Pfizer (PFE)

Q4 2011 Earnings Call

January 31, 2012 10:00 am ET


Charles E. Triano - Senior Vice President of Investor Relations

Ian C. Read - Chairman, Chief Executive Officer and Member of Executive Compliance Committee

Frank A. D'Amelio - Chief Financial Officer, Executive Vice President of Business Operations and Member of Executive Compliance Committee

Olivier Brandicourt - President of Worldwide Primary Care Business and General Manager of Worldwide Primary Care Business

David S. Simmons - President of Emerging Markets & Established Products units and General Manager of Emerging Markets & Established Products units

Geno J. Germano - President of Pfizer Specialty Care & Oncology and General Manager of Pfizer Specialty Care & Oncology

Mikael Dolsten - Senior Vice President and President of Pfizer Worldwide Research & Development


Catherine J. Arnold - Crédit Suisse AG, Research Division

Jami Rubin - Goldman Sachs Group Inc., Research Division

Tim Anderson - Sanford C. Bernstein & Co., LLC., Research Division

Gregory B. Gilbert - BofA Merrill Lynch, Research Division

John T. Boris - Citigroup Inc, Research Division

Marc Goodman - UBS Investment Bank, Research Division

Barbara A. Ryan - Deutsche Bank AG, Research Division

Steve Scala - Cowen and Company, LLC, Research Division

David Risinger - Morgan Stanley, Research Division

Christopher Schott - JP Morgan Chase & Co, Research Division

Jeffrey Holford - Jefferies & Company, Inc., Research Division

Charles Anthony Butler - Barclays Capital, Research Division

Seamus Fernandez - Leerink Swann LLC, Research Division



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Good day, everyone, and welcome to Pfizer's Fourth Quarter 2011 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Chuck Triano, Senior Vice President of Investor Relations. Please go ahead, sir.

Charles E. Triano

Good morning, and thank you for joining us today to review Pfizer's fourth quarter 2011 performance. I'm joined today by our Chairman and CEO, Ian Read; Frank D'Amelio, our CFO; Olivier Brandicourt, President and General Manager of Primary Care; Mikael Dolsten, President of Worldwide Research and Development; Geno Germano, President and General Manager of Specialty Care and Oncology; Amy Schulman, General Counsel, President and General Manager of Pfizer Nutrition; and David Simmons, President and General Manager of Emerging Markets and Established Products. The slides that will be presented on this call can be viewed on our homepage,, by clicking on the link Pfizer Quarterly Corporate Performance Fourth Quarter 2011 located in the Investor Presentation section in the lower right-hand corner of this page.

Before we start, I would like to remind you that our discussions during this conference call will include forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. The factors that could cause actual results to differ are discussed in Pfizer's 2010 annual report on Form 10-K and in our reports on Forms 10-Q and 8-K. Also the discussions during this conference call will include certain financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in Pfizer's current report on Form 8-K dated today, January 31, 2012.

With that, I'll now turn the call over to Ian Read. Ian?

Ian C. Read

Thank you, Chuck, and good morning, everyone. During my remarks this morning, I will briefly recap some highlights from the fourth quarter and for the year, and I'll talk about what we are focusing on for 2012. We finished 2011 with solid fourth quarter and the overall financial performance for the year was strong.

Looking at the quarter, loss of exclusivity continued to impact our business. This quarter, we absorbed nearly $1.3 billion revenue decline due to loss of exclusivity across our Biopharmaceutical commercial units. We saw strong operational growth in key markets such as Japan and China. Revenues in the Emerging Markets business overall declined 2% operationally due to pricing pressures and exceptional items that Frank will review in more detail.

As we have said before, the opportunity in Emerging Markets remains attractive, although quarter-to-quarter performance is volatile. I believe the best measure of our business in these markets is the yearly performance, which I will speak to in a moment. Animal Health, Nutrition and Consumer all turned in strong quarters operationally. Animal Health grew 13%, Nutrition grew 20% and Consumer grew 8% over the same quarter in 2010. And we saw the benefits of our process improvements and cost reduction work this quarter. Adjusted total cost were down 5% operationally.

Turning now to highlights for the year. We met or exceeded every aspect of our financial guidance. We reduced our adjusted R&D spend by nearly $1 billion compared to 2010, but we also took significant actions that strengthened our innovative core, which included: narrowing our therapeutic areas of focus; sharpening our analytical tools to better prioritize investment and stop funding low-potential programs earlier in the R&D cycle; advancing the most promising compounds within our pipeline; and continuing to invest in R&D network and the capability designed to drive biomedical innovation.

During the year, the Emerging Markets business was affected by strong headwinds such as increased pricing pressure in China and Turkey, the loss of exclusivity of Lipitor in Brazil and Mexico in 2010 and devaluation of Venezuela. That being said, revenue in Emerging Markets grew 5% operationally in 2011, comprised of 10% volume growth and a 5% decline in price. Performance was particularly strong in key markets where we increased our investment such as China, which delivered 18% operational revenue growth, and Turkey, which delivered 17% operational growth for 2011.

We grew revenues from key assets in our branded portfolio including Prevnar 13, Lyrica, Enbrel and Sutent. We absorbed approximately $5 billion in LOE and operationally, only saw a slight decline in our revenues year-over-year. We moved quickly to complete a strategic review of the businesses, which resulted in the ongoing expiration of strategic alternatives for the Animal Health and Nutrition business. We saw a steady cadence of progress in our late-stage pipeline and the emergence of a promising mix of early- to mid-stage assets. And we returned over $15 billion to shareholders through dividends and share repurchases.

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