Year-to-Date Financial Highlights
- Celebrex is up 10% worldwide and 7% in the US market that is basically flat. Geodon is growing at a rate of two times the market for atypical antipsychotics.
- The company has purchased $7.5 billion of stock in 2007, for a total of approximately 291 million shares.
- On a year-to-date basis, many of the changes in the first nine months of 2007 compared to 2006 are consistent with those previously described related to the quarter: loss of US exclusivity, strong new product growth, the benefits of efforts to streamline the organization and improve operational efficiency, increase interest income and favorable foreign exchange. Adjusted R&D expenses however increased 5% primarily as a result of collaboration with Bristol-Myers Squibb to develop and commercialize apixaban.
- Adjusted cost of sales increased 6% as a result of changing geographic and product mix. Lipitor worldwide revenues were down 5% compared to the same period last year. Revenues in the US declined 13% while revenues in international markets increased 9%. In the US, revenues declined as a result of intense competition and payer pressure. Of the 9% increase internationally, 6% is due to the favorable impact to foreign exchange and the remainder to operating growth.
Fiscal 2007 Outlook
- Revenues are expected to be $47.5 billion to $48 billion.
- On reported EPS for the full year, given the charges associated with exiting Exubera, the company has now lowered the range to $1.01 to $1.10.
- On adjusted EPS for the full year, the company is improving the range to $2.10 to $2.15.
- Guidance remains unchanged for other items, effective tax rate on adjusted income and cash flows from operation. In the area of stock buyback program, the company expects to repurchase up to $10 billion of stock in 2007.
- On a constant currency basis, the company expects an adjusted SI&A reduction of about $600 million relative to the prior year versus previous guidance of greater than $500 million.
- The company expects full year revenues to fall within the range of 3% to 5% decline in 2006.
- The company is on track this year to achieve the same revenues as last year and better adjusted income in last year, despite the loss of exclusivity on two major drugs, Norvasc and Zoloft, and despite the intense challenges facing largest product. This is due to the strong performance of most of products’ substantial progress in cost reduction efforts and the benefits of favorable foreign exchange.
- Operational performance reflects insistence on a higher level of focused and accountability within the company. The advantages of broadly diversified portfolio and the benefits of continued actions to improve productivity, these attributes are an important part of the solid foundation for the future.
Fiscal 2008 Outlook
Previously issued guidance remains unchanged, except for target to reduce adjusted total cost. The company previously projected that it would achieve an absolute cost reduction of at least $1.5 billion to $2 billion compared to 2006. It now expects to achieve this target but at constant exchange rates. This is reflective of the extent to which expenses have been adversely impacted by foreign exchange. The strengthening of the euro and of the currencies related to the dollars partially offsetting saving from cost reduction initiatives.
Key questions from the third quarter earnings call conducted by Pfizer Inc. on October 18, 2007.
Tim Anderson (Sanford Bernstein): Is the biotherapeutic center that you are going to establish on the West Coast going to be a bricks-and-mortar facility?
Jeff Kindler: We are starting with the facility that we already have in San Francisco called Rinat, which was the neuroscience spin-off from Genentech and has done quite, and we are excited about some of the opportunities that we have there and Dr. Goodman is going to initially start with that base. We are in the process developing the future business plans, but you can look forward to creating a network of organizations without a significant investment in bricks-and-mortar, because I do not think that will be necessary, and it will be an integrated approach to business development that involves both what Corey Goodman is leading, as well as what Martin Mackay, at Oregon, our business development group is leading.
Tim Anderson (Sanford Bernstein): Do you have any comments about Biogenetic being for sale and whether this is something that Pfizer would potentially consider?
Jeff Kindler: We do not comment on that kind of speculation. We will always keep eyes open at any means to build our business through alliances, licensing or acquisitions and when the right opportunities present themselves, we will act appropriately. We want to be disciplined in how we allocate our capital and we want to be thoughtful about that and so, we look at all these opportunities from that perspective. We are going to focus first on product potential, especially with our gaps in our therapeutic areas. We will focus secondly on expanding our platform potential, such as new ways to deliver therapies and the most important consideration here is to ensure that we deploy our capital in the best possible ways to create opportunities for creating shareholder value.
John Boris (Bear Stearns): Could you comment on the dividend increase?
Frank D''Amelio: As a company, we have been committed to total shareholder value. Going forward, we will continue to be committed to total shareholder value.Two years ago, the dividend was 76 cents, this year it $1.16, so it has increased 53% over the last two years. It was 32% in 2006, 21% in 2007. We will announce the 2008 dividend in December of this year for the upcoming year, as it has been our practice from the past.
John Boris (Bear Stearns): What about buybacks?
Frank D''Amelio: We announced this year a repurchases of up to $10 billion. At the end of the quarter, we have repurchased $7.5 billion worth of our shares, 291 million shares. We are on a path to achieve up to 10 billion in our repurchases. in January, we will announce our 2008 buyback program as it has been customary.
John Boris (Bear Stearns): Could you comment on the sales reps or the detailed effort that you have behind the Exubera brand and how are you going to be reallocating that important resource going forward?
Jeff Kindler: We are going to redeploy the vast majority of the effected colleagues in commercial medical and R&D functions, and there will be no reductions in the US field force. We are going to redeploy people in those groups to support projects and products that have greater commercial potential. Manufacturing opportunities for redeployment are pure and they depend on the ultimate role for the impacted sites. We will be exploring alternatives for those sites and their employees and consultation with works councils and other appropriate bodies.
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