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Pfizer Reports Third-Quarter 2011 Results

  • Third-Quarter 2011 Revenues of $17.2 Billion
  • Third-Quarter 2011 Adjusted Diluted EPS(1) of $0.62; Reported Diluted EPS(2) of $0.48, which Reflects a $1.3 Billion After-Tax Gain on Sale of Capsugel(3)
  • Increases 2011 Adjusted Diluted EPS(1) and Reported Diluted EPS(2) Guidance Ranges; Reaffirms 2012 Financial Targets
  • Repurchases $2.1 Billion and $6.5 Billion of Common Stock During Third-Quarter and Year-to-Date through October 31, 2011, Respectively; Increases 2011 Share Repurchase Target to between $7 Billion and $9 Billion

NEW YORK--()--Pfizer Inc. (NYSE: PFE):

   
($ in millions, except per share amounts)
  Third-Quarter(4)   Year-to-Date(4)
2011   2010   Change 2011   2010   Change
Reported Revenues $ 17,193 $ 15,995 7 % $ 50,679 $ 49,703 2 %
Adjusted Income(1) 4,820 4,352 11 % 14,354 14,141 2 %
Adjusted Diluted EPS(1) 0.62 0.54 15 % 1.81 1.75 3 %
Reported Net Income(2) 3,738 866 * 8,570 5,367 60 %
Reported Diluted EPS(2) 0.48 0.11 * 1.08 0.66 64 %
                                     
See end of text prior to tables for notes.
* Calculation not meaningful
 

Pfizer Inc. (NYSE: PFE) today reported financial results for third-quarter 2011. Third-quarter 2011 revenues were $17.2 billion, an increase of 7% compared with the year-ago quarter, which reflects operational growth of $247 million, or 1%, and the favorable impact of foreign exchange of $951 million, or 6%.

For third-quarter 2011, U.S. revenues were $6.9 billion, a decrease of 3% compared with the year-ago quarter. International revenues were $10.3 billion, an increase of 15% compared with the prior-year quarter, which reflected 4% operational growth and an 11% favorable impact of foreign exchange. U.S. revenues represented 40% of total revenues in third-quarter 2011 compared with 44% in the year-ago quarter, while international revenues represented 60% of total revenues in third-quarter 2011 compared with 56% in the year-ago quarter.

Financial Performance

    Third-Quarter Revenues
($ in millions)

Favorable/(Unfavorable)

2011   2010   Change     Foreign Exchange   Operational
 
Primary Care(5) $ 5,948 $ 5,653 5 % 5 % --
Specialty Care(6) 3,799 3,717 2 % 7 % (5 %)
Emerging Markets(7) 2,438 2,072 18 % 6 % 12 %
Established Products(8) 2,230 2,168 3 % 7 % (4 %)
Oncology(9)   332   335 (1 %) 8 % (9 %)
Biopharmaceutical 14,747 13,945 6 % 6 % --
 
Animal Health(10) 1,041 860 21 % 6 % 15 %
Consumer Healthcare(11) 774 673 15 % 4 % 11 %
Nutrition(12) 577 441 31 % 7 % 24 %
Other(13)   54   76 (29 %) 2 % (31 %)
 
Total $ 17,193 $ 15,995 7 % 6 % 1 %
                                 

See end of text prior to tables for notes.

Business Highlights

Primary Care(5) unit revenues in third-quarter 2011 were favorably impacted primarily by foreign exchange, growth from Lipitor in the U.S. and from Celebrex, Lyrica, Pristiq and Spiriva, among others, and the addition of $119 million, or 2%, from legacy King products, while negatively impacted by the loss of exclusivity of Aricept in the U.S. in November 2010 as well as the loss of exclusivity of Lipitor in Canada and Spain in May and July 2010, respectively. Taken together, these losses of exclusivity reduced Primary Care(5) unit revenues by $415 million, or 7%, in comparison with third-quarter 2010.

Specialty Care(6) unit revenues were positively impacted by foreign exchange and strong growth in the Prevenar franchise and Enbrel in most international markets. Prevnar 13 revenues in the U.S. were lower than in third-quarter 2010 as fewer patients received the Prevnar 13 catch-up dose as the timeframe for eligibility has nearly expired. Specialty Care(6) unit revenues were also negatively impacted by the loss of exclusivity of Vfend and Xalatan in the U.S. in February and March 2011, respectively. Collectively, these losses of exclusivity reduced Specialty Care(6) unit revenues by $214 million, or 6%, in comparison with third-quarter 2010.

Emerging Markets(7) unit revenues were positively impacted by foreign exchange and growth in certain key innovative brands, primarily the Prevenar franchise, Celebrex, Enbrel, Lyrica, Vfend and Zyvox, notably with double-digit operational growth in China, Russia, Turkey and India. Revenues were negatively impacted by the loss of exclusivity of Lipitor in Brazil and Mexico in August and December 2010, respectively. These losses of exclusivity reduced Emerging Markets(7) unit revenues by $30 million, or 1%, in comparison with third-quarter 2010.

Established Products(8) unit revenues were mainly impacted by the loss of exclusivity of Protonix and Zosyn in the U.S., which taken together reduced Established Products(8) unit revenues by $242 million, or 11%, in comparison with third-quarter 2010. This decline was more than offset by $144 million, or 7%, from the addition of legacy King products, as well as foreign exchange. Total revenues from established products in both the Established Products(8) and Emerging Markets(7) units were $3.2 billion, with $996 million generated in emerging markets.

Animal Health(10) unit revenues increased by 21%, in comparison with the same quarter last year, reflecting the positive operational impact of $90 million, or 10%, due to the addition of legacy King products, as well as the favorable conditions in global livestock markets and foreign exchange. The Consumer Healthcare(11) unit generated revenue growth of 15% in comparison with third-quarter 2010, primarily driven by the non-recurrence of the voluntary withdrawal of Centrum temporarily in Europe in third-quarter 2010, the U.S. launch of new dietary supplements in third-quarter 2011, as well as foreign exchange. Nutrition(12) unit revenues increased 31% in comparison with the same quarter last year, primarily in China and the Middle East, from increased demand for premium products and from new product launches, in addition to foreign exchange.

Adjusted Expenses(1), Adjusted Income(1) and Adjusted Diluted EPS(1) Highlights

    Third-Quarter Costs and Expenses
($ in millions)

(Favorable)/Unfavorable

2011   2010   Change     Foreign Exchange   Operational
 
Adjusted Cost of Sales (1) $ 3,325 $ 2,852 17 % 10 % 7 %
As a Percent of Revenues 19.3 % 17.8 % N/A N/A N/A
Adjusted SI&A Expenses(1) 4,560 4,581 -- 5 % (5 %)
Adjusted R&D Expenses(1)   2,034     2,155   (6 %) 2 % (8 %)
 
Adjusted Total Costs(14) $ 9,919   $ 9,588   3 % 6 % (3 %)
                       

See end of text prior to tables for notes.

Adjusted total costs(14) were $9.9 billion in third-quarter 2011, an increase of 3% compared with $9.6 billion in third-quarter 2010. Excluding the unfavorable impact of foreign exchange of $541 million, or 6%, adjusted total costs(14) decreased 3%, primarily reflecting the benefit of cost-reduction and productivity initiatives, particularly in the research and development function. Savings were also generated in third-quarter 2011 by reductions in the U.S. field force and declines in promotional spending in response to product losses of exclusivity. These savings were partially offset by the addition of costs from legacy King operations and the inclusion of the annual U.S. healthcare reform fee.

The effective tax rate on adjusted income(1) was approximately 31% in third-quarter 2011 compared with approximately 30% in third-quarter 2010. The increase was primarily due to the change in the jurisdictional mix of earnings, partially offset by the extension of the U.S. research and development credit that was signed into law in December 2010.

The diluted weighted-average shares outstanding for third-quarter 2011 was 7.8 billion shares, a reduction of approximately 247 million shares compared with third-quarter 2010, primarily due to the Company’s ongoing share repurchase program.

As a result of the aforementioned factors, third-quarter 2011 adjusted income(1) was $4.8 billion, an increase of 11% compared with $4.4 billion in the year-ago quarter, and adjusted diluted EPS(1) was $0.62, an increase of 15% compared with $0.54 in the year-ago quarter.

Reported Net Income(2) and Reported Diluted EPS(2) Highlights

In addition to the aforementioned factors, third-quarter 2011 reported earnings in comparison with third-quarter 2010 reported earnings were favorably impacted by a $1.3 billion (after-tax) gain on the sale of Capsugel(3) in third-quarter 2011, as well as the non-recurrence of impairment charges of $1.5 billion (pre-tax) related to certain intangible assets acquired in connection with the Wyeth acquisition and a $701 million (pre-tax) charge for asbestos litigation related to our wholly owned subsidiary, Quigley Company, Inc., both in third-quarter 2010. Third-quarter 2011 reported earnings were negatively impacted compared with the same period last year by higher charges associated with cost-reduction and productivity initiatives.

The effective tax rate on reported results was approximately 34% in third-quarter 2011 compared with approximately 39% in third-quarter 2010. The decrease in the effective tax rate was primarily due to the previously mentioned extension of the U.S. research and development credit and the change in the jurisdictional mix of earnings, as well as the decrease and jurisdictional mix of the aforementioned impairment charges.

As a result of all these factors, third-quarter 2011 reported net income(2) was $3.7 billion, compared with $866 million in the prior-year quarter, and reported diluted EPS(2) was $0.48, compared with $0.11 in the prior-year quarter.

Executive Commentary

Ian Read, President and Chief Executive Officer, stated, “Overall, I am very pleased with our financial performance despite the impact of product losses of exclusivity totaling approximately $950 million this quarter and the challenges posed by current global market and economic conditions. Excluding the impact of product losses of exclusivity, all of our businesses generated revenue growth while effectively managing their cost structures. Notably, in our Emerging Markets business, I am pleased that both our innovative and established product portfolios continued to perform well, largely as a result of our targeted investments despite a volatile environment. Further, in Japan, our second largest market, we generated 19% operational growth enterprise-wide. I am also happy with the strong performance of the Lipitor franchise and our ability to continue to maximize the value of this brand prior to its loss of exclusivity in the U.S. We remain well prepared for the Lipitor U.S. loss of exclusivity later this month and in various other countries shortly thereafter.”

“I am excited by the potential opportunity for Xalkori, recently launched in U.S. specialty pharmacies for the treatment of ALK-positive advanced non-small cell lung cancer, and Prevnar 13/Prevenar 13, recently approved in the European Union for the prevention of invasive pneumococcal disease in adults aged 50 years and older. Additionally, we have several compounds in our late-stage pipeline, notably Eliquis for stroke prevention in patients with atrial fibrillation, tofacitinib in rheumatoid arthritis and axitinib in advanced renal cell carcinoma, among others. Each of these opportunities represents a potential valuable, new treatment option for patients in need,” Mr. Read continued.

Frank D’Amelio, Chief Financial Officer, stated, “Given our solid performance so far this year, our continued confidence in the business within the current environment and our financial flexibility, we are narrowing the range of many of our 2011 financial guidance components and reaffirming our 2012 financial targets. Notably, we are increasing our 2011 adjusted diluted EPS(1) guidance range, resulting in an updated range of $2.24 to $2.29. Additionally, we returned approximately $3.6 billion to our shareholders during the quarter through $1.5 billion in dividends and $2.1 billion from the repurchase of 112.9 million shares. So far in 2011, we have repurchased $6.5 billion, or 331.6 million of our shares, and we now anticipate repurchasing between $7 billion and $9 billion of our common stock this year. In total, we have returned approximately $11.2 billion to our shareholders this year through dividends and share repurchases.”

2011 Financial Guidance(15)

For full-year 2011, Pfizer’s financial guidance, at current exchange rates(16), is summarized below.

     
Reported Revenues   $66.2 to $67.2 billion

(previously $65.2 to $67.2 billion)

Adjusted Cost of Sales(1) as a Percentage of Revenues   19.8% to 20.3%

(previously 19.5% to 20.5%)

Adjusted SI&A Expenses(1)   $19.4 to $19.9 billion

(previously $19.2 to $20.2 billion)

Adjusted R&D Expenses(1)

  $8.1 to $8.4 billion

(previously $8.0 to $8.5 billion)

Adjusted Other (Income)/Deductions(1)   Approximately $800 million

(previously approximately $1.0 billion)

Effective Tax Rate on Adjusted Income(1)   Approximately 29%
Reported Diluted EPS(2)   $1.20 to $1.30

(previously $1.09 to $1.24)

Adjusted Diluted EPS(1)   $2.24 to $2.29

(previously $2.16 to $2.26)

2012 Financial Targets(15)

For full-year 2012, Pfizer’s financial targets, at current exchange rates(16), are summarized below.

     
Reported Revenues   $62.2 to $64.7 billion
Adjusted SI&A Expenses(1)   $17.5 to $18.5 billion
Adjusted R&D Expenses(1)   $6.5 to $7.0 billion
Adjusted Other (Income)/Deductions(1)   Approximately $1.0 billion
Adjusted Operating Margin(1)   High 30%s to low 40%s
Effective Tax Rate on Adjusted Income(1)   Approximately 29%
Reported Diluted EPS(2)   $1.58 to $1.73
Adjusted Diluted EPS(1)   $2.25 to $2.35
Operating Cash Flow   At least $19.0 billion

For additional details, please see the attached financial schedules, product revenue tables, supplemental information and disclosure notice.

(1) "Adjusted Income" and its components and "Adjusted Diluted Earnings Per Share (EPS)" are defined as reported net income(2) and its components and reported diluted EPS(2) excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items. 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, and, therefore, components of the overall adjusted income measure. As described under Adjusted Income in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of Pfizer's Form 10-Q for the fiscal quarter ended July 3, 2011, management uses adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. We believe that investors' understanding of our performance is enhanced by disclosing this measure. Reconciliations of third-quarter 2011 and 2010 and the first nine months of 2011 and 2010 adjusted income and its components and adjusted diluted EPS to reported net income(2) and its components and reported diluted EPS(2), as well as reconciliations of full-year 2011 guidance and 2012 targets for adjusted income and adjusted diluted EPS to full-year 2011 guidance and 2012 targets for reported net income(2) and reported diluted EPS(2), are provided in the materials accompanying this report. The adjusted income and its components and adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. generally accepted accounting principles (GAAP) net income and its components and diluted EPS.

(2) “Reported Net Income” is defined as net income attributable to Pfizer Inc. in accordance with U.S. GAAP. “Reported Diluted EPS” is defined as reported diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.

(3) Capsugel provided capsule products and related services to the pharmaceutical and associated healthcare industries. On August 1, 2011, Pfizer completed the sale of Capsugel to an affiliate of Kohlberg Kravis Roberts & Co. L.P.

(4) In all periods presented, the results from the Capsugel(3) business are reflected in a single line, Discontinued operations - net of tax until the completion of the sale on August 1, 2011. Additionally, due to the acquisition of King Pharmaceuticals, Inc. (King), legacy King operations are reflected in the 2011 results beginning January 31, 2011. Therefore, in accordance with Pfizer’s domestic and international reporting periods, the results for the first nine months of 2011 reflect approximately eight months of King’s U.S. operations and approximately seven months of King’s international operations. Legacy King operations are not reflected in the results for the first nine months of 2010.

(5) The Primary Care unit includes revenues from human pharmaceutical products primarily prescribed by primary-care physicians, and may include, but are not limited to, products in the following therapeutic and disease areas: Alzheimer’s disease, cardiovascular (excluding pulmonary arterial hypertension), diabetes, erectile dysfunction, genitourinary, major depressive disorder, pain, respiratory and smoking cessation. Examples of products in this unit include, but are not limited to, Celebrex, Chantix, Lipitor, Lyrica, Premarin, Pristiq and Viagra. All revenues for such products are allocated to the Primary Care unit, except those generated in emerging markets(7) and those that are managed by the Established Products(8) unit.

(6) The Specialty Care unit includes revenues from human pharmaceutical products primarily prescribed by physicians who are specialists, and may include, but are not limited to, products in the following therapeutic and disease areas: anti-infectives, endocrine disorders, hemophilia, inflammation, multiple sclerosis, ophthalmology, pulmonary arterial hypertension, specialty neuroscience and vaccines. Examples of products in this unit include, but are not limited to, BeneFIX, Enbrel, Genotropin, Geodon, the Prevnar/Prevenar franchise, Rebif, ReFacto, Revatio, Xalatan, Xyntha and Zyvox. All revenues for such products are allocated to the Specialty Care unit, except those generated in emerging markets(7) and those that are managed by the Established Products(8) unit.

(7) The Emerging Markets unit includes revenues from all human prescription pharmaceutical products sold in emerging markets, including, but not limited to, Asia (excluding Japan and South Korea), Latin America, Middle East, Africa, Central and Eastern Europe and Turkey.

(8) The Established Products unit generally includes revenues from human prescription pharmaceutical products that have lost patent protection or marketing exclusivity in certain countries and/or regions. Typically, products are transferred to this unit in the beginning of the fiscal year following losing patent protection or marketing exclusivity. In certain situations, products may be transferred to this unit at a different point than the beginning of the fiscal year following losing patent protection or marketing exclusivity in order to maximize their value. This unit also excludes revenues generated in emerging markets(7). Examples of products in this unit include, but are not limited to, Arthrotec, Effexor, Medrol, Norvasc, Protonix, Relpax and Zosyn/Tazocin.

(9) The Oncology unit includes revenues from human oncology and oncology-related products. Examples of products in this unit include, but are not limited to, Aromasin, Sutent, Torisel and Xalkori. All revenues for such products are allocated to the Oncology unit, except those generated in emerging markets(7) and those that are managed by the Established Products(8) unit.

(10) Animal Health includes worldwide revenues from products to prevent and treat disease in livestock and companion animals, including, but not limited to, vaccines, parasiticides and anti-infectives. On July 7, 2011, the Company announced that it is exploring strategic alternatives for Animal Health, which may include, among others, a full or partial separation from Pfizer through a spin-off, sale or other transaction.

(11) Consumer Healthcare generally includes worldwide revenues from non-prescription medicines and vitamins and may include, but are not limited to, products in the following therapeutic categories: GI-topicals, nutritionals, pain management and respiratory. Examples of products in Consumer Healthcare include, but are not limited to, Advil, Caltrate, Centrum, ChapStick and Robitussin.

(12) Nutrition generally includes revenues from a full line of infant and toddler nutritional products sold outside the U.S. and Canada. Examples of products in Nutrition include, but are not limited to, the S-26 and SMA product lines as well as formula for infants with special nutritional needs. On July 7, 2011, the Company announced that it is exploring strategic alternatives for Nutrition, which may include, among others, a full or partial separation from Pfizer through a spin-off, sale or other transaction.

(13) Includes revenues generated primarily from Pfizer Centersource.

(14) Represents the total of Adjusted Cost of Sales(1), Adjusted SI&A expenses(1) and Adjusted R&D expenses(1).

(15) Does not assume the completion of any business-development transactions not completed as of October 2, 2011, including any one-time upfront payments associated with such transactions. Also excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of October 2, 2011. The 2011 financial guidance includes revenues and expenses related to the Capsugel(3) business as a discontinued operation through July 31, 2011. The gain on the sale of Capsugel(3) is reflected in 2011 Reported Diluted EPS(2) guidance, but is not reflected in 2011 Adjusted Diluted EPS(1) guidance.

(16) The current exchange rates assumed in connection with the 2011 financial guidance are a blend of the actual exchange rates in effect during the first nine months of 2011 and the mid-October 2011 exchange rates for the remainder of the year. The current exchange rates assumed in connection with the 2012 financial targets are the mid-October 2011 exchange rates.

 
PFIZER INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(millions, except per common share data)
             
Third Quarter % Incr. / Nine Months % Incr. /
2011   2010 (Decr.) 2011 2010 (Decr.)
Revenues $ 17,193 $ 15,995 7 $ 50,679 $ 49,703 2
Costs and expenses:
Cost of sales (a) 3,679 3,790 (3 ) 11,177 11,676 (4 )

Selling, informational and administrative expenses (a)

4,621 4,599 - 14,097 13,776 2
Research and development expenses (a) 2,188 2,188 - 6,516 6,590 (1 )
Amortization of intangible assets 1,397 1,156 21 4,168 3,972 5
Acquisition-related in-process research and development charges - - - - 74 (100 )
Restructuring charges and certain acquisition-related costs 1,101 499 121 2,474 2,090 18
Other deductions--net   538     2,349   (77 )   1,778   3,036   (41 )
Income from continuing operations before provision
for taxes on income 3,669 1,414 159 10,469 8,489 23
Provision for taxes on income   1,235     558   121   3,223   3,165   2
Income from continuing operations   2,434     856   184   7,246   5,324   36
Discontinued operations:
(Loss)/income from discontinued operations--net of tax (13 ) 26 * 39 76 (49 )
Gain/(loss) on sale of discontinued operations--net of tax 1,328     (11 ) *   1,316   (9 ) *
Discontinued operations--net of tax   1,315     15   *   1,355   67   *
Net income before allocation to noncontrolling interests 3,749 871 * 8,601 5,391 60
Less: net income attributable to noncontrolling interests 11     5   120   31   24   29
Net income attributable to Pfizer Inc. $ 3,738   $ 866   * $ 8,570 $ 5,367   60
Earnings per share - basic: (b)
Income from continuing operations attributable to
Pfizer Inc. common shareholders $ 0.31 $ 0.11 182 $ 0.92 $ 0.66 39
Discontinued operations--net of tax   0.17     -   *   0.17   0.01   *
Net income attributable to Pfizer Inc. common shareholders $ 0.48   $ 0.11   * $ 1.09 $ 0.67   63
Earnings per share - diluted: (b)
Income from continuing operations attributable to
Pfizer Inc. common shareholders $ 0.31 $ 0.11 182 $ 0.91 $ 0.66 38
Discontinued operations--net of tax   0.17     -   *   0.17   0.01   *
Net income attributable to Pfizer Inc. common shareholders $ 0.48   $ 0.11   * $ 1.08 $ 0.66   64
Weighted-average shares used to calculate earnings per common share:
Basic   7,770     8,027     7,877   8,045  
Diluted   7,810     8,057     7,925   8,079  
 
 
(a) Exclusive of amortization of intangible assets, except as discussed in footnote 3 below.
(b) EPS amounts may not add due to rounding.
*

Calculation not meaningful.

Certain amounts and percentages may reflect rounding adjustments.
 
1.

The above financial statements present the three-month and nine-month periods ended October 2, 2011 and October 3, 2010. Subsidiaries operating outside the United States are included for the three-month and nine-month periods ended August 28, 2011 and August 29, 2010.

 

The sale of the Capsugel business closed on August 1, 2011, and we have recognized a gain related to the sale of Capsugel in Discontinued operations: Gain/(loss) on sale of discontinued operations--net of tax for the three-month and nine-month periods ended October 2, 2011. Capsugel is presented as a discontinued operation and we have made certain reclassification adjustments to conform the 2010 amounts to the current-period presentation.

 

On January 31, 2011, we completed our tender offer for the outstanding shares of common stock of King Pharmaceuticals, Inc. (King) and, commencing from that date, our financial statements include the assets, liabilities, operating results and cash flows of King. Therefore, in accordance with Pfizer's domestic and international reporting periods, the first nine months of 2011 results reflect approximately eight months of King's U.S. operations and approximately seven months of King's international operations. Our consolidated statements of income for the three-month and nine-month periods ended October 3, 2010 do not include King's results of operations.

 
2.

The financial results for the three-month and nine-month periods ended October 2, 2011 are not necessarily indicative of the results which could ultimately be achieved for the full year.

 
3.

Amortization expense related to acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute our products is included in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense related to acquired intangible assets that are associated with a single function is included in Cost of sales, Selling, informational and administrative expenses or Research and development expenses, as appropriate.

 
See Supplemental Information that accompanies these materials for additional details.
 

 
PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF REPORTED NET INCOME ATTRIBUTABLE TO PFIZER INC. AND ITS COMPONENTS
AND REPORTED DILUTED EPS ATTRIBUTABLE TO PFIZER INC. COMMON SHAREHOLDERS
TO ADJUSTED INCOME AND ITS COMPONENTS AND ADJUSTED DILUTED EPS (a)
(UNAUDITED)
(millions of dollars, except per common share data)
             
Quarter Ended October 2, 2011
Purchase Acquisition- Certain
Accounting Related Discontinued Significant
Reported Adjustments Costs(2) Operations Items(3) Adjusted
Revenues $ 17,193 $ - $ - $ - $ - $ 17,193
Costs and expenses:
Cost of sales (b) 3,679 (289 ) (68 ) - 3 3,325
Selling, informational and administrative expenses (b) 4,621 (11 ) (17 ) - (33 ) 4,560
Research and development expenses (b) 2,188 - (5 ) - (149 ) 2,034
Amortization of intangible assets 1,397 (1,360 ) - - - 37
Acquisition-related in-process research and development charges - - - - - -
Restructuring charges and certain acquisition-related costs 1,101 - (211 ) - (890 ) -
Other (income)/deductions--net 538   (51 ) -   -   (241 ) 246
Income from continuing operations before provision
for taxes on income 3,669 1,711 301 - 1,310 6,991
Provision for taxes on income 1,235   447   59   -   419   2,160
Income from continuing operations 2,434   1,264   242   -   891   4,831
Discontinued operations:
(Loss)/income from discontinued operations--net of tax (13 ) - - 13 - -
Gain/(loss) on sale of discontinued operations--net of tax 1,328   -   -   (1,328 ) -   -
Discontinued operations--net of tax 1,315   -   -   (1,315 ) -   -
 
Net income before allocation to noncontrolling interests 3,749 1,264 242 (1,315 ) 891 4,831
Less: net income attributable to noncontrolling interests 11   -   -   -   -   11
Net income attributable to Pfizer Inc. $ 3,738   $ 1,264   $ 242   $ (1,315 ) $ 891   $ 4,820
Earnings per common share - diluted: (c)
Income from continuing operations attributable to Pfizer Inc.
common shareholders $ 0.31 $ 0.16 $ 0.03 $ - $ 0.11 $ 0.62
Discontinued operations--net of tax 0.17   -   -   (0.17 ) -   -
Net income attributable to Pfizer Inc. common shareholders $ 0.48   $ 0.16   $ 0.03   $ (0.17 ) $ 0.11   $ 0.62
 
 
 
 
Nine Months Ended October 2, 2011
Purchase Acquisition- Certain
Accounting Related Discontinued Significant
Reported Adjustments Costs(2) Operations Items(3) Adjusted
Revenues $ 50,679 $ - $ - $ - $ - $ 50,679
Costs and expenses:
Cost of sales (b) 11,177 (1,086 ) (411 ) - (6 ) 9,674
Selling, informational and administrative expenses (b) 14,097 (6 ) (41 ) - (39 ) 14,011
Research and development expenses (b) 6,516 - (9 ) - (397 ) 6,110
Amortization of intangible assets 4,168 (4,069 ) - - - 99
Acquisition-related in-process research and development charges - - - - - -
Restructuring charges and certain acquisition-related costs 2,474 - (1,010 ) - (1,464 ) -
Other (income)/deductions--net 1,778   (71 ) -   -   (1,270 ) 437
Income from continuing operations before provision
for taxes on income 10,469 5,232 1,471 - 3,176 20,348
Provision for taxes on income 3,223   1,354   327   -   1,059   5,963
Income from continuing operations 7,246   3,878   1,144   -   2,117   14,385
Discontinued operations:
(Loss)/income from discontinued operations--net of tax 39 - - (39 ) - -
Gain/(loss) on sale of discontinued operations--net of tax 1,316   -   -   (1,316 ) -   -
Discontinued operations--net of tax 1,355   -   -   (1,355 ) -   -
 
Net income before allocation to noncontrolling interests 8,601 3,878 1,144 (1,355 ) 2,117 14,385
Less: net income attributable to noncontrolling interests 31   -   -   -   -   31
Net income attributable to Pfizer Inc. $ 8,570   $ 3,878   $ 1,144   $ (1,355 ) $ 2,117   $ 14,354
Earnings per common share - diluted: (c)
Income from continuing operations attributable to Pfizer Inc.
common shareholders $ 0.91 $ 0.49 $ 0.14 $ - $ 0.27 $ 1.81
Discontinued operations--net of tax 0.17   -   -   (0.17 ) -   -
Net income attributable to Pfizer Inc. common shareholders $ 1.08   $ 0.49   $ 0.14   $ (0.17 ) $ 0.27   $ 1.81
 
 
(a) Adjusted income and its components and adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS.
 
(b) Exclusive of amortization of intangible assets, except as discussed in note 1.
 
(c) EPS amounts may not add due to rounding.
 
See end of tables for notes.
Certain amounts may reflect rounding adjustments.
 

 
PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF REPORTED NET INCOME ATTRIBUTABLE TO PFIZER INC. AND ITS COMPONENTS
AND REPORTED DILUTED EPS ATTRIBUTABLE TO PFIZER INC. COMMON SHAREHOLDERS
TO ADJUSTED INCOME AND ITS COMPONENTS AND ADJUSTED DILUTED EPS (a)
(UNAUDITED)
(millions of dollars, except per common share data)
             
Quarter Ended October 3, 2010
Purchase Acquisition- Certain
Accounting Related Discontinued Significant
Reported Adjustments Costs(2) Operations Items(3) Adjusted
Revenues $ 15,995 $ - $ - $ - $ (4 ) $ 15,991
Costs and expenses:
Cost of sales (b) 3,790 (487 ) (241 ) - (210 ) 2,852
Selling, informational and administrative expenses (b) 4,599 9 (27 ) - - 4,581
Research and development expenses (b) 2,188 (8 ) (25 ) - - 2,155
Amortization of intangible assets 1,156 (1,124 ) - - - 32
Acquisition-related in-process research and development charges - - - - - -
Restructuring charges and certain acquisition-related costs 499 - (499 ) - - -
Other (income)/deductions--net 2,349   (15 ) -   -   (2,207 ) 127
Income from continuing operations before provision
for taxes on income 1,414 1,625 792 - 2,413 6,244
Provision for taxes on income 558   378   233   -   718   1,887
Income from continuing operations 856   1,247   559   -   1,695   4,357
Discontinued operations:
(Loss)/income from discontinued operations--net of tax 26 - - (26 ) - -
Gain/(loss) on sale of discontinued operations--net of tax (11 ) -   -   11   -   -
Discontinued operations--net of tax 15   -   -   (15 ) -   -
Net income before allocation to noncontrolling interests 871 1,247 559 (15 ) 1,695 4,357
Less: net income attributable to noncontrolling interests 5   -   -   -   -   5
Net income attributable to Pfizer Inc. $ 866   $ 1,247   $ 559   $ (15 ) $ 1,695   $ 4,352
Earnings per common share - diluted: (c)
Income from continuing operations attributable to Pfizer Inc.
common shareholders $ 0.11 $ 0.15 $ 0.07 $ - $ 0.21 $ 0.54
Discontinued operations--net of tax -   -   -   -   -   -
Net income attributable to Pfizer Inc. common shareholders $ 0.11   $ 0.15   $ 0.07   $ -   $ 0.21   $ 0.54
 
 
 
 
Nine Months Ended October 3, 2010
Purchase Acquisition- Certain
Accounting Related Discontinued Significant
Reported Adjustments Costs(2) Operations Items(3) Adjusted
Revenues $ 49,703 $ - $ - $ - $ (17 ) $ 49,686
Costs and expenses:
Cost of sales (b) 11,676 (2,564 ) (367 ) - (221 ) 8,524
Selling, informational and administrative expenses (b) 13,776 17 (190 ) - 14 13,617
Research and development expenses (b) 6,590 (23 ) (45 ) - - 6,522
Amortization of intangible assets 3,972 (3,880 ) - - - 92
Acquisition-related in-process research and development charges 74 (74 ) - - - -
Restructuring charges and certain acquisition-related costs 2,090 - (2,090 ) - - -
Other (income)/deductions--net 3,036   (40 ) -   -   (2,501 ) 495
Income from continuing operations before provision
for taxes on income 8,489 6,564 2,692 - 2,691 20,436
Provision for taxes on income 3,165   1,631   696   -   779   6,271
Income from continuing operations 5,324   4,933   1,996   -   1,912   14,165
Discontinued operations:
(Loss)/income from discontinued operations--net of tax 76 - - (76 ) - -
Gain/(loss) on sale of discontinued operations--net of tax (9 ) -   -   9   -   -
Discontinued operations--net of tax 67   -   -   (67 ) -   -
Net income before allocation to noncontrolling interests 5,391 4,933 1,996 (67 ) 1,912 14,165
Less: net income attributable to noncontrolling interests 24   -   -   -   -   24
Net income attributable to Pfizer Inc. $ 5,367   $ 4,933   $ 1,996   $ (67 ) $ 1,912   $ 14,141
Earnings per common share - diluted: (c)
Income from continuing operations attributable to Pfizer Inc.
common shareholders $ 0.66 $ 0.61 $ 0.25 $ - $ 0.24 $ 1.75
Discontinued operations--net of tax 0.01   -   -   (0.01 ) -   -
Net income attributable to Pfizer Inc. common shareholders $ 0.66   $ 0.61   $ 0.25   $ (0.01 ) $ 0.24   $ 1.75
 
 
(a) Adjusted income and its components and adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS.
 
(b) Exclusive of amortization of intangible assets, except as discussed in note 1.
 
(c) EPS amounts may not add due to rounding.
 
See end of tables for notes.
Certain amounts may reflect rounding adjustments.
 

 
PFIZER INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF REPORTED NET INCOME ATTRIBUTABLE TO PFIZER INC. AND ITS COMPONENTS
AND REPORTED DILUTED EPS ATTRIBUTABLE TO PFIZER INC. COMMON SHAREHOLDERS
TO ADJUSTED INCOME AND ITS COMPONENTS AND ADJUSTED DILUTED EPS*
(UNAUDITED)
             
1)

 Amortization expense related to acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute our products is included in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense related to acquired intangible assets that are associated with a single function is included in Cost of sales, Selling, informational and administrative expenses or Research and development expenses, as appropriate.

 

2)

 Acquisition-related costs includes the following:

 
Third Quarter Nine Months
(millions of dollars)         2011 2010 2011 2010
 
Transaction costs(a) $ 5 $ - $ 28 $ 13
Integration costs(a) 187 231 567 650
Restructuring charges(a) 19 268 415 1,427
Additional depreciation - asset restructuring(b)   90     293     461     602  
Total acquisition-related costs -- pre-tax 301 792 1,471 2,692
Income taxes(c)   (59 )   (233 )   (327 )   (696 )
Total acquisition-related costs -- net of tax $ 242   $ 559   $ 1,144   $ 1,996  
 
(a)

Transaction costs include costs, such as banking, legal, accounting and other similar costs, associated with business combinations. Integration costs primarily represent external, incremental costs directly related to integrating acquired businesses and primarily include expenditures for consulting and systems integration. Restructuring charges include employee termination costs, asset impairments and other exit costs associated with business combinations.

 
(b)

Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions related to acquisitions. Included in Cost of sales ($68 million), Selling, informational and administrative expenses ($17 million) and Research and development expenses ($5 million) for the three months ended October 2, 2011. Included in Cost of sales ($411 million), Selling, informational and administrative expenses ($41 million) and Research and development expenses ($9 million) for the nine months ended October 2, 2011. Included in Cost of sales ($241 million), Selling, informational and administrative expenses ($27 million), and Research and development expenses ($25 million) for the three months ended October 3, 2010. Included in Cost of sales($367 million), Selling, informational and administrative expenses ($190 million) and Research and development expenses ($45 million) for the nine months ended October 3, 2010.

 
(c) Included in Provision for taxes on income.
 
3)

 Certain significant items includes the following:

Third Quarter Nine Months
(millions of dollars)   2011 2010 2011 2010
 
Restructuring charges(a) $ 890 $ - $ 1,464 $ -
Implementation costs and additional depreciation - asset restructuring(b) 182 - 436 -
Certain legal matters(c) 132 701 657 843
Certain asset impairment charges(d) 105 1,468 582 1,668
Inventory write-off(e) (1 ) 212 11 212
Other(f)   2     32     26     (32 )
Total certain significant items -- pre-tax 1,310 2,413 3,176 2,691
Income taxes(g)   (419 )   (718 )   (1,059 )   (779 )
Total certain significant items -- net of tax $ 891   $ 1,695   $ 2,117   $ 1,912  
 
(a)

Included in Restructuring charges and certain acquisition-related costs, primarily related to our cost-reduction and productivity initiatives.

 
(b)

Primarily related to our cost-reduction and productivity initiatives. Included in Selling, informational and administrative expenses ($33 million) and Research and development expenses ($149 million) for the three months ended October 2, 2011. Included in Selling, informational and administrative expenses ($39 million) and Research and development expenses ($397 million) for the nine months ended October 2, 2011.

 
(c)

Included in Other deductions - net. In the first nine months of 2011, primarily relates to charges for hormone-replacement therapy litigation. In both periods of 2010, primarily includes a charge for asbestos litigation related to our wholly owned subsidiary, Quigley Company, Inc.

 

(d)

Primarily included in Other deductions - net. In 2011 and 2010, primarily relates to certain Wyeth assets, including in-process research and development (IPR&D) intangible assets.

 
(e)

Included in Cost of sales. In 2010, primarily relates to unfinished inventory acquired as part of the Wyeth acquisition that became unusable after the acquisition date.

 
(f)

Primarily included in Other deductions - net. In 2010, primarily represents gains on the divestiture of certain Pfizer Animal Health products and related assets.

 
(g) Included in Provision for taxes on income.
 
*

Adjusted income and its components and adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS.

 

         
PFIZER INC.
BUSINESS REVENUES(1)
FIRST NINE MONTHS OF 2011 and 2010
(UNAUDITED)
(millions of dollars)
 
Foreign
2011   2010   Change   Exchange   Operational
Primary Care $ 17,259 $ 17,442 (1 %) 3 % (4 %)
Specialty Care 11,425 11,009 4 % 4 % -
Emerging Markets 7,031 6,294 12 % 4 % 8 %
Established Products 6,914 7,682 (10 %) 4 % (14 %)
Oncology   982     1,045   (6 %)   4 %   (10 %)
Biopharmaceutical 43,611 43,472 - 3 % (3 %)
 
Animal Health 3,078 2,599 18 % 4 % 14 %
Consumer Healthcare 2,240 2,014 11 % 3 % 8 %
Nutrition 1,540 1,375 12 % 5 % 7 %
Other   210     243   (14 %)   -     (14 %)
 
TOTAL $ 50,679   $ 49,703   2 %   4 %   (2 %)
 
 

(1) See notes 5-13 in the accompanying earnings release for a description of each business unit and of "Other".

 

                         

PFIZER INC.
REVENUES
THIRD QUARTER 2011 and 2010
(UNAUDITED)
(millions of dollars)

 
    WORLDWIDE     UNITED STATES     TOTAL INTERNATIONAL(1)
2011 2010 % Change 2011 2010 % Change 2011 2010 % Change
       

 

  Total   Oper.        

 

  Total        

 

  Total   Oper.
TOTAL REVENUES   $ 17,193   $ 15,995   7 %   1 %     $ 6,879   $ 7,063   (3 %)     $ 10,314   $ 8,932   15 %   4 %
REVENUES FROM BIOPHARMACEUTICAL PRODUCTS:   $ 14,747   $ 13,945   6 %   -       $ 6,019   $ 6,298   (4 %)     $ 8,728   $ 7,647   14 %   3 %
Lipitor 2,602 2,534 3 % (2 %) 1,470 1,298 13 % 1,132 1,236 (8 %) (18 %)
Prevnar / Prevenar 13 1,006 735 37 % 35 % 454 540 (16 %) 552 195 183 % 176 %
Enbrel (Outside the U.S. and Canada) 957 799 20 % 7 % - - - 957 799 20 % 7 %
Lyrica 961 757 27 % 19 % 379 356 6 % 582 401 45 % 31 %
Celebrex 643 578 11 % 8 % 405 390 4 % 238 188 27 % 16 %
Viagra 493 459 7 % 2 % 244 242 1 % 249 217 15 % 4 %
Norvasc 350 330 6 % (2 %) 5 - 100 % 345 330 5 % (5 %)
Zyvox 321 285 13 % 7 % 154 148 4 % 167 137 22 % 11 %
Xalatan / Xalacom 277 416 (33 %) (40 %) 9 157 (94 %) 268 259 3 % (8 %)
Sutent 298 257 16 % 7 % 78 67 16 % 220 190 16 % 4 %
Premarin Family 267 263 2 % 1 % 241 241 - 26 22 18 % 13 %
Geodon / Zeldox 263 262 - (2 %) 217 224 (3 %) 46 38 21 % 8 %
Detrol / Detrol LA 213 237 (10 %) (13 %) 136 163 (17 %) 77 74 4 % (6 %)
Genotropin 215 211 2 % (7 %) 46 51 (10 %) 169 160 6 % (5 %)
Vfend 171 200 (15 %) (22 %) - 64 (100 %) 171 136 26 % 17 %
Chantix / Champix 156 163 (4 %) (10 %) 68 74 (8 %) 88 89 (1 %) (12 %)
Effexor XR 165 175 (6 %) (13 %) 52 58 (10 %) 113 117 (3 %) (15 %)
BeneFIX 178 156 14 % 7 % 76 67 13 % 102 89 15 % 2 %
Zosyn / Tazocin 149 255 (42 %) (44 %) 75 177 (58 %) 74 78 (5 %) (10 %)
Caduet 150 127 18 % 12 % 80 86 (7 %) 70 41 71 % 49 %
Pristiq 146 118 24 % 21 % 119 102 17 % 27 16 69 % 47 %
Zoloft 139 126 10 % 1 % 15 18 (17 %) 124 108 15 % 3 %

Prevnar / Prevenar (7-valent)

98

179

(45

%)

(64

%)

-

-

-

98

179

(45

%)

(65

%)

Revatio 140 116 21 % 14 % 80 72 11 % 60 44 36 % 21 %
Medrol 127 119 7 % 3 % 33 33 - 94 86 9 % 4 %
Refacto AF/Xyntha 140 102 37 % 25 % 32 22 45 % 108 80 35 % 20 %
Zithromax / Zmax 93 90 3 % (5 %) 4 4 - 89 86 3 % (7 %)
Aricept**

117

106

10

%

(2

%) - - -

117

106

10

%

(2

%)
Aromasin 85 111 (23 %) (30 %) 8 39 (79 %) 77 72 7 % (4 %)
Cardura 92 95 (3 %) (12 %) 1 1 - 91 94 (3 %) (12 %)
Rapamune 96 104 (8 %) (11 %) 47 55 (15 %) 49 49 - (7 %)
Fragmin 95 84 13 % 2 % 9 13 (31 %) 86 71 21 % 9 %
BMP2 83 101 (18 %) (19 %) 77 98 (21 %) 6 3 100 % 60 %
Relpax 86 75 15 % 9 % 47 42 12 % 39 33 18 % 6 %
Xanax XR 77 72 7 % (2 %) 13 14 (7 %) 64 58 10 % (2 %)
Tygacil 76 78 (3 %) (7 %) 38 40 (5 %) 38 38 - (8 %)
Neurontin 67 80 (16 %) (21 %) 14 21 (33 %) 53 59 (10 %) (17 %)
Diflucan 72 74 (3 %) (9 %) - 2 (100 %) 72 72 - (6 %)
Arthrotec 61 61 - (4 %) 32 32 - 29 29 - (7 %)
Unasyn 58 61 (5 %) (11 %) 3 3 - 55 58 (5 %) (13 %)
Protonix 65 203 (68 %) (68 %) 65 203 (68 %) - - - -
EpiPen*** 59 - * * 47 - * 12 - * *
Sulperazon 51 49 4 % (3 %) - - - 51 49 4 % (3 %)
Skelaxin*** 58 - * * 58 - * - - - -
Inspra 51 37 38 % 22 % 1 1 - 50 36 39 % 22 %
Dalacin/Cleocin 51 54 (6 %) (12 %) 15 17 (12 %) 36 37 (3 %) (9 %)
Alliance Revenue**** 919 1,042 (12 %) (15 %) 571 741 (23 %) 348 301 16 % 3 %
All other biopharmaceutical products

1,710

1,409

21 % 13 % 501 322 56 %

1,209

1,087

11 % 1 %
All other established products     1,406     1,161   21 %   19 %       388     245   58 %       1,018     916   11 %   2 %
REVENUES FROM OTHER PRODUCTS:
ANIMAL HEALTH $ 1,041 $ 860 21 % 15 % $ 433 $ 369 17 % $ 608 $ 491 24 % 12 %
CONSUMER HEALTHCARE $ 774 $ 673 15 % 11 % $ 408 $ 374 9 % $ 366 $ 299 22 % 13 %
NUTRITION $ 577 $ 441 31 % 24 % - - - $ 577 $ 441 31 % 24 %
OTHER*****   $ 54   $ 76   (29 %)   (31 %)     $ 19   $ 22   (14 %)     $ 35   $ 54   (35 %)   (37 %)

*

 -

Calculation not meaningful.

**

 -

Represents direct sales under license agreement with Eisai Co., Ltd.

***

 -

Legacy King product. King's results are included in our financial statements commencing from the acquisition date of January 31, 2011, in accordance with Pfizer's domestic and international year-ends.
Therefore, our results for the third quarter of 2010 do not include King's results of operations.

****

 -

Enbrel (in the U.S. and Canada), Aricept, Exforge, Rebif and Spiriva.

*****

 -

Includes revenues generated primarily from Pfizer Centresource.
Certain amounts and percentages may reflect rounding adjustments.
 
(1) Total International represents Developed Europe region + Developed Rest of World region + Emerging Markets region. Details for these regions are located on the following page.
 

                           
PFIZER INC.
REVENUES
DETAIL OF INTERNATIONAL REVENUES BY GEOGRAPHIC REGION
THIRD QUARTER 2011 and 2010
(UNAUDITED)
(millions of dollars)
 
    DEVELOPED EUROPE(1)     DEVELOPED REST OF WORLD(2)     EMERGING MARKETS(3)
2011 2010 % Change 2011 2010 % Change 2011 2010 % Change
       

 

  Total   Oper.        

 

  Total   Oper.        

 

  Total   Oper.
TOTAL INTERNATIONAL REVENUES   $ 4,074   $ 3,762   8 %   (4 %)     $ 2,840   $ 2,349   21 %   8 %     $ 3,400   $ 2,821   21 %   14 %
REVENUES FROM BIOPHARMACEUTICAL PRODUCTS - INTERNATIONAL:   $ 3,723   $ 3,466   7 %   (5 %)     $ 2,567   $ 2,109   22 %   8 %     $ 2,438   $ 2,072   18 %   12 %
Lipitor 595 628 (5 %) (16 %) 337 397 (15 %) (27 %) 200 211 (5 %) (10 %)
Prevnar / Prevenar 13 192 129 49 % 32 % 84 21 300 % 236 % 276 45 * *
Enbrel (Outside the U.S. and Canada) 626 531 18 % 4 % 139 97 43 % 26 % 192 171 12 % 6 %
Lyrica 326 268 22 % 8 % 162 63 157 % 128 % 94 70 34 % 30 %
Celebrex 46 42 10 % - 112 86 30 % 18 % 80 60 33 % 27 %
Viagra 102 95 7 % (5 %) 57 47 21 % 9 % 90 75 20 % 13 %
Norvasc 38 45 (16 %) (27 %) 187 178 5 % (6 %) 120 107 12 % 6 %
Zyvox 78 69 13 % 1 % 38 32 19 % 6 % 51 36 42 % 36 %
Xalatan / Xalacom 126 134 (6 %) (17 %) 94 81 16 % 4 % 48 44 9 % -
Sutent 119 104 14 % 1 % 42 36 17 % 6 % 59 50 18 % 10 %
Premarin Family 3 3 - (33 %) 7 7 - 14 % 16 12 33 % 17 %
Geodon / Zeldox 18 19 (5 %) (16 %) 7 5 40 % 25 % 21 14 50 % 36 %
Detrol / Detrol LA 38 39 (3 %) (11 %) 25 22 14 % (4 %) 14 13 8 % 8 %
Genotropin 90 90 - (12 %) 55 42 31 % 16 % 24 28 (14 %) (15 %)
Vfend 78 70 11 % (1 %) 34 30 13 % 10 % 59 36 64 % 58 %
Chantix / Champix 37 35 6 % (6 %) 39 46 (15 %) (26 %) 12 8 50 % 38 %
Effexor XR 48 55 (13 %) (25 %) 39 37 5 % (5 %) 26 25 4 % (8 %)
BeneFIX 69 62 11 % (2 %) 25 24 4 % (8 %) 8 3 167 % 133 %
Zosyn / Tazocin 15 22 (32 %) (38 %) 4 5 (20 %) - 55 51 8 % 2 %
Caduet 4 5 (20 %) (40 %) 51 22 132 % 105 % 15 14 7 % -
Pristiq - - - - 17 10 70 % 36 % 10 6 67 % 50 %
Zoloft 17 21 (19 %) (30 %) 74 57 30 % 12 % 33 30 10 % 7 %

Prevnar / Prevenar (7-valent)

4

23

(83

%)

(82

%)

94

56

68

%

53

%

-

100

(100

%)

(126

%)

Revatio 37 30 23 % 7 % 12 8 50 % 22 % 11 6 83 % 100 %
Medrol 24 22 9 % - 11 12 (8 %) - 59 52 13 % 10 %
Refacto AF/Xyntha 99 73 36 % 22 % 9 7 29 % 17 % - - - -
Zithromax / Zmax 15 15 - (13 %) 37 34 9 % (6 %) 37 37 - (5 %)
Aricept** 61 53 15 % -

45

39

15

% 5 %

11

14

(21

%)

(27

%)
Aromasin 42 44 (5 %) (18 %) 17 15 13 % 7 % 18 13 38 % 31 %
Cardura 30 36 (17 %) (28 %) 37 36 3 % (3 %) 24 22 9 % -
Rapamune 15 14 7 % - 4 4 - - 30 31 (3 %) (10 %)
Fragmin 45 33 36 % 21 % 21 18 17 % 6 % 20 20 - (10 %)
BMP2 6 3 100 % 33 % - - - - - - - -
Relpax 20 17 18 % - 15 12 25 % 8 % 4 4 - -
Xanax XR 26 26 - (12 %) 12 10 20 % - 26 22 18 % 9 %
Tygacil 16 19 (16 %) (26 %) 1 1 - - 21 18 17 % 6 %
Neurontin 17 22 (23 %) (33 %) 14 13 8 % - 22 24 (8 %) (8 %)
Diflucan 21 21 - (14 %) 13 12 8 % - 38 39 (3 %) (5 %)
Arthrotec 12 14 (14 %) (29 %) 13 12 8 % - 4 3 33 % 33 %
Unasyn 8 9 (11 %) (22 %) 21 17 24 % - 26 32 (19 %) (16 %)
Protonix - - - - - - - - - - - -
EpiPen*** - - - - 12 - * * - - - -
Sulperazon - - - - 11 10 10 % (10 %) 40 39 3 % -
Skelaxin*** - - - - - - - - - - - -
Inspra 33 25 32 % 16 % 13 9 44 % 22 % 4 2 100 % 100 %
Dalacin/Cleocin 9 10 (10 %) (11 %) 7 5 40 % - 20 22 (9 %) (9 %)
Alliance Revenue**** 131 130 1 % (11 %) 196 153 28 % 15 % 21 18 17 % 11 %
All other biopharmaceutical products 387 361 7 %

(6

%)

323

281 15 %

5

%

499

445

12 % 5 %
All other established products     294     273   8 %   (5 %)       283     242   17 %   5 %       441     401   10 %   5 %
REVENUES FROM OTHER PRODUCTS - INTERNATIONAL:   $ 351   $ 296   19 %   7 %     $ 273   $ 240   14 %   -       $ 962   $ 749   28 %   21 %
*

 -

Calculation not meaningful.
**

 -

Represents direct sales under license agreement with Eisai Co., Ltd.
***

 -

Legacy King product. King's results are included in our financial statements commencing from the acquisition date of January 31, 2011, in accordance with Pfizer's domestic and international year-ends.
Therefore, our results for the third quarter of 2010 do not include King's results of operations.
****

 -

Enbrel (in the U.S. and Canada), Aricept, Exforge, Rebif and Spiriva.
Certain amounts and percentages may reflect rounding adjustments.
 
(1) Developed Europe region includes the following markets: Western Europe and the Scandinavian countries.
(2) Developed Rest of World region includes the following markets: Australia, Canada, Japan, New Zealand, and South Korea.
(3) Emerging Markets region includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Middle East, Africa, Central and Eastern Europe and Turkey.
 

                     
PFIZER INC.
REVENUES
NINE MONTHS 2011 and 2010
(UNAUDITED)
(millions of dollars)
 
    WORLDWIDE   UNITED STATES   TOTAL INTERNATIONAL(1)
2011 2010 % Change 2011 2010 % Change 2011 2010 % Change
       

 

  Total   Oper.        

 

  Total      

 

  Total   Oper.
TOTAL REVENUES   $ 50,679   $ 49,703   2 %   (2 %)   $ 20,603   $ 21,661   (5 %)   $ 30,076   $ 28,042   7 %   1 %
REVENUES FROM BIOPHARMACEUTICAL PRODUCTS:   $ 43,611   $ 43,472   -     (3 %)   $ 18,246   $ 19,554   (7 %)   $ 25,365   $ 23,918   6 %   -  
Lipitor 7,578 8,104 (6 %) (9 %) 4,187 3,921 7 % 3,391 4,183 (19 %) (24 %)
Prevnar / Prevenar 13 2,823 1,590 78 % 76 % 1,533 1,231 25 % 1,290 359 259 % 251 %
Enbrel (Outside the U.S. and Canada) 2,741 2,409 14 % 7 % - - - 2,741 2,409 14 % 7 %
Lyrica 2,695 2,242 20 % 16 % 1,116 1,073 4 % 1,579 1,169 35 % 27 %
Celebrex 1,856 1,752 6 % 3 % 1,179 1,176 - 677 576 18 % 10 %
Viagra 1,458 1,429 2 % (1 %) 732 729 - 726 700 4 % (2 %)
Norvasc 1,081 1,120 (3 %) (10 %) 23 24 (4 %) 1,058 1,096 (3 %) (10 %)
Zyvox 965 876 10 % 7 % 486 463 5 % 479 413 16 % 9 %
Xalatan / Xalacom 960 1,287 (25 %) (30 %) 159 453 (65 %) 801 834 (4 %) (10 %)
Sutent 870 771 13 % 8 % 218 198 10 % 652 573 14 % 7 %
Premarin Family 757 779 (3 %) (3 %) 683 713 (4 %) 74 66 12 % 5 %
Geodon / Zeldox 753 763 (1 %) (2 %) 627 642 (2 %) 126 121 4 % (3 %)
Detrol / Detrol LA 668 758 (12 %) (14 %) 422 515 (18 %) 246 243 1 % (5 %)
Genotropin 654 650 1 % (5 %) 144 156 (8 %) 510 494 3 % (4 %)
Vfend 558 595 (6 %) (11 %) 64 187 (66 %) 494 408 21 % 15 %
Chantix / Champix 545 522 4 % 1 % 248 252 (2 %) 297 270 10 % 3 %
Effexor XR 537 1,512 (64 %) (66 %) 207 1,142 (82 %) 330 370 (11 %) (17 %)
BeneFIX 518 474 9 % 6 % 223 211 6 % 295 263 12 % 6 %
Zosyn / Tazocin 490 749 (35 %) (36 %) 267 505 (47 %) 223 244 (9 %) (12 %)
Caduet 435 388 12 % 8 % 235 256 (8 %) 200 132 52 % 38 %
Pristiq 422 341 24 % 22 % 348 301 16 % 74 40 85 % 65 %
Zoloft 420 390 8 % - 46 54 (15 %) 374 336 11 % 3 %

Prevnar / Prevenar (7-valent)

406

1,030

(61

%)

(66

%)

-

214

(100

%)

406

816

(50

%)

(58

%)

Revatio 393 352 12 % 8 % 229 216 6 % 164 136 21 % 12 %
Medrol 383 341 12 % 9 % 116 88 32 % 267 253 6 % 2 %
Refacto AF/Xyntha 380 290 31 % 25 % 75 61 23 % 305 229 33 % 25 %
Zithromax / Zmax 335 303 11 % 4 % 17 10 70 % 318 293 9 % 1 %
Aricept**

335

337

(1

%)

(7

%) - - -

335

337

(1

%)

(7

%)
Aromasin 294 361 (19 %) (22 %) 53 122 (57 %) 241 239 1 % (5 %)
Cardura 289 312 (7 %) (13 %) 4 11 (64 %) 285 301 (5 %) (12 %)
Rapamune 285 292 (2 %) (5 %) 139 150 (7 %) 146 142 3 % (2 %)
Fragmin 283 258 10 % 3 % 32 40 (20 %) 251 218 15 % 7 %
BMP2 277 298 (7 %) (8 %) 260 286 (9 %) 17 12 42 % 20 %
Relpax 250 239 5 % 2 % 142 141 1 % 108 98 10 % 2 %
Xanax XR 232 224 4 % (2 %) 41 38 8 % 191 186 3 % (4 %)
Tygacil 224 250 (10 %) (13 %) 112 133 (16 %) 112 117 (4 %) (9 %)
Neurontin 222 238 (7 %) (10 %) 51 57 (11 %) 171 181 (6 %) (10 %)
Diflucan 201 205 (2 %) (6 %) 3 5 (40 %) 198 200 (1 %) (5 %)
Arthrotec 182 185 (2 %) (4 %) 96 97 (1 %) 86 88 (2 %) (7 %)
Unasyn 172 182 (5 %) (10 %) 4 6 (33 %) 168 176 (5 %) (10 %)
Protonix 168 535 (69 %) (69 %) 168 535 (69 %) - - - -
EpiPen*** 160 - * * 133 - * 27 - * *
Sulperazon 155 153 1 % (4 %) - - - 155 153 1 % (4 %)
Skelaxin*** 145 - * * 145 - *

-

- * *
Inspra 142 113 26 % 17 % 3 4 (25 %) 139 109 28 % 18 %
Dalacin/Cleocin 139 168 (17 %) (21 %) 35 55 (36 %) 104 113 (8 %) (12 %)
Alliance Revenue**** 2,678 3,107 (14 %) (16 %) 1,628 2,211 (26 %) 1,050 896 17 % 9 %
All other biopharmaceutical products

5,097

4,198

21 %

17

% 1,613 872 85 %

3,484

3,326

5

%

(1

%)
All other established products     4,207     3,492   20 %   20 %     1,287     703   83 %     2,920     2,789   5 %   (1 %)
REVENUES FROM OTHER PRODUCTS:
ANIMAL HEALTH $ 3,078 $ 2,599 18 % 14 % $ 1,205 $ 1,006 20 % $ 1,873 $ 1,593 18 % 11 %
CONSUMER HEALTHCARE $ 2,240 $ 2,014 11 % 8 % $ 1,087 $ 1,016 7 % $ 1,153 $ 998 16 % 9 %
NUTRITION $ 1,540 $ 1,375 12 % 7 % - - - $ 1,540 $ 1,375 12 % 7 %
OTHER*****   $ 210   $ 243   (14 %)   (14 %)   $ 65   $ 85   (24 %)   $ 145   $ 158   (8 %)   (10 %)
*

 -

Calculation not meaningful.
**

 -

Represents direct sales under license agreement with Eisai Co., Ltd.
***

 -

Legacy King product. King's results are included in our financial statements commencing from the acquisition date of January 31, 2011, in accordance with Pfizer's domestic and international year-ends.

Therefore, our results for the first nine months of 2010 do not include King's results of operations.

****

 -

Enbrel (in the U.S. and Canada), Aricept, Exforge, Rebif and Spiriva.
*****

 -

Includes revenues generated primarily from Pfizer Centresource. Certain amounts and percentages may reflect rounding adjustments.
 
(1) Total International represents Developed Europe region + Developed Rest of World region + Emerging Markets region. Details for these regions are located on the following page.

                       
PFIZER INC.
REVENUES
DETAIL OF INTERNATIONAL REVENUES BY GEOGRAPHIC REGION
NINE MONTHS 2011 and 2010
(UNAUDITED)
(millions of dollars)
 
    DEVELOPED EUROPE(1)   DEVELOPED REST OF WORLD(2)   EMERGING MARKETS(3)
2011 2010 % Change 2011 2010 % Change 2011 2010 % Change
       

 

  Total   Oper.      

 

  Total   Oper.        

 

  Total   Oper.
TOTAL INTERNATIONAL REVENUES   $ 12,223   $ 12,079   1 %   (4 %)   $ 8,059   $ 7,344   10 %   (1 %)   $ 9,794   $ 8,619   14 %   9 %
REVENUES FROM BIOPHARMACEUTICAL PRODUCTS - INTERNATIONAL:   $ 11,064   $ 10,974   1 %   (5 %)   $ 7,270   $ 6,650   9 %   (1 %)   $ 7,031   $ 6,294   12 %   7 %
Lipitor 1,804 1,987 (9 %) (14 %) 955 1,505 (37 %) (44 %) 632 691 (9 %) (12 %)
Prevnar / Prevenar 13 545 274 99 % 88 % 171 23 * * 574 62 * *
Enbrel (Outside the U.S. and Canada) 1,758 1,659 6 % - 391 288 36 % 22 % 592 462 28 % 23 %
Lyrica 931 802 16 % 10 % 381 162 135 % 114 % 267 205 30 % 26 %
Celebrex 134 132 2 % (4 %) 307 245 25 % 15 % 236 199 19 % 13 %
Viagra 296 299 (1 %) (6 %) 158 143 10 % - 272 258 5 % 1 %
Norvasc 127 154 (18 %) (21 %) 575 601 (4 %) (13 %) 356 341 4 % -
Zyvox 229 215 7 % 1 % 108 93 16 % 5 % 142 105 35 % 30 %
Xalatan / Xalacom 385 430 (10 %) (15 %) 270 265 2 % (8 %) 146 139 5 % -
Sutent 353 322 10 % 4 % 122 100 22 % 11 % 177 151 17 % 13 %
Premarin Family 8 8 - (13 %) 24 21 14 % 10 % 42 37 14 % 5 %
Geodon / Zeldox 58 66 (12 %) (17 %) 17 13 31 % 15 % 51 42 21 % 14 %
Detrol / Detrol LA 119 129 (8 %) (13 %) 82 71 15 % 4 % 45 43 5 % 2 %
Genotropin 267 277 (4 %) (9 %) 162 133 22 % 9 % 81 84 (4 %) (7 %)
Vfend 226 219 3 % (2 %) 108 92 17 % 9 % 160 97 65 % 61 %
Chantix / Champix 134 123 9 % 4 % 124 124 - (9 %) 39 23 70 % 65 %
Effexor XR 141 184 (23 %) (28 %) 114 113 1 % (10 %) 75 73 3 % (1 %)
BeneFIX 193 187 3 % (2 %) 82 65 26 % 17 % 20 11 82 % 73 %
Zosyn / Tazocin 49 83 (41 %) (43 %) 11 12 (8 %) - 163 149 9 % 5 %
Caduet 13 15 (13 %) (20 %) 143 79 81 % 64 % 44 38 16 % 11 %
Pristiq - - - - 48 27 78 % 54 % 26 13 100 % 85 %
Zoloft 61 66 (8 %) (14 %) 217 181 20 % 8 % 96 89 8 % 4 %

Prevnar / Prevenar (7-valent)

22

230

(90

%)

(91

%)

277

172

61

%

45

%

107

414

(74

%)

(82

%)

Revatio 105 94 12 % 5 % 34 24 42 % 29 % 25 18 39 % 33 %
Medrol 78 74 5 % - 35 34 3 % (3 %) 154 145 6 % 4 %
Refacto AF/Xyntha 279 209 33 % 26 % 25 20 25 % 5 % 1 - 100 % *
Zithromax / Zmax 61 61 - (3 %) 131 115 14 % 1 % 126 117 8 % 3 %
Aricept**

171

172 (1 %) (8 %)

125

111

13

% 4 %

39

54

(28

%)

(30

%)
Aromasin 142 146 (3 %) (8 %) 51 45 13 % 2 % 48 48 - (2 %)
Cardura 94 114 (18 %) (22 %) 116 116 - (9 %) 75 71 6 % 1 %
Rapamune 45 41 10 % 5 % 13 13 - (8 %) 88 88 - (5 %)
Fragmin 132 110 20 % 12 % 57 48 19 % 8 % 62 60 3 % (2 %)
BMP2 17 12 42 % 15 % - - - - - - - -
Relpax 56 54 4 % (4 %) 40 33 21 % 9 % 12 11 9 % 9 %
Xanax XR 80 81 (1 %) (6 %) 36 33 9 % (3 %) 75 72 4 % (3 %)
Tygacil 49 60 (18 %) (22 %) 4 3 33 % - 59 54 9 % 4 %
Neurontin 58 64 (9 %) (16 %) 42 41 2 % (7 %) 71 76 (7 %) (8 %)
Diflucan 59 64 (8 %) (13 %) 35 35 - (11 %) 104 101 3 % 1 %
Arthrotec 37 45 (18 %) (22 %) 37 35 6 % - 12 8 50 % 50 %
Unasyn 26 29 (10 %) (14 %) 61 57 7 % (7 %) 81 90 (10 %) (11 %)
Protonix - - - - - - - - - - - -
EpiPen*** - - - - 27 - * * - - - -
Sulperazon - - - - 32 32 - (13 %) 123 121 2 % (2 %)
Skelaxin*** - - - - - - - - - - - -
Inspra 92 78 18 % 12 % 37 25 48 % 27 % 10 6 67 % 50 %
Dalacin/Cleocin 26 31 (16 %) (23 %) 19 19 - (11 %) 59 63 (6 %) (10 %)

Alliance Revenue****

433 399 9 % 3 % 557 442 26 % 14 % 60 55 9 % 5 %
All other biopharmaceutical products 1,171 1,175 - (5 %)

909

841 8 % (1 %)

1,404

1,310

7

%

3

%
All other established products     883     906   (3 %)   (8 %)     806     741   9 %   (2 %)     1,231     1,142   8 %   4 %
REVENUES FROM OTHER PRODUCTS - INTERNATIONAL:   $ 1,159   $ 1,105   5 %   -     $ 789   $ 694   14 %   3 %   $ 2,763   $ 2,325   19 %   14 %
*

 -

Calculation not meaningful.
**

 -

Represents direct sales under license agreement with Eisai Co., Ltd.
***

 -

Legacy King product. King's results are included in our financial statements commencing from the acquisition date of January 31, 2011, in accordance with Pfizer's domestic and international year-ends.
Therefore, our results for the first nine months of 2010 do not include King's results of operations.
****

 -

Enbrel (in the U.S. and Canada), Aricept, Exforge, Rebif and Spiriva.
Certain amounts and percentages may reflect rounding adjustments.
 
(1) Developed Europe region includes the following markets: Western Europe and the Scandinavian countries.
(2) Developed Rest of World region includes the following markets: Australia, Canada, Japan, New Zealand, and South Korea.
(3) Emerging Markets region includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America, Middle East, Africa, Central and Eastern Europe and Turkey.
 

PFIZER INC.
SUPPLEMENTAL INFORMATION

1. Change in Reported Cost of Sales

Reported cost of sales decreased 3% in third-quarter 2011 and 4% in the first nine months of 2011, compared to the same periods in 2010. The decreases are due to lower purchase accounting adjustments and lower inventory write-offs in 2011, as well as savings associated with our cost-reduction and productivity initiatives, partially offset by the addition of King’s manufacturing operations and the unfavorable impact of foreign exchange of 8% in third-quarter 2011 and 7% in the first nine months of 2011.

Reported cost of sales as a percentage of revenues decreased 2.3 percentage points to 21.4% in third-quarter 2011, compared to the same period in 2010, reflecting the aforementioned factors.

2. Change in Reported Selling, Informational & Administrative (SI&A) Expenses and Reported Research & Development (R&D) Expenses

Reported SI&A expenses were largely unchanged in third-quarter 2011 and increased 2% in the first nine months of 2011, compared to the same periods in 2010. Both periods were unfavorably impacted by the annual fee provided for under the 2010 U.S. healthcare reform legislation beginning this year and the addition of legacy King operating costs, and favorably impacted by savings associated with our cost-reduction and productivity initiatives. In addition, the third quarter and first nine months of 2011 were unfavorably impacted by foreign exchange of 5% and 3%, respectively.

Reported R&D expenses were largely unchanged in third-quarter 2011 and decreased 1% in the first nine months of 2011, compared to the same periods in 2010. Both periods were favorably impacted by savings associated with our cost-reduction and productivity initiatives, and unfavorably impacted by higher charges related to those initiatives, the addition of legacy King expenses and the unfavorable impact of foreign exchange of 2% in both periods.

3. Other (Income)/Deductions – Net

 
($ in millions)   Third Quarter     Nine Months
2011     2010 2011     2010

Interest income(a)

$ (110 )   $ (100 ) $ (332 )   $ (297 )
Interest expense(a) 423       427   1,285       1,338  
Net interest expense 313       327   953       1,041  
Royalty-related income (135 ) (158 ) (447 ) (395 )
Net losses/(gains) on asset disposals 18 (13 ) (8 ) (243 )
Certain legal matters, net(b) 132 712 619 886
Certain asset impairment charges(c) 105 1,478 585 1,710
Other, net 105       3   76       37  
Other deductions-net   $ 538     $ 2,349       $ 1,778     $ 3,036  

(a) Interest income increased in both periods of 2011 due to higher cash balances and higher interest rates earned on investments. Interest expense decreased in both periods of 2011 due to lower long- and short-term debt balances and the conversion of some fixed-rate liabilities to floating-rate liabilities.

(b) In the first nine months of 2011, primarily relates to charges for hormone-replacement therapy litigation. In both periods of 2010, primarily includes a charge for asbestos litigation related to our wholly owned subsidiary, Quigley Company, Inc.

(c) In 2011 and 2010, primarily relates to certain Wyeth assets, including in-process research and development (IPR&D) intangible assets.

4. Effective Tax Rate

Reported

The effective tax rate on reported Income from continuing operations before provision for taxes on income for third-quarter 2011 was 33.7% compared to 39.5% for third-quarter 2010, and in the first nine months of 2011 was 30.8% compared to 37.3% in the first nine months of 2010. The decreases in the effective tax rate were primarily due to:

  • the extension of the U.S. research and development credit, which was signed into law on December 17, 2010;
  • the decrease and jurisdictional mix of certain impairment charges related to assets acquired in connection with the Wyeth acquisition; and
  • the change in the jurisdictional mix of earnings.

Adjusted

The effective tax rate on adjusted income(1) for third quarter 2011 was 30.9% compared to 30.2% in third-quarter 2010 primarily due to the change in the jurisdictional mix of earnings partially offset by the extension of the U.S. research and development credit, and in the first nine months of 2011 was 29.3% compared to 30.7% in the first nine months of 2010 primarily as a result of the extension of the U.S. research and development credit and the change in the jurisdictional mix of earnings.

5. Reconciliation of 2011 Adjusted Income(1) and Adjusted Diluted EPS(1) Guidance to 2011 Reported Net Income Attributable to Pfizer Inc. and Reported Diluted EPS Attributable to Pfizer Inc. Common Shareholders Guidance (a)

 
  Full-Year 2011 Guidance
($ in billions, except per share amounts) Net Income(b)   Diluted EPS(b)

Income/(Expense)

 
Adjusted Income/Diluted EPS(1) Guidance ~$17.7 - $18.1 ~$2.24 - $2.29
Purchase Accounting Impacts of Transactions Completed as of 10/2/11 (4.8) (0.62)
Acquisition-Related Costs (1.5 – 1.7) (0.19 - 0.21)
Non-Acquisition-Related Restructuring Costs(c) (2.0 – 2.2) (0.25 - 0.28)
Gain on Sale of and Income from Capsugel Discontinued Operations 1.3 0.17
Other Certain Significant Items (0.8)   (0.10)
Reported Net Income Attributable to Pfizer Inc./Diluted EPS Guidance   ~$9.5 - $10.3   ~$1.20 - $1.30

(a) The current exchange rates assumed in connection with the 2011 financial guidance are a blend of the actual exchange rates in effect during the first nine months of 2011 and the mid-October 2011 exchange rates for the remainder of the year.

(b) Includes revenues and expenses related to the Capsugel business as a discontinued operation through July 31, 2011. Does not assume the completion of any business-development transactions not completed as of October 2, 2011, including any one-time upfront payments associated with such transactions. Also excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of October 2, 2011.

(c) Includes amounts related to our initiatives to reduce R&D spending, including our realigned R&D footprint, and related to other cost-reduction and productivity initiatives. These amounts are included in Certain Significant Items.

6. Reconciliation of 2012 Adjusted Income(1) and Adjusted Diluted EPS(1) Targets to 2012 Reported Net Income Attributable to Pfizer Inc. and Reported Diluted EPS Attributable to Pfizer Inc. Common Shareholders Targets (a)

 
  Full-Year 2012 Targets
($ in billions, except per share amounts) Net Income(b)   Diluted EPS(b)
Income/(Expense)  
Adjusted Income/Diluted EPS(1) Targets ~$17.2 - $17.9 ~$2.25 - $2.35
Purchase Accounting Impacts of Transactions Completed as of 10/2/11 (3.8) (0.50)
Acquisition-Related Costs (0.7 - 1.0) (0.09 - 0.12)
Non-Acquisition-Related Restructuring Costs(c) (0.3 - 0.4)   (0.03 - 0.05)
Reported Net Income Attributable to Pfizer Inc./Diluted EPS Targets   ~$12.0 - $13.1   ~$1.58 - $1.73

(a) The current exchange rates assumed in connection with the 2012 financial targets are the mid-October 2011 exchange rates.

(b) Does not assume the completion of any business-development transactions not completed as of October 2, 2011, including any one-time upfront payments associated with such transactions. Also excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of October 2, 2011.

(c) Includes amounts related to our initiatives to reduce R&D spending, including our realigned R&D footprint, and related to other cost-reduction and productivity initiatives. These amounts are included in Certain Significant Items.

(1) “Adjusted income” and “adjusted diluted earnings per share (EPS)” are defined as reported net income attributable to Pfizer Inc. and reported diluted EPS attributable to Pfizer Inc. common shareholders excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items. As described under Adjusted Income in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of Pfizer’s Form 10-Q for the fiscal quarter ended July 3, 2011, management uses adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. We believe that investors’ understanding of our performance is enhanced by disclosing this measure. The adjusted income and adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and diluted EPS.

DISCLOSURE NOTICE: The information contained in this earnings release and the attachments is as of November 1, 2011. The Company assumes no obligation to update forward-looking statements contained in this earnings release or the attachments as a result of new information or future events or developments.

This earnings release and the attachments contain forward-looking information about the Company’s future operating and financial performance, business plans and prospects, in-line products and product candidates, and share-repurchase and dividend-rate plans that involves substantial risks and uncertainties. You can identify these statements by the fact that they use words such as “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast”, “goal”, “objective” and other words and terms of similar meaning or use future dates. Among the factors that could cause actual results to differ materially are the following: the success of research and development activities, including, without limitation, the ability to meet anticipated clinical trial completion dates, regulatory submission and approval dates, and launch dates for product candidates; decisions by regulatory authorities regarding whether and when to approve our drug applications as well as their decisions regarding labeling, ingredients and other matters that could affect the availability or commercial potential of our products; the speed with which regulatory authorizations, pricing approvals and product launches may be achieved; the success of external business-development activities; competitive developments, including the impact on our competitive position of new product entrants, in-line branded products, generic products, private label products and product candidates that treat diseases and conditions similar to those treated by our in-line drugs and drug candidates; the ability to meet generic and branded competition after the loss of patent protection for our products or competitor products; the ability to successfully market both new and existing products domestically and internationally; difficulties or delays in manufacturing; trade buying patterns; the impact of existing and future legislation and regulatory provisions on product exclusivity; trends toward managed care and healthcare cost containment; the impact of the U.S. Budget Control Act of 2011 (the Budget Control Act) and the deficit-reduction actions to be taken pursuant to the Budget Control Act in order to achieve the deficit-reduction targets provided for therein; the impact of U.S. healthcare legislation enacted in 2010 – the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act - and of any modification, repeal or invalidation of any of the provisions thereof; U.S. legislation or regulatory action affecting, among other things, pharmaceutical product pricing, reimbursement or access, including under Medicaid, Medicare and other publicly funded or subsidized health programs, the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries, direct-to-consumer advertising and interactions with healthcare professionals, and the use of comparative effectiveness methodologies that could be implemented in a manner that focuses primarily on the cost differences and minimizes the therapeutic differences among pharmaceutical products and restricts access to innovative medicines; legislation or regulatory action in markets outside the U.S. affecting pharmaceutical product pricing, reimbursement or access; contingencies related to actual or alleged environmental contamination; claims and concerns that may arise regarding the safety or efficacy of in-line products and product candidates; significant breakdown, infiltration, or interruption of our information technology systems and infrastructure; legal defense costs, insurance expenses, settlement costs, the risk of an adverse decision or settlement and the adequacy of reserves related to product liability, patent protection, government investigations, consumer, commercial, securities, environmental and tax issues, ongoing efforts to explore various means for resolving asbestos litigation, and other legal proceedings; the Company’s ability to protect its patents and other intellectual property both domestically and internationally; interest rate and foreign currency exchange rate fluctuations; governmental laws and regulations affecting domestic and foreign operations, including, without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside of the U.S. that result from the enactment in August 2010 of the Education Jobs and Medicaid Assistance Act of 2010 and that may result from pending and possible future proposals; changes in U.S. generally accepted accounting principles; uncertainties related to general economic, political, business, industry, regulatory and market conditions including, without limitation, uncertainties related to the impact on us, our lenders, our customers, our suppliers and counterparties to our foreign-exchange and interest-rate agreements of challenging global economic conditions and recent and possible future changes in global financial markets; any changes in business, political and economic conditions due to actual or threatened terrorist activity in the U. S. and other parts of the world, and related U. S. military action overseas; growth in costs and expenses; changes in our product, segment and geographic mix; and the impact of acquisitions, divestitures, restructurings, product withdrawals and other unusual items, including (i) our ability to successfully implement our plans, announced on February 1, 2011, regarding the Company’s research and development function, including the planned exit from the Company’s Sandwich, U.K. site, subject to works council and union consultations; (ii) our ability to realize the projected benefits of our acquisitions of Wyeth and King Pharmaceuticals, Inc.; (iii) our ability to realize the projected benefits of our cost-reduction and productivity initiatives, including those related to the Wyeth integration and to our research and development function; and (iv) the impact of the strategic alternatives that we decide to pursue for our Animal Health and Nutrition businesses. A further list and description of risks, uncertainties and other matters can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and in its reports on Form 10-Q, in each case including in the sections thereof captioned “Forward-Looking Information and Factors That May Affect Future Results” and “Item 1A. Risk Factors”, and in its reports on Form 8-K.

This earnings release may include discussion of certain clinical studies relating to various in-line products and/or product candidates. These studies typically are part of a larger body of clinical data relating to such products or product candidates, and the discussion herein should be considered in the context of the larger body of data.

Contacts

Pfizer Inc.
Media:
Joan Campion, 212-733-2798
or
Investors:
Chuck Triano, 212-733-3901
Suzanne Harnett, 212-733-8009

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Pfizer Reports Third-Quarter 2011 Results

  • Third-Quarter 2011 Revenues of $17.2 Billion
  • Third-Quarter 2011 Adjusted Diluted EPS(1) of $0.62; Reported Diluted EPS(2) of $0.48, which Reflects a $1.3 Billion After-Tax Gain on Sale of Capsugel(3)
  • Increases 2011 Adjusted Diluted EPS(1) and Reported Diluted EPS(2) Guidance Ranges; Reaffirms 2012 Financial Targets
  • Repurchases $2.1 Billion and $6.5 Billion of Common Stock During Third-Quarter and Year-to-Date through October 31, 2011, Respectively; Increases 2011 Share Repurchase Target to between $7 Billion and $9 Billion

NEW YORK--()--Pfizer Inc. (NYSE: PFE):

   
($ in millions, except per share amounts)
  Third-Quarter(4)   Year-to-Date(4)
2011   2010   Change 2011   2010   Change
Reported Revenues $ 17,193 $ 15,995 7 % $ 50,679 $ 49,703 2 %
Adjusted Income(1) 4,820 4,352 11 % 14,354 14,141 2 %
Adjusted Diluted EPS(1) 0.62 0.54 15 % 1.81 1.75 3 %
Reported Net Income(2) 3,738 866 * 8,570 5,367 60 %
Reported Diluted EPS(2) 0.48 0.11 * 1.08 0.66 64 %
                                     
See end of text prior to tables for notes.
* Calculation not meaningful
 

Pfizer Inc. (NYSE: PFE) today reported financial results for third-quarter 2011. Third-quarter 2011 revenues were $17.2 billion, an increase of 7% compared with the year-ago quarter, which reflects operational growth of $247 million, or 1%, and the favorable impact of foreign exchange of $951 million, or 6%.

For third-quarter 2011, U.S. revenues were $6.9 billion, a decrease of 3% compared with the year-ago quarter. International revenues were $10.3 billion, an increase of 15% compared with the prior-year quarter, which reflected 4% operational growth and an 11% favorable impact of foreign exchange. U.S. revenues represented 40% of total revenues in third-quarter 2011 compared with 44% in the year-ago quarter, while international revenues represented 60% of total revenues in third-quarter 2011 compared with 56% in the year-ago quarter.

Financial Performance

    Third-Quarter Revenues
($ in millions)

Favorable/(Unfavorable)

2011   2010   Change     Foreign Exchange   Operational
 
Primary Care(5) $ 5,948 $ 5,653 5 % 5 % --
Specialty Care(6) 3,799 3,717 2 % 7 % (5 %)
Emerging Markets(7) 2,438 2,072 18 % 6 % 12 %
Established Products(8) 2,230 2,168 3 % 7 % (4 %)
Oncology(9)   332   335 (1 %) 8 % (9 %)
Biopharmaceutical 14,747 13,945 6 % 6 % --
 
Animal Health(10) 1,041 860 21 % 6 % 15 %
Consumer Healthcare(11) 774 673 15 % 4 % 11 %
Nutrition(12) 577 441 31 % 7 % 24 %
Other(13)   54   76 (29 %) 2 % (31 %)
 
Total $ 17,193 $ 15,995 7 % 6 % 1 %
                                 

See end of text prior to tables for notes.

Business Highlights

Primary Care(5) unit revenues in third-quarter 2011 were favorably impacted primarily by foreign exchange, growth from Lipitor in the U.S. and from Celebrex, Lyrica, Pristiq and Spiriva, among others, and the addition of $119 million, or 2%, from legacy King products, while negatively impacted by the loss of exclusivity of Aricept in the U.S. in November 2010 as well as the loss of exclusivity of Lipitor in Canada and Spain in May and July 2010, respectively. Taken together, these losses of exclusivity reduced Primary Care(5) unit revenues by $415 million, or 7%, in comparison with third-quarter 2010.

Specialty Care(6) unit revenues were positively impacted by foreign exchange and strong growth in the Prevenar franchise and Enbrel in most international markets. Prevnar 13 revenues in the U.S. were lower than in third-quarter 2010 as fewer patients received the Prevnar 13 catch-up dose as the timeframe for eligibility has nearly expired. Specialty Care(6) unit revenues were also negatively impacted by the loss of exclusivity of Vfend and Xalatan in the U.S. in February and March 2011, respectively. Collectively, these losses of exclusivity reduced Specialty Care(6) unit revenues by $214 million, or 6%, in comparison with third-quarter 2010.

Emerging Markets(7) unit revenues were positively impacted by foreign exchange and growth in certain key innovative brands, primarily the Prevenar franchise, Celebrex, Enbrel, Lyrica, Vfend and Zyvox, notably with double-digit operational growth in China, Russia, Turkey and India. Revenues were negatively impacted by the loss of exclusivity of Lipitor in Brazil and Mexico in August and December 2010, respectively. These losses of exclusivity reduced Emerging Markets(7) unit revenues by $30 million, or 1%, in comparison with third-quarter 2010.

Established Products(8) unit revenues were mainly impacted by the loss of exclusivity of Protonix and Zosyn in the U.S., which taken together reduced Established Products(8) unit revenues by $242 million, or 11%, in comparison with third-quarter 2010. This decline was more than offset by $144 million, or 7%, from the addition of legacy King products, as well as foreign exchange. Total revenues from established products in both the Established Products(8) and Emerging Markets(7) units were $3.2 billion, with $996 million generated in emerging markets.

Animal Health(10) unit revenues increased by 21%, in comparison with the same quarter last year, reflecting the positive operational impact of $90 million, or 10%, due to the addition of legacy King products, as well as the favorable conditions in global livestock markets and foreign exchange. The Consumer Healthcare(11) unit generated revenue growth of 15% in comparison with third-quarter 2010, primarily driven by the non-recurrence of the voluntary withdrawal of Centrum temporarily in Europe in third-quarter 2010, the U.S. launch of new dietary supplements in third-quarter 2011, as well as foreign exchange. Nutrition(12) unit revenues increased 31% in comparison with the same quarter last year, primarily in China and the Middle East, from increased demand for premium products and from new product launches, in addition to foreign exchange.

Adjusted Expenses(1), Adjusted Income(1) and Adjusted Diluted EPS(1) Highlights

    Third-Quarter Costs and Expenses
($ in millions)

(Favorable)/Unfavorable

2011   2010   Change     Foreign Exchange   Operational
 
Adjusted Cost of Sales (1) $ 3,325 $ 2,852 17 % 10 % 7 %
As a Percent of Revenues 19.3 % 17.8 % N/A N/A N/A
Adjusted SI&A Expenses(1) 4,560 4,581 -- 5 % (5 %)
Adjusted R&D Expenses(1)   2,034     2,155   (6 %) 2 % (8 %)
 
Adjusted Total Costs(14) $ 9,919   $ 9,588   3 % 6 % (3 %)
                       

See end of text prior to tables for notes.

Adjusted total costs(14) were $9.9 billion in third-quarter 2011, an increase of 3% compared with $9.6 billion in third-quarter 2010. Excluding the unfavorable impact of foreign exchange of $541 million, or 6%, adjusted total costs(14) decreased 3%, primarily reflecting the benefit of cost-reduction and productivity initiatives, particularly in the research and development function. Savings were also generated in third-quarter 2011 by reductions in the U.S. field force and declines in promotional spending in response to product losses of exclusivity. These savings were partially offset by the addition of costs from legacy King operations and the inclusion of the annual U.S. healthcare reform fee.

The effective tax rate on adjusted income(1) was approximately 31% in third-quarter 2011 compared with approximately 30% in third-quarter 2010. The increase was primarily due to the change in the jurisdictional mix of earnings, partially offset by the extension of the U.S. research and development credit that was signed into law in December 2010.

The diluted weighted-average shares outstanding for third-quarter 2011 was 7.8 billion shares, a reduction of approximately 247 million shares compared with third-quarter 2010, primarily due to the Company’s ongoing share repurchase program.

As a result of the aforementioned factors, third-quarter 2011 adjusted income(1) was $4.8 billion, an increase of 11% compared with $4.4 billion in the year-ago quarter, and adjusted diluted EPS(1) was $0.62, an increase of 15% compared with $0.54 in the year-ago quarter.

Reported Net Income(2) and Reported Diluted EPS(2) Highlights

In addition to the aforementioned factors, third-quarter 2011 reported earnings in comparison with third-quarter 2010 reported earnings were favorably impacted by a $1.3 billion (after-tax) gain on the sale of Capsugel(3) in third-quarter 2011, as well as the non-recurrence of impairment charges of $1.5 billion (pre-tax) related to certain intangible assets acquired in connection with the Wyeth acquisition and a $701 million (pre-tax) charge for asbestos litigation related to our wholly owned subsidiary, Quigley Company, Inc., both in third-quarter 2010. Third-quarter 2011 reported earnings were negatively impacted compared with the same period last year by higher charges associated with cost-reduction and productivity initiatives.

The effective tax rate on reported results was approximately 34% in third-quarter 2011 compared with approximately 39% in third-quarter 2010. The decrease in the effective tax rate was primarily due to the previously mentioned extension of the U.S. research and development credit and the change in the jurisdictional mix of earnings, as well as the decrease and jurisdictional mix of the aforementioned impairment charges.

As a result of all these factors, third-quarter 2011 reported net income(2) was $3.7 billion, compared with $866 million in the prior-year quarter, and reported diluted EPS(2) was $0.48, compared with $0.11 in the prior-year quarter.

Executive Commentary

Ian Read, President and Chief Executive Officer, stated, “Overall, I am very pleased with our financial performance despite the impact of product losses of exclusivity totaling approximately $950 million this quarter and the challenges posed by current global market and economic conditions. Excluding the impact of product losses of exclusivity, all of our businesses generated revenue growth while effectively managing their cost structures. Notably, in our Emerging Markets business, I am pleased that both our innovative and established product portfolios continued to perform well, largely as a result of our targeted investments despite a volatile environment. Further, in Japan, our second largest market, we generated 19% operational growth enterprise-wide. I am also happy with the strong performance of the Lipitor franchise and our ability to continue to maximize the value of this brand prior to its loss of exclusivity in the U.S. We remain well prepared for the Lipitor U.S. loss of exclusivity later this month and in various other countries shortly thereafter.”

“I am excited by the potential opportunity for Xalkori, recently launched in U.S. specialty pharmacies for the treatment of ALK-positive advanced non-small cell lung cancer, and Prevnar 13/Prevenar 13, recently approved in the European Union for the prevention of invasive pneumococcal disease in adults aged 50 years and older. Additionally, we have several compounds in our late-stage pipeline, notably Eliquis for stroke prevention in patients with atrial fibrillation, tofacitinib in rheumatoid arthritis and axitinib in advanced renal cell carcinoma, among others. Each of these opportunities represents a potential valuable, new treatment option for patients in need,” Mr. Read continued.

Frank D’Amelio, Chief Financial Officer, stated, “Given our solid performance so far this year, our continued confidence in the business within the current environment and our financial flexibility, we are narrowing the range of many of our 2011 financial guidance components and reaffirming our 2012 financial targets. Notably, we are increasing our 2011 adjusted diluted EPS(1) guidance range, resulting in an updated range of $2.24 to $2.29. Additionally, we returned approximately $3.6 billion to our shareholders during the quarter through $1.5 billion in dividends and $2.1 billion from the repurchase of 112.9 million shares. So far in 2011, we have repurchased $6.5 billion, or 331.6 million of our shares, and we now anticipate repurchasing between $7 billion and $9 billion of our common stock this year. In total, we have returned approximately $11.2 billion to our shareholders this year through dividends and share repurchases.”

2011 Financial Guidance(15)

For full-year 2011, Pfizer’s financial guidance, at current exchange rates(16), is summarized below.

     
Reported Revenues   $66.2 to $67.2 billion

(previously $65.2 to $67.2 billion)

Adjusted Cost of Sales(1) as a Percentage of Revenues   19.8% to 20.3%

(previously 19.5% to 20.5%)

Adjusted SI&A Expenses(1)   $19.4 to $19.9 billion

(previously $19.2 to $20.2 billion)

Adjusted R&D Expenses(1)

  $8.1 to $8.4 billion

(previously $8.0 to $8.5 billion)

Adjusted Other (Income)/Deductions(1)   Approximately $800 million

(previously approximately $1.0 billion)

Effective Tax Rate on Adjusted Income(1)   Approximately 29%
Reported Diluted EPS(2)   $1.20 to $1.30

(previously $1.09 to $1.24)

Adjusted Diluted EPS(1)   $2.24 to $2.29

(previously $2.16 to $2.26)

2012 Financial Targets(15)

For full-year 2012, Pfizer’s financial targets, at current exchange rates(16), are summarized below.

     
Reported Revenues   $62.2 to $64.7 billion
Adjusted SI&A Expenses(1)   $17.5 to $18.5 billion
Adjusted R&D Expenses(1)   $6.5 to $7.0 billion
Adjusted Other (Income)/Deductions(1)   Approximately $1.0 billion
Adjusted Operating Margin(1)   High 30%s to low 40%s
Effective Tax Rate on Adjusted Income(1)   Approximately 29%
Reported Diluted EPS(2)   $1.58 to $1.73
Adjusted Diluted EPS(1)   $2.25 to $2.35
Operating Cash Flow   At least $19.0 billion

For additional details, please see the attached financial schedules, product revenue tables, supplemental information and disclosure notice.

(1) "Adjusted Income" and its components and "Adjusted Diluted Earnings Per Share (EPS)" are defined as reported net income(2) and its components and reported diluted EPS(2) excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items. 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, and, therefore, components of the overall adjusted income measure. As described under Adjusted Income in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of Pfizer's Form 10-Q for the fiscal quarter ended July 3, 2011, management uses adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. We believe that investors' understanding of our performance is enhanced by disclosing this measure. Reconciliations of third-quarter 2011 and 2010 and the first nine months of 2011 and 2010 adjusted income and its components and adjusted diluted EPS to reported net income(2) and its components and reported diluted EPS(2), as well as reconciliations of full-year 2011 guidance and 2012 targets for adjusted income and adjusted diluted EPS to full-year 2011 guidance and 2012 targets for reported net income(2) and reported diluted EPS(2), are provided in the materials accompanying this report. The adjusted income and its components and adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. generally accepted accounting principles (GAAP) net income and its components and diluted EPS.

(2) “Reported Net Income” is defined as net income attributable to Pfizer Inc. in accordance with U.S. GAAP. “Reported Diluted EPS” is defined as reported diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.

(3) Capsugel provided capsule products and related services to the pharmaceutical and associated healthcare industries. On August 1, 2011, Pfizer completed the sale of Capsugel to an affiliate of Kohlberg Kravis Roberts & Co. L.P.

(4) In all periods presented, the results from the Capsugel(3) business are reflected in a single line, Discontinued operations - net of tax until the completion of the sale on August 1, 2011. Additionally, due to the acquisition of King Pharmaceuticals, Inc. (King), legacy King operations are reflected in the 2011 results beginning January 31, 2011. Therefore, in accordance with Pfizer’s domestic and international reporting periods, the results for the first nine months of 2011 reflect approximately eight months of King’s U.S. operations and approximately seven months of King’s international operations. Legacy King operations are not reflected in the results for the first nine months of 2010.

(5) The Primary Care unit includes revenues from human pharmaceutical products primarily prescribed by primary-care physicians, and may include, but are not limited to, products in the following therapeutic and disease areas: Alzheimer’s disease, cardiovascular (excluding pulmonary arterial hypertension), diabetes, erectile dysfunction, genitourinary, major depressive disorder, pain, respiratory and smoking cessation. Examples of products in this unit include, but are not limited to, Celebrex, Chantix, Lipitor, Lyrica, Premarin, Pristiq and Viagra. All revenues for such products are allocated to the Primary Care unit, except those generated in emerging markets(7) and those that are managed by the Established Products(8) unit.

(6) The Specialty Care unit includes revenues from human pharmaceutical products primarily prescribed by physicians who are specialists, and may include, but are not limited to, products in the following therapeutic and disease areas: anti-infectives, endocrine disorders, hemophilia, inflammation, multiple sclerosis, ophthalmology, pulmonary arterial hypertension, specialty neuroscience and vaccines. Examples of products in this unit include, but are not limited to, BeneFIX, Enbrel, Genotropin, Geodon, the Prevnar/Prevenar franchise, Rebif, ReFacto, Revatio, Xalatan, Xyntha and Zyvox. All revenues for such products are allocated to the Specialty Care unit, except those generated in emerging markets(7) and those that are managed by the Established Products(8) unit.

(7) The Emerging Markets unit includes revenues from all human prescription pharmaceutical products sold in emerging markets, including, but not limited to, Asia (excluding Japan and South Korea), Latin America, Middle East, Africa, Central and Eastern Europe and Turkey.

(8) The Established Products unit generally includes revenues from human prescription pharmaceutical products that have lost patent protection or marketing exclusivity in certain countries and/or regions. Typically, products are transferred to this unit in the beginning of the fiscal year following losing patent protection or marketing exclusivity. In certain situations, products may be transferred to this unit at a different point than the beginning of the fiscal year following losing patent protection or marketing exclusivity in order to maximize their value. This unit also excludes revenues generated in emerging markets(7). Examples of products in this unit include, but are not limited to, Arthrotec, Effexor, Medrol, Norvasc, Protonix, Relpax and Zosyn/Tazocin.

(9) The Oncology unit includes revenues from human oncology and oncology-related products. Examples of products in this unit include, but are not limited to, Aromasin, Sutent, Torisel and Xalkori. All revenues for such products are allocated to the Oncology unit, except those generated in emerging markets(7) and those that are managed by the Established Products(8) unit.

(10) Animal Health includes worldwide revenues from products to prevent and treat disease in livestock and companion animals, including, but not limited to, vaccines, parasiticides and anti-infectives. On July 7, 2011, the Company announced that it is exploring strategic alternatives for Animal Health, which may include, among others, a full or partial separation from Pfizer through a spin-off, sale or other transaction.

(11) Consumer Healthcare generally includes worldwide revenues from non-prescription medicines and vitamins and may include, but are not limited to, products in the following therapeutic categories: GI-topicals, nutritionals, pain management and respiratory. Examples of products in Consumer Healthcare include, but are not limited to, Advil, Caltrate, Centrum, ChapStick and Robitussin.

(12) Nutrition generally includes revenues from a full line of infant and toddler nutritional products sold outside the U.S. and Canada. Examples of products in Nutrition include, but are not limited to, the S-26 and SMA product lines as well as formula for infants with special nutritional needs. On July 7, 2011, the Company announced that it is exploring strategic alternatives for Nutrition, which may include, among others, a full or partial separation from Pfizer through a spin-off, sale or other transaction.

(13) Includes revenues generated primarily from Pfizer Centersource.

(14) Represents the total of Adjusted Cost of Sales(1), Adjusted SI&A expenses(1) and Adjusted R&D expenses(1).

(15) Does not assume the completion of any business-development transactions not completed as of October 2, 2011, including any one-time upfront payments associated with such transactions. Also excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of October 2, 2011. The 2011 financial guidance includes revenues and expenses related to the Capsugel(3) business as a discontinued operation through July 31, 2011. The gain on the sale of Capsugel(3) is reflected in 2011 Reported Diluted EPS(2) guidance, but is not reflected in 2011 Adjusted Diluted EPS(1) guidance.

(16) The current exchange rates assumed in connection with the 2011 financial guidance are a blend of the actual exchange rates in effect during the first nine months of 2011 and the mid-October 2011 exchange rates for the remainder of the year. The current exchange rates assumed in connection with the 2012 financial targets are the mid-October 2011 exchange rates.

 
PFIZER INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(millions, except per common share data)
             
Third Quarter % Incr. / Nine Months % Incr. /
2011   2010 (Decr.) 2011 2010 (Decr.)
Revenues $ 17,193 $ 15,995 7 $ 50,679 $ 49,703 2
Costs and expenses:
Cost of sales (a) 3,679 3,790 (3 ) 11,177 11,676 (4 )

Selling, informational and administrative expenses (a)

4,621 4,599 - 14,097 13,776 2
Research and development expenses (a) 2,188 2,188 - 6,516 6,590 (1 )
Amortization of intangible assets 1,397 1,156 21 4,168 3,972 5
Acquisition-related in-process research and development charges - - - - 74 (100 )
Restructuring charges and certain acquisition-related costs 1,101 499 121 2,474 2,090 18
Other deductions--net   538     2,349   (77 )   1,778   3,036   (41 )
Income from continuing operations before provision
for taxes on income 3,669 1,414 159 10,469 8,489 23
Provision for taxes on income   1,235     558   121   3,223   3,165   2
Income from continuing operations   2,434     856   184   7,246   5,324   36
Discontinued operations:
(Loss)/income from discontinued operations--net of tax (13 ) 26 * 39 76 (49 )
Gain/(loss) on sale of discontinued operations--net of tax 1,328     (11 ) *   1,316   (9 ) *
Discontinued operations--net of tax   1,315     15   *   1,355   67   *
Net income before allocation to noncontrolling interests 3,749 871 * 8,601 5,391 60
Less: net income attributable to noncontrolling interests 11     5   120   31   24   29
Net income attributable to Pfizer Inc. $ 3,738   $ 866   * $ 8,570 $ 5,367   60
Earnings per share - basic: (b)
Income from continuing operations attributable to
Pfizer Inc. common shareholders $ 0.31 $ 0.11 182 $ 0.92 $ 0.66 39
Discontinued operations--net of tax   0.17     -   *   0.17   0.01   *
Net income attributable to Pfizer Inc. common shareholders $ 0.48   $ 0.11   * $ 1.09 $ 0.67   63
Earnings per share - diluted: (b)
Income from continuing operations attributable to
Pfizer Inc. common shareholders $ 0.31 $ 0.11 182 $ 0.91 $ 0.66 38
Discontinued operations--net of tax   0.17     -   *   0.17   0.01   *
Net income attributable to Pfizer Inc. common shareholders $ 0.48   $ 0.11   * $ 1.08 $ 0.66   64
Weighted-average shares used to calculate earnings per common share:
Basic   7,770     8,027     7,877   8,045  
Diluted   7,810     8,057     7,925   8,079