NEW YORK, April 19 /PRNewswire-FirstCall/ -- Pfizer reported first-quarter 2006 financial results today.
"We are reporting solid operating performance for the first quarter of 2006, with an increasing contribution from our new products, significant cost savings from our restructuring initiatives, and additional action to build shareholder value," said Hank McKinnell, chairman and chief executive officer. "We will continue to manage the loss of exclusivity on some of our major products with an aggressive strategy that responds to our competitive challenges and positions Pfizer for renewed growth. We are reconfirming our 2006 full-year financial guidance for revenues and adjusted diluted EPS(1), as well as our targets for 2007 and 2008.
"We are committed in our efforts to reach our full-year revenue goal for Lipitor, although it is an aggressive target given a challenging environment and a slower-than-hoped-for start to the year. New clinical data, educational campaigns on Lipitor that highlight its unique benefit profile, and advantageous formulary positioning are expected to contribute to growth. The same commitment is true for Celebrex, which remains an important treatment option for millions of arthritis patients. Geodon is delivering excellent results, Lyrica is exceeding our high initial expectations, and the contribution of new products will continue to accelerate as we launch new products throughout the year.
"At the same time, we continue to buy company shares aggressively. Having purchased $1 billion of Pfizer stock in the first quarter of 2006, we intend to buy another $1 billion in the second quarter. We hope to purchase up to $4 billion in total this year. Our expected operating cash flow of more than $16 billion enables us to build value today while investing in the future. Already this year we have acquired the sanofi-aventis worldwide rights, including patent rights and production technology, to manufacture and sell Exubera; reached an agreement to acquire Rinat Neuroscience Corp.; and reached an agreement with Schwarz Pharma AG to acquire exclusive worldwide rights to fesoterodine for overactive bladder."
Portfolio, Pipeline Position Human Health for Future Success
"Pfizer's first-quarter 2006 results mark the beginning of a year that will be characterized by the transition to the next-generation Pfizer," said Karen Katen, vice chairman of Pfizer and president of Pfizer Human Health. "Our in-line medicines are continuing to drive performance; recent and upcoming launches of new medicines will replenish and expand the portfolio as older medicines lose exclusivity."
($ billions, except % growth) Impact on Total Human Health Human Health 1Q06 1Q06/1Q05 Revenues % Growth In-Line Products(2) and New Products(2) $10.870 5% Loss-of-Exclusivity Products and Bextra(2) 0.581 (6%) (Withdrawn) Impact of Foreign Exchange (0.338) (3%) Total Human Health Revenues $11.113 (4%)
Human Health revenues of $11.113 billion for the first quarter of 2006 represent a decline of 4 percent compared to the first quarter of 2005. In the U.S., Human Health revenues increased 2 percent for the first quarter of 2006, compared to the same period in 2005. Excluding the major medicines that lost exclusivity in the U.S. since the beginning of 2004 and Bextra, which we voluntarily withdrew in 2005, Human Health adjusted revenues(3) grew 3 percent worldwide and 13 percent in the U.S. for the quarter in 2006 compared to 2005. In addition, the unfavorable impact of foreign exchange on Human Health revenues was $338 million, or 3 percent. Excluding the impact of foreign exchange, adjusted Human Health revenues(3) would have increased 6 percent worldwide.
Many of Pfizer's medicines achieved double-digit growth in the quarter, compared to the first quarter of 2005, across many therapeutic areas, including cardiovascular/metabolic diseases (Caduet up 147 percent); central- nervous-system disorders (Geodon up 32 percent, Relpax up 24 percent); arthritis and pain (Celebrex up 19 percent); infectious and respiratory diseases (Zyvox up 30 percent, Vfend up 33 percent); and oncology (Aromasin up 26 percent).
First-Quarter Portfolio Highlights
Pfizer expects that the performance of key products -- including Lipitor, Celebrex, Lyrica, and Geodon -- will continue to drive overall performance for Pfizer Human Health.
Worldwide sales of Lipitor totaled $3.107 billion in the first quarter of 2006, reflecting growth of 3 percent on a constant-dollar basis. The unfavorable impact of foreign exchange reduces the growth rate to 1 percent on a reported basis. In the U.S., sales of $1.974 billion represent growth of 3 percent over the previous year's first quarter.
While sales growth in the first quarter of 2006 was slower than anticipated, we continue to pursue a target of more than $13 billion in 2006 revenue for Lipitor. Lipitor leads prescriptions for U.S. patients receiving statin therapy for the first time in the last 12 months, with nearly a 37-percent share of new-to-market patients in January 2006, more than twice the share of the closest competitor.(4) Internationally, Lipitor sales in the quarter grew by 4 percent on a constant-dollar basis, although the impact of foreign exchange resulted in a 3-percent reported decline in international Lipitor sales for the quarter.
Scientific data continue to reinforce the trend toward the use of higher dosages of statins for greater cholesterol reduction. Lipitor is generating ongoing outcomes data that support its unique benefit profile on a wide range of endpoints.
For example, data from a sub-analysis of the Treating to New Targets (TNT) study, presented at the American College of Cardiology meeting in March 2006, showed that patients with kidney dysfunction taking 80 mg of Lipitor had significantly greater improvements in kidney function than patients taking 10 mg. Half of these patients on 80 mg had normal kidney function at the end of the study. This further builds on the wealth of evidence that Lipitor is a powerful lipid-lowering agent, which leads to improved health outcomes for a broad range of patients -- even those with impaired kidney function.
These data are being communicated through significantly improved physician encounters versus the competition, a result of last year's U.S. field-force realignment. Pfizer also launched a compelling new educational campaign last month. The new print and television ads feature Dr. Robert Jarvik, inventor of the artificial heart, discussing the advantages of better cardiovascular health and the benefits of Lipitor.
The proven benefits of Lipitor are enabling successful contracting with key customers throughout the U.S., driven in part by the unsurpassed body of clinical evidence supporting it. Contracts covering 60 percent of commercial lives for Lipitor, approximately 106 million lives, have been signed through 2007, allowing broad access to Lipitor through 2007 and beyond.
Worldwide sales of Celebrex totaled $491 million for the first quarter of 2006, reflecting 19-percent growth over the first quarter of 2005. We continue to pursue an aggressive full-year sales target of more than $2 billion for Celebrex for the year. In the U.S., Celebrex new-prescription volume in the first quarter grew 23 percent over the same period in the prior year, despite a 2-percent decline in new-prescription volume for the overall arthritis market. Celebrex is the only actively promoted prescription medicine in the arthritis market. A new branded print advertising campaign began this week. Internationally, first-quarter 2006 sales of $100 million declined by 32 percent, due to strong sales in the beginning of the first quarter of 2005 related to the Vioxx withdrawal as well as the adverse effects of foreign exchange.
Strong clinical data continue to support Celebrex as an important medicine for patients with arthritis. The SUCCESS-1 study (Successive Celecoxib Efficacy and Safety Study), recently published in the American Journal of Medicine, showed that people with osteoarthritis who take Celebrex experience significantly fewer gastrointestinal problems than patients who take non-specific non-steroidal anti-inflammatory drugs.
It was this gastrointestinal profile that led researchers to choose high-dose Celebrex for investigational trials in the area of chemoprevention. The first efficacy data from two of these long-term clinical studies -- Adenoma Prevention with Celecoxib (APC) and Prevention of Sporadic Adenomatous Polyps (PreSAP) -- were presented earlier this month at the American Association for Cancer Research meeting. These studies showed that Celebrex helps stop the regrowth of pre-cancerous polyps (adenomas) that can lead to colon cancer. The final cardiovascular safety results from these long-term polyp studies are consistent with the current Celebrex label.
Worldwide first-quarter 2006 Geodon sales of $182 million represent a 32-percent increase over the prior year. Geodon growth is due to the improved perception among clinicians of its efficacy, increased benefits from optimal dosing, and its favorable metabolic profile, as confirmed by the Clinical Antipsychotic Trials of Intervention Effectiveness (CATIE) trial. As the only antipsychotic that demonstrates efficacy and reduced weight, lipid, triglyceride, and insulin levels, Geodon is uniquely positioned to allow psychiatrists to treat mental health "with the body in mind." The U.S. Patent and Trademark Office granted a five-year extension to the Geodon U.S. patent, extending its exclusivity to 2012. We continue to expect full-year 2006 Geodon revenues of about $800 million.
In only its second year on the market, Lyrica continues to be one of the most successful pharmaceutical market entries, with first-quarter 2006 worldwide revenues of $192 million. We now expect Lyrica to achieve full-year revenues of at least $900 million. In the first quarter of 2006, Lyrica achieved a significant milestone -- more than 1 million patients have now been prescribed Lyrica since its introduction.
In the U.S., Lyrica has been number one in new prescriptions for pain associated with diabetic peripheral neuropathy and post-herpetic neuralgia among primary-care physicians and neurologists for the last five months. Lyrica has now reached a 9.1-percent new-prescription market share for the total anti-epileptic drug market as of the week ending March 31, 2006. Lyrica continues to perform strongly in Europe, with February 2006 sales shares of the anti-epileptic drug market of 24 percent in Italy, 18 percent in Germany, 17 percent in Spain, and 14 percent in the U.K., according to IMS data.
On March 27, 2006, the European Commission approved Lyrica to treat generalized anxiety disorder (GAD) in adults, thereby providing a new treatment option for the approximately 12 million Europeans living with GAD. Pfizer continues to pursue indications for GAD, fibromyalgia, and other conditions in the U.S. and other markets worldwide.
Rich Pipeline of Medicines Continues to Advance
"The first quarter of 2006 marked a strong start to an important year for the Pfizer pipeline," said Dr. John LaMattina, President of Pfizer Global Research and Development.
Along with approving Exubera and Sutent, the FDA approved Eraxis (anidulafungin) during the first quarter of 2006 to treat candidemia and invasive and esophageal candidiasis. Eraxis builds upon Pfizer's strength in medicines for the treatment of infectious diseases, particularly antifungal treatments. In addition to these three exceptional medicines, we anticipate three more approvals by the end of the year: varenicline, Zeven (dalbavancin), and indiplon. By year-end, we expect to have launched these new products, including Sutent, which was the most recently introduced breakthrough treatment for patients with rare and difficult-to-treat forms of cancer.
Pfizer remains on track to deliver on the industry's broadest pipeline, with five new medicines filed or expected to be filed in 2006-07: fesoterodine, a product for overactive bladder that Pfizer has reached an agreement to acquire from Schwarz Pharma AG; maraviroc for HIV/AIDS; asenapine for schizophrenia; ticilimumab for cancer; and torcetrapib/atorvastatin for cholesterol management.
New data for torcetrapib/atorvastatin were highlighted at the American College of Cardiology meeting last month. A sub-analysis of the TNT study found that patients treated to LDL-cholesterol levels below current guidelines showed a direct relationship between raising HDL levels and reducing the frequency of cardiovascular events. This suggests that HDL cholesterol may also provide important therapeutic benefits that may result in further reductions in cardiovascular risk. The torcetrapib/atorvastatin development program is Pfizer's largest and most-comprehensive clinical program ever and is studying 25,000 patients at hundreds of medical centers worldwide at a cost of about $800 million.
In addition, we continue to complement our internal portfolio by entering into collaborations with other important companies, including in the first quarter of 2006:
-- NicOx S.A., to identify novel drugs to treat ophthalmic disorders, and -- NOXXON Pharma, AG, to apply their Spiegelmer(R) Technology Platform to identify molecules to treat obesity.
In the first quarter of 2006, we acquired the sanofi-aventis worldwide rights, including patent rights and production technology, to manufacture and sell Exubera. Earlier this month, we entered into an agreement to acquire Rinat Neurosciences Corp., which is developing therapeutic proteins for the treatment of central-nervous-system disorders, including an approach to alter the progression of Alzheimer's disease. Also earlier this month, we reached an agreement with Schwarz Pharma AG to acquire exclusive worldwide rights to fesoterodine, a new drug candidate for treatment of overactive bladder.
Leveraging Operational/Financial Strength
"Pfizer remains on target to achieve its projected financial performance for 2006 and beyond," said David Shedlarz, vice chairman. "We continue to expect 2006 revenues to be comparable to those in 2005, with growth of in-line and new products substantially replacing revenue declines from loss of exclusivity (most recently, Zithromax in the U.S. in the fourth quarter of 2005 and Zoloft in the U.S. at the end of the second quarter of 2006). We are on track to achieve 2006 adjusted diluted EPS(1) of about $2.00. We now expect 2006 reported diluted EPS of $1.56 to $1.60, an increase driven by reduced Adapting-to-Scale-related restructuring and implementation costs this year.
"Beyond 2006, Pfizer's performance and new opportunities will be driven by our ability to leverage our scale and capabilities; grow our in-line products; deliver our new medicine pipeline; and pursue advances in healthcare access, delivery, and policy. We reconfirm our expectations for financial performance in 2007 and 2008, when we target resumed growth in revenue, as performances of in-line and new products will more than offset the impact of loss of exclusivity. We now expect 2006 cost synergies from the Adapting-to-Scale initiative of at least $2 billion, rising to about $4 billion by 2008. Average annual growth in adjusted diluted EPS(1) over 2007 and 2008 is targeted to be in the high single digits.
"We are making progress in our focused efforts to increase shareholder value. We paid a dividend of 24 cents per share in the first quarter of 2006, a 26-percent increase over the comparable quarter of 2005 and the 39th consecutive year of dividend increases. Pfizer's dividend yield now approaches 4 percent.
"We purchased approximately $1 billion of our common stock in the first quarter of 2006, achieving in just three months the minimum level of share purchases for the full year that we projected at the February 2006 analyst meeting. We expect to purchase an additional $1 billion of Pfizer stock in the second quarter of 2006, and we hope to purchase up to $4 billion of stock in total during 2006. In addition, the outcome of our exploration of strategic options for our Consumer Healthcare business may afford still further share-purchase opportunities.
"We advanced our effort to explore strategic options for our Consumer Healthcare business and continue to consider a range of potential outcomes for this business, including sale or spin-off. The initial level of interest has been high. We continue to anticipate that we will make a decision in the third quarter of 2006."
"While our outlook for full-year 2006 revenues and adjusted diluted EPS(1) is substantially unchanged, various factors will play a part in the results of particular quarters, including foreign exchange, timing considerations related to the launch of new products and loss of exclusivity of mature products, the timing of investments in support of our pipeline and product portfolio, and quarterly variations in our tax rate," said Alan Levin, chief financial officer.
"The adverse impact of foreign exchange on revenues in the first quarter of 2006 is expected to dissipate in the second half of 2006. On the expense side, Pfizer's adjusted diluted EPS(1) in the first quarter of 2006 reflected the timing of various research and development programs relative to last year, the impact of foreign exchange, and about $500 million in overall cost savings derived from our Adapting-to-Scale (AtS) restructuring program. Initiatives pursuant to this restructuring program began to be implemented in the second half of 2005, thereby impacting expense comparisons in the first quarter of 2006. Our gross-margin ratio improved this quarter over the comparable period in 2005, reflecting in part the favorable effects of operating efficiencies and foreign exchange.
"For the full year, we continue to expect that expenditures representing the R&D and SI&A pre-tax components of adjusted income(1) will approximate $7.8 billion and $17.4 billion, respectively, reflecting investments in support of our pipeline and multiple new-product launches later this year. Using the components of adjusted income(1) related to gross margin, we continue to expect a modest improvement in our gross-margin ratio for 2006 relative to full-year 2005.
"Pfizer's effective tax rate on adjusted income(1) of 19.7 percent in the first quarter of 2006 benefited from a change in tax law that favorably affects certain restructuring activity that we undertook in prior years. We continue to expect a full-year 2006 effective tax rate on adjusted income(1) of about 22.5 percent.
"First-quarter 2006 reported diluted EPS of $.56 reflects, among other items, purchase-accounting charges related primarily to our acquisition of Pharmacia Corporation, restructuring and implementation costs associated with our AtS productivity initiative, and a tax benefit related to the resolution of certain tax positions."
Pfizer's Successful Navigation in New Environment
Commenting on first-quarter performance and company-wide initiatives to transform the organization in the face of challenges in the healthcare environment and loss of sales due to patent expirations, Dr. McKinnell said: "Pfizer is successfully navigating a period of major challenges for the company. Aggressive cost-cutting efforts, coupled with investments in business development and significantly improved R&D productivity, are preparing us to transition to the next-generation Pfizer, with resumed growth and an unparalleled pipeline of new medicines to bring to the market," he said.
For additional details, please see the attached financial schedules, product revenue tables, supplemental financial information, and Disclosure Notice.
(1) "Adjusted income" and "adjusted diluted earnings per share (EPS)" are defined as reported net income and reported diluted EPS excluding discontinued operations, purchase-accounting adjustments, merger-related costs, and certain significant items. As described under Adjusted Income in the Financial Review section of Pfizer's Form 10-K for the fiscal year ended December 31, 2005, 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 first-quarter and forecasted full- year adjusted income and adjusted diluted EPS to reported net income and reported diluted EPS are provided in the materials accompanying this report. 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. (2) New Products is defined as first-quarter 2006 worldwide revenues (excluding the impact of foreign exchange) of products launched in 2004-06 -- Caduet, Inspra, Lyrica, Macugen, Nicotrol Rx, Olmetec, Onsenal, Revatio, Sutent, and Zmax. Loss-of-Exclusivity Products and Bextra is defined as first-quarter 2006 worldwide revenues (excluding the impact of foreign exchange) of products that have lost U.S. exclusivity in 2004-06 -- Accupril/Accuretic, Diflucan, Neurontin, and Zithromax -- and of Bextra, sales of which were suspended in 2005. In-Line Products is defined as first-quarter 2006 worldwide revenues (excluding the impact of foreign exchange) of all other Human Health Products. (3) Human Health adjusted revenues are defined as total Human Health revenues excluding the revenues of major products that have lost exclusivity in the U.S. since the beginning of 2004 and the revenues of Bextra, which Pfizer voluntarily withdrew in 2005. See the table accompanying this report. (4) Verispan longitudinal patient database. PFIZER INC AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (millions of dollars, except per common share data) First Quarter % Incr./ 2006 2005 (Decr.) Revenues $12,660 $13,091 (3) Costs and expenses: Cost of sales 1,973 2,191 (10) Selling, informational and administrative expenses 3,810 4,085 (7) Research and development expenses 1,588 1,764 (10) Amortization of intangible assets 828 882 (6) Merger-related in-process research and development charges - 2 * Restructuring charges and merger- related costs 306 219 40 Other (income)/deductions -- net (272) 1,038 (126) Income from continuing operations before provision for taxes on income and minority interests 4,427 2,910 52 Provision for taxes on income 315 2,635 (88) Minority interests 4 3 16 Income from continuing operations 4,108 272 M+ Discontinued operations: Loss from discontinued operations -- net of tax - (12) * Gains on sales of discontinued operations -- net of tax 3 41 (93) Discontinued operations -- net of tax 3 29 (90) Net income $4,111 $301 M+ Earnings per common share - Basic: Income from continuing operations $0.56 $0.04 M+ Discontinued operations -- net of tax - - * Net income $0.56 $0.04 M+ Earnings per common share - Diluted: Income from continuing operations $0.56 $0.04 M+ Discontinued operations -- net of tax - - * Net income $0.56 $0.04 M+ Weighted-average shares used to calculate earnings per common share: Basic 7,314 7,416 Diluted 7,324 7,474 * Calculation not meaningful. M+ Change greater than one thousand percent. Certain amounts and percentages may reflect rounding adjustments. 1. The above financial statement presents the three-month periods ended April 2, 2006 and April 3, 2005. Subsidiaries operating outside the United States are included for the three-month periods ended February 26, 2006 and February 27, 2005. 2. The financial results for the three-month period ended April 2, 2006 are not necessarily indicative of the results which ultimately might be achieved for the current year. 3. Other (income)/deductions -- net in the first quarter of 2005 includes an impairment charge of $1.2 billion related to the developed technology rights and the write-off of machinery and equipment for Bextra, a selective COX-2 inhibitor. 4. Provision for taxes on income in the first quarter of 2006 includes tax benefits associated with the resolution of certain tax positions ($441 million) and in the first quarter of 2005 includes taxes on the repatriation of foreign earnings ($2.2 billion). PFIZER INC AND SUBSIDIARY COMPANIES RECONCILIATION FROM REPORTED NET INCOME AND REPORTED DILUTED EARNINGS PER SHARE TO ADJUSTED INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (UNAUDITED) (millions of dollars, except per common share data) First Quarter % Incr./ 2006 2005 (Decr.) Reported net income $4,111 $301 M+ Purchase accounting adjustments -- net of tax 582 622 (6) Merger-related costs -- net of tax 3 151 (98) Discontinued operations -- net of tax (3) (29) (90) Certain significant items -- net of tax (232) 2,955 * Adjusted income $4,461 $4,000 12 Reported diluted earnings per common share $0.56 $0.04 M+ Purchase accounting adjustments -- net of tax 0.08 0.08 - Merger-related costs -- net of tax - 0.02 * Discontinued operations -- net of tax - - * Certain significant items -- net of tax (0.03) 0.40 * Adjusted diluted earnings per common share $0.61 $0.54 13 * Calculation not meaningful. M+ Change greater than one thousand percent. Certain amounts and percentages may reflect rounding adjustments. 1. The above reconciliation presents the three-month periods ended April 2, 2006 and April 3, 2005. Subsidiaries operating outside the United States are included for the three-month periods ended February 26, 2006 and February 27, 2005. 2. Adjusted Income and Adjusted diluted earnings per common share as shown above reflect the following items: (millions of dollars) First Quarter 2006 2005 Purchase accounting adjustments, pre-tax: In-process research and development charges (a) $- $2 Intangible amortization and other (b) 812 851 Sale of acquired inventory written up to fair value (c) - 4 Total purchase accounting adjustments, pre-tax 812 857 Income taxes (230) (235) Total purchase accounting adjustments -- net of tax 582 622 Merger-related costs, pre-tax: Integration costs (d) 2 106 Restructuring charges (d) 3 113 Total merger-related costs, pre-tax 5 219 Income taxes (2) (68) Total merger-related costs -- net of tax 3 151 Discontinued operations, pre-tax: Loss from discontinued operations (e) - 18 Gains on sales of discontinued operations (e) (5) (65) Total discontinued operations, pre-tax (5) (47) Income taxes 2 18 Total discontinued operations -- net of tax (3) (29) Certain significant items, pre-tax Asset impairment charges and other costs associated with the suspension of selling Bextra (f) - 1,213 Sanofi-aventis research and development milestone (g) (118) - Restructuring charges - Adapting to Scale (d) 301 - Implementation costs - Adapting to Scale (h) 186 - Gain on disposals of investments (i) (51) - Total certain significant items, pre-tax 318 1,213 Income taxes (109) (447) Resolution of certain tax positions (j) (441) - Tax impact for the repatriation of foreign earnings (j) - 2,189 Total certain significant items -- net of tax (232) 2,955 Total purchase accounting adjustments, merger-related costs, discontinued operations, an
