10-QPeriod: Q2 FY2012

PFIZER INC Quarterly Report for Q2 Ended Apr 1, 2012

Filed May 10, 2012For Securities:PFE

Summary

Pfizer Inc. reported a 7% decrease in total revenues for the first quarter of 2012, reaching $15.4 billion compared to $16.5 billion in the prior year period. This decline was primarily driven by the loss of exclusivity for key products like Lipitor in the U.S. and unfavorable foreign exchange rates. Net income also saw a significant drop of 19% to $1.8 billion, or $0.24 per diluted share, down from $2.2 billion, or $0.28 per diluted share, in Q1 2011. The company incurred substantial "certain significant items" totaling $1.45 billion net of tax, largely due to higher litigation charges and asset impairment charges, which impacted profitability. Despite these challenges, Pfizer continued its portfolio transformation, announcing the sale of its Nutrition segment to Nestlé for $11.85 billion, expected to close in the first half of 2013. Looking ahead, Pfizer reaffirmed its commitment to strengthening its core businesses and enhancing shareholder value through dividends and share repurchases. The company's strategic focus remains on key therapeutic areas, and it is actively managing its R&D pipeline and cost structure to navigate the evolving pharmaceutical landscape. Investors should note the ongoing impact of patent expirations and the company's efforts to adapt to market changes.

Financial Highlights

52 data points
Beta

Revenue

$14.88B

81.6% Gross Margin

Net Income

$1.79B

12.1% Net Margin

EPS (Diluted)

$0.24

Total Assets

$185.68B

Cash & Equivalents

$2.93B

Free Cash Flow

$2.52B

Financial Statements
Beta
Revenue$14.88B
Cost of Revenue$2.75B
Gross Profit$12.14B
SG&A Expenses$3.97B
Operating Income$1.72B
Interest Expense$390.00M
Net Income$1.79B
EPS (Basic)$0.24
EPS (Diluted)$0.24
Shares Outstanding (Basic)7.54B
Shares Outstanding (Diluted)7.60B

Key Highlights

  • 1Total revenues decreased by 7% to $15.4 billion in Q1 2012, primarily due to Lipitor's loss of U.S. exclusivity and unfavorable foreign exchange.
  • 2Net income attributable to Pfizer Inc. fell by 19% to $1.79 billion, with diluted EPS down to $0.24 from $0.28 in the prior year.
  • 3The company incurred significant "certain significant items" of $1.45 billion (net of tax), largely driven by increased legal charges (including a $450M settlement provision for Brigham Young University) and asset impairment charges.
  • 4Pfizer announced the agreement to sell its Nutrition segment to Nestlé for $11.85 billion, with the transaction expected to close in the first half of 2013.
  • 5Cost of sales decreased by 19% and Selling, Informational, and Administrative (SI&A) expenses decreased by 8%, reflecting cost-reduction initiatives and the impact of product exclusivity losses.
  • 6Research and Development (R&D) expenses remained relatively stable, decreasing by 1% to $2.07 billion, impacted by productivity initiatives and offsetting charges.
  • 7The company continued its share repurchase program, buying back approximately $1.7 billion of common stock in Q1 2012.

Frequently Asked Questions

The primary driver of the 7% revenue decline to $15.4 billion was the loss of exclusivity for key products, most notably Lipitor in the U.S. which occurred in November 2011, leading to a significant revenue decrease of $991 million. Unfavorable foreign exchange rates also contributed to the decline.

Pfizer recorded $1.45 billion (net of tax) in "certain significant items" during Q1 2012. These charges were primarily due to higher litigation-related matters, including a $450 million provision for an agreement-in-principle to settle a lawsuit by Brigham Young University related to Celebrex, and increased asset impairment charges. These items significantly reduced net income compared to the prior year.

Pfizer announced an agreement to sell its Nutrition operating segment to Nestlé for $11.85 billion in cash. This transaction is expected to close in the first half of 2013, subject to regulatory approvals. The company plans to present the Nutrition business as a discontinued operation in its financial statements.

Pfizer is actively managing its cost structure through various initiatives. Cost of sales decreased by 19% and Selling, Informational, and Administrative (SI&A) expenses decreased by 8% in Q1 2012. These reductions are attributed to cost-saving measures, including workforce reductions, facility rationalization, and decreased promotional spending, partly in response to product exclusivity losses.