Pfizer 2012 Annual Report Download - page 3

Financial Review
Pfizer Inc. and Subsidiary Companies
2
2012 Financial Report
OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK
Our Business
Our mission is to apply science and our global resources to improve health and well-being at every stage of life. We strive to set the standard
for quality, safety and value in the discovery, development and manufacturing of medicines for people and animals. Our diversified global
healthcare portfolio includes human and animal biologic and small molecule medicines and vaccines, as well as many of the world’s best-
known consumer products. Every day, we work across developed and emerging markets to advance wellness, prevention, treatments and
cures that challenge the most feared diseases of our time. We also collaborate with healthcare providers, governments and local communities
to support and expand access to reliable, affordable healthcare around the world. Our revenues are derived from the sale of our products, as
well as through alliance agreements, under which we co-promote products discovered by other companies (Alliance revenues).
The majority of our revenues come from the manufacture and sale of biopharmaceutical products. The biopharmaceutical industry is highly
competitive and we face a number of industry-specific challenges, which can significantly impact our results. These factors include, among
others: the loss or expiration of intellectual property rights, the regulatory environment and pipeline productivity, pricing and access pressures,
and increasing competition among branded products. (For more information about these challenges, see the “Our Operating Environment”
section of this Financial Review.)
The financial information included in our consolidated financial statements for our subsidiaries operating outside the United States (U.S.) is as
of and for the year ended November 30 for each year presented.
References to developed markets include the U.S., Western Europe, Japan, Canada, Australia, Scandinavia, South Korea, Finland and New
Zealand; and references to Emerging Markets include the rest of the world, including, among other countries, China, Brazil, Mexico, Turkey,
Russia and India.
On February 6, 2013, an initial public offering (IPO) of our subsidiary, Zoetis Inc. (Zoetis), was completed, pursuant to which we sold 99.015
million shares of Zoetis in exchange for the retirement of approximately $2.5 billion of Pfizer commercial paper issued on January 10, 2013.
The IPO represented approximately 19.8% of the total outstanding Zoetis shares. On February 1, 2013, Zoetis shares began trading on the
New York Stock Exchange under the symbol "ZTS." Prior to and in connection with the IPO, Zoetis completed a $3.65 billion senior notes
offering and we transferred to Zoetis substantially all of the assets and liabilities 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 recognized a gain of
approximately $4.8 billion, net of tax, in Gain/(loss) on sale of discontinued operations––net of tax. The operating results of this business are
reported as Income/(loss) from discontinued operations––net of tax in our consolidated statements of income for all periods presented. In
addition, in our consolidated balance sheet as of December 31, 2011, the assets and liabilities associated with this discontinued operation are
classified as Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations, as appropriate. (For
additional information, see Notes to Consolidated Financial Statements––Note 2B. Acquisitions, Divestitures, Collaborative Arrangements and
Equity-Method Investments: Divestitures and see the “Our Business Development Initiatives” and “Discontinued Operations” sections of this
Financial Review.)
On August 1, 2011, we completed the sale of our Capsugel business for approximately $2.4 billion in cash and recognized a gain of
approximately $1.3 billion, net of tax, in Gain/(loss) on sale of discontinued operations––net of tax. The operating results of this business are
reported as Income/(loss) from discontinued operations––net of tax in our consolidated statements of income for the years ended December
31, 2011 and December 31, 2010. (For additional information, see Notes to Consolidated Financial Statements––Note 2B. Acquisitions,
Divestitures, Collaborative Arrangements and Equity-Method Investments: Divestitures and see the “Our Business Development Initiatives”
and “Discontinued Operations” sections of this Financial Review.)
The assets, liabilities, operating results and cash flows of acquired businesses, such as King Pharmaceuticals, Inc. (King) (acquired on
January 31, 2011), are included in our results on a prospective basis only commencing from the acquisition date. As such, 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. (For additional information about these acquisitions, see Notes to Consolidated Financial
Statements––Note 2A. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments: Acquisitions and see the “Our
Business Development Initiatives” section of this Financial Review.)
Our 2012 Performance
Revenues decreased 10% in 2012 to $59.0 billion, compared to $65.3 billion in 2011, which reflects an operational decline of $4.8 billion or
8%, primarily the result of the loss of exclusivity of Lipitor in most major markets, including the U.S. on November 30, 2011 and most of
developed Europe in March and May 2012, and the unfavorable impact of foreign exchange of $1.5 billion, or 2%. Lipitor and other product
losses of exclusivity, as well as the final-year terms of our collaboration agreements in certain markets for Spiriva, negatively impacted
revenues by approximately $7.7 billion, or 12%, in 2012 compared to 2011.