PFIZER REPORTS SECOND-QUARTER 2018 RESULTS
NEW YORK--(BUSINESS WIRE)--Jul 31, 2018--Pfizer Inc. (NYSE: PFE) reported financial results for second-quarter 2018 and raised 2018 financial guidance for Adjusted diluted EPS (2).
Results for the second quarter and first six months of 2018 and 2017 (3) are summarized below.
On February 3, 2017, Pfizer completed the sale of its global infusion therapy net assets, Hospira Infusion Systems (HIS). Therefore, financial results for the first six months of 2018 do not reflect any contribution from legacy HIS operations, while the first six months of 2017 reflect approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations (3).
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 (4).
2018 FINANCIAL GUIDANCE (5)
Pfizer’s updated 2018 financial guidance is presented below.Revenue guidance was updated solely to reflect recent unfavorable changes in foreign exchange rates in relation to the U.S. dollar from mid-April 2018 to mid-July 2018, primarily the weakening of the euro, Chinese yuan and Japanese yen. Guidance for Adjusted R&D expenses (2) was updated primarily to reflect higher anticipated spend in the second half of 2018 than previously projected, largely related to our late-stage development programs. Guidance for Adjusted other (income)/deductions (2) was updated primarily to reflect unrealized net gains on equity securities, one-time milestone payments from certain collaborations and out-licensing arrangements and a gain on the sale of certain compound/product rights in the first-half of 2018. Guidance for the effective tax rate on Adjusted income (2),(6) was updated primarily to reflect Pfizer’s evolving understanding of the impact of the Tax Cuts and Jobs Act (“TCJA”) (6) on its business. Although these estimates continue to be subject to further analysis, interpretation and clarification of the TCJA, Pfizer’s current expectation is that this tax rate guidance will be sustainable beyond 2018.
Financial guidance for Adjusted diluted EPS (2) reflects share repurchases totaling approximately $6.1 billion already completed in 2018. Dilution related to share-based employee compensation programs is expected to offset by approximately half the reduction in shares associated with these share repurchases.
CAPITAL ALLOCATIONDuring the first six months of 2018, Pfizer returned $10.1 billion directly to shareholders, through a combination of: $4.0 billion of dividends, composed of $0.34 per share of common stock in each of the first and second quarters of 2018; and$6.1 billion of share repurchases, composed of $2.1 billion of open-market share repurchases in first-quarter 2018 and a $4.0 billion accelerated share repurchase agreement executed in March 2018. As of July 31, 2018, Pfizer’s remaining share repurchase authorization was $10.3 billion.
Ian Read, Chairman and Chief Executive Officer, stated, “We reported solid second-quarter 2018 financial results, with total company revenues up 2% operationally, driven by the continued growth of key brands such as Eliquis, Ibrance and Xeljanz, as well as biosimilars and emerging markets. The performance of these growth drivers was partially offset by product losses of exclusivity, a decline in legacy Established Products in developed markets and ongoing legacy Hospira supply shortages.
“Regarding our investment in innovation, we continue to advance our pipeline, which we believe currently has the largest and most promising array of late-stage prospects it has had in decades. We are looking ahead to several potential near-term opportunities in core therapeutic areas, and continue to see the potential for approximately 25-30 approvals through 2022, of which up to 15 have the potential to be blockbusters. We continue to believe our pipeline positions us to deliver life-changing medicines to patients while enhancing shareholder value.
“In addition, we recently announced a new organizational structure. The new structure is a natural evolution of our business as we transition to a period post-2020 where we expect a higher and more sustained revenue growth profile driven by this new structure, the ongoing success of our in-market products, our advancing pipeline and a dramatic reduction in loss of exclusivity impacts,” Mr. Read concluded.
Frank D’Amelio, Executive Vice President, Business Operations and Chief Financial Officer, stated, “I am pleased with our results over the first-half of 2018, which keep us on track to deliver a solid financial performance this year. We are raising our 2018 guidance range for Adjusted diluted EPS (2), which at the midpoint implies 13% growth compared to last year. Additionally, in the first half of 2018, we returned $10.1 billion directly to shareholders through dividends and share repurchases, demonstrating our continued commitment to returning capital to our shareholders.”
QUARTERLY FINANCIAL HIGHLIGHTS (Second-Quarter 2018 vs. Second-Quarter 2017)
Second-quarter 2018 revenues totaled $13.5 billion, an increase of $570 million, or 4%, compared to the prior-year quarter, reflecting the favorable impact of foreign exchange of $377 million, or 3%, and operational growth of $194 million, or 2%.
Innovative Health (IH) HighlightsIH revenues increased 5% operationally in second-quarter 2018, primarily driven by continued growth from key brands including Eliquis, Ibrance and Xeljanz globally, Prevnar 13/Prevenar 13 primarily in emerging markets and the U.S., as well as Xtandi in the U.S. Operational revenue growth for Eliquis, Ibrance, Xeljanz and Xtandi was 42%, 19%, 37% and 21%, respectively. Second-quarter 2018 IH operational revenue growth was negatively impacted primarily by the loss of exclusivity of Viagra in the U.S. in December 2017 and the resulting shift in the reporting of Viagra revenues in the U.S. and Canada to the Essential Health business at the beginning of 2018 (3). IH operational revenue growth was also negatively impacted by lower revenues for Enbrel in most developed Europe markets due to continued biosimilar competition. Global Prevnar 13/Prevenar 13 revenues increased 7% operationally in second-quarter 2018. Prevenar 13 revenues in international markets increased 8% operationally, primarily due to the overall favorable impact of timing associated with government purchases for the pediatric indication in certain emerging markets compared with the prior-year quarter, as well as the launch of the pediatric indication in China in the second quarter of 2017.In the U.S., Prevnar 13 revenues increased 6%, primarily due to higher government purchases in second-quarter 2018 compared to second-quarter 2017 for the pediatric indication, partially offset by the continued decline in revenues for the adult indication due to a smaller remaining “catch up” opportunity compared to the prior-year quarter.
Essential Health (EH) HighlightsSecond-quarter 2018 EH revenues declined 4% operationally, negatively impacted primarily by: a 12% operational decline in the Legacy Established Products portfolio in developed markets;a 17% operational decline in the Sterile Injectable Pharmaceuticals portfolio in developed markets, primarily due to continued legacy Hospira product shortages in the U.S.; andan 11% operational decline in the Peri-LOE Products portfolio in developed markets, primarily due to expected declines in Lyrica in developed Europe, partially offset by the addition of Viagra revenues from the U.S. and Canada that were previously recorded in the IH business,
partially offset by:10% operational growth in emerging markets, reflecting growth across all portfolios; and44% operational growth from Biosimilars, primarily from Inflectra in certain channels in the U.S. as well as in developed Europe.
GAAP Reported (1) Income Statement Highlights
Pfizer recorded higher other income––net (1) in second-quarter 2018 compared with the prior-year quarter, primarily due to:unrealized net gains on equity securities, primarily from gains on shares of ICU Medical, Inc. stock held by Pfizer that was received as part of the consideration for the sale of HIS net assets (the recording of these unrealized net gains on equity securities reflects the adoption of a new accounting standard in first-quarter 2018; prior to the adoption of the new standard, net unrealized gains and losses on virtually all equity securities with readily determinable fair values were reported in Accumulated other comprehensive income); higher income from collaborations, out-licensing arrangements and sale of compound/product rights; and lower charges for certain legal matters, primarily reflecting the reversal of a legal accrual in second-quarter 2018 where a loss was no longer deemed probable.
Pfizer’s effective tax rate on Reported income (1) for second-quarter 2018 was favorably impacted by the December 2017 enactment of the TCJA (6).
Adjusted (2) Income Statement Highlights
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