The company has announced the closure of nine manufacturing plants this year, most recently, Sandwich, England, and six research sites. To-date, all transactions are proceeding according to plan. Additionally, the vast majority of research programs and development projects have been transferred and stabilized to their new location with minimal disruption. All impacted initiatives will be transferred by yearend.
A wide array of off-shoring and out-sourcing opportunities are in various stages of implementation. Manufacturing, logistics, finance, facilities, medical, legal and IT are among the functions pursuing the financial and operation benefits of this strategy.
Exubera worldwide revenues were $7 billion in the third quarter 2007 and $12 million year-to-date.
The performance of Exubera has led to the decision to exit Exubera, which has resulted in pre-tax charges of $2.8 billion. These charges are comprised to various components, including approximately $1.1 billion of intangible assets, from the acquisition of the rights to Exubera, $661 million of inventory, $454 million of fixed assets and $584 million of other exit costs.
On the income statement, $2.6 billion of this charge is included in cost of sales, while the remainder is included in revenues, SI&A expenses and R&D expenses. The asset-related charges of approximately $2.2 billion, represents non-cash charges, while the other exit costs will result in future cash expenditures.
Adjusted cost of sales as a percent of revenues was 15.1% compared to 15.4% in the same quarter of last year.
However, for the full year the company expects adjusted cost of sales to rise to approximately 15.5% of revenues compared with previous estimates of about 15%. The reason for this change is that a greater portion of revenues and associated costs are being generated in international markets, 52% in the latest quarter versus 45% in the same quarter last year. Portfolio was shifting to a mix of products with high cost relative to the prior year.
Adjusted SI&A expenses declined 1% from last year, this reflects efforts to streamline the organization and improve operational efficiency. The level of decrease is partially offset by the unfavorable impact of foreign exchange.
Adjusted R&D expenses declined 5% from last year, also due primarily to efforts to improve operational efficiency. The company continues to project the full year 2007, adjusted R&D expenses to be approximately $7.5 billion. Effective tax rate on adjusted income was approximately 22%, the company continues to project 22% for full year 2007.
Chantix, smoking cessation treatment posted revenues of $241 million compared with $33 million a year ago.
The revenues of Lyrica, medicine for the management of neuropathic pain and mostly recently fibromyalgia increased 37% to $465 million and revenues of Sutent product for advance kidney and cancer of the digestive system was $151 million compared with $63 million last year.
Zoloft dropped 73% and Norvasc dropped 47%, following the loss of US exclusivity. Excluding Zoloft and Norvasc, worldwide pharmaceutical revenues would have increased 5%.
- Lyrica grew 37% to $465 million, compared to the same period last year and it has delivered $1.3 billion in revenues year-to-date.
- In June, the FDA granted accelerated approval to Lyrica for the treatment of fibromyalgia which more than doubles the potential number of US patients who could benefit from this medicine.
The company launched the new Viagra advertising campaign that has generated a lot of interest and positive feedback from the field.
The company is continuing to bring strong and creative support to Lipitor, which is facing a commercial assault unprecedented in industry''s history. With new indications in data, advertising, field force support and contracting strategies to optimize Tier 2 access, the company is fighting back hard against branded and generic competition, focusing on both new patients and the switch market. In the phase of these challenges, Lipitor revenues were $3.2 billion as compared to $3.3 billion in the third quarter last year.
The company decided to stop further investment in Exubera. This decision reflects strict adherence to three fundamental principles which will continue to guide going forward.
Pfizer began the development program for Exubera in collaboration with Nektar Therapeutics over a decade ago. The company launched it in July 2006 and made a major effort to make it successful. But despite the best efforts of sales, marketing and manufacturing colleagues, the product has simply not gained the acceptance of patients and physicians.
The company is making is the progress on reducing cost structure.
For this year, cost savings in the selling informational and administrative expense component of adjusted income, are ahead of plan. The company is projecting a decrease in these expenses of about $600 million on a constant currency basis. The company is continuing to take the necessary steps to meet goal of reducing total adjusted cost by at least $1.5 billion to $2 billion by 2008, compared to 2006 on a constant currency basis.
The process of closing sites like Ann Arbor in R&D and Brooklyn, Groton and Sandwich in manufacturing is on track. As these are company wide plants to reduce overall headcount by 10%. The company is making solid progress and putting into place a much more flexible cost base that will more easily adapt to changing business needs.
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