Exhibit 99.1
PFIZER INC THIRD-QUARTER 2005 PERFORMANCE REPORT
Pfizer Achieves Third-Quarter Revenue of $12.189 Billion, Reported Net Income
of $1.589 Billion, Reported Diluted EPS
of $.22, Adjusted Income* of $3.811 Billion,
Adjusted Diluted EPS* of $.51
---
New-Product Pipeline Continues to Advance with U.S. Launches of Zmax,
Revatio, and Lyrica; Positive Regulatory Recommendation of Macugen in Europe;
Acquisition of Vicuron Pharmaceuticals; Receipt of FDA Approvable Letter for
Dalbavancin; FDA Advisory Panel Recommendation and Positive Opinion by
European Regulators on Exubera; U.S. and E.U. Filings of Sutent; Completion
of Phase III Clinical Program for Varenicline
---
Company Making Substantial Progress with
"Adapting to Scale" Initiative, Most Organizational Decisions Have Already Been
Announced or Will Be Announced During Next Few Months
---
Pfizer Now Forecasts 2005 Adjusted Diluted EPS* of $1.92-$1.94, 2005 Reported
Diluted EPS of $1.02-$1.04, Will Now Provide New Forward-Looking Guidance Early
Next Year
NEW YORK, Oct. 20 /PRNewswire-FirstCall/ -- Pfizer today reported financial
results for the third quarter of 2005.
"The third quarter of 2005 was characterized by both accomplishments and
challenges," said Hank McKinnell, chairman and chief executive officer. "While
2005 revenues have been reduced by the loss of exclusivity of certain major
products and by lower sales of the selective COX-2 inhibitors, the remainder of
Pfizer's product portfolio in aggregate continues to grow strongly. And the next
generation of Pfizer medications continues to advance, with a number of U.S.
launches, positive regulatory reviews, U.S. and E.U. filings of Sutent, and the
completion of the Phase III clinical program for varenicline.
"Revenues in the third quarter of 2005 reflected lower prescription growth
and increased competition in key therapeutic markets in the U.S., such as the
lipid-lowering market, where the rate of growth in the third quarter declined
significantly versus the first half of the year; and the erectile-dysfunction
market, which has been in decline compared to 2004. The effects of these
considerations are expected to temper fourth-quarter revenues as well. As a
result, Pfizer now expects full-year 2005 adjusted diluted earnings per share*
of $1.92-$1.94 and full-year 2005 reported diluted EPS of $1.02-$1.04. We are
evaluating our financial prospects for 2006 and 2007 in light of current and
anticipated business conditions and are withdrawing our prior guidance for those
years at this time. We plan to provide new guidance early next year, after we
have completed our annual planning process.
"Pfizer is making considerable progress in implementing our Adapting to
Scale productivity initiative. As an example, September marked the on-schedule
completion of an initiative designed to increase the efficiency of our U.S.
Human Health field force through stronger alignment with our customers. While
the training requirements and territory-alignment efforts tempered revenue
performance during the quarter, the positive longer-term impact of this
initiative can already be seen in the promising early returns from the Lyrica
introduction in the U.S. With this initiative and many more like it already
underway, we are ahead of our target for 2005 cost savings and now expect more
than $600 million of savings in the current year. Most organizational decisions
from this initiative have been announced or will be made and announced during
the next few months. As a transforming process, Adapting to Scale will bring
significant changes, and we are committed to making those changes in keeping
with our company's values."
Pfizer revenues for the third quarter of 2005 declined 5 percent to $12.189
billion, compared to the third quarter of 2004. The Company's Human Health
business generated revenues of $10.552 billion, down 7 percent from the third
quarter of 2004. Quarterly revenues of Pfizer's Consumer Healthcare business
were $921 million, up 8 percent, compared to the third quarter of 2004. Pfizer's
Animal Health revenues increased 6 percent to $503 million in the third quarter
of 2005.
Reported third-quarter 2005 net income of $1.589 billion and reported
diluted earnings per share of $.22 included $1.963 billion ($.26 per share) of
purchase accounting adjustments for acquisitions, which includes non-cash
intangible amortization charges, as well as $1.390 billion ($.19 per share) of
in-process R&D charges relating to the acquisition of Vicuron Pharmaceuticals;
merger-related costs of $67 million ($.01 per share); and certain significant
items representing charges of $179 million ($.02 per share), mainly related to
the new Adapting to Scale productivity initiative, all on an after-tax basis.
Excluding these items and the impact of discontinued operations of $13 million,
adjusted income* in the third quarter of 2005 decreased 8 percent relative to
the same period in 2004 to $3.811 billion, and adjusted diluted EPS* in the
third quarter of 2005 decreased 7 percent to $.51, compared to the same period
in 2004.
Pfizer Human Health Focused on Maximizing
In-Line Performance and Launching New Medicines
In aggregate, Pfizer Human Health continued to show solid performance in our
core products in the third quarter of 2005 and year-to-date. However, overall
performance was adversely affected by a number of factors, notably the loss of
exclusivity of key products and by regulatory actions on the selective COX-2
inhibitors and other nonspecific NSAID products. These actions have resulted in
a significant decline in prescription volume in the arthritis market.
Pfizer Human Health worldwide revenues declined 7 percent in the third
quarter of 2005 compared to the third quarter in 2004 and 1 percent
year-to-date. In the U.S., Human Health revenues declined 15 percent in the
third quarter of 2005 compared to the third quarter of 2004 and 9 percent
year-to-date. The loss of exclusivity on key products (primarily Neurontin) has
resulted in a decline in third-quarter worldwide revenues of approximately $800
million and year-to-date worldwide revenues of approximately $2.4 billion in
comparison to the same periods in the prior year. The regulatory actions
relating to Celebrex and the suspension of sales of Bextra have contributed to
an additional decline in third-quarter 2005 selective COX-2 inhibitor worldwide
revenues of $754 million (down 67 percent) and year-to-date selective COX-2
inhibitor worldwide revenues of $2.0 billion (down 62 percent) in comparison to
the same periods in the prior year.
The third quarter of 2005 was also impacted by the overall market decline
for branded prescriptions in the U.S. U.S. branded prescriptions declined 3
percent in the third quarter of 2005 relative to the third quarter of 2004. The
third quarter of 2005 also exhibited a significant change in growth trends
relative to the first half of the year in a number of U.S. therapeutic markets.
Examples include the lipid-lowering market, where total prescriptions grew 10
percent in the third quarter versus 14 percent in the first half of 2005, and
the erectile-dysfunction market, with total prescriptions declining 7 percent in
the third quarter versus zero growth in the first half of 2005.
A number of positive factors have also affected overall performance, as
demonstrated by the strong growth of our core products in aggregate. Excluding
the selective COX-2 inhibitors and products that have recently lost exclusivity,
Human Health adjusted revenues + grew 9 percent in the third quarter of 2005 on
a worldwide basis and 7 percent in the U.S. compared to the third quarter in
2004. Year-to-date, on the same basis, Human Health adjusted revenues+ grew 15
percent worldwide and 16 percent in the U.S. compared to last year. Many of
Pfizer's top products exhibited strong year-to-date growth worldwide, including
Lipitor (up 16 percent), Norvasc (up 8 percent), Zithromax (up 38 percent),
Zyrtec (up 10 percent), Xalatan/Xalacom (up 16 percent), Detrol/Detrol LA (up 14
percent), Camptosar (up 85 percent, benefiting from recent acquisition rights in
Europe), Aromasin (up 88 percent), Relpax (up 49 percent), Zyvox (up 38
percent), Geodon (up 33 percent), and Vfend (up 40 percent).
New Opportunities to Drive Growth
"We continue to advance our next generation of major medicines," said Karen
Katen, vice chairman and president of Pfizer Human Health. "The successful
launches of Lyrica, Macugen, Zmax, and Revatio and the regulatory advance of
product candidates Sutent, Exubera, anidulafungin, and dalbavancin are part of
our strategies focused on restoring growth."
This quarter, Pfizer passed numerous major regulatory and launch milestones
that are expected to drive future commercial success. The September launch of
Lyrica in the U.S., Canada, and Italy made it the first new medication in recent
years for epilepsy and two of the most common forms of nerve pain, post-herpetic
neuralgia and diabetic peripheral neuropathy.
First launched one year ago in Germany and the U.K., Lyrica is now approved
in more than 50 countries and is currently available in more than 25 markets. It
has been one of the most successful launches in European history, and Pfizer
expects to extend that performance in the newly launched markets. Market
penetration has been rapid; after one full year of Lyrica sales, Germany and the
U.K. posted Lyrica sales shares of 14.2 percent and 9.5 percent, respectively
(anti-epileptic drug market), surpassing those of many established competitors
in both countries.
Within the U.S., Lyrica has broad formulary acceptance, with 75 percent of
patients covered through national HMO and PBM plans. Approximately 80 percent of
U.S. pharmacies had stocked Lyrica by the end of September. Initial U.S. market
data suggest a strong uptake for Lyrica, with more than 50,000 new prescriptions
since introduction. Clinical evidence for Lyrica also continues to grow, with
the September edition of Epilepsia focused on the medication's lack of
interactions with other drugs. Additionally, at the August meeting of the
International Epilepsy Congress, data from an independently conducted
meta-analysis showed Lyrica to be among the best in class for treatment of
drug-resistant epilepsy.
Macugen, a medication developed in collaboration with Eyetech
Pharmaceuticals, is off to a strong start since its January launch in the U.S.
and September launch in Canada. It has been approved for sale in Brazil, and the
European Committee for Medicinal Products in Human Use adopted a positive
opinion recommending marketing authorization of Macugen to treat neovascular
(wet) age-related macular degeneration (AMD). Pfizer anticipates the European
Commission will grant marketing authorization for Macugen by the end of 2005.
Macugen helps slow vision loss in patients suffering from neovascular AMD
regardless of lesion subtype or size. A recent tracking study shows that 74
percent of all retina-treating ophthalmologists in the U.S. have administered
Macugen to their patients with AMD, allowing Macugen to serve more than
one-third of newly diagnosed patients, initiating from all subtypes of
neovascular AMD. The exploratory analyses of the VISION study suggest that
treatment with Macugen 0.3 mg may provide better results in patients with
early-stage neovascular AMD compared to the overall VISION study population.
Medicare now covers Macugen in all 50 states, all according to the broad FDA
label without restrictions.
Pfizer continues to make important advances in new anti-infective
medications, which are increasingly important in the fight against bacterial
resistance. Zithromax, which loses its composition of matter patent in the U.S.
in November 2005, remained the number-one prescribed oral antibiotic during the
third quarter of 2005, despite the end of active sales promotion in July, when
the U.S. sales force began promoting Zmax, a single-dose, sustained-release form
of azithromycin. Zmax has surpassed all other recent antibiotic introductions
(including line extensions) in prescription volume at week 10 since April 2000,
even though the Zmax launch occurred in the summer, before the beginning of the
respiratory season. Single-dose Zmax delivers higher azithromycin serum
concentrations during the first 24 hours than Zithromax, demonstrating a clear
benefit of the new medication. A supplemental Marketing Authorization
Application (MAA) for Zmax was approved in Europe in September 2005.
Revatio is off to a solid start following its U.S. June approval by the FDA
to treat adult pulmonary arterial hypertension (PAH), a rare and deadly vascular
condition. The MAA was approved in the E.U. in July. The approvals for this
indication followed a six-year clinical development program for PAH,
demonstrating Pfizer's commitment to treating diseases that are rare, but
deadly, regardless of commercial potential.
In-Line Portfolio Highlights
The Pfizer in-line portfolio remains strong worldwide, with seven of
Pfizer's top ten medications showing growth in the third quarter of 2005 over
the same period in the previous year. On a year-to-date basis, through the first
nine months of 2005, nine of Pfizer's ten top-selling medications show growth
over the same period in the previous year. Six of these ten show double-digit
year-to-date growth.
With almost $2.9 billion of worldwide revenues in the third quarter of 2005
(up 6 percent), Lipitor remains the world's best-selling medication. Last week's
victory with respect to the primary Lipitor patent in the U.K. patent litigation
case helps preserve this position. In our international markets, Lipitor showed
revenue growth of 14 percent in the third quarter of 2005, compared to the third
quarter of 2004.
In the U.S., Lipitor revenues grew 1 percent in the third quarter of 2005,
compared to the third quarter of 2004. This performance reflects an unexpectedly
rapid slowdown in the U.S. lipid-lowering market as a whole and marginal Lipitor
prescription share erosion during the quarter of one percentage point. Evidence
of the substantial lipid-market deceleration can be seen in category
new-prescription growth rates for the third quarter of 8 percent versus
first-half growth of 17 percent, representing more than a 50-percent drop from
robust trends exhibited during the first six months of this year. Despite this
market slowdown, Lipitor still accounts for more than 40 percent of all
lipid-lowering prescriptions, a 26.4-percent advantage versus its next nearest
competitor.
We believe that Lipitor is poised for further growth fueled by newly
emergent outcomes data, which once again confirm Lipitor's outstanding ability
to reduce morbidity associated with cardiovascular disease. These data
demonstrate Lipitor's early and profound ability to reduce myocardial infarction
and stroke across a variety of patient types with varying levels of
cardiovascular risk. We believe that these new data will support renewed growth
for Lipitor. These data will also be prominently featured in upcoming physician
and consumer branded and unbranded promotion beginning this quarter.
Last month, the FDA approved Lipitor use to reduce the risk of stroke and
myocardial infarction in patients with type 2 diabetes. The FDA's decision was
based on the findings of the Collaborative Atorvastatin Diabetes Study (CARDS),
a landmark trial of more than 2,800 patients with type 2 diabetes, near-normal
cholesterol, and at least one other risk factor, such as high blood pressure or
smoking. CARDS showed that patients using Lipitor experienced 48 percent fewer
strokes than those on placebo. The CARDS study's steering committee stopped the
trial nearly two years earlier than planned because of the clinical benefits
among patients who took Lipitor.
In addition, the FDA expanded the Lipitor label to include data on the
reduction in the incidence of stroke in patients with multiple risk factors, as
shown in the Anglo-Scandinavian Cardiac Outcomes Trial (ASCOT) clinical trial.
The ASCOT trial found that Lipitor reduced the relative risk of stroke by 26
percent compared to placebo. The study involved people with normal or borderline
cholesterol and no prior history of heart disease with controlled high blood
pressure and at least three other risk factors for heart disease, such as family
history, age over 55, smoking, diabetes, and obesity. Patients with multiple
risk factors, including diabetes, face a greater threat of heart attack and
stroke. Reducing their risk of such cardiovascular events is extremely
important. Pfizer will work with physicians and patients to ensure that the
burden of stroke is reduced in patients with diabetes through the use of Lipitor
as a powerful tool in this battle.
Despite loss of patent exclusivity in much of Europe, Norvasc growth in the
U.S. continues to anchor its performance. Worldwide, Norvasc has delivered
another billion-dollar quarter, with revenues up 9 percent in the third quarter
of 2005, compared to the third quarter of 2004. August 2005 year-to-date U.S.
new-prescription share (up 8 percent) and total-prescription share growth (up 7
percent) continue to outpace growth of the U.S. cardiovascular market as a whole
(new-prescription share up 6 percent and total-prescription share up 5 percent
compared to last year).
Caduet is expected to benefit from the new indications for Norvasc and
Lipitor. In late September, the FDA approved Norvasc for use in reducing the
risk of hospitalization due to angina and for reducing the risk of a coronary
revascularization procedure for patients with recent angiographically documented
coronary artery disease and without heart failure. Since Caduet combines Lipitor
to treat high cholesterol and Norvasc to treat high blood pressure, this new
indication will likely apply to Caduet as well. Additionally, the first E.U.
filing for Caduet was approved in France, the reference member state. Pfizer is
pursuing E.U. approvals through the mutual recognition process.
With more than a 63 percent share of the U.S. market year-to-date through
August, Viagra continues to lead the erectile-dysfunction market, even as the
entire market sales were down for the period. In addition, Viagra also faces
aggressive competition from other global brands. Year-to-date 2005 Viagra sales
are ahead 1 percent worldwide over last year, and third-quarter 2005 sales are
down 4 percent from the same period last year. Pfizer plans to introduce new
branded advertising compliant with our DTC code to highlight the unique clinical
profile for Viagra, as well as new unbranded advertising to address the needs of
potential new patients who may be hesitant to try any medication for erectile
dysfunction.
In September 2005, with full implementation of revised labeling, Pfizer
began to focus renewed attention on Celebrex, with the goal of making the pain
reliever available to increased numbers of patients. Celebrex is supported by a
large body of scientific and clinical-trial evidence of efficacy and safety
accumulated over 10 years in more than 40,000 patients worldwide. In fact, in
July, the FDA approved a sixth indication for Celebrex -- ankylosing spondylitis
- -- a form of spinal arthritis that affects more than one million people in the
U.S. Pfizer continues to encourage arthritis and pain patients -- and their
physicians -- to discuss the available data on the benefits and risks of
whichever pain medication they choose. Pfizer strongly believes that Celebrex
will continue to be an important treatment option for patients suffering from
acute pain, menstrual pain, or pain from osteoarthritis, adult rheumatoid
arthritis, ankylosing spondylitis, and familial adenomatous polyposis, a rare
condition that leads to colon cancer.
The Pfizer oncology portfolio demonstrated strong growth in the third
quarter of 2005 (up 38 percent) and over the first nine months of 2005 (up 43
percent) compared to the same periods in 2004. This growth is driven by both
organic product growth and our acquisition of broadened Camptosar rights in
Europe and Asia. Among current oncology medications, the National Comprehensive
Cancer Network, an alliance of 19 of the world's leading cancer centers, has
issued guidelines recommending Camptosar as an option across all lines of
treatment.
Aromasin has recently received European Mutual Recognition Procedure
approval for a new indication, adjuvant treatment of estrogen-receptor-positive
invasive early breast cancer, following two to three years of initial adjuvant
therapy with tamoxifen for post-menopausal women. Pfizer also received FDA
approval to market Aromasin for adjuvant treatment of post-menopausal women with
estrogen-receptor-positive early breast cancer following two to three years of
tamoxifen therapy, for a combined total of five consecutive years of adjuvant
hormonal therapy. Both approvals were based on the Intergroup Exemestane Study,
published in the New England Journal of Medicine, which established the
superiority of switching to Aromasin rather than remaining on tamoxifen. The
study showed that patients who switched to Aromasin after two to three years of
tamoxifen (for a combined total of five years of therapy) had 31 percent fewer
incidents of cancer recurrence than those who remained on five years of
tamoxifen therapy. Aromasin is currently available in more than 50 countries.
With revenues of $148 million in the third quarter of 2005, Geodon hit an
all-time U.S. total-prescription share high of 6 percent in the third quarter
and is now the second-fastest-growing atypical anti-psychotic medication. In
international markets, Geodon showed revenue growth of 22 percent in the third
quarter of 2005, compared to the third quarter of 2004. Following a successful
U.S. launch for acute bipolar mania and mixed episodes in August 2004, Geodon
use is up 68 percent for bipolar disorder and up 4 percent for schizophrenia
(for the twelve months ending August 2005 versus the same period ending August
2004). The Clinical Antipsychotic Trials of Intervention Effectiveness (CATIE)
schizophrenia study, supported by the National Institute of Mental Health and
recently published in the New England Journal of Medicine, confirms that Geodon
is an effective anti-psychotic and is less likely to worsen weight, lipids, and
glucose metabolism than other agents. In fact, Geodon was associated with some
improvement in these parameters. These findings are noteworthy because of the
higher prevalence of metabolic issues among patients with schizophrenia and are
consistent with previous Pfizer-sponsored clinical trials involving Geodon.
Geodon has achieved favorable formulary positions with many important insurers,
and it now surpasses Abilify in tier-2 commercial lives covered.
Year-to-date 2005 revenues for Relpax are $170 million, representing sales
growth of more than 49 percent, compared to the first nine months of 2004.
New-prescription volume in the U.S. in August was up 41 percent over the
previous year, and Relpax hit an all-time total-prescription high in the first
week of September. In international markets, Relpax showed revenue growth in the
third quarter of 2005 of 27 percent, compared to the same period last year.
Relpax market share is expected to further increase, based on clinical studies
showing its superiority over other triptans and education to reach the 80
percent of migraine patients who say they are willing to try a new medication.
New Medicine Pipeline Continues to Advance
"With approximately 230 projects in development, the Pfizer new-candidate
pipeline remains robust and continues to mark important regulatory milestones,"
said Dr. John LaMattina, president of Pfizer Global Research and Development.
An NDA for Sutent, a novel multi-targeted oral compound for treatment of
metastatic renal cell carcinoma (mRCC) and malignant gastrointestinal stromal
tumors (GIST), was submitted to the FDA on August 10. The FDA has accepted this
submission and granted Sutent priority-review status for this important cancer
therapy. Priority designation allows for an expedited review of the NDA filing
and is intended for product candidates that may provide a significant
improvement compared to marketed products. An MAA for Sutent was also submitted
to European regulatory authorities during the quarter.
On September 8, 2005, an FDA advisory committee voted to support approval of
Pfizer's inhaled insulin drug candidate Exubera for the treatment of type 1 and
type 2 diabetes. While the FDA usually follows the advice of its advisory
committees, it is not obligated to do so. Additionally, on October 13, 2005, the
Committee for Medicinal Products for Human Use of the European Medicines
Evaluation Agency issued a positive opinion on Exubera, recommending that a
Marketing Authorization be granted. The European Commission is expected to act
upon that recommendation early next year (January).
Significant data support Exubera as a vital potential new treatment. A study
presented at the annual meeting of the European Association for the Study of
Diabetes in September 2005 showed that Exubera is well tolerated and as
effective as injectable, rapid-acting insulin in achieving improved glycemic
control in patients with type 1 diabetes. Just this month, a study published in
the Annals of Internal Medicine investigated use of Exubera among type 2
diabetes patients who are failing to achieve blood-glucose control with
oral-agent therapy. Many patients with type 2 diabetes take oral agents as their
sole treatment and, as in this study, are not at treatment goals. Many are not
at goal because they have not been offered, or have been unwilling to accept,
insulin treatment. This study showed that Exubera in addition to, or in place
of, treatment with oral agents improved blood-sugar control better than
treatment with oral agents alone. In this study, a significantly higher
percentage of patients taking Exubera were able to achieve their treatment goal.
There were no treatment-related discontinuations due to adverse events in any of
the groups during the study. Additionally, pulmonary-function changes were
comparable between groups. Another study showed that complications associated
with diabetes account for as much as 15 percent of a nation's health budget and
that more aggressive adoption of strict treatment goals and effective clinical
decision-making strategies can help reduce this cost.
Once approved by regulators here and around the world, Exubera will provide
an important new insulin delivery modality for patients with type 1 and type 2
diabetes. This would be an important advance for the 16-17 million Americans who
suffer from type 2 diabetes, particularly the two-thirds of whom have
uncontrolled high blood-sugar levels. In Europe, approximately 22.5 million
people suffer from diabetes, with type 2 diabetes accounting for 85 percent to
95 percent of all diagnosed cases. By allowing insulin to be inhaled, Exubera
could help dramatically reduce the insulin-initiation hurdles that result from
fear of injections and therefore keep millions of patients from attaining
appropriate control of their glucose levels. Up to half of patients with type 2
diabetes who require insulin treatment decline it. Research shows that patients
are three times more likely to follow a course of insulin treatment when an
inhaled option is available. Exubera is being developed in partnership with
sanofi-aventis and Nektar Therapeutics.
On September 14, 2005, Pfizer completed the acquisition of Vicuron
Pharmaceuticals. Anidulafungin, one of the key products acquired in the Vicuron
acquisition, is a novel, broad-spectrum antifungal agent of the echinocandin
class that is currently under review by the FDA. The filing for the treatment of
candidemia/invasive candidiasis has been granted priority-review classification.
In a Phase III trial, anidulafungin demonstrated clinical efficacy greater than
fluconazole, including in disease due to Candida glabrata, with a comparable
safety profile in the treatment of candidemia/invasive candidiasis. Pfizer is
currently assessing the potential of anidulafungin in treating additional
patient populations.
The FDA has designated as approvable the NDA for dalbavancin, a new
injectable antibiotic to treat Gram-positive infections also acquired in the
Vicuron acquisition. We anticipate a rapid and successful resolution of
outstanding issues to allow final NDA approval in the coming months. The
addition of these two medications would broaden Pfizer's existing portfolio of
anti-infectives, where the company has a long history of providing patients and
physicians with life-saving medicines.
In addition to these key milestones, several other key submissions, filings,
and approvals were achieved during the third quarter.
The Phase III development program is complete for varenicline, an innovative
treatment for smoking cessation. Data are being prepared for global
registrations and will be presented at November's American Heart Association
meeting. Earlier data showed that varenicline represented an advance over
existing prescription smoking-cessation treatments. In two Phase II trials
evaluating the efficacy, safety, and tolerability of different doses of
varenicline in healthy smokers, about half the smokers treated with varenicline
(1 mg daily) stopped smoking.
It is estimated that 1.25 billion people smoke worldwide and that nearly 5
million premature deaths every year can be attributed to smoking. Even though 70
percent of smokers report thinking of quitting or actively want to quit, no more
than 5 percent of patients can quit on their own due to the chronic, relapsing
nature of this addictive medical condition. Varenicline was designed to
selectively target certain receptors in the brain to reduce craving and
withdrawal symptoms, as well as block the rewards from smoking that perpetuate
dependence. Pfizer plans to submit the NDA for varenicline by the end of 2005.
The NDA for indiplon modified-release formulation, our novel product
candidate for insomnia, was submitted to the FDA in May 2005 and was accepted
for filing by the agency. A standard review cycle is anticipated. The
immediate-release formulation is also under active regulatory review.
The FDA has granted fast-track designation for the clinical-development
program for maraviroc, a new anti-viral therapy that has been shown to be active
against HIV strains that are resistant to the current classes of antiretroviral
agents. Maraviroc represents a mechanistically unprecedented approach to
combating HIV disease. An independent data safety monitoring board (DSMB)
reviews maraviroc clinical-trial data on an ongoing basis. The group met in July
and September of 2005 to review patient data from the Phase IIb/III program. The
DSMB recommended that four of the Phase IIb/III clinical studies in
antiretroviral-naive and antiretroviral-experienced patients continue as
currently designed following a comprehensive review of efficacy, safety, and
laboratory data (including hepatic-enzyme abnormalities). Maraviroc clinical
trials have been ongoing since November 2004, with more than 1,000 patients
enrolled, and a portion of patients have now received more then 24 weeks of
therapy. Based on the results so far, enrollment in the European clinical trials
is likely to increase.
Pfizer continues to build its R&D capabilities. In addition to the
acquisition of Vicuron Pharmaceuticals during the third quarter, Pfizer also
completed the purchase of BioRen, a privately held company specializing in
technologies for optimizing antibodies. The ability to use and develop these
technologies will help Pfizer identify new antibody leads and improve the
properties of antibodies currently in development.
"Pfizer has a strong track record of augmenting our internal product
portfolio with external opportunities," said LaMattina. "The recent acquisition
of Vicuron Pharmaceuticals is one more demonstration of this approach. In the
recent past, Pfizer has acquired companies with innovative technologies and
exciting product candidates, such as Esperion, Idun, Angiosyn, and Meridica, and
has entered into collaborations with Medarex, Rigel, and Coley. The company will
continue to identify external opportunities that enhance our own research."
Through targeted acquisition, licensing, and internal development, Pfizer
research and development is replenishing the commercial portfolio. With the
completion of the Sutent filing, Pfizer is now eighty percent of the way to
achieving the unprecedented goal of filing 20 NDAs in the five-year period
ending in 2006.
Streamlining Our Business to Improve Performance and Efficiency
"Pfizer is leveraging its scale and strengths to maximize the value of
current products; discover, develop, and deliver new products; and explore new
ways to create value," said David Shedlarz and Karen Katen, vice chairmen, who
are co-leading the Adapting to Scale (AtS) productivity initiative for the
company. "To facilitate this process, Adapting to Scale seeks to unburden and
streamline the organization, generating $4 billion in estimated annual cost
savings by 2008 and an enhanced ability to fund key investments. Adapting to
Scale spans all functions, processes, and geographies. Beyond the initial
savings goals, it is intended to have a lasting impact by instilling fundamental
change in how we do business and by strengthening a culture of continuous
improvement.
"The initiative is proceeding very well -- driven by colleague suggestions,
creativity, and hard work. Action plans have been formulated, and we have now
moved aggressively into the implementation phase. Most organizational decisions
from Adapting to Scale have been announced or will be finalized and announced
during the next few months. With this rapid implementation plan, Pfizer can
focus on growing its business."
Examples of AtS initiatives include the following:
- In July, Pfizer Global Research and Development (PGRD) announced
organizational changes to increase efficiency and effectiveness in
bringing new therapies to patients in need while reducing the cost of
research and development. PGRD is being reorganized into eleven
therapeutic categories -- cardiovascular, metabolic, and endocrine;
central nervous system; inflammation; allergy and respiratory; infectious
diseases; pain; gastrointestinal and hepatitis; oncology; urology and
sexual health; ophthalmology; and dermatology. Each therapeutic area will
have three team leaders -- a research leader for compounds not yet in
human testing, a development leader for compounds in human testing not yet
marketed, and a commercial leader for marketed compounds. Discovery
Research will retain its existing structure of six
drug-candidate-producing sites. Development will move toward single sites
for most therapeutic areas.
- Pfizer Global Manufacturing is optimizing its network to ensure the
company's manufacturing facilities are aligned with current and future
product needs. This initiative, which began in 2003 in connection with the
Pharmacia acquisition, is continuing under Adapting to Scale. In the last
few months, Pfizer announced the cessation of operations of facilities in
Corby, U.K.; and Orangeville, Canada. We also determined that the Augusta,
GA, plant will be closed. A significant downsizing was announced in
Lincoln, NE, and restructuring was announced in Groton, CT; Lititz, PA;
and Inchera and Little Island, Ireland. The restructuring of the Puerto
Rico operations will continue, with employment reduction at Barceloneta
and Arecibo to occur later this year in anticipation of cessation of
operations at the Arecibo plant in the next few years. The sale of the
Cruce Davila plant is also being pursued. Since 2003, Pfizer has announced
plans to reduce the number of plants in its global network by more than 25
percent. These initiatives will continue to further enhance the
organization's efficiency.
- Pfizer Global Pharmaceuticals has implemented changes to improve
effectiveness and efficiency, largely by strengthening customer focus. We
completed a major reorganization of the U.S. field force on schedule,
reshaping the management structure to be more responsive to commercial
trends as the Medicare Modernization Act takes effect, and driving greater
sales-force accountability in preparation for the upcoming launch of new
medicines. We are implementing realignment of European marketing teams and
initiatives designed to improve the effectiveness of our field force in
Japan.
- Pfizer Consumer Healthcare has eliminated select contract sales forces in
North America, reduced its advertising-agency expenditures through lowered
fee structures and ongoing agency consolidation around the world, and
reduced its market-research investment on certain small and/or low-growth
brands and increased value by better leveraging research across the
business.
- Pfizer Animal Health has taken several organizational steps, including
consolidation of its veterinary medicine research and development
organization, redeployment of global marketing personnel into regional
operations, and reorganization of U.S. operations into separate livestock
and companion-animal units.
- Initiatives across corporate staff functions are directed to improving
focus, reducing complexity, and capturing the advantages of our global
presence. Savings in purchase of goods and services is a key component of
Adapting to Scale, with a focus on many functions, including information
technology, facilities, marketing, and professional services. Our goal is
to achieve maximum value from our supplier relationships and to gain
efficiency through process standardization to help to unburden these
organizations. In our financial function, we are moving towards a
significantly increased use of shared services to enable our colleagues in
the markets to focus on value-added, customer- facing decision support
roles while more straightforward transactional processes are consolidated
into regional centers and, where possible, low-cost vendors. In
information technology, standardization of the technical infrastructure
and rationalization of the applications portfolio continue according to
plan. More efficient and automated data-center facilities have become
operational in North America. Application retirement and migration to
lower-cost platforms is underway. The number of application-support
vendors is being reduced, and lower-cost support contracts have been
negotiated. Significant initiatives are also under way in our legal, human
resources, and other functions.
During 2005, we anticipate that cost savings from our new productivity
initiative will exceed $600 million, greater than previously forecasted, mainly
attributable to the Human Health business. These cost savings will accelerate
over the following three years, with about $2 billion in savings targeted for
2006, about $3.5 billion in 2007, and about $4 billion upon completion in 2008.
Savings will be realized in procurement, operating expenses, and facilities,
among other sources. The company expects that the cost of implementing this
initiative through 2008 will be approximately $4 billion to $5 billion.
Leveraging Financial Strength
"Pfizer is actively employing its strong positive cash flow for the
long-term interests of shareholders," said David Shedlarz, vice chairman. "The
company is both investing aggressively in promising new business and product
opportunities and returning cash to shareholders through growing dividends.
Pfizer has paid an increasing dividend every year for 38 years. Our current
quarterly dividend of 19 cents per share continues the company's commitment to
return value to shareholders. By year-end, we will have repatriated nearly $37
billion in foreign earnings, thereby enhancing our balance-sheet flexibility.
"The company has purchased nearly 126 million shares of common stock, valued
at $3.4 billion, during 2005," Mr. Shedlarz concluded. "During the third
quarter, purchases of common stock were reduced due to competing uses of cash,
including the Vicuron acquisition. Pfizer remains committed to completing our
currently authorized $5 billion share-purchase program."
"Third-quarter revenue performance reflects a 5-percent decline from last
year," said Alan Levin, chief financial officer. "Cost of sales continues to
remain under pressure this year, reflecting lower production volumes and changes
in our geographic, product, and segment mix, among other factors. Selling,
informational and administrative expenditures and research and development
expenditures, in the aggregate, declined by 4 percent during the quarter,
reflecting the accelerated impact of the company's Adapting to Scale efforts and
reduced operating expenses. As a result of the change in the product and
geographic mix of our income, we now forecast an effective tax rate on adjusted
income* of 22.3 percent versus the previous expectation of 23.0 percent for the
full year; third-quarter results reflect the year-to-date impact of this
reduction.
"For the full year, we continue to project a modest decline in revenues,
compared to 2004, although a somewhat larger decline than previously
anticipated, reflecting lower U.S. Human Health revenues. We now forecast R&D
expenditures of about $7.6 billion this year. At current exchange rates, we are
now forecasting 2005 adjusted diluted EPS* of $1.92-$1.94. Reported diluted EPS
in 2005 of $1.02-$1.04 is now anticipated, compared to a previous estimate of
about $1.24, a change in large part due to in-process R&D charges relating to
the Vicuron acquisition, as well as our reduced 2005 adjusted income* outlook.
The forecasted adjusted* and reported diluted EPS ranges reflect the impact of a
number of factors and uncertainties -- changes in prescription growth rates in
key therapeutic markets and geographies; Adapting to Scale restructuring
activities; the timing and rate of commercial acceptance of new-product
launches; changes in the geographic, product, and segment mix of our revenues
and income; changes in foreign exchange; the timing of regulatory actions; and
other factors. Some of these factors and uncertainties may persist over the
planning horizon. We are currently assessing these factors and other variables
as part of our annual planning process and are now withdrawing our previously
provided financial guidance for 2006 and 2007. We will provide forward-looking
guidance after the completion of this process early next year," concluded
Mr. Levin.
Pfizer Prevails in U.K. Lipitor Patent Case
On October 12, 2005, Pfizer prevailed in an important court decision in the
U.K. involving the main patent protecting Lipitor, the world's most popular
cholesterol-lowering medication. The U.K.'s High Court of Justice upheld the
exclusivity of the main patent that covers atorvastatin, the active ingredient
in Lipitor, until November 2011.
"The favorable decision on the basic patent, if upheld on appeal, means that
Lipitor is protected from generic competition by Ranbaxy in the U.K. for the
full term of the patent," said Jeffrey Kindler, vice chairman and general
counsel. "This is an important victory on behalf of medicine and innovation. The
decision is consistent with the fundamental principle that patent laws exist to
support and encourage medical innovators, not undermine them."
The ruling is the result of a lawsuit brought by generic manufacturer
Ranbaxy, Ltd., which challenged two patents protecting Lipitor. The court ruled
that a second patent covering the calcium salt of atorvastatin is invalid. Since
the calcium salt patent expires 16 months before the basic patent, this decision
on the calcium salt patent has no commercial relevance in the U.K. Pfizer
intends to appeal this decision on the calcium salt patent.
The U.S. case regarding Ranbaxy's challenge to Pfizer's patents for Lipitor
has been fully briefed and argued and is awaiting a decision. The U.K. decision
has no legal bearing on that case. The U.S. court will make its decision based
on U.S. law.
Pfizer Supports Efforts to Expand Drug Access
Through Rollout of Medicare Modernization Act
Pfizer continues to support initiatives around the implementation of the
Medicare Modernization Act (MMA), which represents an important step in
providing innovative medicines to older and disabled Americans.
"The objectives of MMA to offer plan choice and broad access to medicines
through competition are being fulfilled," said Jeffrey Kindler, vice chairman
and general counsel, and Pat Kelly, president, U.S. Pharmaceuticals. "For
example, there are multiple plans available in every region in the country. As a
result, beneficiaries have many choices in determining which plan is best for
them. Because of the competition, beneficiaries will be paying lower costs, $32
for the average monthly premium compared with earlier estimates of $37. Many
plans will be available at even lower costs, and nearly all beneficiaries will
have access to plans that cost $20 or less. We expect the plans will provide
generally broad access to medicines, including Pfizer's portfolio of innovative
products.
"To help build public understanding, we are partnering with community-based
organizations to provide information to beneficiaries and their families," Mr.
Kindler concluded. "We are also participating in community events in virtually
every state. Educational materials developed by Pfizer are being distributed
through about half of the nation's pharmacies."
Hurricane/Earthquake Relief Efforts
Highlight Corporate Citizenship
During the third quarter of 2005, Pfizer made substantial contributions to
the relief and recovery efforts in response to the destruction and dislocation
caused to the people of the Gulf state region by Hurricanes Katrina and Rita and
to victims of the earthquake that struck Pakistan and India.
To date, Pfizer, its employees, and the Pfizer Foundation have provided
nearly $9 million in cash donations to the hurricane relief effort, in addition
to medicines and consumer and animal-health products. Contributions include:
- Providing Pfizer medicines to patients at shelters and relief sites
through Pfizer hospital partners in Baton Rouge, Houston, and Dallas, and
ensuring that patients displaced by Katrina can obtain emergency supplies
of their Pfizer medicines.
- Dispatching three teams of Pfizer supply-chain experts to help local
authorities organize and secure the supply of medicines in Louisiana,
Mississippi, and Texas.
- Offering up to 150 scientists from colleges and universities in the Gulf
states the use of laboratory space at Pfizer's research and development
sites in Michigan to continue important educational and scientific
research.
In response to the recent South Asian earthquake, Pfizer is offering
immediate money, medicine, and expertise to ease the pain of survivors.
Contributions include:
- Donating $1 million in relief grants to UNICEF, the American Red Cross
(which is supporting Pakistan's Red Crescent and India's Red Cross), and
Save the Children -- all of which are active in the region.
- Offering $5 million in medicines and healthcare products to relief
organizations and setting up an expedited matching-gift process for
colleagues who want to donate to earthquake relief.
Pfizer Working to Benefit Patients and Shareholders
"In these difficult times in the pharmaceutical industry, we at Pfizer are
renewing our efforts to bring the best life-saving and life-enhancing medicines
to the world's patients, while striving for solid financial returns for our
shareholders," concluded Hank McKinnell. "As we strengthen our foundation for
the future, I am especially proud of my fellow Pfizer colleagues and the talent,
energy, and determination that they bring to their jobs every day."
For additional details, please see the attached financial schedules, product
revenue tables, and supplemental financial information.
DISCLOSURE NOTICE: The information contained in this document and the
attachments is as of October 20, 2005. The Company assumes no obligation to
update any forward-looking statements contained in this document or the
attachments as a result of new information or future events or developments.
This document and the attachments contain forward-looking information about
the Company's financial results and estimates, business prospects, and products
in research 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," and
other words and terms of similar meaning in connection with any discussion of
future operating or financial performance. Among the factors that could cause
actual results to differ materially are the following: the 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 commercial potential
of our products; the speed with which regulatory authorizations, pricing
approvals, and product launches may be achieved; competitive developments
affecting our current growth products; the ability to successfully market both
new and existing products domestically and internationally; difficulties or
delays in manufacturing; trade buying patterns; the ability to meet generic and
branded competition after the loss of patent protection for our products; the
impact of existing and future regulatory provisions on product exclusivity;
trends toward managed care and health care cost containment; possible U.S.
legislation or regulatory action affecting, among other things, pharmaceutical
pricing and reimbursement, including under Medicaid and Medicare, the
importation of prescription drugs that are marketed outside the U.S. and sold at
prices that are regulated by governments of various foreign countries, and the
involuntary approval of prescription medicines for over-the-counter use; the
potential impact of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003; legislation or regulations in markets outside the
U.S. affecting 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 future 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 mix; and the impact of acquisitions,
divestitures, restructurings, product withdrawals, and other unusual items,
including our ability to integrate and to obtain the anticipated results and
synergies from our acquisition of Pharmacia, and our ability to realize the
projected benefits of our Adapting to Scale multi-year productivity initiative.
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, 2004, and in its reports on Forms 10-Q and 8-K.
This document 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.
* "Adjusted income" and "adjusted diluted earnings per share (EPS)" are
defined as reported net income and reported diluted EPS, excluding
discontinued operations, purchase accounting adjustments, merger-related
costs, and certain significant items. 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 3, 2005, 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. A reconciliation to
reported net income and reported diluted EPS is provided within this
document. The adjusted income and adjusted diluted EPS measures are not,
and should not be viewed as, substitutes for U.S. GAAP net income and
diluted EPS.
+ Human Health adjusted revenues are defined as total Human Health
revenues excluding the revenues of selective COX-2 inhibitors and major
products that have lost exclusivity in the U.S. since the beginning of
2004. See the table accompanying this Performance Report.
PFIZER INC AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(millions of dollars, except per common share data)
Third Quarter Nine Months
------------------------ % Incr./ ------------------------ % Incr./
2005 2004 (Decr.) 2005 2004 (Decr.)
---------- ---------- ---------- ---------- ---------- ----------
Revenues $ 12,189 $ 12,831 (5) $ 37,705 $ 37,593 -
Costs and expenses:
Cost of sales 1,908 1,640 16 6,180 5,185 19
Selling,
informational
and administrative
expenses 3,931 4,036 (3) 12,242 12,227 -
Research and
development
expenses 1,783 1,888 (6) 5,421 5,356 1
Amortization of
intangible
assets 836 843 (1) 2,576 2,496 3
Merger-related
in-process
research and
development
charges 1,390 - * 1,652 955 73
Restructuring
charges and
merger-related
costs 307 190 62 796 726 10
Other (income)/
deductions--net (163) 283 * 669 140 378
Income from continuing
operations before
provision for taxes
on income and
minority
interests 2,197 3,951 (44) 8,169 10,508 (22)
Provision for taxes
on income 591 650 (9) 2,815 2,040 38
Minority interests 4 3 53 9 7 33
Income from
continuing
operations 1,602 3,298 (51) 5,345 8,461 (37)
Discontinued
operations:
(Loss)/income
from discontinued
operations--net
of tax (16) (3) 518 (37) 27 *
Gains on sales
of discontinued
operations--net
of tax 3 46 (93) 44 48 (8)
Discontinued
operations--net
of tax (13) 43 * 7 75 (91)
Net income $ 1,589 $ 3,341 (52) $ 5,352 $ 8,536 (37)
Earnings per
common share -
Basic:
Income from
continuing
operations $ 0.22 $ 0.44 (50) $ 0.73 $ 1.12 (35)
Discontinued
operations--net
of tax - 0.01 * - 0.01 *
Net income $ 0.22 $ 0.45 (51) $ 0.73 $ 1.13 (35)
Earnings per common
share - Diluted:
Income from
continuing
operations $ 0.22 $ 0.43 (49) $ 0.72 $ 1.11 (35)
Discontinued
operations--net
of tax - 0.01 * - 0.01 *
Net income $ 0.22 $ 0.44 (50) $ 0.72 $ 1.12 (36)
Weighted-average
shares used to
calculate earnings
per common share:
Basic 7,333 7,501 7,372 7,554
Diluted 7,382 7,569 7,424 7,642
* Calculation not meaningful.
Certain amounts and percentages may reflect rounding adjustments.
1. The above financial statement presents the three-month and nine-month periods
ended October 2, 2005 and September 26, 2004. Subsidiaries operating outside
the United States are included for the three-month and nine-month periods
ended August 28, 2005 and August 22, 2004.
2. The financial results for the three-month and nine-month periods ended
October 2, 2005 are not necessarily indicative of the results which
ultimately might be achieved for the current year.
3. As required, the estimated value of Merger-related in-process research and
development charges (IPR&D) is expensed at acquisition date. In 2005, we
expensed $1.7 billion of IPR&D, of which $1.4 billion related to our
acquisition of Vicuron Pharmaceuticals, Inc. in the third quarter and $250
million related to our acquisition of Idun Pharmaceuticals, Inc. in the
second quarter. In 2004, we expensed $955 million of IPR&D, primarily related
to our acquisition of Esperion Therapeutics, Inc. in the first quarter.
4. Other (income)/deductions--net in the first nine months of 2005 includes an
impairment charge of $1.2 billion related to the developed technology rights
and the write-off of machinery and equipment for Bextra, a COX-2-selective
inhibitor. Other (income)/deductions--net in the third quarter and first nine
months of 2004 includes a charge of $369 million in connection with certain
litigation-related charges.
5. Provision for taxes on income in the first nine months of 2005 includes tax
benefits associated with the resolution of certain tax positions and taxes on
the repatriation of foreign earnings.
PFIZER INC AND SUBSIDIARY COMPANIES
RECONCILIATION FROM REPORTED NET INCOME AND REPORTED DILUTED EARNINGS PER
SHARE TO ADJUSTED INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
(UNAUDITED)
(millions of dollars, except per common share data)
Third Quarter Nine Months
------------------------ % Incr./ ------------------------ % Incr./
2005 2004 (Decr.) 2005 2004 (Decr.)
---------- ---------- ---------- ---------- ---------- ----------
Reported net
income $ 1,589 $ 3,341 (52) $ 5,352 $ 8,536 (37)
Purchase accounting
adjustments--net
of tax 1,963 521 276 3,401 2,558 33
Merger-related
costs--net of tax 67 112 (40) 397 463 (14)
Discontinued
operations--net
of tax 13 (43) * (7) (75) (91)
Certain significant
items--net of tax 179 229 (22) 2,092 269 678
Adjusted income $ 3,811 $ 4,160 (8) $ 11,235 $ 11,751 (4)
Reported diluted
earnings per
common share $ 0.22 $ 0.44 (50) $ 0.72 $ 1.12 (36)
Purchase accounting
adjustments--net
of tax 0.26 0.08 225 0.46 0.33 39
Merger-related
costs--net of tax 0.01 0.01 - 0.05 0.06 (17)
Discontinued
operations--net
of tax - (0.01) * - (0.01) *
Certain significant
items --net
of tax 0.02 0.03 (33) 0.28 0.04 600
Adjusted diluted
earnings per
common share $ 0.51 $ 0.55 (7) $ 1.51 $ 1.54 (2)
* Calculation not meaningful.
Certain amounts and percentages may reflect rounding adjustments.
1. The above reconciliation presents the three-month and nine-month periods
ended October 2, 2005 and September 26, 2004. Subsidiaries operating outside
the United States are included for the three-month and nine-month periods
ended August 28, 2005 and August 22, 2004.
2. Adjusted Income and Adjusted diluted earnings per common share as shown above
reflect the following items:
Third Quarter Nine Months
------------------------ ------------------------
(millions of dollars) 2005 2004 2005 2004
- ---------------------------- ---------- ---------- ---------- ----------
Purchase accounting
adjustments, pre-tax:
In-process research
and development
charges (a) $ 1,390 $ - $ 1,652 $ 955
Intangible
amortization
and other (b) 811 827 2,494 2,450
Total purchase
accounting
adjustments,
pre-tax
Total purchase
accounting
adjustments, pre-tax 2,201 827 4,146 3,405
Income taxes (238) (306) (745) (847)
Total purchase
accounting
adjustments--net
of tax 1,963 521 3,401 2,558
Merger-related costs,
pre-tax:
Integration costs (c) 93 113 390 367
Restructuring costs (c) 61 77 232 359
Total merger-related
costs, pre-tax 154 190 622 726
Income taxes (87) (78) (225) (263)
Total merger-related
costs--net of tax 67 112 397 463
Discontinued operations,
pre-tax:
Loss/(income) from
discontinued
operations (d) 10 3 44 (42)
Gains on sales of
discontinued businesses
and product lines (d) (7) (65) (72) (68)
Total discontinued
operations, pre-tax 3 (62) (28) (110)
Income taxes 10 19 21 35
Total discontinued
operations--net
of tax 13 (43) (7) (75)
Certain significant items,
pre-tax
Asset impairment charges
and other costs
associated with the
suspension of selling
Bextra (e) 3 - 1,216 -
Litigation charge (f) - 369 - 369
Operating results of
divested legacy
Pharmacia research
facility (g) - - - 64
Restructuring charges
- Adapting to
Scale (c) 153 - 174 -
Implementation
costs - Adapting
to Scale (h) 104 - 136 -
Total certain
significant items,
pre-tax 260 369 1,526 433
Income taxes (81) (140) (547) (164)
Resolution of certain
tax positions (i) - - (586) -
Tax impact for the
repatriation of
foreign earnings (i) - - 1,699 -
Total certain
significant items--net
of tax 179 229 2,092 269
Total purchase accounting
adjustments, merger-related
costs, discontinued
operations, and certain
significant items--net
of tax $ 2,222 $ 819 $ 5,883 $ 3,215
(a) Included in Merger-related in-process research and development charges.
(b) Included primarily in Amortization of intangible assets.
(c) Included in Restructuring charges and merger-related costs.
(d) Included in Discontinued operations--net of tax.
(e) Included in Selling, informational and administrative expenses ($3 million)
for the three months ended October 2, 2005, and included in Cost of sales
($56 million), Selling, informational and administrative expenses ($8
million) and Other (income)/deductions-net ($1.2 billion) for the nine
months ended October 2, 2005.
(f) Included in Other (income)/deductions-net. (g) Included in Research and
development expenses.
(h) Included in Cost of sales ($36 million), Selling, informational and
administrative expenses ($60 million), and Research and development expenses
($8 million) for the three months ended October 2, 2005, and included in
Cost of sales ($37 million), Selling, informational and administrative
expenses ($81 million), and Research and development expenses ($18 million)
for the nine months ended October 2, 2005.
(i) Included in Provision for taxes on income.
PFIZER INC AND SUBSIDIARY COMPANIES
RECONCILIATION FROM HUMAN HEALTH REPORTED REVENUES
TO HUMAN HEALTH ADJUSTED REVENUES
(UNAUDITED)
(millions of dollars)
Worldwide
-------------------------------------------------------------------------------
Third Quarter Nine Months
------------------------ % Incr./ ------------------------ % Incr./
2005 2004 (Decr.) 2005 2004 (Decr.)
---------- ---------- ---------- ---------- ---------- ----------
Total Human Health
revenues $ 10,552 $ 11,288 (7) $ 32,629 $ 33,033 (1)
Celebrex 446 797 (44) 1,258 2,294 (45)
Bextra (73) 324 * (59) 869 *
Dynastat 7 13 (51) 26 31 (16)
Accupril/Accuretic 77 157 (51) 250 501 (50)
Neurontin 155 764 (80) 498 2,243 (78)
Diflucan 103 217 (52) 370 805 (54)
Human Health
adjusted revenues(1) $ 9,837 $ 9,016 9 $ 30,286 $ 26,290 15
U.S.
-------------------------------------------------------------------------------
Third Quarter Nine Months
------------------------ % Incr./ ------------------------ % Incr./
2005 2004 (Decr.) 2005 2004 (Decr.)
---------- ---------- ---------- ---------- ---------- ----------
Total Human Health
revenues $ 5,609 $ 6,619 (15) $ 17,203 $ 18,967 (9)
Celebrex 339 583 (42) 911 1,645 (45)
Bextra (64) 284 * (81) 771 *
Dynastat 0 0 - 0 0 -
Accupril/Accuretic 15 91 (84) 47 297 (84)
Neurontin 41 632 (93) 133 1,846 (93)
Diflucan (20) 87 * (16) 415 *
Human Health
adjusted revenues(1) $ 5,298 $ 4,942 7 $ 16,209 $ 13,993 16
International
-------------------------------------------------------------------------------
Third Quarter Nine Months
------------------------ % Incr./ ------------------------ % Incr./
2005 2004 (Decr.) 2005 2004 (Decr.)
---------- ---------- ---------- ---------- ---------- ----------
Total Human Health
revenues $ 4,943 $ 4,669 6 $ 15,426 $ 14,066 10
Celebrex 107 214 (50) 347 649 (46)
Bextra (9) 40 * 22 98 *
Dynastat 7 13 (51) 26 31 (16)
Accupril/Accuretic 62 66 (4) 203 204 -
Neurontin 114 132 (14) 365 397 (8)
Diflucan 123 130 (5) 386 390 (1)
Human Health
adjusted revenues(1) $ 4,539 $ 4,074 11 $ 14,077 $ 12,297 14
* Calculation not meaningful.
Certain amounts and percentages may reflect rounding adjustments.
(1) Human Health adjusted revenues, which excludes the revenues of selective
COX-2 inhibitors and major products which have lost exclusivity in the U.S.
since the beginning of 2004, is an alternative view of our Human Health
revenue performance and we believe that investors' understanding of Human
Health revenue growth is enhanced by disclosing this performance measure.
Neurontin, Diflucan and Accupril/Accuretic recently lost their U.S.
exclusivity and, as is typical in the pharmaceutical industry, this has
resulted in a dramatic decline in revenues due to generic competition.
Celebrex and Bextra, as a result of a recent regulatory evaluation of the
risks and benefits of all COX-2 medicines, have also experienced a
significant decline in sales. Specifically, the regulatory review of and
conclusions regarding Celebrex have resulted in declining sales as
physicians evaluate the evolving information on the risks and benefits of
all NSAIDs and revised labeling, and on April 7, 2005, the FDA requested the
suspension of Bextra sales and marketing based on its assessment of an
unfavorable risk/benefit profile due to the additional increased risk of
rare, serious skin reactions compared to other NSAIDs. We believe that
excluding the impact of these products assists the reader in understanding
the underlying strength of the balance of our diverse Human Health product
portfolio. Because of its non-standardized definition, this adjusted Human
Health 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 Human Health revenue growth.
PFIZER INC
SEGMENT/PRODUCT REVENUES
THIRD QUARTER 2005
(UNAUDITED)
(millions of dollars)
WORLDWIDE U.S. INTERNATIONAL
------------------------------ ------------------------------ ------------------------------
% % %
2005 2004 Chg 2005 2004 Chg 2005 2004 Chg
-------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL
REVENUES 12,189 12,831 (5) 6,395 7,377 (13) 5,794 5,454 6
HUMAN
HEALTH 10,552 11,288 (7) 5,609 6,619 (15) 4,943 4,669 6
- - CARDIOVASCULAR
AND
METABOLIC
DISEASES 4,467 4,251 5 2,394 2,324 3 2,073 1,927 8
LIPITOR 2,897 2,738 6 1,739 1,725 1 1,158 1,013 14
NORVASC 1,131 1,036 9 546 471 16 585 565 4
CARDURA 132 150 (12) 2 1 29 130 149 (12)
ACCUPRIL/
ACCURETIC 77 157 (51) 15 91 (84) 62 66 (4)
CADUET 48 5 927 47 4 M+ 1 1 -
- - CENTRAL
NERVOUS
SYSTEM
DISORDERS 1,590 2,090 (24) 966 1,490 (35) 624 600 4
ZOLOFT 807 802 1 647 637 1 160 165 (3)
NEURONTIN 155 764 (80) 41 632 (93) 114 132 (14)
GEODON 148 125 18 121 104 17 27 21 22
XANAX/XR 101 100 - 36 38 (4) 65 62 3
ARICEPT** 85 77 11 0 0 - 85 77 10
LYRICA 80 2 M+ 29 0 * 51 2 M+
RELPAX 67 47 42 44 29 52 23 18 27
- - ARTHRITIS
AND PAIN 545 1,274 (57) 323 899 (64) 222 375 (41)
CELEBREX 446 797 (44) 339 583 (42) 107 214 (50)
BEXTRA (73) 324 * (64) 284 * (9) 40 *
- - INFECTIOUS
AND
RESPIRATORY
DISEASES 1,073 1,015 6 533 545 (2) 540 470 15
ZITHROMAX 402 339 19 309 254 22 93 85 9
ZYVOX 157 120 30 109 85 29 48 35 35
VFEND 106 69 54 35 29 23 71 40 76
DIFLUCAN 103 217 (52) (20) 87 * 123 130 (5)
- - UROLOGY 629 647 (3) 352 388 (9) 277 259 7
VIAGRA 386 403 (4) 186 217 (14) 200 186 7
DETROL/
DETROL LA 231 231 - 160 166 (3) 71 65 9
- - ONCOLOGY 507 368 38 193 157 23 314 211 49
CAMPTOSAR 229 126 81 119 112 6 110 14 670
ELLENCE 86 86 - 18 15 27 68 71 (6)
AROMASIN 63 39 61 22 12 91 41 27 49
- - OPHTHALMOLOGY 338 304 11 110 105 4 228 199 15
XALATAN/
XALACOM 338 304 11 110 105 4 228 199 15
- - ENDOCRINE
DISORDERS 262 226 16 85 69 23 177 157 13
GENOTROPIN 200 176 14 59 46 30 141 130 8
- - ALL OTHER 874 919 (5) 495 530 (6) 379 389 (3)
ZYRTEC/
ZYRTEC D 338 333 2 338 333 2 0 0 -
- - ALLIANCE
REVENUE
(Aricept,
Macugen,
Mirapex,
Olmetec,
Rebif and
Spiriva) 267 194 38 158 112 41 109 82 34
CONSUMER
HEALTHCARE 921 851 8 493 453 9 428 398 8
ANIMAL
HEALTH 503 475 6 228 231 (1) 275 244 12
OTHER *** 213 217 (2) 65 74 (14) 148 143 4
* - Calculation not meaningful.
** - Represents direct sales under license agreement with Eisai Co., Ltd.
*** - Includes Capsugel and Pfizer CenterSource .
M+ - Change greater than one-thousand percent.
Certain amounts and percentages may reflect rounding adjustments.
Certain prior year data have been reclassified to conform to the current year
presentation.
PFIZER INC
SEGMENT/PRODUCT REVENUES
NINE MONTHS 2005
(UNAUDITED)
(millions of dollars)
WORLDWIDE U.S. INTERNATIONAL
------------------------------ ------------------------------ ------------------------------
% % %
2005 2004 Chg 2005 2004 Chg 2005 2004 Chg
-------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL
REVENUES 37,705 37,593 - 19,558 21,122 (7) 18,147 16,471 10
HUMAN
HEALTH 32,629 33,033 (1) 17,203 18,967 (9) 15,426 14,066 10
- - CARDIOVASCULAR
AND
METABOLIC
DISEASES 13,664 12,335 11 7,249 6,447 12 6,415 5,888 9
LIPITOR 8,829 7,598 16 5,332 4,612 16 3,497 2,986 17
NORVASC 3,462 3,210 8 1,608 1,372 17 1,854 1,838 1
CARDURA 441 459 (4) 4 5 (15) 437 454 (4)
ACCUPRIL/
ACCURETIC 250 501 (50) 47 297 (84) 203 204 -
CADUET 121 35 249 116 34 241 5 1 706
- - CENTRAL
NERVOUS
SYSTEM
DISORDERS 4,718 6,072 (22) 2,792 4,304 (35) 1,926 1,768 9
ZOLOFT 2,448 2,402 2 1,920 1,889 2 528 513 3
NEURONTIN 498 2,243 (78) 133 1,846 (93) 365 397 (8)
GEODON 430 324 33 352 267 32 78 57 37
XANAX/XR 306 272 13 105 85 23 201 187 8
ARICEPT** 255 222 15 0 0 - 255 222 15
RELPAX 170 114 49 104 66 58 66 48 36
LYRICA 139 2 M+ 29 0 * 110 2 M+
- - ARTHRITIS
AND PAIN 1,729 3,596 (52) 975 2,500 (61) 754 1,096 (31)
CELEBREX 1,258 2,294 (45) 911 1,645 (45) 347 649 (46)
BEXTRA (59) 869 * (81) 771 * 22 98 *
- - INFECTIOUS
AND
RESPIRATORY
DISEASES 3,657 3,375 8 1,936 1,888 3 1,721 1,487 16
ZITHROMAX 1,623 1,176 38 1,235 848 46 388 328 19
ZYVOX 453 328 38 320 239 34 133 89 51
DIFLUCAN 370 805 (54) (16) 415 * 386 390 (1)
VFEND 285 203 40 100 85 18 185 118 56
- - UROLOGY 1,958 1,865 5 1,086 1,078 1 872 787 11
VIAGRA 1,215 1,208 1 590 638 (8) 625 570 10
DETROL/
DETROL LA 705 619 14 482 426 13 223 193 15
- - ONCOLOGY 1,499 1,049 43 535 446 20 964 603 60
CAMPTOSAR 674 365 85 346 326 6 328 39 741
ELLENCE 273 254 7 56 48 16 217 206 5
AROMASIN 176 94 88 60 23 157 116 71 65
- - OPHTHALMOLOGY 1,011 874 16 316 296 7 695 578 20
XALATAN/
XALACOM 1,011 874 16 316 296 7 695 578 20
- - ENDOCRINE
DISORDERS 783 668 17 255 215 19 528 453 16
GENOTROPIN 604 535 13 178 151 18 426 384 11
- - ALL OTHER 2,853 2,723 5 1,625 1,535 6 1,228 1,188 4
ZYRTEC/
ZYRTEC D 1,035 938 10 1,035 938 10 0 0 -
- - ALLIANCE
REVENUE
(Aricept,
Macugen,
Mirapex,
Olmetec,
Rebif and
Spiriva) 757 476 59 434 258 68 323 218 48
CONSUMER
HEALTHCARE 2,835 2,524 12 1,439 1,290 12 1,396 1,234 13
ANIMAL
HEALTH 1,576 1,387 14 710 647 10 866 740 17
OTHER *** 665 649 2 206 218 (5) 459 431 6
* - Calculation not meaningful.
** - Represents direct sales under license agreement with Eisai Co., Ltd.
*** - Includes Capsugel and Pfizer CenterSource.
M+ - Change greater than one-thousand percent.
Certain amounts and percentages may reflect rounding adjustments.
Certain prior year data have been reclassified to conform to the current year
presentation.
PFIZER INC
SUPPLEMENTAL FINANCIAL INFORMATION
1) Impact of Foreign Exchange on Revenues
The weakness of the U.S. dollar relative to other currencies, most
significantly the euro and the Canadian dollar, in the third quarter of 2005
compared to the third quarter of 2004, favorably impacted third-quarter 2005
revenues by $175 million, or 1.4%. The weakness of the U.S. dollar relative to
other currencies, primarily the euro, Canadian dollar, Japanese yen, and British
pound, in the first nine months of 2005 compared to the first nine months of
2004, favorably impacted nine-month 2005 revenues by $909 million, or 2.4%.
Due to the recent strengthening of the U.S. dollar versus the major foreign
currencies, foreign exchange, at current rates, is not expected to have a
material impact on year-over-year revenue comparisons for the fourth quarter of
2005.
2) Cost of Sales Increase
Cost of sales in the third quarter of 2005 increased 16% compared to the
third quarter of 2004, and cost of sales as a percentage of revenues was 15.7%
in the third quarter of 2005, compared to 12.8% in the third quarter of 2004.
These increases reflect unfavorable geographic, segment, and product mix and
adverse changes in production volume, among other factors, partially offset by a
favorable impact from foreign exchange. Cost of sales for the first nine months
of 2005 increased by 19% compared to the first nine months of 2004, and cost of
sales as a percentage of revenues was 16.4% for the first nine months of 2005
and 13.8% for the first nine months of 2004. These increases reflect unfavorable
geographic, segment, and product mix; adverse changes in production volume; and
foreign exchange, among other factors. Cost of sales as a percentage of revenues
will remain under pressure through the remainder of 2005.
3) Costs Relating to Adapting to Scale Productivity Initiative
Costs relating to the Adapting to Scale initiative were $257 million and
$310 million, pre-tax, for the three months and nine months ended October 2,
2005. We expect the costs associated with this multi-year effort to continue
through 2008. Total Adapting-to-Scale-related expenditures expected to be
incurred through 2008 are estimated to be approximately $4 billion to $5
billion, on a pre-tax basis. These costs will include such charges as asset
impairments, exit costs, accelerated depreciation charges (primarily associated
with plant network optimization efforts), implementation costs (incremental
costs of implementing the initiative primarily associated with systems
integration activities and the expansion of certain shared support services),
and severance costs (including the associated impacts to our benefit plans, such
as from settlements and curtailments).
4) Other Income and Other Deductions
Third Quarter Nine Months
------------------------ ------------------------
($ millions) 2005 2004 2005 2004
- ---------------------------- ---------- ---------- ---------- ----------
Net Interest (Income)/
Expense $ (89) $ 4 $ (159) $ 3
Various Litigation Matters - 367 - 369
Impairment of
Bextra-Related Long-Lived
Assets - - 1,152 -
Royalties (101) (87) (267) (238)
Gains on Disposals of
Investments/Product Lines (5) - (70) (2)
Other, Net 32 (1) 13 8
Other (Income)/Deductions-
Net $ (163) $ 283 $ 669 $ 140
Net interest income increased versus the prior year for the three months and
nine months ended October 2, 2005, primarily due to higher average interest
rates.
In the third quarter of 2004, Pfizer recorded a litigation-related charge of
$369 million related to the resolution of claims against Quigley Company, Inc.,
a wholly owned subsidiary of Pfizer.
In connection with the decision to suspend sales of Bextra in the first
quarter of 2005, we recorded a charge of $1.1 billion relating to the impairment
of Bextra's intangible assets for developed technology rights and the write-off
of machinery and equipment of $7 million.
Royalty income primarily relates to licensed medications for cardiovascular
and metabolic diseases and ophthalmic conditions.
5) Effective Tax Rate on Adjusted Earnings
The effective tax rate in calculating adjusted income* for 2005 is now
projected to be 22.3%. The reduction from the previous projection of 23% is
driven by changes in product and geographic mix.
6) Tax Impact on Repatriation of Foreign Earnings
Pfizer's reported net income for the first nine months of 2005 was adversely
impacted by a net charge of $1.7 billion ($.23 per share) in connection with our
decision to repatriate approximately $36.7 billion in foreign earnings.
7) Reconciliation of Forecasted 2005 Adjusted Income* and Adjusted Diluted
EPS* to Forecasted 2005 Reported Net Income and Reported Diluted EPS
($ billions, except per-share amounts) Net Income Diluted EPS
- ---------------------------------------------- ------------- -------------
Forecasted Adjusted Income*/Diluted EPS* $14.2 - $14.4 $1.92 - $1.94
Intangible Amortization and Other (2.3) (.32)
In-Process R&D Charges (Primarily
Vicuron & Idun) (1.7) (.22)
Merger-Related Costs/Productivity-
Initiative Costs (.9) (.13)
Equity Gains .1 .02
Asset-Impairment Charges and Other Costs
Associated with the Suspension of
Selling Bextra (.8) (.10)
Tax Impact on Repatriation of Foreign Earnings (1.7) (.23)
Resolution of Certain Tax Positions .6 .08
Forecasted Reported Net Income/Diluted EPS $7.5 - $7.7 $1.02 - $1.04
Pfizer's estimates of 2005 reported net income of $7.5 billion to $7.7
billion and reported diluted earnings per share of $1.02 to $1.04, subject to
the Disclosure Notice in this report, have been revised from the prior guidance
of $9.1 billion and about $1.24. The revision is principally attributable to
in-process R&D charges of $1.4 billion ($.19 per share) related to the
acquisition of Vicuron during the third quarter of 2005 and revised expectations
(reflective of a lower revenue outlook, partially offset by greater expected
savings associated with the Adapting to Scale productivity initiative and other
expense revisions, and a lower effective tax rate), partially offset by
anticipated gains on the sale of equity investments.
8) Share-Purchase Program
We believe that purchase of our stock is an excellent investment
opportunity. Since the beginning of 1999, Pfizer has purchased more than $35
billion of its common stock. In the second quarter of 2005, the company
completed the $5 billion share-purchase program authorized in October 2004. On
June 23, 2005, Pfizer announced the authorization of a new $5 billion
share-purchase program. At the end of the third quarter of 2005, Pfizer had
purchased approximately 4.3 million shares valued at approximately $111 million
under the new program. The company has purchased nearly 126 million shares of
common stock, valued at $3.4 billion, during 2005. We remain committed to
completing this new $5 billion share-purchase program.