19th Apr 2005 11:52
Pfizer Inc First-Quarter 2005 Performance Report Pfizer Delivers Steady Performance --- First-Quarter Reported Net Income of $301 Million, Reported Diluted EPS of $.04, Reflect Tax Provision for Cash Repatriation of Overseas Earnings and Charges Attributable to the Suspension of Sales of Bextra --- First-Quarter Adjusted Income* of $4.000 Billion; First-Quarter Adjusted Diluted EPS* of $.54 --- Quarter Marked by Revenue Growth of Key In-Line and New Products, New Clinical Data for Lipitor, U.S. Launch of Macugen, FDA Acceptance of Exubera Filing --- Due to Suspension of Bextra Sales and Other Factors, Pfizer Now Projects 2005 Adjusted Diluted EPS* of Approximately $1.98, Reported Diluted EPS of Approximately $1.04 --- Pfizer Expects 2005 to Be 'a Transition Year,' Double-Digit Adjusted Diluted EPS* Growth in 2006, and Accelerating Double-Digit Adjusted Diluted EPS* Growth in 2007 --- Pfizer Remains On Track to Submit an Industry-Record 20 Major U.S. Regulatory Filings in 2001-2006 NEW YORK, April 19 -- Pfizer today reported financial results for the first quarter of 2005. "Pfizer continues to deliver steady performance," said Hank McKinnell, chairman and chief executive officer. "Pfizer's revenue growth of 5 percent in the first quarter was the product of two underlying forces. One Pfizer markets the broadest array of in-line and new products in the industry. Excluding the U.S. revenues of Neurontin, Diflucan, and Accupril -- products that faced generic competition beginning in 2004 -- and total revenues of Celebrex and Bextra, Pfizer revenues for the first quarter of 2005 achieved strong double-digit growth. The other Pfizer is a business going through the natural process of reinventing itself. We are addressing the loss of exclusivity of a number of products, a situation that we have long planned for, by advancing a number of internally developed, in-licensed, and co-promoted product candidates. "As the leader of the worldwide pharmaceutical industry, Pfizer has important competitive advantages that will serve us well and distinguish us from others in our industry. The unparalleled breadth and depth of our product portfolio and pipeline clearly demonstrate the unique benefits of Pfizer's scale and our skill at leveraging the opportunities it provides us. Scale also enhances our status as 'partner of choice' with other companies who have promising product candidates and technologies, as well as giving us influence as a global purchaser of goods and services. "Our strategic and operating flexibility allows us to marshal and focus resources when and where they are needed, to change with a changing environment, and to recognize and seize emerging opportunities. And our will to succeed in the important work of improving human health remains as strong as ever," Dr. McKinnell continued. Pfizer revenues for the first quarter of 2005 grew 5 percent to $13.091 billion, compared to the first quarter of 2004, reflecting strong performances by Lipitor, Zithromax, and other product lines. Revenue growth was also due to three additional days in our fiscal calendar in the quarter as well as the weakening of the U.S. dollar relative to a number of foreign currencies, offset in part by sales declines for Celebrex and Bextra and recent generic competition in the U.S. against Neurontin, Diflucan, and Accupril. The Company's Human Health business generated revenues of $11.440 billion, up 4 percent, in the first quarter compared to the same period in 2004. Quarterly revenues of Pfizer's Consumer Healthcare business were $945 million, up 17 percent. Pfizer's Animal Health revenues increased 16 percent in the quarter to $496 million. Reported first-quarter net income of $301 million and reported diluted earnings per share of $.04 included $622 million ($.08 per share) of significant impacts of purchase accounting for acquisitions (primarily non-cash charges attributable to the acquisition of Pharmacia); merger-related costs of $151 million ($.02 per share); certain significant items of $2.955 billion ($.40 per share), which included $2.189 billion of tax expense related to the planned repatriation of $28.3 billion in overseas cash later in 2005 and $766 million of charges attributable to the suspension of sales of Bextra; and income from discontinued operations of $29 million, all on an after-tax basis. Excluding these items, adjusted income* in the first quarter of 2005 grew 1 percent relative to the prior year to $4.000 billion, and adjusted diluted EPS* in the quarter increased 4 percent to $.54, compared to the same period in 2004. Human Health Continues Industry-Leading Revenue Performance "While 2005 will be a transitional year for Pfizer, the underlying strengths that will sustain us through this period and extend our growth into the future were clearly evident in the solid first-quarter performance of the Human Health business," said Karen Katen, vice chairman and president, Pfizer Human Health. "These strengths are founded in the continued growth of many of our major in-line medicines, along with the growing contributions of our newer introductions -- growth that is driven by clinical data, continued investment in new science and clinical trials, and operational execution." First-quarter Human Health revenue growth of 4 percent, compared to the same period in 2004, was led by Lipitor (+23 percent), Aromasin (+134 percent), Camptosar (+132 percent), Detrol/Detrol LA (+22 percent), Xalatan/Xalacom (+19 percent), Zithromax (+71 percent), Zoloft (+4 percent), Zyrtec (+14 percent), and Zyvox (+47 percent), as well as newer introductions including Geodon (+56 percent), Relpax (+77 percent), Vfend (+38 percent), and Caduet (+10 percent). This solid performance across the in-line portfolio more than offset sales declines, particularly in the U.S., for Celebrex and Bextra, as well as declines for Neurontin, Diflucan, and Accupril due to generic competition. Ms. Katen continued, "Beyond the performance of our current portfolio, we continue to make significant progress in our longstanding efforts to address important health needs. Some notable achievements during the first quarter include the successful introduction in the U.S. of Macugen, a major new medicine to treat a leading cause of blindness, with the product's discoverer Eyetech Pharmaceuticals, Inc.; the approval of Vfend in Japan; the acceptance by the FDA of the filing for Exubera, potentially an important new treatment option for diabetes under co-development with sanofi-aventis and Nektar Therapeutics; significant progress in building a flow of new products to replenish and grow our portfolio, with a pipeline that now spans 149 new molecular entities and 78 product enhancement projects; the evolution of our Human Health organization to better respond to market needs and become more efficient and productive, which will also help achieve Pfizer's targeted $4 billion in annualized cost savings by 2008; and piloting new business approaches that represent solutions to some of the most urgent problems affecting current healthcare systems in the U.S. and around the world." Response to COX-2 Developments. Following the FDA decision to require boxed warnings of potential cardiovascular and gastrointestinal risk for all COX-2-specific pain relievers and all non-steroidal anti-inflammatory drugs (NSAIDs), including older non-specific drugs such as ibuprofen and naproxen, Pfizer will work with the FDA to add expanded risk information in the Celebrex label. Pfizer has accumulated extensive Celebrex clinical data over the past 10 years involving more than 40,000 patients, and we remain committed to conducting additional long-term clinical studies evaluating the benefits and risks of Celebrex. Pfizer will also work closely with the FDA to develop a guide to assist patients and their healthcare professionals in making the best decisions for treating their arthritis pain. Regarding Bextra, Pfizer has suspended its sales in the U.S. in accordance with the FDA's request. The FDA view is that Bextra's cardiovascular risk could not be differentiated from other NSAIDs. However, the agency has concluded that the additional, increased risk of rare but serious skin reactions associated with Bextra, already described in its label, warrants its withdrawal from the market. Pfizer respectfully disagrees with the FDA position regarding the overall risk/benefit profile of Bextra. However, in deference to the regulatory agency's views, the company has suspended sales of the medicine pending further discussions with the FDA. For now, patients should stop taking Bextra and contact their physicians about appropriate treatment options. In addition, at the request of European and other regulators, Pfizer has also suspended sales of Bextra in the European Union, Canada, Hong Kong, Singapore, Malaysia, South Africa, the Philippines, and Mexico. We will explore options with the regulatory agencies under which the company might be permitted to resume making Bextra available to physicians and patients. The company is in contact with other regulatory agencies around the world and will take appropriate measures based on those discussions. Strong Core Business. "While a reduced outlook for the COX-2-specific medicines and the loss of exclusivity for a number of important products will make 2005 a transition year for Pfizer, the strong performance across our broad portfolio of patent-protected medicines during the first quarter indicates that our core Human Health business remains fundamentally sound. Our portfolio of medicines is strong, with five of the world's 25 best-selling medicines, and with 11 medicines that lead their therapeutic areas," Ms. Katen continued. "We anticipate continued growth for many of our major in-line and recently launched medicines based on four major drivers: favorable demographic trends as people live longer; the outstanding need to improve quality of life as people live longer; epidemiological trends showing enormous unmet medical needs in major disease areas; and a continual stream of new clinical data demonstrating the efficacy and therapeutic value of our medicines." The ongoing strength of our major in-line medicines, many of which are fully patent-protected through 2005 and beyond, is most apparent in the performance of Lipitor. After eight years on the market, it continues double-digit growth off the largest base of any pharmaceutical medicine ever. Lipitor had first-quarter revenue of $3.075 billion, ahead 23 percent compared to the same period in 2004, and showed strong growth in market share and prescription volume worldwide. Its ongoing success is based on ever-expanding clinical evidence reinforcing unmatched efficacy and safety. This includes the most recent results from the Treating to New Targets (TNT) study. TNT found that intensive therapy with Lipitor 80 mg can reduce cholesterol and cardiovascular events to among the lowest levels ever achieved in the history of statin trials, with a safety profile comparable to that of lower-dose Lipitor therapy. These results take the treatment of cholesterol to new frontiers, while also reinforcing data from the ASCOT, CARDS, and PROVE-IT studies -- which have all demonstrated early and significant improvement in cardiovascular outcomes. Norvasc first-quarter revenue reached $1.175 billion and is ahead 3 percent compared to the same period in 2004 -- a reduced rate of growth that is attributable in part to loss of exclusivity in several E.U. countries. Its performance in the U.S. continues to be strong, with 11 percent growth in the first quarter, and its new-prescription growth in the U.S. continues to exceed that of the cardiovascular market. The longstanding leadership of Norvasc in the antihypertensive market, based on its excellent safety and efficacy, has been reinforced by recent clinical trials, such as ASCOT, that demonstrate and extend evidence regarding the outstanding effectiveness of Norvasc. Zithromax performance was strong in the first quarter of 2005, based on its clear benefits as well as an active flu season. It achieved $797 million in first-quarter revenue, ahead 71 percent compared to the same period in 2004. Pfizer has filed with the FDA a single-dose Zmax formulation, which would represent a valuable extension of this important medicine. It offers a one-time antibiotic course of therapy that will improve compliance by allowing directly observed therapy in the presence of a healthcare provider. With $438 million in first-quarter revenue, ahead 5 percent compared to the same period in 2004, Viagra is maintaining its market leadership in the face of competition due to its unique functional and emotional benefits. Additional growth opportunities for this medicine are expected to result from new clinical data and sales and marketing efforts that encourage more men to see their healthcare provider. In December, Pfizer submitted a regulatory filing for Revatio, which has the same active ingredient (sildenafil) as Viagra, for treatment for pulmonary arterial hypertension in the U.S., E.U., and other markets. The FDA accepted the Revatio application for priority review. The strong performance of Camptosar during the first quarter, with revenue of $212 million, ahead 132 percent compared to the same period in 2004, is due to clear clinical evidence that using Camptosar as standard first-line treatment in advanced colorectal cancer results in improved survival for patients, as well as Pfizer's acquisition of rights to this gold-standard medicine in Europe and Asia (except Japan) in 2004. In the U.S., which represents approximately half of total Camptosar worldwide sales, revenue was ahead 30 percent in the first quarter. Camptosar continues to show strong growth as second- and third-line advanced colorectal cancer therapy, and we anticipate that new clinical data establishing its efficacy in the first-line setting will accelerate its growth there as well. Among other major in-line medicines, Xalatan/Xalacom achieved first-quarter revenue of $333 million, ahead 19 percent compared to the same period in 2004, as well as strong market performance in both new and total prescriptions. Xalatan is the most-prescribed branded glaucoma medicine in the world. Clinical data showing its advantages in treating intra-ocular pressure compared with beta blockers should support the continued growth of this important medicine. Zyrtec revenue reached $342 million, ahead 14 percent compared to the same period in 2004, and it continues to be the most-prescribed antihistamine agent in the U.S. in a challenging market. Zyrtec has the broadest range of formulations and treats patients as young as six months old. Zyrtec received a warning letter from the FDA on April 13, 2005, addressing three print consumer advertisements. Pfizer will respond to the FDA in the requested timeframe. Worldwide Zoloft sales reached $845 million, ahead 4 percent compared to the same period in 2004. It has been the number-one prescribed antidepressant in the U.S. since 2000. A large body of clinical data supports the safety and effectiveness of Zoloft. In addition, recently launched medicines are increasing their revenue contributions, with additional growth anticipated based on new clinical data and increasing market acceptance. Lyrica, one of Pfizer's newly launched medicines in the U.K., Germany, and Mexico, is showing strong performance in its first year on the market. It is experiencing rapid uptake, with more than an 8 percent revenue share of the total anti-epileptic market in Germany, and more than a 5 percent share in the U.K, after just five months on the market. This early success indicates the clear benefits offered by Lyrica, including its efficacy, with rapid, robust, and sustained pain reduction across the entire dosing range; its tolerability; and its ease of use. New clinical data from studies presented at the American Pain Society meeting last month further support the efficacy of Lyrica in easing neuropathic pain in difficult-to-treat patients, such as those with spinal-cord injury, and those who have not received adequate relief from other therapeutic agents. In the U.S., Lyrica is approved for the two most common forms of neuropathic pain -- diabetic peripheral neuropathy and post-herpetic neuralgia -- and it is expected to be launched later in 2005. Among other recently introduced products with strong first-quarter performance, Vfend revenue reached $88 million, ahead 38 percent compared to the same period in 2004. Approval of the new candidemia indication in December 2004 will further strengthen its position in the high-risk market of patients at risk for both mold and yeast infections, as Vfend is the only intravenous/oral antifungal with first-line indications for both these infections. Vfend also received approval in April 2005 in Japan, which is the world's second largest antifungal market, for a broad first-line antifungal indication. Geodon continues to outperform the market, with revenue of $138 million in the first quarter, ahead 56 percent compared to the same period in 2004. Its recently launched bipolar mania indication has expanded the pool of patients who can benefit from this important medicine. The market is accepting its very distinct benefits, including its efficacy, dosing flexibility, and favorable metabolic and weight-gain profile compared to older agents. Pfizer, along with other manufacturers of atypical antipsychotics, recently received a request from the FDA to add a black-box warning to the Geodon label regarding an increased mortality risk in patients with dementia-related psychosis. The proposed new labeling is based on data from 17 placebo-controlled clinical trials of other atypical antipsychotic agents in patients with dementia-related psychosis. Geodon is not approved for use in this patient population. Revenue for Relpax of $53 million in the first quarter was ahead 77 percent compared to the same period in 2004, and it continues to gain market share in the $2.3 billion global oral triptan market. It is outperforming the overall triptan market in the U.S., with the fastest rates of growth in both new and total prescriptions (65 percent and 87 percent, respectively). Despite being the sixth medicine to the market, the clear benefits Relpax offers have driven its growth to be the number-one triptan in switch prescriptions and number-two in new-to-market prescriptions, behind only Imitrex. The migraine market continues to represent a large untapped growth opportunity for Relpax, with diagnosis rates below 50 percent and treatment rates below 20 percent. A Promising Pipeline. Beyond the in-line portfolio, Pfizer has also assembled a range of late-stage pipeline candidates through our internal R&D and external product sourcing activities that have significant promise for replenishing and expanding our future portfolio of medicines. Many of these candidates target disease areas with significant unmet medical needs. For example, indiplon is for the treatment of patients with insomnia -- a condition that the National Sleep Association estimates affects at least 70 million Americans, with potentially another 75 million coping with minor sleeping disorders. Oporia (lasofoxifene) is for the treatment of osteoporosis, which affects around 10 million Americans and results in an annual economic cost of about $14 billion, not to mention the huge toll on health from 300,000 hip fractures a year caused by untreated osteoporosis. Exubera is for the treatment of patients with diabetes, the sixth-leading cause of death in the U.S. with over 50,000 deaths annually. Ms. Katen noted, "These statistics are startling. They certainly highlight the urgency of getting our new medicines to the market as important new treatment options for patients and their caregivers. Our research and development organization is well on its way to delivering these and many other important new medicines from our labs to the market." "The first quarter of 2005 was again productive for Pfizer R&D," said Dr. John LaMattina, President, Pfizer Global Research and Development. "Pfizer's development pipeline continues to grow and now includes 149 new molecular entities and 78 product enhancement projects. Our discovery research engine is reliably generating new development substrate, advancing ten new candidates into pre-clinical development during just the first quarter. Research and early development output is augmented by an active licensing and technology alliance effort that is completing deals at a pace of one every two weeks. The advanced development pipeline, including key compounds such as Sutent, varenicline, maraviroc (UK-427,857), asenapine, torcetrapib/ atorvastatin, and Daxas, continues to progress. We expect to achieve our goal of filing 20 U.S. regulatory filings in the five-year period ending in 2006, or about one new filing per quarter. "Our productivity initiative to better utilize our wide-ranging R&D capabilities is proceeding on schedule," Dr. LaMattina continued. "We are maintaining a clear focus on key objectives -- increasing R&D productivity while operating at ever higher levels of efficiency." Specific R&D highlights during the first quarter include the following: * The FDA accepted the New Drug Application (NDA) filing for Exubera, or inhaled insulin. In Europe, review of the Marketing Authorization Application for Exubera is actively proceeding. * A revised NDA for Lyrica for the treatment of add-on epilepsy was submitted to the FDA. Lyrica was approved by the FDA in 2004 for the treatment of diabetic peripheral neuropathy and post-herpetic neuralgia and will be launched in the U.S. for these indications, pending the completion of a scheduling designation by the U.S. Department of Health and Human Services and the U.S. Drug Enforcement Administration. * A supplemental NDA was approved for Depo-subQ Provera for treatment of endometriosis pain. * The development program for Sutent, a multi-targeted tyrosine kinase inhibitor for potential treatment of gastrointestinal stromal tumors, renal cell carcinoma, and breast cancer, was accelerated when an independent data safety monitoring board halted pivotal Phase 3 trials seven months early because a statistically significant efficacy endpoint was successfully achieved. Important new-product sourcing deals that have been completed in the first quarter include the acquisition of Idun Pharmaceuticals, a biopharmaceutical company that we agreed to acquire during February of this year. Idun is focused on the discovery and development of therapies to control caspase activity. Their lead compound, IDN-6556, is a first-in-class pan-caspase inhibitor, currently in clinical trials to treat liver disease and hepatitis C infection. In addition, Pfizer reached a collaborative research and license agreement with Rigel Pharmaceuticals for the development of inhaled products for treating allergic asthma and other respiratory diseases; entered an agreement with LifeSpan Biosciences to develop an automated pathology system for rapid and accurate evaluation of tissue specimens in preclinical studies; and gained an exclusive license from Coley Pharmaceuticals to develop, manufacture, and commercialize Coley's ProMune (CPG 7909), a toll-like receptor (TLR 9) agonist delivered by subcutaneous injection for the potential treatment, control, and prevention of cancers in humans. Streamlining Business to Improve Performance and Efficiency. Ms. Katen continued, "Beyond extensive efforts in the Human Health organization to support our business performance through growing our current portfolio and supporting the medicines that will create our future portfolio, we are also focused on targeting our resources toward activities that are most vital to ensuring the continued success of our pharmaceutical operations. Various efforts are underway across our Human Health organization to accomplish this, including the realignment of our U.S. field force, already long recognized as the industry's best in quality and productivity, in response to a changing promotional environment." Other organizational changes include the continued implementation of Pfizer Global Manufacturing's (PGM's) Plant Network Strategy, initiated after the Pharmacia acquisition in 2003 to assure that our global manufacturing plant network is in close alignment with Pfizer's current and future product supply requirements. Recent announcements include the divestment of facilities in Augusta, Georgia; Holland, Michigan; Angers and Val-de-Reuil, France; and Morpeth, U.K.; and the restructuring of facilities in Arecibo, Caguas, and Cruce Davila, Puerto Rico, and Sandwich, U.K. Pfizer is also working to better realize the strategic advantages and meet the efficiency goals of our unmatched global research and development organization, which, with an annual investment in 2005 of approximately $8 billion -- or more than $20 million a day -- make it one of the world's largest research institutions. Some actions include concentrating certain operational functions such as bio-imaging in selected "centers of emphasis"; considering the potential benefits of sourcing certain tasks in lower-cost environments; streamlining our wide-ranging sample and clinical supply network; implementing more efficient clinical-study designs; and continuing to fully leverage our scale advantage in procurement. New Approaches to Healthcare Delivery. "Beyond efforts to improve our internal operational efficiencies, we are implementing a series of initiatives that respond to the most urgent constraints on our continued vitality as a pharmaceutical innovation business," Ms. Katen said. "These pressures are grounded in concerns about the cost of, and access to, medicines; a deep-seated mistrust of some industry practices; and strained healthcare systems that are increasingly unable to finance quality care delivery. "We recognize the urgent need to expand how we provide value to stakeholders beyond medicines. We are moving toward that goal by extending our tradition of innovation to the entire process of getting new medicines to the people who need them, effectively and efficiently. By doing so, we believe that we will ultimately both enhance our leadership in health and protect our future in pharmaceutical innovation." To that end, our efforts include: Expanding Easy Access to Affordable Medicines. Pfizer already has among the industry's most comprehensive, generous, and easy-to-use access programs for uninsured and low-income patients. We are now focused on expanding, and enrolling more people in, these programs through community-based outreach efforts and by participating in Partnership for Prescription Assistance, a new industry-wide umbrella program created by the Pharmaceutical Research and Manufacturers of America. Piloting New Models of Care. We are developing and implementing a series of initiatives to address inefficiencies in healthcare, both in the U.S. and around the world. These are all based on the fundamental premise that better health at lower costs is possible through patient-centered and integrated care delivery that is focused on prevention, early intervention, and appropriate use of medicines. These initiatives include our first model, the Florida: A Healthy State program; its expansion to several European markets; the redesign of Pfizer's own employee healthcare program in the U.S. to be focused more on health and well-being; and our new Green Ribbon Health program in partnership with Humana to provide care-management services to approximately 20,000 Medicare patients in Florida with congestive heart failure, diabetes, or both. "While it will undoubtedly take time for these efforts to deliver results, we are confident in their ultimate success because they all have one primary purpose: serving patients. Meeting the needs of patients and establishing the value of health will also serve the best interests of the public, of our communities, of our business, and ultimately of all our stakeholders," Ms. Katen concluded. Pfizer Provides Revised Financial Guidance for 2005-07 David Shedlarz, vice chairman, noted, "In the first quarter, Pfizer performed well, and the company's long-term prospects remain strong. "We expect 2005 to be a transition year for Pfizer due to a number of factors. Results in 2005 are being, and will continue to be, impacted by loss of U.S. exclusivity of four major products -- Diflucan, Neurontin, and Accupril during 2004 and Zithromax in 2005. Revenues also have been, and will continue to be, impacted by publicity and regulatory actions regarding COX-2-selective inhibitors. Full-year revenues are expected to be substantially unchanged from 2004, as growth from other product lines generally offsets these factors. The suspension of sales of Bextra in the U.S., E.U., and other markets in early April is expected to reduce our previously announced targeted full-year 2005 adjusted and reported diluted EPS* by approximately $.05 per share. Bextra asset write-offs are expected to reduce our previously announced targeted full-year 2005 reported diluted EPS by an additional $.10 per share. However, 2005 results are no longer expected to be impacted by the adoption of new accounting regulations relating to the expensing of stock options, pursuant to a deferral in the implementation date of the new regulations, as announced by the SEC last week. These regulations had been expected to result in an after-tax expense reducing 2005 adjusted and reported diluted EPS* by $.03 per share. Pfizer expects to implement SFAS 123R regarding expensing of stock options as of January 1, 2006. From an efficiency perspective, in 2005 we continue to anticipate Pharmacia merger-related synergies of $4.2 billion this year, an increase of $600 million over 2004 Pharmacia merger-related synergies. Pfizer will also achieve modest cost savings during 2005 from its newly announced productivity initiative. Given these and other factors, we expect 2005 adjusted income* of approximately $14.7 billion, adjusted diluted EPS* of approximately $1.98 per share, reported income of approximately $7.7 billion, and reported diluted EPS of approximately $1.04 per share, subject to the Disclosure Notice in this report. "The differences between targeted 2005 adjusted income* and adjusted diluted EPS* and 2005 reported income and reported diluted EPS are attributable to anticipated non-cash charges of $2.6 billion ($.36 per share) relating to purchase accounting for the acquisition of Pharmacia and an in-process research and development charge relating to our recently completed acquisition of Idun Pharmaceuticals, Inc.; merger-related and restructuring costs of $1.4 billion ($.18 per share), which include both Pharmacia-related charges and charges related to the recently announced planned productivity initiative; and charges relating to the suspension of sales of Bextra of $.8 billion ($.10 per share), all on an after-tax basis. In addition, reported net income for 2005 will include a tax charge of $2.2 billion ($.30 per share) relating to the cash repatriation of foreign earnings in 2005, with a possible subsequent reduction of this charge by about $850 million, due to anticipated technical corrections legislation. All of these estimates are subject to the variables cited in the Disclosure Notice found in this report. "We will sustain both the capability and will to make those investments necessary to support long-term growth. Pfizer's financial strength remains unprecedented and will be enhanced by the cash repatriation of $28.3 billion in foreign earnings during this year. With the current quarterly dividend of $.19 per share, which is 12 percent higher than last year, we are continuing the company's commitment to strong growth in dividends, both today and in the future. We will accelerate and complete our current share-purchase program in the second quarter by purchasing approximately $2.4 billion of the company's stock in this quarter, and early in the second half we will consider additional opportunities to purchase the company's stock. "A number of factors are expected to drive a return to double-digit adjusted earnings* growth in 2006. We are undertaking a new, broad-based, multi-year productivity initiative to increase efficiency and effectiveness of all operations company-wide. Annual savings are projected to total $4 billion by 2008. Improved revenue performance is also anticipated, as many of our in-line products continue to grow, we experience renewed growth of Celebrex, and the contribution of new products increases. "Revenue growth, enhanced by continuing productivity initiatives, is expected to drive a strong 2007, when we anticipate accelerating double-digit adjusted earnings* growth," Mr. Shedlarz concluded. "Several factors affected first-quarter results, including several unique to the quarter," said Alan Levin, chief financial officer. "Revenue growth benefited from strong performances of many major in-line medicines, as well as three additional days in our fiscal calendar compared to the first quarter of 2004. Cost of sales as a percentage of revenues in the first quarter of 2005 was adversely impacted by changes in production volume, as well as geographic, segment, and product mix, reflecting the loss of exclusivity of certain major products in the U.S. and lower year-over-year sales of COX-2 products, compared to the first quarter of 2004, and charges for write-offs of inventory related to the suspension of Bextra sales. Cost of sales as a percentage of revenues will remain under pressure in 2005. R&D spending increased 7 percent in the quarter, reflecting the advancement of our pipeline products. Full-year R&D spending is expected to be approximately $8 billion. Finally, the effective tax rate on adjusted income* increased to 23 percent, reflecting changes in geographic and product mix. "In connection with the decision to suspend sales of Bextra, we recorded certain charges totaling $1.213 billion ($766 million, net of tax) in the first quarter of 2005. These pre-tax charges included $1.145 billion relating to the impairment of Bextra's intangible assets for developed technology rights, $10 million related to the write-off of machinery and equipment, $56 million in write-offs of inventory, and $2 million relating to the costs of administering the suspension of sales. In addition, we recorded in the first quarter of 2005 a net charge of $71 million, substantially against revenues, for estimated customer returns of Bextra." Pfizer Expands Patient-Access And Corporate-Citizenship Initiatives During the first quarter of 2005, Pfizer continued its mission to expand patient access to medicines and to demonstrate good corporate citizenship. In the aftermath of the tsunami disaster, Pfizer has donated approximately $60 million (at wholesale price) of antibiotics, antifungal medicines, and other health products to local and international relief organizations operating in the Asian region. We are partnering with the United Nations by sending Pfizer experts in supply-chain management to the affected areas to support the U.N.-led relief efforts. We have also sent more colleagues to lend support in areas of critical need, such as water purification. In February, Pfizer also convened a first-ever conference for healthcare professionals from tsunami-affected countries in managing post-traumatic stress disorder. The company also is working closely with medical associations and the Ministry of Public Health in Thailand to build local mental-health treatment capacity through programs to train local health professionals, including nurses, social workers, and psychologists, and other community leaders. In Indonesia, Pfizer has pledged more than $600,000 to establish a Public Health Laboratory to monitor potential infectious-disease outbreaks in the disaster-affected region. The laboratory will become a permanent component of the provincial health infrastructure in Banda Aceh as services are re-established following the emergency relief period. In addition to these activities, Pfizer employees have committed personal funds totaling more than $2 million to non-profit organizations assisting in the relief effort, with Pfizer and the Pfizer Foundation providing matching support. Pfizer Has the Capabilities to Meet the Challenges Ahead "Pfizer today faces a paradox," Dr. McKinnell concluded. "On the one hand, the opportunities for bringing innovative, life-saving medicines to the world's patients have never been greater. On the other hand, the challenges for innovative companies like Pfizer have also never been greater. But Pfizer has faced important challenges before and has always addressed them with energy and resolve and emerged a stronger company. Pfizer has a dynamic organization of dedicated colleagues to navigate the challenges that lie ahead, and I appreciate all their efforts. I am confident that Pfizer's people, equipped with our innovative products and unsurpassed capabilities, will rise to the occasion once again and propel our company to long-term success." For additional details, please see the attached financial schedules, product revenue tables, and supplemental information. DISCLOSURE NOTICE: The information contained in this document and the attachments is as of April 19, 2005. The Company assumes no obligation to update any forward-looking statements contained in this document and the attachments as a result of new information or future events or developments. This document and the attachments contain forward-looking information about the Company's financial results and estimates, business prospects, and products in research that involve 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," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Among the factors that could cause actual results to differ materially are the following: the success of research and development activities; decisions by regulatory authorities regarding whether and when to approve our drug applications as well as their decisions regarding labeling and other matters that could affect the commercial potential of our products; the impact of the FDA's decision to require a boxed warning including expanded risk information in the Celebrex label; final actions relating to Celebrex that may be taken by the European Medicines Evaluation Agency following its review of the benefits and risks of COX-2-specific inhibitor medicines; the speed with which regulatory authorizations, pricing approvals, and product launches may be achieved; competitive developments affecting our current growth products; the ability to successfully market both new and existing products domestically and internationally; difficulties or delays in manufacturing; trade buying patterns; the ability to meet generic and branded competition after the loss of patent protection for our products; trends toward managed care and healthcare cost containment; possible U.S. legislation or regulatory action affecting, among other things, pharmaceutical pricing and reimbursement, including under Medicaid and Medicare, the importation of prescription drugs that are marketed outside the U.S. and sold at prices that are regulated by governments of various foreign countries, and the involuntary approval of prescription medicines for over-the-counter use; the potential impact of the Medicare Prescription Drug, Improvement and Modernization Act of 2003; legislation or regulations in markets outside the U.S. affecting 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; legal defense costs, insurance expenses, settlement costs, and the risk of an adverse decision or settlement related to product liability, patent protection, governmental investigations, 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 tax obligations; changes in generally accepted accounting principles; any changes in business, political, and economic conditions due to the threat of future 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 mix; and the impact of acquisitions, divestitures, restructurings, product withdrawals, and other unusual items, including our ability to integrate and to obtain the anticipated results and synergies from our acquisition of Pharmacia, and our ability to realize the projected benefits of the multi-year productivity initiative announced on April 5, 2005. A further list and description of these 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, 2004, and in its periodic reports on Forms 10-Q and 8-K. * "Adjusted income" and "adjusted diluted earnings per share (EPS)" are defined as reported net income and reported diluted earnings per share excluding discontinued operations, significant impacts of purchase accounting for acquisitions, merger-related costs, and certain significant items. A reconciliation to reported net income and reported diluted EPS is provided within this document. PFIZER INC AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (millions of dollars, except per common share data) First Quarter % Incr./ 2005 2004 (Decr.)* Revenues $ 13,091 $ 12,487 5 Costs and expenses: Cost of sales 2,191 1,794 22 Selling, informational and administrative expenses 4,085 3,933 4 Research and development expenses 1,764 1,649 7 Amortization of intangible assets 882 823 7 Merger-related in-process research and development charges 2 955 (100) Merger-related costs 219 247 (11) Other (income)/deductions--net 1,038 (43) ** Income from continuing operations before provision for taxes on income and minority interests 2,910 3,129 (7) Provision for taxes on income 2,635 809 226 Minority interests 3 2 31 Income from continuing operations 272 2,318 (88) Discontinued operations: Income/(loss) from discontinued operations--net of tax (12) 13 ** Gains on sales of discontinued operations--net of tax 41 - - Discontinued operations--net of tax 29 13 125 Net income $ 301 $ 2,331 (87) Earnings per common share - Basic: Income from continuing operations $.04 $.31 (87) Discontinued operations--net of tax - - - Net income $.04 $.31 (87) Earnings per common share - Diluted: Income from continuing operations $.04 $.30 (87) Discontinued operations--net of tax - - - Net income $.04 $.30 (87) Weighted-average shares used to calculate earnings per common share: Basic 7,415.9 7,586.4 Diluted 7,473.8 7,678.5 * - Percentages may reflect rounding adjustments. ** - Calculation not meaningful. 1. The above financial statement presents the three-month periods ended April 3, 2005 and March 28, 2004. Subsidiaries operating outside the United States are included for the three-month periods ended February 27, 2005 and February 22, 2004. 2. The financial results for the three-month period ended April 3, 2005 are not necessarily indicative of the results which ultimately might be achieved for the current year. 3. For selected variance explanations, see accompanying Pfizer Inc Supplemental Information. PFIZER INC AND SUBSIDIARY COMPANIES RECONCILIATION FROM REPORTED INCOME AND EARNINGS PER SHARE TO ADJUSTED INCOME AND ADJUSTED EARNINGS PER SHARE (UNAUDITED) (millions of dollars, except per common share data) First Quarter % Incr./ (Decr.) 2005 2004 Reported net income $ 301 $ 2,331 (87) Discontinued operations--net of tax (29) (13) 125 Purchase accounting adjustments--net of tax 622 1,513 (59) Merger-related costs--net of tax 151 126 20 Certain significant items--net of tax 2,955 19 M+ Adjusted Income $ 4,000 $ 3,976 1 Reported diluted earnings per common share $.04 $.30 (87) Discontinued operations--net of tax - - - Purchase accounting adjustments--net of tax .08 .20 (60) Merger-related costs--net of tax .02 .02 - Certain significant items--net of tax .40 - - Adjusted diluted earnings per common share $.54 $.52 4 ** - Calculation not meaningful. M+ - Change greater than one thousand percent. Certain amounts and percentages may reflect rounding adjustments. 1. The above financial information presents the three-month periods ended April 3, 2005 and March 28, 2004. Subsidiaries operating outside the United States are included for the three-month periods ended February 27, 2005 and February 22, 2004. 2. Adjusted Income and Adjusted diluted earnings per common share as shown above reflect the following items: (millions of dollars) First Quarter 2005 2004 Discontinued operations, pre-tax: Loss/(income) from discontinued operations (a) $ 18 $ (20) Gains on sales of discontinued businesses and product lines (a) (65) - Total discontinued operations, pre-tax (47) (20) Income taxes 18 7 Total discontinued operations-- net of tax (29) (13) Purchase accounting adjustments, pre-tax: In-process research and development charges (b) 2 955 Intangible amortization and other (c) 851 803 Sale of acquired inventory written up to fair value (d) 4 - Total purchase accounting adjustments, pre-tax 857 1,758 Income taxes (235) (245) Total purchase accounting adjustments-- net of tax 622 1,513 Merger-related costs, pre-tax: Integration costs -- Pharmacia (e) 102 101 Integration costs -- Other (e) 4 3 Restructuring charges -- Pharmacia (e) 113 143 Total merger-related costs, pre-tax 219 247 Income taxes (68) (121) Total merger-related costs--net of tax 151 126 Certain significant items, pre-tax Costs associated with the suspension of selling Bextra (f) 1,213 - Operating results of divested legacy Pharmacia research facility (g) - 32 Total certain significant items, pre-tax 1,213 32 Income taxes (447) (13) Tax impact for the repatriation of foreign earnings (h) 2,189 - Total certain significant items-- net of tax 2,955 19 Total discontinued operations, purchase accounting adjustments, merger-related costs and certain significant items--net of tax $ 3,699 $ 1,645 (a) Included in Discontinued operations--net of tax. (b) Included in Merger-related in-process research and development charges. (c) Included primarily in Amortization of intangible assets. (d) Included in Cost of sales. (e) Included in Merger-related costs. (f) Included in Cost of sales ($56 million), Selling, informational and administrative expenses ($2 million) and Other (income)/deductions- net ($1,155 million). (g) Included in Research and development expenses. (h) Included in Income taxes. PFIZER INC SEGMENT/PRODUCT REVENUES FIRST QUARTER 2005 (UNAUDITED) (millions of dollars) QUARTER-TO-DATE WORLDWIDE U.S. INTERNATIONAL % % % 2005 2004 Chg 2005 2004 Chg 2005 2004 Chg TOTAL REVENUES 13,091 12,487 5 6,976 7,149 (2) 6,115 5,338 15 HUMAN HEALTH 11,440 11,041 4 6,206 6,462 (4) 5,234 4,579 14 - CARDIOVASCULAR AND METABOLIC DISEASES 4,726 4,186 13 2,566 2,266 13 2,160 1,920 12 LIPITOR 3,075 2,497 23 1,913 1,573 22 1,162 924 26 NORVASC 1,175 1,141 3 540 489 11 635 652 (3) CARDURA 153 148 4 1 3 (44) 152 145 4 ACCUPRIL/ ACCURETIC 100 191 (47) 29 125 (77) 71 66 7 CADUET 31 28 10 30 28 6 1 0 - - CENTRAL NERVOUS SYSTEM DISORDERS 1,591 1,947 (18) 954 1,380 (31) 637 567 13 ZOLOFT 845 810 4 661 644 3 184 166 10 NEURONTIN 182 696 (74) 56 570 (90) 126 126 (1) GEODON 138 88 56 112 72 56 26 16 53 XANAX/XR 102 86 19 34 25 33 68 61 13 ARICEPT* 85 71 19 0 0 - 85 71 19 RELPAX 53 30 77 32 16 97 21 14 54 LYRICA 20 0 - 0 0 - 20 0 - - ARTHRITIS AND PAIN 637 1,176 (46) 328 828 (60) 309 348 (11) CELEBREX 411 769 (47) 265 558 (53) 146 211 (31) BEXTRA 56 270 (79) 18 244 (93) 38 26 43 - INFECTIOUS AND RESPIRATORY DISEASES 1,482 1,234 20 883 723 22 599 511 17 ZITHROMAX 797 466 71 632 335 89 165 131 25 ZYVOX 143 97 47 104 73 42 39 24 62 DIFLUCAN 138 304 (55) 6 176 (97) 132 128 4 VFEND 88 64 38 34 27 28 54 37 45 - UROLOGY 702 636 11 415 371 12 287 265 9 VIAGRA 438 416 5 230 220 4 208 196 6 DETROL/ DETROL LA 252 206 22 180 145 24 72 61 18 - ONCOLOGY 479 312 54 164 125 31 315 187 69 CAMPTOSAR 212 91 132 104 81 30 108 10 891 ELLENCE 90 80 13 18 17 9 72 63 14 AROMASIN 55 24 134 20 4 463 35 20 77 - OPHTHALMOLOGY 333 279 19 105 99 5 228 180 27 XALATAN/ XALACOM 333 279 19 105 99 5 228 180 27 - ENDOCRINE DISORDERS 257 219 17 88 79 11 169 140 20 GENOTROPIN 203 179 13 63 58 9 140 121 15 - ALL OTHER 991 908 9 561 507 11 430 401 7 ZYRTEC/ ZYRTEC-D 342 299 14 342 299 14 0 0 - - ALLIANCE REVENUE (Aricept, Macugen, Mirapex, Rebif and Spiriva) 242 144 68 142 84 69 100 60 67 CONSUMER HEALTHCARE 945 804 17 483 416 16 462 388 19 ANIMAL HEALTH 496 428 16 219 199 10 277 229 21 OTHER ** 210 214 (2) 68 72 (6) 142 142 1 * - Represents direct sales under license agreement with Eisai Co., Ltd. ** - Includes Capsugel and Pfizer CenterSource. Certain amounts and percentages may reflect rounding adjustments. Certain prior year data have been reclassified to conform to the current year presentation. PFIZER INC SUPPLEMENTAL INFORMATION SHARES OUTSTANDING AND EPS INFORMATION: 1Q05 1Q04 Shares Outstanding (millions) - Basic EPS 7,415.9 7,586.4 Basic EPS $.04 $.31 Adjusted Basic EPS* $.54 $.52 Shares Outstanding (millions) - Diluted EPS 7,473.8 7,678.5 Diluted EPS $.04 $.30 Adjusted Diluted EPS* $.54 $.52 QUESTIONS: PRODUCT PERFORMANCE / NEW PRODUCT DEVELOPMENT CARDIOVASCULAR / METABOLIC / ENDOCRINE Q1) How is Lipitor performing? A1) Worldwide sales of Lipitor totaled $3.075 billion in the first quarter of 2005, reflecting growth of 23% compared to the same period in 2004. Lipitor is the best-selling pharmaceutical product of any kind in the world and the industry's first $10 billion product. Lipitor's full-year 2004 growth outpaced the lipid- lowering market in both sales and unit volume worldwide. Lipitor's strong worldwide performance is supported by the continued strong performance in the U.S. market. Year-to-date U.S. new prescriptions for Lipitor grew 11%, setting the pace in a strong growth market. This impressive performance can be attributed to the safety and efficacy profiles of Lipitor, including demonstrated strong cholesterol reduction, a proven cardiovascular (CV) outcomes benefit, and safety for patients across the full dosing range in more than 400 ongoing and completed clinical trials involving more than 80,000 patients and in 100 million patient years of experience. Also supporting this impressive performance are new groundbreaking clinical data, more aggressive treatment guidelines, and increased promotion within the category. Lipitor has a growing body of evidence demonstrating benefit to patients by impacting disease progression and by reducing heart attacks and strokes (the ASCOT, CARDS, REVERSAL, PROVE-IT, and ALLIANCE clinical trials). Emerging results from a new clinical study -- Treating to New Targets (TNT) -- were reported at the American College of Cardiology on March 8. These results take the treatment of high cholesterol to new frontiers, while also reinforcing data from the ASCOT, CARDS, and PROVE-IT studies, which all demonstrated early and significant improvement in cardiovascular outcomes. TNT is an innovative and important landmark outcomes study that investigated the CV benefit of lowering LDL cholesterol well below current guidelines in patients with coronary heart disease (CHD). It is the largest and longest clinical trial of its kind. TNT found that intensive lipid- lowering therapy with Lipitor 80 mg in patients with stable CHD provides significant clinical benefit beyond that afforded by treatment with Lipitor 10 mg. This five-year trial builds on the well-established safety profile of Lipitor 80 mg, demonstrating musculoskeletal safety comparable to the 10 mg dose. The TNT results have been published online in the New England Journal of Medicine and will appear in its April print issue. There continues to be an opportunity for further growth of the cholesterol-lowering market. Of the tens of millions of people around the world who need medical therapy for high cholesterol, only about one third are actually receiving treatment. Worldwide, millions of people with high cholesterol are not diagnosed, are not treated, or are treated with a dose inadequate to achieve their cholesterol goals. Evolving treatment guidelines continue to encourage the broad use of statin therapy. Q2) How is Caduet performing? A2) Worldwide sales of Caduet totaled $31 million in the first quarter of 2005, reflecting growth of 10% compared to the same period in 2004. The market performance of Caduet in the U.S. continues to improve. U.S. sales of Caduet doubled, and weekly new-prescription volume increased 27%, in the first quarter of 2005 versus the fourth quarter of 2004. Momentum continues to grow behind Caduet due to increased product awareness and acceptance by physicians. The FDA approved Caduet in January 2004, and Pfizer launched the product in the U.S. in May. The first E.U. filing was submitted in France, the reference member state for Caduet, in the fourth quarter of 2003. We will be pursuing E.U. approvals through the mutual recognition process. Caduet has been launched in Mexico and has been approved in ten additional countries throughout Latin America and Asia. Caduet provides an opportunity to address simultaneously two of the most common risk factors of cardiovascular disease with the world's most prescribed branded blood-pressure medication -- Norvasc -- and lipid-lowering medication -- Lipitor -- in one pill. In September 2004, the FDA approved changes to the prescribing information for Lipitor and Caduet to include prevention of cardiovascular disease. The results of the Anglo-Scandinavian Cardiac Outcomes Trial-Lipid Lowering Arm (ASCOT-LLA) bring a critical new insight into the management of hypertensive patients -- that hypertensive patients benefit from Lipitor in addition to blood-pressure -- lowering therapy. In December 2004, Pfizer announced that the independent ASCOT steering committee had decided to stop the study in its entirety due to favorable benefits being seen in patients receiving the Norvasc- based treatment regimen. Preliminary results were presented at the American College of Cardiology (ACC) meeting on March 8, 2005. The fully analyzed ASCOT results are anticipated later in 2005. The clinical benefits of Caduet are reinforced by these positive results from Norvasc as well as those for Lipitor, including the results of the Treating to New Targets study that were also presented at the ACC meeting. These robust scientific data coRelated Shares:
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