PFIZER REPORTS FOURTH-QUARTER AND FULL-YEAR 2018 RESULTS

January 29, 2019 6:45 AM

PROVIDES 2019 FINANCIAL GUIDANCE

NEW YORK--(BUSINESS WIRE)-- Pfizer Inc. (NYSE: PFE) reported financial results for fourth-quarter and full-year 2018 and provided 2019 financial guidance.

Results for the fourth quarter and the full year of 2018 and 2017(4) are summarized below.

OVERALL RESULTS
             
($ in millions, except

per share amounts)

Fourth-Quarter Full-Year
2018   2017   Change 2018   2017   Change
Revenues $   13,976 $   13,703 2% $   53,647 $   52,546 2%
Reported Net Income/(Loss)(1) (394 ) 12,274 * 11,153 21,308 (48%)
Reported Diluted EPS/(LPS)(1) (0.07 ) 2.02 * 1.87 3.52 (47%)
Adjusted Income(2) 3,802 3,772 1% 17,958 16,085 12%
Adjusted Diluted EPS(2) 0.64 0.62 3% 3.00 2.65 13%
                                                   

* Indicates calculation not meaningful or result is equal to or greater than 100%.

 
REVENUES
                 
($ in millions) Fourth-Quarter Full-Year
2018 2017 % Change 2018 2017 % Change
    Total   Oper.     Total   Oper.
Innovative Health $   8,852 $   8,218 8% 10% $   33,426 $   31,422 6% 6%
Essential Health     5,124         5,484     (7%)   (3%)     20,221         21,124     (4%)   (5%)
Total Company $   13,976     $   13,703     2%   5% $   53,647     $   52,546     2%   2%
                                                           
 

Some amounts in this press release may not add due to rounding. All percentages have been calculated using unrounded amounts. References to operational variances pertain to period-over-period growth rates that exclude the impact of foreign exchange(5).

2019 FINANCIAL GUIDANCE(6)

Pfizer’s 2019 financial guidance is presented below. Financial guidance reflects a full year of revenue and expense contributions from Consumer Healthcare(3).

       
Revenues     $52.0 to $54.0 billion
Adjusted Cost of Sales(2) as a Percentage of Revenues     20.8% to 21.8%
Adjusted SI&A Expenses(2)     $13.5 to $14.5 billion
Adjusted R&D Expenses(2)     $7.8 to $8.3 billion
Adjusted Other (Income)/Deductions(2)     Approximately $100 million of income
Effective Tax Rate on Adjusted Income(2)     Approximately 16.0%
Adjusted Diluted EPS(2)     $2.82 to $2.92
   

Financial guidance for Adjusted diluted EPS(2) reflects anticipated share repurchases totaling approximately $9 billion in 2019. Dilution related to share-based employee compensation programs is currently expected to offset the reduction in shares associated with these share repurchases by approximately half.

Financial guidance for Adjusted Other (Income)/Deductions(2) and Adjusted Diluted EPS(2) now excludes the impact of realized and unrealized gains and losses on investments in equity securities. In 2018, Pfizer’s 2018 financial results included net gains on investments in equity securities, which favorably impacted Adjusted Other (Income)/Deductions(2) by $586 million and Adjusted Diluted EPS(2) by approximately $0.08.

A reconciliation of Pfizer’s full-year 2018 financial results to certain components of its 2019 financial guidance, including certain significant factors impacting 2018 financial results and 2019 financial guidance, is below:

                         
    Full-Year
2018 Results
 

2018 (Gains)

on Equity
Investments

 

2018 Results
Excluding (Gains)
on Equity Investments

 

2019 Financial
Guidance at
2018 FX Rates

 

Impact of
Mid-January 2019
FX Rates
Compared to
2018 FX Rates

 

2019 Financial
Guidance

           
Revenues ($ in billions)   $53.6   --   $53.6   $52.9 to $54.9   ($0.9)   $52.0 to $54.0
Adjusted Diluted EPS(2)   $3.00   ($0.08)   $2.92   $2.88 to $2.98   ($0.06)   $2.82 to $2.92
 

CAPITAL ALLOCATION

EXECUTIVE COMMENTARY

Dr. Albert Bourla, Pfizer’s Chief Executive Officer, stated, “2018 was highlighted by solid financial performance, shareholder-friendly capital allocation, the strengthening of our pipeline and the formation of our new commercial structure designed to transition the company to a period post-2020 where we expect a higher and more sustained revenue growth profile.

“We enter 2019 with confidence in the competitive positioning of our businesses, the prospects for our recently launched products and product line extensions, as well as the strength and breadth of our research pipeline. Our focus remains on advancing science and innovation in areas that we believe will serve the unmet needs of patients and also create the most attractive opportunities for value creation.

Dr. Bourla continued, “2019 is expected to be a busy year with important clinical data readouts across our early-, mid- and late-stage pipeline. In the near term, we expect to report pivotal top-line results for tanezumab in chronic lower back pain as well as additional data in osteoarthritis following today’s announcement of a second positive Phase 3 trial. Later in the year, we anticipate reporting pivotal results for rivipansel in vaso-occlusive crisis from sickle cell disease as well as the results of the first Phase 3 trials for abrocitinib (PF-04965842), our Janus kinase-1 (JAK1) inhibitor in development for moderate-to-severe atopic dermatitis. In our earlier stage pipeline, we anticipate generating data for two nonalcoholic steatohepatitis candidates (PF-05221304 and PF-06865571), psoriasis data for two tyrosine kinase 2 (TYK2) inhibitor candidates (PF-06826647 and PF-06700841, a TYK2/JAK1 dual inhibitor) and immune response data for our respiratory syncytial virus infection (PF-06928316) and pentavalent meningococcal (PF-06886992) vaccine candidates. We also expect to provide early clinical data for our mini-dystrophin gene therapy candidate (PF-06939926) in boys with Duchenne muscular dystrophy, and for our gene therapy program for Hemophilia A (PF-07055480), in collaboration with Sangamo Therapeutics, Inc.

“We see attractive opportunities globally to deliver value to patients, payors and other stakeholders through a combination of innovative biopharmaceutical medicines, vaccines, biosimilars, legacy brands and sterile injectable pharmaceutical products. I believe we have the business structure, leadership team and financial capability firmly in place to drive continued success,” Dr. Bourla concluded.

Frank D’Amelio, Chief Financial Officer and Executive Vice President, Business Operations and Global Supply , stated, “Overall, I was pleased with our 2018 financial performance. We were able to achieve 2% operational revenue growth for the year. We also delivered Adjusted diluted EPS(2) growth of 13% in 2018, primarily reflecting a lower effective tax rate on adjusted income(2) due to tax reform, higher adjusted other income(2), strong performance of certain key products and the net impact of our share repurchases. Regarding capital allocation decisions in 2018, we returned $20.2 billion directly to shareholders through share repurchases and dividends and also announced a new joint venture for Pfizer Consumer Healthcare with GlaxoSmithKline plc (GSK)(3), delivering on our commitment to complete the strategic review for our Consumer Healthcare business in 2018.

“Our 2019 financial guidance anticipates continued strong growth from key product franchises, including Ibrance, Eliquis, Xeljanz and Xtandi as well as the expected loss of exclusivity of Lyrica in the U.S. in June 2019. The midpoint of our 2019 revenue guidance range implies comparable operational performance to 2018 while absorbing an anticipated $2.6 billion revenue headwind due to products that have recently lost or are expected to soon lose marketing exclusivity. Additionally, the midpoint of our 2019 guidance range for Adjusted diluted EPS(2) also implies comparable operational performance to 2018 when excluding the anticipated $0.06 unfavorable impact of foreign exchange on 2019 guidance as well as the $0.08 favorable impact on 2018 Adjusted diluted EPS(2) from net gains on equity investments, which will no longer be included in Adjusted(2) financial results. Notably, our guidance for adjusted diluted EPS(2) anticipates share repurchases totaling approximately $9 billion in 2019, which is currently expected to be offset by approximately half due to dilution related to share-based employee compensation programs,” Mr. D’Amelio concluded.

QUARTERLY FINANCIAL HIGHLIGHTS (Fourth-Quarter 2018 vs. Fourth-Quarter 2017)

Fourth-quarter 2018 revenues totaled $14.0 billion, an increase of $274 million, or 2%, compared to the prior-year quarter, reflecting operational growth of $657 million, or 5%, partially offset by the unfavorable impact of foreign exchange of $383 million, or 3%.

Innovative Health (IH) Highlights

Essential Health (EH) Highlights

GAAP Reported(1) Income Statement Highlights

SELECTED TOTAL COMPANY REPORTED COSTS AND EXPENSES(1)
                 
($ in millions)

(Favorable)/Unfavorable

Fourth-Quarter Full-Year
2018 2017 % Change 2018 2017 % Change
    Total   Oper.     Total   Oper.
Cost of Sales(1) $   3,075 $   3,256 (6%) 4% $   11,248 $   11,228 — 2%
Percent of Revenues 22.0 % 23.8 % N/A N/A 21.0 % 21.4 % N/A N/A
SI&A Expenses(1) 4,007 4,555 (12%) (10%) 14,455 14,804 (2%) (3%)
R&D Expenses(1)     2,457         2,316     6%   7%     8,006         7,683     4%   4%
Total $   9,539     $   10,127     (6%)   (2%) $   33,709     $   33,715     —   —
 
Other (Income)/Deductions––net(1) $ 3,259 $ 1,351 * * $ 2,116 $ 1,416 49% 43%
Effective Tax Rate on Reported Income(1)   *   *                 5.9 %       (73.5 %)        

* Indicates calculation not meaningful or result is equal to or greater than 100%.

 

The increase in fourth-quarter 2018 other deductions––net(1) compared with the prior-year quarter was primarily driven by:

partially offset primarily by:

Pfizer’s effective tax rate on Reported income(1) for fourth-quarter and full-year 2018 compared to the prior year periods was unfavorably impacted primarily by:

partially offset primarily by:

Adjusted(2) Income Statement Highlights

SELECTED TOTAL COMPANY ADJUSTED COSTS AND EXPENSES(2)
                 
($ in millions)

(Favorable)/Unfavorable

Fourth-Quarter Full-Year
2018 2017 % Change 2018 2017 % Change
    Total   Oper.     Total   Oper.
Adjusted Cost of Sales(2) $   3,044 $   3,059 — 10% $   11,130 $   10,778 3% 5%
Percent of Revenues 21.8 % 22.3 % N/A N/A 20.7 % 20.5 % N/A N/A
Adjusted SI&A Expenses(2) 3,968 4,321 (8%) (6%) 14,232 14,489 (2%) (2%)
Adjusted R&D Expenses(2)     2,436         2,305     6%   6%     7,962         7,653     4%   4%
Total $   9,448     $   9,685     (2%)   2% $   33,325     $   32,920     1%   1%
 
Adjusted Other (Income)/Deductions––net(2) ($111 ) ($186 ) (41%) (23%) ($1,253 ) ($733 ) 71% 84%
Effective Tax Rate on Adjusted Income(2)       16.6 %       8.6 %                 15.5 %       20.0 %        
 

Pfizer’s effective tax rate on Adjusted income(2) for fourth-quarter 2018 was unfavorably impacted primarily by:

partially offset primarily by:

Pfizer’s effective tax rate on Adjusted income(2) for full-year 2018 was favorably impacted primarily by:

Fourth-quarter 2018 diluted weighted-average shares outstanding used to calculate Reported(1) and Adjusted(2) diluted EPS declined by 152 million shares compared to the prior-year quarter primarily due to Pfizer’s ongoing share repurchase program, reflecting the impact of share repurchases during 2018, partially offset by dilution related to share-based employee compensation programs.

A full reconciliation of Reported(1) to Adjusted(2) financial measures and associated footnotes can be found starting on page 23 of the press release located at the hyperlink below.

FULL-YEAR REVENUE SUMMARY (Full-Year 2018 vs. Full-Year 2017)

Full-year 2018 revenues totaled $53.6 billion, an increase of $1.1 billion, or 2%, compared to full-year 2017, reflecting operational growth of $791 million, or 2%, and the favorable impact of foreign exchange of $310 million, or less than 1%.

Full-year 2018 operational revenue growth of $791 million, or 2%, was primarily driven by:

partially offset primarily by lower revenues for:

RECENT NOTABLE DEVELOPMENTS (Since October 30, 2018)

Product Developments

Pipeline Developments

A comprehensive update of Pfizer’s development pipeline was published today and is now available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of Pfizer’s research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.

Corporate Developments

Pfizer will provide financial reporting to reflect this reorganization beginning in first-quarter 2019.

Please find Pfizer’s press release and associated financial tables, including reconciliations of certain GAAP reported to non-GAAP adjusted information, at the following hyperlink:

https://investors.pfizer.com/files/doc_financials/Quarterly/2018/q4/Q4-2018-PFE-Earnings-Release.pdf

(Note: If clicking on the above link does not open up a new web page, you may need to cut and paste the above URL into your browser's address bar.)

For additional details, see the associated financial schedules and product revenue tables attached to the press release located at the hyperlink referred to above and the attached disclosure notice.

(1) Revenues is defined as revenues in accordance with U.S. generally accepted accounting principles (GAAP). Reported net income/(loss) is defined as net income/(loss) attributable to Pfizer Inc. in accordance with U.S. GAAP. Reported diluted earnings per share (EPS) and reported loss per share (LPS) are defined as diluted EPS or LPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.
 
(2)

Adjusted income and its components and Adjusted diluted EPS are defined as reported U.S. GAAP net income(1) and its components and reported diluted EPS(1) excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items (some of which may recur, such as restructuring or legal charges, but which management does not believe are reflective of ongoing core operations). Adjusted cost of sales, Adjusted selling, informational and administrative (SI&A) expenses, Adjusted research and development (R&D) expenses and Adjusted other (income)/deductions are income statement line items prepared on the same basis as, and therefore components of, the overall Adjusted income measure. As described in the Financial Review––Non-GAAP Financial Measure (Adjusted Income) section of Pfizer’s 2017 Financial Report, which was filed as Exhibit 13 to Pfizer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, management uses Adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. Because Adjusted income is an important internal measurement for Pfizer, management believes that investors’ understanding of our performance is enhanced by disclosing this performance measure. Pfizer reports Adjusted income, certain components of Adjusted income, and Adjusted diluted EPS in order to portray the results of the company’s major operations––the discovery, development, manufacture, marketing and sale of prescription medicines, vaccines and consumer healthcare (OTC) products––prior to considering certain income statement elements. See the accompanying reconciliations of certain GAAP Reported to Non-GAAP Adjusted information for the fourth quarter and full year of 2018 and 2017. The Adjusted income and its components and Adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS.

 
(3) In December 2018, Pfizer entered into a definitive agreement with GSK under which the two companies have agreed to combine their respective consumer healthcare businesses into a new consumer healthcare joint venture that will operate globally under the GSK Consumer Healthcare name. In exchange for contributing its Consumer Healthcare business, Pfizer will receive a 32% equity stake in the new company and GSK will own the remaining 68% of the new company. Upon the closing of the transaction, which is expected to occur in the second half of 2019, subject to customary closing conditions including GSK shareholder approval and required regulatory approvals, Pfizer anticipates deconsolidating its Consumer Healthcare business and will begin to receive its pro rata share of the joint venture’s earnings and dividends, which will be paid on a quarterly basis. For additional information regarding the proposed transaction, please see the Corporate Developments section of this press release.
 
(4) Pfizer’s fiscal year-end for international subsidiaries is November 30 while Pfizer’s fiscal year-end for U.S. subsidiaries is December 31. Therefore, Pfizer’s fourth quarter and full year for U.S. subsidiaries reflect the three and twelve months ending on December 31, 2018 and December 31, 2017 while Pfizer’s fourth quarter and full year for subsidiaries operating outside the U.S. reflect the three and twelve months ending on November 30, 2018 and November 30, 2017.
 
(5) References to operational variances in this press release pertain to period-over-period growth rates that exclude the impact of foreign exchange. The operational variances are determined by multiplying or dividing, as appropriate, the current period U.S. dollar results by the current period average foreign exchange rates and then multiplying or dividing, as appropriate, those amounts by the prior-year period average foreign exchange rates. Although exchange rate changes are part of Pfizer’s business, they are not within Pfizer’s control. Exchange rate changes, however, can mask positive or negative trends in the business; therefore, Pfizer believes presenting operational variances provides useful information in evaluating the results of its business.
 
(6) The 2019 financial guidance reflects the following:
 

•

Pfizer does not provide guidance for GAAP Reported financial measures (other than revenues) or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP Reported financial measures on a forward-looking basis because it is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gains and losses, acquisition-related expenses, net gains or losses on equity securities and potential future asset impairments without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP Reported results for the guidance period.

 

•

Does not assume the completion of any business development transactions not completed as of December 31, 2018, including any one-time upfront payments associated with such transactions.

 

•

Reflects a full year of revenue and expense contributions from Consumer Healthcare(3).

 

•

Reflects an anticipated negative revenue impact of $2.6 billion due to recent and expected generic and biosimilar competition for certain products that have recently lost or are anticipated to soon lose patent protection.

 

•

Exchange rates assumed are as of mid-January 2019. Reflects the anticipated unfavorable impact of approximately $0.9 billion on revenues and approximately $0.06 on Adjusted diluted EPS(2) as a result of changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2018.

 

•

Guidance for Adjusted diluted EPS(2) assumes diluted weighted-average shares outstanding of approximately 5.7 billion shares, which reflects share repurchases totaling $12.2 billion in 2018 and the weighted-average impact of an anticipated approximately $9 billion of share repurchases in 2019. Dilution related to share-based employee compensation programs is currently expected to offset the reduction in shares associated with these share repurchases by approximately half.

 
(7) Rituximab is marketed in the U.S. under the brand name Rituxan® and marketed in the E.U. and other regions under the brand name MabThera®. Rituxan® is a registered trademark of Biogen MA Inc. MabThera® is a registered trademark of F. Hoffman-La Roche AG.
 
(8) Humira® is a registered U.S. trademark of Abbvie Biotechnology Ltd.
 
(9) Avastin® is a registered U.S. trademark of Genentech, Inc.
 

DISCLOSURE NOTICE: Except where otherwise noted, the information contained in this earnings release and the related attachments is as of January 29, 2019. We assume no obligation to update any forward-looking statements contained in this earnings release and the related attachments as a result of new information or future events or developments.

This earnings release and the related attachments contain forward-looking statements about our anticipated future operating and financial performance, business plans and prospects, in-line products and product candidates, including anticipated regulatory submissions, data read-outs, study starts, approvals, performance, timing of exclusivity and potential benefits of Pfizer’s products and product candidates, strategic reviews, capital allocation, business-development plans, the benefits expected from the reorganization of our commercial operations into three businesses effective at the beginning of our 2019 fiscal year, our acquisitions and other business development activities, our proposed transaction with GSK to combine our respective consumer healthcare businesses into a new consumer healthcare joint venture, our ability to successfully capitalize on growth opportunities or prospects, manufacturing and product supply and plans relating to share repurchases and dividends, among other things, that involve substantial risks and uncertainties. You can identify these statements by the fact that they use future dates or use words such as “will,” “may,” “could,” “likely,” “ongoing,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “assume,” “target,” “forecast,” “guidance,” “goal,” “objective,” “aim,” “seek” and other words and terms of similar meaning. Among the factors that could cause actual results to differ materially from past results and future plans and projected future results are the following:

We cannot guarantee that any forward-looking statement will be realized. Achievement of anticipated results is subject to substantial risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements, and are cautioned not to put undue reliance on forward-looking statements. A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and in our subsequent 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 our subsequent reports on Form 8-K.

The operating segment information provided in this earnings release and the related attachments does not purport to represent the revenues, costs and income from continuing operations before provision for taxes on income that each of our operating segments would have recorded had each segment operated as a standalone company during the periods presented.

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. In addition, clinical trial data are subject to differing interpretations, and, even when we view data as sufficient to support the safety and/or effectiveness of a product candidate or a new indication for an in-line product, regulatory authorities may not share our views and may require additional data or may deny approval altogether.

Media

Joan Campion, 212.733.2798



Investors

Chuck Triano, 212.733.3901

Ryan Crowe, 212.733.8160

Bryan Dunn, 212.733.8917

Source: Pfizer Inc.

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