10-QPeriod: Q3 FY2009

PFIZER INC Quarterly Report for Q3 Ended Sep 27, 2009

Filed November 5, 2009For Securities:PFE

Summary

Pfizer Inc. reported its third-quarter and nine-month results for the period ending September 27, 2009. For the quarter, revenues were $11.621 billion, a decrease of 3% from the prior year, while net income attributable to Pfizer Inc. rose 26% to $2.878 billion. For the first nine months, revenues decreased 7% to $33.472 billion, and net income remained relatively flat at $7.868 billion. The company finalized its acquisition of Wyeth for approximately $68 billion on October 15, 2009, a significant event not yet reflected in these interim financial statements but which will materially impact future results and the company's structure. Significant costs associated with this acquisition and ongoing cost-reduction initiatives were noted. The company's financial position was strengthened by substantial debt issuances to fund the Wyeth acquisition, leading to a significant increase in cash and investments. However, revenue declines were observed across major pharmaceutical products like Lipitor and Norvasc due to patent expirations and generic competition, further impacted by foreign exchange headwinds. Despite these challenges, Pfizer is actively managing its costs and strategically positioning itself for future growth through acquisitions and pipeline development.

Financial Highlights

53 data points
Beta

Revenue

$11.62B

84.6% Gross Margin

Net Income

$2.88B

24.8% Net Margin

EPS (Diluted)

$0.43

Total Assets

$141.29B

Cash & Equivalents

$4.23B

Free Cash Flow

$3.84B

Financial Statements
Beta
Revenue$11.62B
Cost of Revenue$1.79B
Gross Profit$9.83B
SG&A Expenses$3.28B
Operating Income$7.86B
Interest Expense$369.00M
Net Income$2.88B
EPS (Basic)$0.43
EPS (Diluted)$0.43
Shares Outstanding (Basic)6.73B
Shares Outstanding (Diluted)6.76B

Key Highlights

  • 1Revenues for the third quarter decreased by 3% to $11.621 billion compared to the prior year, with nine-month revenues down 7% to $33.472 billion, primarily impacted by foreign exchange and generic competition.
  • 2Net income attributable to Pfizer Inc. for the third quarter increased by 26% to $2.878 billion, while nine-month net income was relatively flat at $7.868 billion.
  • 3Pfizer completed the significant acquisition of Wyeth for approximately $68 billion on October 15, 2009. The financial impact of Wyeth's operations is not yet included in these statements.
  • 4The company issued approximately $24 billion in senior unsecured notes in the first half of 2009 to partially finance the Wyeth acquisition, significantly increasing its long-term debt and cash reserves.
  • 5Key pharmaceutical products such as Lipitor and Norvasc experienced revenue declines due to patent expirations and increased generic competition.
  • 6Ongoing cost-reduction initiatives are underway, with significant expected annual savings of $6 billion by the end of 2012, including synergies from the Wyeth integration.
  • 7The effective tax rate increased significantly in the third quarter and first nine months of 2009 compared to the prior year, partly due to financing costs for the Wyeth acquisition.

Frequently Asked Questions

The most significant event is the completion of the acquisition of Wyeth on October 15, 2009, for approximately $68 billion. While Wyeth's financials are not yet consolidated, this acquisition fundamentally reshapes Pfizer's business and will have a substantial impact on future revenues, costs, and strategic direction.

Revenue decline was driven by several factors, including the strengthening U.S. dollar (unfavorable foreign exchange), increased generic competition for key products like Lipitor and Norvasc, and pricing pressures. The increase in net income for the quarter was largely due to the absence of significant charges recorded in the prior year, such as large litigation settlements, and lower restructuring and R&D expenses compared to the prior year's comparable period.

Pfizer financed the Wyeth acquisition through a combination of cash on hand, existing investments, and substantial debt issuances. The company issued approximately $24 billion in senior unsecured notes in the first half of 2009 to partially fund the acquisition. As a result, long-term debt significantly increased to $32.4 billion as of September 27, 2009, from $7.963 billion at year-end 2008. Despite the increased debt, Pfizer maintains investment-grade credit ratings.

Pfizer is pursuing a comprehensive cost-reduction strategy, which includes integration synergies from the Wyeth acquisition and its own cost-reduction initiatives. The company targets total annual cost savings of approximately $6 billion by the end of 2012, achieved through facility closures, workforce reductions, shared services, and procurement savings. Significant costs are associated with these initiatives.