10-QPeriod: Q3 FY2016

PFIZER INC Quarterly Report for Q3 Ended Jul 3, 2016

Filed August 11, 2016For Securities:PFE

Summary

Pfizer Inc. reported solid financial results for the second quarter and first half of 2016, demonstrating revenue growth and effective operational management. Total revenues increased by 11% year-over-year for the quarter and 15% for the first half, driven by strong performances in the Innovative Health (IH) segment, particularly from key products like Ibrance and Xeljanz, and the inclusion of Hospira's results in the Essential Health (EH) segment. Despite significant investments in acquisitions, including Anacor, and ongoing cost-reduction initiatives, Pfizer maintained healthy profitability. The company's strategic focus on key therapeutic areas and business development, alongside a commitment to capital allocation through share repurchases and dividends, positions it well for continued growth. Investors should note the impact of legacy Hospira operations and the potential for future strategic decisions regarding business segment separation.

Financial Highlights

54 data points
Beta

Revenue

$13.15B

75.9% Gross Margin

Net Income

$2.05B

15.6% Net Margin

EPS (Diluted)

$0.33

Total Assets

$170.66B

Cash & Equivalents

$3.41B

Free Cash Flow

$3.21B

Financial Statements
Beta
Revenue$13.15B
Cost of Revenue$3.17B
Gross Profit$9.97B
SG&A Expenses$3.47B
Operating Income$5.08B
Interest Expense$292.00M
Net Income$2.05B
EPS (Basic)$0.34
EPS (Diluted)$0.33
Shares Outstanding (Basic)6.07B
Shares Outstanding (Diluted)6.15B

Key Highlights

  • 1Total revenues increased 11% to $13.1 billion in Q2 2016 and 15% to $26.2 billion in the first half of 2016.
  • 2Innovative Health (IH) segment revenues grew operationally by 9% in Q2 and 18% in the first half, led by strong performance in Ibrance, Eliquis, and Xeljanz.
  • 3Essential Health (EH) segment revenues saw a 19% operational increase in Q2 and 22% in the first half, largely driven by the inclusion of Hospira's operations.
  • 4Net income attributable to Pfizer Inc. decreased by 23% to $2.0 billion in Q2 2016 and increased slightly by 1% to $5.0 billion in the first half of 2016, impacted by higher costs and one-time charges.
  • 5R&D expenses remained relatively stable year-over-year, with a slight increase in Q2 and a decrease in the first half, reflecting ongoing pipeline development and strategic partnerships.
  • 6The company completed the acquisition of Anacor Pharmaceuticals for approximately $4.9 billion in June 2016, strengthening its pipeline in dermatology.
  • 7Pfizer returned $3.7 billion to shareholders via dividends in the first half of 2016 and repurchased $5.0 billion of common stock through an accelerated share repurchase program.

Frequently Asked Questions

Revenue growth was primarily driven by the inclusion of legacy Hospira operations within the Essential Health segment, contributing $1.1 billion in the quarter. Additionally, strong performance from key Innovative Health products, including Ibrance, Lyrica (IH), Xeljanz, Chantix/Champix, and Eliquis, primarily in the U.S., significantly contributed to the top-line increase.

Pfizer completed the acquisition of Anacor for approximately $4.9 billion in June 2016. This acquisition is expected to strengthen Pfizer's pipeline with Anacor's crisaborole, currently under review by the FDA for atopic dermatitis. While the operating results for Anacor were immaterial in the reported period, the acquisition added $1.8 billion in Goodwill and $5.0 billion in Identifiable intangible assets to Pfizer's balance sheet.

Pfizer reaffirmed its 2016 financial guidance, expecting revenues between $51.0 billion and $53.0 billion and Adjusted diluted EPS between $2.38 and $2.48. This guidance anticipates approximately $2.3 billion in negative impact from generic competition and $1.4 billion from unfavorable foreign exchange rates.

R&D expenses were relatively flat year-over-year, slightly increasing by 1% in the second quarter and decreasing by 4% in the first half. This reflects ongoing investment in new products and strategic collaborations, offset in part by development funding received from partners for specific clinical trials. Pfizer's R&D focuses on six high-priority therapeutic areas: immunology and inflammation, cardiovascular and metabolic diseases, oncology, vaccines, neuroscience and pain, and rare diseases, with an additional focus on biosimilars.