On January 30, 2018 Pfizer Inc. (NYSE: PFE) reported financial results for fourth-quarter and full-year 2017 and provided 2018 financial guidance (Press release, Pfizer, JAN 30, 2018, View Source [SID1234523636]).
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Results for the fourth quarter and the full year of 2017 and 2016(3) are summarized below.
OVERALL RESULTS
($ in millions, except
per share amounts)
Fourth-Quarter Full-Year
2017 2016 Change 2017 2016 Change
Revenues $ 13,703 $ 13,627 1% $ 52,546 $ 52,824 (1%)
Reported Net Income(1) 12,274 775 * 21,308 7,215 *
Reported Diluted EPS(1) 2.02 0.13 * 3.52 1.17 *
Adjusted Income(2) 3,772 2,894 30% 16,085 14,761 9%
Adjusted Diluted EPS(2) 0.62 0.47 32% 2.65 2.40 11%
* Indicates calculation result is greater than 100%.
REVENUES
($ in millions) Fourth-Quarter Full-Year
2017
2016 % Change 2017
2016 % Change
Total Oper. Total Oper.
Innovative Health $ 8,218 $ 7,726 6 % 5 % $ 31,422 $ 29,197 8 % 8 %
Essential Health 5,484 5,902 (7 %) (8 %) 21,124 23,627 (11 %) (10 %)
Total Company $ 13,703 $ 13,627 1 % — $ 52,546 $ 52,824 (1 %) —
Excluding HIS revenues from all periods:
Total Company $ 13,703 $ 13,348 3 % 2 % $ 52,449 $ 51,666 2 % 2 %
Essential Health 5,484 5,623 (2 %) (3 %) 21,027 22,469 (6 %)
(6
%)
On December 22, 2017, the U.S. enacted significant changes to U.S. tax law following the passage and signing of H.R.1, "An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018" (also known as the "Tax Cuts and Jobs Act" or the "TCJA"). The TCJA is complex and significantly changes the U.S. corporate income tax system by, among other things, reducing the Federal corporate income tax rate from 35% to 21%, transitioning U.S. international taxation from a worldwide tax system to a territorial tax system and imposing a repatriation tax that is payable over eight years on deemed repatriated accumulated earnings of foreign subsidiaries. Given the significant changes resulting from and complexities associated with the TCJA, the estimated financial impacts for fourth-quarter and full-year 2017 as well as the estimated impact on 2018 Financial Guidance for the effective tax rate on Adjusted income(2) are provisional and subject to further analysis, interpretation and clarification of the TCJA, which could result in changes to these estimates during 2018.
Acquisitions and divestitures completed in 2016 and 2017 impacted financial results in the periods presented(4). 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).
2018 FINANCIAL GUIDANCE(6)
Pfizer’s 2018 financial guidance is presented below. Financial guidance reflects a full year contribution from Consumer Healthcare. Pfizer continues to expect that any decision regarding strategic alternatives for Consumer Healthcare will be made during 2018. Financial guidance also assumes no generic competition for Lyrica in the U.S. until June 2019, which is contingent upon a six-month patent-term extension granted by the U.S. Food and Drug Administration (FDA) for pediatric exclusivity, which the company is currently pursuing.
Revenues $53.5 to $55.5 billion
Adjusted Cost of Sales(2) as a Percentage of Revenues 20.5% to 21.5%
Adjusted SI&A Expenses(2) $14.0 to $15.0 billion
Adjusted R&D Expenses(2) $7.4 to $7.9 billion
Adjusted Other (Income)/Deductions(2) Approximately $400 million of income
Effective Tax Rate on Adjusted Income(2) Approximately 17.0%
Adjusted Diluted EPS(2) $2.90 to $3.00
The 2018 financial guidance for the effective tax rate on Adjusted income(2) reflects the enactment of the TCJA.
Financial guidance for Adjusted diluted EPS(2) anticipates share repurchases totaling $5.0 billion in 2018. Dilution related to share-based employee compensation programs is expected to offset by approximately half the reduction in shares associated with these anticipated share repurchases.
CAPITAL ALLOCATION
Increasing Investment in the U.S.
Over the next five years, Pfizer plans to invest approximately $5.0 billion in capital projects in the U.S., including the strengthening of Pfizer’s manufacturing presence in the U.S.
In fourth-quarter 2017, following the passage of the TCJA, Pfizer made a $200 million charitable contribution to the Pfizer Foundation, an organization that provides grant and investment funding to support organizations and social entrepreneurs in an effort to improve health care delivery.
Pfizer also plans to make a $500 million contribution to its U.S. pension plan in 2018.
The company also has allocated approximately $100 million for a special, one-time bonus to be paid to all non-executive Pfizer colleagues in first-quarter 2018.
During 2017, Pfizer returned $12.7 billion directly to shareholders, through a combination of:
$7.7 billion of dividends, composed of quarterly payments of $0.32 per share of common stock; and
a $5.0 billion accelerated share repurchase agreement executed in February 2017 and completed in May 2017, which resulted in a reduction of approximately 150 million shares of Pfizer’s outstanding common stock.
The full-year 2017 diluted weighted-average shares used to calculate earnings per common share was 6,058 million shares, a reduction of 100 million shares compared to full-year 2016.
In 2018, Pfizer anticipates quarterly dividend payments of $0.34 per share of common stock in addition to $5.0 billion of share repurchases.
As of January 30, 2018, Pfizer’s remaining share repurchase authorization was $16.4 billion, which includes a new $10.0 billion share repurchase program that was authorized by Pfizer’s board of directors in December 2017.
EXECUTIVE COMMENTARY
Ian Read, Chairman and Chief Executive Officer, stated, "Pfizer had a strong year in 2017, delivering solid financial results, advancing several significant pipeline programs and enhancing shareholder value with prudent capital allocation decisions. Regarding our revenue performance in 2017, Pfizer Innovative Health was driven by continued strength from several anchor brands, including Ibrance, Eliquis and Xeljanz — all of which currently have market-leading positions with many years of patent protection remaining. Pfizer Essential Health generated strong operational revenue growth in emerging markets and in our Biosimilars portfolio but was negatively impacted by the HIS divestiture, the expected impact of product losses of exclusivity and legacy Hospira product shortages in the U.S.
"In 2017, we received ten approvals from the FDA, significantly more than Pfizer has achieved in any year in the past decade. Building on these achievements, during 2018 we look forward to important regulatory decisions and clinical data readouts across our pipeline that will drive the next wave of innovation at Pfizer.
"I believe our capital allocation decisions in 2017 enhanced shareholder value. In addition to investing in our business, we also returned $12.7 billion directly to shareholders through a combination of dividends and share repurchases and we decided to explore potential strategic alternatives for our Consumer Healthcare business. We remain on track to make this decision, which could include everything from a full or partial separation to ultimately deciding to retain the business, during 2018.
"I believe our current management and business structure, the tireless dedication of our colleagues and the strong culture we have nurtured position Pfizer especially well for continued success," Mr. Read concluded.
Frank D’Amelio, Executive Vice President, Business Operations and Chief Financial Officer, stated, "Overall, I am pleased with our 2017 financial performance. Despite absorbing a $2.1 billion impact from products that recently lost marketing exclusivity, we were still able to achieve 1% operational revenue growth in 2017 after excluding the net impact of acquisitions and divestitures completed in 2016 and 2017. We also delivered Adjusted diluted EPS(2) growth of 11% in 2017, primarily reflecting a lower effective tax rate due to tax reform, strong performance of key products, continued success in managing our operating expenses and the net impact of our share repurchases.
"Our 2018 financial guidance at the midpoint of our ranges implies revenue growth of 4% and Adjusted diluted EPS(2) growth of 11% compared to 2017 results, which absorbs an anticipated $2.0 billion revenue headwind due to products that recently lost marketing exclusivity. Our effective tax rate on Adjusted income(2) is expected to be approximately 17.0% in 2018, significantly lower than the approximately 23.0% that we previously anticipated for full-year 2017, prior to the enactment of tax reform. Notably, our guidance for Adjusted diluted EPS(2) anticipates share repurchases totaling $5.0 billion in 2018, which is expected to be offset by approximately half due to dilution related to share-based employee compensation programs.
"Finally, regarding tax reform, I am pleased that the aspects of most importance to us were addressed in the new tax code, strengthening our ability to make capital allocation decisions that maximize patient benefit and enhance shareholder value. In addition to an anticipated effective tax rate on Adjusted income(2) in 2018 that is meaningfully lower than in prior years, Pfizer anticipates a repatriation tax liability of approximately $15 billion payable to the U.S. Treasury over eight years as a result of the passage of the TCJA," Mr. D’Amelio concluded.
QUARTERLY FINANCIAL HIGHLIGHTS (Fourth-Quarter 2017 vs. Fourth-Quarter 2016)
Fourth-quarter 2017 revenues totaled $13.7 billion, an increase of $75 million, or 1% compared to the prior-year quarter, reflecting the favorable impact of foreign exchange of $114 million, or 1%, offset by an operational decline of $39 million, or less than 1%.
Excluding the revenues for HIS in the prior-year quarter and the favorable impact of foreign exchange, fourth-quarter 2017 revenues increased by $240 million, or 2% operationally. Fourth-quarter 2017 revenues excluding the net impact of acquisitions and divestitures completed in 2016 and 2017 increased $137 million, or 1% operationally, compared to fourth-quarter 2016.
Innovative Health Highlights
IH revenues increased 5% operationally in fourth-quarter 2017, driven by continued growth from key brands including Eliquis globally, Xeljanz primarily in the U.S., Prevenar 13 primarily in emerging markets, as well as Lyrica, Ibrance and Chantix/Champix, all primarily in the U.S. Global revenues for Eliquis increased 43% operationally, while global Xeljanz revenues grew 47% operationally.
Global Prevnar 13/Prevenar 13 revenues increased 7% operationally in fourth-quarter 2017.
Prevenar 13 revenues in international markets increased 27% operationally, primarily due to the favorable overall impact of timing and increased volume associated with government purchases in certain emerging markets for the pediatric indication compared with the year-ago quarter, as well as from the inclusion of Prevenar 13 in additional national immunization programs in certain emerging markets for the adult and pediatric indications in fourth-quarter 2017.
In the U.S., Prevnar 13 revenues declined 7%, primarily due to the continued decline in revenues for the adult indication due to a smaller remaining "catch up" opportunity compared to the prior-year quarter, partially offset by increased government purchases in fourth-quarter 2017 compared to fourth-quarter 2016 for the pediatric indication.
Global Ibrance revenues grew 11% operationally in fourth-quarter 2017.
In the U.S., Ibrance revenues increased 27% compared with the prior-year quarter, primarily due to continued strong uptake in the metastatic breast cancer setting.
Ibrance revenues in international markets declined in fourth-quarter 2017, negatively impacted by a one-time price adjustment to full-year 2017 revenues in certain developed Europe markets related to finalizing reimbursement agreements in these markets. These agreements establish pricing levels comparable to European pricing analogues for oncology products, ensure patient access and are expected to drive future growth in these markets. Despite the one-time impact in fourth-quarter 2017, underlying Ibrance volumes in developed Europe remain strong, increasing 20% sequentially compared to third-quarter 2017.
Fourth-quarter 2017 IH operational revenue growth was negatively impacted by lower revenues for Viagra in the U.S. primarily due to generic competition that began in December 2017 and for Enbrel in most developed Europe markets due to continued biosimilar competition.
Essential Health Highlights
Fourth-quarter 2017 EH revenues declined 8% operationally, of which 5% operationally was due to the February 2017 divestiture of HIS. Fourth-quarter 2017 EH revenues were also negatively impacted by an 18% operational decline from Peri-LOE Products, primarily due to expected declines in Pristiq in the U.S. as well as Lyrica in developed Europe. EH revenues were also negatively impacted by a 10% operational decline from the Sterile Injectable Pharmaceuticals (SIP) portfolio, primarily due to continued legacy Hospira product shortages in the U.S. These declines were partially offset by 72% operational growth from Biosimilars, primarily from Inflectra in the U.S. and developed Europe.
EH revenues in emerging markets grew 10% operationally, primarily driven by 10% operational growth from the Legacy Established Products portfolio and 23% operational growth from the SIP portfolio. Excluding HIS from both periods, EH revenues in emerging markets grew 12% operationally.
GAAP Reported(1) Income Statement Highlights
SELECTED TOTAL COMPANY REPORTED COSTS AND EXPENSES(1)
($ in millions)
(Favorable)/Unfavorable
Fourth-Quarter Full-Year
2017 2016 % Change 2017 2016 % Change
Total Oper. Total Oper.
Cost of Sales(1) $ 3,259 $ 3,218 1 % (1 %) $ 11,240 $ 12,329 (9 %) (8 %)
Percent of Revenues 23.8 % 23.6 % N/A N/A 21.4 % 23.3 % N/A N/A
SI&A Expenses(1) 4,551 4,423 3 % 2 % 14,784 14,837 — —
R&D Expenses(1) 2,311 2,512 (8 %) (8 %) 7,657 7,872 (3 %) (3 %)
Total $ 10,121 $ 10,153 — (2 %) $ 33,681 $ 35,038 (4 %) (3 %)
Other (Income)/Deductions––net(1) $ 1,331 $ 841 58 % 64 % $ 1,315 $ 3,655 (64 %) (61 %)
Effective Tax Rate on
Reported Income(1)
(1,189.0 %) 1.7 % (73.5 %) 13.4 %
The increase in fourth-quarter 2017 other deductions––net(1) was primarily driven by higher net losses on the retirement of certain outstanding debt securities compared to the prior-year quarter. The decrease in full-year 2017 other deductions––net(1) was primarily driven by the non-recurrence of impairment charges in 2016 as a result of the HIS divestiture as well as lower other impairment charges in 2017 compared to the prior year, partially offset primarily by the aforementioned higher net losses from the retirement of certain outstanding debt securities compared with last year.
As a result of the enactment of the TCJA, Pfizer’s fourth-quarter and full-year 2017 provision for taxes on Reported income(1) was favorably impacted by approximately $10.7 billion, primarily reflecting the remeasurement of U.S. deferred tax liabilities, which includes the repatriation tax on deemed repatriated accumulated earnings of foreign subsidiaries.
Adjusted(2) Income Statement Highlights
SELECTED TOTAL COMPANY ADJUSTED COSTS AND EXPENSES(2)
($ in millions)
(Favorable)/Unfavorable
Fourth-Quarter Full-Year
2017 2016 % Change 2017 2016 % Change
Total Oper. Total Oper.
Adjusted Cost of Sales(2) $ 3,062 $ 3,046 1 % (2 %) $ 10,790 $ 11,630 (7 %) (6 %)
Percent of Revenues 22.3 % 22.4 % N/A N/A 20.5 % 22.0 % N/A N/A
Adjusted SI&A Expenses(2) 4,318 4,402 (2 %) (3 %) 14,469 14,745 (2 %) (2 %)
Adjusted R&D Expenses(2) 2,300 2,505 (8 %) (9 %) 7,626 7,841 (3 %) (3 %)
Total $ 9,679 $ 9,953 (3 %) (4 %) $ 32,885 $ 34,215 (4 %) (3 %)
Adjusted Other (Income)/Deductions––net(2) ($180 ) ($182 ) (1 %) (29 %) ($699 ) ($729 ) (4 %) (20 %)
Effective Tax Rate on Adjusted Income(2) 8.6 % 24.1 % 20.0 % 23.0 %
Pfizer’s fourth-quarter 2017 and full-year 2017 provision for taxes on Adjusted income(2) was favorably impacted due to the aforementioned enactment of the TCJA, primarily reflecting the remeasurement of U.S. deferred tax liabilities on deemed repatriated earnings of foreign subsidiaries that were accrued during 2017.
Fourth-quarter 2017 diluted weighted-average shares outstanding used to calculate Reported(1) and Adjusted(2) diluted EPS declined by 80 million shares compared to the prior-year quarter and, for full-year 2017, declined by 100 million shares compared to full-year 2016. Both fourth-quarter 2017 and full-year 2017 diluted weighted-average shares outstanding were favorably impacted by Pfizer’s share repurchase program, reflecting the impact of the $5 billion accelerated share repurchase agreement executed in February 2017 and completed in May 2017, partially offset by dilution related to share-based employee compensation programs.
A full reconciliation of Reported(1) to Adjusted(2) financial measures and associated footnotes can be found starting on page 21 of the press release located at the hyperlink below.
FULL-YEAR REVENUE SUMMARY (Full-Year 2017 vs. Full-Year 2016)
Full-year 2017 revenues totaled $52.5 billion, a decrease of $278 million, or 1%, reflecting a slight operational decline of $20 million, or less than 1%, and the unfavorable impact of foreign exchange of $259 million, or less than 1%.
Excluding the net impact of acquisitions and divestitures completed in 2016 and 2017 and the unfavorable impact of foreign exchange, full-year 2017 revenues increased by $387 million, or 1% operationally, primarily reflecting:
Operational growth from certain key products, including Ibrance and Eliquis globally, Xeljanz primarily in the U.S., as well as Inflectra primarily in the U.S. and developed Europe; and
Total operational revenue growth in emerging markets of $1.1 billion, or 11%,
partially offset by:
Product losses of exclusivity that negatively impacted 2017 revenues by $2.1 billion operationally, primarily Enbrel in developed Europe, Pristiq and Viagra in the U.S., as well as Lyrica and Vfend in developed Europe;
Lower revenues from the SIP portfolio, primarily due to legacy Hospira product shortages in the U.S.; and
an operational decline from Prevnar 13, reflecting the expected decline in revenues for the Adult indication in the U.S.
Additionally, there was one less selling day in both U.S. and international markets during full-year 2017 compared to full-year 2016, resulting in an unfavorable impact on full-year 2017 revenues of approximately $200 million compared to the prior year.
RECENT NOTABLE DEVELOPMENTS (Since October 31, 2017)
Product Developments
Bavencio (avelumab)
In December 2017, Merck KGaA, Darmstadt, Germany, which operates its biopharmaceutical business as EMD Serono in the U.S. and Canada (Merck KGaA), and Pfizer announced that the FDA granted Breakthrough Therapy Designation (BTD) for avelumab in combination with Inlyta (axitinib) for treatment-naïve patients with advanced renal cell carcinoma (RCC). The BTD is based on the preliminary evaluation of clinical data from JAVELIN Renal 100, a global Phase 1b study assessing the safety and efficacy of avelumab in combination with Inlyta for the treatment of treatment-naïve patients with advanced RCC. BTD is designed to accelerate the development and review of potential medicines for serious conditions, and preliminary clinical evidence indicates that the therapy may demonstrate a substantial improvement over currently available therapies on one or more clinically significant endpoints. This is the second BTD granted to avelumab. In the U.S., Inlyta is approved as monotherapy for the treatment of advanced RCC after failure of one prior systemic therapy.
In November 2017, Merck KGaA and Pfizer announced that the Phase 3 JAVELIN Gastric 300 trial did not meet its primary endpoint of superior overall survival with single-agent avelumab compared with physician’s choice of chemotherapy. The trial investigated avelumab as a third-line treatment for unresectable, recurrent or metastatic gastric or gastroesophageal junction adenocarcinoma patients whose disease progressed following two prior therapeutic regimens, regardless of programmed death ligand-1 (PD-L1) expression. The safety profile of avelumab was consistent with that observed in the overall JAVELIN clinical development program. The JAVELIN Gastric 300 data will be further examined in an effort to better understand these results and will also be submitted for presentation at an upcoming medical congress. The outcome of JAVELIN Gastric 300 does not have any impact on current avelumab approvals.
Bosulif (bosutinib) — In December 2017, Pfizer announced that the FDA approved a supplemental New Drug Application (sNDA) to expand the indication for Bosulif to include adult patients with newly-diagnosed chronic phase Philadelphia chromosome-positive chronic myelogenous leukemia (Ph+ CML). The sNDA was reviewed and approved under the FDA’s Priority Review and accelerated approval programs based on molecular and cytogenetic response rates. Continued approval for this indication may be contingent upon verification and confirmation of clinical benefit in an ongoing long-term follow up trial. Bosulif was first approved in September 2012 in the U.S. for the treatment of adult patients with chronic, accelerated or blast phase Ph+ CML with resistance or intolerance to prior therapy.
Ibrance (palbociclib) — In December 2017, Pfizer announced updated progression-free survival (PFS) results from the Phase 3 PALOMA-2 trial reinforcing the clinical benefit of Ibrance combined with letrozole. The data, which were presented at the 2017 San Antonio Breast Cancer Symposium (SABCS), demonstrated that the combination of Ibrance plus letrozole reduced the risk of disease progression by 44% and improved median PFS by more than one year compared to letrozole plus placebo (27.6 months [95% CI: 22.4, 30.3] vs. 14.5 months [95% CI: 12.3, 17.1]) when used as the initial treatment for postmenopausal women with estrogen receptor-positive, human epidermal growth factor receptor 2-negative metastatic breast cancer (HR=0.56 [95% CI: 0.46, 0.69]). This updated, post-hoc analysis included a median follow-up of more than three years, which is the longest to date of any Phase 3 study of a CDK 4/6 inhibitor. Overall survival data were not yet mature at the time of this updated PFS analysis.
Steglatro (ertugliflozin), Steglujan (ertugliflozin and sitagliptin) and Segluromet (ertugliflozin and metformin hydrochloride) — In December 2017, Pfizer and Merck, known as MSD outside the U.S. and Canada, announced that the FDA approved Steglatro (ertugliflozin) tablets, an oral sodium-glucose cotransporter 2 (SGLT2) inhibitor, as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus. The FDA also approved two fixed-dose combinations: Steglujan (ertugliflozin and sitagliptin) tablets as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus when treatment with both ertugliflozin and sitagliptin is appropriate, and Segluromet (ertugliflozin and metformin hydrochloride) tablets as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus who are not adequately controlled on a regimen containing ertugliflozin or metformin, or in patients who are already treated with both ertugliflozin and metformin. In January 2018, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency recommended the approvals of Steglatro, Steglujan and Segluromet. The European Commission will now review the CHMP’s recommendation, with a decision expected in the first half of 2018.
Sutent (sunitinib malate) — In November 2017, Pfizer announced that the FDA approved a new indication expanding the use of Sutent to include the adjuvant treatment of adult patients at high risk of recurrent renal cell carcinoma following nephrectomy.
Xeljanz/Xeljanz XR (tofacitinib)
In December 2017, Pfizer announced that the FDA approved Xeljanz (5 mg twice daily) and Xeljanz XR (extended release 11 mg once daily) for the treatment of adult patients with active psoriatic arthritis (PsA) who have had an inadequate response or intolerance to methotrexate or other disease-modifying antirheumatic drugs (DMARDs). Xeljanz/Xeljanz XR is the first and only Janus kinase (JAK) inhibitor approved by the FDA for both moderate to severe rheumatoid arthritis and active PsA.
In December 2017, Pfizer announced that the FDA extended the Prescription Drug User Fee Act (PDUFA) date by three months for the sNDA for Xeljanz, under review for the treatment of adult patients with moderately to severely active ulcerative colitis (UC) who have demonstrated an inadequate response, loss of response, or intolerance to corticosteroids, azathioprine, 6-mercaptopurine, or tumor necrosis factor inhibitor therapy. The FDA determined that additional review time was necessary due to information recently submitted by Pfizer. The updated PDUFA goal date for a decision by the FDA is in June 2018. The FDA has confirmed that the sNDA will be the subject of a Gastrointestinal Drugs Advisory Committee meeting that is scheduled for March 8, 2018 to discuss the efficacy and safety data as well as benefit-risk considerations of the UC sNDA.
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.
PF-04965842 — In December 2017, Pfizer announced the initiation of a Phase 3 program for its once-daily JAK1 inhibitor, PF-04965842, to evaluate its efficacy and safety for the treatment of moderate-to-severe atopic dermatitis (AD). This Phase 3 trial is a randomized, double-blind, placebo-controlled, parallel-group study and will evaluate 375 patients 12 years and older with moderate-to-severe AD. Trial participants will be randomly assigned to receive 200 mg once daily or 100 mg once daily or placebo. The primary endpoints are the proportion of patients achieving an Investigator Global Assessment (IGA) score of 0/1 and ≥2 point improvement, and the proportion of patients with at least a 75% or greater change from baseline in their Eczema Area and Severity Index (EASI) score. The treatment duration will be 12 weeks, the same duration as the Phase 2b study B7451006, with a 4 week safety follow-up period or the option to enter a long-term extension study at Week 12. The design of the Phase 3 trial is based on the Phase 2 results that were presented at the 26th Congress of the European Academy of Dermatology and Venereology in September 2017.
PF-05280586 (potential biosimilar to rituximab) — In January 2018, Pfizer announced that the Phase 3 REFLECTIONS B3281006, a comparative safety and efficacy study of PF-05280586 versus MabThera(7) (rituximab-EU), met its primary endpoint, demonstrating equivalence in overall response rate for the first-line treatment of patients with CD20-positive, low tumor burden, follicular lymphoma. PF-05280586 is being developed by Pfizer as a potential biosimilar to Rituxan (rituximab-U.S.)/MabThera(7).
Talazoparib (MDV3800) — In December 2017, Pfizer announced that the Phase 3 EMBRACA trial in patients with germline (inherited) BRCA1/2-positive (gBRCA+) locally advanced and/or metastatic breast cancer demonstrated superior PFS in patients treated with talazoparib, an investigational, oral, dual-mechanism poly ADP ribose polymerase (PARP) inhibitor that is taken once daily, compared to patients who received physician’s choice standard of care chemotherapy. Median PFS was 8.6 months (95% CI: 7.2, 9.3) for patients treated with talazoparib and 5.6 months (95% CI: 4.2, 6.7) for those treated with chemotherapy [HR: 0.54 (95% CI: 0.41, 0.71), p<0.0001]. This represents a 46% reduction in the risk of disease progression. In addition, the proportion of patients achieving a complete or partial response (objective response rate) in the talazoparib group was more than twice that of the control arm (62.6% for talazoparib vs. 27.2% for chemotherapy [OR: 4.99 (95% CI: 2.9-8.8), p<0.0001]). The EMBRACA data was presented as an oral presentation at the 2017 SABCS.
Utomilumab (PF-05082566) — In January 2018, Pfizer disclosed initial results from one arm of the Phase 1b JAVELIN Medley trial in PDx-naïve and PDx-experienced patients using concurrent dosing of utomilumab with avelumab. While the combination had a manageable safety profile, early signals of efficacy were insufficient to support advancing the utomilumab and avelumab combination into Phase 3 trials. Exploratory analyses to potentially identify patient segments that may benefit from this particular combination continue. Detailed results from this trial will be presented at a future medical meeting. The results of other ongoing studies involving utomilumab, including the triple combination of avelumab, utomilumab and PF-04518600 (OX40 agonist) in solid tumors, will further inform next steps for utomilumab.
Corporate Developments
In January 2018, the FDA upgraded the status of Pfizer’s McPherson, Kansas manufacturing facility to Voluntary Action Indicated (VAI) based on an October 2017 inspection. The change to VAI status will lift the compliance hold that the FDA placed on approval of pending applications and is an important step toward resolving the issues cited in the February 2017 FDA Warning Letter.
In January 2018, Pfizer announced its decision to end internal neuroscience discovery and early development efforts and re-allocate funding to other areas where the company has stronger scientific leadership. The company plans to create a dedicated neuroscience venture fund to support continued efforts to advance the field. The development of tanezumab and potential treatments for rare neuromuscular disorders is not impacted by this decision.
In January 2018, Pfizer and Sangamo Therapeutics, Inc. (Sangamo) announced a collaboration for the development of a potential gene therapy using zinc finger protein transcription factors (ZFP-TFs) to treat amyotrophic lateral sclerosis (ALS) and frontotemporal lobar degeneration (FTLD) linked to mutations of the C9ORF72 gene. Under the terms of the collaboration agreement, Sangamo will receive a $12 million upfront payment from Pfizer. Sangamo will be responsible for the development of ZFP-TF candidates. Pfizer will be operationally and financially responsible for subsequent research, development, manufacturing and commercialization for the C9ORF72 ZFP-TF program and any resulting products. Sangamo is eligible to receive potential development and commercial milestone payments of up to $150 million, as well as tiered royalties on net sales.
In December 2017, Pfizer’s board of directors declared a 34-cent first-quarter 2018 dividend on the company’s common stock, representing an increase of approximately 6% compared to the company’s first-quarter 2017 dividend. The first-quarter 2018 dividend is payable March 1, 2018 to shareholders of record at the close of business on February 2, 2018. Additionally, the board of directors also authorized a new $10 billion share repurchase program to be utilized over time. This new program is in addition to the $6.4 billion remaining under the company’s current authorization.
In December 2017, Pfizer and Basilea Pharmaceutica Ltd. (Basilea) entered into an agreement whereby Pfizer will be granted the exclusive development and commercialization rights in China and several countries in the Asia Pacific region to Cresemba (isavuconazole), a novel antifungal medicine for the treatment of adult patients with diagnosed invasive aspergillosis and mucormycosis. Under the terms of the agreement, Pfizer will have exclusive rights to develop, distribute and commercialize Cresemba in sixteen Asian Pacific countries and China (including Hong Kong and Macao). These rights do not include Japan. The specific financial terms of the agreement remain confidential. The agreement is subject to customary regulatory approval. In July 2017, Pfizer completed an agreement with Basilea to obtain the exclusive commercialization rights to Cresemba in Europe (with the exception of the Nordic countries). Since that time, Pfizer has assumed responsibility for the ongoing commercialization of Cresemba in Austria, France, Germany, Italy, and the United Kingdom and successfully launched Cresemba in Spain with additional launches expected in 2018 and beyond.
In November 2017, Pfizer announced a series of leadership and organizational changes with effect from January 1, 2018, including:
Dr. Albert Bourla, formerly Group President, Pfizer Innovative Health, was named Chief Operating Officer;
John Young, formerly Group President, Pfizer Essential Health, was named Group President, Pfizer Innovative Health, reporting to Dr. Bourla; and
Angela Hwang, formerly Global President and General Manager for Pfizer Inflammation & Immunology, was named Group President, Pfizer Essential Health, reporting to Dr. Bourla, and joins the company’s Executive Leadership team.
Additional members of the Pfizer Executive Leadership team reporting to Dr. Bourla include:
Dr. Kirsten Lund-Jurgensen – Executive Vice President and President Pfizer Global Supply
Dr. Rod MacKenzie – Executive Vice President, Chief Development Officer
Laurie Olson – Executive Vice President, Strategy and Commercial Operations
In addition to Dr. Bourla, the following members of Pfizer’s Executive Leadership team will continue to report to Ian Read, Pfizer’s Chairman and CEO:
Frank D’Amelio – Executive Vice President, Business Operations and Chief Financial Officer
Dr. Mikael Dolsten – Executive Vice President and President, Worldwide Research & Development
Chuck Hill – Executive Vice President, Worldwide Human Resources
Rady Johnson – Executive Vice President, Chief Compliance and Risk Officer
Doug Lankler – Executive Vice President, General Counsel
Dr. Freda Lewis-Hall – Executive Vice President and Chief Medical Officer
Sally Susman – Executive Vice President, Corporate Affairs
Please find Pfizer’s press release and associated financial tables, including reconciliations of certain GAAP Reported(1) to non-GAAP Adjusted(2) information, at the following hyperlink:
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(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.
(1) 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) is defined as reported diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.
(2)
Adjusted income and its components and Adjusted diluted EPS are defined as reported U.S. GAAP net income(1) and its components and reported diluted EPS(1) excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items (some of which may recur, such as restructuring or legal charges, but which management does not believe are reflective of ongoing core operations), including significant changes resulting from tax legislation such as the Tax Cuts and Jobs Act ("TCJA"). 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 "Management’s Discussion and Analysis of Financial Condition and Results of Operations––Non-GAAP Financial Measure (Adjusted Income)" section of Pfizer’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 1, 2017, 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, vaccines and consumer healthcare (OTC) products––prior to considering certain income statement elements. See the accompanying reconciliations of certain GAAP Reported to Non-GAAP Adjusted information for the fourth quarter and full year of 2017 and 2016. 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.
(3) 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 fourth quarter and full year for U.S. subsidiaries reflect the three and twelve months ending on December 31, 2017 and December 31, 2016 while Pfizer’s fourth quarter and full year for subsidiaries operating outside the U.S. reflect the three and twelve months ending on November 30, 2017 and November 30, 2016.
(4) The following acquisitions and divestitures impacted financial results for the periods presented:
On June 24, 2016, Pfizer acquired Anacor Pharmaceuticals, Inc. (Anacor). Therefore, financial results for full-year 2017 reflect legacy Anacor operations while financial results for full-year 2016 reflect approximately six months of legacy Anacor operations. Financial results for the fourth quarter of 2017 and 2016 both reflect legacy Anacor operations.
On September 28, 2016, Pfizer acquired Medivation, Inc. (Medivation). Therefore, financial results for fourth-quarter and full-year 2017 reflect legacy Medivation operations while financial results for full-year 2016 reflect approximately three months of legacy Medivation operations. Financial results for the fourth quarter of 2017 and 2016 both reflect legacy Medivation operations.
On December 22, 2016, Pfizer completed the acquisition of the development and commercialization rights to AstraZeneca’s small molecule anti-infective business, primarily outside the U.S. Therefore, financial results for fourth-quarter and full-year 2017 reflect contributions from certain legacy AstraZeneca anti-infective products while fourth-quarter and full-year 2016 do not include any contributions from legacy AstraZeneca anti-infective products.
On February 3, 2017, Pfizer completed the sale of its global infusion therapy net assets, Hospira Infusion Systems (HIS). Therefore, financial results for the fourth quarter of 2017 do not reflect any contribution from legacy HIS operations, while full-year 2017 reflects approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations(3). Financial results for fourth-quarter and full-year 2016 both reflect legacy HIS global operations, respectively.
(5) 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.
(6) The 2018 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 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 December 31, 2017, including any one-time upfront payments associated with such transactions.
Exchange rates assumed are as of mid-January 2018.
Reflects an anticipated negative revenue impact of $2.0 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. Assumes no generic competition for Lyrica in the U.S. until June 2019, which is contingent upon a six-month patent-term extension granted by the FDA for pediatric exclusivity, which the company is currently pursuing.
Reflects the anticipated favorable impact of $900 million on revenues and $0.06 on Adjusted diluted EPS(2) as a result of favorable changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2017.
Guidance for Adjusted diluted EPS(2) assumes diluted weighted-average shares outstanding of approximately 6.0 billion shares, which reflects anticipated share repurchases totaling $5.0 billion in 2018. Dilution related to share-based employee compensation programs is expected to offset by approximately half the reduction in shares associated with these anticipated share repurchases.
Guidance for the effective tax rate on Adjusted income(2) reflects the enactment of the TCJA.