Pfizer, Inc. (PFE)

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Pfizer Inc. (PFE)

Q2 2009 Earnings Call

July 22, 2009 11:00 am ET


Chuck Triano - SVP of IR

Jeff Kindler - Chairman and CEO

Frank D'Amelio - CFO

Amy Schulman - SVP and General Counsel

Ian Read - SVP and President, Worldwide Pharmaceutical Operations

Martin Mackay - President, Global Research and Development


Catherine Arnold - Credit Suisse

David Reisinger - Morgan Stanley

Jami Rubin - Goldman Sachs

Tim Anderson - Sanford Bernstein

Tony Butler - Barclays Capital

John Boris - Citi

Seamus Fernandez - Leerink Swann



Ladies and gentlemen, welcome to the second quarter 2009 earnings call. Chuck Triano, you may now begin the call.

Chuck Triano

Thank you, operator, and good morning everyone. Thank you for joining us today to review our second quarter 2009 performance. I am here with Jeff Kindler, Frank D'Amelio, Ian Read, Martin Mackay, and Amy Schulman.

The financial charts that will be presented on this call can be viewed on our home page at in the Investor Presentations tab by clicking on the link, Quarterly Performance, Second Quarter 2009.

We know this is a busy day for many of you with other companies reporting, and we will keep our opening remarks brief and then move to Q&A. The call will last for 45 minutes, and we will end at 11.45.

Before we start, I would like to remind you that our discussions during this conference call will include forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements.

The factors that could cause actual results to differ are discussed in Pfizer's 2008 annual report on Form 10-K, and in our reports on Form 10-Q and Form 8-K. Also, the discussions during this conference call will include certain financial measures that were not prepared in accordance with generally accepted accounting principles.

Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in Pfizer's current report on Form 8-K, dated today, July 22, 2009. These reports are available on our website at in the Investors SEC Filing section.

With that, I will now turn the call over to Jeff Kindler. Jeff?

Jeff Kindler

Thanks Chuck. Good morning everyone and thanks for joining us today. I will start this morning with a brief overview of our second quarter results, then offer a few comments on the integration planning for the pending Wyeth acquisition, and conclude with a few short remarks on healthcare reform in the United States. Then, as always, I will turn it over to Frank for a more thorough review of the quarter.

First our results. On a constant currency basis, every one of our Pharmaceutical units, as well as our Animal Health business, generated revenue growth during the quarter, with the exception of the Established Products Unit.

In previous calls, we have explained that since the Established Products Unit manages a portfolio of products that generally have lost patent protection or marketing exclusivity, it is expected to experience declining revenues at this stage of its lifecycle.

As you have heard from David Simmons, the President of that business, our plan is to recapture value for these products and ultimately stabilize and then grow revenue for the business.

It is important to note that in this quarter, this unit again performed inline with our expectations, as did all of our business units. Our solid second quarter performance comes despite the effects of a challenging global economy, and the highly competitive conditions we face in most of our markets.

Despite the various challenges, our colleagues remain intensely focused on meeting our commitments to our shareholders. As a result, we remain on track to meet our financial goals for 2009.

In fact, today we are increasing our 2009 guidance for reported and adjusted diluted earnings per share, as well as raising the lower end of the range on our 2009 revenue guidance.

As you saw in our release, we posted revenue of $11 billion in the second quarter. This represents a 9% decrease compared to the second quarter of last year. Revenues were flat on a constant currency basis.

Operationally, many of our key products performed well, including Lyrica, Geodon, Sutent and Revatio, as well as Lipitor, which performed well internationally despite intense generic competition.

As for the bottom line, we are building on the achievements of the last two years by continuing to reduce our cost base and improve our productivity. Overall, operational improvements decreased our adjusted total costs by about $410 million in the second quarter.

We plan to reinvest a portion of these savings throughout the rest of the year, including increased investment in our emerging market and Established Products units, where we have identified important high potential growth opportunities.

For example, we plan on increasing our investment in China to continue to grow our field force and enhance our support for key product opportunities there, including Lipitor, Champix and Celebrex. And following recent changes in the Chantix labeling here in the United States, we also plan to invest in increased communications with smokers and physicians about this important medicine.

In addition, we intend to further support our late-stage development portfolio. This quarter, we presented positive Phase II data on our JAK-3 inhibitor for rheumatoid arthritis, as well as positive Phase I data on our oral ALK inhibitor for patients with non-small cell lung cancer.

Our pipeline now includes more than 100 projects, and we remain on track to meet the R&D commitments we made to our shareholders last year. All of this demonstrates that our colleagues are focused on delivering on our commitments, even as Pfizer continues to change to meet the demands of an evolving global healthcare marketplace.

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