Pfizer 2006 Annual Report Download - page 57

2006 Financial Report 55
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
B. Other Intangible Assets
The components of identifiable intangible assets as of
December 31 follow:
2006 2005
GROSS GROSS
CARRYING ACCUMULATED CARRYING ACCUMULATED
(MILLIONS OF DOLLARS) AMOUNT AMORTIZATION AMOUNT AMORTIZATION
Finite-lived
intangible assets:
Developed
technology rights $32,769 $(12,423) $30,729 $(8,810)
Brands 568 (97) 885 (51)
License agreements 189 (41) 152 (27)
Trademarks 113 (73) 106 (65)
Other
(a)
508 (266) 446 (203)
Total amortized
finite-lived
intangible assets 34,147 (12,900) 32,318 (9,156)
Indefinite-lived
intangible assets:
Brands 2,991 — 2,990 —
Trademarks 77 — 79 —
Other
(b)
35 — 13 —
Total indefinite-lived
intangible assets 3,103 — 3,082 —
Total identifiable
intangible assets $37,250 $(12,900) $35,400 $(9,156)
Total identifiable
intangible assets,
less accumulated
amortization $24,350 $26,244
(a)
Includes patents, non-compete agreements, customer contracts
and other intangible assets.
(b)
Includes pension-related intangible assets.
Developed technology rights represent the amortized value
associated with developed technology, which has been acquired
from third parties and which can include the right to develop, use,
market, sell and/or offer for sale the product, compounds and
intellectual property that we have acquired with respect to
products, compounds and/or processes that have been completed.
We possess a well-diversified portfolio of hundreds of developed
technology rights across therapeutic categories primarily
representing the commercialized products included in our
Pharmaceutical segment that we acquired in connection with
our Pharmacia acquisition. While the Arthritis and Pain therapeutic
category represents about 28% of the total amortized value of
developed technology rights as of December 31, 2006, the balance
of the amortized value is evenly distributed across the following
Pharmaceutical therapeutic product categories: Ophthalmology;
Oncology; Urology; Infectious and Respiratory Diseases; Endocrine
Disorders categories; and, as a group, the Cardiovascular and
Metabolic Diseases; Central Nervous System Disorders and All
Other categories. The significant components include values
determined for Celebrex, Detrol, Xalatan, Genotropin, Zyvox,
Campto/Camptosar and Exubera. Also included in this category are
the post-approval milestone payments made under our alliance
agreements for certain Pharmaceutical products, such as Rebif,
Spiriva, Celebrex (prior to our acquisition of Pharmacia) and
Macugen. These rights are all subject to our review for impairment
explained in Note 1K. Amortization of Intangible Assets,
Depreciation and Certain Long-Lived Assets.
The weighted-average life of our total finite-lived intangible
assets is approximately eight years, which includes developed
technology rights at eight years. Total amortization expense for
finite-lived intangible assets was $3.4 billion in 2006, $3.5 billion
in 2005 and $3.4 billion in 2004.
Brands represent the amortized value associated with tradenames,
as the products themselves no longer receive patent protection.
Most of these assets are associated with our Pharmaceutical
segment and the significant components include values
determined for Depo-Provera, Xanax and Medrol.
In 2006 and 2004, we recorded charges of $320 million and $691
million in Other (income)/deductions—net related to the
impairment of our Depo-Provera brand, a contraceptive injection,
(included in our Pharmaceutical segment). Both impairments
were primarily due to the unexpected entrance of generic
competition in the U.S. market, as well as an adverse labeling
change in 2004. In 2004, this asset was also reclassified from an
indefinite-lived brand to a finite-lived brand.
In 2005, we recorded an impairment charge of $1.1 billion in Other
(income)/deductions—net related to the developed technology
rights for Bextra, a selective COX-2 inhibitor (included in our
Pharmaceutical segment), in connection with the decision to
suspend sales of Bextra. In addition, in connection with the
suspension, we also recorded $5 million related to the write-off of
machinery and equipment included in Other (income)/ deductions—
net; $73 million in write-offs of inventory and exit costs, included
in Cost of sales; $8 million related to the costs of administering the
suspension of sales, included in Selling, informational and
administrative expenses; and $212 million for an estimate of
customer returns, primarily included against Revenues.
The annual amortization expense expected for the years 2007
through 2010 is as follows:
(MILLIONS OF DOLLARS)
2007 2008 2009 2010 2011
Amortization expense $3,267 $2,743 $2,502 $2,495 $2,493
13. Pension and Postretirement Benefit Plans
and Defined Contribution Plans
We provide defined benefit pension plans and defined
contribution plans for the majority of our employees worldwide.
In the U.S., we have both qualified and supplemental (non-
qualified) defined benefit plans. A qualified plan meets the
requirements of certain sections of the Internal Revenue Code and,
generally, contributions to qualified plans are tax deductible. A
qualified plan typically provides benefits to a broad group of
employees and may not discriminate in favor of highly
compensated employees in its coverage, benefits or contributions.
We also provide benefits through supplemental (non-qualified)
retirement plans to certain employees. In addition, we provide
medical and life insurance benefits to certain retirees and their
eligible dependents through our postretirement plans.
We use a measurement date of December 31 for a majority of our
U.S. pension and postretirement plans and November 30 for a