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TheStreet Open House

Pfizer Reports Third-Quarter 2012 Results

Specialty Care unit revenues declined 5% operationally in comparison with third-quarter 2011. Revenues were positively impacted by the operational growth of Enbrel, Rebif and Benefix, and negatively impacted by the decline in the Prevnar/Prevenar franchise, primarily in the U.S. and developed Europe, as the pediatric catch-up dose opportunity in third-quarter 2011 was no longer available in third-quarter 2012 since all eligible patients have been vaccinated. Additionally, utilization of Prevnar/Prevenar in adults remains minimal at this time. Specialty Care unit revenues were also negatively impacted by approximately $260 million, or 7%, in comparison with third-quarter 2011 by the losses of exclusivity of Xalatan in developed Europe in January 2012 and Geodon in the U.S. in March 2012.

Established Products unit revenues increased 11% operationally in comparison with the prior-year period, primarily reflecting the inclusion of $320 million of U.S. and Japan branded Lipitor revenues in third-quarter 2012, as well as launches of generic versions of other Pfizer branded primary care and specialty care products. These increases were partially offset by the continuing decline of revenues of certain products that previously lost exclusivity and the impact of ongoing pricing pressures, primarily in South Korea and developed Europe. Total revenues from established products in both the Established Products and Emerging Markets units were $3.4 billion, with $1.0 billion generated in emerging markets.

Emerging Markets unit revenues grew 6% operationally in comparison with third-quarter 2011, primarily due to volume growth in China, Mexico and Russia as a result of more targeted promotional efforts for key innovative and established products, including Lipitor, Norvasc and Lyrica. Growth was partially offset by the timing of government purchases of Prevenar 13 in Turkey in comparison with the year-ago period.

Animal Health unit revenues increased 4% operationally in comparison with the same quarter last year, largely due to increased demand across the companion animal and global livestock portfolios in key geographies. Consumer Healthcare unit revenues increased 6% operationally in comparison with third-quarter 2011, primarily due to the addition of products from the acquisitions of Ferrosan Consumer Health in December 2011 and Alacer Corp. in February 2012.

 

Adjusted Expenses (2) , Adjusted Income (2) and Adjusted Diluted EPS (2) Highlights

        Third-Quarter Selected Costs and Expenses
($ in millions)                  

Foreign

     
(Favorable)/Unfavorable   2012   2011 Change

Exchange

Operational
 

Adjusted Cost of Sales (2)

$ 2,565 $ 3,057 (16%) (9%) (7%)
As a Percent of Revenues

18.4%

18.4%

N/A N/A N/A
Adjusted SI&A Expenses (2) 3,729 4,397 (15%) (4%) (11%)
Adjusted R&D Expenses (2)   1,935   2,023 (4%) (1%) (3%)
 
Total $ 8,229 $ 9,477 (13%) (5%) (8%)
 

See end of text prior to tables for notes.

 

Adjusted cost of sales (2), adjusted SI&A expenses (2) and adjusted R&D expenses (2) in the aggregate were $8.2 billion in third-quarter 2012, a decrease of 13% compared with $9.5 billion in third-quarter 2011. Excluding the favorable impact of foreign exchange of $440 million, or 5%, these costs decreased 8%, primarily reflecting the benefits of cost-reduction and productivity initiatives as well as the impact of lower revenues. Savings in adjusted R&D expenses (2) were generated in third-quarter 2012 by the discontinuation of certain therapeutic areas and R&D programs in connection with our previously announced initiatives, which were partially offset by a $250 million payment to AstraZeneca to obtain the exclusive global over-the-counter rights to Nexium. Lower adjusted SI&A expenses (2) compared with the year-ago period reflect a reduction in the field force and a decrease in promotional spending, both partially in response to product losses of exclusivity, and more streamlined corporate support functions, as well as the favorable impact of foreign exchange. Adjusted cost of sales (2) and adjusted cost of sales (2) as a percent of revenues were favorably impacted by the benefits generated from the ongoing cost-reduction and productivity initiatives to streamline the manufacturing network and by foreign exchange, while unfavorably impacted by the decline in revenues contributing to a shift in geographic and business mix. Additionally, lower adjusted cost of sales (2) compared with the same period last year reflects reduced manufacturing volumes given the aforementioned products that lost exclusivity in various markets.

In third-quarter 2012, the effective tax rate on adjusted income (2) was 28.3%, compared with 31.2% in the third-quarter 2011. The third-quarter 2012 rate reflects the favorable impact of the change in the jurisdictional mix of earnings as well as the resolution of foreign audits pertaining to multiple tax years, partially offset by the unfavorable impact of the expiration of the U.S. research and development tax credit.

The diluted weighted-average shares outstanding for third-quarter 2012 were 7.5 billion shares, a reduction of approximately 302 million shares compared with third-quarter 2011. This decline was primarily due to the Company’s ongoing share-repurchase program.

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