On April 30, 2019 Pfizer Inc. (NYSE: PFE) reported financial results for first-quarter 2019 and raised the midpoint of its 2019 financial guidance for adjusted diluted EPS(2) (Press release, Pfizer, APR 30, 2019, View Source [SID1234535468]).
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At the start of the 2019 fiscal year(3), Pfizer reorganized its commercial operations into three businesses:
Pfizer Biopharmaceuticals Group (Biopharma), a science-based innovative medicines business, which includes all of the previous Innovative Health business units (except Consumer Healthcare) as well as a new Hospital business unit that commercializes Pfizer’s global portfolio of sterile injectable and anti-infective medicines and includes Pfizer’s contract manufacturing operation, Pfizer CentreOne. Pfizer also incorporated its biosimilar portfolio into its Oncology and Inflammation & Immunology business units and certain legacy established products into the Internal Medicine business unit.
Upjohn, a global, off-patent branded and generic established medicines business, which includes 20 off-patent solid oral dose legacy brands including Lyrica, Lipitor, Norvasc, Viagra and Celebrex, as well as certain generic medicines.
Consumer Healthcare(4), which includes Pfizer’s over-the-counter medicines.
Some amounts in this press release may not add due to rounding. All percentages have been calculated using unrounded amounts. References to operational variances pertain to period-over-period growth rates that exclude the impact of foreign exchange(5).
2019 FINANCIAL GUIDANCE(6)
Pfizer’s updated 2019 financial guidance is presented below. Financial guidance continues to reflect a full year of revenue and expense contributions from Consumer Healthcare(4).
Guidance for Adjusted Other (Income)/Deductions(2) was increased by $100 million, primarily due to milestone income recorded in first-quarter 2019.
The midpoint of the guidance range for Adjusted diluted EPS(2) was increased by $0.01 to an updated range of $2.83 to $2.93, reflecting a $0.03 operational improvement, primarily due to the aforementioned increase to Adjusted other income(2), partially offset by unfavorable changes in foreign exchange rates since mid-January 2019, which had an incremental negative impact of $0.02.
Financial guidance for Adjusted diluted EPS(2) reflects share repurchases totaling $8.9 billion in 2019. Dilution related to share-based employee compensation programs is currently expected to offset the reduction in shares associated with these share repurchases by approximately half.
CAPITAL ALLOCATION
During first-quarter 2019, Pfizer returned $10.9 billion directly to shareholders, through a combination of:
$2.0 billion of dividends, or $0.36 per share of common stock; and
$8.9 billion of share repurchases, composed of $2.1 billion of open-market share repurchases and a $6.8 billion accelerated share repurchase agreement executed in February 2019.
As of April 30, 2019, Pfizer’s remaining share repurchase authorization was $5.3 billion.
EXECUTIVE COMMENTARY
Dr. Albert Bourla, Pfizer’s Chief Executive Officer, stated, "Our first-quarter 2019 financial results were strong, driven by continued strength from certain Biopharma brands, primarily Eliquis, Ibrance, Prevnar 13/Prevenar 13 and Xeljanz, as well as strong operational growth from certain Upjohn brands, primarily in China. Our new commercial structure is designed to maximize today’s revenue growth opportunities while transitioning the company to a period post-2020 where we expect sustained mid-single-digit operational revenue growth through 2025. We remain focused on executing on our commercial strategies, managing expenses, advancing our pipeline and prudently allocating our capital to position Pfizer for sustainable success.
"Our pipeline continues to deliver differentiated therapies that have the potential to improve the standard of care for patients across multiple therapeutic areas. In the first four months of 2019, we have received five regulatory approvals and presented Phase 3 data for Xtandi in metastatic hormone-sensitive prostate cancer as well as Phase 2 immunogenicity data in adults for our 20-valent pneumococcal vaccine candidate. Over the rest of 2019, we are looking forward to potential U.S. regulatory approvals for tafamidis in transthyretin cardiomyopathy, our Bavencio-Inlyta combination for the treatment of first-line renal cell carcinoma as well as for our biosimilar rituximab, bevacizumab and adalimumab molecules. We also expect Phase 3 read outs in 2019 for PF-04965842, our Janus kinase-1 (JAK1) inhibitor in development for moderate-to-severe atopic dermatitis, and rivipansel, in development for vaso-occlusive crisis from sickle cell disease. I believe our pipeline today represents an unprecedented opportunity to deliver a life-changing impact for millions of patients while enhancing value for all of our stakeholders," Dr. Bourla concluded.
Frank D’Amelio, Chief Financial Officer and Executive Vice President, Business Operations and Global Supply, stated, "Overall, I was pleased with our first-quarter 2019 financial performance. We were able to achieve 5% operational revenue growth and delivered Adjusted diluted EPS(2) growth of 13%, primarily reflecting the strong performance of certain key products and the net impact of our share repurchases. We reaffirmed our 2019 financial guidance for revenues. Additionally, we raised the midpoint of our guidance range for Adjusted diluted EPS(2) by $0.01, reflecting a $0.03 operational improvement, primarily due to approximately $100 million of incremental Adjusted other income(2) that was recorded in first-quarter 2019, partially offset by a $0.02 negative impact reflecting unfavorable changes in foreign exchange rates since mid-January 2019. Finally, in first-quarter 2019, we returned $10.9 billion directly to shareholders through share repurchases and dividends."
QUARTERLY FINANCIAL HIGHLIGHTS (First-Quarter 2019 vs. First-Quarter 2018)
First-quarter 2019 revenues totaled $13.1 billion, an increase of $211 million, or 2%, compared to the prior-year quarter, reflecting operational growth of $664 million, or 5%, partially offset by the unfavorable impact of foreign exchange of $453 million, or 4%.
Pfizer Biopharmaceuticals Group (Biopharma) Revenue Highlights
First-quarter 2019 Biopharma revenues totaled $9.2 billion, up 7% operationally, primarily driven by:
Eliquis globally, up 36% operationally, primarily driven by continued increased adoption in non-valvular atrial fibrillation as well as oral anti-coagulant market share gains;
Ibrance globally, up 25% operationally, primarily driven by:
107% operational growth in international markets, reflecting continued strong uptake following launches in developed Europe, Japan and certain emerging markets; and
2% growth in the U.S., reflecting continued moderating volumes in approved metastatic breast cancer indications;
Prevnar 13/Prevenar 13 globally, up 10% operationally, primarily driven by:
31% operational growth in emerging markets, reflecting the favorable overall impact of timing and increased volume associated with government purchases for the pediatric indication and increased shipments associated with Gavi, the Vaccine Alliance, partially offset primarily by the non-recurrence of volumes associated with an adult national immunization program in first-quarter 2018; and
6% growth in the U.S., reflecting increased government purchases in first-quarter 2019 for the pediatric indication, partially offset by the continued decline in revenues for the adult indication due to a declining "catch up" opportunity compared to the prior-year quarter; and
Xeljanz globally, up 34% operationally, driven by:
89% operational growth in international markets, primarily reflecting continued uptake in the rheumatoid arthritis indication as well as from the recent launch of the ulcerative colitis indication in certain developed markets; and
18% growth in the U.S., reflecting continued strong volume growth in the rheumatoid arthritis indication and from the launches of the psoriatic arthritis and ulcerative colitis indications, partially offset by expected higher rebating and unfavorable channel mix in first-quarter 2019,
partially offset primarily by lower revenues for:
the Hospital business in the U.S., down 8%, primarily due to the continued expected negative impact from generic competition for products that have previously lost marketing exclusivity; and
certain rare disease products, including the hemophilia franchises primarily due to competitive pressures, and Genotropin in the U.S., primarily due to unfavorable channel mix.
Upjohn Revenue Highlights
First-quarter 2019 Upjohn revenues totaled $3.1 billion, up 1% operationally, reflecting:
25% operational growth in emerging markets, driven by strong, volume-driven operational growth in China, primarily from Lipitor, Norvasc and Celebrex; and
10% operational growth in Japan, primarily driven by strong volume growth from Lyrica and Celebrex,
partially offset by:
13% operational decline in developed markets excluding Japan, primarily driven by lower revenues for:
Viagra and Upjohn’s authorized generic for Viagra in the U.S. resulting from increased generic competition following Viagra’s December 2017 patent expiration;
Lyrica, primarily due to lower volumes in the U.S., reflecting wholesaler destocking in advance of anticipated generic competition beginning on June 30, 2019, and in developed Europe, reflecting continued generic competition; and
Greenstone, Upjohn’s authorized generic subsidiary, primarily due to continued industry-wide pricing challenges in the U.S.
Consumer Healthcare(4) Revenue Highlights
First-quarter 2019 Consumer Healthcare(4) revenues totaled $858 million, down 2% operationally, reflecting an 8% decline in the U.S., partially offset by 4% operational growth in international markets.
Pfizer recorded other deductions––net(1) in first-quarter 2019 compared with other income––net(1) in the prior-year quarter, primarily driven by:
higher net losses on the early retirement of certain outstanding debt securities;
higher business and legal entity alignment costs;
higher asset impairments charges;
higher net interest expense; and
lower income from collaborations, out-licensing and sale of compound/product rights,
partially offset primarily by:
a favorable change in the fair value of contingent consideration.
First-quarter 2019 diluted weighted-average shares outstanding used to calculate Reported(1) and Adjusted(2) diluted EPS declined by 307 million shares compared to the prior-year quarter primarily due to Pfizer’s ongoing share repurchase program, reflecting the impact of share repurchases during 2018 and in first-quarter 2019, partially offset by dilution related to share-based employee compensation programs.
A full reconciliation of Reported(1) to Adjusted(2) financial measures and associated footnotes can be found starting on page 18 of the press release located at the hyperlink below.
RECENT NOTABLE DEVELOPMENTS (Since January 29, 2019)
Product Developments
Bavencio (avelumab)
In March 2019, Merck KGaA, Darmstadt, Germany, which operates its biopharmaceutical business as EMD Serono in the U.S. and Canada (Merck KGaA), and Pfizer announced that the European Medicines Agency (EMA) validated for review the Type II variation application for Bavencio in combination with Inlyta (axitinib) for the treatment of patients with advanced renal cell carcinoma (RCC).
In March 2019, Merck KGaA and Pfizer announced the discontinuation of the ongoing Phase 3 JAVELIN Ovarian PARP 100 study evaluating the efficacy and safety of avelumab in combination with chemotherapy followed by maintenance therapy of avelumab in combination with talazoparib, a poly (ADP-ribose) polymerase (PARP) inhibitor, versus an active comparator in treatment-naïve patients with locally advanced or metastatic ovarian cancer.
In February 2019, Merck KGaA and Pfizer announced that the U.S. Food and Drug Administration (FDA) has accepted for priority review the supplemental Biologics License Application (BLA) for Bavencio in combination with Inlyta (axitinib) for patients with advanced RCC. The Prescription Drug User Fee Act goal date for a decision by the FDA is in June 2019.
Eliquis (apixaban) — In March 2019, the Bristol-Myers Squibb-Pfizer Alliance announced results from the Phase 4 AUGUSTUS trial evaluating Eliquis versus vitamin K antagonists (VKAs) in patients with non-valvular atrial fibrillation and recent acute coronary syndrome and/or undergoing percutaneous coronary intervention. Results showed that in patients receiving a P2Y12 inhibitor with or without aspirin (antiplatelet therapies), the proportion of patients with major or clinically relevant non-major bleeding at six months was significantly lower for those treated with Eliquis compared to those treated with a VKA. These data were featured as a late-breaking oral presentation at the American College of Cardiology’s 68th Annual Scientific Session 2019 and simultaneously published in the New England Journal of Medicine.
Ibrance (palbociclib) — In April 2019, Pfizer announced that the FDA approved a supplemental New Drug Application to expand the indications for Ibrance in combination with an aromatase inhibitor or fulvestrant to include men with hormone receptor-positive (HR+), human epidermal growth factor receptor 2 (HER2)-negative advanced or metastatic breast cancer. The approval is based on data from electronic health records and postmarketing reports of the real-world use of Ibrance in male patients sourced from three databases: IQVIA Insurance database, Flatiron Health Breast Cancer database and the Pfizer global safety database.
Lorbrena/Lorviqua (lorlatinib) — In March 2019, Pfizer announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) adopted a positive opinion for Lorviqua (approved in the U.S., Canada, and Japan under the brand name Lorbrena), an anaplastic lymphoma kinase (ALK) tyrosine kinase inhibitor (TKI), recommending conditional marketing authorization in the European Union (EU) as a monotherapy treatment for adult patients with ALK-positive advanced non-small cell lung cancer (NSCLC) whose disease has progressed after alectinib or ceritinib as the first ALK TKI therapy, or crizotinib and at least one other ALK TKI. Conversion to normal approval is contingent on provisions of comprehensive data confirming that the benefit-risk balance is positive. The CHMP’s opinion will be reviewed by the European Commission (EC), with a decision expected in the coming months.
Talzenna (talazoparib) — In April 2019, Pfizer announced that the CHMP of the EMA adopted a positive opinion for Talzenna recommending marketing authorization in the EU as a monotherapy treatment for adult patients with germline breast cancer susceptibility gene (gBRCA)1/2-mutations, who have HER2-negative locally advanced or metastatic breast cancer. Patients should have been previously treated with an anthracycline and/or a taxane in the (neo)adjuvant, locally advanced or metastatic setting unless patients were not suitable for these treatments. Patients with HR+ breast cancer should have been treated with a prior endocrine-based therapy, or be considered unsuitable for endocrine-based therapy. The CHMP’s opinion will be reviewed by the EC, with a decision expected in the coming months.
Trazimera (trastuzumab-qyyp) — In March 2019, Pfizer announced that the FDA approved Trazimera, a biosimilar to Herceptin(7), for the treatment of HER2 overexpressing breast cancer and HER2 overexpressing metastatic gastric or gastroesophageal junction adenocarcinoma. Trazimera is Pfizer’s first oncology monoclonal antibody biosimilar and its fifth biosimilar to be approved by the FDA. Trazimera was approved for use in the EU in July 2018 for the same indications.
Vizimpro (dacomitinib) — In April 2019, Pfizer announced that the EC approved Vizimpro in the EU as monotherapy for the first-line treatment of adult patients with locally advanced or metastatic NSCLC with epidermal growth factor receptor-activating mutations.
Xeljanz (tofacitinib) — In February 2019, Pfizer announced that it modified an ongoing post-marketing requirement study evaluating the safety of Xeljanz at two doses, 10 mg twice daily (BID) and 5 mg BID, versus a tumor necrosis factor inhibitor (TNFi) control group in patients with rheumatoid arthritis. Following notification from the tofacitinib rheumatology Data Safety Monitoring Board (DSMB) of a safety signal regarding the Xeljanz 10 mg BID treatment group, Pfizer transitioned all patients in the Xeljanz 10 mg BID treatment group to the Xeljanz 5 mg BID treatment group. The DSMB observed that patients in this study that were treated with Xeljanz 10 mg BID had a statistically and clinically important difference in the occurrence of pulmonary embolism, compared with patients who were treated with a TNFi. The DSMB also noted an increase in overall mortality in the Xeljanz 10 mg BID treatment group compared to the Xeljanz 5 mg BID and TNFi treatment groups. The DSMB also stated it firmly believes that the risk-benefit profile of Xeljanz 5 mg BID in comparison to the TNFi group remains appropriately balanced in this study. The Xeljanz 5 mg BID dose is the FDA approved dose for adult patients with moderate to severe rheumatoid arthritis. This study was designed to assess the risk of cardiovascular (CV) events and therefore in contrast to previous Xeljanz studies, patients were required to be at least 50 years of age and have at least one CV risk factor to be eligible for participation in this study. All patients entered the study on stable doses of background methotrexate. Pfizer will work with the FDA and other regulatory agencies to review the full results upon completion of this study.
Xtandi (enzalutamide) — In February 2019, Astellas Pharma Inc. and Pfizer announced results from the Phase 3 ARCHES trial in men with metastatic hormone-sensitive prostate cancer (mHSPC). The results showed that Xtandi plus androgen deprivation therapy (ADT) met the primary endpoint by significantly reducing the risk of radiographic progression or death by 61% versus ADT alone. Adverse events in the ARCHES clinical trial were generally consistent with those reported in enzalutamide clinical trials in patients with castration-resistant prostate cancer. These data were presented in an oral session at the 2019 Genitourinary Cancers Symposium.
Zirabev (PF-06439535, biosimilar bevacizumab) — In February 2019, Pfizer announced the EC approved Zirabev, a biosimilar to Avastin(8), for the treatment of metastatic carcinoma of the colon or rectum, metastatic breast cancer, unresectable advanced, metastatic or recurrent NSCLC, advanced and/or metastatic RCC and persistent, recurrent or metastatic carcinoma of the cervix.
Pipeline Developments
A comprehensive update of Pfizer’s development pipeline was published today and is now available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of Pfizer’s research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.
PF-06482077 (20-Valent Pneumococcal Conjugate Vaccine) — In April 2019, Pfizer presented data from a Phase 2 proof-of-concept study for its 20-valent pneumococcal conjugate vaccine (20vPnC) candidate, PF-06482077, which is being investigated for the prevention of invasive disease and pneumonia caused by Streptococcus pneumoniae serotypes contained in the vaccine in adults aged 18 years and older. The presentation was delivered at the 29th European Congress of Clinical Microbiology and Infectious Diseases. Pfizer’s 20vPnC candidate includes the 13 serotypes contained in Prevnar 13 plus seven additional serotypes serotypes (8, 10A, 11A,12F, 15B, 22F, and 33F). Pfizer is enrolling three Phase 3 studies evaluating 20vPnC in adults. Combined, these three studies will enroll more than 6,000 adult subjects, including populations of vaccine-naïve adults and adults with prior pneumococcal vaccination. Pfizer expects to submit a BLA to the FDA by the end of 2020, subject to the successful completion of Phase 3 studies in adults.
PF-07055480 (SB-525) — In April 2019, Sangamo Therapeutics, Inc. (Sangamo) and Pfizer announced interim data from the Phase 1/2 Alta study evaluating investigational SB-525 gene therapy for severe hemophilia A. Data indicate that SB-525 was generally well-tolerated and demonstrated a dose-dependent increase in Factor VIII levels across the four dosage cohorts. Eight patients in total were dosed. Based on these results, the Safety Monitoring Committee (SMC) recommended cohort expansion at the 3e13 vg/kg dose. Longer-term follow-up data will be presented at an upcoming scientific meeting. Per the SMC recommendation and study protocol, the fourth cohort will be expanded by up to five patients. Patient enrollment is underway. SB-525 is being developed as part of a global collaboration between Sangamo and Pfizer.
Tanezumab (PF-4383119)
In April 2019, Pfizer and Eli Lilly and Company (Lilly) announced top-line results from a Phase 3 study evaluating tanezumab 2.5 mg and 5 mg. The objective of the study was to compare the long-term joint safety and 16-week efficacy of tanezumab relative to nonsteroidal anti-inflammatory drugs (NSAIDs) in patients with moderate-to-severe osteoarthritis (OA) of the hip or knee. The tanezumab 5 mg treatment arm met two of the three co-primary efficacy endpoints, demonstrating a statistically significant improvement in pain and physical function compared to NSAIDs at the 16-week analysis, while patients’ overall assessment of their OA was not statistically different than NSAIDs. Patients who received tanezumab 2.5 mg did not experience a statistically significant improvement in pain, physical function or patients’ overall assessment of their OA at 16 weeks compared to NSAIDs. In the safety analysis, there was a higher rate of joint safety events in the tanezumab arms compared to NSAIDs at 80 weeks; the difference was statistically significant. Pfizer and Lilly continue to analyze these results and are assessing potential next steps for tanezumab. The full results from this study will be submitted for future scientific publication or presentation.
In February 2019, Pfizer and Lilly announced positive top-line results from a Phase 3 study evaluating tanezumab in patients with moderate-to-severe chronic low back pain. In the study, treatment with tanezumab 10 mg met the primary endpoint, demonstrating a statistically significant improvement in pain at 16 weeks compared to placebo. The tanezumab 5 mg arm demonstrated a numerical improvement in pain, but did not reach statistical significance compared to placebo at the week 16 analysis. The full results from this study will be submitted for future scientific publication or presentation.
Corporate Developments
In March 2019, Vivet Therapeutics (Vivet), a privately held gene therapy biotech company dedicated to developing gene therapy treatments for inherited liver disorders with high unmet medical need, and Pfizer announced that Pfizer has acquired a 15% equity interest in Vivet and secured an exclusive option to acquire all outstanding shares. Pfizer and Vivet will collaborate on the development of VTX-801, Vivet’s proprietary treatment candidate for Wilson disease. Under the terms of the transaction, Pfizer paid approximately €45 million ($51 million) upon signing and will pay an additional €20 million ($23 million) upon achievement of a development milestone. If Pfizer exercises its option to acquire the remaining outstanding shares, it may pay up to €540 million ($613 million) inclusive of the option exercise payment and subject to the achievement of certain post-acquisition clinical, regulatory and commercial milestones. Pfizer can exercise its option to acquire 100% of Vivet following the company’s delivery of certain data from the Phase 1/2 clinical trial for VTX-801. As part of the transaction, Pfizer senior executive Monika Vnuk, M.D., Vice President, Worldwide Business Development, will join Vivet’s Board of Directors. Other terms of the transaction were not disclosed.
Pfizer’s first-quarter 2019 earnings conference call with investment analysts is scheduled for Tuesday, April 30, 2019 at 10:00 a.m. EDT. For instructions on how to join the conference call or the webcast, please refer to the previously-issued press release located on the company’s investor website (www.pfizer.com/investors). Slides that will accompany today’s webcast were posted to the company’s investor website at 6:45 a.m. EDT, concurrent with the issuance of this press release. Pfizer intends to continue this practice for future earnings announcements.
Please find Pfizer’s press release and associated financial tables, including reconciliations of certain GAAP reported to non-GAAP adjusted information, at the following hyperlink:
(Note: If clicking on the above link does not open up a new web page, you may need to cut and paste the above URL into your browser’s address bar.)
For additional details, see the associated financial schedules and product revenue tables attached to the press release located at the hyperlink referred to above and the attached disclosure notice.
(1)Revenues is defined as revenues in accordance with U.S. generally accepted accounting principles (GAAP). Reported net income is defined as net income attributable to Pfizer Inc. in accordance with U.S. GAAP. Reported diluted earnings per share (EPS) are defined as diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.
(2 )Adjusted income and its components and Adjusted diluted EPS are defined as reported U.S. GAAP net income(1) and its components and reported diluted EPS(1) excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items (some of which may recur, such as restructuring charges, legal charges or net gains and losses on investments in equity securities, but which management does not believe are reflective of ongoing core operations). Adjusted cost of sales, Adjusted selling, informational and administrative (SI&A) expenses, Adjusted research and development (R&D) expenses and Adjusted other (income)/deductions are income statement line items prepared on the same basis as, and therefore components of, the overall Adjusted income measure. As described in the Financial Review––Non-GAAP Financial Measure (Adjusted Income) section of Pfizer’s 2018 Financial Report, which was filed as Exhibit 13 to Pfizer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, management uses Adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. Because Adjusted income is an important internal measurement for Pfizer, management believes that investors’ understanding of our performance is enhanced by disclosing this performance measure. Pfizer reports Adjusted income, certain components of Adjusted income, and Adjusted diluted EPS in order to portray the results of the company’s major operations––the discovery, development, manufacture, marketing and sale of prescription medicines, vaccines and consumer healthcare products––prior to considering certain income statement elements. See the accompanying reconciliations of certain GAAP Reported to Non-GAAP Adjusted information for the first quarter of 2019 and 2018. The Adjusted income and its components and Adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS.
(3)Pfizer’s fiscal year-end for international subsidiaries is November 30 while Pfizer’s fiscal year-end for U.S. subsidiaries is December 31. Therefore, Pfizer’s first quarter for U.S. subsidiaries reflects the three months ending on March 31, 2019 and April 1, 2018 while Pfizer’s first quarter for subsidiaries operating outside the U.S. reflects the three months ending on February 24, 2019 and February 25, 2018.
(4)In December 2018, Pfizer entered into a definitive agreement with GSK under which the two companies have agreed to combine their respective consumer healthcare businesses into a new consumer healthcare joint venture that will operate globally under the GSK Consumer Healthcare name. In exchange for contributing its Consumer Healthcare business, Pfizer will receive a 32% equity stake in the new company and GSK will own the remaining 68% of the new company. Upon the closing of the transaction, which is expected to occur in the second half of 2019, subject to customary closing conditions including GSK shareholder approval and required regulatory approvals, Pfizer anticipates deconsolidating its Consumer Healthcare business and will begin to receive its pro rata share of the joint venture’s earnings and dividends, which will be paid on a quarterly basis.
(5) References to operational variances in this press release pertain to period-over-period growth rates that exclude the impact of foreign exchange. The operational variances are determined by multiplying or dividing, as appropriate, the current period U.S. dollar results by the current period average foreign exchange rates and then multiplying or dividing, as appropriate, those amounts by the prior-year period average foreign exchange rates. Although exchange rate changes are part of Pfizer’s business, they are not within Pfizer’s control. Exchange rate changes, however, can mask positive or negative trends in the business; therefore, Pfizer believes presenting operational variances provides useful information in evaluating the results of its business.
(6) The 2019 financial guidance reflects the following:
Pfizer does not provide guidance for GAAP Reported financial measures (other than revenues) or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP Reported financial measures on a forward-looking basis because it is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gains and losses, acquisition-related expenses, net gains or losses on investments in equity securities and potential future asset impairments without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP Reported results for the guidance period.
Does not assume the completion of any business development transactions not completed as of March 31, 2019, including any one-time upfront payments associated with such transactions.
Reflects a full year of revenue and expense contributions from Consumer Healthcare(4).
Reflects an anticipated negative revenue impact of $2.6 billion due to recent and expected generic and biosimilar competition for certain products that have recently lost or are anticipated to soon lose patent protection.
Exchange rates assumed are a blend of the actual exchange rates in effect through first-quarter 2019 and mid-April 2019 rates for the remainder of the year. Reflects the anticipated unfavorable impact of approximately $1.1 billion on revenues and approximately $0.08 on Adjusted diluted EPS(2) as a result of changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2018.
Guidance for Adjusted diluted EPS(2) assumes diluted weighted-average shares outstanding of approximately 5.7 billion shares, which reflects the weighted-average impact of share repurchases totaling $8.9 billion executed in first-quarter 2019. Dilution related to share-based employee compensation programs is currently expected to offset the reduction in shares associated with these share repurchases by approximately half.
(7) Herceptin is a registered U.S. trademark of Genentech, Inc.
(8) Avastin is a registered U.S. trademark of Genentech, Inc.