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Appendix A
2011 Financial Report

Table of contents

  • Page 1
    Appendix A 2011 Financial Report

  • Page 2
    ... relating to our financial and operating performance, business plans and prospects, in-line products and product candidates, strategic review, capital allocation, and share-repurchase and dividend-rate plans. Such forward-looking statements are based on management's current expectations about future...

  • Page 3
    ...'s international operations. (For more information about these acquisitions, see the "Our Business Development Initiatives" section of this Financial Review.) On August 1, 2011, we completed the sale of our Capsugel business. In connection with our decision to sell, the operating results associated...

  • Page 4
    ... Review and Notes to Consolidated Financial Statements-Note 4. Other Deductions--net); lower purchase accounting impacts of $1.5 billion (pre-tax) in 2011 compared to 2010, primarily related to inventory sold that had been recorded at fair value; lower merger restructuring and transaction costs...

  • Page 5
    ... companies of branded prescription drug sales to specified government programs (effective January 1, 2011, with the total fee to be paid each year by the pharmaceutical industry increasing annually through 2018). In addition, the U.S. Healthcare Legislation includes provisions that affect the cost...

  • Page 6
    ...'s 180-day generic exclusivity period in late May 2012. Through the end of 2011, sales of Lipitor in the U.S. were reported in our Primary Care business unit. Beginning in 2012, sales of Lipitor in the U.S. will be reported in our Established Products business unit. • 2011 Financial Report 5

  • Page 7
    Financial Review Pfizer Inc. and Subsidiary Companies • Lipitor in international markets-Lipitor lost exclusivity in Australia in February 2012; in Japan in 2011; and in Brazil, Canada, Spain and Mexico in 2010; and it has lost exclusivity in nearly all emerging market countries. We do not ...

  • Page 8
    Financial Review Pfizer Inc. and Subsidiary Companies Pricing and Access Pressures Governments, managed care organizations and other payer groups continue to seek increasing discounts on our products through a variety of means such as leveraging their purchasing power, implementing price controls, ...

  • Page 9
    ... us to share risk and to access external scientific and technological expertise. For information about our pending new drug applications (NDA) and supplemental filings, see the "Revenues-Product Developments-Biopharmaceutical" section of this Financial Review. Our acquisition strategy included the...

  • Page 10
    ... of cash acquired). Our acquisition of King complements our current portfolio of pain treatments in our Primary Care business unit and provides potential growth opportunities in our Established Products and Animal Health business units. For additional information, see Notes to Consolidated Financial...

  • Page 11
    ... to Consolidated Financial Statements--Note 2F. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Equity-Method Investments. On October 15, 2009 (the acquisition date), we acquired all of the outstanding equity of Wyeth in a cash-and-stock transaction, valued at...

  • Page 12
    ... plan assets, see Notes to Consolidated Financial Statements-- Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans. For a discussion about the application of Fair Value to our asset impairment reviews, see "Asset Impairment Reviews--Long-Lived Assets" below. Revenues...

  • Page 13
    ... with these assets; for Brand assets, the current competitive environment and planned investment support; and, for Developed Technology Rights, in the case of Thelin, we voluntarily withdrew the product in regions where it was approved and discontinued all clinical studies worldwide and, for...

  • Page 14
    ... the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the projections and the impact of technological risk associated with in-process research and development assets, as well as the selection of a long-term growth rate; the discount rate...

  • Page 15
    ... with the market approach. (On July 7, 2011, we announced our decision to explore strategic alternatives for our Nutrition and Animal Health businesses. See the "Our Business Development initiatives" section of this Financial Review.) • • Future Impairment Risks While all reporting units can...

  • Page 16
    ... of return on plan assets and the discount rate used to determine the benefit obligations for the U.S. qualified pension plans: 2011 2010 2009 Expected annual rate of return Actual annual rate of return Discount rate 8.5% 3.8 5.1 8.5% 10.8 5.9 8.5% 14.2 6.3 As a result of the global financial...

  • Page 17
    ... Review Pfizer Inc. and Subsidiary Companies ANALYSIS OF THE CONSOLIDATED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, (MILLIONS OF DOLLARS) % CHANGE 2009 11/10 10/09 2011 2010 Revenues Cost of sales % of revenues Selling, informational and administrative expenses % of revenues Research...

  • Page 18
    ... full year in 2010. The U.S. was the only country to contribute more than 10% of total revenues in each year. Our policy relating to the supply of pharmaceutical inventory at domestic wholesalers, and in major international markets, is to generally maintain stocking levels under one month on average...

  • Page 19
    ...Subsidiary Companies Revenues by Segment and Geographic Area Worldwide revenues by operating segment, business unit and geographic area follow: WORLDWIDE (MILLIONS OF DOLLARS) YEAR ENDED DECEMBER 31, U.S. INTERNATIONAL WORLDWIDE % CHANGE U.S. INTERNATIONAL 2011(a), (b) 2010(b) 2009(b) 2011...

  • Page 20
    ... 2011. • Emerging Markets unit revenues increased 7%, compared to 2010, due to higher operational revenues of 5%, as well as a 2% favorable impact of foreign exchange. The increase in Emerging Markets unit operational revenues in 2011 was due to growth in certain key innovative brands, primarily...

  • Page 21
    ...2010 related to the acquisition of Wyeth. • Consumer Healthcare unit revenues increased 10% in 2011, compared to 2010, reflecting higher operational revenues of 8% and the favorable impact of foreign exchange of 2%. The operational revenue increase in 2011 was primarily driven by increased sales...

  • Page 22
    Financial Review Pfizer Inc. and Subsidiary Companies Nutrition Operating Segment • Nutrition unit revenues increased 15% in 2011, compared to 2010, reflecting higher operational revenues of 11% and the favorable impact of foreign exchange of 4%. The operational revenue increase was primarily due...

  • Page 23
    ...half months of Wyeth's international operations. Represents direct sales under license agreement with Eisai Co., Ltd. (c) Legacy King product. King's operations are included in our financial statements commencing from the acquisition date of January 31, 2011. Therefore, our results for 2010 and 2009...

  • Page 24
    ... family of products remains the leading therapy to help women address moderate-to-severe menopausal symptoms. It recorded a decrease in worldwide revenues of 3% in 2011, compared to 2010. Genotropin, one of the world's leading human growth hormones, is used in children for the treatment of short...

  • Page 25
    ... antibiotic, faces generic global competition. U.S. exclusivity was lost in September 2009. Zosyn/Tazocin recorded a decrease in worldwide revenues of 33% in 2011, compared to 2010. Pristiq is approved for the treatment of major depressive disorder in the U.S. and in various other countries. Pristiq...

  • Page 26
    ... 10/09 Primary Care Operating Segment(a) Specialty Care and Oncology Operating Segment(a) Established Products and Emerging Markets Operating Segment(a) Animal Health and Consumer Healthcare Operating Segment(a) Nutrition and Pfizer CentreSource(a) Worldwide Research and Development/Pfizer Medical...

  • Page 27
    ...Our development pipeline, which is updated quarterly, can be found at www.pfizer.com/pipeline. It includes an overview of our research and a list of compounds in development with targeted indication, phase of development and, for late-stage programs, mechanism of action. The information currently in...

  • Page 28
    ... 17 years. In October 2010, we submitted our response. In April 2010, we received a "warning letter" from the FDA with respect to the clinical trial in support of this supplemental NDA. We are working to address the issues raised in the letter. In April 2011, we received a second "complete response...

  • Page 29
    ... young children due to a request by the Pharmaceutical and Medical Devices Agency (PMDA) for an additional study of this indication in Japanese subjects. We are conducting the requested additional study and, if the results are positive, we plan to resubmit the application. 28 2011 Financial Report

  • Page 30
    ... meet the primary efficacy endpoints and that the two companies will discontinue development of dimebon for all indications, terminate the ongoing open label extension study in Alzheimer's disease and terminate their collaboration to co-develop and market dimebon. Additional product-related programs...

  • Page 31
    ... 87% Cost of sales decreased 5% in 2011, compared to 2010, primarily as a result of: lower purchase accounting charges of $1.7 billion, primarily reflecting the fair value adjustments to acquired inventory from Wyeth that was subsequently sold; and savings associated with our cost-reduction...

  • Page 32
    ... these actions, including sales and marketing, manufacturing and research and development, as well as functions such as information technology, shared services and corporate operations. Since the acquisition of Wyeth, our cost-reduction initiatives announced on January 26, 2009, but not completed as...

  • Page 33
    ... Global Supply division's plant network strategy has targeted the exiting of ten additional sites over the next several years. Research and Development: After the acquisition of Wyeth, we operated in 20 R&D sites and announced that we would close a number of sites. We have completed a number of site...

  • Page 34
    ...(c) Employee termination costs Asset impairments Other Restructuring charges and certain acquisition-related costs Additional depreciation--asset restructuring, recorded in our Consolidated Statements of Income as follows(d): Cost of Sales Selling, informational and administrative expenses Research...

  • Page 35
    ... income of $345 million in 2010, primarily due to lower interest rates coupled with lower average investment balances; and the non-recurrence of a $482 million gain recorded in 2009 related to ViiV (see further discussion in the "Our Business Development Initiatives" section of this Financial Review...

  • Page 36
    ... merits of our tax position, and the non-recurrence of the $556 million tax benefit recorded in the fourth quarter of 2009 related to the sale of one of our biopharmaceutical companies, Vicuron Pharmaceuticals, Inc. Tax Law Changes On August 10, 2010, the President of the United States signed into...

  • Page 37
    ... in order to portray the results of our major operations--the discovery, development, manufacture, marketing and sale of prescription medicines for humans and animals, consumer healthcare (over-the-counter) products, vaccines and nutrition products--prior to considering certain income statement...

  • Page 38
    ... the acquired fixed assets, amortization related to the increase in fair value of acquired debt, charges for purchased IPR&D and the fair value changes associated with contingent consideration. Therefore, the Adjusted income measure includes the revenues earned upon the sale of the acquired products...

  • Page 39
    ... as reported under U.S. GAAP to Adjusted income follows: (MILLIONS OF DOLLARS) YEAR ENDED DECEMBER 31, 2011 2010 2009 % CHANGE 11/10 10/09 Reported net income attributable to Pfizer Inc. Purchase accounting adjustments-net of tax Acquisition-related costs-net of tax Discontinued operations-net of...

  • Page 40
    ... estimated useful lives of assets involved in restructuring actions related to acquisitions. For 2011, included in Cost of sales ($557 million), Selling, informational and administrative expenses ($45 million) and Research and development expenses ($23 million). For 2010, included in Cost of sales...

  • Page 41
    ... inventory sold during 2011 that was acquired from Wyeth and that had been recorded at fair value. For Assets of discontinued operations and other assets held for sale, the decrease reflects the sale of Capsugel (see Notes to Consolidated Financial Statements-Note 2D. Acquisitions, Divestitures...

  • Page 42
    Financial Review Pfizer Inc. and Subsidiary Companies ANALYSIS OF THE CONSOLIDATED STATEMENTS OF CASH FLOWS (MILLIONS OF DOLLARS) YEAR ENDED DECEMBER 31, 2011 2010 2009 % INCR./(DECR.) 11/10 10/09 Cash provided by/(used in): Operating activities Investing activities Financing activities Effect ...

  • Page 43
    ...billion of our common stock in 2012; the cash requirements associated with our cost-reduction/productivity initiatives; paying down outstanding debt; contributions to our pension and postretirement plans; and business-development activities. Our long-term debt is rated high quality by both Standard...

  • Page 44
    ...and share held by our employee benefit trust). In fiscal 2012, we funded our acquisition of Ferrosan's consumer healthcare business, which closed in December 2011 (which falls in the first fiscal quarter of 2012 for our international operations), with available cash and the proceeds from short-term...

  • Page 45
    ... Policies: Estimates and Assumptions. Share Purchase Plans From June 2005 through year-end 2011, we purchased approximately 1.2 billion shares of our common stock for approximately $28 billion. On February 1, 2011, we announced that the Board of Directors authorized a new $5 billion share-purchase...

  • Page 46
    ... words and terms of similar meaning or by using future dates in connection with any discussion of future operating or financial performance, business plans and prospects, in-line products and product candidates, strategic review, capital allocation, and share-repurchase and dividend-rate plans. In...

  • Page 47
    ...things, pharmaceutical product pricing, reimbursement or access, including under Medicaid, Medicare and other publicly funded or subsidized health programs; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; direct-to...

  • Page 48
    ... to realize the projected benefits of our costreduction and productivity initiatives, including those related to our research and development organization; and (iii) the impact of the strategic alternatives that we decide to pursue for our Animal Health and Nutrition businesses. We cannot guarantee...

  • Page 49
    ...and Subsidiary Companies Our financial instrument holdings at year-end were analyzed to determine their sensitivity to interest rate changes. The fair values of these instruments were determined using various methodologies. For additional details, see Notes to Consolidated Financial Statements-Note...

  • Page 50
    ... and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control...

  • Page 51
    Audit Committee Report The Audit Committee reviews the Company's financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls. In this context, the ...

  • Page 52
    ...The Board of Directors and Shareholders of Pfizer Inc.: We have audited the accompanying consolidated balance sheets of Pfizer Inc. and Subsidiary Companies as of December 31, 2011 and 2010, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years...

  • Page 53
    ... the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Pfizer Inc. and Subsidiary Companies as of December 31, 2011 and 2010, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in...

  • Page 54
    ... Subsidiary Companies (MILLIONS, EXCEPT PER COMMON SHARE DATA) YEAR ENDED DECEMBER 31, 2011 2010 2009 Revenues Costs and expenses: Cost of sales(a) Selling, informational and administrative expenses(a) Research and development expenses(a) Amortization of intangible assets Acquisition-related in...

  • Page 55
    Consolidated Balance Sheets Pfizer Inc. and Subsidiary Companies (MILLIONS, EXCEPT PREFERRED STOCK ISSUED AND PER COMMON SHARE DATA) AS OF DECEMBER 31, 2011 2010 Assets Cash and cash equivalents Short-term investments Accounts receivable, less allowance for doubtful accounts: 2011-$227; 2010-$208...

  • Page 56
    ... Subsidiary Companies PFIZER INC. SHAREHOLDERS EMPLOYEE ACCUM. BENEFIT TRUSTS TREASURY STOCK OTHER TOTAL ADD'L COMP. SHARENONSHARESTATED PAR PAID-IN FAIR RETAINED INC./ HOLDERS' CONTROLLING HOLDERS' SHARES VALUE SHARES VALUE CAPITAL SHARES VALUE SHARES COST EARNINGS (LOSS) EQUITY INTERESTS EQUITY...

  • Page 57
    ... interests Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: Depreciation and amortization Share-based compensation expense Asset write-offs and impairment charges Acquisition-related in-process research and development...

  • Page 58
    ..., our consolidated financial statements for the year ended December 31, 2011 reflect approximately 11 months of King's U.S. operations and approximately 10 months of King's international operations. On October 15, 2009, we completed our acquisition of Wyeth in a cash-and-stock transaction valued on...

  • Page 59
    ... fair value of acquired IPR&D be recorded on the balance sheet. Transaction costs are expensed as incurred. Any excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill. When we acquire net assets that do not constitute a business as defined...

  • Page 60
    ... we receive a share of their net sales or profits. Alliance revenues are recorded when our co-promotion partners ship the product and title passes to their customers. The related expenses for selling and marketing these products are included in Selling, informational and administrative expenses. In...

  • Page 61
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies H. Cost of Sales and Inventories We carry inventories at the lower of cost or market. The cost of finished goods, work in process and raw materials is determined using average actual cost. We regularly review our ...

  • Page 62
    ... associated with acquiring and integrating an acquired business. (If the restructuring action results in a change in the estimated useful life of an asset, that incremental impact is classified in Cost of sales, Selling, informational and administrative expenses and Research and development expenses...

  • Page 63
    ... which those costs are shared with the employee or others (such as governmental programs). Plan assets are measured at fair value. Net periodic benefit costs are recognized, as required, into Cost of sales, Selling, informational and administrative expenses and Research and development expenses, as...

  • Page 64
    ... Statements Pfizer Inc. and Subsidiary Companies Wyeth's core business was the discovery, development, manufacture and sale of prescription pharmaceutical products, including vaccines, for humans. Other operations of Wyeth included the discovery, development, manufacture and sale of consumer...

  • Page 65
    ... to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies The assets acquired and liabilities assumed from Wyeth follow: AMOUNTS RECOGNIZED AS OF ACQUISITION DATE (FINAL) (MILLIONS OF DOLLARS) Working capital, excluding inventories(a) Inventories Property, plant and equipment...

  • Page 66
    ...been had we completed the acquisition on January 1, 2009. In addition, the unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company nor do they reflect the expected realization of any cost savings associated with the acquisition. The...

  • Page 67
    ... to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies B. Acquisition of King Pharmaceuticals, Inc. Description of the Transaction On January 31, 2011 (the acquisition date), we completed a tender offer for the outstanding shares of common stock of King at a purchase price of...

  • Page 68
    ... in Identifiable intangible assets-in-process research and development. The fair value of the contingent consideration at the acquisition date was estimated by utilizing a probability-weighted income approach. We started with an estimate of the timing of the potential cash payments by year, based on...

  • Page 69
    ... 1, 2011, we completed the sale of our Capsugel business for approximately $2.4 billion in cash. In connection with the decision to sell, the operating results associated with the Capsugel business are classified as Discontinued operations-net of tax in the consolidated statements of income for...

  • Page 70
    ...our collaboration partners follow: (MILLIONS OF DOLLARS) YEAR ENDED DECEMBER 31, 2011 2010 2009 Revenues-Revenues(a) Revenues-Alliance revenues(b) Total revenues from collaborative arrangements Cost of sales(c) Selling, informational and administrative expenses(d) Research and development expenses...

  • Page 71
    ... by these actions, including sales and marketing, manufacturing and research and development, as well as functions such as information technology, shared services and corporate operations. In early February 2011, we announced a new research and productivity initiative to accelerate our strategies to...

  • Page 72
    ... Wyeth debt. Interest income decreased due to lower interest rates, coupled with lower average cash balances. Capitalized interest expense totaled $50 million in 2011, $36 million in 2010 and $34 million in 2009. In 2010 and 2009, represents gains on sales of certain investments and businesses. Net...

  • Page 73
    ... with these assets; for Brand assets, the current competitive environment and planned investment support; and, for Developed Technology Rights, in the case of Thelin, we voluntarily withdrew the product in regions where it was approved and discontinued all clinical studies worldwide, and for...

  • Page 74
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies (b) (c) (d) In 2010, the Federal current income tax benefit is primarily due to the tax benefit recorded in connection with our $1.4 billion settlement with the U.S. Internal Revenue Service and the reversal of $600 ...

  • Page 75
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies (b) (c) (d) municipal taxes. In Ireland, we benefited from an incentive tax rate effective through 2010 on income from manufacturing operations. In Singapore, we benefit from incentive tax rates effective through 2031...

  • Page 76
    ...Internal Revenue Service (IRS) with respect to the audits of the Wyeth tax returns for the years 2002 through 2005. The settlement resulted in an income tax benefit to Pfizer of approximately $80 million for income tax and interest. Tax years 2006 through the Wyeth acquisition date (October 15, 2009...

  • Page 77
    ... in 2010 and $6 million income in 2009. The currency translation adjustments reclassified to income resulted from the sale of legal entities. Income taxes are not provided for foreign currency translation relating to permanent investments in international subsidiaries. 76 2011 Financial Report

  • Page 78
    ... fair value on a recurring basis were not significant as of December 31, 2011 or December 31, 2010. Our private equity securities represent investments in the life sciences sector. Our short-term and long-term loans are due from companies with highly rated securities (Standard & Poor's (S&P) ratings...

  • Page 79
    ... test-comparisons of values with actual sales of financial instruments. The selected financial assets and liabilities are presented in our consolidated balance sheets as follows: (MILLIONS OF DOLLARS) AS OF DECEMBER 31, 2011 2010 Assets Cash and cash equivalents Short-term investments Short-term...

  • Page 80
    ... 31, 2010. The weighted-average effective interest rate on short-term borrowings outstanding was 0.2% as of December 31, 2011, and 2.8% as of December 31, 2010. As of December 31, 2011, we had access to $9.4 billion of lines of credit, of which $2.3 billion expire within one year. Of these lines of...

  • Page 81
    ... future foreign exchange cash flows relates to our $2.3 billion U.K. pound debt maturing in 2038. All derivative contracts used to manage foreign currency risk are measured at fair value and are reported as assets or liabilities on the consolidated balance sheet. Changes in fair value are reported...

  • Page 82
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies All derivative contracts used to manage interest rate risk are measured at fair value and reported as assets or liabilities on the consolidated balance sheet. Changes in fair value are reported in earnings, as follows:...

  • Page 83
    ... and Other Intangible Assets A. Goodwill The components and changes in the carrying amount of goodwill follow: PRIMARY CARE SPECIALTY CARE AND ONCOLOGY ESTABLISHED PRODUCTS AND EMERGING MARKETS ANIMAL HEALTH AND CONSUMER HEALTHCARE (MILLIONS OF DOLLARS) NUTRITION OTHER(a) TOTAL Balance, January...

  • Page 84
    ... assets, less accumulated amortization: Developed technology rights: Specialty Care (64%); Established Products (17%); Primary Care (15%); Animal Health (2%); Oncology (1%); and Nutrition (1%) Brands, finite-lived: Consumer Healthcare (57%); Established Products (29%); and Animal Health...

  • Page 85
    ... assets are associated with our Consumer Healthcare and Nutrition business units. Virtually all of these assets were acquired in connection with our Wyeth acquisition in 2009 and our Pharmacia acquisition in 2003. The more significant components of indefinite-lived brands are the following (in order...

  • Page 86
    ...(c) 2011 2010 2009 INTERNATIONAL(e) 2011 2010 2009 Service cost(a) Interest cost(a) Expected return on plan assets(a) Amortization of: Actuarial losses Prior service (credits)/costs Curtailments and settlements-net Special termination benefits Net periodic benefit costs Other changes recognized...

  • Page 87
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies B. Actuarial Assumptions The weighted-average actuarial assumptions of our benefit plans follow: (PERCENTAGES) 2011 2010 2009 Weighted-average assumptions used to determine benefit obligations: Discount rate: U.S. ...

  • Page 88
    ... Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies C. Obligations and Funded Status An analysis of the changes in our benefit obligations, plan assets and funded status of our benefit plans follow: YEAR ENDED DECEMBER 31, PENSION PLANS U.S. SUPPLEMENTAL (NON-QUALIFIED)(b) 2011...

  • Page 89
    ... to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies The funded status is recognized in our consolidated balance sheets as follows: AS OF DECEMBER 31, PENSION PLANS U.S. SUPPLEMENTAL (NON-QUALIFIED) 2011 2010 (MILLIONS OF DOLLARS) U.S. QUALIFIED 2011 2010 INTERNATIONAL 2011...

  • Page 90
    ... Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies D. Plan Assets The components of plan assets follow: FAIR VALUE(a) (MILLIONS OF DOLLARS) FAIR VALUE(a) LEVEL 3 AS OF DECEMBER 31, 2010 LEVEL 1 LEVEL 2 LEVEL 3 AS OF DECEMBER 31, 2011 LEVEL 1 LEVEL 2 U.S. qualified pension...

  • Page 91
    ... PURCHASES, FAIR FAIR VALUE ASSETS ASSETS SOLD SALES AND TRANSFER EXCHANGE VALUE, BEGINNING HELD, DURING THE SETTLEMENTS, INTO/(OUT OF) RATE END OF OF YEAR END OF YEAR PERIOD NET LEVEL 3 CHANGES YEAR (MILLIONS OF DOLLARS) 2011 U.S. qualified pension plans: Private equity funds Other International...

  • Page 92
    ... acquire Wyeth was recorded as a reduction to Retained Earnings. We purchase our common stock via privately negotiated transactions or in open market purchases as circumstances and prices warrant. Purchased shares under each of the sharepurchase plans, which are authorized by our Board of Directors...

  • Page 93
    ...) YEAR ENDED DECEMBER 31, 2011 2010 2009 Stock option expense RSU expense TSRU expense Directors' compensation and other PSA expense/(expense reduction) Share-based payment expense Tax benefit for share-based compensation expense Share-based payment expense, net of tax 92 2011 Financial Report...

  • Page 94
    ...-line basis over the vesting term into Cost of sales, Selling, informational and administrative expenses, and Research and development expenses, as appropriate. The weighted-average assumptions used in the valuation of stock options follow: YEAR ENDED DECEMBER 31, 2011 2010 2009 Expected dividend...

  • Page 95
    ... term into Cost of sales, Selling, informational and administrative expenses, and Research and development expenses, as appropriate. The weighted-average assumptions used in the valuation of PSAs follow: YEAR ENDED DECEMBER 31, 2011 2010 2009 Risk-free interest rate(a) Expected Pfizer stock price...

  • Page 96
    ... pay higher rent when operating expenses increase. Rental expense, net of sublease income, was $382 million in 2011, $387 million in 2010 and $356 million in 2009. The future minimum rental commitments under non-cancelable operating leases follow: (MILLIONS OF DOLLARS) 2012 2013 2014 2015 2016...

  • Page 97
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies • • • Product liability and other product-related litigation, which can include personal injury, consumer, off-label promotion, securities-law, antitrust and breach of contract claims, among others, often ...

  • Page 98
    ... to market a generic version of Viagra. Teva USA and Teva Pharmaceutical Industries assert the invalidity and non-infringement of the Viagra use patent, which expires in 2019, but have not challenged the basic patent, which expires in 2012. In August 2011, the court ruled that our Viagra use patent...

  • Page 99
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies Apotex Inc. notified us, in May and June 2011, respectively, that it had filed abbreviated new drug applications with the FDA seeking approval to market generic versions of Lyrica oral solution and Lyrica capsules. ...

  • Page 100
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies Tygacil (tigecycline) In October 2009, Sandoz notified Wyeth that it had filed an abbreviated new drug application with the FDA seeking approval to market a generic version of Tygacil. Sandoz asserts the invalidity and ...

  • Page 101
    ... Warner-Lambert and American Optical are entitled to payment from each of those carriers of a proportionate share of the costs associated with those claims. Under New Jersey law, a special allocation master was appointed to implement certain aspects of the court's rulings. 100 2011 Financial Report

  • Page 102
    ... to a share of the profits from Celebrex sales. Plaintiffs seek, among other things, compensatory and punitive damages. Various Drugs: Off-Label Promotion Actions • Securities Action In May 2010, a purported class action was filed in the U.S. District Court for the Southern District of New York...

  • Page 103
    ... loss related to the use or purchase of certain estrogen and progestin medications prescribed for women to treat the symptoms of menopause. Although new actions are occasionally filed, the number of new actions was not significant in 2011, and we do not expect a substantial change in the rate of new...

  • Page 104
    ... the promotion and sale of Neurontin. The plaintiffs in the purported class actions seek to represent nationwide and certain statewide classes consisting of persons, including individuals, health insurers, employee benefit plans and other thirdparty payers, who purchased or reimbursed patients for...

  • Page 105
    ... Court for the District of New Jersey certified a nationwide class consisting of wholesalers and other entities who purchased Neurontin directly from Pfizer and Warner-Lambert during the period from December 11, 2002 to August 31, 2008 and who also purchased generic gabapentin after it became...

  • Page 106
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies Bapineuzumab In June 2010, a purported class action was filed in the U.S. District Court for the District of New Jersey against Pfizer, as successor to Wyeth, and several former officers of Wyeth. The complaint alleges ...

  • Page 107
    ...Pfizer did not report to the states their best price for certain products under the Medicaid program. In addition, Pharmacia, Pfizer and other pharmaceutical manufacturers are defendants in a number of purported class action suits in various federal and state courts brought by employee benefit plans...

  • Page 108
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies In connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities related to Pharmacia's former agricultural business. New Monsanto is defending and...

  • Page 109
    ...Specialty Care and Oncology, Established Products and Emerging Markets, Animal Health and Consumer Healthcare and Nutrition. Each operating segment has responsibility for its commercial activities and for certain research and development activities related to in-line products and IPR&D projects that...

  • Page 110
    ... human prescription pharmaceutical products sold in Emerging Markets, including Asia (excluding Japan and South Korea), Latin America, Middle East, Africa, Central and Eastern Europe and Turkey. • Animal Health and Consumer Healthcare operating segment-comprises the Animal Health business unit...

  • Page 111
    ... 31, 2009(c) Primary Care Specialty Care and Oncology Established Products and Emerging Markets Animal Health and Consumer Healthcare Total reportable segments Nutrition and other business activities(d) Reconciling Items: Corporate(e) Purchase accounting adjustments(f) Acquisition-related costs...

  • Page 112
    ... revenues and operating results of Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales operation, and the research and development costs managed by our Worldwide Research and Development organization and our Pfizer Medical organization. Corporate for R&D expenses...

  • Page 113
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies Significant Product Revenues Significant product revenues follow: YEAR ENDED DECEMBER 31, (MILLIONS OF DOLLARS) 2011 2010 2009 Revenues from biopharmaceutical products(a): Lipitor(b) Lyrica Prevnar 13/Prevenar 13(c)...

  • Page 114
    ...) Pfizer Inc. and Subsidiary Companies QUARTER (MILLIONS OF DOLLARS, EXCEPT PER COMMON SHARE DATA) FIRST SECOND THIRD FOURTH 2011 Revenues Costs and expenses(a) Acquisition-related in-process research and development charges Restructuring charges and certain acquisition-related costs(b) Income...

  • Page 115
    ..., EXCEPT PER COMMON SHARE DATA) FIRST SECOND THIRD FOURTH 2010 Revenues Costs and expenses(a) Acquisition-related in-process research and development charges Restructuring charges and certain acquisition-related costs(b) Income from continuing operations before provision/(benefit) for taxes on...

  • Page 116
    Financial Summary Pfizer Inc. and Subsidiary Companies (MILLIONS, EXCEPT PER COMMON SHARE DATA) 2011 YEAR ENDED/AS OF DECEMBER 31,(a) 2010 2009 2008 2007 Revenues Research and development expenses(b) Other costs and expenses Acquisition-related in-process research and development charges(c) ...

  • Page 117
    Financial Summary Pfizer Inc. and Subsidiary Companies Peer Group Performance Graph 125.0 100.0 75.0 50.0 25.0 0.0 2006 2007 2008 2009 2010 2011 PFIZER PEER GROUP S&P 500 Five Year Performance 2006 2007 2008 2009 2010 2011 PFIZER PEER GROUP S&P 500 100.0 100.0 100.0 91.9 102.0 105.5 76...