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As Of Filer Filing For·On·As Docs:Size 2/23/17 Pfizer Inc 10-K 12/31/16 168:37M |
Document/Exhibit Description Pages Size
1: 10-K Annual Report HTML 504K
2: EX-10.4 Form of Stock Option Grant Notice and Summary of HTML 94K
Key Terms
4: EX-13 2016 Financial Report HTML 2.85M
5: EX-21 Subsidiaries of the Company HTML 150K
6: EX-23 Consent of Kpmg, Independent Registered Public HTML 63K
Accounting Firm
3: EX-12 Computation of Ratio of Earnings to Fixed Charges HTML 81K
7: EX-31.1 Certification by the Chief Executive Officer - 302 HTML 58K
8: EX-31.2 Certification by the Chief Financial Officer - 302 HTML 58K
9: EX-32.1 Certification by the Chief Executive Officer - 906 HTML 55K
10: EX-32.2 Certification by the Chief Financial Officer - 906 HTML 55K
17: R1 Document and Entity Information HTML 82K
18: R2 Consolidated Statements of Income HTML 146K
19: R3 Consolidated Statements of Comprehensive Income HTML 139K
20: R4 Consolidated Balance Sheets HTML 173K
21: R5 Consolidated Balance Sheets (Parenthetical) HTML 72K
22: R6 Consolidated Statements of Equity HTML 138K
23: R7 Consolidated Statements of Equity (Parenthetical) HTML 56K
24: R8 Consolidated Statements of Cash Flows HTML 196K
25: R9 Consolidated Statements of Cash Flows HTML 57K
(Parenthetical)
26: R10 Basis of Presentation and Significant Accounting HTML 143K
Policies
27: R11 Acquisitions, Assets and Liabilities Held for HTML 256K
Sale, Licensing Agreements, Research and
Development and Collaborative Arrangements,
Equity-Method Investments and Cost-Method
Investment
28: R12 Restructuring Charges and Other Costs Associated HTML 152K
with Acquisitions and Cost-Reduction/Productivity
Initiatives
29: R13 Other (Income)/Deductions - Net HTML 137K
30: R14 Tax Matters HTML 296K
31: R15 Accumulated Other Comprehensive Loss, Excluding HTML 102K
Noncontrolling Interests
32: R16 Financial Instruments HTML 398K
33: R17 Inventories HTML 69K
34: R18 Property, Plant and Equipment HTML 77K
35: R19 Identifiable Intangible Assets and Goodwill HTML 167K
36: R20 Pension and Postretirement Benefit Plans and HTML 907K
Defined Contribution Plans
37: R21 Equity HTML 84K
38: R22 Share-Based Payments HTML 295K
39: R23 Earnings Per Common Share Attributable to Pfizer HTML 106K
Inc. Common Shareholders
40: R24 Lease Commitments HTML 69K
41: R25 Insurance HTML 55K
42: R26 Commitments and Contingencies HTML 147K
43: R27 Segment, Geographic and Other Revenue Information HTML 422K
44: R28 Subsequent Event HTML 57K
45: R29 Basis of Presentation and Significant Accounting HTML 198K
Policies (Policies)
46: R30 Acquisitions, Assets and Liabilities Held for HTML 180K
Sale, Licensing Agreements, Research and
Development and Collaborative Arrangements,
Equity-Method Investments and Cost-Method
Investment (Tables)
47: R31 Restructuring Charges and Other Costs Associated HTML 147K
with Acquisitions and Cost-Reduction/Productivity
Initiatives (Tables)
48: R32 Other (Income)/Deductions - Net (Tables) HTML 139K
49: R33 Tax Matters (Tables) HTML 271K
50: R34 Accumulated Other Comprehensive Loss, Excluding HTML 98K
Noncontrolling Interests (Tables)
51: R35 Financial Instruments (Tables) HTML 390K
52: R36 Inventories (Tables) HTML 88K
53: R37 Property, Plant and Equipment (Tables) HTML 76K
54: R38 Identifiable Intangible Assets and Goodwill HTML 231K
(Tables)
55: R39 Pension and Postretirement Benefit Plans and HTML 956K
Defined Contribution Plans (Tables)
56: R40 Equity (Tables) HTML 66K
57: R41 Share-Based Payments (Tables) HTML 309K
58: R42 Earnings Per Common Share Attributable to Pfizer HTML 104K
Inc. Common Shareholders (Tables)
59: R43 Lease Commitments (Tables) HTML 66K
60: R44 Segment, Geographic and Other Revenue Information HTML 579K
(Tables)
61: R45 Basis of Presentation and Significant Accounting HTML 160K
Policies (Details)
62: R46 Acquisitions, Assets and Liabilities Held for HTML 92K
Sale, Licensing Agreements, Research and
Development and Collaborative Arrangements,
Equity-Method Investments and Cost-Method
Investment - Medivation, Inc. (Details)
63: R47 Acquisitions, Assets and Liabilities Held for HTML 95K
Sale, Licensing Agreements, Research and
Development and Collaborative Arrangements,
Equity-Method Investments and Cost-Method
Investment - Bamboo Therapeutics, Inc. (Details)
64: R48 Acquisitions, Assets and Liabilities Held for HTML 80K
Sale, Licensing Agreements, Research and
Development and Collaborative Arrangements,
Equity-Method Investments and Cost-Method
Investment - Anacor Pharmaceuticals, Inc.
(Details)
65: R49 Acquisitions, Assets and Liabilities Held for HTML 261K
Sale, Licensing Agreements, Research and
Development and Collaborative Arrangements,
Equity-Method Investments and Cost-Method
Investment - Hospira Acquisition (Details)
66: R50 Acquisitions, Assets and Liabilities Held for HTML 94K
Sale, Licensing Agreements, Research and
Development and Collaborative Arrangements,
Equity-Method Investments and Cost-Method
Investment - Additional Acquisitions (Details)
67: R51 Acquisitions, Assets and Liabilities Held for HTML 151K
Sale, Licensing Agreements, Research and
Development and Collaborative Arrangements,
Equity-Method Investments and Cost-Method
Investment - Assets and Liabilities Held for Sale
(Details)
68: R52 Acquisitions, Assets and Liabilities Held for HTML 86K
Sale, Licensing Agreements, Research and
Development and Collaborative Arrangements,
Equity-Method Investments and Cost-Method
Investment - Licensing Agreements (Details)
69: R53 Acquisitions, Assets and Liabilities Held for HTML 153K
Sale, Licensing Agreements, Research and
Development and Collaborative Arrangements,
Equity-Method Investments and Cost-Method
Investment - Research and Development and
Collaborative Arrangements (Detail)
70: R54 Acquisitions, Assets and Liabilities Held for HTML 103K
Sale, Licensing Agreements, Research and
Development and Collaborative Arrangements,
Equity-Method Investments and Cost-Method
Investment - Equity and Cost-Method Investments
(Details)
71: R55 Restructuring Charges and Other Costs Associated HTML 92K
with Acquisitions and Cost-Reduction/Productivity
Initiatives - Narrative (Detail)
72: R56 Restructuring Charges and Other Costs Associated HTML 100K
with Acquisitions and Cost-Reduction/Productivity
Initiatives - Costs (Detail)
73: R57 Restructuring Charges and Other Costs Associated HTML 99K
with Acquisitions and Cost-Reduction/Productivity
Initiatives - Costs - Footnotes (Detail)
74: R58 Restructuring Charges and Other Costs Associated HTML 78K
with Acquisitions and Cost-Reduction/Productivity
Initiatives - Restructuring Accruals (Detail)
75: R59 Restructuring Charges and Other Costs Associated HTML 62K
with Acquisitions and Cost-Reduction/Productivity
Initiatives - Restructuring Accruals - Footnotes
(Detail)
76: R60 Other (Income)/Deductions - Net (Details) HTML 94K
77: R61 Other (Income)/Deductions - Net - Footnotes - HTML 55K
Interest (Income) Expense (Details)
78: R62 Other (Income)/Deductions - Net - Footnotes - HTML 72K
Royalty Income (Details)
79: R63 Other (Income)/Deductions - Net - Footnotes - HTML 75K
Commitments and Contingencies (Details)
80: R64 Other (Income)/Deductions - Net - Footnotes - HTML 78K
Investments (Details)
81: R65 Other (Income)/Deductions - Net - Footnotes - HTML 104K
Indefinite-Lived Intangibles (Details)
82: R66 Other (Income)/Deductions - Net - Footnotes - HTML 58K
Finite-Lived Intangibles (Details)
83: R67 Other (Income)/Deductions - Net - Footnotes - HTML 80K
Additional Information (Details)
84: R68 Other (Income)/Deductions - Net - Additional HTML 92K
Information about Intangible Assets (Detail)
85: R69 Tax Matters - Income from Continuing Operations HTML 63K
Before Provision for Taxes on Income (Details)
86: R70 Tax Matters - Provision for Taxes on Income HTML 83K
(Details)
87: R71 Tax Matters - Provision for Taxes on Income HTML 62K
(Narrative) (Details)
88: R72 Tax Matters - Tax Rate Reconciliation (Details) HTML 81K
89: R73 Tax Matters - Deferred Taxes (Details) HTML 116K
90: R74 Tax Matters - Deferred Taxes - Footnotes (Details) HTML 63K
91: R75 Tax Matters - Narrative (Details) HTML 83K
92: R76 Tax Matters - Reconciliation of Gross Unrecognized HTML 75K
Tax Benefits (Details)
93: R77 Tax Matters - Reconciliation of Gross Unrecognized HTML 70K
Tax Benefits - Footnotes (Details)
94: R78 Tax Matters - Taxes on Items of Other HTML 102K
Comprehensive Income/(Loss) (Details)
95: R79 Accumulated Other Comprehensive Loss, Excluding HTML 81K
Noncontrolling Interests (Details)
96: R80 Accumulated Other Comprehensive Loss, Excluding HTML 56K
Noncontrolling Interests - Footnotes (Details)
97: R81 Accumulated Other Comprehensive Loss, Excluding HTML 61K
Noncontrolling Interests - Narrative (Details)
98: R82 Financial Instruments - Assets and Liabilities HTML 132K
Measured on Recurring Basis (Details)
99: R83 Financial Instruments - Assets and Liabilities HTML 98K
Measured on Recurring Basis - Footnotes (Details)
100: R84 Financial Instruments - Balance Sheet Grouping HTML 82K
(Details)
101: R85 Financial Instruments - Balance Sheet Grouping - HTML 89K
Footnotes (Details)
102: R86 Financial Instruments - Investments in Debt HTML 120K
Securities (Details)
103: R87 Financial Instruments - Narrative (Details) HTML 86K
104: R88 Financial Instruments - Long-Term Debt Narrative HTML 100K
(Details)
105: R89 Financial Instruments - Long-Term Debt (Details) HTML 139K
106: R90 Financial Instruments - Long-Term Debt - Footnotes HTML 70K
(Details)
107: R91 Financial Instruments - Long-Term Debt Outstanding HTML 69K
Maturities (Details)
108: R92 Financial Instruments - Derivative Financial HTML 136K
Instruments and Hedging Activities (Details)
109: R93 Inventories (Details) HTML 76K
110: R94 Property, Plant and Equipment (Details) HTML 99K
111: R95 Identifiable Intangible Assets and Goodwill - HTML 92K
Finite-lived and Indefinite-lived Intangible
Assets (Details)
112: R96 Identifiable Intangible Assets and Goodwill - HTML 68K
Finite-lived Intangible Assets Percentage of Total
Intangibles (Details)
113: R97 Identifiable Intangible Assets and Goodwill - HTML 68K
Indefinite-lived Intangible Assets Percentage of
Total Intangibles (Details)
114: R98 Identifiable Intangible Assets and Goodwill - HTML 65K
Narrative (Details)
115: R99 Identifiable Intangible Assets and Goodwill - HTML 64K
Expected Annual Amortization Expense (Details)
116: R100 Identifiable Intangible Assets and Goodwill - HTML 78K
Goodwill (Details)
117: R101 Pension and Postretirement Benefit Plans and HTML 68K
Defined Contribution Plans - Narrative (Details)
118: R102 Pension and Postretirement Benefit Plans and HTML 149K
Defined Contribution Plans (Details)
119: R103 Pension and Postretirement Benefit Plans and HTML 69K
Defined Contribution Plans - Amounts Expected to
be Amortized into Net Periodic Benefit Costs
(Details)
120: R104 Pension and Postretirement Benefit Plans and HTML 89K
Defined Contribution Plans - Weighted-Average
Actuarial Assumptions (Details)
121: R105 Pension and Postretirement Benefit Plans and HTML 62K
Defined Contribution Plans - Healthcare Cost Trend
Rate Assumptions (Details)
122: R106 Pension and Postretirement Benefit Plans and HTML 64K
Defined Contribution Plans - One-Percentage-Point
Increase or Decrease in the Healthcare Cost Trend
Rate (Details)
123: R107 Pension and Postretirement Benefit Plans and HTML 188K
Defined Contribution Plans - Obligations and
Funded Status (Details)
124: R108 Pension and Postretirement Benefit Plans and HTML 80K
Defined Contribution Plans - Funded Status
Recognized in Consolidated Balance Sheets
(Details)
125: R109 Pension and Postretirement Benefit Plans and HTML 75K
Defined Contribution Plans - Amounts Recognized in
Accumulated Other Comprehensive (Loss)/Income
(Details)
126: R110 Pension and Postretirement Benefit Plans and HTML 64K
Defined Contribution Plans - Amounts Recognized in
Accumulated Other Comprehensive (Loss)/Income -
Footnotes (Details)
127: R111 Pension and Postretirement Benefit Plans and HTML 74K
Defined Contribution Plans - Pension Plans in
Excess of Plan Assets (Details)
128: R112 Pension and Postretirement Benefit Plans and HTML 250K
Defined Contribution Plans - Plan Assets (Details)
129: R113 Pension and Postretirement Benefit Plans and HTML 92K
Defined Contribution Plans - Analysis of Changes
in Significant Investments Valued Using
Significant Unobservable Inputs (Details)
130: R114 Pension and Postretirement Benefit Plans and HTML 128K
Defined Contribution Plans - Long-term Target
Asset Allocations Ranges and the Percentage of the
Fair Value of Plan Assets (Detail)
131: R115 Pension and Postretirement Benefit Plans and HTML 107K
Defined Contribution Plans - Expected Future Cash
Flow Information (Details)
132: R116 Equity - Summary of Common Stock Purchases HTML 64K
(Details)
133: R117 Equity - Narrative (Details) HTML 112K
134: R118 Share-Based Payments - Narrative (Detail) HTML 83K
135: R119 Share-Based Payments - Impact on Net Income HTML 76K
(Detail)
136: R120 Share-Based Payments - Restricted Stock Unit HTML 87K
Activity (Detail)
137: R121 Share-Based Payments - Data Related to All HTML 62K
Restricted Stock Unit Activity (Detail)
138: R122 Share-Based Payments - Stock Option Narrative HTML 62K
(Details)
139: R123 Share-Based Payments - Valuation Assumptions of HTML 67K
Stock Options (Detail)
140: R124 Share-Based Payments - Stock Option Activity HTML 107K
(Detail)
141: R125 Share-Based Payments - Data Related to All Stock HTML 70K
Option Activity (Detail)
142: R126 Share-Based Payments - Portfolio Performance HTML 65K
Shares Narrative (Details)
143: R127 Share-Based Payments - Portfolio Performance HTML 82K
Shares Activity (Details)
144: R128 Share-Based Payments - Data Related to All HTML 62K
Portfolio Performance Shares Activity (Details)
145: R129 Share-Based Payments - Total Shareholder Return HTML 72K
Units Narrative (Details)
146: R130 Share-Based Payments - Valuation Assumptions of HTML 66K
Total Shareholder Return Units (Detail)
147: R131 Share-Based Payments - Total Shareholder Return HTML 91K
Units Activity (Details)
148: R132 Share-Based Payments - Outstanding Total HTML 98K
Shareholder Return Units Activity (Details)
149: R133 Share-Based Payments - Data Related to All Total HTML 62K
Shareholder Return Units (Details)
150: R134 Share-Based Payments - Performance Share Awards HTML 68K
(PSAs) Narrative (Details)
151: R135 Share-Based Payments - Performance Share Awards HTML 77K
(PSAs) Activity (Details)
152: R136 Share-Based Payments - Data Related to All HTML 62K
Performance Share Awards (PSAs) (Details)
153: R137 Earnings Per Common Share Attributable to Pfizer HTML 109K
Inc. Common Shareholders - Basic and Diluted
Numerator and Denominator (Details)
154: R138 Lease Commitments (Detail) HTML 73K
155: R139 Commitments and Contingencies (Action In Which We HTML 97K
Are the Plaintiff) (Details)
156: R140 Commitments and Contingencies (Action In Which We HTML 88K
Are The Defendant) (Details)
157: R141 Commitments and Contingencies (Certain Matters HTML 97K
Resolved And Purchase Commitments) (Details)
158: R142 Segment, Geographic and Other Revenue Information HTML 102K
- Narrative (Detail)
159: R143 Segment, Geographic and Other Revenue Information HTML 99K
(Detail)
160: R144 Segment, Geographic and Other Revenue Information HTML 116K
- Footnotes (Detail)
161: R145 Segment, Geographic and Other Revenue Information HTML 68K
- Revenues By Geographic Area (Detail)
162: R146 Segment, Geographic and Other Revenue Information HTML 63K
- Revenues By Geographic Area - Footnotes (Detail)
163: R147 Segment, Geographic and Other Revenue Information HTML 70K
- Long-Lived Assets By Geographic Region (Detail)
164: R148 Segment, Geographic and Other Revenue Information HTML 246K
- Revenues By Products (Detail)
165: R149 Subsequent Event (Details) HTML 81K
167: XML IDEA XML File -- Filing Summary XML 340K
166: EXCEL IDEA Workbook of Financial Reports XLSX 294K
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168: ZIP XBRL Zipped Folder -- 0000078003-17-000014-xbrl Zip 972K
| Exhibit |
Pfizer Inc. 2016 Financial Report | |
 | |
2016 Financial Report | This Financial Report for the fiscal year ended December 31, 2016, which was filed as Exhibit 13 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2016 |
2016 Form 10-K | Annual Report on Form 10-K for the fiscal year ended December 31, 2016 |
AAV | Adeno-Associated
Virus |
ABO | Accumulated postretirement benefit obligation |
ACA (Also referred to as U.S. Healthcare Legislation) | U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act. |
ACIP | Advisory Committee on Immunization Practices |
ALK | anaplastic lymphoma kinase |
Allergan | Allergan
plc |
Alliance revenues | Revenues from alliance agreements under which we co-promote products discovered or developed by other companies or us |
AM-Pharma | AM-Pharma B.V. |
Anacor | Anacor Pharmaceuticals, Inc. |
Astellas | Astellas Pharma U.S. Inc. |
ASU | Accounting Standards Update |
ATM-AVI | aztreonam-avibactam |
Bamboo | Bamboo
Therapeutics, Inc. |
Baxter | Baxter International Inc. |
BMS | Bristol-Myers Squibb Company |
CDC | U.S. Centers for Disease Control and Prevention |
Cellectis | Cellectis SA |
Celltrion | Celltrion Inc. and Celltrion Healthcare, Co., Ltd. (collectively) |
Citibank | Citibank
N.A. |
Developed Markets | U.S., Western Europe, Japan, Canada, Australia, South Korea, Scandinavian countries, Finland and New Zealand |
EEA | European Economic Area |
EGWP | Employer Group Waiver Plan |
EH | Essential Health |
ELT | Executive Leadership Team |
EMA | European
Medicines Agency |
Emerging Markets | Includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Africa, Eastern Europe, Central Europe, the Middle East and Turkey |
EPS | earnings per share |
EU | European Union |
Exchange Act | Securities Exchange Act of 1934, as amended |
FASB | Financial
Accounting Standards Board |
FDA | U.S. Food and Drug Administration |
GAAP | Generally Accepted Accounting Principles |
GHD | growth hormone deficiency |
GIST | gastrointestinal stromal tumors |
GIP | Global Innovative Pharmaceutical segment |
GPD | Global
Product Development organization |
GS&Co. | Goldman, Sachs & Co. |
HER | human epidermal growth factor receptor |
HER2- | human epidermal growth factor receptor 2-negative |
hGH-CTP | human growth hormone |
HIS | Hospira Infusion Systems |
HIV | human
immunodeficiency virus |
Hisun | Zhejiang Hisun Pharmaceuticals Co., Ltd. |
Hisun Pfizer | Hisun Pfizer Pharmaceuticals Company Limited |
Hospira | Hospira, Inc. |
HR+ | hormone receptor-positive |
2016
Financial Report | i | |
ICU
Medical | ICU Medical, Inc. |
IH | Innovative Health |
InnoPharma | InnoPharma, Inc. |
IPR&D | in-process research and development |
IRC | Internal Revenue Code |
IRS | U.S. Internal Revenue Service |
IV | intravenous |
Janssen | Janssen
Biotech Inc. |
King | King Pharmaceuticals, Inc. |
LDL | low density lipoprotein |
LIBOR | London Interbank Offered Rate |
Lilly | Eli Lilly & Company |
LOE | loss of exclusivity |
MCO | Managed
Care Organization |
MDV | multi-dose vial |
Medivation | Medivation, Inc. |
Merck | Merck & Co., Inc. |
Moody’s | Moody’s Investors Service |
NAV | Net asset value |
NDA | new
drug application |
NovaQuest | NovaQuest Co-Investment Fund II, L.P. or NovaQuest Co-Investment Fund V, L.P., as applicable |
NSCLC | non-small cell lung cancer |
NYSE | New York Stock Exchange |
OPKO | OPKO Health, Inc. |
OTC | over-the-counter |
PBM | Pharmacy
Benefit Manager |
PBO | Projected benefit obligation |
PCS | Pfizer CentreSource |
PE | pulmonary embolism |
PGS | Pfizer Global Supply |
Pharmacia | Pharmacia Corporation |
PPS | Portfolio
Performance Shares |
PP&E | Property, plant & equipment |
PSAs | Performance Share Awards |
PTUs | Profit Units |
RCC | renal cell carcinoma |
recAP | recombinant human Alkaline Phosphatase |
R&D | research
and development |
RPI | RPI Finance Trust |
RSUs | Restricted Stock Units |
Sandoz | Sandoz, Inc., a division of Novartis AG |
SEC | U.S. Securities and Exchange Commission |
SGA | small for gestational age |
S&P | Standard
and Poor’s |
Teuto | Laboratório Teuto Brasileiro S.A. |
TSR | Total Shareholder Return |
TSRUs | Total Shareholder Return Units |
U.K. | United Kingdom |
U.S. | United States |
VAT | value
added tax |
VIE | Variable interest entity |
ViiV | ViiV Healthcare Limited |
VOC | Global Vaccines, Oncology and Consumer Healthcare segment |
WRD | Worldwide Research and Development |
Zoetis | Zoetis Inc. |
ii | 2016
Financial Report | |
● | Beginning on page 2 | ||||
This
section provides information about the following: Our Business; Our 2016 Performance; Our Operating Environment; The Global Economic Environment, Our Strategy; Our Business Development Initiatives, such as acquisitions, dispositions, licensing and collaborations; and Our Financial Guidance for 2017. | |||||
● | Beginning on page 14 | ||||
This
section discusses those accounting policies and estimates that we consider important in understanding our consolidated financial statements. For additional discussion of our accounting policies, see Notes to Consolidated Financial Statements—Note 1. Basis of Presentation and Significant Accounting Policies. | |||||
● | Beginning on page 21 | ||||
This
section includes a Revenues Overview section as well as the following sub-sections: | |||||
Beginning on page 26 | |||||
This sub-section provides an overview of several of our biopharmaceutical products. | |||||
Beginning on page 30 | |||||
This sub-section provides an overview of important biopharmaceutical product developments. | |||||
Beginning
on page 33 | |||||
This sub-section provides a discussion about our costs and expenses. | |||||
Beginning on page 38 | |||||
This
sub-section provides a discussion of items impacting our tax provisions. | |||||
Beginning on page 38 | |||||
This sub-section provides a discussion of an alternative view of performance used by management. | |||||
● | Beginning on page 44 | ||||
This section provides a discussion of the performance of each of our operating segments. | |||||
● | Beginning on page 51 | ||||
This
section provides a discussion of changes in certain components of other comprehensive income. | |||||
● | Beginning on page 51 | ||||
This section provides a discussion of changes in certain balance sheet accounts, including Accumulated other comprehensive loss. | |||||
● | Beginning on page 52 | ||||
This section provides an analysis of our consolidated cash flows for the three years ended December 31, 2016. | |||||
● | Beginning
on page 54 | ||||
This section provides an analysis of selected measures of our liquidity and of our capital resources as of December 31, 2016 and December 31, 2015, as well as a discussion of our outstanding debt and other commitments that existed as of December 31, 2016 and December 31, 2015. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer’s future activities. | |||||
● | Beginning on page 59 | ||||
This section discusses accounting standards that we have recently adopted, as well as those that recently have been issued, but not yet adopted. | |||||
● | Beginning on page 61 | ||||
This
section provides a description of the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements presented in this Financial Review relating to, among other things, our anticipated operating and financial performance, business plans and prospects, in-line products and product candidates, strategic reviews, capital allocation, business-development plans and plans relating to share repurchases and dividends. Also included in this section are discussions of Financial Risk Management and Contingencies, including legal and tax matters. | |||||
2016
Financial Report | 1 | |
References to developed and emerging markets in this Financial Review include: | ||
Developed markets | U.S.,
Western Europe, Japan, Canada, Australia, South Korea, Scandinavian countries, Finland and New Zealand | |
Emerging markets (include, but are not limited to) | Asia (excluding Japan and South Korea), Latin America, Africa, Eastern Europe, Central Europe, the Middle East and Turkey | |
• | On
February 3, 2017, we completed the sale of our global infusion therapy net assets, HIS, to ICU Medical for up to approximately $900 million, composed of cash and contingent cash consideration, ICU Medical common stock and seller financing. Assets and liabilities associated with HIS are presented as held for sale in the consolidated balance sheet as of December 31, 2016. |
• | On December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations, we acquired the development
and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S., including the commercialization and development rights to the newly approved EU drug Zavicefta™ (ceftazidime-avibactam), the marketed agents Merrem™/Meronem™ (meropenem) and Zinforo™ (ceftaroline fosamil), and the clinical development assets ATM-AVI and CXL (ceftaroline fosamil-AVI). |
• | On September 28, 2016, we acquired Medivation for $81.50 per share. The total fair value of consideration transferred for Medivation was approximately $14.3 billion in cash ($13.9 billion,
net of cash acquired). Of this consideration, approximately $365 million was not paid as of December 31, 2016, and was recorded in Other current liabilities. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Medivation, and, in accordance with our domestic reporting periods, our consolidated financial statements for the year ended December 31, 2016 reflect approximately three months of legacy Medivation operations. |
• | On June
24, 2016, we acquired Anacor for $99.25 per share. The total fair value of consideration transferred for Anacor was approximately $4.9 billion in cash ($4.5 billion, net of cash acquired), plus $698 million debt assumed. Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Anacor, and, in accordance with our domestic reporting periods, our consolidated financial statements for the year ended December 31, 2016 reflect approximately six months of legacy Anacor operations, which were immaterial. |
• | On
April 6, 2016, we announced that the merger agreement between Pfizer and Allergan entered into on November 22, 2015 was terminated by mutual agreement of the companies. The decision was driven by the actions announced by the U.S. Department of Treasury |
2 | 2016 Financial Report | |
• | On September 3, 2015, we acquired Hospira for approximately $16.1 billion in cash ($15.7 billion, net of cash acquired). Commencing from the acquisition date, our financial statements reflect the assets,
liabilities, operating results and cash flows of Hospira. In accordance with our domestic and international reporting periods, our consolidated financial statements for the year ended December 31, 2015 reflect four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations. |
The following provides an analysis of the 2016 revenue growth: | ||||
(BILLIONS
OF DOLLARS) | ||||
2015 Revenues | $ | 48.9 | ||
Acquisition-related
growth | ||||
Hospira | 3.1 | |||
Medivation | 0.1 | |||
Pfizer-standalone | ||||
Operational
revenue growth from certain key products, net | 4.0 | |||
Operational revenue decline due to product losses of exclusivity and the expiry of the collaboration agreement to co-promote Rebif in the U.S. | (1.8 | ) | ||
5.5 | ||||
2016
Operational Revenues | 54.3 | |||
Unfavorable impact of foreign exchange | (1.5 | ) | ||
2016 Revenues | $ | 52.8 | ||
• | higher Cost of sales (up $2.7 billion) (see the “Costs and Expenses––Cost of Sales” section of this Financial Review); |
• | a $1.7 billion charge related to the write-down of HIS net assets to fair value less estimated costs to sell (see the Notes to Consolidated Financial
Statements––Note 2B. Acquisitions, Assets and Liabilities Held for Sale, Licensing Agreements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Assets and Liabilities Held for Sale); |
• | higher asset impairments (up $629 million) (see the Notes to Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net); |
• | higher
Restructuring charges and certain acquisition-related costs (up $571 million) (see the Notes to Consolidated Financial Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives); |
• | higher Amortization of intangible assets (up $328 million) (see the “Costs and Expenses––Amortization of Intangible Assets” section of this Financial Review); and |
• | higher
Research and development expenses (up $182 million) (see the “Costs and Expenses––Research and Development Expenses” section of this Financial Review); |
2016 Financial Report | 3 | |
• | the non-recurrence of a foreign currency loss ($806 million) related to Venezuela in 2015 (see the Notes to Financial Statements––Note 4. Other (Income)/Deductions––Net); |
• | lower charges for legal matters (down $466 million) (see the Notes to Financial Statements––Note 4.
Other (Income)/Deductions––Net); and |
• | lower Other, net deductions (down $318 million) (see the Notes to Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net). |
4 | 2016
Financial Report | |
The
following table provides information about certain of our products recently experiencing, or expected to experience in 2017, patent expirations or loss of regulatory exclusivity in the U.S., Europe or Japan, showing, by product, the key dates or expected key dates, the markets impacted and the revenues associated with those products in those markets: | ||||||||||||||||
(MILLIONS OF DOLLARS) | Product Revenues in Markets Impacted | |||||||||||||||
Products | Key
Dates(a) | Markets Impacted | Year Ended December 31, | |||||||||||||
2016 | 2015 | 2014 | ||||||||||||||
Viagra(b) | June
2013 May 2014 December 2017 | Major European markets Japan U.S. | $ | 1,217 | $ | 1,338 | $ | 1,260 | ||||||||
Rapamune | January
2014 June 2015 | U.S. Major European markets | 115 | 129 | 254 | |||||||||||
Inspra(c) | March
2014 July 2015 | Major European markets Japan | 97 | 118 | 208 | |||||||||||
Lyrica(d) | July
2014 | Major European markets | 692 | 1,048 | 1,634 | |||||||||||
Celebrex(e) | November
2014 December 2014 | Major European markets U.S. | 148 | 189 | 1,872 | |||||||||||
Zyvox(f) | August
2014 First half of 2015 January 2016 | Japan U.S. Major European markets | 235 | 644 | 1,116 | |||||||||||
Enbrel(g) | August
2015 September 2015 | Major European markets Japan | 2,146 | 2,402 | 2,832 | |||||||||||
Relpax | December
2015 December 2016 | Major European markets U.S. | 263 | 295 | 317 | |||||||||||
Vfend | July
2016 January 2016 | Major European markets Japan | 299 | 349 | 403 | |||||||||||
Tygacil | April
2016 | U.S. | 80 | 110 | 112 | |||||||||||
Pristiq(h) | March
2017 | U.S. | 578 | 553 | 553 | |||||||||||
(a) | Unless
stated otherwise, “Key Dates” indicate patent-based expiration dates. |
(b) | As a result of a patent litigation settlement, Teva Pharmaceuticals USA, Inc. will be allowed to launch a generic version of Viagra in the U.S. in December 2017, or earlier under certain circumstances. |
(c) | Generic versions of Inspra became available in major European markets following the March 2014 expiry of regulatory exclusivity for Inspra in most major European markets, allowing generic
companies to submit applications for marketing authorizations for their generic products. |
(d) | Generic versions of Lyrica became available in major European markets following the July 2014 expiry of regulatory exclusivity for Lyrica in the EU, allowing generic companies to submit applications for marketing authorizations for their generic products. |
(e) | In December 2014, generic versions of Celebrex became available pursuant to settlement agreements with several generic
manufacturers. |
(f) | Pursuant to terms of a settlement agreement, certain formulations of Zyvox became subject to generic competition in the U.S. in January 2015. Other formulations of Zyvox became subject to generic competition in the U.S. in the first half of 2015. |
(g) | In January 2016, an etanercept biosimilar referencing Enbrel was approved by the European Commission. |
(h) | As
a result of a patent litigation settlement with several generic manufacturers, generic versions of Pristiq will be allowed to launch in the U.S. in March 2017. |
The following table provides information about certain of our alliance revenue products that have experienced losses of collaboration rights, showing, by product, the
date of the loss of the collaboration rights, the markets impacted and the alliance revenues associated with those products in those markets: | ||||||||||||||||
(MILLIONS OF DOLLARS) | Alliance Revenues in Markets Impacted | |||||||||||||||
Products | Date of Loss of Collaboration
Rights | Markets Impacted | Year Ended December 31, | |||||||||||||
2016 | 2015 | 2014 | ||||||||||||||
Spiriva(a) | April
2014 (U.S.), between 2012 and 2016 (Japan, certain European countries, Australia, Canada and South Korea) | U.S., Japan, certain European countries, Australia, Canada and South Korea | $ | 6 | $ | 27 | $ | 168 | ||||||||
Rebif(b) | End
of 2015 | U.S. | — | 371 | 415 | |||||||||||
(a) | Our
collaboration with Boehringer Ingelheim for Spiriva expired on a country-by-country basis between 2012 and 2016. On April 29, 2014, our alliance in the U.S. came to an end. |
(b) | Our collaboration agreement with EMD Serono Inc. to co-promote Rebif in the U.S. expired at the end of 2015. |
2016 Financial Report | 5 | |
• | $410 million recorded as a reduction to Revenues, related to the Medicare “coverage gap” discount provision; and |
• | $312 million recorded in Selling, informational and administrative
expenses, related to the fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs. |
• | $399 million recorded as a reduction to Revenues, related
to the Medicare “coverage gap” discount provision; and |
• | $251 million recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs. The decrease in the impact of the U.S. Healthcare Legislation on Selling, informational and administrative expenses in 2015 compared to 2014 was primarily a result of the non-recurrence of the $215 million charge in 2014 to account for an additional
year of the non-tax deductible Branded Prescription Drug Fee, partially offset by a lower favorable true-up in 2015, compared to the favorable true-up in 2014, associated with the final invoice for the respective prior-calendar year received from the federal government, which reflected a lower share than that of the initial invoice. |
• | $382 million recorded as a reduction to Revenues,
related to the Medicare “coverage gap” discount provision; and |
• | $362 million recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government. 2014 included a $215 million charge to account for an additional year of the non-tax deductible Branded Prescription Drug Fee in accordance with final regulations issued in the third quarter of 2014 by the IRS. The amount in 2014 also reflected a favorable true-up associated with the final 2013 invoice received from the federal government, which reflected a lower share than that of the initial 2013 invoice. |
6 | 2016
Financial Report | |
2016
Financial Report | 7 | |
• | Governments, corporations, and insurance companies, which provide insurance benefits to
patients, have implemented increases in cost-sharing and restrictions on access to medicines, potentially causing patients to switch to generic products, delay treatments, skip doses or use less effective treatments. Government financing pressures can lead to negative pricing pressure in various markets where governments take an active role in setting prices, access criteria (e.g., through public or private health technology assessments), or other means of cost control. Examples include Europe, Japan, China, Canada, South Korea and a number of other international markets. The U.S. continues to maintain competitive insurance markets, but has also seen significant increases in patient cost-sharing and growing government influence as government programs continue to grow as a source of coverage. |
• | We
continue to monitor developments regarding government and government agency receivables in several European markets, including Greece, where economic conditions remain challenging and uncertain. For further information about our Accounts Receivable, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this Financial Review. |
• | Significant portions of our revenues and earnings, as well as our substantial international net assets, are exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk in part through operational means, including managing same-currency revenues in relation to same-currency costs and same-currency assets in
relation to same-currency liabilities. Depending on market conditions, foreign exchange risk also is managed through the use of derivative financial instruments and foreign currency debt. As we operate in multiple foreign currencies, including the euro, the Japanese yen, the Chinese renminbi, the U.K. pound, the Canadian dollar and approximately 100 other currencies, changes in those currencies relative to the U.S. dollar will impact our revenues and expenses. If the U.S. dollar were to weaken against another currency, assuming all other variables remained constant, our revenues would increase, having a positive impact on earnings, and our overall expenses would increase, having a negative impact on earnings. Conversely, if the U.S. dollar were to strengthen against another currency, assuming all other variables remained constant, our revenues would decrease, having a negative impact on earnings, and our overall expenses would decrease, having a positive impact on earnings.
Therefore, significant changes in foreign exchange rates, including those changes resulting from the volatility following the U.K. referendum in which voters approved the exit from the EU, can impact our results and our financial guidance. |
• | In June 2016, the U.K. electorate voted in a referendum to leave the EU, which is commonly referred to as “Brexit”. The U.K. government has not formally notified the European Council of their intention to leave the EU. In January 2017, the U.K. Parliament voted in favor of legislation to give the Prime Minister the power to trigger Article 50 of the Lisbon Treaty to begin the two-year negotiation process establishing the terms of the exit and outlining the future relationship between the U.K. and
the EU. The U.K. Prime Minister has said the negotiations are expected to begin at the end of March 2017. This process is expected to be highly complex, and, in January 2017, the Prime Minister announced a 12-point plan of negotiating objectives and confirmed that the U.K. government will not seek continued membership of the EU single market. The end result of these negotiations may pose certain implications to our research, commercial and general business operations in the U.K. and the EU. |
8 | 2016
Financial Report | |
Some additional information about our business segments follows: | ||
IH Segment | EH Segment | |
IH focuses on developing and commercializing novel, value-creating medicines and vaccines that significantly improve patients’ lives, as well as products for consumer healthcare. Key therapeutic
areas include internal medicine, vaccines, oncology, inflammation & immunology, rare diseases and consumer healthcare. | EH includes legacy brands that have lost or will soon lose market exclusivity in both developed and emerging markets, branded generics, generic sterile injectable products, biosimilars and, through February 2, 2017, infusion systems. EH also includes an R&D organization, as well as our contract manufacturing business. | |
Leading brands include: - Prevnar 13 -
Xeljanz - Eliquis - Lyrica (U.S., Japan and certain other markets) - Enbrel (outside the U.S. and Canada) - Viagra (U.S. and Canada) - Ibrance - Xtandi - Several OTC consumer products (e.g., Advil and Centrum) | Leading
brands include: - Lipitor - Premarin family - Norvasc - Lyrica (Europe, Russia, Turkey, Israel and Central Asia countries) - Celebrex - Pristiq - Several sterile injectable products | |
• | In
connection with the formation in early 2016 of the GPD organization, a new unified center for late-stage development for our innovative products, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios, certain development-related functions transferred from IH to GPD. |
• | Beginning in 2016, our contract manufacturing business, Pfizer CentreOne, is part of EH. Pfizer CentreOne consists of (i) the revenues and expenses of legacy Pfizer's contract
manufacturing and active pharmaceutical ingredient sales operation (previously known as Pfizer CentreSource or PCS), including the revenues and expenses related to our manufacturing and supply agreements with Zoetis, which prior to 2016 was managed outside EH as part of PGS and previously reported in “Other Unallocated” costs; and (ii) the revenues and expenses of legacy Hospira's One-2-One sterile injectables contract manufacturing operation, which has been included in EH since we acquired Hospira on September 3, 2015. |
• | In connection with the formation of a new EH R&D organization effective
in the first quarter of 2016, certain functions transferred from Pfizer’s WRD organization to the new EH R&D organization. The new R&D organization within EH expects to develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars. |
2016 Financial Report | 9 | |
• | Biosimilars; |
• | Inflammation
and Immunology; |
• | Metabolic Disease and Cardiovascular Risks; |
• | Neuroscience; |
• | Oncology; |
• | Rare
Diseases; and |
• | Vaccines. |
10 | 2016 Financial Report | |
• | Sale
of Hospira Infusion Systems Net Assets to ICU Medical, Inc.––On February 3, 2017, we completed the sale of our global infusion therapy net assets, HIS, to ICU Medical for up to approximately $900 million, composed of cash and contingent cash consideration, ICU Medical common stock and seller financing. HIS includes IV pumps, solutions and devices. Under the terms of the agreement, we received 3.2 million newly issued shares of ICU Medical common stock, which we valued at approximately $430 million (based upon the closing price of ICU Medical common stock on the closing date less a discount for lack of marketability), a promissory note in the amount of $75 million and net cash of approximately $200
million before customary adjustments for net working capital. In addition, we are entitled to receive a contingent amount of up to an additional $225 million in cash based on ICU Medical’s achievement of certain cumulative performance targets for the combined company through December 31, 2019. After receipt of the ICU Medical shares, we own approximately 16.4% of ICU Medical as of the closing date. We have agreed to certain restrictions on transfer of our ICU Medical shares for 18 months. The promissory note from ICU Medical has a term of three years and bears interest at LIBOR plus 2.25% for the first year and LIBOR plus 2.50%
for the second and third years. At December 31, 2016, we determined that the carrying value of the HIS net assets held for sale exceeded their fair value less estimated costs to sell, resulting in a pre-tax impairment charge of $1.7 billion which is included in Other (income)/deductions––net (see Notes to Consolidated Financial Statements––Note 4. Other (Income)/Deductions––Net). The difference between the carrying value and fair value of the HIS net assets held for sale and the resulting pre-tax impairment may change when determined as of the February 3, 2017 closing date as a result of several factors, such as changes in the carrying value of the HIS net assets between December
31, 2016 and the closing date. |
• | Acquisition of AstraZeneca’s Anti-Infectives Business (EH)––On December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations, we acquired the development and commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S., including the commercialization and development rights to the newly approved EU drug Zavicefta™ (ceftazidime-avibactam), the marketed agents Merrem™/Meronem™ (meropenem) and Zinforo™ (ceftaroline fosamil), and the clinical development assets ATM-AVI and CXL (ceftaroline fosamil-AVI). Under the terms of the agreement, Pfizer made an
upfront payment of approximately $550 million to AstraZeneca upon the close of the transaction and will make a deferred payment of $175 million in January 2019. In addition, AstraZeneca is eligible to receive up to $250 million in milestone payments, up to $600 million in sales-related payments, as well as tiered royalties on sales of Zavicefta™ and ATM-AVI in certain markets. |
• | Acquisition of Medivation, Inc. (IH)––On September 28, 2016, we acquired Medivation for $81.50
per share. The total fair value of consideration transferred for Medivation was approximately $14.3 billion in cash ($13.9 billion, net of cash acquired). Medivation’s portfolio includes Xtandi (enzalutamide), an androgen receptor inhibitor that blocks multiple steps in the androgen receptor signaling pathway within tumor cells. Xtandi is being developed and commercialized through a collaboration between Pfizer and Astellas. Astellas has exclusive commercialization rights for Xtandi outside the U.S. In addition, Medivation has two development-stage oncology assets in its pipeline: talazoparib, which is currently in a Phase 3 study for the treatment of BRCA-mutated breast cancer, and pidilizumab, an immuno-oncology asset being developed for diffuse large B-cell lymphoma and other hematologic malignancies. We expect this acquisition will accelerate our leadership in Oncology––a
high priority area for our company. |
2016 Financial Report | 11 | |
• | Acquisition
of Bamboo Therapeutics, Inc. (R&D)––On August 1, 2016, we acquired all the remaining equity in Bamboo, a privately-held biotechnology company, focused on developing gene therapies for the potential treatment of patients with certain rare diseases relating to neuromuscular conditions and those affecting the central nervous system, for $150 million, plus potential milestone payments of up to $495 million contingent upon the progression of key assets through development, regulatory approval and commercialization. We previously purchased a minority stake in Bamboo in the first quarter of 2016 for a payment of approximately $43 million. This acquisition provides us with several clinical and pre-clinical assets that complement our rare disease portfolio, an advanced recombinant AAV vector design and production technology, and a fully functional Phase I/II gene therapy manufacturing facility. |
• | Acquisition
of Anacor Pharmaceuticals, Inc. (IH)––On June 24, 2016, we acquired Anacor for $99.25 per share. The total fair value of consideration transferred for Anacor was approximately $4.9 billion in cash ($4.5 billion net of cash acquired) plus $698 million debt assumed. Anacor’s crisaborole, a non-steroidal topical PDE-4 inhibitor with anti-inflammatory properties, was approved by the FDA on December 14, 2016 under the trade name, Eucrisa, for the treatment of mild-to-moderate atopic dermatitis in patients two years of age and older, commonly referred to as a type of eczema. Anacor also holds the rights to Kerydin, a topical treatment for onychomycosis (toenail fungus) that
is distributed and commercialized by Sandoz in the U.S. |
• | Research and Development Arrangement with NovaQuest Co-Investment Fund II, L.P. ––On November 1, 2016, we announced the discontinuation of the global clinical development program for bococizumab. During December 2016, $31.3 million was refunded to NovaQuest representing amounts NovaQuest prepaid for development costs (under the May 2016 agreement described below) that were not used for program expenses due to the discontinuation of the development program. No additional payments are expected to be received from or paid to
NovaQuest under this agreement, which was effectively terminated on November 18, 2016. |
• | Research and Development Arrangement with NovaQuest Co-Investment Fund V, L.P.––In April 2016, Pfizer entered into an agreement with NovaQuest under which NovaQuest will fund up to $200 million in development costs related to certain Phase III clinical trials of Pfizer’s rivipansel compound and Pfizer will use commercially reasonable efforts to develop and obtain regulatory approvals for such compound. NovaQuest’s development
funding is expected to cover up to 100% of the development costs and will be received over approximately twelve quarters from 2016 to 2019. As there is a substantive and genuine transfer of risk to NovaQuest, the development funding is recognized by us as an obligation to perform contractual services and therefore is a reduction of Research and development expenses as incurred. The reduction to Research and development expenses for 2016 totaled $46.6 million. Following potential regulatory approval, NovaQuest will be eligible to receive a combination of fixed milestone payments of up to approximately $267 million in total, based on achievement of first commercial sale and certain levels of cumulative net sales as well as royalties on rivipansel net sales over approximately eight years. Fixed sales-based milestone payments will be
recorded as intangible assets and amortized to Amortization of intangible assets over the estimated commercial life of the rivipansel product and royalties on net sales will be recorded as Cost of sales when incurred. |
• | Terminated Agreement to Combine with Allergan plc––On April 6, 2016, we announced that the merger agreement between Pfizer and Allergan entered into on November 22, 2015 was terminated by mutual agreement of the companies. In connection with the termination of the merger agreement, on April
8, 2016 (which fell into Pfizer’s second fiscal quarter), Pfizer paid Allergan $150 million (pre-tax) for reimbursement of Allergan’s expenses associated with the terminated transaction. Pfizer and Allergan also released each other from any and all claims in connection with the merger agreement. For additional information, see Notes to Consolidated Financial Statements––Note 4. Other (Income)/Deductions—Net and the “Our Business” section of this Financial Review. |
• | Research and Development Arrangement with RPI Finance Trust––In January 2016, Pfizer entered into an agreement
with RPI, a subsidiary of Royalty Pharma, under which RPI will fund up to $300 million in development costs related to certain Phase III clinical trials of Pfizer’s Ibrance (palbociclib) product primarily for adjuvant treatment of hormone receptor positive early breast cancer (the Indication). RPI’s development funding is expected to cover up to 100% of the costs primarily for the applicable clinical trials through 2021. As there is a substantive and genuine transfer of risk to RPI, the development funding is recognized by us as an obligation to perform contractual services and therefore is a reduction of Research and development expenses as incurred. The reduction to Research and development expenses for 2016 totaled $44.9 million. If successful and upon approval of Ibrance in the U.S.
or certain major markets in the EU for the Indication based on the applicable clinical trials, RPI will be eligible to receive a combination of approval-based fixed milestone payments of up to $250 million dependent upon results of the clinical trials and royalties on certain Ibrance sales over approximately seven years. Fixed milestone payments due upon approval will be recorded as intangible assets and amortized to Amortization of intangible assets over the estimated commercial life of the Ibrance product and sales-based royalties will be recorded as Cost of sales when incurred. |
• | Acquisition of Hospira (EH)––On September
3, 2015, we acquired Hospira, a leading provider of sterile injectable drugs and infusion technologies as well as a provider of biosimilars, for approximately $16.1 billion in cash ($15.7 billion, net of cash acquired). For additional information, see the “Our Business” section of this Financial Review. |
• | Acquisition of a Minority Interest in AM-Pharma B.V. (IH)––In April 2015, we acquired a minority equity interest in AM-Pharma, a privately-held Dutch biopharmaceutical company focused on the development of recAP for inflammatory diseases, and secured an exclusive option to acquire the remaining equity in the
company. The option becomes exercisable after completion of a Phase II trial of recAP in the treatment of Acute Kidney Injury related to sepsis, which is expected in 2017. Under the terms of the agreement, we paid $87.5 million for both the exclusive option and the minority equity interest, which was recorded as a cost-method investment in Long-term investments, and we may make additional payments of up to $512.5 million upon exercise of the option and potential launch of any product that may result from this investment. |
12 | 2016
Financial Report | |
• | Collaboration with OPKO Health, Inc.––We
entered into a collaborative agreement with OPKO, which closed in January 2015, to develop and commercialize OPKO’s long-acting hGH-CTP for the treatment of GHD in adults and children, as well as for the treatment of growth failure in children born SGA who fail to show catch-up growth by two years of age. hGH-CTP has the potential to reduce the required dosing frequency of human growth hormone to a single weekly injection from the current standard of one injection per day. We have received the exclusive license to commercialize hGH-CTP worldwide. OPKO will lead the clinical activities and will be responsible for funding the development programs for the key indications, which include Adult and Pediatric GHD and Pediatric SGA. We will be responsible for all development costs for additional indications, all postmarketing studies, manufacturing and commercialization activities for all indications, and we will lead the manufacturing activities related to product development.
In February 2015, we made an upfront payment of $295 million to OPKO, which was recorded in Research and development expenses, and OPKO is eligible to receive up to an additional $275 million upon the achievement of certain regulatory milestones. OPKO is also eligible to receive royalty payments associated with the commercialization of hGH-CTP for Adult GHD, which is subject to regulatory approval. Upon the launch of hGH-CTP for Pediatric GHD, which is subject to regulatory approval, the royalties will transition to tiered gross profit sharing for both hGH-CTP and our product, Genotropin. |
• | Acquisition of
Marketed Vaccines Business of Baxter International Inc. (IH)––On December 1, 2014 (which fell in the first fiscal quarter of 2015 for our international operations), we acquired Baxter’s portfolio of marketed vaccines for a final purchase price of $648 million. The portfolio that was acquired consists of NeisVac-C and FSME-IMMUN/TicoVac. NeisVac-C is a vaccine that helps protect against meningitis caused by group C meningococcal meningitis and FSME-IMMUN/TicoVac is a vaccine that helps protect against tick-borne encephalitis. |
• | Collaboration with Merck KGaA (IH)––In November 2014, we entered into a collaborative arrangement with Merck KGaA, to jointly
develop and commercialize avelumab, the proposed international non-proprietary name for the investigational anti-PD-L1 antibody (MSB0010718C), currently in development as a potential treatment for multiple types of cancer. We and Merck KGaA are exploring the therapeutic potential of this novel anti-PD-L1 antibody as a single agent as well as in various combinations with our and Merck KGaA’s broad portfolio of approved and investigational oncology therapies. Our avelumab program with Merck KGaA has 30 programs on-going, ten of which are potentially registration enabling trials (two in lung cancer, two in gastric cancer, two in ovarian cancer, and one each in bladder cancer, Merkel cell carcinoma (MCC), squamous cell carcinoma of the head and neck and RCC). We received FDA breakthrough therapy designation for avelumab in metastatic MCC. In the fourth quarter of 2016, the FDA biologics license application and the EMA marketing authorization application for MCC were accepted
for review. We and Merck KGaA are also combining resources and expertise to advance Pfizer’s anti-PD-1 antibody into Phase 1 trials. Under the terms of the agreement, in the fourth quarter of 2014, we made an upfront payment of $850 million to Merck KGaA and Merck KGaA is eligible to receive regulatory and commercial milestone payments of up to approximately $2.0 billion. Both companies will jointly fund all development and commercialization costs, and split equally any profits generated from selling any anti-PD-L1 or anti-PD-1 products from this collaboration. Also, as part of the agreement, we gave Merck KGaA certain co-promotion rights for Xalkori in the U.S. and several other key markets, and co-promotion activities were initiated in key select markets in 2015. In 2014, we recorded $1.2 billion of Research and development expenses associated
with this collaborative arrangement, composed of the $850 million upfront cash payment as well as an additional amount of $309 million, reflecting the estimated fair value of the co-promotion rights given to Merck KGaA. |
• | Acquisition of InnoPharma, Inc. (IH)––On September 24, 2014, we completed our acquisition of InnoPharma, a privately-held pharmaceutical development company, for an upfront cash payment of $225 million and contingent consideration of up to $135 million. |
• | License
from Cellectis SA––In June 2014, we entered into a global arrangement with Cellectis to develop Chimeric Antigen Receptor T-cell immunotherapies in the field of oncology directed at select cellular surface antigen targets. In August 2014, in connection with this licensing agreement, we made an upfront payment of $80 million to Cellectis, which was recorded in Research and development expenses. We will also fund R&D costs associated with up to 15 Pfizer-selected targets and, for the benefit of Cellectis, a portion of the R&D costs associated with four Cellectis-selected targets within the arrangement. Cellectis is eligible to receive development, regulatory and commercial milestone payments of up to $185 million per product that results from the Pfizer-selected targets as well as tiered royalties on net sales of any products that are commercialized
by Pfizer. |
• | Collaboration with Eli Lilly & Company––In 2013, we entered into a collaboration agreement with Lilly to jointly develop and globally commercialize Pfizer’s tanezumab, which provides that Pfizer and Lilly will equally share product-development expenses as well as potential revenues and certain product-related costs. Following the decision by the FDA in March 2015 to lift the partial clinical hold on the tanezumab development program, we received a $200 million upfront payment from Lilly in accordance with the collaboration agreement between Pfizer and Lilly, which is recorded as deferred revenue in our consolidated balance sheet and is being recognized into
Other (income)/deductions––net over a multi-year period beginning in the second quarter of 2015. Pfizer and Lilly resumed the Phase 3 chronic pain program for tanezumab in July 2015. Under the collaboration agreement with Lilly, we are eligible to receive additional payments from Lilly upon the achievement of specified regulatory and commercial milestones. |
• | License of Nexium OTC Rights––In August 2012, we entered into an agreement with AstraZeneca for the exclusive, global, OTC rights for Nexium, a prescription drug approved to treat the symptoms of gastroesophageal reflux disease. On May
27, 2014, we launched Nexium 24HR in the U.S., and on July 11, 2014, we paid AstraZeneca a related $200 million product launch milestone payment. On August 1, 2014, we launched Nexium Control in Europe, and on September 15, 2014, we paid AstraZeneca a related $50 million product launch milestone payment. These post-approval milestone payments were recorded in Identifiable intangible assets, less accumulated amortization and are being amortized over the estimated useful life of the Nexium brand. Included in Other current liabilities at December 31, 2015 are accrued milestone payments to AstraZeneca of $93 million, which were subsequently paid to AstraZeneca in April 2016. AstraZeneca
is eligible to receive additional milestone payments of up to approximately $200 million, based on the level of worldwide sales as well as quarterly royalty payments based on worldwide sales. |
2016 Financial Report | 13 | |
The following table provides our financial guidance for full-year 2017(a), (b): | |
Revenues | $52.0 to $54.0 billion |
Adjusted cost of sales as a percentage of revenues | 20.0% to 21.0% |
Adjusted selling, informational and administrative expenses | $13.7
to $14.7 billion |
Adjusted research and development expenses | $7.5 to $8.0 billion |
Adjusted other (income)/deductions | Approximately $100 million of deductions |
Effective tax rate on adjusted income | Approximately 23.0% |
Adjusted diluted EPS | $2.50 to $2.60 |
(a) | The
2017 financial guidance reflects the following: |
• | The disposition of the HIS net assets in February 2017, which contributed $1.2 billion of revenues and $0.03 of adjusted diluted EPS in 2016. |
• | Does not assume the completion of any business development transactions not completed as of December 31, 2016, including any one-time upfront payments associated with such transactions,
except for the disposition of HIS in February 2017. |
• | Exchange rates assumed are as of mid-January 2017. |
• | Reflects an anticipated negative revenue impact of $2.4 billion due to recent and expected generic and biosimilar competition for certain products that have recently lost or are anticipated to soon lose patent protection. |
• | Reflects
the anticipated negative impact of $0.9 billion on revenues and $0.05 on adjusted diluted EPS as a result of unfavorable changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2016. |
• | Guidance for adjusted diluted EPS assumes diluted weighted-average shares outstanding of approximately 6.1 billion shares, which reflects our $5.0 billion accelerated share repurchase agreement announced in February 2017, which is expected to more than offset potential dilution related to employee compensation programs. |
(b) | For
an understanding of Adjusted income and its components and Adjusted diluted EPS (all of which are non-GAAP financial measures), see the “Non-GAAP Financial Measure (Adjusted Income)” section of this Financial Review. |
14 | 2016 Financial Report | |
• | A
significant adverse change in legal factors or in the business climate that could affect the value of the asset. For example, a successful challenge of our patent rights would likely result in generic competition earlier than expected. |
• | A significant adverse change in the extent or manner in which an asset is used. For example, restrictions imposed by the FDA or other regulatory authorities could affect our ability to manufacture or sell a product. |
• | A projection or forecast that indicates losses or reduced profits associated
with an asset. This could result, for example, from a change in a government reimbursement program that results in an inability to sustain projected product revenues and profitability. This also could result from the introduction of a competitor’s product that results in a significant loss of market share or the inability to achieve the previously projected revenue growth, as well as the lack of acceptance of a product by patients, physicians and payers. For IPR&D projects, this could result from, among other things, a change in outlook based on clinical trial data, a delay in the projected launch date or additional expenditures to commercialize the product. |
2016 Financial Report | 15 | |
• | The income approach is a forward-looking approach to estimating fair value and relies primarily on internal forecasts. Within the income approach,
the method that we use is the discounted cash flow method. We start with a forecast of all the expected net cash flows associated with the reporting unit, which includes the application of a terminal value, and then we apply a reporting unit-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of technological risk and competitive, legal and/or regulatory forces on the projections, as well as the selection of a long-term growth rate; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows. |
• | The
market approach is a historical approach to estimating fair value and relies primarily on external information. Within the market approach are two methods that we may use: |
◦ | Guideline public company method—this method employs market multiples derived from market prices of stocks of companies that are engaged in the same or similar lines of business and that are actively traded on a free and open market and the application of the identified multiples to the corresponding measure of our reporting unit’s financial performance. |
◦ | Guideline
transaction method—this method relies on pricing multiples derived from transactions of significant interests in companies engaged in the same or similar lines of business and the application of the identified multiples to the corresponding measure of our reporting unit’s financial performance. |
• | When we estimate the fair value of our six biopharmaceutical reporting units, we rely solely on the income approach. We use the income approach exclusively as the use of the comparable guideline company method is not practical or reliable. For the income approach, we use the discounted cash flow method. |
• | When we estimate the fair value of our Consumer Healthcare reporting unit, we use a combination of approaches and methods. We use the income approach and the market
approach, which we weight equally in our analysis. We weight them equally as we have equal confidence in the appropriateness of the approaches for this reporting unit. For the income approach, we use the discounted cash flow method and for the market approach, we use both the guideline public company method and the guideline transaction method, which we weight equally to arrive at our market approach value. |
16 | 2016
Financial Report | |
The following table provides (i) at the end of each year,
the expected annual rate of return on plan assets for the following year, (ii) the actual annual rate of return on plan assets achieved in each year, and (iii) the weighted-average discount rate used to measure the benefit obligations at the end of each year for our U.S. qualified pension plans and our international pension plans(a): | |||||||||
2016 | 2015 | 2014 | |||||||
U.S.
Qualified Pension Plans | |||||||||
Expected annual rate of return on plan assets | 8.0 | % | 8.0 | % | 8.3 | % | |||
Actual
annual rate of return on plan assets | 8.1 | (0.8 | ) | 6.8 | |||||
Discount rate used to measure the plan obligations | 4.3 | 4.5 | 4.2 | ||||||
International
Pension Plans | |||||||||
Expected annual rate of return on plan assets | 4.7 | 5.2 | 5.5 | ||||||
Actual
annual rate of return on plan assets | 9.3 | 3.6 | 13.2 | ||||||
Discount rate used to measure the plan obligations | 2.4 | 3.1 | 3.0 | ||||||
(a) | For
detailed assumptions associated with our benefit plans, see Notes to Consolidated Financial Statements—Note 11B. Pension and Postretirement Benefit Plans and Defined Contribution Plans: Actuarial Assumptions. |
The following table illustrates the sensitivity of net periodic benefit costs to a 50 basis point decline in our assumption for the expected annual rate of return on plan assets, holding all other assumptions constant (in millions, pre-tax): | ||||
Change | Increase
in 2017 Net Periodic Benefit Costs | |||
Assumption | ||||
Expected annual rate of return on plan assets | 50 basis point decline | $102 | ||
The following table illustrates the sensitivity of net periodic benefit costs and benefit obligations to a 10 basis point decline in our assumption for the discount rate, holding all other assumptions constant (in millions, pre-tax): | ||||||
Change | 2017
Net Periodic Benefit Costs | 2016 Benefit Obligations | ||||
Assumption | Increase | Increase | ||||
Discount rate | 10 basis point decline | $34 | $421 | |||
2016
Financial Report | 17 | |
• | Finished goods—Estimated selling price, less an estimate of costs to be incurred to sell the inventory, and an estimate of a reasonable profit allowance for that selling effort. |
• | Work in process—Estimated selling price of an equivalent finished good, less an estimate of costs to be incurred to complete the work-in-process inventory, an estimate of costs to be incurred to sell the inventory and an estimate of a reasonable profit allowance for those manufacturing
and selling efforts. |
• | Raw materials and supplies—Estimated cost to replace the raw materials and supplies. |
• | Land––Market, a sales comparison approach that measures value of an asset through an analysis of sales and offerings of comparable property. |
• | Buildings, Machinery and equipment and Furniture and fixtures—Replacement cost, an approach that measures the value of an asset by estimating the cost
to acquire or construct comparable assets. For buildings that are not highly specialized or that could be income producing if leased to a third party, we also considered market and income factors. |
• | Construction in progress—Replacement cost, generally assumed to equal historical book value. |
18 | 2016
Financial Report | |
The
amounts recorded for the major components of acquired property, plant and equipment are as follows: | ||||||
(MILLIONS OF DOLLARS) | Useful Lives (Years) | Amounts Recognized as of Acquisition Date (as adjusted) Final | ||||
Land | $ | 111 | ||||
Buildings | 33—50 | 511 | ||||
Machinery
and equipment | 8—20 | 1,049 | ||||
Furniture, fixtures and other | 3—121/2 | 141 | ||||
Construction in progress | 541 | |||||
Total
Property, plant and equipment | $ | 2,352 | ||||
The
amounts recorded for the major components of acquired identifiable intangible assets are as follows: | |||||||
MILLIONS OF DOLLARS | Amounts Recognized As of Acquisition Date (as adjusted) Final | Weighted-Average Useful Lives (Years) | |||||
Developed technology rights––finite lived | $ | 7,720 | 17 | ||||
Other––finite-lived | 570 | 12 | |||||
IPR&D | 1,030 | — | |||||
• | In
order to eliminate certain redundancies in Pfizer’s biosimilar drug products pipeline created as a result of the acquisition of Hospira, in September 2015 we opted to return to Celltrion Inc. and Celltrion Healthcare, Co., Ltd. (collectively Celltrion) rights that Hospira had previously acquired to potential biosimilars to Rituxan® (rituximab) and Herceptin® (trastuzumab). In connection with the return of these rights, we wrote off these IPR&D assets, totaling $170 million. See the Notes to Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives for additional information. |
• | As
of the acquisition date, the higher value remaining biosimilar IPR&D assets acquired from Hospira had been submitted to the FDA for approval and include potential biosimilars for (i) epoetin alfa (treatment of anemia in dialysis and oncology applications); and (ii) infliximab (rheumatoid arthritis and gastrointestinal disorders), which we began selling in the U.S. in November 2016. These biosimilars and filgrastim (oncology) are already available in certain markets outside the U.S. Filgrastim in the U.S. market and other biosimilar IPR&D assets acquired from Hospira are in late-stage development. See the “Product Developments––Biopharmaceutical” section of this Financial Review for additional information about these programs. |
• | The
sterile injectable IPR&D assets acquired from Hospira are in various therapeutic areas including anti-infectives, oncology, cardiovascular and neurology, among others. The sterile injectable IPR&D assets are in various stages of development with anticipated launch dates as of the acquisition date across 2016, 2017 and 2018. |
2016 Financial Report | 19 | |
• | Revenue—We use historical, forecast, industry or other sources of market data including estimates of sales volume, selling prices, market penetration, market share
and year-over-year growth rates over the product’s life cycle. |
• | Cost of sales, Sales and marketing expenses, General and administrative expenses—We use historical, forecast, industry or other sources of market data to estimate the costs associated with the identifiable intangible asset over the product’s life cycle. |
• | R&D expenses—In the case of approved products, we estimate the appropriate level of ongoing R&D support, and for unapproved compounds, we estimate the amount and timing of costs to develop the R&D
into viable products. |
• | Estimated life of the asset—We assess the asset’s life cycle and the competitive trends impacting the asset, including consideration of any technical, legal, regulatory or economic barriers to entry, expected changes in standards of practice for indications addressed by the asset, as well as obsolescence factors and estimated contract renewal rates. |
• | Inherent risk—We use a discount
rate that is primarily based on the weighted-average cost of capital with an additional premium to reflect the risks associated with the specific intangible asset, such as country risks (political, inflation, currency and property risks) and commercial risks. In addition, for unapproved assets, an additional risk factor is added for the risk of technical and regulatory success, called the probability of technical and regulatory success (PTRS). |
• | The discount rates used in the intangible asset valuations ranged from 11% to 16%, and the estimated cash flows were projected over periods extending up to 20 years or more. For IPR&D assets, the PTRS rates ranged from 44% to 88%. Within this broad range, we recorded approximately $20
million of assets with a PTRS of 44%, $230 million of assets with a PTRS of 45% to 75% and $780 million of assets with a PTRS above 75% ($610 million after the write-off of the acquired biosimilar IPR&D assets discussed above). All of these judgments and estimates can materially impact our results of operations. |
20 | 2016 Financial Report | |
Year Ended December 31, | %
Change | |||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | 16/15 | 15/14 | |||||||||||||
Revenues | $ | 52,824 | $ | 48,851 | $ | 49,605 | 8 | (2 | ) | |||||||||
Cost
of sales | 12,329 | 9,648 | 9,577 | 28 | 1 | |||||||||||||
%
of revenues | 23.3 | % | 19.7 | % | 19.3 | % | ||||||||||||
Selling,
informational and administrative expenses | 14,837 | 14,809 | 14,097 | — | 5 | |||||||||||||
%
of revenues | 28.1 | % | 30.3 | % | 28.4 | % | ||||||||||||
Research
and development expenses | 7,872 | 7,690 | 8,393 | 2 | (8 | ) | ||||||||||||
%
of revenues | 14.9 | % | 15.7 | % | 16.9 | % | ||||||||||||
Amortization
of intangible assets | 4,056 | 3,728 | 4,039 | 9 | (8 | ) | ||||||||||||
%
of revenues | 7.7 | % | 7.6 | % | 8.1 | % | ||||||||||||
Restructuring
charges and certain acquisition-related costs | 1,724 | 1,152 | 250 | 50 | * | |||||||||||||
%
of revenues | 3.3 | % | 2.4 | % | 0.5 | % | ||||||||||||
Other
(income)/deductions—net | 3,655 | 2,860 | 1,009 | 28 | * | |||||||||||||
Income
from continuing operations before provision for taxes on income | 8,351 | 8,965 | 12,240 | (7 | ) | (27 | ) | |||||||||||
%
of revenues | 15.8 | % | 18.4 | % | 24.7 | % | ||||||||||||
Provision
for taxes on income | 1,123 | 1,990 | 3,120 | (44 | ) | (36 | ) | |||||||||||
Effective
tax rate | 13.4 | % | 22.2 | % | 25.5 | % | ||||||||||||
Income
from continuing operations | 7,229 | 6,975 | 9,119 | 4 | (24 | ) | ||||||||||||
%
of revenues | 13.7 | % | 14.3 | % | 18.4 | % | ||||||||||||
Discontinued
operations—net of tax | 17 | 11 | 48 | 49 | (77 | ) | ||||||||||||
Net
income before allocation to noncontrolling interests | 7,246 | 6,986 | 9,168 | 4 | (24 | ) | ||||||||||||
%
of revenues | 13.7 | % | 14.3 | % | 18.5 | % | ||||||||||||
Less:
Net income attributable to noncontrolling interests | 31 | 26 | 32 | 20 | (21 | ) | ||||||||||||
Net
income attributable to Pfizer Inc. | $ | 7,215 | $ | 6,960 | $ | 9,135 | 4 | (24 | ) | |||||||||
%
of revenues | 13.7 | % | 14.2 | % | 18.4 | % | ||||||||||||
* | Calculation not meaningful. |
• | the inclusion of revenues from a full year of legacy Hospira global operations in 2016, as compared to four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations in 2015, resulting in operational growth of $3.1
billion in 2016; |
• | the continued operational growth from key brands including Ibrance, Lyrica (IH), Xeljanz and Chantix/Champix and Consumer Healthcare, (all primarily in the U.S.), as well as Eliquis and Xalkori (globally) (collectively, up approximately $3.6 billion in 2016); |
• | operational growth in the legacy Pfizer Sterile Injectable Pharmaceuticals portfolio, mostly in emerging markets and the U.S.
(up approximately $290 million); and |
• | to a lesser extent, the inclusion of legacy Medivation operations of $140 million, |
• | the loss of exclusivity and associated generic competition for Zyvox primarily in the U.S. and certain developed Europe markets (down approximately $410 million), Lyrica (EH) in certain developed Europe markets (down approximately $330 million) and for certain other products (collectively, down approximately $440 million) as well as
biosimilar competition for Enbrel in most developed Europe markets (down approximately $230 million); |
• | the decline in Prevnar 13/Prevenar 13 revenues, primarily driven by an expected decline in revenues for the adult indication in the U.S. due to a high initial capture rate of the eligible population following its successful fourth-quarter 2014 launch, which resulted in a smaller remaining “catch up” opportunity compared to the prior-year, as well as the unfavorable impact of the timing of government purchases for the pediatric indication (down approximately $450 million); and |
• | the
year-end 2015 expiry of the collaboration agreement to co-promote Rebif in the U.S. (down approximately $370 million in 2016). |
2016 Financial Report | 21 | |
• | the performance of several key products in developed markets, including the continued strong uptake of Prevnar 13 among adults (largely in the U.S.), Ibrance (nearly all in the U.S.), Eliquis, Lyrica (IH) (primarily in the U.S. and Japan), Xeljanz (primarily in the U.S.), Viagra (IH) (primarily in the U.S.) and Nexium 24HR (primarily in the U.S.) (collectively, up approximately $4.1 billion); |
• | the
inclusion of four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations of $1.5 billion; |
• | a 7% operational increase in revenues in emerging markets, reflecting continued strong operational growth, primarily from Prevenar 13, Lipitor and Enbrel (up approximately $810 million); and |
• | inclusion of the vaccines acquired from Baxter of $178 million, |
• | the
loss of exclusivity and immediate multi-source generic competition for Celebrex in the U.S. in December 2014 and certain other developed markets (down approximately $1.8 billion), and the loss of exclusivity for Lyrica (EH) in certain developed Europe markets (down approximately $420 million), for Zyvox in the U.S. (down approximately $420 million), for Rapamune in the U.S. (down approximately $120 million) and for certain other products (collectively, down approximately $330 million); |
• | the performance of certain other products in developed markets and BeneFIX in the U.S. (collectively, down approximately $370 million); and |
• | the
termination of the Spiriva co-promotion collaboration in certain countries (down approximately $100 million). |
22 | 2016 Financial Report | |
The following table provides information about revenue deductions: | ||||||||||||
Year Ended December 31, | ||||||||||||
(MILLIONS
OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
Medicare rebates(a) | $ | 1,063 | $ | 1,002 | $ | 1,077 | ||||||
Medicaid
and related state program rebates(a) | 1,473 | 1,263 | 779 | |||||||||
Performance-based contract rebates(a), (b) | 2,560 | 2,253 | 2,219 | |||||||||
Chargebacks(c) | 5,736 | 4,961 | 3,755 | |||||||||
Sales
allowances(d) | 4,623 | 4,200 | 4,547 | |||||||||
Sales returns and cash discounts | 1,441 | 1,335 | 1,279 | |||||||||
Total(e) | $ | 16,895 | $ | 15,014 | $ | 13,656 | ||||||
(a) | Rebates
are product-specific and, therefore, for any given year are impacted by the mix of products sold. |
(b) | Performance-based contract rebates include contract rebates with managed care customers within the U.S., including health maintenance organizations and PBMs, who receive rebates based on the achievement of contracted performance terms and claims under these contracts. Outside the U.S., performance-based contract
rebates include rebates to wholesalers/distributors based on achievement of contracted performance for specific products or sales milestones. |
(c) | Chargebacks primarily represent reimbursements to U.S. wholesalers for honoring contracted prices to third parties. |
(d) | Sales allowances primarily represent price reductions that are contractual or legislatively mandated outside the U.S., discounts and distribution fees. |
(e) | For
2016, associated with the following segments: IH ($7.1 billion); and EH ($9.8 billion). For 2015, associated with the following segments: IH ($5.8 billion); and EH ($9.2 billion). For 2014, associated with the following segments: IH ($4.6 billion); and EH ($9.1 billion). |
• | an increase in chargebacks from EH products, primarily due to the inclusion of a full year of legacy Hospira sterile injectables in 2016, compared to the inclusion of only four months of legacy Hospira sterile injectables in 2015, and from certain IH products; |
• | an increase in performance-based contract
rebates, primarily due to sales to managed care customers in the U.S. and higher rebates in certain developed Europe markets due to competitive pressures post loss of exclusivity for certain products; and |
• | an increase in Medicaid and related state program rebates, primarily as a result of updated estimates of sales related to these programs. |
2016 Financial Report | 23 | |
The
following table provides worldwide revenues by operating segment and geographic area: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | % Change | |||||||||||||||||||||||||||||||||||||||||||||||||||
Worldwide | U.S. | International | Worldwide | U.S. | International | |||||||||||||||||||||||||||||||||||||||||||||||
(MILLIONS
OF DOLLARS) | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | 16/15 | 15/14 | 16/15 | 15/14 | 16/15 | 15/14 | |||||||||||||||||||||||||||||||||||||
Operating
Segments(a): | ||||||||||||||||||||||||||||||||||||||||||||||||||||
IH | $ | 29,197 | $ | 26,758 | $ | 24,005 | $ | 16,773 | $ | 14,446 | $ | 10,958 | $ | 12,424 | $ | 12,312 | $ | 13,047 | 9 | 11 | 16 | 32 | 1 | (6 | ) | |||||||||||||||||||||||||||
EH | 23,627 | 22,094 | 25,600 | 9,596 | 7,258 | 8,115 | 14,031 | 14,836 | 17,485 | 7 | (14 | ) | 32 | (11 | ) | (5 | ) | (15 | ) | |||||||||||||||||||||||||||||||||
Total
revenues | $ | 52,824 | $ | 48,851 | $ | 49,605 | $ | 26,369 | $ | 21,704 | $ | 19,073 | $ | 26,455 | $ | 27,147 | $ | 30,532 | 8 | (2 | ) | 21 | 14 | (3 | ) | (11 | ) | |||||||||||||||||||||||||
(a) | IH
= the Innovative Health segment; and EH = the Essential Health segment. For additional information about each operating segment, see the “Our Strategy––Commercial Operations” section of this Financial Review and Notes to Consolidated Financial Statements––Note 18A. Segment, Geographic and Other Revenue Information: Segment Information. |
• | in the U.S., revenues increased $4.7 billion, or 21%, in 2016, compared to 2015, reflecting, among other things: |
◦ | the
inclusion of revenues from a full year of legacy Hospira U.S. operations of approximately $3.5 billion in 2016, as compared to four months of revenues from legacy Hospira U.S. operations of $1.2 billion in 2015, resulting in growth of approximately $2.2 billion in 2016; and |
◦ | the continued growth of several key products including Ibrance, Lyrica (IH), Eliquis, Xeljanz and Chantix (collectively, up approximately $2.8 billion in 2016), |
◦ | the
year-end 2015 expiry of the collaboration agreement to co-promote Rebif (down approximately $370 million in 2016); |
◦ | the loss of exclusivity and associated generic competition for Zyvox (down approximately $200 million in 2016); and |
◦ | the decline in revenues for the Prevnar 13 family primarily driven by the adult indication in the U.S. due to a high initial capture rate of the eligible population following its successful
fourth-quarter 2014 launch, which resulted in a smaller remaining “catch up” opportunity compared to 2015 (Prevnar 13 family down approximately $380 million in 2016). |
• | in our international markets, revenues decreased $693 million, or 3%, in 2016, compared to 2015. Foreign exchange unfavorably impacted international revenues by approximately $1.5 billion, or 5% in 2016.
Operationally, revenues increased approximately $790 million, or 3%, in 2016, compared to 2015, reflecting, among other things: |
◦ | the inclusion of revenues from a full year of legacy Hospira international operations of approximately $1.2 billion in 2016, compared to the inclusion of revenues from only three months of legacy Hospira international operations of approximately $270 million in 2015; |
◦ | the
continued growth of Eliquis (up approximately $340 million in 2016); and |
◦ | the continued growth from certain other products in emerging markets, excluding the contributions from legacy Hospira and Eliquis (collectively, up approximately $500 million in 2016), |
◦ | lower revenues as a result of the loss of exclusivity and associated biosimilar or generic (as
applicable) competition, primarily in developed Europe markets for Lyrica (EH), Enbrel and Zyvox (collectively, down approximately $770 million operationally in 2016). |
• | in the U.S., revenues increased $2.6 billion, or 14%, in 2015, compared to 2014, reflecting, among other things: |
24 | 2016
Financial Report | |
◦ | the performance of several key products, including
Prevnar 13 primarily in adults (up approximately $1.9 billion), Ibrance (which was launched in the U.S. in February 2015, up approximately $720 million), as well as Lyrica (IH), Eliquis, Xeljanz, Viagra (IH) and Nexium 24HR (collectively, up approximately $1.0 billion in 2015); and |
◦ | the inclusion of four months of legacy Hospira U.S. operations of $1.2 billion in 2015, |
◦ | losses
of exclusivity and associated multi-source generic competition for Celebrex in the U.S. in December 2014 (down approximately $1.6 billion in 2015); |
◦ | the loss of exclusivity for Zyvox and Rapamune, as well as the termination of our Spiriva co-promotion collaboration (collectively, down approximately $620 million in 2015); and |
◦ | the performance of Lipitor and BeneFIX (collectively, down approximately $160 million in 2015). |
• | in
our international markets, revenues decreased $3.4 billion, or 11%, in 2015, compared to 2014. Foreign exchange unfavorably impacted international revenues by approximately $3.8 billion, or 12% in 2015. Operationally, revenues increased by $402 million, or 1%, in 2015 compared to 2014 reflecting, among other things: |
◦ | the operational increase in revenues in emerging markets, reflecting continued strong operational growth primarily from the IH business, including Prevenar and Enbrel, among other products, and Lipitor
(up approximately $600 million in 2015); |
◦ | higher revenues in developed markets for Eliquis and Lyrica (IH), as well as from vaccines acquired in December 2014 from Baxter (in Europe) (collectively, up approximately $590 million in 2015); and |
◦ | the inclusion of three months of legacy Hospira international operations of $270 million in 2015, |
◦ | lower revenues in developed markets for Lyrica (EH), Celebrex, Inspra and Viagra (EH) as a result of the loss of exclusivity, as well as the performance of Lipitor and Norvasc in developed markets, and Zosyn/Tazocin in emerging markets (collectively, down approximately $1.0 billion in 2015). |
2016 Financial Report | 25 | |
The following table provides revenue information for several of our major products: | ||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | Year Ended December 31, | %
Change | ||||||||||||||||||||||||
PRODUCT | PRIMARY INDICATIONS OR CLASS | 2016 | 2015 | 2014 | 16/15 | 15/14 | ||||||||||||||||||||
Total | Oper. | Total | Oper. | |||||||||||||||||||||||
TOTAL
REVENUES | $ | 52,824 | $ | 48,851 | $ | 49,605 | 8 | 11 | (2 | ) | 6 | |||||||||||||||
PFIZER
INNOVATIVE HEALTH (IH)(a): | $ | 29,197 | $ | 26,758 | $ | 24,005 | 9 | 11 | 11 | 19 | ||||||||||||||||
Internal
Medicine | $ | 8,858 | $ | 7,611 | $ | 6,727 | 16 | 17 | 13 | 17 | ||||||||||||||||
Lyrica
IH(b) | Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury | 4,165 | 3,655 | 3,350 | 14 | 14 | 9 | 13 | ||||||||||||||||||
Viagra
IH(c) | Erectile dysfunction | 1,181 | 1,297 | 1,181 | (9 | ) | (9 | ) | 10 | 10 | ||||||||||||||||
Chantix/Champix | An
aid to smoking cessation treatment | 842 | 671 | 647 | 26 | 27 | 4 | 9 | ||||||||||||||||||
Toviaz | Overactive
bladder | 258 | 267 | 288 | (3 | ) | (4 | ) | (7 | ) | 1 | |||||||||||||||
BMP2 | Development
of bone and cartilage | 251 | 232 | 228 | 8 | 8 | 2 | 2 | ||||||||||||||||||
Alliance
revenues(d) | Various | 1,588 | 1,256 | 759 | 26 | 26 | 66 | 75 | ||||||||||||||||||
All
other Internal Medicine(e) | Various | 573 | 233 | 276 | * | * | (16 | ) | (12 | ) | ||||||||||||||||
Vaccines | $ | 6,071 | $ | 6,454 | $ | 4,480 | (6 | ) | (5 | ) | 44 | 51 | ||||||||||||||
Prevnar
13/Prevenar 13 | Vaccines for prevention of pneumococcal disease | 5,718 | 6,245 | 4,464 | (8 | ) | (7 | ) | 40 | 46 | ||||||||||||||||
FSME/IMMUN-TicoVac | Tick-borne
encephalitis vaccine | 114 | 104 | — | 10 | 10 | * | * | ||||||||||||||||||
All
other Vaccines | Various | 239 | 104 | 16 | * | * | * | * | ||||||||||||||||||
Oncology | $ | 4,563 | $ | 2,955 | $ | 2,218 | 54 | 56 | 33 | 43 | ||||||||||||||||
Ibrance | Advanced
breast cancer | 2,135 | 723 | — | * | * | * | * | ||||||||||||||||||
Sutent | Advanced
and/or metastatic RCC, refractory GIST and advanced pancreatic neuroendocrine tumor | 1,095 | 1,120 | 1,174 | (2 | ) | 1 | (5 | ) | 7 | ||||||||||||||||
Xalkori | ALK-positive
NSCLC and ROS1-positive NSCLC | 561 | 488 | 438 | 15 | 17 | 11 | 20 | ||||||||||||||||||
Inlyta | Advanced
RCC | 401 | 430 | 410 | (7 | ) | (6 | ) | 5 | 14 | ||||||||||||||||
Xtandi
alliance revenues | Advanced prostate cancer | 140 | — | — | * | * | — | — | ||||||||||||||||||
All
other Oncology | Various | 231 | 194 | 195 | 19 | 19 | (1 | ) | 5 | |||||||||||||||||
Inflammation
& Immunology (I&I) | $ | 3,928 | $ | 3,918 | $ | 4,241 | — | 6 | (8 | ) | 6 | |||||||||||||||
Enbrel
(Outside the U.S. and Canada) | Rheumatoid, juvenile rheumatoid and psoriatic arthritis, plaque psoriasis and ankylosing spondylitis | 2,909 | 3,333 | 3,850 | (13 | ) | (6 | ) | (13 | ) | 1 | |||||||||||||||
Xeljanz | Rheumatoid
arthritis | 927 | 523 | 308 | 77 | 78 | 70 | 72 | ||||||||||||||||||
All
other I&I | Various | 93 | 61 | 82 | 51 | 42 | (25 | ) | (13 | ) | ||||||||||||||||
Rare
Disease | $ | 2,369 | $ | 2,425 | $ | 2,893 | (2 | ) | — | (16 | ) | (7 | ) | |||||||||||||
BeneFIX | Hemophilia | 712 | 752 | 856 | (5 | ) | (4 | ) | (12 | ) | (5 | ) | ||||||||||||||
Genotropin | Replacement
of human growth hormone | 579 | 617 | 723 | (6 | ) | (5 | ) | (15 | ) | (4 | ) | ||||||||||||||
Refacto
AF/Xyntha | Hemophilia | 554 | 533 | 631 | 4 | 8 | (16 | ) | (5 | ) | ||||||||||||||||
Somavert | Acromegaly | 232 | 218 | 229 | 6 | 8 | (5 | ) | 7 | |||||||||||||||||
Rapamune | Prevention
of organ rejection in kidney transplantation | 170 | 197 | 339 | (14 | ) | (7 | ) | (42 | ) | (36 | ) | ||||||||||||||
All
other Rare Disease | Various | 122 | 108 | 114 | 13 | 11 | (4 | ) | 10 | |||||||||||||||||
Consumer
Healthcare | $ | 3,407 | $ | 3,395 | $ | 3,446 | — | 5 | (1 | ) | 5 | |||||||||||||||
PFIZER
ESSENTIAL HEALTH (EH)(f) | $ | 23,627 | $ | 22,094 | $ | 25,600 | 7 | 11 | (14 | ) | (6 | ) | ||||||||||||||
Legacy
Established Products (LEP)(g) | $ | 11,194 | $ | 11,745 | $ | 13,016 | (5 | ) | — | (10 | ) | (2 | ) | |||||||||||||
Lipitor | Reduction
of LDL cholesterol | 1,758 | 1,860 | 2,061 | (6 | ) | 2 | (10 | ) | (4 | ) | |||||||||||||||
Premarin
family | Symptoms of menopause | 1,017 | 1,018 | 1,076 | — | — | (5 | ) | (4 | ) | ||||||||||||||||
Norvasc | Hypertension | 962 | 991 | 1,112 | (3 | ) | 1 | (11 | ) | (3 | ) | |||||||||||||||
EpiPen | Epinephrine
injection used in treatment of life-threatening allergic reactions | 386 | 339 | 294 | 14 | 14 | 15 | 19 | ||||||||||||||||||
Xalatan/Xalacom | Glaucoma
and ocular hypertension | 363 | 399 | 495 | (9 | ) | (8 | ) | (19 | ) | (6 | ) | ||||||||||||||
Relpax | Symptoms
of migraine headache | 323 | 352 | 382 | (8 | ) | (8 | ) | (8 | ) | (2 | ) | ||||||||||||||
Zoloft | Depression
and certain anxiety disorders | 304 | 374 | 423 | (19 | ) | (14 | ) | (12 | ) | (1 | ) | ||||||||||||||
Effexor | Depression
and certain anxiety disorders | 278 | 288 | 344 | (3 | ) | — | (16 | ) | (8 | ) | |||||||||||||||
Zithromax/Zmax | Bacterial
infections | 272 | 275 | 311 | (1 | ) | 1 | (11 | ) | (3 | ) | |||||||||||||||
Xanax/Xanax
XR | Anxiety disorders | 222 | 224 | 253 | (1 | ) | 1 | (11 | ) | 2 | ||||||||||||||||
Cardura | Hypertension/Benign
prostatic hyperplasia | 192 | 210 | 263 | (9 | ) | (6 | ) | (20 | ) | (9 | ) | ||||||||||||||
Neurontin | Seizures | 182 | 196 | 210 | (7 | ) | 2 | (7 | ) | 2 | ||||||||||||||||
Tikosyn | Maintenance
of normal sinus rhythm, conversion of atrial fibrillation/flutter | 153 | 179 | 141 | (15 | ) | (15 | ) | 27 | 27 | ||||||||||||||||
Depo-Provera | Contraceptive | 126 | 170 | 201 | (26 | ) | (22 | ) | (15 | ) | (10 | ) | ||||||||||||||
Diflucan | Fungal
infections | 119 | 181 | 208 | (34 | ) | (30 | ) | (13 | ) | (3 | ) | ||||||||||||||
All
other LEP | Various | 4,538 | 4,689 | 5,242 | (3 | ) | 4 | (11 | ) | (2 | ) | |||||||||||||||
26 | 2016
Financial Report | |
(MILLIONS
OF DOLLARS) | Year Ended December 31, | % Change | ||||||||||||||||||||||||
PRODUCT | PRIMARY INDICATIONS OR CLASS | 2016 | 2015 | 2014 | 16/15 | 15/14 | ||||||||||||||||||||
Total | Oper. | Total | Oper. | |||||||||||||||||||||||
Sterile
Injectable Pharmaceuticals (SIP)(h) | $ | 6,018 | $ | 3,944 | $ | 3,277 | 53 | 56 | 20 | 27 | ||||||||||||||||
Medrol | Adrenocortical
steroid | 450 | 402 | 381 | 12 | 16 | 5 | 12 | ||||||||||||||||||
Sulperazon | Antibiotic | 396 | 339 | 354 | 17 | 23 | (4 | ) | (1 | ) | ||||||||||||||||
Fragmin | Anticoagulant | 318 | 335 | 364 | (5 | ) | — | (8 | ) | 5 | ||||||||||||||||
Tygacil | Antibiotic | 274 | 304 | 323 | (10 | ) | (5 | ) | (6 | ) | 3 | |||||||||||||||
All
other SIP | Various | 4,579 | 2,563 | 1,855 | 79 | 81 | 38 | 44 | ||||||||||||||||||
Peri-LOE
Products(i) | $ | 4,220 | $ | 5,326 | $ | 8,855 | (21 | ) | (18 | ) | (40 | ) | (32 | ) | ||||||||||||
Lyrica
EH(b) | Epilepsy, neuropathic pain and generalized anxiety disorder | 801 | 1,183 | 1,818 | (32 | ) | (29 | ) | (35 | ) | (23 | ) | ||||||||||||||
Celebrex | Arthritis
pain and inflammation, acute pain | 733 | 830 | 2,699 | (12 | ) | (10 | ) | (69 | ) | (66 | ) | ||||||||||||||
Pristiq | Depression | 732 | 715 | 737 | 2 | 4 | (3 | ) | 1 | |||||||||||||||||
Vfend | Fungal
infections | 590 | 682 | 756 | (13 | ) | (10 | ) | (10 | ) | 3 | |||||||||||||||
Zyvox | Bacterial
infections | 421 | 883 | 1,352 | (52 | ) | (49 | ) | (35 | ) | (27 | ) | ||||||||||||||
Viagra
EH(c) | Erectile dysfunction | 383 | 411 | 504 | (7 | ) | (1 | ) | (18 | ) | (8 | ) | ||||||||||||||
Revatio | Pulmonary
arterial hypertension | 285 | 260 | 276 | 10 | 10 | (6 | ) | 7 | |||||||||||||||||
All
Other Peri-LOE Products | Various | 276 | 362 | 714 | (24 | ) | (21 | ) | (49 | ) | (42 | ) | ||||||||||||||
Infusion
Systems(j) | Various | $ | 1,158 | $ | 403 | $ | — | * | * | * | * | |||||||||||||||
Biosimilars(k) | Various | $ | 319 | $ | 63 | $ | — | * | * | * | * | |||||||||||||||
Inflectra/Remsima | Inflammatory
diseases | 192 | 30 | — | * | * | * | * | ||||||||||||||||||
All
Other Biosimilars | Various | 127 | 33 | — | * | * | * | * | ||||||||||||||||||
Pfizer
CentreOne(l) | $ | 718 | $ | 612 | $ | 451 | 17 | 18 | 36 | 44 | ||||||||||||||||
Total
Lyrica(b) | Epilepsy, post-herpetic neuralgia and diabetic peripheral neuropathy, fibromyalgia, neuropathic pain due to spinal cord injury | $ | 4,966 | $ | 4,839 | $ | 5,168 | 3 | 4 | (6 | ) | — | ||||||||||||||
Total
Viagra(c) | Erectile dysfunction | $ | 1,564 | $ | 1,708 | $ | 1,685 | (8 | ) | (7 | ) | 1 | 5 | |||||||||||||
Total
Alliance revenues | Various | $ | 1,746 | $ | 1,312 | $ | 957 | 33 | 33 | 37 | 45 | |||||||||||||||
(a) | The
IH business, previously known as the Innovative Products business, encompasses Internal Medicine, Vaccines, Oncology, Inflammation & Immunology, Rare Disease and Consumer Healthcare and includes all legacy Anacor and Medivation commercial operations. Anacor’s and Medivation’s commercial operations are included in IH’s operating results in our consolidated statements of income, commencing from the acquisition date of June 24, 2016 for Anacor and from the acquisition date of September 28, 2016 for Medivation. As a result, IH’s revenues for 2016 reflect approximately six months of legacy Anacor operations, which were immaterial, and three months of legacy Medivation operations. |
(b) | Lyrica
revenues from all of Europe, Russia, Turkey, Israel and Central Asia countries are included in Lyrica EH. All other Lyrica revenues are included in Lyrica-IH. Total Lyrica revenues represent the aggregate of worldwide revenues from Lyrica IH and Lyrica EH. |
(c) | Viagra revenues from the U.S. and Canada are included in Viagra IH. All other Viagra revenues are included in Viagra EH. Total Viagra revenues represent the aggregate of worldwide revenues from Viagra IH and Viagra EH. |
(d) | Includes
Eliquis, (2016 and 2015) and Rebif (2015 only). |
(e) | Includes Eliquis direct sales markets. |
(f) | The EH business, previously known as the Established Products business, encompasses Legacy Established Products, Sterile Injectable Pharmaceuticals, Peri-LOE Products, Infusion Systems (through February 2, 2017), Biosimilars and Pfizer CentreOne and includes all legacy Hospira commercial operations. For additional information about
changes impacting EH, see Notes to Consolidated Financial Statements––Note 18A. Segment, Geographic and Other Revenue Information: Segment Information. |
(g) | Legacy Established Products include products that have lost patent protection (excluding Sterile Injectable Pharmaceuticals and Peri-LOE Products). |
(h) | Sterile Injectable Pharmaceuticals include generic injectables and proprietary specialty injectables (excluding Peri-LOE Products). |
(i) | Peri-LOE
Products include products that have recently lost or are anticipated to soon lose patent protection. These products primarily include Lyrica in certain developed Europe markets, Pristiq globally, Celebrex, Zyvox and Revatio in most developed markets, Vfend and Viagra in certain developed Europe markets and Japan, and Inspra in the EU. |
(j) | Infusion Systems (through February 2, 2017) include Medication Management Systems products composed of infusion pumps and related software and services, as well as IV Infusion Products, including large volume IV solutions and their associated administration sets. |
(k) | Biosimilars
include Inflectra/Remsima (biosimilar infliximab) in the U.S. and certain international markets, Nivestim (biosimilar filgrastim) in certain European, Asian and Africa/Middle East markets and Retacrit (biosimilar epoetin zeta) in certain European and Africa/Middle East markets. |
(l) | Pfizer CentreOne includes (i) revenues from legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation (previously known as Pfizer CentreSource or PCS), including revenues related to our manufacturing and supply agreements with Zoetis and (ii) revenues from legacy Hospira’s One-2-One sterile injectables contract
manufacturing operation. For additional information, see Notes to Consolidated Financial Statements––Note 18A. Segment, Geographic and Other Revenue Information: Segment Information. |
* | Indicates calculation not meaningful or greater than 100%. |
• | Prevnar 13/Prevenar 13 (IH) is our pneumococcal conjugate vaccine for the prevention of pneumococcal disease. Overall, worldwide revenues for Prevnar 13/Prevenar 13 decreased 7% operationally in 2016, compared to 2015. Foreign exchange had an unfavorable impact on worldwide revenues of 1%
in 2016, compared to 2015. |
2016 Financial Report | 27 | |
• | Lyrica (EH (revenues from all of Europe, Russia, Turkey, Israel and Central Asia)/IH (revenues from all other geographies)) is indicated in the U.S. for three neuropathic pain conditions, fibromyalgia and adjunctive therapy for adult patients with partial onset seizures. In certain markets outside the U.S., indications include neuropathic pain (peripheral and central), fibromyalgia, adjunctive treatment of epilepsy and generalized anxiety disorder. Worldwide revenues for Lyrica increased 4% operationally in 2016,
compared to 2015. Foreign exchange had an unfavorable impact on worldwide revenues of 1% in 2016, compared to 2015. |
• | Enbrel (IH, outside the U.S. and Canada), indicated for the treatment of moderate-to-severe rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis
and nonradiographic axial spondyloarthritis, recorded an operational decrease of 6% in worldwide revenues, excluding the U.S. and Canada, in 2016, compared to 2015, primarily due to the impact of the entrance of the first etanercept biosimilar, as well as mandated price reductions across certain markets in Europe, partially offset by stronger demand and price increases in emerging markets, specifically in Latin America. Foreign exchange had an unfavorable impact on revenues of 7% in 2016, compared to 2015. |
• | Ibrance
(IH) was launched in the U.S. in February 2015, and subsequently in certain international markets as a treatment for a certain form of advanced breast cancer. Ibrance recorded worldwide revenues of $2.1 billion in 2016, nearly all of which were recorded in the U.S. The significant revenues relate to the strength of our scientific/clinical data, continued positive patient experience as well as Ibrance being the only registered product in this class of medicines in any country as of December 2016. Ibrance is currently approved in the U.S. and 57 other countries. |
• | Lipitor (EH) is indicated for the treatment of elevated LDL-cholesterol
levels in the blood. Lipitor faces generic competition in all major developed markets. Worldwide revenues for Lipitor increased 2% operationally in 2016, compared to 2015. Foreign exchange had an unfavorable impact on worldwide revenues of 8% in 2016, compared to 2015. |
• | Viagra (IH
(U.S. and Canada revenues)/EH (all other revenues excluding U.S. and Canada)) is indicated for the treatment of erectile dysfunction. Viagra worldwide revenues decreased 7% operationally in 2016, compared to 2015, primarily due to new access constraints and increased rebates. Foreign exchange had an unfavorable impact on worldwide revenues of 2% in 2016, compared to 2015. Revenues in the U.S. decreased 9% in 2016, compared to
2015, primarily reflecting new access constraints and increases in rebates, partially offset by increases in pill quantity per prescription, higher sales to the Department of Veterans Affairs and the Department of Defense and shifts in wholesaler buying patterns. International revenues decreased 1% operationally in 2016, compared to 2015, primarily from lower volumes in China and in developed international markets. Foreign exchange had an unfavorable impact on international revenues of 6% in 2016, compared to 2015. |
• | Sutent
(IH) is indicated for the treatment of advanced renal cell carcinoma, including metastatic renal cell carcinoma (mRCC); GIST after disease progression on, or intolerance to, imatinib mesylate; and advanced pancreatic neuroendocrine tumor. Sutent worldwide revenues increased 1% operationally in 2016, compared to 2015, primarily due to price increases in the U.S., as well as strong demand in Japan |
28 | 2016
Financial Report | |
• | Our Premarin family of products (EH) helps women address moderate-to-severe menopausal symptoms. Premarin worldwide revenues were relatively flat operationally in 2016, compared to 2015. Revenues in the U.S. increased 1% in 2016, compared to 2015,
primarily driven by price increases, partially offset by prescription volume declines and lower market growth. Internationally, Premarin revenues decreased 1% operationally in 2016, compared to 2015, primarily due to lower volume in developed markets and certain markets in Africa. Foreign exchange had an unfavorable impact on international revenues of 9% in 2016, compared to 2015. |
• | Norvasc
(EH) is indicated for the treatment of hypertension. Norvasc worldwide revenues increased 1% operationally in 2016, compared to 2015. Results for 2016 were primarily impacted by strong demand in China, offset by generic erosion in Japan. Foreign exchange had an unfavorable impact on worldwide revenues of 4% in 2016, compared to 2015. |
• | Xeljanz
(IH) is approved for use as a second-line therapy for the treatment of adult patients with moderate to severe active rheumatoid arthritis who have had an inadequate response or intolerance to methotrexate and is approved in over 50 markets including the U.S., Japan, Australia, Turkey, Canada, Switzerland and Brazil. Xeljanz worldwide revenues increased 78% operationally in 2016, compared to 2015. In the U.S., Xeljanz revenues increased 71% in 2016, compared to 2015, driven by increased adoption among rheumatologists, growing awareness among patients, improvements in payer access and price increases. Xeljanz recorded international
revenues of $122 million in 2016. Foreign exchange had an unfavorable impact on worldwide revenues of 1% in 2016, compared to 2015. |
• | Chantix/Champix (IH) is approved as an aid to smoking-cessation treatment in adults 18 years of age and older in more than 100 countries. Worldwide revenues increased 27% operationally
in 2016, compared to 2015. Foreign exchange had an unfavorable impact on worldwide revenues of 1% in 2016, compared to 2015. |
• | Celebrex (EH) is indicated for the treatment of the signs and symptoms of osteoarthritis and rheumatoid arthritis worldwide and for the management
of acute pain in adults in the U.S., Japan and certain other markets. Celebrex worldwide revenues decreased 10% operationally in 2016, compared to 2015, primarily driven by the loss of exclusivity and associated generic competition in the U.S. and most developed international markets, partially offset by growth in China and lower chargebacks and favorable rebates in the U.S. Foreign exchange had an unfavorable impact on worldwide revenues of 2% in 2016, compared to 2015. |
• | Pristiq
(EH) is indicated for the treatment of major depressive disorder in the U.S. and in various other countries. Pristiq has also been indicated for treatment of moderate-to-severe vasomotor symptoms associated with menopause in certain international markets. Worldwide revenues for Pristiq increased 4% operationally in 2016, compared to 2015, primarily due to growth in the U.S. Foreign exchange had an unfavorable impact on worldwide revenues of 1% in 2016, compared to 2015. |
• | BeneFIX
and ReFacto AF/Xyntha (IH) are recombinant hemophilia products that assist patients with their lifelong hemophilia bleeding disorders. BeneFIX worldwide revenues decreased 4% operationally in 2016, compared to 2015, primarily as a result of erosion of market share in the U.S. and European countries due to the launch of new extended half-life treatment options. Foreign exchange had an unfavorable impact on worldwide revenues of 2% in 2016, compared to 2015. |
• | Xalkori
(IH) is indicated for the treatment of patients with locally advanced or metastatic NSCLC that is ALK-positive or ROS1-positive. Xalkori worldwide revenues increased 17% operationally in 2016, compared to 2015, as a result of a steady increase in diagnostic rates for the ALK gene mutation across key markets, which has led to more patients being treated, and the March 2016 FDA approval of the supplemental NDA to treat patients with metastatic NSCLC whose tumors are ROS1-positive. Foreign exchange had an unfavorable impact on worldwide revenues of 2% in 2016, compared to 2015. |
• | Zyvox
(EH) is used to treat serious Gram-positive pathogens, including methicillin-resistant staphylococcus-aureus. Zyvox worldwide revenues decreased 49% operationally in 2016, compared to 2015, due to generic competition in the U.S. and developed international markets and corresponding pricing pressures. Foreign exchange had an unfavorable impact on worldwide revenues of 3% in 2016, compared to 2015. |
• | Inlyta
(IH) is indicated for the treatment of patients with advanced RCC after failure of a prior systemic treatment. Worldwide revenues decreased 6% operationally in 2016, compared to 2015, primarily due to increased competition in North America and Europe, partially offset by performance in China, as well as Australia, Argentina and Brazil. Foreign exchange had a de minimis impact on worldwide revenues in 2016, compared to 2015. |
• | Inflectra/Remsima
(EH), a biosimilar of Remicade® (infliximab), is indicated for the treatment of patients with certain inflammatory diseases. In 2009, Hospira entered into an agreement to develop and market certain biosimilar molecules with Celltrion including Inflectra. Pfizer has exclusive commercialization rights to Inflectra in the U.S., Canada and certain other territories. Pfizer also shares Inflectra commercialization rights with Celltrion in Europe. In Europe, Inflectra has now launched in 38 markets. In December 2014, Hospira launched Inflectra in Canada. In April 2016, the FDA approved Inflectra (infliximab-dyyb) across all eligible indications of Remicade®. |
2016 Financial Report | 29 | |
• | Alliance revenues (IH/EH) increased 33% operationally in 2016, compared to 2015,
mainly due to: |
◦ | an increase in Eliquis alliance revenues due to increased market share; and |
◦ | the inclusion of Xtandi revenues of $140 million in the U.S. resulting from the acquisition of Medivation in September 2016, |
◦ | the
year-end 2015 expiry of the collaboration agreement to co-promote Rebif in the U.S., which resulted in a decrease of approximately $370 million in 2016, compared to 2015. |
◦ | Eliquis (IH) has been jointly developed and is commercialized by Pfizer and BMS. Pfizer funds between 50% and 60% of all development costs depending on the study. Profits and losses are shared equally on a global basis except for in
certain countries where Pfizer commercializes Eliquis and pays BMS compensation based on a percentage of net sales. In April 2015, we signed an agreement with BMS to transfer full commercialization rights in certain smaller markets to us, beginning in the third quarter of 2015. BMS supplies the product to us at cost plus a percentage of the net sales to end-customers in these markets. Eliquis is part of the Novel Oral Anticoagulant (NOAC) market; the agents in this class were developed as alternative treatment options to warfarin in appropriate patients. Eliquis (apixaban) is approved for multiple indications in major markets around the world: |
◦ | to reduce the risk of stroke and systemic embolism in patients with nonvalvular atrial fibrillation; |
◦ | for
the treatment of deep vein thrombosis (DVT) and PE, and for the reduction in the risk of recurrent DVT and PE following initial therapy; and |
◦ | for the prophylaxis of DVT, which may lead to PE, in patients who have undergone hip or knee replacement surgery. |
◦ | Xtandi
(IH) is being developed and commercialized through a collaboration between Pfizer and Astellas. The two companies share equally in the gross profits (losses) related to U.S. net sales of Xtandi. Subject to certain exceptions, Pfizer and Astellas also share equally all Xtandi commercialization costs attributable to the U.S. market. Pfizer and Astellas also share certain development and other collaboration expenses and Pfizer receives tiered royalties as a percentage of international Xtandi net sales (recorded in Other (income)/deductions––net). Xtandi is approved for the following indications: |
◦ | treatment of patients with metastatic castration-resistant prostate cancer in the U.S., Europe and
many other countries worldwide; and |
◦ | treatment of patients with castration-resistant prostate cancer in Japan. |
• | delivering a pipeline of differentiated therapies with the greatest scientific and commercial promise; |
• | innovating
new capabilities that can position Pfizer for long-term leadership; and |
• | creating new models for biomedical collaboration that will expedite the pace of innovation and productivity. |
• | Biosimilars; |
• | Inflammation
and Immunology; |
• | Metabolic Disease and Cardiovascular Risks; |
• | Neuroscience; |
• | Oncology |
• | Rare
Diseases; and |
• | Vaccines. |
30 | 2016 Financial Report | |
RECENT FDA APPROVALS | ||
PRODUCT | INDICATION | DATE APPROVED |
Eucrisa (Crisaborole) | A non-steroidal topical anti-inflammatory PDE-4 inhibitor for
the treatment of mild-to-moderate atopic dermatitis | December 2016 |
Troxyca (oxycodone HCI/ naltrexone/HCI) | Extended-release capsules for the management of pain severe enough to require daily, around-the-clock long-term opioid treatment and for which alternative treatment options are inadequate | August 2016 |
Xalkori (Crizotinib) | Treatment of patients with ROS1-positive metastatic non-small cell lung cancer | March 2016 |
Xeljanz
(Tofacitinib) | Extended-release 11mg tablets for the once-daily treatment of moderate to severe rheumatoid arthritis in patients who have had an inadequate response or intolerance to methotrexate | February 2016 |
Ibrance (Palbociclib) | Treatment of HR+, HER2- advanced or metastatic breast cancer in combination with fulvestrant in women with disease progression following endocrine therapy | February 2016 |
PENDING
U.S. NDAs AND SUPPLEMENTAL FILINGS | ||
PRODUCT | PROPOSED INDICATION | DATE FILED* |
Inotuzumab ozogamicin | Treatment of acute lymphoblastic leukemia | February 2017 |
Lyrica (Pregabalin) | Controlled Release (once-a-day) dosing | February 2017 |
Mylotarg (Gemtuzumab ozogamicin) | Treatment
of acute myeloid leukemia | January 2017 |
Avelumab (PF-06834635) (MSB0010718C) | Treatment of metastatic Merkel cell carcinoma | November 2016 |
Retacrit(a) | A potential biosimilar to Epogen® and Procrit® (epotein alfa) | February 2015 |
Tafamidis meglumine(b) | Treatment
of transthyretin familial amyloid polyneuropathy | February 2012 |
* | The dates set forth in this column are the dates on which the FDA accepted our submissions. |
(a) | Epogen® is a registered U.S. trademark of Amgen Inc.; Procrit® is a registered U.S. trademark of Johnson & Johnson. In October 2015, we received a “complete response” letter from the FDA with respect to our biologics license application for Retacrit,
our proposed biosimilar to epoetin alfa, which was submitted for all indications of the reference product. In December 2016, we completed the resubmission of the biologics license application to the FDA for Retacrit in response to the “complete response” letter. We are continuing to work closely with the FDA on next steps. |
(b) | In May 2012, the FDA’s Peripheral and Central Nervous System Drugs Advisory Committee voted that the tafamidis meglumine data provide substantial evidence of efficacy for a surrogate endpoint that is reasonably likely to predict a clinical benefit. In June 2012, the FDA issued a “complete response” letter with respect to the tafamidis NDA. The FDA has requested the completion of a
second efficacy study, and also has asked for additional information on the data within the current tafamidis NDA. Pfizer initiated study B3461028 in December 2013, a global Phase 3 study to support a potential new indication in transthyretin cardiomypathy, which includes transthyretin familial amyloid cardiomyopathy (TTR-FAC) and wild-type cardiomyopathy (WT-CM). We anticipate results from this study in 2018, and continue to work with the FDA to identify next steps. |
2016 Financial Report | 31 | |
REGULATORY APPROVALS AND FILINGS IN THE EU AND JAPAN | |||
PRODUCT | DESCRIPTION
OF EVENT | DATE APPROVED | DATE FILED* |
Ertugliflozin | Application filed in the EU for the treatment of type 2 diabetes, which is being developed in collaboration with Merck | — | February 2017 |
Mylotarg (Gemtuzumab ozogamicin) | Application filed in the EU for the treatment of acute myeloid leukemia | — | December
2016 |
Ibrance (Palbociclib) | Approval in the EU for palbociclib in combination with endocrine therapy for the treatment of HR+, HER2- advanced or metastatic breast cancer, as well as for the treatment of recurrent advanced breast cancer | November 2016 | — |
Ibrance (Palbociclib) | Application filed in Japan for palbociclib in combination with endocrine therapy for the treatment of inoperable or recurrent
breast cancer | — | October 2016 |
Avelumab (PF-06834635) (MSB0010718C) | Application filed in the EU for the treatment of metastatic Merkel cell carcinoma | — | October 2016 |
Xalkori (Crizotinib) | Approval in the EU for the treatment of ROS1-positive non-small cell lung cancer | August 2016 | — |
Xalkori
(Crizotinib) | Application filed in Japan for the treatment of ROS1-positive non-small cell lung cancer | — | August 2016 |
Inotuzumab ozogamicin | Application filed in the EU for the treatment of acute lymphoblastic leukemia | — | May 2016 |
Trumenba | Application filed in the EU for a prophylactic vaccine for active immunization to prevent invasive
disease caused by Neisseria meningitidis serogroup B in individuals 10 through 25 years of age | — | May 2016 |
Xeljanz (Tofacitinib)(a) | Application filed in the EU for the treatment of moderate to severe active rheumatoid arthritis in adult patients who have responded inadequately to, or who are intolerant to one or more disease-modifying antirheumatic drugs. Xeljanz can be given as monotherapy in case of intolerance to methotrexate (MTX) or when treatment with MTX is inappropriate | — | March
2016 |
* | For applications in the EU, the dates set forth in this column are the dates on which the EMA validated our submissions. |
(a) | In January 2017, the EMA’s Committee for Medicinal Products for Human Use issued an opinion recommending that Xeljanz be granted approval for the treatment of moderate to severe active rheumatoid arthritis in adult patients who have responded inadequately to, or who are intolerant to one or more disease-modifying antirheumatic drugs. Xeljanz can be given
as monotherapy in case of intolerance to methotrexate (MTX) or when treatment with MTX is inappropriate. |
LATE-STAGE CLINICAL PROGRAMS FOR ADDITIONAL USES AND DOSAGE FORMS FOR IN-LINE AND IN-REGISTRATION PRODUCTS | |
PRODUCT | PROPOSED INDICATION |
Bosulif (Bosutinib) | First-line treatment for patients with chronic phase Philadelphia chromosome positive chronic myelogenous leukemia, which is being developed in collaboration
with Avillion Group |
Inlyta (Axitinib) | Adjuvant treatment of renal cell carcinoma, which is being developed in collaboration with SFJ Pharmaceuticals Group |
Ibrance (Palbociclib) | Treatment of high-risk early breast cancer, in collaboration with the German Breast Group |
Ibrance (Palbociclib) | Treatment of HR+ early breast cancer, in collaboration with the Alliance Foundation Trials, LLC, and the Austrian Breast Colorectal Cancer Study Group |
Sutent (Sunitinib) | Adjuvant
treatment of renal cell carcinoma |
Xtandi (Enzalutamide) | Treatment of non-metastatic castrate resistant prostate cancer |
Xtandi (Enzalutamide) | Treatment of non-metastatic high risk hormone-sensitive prostate cancer |
Xtandi (Enzalutamide) | Treatment of metastatic hormone sensitive prostate cancer |
Xtandi (Enzalutamide) | Treatment of triple negative breast cancer |
Xeljanz
(Tofacitinib) | Treatment of ulcerative colitis |
Xeljanz (Tofacitinib) | Treatment of psoriatic arthritis |
Vyndaqel (Tafamidis meglumine) | Adult symptomatic transthyretin cardiomyopathy |
32 | 2016
Financial Report | |
NEW DRUG CANDIDATES IN LATE-STAGE DEVELOPMENT | |
CANDIDATE | PROPOSED
INDICATION |
Avelumab (PF-06834635) (MSB0010718C) | A monoclonal antibody that inhibits PD-L1, in combination with Inlyta (axitinib), a tyrosine kinase inhibitor, for the first-line treatment of advanced renal cell carcinoma, which is being developed in collaboration with Merck KGaA, Germany |
Avelumab (PF-06834635) (MSB0010718C) | A monoclonal antibody that inhibits PD-L1 for the first-line treatment of stage IIIb/IV non-small cell lung cancer, which is being developed in collaboration with Merck KGaA, Germany |
Avelumab (PF-06834635) (MSB0010718C) | A
monoclonal antibody that inhibits PD-L1 for treatment of stage IIIb/IV non-small cell lung cancer that has progressed after a platinum-containing doublet, which is being developed in collaboration with Merck KGaA, Germany |
Avelumab (PF-06834635) (MSB0010718C) | A monoclonal antibody that inhibits PD-L1 for treatment of platinum-resistant/refractory ovarian cancer, which is being developed in collaboration with Merck KGaA, Germany |
Avelumab (PF-06834635) (MSB0010718C) | A monoclonal antibody that inhibits PD-L1 for the first-line treatment of ovarian cancer, which is being developed in collaboration with Merck KGaA,
Germany |
Avelumab (PF-06834635) (MSB0010718C) | A monoclonal antibody that inhibits PD-L1 for maintenance treatment, in the first-line setting, for patients with urothelial cancer, which is being developed in collaboration with Merck KGaA, Germany |
Avelumab (PF-06834635) (MSB0010718C) | A monoclonal antibody that inhibits PD-L1 for maintenance treatment of advanced or metastatic gastric/gastro-esophageal junction cancers, which is being developed in collaboration with Merck KGaA, Germany |
Avelumab (PF-06834635) (MSB0010718C) | A
monoclonal antibody that inhibits PD-L1 for the third-line treatment of advanced or metastatic gastric/gastro-esophageal junction cancers, which is being developed in collaboration with Merck KGaA, Germany |
Avelumab (PF-06834635) (MSB0010718C) | A monoclonal antibody that inhibits PD-L1 for treatment of locally advanced squamous cell carcinoma of the head and neck, which is being developed in collaboration with Merck KGaA, Germany |
Dacomitinib | A pan-human epidermal growth factor receptor (HER) tyrosine kinase inhibitor for the first-line treatment of patients with advanced non-small cell lung cancer with estimated glomerular filtration rate (eGFR) activating
mutations, which is being developed in collaboration with SFJ Pharmaceuticals Group |
Ertugliflozin | An oral SGLT2 inhibitor for the treatment of type 2 diabetes, which is being developed in collaboration with Merck (U.S.) . |
PF-06836922 | A long-acting hGH-CTP for the treatment of growth hormone deficiency in adults, which is being developed in collaboration with OPKO. |
PF-06438179(a) | A potential biosimilar to Remicade® (infliximab) |
PF-05280014(b) | A
potential biosimilar to Herceptin® (trastuzumab) |
PF-05280586(c) | A potential biosimilar to Rituxan® (rituximab) |
PF-06439535(d) | A potential biosimilar to Avastin® (bevacizumab) |
PF-06410293(e) | A potential biosimilar to Humira® (adalimumab) |
Rivipansel
(GMI-1070) | A pan-selectin inhibitor for the treatment of vaso-occlusive crisis in hospitalized individuals with sickle cell disease, which was licensed from GlycoMimetics Inc. |
talazoparib (MDV3800) | An oral PARP inhibitor for the treatment of patients with germline breast cancer susceptibility gene BRCA mutated advanced breast cancer |
Tanezumab | An anti-nerve growth factor monoclonal antibody for the treatment of pain, which is being developed in collaboration with Lilly |
(a) | Remicade®
is a registered trademark of Janssen Biotech, Inc. In February 2016, we divested the rights for development and commercialization of PF-06438179, a potential biosimilar to Remicade® (infliximab) in the 28 countries that form the European Economic Area (EEA) to Sandoz, which was a condition to the European Commission’s approval of the Hospira transaction. We retain commercialization rights to PF-06438179 in all countries outside of the EEA. |
(b) | Herceptin® is a registered trademark of Genentech, Inc. |
(c) | Rituxan®
is a registered trademark of Biogen MA Inc. |
(d) | Avastin® is a registered trademark of Genentech, Inc. |
(e) | Humira® is a registered trademark of AbbVie Biotechnology Ltd. |
Year Ended December 31, | %
Change | |||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | 16/15 | 15/14 | |||||||||||
Cost
of sales | $ | 12,329 | $ | 9,648 | $ | 9,577 | 28 | 1 | ||||||||
As
a percentage of Revenues | 23.3 | % | 19.7 | % | 19.3 | % | ||||||||||
• | the inclusion of a full year of legacy Hospira global operations in 2016, compared to the inclusion of four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations in 2015; |
• | the
growth in revenues from key innovative brands as well as the growth in the legacy Pfizer Sterile Injectable Pharmaceuticals portfolio; |
2016 Financial Report | 33 | |
• | production
variances driven by changes in product mix, including products which have lost exclusivity and manufacturing production issues at certain sites (up approximately $300 million); |
• | an increase in costs associated with our cost-reduction/productivity initiatives including plant network strategy (approximately $200 million); and |
• | the unfavorable impact of foreign exchange of 3% or approximately $410 million in 2016. |
• | an unfavorable change in product mix due to (i) the inclusion of a full year of legacy Hospira global operations in 2016, compared to the inclusion of four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations in 2015, with products that carry a higher cost, as well as the impact of acquired Hospira inventory which was measured at fair value on the acquisition date and amortized over
the turn of the related inventory; and (ii) the impact of losses of exclusivity on products which formerly had a higher gross margin; |
• | the unfavorable impact of foreign exchange; and |
• | the unfavorable impact of costs incurred to implement our cost-reduction/productivity initiatives (not related to acquisitions) in 2016, compared to 2015, |
• | a
favorable change in product mix related to legacy Pfizer products, excluding the impact of losses of exclusivity on products referred to above; and |
• | non-recurring charges of $72 million related to manufacturing plant pension obligations and non-recurring charges of $72 million related to inventory impairment in Venezuela in 2015 related to the foreign currency change described in the “Global Economic Conditions—Venezuela Operations” section in this Financial Review. |
• | an
increase in sales volumes due to (i) the inclusion of four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations and the vaccine portfolio operations acquired from Baxter in fiscal 2015, both of which are comprised of inventory measured at fair value on the acquisition date (approximately $2.1 billion); and (ii) the net increase in sales volume of Pfizer legacy products; and |
• | non-recurring charges of $72 million related to manufacturing plant pension obligations and $72 million related to inventory impairment in Venezuela in 2015 related to the foreign currency change described in the “Global Economic Conditions—Venezuela Operations” section in this Financial Review, |
• | favorable foreign exchange of 10% in 2015; |
• | a change in the profit deferred in inventory relating to inventory that had not been sold to third parties resulting in a non-cash benefit of $306 million; and, to a lesser extent |
• | manufacturing efficiencies; and |
• | a
decrease in royalty expense associated with products that recently lost marketing exclusivity. |
• | an unfavorable change in product mix due to (i) the inclusion of four months of legacy Hospira U.S. operations, three months of legacy Hospira international operations, and the vaccine portfolio operations acquired from Baxter in fiscal 2015, both of which are comprised of inventory measured at fair value on the acquisition date; and (ii) the impact of losses of exclusivity, |
• | a change in the profit deferred in inventory relating to inventory that had not been sold to third parties (described above); |
• | manufacturing efficiencies; |
• | favorable foreign exchange; |
• | a
decrease in royalty expenses associated with products that have recently lost marketing exclusivity; and |
• | an increase in alliance revenues which have no associated cost of sales. |
Year Ended December 31, | %
Change | |||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | 16/15 | 15/14 | |||||||||||
Selling,
informational and administrative expenses | $ | 14,837 | $ | 14,809 | $ | 14,097 | — | 5 | ||||||||
As
a percentage of Revenues | 28.1 | % | 30.3 | % | 28.4 | % | ||||||||||
• | an increase in the allowance for doubtful trade accounts receivable, resulting from unfavorable developments with a distributor (approximately $280 million); |
34 | 2016
Financial Report | |
• | the inclusion of a full year of legacy Hospira global
operations in 2016, compared to the inclusion of four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations in 2015; and |
• | additional investment across several of our key products, |
• | the non-recurrence of a $419 million charge related to the settlement of pension obligations in accordance with an
offer to certain terminated employees who are vested in their pension benefits to elect a lump-sum payment or annuity of their deferred vested pension benefits in 2015; and |
• | the favorable impact of foreign exchange of 2% in 2016. |
• | increased
investments to support recently launched products and other in-line biopharmaceutical products and certain Consumer Healthcare brands; |
• | a non-recurring charge of $419 million related to the settlement of pension obligations in accordance with an offer to certain terminated employees who are vested in their pension benefits to elect a lump-sum payment or annuity of their deferred vested pension benefits; and |
• | the inclusion of four months of legacy Hospira U.S. operations and
three months of legacy Hospira international operations, |
• | the favorable impact of foreign exchange of 6%; |
• | lower expenses associated with certain products that have recently lost marketing exclusivity; |
• | lower field force, advertising
and promotional expenses, reflecting the benefits of cost-reduction and productivity initiatives; as well as |
• | the non-recurrence of a $215 million charge to account for an additional year of the non-tax deductible Branded Prescription Drug Fee in accordance with final regulations issued in the third quarter of 2014 by the IRS. |
Year Ended December 31, | %
Change | ||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | 16/15 | 15/14 | ||||||||||||
Research
and development expenses | $ | 7,872 | $ | 7,690 | $ | 8,393 | 2 | (8 | ) | ||||||||
As
a percentage of Revenues | 14.9 | % | 15.7 | % | 16.9 | % | |||||||||||
• | costs of approximately $260 million to close out studies for the global clinical development program for bococizumab that was discontinued in the fourth quarter of 2016; |
• | the inclusion of a full year of legacy Hospira global
operations in 2016, compared to the inclusion of four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations in 2015 and increased investment in legacy Hospira biosimilar and sterile injectable development programs and, to a lesser extent, the inclusion of approximately six months of legacy Anacor operations and approximately three months of legacy Medivation operations; and |
• | increased costs associated with our oncology programs, primarily our avelumab alliance with Merck KGaA, |
• | the
non-recurrence of the $295 million upfront payment to OPKO in the first quarter of 2015 associated with a worldwide development and commercialization agreement; and |
• | development funding of $272 million under which we had an obligation to perform contractual services related to certain clinical trials of bococizumab, Ibrance and rivipansel (see Notes to Consolidated Financial Statements––Note 2D. Acquisitions, Assets and Liabilities Held for Sale, Licensing Agreements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Research
and Development and Collaborative Arrangements). |
• | the non-recurrence of a charge associated with a collaborative arrangement with Merck KGaA, announced in November 2014, to jointly develop and commercialize avelumab, an investigational anti-PD-L1 antibody currently in development as a potential treatment for multiple types of cancer. The charge included an $850 million upfront cash payment
as well as an additional amount of $309 million, reflecting the estimated fair value of certain co-promotion rights for Xalkori given to Merck KGaA (for further discussion, see the “Our Strategy––Our Business Development Initiatives” section of this Financial Review); |
• | lower clinical trial expenses for various studies for certain previously approved products, including as a result of the completion of postmarketing commitments; |
• | lower upfront payments associated with certain licensing agreements compared to
2014; and |
• | the favorable impact of foreign exchange of 2%, |
2016 Financial Report | 35 | |
• | higher clinical trial spend for certain oncology and IH pipeline programs; |
• | the
$295 million upfront payment to OPKO in the first quarter of 2015 associated with a worldwide development and commercialization agreement; |
• | increased investment in biosimilar and sterile injectable development programs; and |
• | the inclusion of four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations. |
• | Research
Units within our WRD organization continue to be generally responsible for research assets for our IH business (assets that have not yet achieved proof-of-concept). Our Research Units are organized in a variety of ways (by therapeutic area or combinations of therapeutic areas, by discipline, by location, etc.) to enhance flexibility, cohesiveness and focus. Because of our structure, we can rapidly redeploy resources within a Research Unit between various projects as necessary because the workforce shares similar skills, expertise and/or focus. |
• | We created an R&D organization within the EH business, which supports the large base of EH products and is expected to develop potential new sterile injectable drugs and therapeutic solutions, as
well as biosimilars. |
• | We formed the GPD organization, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios. GPD also provides technical support and other services to Pfizer R&D projects. |
• | Our science-based and other end-to-end platform-services organizations, where a significant portion of our R&D spending occurs, provide technical expertise and other services to the various R&D projects, and are organized into science-based
functions (which are part of our WRD organization), such as Pharmaceutical Sciences, Medicinal Chemistry, Regulatory and Drug Safety, and non-science-based functions, such as Facilities, Business Technology and Finance. As a result, within each of these functions, we are able to migrate resources among projects, candidates and/or targets in any therapeutic area and in most phases of development, allowing us to react quickly in response to evolving needs. |
Year Ended December 31, | % Change | ||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | 16/15 | 15/14 | ||||||||||||
Amortization
of intangible assets | $ | 4,056 | $ | 3,728 | $ | 4,039 | 9 | (8 | ) | ||||||||
As
a percentage of Revenues | 7.7 | % | 7.6 | % | 8.1 | % | |||||||||||
36 | 2016
Financial Report | |
Year Ended December 31, | %
Change | ||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | 16/15 | 15/14 | ||||||||||||
Restructuring
charges and certain acquisition-related costs | $ | 1,724 | $ | 1,152 | $ | 250 | 50 | * | |||||||||
Total
additional depreciation––asset restructuring | 207 | 122 | 261 | 70 | (53 | ) | |||||||||||
Total
implementation costs | 340 | 203 | 270 | 67 | (25 | ) | |||||||||||
Costs
associated with acquisitions and cost-reduction/productivity initiatives(a) | $ | 2,271 | $ | 1,478 | $ | 781 | 54 | 89 | |||||||||
(a) | Comprises
Restructuring charges and certain acquisition-related costs as well as costs associated with our cost-reduction/productivity initiatives included in Cost of sales, Research and development expenses and/or Selling, informational and administrative expenses, as appropriate. |
* | Calculation not meaningful. |
Year Ended December 31, | %
Change | |||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | 16/15 | 15/14 | |||||||||||
Other
(income)/deductions—net | $ | 3,655 | $ | 2,860 | $ | 1,009 | 28 | * | ||||||||
* | Calculation
not meaningful. |
2016 Financial Report | 37 | |
Year Ended December 31, | %
Change | |||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | 16/15 | 15/14 | |||||||||||||
Provision
for taxes on income | $ | 1,123 | $ | 1,990 | $ | 3,120 | (44 | ) | (36 | ) | ||||||||
Effective
tax rate on continuing operations | 13.4 | % | 22.2 | % | 25.5 | % | ||||||||||||
• | the
benefits related to the final resolution of an agreement in principle reached in February 2016 and finalized in April 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our initial assessment in 2015 of the likelihood of prevailing on the technical merits of our tax position; |
• | the non-recurrence of the non-deductibility of a foreign currency loss related to Venezuela; |
• | the change in the jurisdictional mix of earnings as a result of operating fluctuations in the
normal course of business; |
• | the increase in benefits associated with the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations; and |
• | the benefits related to the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, requiring excess tax benefits or deficiencies of share-based compensation to be recognized as a component of the
Provision for taxes on income. The net tax benefit was $89 million in 2016 (see Notes to Consolidated Financial Statements—Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards), |
• | the non-recurrence of tax benefits associated with certain tax initiatives. |
• | the
change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business; |
• | the non-recurrence of the non-deductibility of the $215 million charge to account for an additional year of the Branded Prescription Drug Fee in accordance with the final regulations issued in the third quarter of 2014 by the IRS; and |
• | the tax benefits associated with certain tax initiatives, |
• | the
non-deductibility of a foreign currency loss related to Venezuela; and |
• | the non-deductibility of a charge for the agreement in principle reached in February 2016 to resolve claims relating to Protonix. |
38 | 2016 Financial Report | |
• | senior
management receives a monthly analysis of our operating results that is prepared on an Adjusted income basis and Adjusted diluted earnings per share basis; |
• | our annual budgets are prepared on an Adjusted income and Adjusted diluted earnings per share basis; and |
• | senior management’s annual compensation is derived, in part, using Adjusted income and Adjusted diluted earnings per share measures. Adjusted income is the performance metric utilized in the determination of bonuses under the Pfizer Inc. Executive Annual Incentive
Plan that is designed to limit the bonuses payable to the Executive Leadership Team (ELT) for purposes of IRC Section 162(m). Subject to the Section 162(m) limitation, the bonuses are funded from a pool based on the performance measured by three financial metrics, including adjusted diluted earnings per share, which is derived from Adjusted income. This metric accounts for 40% of the bonus pool funding. The pool applies to the bonus plans for virtually all bonus-eligible, non-sales-force employees worldwide, including the ELT members and other members of senior management. In addition, commencing with the 2015 Performance Share Awards, adjusted operating income is one of the measures utilized to determine payout. Adjusted operating income is derived from Adjusted income. |
2016 Financial Report | 39 | |
40 | 2016
Financial Report | |
2016 | ||||||||||||||||||||||||
IN
MILLIONS, EXCEPT PER COMMON SHARE DATA | GAAP Reported | Purchase Accounting Adjustments(a) | Acquisition-Related Costs(a) | Discontinued
Operations(a) | Certain Significant Items(a) | Non-GAAP Adjusted | ||||||||||||||||||
Revenues | $ | 52,824 | $ | — | $ | — | $ | — | $ | — | $ | 52,824 | ||||||||||||
Cost
of sales | 12,329 | (295 | ) | (7 | ) | — | (397 | ) | 11,630 | |||||||||||||||
Selling,
informational and administrative expenses | 14,837 | (3 | ) | — | — | (89 | ) | 14,745 | ||||||||||||||||
Research
and development expenses | 7,872 | 3 | — | — | (34 | ) | 7,841 | |||||||||||||||||
Amortization
of intangible assets | 4,056 | (3,928 | ) | — | — | — | 128 | |||||||||||||||||
Restructuring
charges and certain acquisition-related costs | 1,724 | — | (778 | ) | — | (945 | ) | — | ||||||||||||||||
Other
(income)/deductions––net | 3,655 | 39 | — | — | (4,423 | ) | (729 | ) | ||||||||||||||||
Income
from continuing operations before provision for taxes on income | 8,351 | 4,185 | 785 | — | 5,888 | 19,210 | ||||||||||||||||||
Provision
for taxes on income(b) | 1,123 | 1,248 | 104 | — | 1,943 | 4,418 | ||||||||||||||||||
Income
from continuing operations | 7,229 | 2,937 | 682 | — | 3,944 | 14,792 | ||||||||||||||||||
Discontinued
operations––net of tax | 17 | — | — | (17 | ) | — | — | |||||||||||||||||
Net
income attributable to noncontrolling interests | 31 | — | — | — | — | 31 | ||||||||||||||||||
Net
income attributable to Pfizer Inc. | 7,215 | 2,937 | 682 | (17 | ) | 3,944 | 14,761 | |||||||||||||||||
Earnings
per common share attributable to Pfizer Inc.––diluted | 1.17 | 0.48 | 0.11 | — | 0.64 | 2.40 | ||||||||||||||||||
2015 | ||||||||||||||||||||||||
IN
MILLIONS, EXCEPT PER COMMON SHARE DATA | GAAP Reported | Purchase Accounting Adjustments(a) | Acquisition-Related Costs(a) | Discontinued
Operations(a) | Certain Significant Items(a) | Non-GAAP Adjusted | ||||||||||||||||||
Revenues | $ | 48,851 | $ | — | $ | — | $ | — | $ | — | $ | 48,851 | ||||||||||||
Cost
of sales | 9,648 | (413 | ) | (75 | ) | — | (140 | ) | 9,021 | |||||||||||||||
Selling,
informational and administrative expenses | 14,809 | — | — | — | (484 | ) | 14,324 | |||||||||||||||||
Research
and development expenses | 7,690 | 7 | — | — | (44 | ) | 7,653 | |||||||||||||||||
Amortization
of intangible assets | 3,728 | (3,598 | ) | — | — | — | 130 | |||||||||||||||||
Restructuring
charges and certain acquisition-related costs | 1,152 | — | (820 | ) | — | (333 | ) | — | ||||||||||||||||
Other
(income)/deductions––net | 2,860 | 52 | — | — | (3,321 | ) | (409 | ) | ||||||||||||||||
Income
from continuing operations before provision for taxes on income | 8,965 | 3,953 | 894 | — | 4,321 | 18,133 | ||||||||||||||||||
Provision
for taxes on income(b) | 1,990 | 1,110 | 303 | — | 949 | 4,352 | ||||||||||||||||||
Income
from continuing operations | 6,975 | 2,843 | 591 | — | 3,372 | 13,781 | ||||||||||||||||||
Discontinued
operations––net of tax | 11 | — | — | (11 | ) | — | — | |||||||||||||||||
Net
income attributable to noncontrolling interests | 26 | — | — | — | — | 26 | ||||||||||||||||||
Net
income attributable to Pfizer Inc. | 6,960 | 2,843 | 591 | (11 | ) | 3,372 | 13,755 | |||||||||||||||||
Earnings
per common share attributable to Pfizer Inc.––diluted | 1.11 | 0.45 | 0.09 | — | 0.54 | 2.20 | ||||||||||||||||||
2016 Financial Report | 41 | |
2014 | ||||||||||||||||||||||||
IN
MILLIONS, EXCEPT PER COMMON SHARE DATA | GAAP Reported | Purchase Accounting Adjustments(a) | Acquisition-Related Costs(a) | Discontinued
Operations(a) | Certain Significant Items(a) | Non-GAAP Adjusted | ||||||||||||||||||
Revenues | $ | 49,605 | $ | — | $ | — | $ | — | $ | (198 | ) | $ | 49,406 | |||||||||||
Cost
of sales | 9,577 | 101 | (53 | ) | — | (491 | ) | 9,134 | ||||||||||||||||
Selling,
informational and administrative expenses | 14,097 | 1 | — | — | (377 | ) | 13,721 | |||||||||||||||||
Research
and development expenses | 8,393 | 2 | — | — | (1,243 | ) | 7,153 | |||||||||||||||||
Amortization
of intangible assets | 4,039 | (3,884 | ) | — | — | — | 155 | |||||||||||||||||
Restructuring
charges and certain acquisition-related costs | 250 | — | (130 | ) | — | (121 | ) | — | ||||||||||||||||
Other
(income)/deductions––net | 1,009 | 139 | — | — | (1,716 | ) | (567 | ) | ||||||||||||||||
Income
from continuing operations before provision for taxes on income | 12,240 | 3,641 | 183 | — | 3,749 | 19,812 | ||||||||||||||||||
Provision
for taxes on income(b) | 3,120 | 1,085 | 76 | — | 969 | 5,250 | ||||||||||||||||||
Income
from continuing operations | 9,119 | 2,556 | 107 | — | 2,780 | 14,562 | ||||||||||||||||||
Discontinued
operations––net of tax | 48 | — | — | (48 | ) | — | — | |||||||||||||||||
Net
income attributable to noncontrolling interests | 32 | — | — | — | — | 32 | ||||||||||||||||||
Net
income attributable to Pfizer Inc. | 9,135 | 2,556 | 107 | (48 | ) | 2,780 | 14,530 | |||||||||||||||||
Earnings
per common share attributable to Pfizer Inc.––diluted | 1.42 | 0.40 | 0.02 | (0.01 | ) | 0.43 | 2.26 | |||||||||||||||||
(a) | For
details of adjustments, see “Details of Income Statement Items Included in GAAP Reported but Excluded from Non-GAAP Adjusted Income” below. |
(b) | The effective tax rate on Non-GAAP Adjusted income was 23.0% in 2016, 24.0% in 2015 and 26.5% in 2014. The decline in the effective tax rate for 2016 compared with 2015 was primarily due to a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, an increase in tax
benefits associated with the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations, as well as benefits related to the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, requiring excess tax benefits or deficiencies of share-based compensation to be recognized as a component of the Provision for taxes on income. The decline in the effective tax rate in 2015 compared to 2014 was primarily due to a favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business. |
42 | 2016
Financial Report | |
Adjusted
income, as shown above, excludes the following items: | ||||||||||||
Year Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
Purchase
accounting adjustments | ||||||||||||
Amortization, depreciation and other(a) | $ | 3,890 | $ | 3,540 | $ | 3,742 | ||||||
Cost
of sales | 295 | 413 | (101 | ) | ||||||||
Total purchase accounting adjustments—pre-tax | 4,185 | 3,953 | 3,641 | |||||||||
Income
taxes(b) | (1,248 | ) | (1,110 | ) | (1,085 | ) | ||||||
Total purchase accounting adjustments—net of tax | 2,937 | 2,843 | 2,556 | |||||||||
Acquisition-related
costs | ||||||||||||
Restructuring charges(c) | 211 | 479 | 50 | |||||||||
Transaction
costs(c) | 127 | 123 | — | |||||||||
Integration costs(c) | 441 | 218 | 80 | |||||||||
Additional
depreciation—asset restructuring(d) | 7 | 75 | 53 | |||||||||
Total acquisition-related costs—pre-tax | 785 | 894 | 183 | |||||||||
Income
taxes(e) | (104 | ) | (303 | ) | (76 | ) | ||||||
Total acquisition-related costs—net of tax | 682 | 591 | 107 | |||||||||
Discontinued
operations | ||||||||||||
Total discontinued operations—net of tax, attributable to Pfizer Inc.(f) | (17 | ) | (11 | ) | (48 | ) | ||||||
Certain
significant items | ||||||||||||
Restructuring charges(g) | 945 | 333 | 121 | |||||||||
Implementation
costs and additional depreciation—asset restructuring(h) | 540 | 251 | 478 | |||||||||
Certain legal matters, net(i) | 494 | 968 | 999 | |||||||||
Impairment
on remeasurement of HIS net assets(i) | 1,712 | — | — | |||||||||
Certain asset impairments(i) | 1,426 | 787 | 440 | |||||||||
Foreign
currency loss and inventory impairment related to Venezuela(j) | — | 878 | — | |||||||||
Charge related to pension settlement(k) | — | 491 | — | |||||||||
Upfront
fee associated with collaborative arrangement(l) | — | — | 1,163 | |||||||||
Additional year of Branded Prescription Drug Fee(m) | — | — | 215 | |||||||||
Business
and legal entity alignment costs(i) | 261 | 282 | 168 | |||||||||
Other(n) | 509 | 332 | 165 | |||||||||
Total
certain significant items—pre-tax | 5,888 | 4,321 | 3,749 | |||||||||
Income taxes(o) | (1,943 | ) | (949 | ) | (969 | ) | ||||||
Total
certain significant items—net of tax | 3,944 | 3,372 | 2,780 | |||||||||
Total purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items—net of tax, attributable to Pfizer Inc. | $ | 7,546 | $ | 6,795 | $ | 5,394 | ||||||
(a) | Included
primarily in Amortization of intangible assets. |
(b) | Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. |
(c) | Included in Restructuring charges and certain acquisition-related
costs. Restructuring charges include employee termination costs, asset impairments and other exit costs associated with business combinations. Transaction costs represent external costs for banking, legal, accounting and other similar services. Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes. For additional information, see Notes to Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives. |
(d) | Included
in Cost of sales. Represents the impact of changes in estimated useful lives of assets involved in restructuring actions related to acquisitions. |
(e) | Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. As applicable, each period may also include the impact of the remeasurement of certain deferred tax liabilities resulting from our plant network restructuring activities: in 2016, there was an unfavorable impact,
and in 2014, there was a favorable impact. |
(f) | Included in Discontinued operations––net of tax. For 2016, 2015 and 2014, represents post-close adjustments. |
(g) | Included in Restructuring charges and certain acquisition-related costs (see Notes to Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and
Cost-Reduction/Productivity Initiatives). Amounts relate to our cost-reduction and productivity initiatives not related to acquisitions. |
2016 Financial Report | 43 | |
(h) | Amounts
relate to our cost-reduction/productivity initiatives not related to acquisitions (see Notes to Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives). For 2016, primarily all included in Cost of sales ($423 million), Selling, informational and administrative expenses ($81 million) and Research and development expenses ($32 million). For 2015, virtually all included in Cost of sales ($145 million), Selling, informational and
administrative expenses ($83 million) and Research and development expenses ($19 million). For 2014, virtually all included in Cost of sales ($253 million), Selling, informational and administrative expenses ($141 million) and Research and development expenses ($83 million). |
(i) | Included
in Other (income)/deductions—net (see the “Other (Income)/Deductions—Net” section of this Financial Review and Notes to Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net). |
(j) | In 2015, represents (i) an $806 million foreign currency loss included in Other (income)/deductions––net related to conditions in Venezuela during 2015, that had us resolve that our Venezuelan bolivar-denominated net monetary assets that are subject to revaluation were no longer expected
to be settled at the Venezuelan government CENCOEX official rate of 6.30, but rather at the then SIMADI rate of 200, the lowest official rate. Those conditions included the inability to obtain significant conversions of Venezuelan bolivars related to intercompany U.S. dollar denominated accounts, an evaluation of the effects of the implementation of a fourth-quarter 2015 operational restructuring, resulting in 36% reduction in our labor force in Venezuela, and our expectation of the changes in Venezuela’s responses to changes in its economy; and (ii) a $72 million charge included in Cost of sales related to inventory impairment in Venezuela related to the foreign currency change described above. |
(k) | In
2015, included in Cost of sales ($72 million) and Selling, informational and administrative expenses ($419 million) and primarily represents a non-recurring charge related to settlement of pension obligations in accordance with an offer to certain terminated employees who are vested in their pension benefits to elect a lump-sum payment or annuity of their deferred vested pension benefits. |
(l) | Virtually all included in Research
and development expenses. Represents a charge associated with a collaborative arrangement with Merck KGaA, announced in November 2014, to jointly develop and commercialize avelumab, an investigational anti-PD-L1 antibody currently in development as a potential treatment for multiple types of cancer. The charge includes an $850 million upfront cash payment as well as an additional amount of $309 million, reflecting the estimated fair value of the co-promotion rights for Xalkori given to Merck KGaA. |
(m) | Included in Selling, informational and administrative expenses.
In 2014, represents a charge to account for an additional year of the non-tax deductible Branded Prescription Drug Fee in accordance with final regulations issued in the third quarter of 2014 by the IRS. |
(n) | For 2016, primarily included in Cost of sales ($27 million income) and Other (income)/deductions––net ($526 million). For 2015, virtually all included in Cost of sales ($149 million income)
and Other (income)/deductions––net ($473 million). For 2014, virtually all included in Revenues ($198 million), Cost of sales ($238 million), Selling, informational and administrative expenses ($21 million) and Other (income)/deductions––net ($103 million). For 2016, includes, among other things, a net loss of approximately $312 million upon the early redemption of debt, which includes the related termination
of interest rate swaps, and $150 million paid to Allergan for reimbursement of Allergan's expenses associated with the terminated transaction, both of which are included in Other (income/deductions—net. For 2015, includes, among other things, a change in the profit deferred in inventory relating to inventory that had not been sold to third parties, which is included in Cost of sales (non-cash benefit of $221 million), losses of $239 million, which are included in Other (income)/deductions––net, and are related to our share of an equity method investee’s charges incurred for its re-measurement of a contingent consideration liability, and
charges of $173 million related to the write-down of assets to net realizable value, which are primarily included in Other (income)/deductions––net. For 2014, includes, among other things, income resulting from a decline in an estimated loss on an option to acquire the remaining interest in Teuto, a 40%-owned generics company in Brazil (approximately $55 million), and income associated with the manufacturing and supply agreements with Zoetis that are virtually all included in Revenues ($272 million) and Cost of sales ($237 million). |
(o) | Included
in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. The amount in 2016 was favorably impacted by benefits related to the final resolution of an agreement in principle reached in February 2016 and finalized in April 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our initial assessment in 2015 of the likelihood of prevailing on the technical merits of our tax position. The amount in 2015 was favorably impacted by tax benefits associated with certain tax initiatives. In addition, the amount in 2015 was unfavorably impacted by a non-deductible foreign currency loss related to Venezuela and the non-deductible charge for the agreement in
principle reached in February 2016 to resolve claims relating to Protonix. The amount in 2014 was favorably impacted by the decline in the non-tax deductible estimated loss recorded in the third quarter of 2013 related to an option to acquire the remaining interest in Teuto, since we expected to retain the investment indefinitely, and unfavorably impacted by a non-tax deductible charge to account for an additional year of the Branded Prescription Drug Fee in accordance with final regulations issued in the third quarter of 2014 by the IRS. See Notes to Consolidated Financial Statements—Note 5A. Tax Matters: Taxes on Income from Continuing Operations. |
The
following tables provide revenue and cost information by reportable operating segment and a reconciliation of that information to our consolidated statements of income: | ||||||||||||||||||||||||
2016 | ||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | Innovative Health(a) | Essential Health(a) | Other(b) | Non-GAAP Adjusted(c) | Reconciling
Items(d) | GAAP Reported | ||||||||||||||||||
Revenues | $ | 29,197 | $ | 23,627 | $ | — | $ | 52,824 | $ | — | $ | 52,824 | ||||||||||||
Cost
of sales | 4,041 | 6,273 | 1,316 | 11,630 | 699 | 12,329 | ||||||||||||||||||
%
of revenue | 13.8 | % | 26.5 | % | * | 22.0 | % | * | 23.3 | % | ||||||||||||||
Selling,
informational and administrative expenses | 7,248 | 3,455 | 4,042 | 14,745 | 92 | 14,837 | ||||||||||||||||||
Research
and development expenses | 2,940 | 1,232 | 3,669 | 7,841 | 31 | 7,872 | ||||||||||||||||||
Amortization
of intangible assets | 102 | 26 | — | 128 | 3,928 | 4,056 | ||||||||||||||||||
Restructuring
charges and certain acquisition-related costs | — | — | — | — | 1,724 | 1,724 | ||||||||||||||||||
Other
(income)/deductions––net | (988 | ) | (256 | ) | 515 | (729 | ) | 4,384 | 3,655 | |||||||||||||||
Income
from continuing operations before provision for taxes on income | $ | 15,854 | $ | 12,898 | $ | (9,542 | ) | $ | 19,210 | $ | (10,858 | ) | $ | 8,351 | ||||||||||
44 | 2016
Financial Report | |
2015 | ||||||||||||||||||||||||
(MILLIONS
OF DOLLARS) | Innovative Health(a) | Essential Health(a) | Other(b) | Non-GAAP Adjusted(c) | Reconciling
Items(d) | GAAP Reported | ||||||||||||||||||
Revenues | $ | 26,758 | $ | 22,094 | $ | — | $ | 48,851 | $ | — | $ | 48,851 | ||||||||||||
Cost
of sales | 3,651 | 4,891 | 479 | 9,021 | 627 | 9,648 | ||||||||||||||||||
%
of revenue | 13.6 | % | 22.1 | % | * | 18.5 | % | * | 19.7 | % | ||||||||||||||
Selling,
informational and administrative expenses | 6,807 | 3,573 | 3,945 | 14,324 | 485 | 14,809 | ||||||||||||||||||
Research
and development expenses | 2,712 | 1,032 | 3,909 | 7,653 | 37 | 7,690 | ||||||||||||||||||
Amortization
of intangible assets | 94 | 36 | — | 130 | 3,598 | 3,728 | ||||||||||||||||||
Restructuring
charges and certain acquisition-related costs | — | — | — | — | 1,152 | 1,152 | ||||||||||||||||||
Other
(income)/deductions––net | (1,086 | ) | (152 | ) | 829 | (409 | ) | 3,269 | 2,860 | |||||||||||||||
Income
from continuing operations before provision for taxes on income | $ | 14,581 | $ | 12,714 | $ | (9,162 | ) | $ | 18,133 | $ | (9,168 | ) | $ | 8,965 | ||||||||||
2014 | ||||||||||||||||||||||||
(MILLIONS
OF DOLLARS) | Innovative Health(a) | Essential Health(a) | Other(b) | Non-GAAP Adjusted(c) | Reconciling
Items(d) | GAAP Reported | ||||||||||||||||||
Revenues | $ | 24,005 | $ | 25,401 | $ | — | $ | 49,406 | $ | 198 | $ | 49,605 | ||||||||||||
Cost
of sales | 3,848 | 4,734 | 551 | 9,134 | 443 | 9,577 | ||||||||||||||||||
%
of revenue | 16.0 | % | 18.6 | % | * | 18.5 | % | * | 19.3 | % | ||||||||||||||
Selling,
informational and administrative expenses | 6,162 | 3,900 | 3,658 | 13,721 | 377 | 14,097 | ||||||||||||||||||
Research
and development expenses | 2,278 | 938 | 3,937 | 7,153 | 1,241 | 8,393 | ||||||||||||||||||
Amortization
of intangible assets | 69 | 85 | — | 155 | 3,884 | 4,039 | ||||||||||||||||||
Restructuring
charges and certain acquisition-related costs | — | — | — | — | 250 | 250 | ||||||||||||||||||
Other
(income)/deductions––net | (1,096 | ) | (276 | ) | 804 | (567 | ) | 1,577 | 1,009 | |||||||||||||||
Income
from continuing operations before provision for taxes on income | $ | 12,743 | $ | 16,020 | $ | (8,951 | ) | $ | 19,812 | $ | (7,573 | ) | $ | 12,240 | ||||||||||
(a)
| Amounts represent the revenues and costs managed by each of our operating segments. The expenses generally include only those costs directly attributable to the operating segment. |
• | Our results of operations include the operating results of acquired businesses after the completion of the acquisition. On June 24, 2016, we acquired Anacor and on September 28, 2016, we acquired Medivation. Commencing from their respective acquisition dates, our results of operations and IH’s operating results for 2016 include approximately six months of legacy Anacor operations, which were
immaterial, and approximately three months of legacy Medivation operations. On September 3, 2015, we acquired Hospira. Commencing from the acquisition date, our results of operations and EH’s operating results include legacy Hospira commercial operations, including the legacy Hospira One-2-One contract manufacturing business. In accordance with our domestic and international reporting periods, our results of operations and EH’s operating results for 2015 reflect four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations. See Notes to Consolidated Financial Statements––Note 2A. Acquisitions, Assets and Liabilities Held for Sale, Licensing Agreements, Research and Development and Collaborative Arrangements, Equity-Method
Investments and Cost-Method Investment: Acquisitions for additional information. |
• | The following organizational changes in 2016 impacted our operating segments: |
2016 Financial Report | 45 | |
(b) | Other comprises the revenues and costs included in our Adjusted income components (see footnote (c) below) that are managed outside
of our two operating segments and includes the following: |
2016 | ||||||||||||||||||||||||
Other
Business Activities | ||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | WRD(i) | GPD(ii) | Medical(iii) | Corporate(iv) | Other
Unallocated(v) | Total | ||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Cost
of sales | — | — | — | 199 | 1,117 | 1,316 | ||||||||||||||||||
Selling,
informational and administrative expenses | — | — | 164 | 3,841 | 37 | 4,042 | ||||||||||||||||||
Research
and development expenses | 2,352 | 691 | 1 | 611 | 14 | 3,669 | ||||||||||||||||||
Amortization
of intangible assets | — | — | — | — | — | — | ||||||||||||||||||
Restructuring
charges and certain acquisition-related costs | — | — | — | — | — | — | ||||||||||||||||||
Other
(income)/deductions––net | (24 | ) | — | — | 676 | (136 | ) | 515 | ||||||||||||||||
Income
from continuing operations before provision for taxes on income | $ | (2,328 | ) | $ | (691 | ) | $ | (165 | ) | $ | (5,326 | ) | $ | (1,032 | ) | $ | (9,542 | ) | ||||||
2015 | ||||||||||||||||||||||||
Other
Business Activities | ||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | WRD(i) | GPD(ii) | Medical(iii) | Corporate(iv) | Other Unallocated(v) | Total | ||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Cost
of sales | — | — | — | 20 | 459 | 479 | ||||||||||||||||||
Selling,
informational and administrative expenses | 2 | — | 149 | 3,711 | 84 | 3,945 | ||||||||||||||||||
Research
and development expenses | 2,331 | 658 | 29 | 878 | 14 | 3,909 | ||||||||||||||||||
Amortization
of intangible assets | — | — | — | — | — | — | ||||||||||||||||||
Restructuring
charges and certain acquisition-related costs | — | — | — | 3 | (3 | ) | — | |||||||||||||||||
Other
(income)/deductions––net | (77 | ) | — | — | 817 | 89 | 829 | |||||||||||||||||
Income
from continuing operations before provision for taxes on income | $ | (2,255 | ) | $ | (658 | ) | $ | (177 | ) | $ | (5,430 | ) | $ | (642 | ) | $ | (9,162 | ) | ||||||
2014 | ||||||||||||||||||||||||
Other
Business Activities | ||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | WRD(i) | GPD(ii) | Medical(iii) | Corporate(iv) | Other Unallocated(v) | Total | ||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Cost
of sales | — | — | — | 100 | 452 | 551 | ||||||||||||||||||
Selling,
informational and administrative expenses | — | — | 144 | 3,454 | 60 | 3,658 | ||||||||||||||||||
Research
and development expenses | 2,431 | 614 | 27 | 850 | 15 | 3,937 | ||||||||||||||||||
Amortization
of intangible assets | — | — | — | — | — | — | ||||||||||||||||||
Restructuring
charges and certain acquisition-related costs | — | — | — | — | — | — | ||||||||||||||||||
Other
(income)/deductions––net | (66 | ) | — | — | 795 | 75 | 804 | |||||||||||||||||
Income
from continuing operations before provision for taxes on income | $ | (2,365 | ) | $ | (614 | ) | $ | (171 | ) | $ | (5,200 | ) | $ | (601 | ) | $ | (8,951 | ) | ||||||
(i) | WRD—the
R&D expenses managed by our WRD organization, which is generally responsible for research projects for our IH business until proof-of-concept is achieved and then for transitioning those projects to the IH segment via the newly formed GPD organization for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual property rights. The WRD organization also has responsibility for certain science-based and other platform-services organizations, which provide technical expertise and other services to the various R&D projects, including EH R&D projects. WRD is also responsible for facilitating all regulatory submissions and interactions with regulatory agencies, including all safety-event activities. As noted above, in connection with the formation of the new EH R&D organization, certain functions transferred from WRD to the new EH R&D organization. We have reclassified approximately $274
million of costs in 2015 and $281 million of costs in 2014 from WRD to EH to conform to the current period presentation as part of EH. Also, in connection with the formation of the new GPD organization, beginning in the second quarter of 2016, certain development-related functions transferred from WRD to GPD. See note (ii) below for additional information. |
(ii) | GPD––the costs associated with our newly formed GPD organization, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios. GPD also provides technical support and other services to Pfizer R&D projects. In connection
with the formation in early 2016 of the GPD organization, effective in the second quarter of 2016, certain development-related functions transferred from WRD and IH to GPD. |
46 | 2016 Financial Report | |
(iii) | Medical—the costs associated with our Pfizer Medical organization (Medical), which, is responsible
for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, and partnerships with global public health and medical associations. In 2014 and 2015, Medical was also responsible for regulatory inspection readiness reviews, internal audits of Pfizer-sponsored clinical trials and internal regulatory compliance processes, which are now part of the compliance function within Corporate. |
(iv) | Corporate—the costs associated with Corporate, representing platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources,
worldwide public affairs, compliance, and worldwide procurement) and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on investments. |
(v) | Other Unallocated—other unallocated costs, representing overhead expenses associated with our manufacturing and commercial operations that are not directly assessed to an operating segment as business unit (segment) management does not manage these costs (which include manufacturing variances associated with production). The increase in Cost of sales in 2016 reflects, among other items, the change in manufacturing variances driven by demand decreases versus plan for certain legacy
Hospira and legacy Pfizer products. |
(PERCENTAGES) | IH | EH | |||
WRD/GPD/Medical
Costs | |||||
Selling, informational and administrative expenses | 70% - 72% | 28% - 30% | |||
Research and development expenses | 98%
- 100% | 0% - 2% | |||
Other (income)/deductions––net | * | * | |||
Total WRD/GPD/Medical Costs | 97% - 99% | 1%
- 3% | |||
Corporate/Other Unallocated Costs | |||||
Cost of sales | 19%
- 21% | 79% - 81% | |||
Selling, informational and administrative expenses | 52% - 54% | 46% - 48% | |||
Research and development expenses | 84% - 86% | 14%
- 16% | |||
Other (income)/deductions––net | * | * | |||
Total Corporate/Other Unallocated Costs | 48% - 50% | 50% - 52% | |||
Total
WRD/GPD/Medical and Corporate/Other Unallocated Costs | |||||
Cost of sales | 19% - 21% | 79% - 81% | |||
Selling, informational and administrative expenses | 52%
- 54% | 46% - 48% | |||
Research and development expenses | 96% - 98% | 2% - 4% | |||
Other (income)/deductions––net | * | * | |||
Total
WRD/GPD/Medical and Corporate/Other Unallocated Costs | 66% - 68% | 32% - 34% | |||
* | Amounts in the period may not necessarily be indicative of ongoing operating activity. After excluding net interest-related expense not attributable to an operating segment included in Corporate and net income from investments and other assets not attributable to an operating segment included in Corporate, Other (income)/deductions––net
approximates $135 million of income for 2016. |
• | WRD/GPD/Medical––The information provided in the table above for WRD, GPD and Medical was substantially all derived from our estimates of the costs incurred in connection with the R&D projects associated with each operating segment. |
• | Corporate/Other
Unallocated––The information provided in the table above for Corporate and Other Unallocated was derived using proportional allocation methods based on global, regional or country revenues or global, regional or country headcount, as well as certain cost metrics, as appropriate, such as those derived from R&D and manufacturing costs, and to a lesser extent, specific identification. Management believes that the allocations of Corporate and Other Unallocated costs are reasonable. |
(c) | See the “Adjusted Income” section of this Financial Review for a definition of these “Adjusted Income” components. |
(d) | Includes
costs associated with (i) purchase accounting adjustments; (ii) acquisition-related costs; and (iii) certain significant items, which are substantive and/or unusual, and in some cases recurring, items (such as restructuring or legal charges) that are evaluated on an individual basis by management. In 2014, certain significant items include revenues and expenses related to our manufacturing and supply agreements with Zoetis, which are part of Pfizer CentreOne. For additional information about these reconciling items and/or our Non-GAAP Adjusted measure of performance, see the “Adjusted Income” section of this Financial Review. |
• | IH
Revenues increased 9% to $29.2 billion in 2016, compared to $26.8 billion in 2015. Foreign exchange had an unfavorable impact of 2% in 2016, compared to 2015. IH Revenues increased 11% operationally in 2016, compared to the same period in 2015. |
2016
Financial Report | 47 | |
The
following provides an analysis of 2016 revenue growth for IH: | ||||
Year Ended December 31, | ||||
(BILLIONS OF DOLLARS) | 2016 | |||
Acquisitions | ||||
Inclusion
of Xtandi revenues in the U.S. resulting from the acquisition of Medivation in September 2016 | $ | 0.1 | ||
Operational growth/(decline) | ||||
Continued operational growth from key brands including Ibrance, Lyrica, Xeljanz, Chantix/Champix
and Consumer Healthcare, all primarily in the U.S., as well as Eliquis and Xalkori globally | 3.6 | |||
Decline in Rebif revenues in the U.S. due to the year-end 2015 expiry of the collaboration agreement to co-promote Rebif in the U.S., as well as lower revenues for Enbrel in most developed Europe markets, primarily due to biosimilar competition | (0.6 | ) | ||
Decline in Prevnar 13/Prevenar 13 revenues, primarily driven by an expected
decline in revenues for the adult indication in the U.S. due to a high initial capture rate of the eligible population following its successful fourth-quarter 2014 launch, which resulted in a smaller remaining “catch up” opportunity compared to the prior-year, as well as the unfavorable impact of the timing of government purchases for the pediatric indication | (0.5 | ) | ||
Other operational factors, net | 0.4 | |||
Unfavorable
impact of foreign exchange | (0.6 | ) | ||
IH Revenues growth in 2016 | $ | 2.4 | ||
• | Cost of sales as a percentage of Revenues increased slightly in 2016, compared to 2015, due to the unfavorable impact of foreign exchange and an increase in royalty expense, partially offset by a favorable change in product mix, including an increase in alliance revenues, which have no associated cost of sales. The increase in Cost of sales of
11% in 2016, compared to 2015, was primarily driven by the unfavorable impact of foreign exchange, an increase in royalty expense and an increase in sales volumes. |
• | The increase in Selling, informational and administrative expenses of 6% in 2016, compared to 2015, reflects an increase in the allowance for doubtful trade accounts receivable, resulting from unfavorable developments
with a distributor, and additional investment across several of our key products, partially offset by the favorable impact of foreign exchange. |
• | The increase in Research and development expenses of 8% in 2016, compared to 2015, primarily reflects: |
◦ | costs to close out studies for the
global clinical development program for bococizumab that was discontinued in the fourth quarter of 2016, |
◦ | increased costs associated with our oncology programs, primarily our avelumab alliance with Merck KGaA, and |
◦ | the inclusion of three months of legacy Medivation operations in 2016, |
◦ | the
non-recurrence of the $295 million upfront payment made to OPKO in the first quarter of 2015. |
• | The unfavorable change in Other (income)/deductions––net in 2016, compared to 2015, primarily reflects the unfavorable impact of foreign exchange, a net decrease in royalty income and a decrease in our equity income from a certain equity-method investment. |
48 | 2016
Financial Report | |
The following provides an analysis of 2015 revenue growth for IH: | ||||
Year
Ended December 31, | ||||
(BILLIONS OF DOLLARS) | 2015 | |||
Acquisitions | ||||
Inclusion of revenues associated with the acquisition of Baxter’s portfolio of marketed vaccines in Europe | $ | 0.2 | ||
Operational
growth/(decline) | ||||
Increase in Prevnar family revenues, in the U.S., primarily driven by continued strong uptake of Prevnar 13 among adults following the positive recommendation from ACIP for use in adults aged 65 and older in the third quarter of 2014, and in certain emerging markets, primarily reflecting Prevenar’s inclusion in additional national immunization programs | 2.1 | |||
Strong operational performance of Eliquis globally, Lyrica, primarily in the U.S. and Japan, as well as Xeljanz,
Viagra and Chantix, all primarily in the U.S. | 1.5 | |||
Continued strong momentum following the February 2015 U.S. launch of Ibrance for advanced breast cancer and, to a lesser extent, stronger demand for Xalkori, Sutent and Inlyta in most markets | 0.9 | |||
A decline in Rapamune revenues in the U.S. due to generic competition, which began in October 2014 | (0.1 | ) | ||
Declines
in the hemophilia portfolio in the U.S. due to increased competition | (0.1 | ) | ||
Other operational factors, net | 0.2 | |||
Unfavorable impact of foreign exchange | (1.9 | ) | ||
IH
Revenues growth in 2015 | $ | 2.8 | ||
• | Cost
of sales as a percentage of Revenues decreased 2.4 percentage points in 2015, compared to 2014, primarily driven by favorable product mix, favorable foreign exchange and a decrease in royalty expense. The decrease in Cost of sales of 5% in 2015, compared to 2014, was primarily driven by favorable foreign exchange and, to a lesser extent, a decrease in royalty expense, partially offset by an increase in sales volumes, driven primarily by continued strong uptake of Prevnar 13 among adults, as well as the acquisition of Baxter’s portfolio of marketed vaccines in Europe. |
• | The
increase in Selling, informational and administrative expenses of 10% in 2015, compared to 2014, reflects higher promotional expenses in the U.S., primarily for newly launched Consumer Healthcare product line extensions, Prevnar 13 in adults and Ibrance and additional investment in Eliquis, Lyrica and certain other products, partially offset by favorable foreign exchange. |
• | The increase in Research and development expenses of 19% in 2015,
compared to 2014, primarily reflects the $295 million upfront payment to OPKO made in the first quarter of 2015, increased investment in certain late-stage pipeline programs, primarily bococizumab, and increased costs associated with our vaccine and oncology programs, primarily our anti-PD-L1 alliance with Merck KGaA and Ibrance, partially offset by lower clinical trial expenses for certain previously approved products as well as for Trumenba, Prevnar 13 adult and certain oncology products. |
• | EH
Revenues increased 7% to $23.6 billion in 2016, compared to $22.1 billion in 2015. Foreign exchange had an unfavorable impact of 4% in 2016, compared to 2015. EH Revenues excluding the contribution from the legacy Hospira portfolio, decreased 8%, or 3% operationally, in 2016, compared to 2015. |
The
following provides an analysis of 2016 revenue growth for EH: | ||||
Year Ended December 31, | ||||
(BILLIONS OF DOLLARS) | 2016 | |||
Acquisitions | ||||
Twelve
months of revenues from legacy Hospira global operations in 2016, compared to four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations in 2015 | $ | 3.1 | ||
Operational growth/(decline) | ||||
Decline
from the Peri-LOE Products portfolio, primarily due to the loss of exclusivity and associated generic competition for certain Peri-LOE Products, primarily Zyvox in the U.S. and certain developed Europe markets as well as Lyrica in certain developed Europe markets | (1.0 | ) | ||
Operational growth in the legacy Pfizer Sterile Injectable Pharmaceuticals portfolio, mostly in emerging markets and the U.S. | 0.3 | |||
Unfavorable
impact of foreign exchange | (0.9 | ) | ||
EH Revenues growth in 2016 | $ | 1.5 | ||
2016 Financial Report | 49 | |
• | Cost of sales as a percentage of Revenues increased 4.4 percentage points in 2016, compared to 2015, primarily due to the inclusion of a full year of legacy Hospira global operations in 2016, compared to the inclusion
of only four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations in 2015, the unfavorable impact of product losses of exclusivity and the unfavorable impact of foreign exchange. The increase in Cost of sales of 28% in 2016, compared to 2015, was driven by the inclusion of a full year of legacy Hospira global operations in 2016, compared to the inclusion of only four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations in 2015 and the unfavorable impact of foreign exchange, partially offset by lower volumes across the Legacy Established Products portfolio and the impact of products losing exclusivity. |
• | Selling,
informational and administrative expenses decreased 3% in 2016, compared to 2015, primarily due to the favorable impact of foreign exchange, lower advertising, promotional and field force expenses, reflecting the benefits of cost-reduction and productivity initiatives, and lower general and administrative expenses, partially offset by the inclusion of a full year of legacy Hospira global operations in 2016, compared to the inclusion of only four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations in 2015. |
• | Research
and development expenses increased 19% in 2016, compared to 2015, reflecting the inclusion of a full year of legacy Hospira global operations in 2016, compared to the inclusion of only four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations in 2015 and increased investment primarily in legacy Hospira biosimilar and sterile injectable development programs. |
• | The favorable change in Other (income)/deductions––net in
2016, compared to 2015, primarily reflects resolution of a contract disagreement, partially offset by the unfavorable impact of foreign exchange. |
• | EH Revenues decreased 13% to $22.1 billion in 2015, compared to $25.4 billion to 2014. Foreign exchange
had an unfavorable impact of 7% on EH revenues in 2015, compared to 2014. Revenues decreased by 6% operationally in 2015. |
The following provides an analysis of 2015 revenue decline for EH: | ||||
Year Ended December 31, | ||||
(BILLIONS OF DOLLARS) | 2015 | |||
Acquisitions | ||||
Hospira | $ | 1.5 | ||
Operational
growth/(decline) | ||||
Loss of exclusivity and associated launch of multi-source generic competition for Celebrex in the U.S. in December 2014, for Zyvox in the U.S. beginning in the first half of 2015, for Lyrica in certain developed Europe markets beginning in the first quarter of 2015, and Inspra in developed Europe markets beginning in August 2014 | (2.5 | ) | ||
The decline in Zosyn/Tazocin revenues due to a disruption in supply due to manufacturing issues | (0.2 | ) | ||
The
termination of the co-promotion collaboration for Spiriva | (0.1 | ) | ||
A decline in Lipitor revenues in developed markets as a result of continued generic competition | (0.2 | ) | ||
Growth in emerging markets (excluding legacy Hospira) | 0.2 | |||
Other
operational factors, net | (0.2 | ) | ||
Unfavorable impact of foreign exchange | (1.9 | ) | ||
EH Revenues decline in 2015 | $ | (3.3 | ) | |
• | Cost of sales as a percentage of Revenues increased 3.5 percentage points in 2015, compared to 2014, primarily due to the impact of losses of exclusivity resulting in an unfavorable change in product mix and the inclusion
of legacy Hospira operations, partially offset by favorable foreign exchange. The increase in Cost of sales of 3% in 2015, compared to 2014, was primarily driven by the inclusion of legacy Hospira operations, partially offset by favorable foreign exchange and lower volumes as a result of products losing exclusivity. |
• | Selling, informational and administrative expenses decreased 8% in 2015, compared to 2014, primarily due to lower field force, advertising
and promotional expenses reflecting the benefits of cost-reduction and productivity initiatives, as well as favorable foreign exchange, partially offset by the inclusion of legacy Hospira operations, an increase in certain general and administrative expenses and higher cost for the U.S. Branded Prescription Drug Fee compared to the prior year. |
• | Research and development expenses increased 10% in 2015, compared to 2014, reflecting the inclusion of legacy Hospira operations and increased investment in biosimilar development programs and sterile injectable development programs acquired
as part of our acquisition of InnoPharma, partially offset by lower clinical trial expenses related to postmarketing commitments, primarily Celebrex and Pristiq. |
• | The unfavorable change in Other (income)/deductions––net of 45% in 2015, compared to 2014, primarily reflects the non-recurrence of prior year gains on the sale of product rights, unfavorable foreign exchange and a decrease in our equity income from our equity-method investment in China (Hisun Pfizer), partially offset by other income gains. |
50 | 2016
Financial Report | |
• | Foreign currency translation adjustments, net, primarily reflects the strengthening of the U.S. dollar against the U.K. pound, Chinese renminbi, Mexican peso, and Argentine peso, partially offset by the weakening of the U.S. dollar against the Australian dollar and Japanese yen. |
• | For Unrealized holding gains/(losses)
on derivative financial instruments, net and Unrealized holding gains/(losses) on available-for-sale securities, net, reflects the impact of fair value remeasurements and the reclassification of realized amounts into income. For additional information, see Notes to Consolidated Financial Statements—Note 7. Financial Instruments. |
• | For Benefit plans: actuarial losses, net, reflects the actuarial losses related primarily to a decrease in the discount rate, partially offset by (i) the amortization of changes in the pension benefit obligation previously recognized in Other Comprehensive
Income, and (ii) higher actual return on plan assets as compared to the expected return on plan assets. For additional information, see Notes to Consolidated Financial Statements—Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans and the “Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions––Benefit Plans” section of this Financial Review. |
• | For Foreign currency translation adjustments, net, reflects primarily the strengthening of the U.S. dollar against the euro, Brazilian real, Canadian dollar, Australian dollar, British
pound, Mexican peso and Japanese yen. |
• | For Unrealized holding gains/(losses) on derivative financial instruments, net and Unrealized holding gains/(losses) on available-for-sale securities, net, reflects the impact of fair value remeasurements and the reclassification of realized amounts into income. For additional information, see Notes to Consolidated Financial Statements—Note 7. Financial Instruments. |
• | For
Benefit plans: actuarial losses, net, primarily reflects the reclassification into income of amounts related to (i) the amortization of changes in the pension benefit obligation previously recognized in Other comprehensive income, (ii) lower actual return on plan assets as compared to the expected return on assets, and (iii) settlement activity, as well as the impact of foreign exchange. For additional information, see Notes to Consolidated Financial Statements—Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans and the “Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions––Benefit Plans” section of this Financial Review. |
• | For
Benefit plans: prior service credits and other, net, reflects a $507 million reduction in our U.S. Postretirement Plan obligation due to a plan amendment approved in June 2015 that introduced a cap on costs for certain groups within the plan, partially offset by the reclassification into income of amounts related to (i) amortization of changes in prior service costs and credits previously recognized in Other comprehensive income and (ii) curtailment activity. For additional information, see Notes to Consolidated Financial Statements—Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans. |
• | For
Foreign currency translation adjustments, reflects primarily the weakening of the euro against the U.S. dollar, and, to a lesser, extent the weakening of the Japanese yen, Canadian dollar, Brazilian real and U.K. pound against the U.S. dollar. Also, includes the reclassification of amounts associated with legal entity dispositions into income. |
• | For Unrealized holding gains/(losses) on derivative financial instruments, net and Unrealized holding gains/(losses) on available-for-sale securities, net, reflects the
impact of fair value remeasurements and the reclassification of realized amounts into income. For additional information, see Notes to Consolidated Financial Statements—Note 7. Financial Instruments. |
• | For Benefit plans: actuarial losses, net, reflects the actuarial losses related primarily to a decrease in the discount rate. For additional information, see Notes to Consolidated Financial Statements—Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans and the “Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions––Benefit Plans”
section of this Financial Review. |
• | For Benefit plans: prior service credits and other, net, reflects an amendment to our post-retirement plans that decreased the benefit obligation by transferring certain plan participants to a retiree drug coverage program eligible for a Medicare Part D plan subsidy. For additional information, see Notes to Consolidated Financial Statements—Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans. |
2016 Financial Report | 51 | |
• | For
Trade accounts receivable, less allowance for doubtful accounts, the change reflects the timing of sales and collections in the normal course of business and an increase in the allowance for doubtful accounts, resulting from unfavorable developments with a distributor. |
• | For Inventories, the change reflects planned inventory reductions, including those related to demand, and the sell through of inventory acquired through the Hospira acquisition, partially offset by the build of inventory for new product launches. |
• | For
Other current assets, the change reflects an increase in VAT receivable balances due to a change in our supply chain, as well as the timing of receipts and payments in the normal course of business. |
• | For PP&E, the change reflects depreciation during the period offset by capital additions in the normal course of business. |
• | For Identifiable intangible assets, less accumulated amortization,
the change primarily reflects amortization and impairments for the period (see Notes to Consolidated Financial Statements—Note 4. Other (Income)/Deductions—Net for additional information on impairments for the period). |
• | For Other noncurrent assets, the change reflects a reduction in receivables associated with our derivative financial instruments, partially offset by an increase in noncurrent VAT receivable balances due to a change in our supply chain. |
• | For
Trade accounts payable, the change reflects the timing of purchases and payments in the normal course of business, including efforts to improve working capital efficiencies. |
• | For Accrued compensation and related items, the increase reflects accruals, partially offset by 2015’s bonus payments made to employees. |
• | For Other current liabilities, the change reflects consideration due
for the acquisition of Medivation (see Notes to Consolidated Financial Statements––Note 2A. Acquisitions, Assets and Liabilities Held for Sale, Licensing Agreements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions), the payment to resolve claims relating to Protonix and accruals for certain legal matters (see Notes to Consolidated Financial Statements—Note 17A5. Commitments and Contingencies: Legal Proceedings––Matters Resolved During 2016), a reduction in payables associated with our derivative financial instruments, payments for interest and the timing of other accruals and payments in the normal course of business partially offset by increases related to restructuring matters, closeout of bococizumab clinical
studies and accrued healthcare fees. |
• | For Pension benefit obligations, net, and Postretirement benefit obligations, net, the change reflects a $1.0 billion voluntary pension contribution in January 2016, a decrease in our discount rate assumption used in the measurement of the plan obligations, as well as the information provided in Notes to Consolidated Financial Statements—Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans. |
• | For
Other noncurrent liabilities, the change reflects an increase in the payables associated with our restructuring matters, deferred revenue from a co-development agreement and our derivative financial instruments, partially offset by payments and accruals for certain legal matters, and changes in accruals in the normal course of business. |
• | For Accumulated other comprehensive loss, the change for 2016 reflects, among other changes, foreign currency translation adjustments and actuarial losses. For additional information see the “Analysis of the Consolidated Statements of Comprehensive Income” section of this Financial Review. |
• | For
Treasury stock, the change reflects $5 billion paid to GS&Co. in March 2016 pursuant to the terms of an accelerated share repurchase agreement. See Notes to Consolidated Financial Statements—Note 12. Equity for additional information. |
Year
Ended December 31, | % Change | |||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | 16/15 | 15/14 | |||||||||||||
Cash
provided by/(used in): | ||||||||||||||||||
Operating activities(a) | $ | 15,901 | $ | 14,688 | $ | 17,084 | 8 | (14 | ) | |||||||||
Investing
activities | (7,811 | ) | (2,980 | ) | (5,654 | ) | * | (47 | ) | |||||||||
Financing
activities(a) | (8,921 | ) | (10,409 | ) | (10,187 | ) | (14 | ) | 2 | |||||||||
Effect
of exchange-rate changes on cash and cash equivalents | (215 | ) | (1,000 | ) | (83 | ) | (79 | ) | * | |||||||||
Net
increase/(decrease) in Cash and cash equivalents | $ | (1,046 | ) | $ | 298 | $ | 1,160 | * | (74 | ) | ||||||||
* | Calculation
not meaningful. |
52 | 2016 Financial Report | |
(a) | Amounts
reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, that requires that cash flows present (i) excess tax benefits as Other tax accounts, net as part of operating activities, rather than financing activities on a prospective basis beginning in the year of adoption, and (ii) cash paid by us when directly withholding shares for tax-withholding purposes as a cash outflow from financing activities, rather than operating activities and is reflected in the year of adoption and retrospectively in 2015 and 2014. The year-to-date excess tax benefit was $26 million, $51 million, $87 million, and $91 million in each of the first, second, third and fourth quarters of 2016, respectively. For cash paid by us for withholding purposes, $137 million for 2016 is presented as financing activities in
the consolidated statements of cash flows, and cash outflows of $189 million for 2015 and $195 million for 2014 were reclassified from operating activities to financing activities in the consolidated statements of cash flows, respectively. (see Notes to Consolidated Financial Statements—Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards). |
• | net redemptions/proceeds from sale of investments of $12.5 billion in 2016,
compared to net redemptions/proceeds of investments of $14.6 billion in 2015; and |
• | cash paid of $18.4 billion, net of cash acquired, primarily for the acquisitions of Medivation, Bamboo and Anacor in 2016 compared to cash paid of $16.5 billion, net of cash acquired, primarily for the acquisition of Hospira and the acquisition of Baxter’s portfolio of marketed vaccines in 2015. (see Notes to Consolidated Financial Statements—Note 2A. Acquisitions,
Assets and Liabilities Held for Sale, Licensing Agreements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions). |
2016 Financial Report | 53 | |
• | net redemptions/proceeds from sale of investments of $14.6 billion in 2015, compared to net purchases of investments of $4.2 billion in 2014, |
• | cash paid of $16.5 billion, net of cash acquired, primarily for the acquisition of Hospira and the acquisition of Baxter’s portfolio of marketed vaccines in 2015. (see Notes to Consolidated Financial Statements—Note 2A. Acquisitions, Assets and Liabilities Held for Sale, Licensing Agreements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Acquisitions). |
• | the issuance of long-term debt of $11 billion on June 3, 2016 and November 21, 2016; and |
• | purchases
of common stock of $5.0 billion in 2016, compared to $6.2 billion in 2015, |
• | net payments on short-term borrowings of $714 million in 2016, compared to net proceeds on short-term borrowings of $4.3 billion in 2015; |
• | higher
repayments on long-term debt of $7.7 billion in 2016, compared to $3.0 billion in 2015; |
• | higher cash dividends paid of $7.3 billion in 2016, compared to $6.9 billion in 2015; and |
• | lower proceeds from the exercise of stock options of $1.0
billion in 2016, compared to $1.3 billion in 2015. |
• | net
principal payments on long-term debt of $3.0 billion in 2015, compared to net proceeds from issuance of long-term debt of $2.4 billion in 2014; and |
• | purchases of common stock of $6.2 billion in 2015, compared to $5.0 billion in 2014, |
• | net
proceeds from short-term borrowings of $4.3 billion in 2015, compared to net payments on short-term borrowings of $1.8 billion in 2014. |
• | the
working capital requirements of our operations, including our R&D activities; |
• | investments in our business; |
• | dividend payments and potential increases in the dividend rate; |
• | share repurchases; |
• | the
cash requirements associated with our cost-reduction/productivity initiatives; |
• | paying down outstanding debt; |
• | contributions to our pension and postretirement plans; and |
• | business-development activities. |
54 | 2016 Financial Report | |
The following table provides certain relevant
measures of our liquidity and capital resources: | ||||||||
As of December 31, | ||||||||
(MILLIONS OF DOLLARS, EXCEPT RATIOS AND PER COMMON SHARE DATA) | 2016 | 2015 | ||||||
Selected financial assets: | ||||||||
Cash
and cash equivalents(a) | $ | 2,595 | $ | 3,641 | ||||
Short-term investments(a) | 15,255 | 19,649 | ||||||
Long-term
investments(a) | 7,116 | 15,999 | ||||||
24,967 | 39,290 | |||||||
Debt(b): | ||||||||
Short-term
borrowings, including current portion of long-term debt | 10,688 | 10,159 | ||||||
Long-term debt | 31,398 | 28,740 | ||||||
42,085 | 38,899 | |||||||
Selected
net financial assets/(liabilities)(c) | $ | (17,118 | ) | $ | 391 | |||
Working
capital(d) | $ | 7,834 | $ | 14,405 | ||||
Ratio of current assets to current liabilities(d) | 1.25:1 | 1.49:1 | ||||||
Total
Pfizer Inc. shareholders’ equity per common share(e) | $ | 9.81 | $ | 10.48 | ||||
(a) | See Notes to Consolidated Financial Statements––Note
7. Financial Instruments for a description of certain assets held and for a description of credit risk related to our financial instruments held. |
(b) | We adopted a new accounting standard as of January 1, 2016 that changed the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying value of that associated debt, consistent with the presentation of a debt discount. See Notes to Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards. |
(c) | The
change in selected net financial assets/(liabilities) is predominantly a result of cash paid for acquisitions of businesses, particularly Medivation and Anacor. We retain a strong financial liquidity position as a result of our net cash provided by operating activities, our high quality financial asset portfolio and access to capital markets. Both Moody’s and S&P rating agencies maintained our strong investment-grade corporate debt-rating subsequent to the acquisitions. For additional information, see the “Credit Ratings” section of this Financial Review. |
(d) | The decrease in working capital is primarily due to a decrease in short-term investments and an increase in short-term borrowings, and the timing of accruals,
cash receipts and payments in the ordinary course of business, partially offset by the reclassification of Assets held for sale (see Notes to Consolidated Financial Statements––Note 2B. Acquisitions, Assets and Liabilities Held for Sale, Licensing Agreements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Assets and Liabilities Held for Sale). |
(e) | Represents total Pfizer Inc. shareholders’ equity divided by the actual number of common shares outstanding (which excludes treasury stock). |
2016
Financial Report | 55 | |
The following table provides the current ratings assigned by these rating agencies to our commercial paper and senior unsecured long-term debt: | ||||||
NAME OF RATING AGENCY | Pfizer Commercial Paper | Pfizer Long-Term
Debt | Date of Last Rating Change | |||
Rating | Rating | |||||
Moody’s(a) | P-1 | A1 | October
2009 | |||
S&P(b) | A-1+ | AA | October 2009 | |||
(a) | In September 2016, Moody's updated its credit outlook from negative outlook to stable. |
(b) | In
April 2016, S&P updated its credit outlook from negative watch to stable. |
56 | 2016 Financial Report | |
Payments due under contractual obligations as of December 31, 2016, mature as follows: | ||||||||||||||||||||
Years | ||||||||||||||||||||
(MILLIONS
OF DOLLARS) | Total | 2017 | 2018-2019 | 2020-2021 | Thereafter | |||||||||||||||
Long-term
debt, including current portion(a) | $ | 35,623 | $ | 4,225 | $ | 6,917 | $ | 4,601 | $ | 19,879 | ||||||||||
Interest
payments on long-term debt obligations(b) | 19,604 | 1,247 | 2,464 | 2,281 | 13,612 | |||||||||||||||
Other
long-term liabilities(c) | 3,278 | 402 | 775 | 673 | 1,429 | |||||||||||||||
Operating
Leases | 1,801 | 220 | 351 | 263 | 967 | |||||||||||||||
Purchase
obligations and other(d) | 4,726 | 1,247 | 958 | 973 | 1,548 | |||||||||||||||
Uncertain
tax positions(e) | 48 | 48 | — | — | — | |||||||||||||||
(a) | Long-term
debt consists of senior unsecured notes (including fixed and floating rate, foreign currency denominated, and other notes) and capital lease obligations (see Notes to Consolidated Financial Statements—Note 7. Financial Instruments). Commitments under capital leases are not significant. |
(b) | Our calculations of expected interest payments incorporate only current period assumptions for interest rates, foreign currency translation rates and hedging strategies (see Notes to Consolidated Financial Statements—Note 7. Financial Instruments), and assume that interest is accrued through the maturity date or expiration of the related instrument. |
(c) | Includes
expected payments relating to our unfunded U.S. supplemental (non-qualified) pension plans, postretirement plans and deferred compensation plans. Excludes amounts relating to our U.S. qualified pension plans and international pension plans, all of which have a substantial amount of plan assets, because the required funding obligations are not expected to be material and/or because such liabilities do not necessarily reflect future cash payments, as the impact of changes in economic conditions on the fair value of the pension plan assets and/or liabilities can be significant. In January 2017, we made a $1.0 billion voluntary contribution to the U.S. qualified plans. We do not anticipate making any additional contributions to the U.S. qualified plans in 2017. Also, excludes $5.5 billion of |
2016
Financial Report | 57 | |
(d) | Includes
agreements to purchase goods and services that are enforceable and legally binding and includes amounts relating to advertising, information technology services, employee benefit administration services, and potential milestone payments deemed reasonably likely to occur. |
(e) | Includes only income tax amounts currently payable. We are unable to predict the timing of tax settlements related to our noncurrent obligations for uncertain tax positions as tax audits can involve complex issues and the resolution of those issues may span multiple years, particularly if subject to negotiation or litigation. |
The following table provides the number of shares of our common stock purchased and the cost
of purchases under our publicly announced share-purchase plans, including our accelerated share repurchase agreements: | ||||||||||||
(SHARES IN MILLIONS, DOLLARS IN BILLIONS) | 2016(a) | 2015(b) | 2014 | |||||||||
Shares
of common stock purchased | 154 | 182 | 165 | |||||||||
Cost of purchase | $ | 5.0 | $ | 6.2 | $ | 5.0 | ||||||
(a) | Represents
shares purchased pursuant to and received upon settlement of the accelerated share repurchase agreement entered into on March 8, 2016. See above for additional information. |
(b) | Includes approximately 151 million shares purchased for $5.2 billion pursuant to the accelerated share repurchase agreement entered into on February 9, 2015 (see above for additional information), as well as other share repurchases through year-end 2015. |
58 | 2016 Financial Report | |
The following table provides a brief description of recently issued accounting standards, not yet adopted: | ||||
Standard/Description | Effective Date | Effect
on the Financial Statements or Other Significant Matters | ||
In October 2016, the FASB issued amended guidance on the assessment of whether an entity is the primary beneficiary of a VIE. Under this new guidance, when evaluating whether an entity is the primary beneficiary, a single decision maker must consider its indirect interest held through related parties under common control proportionately. | January 1, 2017. Earlier application is permitted, including adoption in an interim period. | The provisions of this new standard will not have a material impact
on our consolidated financial statements. | ||
In July 2015, the FASB issued an update related to inventory. The new guidance requires that inventory be measured at the lower of cost or net realizable value. | We do not expect the provisions of this new standard will have a material impact on our consolidated financial statements. | |||
In May 2014, the FASB issued amended guidance related to revenue from contracts
with customers. The new guidance introduces a new principles-based framework for revenue recognition and disclosure. Since its issuance the FASB has issued six ASUs, amending the guidance and effective date, and the SEC has rescinded certain related SEC guidance; the most recent of these changes was issued in December 2016. | January 1, 2018. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. | We have made substantial progress in completing
our review of the impact of this guidance across our various business arrangements and revenue related activities, and do not expect the adoption of this standard to have a material impact on our financial statements and revenue recognition practices, or our internal controls. Under the development portion of our collaboration agreements, we expect the milestone payments, which are recorded in Other (income)/deductions––net, to be amortized over the development period rather than the life of the agreement, as we currently do. We continue to monitor additional changes, modifications, clarifications or interpretations undertaken by the FASB, which may impact our current conclusions. In addition, we continue to monitor other changes, such as changes in our business, new collaboration arrangements, business combinations, etc., which may impact our current conclusions prior to the
adoption date. | ||
In August 2016, the FASB issued new guidance on the classification of certain transactions in the Statement of Cash Flows. | January 1, 2018. Earlier application is permitted. | We are assessing the impact of this guidance on our consolidated financial statements. | ||
In October 2016, the FASB issued new guidance on the presentation of restricted cash in the Statement of Cash Flows. | January
1, 2018. Earlier application is permitted. | We are assessing the impact of this guidance on our consolidated financial statements. | ||
In October 2016, the FASB issued an update to its guidance on income tax accounting. The new guidance replaces the prohibition against recognizing current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party with a requirement to do so, unless the asset transferred is inventory. | January 1, 2018. Earlier application is permitted in the first interim period of
an annual reporting period. | We have not yet completed our review of the impact of this new guidance on our consolidated financial statements. The impact of adoption will be recorded as a cumulative effect adjustment to Retained earnings. | ||
2016 Financial Report | 59 | |
Standard/Description | Effective
Date | Effect on the Financial Statements or Other Significant Matters | ||
In January 2016, the FASB issued an update to its guidance on recognition and measurement of financial assets and liabilities. Among other things, the new guidance makes the following targeted changes to existing guidance: 1. Requires certain equity investments to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions
for the identical or similar investment of the same issuer. 2. Requires a qualitative assessment of equity investments without readily determinable fair values to identify impairment. 3. Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. | January 1, 2018. Earlier application is permitted as of the beginning of an interim or annual reporting period. | We are assessing the impact of the provisions of this new guidance on our consolidated
financial statements. | ||
In January 2017, the FASB issued new guidance to clarify the definition of a business. The new guidance provides a new framework for determining whether business development transactions should be accounted for as acquisitions (or disposals) of assets or businesses. If the fair value of the gross assets acquired is concentrated in a single identifiable asset, the transaction will not qualify for treatment as a business. The new guidance also requires that to be considered a business, a set of integrated activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs, without regard as to whether a market participant could replace missing elements. In addition, the new guidance narrows the
definition of the term "output" to make it consistent with how outputs are described in the updated revenue recognition guidance. | January 1, 2018. Earlier application is permitted for acquisition or derecognition events that occurred prior to issuance date or effective date of the guidance only when the transaction has not been reported in financial statements that have been issued or made available for issuance. | We have not yet completed our review of the impact of this guidance. However, we anticipate that after adoption, fewer transactions will be accounted for as business acquisitions (decreasing the amount of goodwill incurred and potentially increasing
IPR&D expense), or disposals of a business. | ||
In February 2017, the FASB issued amended guidance related to the derecognition of nonfinancial assets. | January 1, 2018. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. However, this guidance must be applied at the same time as the new guidance on revenue recognition. | We are assessing the impact of the provisions
of this new guidance on our consolidated financial statements. | ||
In February 2016, the FASB issued an update to its guidance on leases. The new ASU provides guidance for both lessee and lessor accounting models. Among other things, the new guidance requires that a right of use asset and a lease liability be recognized for leases with a duration of greater than one year. | January 1, 2019. Earlier application is permitted. | We have not yet completed our review of the impact of this guidance. However, we anticipate
recognition of additional assets and corresponding liabilities related to leases on our balance sheet. | ||
In June 2016, the FASB issued new guidance on accounting for credit losses of financial instruments. The new guidance replaces the incurred losses methodology in current GAAP with a methodology that reflects expected credit losses using an allowance account. | January 1, 2020. Earlier application is permitted as of fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. | We
have not yet completed our review of the impact of this new guidance on our consolidated financial statements. | ||
In January 2017, the FASB issued new guidance for goodwill impairment testing. The new guidance eliminates the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under the new guidance the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, although it cannot exceed the total amount of goodwill allocated to that reporting unit. | January
1, 2020. Earlier application is permitted. | We have not yet completed our review of the impact of this new guidance on our consolidated financial statements. | ||
60 | 2016 Financial Report | |
• | the outcome of R&D activities, including, without limitation, the ability to meet anticipated pre-clinical and clinical trial commencement and completion dates, regulatory submission and approval dates, and launch dates for product candidates, as well as the possibility of unfavorable pre-clinical and clinical trial results, including unfavorable new clinical data and additional analyses of existing clinical data; |
• | decisions by regulatory authorities regarding whether
and when to approve our drug applications, which will depend on the assessment by such regulatory authorities of the benefit-risk profile suggested by the totality of the efficacy and safety information submitted; decisions by regulatory authorities regarding labeling, ingredients and other matters that could affect the availability or commercial potential of our products; and uncertainties regarding our ability to address the comments in complete response letters received by us with respect to certain of our drug applications to the satisfaction of the FDA; |
• | the speed with which regulatory authorizations, pricing approvals and product launches may be achieved; |
• | the
outcome of post-approval clinical trials, which could result in the loss of marketing approval for a product or changes in the labeling for, and/or increased or new concerns about the safety or efficacy of, a product that could affect its availability or commercial potential; |
• | risks associated with interim data, including the risk that final results of studies for which interim data have been provided and/or additional clinical trials may be different from (including less favorable than) the interim data results and may not support further clinical development of the applicable product candidate or indication; |
• | the
success of external business-development activities, including the ability to satisfy the conditions to closing of announced transactions in the anticipated time frame or at all; |
• | competitive developments, including the impact on our competitive position of new product entrants, in-line branded products, generic products, private label products, biosimilars and product candidates that treat diseases and conditions similar to those treated by our in-line drugs and drug candidates; |
• | the implementation by the FDA and regulatory
authorities in certain other countries of an abbreviated legal pathway to approve biosimilar products, which could subject our biologic products to competition from biosimilar products, with attendant competitive pressures, after the expiration of any applicable exclusivity period and patent rights; |
• | risks related to our ability to develop and launch biosimilars, including risks associated with "at risk" launches, defined as the marketing of a product by Pfizer before the final resolution of litigation (including any appeals) brought by a third party alleging that such marketing would infringe one or more patents owned or controlled by the third party; |
• | the
ability to meet competition from generic, branded and biosimilar products after the loss or expiration of patent protection for our products or competitor products; |
• | the ability to successfully market both new and existing products domestically and internationally; |
• | difficulties or delays in manufacturing, including possible legal or regulatory actions, such as warning letters, suspension of manufacturing, seizure or product, injunctions or voluntary recall of a product; |
• | trade
buying patterns; |
• | the impact of existing and future legislation and regulatory provisions on product exclusivity; |
• | trends toward managed care and healthcare cost containment, and our ability to obtain or maintain timely or adequate pricing or formulary placement for our products; |
• | the impact of
any significant spending reductions or cost controls affecting Medicare, Medicaid or other publicly funded or subsidized health programs or changes in the tax treatment of employer-sponsored health insurance that may be implemented, and/or any significant additional taxes or fees that may be imposed on the pharmaceutical industry as part of any broad deficit-reduction effort; |
2016 Financial Report | 61 | |
• | the impact of any U.S. healthcare reform or legislation, including any repeal, substantial modification or invalidation of any or all of the provisions of the U.S. Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act; |
• | U.S. federal or state legislation or regulatory action and/or policy efforts affecting, among other things, pharmaceutical product pricing, reimbursement or access, including under Medicaid, Medicare and other publicly funded or subsidized health programs; patient out-of-pocket costs for medicines, manufacturer prices and/or price increases that could result in new mandatory rebates and discounts or other pricing restrictions; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; restrictions on direct-to-consumer advertising; limitations on interactions with healthcare professionals; or the use of comparative effectiveness
methodologies that could be implemented in a manner that focuses primarily on the cost differences and minimizes the therapeutic differences among pharmaceutical products and restricts access to innovative medicines; as well as pricing pressures for our products as a result of highly competitive insurance markets; |
• | legislation or regulatory action in markets outside the U.S. affecting pharmaceutical product pricing, reimbursement or access, including, in particular, continued government-mandated reductions in prices and access restrictions for certain biopharmaceutical products to control costs in those markets; |
• | the
exposure of our operations outside the U.S. to possible capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, as well as political unrest, unstable governments and legal systems and inter-governmental disputes; |
• | 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; |
• | any
significant breakdown, infiltration or interruption of our information technology systems and infrastructure; |
• | legal defense costs, insurance expenses and settlement costs; |
• | the risk of an adverse decision or settlement and the adequacy of reserves related to legal proceedings, including patent litigation, product liability and other product-related litigation, including personal injury, consumer, off-label promotion, securities, antitrust and breach of contract
claims, commercial, environmental, government investigations, employment and other legal proceedings, including various means for resolving asbestos litigation, as well as tax issues; |
• | our ability to protect our patents and other intellectual property, both domestically and internationally; |
• | interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates and the volatility following the U.K. referendum in which voters
approved the exit from the EU; |
• | governmental laws and regulations affecting domestic and foreign operations, including, without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside the U.S. that may result from pending and possible future proposals; |
• | any significant issues involving our largest wholesale distributors, which account for a substantial portion of our revenues; |
• | the
possible impact of the increased presence of counterfeit medicines in the pharmaceutical supply chain on our revenues and on patient confidence in the integrity of our medicines; |
• | the end result of any negotiations between the U.K. government and the EU regarding the terms of the U.K.’s exit from the EU, which could have implications on our research, commercial and general business operations in the U.K. and the EU; |
• | any significant issues that may arise related to the outsourcing of certain operational and staff functions
to third parties, including with regard to quality, timeliness and compliance with applicable legal requirements and industry standards; |
• | any significant issues that may arise related to our joint ventures and other third-party business arrangements; |
• | changes in U.S. generally accepted accounting principles; |
• | changes
in interpretations of existing laws and regulations, or changes in laws and regulations, in the U.S. and other countries; |
• | uncertainties related to general economic, political, business, industry, regulatory and market conditions including, without limitation, uncertainties related to the impact on us, our customers, suppliers and lenders and counterparties to our foreign-exchange and interest-rate agreements of challenging global economic conditions and recent and possible future changes in global financial markets; and the related risk that our allowance for doubtful accounts may not be adequate; |
• | any
changes in business, political and economic conditions due to actual or threatened 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; |
• | the impact of purchase
accounting adjustments, acquisition-related costs, discontinued operations and certain significant items; |
• | the impact of acquisitions, divestitures, restructurings, internal reorganizations, product recalls, withdrawals and other unusual items, including our ability to realize the projected benefits of our cost-reduction and productivity initiatives and of the internal separation of our commercial operations into our current operating structure; |
• | the risk of an impairment charge related to our intangible assets, goodwill
or equity-method investments; |
• | risks related to internal control over financial reporting; and |
• | risks and uncertainties related to our recent acquisitions of Hospira, Anacor, Medivation and AstraZeneca’s small molecule anti-infectives business, including, among other things, the ability to realize the anticipated benefits of the acquisitions of Hospira, Anacor, Medivation and |
62 | 2016
Financial Report | |
2016
Financial Report | 63 | |
64 | 2016 Financial Report | |
 | ||
Ian
Read | ||
Chairman and Chief Executive Officer | ||
 |  | |
Frank
D’Amelio | Loretta Cangialosi | |
Principal Financial Officer | Principal Accounting Officer | |
2016
Financial Report | 65 | |
 |  | |
Suzanne
Nora Johnson | W. Don Cornwell | |
Chair, Audit Committee | ||
 |  | |
Joseph
J. Echevarria | Stephen W. Sanger  | |
| ||
James
C. Smith | ||
66 | 2016
Financial Report | |
KPMG LLP |
New York, New York |
2016
Financial Report | 67 | |
KPMG LLP |
New York, New York |
68 | 2016
Financial Report | |
Year
Ended December 31, | ||||||||||||
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | 2016 | 2015 | 2014 | |||||||||
Revenues | $ | 52,824 | $ | 48,851 | $ | 49,605 | ||||||
Costs
and expenses: | ||||||||||||
Cost of sales(a) | 12,329 | 9,648 | 9,577 | |||||||||
Selling,
informational and administrative expenses(a) | 14,837 | 14,809 | 14,097 | |||||||||
Research and development expenses(a) | 7,872 | 7,690 | 8,393 | |||||||||
Amortization
of intangible assets | 4,056 | 3,728 | 4,039 | |||||||||
Restructuring charges and certain acquisition-related costs | 1,724 | 1,152 | 250 | |||||||||
Other
(income)/deductions––net | 3,655 | 2,860 | 1,009 | |||||||||
Income from continuing operations before provision for taxes on income | 8,351 | 8,965 | 12,240 | |||||||||
Provision
for taxes on income | 1,123 | 1,990 | 3,120 | |||||||||
Income from continuing operations | 7,229 | 6,975 | 9,119 | |||||||||
Discontinued
operations: | ||||||||||||
Income from discontinued operations––net of tax | 16 | 17 | (6 | ) | ||||||||
Gain/(loss)
on disposal of discontinued operations––net of tax | — | (6 | ) | 55 | ||||||||
Discontinued operations––net of tax | 17 | 11 | 48 | |||||||||
Net
income before allocation to noncontrolling interests | 7,246 | 6,986 | 9,168 | |||||||||
Less: Net income attributable to noncontrolling interests | 31 | 26 | 32 | |||||||||
Net
income attributable to Pfizer Inc. | $ | 7,215 | $ | 6,960 | $ | 9,135 | ||||||
Earnings
per common share––basic: | ||||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders | $ | 1.18 | $ | 1.13 | $ | 1.43 | ||||||
Discontinued
operations––net of tax | — | — | 0.01 | |||||||||
Net income attributable to Pfizer Inc. common shareholders | $ | 1.18 | $ | 1.13 | $ | 1.44 | ||||||
Earnings
per common share––diluted: | ||||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders | $ | 1.17 | $ | 1.11 | $ | 1.41 | ||||||
Discontinued
operations––net of tax | — | — | 0.01 | |||||||||
Net income attributable to Pfizer Inc. common shareholders | $ | 1.17 | $ | 1.11 | $ | 1.42 | ||||||
Weighted-average
shares––basic | 6,089 | 6,176 | 6,346 | |||||||||
Weighted-average shares––diluted(b) | 6,159 | 6,257 | 6,424 | |||||||||
Cash
dividends paid per common share | $ | 1.20 | $ | 1.12 | $ | 1.04 | ||||||
(a) | Exclusive
of amortization of intangible assets, except as disclosed in Note 1K. Basis of Presentation and Significant Accounting Policies: Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets. |
(b) | Amount for 2016 reflects the adoption of a new accounting standard, as of January 1, 2016, that requires when applying the treasury stock method for shares that could be repurchased, the assumed proceeds no longer include the amount of excess tax benefit (see Note 1B). |
2016 Financial Report | 69 | |
Year
Ended December 31, | ||||||||||||
(MILLIONS) | 2016 | 2015 | 2014 | |||||||||
Net income before allocation to noncontrolling interests | $ | 7,246 | $ | 6,986 | $ | 9,168 | ||||||
Foreign
currency translation adjustments, net | $ | (815 | ) | $ | (3,110 | ) | $ | (1,992 | ) | |||
Reclassification adjustments(a) | — | — | (62 | ) | ||||||||
(815 | ) | (3,110 | ) | (2,054 | ) | |||||||
Unrealized
holding gains/(losses) on derivative financial instruments, net | (442 | ) | 204 | 24 | ||||||||
Reclassification adjustments for realized (gains)/losses(b) | 452 | (368 | ) | 477 | ||||||||
10 | (165 | ) | 501 | |||||||||
Unrealized
holding gains/(losses) on available-for-sale securities, net | 248 | (846 | ) | (640 | ) | |||||||
Reclassification adjustments for realized (gains)/losses(b) | (118 | ) | 796 | 222 | ||||||||
130 | (50 | ) | (418 | ) | ||||||||
Benefit
plans: actuarial losses, net | (1,888 | ) | (37 | ) | (4,173 | ) | ||||||
Reclassification adjustments related to amortization(c) | 558 | 550 | 195 | |||||||||
Reclassification
adjustments related to settlements, net(c) | 127 | 671 | 101 | |||||||||
Other | 195 | 199 | 188 | |||||||||
(1,009 | ) | 1,383 | (3,690 | ) | ||||||||
Benefit
plans: prior service credits and other, net | 184 | 432 | 746 | |||||||||
Reclassification adjustments related to amortization(c) | (173 | ) | (160 | ) | (73 | ) | ||||||
Reclassification
adjustments related to curtailments, net(c) | (26 | ) | (32 | ) | 8 | |||||||
Other | 6 | (3 | ) | (9 | ) | |||||||
(8 | ) | 237 | 672 | |||||||||
Other
comprehensive loss, before tax | (1,692 | ) | (1,705 | ) | (4,988 | ) | ||||||
Tax provision/(benefit) on other comprehensive loss(d) | (174 | ) | 528 | (946 | ) | |||||||
Other
comprehensive loss before allocation to noncontrolling interests | $ | (1,518 | ) | $ | (2,232 | ) | $ | (4,042 | ) | |||
Comprehensive
income before allocation to noncontrolling interests | $ | 5,728 | $ | 4,754 | $ | 5,126 | ||||||
Less: Comprehensive income/(loss) attributable
to noncontrolling interests | 28 | (1 | ) | 36 | ||||||||
Comprehensive income attributable to Pfizer Inc. | $ | 5,701 | $ | 4,755 | $ | 5,090 | ||||||
(a) | Reclassified
into Gain on disposal of discontinued operations—net of tax in the consolidated statements of income. |
(b) | Reclassified into Other (income)/deductions—net in the consolidated statements of income. |
(c) | Generally reclassified, as part of net periodic pension cost, into Cost of sales, Selling, informational and administrative expenses,
and/or Research and development expenses, as appropriate, in the consolidated statements of income. For additional information, see Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans. |
(d) | See Note 5E. Tax Matters: Tax Provision/(Benefit) on Other Comprehensive Loss. |
70 | 2016 Financial Report | |
As
of December 31, | ||||||||
(MILLIONS, EXCEPT PREFERRED STOCK ISSUED AND PER COMMON SHARE DATA) | 2016 | 2015 | ||||||
Assets | ||||||||
Cash
and cash equivalents | $ | 2,595 | $ | 3,641 | ||||
Short-term investments | 15,255 | 19,649 | ||||||
Trade
accounts receivable, less allowance for doubtful accounts: 2016—$609; 2015—$384 | 8,225 | 8,176 | ||||||
Inventories | 6,783 | 7,513 | ||||||
Current
tax assets | 3,041 | 2,662 | ||||||
Other current assets | 2,249 | 2,154 | ||||||
Assets
held for sale | 801 | 9 | ||||||
Total current assets | 38,949 | 43,804 | ||||||
Long-term
investments | 7,116 | 15,999 | ||||||
Property, plant and equipment, less accumulated depreciation | 13,318 | 13,766 | ||||||
Identifiable
intangible assets, less accumulated amortization | 52,648 | 40,356 | ||||||
Goodwill | 54,449 | 48,242 | ||||||
Noncurrent
deferred tax assets and other noncurrent tax assets | 1,812 | 1,794 | ||||||
Other noncurrent assets | 3,323 | 3,420 | ||||||
Total
assets | $ | 171,615 | $ | 167,381 | ||||
Liabilities
and Equity | ||||||||
Short-term borrowings, including current portion of long-term debt: 2016—$4,225; 2015—$3,719 | $ | 10,688 | $ | 10,159 | ||||
Trade
accounts payable | 4,536 | 3,620 | ||||||
Dividends payable | 1,944 | 1,852 | ||||||
Income
taxes payable | 437 | 418 | ||||||
Accrued compensation and related items | 2,487 | 2,359 | ||||||
Other
current liabilities | 11,023 | 10,990 | ||||||
Total current liabilities | 31,115 | 29,399 | ||||||
Long-term
debt | 31,398 | 28,740 | ||||||
Pension benefit obligations, net | 6,406 | 6,310 | ||||||
Postretirement
benefit obligations, net | 1,766 | 1,809 | ||||||
Noncurrent deferred tax liabilities | 30,753 | 26,877 | ||||||
Other
taxes payable | 4,000 | 3,992 | ||||||
Other noncurrent liabilities | 6,337 | 5,257 | ||||||
Total
liabilities | 111,776 | 102,384 | ||||||
Commitments and Contingencies | ||||||||
Preferred
stock, no par value, at stated value; 27 shares authorized; issued: 2016—597; 2015—649 | 24 | 26 | ||||||
Common stock, $0.05 par value; 12,000 shares authorized; issued: 2016—9,230; 2015—9,178 | 461 | 459 | ||||||
Additional
paid-in capital | 82,685 | 81,016 | ||||||
Treasury stock, shares at cost: 2016—3,160; 2015—3,003 | (84,364 | ) | (79,252 | ) | ||||
Retained
earnings | 71,774 | 71,993 | ||||||
Accumulated other comprehensive loss | (11,036 | ) | (9,522 | ) | ||||
Total
Pfizer Inc. shareholders’ equity | 59,544 | 64,720 | ||||||
Equity attributable to noncontrolling interests | 296 | 278 | ||||||
Total
equity | 59,840 | 64,998 | ||||||
Total liabilities and equity | $ | 171,615 | $ | 167,381 | ||||
2016 Financial Report | 71 | |
PFIZER
INC. SHAREHOLDERS | |||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Treasury Stock | |||||||||||||||||||||||||||||||||||||||||||
(MILLIONS, EXCEPT
PREFERRED SHARES) | Shares | Stated Value | Shares | Par Value | Add’l Paid-In Capital | Shares | Cost | Retained
Earnings | Accum. Other Comp. Loss | Share - holders’ Equity | Non-controlling Interests | Total Equity | |||||||||||||||||||||||||||||||||
Balance,
January 1, 2014 | 829 | $ | 33 | 9,051 | $ | 453 | $ | 77,283 | (2,652 | ) | $ | (67,923 | ) | $ | 69,732 | $ | (3,271 | ) | $ | 76,307 | $ | 313 | $ | 76,620 | |||||||||||||||||||||
Net
income | 9,135 | 9,135 | 32 | 9,168 | |||||||||||||||||||||||||||||||||||||||||
Other comprehensive
income/(loss), net of tax | (4,045 | ) | (4,045 | ) | 3 | (4,042 | ) | ||||||||||||||||||||||||||||||||||||||
Cash
dividends declared: | |||||||||||||||||||||||||||||||||||||||||||||
Common
stock | (6,690 | ) | (6,690 | ) | (6,690 | ) | |||||||||||||||||||||||||||||||||||||||
Preferred
stock | (2 | ) | (2 | ) | (2 | ) | |||||||||||||||||||||||||||||||||||||||
Noncontrolling
interests | (6 | ) | (6 | ) | |||||||||||||||||||||||||||||||||||||||||
Share-based
payment transactions | 59 | 3 | 1,693 | (2 | ) | (100 | ) | 1,597 | 1,597 | ||||||||||||||||||||||||||||||||||||
Purchases
of common stock | (165 | ) | (5,000 | ) | (5,000 | ) | (5,000 | ) | |||||||||||||||||||||||||||||||||||||
Preferred
stock conversions and redemptions | (112 | ) | (4 | ) | (4 | ) | — | 1 | (8 | ) | (8 | ) | |||||||||||||||||||||||||||||||||
Other | — | — | — | (1 | ) | 5 | — | — | — | — | 5 | (22 | ) | (17 | ) | ||||||||||||||||||||||||||||||
Balance,
December 31, 2014 | 717 | 29 | 9,110 | 455 | 78,977 | (2,819 | ) | (73,021 | ) | 72,176 | (7,316 | ) | 71,301 | 321 | 71,622 | ||||||||||||||||||||||||||||||
Net
income | 6,960 | 6,960 | 26 | 6,986 | |||||||||||||||||||||||||||||||||||||||||
Other comprehensive
income/(loss), net of tax | (2,206 | ) | (2,206 | ) | (26 | ) | (2,232 | ) | |||||||||||||||||||||||||||||||||||||
Cash
dividends declared: | |||||||||||||||||||||||||||||||||||||||||||||
Common
stock | (7,141 | ) | (7,141 | ) | (7,141 | ) | |||||||||||||||||||||||||||||||||||||||
Preferred
stock | (2 | ) | (2 | ) | (2 | ) | |||||||||||||||||||||||||||||||||||||||
Noncontrolling
interests | — | (16 | ) | (16 | ) | ||||||||||||||||||||||||||||||||||||||||
Share-based
payment transactions | 67 | 3 | 2,015 | (1 | ) | (72 | ) | 1,946 | 1,946 | ||||||||||||||||||||||||||||||||||||
Purchases
of common stock | (182 | ) | (6,160 | ) | (6,160 | ) | (6,160 | ) | |||||||||||||||||||||||||||||||||||||
Preferred
stock conversions and redemptions | (68 | ) | (3 | ) | (3 | ) | 1 | (5 | ) | (5 | ) | ||||||||||||||||||||||||||||||||||
Other | — | — | — | 27 | — | — | — | 27 | (27 | ) | — | ||||||||||||||||||||||||||||||||||
Balance,
December 31, 2015 | 649 | 26 | 9,178 | 459 | 81,016 | (3,003 | ) | (79,252 | ) | 71,993 | (9,522 | ) | 64,720 | 278 | 64,998 | ||||||||||||||||||||||||||||||
Net
income | 7,215 | 7,215 | 31 | 7,246 | |||||||||||||||||||||||||||||||||||||||||
Other comprehensive
income/(loss), net of tax | (1,514 | ) | (1,514 | ) | (3 | ) | (1,518 | ) | |||||||||||||||||||||||||||||||||||||
Cash
dividends declared: | |||||||||||||||||||||||||||||||||||||||||||||
Common
stock | (7,446 | ) | (7,446 | ) | (7,446 | ) | |||||||||||||||||||||||||||||||||||||||
Preferred
stock | (2 | ) | (2 | ) | (2 | ) | |||||||||||||||||||||||||||||||||||||||
Noncontrolling
interests | — | (10 | ) | (10 | ) | ||||||||||||||||||||||||||||||||||||||||
Share-based
payment transactions | 52 | 3 | 1,672 | (3 | ) | (111 | ) | 1,563 | 1,563 | ||||||||||||||||||||||||||||||||||||
Purchases
of common stock | (154 | ) | (5,000 | ) | (5,000 | ) | (5,000 | ) | |||||||||||||||||||||||||||||||||||||
Preferred
stock conversions and redemptions | (52 | ) | (2 | ) | (2 | ) | — | — | (5 | ) | (5 | ) | |||||||||||||||||||||||||||||||||
Other(a) | — | — | — | — | — | — | 13 | 13 | — | 13 | |||||||||||||||||||||||||||||||||||
Balance,
December 31, 2016 | 597 | $ | 24 | 9,230 | $ | 461 | $ | 82,685 | (3,160 | ) | $ | (84,364 | ) | $ | 71,774 | $ | (11,036 | ) | $ | 59,544 | $ | 296 | $ | 59,840 | |||||||||||||||||||||
(a) | Represents
the $13 million cumulative effect of the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, for certain elements of the accounting for share-based payments. For additional information, see Note 1B. |
72 | 2016
Financial Report | |
Year
Ended December 31, | ||||||||||||
(MILLIONS) | 2016 | 2015 | 2014 | |||||||||
Operating
Activities | ||||||||||||
Net income before allocation to noncontrolling interests | $ | 7,246 | $ | 6,986 | $ | 9,168 | ||||||
Adjustments
to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 5,757 | 5,157 | 5,537 | |||||||||
Asset
write-offs and impairments | 1,613 | 1,119 | 531 | |||||||||
Foreign currency loss related to Venezuela | — | 806 | — | |||||||||
Gain/(loss)
on disposal of discontinued operations | — | 6 | (51 | ) | ||||||||
Write-down of HIS net assets to fair value less estimated costs to sell | 1,712 | — | — | |||||||||
Deferred
taxes from continuing operations | (700 | ) | (20 | ) | 320 | |||||||
Deferred taxes from discontinued operations | — | 2 | (3 | ) | ||||||||
Share-based
compensation expense | 691 | 669 | 586 | |||||||||
Benefit plan contributions in excess of expense | (712 | ) | (617 | ) | (199 | ) | ||||||
Other
adjustments, net(a) | 209 | (160 | ) | (430 | ) | |||||||
Other changes in assets and liabilities, net of acquisitions and divestitures: | ||||||||||||
Trade
accounts receivable | (134 | ) | 21 | 148 | ||||||||
Inventories | 365 | (199 | ) | 175 | ||||||||
Other
assets | (60 | ) | 236 | 1,161 | ||||||||
Trade accounts payable | 871 | 254 | 297 | |||||||||
Other
liabilities(a) | (223 | ) | 664 | (650 | ) | |||||||
Other tax accounts, net | (734 | ) | (235 | ) | 492 | |||||||
Net
cash provided by operating activities | 15,901 | 14,688 | 17,084 | |||||||||
Investing
Activities | ||||||||||||
Purchases of property, plant and equipment | (1,823 | ) | (1,397 | ) | (1,199 | ) | ||||||
Purchases
of short-term investments | (15,957 | ) | (28,581 | ) | (50,954 | ) | ||||||
Proceeds from redemptions/sales of short-term investments | 29,436 | 40,064 | 47,374 | |||||||||
Net
(purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less | (4,218 | ) | 5,768 | 3,930 | ||||||||
Purchases of long-term investments | (8,011 | ) | (9,542 | ) | (10,718 | ) | ||||||
Proceeds
from redemptions/sales of long-term investments | 11,254 | 6,929 | 6,145 | |||||||||
Acquisitions of businesses, net of cash acquired | (18,368 | ) | (16,466 | ) | (195 | ) | ||||||
Acquisitions
of intangible assets | (176 | ) | (99 | ) | (384 | ) | ||||||
Other investing activities, net | 51 | 344 | 347 | |||||||||
Net
cash used in investing activities | (7,811 | ) | (2,980 | ) | (5,654 | ) | ||||||
Financing
Activities | ||||||||||||
Proceeds from short-term borrowings | 7,472 | 5,557 | 13 | |||||||||
Principal
payments on short-term borrowings | (5,102 | ) | (3,965 | ) | (10 | ) | ||||||
Net proceeds from/(payments on) short-term borrowings with original maturities of three months or less | (3,084 | ) | 2,717 | (1,841 | ) | |||||||
Proceeds
from issuance of long-term debt | 10,976 | — | 4,491 | |||||||||
Principal payments on long-term debt | (7,689 | ) | (2,990 | ) | (2,110 | ) | ||||||
Purchases
of common stock | (5,000 | ) | (6,160 | ) | (5,000 | ) | ||||||
Cash dividends paid | (7,317 | ) | (6,940 | ) | (6,609 | ) | ||||||
Proceeds
from exercise of stock options | 1,019 | 1,263 | 1,002 | |||||||||
Other financing activities, net(a) | (196 | ) | 109 | (123 | ) | |||||||
Net
cash used in financing activities | (8,921 | ) | (10,409 | ) | (10,187 | ) | ||||||
Effect of exchange-rate changes on cash and cash equivalents | (215 | ) | (1,000 | ) | (83 | ) | ||||||
Net
increase/(decrease) in cash and cash equivalents | (1,046 | ) | 298 | 1,160 | ||||||||
Cash and cash equivalents, beginning | 3,641 | 3,343 | 2,183 | |||||||||
Cash
and cash equivalents, end | $ | 2,595 | $ | 3,641 | $ | 3,343 | ||||||
-
Continued - | ||||||||||||
2016 Financial Report | 73 | |
Year
Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Supplemental Cash Flow Information | ||||||||||||
Non-cash
transaction: | ||||||||||||
Exchange of Hospira subsidiary debt for Pfizer debt(b) | $ | — | $ | 1,669 | $ | — | ||||||
Cash
paid (received) during the period for: | ||||||||||||
Income taxes | $ | 2,521 | $ | 2,383 | $ | 2,100 | ||||||
Interest | 1,451 | 1,302 | 1,550 | |||||||||
Interest
rate hedges | (338 | ) | (237 | ) | (374 | ) | ||||||
74 | 2016
Financial Report | |
2016 Financial Report | 75 | |
76 | 2016 Financial Report | |
• | Income approach, which is based on the present value of a future stream of net cash flows. |
• | Market
approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities. |
• | Cost approach, which is based on the cost to acquire or construct comparable assets, less an allowance for functional and/or economic obsolescence. |
• | Quoted prices for identical assets or liabilities in active markets (Level 1 inputs). |
• | Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (Level 2 inputs). |
• | Unobservable
inputs that reflect estimates and assumptions (Level 3 inputs). |
• | In the U.S., we record provisions for pharmaceutical Medicare, Medicaid, and performance-based contract rebates based upon our experience ratio of rebates paid and actual prescriptions written during prior quarters. We apply the experience ratio to the respective |
2016
Financial Report | 77 | |
• | Outside
the U.S., the majority of our pharmaceutical sales allowances are contractual or legislatively mandated and our estimates are based on actual invoiced sales within each period, which reduces the risk of variations in the estimation process. In certain European countries, rebates are calculated on the government’s total unbudgeted pharmaceutical spending or on specific product sales thresholds, and we apply an estimated allocation factor against our actual invoiced sales to project the expected level of reimbursement. We obtain third-party information that helps us to monitor the adequacy of these accruals. |
• | Provisions for pharmaceutical chargebacks (primarily reimbursements to U.S. wholesalers for honoring contracted prices to third parties)
closely approximate actual as we settle these deductions generally within two to five weeks of incurring the liability. |
• | Provisions for pharmaceutical sales returns are based on a calculation for each market that incorporates the following, as appropriate: local returns policies and practices; historical returns as a percentage of sales; an understanding of the reasons for past returns; estimated shelf life by product; an estimate of the amount of time between shipment and return or lag time; and any other factors that could impact the estimate of future returns, such as loss of exclusivity, product recalls or a changing competitive environment. Generally, returned products are destroyed, and customers are refunded the sales price in the form
of a credit. |
• | We record sales incentives as a reduction of revenues at the time the related revenues are recorded or when the incentive is offered, whichever is later. We estimate the cost of our sales incentives based on our historical experience with similar incentives programs to predict customer behavior. |
78 | 2016
Financial Report | |
• | Property, plant and equipment, less accumulated depreciation—These assets are recorded at cost and are increased by the cost of any significant improvements after purchase. Property, plant and equipment assets, other than land and construction in progress, are depreciated on a straight-line basis over the estimated useful life of the individual assets. Depreciation begins when the asset is ready for its intended use. For tax purposes, accelerated depreciation methods are used as allowed by tax laws. |
• | Identifiable
intangible assets, less accumulated amortization—These acquired assets are recorded at cost. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Intangible assets with indefinite lives that are associated with marketed products are not amortized until a useful life can be determined. Intangible assets associated with IPR&D projects are not amortized until approval is obtained in a major market, typically either the U.S. or the EU, or in a series of other countries, subject to certain specified conditions and management judgment. The useful life of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows are expected to be generated. |
• | Goodwill—Goodwill
represents the excess of the consideration transferred for an acquired business over the assigned values of its net assets. Goodwill is not amortized. |
• | For finite-lived intangible assets, such as developed technology rights, and for other long-lived assets, such as property, plant
and equipment, whenever impairment indicators are present, we calculate the undiscounted value of the projected cash flows associated with the asset, or asset group, and compare this estimated amount to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value. In addition, in all cases of an impairment review, we re-evaluate the remaining useful lives of the assets and modify them, as appropriate. |
• | For indefinite-lived intangible assets, such as Brands and IPR&D assets, when necessary, we determine the fair value of the asset and record an impairment loss, if any, for the excess of book value over fair value. In addition, in all cases of an impairment review
other than for IPR&D assets, we re-evaluate whether continuing to characterize the asset as indefinite-lived is appropriate. |
• | For goodwill, when necessary, we determine the fair value of each reporting unit and compare that value to its book value. If the carrying amount is found to be greater, we then determine the implied fair value of goodwill by subtracting the fair value of all the identifiable net assets other than goodwill from the fair value of the reporting unit and record an impairment loss, if any, for the excess of the book value of goodwill over the implied fair value. |
2016
Financial Report | 79 | |
• | Trading securities are carried at fair value, with changes in fair value reported in Other (income)/deductions—net. |
• | Available-for-sale
debt and equity securities are carried at fair value, with changes in fair value reported in Other comprehensive income/(loss) until realized. |
• | Held-to-maturity debt securities are carried at amortized cost. |
• | Private equity securities are carried at equity-method or at cost-method. For equity investments where we have significant influence over the financial and operating policies of the investee, we use the equity-method of accounting. Under the equity-method, we record
our share of the investee’s income and expenses in Other (income)/deductions—net. The excess of the cost of the investment over our share of the equity of the investee as of the acquisition date is allocated to the identifiable assets of the investee, with any remaining excess amount allocated to goodwill. Such investments are initially recorded at cost, which typically does not include amounts of contingent consideration. |
80 | 2016
Financial Report | |
2016 Financial Report | 81 | |
(MILLIONS
OF DOLLARS) | Amounts Recognized as of Acquisition Date (as previously reported as of | Measurement Period Adjustments(a) | Amounts
Recognized as of Acquisition Date (as adjusted) Final | |||||||||
Working capital, excluding inventories(b) | $ | 274 | $ | 68 | $ | 342 | ||||||
Inventories | 1,924 | (23 | ) | 1,901 | ||||||||
PP&E | 2,410 | (57 | ) | 2,352 | ||||||||
Identifiable
intangible assets, excluding IPR&D(c) | 8,270 | 20 | 8,290 | |||||||||
IPR&D | 995 | 35 | 1,030 | |||||||||
Other
noncurrent assets | 408 | (46 | ) | 362 | ||||||||
Long-term debt | (1,928 | ) | — | (1,928 | ) | |||||||
Benefit
obligations | (117 | ) | — | (117 | ) | |||||||
Net income tax accounts(d) | (3,394 | ) | 14 | (3,380 | ) | |||||||
Other
noncurrent liabilities | (39 | ) | (23 | ) | (61 | ) | ||||||
Total identifiable net assets | 8,803 | (12 | ) | 8,791 | ||||||||
Goodwill | 7,284 | 12 | 7,295 | |||||||||
Net
assets acquired/total consideration transferred | $ | 16,087 | $ | — | $ | 16,087 | ||||||
(a) | The
changes in the estimated fair values are primarily to better reflect market participant assumptions about facts and circumstances existing as of the acquisition date. The measurement period adjustments did not result from intervening events subsequent to the acquisition date. |
(b) | Includes cash and cash equivalents, short-term investments, accounts receivable, other current assets, assets held for sale, accounts payable and other current liabilities. |
(c) | Comprised of finite-lived
developed technology rights with a weighted-average life of approximately 17 years ($7.7 billion) and other finite-lived identifiable intangible assets with a weighted-average life of approximately 12 years ($570 million). |
(d) | Final amounts recognized as of the acquisition date (as adjusted), included in Current tax assets ($57 million), Noncurrent deferred tax assets and other noncurrent tax assets
($58 million), Income taxes payable ($5 million), Noncurrent deferred tax liabilities ($3.4 billion) and Other taxes payable ($101 million, including accrued interest of $5 million). Preliminary amounts recognized as of the acquisition date (as previously reported), included in Current tax assets ($79 million), Noncurrent deferred tax assets and other noncurrent tax assets ($25 million), Income taxes payable
($5 million), Noncurrent deferred tax liabilities ($3.4 billion) and Other taxes payable ($114 million, including accrued interest of $5 million). |
82 | 2016 Financial Report | |
• | Environmental
Matters—In the ordinary course of business, Hospira incurs liabilities for environmental matters such as remediation work, asset retirement obligations and environmental guarantees and indemnifications. The contingencies for environmental matters are not significant to Pfizer’s financial statements. |
• | Legal Matters—Hospira is involved in various legal proceedings, including product liability, patent, commercial, antitrust and environmental matters and government investigations, of a nature considered normal to its business. The contingencies arising from legal matters are not significant to Pfizer’s financial statements. |
• | Tax
Matters—In the ordinary course of business, Hospira incurs liabilities for income taxes. Income taxes are exceptions to both the recognition and fair value measurement principles associated with the accounting for business combinations. Reserves for income tax contingencies continue to be measured under the benefit recognition model as previously used by Hospira. Net liabilities for income taxes approximate $3.4 billion as of the acquisition date, which includes $109 million for uncertain tax positions. The net tax liability includes the recording of additional adjustments of approximately $3.2 billion for the tax impact of fair value adjustments and approximately $719 million for income tax matters that we intend to
resolve in a manner different from what Hospira had planned or intended. For example, because we plan to repatriate certain overseas funds, we provided deferred taxes on Hospira’s unremitted earnings for which no taxes have been previously provided by Hospira as it was Hospira’s intention to indefinitely reinvest those earnings. |
• | the expected specific synergies
and other benefits that we believe will result from combining the operations of Hospira with the operations of Pfizer; |
• | any intangible assets that do not qualify for separate recognition, as well as future, as yet unidentified projects and products; and |
• | the value of the going-concern element of Hospira’s existing businesses (the higher rate of return on the assembled collection of net assets versus if Pfizer had acquired all of the net assets separately). |
(MILLIONS
OF DOLLARS) | 2015 | |||
Revenues | $ | 1,513 | ||
Net loss attributable to Pfizer Inc. common shareholders(a) | (575 | ) | ||
(a) | Includes
purchase accounting charges related to the provisional estimated fair values recognized as of the acquisition date for (i) the fair value adjustment for acquisition-date inventory that has been sold ($378 million pre-tax); (ii) amortization expense related to the fair value of identifiable intangible assets acquired from Hospira ($161 million pre-tax); (iii) depreciation expense related to the fair value adjustment of fixed assets acquired from Hospira ($34 million pre-tax ); and (iv) amortization expense related to the fair value adjustment of long-term debt acquired from Hospira ($13 million income pre-tax), as well as restructuring and integration costs ($556 million pre-tax). |
Unaudited Supplemental Pro Forma Consolidated Results | ||||||||
Year Ended December 31, | ||||||||
(MILLIONS
OF DOLLARS, EXCEPT PER COMMON SHARE DATA) | 2015 | 2014 | ||||||
Revenues | $ | 52,082 | $ | 54,069 | ||||
Net
income attributable to Pfizer Inc. common shareholders | 7,669 | 8,173 | ||||||
Diluted EPS attributable to Pfizer Inc. common shareholders | 1.23 | 1.27 | ||||||
2016
Financial Report | 83 | |
• | Elimination of Hospira’s historical intangible asset amortization expense (approximately $33 million in 2015 and $77 million in 2014). |
• | Additional amortization expense (approximately
$342 million in 2015 and $502 million in 2014) related to the fair value of identifiable intangible assets acquired. |
• | Additional depreciation expense (approximately $52 million in 2015 and $102 million in 2014) related to the fair value adjustment to PP&E acquired. |
• | Adjustment related to the non-recurring fair value adjustment to acquisition-date
inventory estimated to have been sold (the elimination of $364 million of charges in 2015 and the addition of $591 million of charges in 2014). |
• | Adjustment to decrease interest expense (approximately $18 million in 2015 and $42 million in 2014) related to the fair value adjustment of Hospira debt. |
• | Adjustment for non-recurring acquisition-related
costs directly attributable to the acquisition (the elimination of $877 million of charges in 2015, and the addition of $877 million of charges in 2014), reflecting non-recurring charges incurred by both Hospira and Pfizer which would have been recorded in 2014 under the pro forma assumption that the Hospira acquisition was completed on January 1, 2014. |
84 | 2016
Financial Report | |
As
of December 31, | ||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | ||||||
Assets Held for Sale | ||||||||
Inventories | $ | 377 | $ | — | ||||
PP&E | 457 | — | ||||||
Identifiable
intangible assets | 1,319 | — | ||||||
Goodwill | 119 | — | ||||||
Other
assets | 152 | — | ||||||
Less: adjustment to HIS assets for net realizable value(a) | (1,681 | ) | — | |||||
Total
HIS assets held for sale | 743 | — | ||||||
Other assets held for sale(b) | 58 | 9 | ||||||
Assets
held for sale | $ | 801 | $ | 9 | ||||
Liabilities
Held for Sale | ||||||||
Accrued compensation and related items | $ | 54 | $ | — | ||||
Other
liabilities | 103 | — | ||||||
Total HIS liabilities held for sale | $ | 157 | $ | — | ||||
(a) | For
2016, we recorded an adjustment to HIS assets for net realizable value of $1,681 million plus estimated costs to sell of $31 million for a total impairment on HIS net assets of $1,712 million. |
(b) | Other assets held for sale consist primarily of PP&E and other assets. |
2016
Financial Report | 85 | |
The
following table provides the amounts and classification of payments (income/(expense)) between us and our collaboration partners: | ||||||||||||
Year Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
Revenues—Revenues(a) | $ | 659 | $ | 644 | $ | 786 | ||||||
Revenues—Alliance
revenues(b) | 1,746 | 1,312 | 957 | |||||||||
Total revenues from collaborative arrangements | 2,405 | 1,956 | 1,743 | |||||||||
Cost
of sales(c) | (315 | ) | (282 | ) | (280 | ) | ||||||
Selling, informational and administrative expenses(d) | (5 | ) | (287 | ) | (268 | ) | ||||||
Research
and development expenses(e) | 64 | (330 | ) | (1,210 | ) | |||||||
Other income/(deductions)—net(f) | 542 | 482 | 518 | |||||||||
(a) | Represents
sales to our partners of products manufactured by us. |
86 | 2016 Financial Report | |
(b) | Substantially
all relates to amounts earned from our partners under co-promotion agreements. The increase in 2016 reflects an increase in alliance revenues from Eliquis and the inclusion of Xtandi revenues resulting from the acquisition of Medivation in September 2016, partially offset by the expiration of the Rebif co-promotion collaboration at the end of 2015. The increase in 2015 reflects an increase in alliance revenues from Eliquis, partially offset by Spiriva (as a result of the expiration of the co-promotion collaboration in the U.S. and certain European countries during 2014). |
(c) | Primarily relates to royalties earned by our partners and cost of sales associated with inventory purchased from our partners. |
(d) | Represents
net reimbursements to our partners for selling, informational and administrative expenses incurred. |
(e) | Primarily relates to upfront payments and pre-approval milestone payments earned by our partners as well as net reimbursements. The upfront and milestone payments were as follows: $15 million in 2016, $310 million in 2015 (primarily related to our collaboration with OPKO, see below) and $1.2 billion in 2014 (related to our collaboration
with Merck KGaA, see below). 2016 also includes a $120 million reimbursement related to our collaboration with Lilly (see below). |
(f) | In 2016, 2015 and 2014, includes royalties earned on sales of Enbrel in the U.S. and Canada after October 31, 2013. On that date, the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada expired, and we became entitled to royalties for a 36-month period thereafter until October
31, 2016. |
2016
Financial Report | 87 | |
• | In 2016, we determined that we had an other-than-temporary decline in the value of Teuto, and, therefore, in 2016, we recognized a loss of $50 million in Other (income)/deductions––net (see Note 4) related to
our equity-method investment. The decline in value resulted from lower expectations as to the future cash flows to be generated by Teuto, primarily due to a slowdown in Brazilian economic conditions, which have been impacted by political risk, higher inflation, and the depreciation of the Brazilian Real. |
• | In 2014, we recorded income of approximately $55 million in Other (income)/deductions––net, resulting from a decline in the estimated loss from the net call/put option recorded in 2013 and an impairment loss of $56 million in Other (income)/deductions––net related
to our equity method investment. |
88 | 2016 Financial Report | |
• | In connection with acquisition activity, we
typically incur costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and |
• | In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems. |
• | The 2014 global commercial structure reorganization, which primarily includes the streamlining of certain functions, the realignment of regional locations and colleagues to the support the businesses, as well as implementing the necessary system changes to support different reporting requirements. Through December 31, 2016, we incurred costs of approximately $219 million and have completed this initiative. |
• | Manufacturing
plant network rationalization and optimization, where execution timelines are necessarily long. In connection with our plant network strategy and facility optimization of manufacturing operations under the 2014-2016 initiatives, we incurred costs of approximately $367 million associated with prior acquisition activity and costs of approximately $1.1 billion associated with new non-acquisition-related cost-reduction initiatives. |
• | Other new cost-reduction/productivity initiatives, primarily related to commercial property rationalization and other consolidation and savings opportunities. In connection with these cost-reduction activities, during 2014-2016,
we incurred costs of approximately $1.4 billion. |
2016 Financial Report | 89 | |
The
following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives: | ||||||||||||
Year Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
Restructuring
charges(a): | ||||||||||||
Employee terminations | $ | 940 | $ | 489 | $ | 68 | ||||||
Asset
impairments | 142 | 254 | 45 | |||||||||
Exit costs | 74 | 68 | 58 | |||||||||
Total
restructuring charges | 1,156 | 811 | 170 | |||||||||
Transaction costs(b) | 127 | 123 | — | |||||||||
Integration
costs(c) | 441 | 219 | 80 | |||||||||
Restructuring charges and certain acquisition-related costs | 1,724 | 1,152 | 250 | |||||||||
Additional
depreciation––asset restructuring recorded in our consolidated statements of income as follows(d): | ||||||||||||
Cost of sales | 201 | 117 | 228 | |||||||||
Selling,
informational and administrative expenses | — | — | 1 | |||||||||
Research and development expenses | 7 | 5 | 31 | |||||||||
Total
additional depreciation––asset restructuring | 207 | 122 | 261 | |||||||||
Implementation costs recorded in our consolidated statements of income as follows(e): | ||||||||||||
Cost
of sales | 230 | 102 | 78 | |||||||||
Selling, informational and administrative expenses | 81 | 82 | 140 | |||||||||
Research
and development expenses | 25 | 14 | 52 | |||||||||
Other (income)/deductions––net | 3 | 5 | 1 | |||||||||
Total
implementation costs | 340 | 203 | 270 | |||||||||
Total costs associated with acquisitions and cost-reduction/productivity initiatives | $ | 2,271 | $ | 1,478 | $ | 781 | ||||||
(a) | In
2016, Employee terminations represent the expected reduction of the workforce by approximately 4,900 employees, mainly in manufacturing, sales, research and corporate. Employee termination costs are generally recorded when the actions are probable and estimable and include accrued severance benefits, pension and postretirement benefits, many of which may be paid out during periods after termination. |
• | IH ($272 million);
EH ($158 million); WRD, GPD and Medical (M) (WRD/GPD/M) ($169 million); manufacturing operations ($368 million); and Corporate ($189 million). |
• | IH ($85 million);
EH ($402 million); WRD/GPD/M ($80 million); manufacturing operations ($80 million); and Corporate ($164 million), |
• | IH ($63 million); EH ($57 million); WRD/GPD/M ($37 million); manufacturing operations ($97 million);
and Corporate ($65 million). as well as $149 million of income related to the partial reversal of prior-period restructuring charges not directly associated with the new individual segments, and primarily reflecting a change in estimate with respect to our sales force restructuring plans. |
(b) | Transaction costs represent external costs for banking, legal, accounting and other similar services, most of which in 2016 are directly related
to our acquisitions of Medivation and Anacor, and the terminated transaction with Allergan. Transaction costs in 2015 represent external costs directly related to the acquisition of Hospira and the terminated transaction with Allergan and primarily include expenditures for banking, legal, accounting and other similar services. |
(c) | Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes. In 2016, integration costs primarily relate to our acquisition of Hospira and the terminated transaction with Allergan. Integration costs in 2015 represent external incremental
costs directly related to our acquisition of Hospira. |
(d) | Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions. |
(e) | Implementation costs represent external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives. |
90 | 2016
Financial Report | |
The
following table provides the components of and changes in our restructuring accruals: | ||||||||||||||||
(MILLIONS OF DOLLARS) | Employee Termination Costs | Asset Impairment Charges | Exit Costs | Accrual | ||||||||||||
Balance,
January 1, 2015 | $ | 1,114 | $ | — | $ | 52 | $ | 1,166 | ||||||||
Provision | 489 | 254 | 68 | 811 | ||||||||||||
Utilization
and other(a) | (495 | ) | (254 | ) | (71 | ) | (820 | ) | ||||||||
Balance, December
31, 2015(b) | 1,109 | — | 48 | 1,157 | ||||||||||||
Provision | 940 | 142 | 74 | 1,156 | ||||||||||||
Utilization
and other(a) | (502 | ) | (142 | ) | (86 | ) | (730 | ) | ||||||||
Balance,
December 31, 2016(c) | $ | 1,547 | $ | — | $ | 36 | $ | 1,583 | ||||||||
(a) | Includes
adjustments for foreign currency translation. |
(b) | Included in Other current liabilities ($776 million) and Other noncurrent liabilities ($381 million). |
(c) | Included in Other current liabilities ($863 million)
and Other noncurrent liabilities ($720 million). |
The
following table provides components of Other (income)/deductions––net: | ||||||||||||
Year Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
Interest
income(a) | $ | (470 | ) | $ | (471 | ) | $ | (425 | ) | |||
Interest expense(a) | 1,186 | 1,199 | 1,360 | |||||||||
Net
interest expense | 716 | 728 | 935 | |||||||||
Foreign currency loss related to Venezuela(b) | — | 806 | — | |||||||||
Royalty-related
income(c) | (905 | ) | (922 | ) | (1,002 | ) | ||||||
Certain legal matters, net(d) | 510 | 975 | 993 | |||||||||
Net
gains on asset disposals(e) | (171 | ) | (232 | ) | (288 | ) | ||||||
Impairment on remeasurement of HIS net assets(f) | 1,712 | — | — | |||||||||
Certain
asset impairments(g) | 1,447 | 818 | 469 | |||||||||
Business and legal entity alignment costs(h) | 261 | 282 | 168 | |||||||||
Other,
net(i) | 85 | 403 | (265 | ) | ||||||||
Other (income)/deductions––net | $ | 3,655 | $ | 2,860 | $ | 1,009 | ||||||
(a) | 2015
v. 2014––Interest income increased primarily due to higher investment returns. Interest expense decreased, primarily due to the repayment of a portion of long-term debt in the first quarter of 2015 and the benefit of the effective conversion of some fixed-rate liabilities to floating-rate liabilities. Capitalized interest expense totaled $61 million in 2016, $32 million in 2015 and $41 million in 2014. |
(b) | In
2015, represents a foreign currency loss related to conditions in Venezuela during 2015, that had us resolve that our Venezuelan bolivar-denominated net monetary assets that are subject to revaluation were no longer expected to be settled at the Venezuelan government CENCOEX official rate of 6.30, but rather at the then SIMADI rate of 200, the lowest official rate. Those conditions included the inability to obtain significant conversions of Venezuelan bolivars related to intercompany U.S. dollar denominated accounts, an evaluation of the effects of the implementation of a fourth-quarter 2015 operational restructuring, resulting in a 36% reduction in our labor force in Venezuela, and our expectation of the changes in Venezuela’s responses to changes in its economy. |
(c) | Royalty-related
income decreased in 2016, reflecting lower royalty income for Enbrel of $54 million, resulting from the expiration on October 31, 2016 of the 36-month royalty period under the collaboration agreement for Enbrel in the U.S. and Canada (the collaboration period under the agreement expired on October 31, 2013), and the expiration of other royalty agreements, partially offset by Xtandi royalty-related income of $63 million. |
(d) | In 2016,
primarily includes amounts to resolve a Multi-District Litigation relating to Celebrex and Bextra pending against the Company in New York federal court for $486 million, partially offset by the reversal of a legal accrual where a loss is no longer deemed probable. For additional information, see Note 17A5. In addition, 2016 includes a settlement related to a patent matter. In 2015, primarily includes $784.6 million related to an agreement in principle reached in February 2016 and finalized in April 2016 to resolve claims alleging that Wyeth's practices relating to the calculation of Medicaid rebates for its drug, Protonix (pantoprazole sodium), between
2001 and 2006, several years before Pfizer acquired Wyeth in 2009, violated the Federal Civil False Claims Act and other laws. For additional information, see Note 17A5. In 2014, primarily includes approximately $610 million for Neurontin-related matters (including off-label promotion actions and antitrust actions), $400 million to resolve a securities class action against Pfizer in New York federal court, and approximately $56 million for an Effexor-related matter, partially offset by $130 million of income from the reversal of two legal accruals where a loss is no longer deemed probable. |
(e) | In
2016, primarily includes (i) gross realized gains on sales of available-for-sale debt securities of $666 million; (ii) gross realized losses on sales of available-for-sale debt securities of $548 million; (iii) loss of $64 million from derivative financial instruments used to hedge the foreign exchange component of the matured available-for-sale debt securities; (iv) gains on sales/out-licensing of product and compound rights of approximately $84 million; and (v) gains on sales of investments in private equity securities of approximately $2 million. Proceeds from the sale of available-for-sale securities were $10.2 billion in 2016.
|
2016 Financial Report | 91 | |
(f) | In 2016, represents a charge related to the write-down of the HIS net assets to fair value less estimated costs to sell. See Note 2B for additional information. |
(g) | In
2016, primarily includes intangible asset impairment charges of $869 million, reflecting (i) $366 million related to developed technology rights for a generic injectable antibiotic product for the treatment of bacterial infections; and (ii) $265 million related to an IPR&D compound for the treatment of anemia, both acquired in connection with our acquisition of Hospira; (iii) $128 million of sterile injectable IPR&D compounds acquired in connection with our acquisition of InnoPharma; and (iv) $110 million of other IPR&D assets, $81 million of which were acquired in connection with our acquisition of Hospira and $29
million of which were acquired in connection with our acquisition of King in 2011. The intangible asset impairment charges for 2016 are associated with the following: EH ($840 million) and IH ($29 million). In addition, 2016 includes an impairment loss of $452 million related to Pfizer’s 49%-owned equity-method investment with Hisun in China, Hisun Pfizer, and an impairment loss of $50 million related to Pfizer's 40%-owned equity-method investment in Teuto. For additional information concerning Hisun Pfizer and Teuto, see Note 2E. |
(h) | Represents expenses for changes to our infrastructure to align our commercial operations, including costs to internally separate our businesses into distinct legal entities, as well as to streamline our intercompany supply operations to better support each business. |
(i) | In
2016, includes among other things, (i) $150 million paid to Allergan for reimbursement of Allergan’s expenses associated with the terminated transaction (see Note 1A); (ii) income of $116 million from resolution of a contract disagreement; and (iii) a net loss of approximately $312 million upon the early redemption of debt, which includes the related termination of interest rate swaps. In 2015, includes, among other things, (i) charges of $194 million related to the write-down of assets to net realizable value; (ii) charges of $159 million, reflecting
the change in the fair value of contingent consideration liabilities; and (iii) income of $45 million associated with equity-method investees. In 2014, includes, among other things, (i) gains of approximately $40 million, reflecting the change in the fair value of contingent consideration liabilities associated with prior acquisitions; (ii) income associated with equity-method investees of $86 million; (iii) income of $55 million resulting from a decline in the estimated loss on an option to acquire the remaining interest in Teuto; and (iv) a loss of $30 million due to a change in our ownership interest in ViiV. For additional information concerning Teuto and ViiV, see Note
2E. |
The following table provides additional information about the intangible assets that were impaired during
2016 in Other (income)/deductions––net : | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
Fair Value(a) | 2016 | |||||||||||||||||||
(MILLIONS
OF DOLLARS) | Amount | Level 1 | Level 2 | Level 3 | Impairment | |||||||||||||||
Intangible assets––IPR&D(b) | $ | 95 | $ | — | $ | — | $ | 95 | $ | 503 | ||||||||||
Intangible
assets––Developed technology rights(b) | 30 | — | — | 30 | 366 | |||||||||||||||
Total | $ | 125 | $ | — | $ | — | $ | 125 | $ | 869 | ||||||||||
(a) | The
fair value amount is presented as of the date of impairment, as these assets are not measured at fair value on a recurring basis. See also Note 1E. |
(b) | Reflects intangible assets written down to fair value in 2016. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows associated with the asset and then applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing
of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the product and the impact of technological risk associated with IPR&D assets; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows. |
92 | 2016 Financial Report | |
The
following table provides the components of Income from continuing operations before provision for taxes on income: | ||||||||||||
Year Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
United
States | $ | (8,534 | ) | $ | (6,809 | ) | $ | (4,744 | ) | |||
International | 16,886 | 15,773 | 16,984 | |||||||||
Income
from continuing operations before provision for taxes on income(a), (b) | $ | 8,351 | $ | 8,965 | $ | 12,240 | ||||||
(a) | 2016
v. 2015––The increase in the domestic loss was primarily due to a charge related to the write-down of HIS net assets to fair value less estimated costs to sell, higher asset impairments, and higher restructuring charges and certain acquisition-related costs, partially offset by the inclusion of a full year of legacy U.S. Hospira operations as compared to four months of U.S. operations in 2015, and lower charges for legal matters. The increase in international income is primarily due to the non-recurrence of a foreign currency loss related to Venezuela partially offset by a charge related to the write-down of HIS net assets to fair value less estimated costs to sell, and higher restructuring charges and certain acquisition-related costs. |
(b) | 2015
v. 2014––The increase in the domestic loss was primarily due to the loss of exclusivity for Celebrex and Zyvox, higher restructuring charges and higher selling, informational and administrative expenses, partially offset by the performance of certain products including Prevnar 13 and Ibrance, and the impact of Hospira operations. The decrease in international income was primarily due to a foreign currency loss related to Venezuela, higher asset impairments, and the loss of exclusivity for Lyrica in certain developed markets, partially offset by lower R&D costs. |
The
following table provides the components of Provision for taxes on income based on the location of the taxing authorities: | ||||||||||||
Year Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
United
States | ||||||||||||
Current income taxes: | ||||||||||||
Federal | $ | 342 | $ | 67 | $ | 393 | ||||||
State
and local | (52 | ) | (8 | ) | 85 | |||||||
Deferred income taxes: | ||||||||||||
Federal | (419 | ) | 300 | 725 | ||||||||
State
and local | (106 | ) | (36 | ) | (256 | ) | ||||||
Total U.S. tax provision | (235 | ) | 323 | 948 | ||||||||
International | ||||||||||||
Current
income taxes | 1,532 | 1,951 | 2,321 | |||||||||
Deferred income taxes | (175 | ) | (284 | ) | (149 | ) | ||||||
Total
international tax provision | 1,358 | 1,667 | 2,172 | |||||||||
Provision for taxes on income | $ | 1,123 | $ | 1,990 | $ | 3,120 | ||||||
• | U.S. tax expense of approximately $1.1 billion as a result of providing U.S. deferred income taxes on certain funds earned outside the U.S. that will not be indefinitely reinvested overseas, virtually all of which were earned in the current year (see Note 5C); |
• | tax benefits of approximately
$460 million, representing tax and interest, resulting from the resolution of certain tax positions pertaining to prior years, primarily with various foreign tax authorities, and from the expiration of certain statutes of limitations; |
• | benefits related to the final resolution of an agreement in principle reached in February 2016 and finalized in April 2016 to resolve certain claims related to Protonix, which resulted in the receipt of information that raised our initial assessment in 2015 of the likelihood of prevailing on the technical merits of our tax position; |
• | net
tax benefits of $89 million, related to the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, requiring excess tax benefits or deficiencies of share-based compensation to be recognized as a component of the Provision for taxes on income (see Note 1B); |
• | the non-deductibility of a $312 million fee payable to the federal government as a result of the U.S. Healthcare Legislation; and |
• | the
permanent extension of the U.S. R&D tax credit, which was signed into law in December 2015. |
• | U.S. tax expense of approximately $2.1 billion as a result of providing U.S. deferred income taxes on certain funds earned outside the U.S. that will not be indefinitely reinvested overseas, virtually all of which were earned in the current year (see Note 5C); |
• | tax
benefits of approximately $360 million, representing tax and interest, resulting from the resolution of certain tax positions pertaining to prior years, primarily with various foreign tax authorities, and from the expiration of certain statutes of limitations; |
• | the permanent extension of the U.S. R&D tax credit, which was signed into law in December 2015, as well as tax benefits associated with certain tax initiatives; |
• | the non-deductibility of a foreign currency loss
related to Venezuela; |
• | the non-deductibility of a charge for the agreement in principle reached in February 2016 to resolve claims relating to Protonix; and |
• | the non-deductibility of a $251 million fee payable to the federal government as a result of the U.S. Healthcare Legislation. |
2016
Financial Report | 93 | |
• | U.S. tax expense of approximately $2.2 billion as a result of providing U.S. deferred income taxes on certain funds earned outside the U.S. that will not be indefinitely reinvested overseas, virtually all of which were earned in 2014 (see Note 5C); |
• | tax benefits of approximately $350 million,
representing tax and interest, resulting from the resolution of certain tax positions pertaining to prior years, primarily with various foreign tax authorities, and from the expiration of certain statutes of limitations; |
• | the favorable impact of the decline in the non-tax deductible loss recorded in 2013 related to an option to acquire the remaining interest in Teuto, since we expect to retain the investment indefinitely; |
• | the extension of the U.S. R&D tax credit, which was signed into law in December 2014; and |
• | the
non-deductibility of a $362 million fee payable to the federal government as a result of the U.S. Healthcare Legislation. |
The
reconciliation of the U.S. statutory income tax rate to our effective tax rate for Income from continuing operations follows: | |||||||||
Year Ended December 31, | |||||||||
2016 | 2015 | 2014 | |||||||
U.S.
statutory income tax rate | 35.0 | % | 35.0 | % | 35.0 | % | |||
Taxation of non-U.S. operations(a), (b), (c) | (13.8 | ) | (9.6 | ) | (7.4 | ) | |||
Tax
settlements and resolution of certain tax positions(d) | (5.5 | ) | (4.0 | ) | (2.9 | ) | |||
U.S. Healthcare Legislation(d) | 1.3 | 0.9 | 1.0 | ||||||
U.S.
R&D tax credit and manufacturing deduction(d) | (1.0 | ) | (1.0 | ) | (0.9 | ) | |||
Certain legal settlements and charges(d) | (2.9 | ) | 3.1 | — | |||||
All
other, net(e) | 0.3 | (2.1 | ) | 0.5 | |||||
Effective tax rate for income from continuing operations | 13.4 | % | 22.2 | % | 25.5 | % | |||
(a) | For
taxation of non-U.S. operations, this rate impact reflects the income tax rates and relative earnings in the locations where we do business outside the U.S., together with the cost of repatriation decisions, as well as changes in uncertain tax positions not included in the reconciling item called “Tax settlements and resolution of certain tax positions”. Specifically: (i) the jurisdictional location of earnings is a significant component of our effective tax rate each year as tax rates outside the U.S. are generally lower than the U.S. statutory income tax rate, and the rate impact of this component is influenced by the specific location of non-U.S. earnings and the level of such earnings as compared to our total earnings; (ii) the cost of repatriation decisions, and other U.S. tax implications of our foreign operations, is a significant component of our effective tax rate each year and generally offsets some of the reduction to our effective tax rate each year
resulting from the jurisdictional location of earnings; and (iii) the impact of changes in uncertain tax positions not included in the reconciling item called “Tax settlements and resolution of certain tax positions” is a component of our effective tax rate each year that can result in either an increase or decrease to our effective tax rate. The jurisdictional mix of earnings, which includes the impact of the location of earnings as well as repatriation costs, can vary as a result of the repatriation decisions, as a result of operating fluctuations in the normal course of business and as a result of the extent and location of other income and expense items, such as restructuring charges, asset impairments and gains and losses on strategic business decisions. See also Note 5A for the components of pre-tax income and Provision for taxes on income, which is based on the
location of the taxing authorities, and for information about settlements and other items impacting Provision for taxes on income. |
(b) | In all periods presented, the reduction in our effective tax rate resulting from the jurisdictional location of earnings is largely due to generally lower tax rates, as well as manufacturing and other incentives associated with our subsidiaries in Puerto Rico, Singapore, Costa Rica, and the Dominican Republic. We benefit from a Puerto Rican incentive grant that expires in 2029. Under the grant, we are partially exempt from income, property and municipal
taxes. In Singapore, we benefit from incentive tax rates effective through 2031 on income from manufacturing and other operations. Hospira’s infusion technologies business benefits from income tax exemptions in Costa Rica and the Dominican Republic through 2028 and 2019, respectively. |
(c) | The favorable rate impact in 2016 also includes the non-recurrence of the non-deductibility of a foreign currency loss related to Venezuela. The rate impact in 2015 also includes the non-deductibility of a foreign currency loss related to Venezuela. The favorable rate impact in 2014 also includes the decline in the non-tax deductible loss recorded in 2013 related to an option to acquire the remaining interest in Teuto, since we expected
to retain the investment indefinitely. For additional information, see Note 2E. |
(d) | For a discussion about tax settlements and resolution of certain tax positions, the impact of U.S. Healthcare Legislation, the U.S. R&D tax credit and the impact of certain legal settlements and charges, see Note 5A. |
(e) | All other, net in 2015 primarily relates to tax benefits associated with certain tax initiatives
in the normal course of business. |
94 | 2016 Financial Report | |
The components of our deferred tax assets and liabilities, shown before jurisdictional netting, follow: | ||||||||||||||||
2016
Deferred Tax | 2015 Deferred Tax | |||||||||||||||
(MILLIONS OF DOLLARS) | Assets | (Liabilities) | Assets | (Liabilities) | ||||||||||||
Prepaid/deferred items | $ | 2,180 | $ | (68 | ) | $ | 2,247 | $ | (38 | ) | ||||||
Inventories | 366 | (47 | ) | 381 | (190 | ) | ||||||||||
Intangible
assets | 1,139 | (15,172 | ) | 1,063 | (10,885 | ) | ||||||||||
Property, plant and equipment | 92 | (982 | ) | 65 | (1,096 | ) | ||||||||||
Employee
benefits | 3,356 | (74 | ) | 3,302 | (167 | ) | ||||||||||
Restructurings and other charges | 458 | (2 | ) | 318 | (20 | ) | ||||||||||
Legal
and product liability reserves | 650 | — | 730 | — | ||||||||||||
Net operating loss/tax credit carryforwards(a) | 2,957 | — | 3,808 | — | ||||||||||||
Unremitted
earnings(b) | — | (23,108 | ) | — | (23,626 | ) | ||||||||||
State
and local tax adjustments | 301 | — | 328 | — | ||||||||||||
All other | 306 | (503 | ) | 310 | (646 | ) | ||||||||||
11,806 | (39,956 | ) | 12,552 | (36,668 | ) | |||||||||||
Valuation
allowances | (1,949 | ) | — | (2,029 | ) | — | ||||||||||
Total deferred taxes | $ | 9,857 | $ | (39,956 | ) | $ | 10,523 | $ | (36,668 | ) | ||||||
Net
deferred tax liability (c) | $ | (30,099 | ) | $ | (26,145 | ) | ||||||||||
(a) | The
amounts in 2016 and 2015 are reduced for unrecognized tax benefits of $3.0 billion and $2.9 billion, respectively, where we have net operating loss carryforwards, similar tax losses, and/or tax credit carryforwards that are available, under the tax law of the applicable jurisdiction, to settle any additional income taxes that would result from the disallowance of a tax position. |
(b) | The decrease in 2016 reflects the reversal of certain prior year accruals for earnings outside the U.S.
that were not indefinitely reinvested overseas, partially offset by additional accruals for certain funds earned outside the U.S. in the current year that will not be indefinitely reinvested overseas. For additional information, see Note 5A. |
(c) | In 2016, Noncurrent deferred tax assets and other noncurrent tax assets ($654 million), and Noncurrent deferred tax liabilities ($30.8 billion). In 2015,
Noncurrent deferred tax assets and other noncurrent tax assets ($732 million), and Noncurrent deferred tax liabilities ($26.8 billion). |
2016 Financial Report | 95 | |
• | Tax assets associated with uncertain tax positions primarily represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another tax jurisdiction. These potential benefits generally result from cooperative efforts among taxing authorities, as required by tax treaties to minimize double taxation, commonly referred to as the competent authority process. The recoverability of these assets, which we believe to be more likely than
not, is dependent upon the actual payment of taxes in one tax jurisdiction and, in some cases, the successful petition for recovery in another tax jurisdiction. As of December 31, 2016 and 2015, we had approximately $1.2 billion and $1.1 billion, respectively, in assets associated with uncertain tax positions. In 2016, these amounts were included in Noncurrent deferred tax assets and other noncurrent tax assets ($1.0 billion) and Noncurrent deferred tax liabilities ($201 million). In
2015, these amounts were included in Noncurrent deferred tax assets and other noncurrent tax assets ($963 million) and Noncurrent deferred tax liabilities ($179 million). |
• | Tax liabilities associated with uncertain tax positions represent unrecognized tax benefits, which arise when the estimated benefit recorded in our financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. These unrecognized tax benefits relate primarily to issues common among multinational
corporations. Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate. |
The reconciliation of the beginning and ending amounts of gross unrecognized tax benefits follows: | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
Balance,
beginning | $ | (5,919 | ) | $ | (6,182 | ) | $ | (6,087 | ) | |||
Acquisitions(a) | (83 | ) | (110 | ) | — | |||||||
Increases
based on tax positions taken during a prior period(b) | (11 | ) | (31 | ) | (110 | ) | ||||||
Decreases based on tax positions taken during a prior period(b), (c) | 409 | 496 | 473 | |||||||||
Decreases
based on settlements for a prior period(d) | 126 | 64 | 70 | |||||||||
Increases based on tax positions taken during the current period(b) | (489 | ) | (675 | ) | (795 | ) | ||||||
Impact
of foreign exchange | (5 | ) | 319 | 161 | ||||||||
Other, net(b), (e) | 146 | 199 | 106 | |||||||||
Balance,
ending(f) | $ | (5,826 | ) | $ | (5,919 | ) | $ | (6,182 | ) | |||
(a) | For
2016, primarily related to the acquisitions of Medivation and Anacor. For 2015, primarily related to the acquisition of Hospira. See also Note 2A. |
(b) | Primarily included in Provision for taxes on income. |
(c) | Primarily related to effectively settling certain tax positions primarily with foreign tax authorities. See also Note 5A. |
(d) | Primarily
related to cash payments and reductions of tax attributes. |
(e) | Primarily related to decreases as a result of a lapse of applicable statutes of limitations. |
(f) | In 2016, included in Income taxes payable ($14 million), Current tax assets ($17 million),
Noncurrent deferred tax assets and other noncurrent tax assets ($184 million), Noncurrent deferred tax liabilities ($2.8 billion) and Other taxes payable ($2.8 billion). In 2015, included in Income taxes payable ($38 million), Current tax assets ($22 million), Noncurrent deferred tax assets and other noncurrent tax assets ($135 million), Noncurrent
deferred tax liabilities ($2.7 billion) and Other taxes payable ($3.0 billion). |
• | Interest related to our unrecognized tax benefits is recorded in accordance with the laws of each jurisdiction and is recorded in Provision for taxes on income in our consolidated statements of income. In 2016, we recorded net interest expense of $72 million. In 2015, we recorded net interest expense of $71
million; and in 2014, we recorded net interest expense of $40 million. Gross accrued interest totaled $771 million as of December 31, 2016 (reflecting a decrease of approximately $18 million as a result of cash payments) and gross accrued interest totaled $714 million as of December 31, 2015 (reflecting a decrease of approximately $5 million as a result of cash payments). In 2016, these amounts were included in Income
taxes payable ($4 million) Current tax assets ($13 million) and Other taxes payable ($754 million). In 2015, these amounts were included in Current tax assets ($12 million) and Other taxes payable ($702 million). Accrued penalties are not significant. See also Note 5A. |
• | With respect to Pfizer, the IRS has issued a Revenue Agent’s Report (RAR) for tax years 2009-2010. We are not in agreement with the RAR and are currently appealing certain disputed issues. Tax years 2011-2013 are currently under audit. Tax years 2014-2016 are open, but not under audit. All other tax years are closed. |
• | With
respect to Hospira, the federal income tax audit of tax years 2010-2011 was effectively settled in the second quarter of 2016. The IRS is currently auditing tax years 2012-2013 and 2014 through short-year 2015. All other tax years are closed. The tax years under audit for Hospira are not considered material to Pfizer. |
• | With respect to Anacor and Medivation, the open tax years are not considered material to Pfizer. |
96 | 2016 Financial Report | |
The following table provides the components of the Tax provision/(benefit) on other comprehensive loss: | ||||||||||||
Year
Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
Foreign currency translation adjustments, net(a) | $ | (15 | ) | $ | 90 | $ | 42 | |||||
Unrealized
holding gains/(losses) on derivative financial instruments, net | (75 | ) | (173 | ) | (199 | ) | ||||||
Reclassification adjustments for realized (gains)/losses | 158 | 104 | 262 | |||||||||
83 | (69 | ) | 63 | |||||||||
Unrealized
holding gains/(losses) on available-for-sale securities, net | 49 | (104 | ) | (56 | ) | |||||||
Reclassification adjustments for realized (gains)/losses | (15 | ) | 59 | 10 | ||||||||
34 | (45 | ) | (46 | ) | ||||||||
Benefit
plans: actuarial losses, net | (535 | ) | (23 | ) | (1,416 | ) | ||||||
Reclassification adjustments related to amortization | 186 | 183 | 61 | |||||||||
Reclassification
adjustments related to settlements, net | 45 | 237 | 35 | |||||||||
Other | 36 | 66 | 61 | |||||||||
(269 | ) | 462 | (1,258 | ) | ||||||||
Benefit
plans: prior service credits and other, net | 67 | 160 | 281 | |||||||||
Reclassification adjustments related to amortization | (64 | ) | (59 | ) | (28 | ) | ||||||
Reclassification
adjustments related to curtailments, net | (10 | ) | (12 | ) | — | |||||||
Other | (1 | ) | — | (1 | ) | |||||||
(7 | ) | 89 | 253 | |||||||||
Tax
provision/(benefit) on other comprehensive loss | $ | (174 | ) | $ | 528 | $ | (946 | ) | ||||
(a) | Taxes
are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely. |
The
following table provides the changes, net of tax, in Accumulated other comprehensive loss: | ||||||||||||||||||||||||
Net Unrealized Gain/(Losses) | Benefit Plans | |||||||||||||||||||||||
(MILLIONS OF DOLLARS) | Foreign Currency Translation Adjustments | Derivative
Financial Instruments | Available-For-Sale Securities | Actuarial Gains/(Losses) | Prior Service (Costs)/ Credits and Other | Accumulated Other Comprehensive
Income/(Loss) | ||||||||||||||||||
Balance, January 1, 2014 | $ | (590 | ) | $ | 79 | $ | 150 | $ | (3,223 | ) | $ | 313 | $ | (3,271 | ) | |||||||||
Other
comprehensive income/(loss)(a) | (2,099 | ) | 438 | (372 | ) | (2,432 | ) | 419 | (4,045 | ) | ||||||||||||||
Balance,
December 31, 2014 | (2,689 | ) | 517 | (222 | ) | (5,654 | ) | 733 | (7,316 | ) | ||||||||||||||
Other
comprehensive income/(loss)(a) | (3,174 | ) | (96 | ) | (5 | ) | 921 | 148 | (2,206 | ) | ||||||||||||||
Balance,
December 31, 2015 | (5,863 | ) | 421 | (227 | ) | (4,733 | ) | 880 | (9,522 | ) | ||||||||||||||
Other
comprehensive income/(loss)(a) | $ | (797 | ) | $ | (73 | ) | $ | 96 | $ | (740 | ) | $ | (1 | ) | $ | (1,514 | ) | |||||||
Balance,
December 31, 2016 | $ | (6,659 | ) | $ | 348 | $ | (131 | ) | $ | (5,473 | ) | $ | 879 | $ | (11,036 | ) | ||||||||
(a) | Amounts
do not include foreign currency translation adjustments attributable to noncontrolling interests of $3 million loss in 2016, $26 million loss in 2015 and $3 million gain in 2014. |
2016 Financial Report | 97 | |
The
following table provides additional information about certain of our financial assets and liabilities: | ||||||||
As of December 31, | ||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | ||||||
Selected financial assets measured at fair value on
a recurring basis(a) | ||||||||
Trading funds and securities(b) | $ | 325 | $ | 287 | ||||
Available-for-sale
debt securities(c) | 18,632 | 32,078 | ||||||
Money market funds | 1,445 | 934 | ||||||
Available-for-sale
equity securities(c) | 540 | 603 | ||||||
Derivative financial instruments in a receivable position(d): | ||||||||
Interest
rate swaps | 625 | 837 | ||||||
Foreign currency swaps | 79 | 135 | ||||||
Foreign
currency forward-exchange contracts | 551 | 559 | ||||||
22,198 | 35,433 | |||||||
Other
selected financial assets | ||||||||
Held-to-maturity debt securities, carried at amortized cost(c), (e) | 1,242 | 1,388 | ||||||
Private
equity securities, carried at equity-method or at cost-method(e), (f) | 735 | 1,336 | ||||||
1,977 | 2,724 | |||||||
Total
selected financial assets | $ | 24,175 | $ | 38,157 | ||||
Selected financial liabilities measured at fair value on a recurring basis(a) | ||||||||
Derivative
financial instruments in a liability position(g): | ||||||||
Interest rate swaps | $ | 148 | $ | 139 | ||||
Foreign
currency swaps | 1,374 | 1,489 | ||||||
Foreign currency forward-exchange contracts | 143 | 81 | ||||||
1,665 | 1,709 | |||||||
Other
selected financial liabilities | ||||||||
Short-term borrowings: | ||||||||
Principal amount | 10,674 | 10,160 | ||||||
Net
fair value adjustments related to hedging and purchase accounting | 24 | 2 | ||||||
Net unamortized discounts, premiums and debt issuance costs(h) | (11 | ) | (3 | ) | ||||
Total
short-term borrowings, carried at historical proceeds, as adjusted(e) | 10,688 | 10,159 | ||||||
Long-term debt: | ||||||||
Principal
amount | 30,529 | 27,573 | ||||||
Net fair value adjustments related to hedging and purchase accounting | 998 | 1,294 | ||||||
Net
unamortized discounts, premiums and debt issuance costs(h) | (130 | ) | (127 | ) | ||||
Total long-term debt, carried at historical proceeds, as adjusted(i) | 31,398 | 28,740 | ||||||
42,085 | 38,899 | |||||||
Total
selected financial liabilities | $ | 43,750 | $ | 40,608 | ||||
(a) | We use a market approach in valuing financial instruments on a recurring basis. For additional information, see Note
1E. All of our financial assets and liabilities measured at fair value on a recurring basis use Level 2 inputs in the calculation of fair value, except less than 2% that use Level 1 inputs and money market funds measured at net asset value. |
(b) | As of December 31, 2016, trading funds and securities are composed of $236 million of trading equity funds and $89 million of trading debt funds. As of December 31,
2015, trading funds and securities are composed of $185 million of trading equity funds and $102 million of trading debt funds. As of December 31, 2016 and December 31, 2015, trading equity funds of $71 million and $85 million, respectively, are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan. |
(c) | Gross
unrealized gains and losses related to 2016 are not significant. Unrealized losses related to 2015 available-for-sale debt securities are $593 million and unrealized gains are $44 million. The vast majority of investments related to 2015, in an unrealized loss position, relate to the foreign exchange impact on foreign currency denominated securities, which are hedged with foreign currency forward-exchange contracts and cross-currency swaps. We have the intent and ability to hold such investments to maturity. |
(d) | Designated as hedging instruments,
except for certain contracts used as offsets; namely, foreign currency forward-exchange contracts with fair values of $162 million as of December 31, 2016; and foreign currency forward-exchange contracts with fair values of $136 million as of December 31, 2015. |
(e) | The
differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities at cost-method and short-term borrowings not measured at fair value on a recurring basis were not significant as of December 31, 2016 or December 31, 2015. The fair value measurements of our held-to-maturity debt securities and our short-term borrowings are based on Level 2 inputs, using a market approach. The fair value measurements of our private equity securities carried at cost are based on Level 3 inputs. Short-term borrowings include foreign currency short-term borrowings with fair values of $547 million as of December 31, 2015, which are used as
hedging instruments. |
(f) | Our private equity securities represent investments in the life sciences sector. |
(g) | Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency swaps with fair values of $269 million and foreign currency forward-exchange contracts
with fair values of $113 million as of December 31, 2016; and foreign currency swaps with fair values of $234 million and foreign currency forward-exchange contracts with fair values of $59 million as of December 31, 2015. |
(h) | We adopted a new standard as of January
1, 2016 that changed the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying value of that associated debt, consistent with the presentation of a debt discount. See Note 1B for additional information. |
98 | 2016 Financial Report | |
(i) | The fair value of our long-term debt (not including the current portion of long-term debt) was $34.9 billion as of December 31, 2016 and $32.7
billion as of December 31, 2015. The fair value measurements for our long-term debt are based on Level 2 inputs, using a market approach. |
• | Trading
equity securities—quoted market prices. |
• | Trading debt securities—observable market interest rates. |
• | Available-for-sale debt securities—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data and credit-adjusted interest rate yield curves. Receivable-backed, loan-backed, and mortgage-backed securities are valued by third-party models that use significant inputs derived from observable market data like prepayment rates, default rates, and recovery rates. |
• | Money
market funds—observable net asset value prices. |
• | Available-for-sale equity securities—third-party pricing services that principally use a composite of observable prices. |
• | Derivative financial instruments (assets and liabilities)—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data. Where applicable, these models discount future cash flow amounts using market-based observable inputs, including interest rate yield curves, and forward and spot prices for currencies.
The credit risk impact to our derivative financial instruments was not significant. |
• | Held-to-maturity debt securities—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data and credit-adjusted interest rate yield curves. |
• | Private equity securities, excluding equity-method investments—application of the implied volatility associated with an observable biotech index to the carrying amount of our portfolio. |
• | Short-term
borrowings and long-term debt—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data and our own credit rating. |
The following table
provides the classification of these selected financial assets and liabilities in our consolidated balance sheets: | ||||||||
As of December 31, | ||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | ||||||
Assets | ||||||||
Cash
and cash equivalents | $ | 547 | $ | 978 | ||||
Short-term investments | 15,255 | 19,649 | ||||||
Other
current assets(a) | 567 | 587 | ||||||
Long-term investments | 7,116 | 15,999 | ||||||
Other
noncurrent assets(b) | 689 | 944 | ||||||
$ | 24,175 | $ | 38,157 | |||||
Liabilities | ||||||||
Short-term
borrowings, including current portion of long-term debt(c) | $ | 10,688 | $ | 10,159 | ||||
Other current liabilities(d) | 443 | 645 | ||||||
Long-term
debt(c) | 31,398 | 28,740 | ||||||
Other noncurrent liabilities(e) | 1,222 | 1,064 | ||||||
$ | 43,750 | $ | 40,608 | |||||
(a) | As
of December 31, 2016, derivative instruments at fair value include interest rate swaps ($26 million), foreign currency swaps ($43 million) and foreign currency forward-exchange contracts ($497 million) and, as of December 31, 2015, include interest rate swaps ($2 million), foreign currency swaps ($46 million) and foreign currency forward-exchange contracts ($538
million). |
(b) | As of December 31, 2016, derivative instruments at fair value include interest rate swaps ($599 million), foreign currency swaps ($36 million) and foreign currency forward-exchange contracts ($54 million) and, as of December 31, 2015, include interest rate swaps
($835 million), foreign currency swaps ($89 million) and foreign currency forward-exchange contracts ($20 million). |
(c) | We adopted a new standard as of January 1, 2016 that changed the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying value of that associated debt, consistent with the presentation of a debt discount. See Note 1B for
additional information. |
(d) | At December 31, 2016, derivative instruments at fair value include interest rate swaps ($1 million), foreign currency swaps ($300 million) and foreign currency forward-exchange contracts ($143 million) and, as of December 31, 2015, include interest rate swaps ($5
million), foreign currency swaps ($560 million) and foreign currency forward-exchange contracts ($80 million). |
(e) | At December 31, 2016, derivative instruments at fair value include interest rate swaps ($147 million) and foreign currency swaps ($1.1 billion) and, as of December 31,
2015, include interest rate swaps ($134 million), foreign currency swaps ($928 million) and foreign currency forward-exchange contracts ($1 million). |
2016 Financial Report | 99 | |
The
following table provides the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities: | ||||||||||||||||||||
Years | ||||||||||||||||||||
(MILLIONS OF DOLLARS) | Within 1 | Over
1 to 5 | Over 5 to 10 | Over 10 | Total | |||||||||||||||
Available-for-sale debt securities | ||||||||||||||||||||
Corporate
debt(a) | $ | 2,783 | $ | 2,727 | $ | 1,557 | $ | 23 | $ | 7,089 | ||||||||||
Western
European, Scandinavian and other government debt(b) | 4,661 | 432 | — | — | 5,093 | |||||||||||||||
U.S.
government debt | 2,134 | 88 | — | — | 2,222 | |||||||||||||||
Western
European, Scandinavian, Australian and other government agency debt(b) | 1,746 | 137 | — | — | 1,883 | |||||||||||||||
Supranational
debt(b) | 910 | 294 | — | — | 1,204 | |||||||||||||||
Other
asset-backed debt(c) | 367 | 217 | 18 | 3 | 605 | |||||||||||||||
Government
National Mortgage Association and other U.S. government guaranteed asset-backed securities | 535 | — | — | — | 535 | |||||||||||||||
Held-to-maturity
debt securities | ||||||||||||||||||||
Time deposits and other | 1,000 | 1 | 3 | — | 1,004 | |||||||||||||||
Western
European government debt(b) | 236 | 2 | — | — | 238 | |||||||||||||||
Total
debt securities | $ | 14,371 | $ | 3,898 | $ | 1,579 | $ | 26 | $ | 19,873 | ||||||||||
(a) | Issued
by a diverse group of corporations, largely consisting of financial institutions, virtually all of which are investment-grade. |
(b) | Issued by governments, government agencies or supranational entities, as applicable, all of which are investment-grade. |
(c) | Includes receivable-backed, loan-backed, and mortgage-backed securities, all of which are investment-grade and in senior positions in the capital structure of the security. Receivable-backed securities are collateralized
by credit cards receivables, and loan-backed securities are collateralized by senior secured obligations of a diverse pool of companies or student loans. Mortgage-backed securities are collateralized by diversified pools of residential and commercial mortgages. |
100 | 2016 Financial Report | |
The following table provides the components of our senior unsecured long-term debt(a): | ||||||||||
Principal | ||||||||||
As
of December 31, | ||||||||||
(MILLIONS OF DOLLARS) | Maturity Date | 2016 | 2015 | |||||||
4.55% euro(b) | May 2017 | $ | — | $ | 980 | |||||
1.10%(b) | May
2017 | — | 1,000 | |||||||
1.20% | June 2018 | 1,250 | — | |||||||
1.50% | June
2018 | 1,000 | 1,000 | |||||||
6.20% | March 2019 | — | 3,250 | |||||||
2.10% | May
2019 | 1,500 | 1,500 | |||||||
1.70% | December 2019 | 1,000 | — | |||||||
5.75%
euro | June 2021 | 2,108 | 2,178 | |||||||
1.95% | June 2021 | 1,150 | — | |||||||
2.20% | December
2021 | 1,000 | — | |||||||
3.00% | June 2023 | 1,000 | 1,000 | |||||||
3.40% | May
2024 | 1,000 | 1,000 | |||||||
2.75% | June 2026 | 1,250 | — | |||||||
3.00% | December
2026 | 1,750 | — | |||||||
4.00% | December 2036 | 1,000 | — | |||||||
5.95% | April
2037 | 2,000 | 2,000 | |||||||
6.50% U.K. pound | June 2038 | 1,852 | 2,223 | |||||||
7.20% | March
2039 | 2,500 | 2,500 | |||||||
4.40% | May 2044 | 1,000 | 500 | |||||||
4.125% | December
2046 | 1,250 | — | |||||||
Notes and other debt with a weighted-average interest rate of 3.30%(c) | 2018–2021 | 2,464 | 3,974 | |||||||
Notes
and other debt with a weighted-average interest rate of 5.99%(d) | 2023–2043 | 4,455 | 4,468 | |||||||
Total principal amount of long-term debt | 30,529 | 27,573 | ||||||||
Net
fair value adjustments related to hedging and purchase accounting | 998 | 1,294 | ||||||||
Net unamortized discounts, premiums and debt issuance costs | (130 | ) | (127 | ) | ||||||
Total
long-term debt, carried at historical proceeds, as adjusted | $ | 31,398 | $ | 28,740 | ||||||
Current portion of long-term debt (not included above) | $ | 4,225 | $ | 3,719 | ||||||
(a) | Instrument
is redeemable by us at any time at the greater of 100% of the principal amount of the notes or the sum of the present values of the remaining scheduled payments of principal and interest discounted at the U.S. Treasury rate plus an incremental spread ranging from 0.05% to 0.50%, plus, in each case, accrued and unpaid interest. |
(b) | At December 31, 2016, the debt issuances have been reclassified to the current portion of long-term debt. |
(c) | Contains
debt issuances with a weighted-average maturity of approximately two years for balances that exist as of December 31, 2016. |
(d) | Contains debt issuances with a weighted-average maturity of approximately 16 years for balances that exist as of December 31, 2016. |
The
following table provides the maturity schedule of our Long-term debt outstanding as of December 31, 2016: | ||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2018 | 2019 | 2020 | 2021 | After 2021 | Total | ||||||||||||||||||
Maturities | $ | 3,567 | $ | 3,350 | $ | 360 | $ | 4,241 | $ | 19,879 | $ | 31,398 | ||||||||||||
2016
Financial Report | 101 | |
• | We record in Other comprehensive income/(loss) the effective portion of the gains or losses on foreign currency forward-exchange contracts and foreign currency swaps that are designated as cash flow hedges and reclassify those amounts, as appropriate, into earnings in the same period or periods during which the hedged transaction affects earnings. |
• | We
recognize the gains and losses on foreign currency forward-exchange contracts and foreign currency swaps that are used to offset the same foreign currency assets or liabilities immediately into earnings along with the earnings impact of the items they generally offset. These contracts essentially take the opposite currency position of that reflected in the month-end balance sheet to counterbalance the effect of any currency movement. |
• | We recognize the gain and loss impact on foreign currency swaps and foreign currency forward-exchange contracts
designated as hedges of our net investments in earnings in three ways: over time—for the periodic net swap payments; immediately—to the extent of any change in the difference between the foreign exchange spot rate and forward rate; and upon sale or substantial liquidation of our net investments—to the extent of change in the foreign exchange spot rates. |
• | We record in Other comprehensive income/(loss) the foreign exchange gains and losses related to foreign exchange-denominated debt designated as a hedge of our net investments in foreign subsidiaries and reclassify those amounts into earnings upon the sale or
substantial liquidation of our net investments. |
• | We recognize the gains and losses on interest rate swaps that are designated as fair value hedges in earnings upon the recognition of the change in fair value of the hedged risk. We recognize the offsetting earnings impact of fixed-rate debt attributable to the hedged risk also in earnings. |
102 | 2016
Financial Report | |
The
following table provides information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk: | ||||||||||||||||||||||||
Amount of Gains/(Losses) Recognized in OID(a), (b), (c) | Amount of Gains/(Losses) Recognized in OCI (Effective Portion)(a), (d) | Amount
of Gains/(Losses) Reclassified from OCI into OID (Effective Portion)(a), (d) | ||||||||||||||||||||||
As of December 31, | ||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Derivative
Financial Instruments in Cash Flow Hedge Relationships: | ||||||||||||||||||||||||
Foreign
currency swaps | $ | — | $ | — | $ | (280 | ) | $ | (826 | ) | $ | (387 | ) | $ | (613 | ) | ||||||||
Foreign
currency forward-exchange contracts | (4 | ) | — | (164 | ) | 1,028 | (65 | ) | 980 | |||||||||||||||
Derivative
Financial Instruments in Net Investment Hedge Relationships: | ||||||||||||||||||||||||
Foreign
currency forward-exchange contracts | 1 | (1 | ) | (15 | ) | 256 | — | — | ||||||||||||||||
Derivative
Financial Instruments Not Designated as Hedges: | ||||||||||||||||||||||||
Foreign
currency forward-exchange contracts | (92 | ) | (42 | ) | — | — | — | — | ||||||||||||||||
Foreign
currency swaps | (13 | ) | (4 | ) | — | — | — | — | ||||||||||||||||
Non-Derivative
Financial Instruments in Net Investment Hedge Relationships: | ||||||||||||||||||||||||
Foreign
currency short-term borrowings | — | — | (26 | ) | 3 | — | — | |||||||||||||||||
All
other net | — | (16 | ) | 1 | — | (1 | ) | — | ||||||||||||||||
$ | (107 | ) | $ | (64 | ) | $ | (483 | ) | $ | 461 | $ | (452 | ) | $ | 367 | |||||||||
(a) | OID
= Other (income)/deductions—net, included in Other (income)/deductions—net in the consolidated statements of income. OCI = Other comprehensive income/(loss), included in the consolidated statements of comprehensive income. |
(b) | Includes gains and losses attributable to derivative instruments designated and qualifying as fair value hedges, as well as the offsetting gains and losses attributable to the hedged items in such hedging relationships. |
(c) | There
was no significant ineffectiveness for any period presented. |
(d) | For derivative financial instruments in cash flow hedge relationships, the effective portion is included in Other comprehensive income/(loss)––Unrealized holding gains/(losses) on derivative financial instruments, net. For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the effective portion is included in Other comprehensive loss––Foreign currency translation adjustments, net. |
2016 Financial Report | 103 | |
The following table provides the components of Inventories: | ||||||||
As
of December 31, | ||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | ||||||
Finished goods | $ | 2,293 | $ | 2,714 | ||||
Work
in process | 3,696 | 3,932 | ||||||
Raw materials and supplies | 793 | 867 | ||||||
Inventories(a) | $ | 6,783 | $ | 7,513 | ||||
Noncurrent
inventories not included above(b) | $ | 683 | $ | 594 | ||||
(a) | The change from December 31, 2015 reflects,
among other things, the reclassification of $377 million to Assets held for sale (see Note 2B). |
(b) | Included in Other noncurrent assets. There are no recoverability issues associated with these amounts. |
The
following table provides the components of Property, plant and equipment: | ||||||||||
Useful Lives | As of December 31, | |||||||||
(MILLIONS OF DOLLARS) | (Years) | 2016 | 2015 | |||||||
Land | - | $ | 530 | $ | 588 | |||||
Buildings | 33-50 | 9,810 | 9,604 | |||||||
Machinery
and equipment | 8-20 | 11,248 | 10,933 | |||||||
Furniture, fixtures and other | 3-12 1/2 | 4,410 | 4,351 | |||||||
Construction
in progress | - | 2,127 | 1,791 | |||||||
28,125 | 27,268 | |||||||||
Less:
Accumulated depreciation | 14,807 | 13,502 | ||||||||
Property, plant and equipment(a) | $ | 13,318 | $ | 13,766 | ||||||
(a) | The
decrease in total property, plant and equipment is primarily due to depreciation, the reclassification of $457 million to Assets held for sale (see Note 2B) and, to a lesser extent, impairments and the impact of foreign exchange, partially offset by capital additions. |
The
following table provides the components of Identifiable intangible assets: | ||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | Gross Carrying Amount | Accumulated Amortization | Identifiable Intangible Assets,
less Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | Identifiable Intangible Assets,
less Accumulated Amortization | ||||||||||||||||||
Finite-lived intangible assets | ||||||||||||||||||||||||
Developed
technology rights | $ | 83,390 | $ | (49,650 | ) | $ | 33,740 | $ | 77,613 | $ | (47,193 | ) | $ | 30,419 | ||||||||||
Brands | 2,092 | (1,032 | ) | 1,060 | 1,973 | (928 | ) | 1,044 | ||||||||||||||||
Licensing
agreements and other | 1,869 | (1,005 | ) | 864 | 1,619 | (918 | ) | 701 | ||||||||||||||||
87,351 | (51,687 | ) | 35,664 | 81,205 | (49,040 | ) | 32,165 | |||||||||||||||||
Indefinite-lived
intangible assets | ||||||||||||||||||||||||
Brands
and other | 6,883 | 6,883 | 7,021 | 7,021 | ||||||||||||||||||||
IPR&D(a) | 10,101 | 10,101 | 1,171 | 1,171 | ||||||||||||||||||||
16,984 | 16,984 | 8,192 | 8,192 | |||||||||||||||||||||
Identifiable
intangible assets(a) | $ | 104,335 | $ | (51,687 | ) | $ | 52,648 | $ | 89,396 | $ | (49,040 | ) | $ | 40,356 | ||||||||||
(a) | The
increase in Identifiable intangible assets, less accumulated amortization, is primarily related to assets acquired as part of the acquisitions of Medivation, Anacor and Bamboo (see Note 2A), and the impact of measurement period adjustments related to our acquisition of Hospira (see Note 2A), partially offset by amortization, impairments and the reclassification of $1.3 billion to Assets held for sale (see Note 2B). For information about impairments, see Note 4. The increase in IPR&D, is primarily related to assets acquired as part of the acquisitions of Anacor and
Medivation, largely crisaborole and Xtandi. The intellectual property for crisaborole is owned by an international entity. |
104 | 2016 Financial Report | |
Our
identifiable intangible assets are associated with the following, as a percentage of total identifiable intangible assets, less accumulated amortization: | |||||||||
IH | EH | WRD | |||||||
Developed
technology rights | 64 | % | 35 | % | — | ||||
Brands, finite-lived | 73 | % | 27 | % | — | ||||
Brands,
indefinite-lived | 71 | % | 29 | % | — | ||||
IPR&D | 92 | % | 5 | % | 4 | % | |||
The
following table provides the annual amortization expense expected for the years 2017 through 2021: | ||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2017 | 2018 | 2019 | 2020 | 2021 | |||||||||||||||
Amortization
expense | $ | 4,827 | $ | 4,706 | $ | 4,481 | $ | 3,442 | $ | 3,348 | ||||||||||
2016
Financial Report | 105 | |
The
following table provides the components of and changes in the carrying amount of Goodwill: | ||||||||||||
(MILLIONS OF DOLLARS) | IH | EH | Total | |||||||||
Balance, January
1, 2015 | $ | 24,430 | $ | 17,639 | $ | 42,069 | ||||||
Additions(a) | 39 | 7,284 | 7,323 | |||||||||
Other(b) | (660 | ) | (489 | ) | (1,149 | ) | ||||||
Balance,
December 31, 2015 | 23,809 | 24,433 | 48,242 | |||||||||
Additions(c) | 6,357 | 12 | 6,369 | |||||||||
Other(d) | (32 | ) | (130 | ) | (162 | ) | ||||||
Balance,
December 31, 2016 | $ | 30,134 | $ | 24,315 | $ | 54,449 | ||||||
(a) | EH
additions relate to our acquisition of Hospira. For additional information, see Note 2A. |
(b) | Primarily reflects the impact of foreign exchange. |
(c) | IH additions primarily relate to our acquisitions of Medivation, Anacor and Bamboo and are subject to change until we complete the valuations of assets acquired and liabilities assumed from Medivation, Anacor and Bamboo (see Note 2A). |
(d) | Primarily
reflects the impact of foreign exchange and, with respect to EH, the impact of the reclassification of $119 million to Assets held for sale during 2016 (see Note 2B). |
The
following table provides the annual cost/(income) and changes in Other comprehensive loss for our benefit plans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
Pension Plans | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Qualified(a) | U.S. Supplemental (Non-Qualified)(b) | International(c),
(f) | Postretirement Plans(d), (f) | |||||||||||||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | ||||||||||||||||||||||||||||||||||||
Service
cost | $ | 257 | $ | 287 | $ | 253 | $ | 18 | $ | 22 | $ | 20 | $ | 165 | $ | 186 | $ | 199 | $ | 41 | $ | 55 | $ | 55 | ||||||||||||||||||||||||
Interest
cost | 646 | 676 | 697 | 53 | 54 | 57 | 233 | 307 | 394 | 101 | 117 | 169 | ||||||||||||||||||||||||||||||||||||
Expected
return on plan assets | (958 | ) | (1,089 | ) | (1,043 | ) | — | — | — | (381 | ) | (418 | ) | (459 | ) | (34 | ) | (53 | ) | (63 | ) | |||||||||||||||||||||||||||
Amortization
of: | ||||||||||||||||||||||||||||||||||||||||||||||||
Actuarial
losses | 395 | 346 | 63 | 37 | 44 | 29 | 93 | 122 | 97 | 32 | 38 | 6 | ||||||||||||||||||||||||||||||||||||
Prior
service credits | 5 | (5 | ) | (7 | ) | (1 | ) | (2 | ) | (2 | ) | (3 | ) | (7 | ) | (7 | ) | (174 | ) | (146 | ) | (57 | ) | |||||||||||||||||||||||||
Curtailments | 10 | 3 | 2 | 1 | — | — | (2 | ) | 5 | — | (26 | ) | (31 | ) | (7 | ) | ||||||||||||||||||||||||||||||||
Settlements | 90 | 556 | 52 | 28 | 34 | 28 | 9 | 81 | 22 | — | — | — | ||||||||||||||||||||||||||||||||||||
Special
termination benefits | — | — | — | — | — | — | 1 | 1 | 8 | — | — | — | ||||||||||||||||||||||||||||||||||||
Net
periodic benefit costs/(income) reported in Income | 444 | 773 | 16 | 137 | 153 | 132 | 115 | 277 | 254 | (59 | ) | (21 | ) | 102 | ||||||||||||||||||||||||||||||||||
(Income)/cost
reported in Other comprehensive loss(e) | 253 | (396 | ) | 2,768 | 121 | (143 | ) | 163 | 640 | (542 | ) | 260 | 3 | (540 | ) | (174 | ) | |||||||||||||||||||||||||||||||
(Income)/cost
recognized in Comprehensive income | $ | 697 | $ | 378 | $ | 2,784 | $ | 258 | $ | 10 | $ | 294 | $ | 755 | $ | (265 | ) | $ | 514 | $ | (56 | ) | $ | (560 | ) | $ | (72 | ) | ||||||||||||||||||||
106 | 2016
Financial Report | |
(a) | 2016 v. 2015––The
decrease in net periodic benefit costs for our U.S. qualified pension plans was primarily driven by (i) a year-over-year decrease in settlement activity compared to that of 2015 related to the non-recurring lump-sum settlement option to certain plan participants discussed in the 2015 v. 2014 analysis, below, (ii) lower service costs resulting from a higher discount rate, and (iii) lower interest costs resulting from a lower beginning benefit obligation. The aforementioned decreases were partially offset by (i) a lower expected return on plan assets resulting from both a lower expected rate of return, and a net decrease of approximately $1.1 billion in the asset base, due in part to lump-sum payments made in 2015 to certain terminated vested colleagues to settle Pfizer’s pension obligation, and (ii) an increase in the amounts amortized for actuarial losses, primarily resulting from the remeasurement in 2015 of Hospira’s
U.S. qualified pension plan due to its plan termination. |
(b) | 2016 v. 2015––The decrease in
net periodic benefit costs for our U.S. supplemental (non-qualified) pension plans was primarily driven by (i) a decrease in the amounts amortized for actuarial losses resulting from the increase in 2015 in the discount rate used to determine the benefit obligation, (ii) lower settlement activity, and (iii) lower service costs resulting from a higher discount rate. |
(c) | 2016
v. 2015––The decrease in net periodic benefit costs for our international pension plans was primarily driven by (i) lower service and interest costs, resulting from a change in our approach for measuring service and interest costs (see (f) below), (ii) lower settlement activity, and (iii) a decrease in the amounts amortized for actuarial losses resulting from large gains in 2015, which decreased the plan net loss position. The aforementioned decreases to our net periodic benefit costs were partially offset by a decrease in the expected return on plan assets due to a lower asset base and a lower expected rate of return on plan assets. |
(d) | 2016 v. 2015––The increase in net periodic benefit income for our postretirement plans was primarily driven by (i) an increase in prior service credits due to the postretirement medical plan
cap changes during 2016 and 2015, (ii) lower interest costs resulting from a lower benefit obligation, (iii) lower service costs resulting from a higher discount rate, and (iv) a decrease in the amounts amortized for actuarial losses resulting from the increase in 2015 in the discount rate used to determine the benefit obligation. The aforementioned changes were partially offset by (i) a decrease in expected return on plan assets, primarily resulting from a decrease in plan assets, reflecting payments by the plan for IRC Section 401(h) reimbursements to Pfizer for eligible 2014 and 2015 prescription drug expenses for certain retirees, and (ii) lower curtailment gains. |
(e) | For details of the changes in Other comprehensive loss, see the benefit plan activity
in the consolidated statements of comprehensive income. |
(f) | Effective January 1, 2016, the Company changed the approach used to measure service and interest costs for certain international pension and other postretirement benefit plans. For fiscal 2015 and 2014, the Company measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the respective plan obligations. For fiscal 2016, we elected to measure service and interest costs by applying
the spot rates along the yield curve for certain international plans to the plans' liability cash flows. The Company believes the new approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. This change does not affect the measurement of our plan obligations. We have accounted for this change as a change in accounting estimate and, accordingly, have accounted for it on a prospective basis. The reduction in expense for 2016 associated with this change in estimate was $42 million, primarily related to certain international pension plans, which was recognized evenly over each quarter of the year. The change in approach for the postretirement benefit plans was not material
to the 2016 consolidated statement of income. |
The following table provides the amounts in Accumulated other comprehensive loss expected to be amortized into 2017 net periodic benefit costs: | ||||||||||||||||
Pension
Plans | ||||||||||||||||
(MILLIONS OF DOLLARS) | U.S. Qualified | U.S. Supplemental (Non-Qualified) | International | Postretirement Plans | ||||||||||||
Actuarial losses | $ | (414 | ) | $ | (50 | ) | $ | (113 | ) | $ | (31 | ) | ||||
Prior
service credits and other | (5 | ) | 1 | 4 | 184 | |||||||||||
Total | $ | (419 | ) | $ | (49 | ) | $ | (109 | ) | $ | 153 | |||||
2016
Financial Report | 107 | |
The
following table provides the weighted-average actuarial assumptions of our benefit plans: | ||||||
(PERCENTAGES) | 2016 | 2015 | 2014 | |||
Weighted-average assumptions used to determine benefit obligations | ||||||
Discount
rate: | ||||||
U.S. qualified pension plans | 4.3% | 4.5% | 4.2% | |||
U.S. non-qualified
pension plans | 4.2% | 4.5% | 4.0% | |||
International pension plans | 2.4% | 3.1% | 3.0% | |||
Postretirement
plans | 4.2% | 4.5% | 4.2% | |||
Rate of compensation increase: | ||||||
U.S.
qualified pension plans | 2.8% | 2.8% | 2.8% | |||
U.S. non-qualified pension plans | 2.8% | 2.8% | 2.8% | |||
International
pension plans | 2.6% | 2.6% | 2.7% | |||
Weighted-average assumptions used to determine net periodic benefit cost | ||||||
Discount
rate: | ||||||
U.S. qualified pension plans | 4.5% | 4.2% | 5.2% | |||
U.S. non-qualified
pension plans | 4.5% | 4.0% | 4.8% | |||
International pension plans interest cost(a) | 2.7% | 3.0% | 3.9% | |||
International
pension plans service cost(a) | 3.0% | 3.0% | 3.9% | |||
Postretirement plans | 4.5% | 4.2% | 5.1% | |||
Expected
return on plan assets: | ||||||
U.S. qualified pension plans | 8.0% | 8.3% | 8.5% | |||
International
pension plans | 5.2% | 5.5% | 5.8% | |||
Postretirement plans | 8.0% | 8.3% | 8.5% | |||
Rate
of compensation increase: | ||||||
U.S. qualified pension plans | 2.8% | 2.8% | 2.8% | |||
U.S.
non-qualified pension plans | 2.8% | 2.8% | 2.8% | |||
International pension plans | 2.6% | 2.7% | 2.9% | |||
(a) | As
discussed above, effective January 1, 2016, the Company changed the approach used to measure service cost and interest costs for certain international pension plans and other postretirement benefits. In accordance with this change, the effective rate for interest on the benefit obligations and effective rate for service cost, respectively, are reported for international pension plans. |
The following table provides the healthcare cost trend rate assumptions for our U.S. postretirement benefit plans: | ||||||
2016 | 2015 | |||||
Healthcare
cost trend rate assumed for next year (up to age 65) | 6.3 | % | 6.5 | % | ||
Healthcare cost trend rate assumed for next year (age 65 and older) | 7.4 | % | 7.9 | % | ||
Rate
to which the cost trend rate is assumed to decline | 4.5 | % | 4.5 | % | ||
Year that the rate reaches the ultimate trend rate | 2037 | 2037 | ||||
The
following table provides the effects as of December 31, 2016 of a one-percentage-point increase or decrease in the healthcare cost trend rate assumed for postretirement benefits: | ||||||||
(MILLIONS OF DOLLARS) | Increase | Decrease | ||||||
Effect on total service and interest cost components | $ | 5 | $ | (5 | ) | |||
Effect
on postretirement benefit obligation | 37 | (50 | ) | |||||
108 | 2016 Financial Report | |
The following table provides an analysis of the changes in our benefit obligations, plan assets and funded
status of our benefit plans: | ||||||||||||||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||||||||||||||
Pension Plans | ||||||||||||||||||||||||||||||||
U.S.
Qualified(a) | U.S. Supplemental (Non-Qualified)(b) | International(c) | Postretirement Plans(d) | |||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Change
in benefit obligation(e) | ||||||||||||||||||||||||||||||||
Benefit
obligation, beginning | $ | 14,926 | $ | 16,575 | $ | 1,343 | $ | 1,481 | $ | 9,214 | $ | 10,796 | $ | 2,463 | $ | 3,168 | ||||||||||||||||
Service
cost | 257 | 287 | 18 | 22 | 165 | 186 | 41 | 55 | ||||||||||||||||||||||||
Interest
cost | 646 | 676 | 53 | 54 | 233 | 307 | 101 | 117 | ||||||||||||||||||||||||
Employee
contributions | — | — | — | — | 7 | 7 | 85 | 79 | ||||||||||||||||||||||||
Plan
amendments | — | 62 | — | 4 | (6 | ) | (1 | ) | (177 | ) | (497 | ) | ||||||||||||||||||||
Changes
in actuarial assumptions and other | 725 | (774 | ) | 185 | (70 | ) | 1,273 | (273 | ) | 22 | (185 | ) | ||||||||||||||||||||
Foreign
exchange impact | — | — | — | — | (781 | ) | (938 | ) | — | (20 | ) | |||||||||||||||||||||
Acquisitions/divestitures/other,
net | — | 542 | — | 9 | 1 | 19 | — | 49 | ||||||||||||||||||||||||
Curtailments | 9 | 3 | 1 | — | (14 | ) | (2 | ) | — | (3 | ) | |||||||||||||||||||||
Settlements | (449 | ) | (2,034 | ) | (78 | ) | (93 | ) | (45 | ) | (499 | ) | — | — | ||||||||||||||||||
Special
termination benefits | — | — | — | — | 1 | 1 | — | — | ||||||||||||||||||||||||
Benefits
paid | (568 | ) | (412 | ) | (72 | ) | (65 | ) | (358 | ) | (389 | ) | (282 | ) | (300 | ) | ||||||||||||||||
Benefit
obligation, ending(e) | 15,547 | 14,926 | 1,450 | 1,343 | 9,691 | 9,214 | 2,254 | 2,463 | ||||||||||||||||||||||||
Change
in plan assets | ||||||||||||||||||||||||||||||||
Fair
value of plan assets, beginning | 11,633 | 12,706 | — | — | 7,959 | 8,588 | 622 | 762 | ||||||||||||||||||||||||
Actual
gain/(loss) on plan assets | 939 | (124 | ) | — | — | 693 | 290 | 44 | (3 | ) | ||||||||||||||||||||||
Company
contributions | 1,000 | 1,000 | 151 | 158 | 209 | 558 | (12 | ) | 84 | |||||||||||||||||||||||
Employee
contributions | — | — | — | — | 7 | 7 | 85 | 79 | ||||||||||||||||||||||||
Foreign
exchange impact | — | — | — | — | (782 | ) | (602 | ) | — | — | ||||||||||||||||||||||
Acquisitions/divestitures,
net | — | 496 | — | — | (1 | ) | 6 | — | — | |||||||||||||||||||||||
Settlements | (449 | ) | (2,034 | ) | (78 | ) | (93 | ) | (45 | ) | (499 | ) | — | — | ||||||||||||||||||
Benefits
paid | (568 | ) | (412 | ) | (72 | ) | (65 | ) | (358 | ) | (389 | ) | (282 | ) | (300 | ) | ||||||||||||||||
Fair
value of plan assets, ending | 12,556 | 11,633 | — | — | 7,683 | 7,959 | 458 | 622 | ||||||||||||||||||||||||
Funded
status—Plan assets less than benefit obligation | $ | (2,990 | ) | $ | (3,292 | ) | $ | (1,450 | ) | $ | (1,343 | ) | $ | (2,008 | ) | $ | (1,255 | ) | $ | (1,796 | ) | $ | (1,841 | ) | ||||||||
(a) | The
favorable change in the funded status of our U.S. qualified plans was primarily due to an increase in the actual return on assets, partially offset by plan losses resulting from the decrease in the discount rate at the end of 2016. |
(b) | Our U.S. supplemental (non-qualified) plans are generally not funded and these obligations, which are substantially greater than the annual cash outlay for these liabilities, will be paid from cash generated from operations. The increase in the benefit obligation is primarily due to a decrease in the discount rate. |
(c) | The
unfavorable change in the international plans’ funded status was primarily due to plan losses related to a decrease in the discount rate (reflecting lower interest rates), partially offset by an increase in the actual return on plan assets. |
(d) | The favorable change in the funded status of our postretirement plans was primarily due to plan amendments for certain U.S. and Puerto Rico postretirement plans. The U.S. plan change applied a fixed cap on costs for certain groups within the plan. The Puerto Rico plan change includes: (i) a cap on costs for certain groups within the plan, and (ii) the adoption of the EGWP. The changes resulted in reductions to the plan liabilities of $82 million
for the U.S. postretirement plan and $95 million for the Puerto Rico postretirement plan. |
(e) | For the U.S. and international pension plans, the benefit obligation is the PBO. For the postretirement plans, the benefit obligation is the ABO. The ABO for all of our U.S. qualified pension plans was $15.4 billion in 2016 and $14.8 billion in 2015. The ABO for our U.S. supplemental (non-qualified) pension plans was $1.4 billion
in 2016 and $1.3 billion in 2015. The ABO for our international pension plans was $9.3 billion in 2016 and $8.8 billion in 2015. |
2016 Financial Report | 109 | |
The
following table provides information as to how the funded status is recognized in our consolidated balance sheets: | ||||||||||||||||||||||||||||||||
As of December 31, | ||||||||||||||||||||||||||||||||
Pension Plans | ||||||||||||||||||||||||||||||||
U.S.
Qualified | U.S. Supplemental (Non-Qualified) | International | Postretirement Plans | |||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Noncurrent
assets(a) | $ | — | $ | — | $ | — | $ | — | $ | 300 | $ | 572 | $ | — | $ | — | ||||||||||||||||
Current
liabilities(b) | (160 | ) | — | (152 | ) | (126 | ) | (28 | ) | (25 | ) | (30 | ) | (31 | ) | |||||||||||||||||
Noncurrent
liabilities(c) | (2,830 | ) | (3,292 | ) | (1,297 | ) | (1,216 | ) | (2,279 | ) | (1,801 | ) | (1,766 | ) | (1,809 | ) | ||||||||||||||||
Funded
status | $ | (2,990 | ) | $ | (3,292 | ) | $ | (1,450 | ) | $ | (1,343 | ) | $ | (2,008 | ) | $ | (1,255 | ) | $ | (1,796 | ) | $ | (1,841 | ) | ||||||||
(a) | Included
primarily in Other noncurrent assets. |
(b) | Included in Accrued compensation and related items. |
(c) | Included in Pension benefit obligations, net and Postretirement benefit obligations, net, as appropriate. |
The
following table provides the pre-tax components of cumulative amounts recognized in Accumulated other comprehensive loss: | ||||||||||||||||||||||||||||||||
As of December 31, | ||||||||||||||||||||||||||||||||
Pension Plans | ||||||||||||||||||||||||||||||||
U.S.
Qualified | U.S. Supplemental (Non-Qualified) | International | Postretirement Plans | |||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Actuarial
losses(a) | $ | (4,530 | ) | $ | (4,272 | ) | $ | (538 | ) | $ | (419 | ) | $ | (2,629 | ) | $ | (1,979 | ) | $ | (502 | ) | $ | (523 | ) | ||||||||
Prior
service (costs)/credits | (27 | ) | (33 | ) | 2 | 4 | 40 | 29 | 1,392 | 1,415 | ||||||||||||||||||||||
Total | $ | (4,558 | ) | $ | (4,305 | ) | $ | (536 | ) | $ | (415 | ) | $ | (2,589 | ) | $ | (1,949 | ) | $ | 889 | $ | 892 | ||||||||||
(a) | The
accumulated actuarial losses primarily represent the impact of changes in discount rates and other assumptions that result in cumulative changes in our projected benefit obligations, as well as the cumulative difference between the expected return and actual return on plan assets. These accumulated actuarial losses are recognized in Accumulated other comprehensive loss and are amortized into net periodic benefit costs primarily over the average remaining service period for active participants, using the corridor approach. The average amortization periods to be utilized for 2017 are 8.2 years for our U.S. qualified plans, 8.1 years for our U.S. supplemental (non-qualified) plans, 19.3 years for our international plans, and 9.1
years for our postretirement plans. |
The following table provides information related to the funded status of selected benefit plans: | ||||||||||||||||||||||||
As
of December 31, | ||||||||||||||||||||||||
Pension Plans | ||||||||||||||||||||||||
U.S. Qualified | U.S. Supplemental (Non-Qualified) | International | ||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Pension
plans with an ABO in excess of plan assets: | ||||||||||||||||||||||||
Fair value of plan assets | $ | 12,556 | $ | 11,633 | $ | — | $ | — | $ | 4,625 | $ | 976 | ||||||||||||
ABO | 15,422 | 14,755 | 1,410 | 1,324 | 6,558 | 2,495 | ||||||||||||||||||
Pension
plans with a PBO in excess of plan assets: | ||||||||||||||||||||||||
Fair value of plan assets | 12,556 | 11,633 | — | — | 4,936 | 1,546 | ||||||||||||||||||
PBO | 15,547 | 14,926 | 1,450 | 1,343 | 7,244 | 3,373 | ||||||||||||||||||
110 | 2016 Financial Report | |
The
following table provides the components of plan assets: | ||||||||||||||||||||||||||||||||||||||||
Fair Value(a) | Fair Value(a) | |||||||||||||||||||||||||||||||||||||||
(MILLIONS
OF DOLLARS) | As of December 31, 2016 | Level 1 | Level 2 | Level 3 | Assets Measured at NAV(b) | As
of December 31, 2015 | Level 1 | Level 2 | Level 3 | Assets Measured at NAV(b) | ||||||||||||||||||||||||||||||
U.S. qualified pension plans | ||||||||||||||||||||||||||||||||||||||||
Cash
and cash equivalents | $ | 672 | $ | 92 | $ | 580 | $ | — | $ | — | $ | 417 | $ | 81 | $ | 336 | $ | — | $ | — | ||||||||||||||||||||
Equity
securities: | ||||||||||||||||||||||||||||||||||||||||
Global
equity securities | 3,970 | 3,943 | 27 | — | — | 3,720 | 3,717 | 2 | 1 | — | ||||||||||||||||||||||||||||||
Equity
commingled funds | 1,062 | — | 772 | — | 290 | 951 | — | 689 | — | 262 | ||||||||||||||||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||||||||||||||||||||||
Corporate
debt securities | 3,232 | 14 | 3,217 | 1 | — | 2,866 | 3 | 2,861 | 2 | — | ||||||||||||||||||||||||||||||
Government
and government agency obligations | 1,060 | — | 1,060 | — | — | 989 | — | 989 | — | — | ||||||||||||||||||||||||||||||
Fixed
income commingled funds | 92 | — | — | — | 92 | 222 | — | 57 | — | 165 | ||||||||||||||||||||||||||||||
Other
investments: | ||||||||||||||||||||||||||||||||||||||||
Partnership
investments(c) | 1,093 | — | — | — | 1,093 | 1,120 | — | — | — | 1,120 | ||||||||||||||||||||||||||||||
Insurance
contracts | 235 | — | 235 | — | — | 259 | — | 259 | — | — | ||||||||||||||||||||||||||||||
Other
commingled funds(d) | 1,140 | — | — | — | 1,140 | 1,089 | — | — | — | 1,089 | ||||||||||||||||||||||||||||||
Total | 12,556 | 4,049 | 5,891 | 1 | 2,615 | 11,633 | 3,801 | 5,193 | 3 | 2,636 | ||||||||||||||||||||||||||||||
International
pension plans | ||||||||||||||||||||||||||||||||||||||||
Cash
and cash equivalents | 439 | 38 | 401 | — | — | 207 | 14 | 193 | — | — | ||||||||||||||||||||||||||||||
Equity
securities: | ||||||||||||||||||||||||||||||||||||||||
Global
equity securities | 174 | 163 | 11 | — | — | 901 | 816 | 85 | — | — | ||||||||||||||||||||||||||||||
Equity
commingled funds | 2,490 | — | 1,265 | — | 1,224 | 2,218 | 16 | 854 | — | 1,348 | ||||||||||||||||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||||||||||||||||||||||
Corporate
debt securities | 489 | — | 474 | — | 15 | 653 | 171 | 469 | — | 12 | ||||||||||||||||||||||||||||||
Government
and government agency obligations | 853 | — | 786 | — | 67 | 1,224 | 109 | 1,048 | — | 67 | ||||||||||||||||||||||||||||||
Fixed
income commingled funds | 1,750 | — | 1,174 | — | 576 | 1,216 | 37 | 919 | — | 260 | ||||||||||||||||||||||||||||||
Other
investments: | ||||||||||||||||||||||||||||||||||||||||
Partnership
investments(c) | 32 | — | — | — | 32 | 40 | — | 6 | — | 33 | ||||||||||||||||||||||||||||||
Insurance
contracts | 272 | — | 17 | 254 | 1 | 257 | — | 21 | 219 | 17 | ||||||||||||||||||||||||||||||
Other(d) | 1,185 | — | 430 | 324 | 431 | 1,245 | 59 | 370 | 398 | 418 | ||||||||||||||||||||||||||||||
Total | 7,683 | 201 | 4,558 | 578 | 2,346 | 7,959 | 1,222 | 3,965 | 618 | 2,155 | ||||||||||||||||||||||||||||||
U.S.
postretirement plans(e) | ||||||||||||||||||||||||||||||||||||||||
Cash
and cash equivalents | — | — | — | — | — | 6 | — | 6 | — | — | ||||||||||||||||||||||||||||||
Equity
securities: | ||||||||||||||||||||||||||||||||||||||||
Global
equity securities | — | — | — | — | — | 64 | 64 | — | — | — | ||||||||||||||||||||||||||||||
Equity
commingled funds | — | — | — | — | — | 16 | — | 12 | — | 4 | ||||||||||||||||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||||||||||||||||||||||
Corporate
debt securities | — | — | — | — | — | 49 | — | 49 | — | — | ||||||||||||||||||||||||||||||
Government
and government agency obligations | — | — | — | — | — | 17 | — | 17 | — | — | ||||||||||||||||||||||||||||||
Fixed
income commingled funds | — | — | — | — | — | 4 | — | 1 | — | 3 | ||||||||||||||||||||||||||||||
Other
investments: | ||||||||||||||||||||||||||||||||||||||||
Partnership
investments(c) | — | — | — | — | — | 19 | — | — | — | 19 | ||||||||||||||||||||||||||||||
Insurance
contracts | 458 | — | 458 | — | — | 429 | — | 429 | — | — | ||||||||||||||||||||||||||||||
Other
commingled funds(d) | — | — | — | — | — | 19 | — | — | — | 19 | ||||||||||||||||||||||||||||||
Total | $ | 458 | $ | — | $ | 458 | $ | — | $ | — | $ | 622 | $ | 64 | $ | 514 | $ | — | $ | 45 | ||||||||||||||||||||
(a) | Fair
values are determined based on valuation inputs categorized as Level 1, 2 or 3 (see Note 1E). |
(b) | In accordance with the provisions of a new accounting standard we adopted on January 1, 2016, described below, certain investments that are measured at NAV per share (or its equivalent) have not been classified in the fair value hierarchy. The NAV amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefits plan assets. As a result, a reclassification has been made to the prior year’s plan asset classification table to conform to the
current year’s presentation. |
(c) | Primarily includes investments in private equity, private debt, public equity limited partnerships, and, to a lesser extent, real estate and venture capital. |
(d) | Primarily includes, for U.S. plan assets, investments in hedge funds and, to a lesser extent, real estate and, for international plan assets, investments in real estate and hedge funds. |
(e) | Reflects
postretirement plan assets, which support a portion of our U.S. retiree medical plans. |
2016 Financial Report | 111 | |
The
following table provides an analysis of the changes in our more significant investments valued using significant unobservable inputs: | ||||||||||||||||
Year Ended December 31, | ||||||||||||||||
International Pension Plans | ||||||||||||||||
Insurance contracts | Other | |||||||||||||||
(MILLIONS
OF DOLLARS) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Fair value, beginning(a) | $ | 219 | $ | 254 | $ | 398 | $ | 395 | ||||||||
Actual return on plan
assets: | ||||||||||||||||
Assets held, ending | 11 | 16 | (1 | ) | 30 | |||||||||||
Assets
sold during the period | — | — | 6 | 13 | ||||||||||||
Purchases, sales and settlements, net | 20 | (19 | ) | (18 | ) | (21 | ) | |||||||||
Exchange
rate changes | 4 | (33 | ) | (61 | ) | (19 | ) | |||||||||
Fair value, ending | $ | 254 | $ | 219 | $ | 324 | $ | 398 | ||||||||
(a) | We
adopted a new accounting standard as of January 1, 2016 whereby certain investments in 2016 and 2015 that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified as Level 1, 2 or 3 in the above fair value hierarchy table, but are included in the total. As a result, a reclassification has been made to the prior year's plan asset classification table to conform to the current year's presentation. |
• | Cash and cash equivalents: Level 1 investments may include cash, cash equivalents and foreign currency valued using exchange
rates. Level 2 investments may include short-term investment funds which are commingled funds priced at a stable NAV by the administrator of the funds. |
• | Equity securities: Level 1 investments may include individual securities that are valued at the closing price or last trade reported on the major market on which they are traded. Level 1 and Level 2 investments may include commingled funds that have a readily determinable fair value based on quoted prices on an exchange or a published NAV derived from the quoted prices in active markets of the underlying securities. Level 3 investments may include individual securities that are unlisted, delisted, suspended, or illiquid and are typically valued using their last available price. |
• | Fixed
income securities: Level 1 investments may include individual securities that are valued at the closing price or last trade reported on the major market on which they are traded. Level 2 investments may include commingled funds that have a readily determinable fair value based on observable prices of the underlying securities. Level 2 investments may include corporate bonds, government and government agency obligations and other fixed income securities valued using bid evaluation pricing models or quoted prices of securities with similar characteristics. Level 3 investments may include securities that are valued using alternative pricing sources, such as investment managers or brokers, which use proprietary pricing models that incorporate unobservable inputs. |
• | Other
investments: Level 1 investments may include individual securities that are valued at the closing price or last trade reported on the major market on which they are traded. Level 2 investments may include Insurance contracts which invest in interest bearing cash, U.S. government securities and corporate debt instruments. |
112 | 2016
Financial Report | |
The
following table provides the long-term target asset allocations ranges and the percentage of the fair value of plan assets for benefit plans: | |||||||||
As of December 31, | |||||||||
Target Allocation Percentage | Percentage of Plan Assets | ||||||||
(PERCENTAGES) | 2016 | 2016 | 2015 | ||||||
U.S.
qualified pension plans | |||||||||
Cash and cash equivalents | 0-10% | 5.3 | % | 3.6 | % | ||||
Equity
securities | 35-55% | 40.1 | % | 40.2 | % | ||||
Fixed income securities | 30-55% | 34.9 | % | 35 | % | ||||
Other
investments(a) | 5-17.5% | 19.7 | % | 21.2 | % | ||||
Total | 100 | % | 100 | % | 100 | % | |||
International
pension plans | |||||||||
Cash and cash equivalents | 0-10% | 5.7 | % | 2.6 | % | ||||
Equity
securities | 25-50% | 34.7 | % | 39.2 | % | ||||
Fixed income securities | 30-55% | 40.2 | % | 38.8 | % | ||||
Other
investments | 19.4 | % | 19.4 | % | |||||
Total | 100 | % | 100 | % | 100 | % | |||
U.S.
postretirement plans | |||||||||
Cash and cash equivalents | 0-5% | — | 1.0 | % | |||||
Equity
securities | — | — | 12.8 | % | |||||
Fixed income securities | — | — | 11.2 | % | |||||
Other
investments | 95-100% | 100 | % | 75 | % | ||||
Total | 100 | % | 100 | % | 100 | % | |||
(a) | Actual
percentage of plan assets in Other investments for 2016 includes $235 million (this amount was $259 million in 2015) related to a group fixed annuity insurance contract that was executed by legacy Wyeth for certain members of its defined benefit plans prior to Pfizer acquiring the company in 2009, and $144 million (this amount was $129 million in 2015) related to an investment in a partnership whose primary holdings are public equity securities. |
2016 Financial Report | 113 | |
The
following table provides the expected future cash flow information related to our benefit plans: | ||||||||||||||||
Pension Plans | ||||||||||||||||
(MILLIONS OF DOLLARS) | U.S. Qualified | U.S. Supplemental (Non-Qualified) | International | Postretirement
Plans | ||||||||||||
Expected employer contributions: | ||||||||||||||||
2017(a) | $ | 1,160 | $ | 152 | $ | 175 | $ | 179 | ||||||||
Expected
benefit payments: | ||||||||||||||||
2017 | $ | 1,519 | $ | 152 | $ | 331 | $ | 186 | ||||||||
2018 | 1,058 | 128 | 333 | 196 | ||||||||||||
2019 | 947 | 118 | 335 | 198 | ||||||||||||
2020 | 952 | 119 | 350 | 197 | ||||||||||||
2021 | 930 | 112 | 356 | 196 | ||||||||||||
2022–2026 | 4,391 | 503 | 1,867 | 919 | ||||||||||||
(a) | For
the U.S. qualified plans, the $1.0 billion voluntary contribution, which was considered pre-funding for future anticipated mandatory contributions and is also expected to reduce Pension Benefit Guaranty Corporation variable rate premiums, was paid in January 2017. |
114 | 2016 Financial Report | |
The following table provides the number of shares of our common stock purchased and the cost of purchases
under our publicly announced share-purchase plans, including our accelerated share repurchase agreements: | ||||||||||||
(SHARES IN MILLIONS, DOLLARS IN BILLIONS) | 2016(a) | 2015(b) | 2014 | |||||||||
Shares
of common stock purchased | 154 | 182 | 165 | |||||||||
Cost of purchase | $ | 5.0 | $ | 6.2 | $ | 5.0 | ||||||
(a) | Represents
shares purchased pursuant to and received upon settlement of the accelerated share repurchase agreement entered into on March 8, 2016. See above for additional information. |
(b) | Includes approximately 151 million shares purchased for $5.2 billion pursuant to the accelerated share repurchase agreement entered into on February 9, 2015 (see above for additional information), as well as other share repurchases through year-end 2015. |
2016 Financial Report | 115 | |
The following table provides the components of share-based compensation expense and the associated tax benefit: | ||||||||||||
Year Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
Restricted
Stock Units | $ | 299 | $ | 306 | $ | 270 | ||||||
Portfolio Performance Shares | 135 | 147 | 96 | |||||||||
Total
Shareholder Return Units | 134 | 36 | 37 | |||||||||
Stock Options | 106 | 165 | 150 | |||||||||
Performance
Share Awards | 13 | 11 | 30 | |||||||||
Directors’ compensation | 4 | 4 | 3 | |||||||||
Share-based
payment expense | 691 | 669 | 586 | |||||||||
Tax benefit for share-based compensation expense | (205 | ) | (198 | ) | (179 | ) | ||||||
Share-based
payment expense, net of tax | $ | 486 | $ | 471 | $ | 407 | ||||||
The following table summarizes all RSU activity during 2016: | |||||||
Shares (Thousands) | Weighted-Average Grant-Date
Fair Value Per Share | ||||||
Nonvested, December 31, 2015 | 29,135 | $ | 31.53 | ||||
Granted | 10,581 | 30.74 | |||||
Vested | (9,630 | ) | 27.41 | ||||
Reinvested
dividend equivalents | 1,093 | 32.56 | |||||
Forfeited | (1,574 | ) | 32.18 | ||||
Nonvested,
December 31, 2016 | 29,605 | $ | 32.59 | ||||
The
following table provides data related to all RSU activity: | ||||||||||||
(MILLIONS OF DOLLARS) | Year Ended December 31, | |||||||||||
2016 | 2015 | 2014 | ||||||||||
Total
fair value of shares vested | $ | 293 | $ | 371 | $ | 401 | ||||||
Total compensation cost related to nonvested RSU awards not yet recognized,
pre-tax | $ | 262 | $ | 279 | $ | 255 | ||||||
Weighted-average period over which RSU cost is expected to be recognized (years) | 1.7 | 1.8 | 1.8 | |||||||||
116 | 2016
Financial Report | |
The
following table provides the weighted-average assumptions used in the valuation of stock options: | |||||||||
Year Ended December 31, | |||||||||
2016 | 2015 | 2014 | |||||||
Expected
dividend yield(a) | 3.85 | % | 3.19 | % | 3.18 | % | |||
Risk-free interest rate(b) | 1.55 | % | 1.89 | % | 1.94 | % | |||
Expected
stock price volatility(c) | 21.64 | % | 18.34 | % | 19.76 | % | |||
Expected term (years)(d) | 6.75 | 6.75 | 6.50 | ||||||
(a) | Determined
using a constant dividend yield during the expected term of the option. |
(b) | Determined using the interpolated yield on U.S. Treasury zero-coupon issues. |
(c) | Determined using implied volatility, after consideration of historical volatility. |
(d) | Determined
using historical exercise and post-vesting termination patterns. |
The following table summarizes all stock option activity during 2016: | |||||||||||||
Shares (Thousands) | Weighted-Average Exercise
Price Per Share | Weighted-Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value(a) (Millions) | ||||||||||
Outstanding, December 31, 2015 | 232,554 | $ | 26.41 | ||||||||||
Granted | 1,371 | 30.59 | |||||||||||
Exercised | (42,550 | ) | 24.03 | ||||||||||
Forfeited | (2,949 | ) | 33.18 | ||||||||||
Expired | (1,750 | ) | 28.55 | ||||||||||
Outstanding,
December 31, 2016 | 186,676 | 26.86 | 5.7 | $ | 1,138 | ||||||||
Vested and
expected to vest, December 31, 2016(b) | 184,537 | 26.77 | 5.6 | 1,138 | |||||||||
Exercisable,
December 31, 2016 | 105,862 | $ | 21.85 | 4.1 | $ | 1,126 | |||||||
(a) | Market
price of underlying Pfizer common stock less exercise price. |
(b) | The number of options expected to vest takes into account an estimate of expected forfeitures. |
The following table summarizes data related to all stock option activity: | ||||||||||||
Year Ended
December 31, | ||||||||||||
(MILLIONS OF DOLLARS, EXCEPT PER STOCK OPTION AMOUNTS) | 2016 | 2015 | 2014 | |||||||||
Weighted-average grant-date fair value per stock option | $ | 3.89 | $ | 4.30 | $ | 4.40 | ||||||
Aggregate
intrinsic value on exercise | $ | 389 | $ | 666 | $ | 458 | ||||||
Cash received upon exercise | $ | 1,019 | $ | 1,263 | $ | 1,002 | ||||||
Tax
benefits realized related to exercise | $ | 112 | $ | 187 | $ | 131 | ||||||
Total compensation cost related to nonvested stock options not yet
recognized, pre-tax | $ | 58 | $ | 159 | $ | 147 | ||||||
Weighted-average period over which stock option compensation cost is expected to be
recognized (years) | 1.1 | 1.8 | 1.8 | |||||||||
2016
Financial Report | 117 | |
The
following table summarizes all PPS activity during 2016, with the shares representing the maximum award that could be achieved: | |||||||
Shares (Thousands) | Weighted-Average Intrinsic Value Per Share | ||||||
Nonvested, December 31, 2015 | 22,503 | $ | 32.28 | ||||
Granted | 8,059 | 30.59 | |||||
Vested(a) | (6,900 | ) | 30.23 | ||||
Forfeited | (1,396 | ) | 33.29 | ||||
Nonvested,
December 31, 2016(a) | 22,266 | $ | 32.48 | ||||
The
following table provides data related to all PPS activity: | ||||||||||||
(MILLIONS OF DOLLARS) | Year Ended December 31, | |||||||||||
2016 | 2015 | 2014 | ||||||||||
Total
fair value of shares vested | $ | 118 | $ | 60 | $ | — | ||||||
Total compensation cost related to nonvested PPS awards not yet recognized, pre-tax | $ | 93 | $ | 102 | $ | 139 | ||||||
Weighted-average
period over which PPS cost is expected to be recognized (years) | 1.8 | 1.7 | 1.8 | |||||||||
The following table provides the weighted-average assumptions used in the valuation of TSRUs: | |||||||||
Year Ended December 31, | |||||||||
2016 | 2015 | 2014 | |||||||
Expected
dividend yield(a) | 3.85 | % | 3.19 | % | 3.18 | % | |||
Risk-free interest rate(b) | 1.31 | % | 1.76 | % | 1.78 | % | |||
Expected
stock price volatility(c) | 21.64 | % | 18.41 | % | 19.76 | % | |||
Contractual term (years) | 5.12 | 5.91 | 5.97 | ||||||
(a) | Determined
using a constant dividend yield during the expected term of the TSRU. |
(b) | Determined using the interpolated yield on U.S. Treasury zero-coupon issues. |
(c) | Determined using implied volatility, after consideration of historical volatility. |
118 | 2016
Financial Report | |
The
following table summarizes all TSRU activity during 2016: | |||||||||||
TSRUs (Thousands) | Weighted-Average Grant-Date Fair Value Per TSRU | Weighted-Average Grant
Price Per TSRU | |||||||||
Nonvested, December 31, 2015 | 18,067 | $ | 6.07 | $ | 31.27 | ||||||
Granted | 53,467 | 5.83 | 30.59 | ||||||||
Vested | (6,440 | ) | 5.14 | 27.41 | |||||||
Forfeited | (3,087 | ) | 5.91 | 30.90 | |||||||
Nonvested,
December 31, 2016 | 62,007 | $ | 5.97 | $ | 31.10 | ||||||
The
following table summarizes TSRU and PTU information as of December 31, 2016(a), (b): | ||||||||||||||||
TSRUs (Thousands) | PTUs (Thousands) | Weighted-Average Grant Price Per
TSRU | Weighted-Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (Millions) | ||||||||||||
TSRUs Outstanding | 81,413 | — | $ | 29.15 | 3.5 | $ | 439 | |||||||||
TSRUs
Vested | 19,406 | — | 22.93 | 1.5 | 279 | |||||||||||
TSRUs
Expected to vest | 58,362 | — | 31.13 | 4.2 | 150 | |||||||||||
TSRUs
exercised and converted to PTUs | — | 120 | $ | — | 0.2 | $ | 4 | |||||||||
(a) | In
2016, we settled 4,442,865 TSRUs with a weighted-average grant price of $18.95 per unit. |
(b) | In 2016, 237,246 TSRUs with a weighted-average grant price of $20.86 per unit were converted into 120,273 PTUs. |
The
following table provides data related to all TSRU activity: | ||||||||||||
Year Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS, EXCEPT PER TSRU AMOUNTS) | 2016 | 2015 | 2014 | |||||||||
Weighted-average
grant-date fair value per TSRU | $ | 5.83 | $ | 6.66 | $ | 6.51 | ||||||
Total compensation cost related to nonvested TSRU grants not yet recognized,
pre-tax | $ | 164 | $ | 29 | $ | 30 | ||||||
Weighted-average period over which TSRU cost is expected to be recognized (years) | 1.9 | 1.8 | 1.8 | |||||||||
The following table summarizes all PSA activity during 2016, with the shares granted representing the maximum award that could be achieved: | |||||||
Shares (Thousands) | Weighted-Average Intrinsic
Value Per Share | ||||||
Nonvested, December 31, 2015 | 3,871 | $ | 32.28 | ||||
Granted | 1,900 | 30.59 | |||||
Vested | (289 | ) | 30.23 | ||||
Forfeited | (936 | ) | 30.61 | ||||
Nonvested,
December 31, 2016 | 4,546 | $ | 32.48 | ||||
2016 Financial Report | 119 | |
The
following table provides data related to all PSA activity: | ||||||||||||
Year Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
Total fair value of shares vested | $ | 9 | $ | 14 | $ | 39 | ||||||
Total
compensation cost related to nonvested PSA grants not yet recognized, pre-tax | $ | 30 | $ | 24 | $ | 21 | ||||||
Weighted-average period over
which PSA cost is expected to be recognized (years) | 1.8 | 1.9 | 1.7 | |||||||||
The
following table provides the detailed calculation of Earnings per common share (EPS): | ||||||||||||
Year Ended December 31, | ||||||||||||
(IN MILLIONS) | 2016 | 2015 | 2014 | |||||||||
EPS
Numerator––Basic | ||||||||||||
Income from continuing operations | $ | 7,229 | $ | 6,975 | $ | 9,119 | ||||||
Less:
Net income attributable to noncontrolling interests | 31 | 26 | 32 | |||||||||
Income from continuing operations attributable to Pfizer Inc. | 7,198 | 6,949 | 9,087 | |||||||||
Less:
Preferred stock dividends––net of tax | 1 | 1 | 1 | |||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders | 7,197 | 6,948 | 9,086 | |||||||||
Discontinued
operations––net of tax | 17 | 11 | 48 | |||||||||
Less: Discontinued operations––net of tax, attributable to noncontrolling interests | — | — | — | |||||||||
Discontinued
operations––net of tax, attributable to Pfizer Inc. common shareholders | 17 | 11 | 48 | |||||||||
Net income attributable to Pfizer Inc. common shareholders | $ | 7,214 | $ | 6,959 | $ | 9,134 | ||||||
EPS
Numerator––Diluted | ||||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions | $ | 7,197 | $ | 6,948 | $ | 9,087 | ||||||
Discontinued
operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions | 17 | 11 | 48 | |||||||||
Net income attributable to Pfizer Inc. common shareholders and assumed conversions | $ | 7,214 | $ | 6,960 | $ | 9,135 | ||||||
EPS
Denominator | ||||||||||||
Weighted-average number of common shares outstanding––Basic | 6,089 | 6,176 | 6,346 | |||||||||
Common-share
equivalents: stock options, stock issuable under employee compensation plans, convertible preferred stock and accelerated share repurchase agreements(a) | 70 | 81 | 78 | |||||||||
Weighted-average number of common shares outstanding––Diluted(a) | 6,159 | 6,257 | 6,424 | |||||||||
Stock
options that had exercise prices greater than the average market price of our common stock issuable under employee compensation plans(b) | 63 | 50 | 44 | |||||||||
(a) | Amount
for 2016 reflects the adoption of a new accounting standard, as of January 1, 2016, that requires when applying the treasury stock method for shares that could be repurchased, the assumed proceeds no longer include the amount of excess tax benefit (see Note 1B). |
(b) | These common stock equivalents were outstanding for the years ended December 31, 2016, 2015 and 2014, but were not included in the computation of diluted EPS for those periods
because their inclusion would have had an anti-dilutive effect. |
The
future minimum rental commitments under non-cancelable operating leases follow: | ||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2017 | 2018 | 2019 | 2020 | 2021 | After
2021 | ||||||||||||||||||
Lease commitments | $ | 220 | $ | 188 | $ | 163 | $ | 138 | $ | 125 | $ | 967 | ||||||||||||
120 | 2016
Financial Report | |
• | Patent litigation, which typically involves challenges to the coverage and/or validity of patents on various products, processes or dosage forms. We are the plaintiff in the vast majority of these actions. An adverse outcome in actions in which we are the plaintiff could result in loss of patent protection for a drug, a
significant loss of revenues from that drug or impairment of the value of associated assets. |
• | Product liability and other product-related litigation, which can include personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, among others, often involves highly complex issues relating to medical causation, label warnings and reliance on those warnings, scientific evidence and findings, actual, provable injury and other matters. |
• | Commercial
and other matters, which can include merger-related and product-pricing claims and environmental claims and proceedings, can involve complexities that will vary from matter to matter. |
• | Government investigations, which often are related to the extensive regulation of pharmaceutical companies by national, state and local government agencies in the U.S. and in other countries. |
2016
Financial Report | 121 | |
122 | 2016 Financial Report | |
2016 Financial Report | 123 | |
• | Personal
Injury Actions |
• | Antitrust Actions |
• | Antitrust Actions |
124 | 2016
Financial Report | |
• | Personal
Injury Actions |
2016 Financial Report | 125 | |
126 | 2016 Financial Report | |
2016
Financial Report | 127 | |
128 | 2016 Financial Report | |
Some
additional information about our business segments follows: | ||
IH Segment | EH Segment | |
IH focuses on developing and commercializing novel, value-creating medicines and vaccines that significantly improve patients’ lives, as well as products for consumer healthcare. Key therapeutic areas include internal medicine, vaccines, oncology, inflammation & immunology, rare diseases and consumer healthcare. | EH includes legacy brands that have lost or will soon lose market exclusivity in both developed and emerging markets, branded generics,
generic sterile injectable products, biosimilars and, through February 2, 2017, infusion systems. EH also includes an R&D organization, as well as our contract manufacturing business. | |
Leading brands include: - Prevnar 13 - Xeljanz - Eliquis - Lyrica (U.S., Japan and certain other markets) - Enbrel (outside the U.S. and Canada) -
Viagra (U.S. and Canada) - Ibrance - Xtandi - Several OTC consumer products (e.g., Advil and Centrum) | Leading brands include: - Lipitor - Premarin family - Norvasc - Lyrica (Europe, Russia, Turkey, Israel and Central Asia countries) -
Celebrex - Pristiq - Several sterile injectable products | |
• | In connection with the formation in early 2016 of the GPD organization, a new unified center for late-stage development for our innovative products, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios, effective in the second quarter of 2016, certain development-related functions transferred from IH to GPD. |
• | Beginning in 2016, our contract manufacturing business, Pfizer CentreOne, is part of EH. Pfizer CentreOne consists of (i) the revenues and expenses of legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation (previously known as Pfizer CentreSource or PCS), including the revenues and expenses related to our manufacturing and supply agreements with Zoetis, which prior to 2016 was managed outside EH as part of PGS and previously reported in “Other Unallocated” costs; and (ii) the revenues and expenses of
legacy Hospira's One-2-One sterile injectables contract manufacturing operation, which has been included in EH since we acquired Hospira on September 3, 2015. |
• | In connection with the formation of a new EH R&D organization effective in the first quarter of 2016, certain functions transferred from Pfizer’s WRD organization to the new EH R&D organization. The new R&D organization within EH expects to develop potential new sterile injectable drugs and therapeutic solutions, as well as biosimilars. |
• | WRD, which is generally responsible for research projects for our IH business until proof-of-concept is achieved and then for transitioning those projects to the IH segment via the newly formed GPD organization for possible clinical and commercial development.
R&D spending may include upfront and milestone payments for intellectual property rights. The WRD organization also has responsibility for certain science-based and other platform-services organizations, which provide technical expertise and other services to the various R&D projects, including EH R&D projects. WRD is also responsible for facilitating all regulatory submissions and interactions with regulatory agencies, including all safety-event activities. |
• | GPD, which is generally responsible for the clinical development of assets that are in clinical trials for our WRD and Innovative portfolios. GPD also provides technical support and other services to Pfizer R&D projects. In connection with the formation of the GPD organization,
effective in the second quarter of 2016, certain development-related functions transferred from WRD and IH to GPD. We have reclassified approximately $78 million of costs in the first quarter of 2016, $341 million of costs in 2015, and $343 million of costs in 2014 from WRD to GPD as well as $76 million of costs in the first quarter of 2016, $318 million of costs in 2015 and $271 million of costs in 2014 from IH to GPD to conform to the presentation as part of GPD in 2016. |
• | Pfizer
Medical, which is responsible for the provision of medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education, and partnerships with global public health and medical associations. In 2015 and 2014, Medical was also responsible for regulatory inspection readiness reviews, internal audits of Pfizer-sponsored clinical trials and internal regulatory compliance processes, which are now part of the compliance function within Corporate. |
2016 Financial Report | 129 | |
• | Corporate, representing platform functions (such as worldwide technology, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement) and certain compensation and other
corporate costs, such as interest income and expense, and gains and losses on investments. |
• | Other unallocated costs, representing overhead expenses associated with our manufacturing and commercial operations that are not directly assessed to an operating segment as business unit (segment) management does not manage these costs (which include manufacturing variances associated with production). The increase in Cost of sales in 2016 reflects, among other items, the change in manufacturing variances driven by demand decreases versus plan for certain legacy Hospira and legacy Pfizer products. |
• | Certain
transactions and events such as (i) purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and PP&E; (ii) acquisition-related costs, where we incur costs for executing the transaction, integrating the acquired operations and restructuring the combined company; and (iii) certain significant items, which are substantive and/or unusual, and in some cases recurring, items that are evaluated on an individual basis by management and which include non-acquisition-related restructuring costs, as well as costs incurred for legal settlements, asset impairments and disposals of assets or businesses, including, as applicable, any associated transition activities. |
The
following table provides selected income statement information by reportable segment: | ||||||||||||||||||||||||||||||||||||
Revenues | Earnings(a) | Depreciation and Amortization(b) | ||||||||||||||||||||||||||||||||||
Year Ended December 31, | Year
Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||
Reportable
Segments: | ||||||||||||||||||||||||||||||||||||
IH(c) | $ | 29,197 | $ | 26,758 | $ | 24,005 | $ | 15,854 | $ | 14,581 | $ | 12,743 | $ | 583 | $ | 552 | $ | 522 | ||||||||||||||||||
EH(d) | 23,627 | 22,094 | 25,401 | 12,898 | 12,714 | 16,020 | 600 | 446 | 490 | |||||||||||||||||||||||||||
Total
reportable segments | 52,824 | 48,851 | 49,406 | 28,752 | 27,295 | 28,763 | 1,183 | 998 | 1,012 | |||||||||||||||||||||||||||
Other
business activities(e) | — | — | — | (3,184 | ) | (3,091 | ) | (3,151 | ) | 86 | 77 | 74 | ||||||||||||||||||||||||
Reconciling
Items: | ||||||||||||||||||||||||||||||||||||
Corporate(f) | — | — | — | (5,326 | ) | (5,430 | ) | (5,200 | ) | 356 | 354 | 384 | ||||||||||||||||||||||||
Purchase
accounting adjustments(f) | — | — | — | (4,185 | ) | (3,953 | ) | (3,641 | ) | 3,890 | 3,573 | 3,782 | ||||||||||||||||||||||||
Acquisition-related
costs(f) | — | — | — | (785 | ) | (894 | ) | (183 | ) | 7 | 75 | 53 | ||||||||||||||||||||||||
Certain
significant items(g) | — | — | 198 | (5,888 | ) | (4,321 | ) | (3,749 | ) | 200 | 48 | 207 | ||||||||||||||||||||||||
Other
unallocated(f) | — | — | — | (1,032 | ) | (642 | ) | (601 | ) | 35 | 33 | 24 | ||||||||||||||||||||||||
$ | 52,824 | $ | 48,851 | $ | 49,605 | $ | 8,351 | $ | 8,965 | $ | 12,240 | $ | 5,757 | $ | 5,157 | $ | 5,537 | |||||||||||||||||||
(a) | Income
from continuing operations before provision for taxes on income. |
(b) | Certain production facilities are shared. Depreciation is allocated based on estimates of physical production. Amounts here relate solely to the depreciation and amortization associated with continuing operations. |
(c) | On June 24, 2016, we acquired Anacor and on September 28, 2016, we acquired Medivation. Commencing
from their respective acquisition dates, our results of operations and IH’s operating results for 2016 include approximately six months of legacy Anacor operations, which were immaterial, and approximately three months of legacy Medivation operations. Additionally, in connection with the formation in early 2016 of the GPD organization, effective in the second quarter of 2016, certain development-related functions transferred from IH to GPD. We have reclassified approximately $76 million of costs in the first quarter of 2016, $318 million of costs in 2015 and $271 million of costs in 2014 from IH to GPD to conform to the presentation as part of GPD in 2016. |
(d) | On
September 3, 2015, we acquired Hospira. Commencing from the acquisition date, our results of operations and EH’s operating results include legacy Hospira commercial operations, including the legacy Hospira One-2-One contract manufacturing business. In accordance with our domestic and international reporting periods, our results of operations and EH's operating results for 2015 reflect four months of legacy Hospira U.S. operations and three months of legacy Hospira International operations. See Note 2A for additional information. Beginning in 2016, our contract manufacturing business, Pfizer CentreOne, is part of EH. Pfizer CentreOne consists of (i)
the revenues and expenses of legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation (previously known as Pfizer CentreSource or PCS), including the revenues and expenses related to our manufacturing and supply agreements with Zoetis, which prior to 2016 was managed outside EH as part of PGS and previously reported in “Other Unallocated” costs; and (ii) the revenues and expenses of legacy Hospira's One-2-One sterile injectables contract manufacturing operation, which has been included in EH since we acquired Hospira on September 3, 2015. We have reclassified prior period PCS operating results ($506 million of PCS revenues and $96
million of PCS earnings in 2015, which in 2015 includes revenues and expenses related to our manufacturing and supply agreements with Zoetis, and $253 million of PCS revenues and $69 million of PCS earnings in 2014) to conform to the current period presentation as part of EH. As noted above, in connection with the formation in 2016 of a new EH R&D organization, certain functions transferred from Pfizer’s WRD organization to the new EH R&D organization. We have reclassified approximately $274 million of costs in 2015 and $281 million of costs in 2014 from WRD to EH to conform to the current period presentation as part of EH. |
(e) | Other
business activities includes the costs managed by our WRD, GPD and Pfizer Medical organizations. |
(f) | For a description, see the “Other Costs and Business Activities” section above. |
(g) | Certain significant items are substantive and/or unusual, and in some cases recurring, items (such as restructuring or legal charges) that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis. |
130 | 2016
Financial Report | |
The
following table provides revenues by geographic area: | ||||||||||||
Year Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
United
States(a) | $ | 26,369 | $ | 21,704 | $ | 19,073 | ||||||
Developed Europe(a),
(b) | 9,306 | 9,714 | 11,719 | |||||||||
Developed Rest of World(a), (c) | 6,729 | 6,298 | 7,314 | |||||||||
Emerging
Markets (a), (d) | 10,420 | 11,136 | 11,499 | |||||||||
Revenues | $ | 52,824 | $ | 48,851 | $ | 49,605 | ||||||
(a) | On
June 24, 2016, we acquired Anacor and on September 28, 2016, we acquired Medivation. Commencing from their respective acquisition dates, our results of operations include the operating results of Anacor and Medivation. In accordance with our domestic reporting period, our results of operations for 2016 include approximately six months of legacy Anacor operations, which were immaterial, and approximately three months of legacy Medivation operations. On September 3, 2015, we acquired Hospira. Commencing from the acquisition date, our results of operations include the operating results of Hospira. In accordance with our domestic and international reporting periods, our results of operations for 2015 reflect four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations. See Note
2A for additional information. |
(b) | Developed Europe region includes the following markets: Western Europe, Scandinavian countries and Finland. Revenues denominated in euros were $7.2 billion in 2016, $7.4 billion in 2015 and $9.0 billion in 2014. |
(c) | Developed
Rest of World region includes the following markets: Japan, Canada, Australia, South Korea and New Zealand. |
(d) | Emerging Markets region includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Africa, Eastern Europe, Central Europe, the Middle East and Turkey. |
Long-lived
assets by geographic region follow(a): | ||||||||||||
As of December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
Property,
plant and equipment, net | ||||||||||||
United States | $ | 6,649 | $ | 7,072 | $ | 5,575 | ||||||
Developed
Europe(b) | 4,228 | 4,376 | 4,606 | |||||||||
Developed Rest of World(c) | 643 | 660 | 617 | |||||||||
Emerging
Markets(d) | 1,797 | 1,658 | 963 | |||||||||
Property, plant and equipment, net | $ | 13,318 | $ | 13,766 | $ | 11,762 | ||||||
(a) | Reflects
legacy Medivation and legacy Anacor amounts in 2016, commencing on the Medivation acquisition date, September 28, 2016, and Anacor acquisition date, June 24, 2016. Reflects legacy Hospira amounts in 2016 and 2015 commencing on the Hospira acquisition date, September 3, 2015. |
(b) | Developed Europe region includes the following markets: Western Europe, Scandinavian countries and Finland. |
(c) | Developed
Rest of World region includes the following markets: Japan, Canada, Australia, South Korea and New Zealand. Emerging Markets region includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Africa, Eastern Europe, Central Europe, the Middle East and Turkey. |
2016 Financial Report | 131 | |
132 | 2016
Financial Report | |
The
following table provides detailed revenue information: | ||||||||||||
Year Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
PFIZER
INNOVATIVE HEALTH (IH)(a) | $ | 29,197 | $ | 26,758 | $ | 24,005 | ||||||
Internal Medicine | $ | 8,858 | $ | 7,611 | $ | 6,727 | ||||||
Lyrica
IH(b) | 4,165 | 3,655 | 3,350 | |||||||||
Viagra IH(c) | 1,181 | 1,297 | 1,181 | |||||||||
Chantix/Champix | 842 | 671 | 647 | |||||||||
Toviaz | 258 | 267 | 288 | |||||||||
BMP2 | 251 | 232 | 228 | |||||||||
Alliance
revenues(d) | 1,588 | 1,256 | 759 | |||||||||
All other Internal Medicine(e) | 573 | 233 | 276 | |||||||||
Vaccines | $ | 6,071 | $ | 6,454 | $ | 4,480 | ||||||
Prevnar
13/Prevenar 13 | 5,718 | 6,245 | 4,464 | |||||||||
FSME/IMMUN-TicoVac | 114 | 104 | — | |||||||||
All
other Vaccines | 239 | 104 | 16 | |||||||||
Oncology | $ | 4,563 | $ | 2,955 | $ | 2,218 | ||||||
Ibrance | 2,135 | 723 | — | |||||||||
Sutent | 1,095 | 1,120 | 1,174 | |||||||||
Xalkori | 561 | 488 | 438 | |||||||||
Inlyta | 401 | 430 | 410 | |||||||||
Xtandi
alliance revenues | 140 | — | — | |||||||||
All other Oncology | 231 | 194 | 195 | |||||||||
Inflammation
& Immunology (I&I) | $ | 3,928 | $ | 3,918 | $ | 4,241 | ||||||
Enbrel (Outside the U.S. and Canada) | 2,909 | 3,333 | 3,850 | |||||||||
Xeljanz | 927 | 523 | 308 | |||||||||
All
other I&I | 93 | 61 | 82 | |||||||||
Rare Disease | $ | 2,369 | $ | 2,425 | 2,893 | |||||||
BeneFIX | 712 | 752 | 856 | |||||||||
Genotropin | 579 | 617 | 723 | |||||||||
Refacto
AF/Xyntha | 554 | 533 | 631 | |||||||||
Somavert | 232 | 218 | 229 | |||||||||
Rapamune | 170 | 197 | 339 | |||||||||
All
other Rare Disease | 122 | 108 | 114 | |||||||||
Consumer Healthcare | $ | 3,407 | $ | 3,395 | $ | 3,446 | ||||||
PFIZER
ESSENTIAL HEALTH (EH)(f) | $ | 23,627 | $ | 22,094 | $ | 25,600 | ||||||
Legacy Established
Products (LEP)(g) | $ | 11,194 | $ | 11,745 | $ | 13,016 | ||||||
Lipitor | 1,758 | 1,860 | 2,061 | |||||||||
Premarin
family | 1,017 | 1,018 | 1,076 | |||||||||
Norvasc | 962 | 991 | 1,112 | |||||||||
EpiPen | 386 | 339 | 294 | |||||||||
Xalatan/Xalacom | 363 | 399 | 495 | |||||||||
Relpax | 323 | 352 | 382 | |||||||||
Zoloft | 304 | 374 | 423 | |||||||||
Effexor | 278 | 288 | 344 | |||||||||
Zithromax/Zmax | 272 | 275 | 311 | |||||||||
Xanax/Xanax
XR | 222 | 224 | 253 | |||||||||
Cardura | 192 | 210 | 263 | |||||||||
Neurontin | 182 | 196 | 210 | |||||||||
Tikosyn | 153 | 179 | 141 | |||||||||
Depo-Provera | 126 | 170 | 201 | |||||||||
Diflucan | 119 | 181 | 208 | |||||||||
All
other LEP | 4,538 | 4,689 | 5,242 | |||||||||
Sterile Injectable Pharmaceuticals (SIP)(h) | $ | 6,018 | $ | 3,944 | $ | 3,277 | ||||||
Medrol | 450 | 402 | 381 | |||||||||
Sulperazon | 396 | 339 | 354 | |||||||||
Fragmin | 318 | 335 | 364 | |||||||||
Tygacil | 274 | 304 | 323 | |||||||||
All
other SIP | 4,579 | 2,563 | 1,855 | |||||||||
2016 Financial Report | 133 | |
Year
Ended December 31, | ||||||||||||
(MILLIONS OF DOLLARS) | 2016 | 2015 | 2014 | |||||||||
Peri-LOE Products(i) | $ | 4,220 | $ | 5,326 | $ | 8,855 | ||||||
Lyrica
EH(b) | 801 | 1,183 | 1,818 | |||||||||
Celebrex | 733 | 830 | 2,699 | |||||||||
Pristiq | 732 | 715 | 737 | |||||||||
Vfend | 590 | 682 | 756 | |||||||||
Zyvox | 421 | 883 | 1,352 | |||||||||
Viagra
EH(c) | 383 | 411 | 504 | |||||||||
Revatio | 285 | 260 | 276 | |||||||||
All
Other Peri-LOE Products | 276 | 362 | 714 | |||||||||
Infusion Systems(j) | $ | 1,158 | $ | 403 | $ | — | ||||||
Biosimilars(k) | $ | 319 | $ | 63 | $ | — | ||||||
Inflectra/Remsima | 192 | 30 | — | |||||||||
All
Other Biosimilars | 127 | 33 | — | |||||||||
Pfizer CentreOne(l) | $ | 718 | $ | 612 | $ | 451 | ||||||
Revenues | $ | 52,824 | $ | 48,851 | $ | 49,605 | ||||||
Total
Lyrica(b) | $ | 4,966 | $ | 4,839 | $ | 5,168 | ||||||
Total Viagra(c) | $ | 1,564 | $ | 1,708 | $ | 1,685 | ||||||
Total
Alliance revenues | $ | 1,746 | $ | 1,312 | $ | 957 | ||||||
(a) | The
IH business, previously known as the Innovative Products business, encompasses Internal Medicine, Vaccines, Oncology, Inflammation & Immunology, Rare Disease and Consumer Healthcare and includes all legacy Anacor and Medivation commercial operations. Anacor's and Medivation's commercial operations are included in IH's operating results in our consolidated statements of income, commencing from the acquisition date of June 24, 2016 for Anacor and from the acquisition date of September 28, 2016 for Medivation. As a result, IH's revenues for 2016 reflect approximately six months of legacy Anacor operations, which were immaterial, and three months of legacy Medivation operations. |
(b) | Lyrica
revenues from all of Europe, Russia, Turkey, Israel and Central Asia countries are included in Lyrica EH. All other Lyrica revenues are included in Lyrica IH. Total Lyrica revenues represent the aggregate of worldwide revenues from Lyrica IH and Lyrica EH. |
(c) | Viagra revenues from the U.S. and Canada are included in Viagra IH. All other Viagra revenues are included in Viagra EH. Total Viagra revenues represent the aggregate of worldwide revenues from Viagra IH and Viagra EH. |
(d) | Includes
Eliquis for all years presented and Rebif for 2015 and 2014. |
(e) | Includes Eliquis direct sales markets. |
(f) | The EH business, previously known as the Established Products business, encompasses Legacy Established Products, Sterile Injectable Pharmaceuticals, Peri-LOE Products, Infusion Systems (through February 2, 2017), Biosimilars and Pfizer CentreOne and includes all legacy Hospira commercial operations. Hospira's commercial
operations, including the legacy Hospira One-2-One sterile injectables contract manufacturing business, are included in EH’s operating results in our consolidated statements of income, commencing from the acquisition date of September 3, 2015. Therefore, in accordance with our domestic and international reporting periods, our results of operations and EH's operating results for 2015 reflect four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations. Also, effective as of the beginning of 2016, our contract manufacturing business, Pfizer CentreOne, is part of EH. Pfizer CentreOne consists of (i) legacy Pfizer's contract
manufacturing and active pharmaceutical ingredient sales operation (previously known as Pfizer CentreSource or PCS), including our manufacturing and supply agreements with Zoetis, which prior to 2016 was managed outside EH as part of PGS and previously reported in “Other Unallocated” costs; and (ii) legacy Hospira's One-2-One sterile injectables contract manufacturing operation. We have reclassified prior period PCS revenues ($506 million in 2015 and $253 million in 2014) to conform to the current period presentation as part of EH. |
(g) | Legacy
Established Products include products that have lost patent protection (excluding Sterile Injectable Pharmaceuticals and Peri-LOE Products). |
(h) | Sterile Injectable Pharmaceuticals include generic injectables and proprietary specialty injectables (excluding Peri-LOE Products). |
(i) | Peri-LOE Products include products that have recently lost or are anticipated to soon lose patent protection. These products primarily include Lyrica in certain developed Europe markets, Pristiq
globally, Celebrex, Zyvox and Revatio in most developed markets, Vfend and Viagra in certain developed Europe markets and Japan, and Inspra in the EU. |
(j) | Infusion Systems (through February 2, 2017) include Medication Management Systems products composed of infusion pumps and related software and services, as well as IV Infusion Products, including large volume IV solutions and their associated administration sets. |
(k) | Biosimilars
include Inflectra/Remsima (biosimilar infliximab) in the U.S. and certain international markets, Nivestim (biosimilar filgrastim) in certain European, Asian and Africa/Middle East markets and Retacrit (biosimilar epoetin zeta) in certain European and Africa/Middle East markets. |
(l) | Pfizer CentreOne includes (i) revenues from legacy Pfizer's contract manufacturing and active pharmaceutical ingredient sales operation (previously known as Pfizer CentreSource or PCS), including revenues related to our manufacturing and supply agreements with Zoetis; and (ii) revenues from legacy Hospira’s One-2-One sterile injectables contract
manufacturing operation. |
134 | 2016 Financial Report | |
2016
Financial Report | 135 | |
Quarter | ||||||||||||||||
(MILLIONS
OF DOLLARS, EXCEPT PER COMMON SHARE DATA) | First | Second(a) | Third(b) | Fourth | ||||||||||||
2016 | ||||||||||||||||
Revenues | $ | 13,005 | $ | 13,147 | $ | 13,045 | $ | 13,627 | ||||||||
Costs
and expenses(c), (d) | 9,303 | 10,421 | 10,910 | 12,115 | ||||||||||||
Restructuring
charges and certain acquisition-related costs(e) | 141 | 316 | 531 | 735 | ||||||||||||
Income
from continuing operations before provision for taxes on income | 3,561 | 2,410 | 1,604 | 777 | ||||||||||||
Provision
for taxes on income(f) | 513 | 347 | 249 | 13 | ||||||||||||
Income
from continuing operations(f) | 3,048 | 2,062 | 1,355 | 763 | ||||||||||||
Discontinued
operations—net of tax | — | 1 | — | 17 | ||||||||||||
Net income before allocation to noncontrolling
interests(f) | 3,048 | 2,063 | 1,355 | 780 | ||||||||||||
Less:
Net income attributable to noncontrolling interests | 9 | 16 | — | 6 | ||||||||||||
Net income
attributable to Pfizer Inc.(f) | $ | 3,038 | $ | 2,047 | $ | 1,355 | $ | 775 | ||||||||
Earnings
per common share—basic: | ||||||||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders | $ | 0.49 | $ | 0.34 | $ | 0.22 | $ | 0.12 | ||||||||
Discontinued
operations—net of tax | — | — | — | — | ||||||||||||
Net income attributable to Pfizer Inc. common
shareholders | $ | 0.49 | $ | 0.34 | $ | 0.22 | $ | 0.13 | ||||||||
Earnings
per common share—diluted(f): | ||||||||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders | $ | 0.49 | $ | 0.33 | $ | 0.22 | $ | 0.12 | ||||||||
Discontinued
operations—net of tax | — | — | — | — | ||||||||||||
Net income attributable to Pfizer Inc. common
shareholders | $ | 0.49 | $ | 0.33 | $ | 0.22 | $ | 0.13 | ||||||||
Cash
dividends paid per common share | $ | 0.30 | $ | 0.30 | $ | 0.30 | $ | 0.30 | ||||||||
Stock
prices | ||||||||||||||||
High | $ | 32.24 | $ | 35.65 | $ | 37.39 | $ | 34.00 | ||||||||
Low | $ | 28.25 | $ | 30.06 | $ | 33.30 | $ | 29.83 | ||||||||
(a) | In
accordance with our domestic reporting periods, our consolidated statement of income for the second quarter of 2016 reflects five days of operating results for Anacor, which were immaterial. |
(b) | In accordance with our domestic and international reporting periods, our consolidated statement of income for the third quarter of 2016 reflects three business days of legacy Medivation operations, which were immaterial. |
(c) | The third quarter of 2016 includes a pre-tax impairment charge
of $1.4 billion recorded in Other (income)/deductions––net, representing the amount by which the carrying value of HIS net assets held for sale exceeded the fair value less estimated costs to sell. |
(d) | The fourth quarter of 2016 historically reflects higher costs in Cost of sales, Selling, informational and administrative expenses and Research and development expenses. The fourth quarter of 2016 includes a pre-tax impairment charge of $290 million recorded in Other
(income)/deductions––net, representing the amount by which the carrying value of HIS net assets held for sale exceeded the fair value less estimated costs to sell. |
(e) | The third quarter of 2016 reflects (i) restructuring charges of $404 million for employee termination costs, exit costs and asset impairments, which are largely associated with cost reduction and productivity initiatives not associated with acquisitions, as well as our acquisitions of Hospira and Medivation; (ii) transaction costs, such as banking, legal, accounting and other similar services, of $54 million, most of which are directly related to our acquisition of Medivation; and (iii) integration costs, representing external, incremental
costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes, of $73 million, primarily related to our acquisition of Hospira. |
(f) | Amounts reflect the adoption of a new accounting standard in the fourth quarter of 2016, as of January 1, 2016, requiring excess tax benefits or deficiencies for share-based compensation to be recognized as a component of the Provision for taxes on income. The net tax benefit was $22 million, $28 million, $35 million, and $4 million in each of the first, second, third and fourth quarters of 2016, respectively. For additional information, see Notes to Consolidated Financial Statements––Note 1B. Adoption of New Accounting Standards. |
136 | 2016 Financial Report | |
Quarter | ||||||||||||||||
(MILLIONS
OF DOLLARS, EXCEPT PER COMMON SHARE DATA) | First | Second | Third(a) | Fourth(b) | ||||||||||||
2015 | ||||||||||||||||
Revenues | $ | 10,864 | $ | 11,853 | $ | 12,087 | $ | 14,047 | ||||||||
Costs
and expenses(c) | 7,722 | 8,228 | 8,808 | 13,976 | ||||||||||||
Restructuring
charges and certain acquisition-related costs(d), (e) | 60 | 86 | 581 | 425 | ||||||||||||
Income/(loss)
from continuing operations before provision for taxes on income | 3,082 | 3,539 | 2,697 | (354 | ) | |||||||||||
Provision/(benefit)
for taxes on income | 706 | 905 | 567 | (188 | ) | |||||||||||
Income/(loss) from continuing operations | 2,376 | 2,635 | 2,130 | (166 | ) | |||||||||||
Discontinued
operations—net of tax | 5 | 1 | 8 | (3 | ) | |||||||||||
Net income/(loss) before allocation to noncontrolling
interests | 2,381 | 2,635 | 2,139 | (169 | ) | |||||||||||
Less: Net income attributable to noncontrolling
interests | 6 | 9 | 9 | 3 | ||||||||||||
Net income/(loss) attributable to Pfizer Inc. | $ | 2,376 | $ | 2,626 | $ | 2,130 | $ | (172 | ) | |||||||
Earnings/(loss)
per common share—basic: | ||||||||||||||||
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders | $ | 0.38 | $ | 0.43 | $ | 0.34 | $ | (0.03 | ) | |||||||
Discontinued
operations—net of tax | — | — | — | — | ||||||||||||
Net income/(loss) attributable to Pfizer Inc.
common shareholders | $ | 0.38 | $ | 0.43 | $ | 0.35 | $ | (0.03 | ) | |||||||
Earnings/(loss)
per common share—diluted: | ||||||||||||||||
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders | $ | 0.38 | $ | 0.42 | $ | 0.34 | $ | (0.03 | ) | |||||||
Discontinued
operations—net of tax | — | — | — | — | ||||||||||||
Net income/(loss) attributable to Pfizer Inc.
common shareholders | $ | 0.38 | $ | 0.42 | $ | 0.34 | $ | (0.03 | ) | |||||||
Cash
dividends paid per common share | $ | 0.28 | $ | 0.28 | $ | 0.28 | $ | 0.28 | ||||||||
Stock
prices | ||||||||||||||||
High | $ | 35.45 | $ | 35.53 | $ | 36.46 | $ | 36.07 | ||||||||
Low | $ | 31.01 | $ | 33.21 | $ | 28.47 | $ | 30.64 | ||||||||
(a) | In
accordance with our domestic and international reporting periods, our consolidated statement of income for the third quarter of 2015 reflects one month of legacy Hospira U.S. operations but does not include any financial results from legacy Hospira international operations. |
(b) | In accordance with our domestic and international reporting periods, our consolidated statement of income for the fourth quarter of 2015 reflects three months of legacy Hospira global operations. |
(c) | The
fourth quarter of 2015 historically reflects higher costs in Cost of sales, Selling, informational and administrative expenses and Research and development expenses. The fourth quarter of 2015 includes (i) charges of $878 million related to Venezuela resulting from foreign currency loss ($806 million) and an inventory impairment charge ($72 million); (ii) a charge of $784.6 million for an agreement in principle reached in February and finalized in April 2016 to settle claims relating to Protonix; (iii) charges of $491 million related to pension settlements; (iv) a benefit of $306 million resulting from a change in the profit deferred in inventory relating to inventory that had not been sold to third parties; and (v) a charge of $245
million related to the write-down of assets to net realizable value, which is primarily recorded in Other (income)/deductions––net. |
(d) | The third quarter of 2015 reflects (i) restructuring charges of $469 million for employee termination costs, asset impairments and other exit costs largely associated with our acquisition of Hospira; (ii) transaction costs, such as banking, legal, accounting and other similar services, directly related to our acquisition of Hospira of $64 million; and (iii) integration costs, representing external, incremental costs directly related to integrating acquired businesses,
and primarily include expenditures for consulting and the integration of systems and processes of $48 million, largely related to our acquisition of Hospira. |
(e) | The fourth quarter of 2015 reflects (i) restructuring charges of $256 million for employee termination costs, asset impairments and other exit costs, which are largely associated with our acquisition of Hospira; (ii) transaction costs, such as banking, legal, accounting and other similar services, directly related to our terminated combination with Allergan and our acquisition of Hospira of $52 million; and (iii) integration costs, representing external, incremental
costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes, of $116 million, primarily related to our acquisition of Hospira. |
2016 Financial Report | 137 | |
Year
Ended/As of December 31,(a) | ||||||||||||||||||||
(MILLIONS, EXCEPT PER COMMON SHARE DATA) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Revenues(b) | $ | 52,824 | $ | 48,851 | $ | 49,605 | $ | 51,584 | $ | 54,657 | ||||||||||
Income
from continuing operations(b), (c) | 7,229 | 6,975 | 9,119 | 11,410 | 9,021 | |||||||||||||||
Total
assets(b), (d) | 171,615 | 167,381 | 167,473 | 170,329 | 182,896 | |||||||||||||||
Long-term
obligations(b), (d), (e), (f) | 80,660 | 72,985 | 74,265 | 70,395 | 72,030 | |||||||||||||||
Earnings
per common share—basic(c) | ||||||||||||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders(c) | $ | 1.18 | $ | 1.13 | $ | 1.43 | $ | 1.67 | $ | 1.21 | ||||||||||
Discontinued
operations—net of tax(g) | — | — | 0.01 | 1.56 | 0.75 | |||||||||||||||
Net
income attributable to Pfizer Inc. common shareholders(c) | $ | 1.18 | $ | 1.13 | $ | 1.44 | $ | 3.23 | $ | 1.96 | ||||||||||
Earnings
per common share—diluted(c) | ||||||||||||||||||||
Income from continuing operations attributable to Pfizer Inc. common shareholders(c) | $ | 1.17 | $ | 1.11 | $ | 1.41 | $ | 1.65 | $ | 1.20 | ||||||||||
Discontinued
operations—net of tax(g) | — | — | 0.01 | 1.54 | 0.74 | |||||||||||||||
Net
income attributable to Pfizer Inc. common shareholders(c) | $ | 1.17 | $ | 1.11 | $ | 1.42 | $ | 3.19 | $ | 1.94 | ||||||||||
Cash
dividends paid per common share | $ | 1.20 | $ | 1.12 | $ | 1.04 | $ | 0.96 | $ | 0.88 | ||||||||||
(a) | 2016
reflects the acquisition of Medivation on September 28, 2016 and the acquisition of Anacor on June 24, 2016, and 2015 and 2016 reflect the acquisition of Hospira on September 3, 2015. |
(b) | All amounts reflect the June 24, 2013 disposition of Zoetis and its presentation as a discontinued operation in all periods prior to 2014 presented. |
(c) | 2016
reflects the adoption of a new accounting standard, as of January 1, 2016, requiring excess tax benefits or deficiencies for share-based compensation to be recognized as a component of the Provision for taxes on income. For additional information, see Notes to Consolidated Financial Statements––Note 1B. Adoption of New Accounting Standards. |
(d) | All years reflect the retrospective adoption of a new accounting standard as of January 1, 2016 that changed the presentation of debt issuance costs related to a recognized debt liability
as a direct deduction from the carrying value of the associated debt, consistent with the presentation of a debt discount. For additional information, see Notes to Consolidated Financial Statements––Note 1B. Adoption of New Accounting Standards. |
(e) | All years reflect the adoption of an accounting standard that requires all deferred tax assets and liabilities to be classified as noncurrent in the balance sheet. |
(f) | Defined as Long-term
debt, Pension benefit obligations, net, Postretirement benefit obligations, net, Noncurrent deferred tax liabilities, Other taxes payable and Other noncurrent liabilities. |
(g) | Includes (i) the Animal Health (Zoetis) business through June 24, 2013, the date of disposal, and (ii) the Nutrition business through November 30, 2012, the date of disposal. |
138 | 2016
Financial Report | |
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||
PFIZER | $100.0 | $120.4 | $152.0 | 160.0 | $171.4 | $179.1 | ||||||
PEER
GROUP | $100.0 | $112.4 | $149.4 | 167.9 | $170.4 | $173.8 | ||||||
S&P 500 | $100.0 | $116.0 | $153.5 | 174.5 | $176.9 | $198.1 | ||||||
2016
Financial Report | 139 | |
| This ‘10-K’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 1/1/20 | ||||
| 12/31/19 | 10-K, 11-K, 4 | |||
| 1/1/19 | ||||
| 12/15/18 | ||||
| 1/1/18 | 3 | |||
| 3/1/17 | 4, FWP | |||
| Filed on: | 2/23/17 | 3, 4, 8-K | ||
| 2/6/17 | ||||
| 2/3/17 | 3, 8-K | |||
| 2/2/17 | 8-K | |||
| 1/31/17 | 8-K, NO ACT | |||
| 1/23/17 | ||||
| 1/5/17 | ||||
| 1/1/17 | ||||
| For Period end: | 12/31/16 | 11-K, 4, 5, SD | ||
| 12/22/16 | ||||
| 12/15/16 | 4, NO ACT | |||
| 12/14/16 | ||||
| 12/12/16 | ||||
| 11/30/16 | 4 | |||
| 11/21/16 | 8-K | |||
| 11/18/16 | 8-K | |||
| 11/1/16 | 4, 8-K | |||
| 10/31/16 | 4 | |||
| 10/26/16 | 8-K | |||
| 10/6/16 | 4 | |||
| 9/28/16 | SC TO-T/A | |||
| 8/1/16 | 4 | |||
| 7/11/16 | ||||
| 6/24/16 | SC TO-T/A | |||
| 6/20/16 | ||||
| 6/3/16 | 4, 8-K | |||
| 4/29/16 | 4 | |||
| 4/8/16 | ||||
| 4/6/16 | 8-K | |||
| 4/4/16 | 4, SC 13G/A | |||
| 3/10/16 | ||||
| 3/8/16 | 8-K | |||
| 2/12/16 | SC 13G | |||
| 1/1/16 | ||||
| 12/31/15 | 10-K, 11-K, 4, SD | |||
| 12/18/15 | 425, 8-K, NO ACT | |||
| 11/30/15 | 4, 425 | |||
| 11/22/15 | 8-K | |||
| 9/3/15 | 8-K, S-4 | |||
| 7/13/15 | 4 | |||
| 7/2/15 | 4 | |||
| 6/24/15 | ||||
| 2/11/15 | 4, SC 13G | |||
| 2/9/15 | 8-K, SC 13G/A | |||
| 1/1/15 | ||||
| 12/31/14 | 10-K, 11-K, 4, ARS | |||
| 12/1/14 | ||||
| 10/23/14 | ||||
| 9/24/14 | ||||
| 9/15/14 | 4 | |||
| 8/1/14 | ||||
| 7/11/14 | 4 | |||
| 6/30/14 | 11-K/A, 4 | |||
| 5/31/14 | ||||
| 5/27/14 | 425, 8-K | |||
| 5/15/14 | 4, 8-K | |||
| 4/29/14 | 425 | |||
| 4/24/14 | 4, 8-K, DEF 14A | |||
| 4/1/14 | ||||
| 1/21/14 | ||||
| 1/1/14 | 3 | |||
| 10/31/13 | 4 | |||
| 7/1/13 | 4 | |||
| 6/27/13 | 425, SC TO-I/A | |||
| 6/24/13 | 4, 425, SC TO-I/A | |||
| 1/1/13 | 3 | |||
| 11/30/12 | 4 | |||
| 12/31/11 | 10-K, 11-K, ARS | |||
| 1/1/11 | ||||
| 5/31/10 | ||||
| 6/14/08 | ||||
| 4/2/07 | ||||
| 1/1/06 | ||||
| 10/19/05 | ||||
| 10/31/00 | ||||
| List all Filings | ||||