On May 2, 2017 Pfizer Inc. (NYSE:PFE) reported financial results for first-quarter 2017 and reaffirmed its 2017 financial guidance (Press release, Pfizer, MAY 2, 2017, View Source [SID1234518775]).
On June 24, 2016, Pfizer acquired Anacor Pharmaceuticals, Inc. (Anacor). Therefore, financial results for first-quarter 2017 reflect three months of legacy Anacor operations, which were immaterial.
On September 28, 2016, Pfizer acquired Medivation, Inc. (Medivation). Therefore, financial results for first-quarter 2017 reflect three months of legacy Medivation operations.
On February 3, 2017, Pfizer completed the sale of its global infusion therapy net assets, Hospira Infusion Systems (HIS). Therefore, financial results for first-quarter 2017 reflect approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations, while financial results for first-quarter 2016 reflect three months of legacy HIS global operations.(3)
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.(4) Results for the first quarter of 2017 and 2016 are summarized below.
($ in millions, except
per share amounts)
2017 2016 Change
$ 12,779 $ 13,005 (2%)
Reported Net Income(1)
3,121 3,038 3%
Reported Diluted EPS(1)
0.51 0.49 6%
4,192 4,177 —
Adjusted Diluted EPS(2)
0.69 0.67 3%
($ in millions)
2017 2016 % Change
7,415 7,033 5% 6%
5,364 5,972 (10%) (9%)
Total Company $ 12,779 $ 13,005 (2%) (1%)
Excluding HIS revenues from all periods:
$ 12,682 $ 12,702 — 1%
Essential Health 5,267 5,668 (7%) (6%)
2017 FINANCIAL GUIDANCE(5)
Pfizer’s reaffirmed 2017 financial guidance is presented below:
Revenues $52.0 to $54.0 billion
Adjusted Cost of Sales(2) as a Percentage of Revenues 20.0% to 21.0%
Adjusted SI&A Expenses(2) $13.7 to $14.7 billion
Adjusted R&D Expenses(2) $7.5 to $8.0 billion
Adjusted Other (Income)/Deductions(2) Approximately $100 million of deductions
Effective Tax Rate on Adjusted Income(2) Approximately 23.0%
Adjusted Diluted EPS(2) $2.50 to $2.60
During first-quarter 2017, Pfizer returned $6.9 billion directly to shareholders, through a combination of:
a $1.9 billion dividend payment, or $0.32 per share of common stock; and
a $5.0 billion accelerated share repurchase agreement executed in February 2017.
As of May 2, 2017, Pfizer’s remaining share repurchase authorization was approximately $6.4 billion.
Ian Read, Chairman and Chief Executive Officer, stated, “I was pleased with our first-quarter 2017 financial performance, which was in line with our expectations, and it reinforces our confidence in the business going forward. I believe each of our businesses is well positioned within their individual markets with strong portfolios, highly skilled and accomplished leadership and focused strategies. Innovative Health’s core franchises — Prevnar 13, Lyrica, Ibrance, Eliquis, Xeljanz and Xtandi — have strong leadership positions in their respective therapeutic categories and are complemented by new product launches, including Eucrisa and Bavencio, as well as meaningful pipeline progress. Essential Health’s growth opportunities — Sterile Injectables, Biosimilars and Emerging Markets — continue to perform in line with our expectations while we refine the business and position it for potential sustainable revenue growth.
“Finally, we will continue to allocate our capital to initiatives that we believe will maximize value creation,” Mr. Read concluded.
Frank D’Amelio, Executive Vice President, Business Operations and Chief Financial Officer, stated, “Today we are reaffirming our 2017 financial guidance, reflecting our performance to date as well as our confidence in the business going forward. Excluding the negative impacts of the divestiture of HIS and foreign exchange, the midpoints of our 2017 revenue and Adjusted diluted EPS(2) guidance ranges reflect 4% and 10% operational growth, respectively.”
QUARTERLY FINANCIAL HIGHLIGHTS (First-Quarter 2017 vs. First-Quarter 2016)
First-quarter 2017 revenues totaled $12.8 billion, a decline of $226 million, or 2% compared to the prior-year quarter, reflecting an operational decline of $110 million, or 1%, and the unfavorable impact of foreign exchange of $116 million, or 1%.
Excluding the revenues for HIS in both periods and the unfavorable impact of foreign exchange, first-quarter 2017 revenues increased by $97 million, or 1%. First-quarter 2017 revenues excluding the net impact of acquisitions and divestitures completed in 2016 and 2017 were flat operationally compared to first-quarter 2016.
Of note, there was one less selling day in the U.S. and two fewer selling days in international markets during first-quarter 2017 compared to first-quarter 2016, resulting in a negative impact on first-quarter 2017 revenues of approximately $300 million compared to the prior-year quarter. Full-year 2017 will have one less U.S. selling day and one less international selling day compared to full-year 2016.
Innovative Health Highlights
IH revenues increased 6% operationally in first-quarter 2017, driven by continued growth from key brands including Ibrance and Eliquis globally, the addition of Xtandi revenues in the U.S. resulting from the September 2016 acquisition of Medivation, as well as Lyrica and Xeljanz, both primarily in the U.S. Global Ibrance revenue increased 59% operationally while global operational revenue growth for Eliquis and Xeljanz was 52% and 27%, respectively.
Global Prevnar 13/Prevenar 13 revenues declined 7% operationally. In the U.S., Prevnar 13 revenues decreased 9% primarily due to the continued decline in revenues for the Adult indication due to a smaller remaining “catch up” opportunity compared to the prior-year quarter, partially offset by the favorable impact from the timing of government purchases for the pediatric indication. Prevenar 13 revenues in international markets decreased 4% operationally, primarily due to the unfavorable timing of government purchases in certain emerging markets for the pediatric indication, partially offset by modest growth of the Adult indication in certain developed Europe markets.
First-quarter 2017 operational growth was also negatively impacted by lower revenues for Enbrel in most developed Europe markets, primarily due to continued biosimilar competition, as well as by Viagra in the U.S. primarily due to lower market demand.
Essential Health Highlights
First-quarter 2017 EH revenues declined 9% operationally, primarily resulting from a 23% operational decline from Peri-LOE Products, including Pristiq in the U.S., which lost marketing exclusivity in the U.S. in March 2017, Lyrica in most developed Europe markets and Zyvox in developed Europe and in the U.S., a 68% decline in HIS revenues, reflecting its February 3, 2017 divestiture, and a 5% operational decline from Legacy Established Products (LEP). These declines were partially offset by 3% operational growth from the Sterile Injectable Pharmaceuticals (SIP) portfolio and 62% operational growth from Biosimilars, primarily driven by Inflectra in certain developed Europe markets and in the U.S. EH revenues excluding the performance of HIS in both periods declined 6% operationally.
Developed markets revenues declined 14% operationally, negatively impacted by a 34% operational decline from Peri-LOE Products, a 72% operational decline in HIS revenues and a 9% operational decline from the LEP portfolio, partially offset by 62% operational growth from Biosimilars. Excluding the performance of HIS in both periods, EH revenues in developed markets declined 10% operationally.
Revenues in emerging markets grew 5% operationally, primarily driven by 21% operational growth from the SIP portfolio. Excluding the performance of HIS in both periods, EH revenues in emerging markets grew 6% operationally.
GAAP Reported(1) Income Statement Highlights
SELECTED TOTAL COMPANY REPORTED COSTS AND EXPENSES(1)
($ in millions)
2017 2016 % Change
Cost of Sales(1) $ 2,470 $ 2,851
Percent of Revenues 19.3 % 21.9 % N/A N/A
SI&A Expenses(1) 3,308 3,385 (2%) (2%)
R&D Expenses(1) 1,708 1,731 (1%) (1%)
Total $ 7,486 $ 7,967 (6%) (5%)
($1 ) $ 330 * *
Effective Tax Rate on
20.8 % 14.4 %
* Indicates calculation not meaningful.
Adjusted(2) Income Statement Highlights
SELECTED TOTAL COMPANY ADJUSTED COSTS AND EXPENSES(2)
($ in millions)
2017 2016 % Change
Adjusted Cost of Sales(2) $ 2,434 $ 2,565 (5%) (4%)
Percent of Revenues 19.1 % 19.7 %
Adjusted SI&A Expenses(2) 3,288 3,368 (2%) (2%)
Adjusted R&D Expenses(2) 1,705 1,723 (1%) —
Total $ 7,428 $ 7,656 (3%) (2%)
($88 ) ($149 )
Effective Tax Rate on
22.3 % 23.4 %
The diluted weighted-average shares outstanding used to calculate Reported(1) and Adjusted(2) diluted EPS declined by 133 million shares compared to the prior-year quarter due to Pfizer’s share repurchase program, reflecting the impact of a $5 billion accelerated share repurchase agreement executed in March 2016 and completed in June 2016 and another $5 billion accelerated share repurchase agreement executed in February 2017.
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 31, 2017)
In March 2017, EMD Serono Inc. (EMD Serono), the biopharmaceutical business of Merck KGaA, Darmstadt, Germany, in the U.S. and Canada, and Pfizer announced that the U.S. Food and Drug Administration (FDA) approved Bavencio Injection 20 mg/mL, for intravenous use, for the treatment of adults and pediatric patients 12 years and older with metastatic Merkel cell carcinoma (mMCC). This indication is approved under accelerated approval based on tumor response and duration of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials. Bavencio, a human anti-PD-L1 antibody, is the first FDA-approved therapy for patients with mMCC, a rare and aggressive skin cancer.
In February 2017, EMD Serono and Pfizer announced that the FDA accepted for Priority Review EMD Serono’s Biologics License Application (BLA) for avelumab as a treatment for patients with locally advanced or metastatic urothelial carcinoma with disease progression on or after platinum-based therapy. The FDA has set a Prescription Drug User Fee Act (PDUFA) target action date of August 27, 2017 for avelumab in this indication.
Eliquis (apixaban) — In March 2017, Bristol-Myers Squibb Company and Pfizer announced findings from a real-world data analysis of the U.S. Medicare database comparing the risk of stroke or systemic embolism and rate of major bleeding among patients with non-valvular atrial fibrillation who were treated with direct oral anticoagulants versus warfarin. In the analysis, titled Effectiveness and Safety of Apixaban, Dabigatran, and Rivaroxaban Compared to Warfarin among Non-Valvular Atrial Fibrillation Patients in the U.S. Medicare Population, Eliquis was associated with a significantly lower risk of stroke or systemic embolism and lower rate of major bleeding compared to warfarin. These data, which supplement results from randomized trials, were presented at the American College of Cardiology’s 66th Annual Scientific Session.
Ibrance (palbociclib) — In March 2017, Pfizer announced that the FDA approved a supplemental New Drug Application for Ibrance, based on the results from the confirmatory Phase 3 trial, PALOMA-2. The FDA action converts the accelerated approval of Ibrance to regular approval and broadens the range of anti-hormonal therapy that may be administered with Ibrance. Ibrance now is indicated in combination with an aromatase inhibitor, expanding on its earlier indication in combination with letrozole, as initial endocrine based therapy for postmenopausal women with hormone receptor-positive, human epidermal growth factor receptor 2-negative advanced or metastatic breast cancer.
Inflectra (infliximab-dyyb) — In February 2017, Pfizer and Celltrion Healthcare announced that data presented at the 12th Congress of the European Crohn’s and Colitis Organisation showed that for patients with moderate-to-severe Crohn’s disease (CD), treatment with Inflectra has similar efficacy and safety to treatment with Remicade(6), its reference product. The randomized 54-week clinical trial in 214 patients met its primary endpoint demonstrating that, at six weeks, Inflectra was similar to Remicade(6) in the treatment of CD thereby meeting the criterion for non-inferiority. Further results on the longer-term safety and efficacy of Inflectra from this ongoing 54-week study in CD are expected later this year. The study is also examining the treatment response and safety profile in patients when switched from Remicade(6) to Inflectra, and from Inflectra to Remicade(6).
Trumenba (Meningococcal Serogroup B Bivalent Recombinant Lipoprotein vaccine) — In March 2017, Pfizer announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) has adopted a positive opinion recommending that Trumenba be granted marketing authorization in the European Union (EU) for active immunization of individuals 10 years and older to prevent invasive meningococcal disease caused by Neisseria meningitidis serogroup B. The CHMP’s opinion will now be reviewed by the European Commission (EC), which has the authority to approve medicines for the EU.
In March 2017, Pfizer announced that the EC approved Xeljanz 5 mg twice daily (BID) oral tablets in combination with methotrexate (MTX) for the treatment of moderate to severe active rheumatoid arthritis (RA) in adult patients who have responded inadequately to, or who are intolerant to one or more disease-modifying antirheumatic drugs (DMARDs). Xeljanz can be given as monotherapy in case of intolerance to MTX or when treatment with MTX is inappropriate.
In March 2017, Pfizer announced that the Chinese Food and Drug Administration approved Xeljanz 5 mg BID in China for the treatment of adult patients with moderately to severely active RA who have had an inadequate response or intolerance to MTX. Xeljanz may be used in combination with MTX or other non-biologic DMARDs.
In February 2017, Pfizer announced top-line results from ORAL Strategy, a Phase 3B/4 study of Xeljanz 5 mg BID in the treatment of moderate to severe RA. ORAL Strategy is the first trial to compare a JAK inhibitor as monotherapy or in combination with MTX versus adalimumab (Humira(7)) plus MTX in MTX inadequate responders using ACR50 at Month 6 as the primary endpoint. There were three comparisons, which found:
Xeljanz 5 mg plus MTX met its primary endpoint in demonstrating non-inferiority versus Humira(7) plus MTX; and
Xeljanz 5 mg monotherapy did not meet its primary endpoint of non-inferiority versus Humira(7) plus MTX or versus Xeljanz plus MTX.
The safety findings were consistent with the known adverse events and serious adverse events profile for Xeljanz.
In April 2017, Pfizer presented positive results of the REPROVE study (randomized, multi-center study of ceftazidime-avibactam versus meropenem in adults with nosocomial pneumonia including ventilator associated pneumonia) that showed that patients diagnosed with hospital-acquired pneumonia, treated with Zavicefta, a novel combination antibiotic for the treatment of certain known or suspected Gram-negative bacterial infections, or Meropenem (meropenem for injection), a broad spectrum carbapenem antibiotic currently considered the standard of care, experienced comparable rates of clinical cure at test-of-cure 21-25 days after randomization. Clinical cure was the primary endpoint of the study and defined as a complete resolution of all signs and symptoms of infection. In addition, patients treated with Zavicefta and Meropenem experienced comparable rates of tolerability consistent with the known profile of ceftazidime alone. In December 2016, Pfizer completed the acquisition of the development and commercialization rights to AstraZeneca’s small molecule anti-infective business, primarily outside the U.S., including the commercialization and development rights to Zavicefta outside North America.
In March 2017, Pfizer announced that Zavicefta is now available in the U.K. and Germany. Pfizer expects to launch Zavicefta in additional markets outside the U.S. throughout 2017 and 2018.
A comprehensive update of Pfizer’s development pipeline was published today and is now available at View Source 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.
Ertugliflozin (PF-04971729) — In March 2017, Merck, known as MSD outside the U.S. and Canada, and Pfizer, announced that the FDA has accepted for review three New Drug Applications (NDAs) for medicines containing ertugliflozin, an investigational SGLT2 inhibitor in development to help improve glycemic control in adults with type 2 diabetes: one for monotherapy, one for the fixed-dose combination of ertugliflozin and Januvia(8) (sitagliptin), and one for the fixed-dose combination of ertugliflozin and metformin. The PDUFA action date from the FDA is in December 2017 for the three NDAs. Additionally, in February 2017, the EMA validated for review three Marketing Authorization Applications for ertugliflozin monotherapy and the two fixed-dose combination products.
In April 2017, Pfizer announced that the CHMP of the EMA adopted a positive opinion recommending approval of Besponsa (inotuzumab ozogamicin) in the EU as monotherapy for the treatment of adults with relapsed or refractory CD22-positive B-cell precursor Philadelphia chromosome negative (Ph-) acute lymphoblastic leukemia (ALL) and Philadelphia chromosome positive (Ph+) ALL, who have previously failed treatment with at least one tyrosine kinase inhibitor. The CHMP’s opinion will now be reviewed by the EC. If approved, Besponsa will be the first antibody drug conjugate available for patients with this type of leukemia.
In February 2017, Pfizer announced that a BLA for inotuzumab ozogamicin was accepted for filing and granted Priority Review by the FDA. Inotuzumab ozogamicin is being evaluated for the treatment of adult patients with relapsed or refractory B-cell precursor ALL. The PDUFA goal date for a decision by the FDA is in August 2017.
Lorlatinib (PF-06463922) — Pfizer announced in April 2017 that its investigational next-generation anaplastic lymphoma kinase (ALK)/ROS1 tyrosine kinase inhibitor, lorlatinib, was granted Breakthrough Therapy designation from the FDA for the treatment of patients with ALK-positive metastatic non-small cell lung cancer (NSCLC), previously treated with one or more ALK inhibitors. The Breakthrough Therapy designation is supported by the efficacy and safety data of an ongoing Phase 1/2 clinical trial of lorlatinib, which includes patients with ALK-positive NSCLC who were previously treated with one or more ALK inhibitors.
PF-06425090 (Clostridium difficile (C. difficile) vaccine candidate) — In March 2017, Pfizer initiated a randomized, placebo-controlled, observer-blinded Phase 3 study to evaluate the efficacy, safety and tolerability of its investigational C. difficile vaccine in adults aged 50 and over, who are at risk of developing C. difficile infection (CDI). The CLOVER (Clostridium difficile Vaccine Efficacy Trial) study will assess whether PF-06425090 prevents CDI, and whether it is safe and well tolerated. Each patient will receive three doses of PF-06425090 or placebo and be followed for up to three years after vaccination. The trial is expected to enroll nearly 16,000 patients.
In February 2017, Pfizer announced that it entered into an accelerated share repurchase agreement with Citibank N.A. (Citibank) to repurchase $5 billion of Pfizer’s common stock. Pursuant to the terms of the agreement, on February 6, 2017, Pfizer paid $5 billion to Citibank and received an initial delivery of approximately 126 million shares of Pfizer common stock from Citibank. At settlement of the agreement, which is expected to occur during or prior to the third quarter of 2017, Citibank may be required to deliver additional shares of common stock to Pfizer, or, under certain circumstances, Pfizer may be required to deliver shares of its common stock or may elect to make a cash payment to Citibank, with the number of shares to be delivered or the amount of such payment based on the volume-weighted average price of Pfizer’s common stock during the term of the transaction.
In February 2017, Pfizer completed the sale of HIS to ICU Medical, Inc. (ICU Medical) for up to approximately $900 million, composed of cash and contingent cash consideration, ICU Medical common stock and seller financing.
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) is defined as reported diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.
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 or legal charges, 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 2016 Financial Report, which was filed as Exhibit 13 to Pfizer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, 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 (OTC) 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 2017 and 2016. 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 April 2, 2017 and April 3, 2016 while Pfizer’s first-quarter for subsidiaries operating outside the U.S. reflects the three months ending on February 26, 2017 and February 28, 2016.
(4) 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 to evaluate the results of its business.
The 2017 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 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 April 2, 2017, including any one-time upfront payments associated with such transactions.
Exchange rates assumed are a blend of the actual exchange rates in effect through first-quarter 2017 and mid-April 2017 exchange rates for the remainder of the year.
Reflects an anticipated negative revenue impact of $2.4 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.
Reflects the anticipated negative impact of $0.5 billion on revenues and $0.03 on Adjusted diluted EPS(2) as a result of unfavorable changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2016.
Guidance for Adjusted diluted EPS(2) assumes diluted weighted-average shares outstanding of between 6.0 to 6.1 billion shares, which reflects the impact of the $5 billion accelerated share repurchase agreement executed in February 2017.
(6) Remicade is a registered U.S. trademark of Janssen Biotech, Inc.
(7) Humira is a registered U.S. trademark of Abbvie Biotechnology Ltd.
(8) Januvia is a registered trademark of Merck Sharp & Dohme Corp., a subsidiary of Merck & Co., Inc.