10-QPeriod: Q3 FY2018

PFIZER INC Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 8, 2018For Securities:PFE

Summary

Pfizer Inc. reported a notable increase in net income for the third quarter and first nine months of 2018 compared to the prior year, driven by significant favorable tax adjustments related to the Tax Cuts and Jobs Act (TCJA) and operational growth across key products. Revenues saw a modest 1% increase year-over-year for the third quarter, reaching $13.3 billion, and a 2% increase for the first nine months to $39.7 billion. This growth was primarily fueled by the Innovative Health (IH) segment, which saw strength in products like Eliquis, Ibrance, Xeljanz, and Prevnar 13, despite headwinds in some legacy products and therapeutic areas. The company's financial position remains strong with substantial cash and investments, although short-term and long-term debt remain significant. Pfizer also continued its share repurchase program, demonstrating a commitment to returning capital to shareholders. The company reiterated its full-year 2018 financial guidance, indicating confidence in its operational performance despite some downward revenue revisions due to foreign exchange rates and Essential Health performance.

Key Highlights

  • 1Net income attributable to Pfizer Inc. increased significantly by 45% to $4.11 billion ($0.69 per diluted share) for the third quarter of 2018, and by 28% to $11.55 billion ($1.92 per diluted share) for the first nine months.
  • 2Total revenues for the third quarter of 2018 were $13.3 billion, a 1% increase compared to the prior year, with operational growth of 2% largely offset by unfavorable foreign exchange impacts.
  • 3The Innovative Health (IH) segment demonstrated robust growth, with revenues increasing by 4% to $8.5 billion in Q3 and 6% to $24.6 billion in the first nine months, driven by strong performances from key brands like Eliquis, Ibrance, and Xeljanz.
  • 4The Essential Health (EH) segment experienced a revenue decline of 4% to $4.8 billion in Q3 and 3% to $15.1 billion in the first nine months, impacted by ongoing product shortages in the Sterile Injectable Pharmaceuticals (SIP) portfolio and competitive pressures on legacy products.
  • 5The provision for taxes on income saw a substantial decrease of 91% to $66 million for the third quarter and 44% to $1.27 billion for the nine months, reflecting the favorable impact of the Tax Cuts and Jobs Act (TCJA) and a lower effective tax rate.
  • 6The company completed an accelerated share repurchase agreement of $4.0 billion in March 2018 and continued with other share repurchases, repurchasing approximately 46.7 million shares in Q3 2018.
  • 7Pfizer reaffirmed its full-year 2018 financial guidance for Adjusted diluted EPS in the range of $2.98 to $3.02, although it narrowed the revenue guidance range to $53.0 to $53.7 billion.

Frequently Asked Questions

Pfizer's total revenues increased by 1% to $13.3 billion in the third quarter of 2018 compared to the same period in 2017. This increase was driven by operational growth of 2%, which was partially offset by an unfavorable impact of foreign exchange.

The Innovative Health (IH) segment was the primary driver of revenue growth, with a 4% increase year-over-year. Key products like Eliquis, Ibrance, Xeljanz, and Prevnar 13 showed strong performance. The Essential Health (EH) segment saw a revenue decline.

The TCJA significantly reduced Pfizer's provision for taxes on income and lowered its effective tax rate. For the third quarter of 2018, the provision for taxes on income decreased by 91% to $66 million, and the effective tax rate was 1.6%, largely due to tax benefits from the TCJA and favorable adjustments to provisional estimates related to the legislation.

Pfizer reaffirmed its full-year 2018 guidance for Adjusted diluted Earnings Per Share (EPS) to be in the range of $2.98 to $3.02. However, the company narrowed its revenue guidance range to $53.0 to $53.7 billion due to lower-than-anticipated Essential Health revenues and unfavorable foreign exchange rates.