This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Pfizer (PFE) on January 26, 2009.
Management:
Chairman and CEO: Jeffrey B. Kindler
President, Worldwide Pharmaceuticals Operations: Ian Read
Chairman and CEO of Wyeth: Bernard Poussot
SVP CFO of Wyeth: Gregory Norden
SVP and General Counsel: Amy Schulman
SVP and General Counsel of Wyeth: Lawrence V. Stein
Head of Research and Development: Martin Mackay
SVP, IR: Charles E. Triano
VP, IR of Wyeth: Justin R. Victoria
Key Investor Issues:
- Pfizer is acquiring the entire Wyeth share capital for $50 per share.
- Q4 diluted EPS were 4 cents versus 40 cents in the previous year quarter.
Fourth Quarter Financial Highlights:
The Wyeth management reported on the key value areas that the company will bring in the new merged entity.
- Wyeth is a global biopharmaceutical company with striking diversity.
- An estimated 60% of company revenues are from non-traditional pharmaceuticals.
- Biopharma Enbrel, from Wyeth, has become the number one biologic product in the world.
- The vaccine Prevnar is currently the largest selling vaccine in the world.
- The management has established pharmaceuticals block busters such as Effexor and Zosyn which are both number one in their categories.
- Consumer health is an important piece of the business with brands like Advil, Centrum, and Robitussin.
- The company will add a diverse portfolio of innovative new products.
- Tygacil, Torisel, Pristiq, Xyntha, and Relistor are all recent new product pools and the management is in the process of launching the products worldwide.
- Collectively, they reportedly offer a multi-billion dollar peak potential.
According to Pfizer management, the acquisition of Wyeth will most meaningfully advance strategic priorities.
- The priorities include enhancing the in line and pipeline patent protected portfolio in key invest to win disease areas.
- These are areas where there are significant unmet medical needs and where the management believes can help in becoming a top tier player in biotherapeutics and vaccines.
- Combining with Wyeth will extend the company’s global healthcare leadership.
- The merger will establish Pfizer as a leader in human health, animal health, consumer health and nutritionals.
- The transaction will also propel Pfizer as the number one company in primary care and the number two company in specialty care.
- The investors were advised that the deal definitively addresses the revenue loss from Lipitor’s loss of exclusivity.
- The combined company will solidify Pfizer’s ability to deliver consistent and stable earnings growth and strong operating cash flow.
The management has reportedly strengthened the foundation of the new company.
- The management assembled a world-class leadership team from inside and outside of Pfizer.
- The company also set out to establish a lower and more flexible cost base.
- The management also revamped the research enterprise, narrowing focus on those disease areas with significant unmet medical needs.
- The company reportedly established distinct business units, each focused on a different customer segment, with a clearly accountable leader and with responsibility for everything.
With this transaction, the company is poised to become the third largest biotherapeutics company in the world.
- Enbrel is the world’s leading biologic.
- The Wyeth combination also allows the management to enter the growing vaccines market in a powerful position.
- The new company will have the fourth largest vaccines business globally and the portfolio will include Prevnar, the largest vaccine in the world.
- The transaction also meaningfully diversifies the company’s therapeutics offerings and platforms.
- Geographically, the companies’ combined global footprint will be unrivaled.
- Going forward, the new company will lead the pharmaceutical markets of the United States, Europe, Latin America, Japan and the rest of Asia.
The Q4 reported revenues were $12.3 billion, a year-over-year decrease of 4%.
- The decrease was driven by the negative impact of the loss of US exclusivity of Zyrtec and Camptosar and the loss of exclusivity for Norvasc in Korea and Japan.
- The dip was also a result of foreign exchange which decreased revenues by approximately $380 million or 3% which were partially offset by the solid performance of key products.
Reported net income was $266 million for the quarter compared with $2.7 billion in the year ago quarter.
- The reported diluted EPS was 4 cents versus 40 cents in the year ago quarter.
- The year-over-year decreases were driven by a $2.3 billion pre-tax and after-tax charge from an agreement to resolve previously disclosed investigations regarding allegations of past off-label promotional practices concerning Bextra and other open investigations.
- Adjusted revenues were $12.3 billion, a 4% decrease year-over-year, driven by the unfavorable impact of the loss of the exclusivity of Norvasc, Zyrtec and Camptosar and foreign exchange.
- Adjusted income increased 29% year-over-year to $4.4 billion and adjusted, diluted EPS increased 30% to 65 cents.
- Looking to 2009, on the top line, annual revenues are forecast to be in the range of $44 billion to $46 billion.
- This assumes a $3 billion year-over-year reduction versus 2008 directly related to the strengthening of the US dollar.
- The 2009 adjusted diluted EPS are forecast to be negatively impacted by approximately 21 cents due to the expected $3 billion year-over-year revenue decline related to foreign exchange; 21 cents related to increasing the effective tax rate to 30%; 4 cents due to increased pension expenses and 4 cents resulting from a decrease in interest income.
- All these factors translate into a negative impact of roughly 50 cents on 2009 adjusted diluted EPS versus 2008.
Under the terms of the agreement Pfizer is acquiring all of Wyeth’s outstanding common shares at a current value of about $50.00 per share.
- Wyeth’s shareowners will receive $33.00 per share in cash, plus a current value of approximately $17.00 per share of Pfizer’s stock based on a fixed exchange ratio of 0.985.
- The transaction will be funded through a combination of cash, debt and equity.
- Upon completion, Pfizer shareowners will own approximately 84% in stock in the combined company and Wyeth shareowners will own 16%.
- The sources of funding for the transaction include $22.5 billion in cash, $22.5 billion of debt and about $23 billion in Pfizer’s stock.
- The company is reducing quarterly dividend to 16 cents per share.
- As part of this transaction, the management expects to realize about $4 billion in synergies.
- It is anticipated that 50% of these synergies will be realized within the first 12 months after the close, 75% within the first 24 months and the full benefit of the synergies in the first 36 months.
- An approximate 50% of these synergies are forecast to come from SI&A and the remaining from R&D and manufacturing.
- It is estimated that the transaction will result in the combined companies’ global workforce reduction by approximately 15%.
- This reduction includes the 10% reduction to Pfizer’s workforce associated with its new cost reduction initiative.
Fiscal 2012 Financial Targets:
