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Appendix A
2012 Financial Report

Table of contents

  • Page 1
    Appendix A 2012 Financial Report

  • Page 2
    ... financial and operating performance, business plans and prospects, in-line products and product candidates, strategic reviews, capital allocation, business-development plans, and plans relating to share repurchases and dividends. Such forward-looking statements are based on management's current...

  • Page 3
    ... of our Animal Health business. (For additional information, see Notes to Consolidated Financial Statements--Note 19A. Subsequent Events: Zoetis Debt Offering and Initial Public Offering.) On November 30, 2012, we completed the sale of our Nutrition business to Nestlé for $11.85 billion in cash and...

  • Page 4
    ... $1.4 billion (pre-tax) higher in 2012 than 2011 (see further discussion in the "Costs and Expenses--Other Deductions--Net" section of this Financial Review and Notes to Consolidated Financial Statements--Note 4. Other Deductions--Net); and charges in 2012 associated with the separation of Zoetis of...

  • Page 5
    ...-calendar-year share relative to other 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). • • Impacts to our 2012 Results We recorded...

  • Page 6
    ...in 2012, sales of Lipitor in the U.S. were reported in our Established Products business unit. Lipitor in international markets-Lipitor lost exclusivity in Japan in June 2011 (with generic competition occurring in November 2011), Australia in April 2012 and most of developed Europe in March 2012 and...

  • Page 7
    ...'s labeling, restricting the use of a product, communicating new safety information to the public, or, in rare cases, removing a product from the market. Pricing and Access Pressures Governments, managed care organizations and other payer groups continue to seek increasing discounts on our products...

  • Page 8
    ... Zoetis, then, following such separation, Pfizer will be a global biopharmaceutical company with an innovative core (our Primary Care, Specialty Care and Oncology units) and a value core (our Established Products unit) in developed markets, with different cost structures and operating drivers...

  • Page 9
    ... the total outstanding Zoetis shares. For additional information, see Notes to Consolidated Financial Statements--Note 19A. Subsequent Events: Zoetis Debt Offering and Initial Public Offering. On November 30, 2012, we completed the sale of our Nutrition business to Nestlé for $11.85 billion in cash...

  • Page 10
    ..., Hisun Pfizer Pharmaceuticals Company Limited (HPP), to develop, manufacture and commercialize off-patent pharmaceutical products in China and global markets. HPP was established with registered capital of $250 million. For additional information, see Notes to Consolidated Financial Statements-Note...

  • Page 11
    Financial Review Pfizer Inc. and Subsidiary Companies liver transplant is the only treatment option currently available. Our acquisition of FoldRx has increased our presence in the growing rare medical disease market, which complements our Specialty Care unit. For additional information regarding ...

  • Page 12
    ... Subsidiary Companies For a discussion about the application of Fair Value to our benefit plan assets, see Notes to Consolidated Financial Statements--Note 11D. Pension and Postretirement Benefit Plans and Defined Contribution Plans: Plan Assets. For a discussion about the application of Fair Value...

  • Page 13
    ... risk associated 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...

  • Page 14
    ... both the guideline public company method and the guideline transaction method, which we weight equally to arrive at our market approach value. When we estimate the fair value of our Animal Health reporting unit, we use the income approach, relying exclusively on the discounted cash flow method. We...

  • Page 15
    .... Pension and Postretirement Benefit Plans and Defined Contribution Plans: Plan Assets for asset allocation ranges and actual asset allocations for 2012 and 2011). The expected return for our U.S. plans and the majority of our international plans is applied to the fair market value of plan assets at...

  • Page 16
    ...Revenues Cost of sales % of revenues Selling, informational and administrative expenses % of revenues Research and development expenses % of revenues Amortization of intangible assets % of revenues Restructuring charges and certain acquisition-related costs % of revenues Other deductions-net Income...

  • Page 17
    ... of total revenue in 2012. The U.S. was the only country to contribute more than 10% of total revenues in 2011 and 2010. 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...

  • Page 18
    ...(a) 2010 2012 2012 2011(a) 2011(a) Biopharmaceutical revenues: Primary Care Operating Segment Specialty Care Oncology SC&O Operating Segment Emerging Markets Established Products EP&EM Operating Segment $ 15,558 14,151 1,310 15,461 9,960 10,235 20,195 51,214 Other product revenues: Animal Health...

  • Page 19
    ... Primary Care unit revenues by $7.9 billion, or 35%, in comparison with 2011. The impact of these declines was slightly offset by the strong operational growth of Lyrica in developed markets and Celebrex and Viagra in the U.S. Specialty Care and Oncology Operating Segment • Specialty Care unit...

  • Page 20
    ... markets during 2010, as well as Aricept 5mg and 10mg tablets in the U.S. in November 2010. Taken together, these losses of exclusivity reduced Primary Care unit revenues by approximately $2.1 billion, or 9%, in comparison with 2010. Specialty Care and Oncology Operating Segment • Specialty Care...

  • Page 21
    ... business, as well as deeper market penetration in emerging markets. This was partially offset by the adverse impact of required product divestitures in 2010 related to the acquisition of Wyeth. Consumer Healthcare Operating Segment • Consumer Healthcare unit revenues increased 10% in 2011...

  • Page 22
    ... to 2011. In the U.S., revenues increased 10% in 2012, compared to 2011. Notwithstanding these increases, U.S. revenues continue to be affected by increased competition from generic versions of competitive medicines, as well as managed care pricing and formulary pressures. 2012 Financial Report 21

  • Page 23
    ...to strong Direct to Customer investment and field force promotion. Strong operational performance in international markets was driven by volume and share growth in Japan and emerging markets in the low back pain indication, partially offset by lower developed Europe revenues in 2012 compared to 2011...

  • Page 24
    ... Companies • Viagra is indicated for the treatment for erectile dysfunction. Viagra worldwide revenues increased 4% in 2012, compared to 2011, primarily due to the increase in U.S. revenues, partially offset by branded and generic competitive pressure in developed Europe, other developed markets...

  • Page 25
    ... the 27 countries of the EU, plus Iceland and Norway, Canada, Japan and the U.S., and it was launched for that indication in the U.S. in January 2013. The two companies share commercialization expenses and profit/losses equally on a global basis. Embeda-We met with the FDA in May 2012 to discuss our...

  • Page 26
    ... the Animal Health operating segment and the Consumer Healthcare operating segment. The increase in 2012 primarily relates to a $250 million payment to AstraZeneca to obtain the exclusive global over-the-counter rights to Nexium. Worldwide Research and Development is generally responsible for human...

  • Page 27
    ...Inc. and Subsidiary Companies research primarily focuses on five high-priority areas that have a mix of small and large molecules-immunology and inflammation; oncology; cardiovascular and metabolic diseases; neuroscience and pain; and vaccines. In addition to reducing the number of disease areas of...

  • Page 28
    ... (b) This indication for Eliquis (apixaban) was developed and is being commercialized in collaboration with BMS. In January 2013, the EMA's Committee for Medicinal Products for Human Use (CHMP) issued an opinion recommending that bosutinib be granted conditional approval for treatment of previously...

  • Page 29
    ... appropriate path forward. Additional product-related programs are in various stages of discovery and development. Also, see the discussion in the "Our Business Development Initiatives" section of this Financial Review. COSTS AND EXPENSES Cost of Sales Year Ended December 31, 2012 2011 11,334 $ 14...

  • Page 30
    ... to product losses of exclusivity; more streamlined corporate support functions; and the favorable impact of foreign exchange of 2%, partially offset by: • costs associated with the separation of Zoetis employees, net assets and operations from Pfizer. 2011 v. 2010 SI&A expenses were largely...

  • Page 31
    ... the development of global systems. • All of our businesses and functions may be impacted by these actions, including sales and marketing, manufacturing and research and development, as well as groups such as information technology, shared services and corporate operations. Since the acquisition...

  • Page 32
    ...), Specialty Care and Oncology operating segment ($175 million), Established Products and Emerging Markets operating segment ($125 million), Animal Health operating segment ($59 million), Consumer Healthcare operating segment ($45 million), research and development operations ($6 million income...

  • Page 33
    ... $1.4 billion higher in 2012 than in 2011, primarily due to a $491 million charge resulting from an agreement-in-principle with the U.S. Department of Justice to resolve an investigation into Wyeth's historical promotional practices in connection with Rapamune, a $450 million settlement of...

  • Page 34
    ... (see Notes to Consolidated Financial Statements-Note 5A. Tax Matters: Taxes on Income from Continuing Operations). 2012 v. 2011 The lower effective tax rate in 2012 compared to 2011 is primarily the result of: • • a multi-year settlement with the IRS in 2012 that resulted in a tax benefit of...

  • Page 35
    ... the results of our major operations--the discovery, development, manufacture, marketing and sale of prescription medicines for humans and animals, consumer healthcare (over-thecounter) products, and vaccines--prior to considering certain income statement elements. We have defined Adjusted income as...

  • Page 36
    ... Operations Adjusted income is calculated prior to considering the results of operations included in discontinued operations, as well as any related gains or losses on the sale of such operations such as the sale of our Capsugel business, which we sold in August 2011, and the sale of our Nutrition...

  • Page 37
    ... nature with a defined term, such as those related to our non-acquisition-related cost-reduction and productivity initiatives; amounts related to certain disposals of businesses, products or facilities that do not qualify as discontinued operations under U.S. GAAP; amounts associated with transition...

  • Page 38
    ...Consolidated Financial Statements-Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives). For 2012, included in Cost of sales ($31 million), Selling, informational and administrative expenses ($140 million) and Research and development...

  • Page 39
    ... 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans. ANALYSIS OF THE CONSOLIDATED BALANCE SHEETS For information about certain of our financial assets and liabilities, including Cash and cash equivalents, Short-term investments, Long-term investments, Short-term borrowings...

  • Page 40
    ...Nutrition business of $11.85 billion in 2012 compared to net proceeds from the sale of our Capsugel business of $2.4 billion in 2011 (see Notes to Consolidated Financial Statements--Note 2B. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Divestitures); and cash...

  • Page 41
    ...rate; share repurchases; 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. With regard to share repurchases, the Company's new $10 billion share...

  • Page 42
    ...Nutrition business. For additional information, see the "Analysis of the Consolidated Statements of Cash Flows" section of this Financial Review. Working capital includes net assets held for sale of $70 million as of December 31, 2012 and $4.1 billion as of December 31, 2011. Represents total Pfizer...

  • Page 43
    ...used for share repurchases, as well as other value-creating opportunities. For additional information regarding our sale of the Nutrition business to Nestlé, see Notes to Consolidated Financial Statements--Note 2B. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments...

  • Page 44
    ...the Zoetis commercial paper program. Global Economic Conditions The challenging economic environment has not had, nor do we anticipate it will have, a significant impact on our liquidity. Due to our significant operating cash flows, financial assets, access to capital markets and available lines of...

  • Page 45
    ... be evaluated in the context of future business performance, we currently believe that we can support future annual dividend increases, barring significant unforeseen events. NEW ACCOUNTING STANDARDS Recently Adopted Accounting Standards See Notes to Consolidated Financial Statements-Note 1B. Basis...

  • Page 46
    ..., future performance or results of current and anticipated products, sales efforts, expenses, interest rates, foreign exchange rates, the outcome of contingencies, such as legal proceedings, plans relating to share repurchases and dividends, government regulation and financial results, including, in...

  • Page 47
    ... and infrastructure; legal defense costs, insurance expenses, settlement costs, the risk of an adverse decision or settlement and the adequacy of reserves related to product liability, patent protection, government investigations, consumer, commercial, securities, antitrust, environmental and tax...

  • Page 48
    ... rate changes. The fair values of these instruments were determined using various methodologies. For additional details, see Notes to Consolidated Financial Statements-Note 7A. Financial Instruments: Selected Financial Assets and Liabilities. In this sensitivity analysis, we used a one hundred basis...

  • Page 49
    ... settlement of that tax year with the appropriate agency. We regularly re-evaluate our tax positions based on the results of audits of federal, state and foreign income tax filings, statute of limitations expirations, changes in tax law or receipt of new information that would either increase...

  • Page 50
    ... Over Financial Reporting The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal control over financial reporting is...

  • Page 51
    ...the fair and complete presentation of the Company's results and the assessment of the Company's internal control over financial reporting. The Committee has discussed significant accounting policies applied by the Company in its financial statements, as well as alternative treatments. Management has...

  • Page 52
    ... Statements 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, 2012 and 2011, and the related consolidated statements of income, comprehensive income, equity, and cash...

  • Page 53
    ... with 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, 2012 and 2011, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of...

  • Page 54
    Consolidated Statements of Income Pfizer Inc. and Subsidiary Companies (MILLIONS, EXCEPT PER COMMON SHARE DATA) Revenues Costs and expenses: Cost of sales(a) Selling, informational and administrative expenses(a) Research and development expenses(a) Amortization of intangible assets Restructuring ...

  • Page 55
    ... 2012 and 2011, reclassified to Gain/(loss) on sale of discontinued operations-net of tax. Reclassified into Other deductions-net in the consolidated statements of income. Generally reclassified into Cost of sales, Selling, informational and administrative expenses, and/or Research and development...

  • Page 56
    Consolidated Balance Sheets Pfizer Inc. and Subsidiary Companies (MILLIONS, EXCEPT PREFERRED STOCK ISSUED AND PER COMMON SHARE DATA) As of December 31, 2012 2011 Assets Cash and cash equivalents Short-term investments Accounts receivable, less allowance for doubtful accounts, 2012-$374; 2011-$...

  • Page 57
    ... of Equity Pfizer Inc. and Subsidiary Companies PFIZER INC. SHAREHOLDERS Preferred Stock Common Stock Employee Benefit Trusts Treasury Stock Accum. Other Comp. Inc./ (Loss) (MILLIONS, EXCEPT PREFERRED SHARES) Balance, January 1, 2010 Net income Other comprehensive loss, net of tax Cash dividends...

  • Page 58
    ...on short-term borrowings with original maturities of 90 days or less Principal payments on long-term debt Purchases of common stock Cash dividends paid Other financing activities Net cash used in financing activities Effect of exchange-rate changes on cash and cash equivalents Net increase/(decrease...

  • Page 59
    ... Investments: Divestitures. On January 31, 2011, we acquired King Pharmaceuticals, Inc. (King). Commencing from the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of King, and, in accordance with our domestic and international reporting...

  • Page 60
    ... IPR&D is expensed. Contingent consideration in business acquisitions is included as part of the acquisition cost and is recognized at fair value as of the acquisition date. Fair value is generally estimated by using a probability-weighted income approach. Any liability resulting from contingent...

  • Page 61
    ... their rebates on the government's unbudgeted pharmaceutical spending, and we use an estimated allocation factor (based on historical payments) and total revenues by country against our actual invoiced sales to project the expected level of reimbursement. We obtain third-party information that helps...

  • Page 62
    ...expenses totaled approximately $2.9 billion in 2012, $3.7 billion in 2011 and $3.8 billion in 2010. Production costs are expensed as incurred and the costs of radio time, television time and space in publications are expensed when the related advertising occurs. J. Research and Development Expenses...

  • Page 63
    ... evaluate all of our financial assets for impairment. For investments in debt and equity securities, when a decline in fair value, if any, is determined to be other-than-temporary, an impairment charge is recorded in the statement of income, and a new cost basis in the investment is established...

  • Page 64
    ...cost of providing the healthcare and life insurance benefits, as well as the extent to 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...

  • Page 65
    ... and Eastern Europe. This acquisition is reflected in our consolidated financial statements beginning in the first fiscal quarter of 2012. Our acquisition of Ferrosan's consumer healthcare business increases our presence in dietary supplements with a new set of brands and pipeline products. Also, we...

  • Page 66
    ... pharmaceutical business focused on delivering new formulations of pain treatments designed to discourage common methods of misuse and abuse; the Meridian auto-injector business for emergency drug delivery, which develops and manufactures the EpiPen; an established products portfolio; and an animal...

  • Page 67
    ... charges in 2010, reflecting charges incurred by both King and Pfizer). FoldRx Pharmaceuticals, Inc. On October 6, 2010, we completed our acquisition of FoldRx Pharmaceuticals, Inc. (FoldRx), a privately held drug discovery and clinical development company. FoldRx's lead product candidate, Vyndaqel...

  • Page 68
    ..., we have agreements to co-promote pharmaceutical products discovered by us or other companies, and we have agreements where we partner to co-develop and/or participate together in commercializing, marketing, promoting, manufacturing and/or distributing a drug product. 2012 Financial Report 67

  • Page 69
    ...covering cardiovascular disease, infectious disease, oncology, mental health, and other therapeutic areas. See also Note 19B. Subsequent Events: Hisun Pfizer Pharmaceuticals Company Limited (HPP). The parties will also contribute manufacturing sites, cash and other relevant assets. Our investment in...

  • Page 70
    ...), Specialty Care and Oncology operating segment ($175 million), Established Products and Emerging Markets operating segment ($125 million), Animal Health operating segment ($59 million), Consumer Healthcare operating segment ($45 million), research and development operations ($6 million income...

  • Page 71
    ...Companies The restructuring charges in 2011 are associated with the following: • Primary Care operating segment ($593 million), Specialty Care and Oncology operating segment ($220 million), Established Products and Emerging Markets operating segment ($110 million), Animal Health operating segment...

  • Page 72
    ... risk associated 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...

  • Page 73
    ..., Celebrex, hormone-replacement therapy and Chantix; higher costs associated with the separation of Zoetis; and the payment to AstraZeneca to obtain the exclusive global over-the-counter rights to Nexium, partially offset by lower acquisition-related costs. The increase in international income was...

  • Page 74
    ...(d) U.S. Healthcare Legislation(d) U.S. research and development tax credit and manufacturing deduction Certain legal settlements and charges(d) Acquired IPR&D Wyeth acquisition-related costs Sales of biopharmaceutical companies All other--net Effective tax rate for income from continuing operations...

  • Page 75
    ... on Income from Continuing Operations. We received no benefit from the U.S. research and development tax credit in 2012 as the credit expired on December 31, 2011 and was not extended until January 2013. C. Deferred Taxes Deferred taxes arise as a result of basis differentials between financial...

  • Page 76
    ...(c), (e) Balance, ending(f) The amount in 2011 primarily relates to the acquisition of King. See also Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions. Primarily relates to the sale of our Nutrition business. See also Note 2B. Acquisitions...

  • Page 77
    ... adjustments related to curtailments and settlements, net Other Tax benefit on other comprehensive loss (a) Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely. 76 2012 Financial Report

  • Page 78
    ... $ $ Derivative Financial Instruments 6 (214) (208) (153) (361) 273 (88) $ $ AvailableFor-Sale Securities 269 (112) 157 (111) 46 117 163 $ $ Benefit Plans Actuarial Gains/ (Losses) Prior Service (Costs)/ Credits And Other 94 295 389 (27) 362 (103) 259 $ $ Accumulated Other Comprehensive Income/(Loss...

  • Page 79
    ... basis were not significant as of December 31, 2012 or December 31, 2011. The fair value measurements of our held-to-maturity debt securities and our short-term borrowings are based on Level 2 inputs, using a market approach. The fair value measurements of our private equity securities at cost...

  • Page 80
    ... selected financial assets and liabilities in our consolidated balance sheets: As of December 31, (MILLIONS OF DOLLARS) 2012 $ 1,000 22,319 14,149 296 (b) 2011 $ 900 23,270 9,814 357 1,042 $ $ 35,383 4,016 459 34,926 1,306 $ 40,707 Assets Cash and cash equivalents Short-term investments Long-term...

  • Page 81
    ...to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies In addition, we have long-term receivables where the determination of fair value employs discounted future cash flows, using current interest rates at which similar loans would be made to borrowers with similar credit ratings...

  • Page 82
    ... of time over which we are hedging future foreign exchange cash flow relates to our $2.4 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...

  • Page 83
    ....6 billion. The derivative financial instruments primarily hedge U.S. dollar and euro fixed-rate debt. 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...

  • Page 84
    ... primarily supports the approximate fair value of our derivative contracts. With respect to the collateral received, which is included in Cash and cash equivalents, the obligations are reported in Short-term borrowings, including current portion of long-term debt. 2012 Financial Report 83

  • Page 85
    ..., 2011 Additions(d) Other(c) Balance, December 31, 2012 (a) (b) (c) (d) Reflects amounts associated with Animal Health and Consumer Healthcare. Primarily reflects the acquisition of King (see Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions...

  • Page 86
    ... Research and Development (55%); Established Products (20%); Primary Care (12%); Specialty Care (10%); and Animal Health (3%). There are no percentages for our Emerging Markets business unit as it is a geographic-area unit, not a product-based unit. The carrying value of the assets associated...

  • Page 87
    ... time in the future. Amortization The weighted-average life of both our total finite-lived intangible assets and the largest component, Developed technology rights, is approximately 11 years. Total amortization expense for finite-lived intangible assets was $5.4 billion in 2012, $5.8 billion in 2011...

  • Page 88
    ...2013 net periodic benefit costs: Pension Plans U.S. Qualified $ $ (360) $ 7 (353) $ U.S. Supplemental (Non-Qualified) (54) $ 2 (52) $ International (149) $ 8 (141) $ Postretirement Plans (46) 45 (1) (MILLIONS OF DOLLARS) Actuarial losses Prior service credits and other Total 2012 Financial Report...

  • Page 89
    ... Financial Statements Pfizer Inc. and Subsidiary Companies B. Actuarial Assumptions The following table provides the weighted-average actuarial assumptions of our benefit plans: (PERCENTAGES) 2012 2011 2010 Weighted-average assumptions used to determine benefit obligations Discount rate...

  • Page 90
    ... Service cost Interest cost Employee contributions Plan amendments Changes in actuarial assumptions and other Foreign exchange impact Acquisitions Curtailments Settlements Special termination benefits Benefits paid Benefit obligation, ending(e) Change in plan assets Fair value of plan assets...

  • Page 91
    ... Financial Statements Pfizer Inc. and Subsidiary Companies The following table provides information as to how the funded status is recognized in our consolidated balance sheets: As of December 31, Pension Plans U.S. Qualified (MILLIONS OF DOLLARS) U.S. Supplemental (Non-Qualified) 2011 2012...

  • Page 92
    ...cash equivalents Equity securities: Global equity securities Equity commingled funds Debt securities: Fixed income commingled funds Government bonds Corporate debt securities Other investments: Private equity funds Insurance contracts Other Total International pension plans Cash and cash equivalents...

  • Page 93
    ...the fair value of our pension and postretirement plans' assets Cash and cash equivalents, Equity commingled funds, Fixed-income commingled funds--observable prices. Global equity securities-quoted market prices. Government bonds, Corporate debt securities-observable market prices. Other investments...

  • Page 94
    ... assets. Our long-term return expectations are developed based on a diversified, global investment strategy that takes into account historical experience, as well as the impact of portfolio diversification, active portfolio management, and our view of current and future economic and financial market...

  • Page 95
    ... $11.8 billion at December 31, 2012. B. Preferred Stock The Series A convertible perpetual preferred stock is held by an Employee Stock Ownership Plan (Preferred ESOP) Trust and provides dividends at the rate of 6.25%, which are accumulated and paid quarterly. The per-share stated value is $40...

  • Page 96
    ... closing price of Pfizer common stock. The values determined through this fair value methodology generally are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, informational and administrative expenses, and Research and development expenses, as appropriate. 2012...

  • Page 97
    ...straight-line basis over the vesting term into Cost of sales, Selling, informational and administrative expenses, and Research and development expenses, as appropriate. The following table provides the weighted-average assumptions used in the valuation of stock options: Year Ended December 31, 2012...

  • Page 98
    ...a straight-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 TSRUs follow: Year Ended December 31, 2012 Expected dividend yield Risk...

  • Page 99
    ... OF DOLLARS) 2012 $ $ - 33 2.2 $ $ 2011 - - - $ $ 2010 - - - Total fair value of shares vested Total compensation cost related to nonvested PPS awards not yet recognized, pre-tax Weighted-average period over which nonvested PPS cost is expected to be recognized (years) 98 2012 Financial Report

  • Page 100
    ...conversions Discontinued operations--net of tax Net income attributable to Pfizer Inc. common shareholders and assumed conversions EPS Denominator Weighted-average number of common shares outstanding--Basic Common-share equivalents: stock options, stock issuable under employee compensation plans and...

  • Page 101
    ... could result in a loss of patent protection for the drug at issue, a significant loss of revenues from that drug and impairments of any associated assets. Product liability and other product-related litigation, which can include personal injury, consumer, off-label promotion, securities-law...

  • Page 102
    ... Statements Pfizer Inc. and Subsidiary Companies abbreviated new drug application with the U.S. Food and Drug Administration (FDA) seeking approval to market a generic version of Viagra. Teva USA and Teva Pharmaceutical Industries assert the invalidity and non-infringement of the Viagra use patent...

  • Page 103
    ... Pfizer. EpiPen King Pharmaceuticals, Inc. (King) brought a patent-infringement action against Sandoz in the U.S. District Court for the District of New Jersey in July 2010 as the result of its abbreviated new drug application with the FDA seeking approval to market an epinephrine injectable product...

  • Page 104
    ... disease (Pfizer procured this insurance in August 2011). Following the execution of the settlement agreement with the Ad Hoc Committee, Quigley filed a revised plan of reorganization and accompanying disclosure statement with the Bankruptcy Court in April 2011, which it amended in June 2012...

  • Page 105
    ...the price of Pfizer common stock allegedly attributable to the claimed violations. Hormone-Replacement Therapy • Personal Injury and Economic Loss Actions Pfizer and certain wholly owned subsidiaries and limited liability companies, including Wyeth and King, along with several other pharmaceutical...

  • Page 106
    ... in 2013. Most of the unresolved actions against Pfizer and/or its affiliated companies have been outstanding for more than five years and could take many more years to resolve. However, opportunistic settlements could occur at any time. The litigation process is time-consuming, as every hormone...

  • Page 107
    ... consisting of persons, including individuals, health insurers, employee benefit plans and other third-party payers, who purchased or reimbursed patients for the purchase of Neurontin that allegedly was used for indications other than those included in the product labeling approved by the FDA. In...

  • Page 108
    ... Statements Pfizer Inc. and Subsidiary Companies patents relating to Neurontin, as well as engaging in off-label marketing of Neurontin. Plaintiffs seek compensatory damages on behalf of the class, which may be subject to trebling. Lipitor • Whistleblower Action In 2004, a former employee...

  • Page 109
    ...or causing Wyeth to make false and misleading statements, and by failing to disclose or causing Wyeth to fail to disclose material information, concerning the results of a clinical trial involving bapineuzumab, a product in development for the treatment of Alzheimer's disease. The plaintiff seeks to...

  • Page 110
    ... wholesale price (AWP) information for certain of their products that was higher than the actual average prices at which those products were sold. The AWP is used to determine reimbursement levels under Medicare Part B and Medicaid and in many private-sector insurance policies and medical plans. The...

  • Page 111
    ...could result from government investigations. Among the investigations by government agencies is the matter discussed below. The DOJ is conducting a civil investigation regarding Wyeth's practices relating to the pricing for Protonix for Medicaid rebate purposes prior to Wyeth's acquisition by Pfizer...

  • Page 112
    ... A. Segment Information We manage our operations through five operating segments--Primary Care, Specialty Care and Oncology, Established Products and Emerging Markets, Animal Health, and Consumer Healthcare. (As of the third quarter of 2012, the Animal Health and Consumer Healthcare business units...

  • Page 113
    ... Pfizer Inc. and Subsidiary Companies • Animal Health operating segment--includes worldwide revenues and earnings, as defined by management, from products and services to prevent and treat disease in livestock and companion animals, including anti-infectives, vaccines, parasiticides, medicinal...

  • Page 114
    ...2012 2011(c) Reportable Segments: Primary Care(d) Specialty Care and Oncology Established Products and Emerging Markets(e) Total reportable segments Other operating segments(f) Other business activities(g) Reconciling Items: Corporate(h) Purchase accounting adjustments(i) Acquisition-related costs...

  • Page 115
    ... the following markets: Western Europe, Finland and the Scandinavian countries. Revenues denominated in euros were $10 billion, $12 billion and $12 billion for 2012, 2011 and 2010, respectively. Developed Rest of World region includes the following markets: Australia, Canada, Japan, New Zealand and...

  • Page 116
    Notes to Consolidated Financial Statements Pfizer Inc. and Subsidiary Companies Significant Product Revenues The following table provides revenues by product: Year Ended December 31, (MILLIONS OF DOLLARS) 2012 2011(a) 2010 Revenues from biopharmaceutical products: Lyrica Lipitor(b) Enbrel (...

  • Page 117
    ... and cash flows that comprise Zoetis are not the same as those of the Animal Health operating segment. B. Hisun Pfizer Pharmaceuticals Company Limited (HPP) On January 1, 2013, as previously announced, we contributed product rights associated with China and other assets to our 49%-owned equity...

  • Page 118
    ... fourth quarter of 2012 reflects historically higher Q4 costs in Cost of sales, Selling, informational and administrative expenses, Research and development expenses and Other deductions-net. The fourth quarter of 2012 reflects higher employee termination costs. The fourth quarter of 2012 reflects...

  • Page 119
    ... fourth quarter of 2011 reflects historically higher Q4 costs in Cost of sales and Selling, informational and administrative expenses, Research and development expenses and Other deductions-net. The third quarter of 2011 reflects higher employee termination costs. The third quarter of 2011 reflects...

  • Page 120
    ... operations-net of tax Net income attributable to Pfizer Inc. common shareholders Market value per share (December 31) Return on Pfizer Inc. shareholders' equity Cash dividends paid per common share Pfizer Inc. shareholders' equity per common share(h) Current ratio Weighted-average shares...

  • Page 121
    Financial Summary Pfizer Inc. and Subsidiary Companies Peer Group Performance Graph The following graph assumes a $100 investment on December 31, 2007, and reinvestment of all dividends, in each of the Company's Common Shares, the S&P 500 Index, and a composite peer group of the major U.S.- and ...