On October 29, 2019 Pfizer Inc. (NYSE:PFE) reported financial results for third-quarter 2019 and updated certain components of its 2019 financial guidance (Press release, Pfizer, OCT 29, 2019, View Source [SID1234549955]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
Acquisitions and divestitures completed in the first nine months of 2019 impacted financial results in the periods presented(1). Some amounts in this press release may not add due to rounding. All percentages have been calculated using unrounded amounts. References to operational variances pertain to period-over-period growth rates that exclude the impact of foreign exchange(5).
2019 FINANCIAL GUIDANCE(6)
Financial guidance for Adjusted diluted EPS(3) reflects share repurchases totaling $8.9 billion already completed in 2019. Dilution related to share-based employee compensation programs is currently expected to offset the reduction in shares associated with these share repurchases by approximately half.
CAPITAL ALLOCATION
During the first nine months of 2019, Pfizer returned $14.9 billion directly to shareholders, through a combination of:
– $6.1 billion of dividends, composed of dividends of $0.36 per share of common stock in each of the first, second and third quarters of 2019; and
– $8.9 billion of share repurchases, composed of $2.1 billion of open-market share repurchases in first-quarter 2019 and a $6.8 billion accelerated share repurchase agreement executed in February 2019 and completed in August 2019.
As of October 29, 2019, Pfizer’s remaining share repurchase authorization was $5.3 billion.
EXECUTIVE COMMENTARY
Dr. Albert Bourla, Pfizer’s Chief Executive Officer, stated, "We reported strong third-quarter 2019 financial results, driven by 9% volume-driven operational revenue growth in our Biopharma business, including growth from key brands such as Ibrance, Xeljanz, Eliquis, Vyndaqel and Inlyta as well as in emerging markets. Upjohn revenues were negatively impacted primarily by the July 2019 loss of exclusivity of Lyrica in the U.S., while Consumer Healthcare revenues declined as a result of the completion of the JV transaction with GSK(1) during the quarter.
"We continue to be excited with the progress we are making with our pipeline, both in terms of the breadth of opportunities and depth of the science. Over the past three months, we have announced positive data for our 20-valent pneumococcal conjugate vaccine candidate in healthy infants, for abrocitinib in moderate-to-severe atopic dermatitis, for somatrogon in children with growth hormone deficiency and for Braftovi/Mektovi combinations in metastatic colorectal cancer. We also entered into a worldwide exclusive licensing agreement with Akcea Therapeutics for AKCEA-ANGPTL3-LRx, an investigational antisense therapy being developed to treat patients with certain cardiovascular and metabolic diseases, and began enrolling patients in a Phase 3 study of PF-07055480 (SB-525), an investigational gene therapy approach for hemophilia A.
"Following the expected close of the Upjohn-Mylan transaction next year, Pfizer RemainCo will be a smaller, science-based company with a singular focus on innovation. We expect Pfizer RemainCo will be positioned to deliver revenue and Adjusted diluted EPS(3) growth that is among the industry leaders while continuing to allocate significant capital directly to shareholders, primarily through dividends," Dr. Bourla concluded.
Frank D’Amelio, Chief Financial Officer and Executive Vice President, Business Operations and Global Supply, stated, "I was pleased with our third-quarter 2019 financial results, which reflect strong momentum in our Biopharma business. We updated our 2019 financial guidance primarily to reflect our financial results through the first nine months of 2019 and our confidence in the business going forward. We raised the midpoint of our 2019 guidance range for revenues by $200 million to a range of $51.2 to $52.2 billion, composed of $400 million of operational revenue improvement, partially offset by a $200 million unfavorable impact from changes in FX rates since mid-July 2019. We also increased the midpoint of our 2019 guidance range for Adjusted Diluted EPS(3) by $0.16 to a range of $2.94 to $3.00, reflecting an $0.18 operational improvement, partially offset by a $0.02 unfavorable impact from changes in FX rates. The operational improvement primarily reflects the aforementioned improved revenue outlook as well as an improved outlook for Adjusted cost of sales(3) as a percentage of revenues, driven by a more favorable product mix than previously anticipated. Finally, through the first nine months of 2019, we returned $14.9 billion directly to shareholders through dividends and share repurchases, demonstrating our commitment to returning capital to our shareholders."
QUARTERLY FINANCIAL HIGHLIGHTS (Third-Quarter 2019 vs. Third-Quarter 2018)
Third-quarter 2019 revenues totaled $12.7 billion, a decrease of $618 million, or 5%, compared to the prior-year quarter, reflecting an operational decline of $403 million, or 3%, as well as the unfavorable impact of foreign exchange of $215 million, or 2%.
Biopharma Revenue Highlights
Third-quarter 2019 Biopharma revenues totaled $10.1 billion, up 9% operationally, primarily driven by:
Ibrance globally, up 27% operationally, primarily driven by:
– 48% operational growth in international markets, reflecting continued strong uptake following launches primarily in developed Europe and certain emerging markets; and
– 18% growth in the U.S., primarily driven by cyclin-dependent kinase (CDK) class market share growth and Ibrance’s continued CDK market share leadership in its approved metastatic breast cancer indications;
Xeljanz globally, up 40% operationally, primarily driven by:
– 34% growth in the U.S., reflecting continued volume growth in the rheumatoid arthritis (RA) indication driven by improved formulary access, growth from the 2018 launches of the ulcerative colitis (UC) and psoriatic arthritis indications as well as the non-recurrence of a one-time true-up payment to a single customer in the prior-year quarter for improved access last year, partially offset by higher rebating from new commercial contracts; and
– 61% operational growth in international markets, reflecting continued uptake in the RA indication as well as from the recent launch of the UC indication in certain developed markets;
Eliquis globally, up 20% operationally, primarily driven by continued increased adoption in non-valvular atrial fibrillation as well as oral anti-coagulant market share gains, partially offset by a higher Medicare "coverage gap" discount provision on U.S. revenues compared to the prior-year quarter;
the Hospital business in emerging markets and the U.S., collectively up 9% operationally, primarily driven by continued growth from anti-infective products in China as well as the November 2018 U.S. launch of Panzyga;
Vyndaqel globally, up 325% operationally, driven by:
– the U.S. launch in May 2019 for the treatment of the transthyretin amyloid cardiomyopathy (ATTR-CM); and
– 111% operational growth in international markets, primarily driven by continued uptake for the transthyretin amyloid polyneuropathy indication, primarily in developed Europe, as well as the March 2019 launch of the ATTR-CM indication in Japan; and
Inlyta in the U.S., up 240%, primarily driven by increased uptake resulting from the second-quarter 2019 U.S. Food and Drug Administration (FDA) approvals for combinations of certain immune checkpoint inhibitors plus Inlyta for the first-line treatment of patients with advanced renal cell carcinoma (RCC),
partially offset primarily by lower revenues for:
Enbrel internationally, down 19% operationally, primarily reflecting continued biosimilar competition in most developed Europe markets; and
Prevnar 13 in the U.S., down 7%, primarily reflecting lower government purchases in third-quarter 2019 for the pediatric indication as well as the continued decline in revenues for the adult indication due to a declining "catch up" opportunity compared to the prior-year quarter.
Upjohn Revenue Highlights
Third-quarter 2019 Upjohn revenues totaled $2.2 billion, down 26% operationally, primarily driven by the expected significant volume declines for Lyrica in the U.S. due to multi-source generic competition that began in July 2019. Excluding the unfavorable impact of Lyrica in the U.S., third-quarter 2019 revenues for Upjohn declined 6% operationally.
Third-quarter 2019 Upjohn revenues in China increased 2% operationally, primarily driven by volume growth for Lipitor and Norvasc in provinces where the volume-based procurement (VBP) program has not yet been implemented as well as operational growth from Viagra, partially offset primarily by volume declines and an unfavorable pricing impact for Lipitor and Norvasc in certain cities where the VBP program was implemented in March 2019. Given 9% operational revenue growth over the first nine months of 2019 and the anticipated expansion of the VBP program to all provinces in China later in 2019, Pfizer now expects Upjohn revenues in China to grow by mid-to-high-single digits operationally for full-year 2019 compared with 2018.
Consumer Healthcare Revenue Highlights
Third-quarter 2019 Consumer Healthcare revenues totaled $377 million, down 54% operationally, reflecting the July 31, 2019 completion of the Consumer Healthcare JV transaction with GSK(1). As a result of the transaction, Pfizer’s third-quarter 2019 revenues reflect only one month of Consumer Healthcare domestic operations and two months of Consumer Healthcare international operations(4) while third-quarter 2018 revenues reflect three months of Consumer Healthcare global operations.
Indicates calculation not meaningful.
In third-quarter 2019, Pfizer recognized an $8.1 billion pre-tax gain upon the completion of the Consumer Healthcare JV transaction with GSK(1), reflecting the difference in the fair value of Pfizer’s 32% equity stake in the JV and the carrying value of its Consumer Healthcare business.
Third-quarter 2019 Cost of Sales(2), SI&A Expenses(2) and R&D Expenses(2) were favorably impacted by the July 31, 2019 completion of the Consumer Healthcare JV transaction with GSK(1). As a result of the transaction, third-quarter 2019 expenses reflect one month of Consumer Healthcare domestic operations and two months of Consumer Healthcare international operations(4) while third-quarter 2018 expenses reflect three months of Consumer Healthcare global operations. Third-quarter 2019 R&D Expenses(2) were unfavorably impacted by the upfront payment associated with the acquisition of Therachon Holding AG in July 2019.
Pfizer recorded other deductions––net(2) in third-quarter 2019 compared with other income––net(2) in the prior-year quarter, primarily driven by:
the non-recurrence of a non-cash gain recorded in third-quarter 2018 associated with a transaction with Bain Capital Private Equity and Bain Capital Life Sciences to create a new biopharmaceutical company, Cerevel Therapeutics, LLC, to continue development of a portfolio of clinical and pre-clinical stage neuroscience assets primarily targeting disorders of the central nervous system;
higher net interest expense;
lower income from collaborations, out-licensing and sale of compound/product rights; and
higher business and legal entity alignment costs.
Pfizer’s effective tax rate on Reported income(2) for third-quarter 2019 compared to the prior-year period was unfavorably impacted primarily by:
the tax expense associated with the aforementioned $8.1 billion pre-tax gain related to the completion of the Consumer Healthcare JV transaction with GSK(1);
the non-recurrence of certain tax initiatives and favorable adjustments recorded in third-quarter 2018 to the provisional estimate of the legislation in the U.S. commonly referred to as the Tax Cuts and Jobs Act; and
a decrease in tax benefits associated with the resolution of certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of certain statutes of limitations.
RECENT NOTABLE DEVELOPMENTS (Since July 29, 2019)
Product Developments
Bavencio (avelumab) — In October 2019, EMD Serono, the biopharmaceutical business of Merck KGaA, Darmstadt, Germany in the U.S. and Canada, and Pfizer announced that the European Commission granted marketing authorization for Bavencio in combination with Inlyta (axitinib) for the first-line treatment of adult patients with advanced RCC. EMD Serono and Pfizer have a global strategic alliance to jointly develop and commercialize Bavencio.
Braftovi (encorafenib) and Mektovi (binimetinib) — In September 2019, Pfizer announced detailed results from the interim analysis of the Phase 3 BEACON CRC trial evaluating the combination of Braftovi, Mektovi, and cetuximab (Braftovi Triplet), in patients with advanced BRAFV600E-mutant metastatic colorectal cancer (mCRC), following one or two lines of therapy. The results show significant improvements in overall survival and objective response rates for the Braftovi Triplet and Braftovi Doublet combination (Braftovi plus cetuximab), compared to cetuximab plus irinotecan-containing regimens, and provide analysis of the efficacy and safety of the Braftovi Triplet compared to the Braftovi Doublet. These data were presented during a late-breaking oral session at the European Society for Medical Oncology (ESMO) (Free ESMO Whitepaper) 2019 Congress, and simultaneously published online in The New England Journal of Medicine. Pfizer has submitted the results of the BEACON CRC trial to the FDA for review.
Ibrance (palbociclib) — In September 2019, Pfizer announced the presentation of four Ibrance real-world analyses. The studies support the effectiveness of Ibrance combination therapy in everyday clinical practice and provide additional insights on its use in certain patients with hormone receptor-positive, human epidermal growth factor receptor 2-negative metastatic breast cancer. The posters were presented at ESMO (Free ESMO Whitepaper) 2019 and notably included the first real-world comparative analysis of a CDK 4/6 inhibitor in combination with an aromatase inhibitor compared to an aromatase inhibitor alone, among other data.
Vyndamax (tafamidis) — In September 2019, Pfizer introduced Vyndamax 61 mg capsules in the U.S. Vyndamax offers patients a once-daily formulation taken as a single capsule, a more convenient option than Vyndaqel (tafamidis meglumine) 80 mg, which is dosed once-daily taken as four 20 mg capsules. Vyndamax and Vyndaqel are first-in-class transthyretin stabilizers, approved in the U.S. for the treatment of wild-type or hereditary ATTR-CM in adults to reduce cardiovascular mortality and cardiovascular-related hospitalization.
Xtandi (enzalutamide) — In August 2019, Astellas Pharma Inc. (Astellas) and Pfizer announced that the FDA accepted for review the filing of a supplemental New Drug Application for Xtandi to add an indication for the treatment of men with metastatic castration-sensitive prostate cancer. The application was granted Priority Review by the FDA and has a Prescription Drug User Fee Act goal date for a decision by the FDA in fourth-quarter 2019.
Pipeline Developments
A comprehensive update of Pfizer’s development pipeline was published today and is now available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of Pfizer’s research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.
Abrocitinib (PF-04965842)
– In October 2019, Pfizer announced complete results from a Phase 3, 12-week, pivotal study (JADE MONO-1) in patients aged 12 and older with moderate to severe atopic dermatitis (AD). Abrocitinib, an investigational oral Janus kinase 1 (JAK1) inhibitor, met all the co-primary and key secondary endpoints, which were related to skin clearance and itch relief compared to placebo. Safety data showed that both evaluated doses of abrocitinib (200 mg and 100 mg) were well tolerated and were consistent with a companion study (JADE MONO-2) from the JAK1 Atopic Dermatitis Efficacy and Safety (JADE) global development program. The results were shared as a late-breaking presentation at the 28th Congress of the European Academy of Dermatology and Venereology.
– In September 2019, Pfizer announced positive top-line results from a second Phase 3 pivotal study evaluating the efficacy and safety of abrocitinib in patients aged 12 and older with moderate to severe AD. This is the second monotherapy trial in the JADE global development program (B7451013, or JADE MONO-2). Consistent with JADE MONO-1, results showed that by week 12 the percentage of patients achieving each co-primary efficacy endpoint and each key secondary endpoint with either dose of abrocitinib was statistically significantly higher than placebo. In addition, a statistically significant number of patients achieved a reduction in pruritus by week two, as measured by a four-point or larger reduction in itch severity measured with the pruritus numerical rating scale. Safety results showed that both doses of abrocitinib were well-tolerated and were consistent with JADE MONO-1.
PF-06425090 (Clostridium difficile (C. difficile) vaccine candidate) — In September 2019, at a pre-specified interim review meeting for the Phase 3 CLOVER (C. difficile Vaccine Efficacy Trial) study, the independent Data Monitoring Committee (DMC) identified no adverse safety signals for the vaccine candidate and that the study should continue. Additionally, after reviewing the event accrual rate, the DMC also recommended that Pfizer consider expanding enrollment in the study in order to potentially accelerate the event accrual rate because the trial has accumulated events at a slower rate than initially anticipated. Pfizer achieved its initial enrollment target for the CLOVER study of approximately 17,000 participants in March 2019. Pfizer is currently determining next steps and will share an update on this program in the future.
PF-06482077 (20-Valent Pneumococcal Conjugate Vaccine)
– In September 2019, Pfizer announced positive preliminary results following administration of three doses in a four-dose series for a proof-of-concept Phase 2 study to assess safety and immunogenicity of its 20-valent pneumococcal conjugate vaccine (20vPnC) candidate, PF-06482077, being investigated for the prevention of invasive disease and otitis media caused by Streptococcus pneumoniae serotypes contained in the vaccine in healthy infants. Pfizer’s 20vPnC candidate includes the 13 serotypes contained in Prevnar 13 plus seven additional serotypes (8, 10A, 11A, 12F, 15B, 22F, and 33F). The initial three doses of 20vPnC in this Phase 2 trial provide preliminary evidence that the vaccine candidate in infants has an overall safety profile that is similar to Prevnar 13 and induced immune responses for all 20 serotypes in infants. Pfizer will seek to present and publish outcomes from this clinical trial at a future date once safety and immunogenicity data has been analyzed following the completion of the four-dose regimen. Pfizer intends to initiate Phase 3 studies in infants in 2020.
– In September 2019, Pfizer announced that it has completed enrollment in its three Phase 3 pivotal clinical trials (NCT03828617, NCT03835975 and NCT03760146) evaluating 20vPnC for the prevention of invasive disease and pneumonia in adults 18 years and older. Combined, these three trials have enrolled more than 6,000 adult subjects, including populations of vaccine-naïve adults and adults with prior pneumococcal vaccination. Pfizer remains on track to submit the Biologics License Application for the adult 20vPnC indications to the FDA by the end of 2020, subject to the successful completion of these Phase 3 studies.
Marstacimab (PF-06741086) — In September 2019, the FDA granted Fast Track designation for marstacimab, Pfizer’s investigational anti-tissue factor pathway inhibitor for use in combination with inhibitors as a potential treatment for hemophilia A and hemophilia B. Fast Track designation is a process designed to facilitate the development and expedite the review of new therapies that treat serious conditions and fill unmet medical needs. Marstacimab achieved proof-of-concept in second-quarter 2019 and Pfizer intends to begin enrolling patients in a Phase 3 study in adult and teenage patients with severe hemophilia A or B later this year.
Rivipansel (GMI-1070) — In August 2019, Pfizer announced that the Phase 3 RESET (Rivipansel Evaluating Safety, Efficacy and Time to Discharge) pivotal study did not meet its primary or key secondary efficacy endpoints. The objective of the trial was to evaluate the efficacy and safety of rivipansel in patients aged six and older with sickle cell disease who were hospitalized for a vaso-occlusive crisis and required treatment with intravenous (IV) opioids. The primary endpoint was time to readiness-for-discharge and the key secondary efficacy endpoints were time-to-discharge, cumulative IV opioid consumption and time to discontinuation of IV opioids. Detailed analyses of the RESET study will be submitted for presentation at a future scientific meeting.
PF-07055480 (SB-525) — In October 2019, based on the results observed in the ongoing Phase 1/2 study of investigational PF-07055480 gene therapy for severe hemophilia A, Pfizer began enrollment in a lead-in Phase 3 study. Following a six-month lead-in period to establish a patient’s baseline control, Pfizer anticipates dosing patients with PF-07055480 in first-half 2020. PF-07055480 is being developed as part of a global collaboration between Sangamo Therapeutics, Inc. and Pfizer.
Somatrogon (PF-06836922, long-acting human growth hormone) — In October 2019, Pfizer and OPKO Health, Inc. (OPKO) announced that the global Phase 3 trial evaluating somatrogon dosed once-weekly in pre-pubertal children with growth hormone deficiency (GHD) met its primary endpoint of non-inferiority to daily Genotropin (somatropin) for injection, as measured by annual height velocity at 12 months. Somatrogon was generally well tolerated in the study and comparable to that of somatropin dosed once-daily with respect to the types, numbers and severity of the adverse events observed between the treatment arms. Immunogenicity testing and analysis of additional data are ongoing, and full results of the study will be submitted for presentation at a future scientific meeting. In 2014, Pfizer and OPKO entered into a worldwide agreement for the development and commercialization of somatrogon for the treatment of GHD. Under the agreement, OPKO is responsible for conducting the clinical program and Pfizer is responsible for registering and commercializing the product.
Corporate Developments
In October 2019, Akcea Therapeutics, Inc. (Akcea), a majority-owned affiliate of Ionis Pharmaceuticals, Inc. (Ionis), and Pfizer announced that the companies have entered into a worldwide exclusive licensing agreement for AKCEA-ANGPTL3-LRx, an investigational antisense therapy being developed to treat patients with certain cardiovascular and metabolic diseases. Under terms of the agreement, Akcea and Ionis will split equally a $250 million upfront license fee and are also eligible to receive development, regulatory and sales milestone payments of up to $1.3 billion and tiered, double-digit royalties on annual worldwide net sales following marketing approval of AKCEA-ANGPTL3-LRx, if any. Pfizer is responsible for all development and regulatory activities and costs beyond those associated with the ongoing Phase 2 study. This transaction is expected to close in the fourth quarter of 2019 and is subject to clearance under the Hart-Scott Rodino Antitrust Improvements Act as well as other customary closing conditions.
In September 2019, Pfizer’s Board of Directors announced that Executive Chairman of the Board Ian C. Read has chosen to retire on December 31, 2019, and that it has unanimously elected Pfizer’s Chief Executive Officer (CEO), Dr. Albert Bourla, to succeed him as Chairman of the Board of Directors effective January 1, 2020. Dr. Bourla will also retain the CEO role. Mr. Read joined Pfizer in 1978, was named CEO of Pfizer in 2010, and Chairman of the Board of Directors in 2011.
In August 2019, Pfizer announced an additional half billion dollar investment for the construction of its state-of-the-art gene therapy manufacturing facility in Sanford, North Carolina. This facility is anticipated to support Pfizer’s continuing investment in gene therapy research and development, similar to Pfizer’s Chapel Hill and Kit Creek, North Carolina R&D sites. This facility would expand the company’s presence in North Carolina, where there are currently more than 3,600 Pfizer colleagues, including 650 in Sanford. The expanded facility is projected to add approximately 300 new jobs. In addition to its gene therapy operations, colleagues at Pfizer’s Sanford facility also manufacture components for the company’s vaccine portfolio, including Prevnar 13 and several vaccines currently in Pfizer’s research pipeline. By expanding its manufacturing footprint in Sanford, Pfizer expects to strengthen its ability to produce and supply both clinical- and commercial-scale quantities of critical, potentially life-changing gene therapy medicines to patients living with rare diseases around the world. Specifically, the new facility would help advance Pfizer’s work in manufacturing highly specialized, potentially curative gene therapies that use custom-made recombinant adeno-associated virus vectors.
On July 31, 2019, Pfizer completed its Consumer Healthcare JV transaction with GSK(1), which combined the companies’ respective consumer healthcare businesses to create the world’s largest over-the-counter business. As previously announced, under the terms of the transaction, Pfizer owns a 32% equity stake in the JV and GSK owns 68%.
In July 2019, Pfizer announced the successful completion of its acquisition of Array BioPharma Inc. (Array). Array’s portfolio includes the approved combined use of Braftovi (encorafenib) and Mektovi (binimetinib) for the treatment of BRAFV600E or BRAFV600K mutant unresectable or metastatic melanoma.
Please find Pfizer’s press release and associated financial tables, including reconciliations of certain GAAP reported to non-GAAP adjusted information, at the following hyperlink:
(Note: If clicking on the above link does not open up a new web page, you may need to cut and paste the above URL into your browser’s address bar.)
For additional details, see the associated financial schedules and product revenue tables attached to the press release located at the hyperlink referred to above and the attached disclosure notice.
The following acquisitions and divestitures impacted financial results for the periods presented:
On July 31, 2019, Pfizer and GlaxoSmithKline plc (GSK) completed a transaction that combined the two companies’ respective consumer healthcare businesses into a joint venture (JV), operating under the GSK Consumer Healthcare name. In exchange for contributing its Consumer Healthcare business to the JV, Pfizer received a 32% equity stake in the JV and GSK owns the remaining 68% of the JV. Upon the closing of the transaction, Pfizer deconsolidated its Consumer Healthcare business and recognized an $8.1 billion pre-tax gain, reflecting the difference in the fair value of Pfizer’s 32% equity stake in the JV and the carrying value of its Consumer Healthcare business. Pfizer began recording its pro rata share of the JV’s earnings on a one-quarter lag basis from August 1, 2019 (Pfizer will record in fourth-quarter 2019 its pro rata share of the JV’s earnings from third-quarter 2019). Pfizer’s third-quarter 2019 revenues and expenses reflect only one month of Consumer Healthcare domestic operations and two months of Consumer Healthcare international operations(4) while third-quarter 2018 revenues and expenses reflect three months of Consumer Healthcare global operations. Likewise, revenues and expenses for the first nine months of 2019 reflect seven months of Consumer Healthcare domestic operations and eight months of Consumer Healthcare international operations(4) while revenues and expenses for the first nine months of 2018 reflect nine months of Consumer Healthcare global operations.
On July 30, 2019, Pfizer announced the successful completion of its acquisition of Array BioPharma Inc. (Array). Array’s portfolio includes the approved combined use of Braftovi (encorafenib) and Mektovi (binimetinib) for the treatment of BRAFV600E or BRAFV600K mutant unresectable or metastatic melanoma.
On July 1, 2019, Pfizer announced the successful completion of its acquisition of the privately held clinical-stage biotechnology company, Therachon Holding AG.
Revenues is defined as revenues in accordance with U.S. generally accepted accounting principles (GAAP). Reported net income is defined as net income attributable to Pfizer Inc. in accordance with U.S. GAAP. Reported diluted earnings per share (EPS) are defined as diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.
Adjusted income and its components and Adjusted diluted EPS are defined as reported U.S. GAAP net income(2) and its components and reported diluted EPS(2) excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items (some of which may recur, such as gains on the completion of joint venture transactions, restructuring charges, legal charges or net gains and losses on investments in equity securities, but which management does not believe are reflective of ongoing core operations). Adjusted cost of sales, Adjusted selling, informational and administrative (SI&A) expenses, Adjusted research and development (R&D) expenses and Adjusted other (income)/deductions are income statement line items prepared on the same basis as, and therefore components of, the overall Adjusted income measure. As described in the Financial Review––Non-GAAP Financial Measure (Adjusted Income) section of Pfizer’s 2018 Financial Report, which was filed as Exhibit 13 to Pfizer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, management uses Adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. Because Adjusted income is an important internal measurement for Pfizer, management believes that investors’ understanding of our performance is enhanced by disclosing this performance measure. Pfizer reports Adjusted income, certain components of Adjusted income, and Adjusted diluted EPS in order to portray the results of the company’s major operations––the discovery, development, manufacture, marketing and sale of prescription medicines and vaccines––prior to considering certain income statement elements. See the accompanying reconciliations of certain GAAP Reported to Non-GAAP Adjusted information for the third quarter and first nine months of 2019 and 2018. The Adjusted income and its components and Adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS.
Pfizer’s fiscal year-end for international subsidiaries is November 30 while Pfizer’s fiscal year-end for U.S. subsidiaries is December 31. Therefore, Pfizer’s third quarter and first nine months for U.S. subsidiaries reflects the three and nine months ending on September 29, 2019 and September 30, 2018 while Pfizer’s third quarter and first nine months for subsidiaries operating outside the U.S. reflects the three and nine months ending on August 25, 2019 and August 26, 2018.
References to operational variances in this press release pertain to period-over-period growth rates that exclude the impact of foreign exchange. The operational variances are determined by multiplying or dividing, as appropriate, the current period U.S. dollar results by the current period average foreign exchange rates and then multiplying or dividing, as appropriate, those amounts by the prior-year period average foreign exchange rates. Although exchange rate changes are part of Pfizer’s business, they are not within Pfizer’s control. Exchange rate changes, however, can mask positive or negative trends in the business; therefore, Pfizer believes presenting operational variances provides useful information in evaluating the results of its business.
The 2019 financial guidance reflects the following:
Pfizer does not provide guidance for GAAP Reported financial measures (other than revenues) or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP Reported financial measures on a forward-looking basis because it is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gains and losses, acquisition-related expenses, net gains or losses on investments in equity securities and potential future asset impairments without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP Reported results for the guidance period.
Does not assume the completion of any business development transactions not completed as of September 29, 2019.
Includes revenues and expenses associated with Pfizer’s Consumer Healthcare business through July 31, 2019 as well as Pfizer’s pro rata share of anticipated earnings from the Consumer Healthcare JV with GSK(1) from August 1, 2019, which will be recorded on a quarterly basis in Adjusted other (income)/deductions(3). Pfizer will record its share of the JV’s anticipated earnings on a one-quarter lag; therefore, 2019 financial guidance for Adjusted other (income)/deductions(3) and Adjusted diluted EPS(3) reflects Pfizer’s share of two months of the JV’s earnings that are expected to be generated in third-quarter 2019, which will be recorded by Pfizer in fourth-quarter 2019.
Reflects an anticipated negative revenue impact of $2.1 billion due to recent and expected generic and biosimilar competition for certain products that have recently lost or are anticipated to soon lose patent protection.
Exchange rates assumed are a blend of the actual exchange rates in effect through third-quarter 2019 and mid-October 2019 rates for the remainder of the year. Reflects the anticipated unfavorable impact of approximately $1.4 billion on revenues and approximately $0.10 on Adjusted diluted EPS(2) as a result of changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2018.
Guidance for Adjusted diluted EPS(2) assumes diluted weighted-average shares outstanding of approximately 5.7 billion shares, which reflects the weighted-average impact of share repurchases totaling $8.9 billion completed in 2019. Dilution related to share-based employee compensation programs is currently expected to offset the reduction in shares associated with these share repurchases by approximately half.