10-QPeriod: Q1 FY2008

PFIZER INC Quarterly Report for Q1 Ended Mar 30, 2008

Filed May 2, 2008For Securities:PFE

Summary

Pfizer Inc. reported a 5% decrease in revenues for the first quarter of 2008, reaching $11.8 billion, down from $12.5 billion in the prior year's comparable quarter. This decline was primarily driven by the loss of exclusivity for key drugs such as Norvasc, Zyrtec/Zyrtec D, and Camptosar, which significantly impacted U.S. sales. Despite revenue pressures, the company's net income saw a more substantial decrease of 18%, falling to $2.78 billion from $3.39 billion year-over-year. This was influenced by increased acquisition-related charges and the ongoing impact of cost-reduction initiatives. Pfizer continued its strategic acquisitions, notably acquiring CovX and Coley Pharmaceutical Group, while also engaging in share repurchases, though at a lower rate than the previous year.

Key Highlights

  • 1Total revenues decreased by 5% to $11.8 billion, impacted by patent expirations and generic competition on key products like Norvasc and Zyrtec/Zyrtec D.
  • 2Net income declined by 18% to $2.78 billion, reflecting higher acquisition-related in-process R&D charges and restructuring costs.
  • 3Earnings per diluted share (EPS) decreased to $0.41 from $0.48 year-over-year.
  • 4Research and Development expenses increased by 8% to $1.79 billion, partly due to implementation costs from cost-reduction initiatives.
  • 5The company completed strategic acquisitions of CovX and Coley Pharmaceutical Group, incurring $398 million in acquisition-related in-process R&D charges.
  • 6Cost-reduction initiatives are progressing, with significant progress reported in plant network optimization and workforce reductions.
  • 7Cash provided by operating activities significantly increased to $3.3 billion, compared to $1.2 billion in the prior year's quarter, mainly due to lower tax payments.

Frequently Asked Questions

The primary driver for the revenue decline was the loss of U.S. exclusivity for major drugs such as Norvasc, Zyrtec/Zyrtec D, and Camptosar. This led to a significant drop in sales, particularly in the U.S. market, and increased rebate pressures.

Profitability was impacted by several factors. While revenues declined, net income saw a steeper decrease of 18% to $2.78 billion. This was largely due to higher acquisition-related in-process research and development charges, increased R&D expenses driven by cost-reduction initiatives, and a less favorable tax rate compared to the prior year.

Pfizer continued its acquisition strategy by acquiring CovX, a biotherapeutics company, and Coley Pharmaceutical Group, Inc., a biopharmaceutical company focused on vaccines. These acquisitions contributed to $398 million in acquisition-related in-process research and development charges.

Pfizer is actively pursuing cost-reduction initiatives, aiming for significant savings by the end of 2008. These initiatives include optimizing its manufacturing plant network, reducing its global sales force, streamlining organizational structures, and increasing outsourcing. While these efforts are progressing, they have led to increased implementation costs within operating expenses.