02) $ 0.02 $ 0.54
======== ========== ======= ========= ======== ========
Nine Months Ended October 1, 2006
-------------------------------------------------------
Purchase Acqui- Discon- Certain
Accounting sition- tinued Signi-
Adjust- Related Oper- ficant
Reported ments Costs ations(2) Items(3) Adjusted
-------- ---------- ------- --------- -------- --------
Revenues $ 35,768 $ - $ - $ - $ - $ 35,768
Costs and
expenses:
Cost of sales
(a) 5,423 (26) - - (278) 5,119
Selling,
informational
and
administrative
expenses (a) 11,027 9 - - (160) 10,876
Research and
development
expenses (a) 5,187 (21) - - (14) 5,152
Amortization
of intangible
assets 2,446 (2,363) - - 1 84
Acquisition-
related in-
process R&D
charges 513 (513) - - - -
Restructuring
charges and
acquisition-
related costs 816 - (15) - (801) -
Other
(income)/
deductions--
net (958) (13) - - 182 (789)
-------- ---------- ------- --------- -------- --------
Income from
continuing
operations
before
provision for
taxes on
income and
minority
interests 11,314 2,927 15 - 1,070 15,326
Provision for
taxes on
income 1,769 695 6 - 911 3,381
Minority
interests 10 - - - - 10
-------- ---------- ------- --------- -------- --------
Income from
continuing
operations 9,535 2,232 9 - 159 11,935
-------- ---------- ------- --------- -------- --------
Discontinued
operations:
Income from
discontinued
operations--
net of tax 330 - - (330) - -
Gains/(losses)
on sales of
discontinued
operations--
net of tax 23 - - (23) - -
-------- ---------- ------- --------- -------- --------
Discontinued
operations--
net of tax 353 - - (353) - -
-------- ---------- ------- --------- -------- --------
Net income $ 9,888 $ 2,232 $ 9 $ (353) $ 159 $ 11,935
======== ========== ======= ========= ======== ========
Earnings per
common share
- diluted:
Income from
continuing
operations $ 1.30 $ 0.31 $ - $ - $ 0.02 $ 1.63
Discontinued
operations--
net of tax 0.05 - - (0.05) - -
-------- ---------- ------- --------- -------- --------
Net income $ 1.35 $ 0.31 $ - $ (0.05) $ 0.02 $ 1.63
======== ========== ======= ========= ======== ========
(a) Exclusive of amortization of intangible assets, except as
discussed in note 1.
See end of tables for notes.
Certain amounts may reflect rounding adjustments.
PFIZER INC AND SUBSIDIARY COMPANIES
NOTES TO RECONCILIATION OF REPORTED NET INCOME AND ITS COMPONENTS AND
REPORTED DILUTED EPS TO ADJUSTED INCOME AND ITS COMPONENTS AND
ADJUSTED DILUTED EPS
(UNAUDITED)
1) Amortization expense related to acquired intangible assets that
contribute to our ability to sell, manufacture, research, market
and distribute our products are included in Amortization of
intangible assets as they benefit multiple business functions.
Amortization expense related to acquired intangible assets that
are associated with a single function are included in Cost of
sales, Selling, informational and administrative expenses or
Research and development expenses, as appropriate.
2) Discontinued Operations is primarily related to our former Consumer
Healthcare business.
3) On a pre-tax basis Certain significant items includes the
following:
Third Quarter Nine Months
----------------- ------------------
(millions of dollars) 2007 2006 2007 2006
--------- ------- --------- --------
Restructuring charges - Cost-
reduction initiatives(a) $ 437 $ 245 $ 2,267 $ 801
Implementation costs - Cost-
reduction initiatives(b) 373 182 864 547
Charges associated with
Exubera(c) 2,804 - 2,804 -
Consumer Healthcare business
transition activity(d) (8) - (24) -
Sanofi-aventis research and
development milestone(e) - - - (118)
Other(f) 36 (86) 61 (160)
--------- ------- --------- --------
Total certain significant
items, pre-tax 3,642 341 5,972 1,070
Income taxes(g) (1,047) (104) (1,802) (346)
Resolution of certain tax
positions(g) - - - (441)
Tax impact for the repatriation
of foreign earnings(g) - (124) - (124)
--------- ------- --------- --------
Total certain significant
items--net of tax $ 2,595 $ 113 $ 4,170 $ 159
========= ======= ========= ========
(a) Included in Restructuring charges and acquisition-related costs.
(b) Included in Cost of sales ($173 million), Selling, informational
and administrative expenses ($70 million), and Research and
development expenses ($130 million) for the three months ended
September 30, 2007. Included in Cost of sales ($437 million),
Selling, informational and administrative expenses ($198
million), Research and development expenses ($292 million) and
Other (income)/ deductions - net ($63 million income) for the
nine months ended September 30, 2007. Included in Cost of sales
($50 million), Selling, informational and administrative
expenses ($63 million), Research and development expenses ($70
million) and Other (income)/deductions - net ($1 million income)
for the three months ended October 1, 2006. Included in Cost of
sales ($278 million), Selling, informational and administrative
expenses ($160 million), Research and development expenses ($132
million) and Other (income)/deductions - net ($23 million
income) for the nine months ended October 1, 2006.
(c) The financial results for the three-month and nine-month periods
ended September 30, 2007, include charges associated with the
impairment of Exubera assets and the decision to exit and stop
additional investment in the product. These charges include
approximately $1.1 billion of intangible assets, $661 million of
inventory, $454 million of fixed assets, and $584 million of
other exit costs. The charges are included in Cost of sales
($2.6 billion), Selling, informational and administrative
expenses ($83 million), Research and development expenses ($131
million) and Revenues ($10 million for an estimate of customer
returns).
(d) Included in Revenues ($50 million), Cost of sales ($41 million),
Selling, informational and administrative expenses ($5 million)
and Other (income)/deductions - net ($4 million income) for the
three months ended September 30, 2007, and included in Revenues
($144 million), Cost of sales ($121 million), Selling,
informational and administrative expenses ($12 million) and
Other (income)/deductions - net ($13 million income) for the
nine months ended September 30, 2007.
(e) Included in Research and development expenses.
(f) Other can include items such as Gains/(losses) on sale of
investments, Gains/(losses) on disposal of assets and
litigation-related matters.
(g) Included in Provision for taxes on income.
PFIZER INC
SEGMENT/PRODUCT REVENUES
THIRD QUARTER 2007
(UNAUDITED)
(millions of dollars)
QUARTER-TO-DATE
-----------------------------------------------------------
WORLDWIDE U.S. INTERNATIONAL
-----------------------------------------------------------
% % %
2007 2006 Change 2007 2006 Change 2007 2006 Change
======================================================================
TOTAL
REVENUES 11,990 12,280 (2) 5,747 6,708 (14) 6,243 5,572 12
======================================================================
- ----------------------------------------------------------------------
PHARMA-
CEUTICAL 11,036 11,485 (4) 5,352 6,380 (16) 5,684 5,105 11
- ----------------------------------------------------------------------
- - CARDIO-
VASCULAR
AND
METABOLIC
DISEASES 4,620 5,111 (10) 2,252 2,951 (24) 2,368 2,160 10
LIPITOR 3,170 3,321 (5) 1,810 2,074 (13) 1,360 1,247 9
NORVASC 640 1,208 (47) 48 628 (92) 592 580 2
CHANTIX /
CHAMPIX 241 33 630 186 33 465 55 - *
CADUET 149 98 52 128 94 35 21 4 425
CARDURA 119 133 (11) 1 1 (22) 118 132 (11)
- - CENTRAL
NERVOUS
SYSTEM
DISORDERS 1,297 1,500 (14) 609 900 (32) 688 600 14
LYRICA 465 340 37 269 217 24 196 123 59
GEODON /
ZELDOX 228 201 13 186 169 9 42 32 36
ZOLOFT 124 459 (73) 31 373 (92) 93 86 8
NEURONTIN 106 126 (16) 21 31 (33) 85 95 (10)
ARICEPT** 100 90 12 1 1 42 99 89 12
XANAX / XR 85 74 13 17 16 6 68 58 15
RELPAX 81 72 13 53 47 14 28 25 10
- - ARTHRITIS
AND PAIN 735 706 4 475 474 - 260 232 12
CELEBREX 577 537 8 433 419 3 144 118 23
- - INFECTIOUS
AND
RESPIRATORY
DISEASES 859 836 3 277 285 (3) 582 551 6
ZYVOX 232 206 13 144 136 6 88 70 26
VFEND 162 132 22 52 46 13 110 86 27
ZITHROMAX /
ZMAX 89 104 (14) 6 19 (72) 83 85 (1)
DIFLUCAN 96 109 (12) 3 (3) * 93 112 (17)
- - UROLOGY 758 732 4 416 412 1 342 320 7
VIAGRA 450 423 6 208 199 4 242 224 9
DETROL /
DETROL LA 294 295 - 203 207 (2) 91 88 3
- - ONCOLOGY 664 540 23 240 224 7 424 316 33
CAMPTOSAR 243 218 12 137 122 12 106 96 12
SUTENT 151 63 140 60 49 22 91 14 550
AROMASIN 102 84 22 33 30 10 69 54 29
- - OPHTHAL-
MOLOGY 413 376 10 131 128 2 282 248 14
XALATAN /
XALACOM 402 374 7 131 128 2 271 246 10
- - ENDOCRINE
DISORDERS 271 246 10 66 61 8 205 185 10
GENOTROPIN 216 198 8 60 56 9 156 142 8
- - ALL OTHER 962 1,102 (13) 609 748 (19) 353 354 -
ZYRTEC /
ZYRTEC D 428 397 8 428 397 8 - - -
- - ALLIANCE
REVENUE
(Aricept,
Exforge,
Macugen,
Mirapex,
Olmetec,
Rebif and
Spiriva) 457 336 36 277 197 40 180 139 29
- ----------------------------------------------------------------------
ANIMAL
HEALTH 636 562 13 292 260 12 344 302 14
- ----------------------------------------------------------------------
OTHER *** 318 233 36 103 68 51 215 165 30
- ----------------------------------------------------------------------
* - Calculation not meaningful.
** - Represents direct sales under license agreement with Eisai Co.,
Ltd.
*** - Includes Consumer Healthcare business transition activity,
Capsugel and Pfizer Centersource.
M+ - Change greater than one thousand percent.
Certain amounts and percentages may reflect rounding adjustments.
PFIZER INC
SEGMENT/PRODUCT REVENUES
NINE MONTHS 2007
(UNAUDITED)
(millions of dollars)
YEAR-TO-DATE
------------------------------------------------------------
WORLDWIDE U.S. INTERNATIONAL
------------------------------------------------------------
% % %
2007 2006 Change 2007 2006 Change 2007 2006 Change
======================================================================
TOTAL
REVENUES 35,548 35,768 (1) 17,438 19,418 (10) 18,110 16,350 11
======================================================================
- ----------------------------------------------------------------------
PHARMA-
CEUTICAL 32,722 33,417 (2) 16,287 18,448 (12) 16,435 14,969 10
- ----------------------------------------------------------------------
- - CARDIO-
VASCULAR
AND
METABOLIC
DISEASES 13,858 14,628 (5) 7,016 8,259 (15) 6,842 6,369 7
LIPITOR 9,247 9,551 (3) 5,331 5,904 (10) 3,916 3,647 7
NORVASC 2,351 3,549 (34) 577 1,814 (68) 1,774 1,735 2
CHANTIX /
CHAMPIX 603 33 M+ 499 33 M+ 104 - *
CADUET 414 255 62 372 240 55 42 15 193
CARDURA 378 398 (5) 3 5 (35) 375 393 (5)
- - CENTRAL
NERVOUS
SYSTEM
DISORDERS 3,716 4,787 (22) 1,742 3,038 (43) 1,974 1,749 13
LYRICA 1,265 803 58 728 503 45 537 300 79
GEODON /
ZELDOX 622 548 14 510 455 12 112 93 21
ZOLOFT 397 1,944 (80) 132 1,676 (92) 265 268 (1)
NEURONTIN 321 376 (15) 57 73 (22) 264 303 (13)
ARICEPT** 285 260 10 1 1 10 284 259 10
XANAX / XR 239 235 1 45 55 (18) 194 180 7
RELPAX 230 205 12 149 133 12 81 72 11
- -
ARTHRITIS
AND PAIN 2,110 1,974 7 1,371 1,304 5 739 670 10
CELEBREX 1,653 1,499 10 1,250 1,165 7 403 334 21
- - INFECTIOUS
AND
RESPIRATORY
DISEASES 2,609 2,608 - 843 966 (13) 1,766 1,642 8
ZYVOX 692 559 24 445 383 16 247 176 39
VFEND 455 367 24 153 129 19 302 238 27
ZITHROMAX
/ ZMAX 328 529 (38) 24 213 (89) 304 316 (4)
DIFLUCAN 311 326 (5) 9 (4) * 302 330 (8)
- - UROLOGY 2,172 2,055 6 1,192 1,157 3 980 898 9
VIAGRA 1,266 1,207 5 574 574 - 692 633 10
DETROL /
DETROL LA 866 810 7 604 568 6 262 242 8
- - ONCOLOGY 1,911 1,550 23 723 614 18 1,188 936 27
CAMPTOSAR 713 668 7 397 364 9 316 304 4
SUTENT 399 115 248 174 98 77 225 17 M+
AROMASIN 287 229 25 96 83 16 191 146 31
- - OPHTHAL-
MOLOGY 1,179 1,065 11 380 360 6 799 705 13
XALATAN /
XALACOM 1,151 1,062 8 380 360 6 771 702 10
- -
ENDOCRINE
DISORDERS 769 724 6 187 191 (2) 582 533 9
GENOTROPIN 619 586 6 173 169 3 446 417 7
- - ALL
OTHER 3,151 3,042 4 2,093 1,965 7 1,058 1,077 (2)
ZYRTEC /
ZYRTEC D 1,274 1,195 7 1,274 1,195 7 - - -
- - ALLIANCE
REVENUE
(Aricept,
Exforge,
Macugen,
Mirapex,
Olmetec,
Rebif and
Spiriva) 1,247 984 27 740 594 25 507 390 30
- ----------------------------------------------------------------------
ANIMAL
HEALTH 1,854 1,656 12 810 751 8 1,044 905 15
- ----------------------------------------------------------------------
OTHER *** 972 695 40 341 219 56 631 476 33
- ----------------------------------------------------------------------
* - Calculation not meaningful.
** - Represents direct sales under license agreement with Eisai Co.,
Ltd.
*** - Includes Consumer Healthcare business transition activity,
Capsugel and Pfizer Centersource.
M+ - Change greater than one thousand percent.
Certain amounts and percentages may reflect rounding adjustments.
PFIZER INC AND SUBSIDIARY COMPANIES
RECONCILIATION FROM REPORTED PHARMACEUTICAL REVENUES TO TOTAL
IN-LINE AND NEW PRODUCTS(1) PHARMACEUTICAL REVENUES
(UNAUDITED)
(millions of dollars)
Worldwide
---------------------------------------------------
Third Quarter % Incr. Nine Months % Incr.
----------------- / ----------------- /
2007 2006 (Decr.) 2007 2006 (Decr.)
-------- -------- ------- -------- -------- -------
Total reported
Pharmaceutical
revenues $ 11,036 $ 11,485 (4) $ 32,722 $ 33,417 (2)
Norvasc 640 1,208 (47) 2,351 3,549 (34)
Zoloft 124 459 (73) 397 1,944 (80)
------- ------- ------- -------
Total in-line
products and new
products(1)
Pharmaceutical
revenues $ 10,272 $ 9,818 5 $ 29,974 $ 27,924 7
======= ======= ======= =======
U.S.
---------------------------------------------------
Third Quarter % Incr. Nine Months % Incr.
----------------- / ----------------- /
2007 2006 (Decr.) 2007 2006 (Decr.)
-------- -------- ------- -------- -------- -------
Total reported
Pharmaceutical
revenues $ 5,352 $ 6,380 (16) $ 16,287 $ 18,448 (12)
Norvasc 48 628 (92) 577 1,814 (68)
Zoloft 31 373 (92) 132 1,676 (92)
------- ------- ------- -------
Total in-line
products and new
products(1)
Pharmaceutical
revenues $ 5,273 $ 5,379 (2) $ 15,578 $ 14,958 4
======= ======= ======= =======
International
---------------------------------------------------
Third Quarter % Incr. Nine Months % Incr.
----------------- / ----------------- /
2007 2006 (Decr.) 2007 2006 (Decr.)
-------- -------- ------- -------- -------- -------
Total reported
Pharmaceutical
revenues $ 5,684 $ 5,105 11 $ 16,435 $ 14,969 10
Norvasc 592 580 2 1,774 1,735 2
Zoloft 93 86 8 265 268 (1)
------- ------- ------- -------
Total in-line
products and new
products(1)
Pharmaceutical
revenues $ 4,999 $ 4,439 13 $ 14,396 $ 12,966 11
======= ======= ======= =======
Certain amounts and percentages may reflect rounding adjustments.
(1) Total in-line and new products Pharmaceutical revenues, which
exclude the revenues of major products that have lost exclusivity
in the U.S. since the beginning of 2006, is an alternative view of
our Pharmaceutical revenues and we believe that investors'
understanding of Pharmaceutical revenues is enhanced by disclosing
this performance measure. Zoloft lost its U.S. exclusivity at the
end of June 2006 and Norvasc lost its U.S. exclusivity in March
2007, and as is typical in the pharmaceutical industry, this has
resulted in a dramatic decline in revenues due to generic
competition. We believe that excluding the impact of these products
assists the reader in understanding the underlying strength of the
balance of our diverse Pharmaceutical product portfolio in 2007.
Because of its non-standardized definition, this total in-line and
new products Pharmaceutical revenues measure has limitations as it
may not be comparable with the calculation of similar measures of
other companies. This additional revenue measure is not, and should
not be viewed as, a substitute for the U.S. GAAP comparison of
Pharmaceutical revenues.
(2) Total in-line and new products Pharmaceutical International
revenues reflect a favorable impact in the third quarter and the
first nine months of 2007 due to changes in foreign exchange rates.
PFIZER INC
SUPPLEMENTAL INFORMATION
1) Impact of Foreign Exchange on Revenues
The weakening of the U.S. dollar relative to other currencies,
primarily the euro and British pound, favorably impacted our revenues
by approximately $300 million, or 2.5%, in the third quarter of 2007,
compared to the same period in 2006, and approximately $860 million,
or 2.4%, in the first nine months of 2007, compared to the same period
in 2006.
2) Charges Related to Exubera
After carefully assessing the financial performance of Exubera, an
inhaled-insulin product, we decided to exit Exubera. Despite our best
efforts, Exubera has failed to gain the acceptance of patients and
physicians. In the third quarter of 2007, we recorded total pre-tax
charges of $2.8 billion, which includes charges for asset impairments,
exit and disposal costs.
Our Exubera-related exit plans will include working with
physicians over the next three months to transition patients to other
treatment options, evaluating redeployment options for colleagues,
working with our partners and vendors with respect to transition and
exit activities and exploring asset disposal opportunities, among
other activities.
In the third quarter of 2007, we recorded the following charges
related to our decision to exit Exubera:
($ millions)
Intangible asset impairment charge $1,105
Inventory write-off 661
Fixed assets impairment 454
Other exit costs 584
------
Total charges, pre-tax $2,804
======
These charges are included in Cost of sales ($2.6 billion),
Selling, informational and administrative expenses ($83 million),
Research and development expenses ($131 million) and Revenues ($10
million for an estimate of customer returns) in the third quarter of
2007.
The asset write-offs (intangibles, inventory and fixed assets)
represent non-cash charges. The other exit costs, which includes
contract termination charges, among other things, will result in
future cash expenditures. During the implementation of the exit
strategy, certain additional cash costs will be incurred and reported
in future periods, such as, maintenance-level operating costs and
demolition; however, at this time, those future costs are not expected
to be material.
3) Change in Cost of Sales
Cost of sales increased 135% in the three months ended September
30, 2007, compared to the same period in 2006, and 59% in the nine
months ended September 30, 2007, compared to the same period in 2006.
These increases reflect charges of $2.6 billion associated with
Exubera, unfavorable product mix, reflecting the loss of U.S.
exclusivity on low manufacturing cost products, like Zoloft and
Norvasc, the unfavorable impact of foreign exchange, as well as the
impact of higher 2007 implementation costs associated with our
cost-reduction initiatives, partially offset by the savings impact of
our cost-base reduction efforts. Charges in cost of sales related to
our cost-reduction initiatives were $173 million for the three months
ended September 30, 2007, and $50 million for the three months ended
October 1, 2006, and $437 million for the nine months ended September
30, 2007, and $278 million for the nine months ended October 1, 2006.
Cost of sales also includes $41 million for the three months ended
September 30, 2007, and $121 million for the nine months ended
September 30, 2007, related to business transition activities
associated with the sale of our Consumer Healthcare business,
completed in December 2006. These expenses are transitional in nature
and generally result from agreements that seek to facilitate the
orderly transfer of operations of our former Consumer Healthcare
business to the new owner.
Cost of sales as a percentage of revenues increased 22.5
percentage points to 38.5% in the third quarter of 2007, reflecting
charges of $2.6 billion associated with Exubera, unfavorable
geographic and product mix in our portfolio, and the impact of higher
2007 implementation costs associated with our cost-reduction
initiatives, compared to the same period in 2006, partially offset by
the savings impact of our cost-base reduction efforts.
4) Change in Selling, Informational & Administrative (SI&A)
Expenses and Research & Development (R&D) Expenses
Reported SI&A expenses in the three months and nine months ended
September 30, 2007 were comparable to the same periods in 2006,
reflecting the savings impact of our cost-reduction initiatives,
offset by charges of $83 million associated with Exubera and the
unfavorable impact of foreign exchange on expenses. Reported SI&A
expense includes charges of $70 million for the three months ended
September 30, 2007 and $63 million for the three months ended October
1, 2006, related to our cost-reduction initiatives, and $198 million
for the nine months ended September 30, 2007 and $160 million for the
nine months ended October 1, 2006.
Reported R&D expenses, excluding acquisition-related in-process
research and development charges (IPR&D), increased 5% in the third
quarter of 2007 compared to the same period in 2006, and increased 12%
in the first nine months of 2007 compared to the same period in 2006.
The third-quarter increase is primarily due to charges of $131 million
associated with Exubera and higher costs associated with our
cost-reduction initiatives, partially offset by lower milestone
payments. The increase in the first nine-months is primarily due to
collaboration payments made to Bristol-Myers-Squibb Company in the
second quarter of 2007 for the development and commercialization of
apixaban, as well as charges of $131 million associated with Exubera
recorded in the third quarter of 2007. Reported R&D expenses includes
charges of $130 million for the three months ended September 30, 2007,
and $70 million for the three months ended October 1, 2006, related to
our cost-reduction initiatives, and $292 million for the nine months
ended September 30, 2007, and $132 million for the nine months ended
October 1, 2006.
IPR&D charges of $283 million, primarily related to the
acquisitions of BioRexis Pharmaceutical Corp. and Embrex, Inc., were
recorded in the first quarter of 2007 and $513 million, primarily
related to the acquisition of Rinat Neuroscience Corp., was recorded
in the second quarter of 2006.
5) Other Income and Other Deductions
($ millions) Third Quarter Nine Months
----------------- ------------------
2007 2006* 2007 2006*
-------- -------- --------- --------
Net Interest (Income)/Expense(a) $ (280) $ (119) $ (814) $ (277)
Royalty Income (36) (94) (169) (278)
Net Gains on Asset Disposals (10) (90) (89) (262)
Other, Net 66 (40) (77) (141)
-------- -------- --------- --------
Other (Income)/Deductions-Net $ (260) $ (343) $ (1,149) $ (958)
======== ======== ========= ========
*Certain 2006 amounts were reclassified to conform to the 2007
presentation.
(a) Increases in net interest income in the third quarter and
first nine months of 2007 compared to the same periods in 2006 were
due primarily to higher interest rates and an increase in our net
financial assets, reflecting proceeds of $16.6 billion from the sale
of our Consumer Healthcare business in late December 2006.
6) Effective Tax Rate
The effective tax rates on reported Income from continuing
operations before provision for taxes on income and minority interest
for the third quarter of 2007 was a 25.4% benefit compared to an 18.1%
cost in the third quarter of 2006, primarily reflecting the impact of
charges associated with Exubera, among other factors. The effective
tax rates on reported Income from continuing operations before
provision for taxes on income and minority interest for the first nine
months of 2007 was 12.7% compared to 15.6% in the first nine months of
2006, primarily reflecting the impact of charges associated with
Exubera, the impact of a $283 million charge in the first nine months
of 2007 compared to a $513 million charge for the same period in 2006
for acquired IPR&D, which is not deductible for tax purposes, as well
as the volume and geographic mix of restructuring charges in the first
nine months of 2007 compared to the same period in 2006, partially
offset by certain one-time tax benefits in 2006 associated with
favorable tax legislation and the resolution of certain tax positions
in the first quarter of 2006. The effective tax rates on adjusted
income(1) for the third quarter and first nine months of 2007 were
21.7% and 21.8% compared to 23.2% and 22.1% for the same periods in
2006.
7) Reconciliation of 2007 and 2008 Adjusted Income(1) and Adjusted
Diluted EPS(1) Guidance to 2007 and 2008 Reported Net Income and
Reported Diluted EPS Guidance
Previous Full-Year 2007 Revised Full-Year 2007
Guidance Guidance
($ billions,
except per-share Net Diluted Net Diluted
amounts) Income(a) EPS(a) Income(a) EPS(a)
----------- ------------- ----------- -------------
Income/(Expense)
- -----------------
Adjusted
Income/Diluted ~$14.5 - ~$2.08 - ~$14.6 - ~$2.10 -
EPS(1) Guidance $15.0 $2.15 $15.0 $2.15
Purchase
Accounting
Impacts, Net of
Tax (2.7) (0.39) (2.7) (0.39)
Charges Related
to Exubera, Net
of Tax -- -- (2.1) (0.31)
----------- ------------- ----------- -------------
Costs Related to
Cost-Reduction
Initiatives, Net
of Tax (2.5 - 2.7) (0.35 - 0.39) (2.5 - 2.7) (0.35 - 0.39)
----------- ------------- ----------- -------------
Reported Net
Income/Diluted ~$9.1 - ~$1.30 - ~$7.1 - ~$1.01 -
EPS Guidance $9.8 $1.41 $7.7 $1.10
=========== ============= =========== =============
Previous Full-Year 2008 Revised Full-Year 2008
Guidance Guidance
($ billions,
except per-share Net Diluted Net Diluted
amounts) Income(a) EPS(a) Income(a) EPS(a)
----------- ------------- ----------- -------------
Income/(Expense)
- -----------------
Adjusted
Income/Diluted ~$15.6 - ~$2.31 - ~$15.6 - ~$2.31 -
EPS(1) Guidance $16.6 $2.45 $16.6 $2.45
Purchase
Accounting
Impacts, Net of
Tax (2.0) (0.30) (2.0) (0.30)
Costs Related to
Cost-Reduction
Initiatives, Net
of Tax (1.5 - 1.8) (0.22 - 0.26) (1.5 - 1.8) (0.22 - 0.26)
----------- ------------- ----------- -------------
Reported Net
Income/Diluted ~$11.8 - ~$1.75 - ~$11.8 - ~$1.75 -
EPS Guidance $13.1 $1.93 $13.1 $1.93
=========== ============= =========== =============
(a) Guidance in the table above exclude the effects of
business-development transactions not completed as of September 30,
2007.
(1) "Adjusted income" and its components and "adjusted diluted
earnings per share (EPS)" are defined as reported net income and its
components and reported diluted EPS excluding purchase-accounting
adjustments, acquisition-related costs, discontinued operations and
certain significant items. Adjusted Cost of sales, Adjusted SI&A
expenses and Adjusted R&D expenses are income statement line items
prepared on the same basis and, therefore components of the overall
Adjusted Income measure. As described under Adjusted Income in the
Management's Discussion and Analysis of Financial Condition and
Results of Operations section of Pfizer's Form 10-Q for the quarterly
period ended July 1, 2007, management uses adjusted income, among
other factors, to set performance goals and to measure the performance
of the overall company. We believe that investors' understanding of
our performance is enhanced by disclosing this measure.
Reconciliations of third-quarter and nine-month 2007 and 2006 adjusted
income and its components and adjusted diluted EPS to reported net
income and its components and reported diluted EPS, as well as
reconciliations of full-year 2007 and 2008 adjusted income and
adjusted diluted EPS guidance to full-year 2007 and 2008 reported net
income and reported diluted EPS guidance, are provided in the
materials accompanying this report. The adjusted income and its
components and adjusted diluted EPS measures are not, and should not
be viewed as, substitutes for U.S. GAAP net income and diluted EPS.
DISCLOSURE NOTICE: The information contained in this earnings
release and the attachments is as of October 18, 2007. The Company
assumes no obligation to update any forward-looking statements
contained in this earnings release or the attachments as a result of
new information or future events or developments. This earnings
release and the attachments contain forward-looking information about
the Company's financial results and estimates, business plans and
prospects, in-line products and product candidates that involve
substantial risks and uncertainties. You can identify these statements
by the fact that they use words such as "will," "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe,"
"target," "forecast" and other words and terms of similar meaning in
connection with any discussion of future operating or financial
performance or business plans and prospects. Among the factors that
could cause actual results to differ materially are the following:
-- Success of research and development activities
-- Decisions by regulatory authorities regarding whether and when
to approve our drug applications as well as their decisions
regarding labeling and other matters that could affect the
availability or commercial potential of our products
-- Speed with which regulatory authorizations, pricing approvals
and product launches may be achieved
-- Success of external business development activities
-- Competitive developments, including with respect to competitor
drugs and drug candidates that treat diseases and conditions
similar to those treated by our in-line drugs and drug
candidates
-- Ability to successfully market both new and existing products
domestically and internationally
-- Difficulties or delays in manufacturing
-- Trade buying patterns
-- Ability to meet generic and branded competition after the loss
of patent protection for our products and competitor products
-- Impact of existing and future regulatory provisions on product
exclusivity
-- Trends toward managed care and healthcare cost containment
-- U.S. legislation or regulatory action affecting, among other
things, pharmaceutical product pricing, reimbursement or
access, including under Medicaid and Medicare, the importation
of prescription drugs that are marketed from outside the U.S.
at prices that are regulated by governments of various foreign
countries, and the involuntary approval of prescription
medicines for over-the-counter use
-- Impact of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003
-- Legislation or regulatory action in markets outside the U.S.
affecting pharmaceutical product pricing, reimbursement or
access
-- Contingencies related to actual or alleged environmental
contamination
-- Claims and concerns that may arise regarding the safety or
efficacy of in-line products and product candidates
-- Legal defense costs, insurance expenses, settlement costs and
the risk of an adverse decision or settlement related to
product liability, patent protection, governmental
investigations, ongoing efforts to explore various means for
resolving asbestos litigation, and other legal proceedings
-- The Company's ability to protect its patents and other
intellectual property both domestically and internationally
-- Interest rate and foreign currency exchange rate fluctuations
-- Governmental laws and regulations affecting domestic and
foreign operations, including tax obligations
-- Changes in generally accepted accounting principles
-- Any changes in business, political and economic conditions due
to the threat of terrorist activity in the U.S. and other
parts of the world, and related U.S. military action overseas
-- Growth in costs and expenses
-- Changes in our product, segment and geographic mix
-- Impact of acquisitions, divestitures, restructurings, product
withdrawals and other unusual items, including our ability to
realize the projected benefits of our cost-reduction
initiatives.
A further list and description of these risks, uncertainties, and
other matters can be found in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2006, and in its reports on
Forms 10-Q and 8-K.
CONTACT: Pfizer Inc
Media
Andy McCormick, 212-733-5469
Shreya Prudlo, 212-733-4889
or
Investors
Suzanne Harnett, 212-733-8009
Jennifer Davis, 212-733-0717