Pfizer, Inc. (PFE)

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Pfizer Inc. (PFE)

Q3 2012 Earnings Call

November 1, 2012 10:00 AM ET


Chuck Triano – SVP, IR

Ian Read – Chairman, President and CEO

Frank D’Amelio – EVP and CFO

Geno Germano – President and General Manager, Specialty Care

Mikael Dolsten – President, Worldwide Research and Development

Olivier Brandicourt – President and General Manager, Emerging Markets and Established Products

John Young – President and General Manager, Primary Care


Jami Rubin – Goldman Sachs

Tim Anderson – Sanford Bernstein

Mark Schoenebaum – ISI

Tony Butler – Barclays Capital

David Risinger – Morgan Stanley

Chris Schott – JP Morgan

Olivier Brandicourt

Steve Scala – Cowen & Company

Seamus Fernandez – Leerink Swann

Jeff Holford – Jefferies

Alex Arphe – BMO

Damian Canover – Morningstar

Mark Goodman – UBS



Good day, everyone, and welcome to Pfizer’s Third Quarter 2012 Earnings Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to Mr. Chuck Triano, Senior Vice President of Investor Relations. Please go ahead, Sir.

Chuck Triano

Good morning, everyone, and thank you for joining us today to review Pfizer’s third quarter 2012 performance. Today I’m joined by our Chairman and CEO, Ian Read; Frank D’Amelio, our CFO; Olivier Brandicourt, President and General Manager of Emerging Markets and Establish Products; Mikael Dolsten, President of Worldwide Research and Development, who is joining us remotely due to the storm situation; Geno Germano, President and General Manager of Specialty Care and Oncology; Amy Schulman, General Counsel, President and General Manager of Pfizer Nutrition; and John Young, President and General Manager of Primary Care.

The slides that will be presented on this call can be viewed at by clicking on the link for Pfizer quarterly corporate performance, third quarter 2012 located in the Investor Presentations section in the lower right-hand corner of this page. Before we start, I’d like to remind you that our discussions during this conference call will include forward-looking statements and that actual results could differ materially from those projected in forward-looking statements. The factors that could cause actual results to differ are discussed in Pfizer’s 2011 annual report on Form 10-K and in our reports on Forms 10-Q and 8K.

Discussion during this call will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in Pfizer’s current report on Form 8K dated today, November 1, 2011. In addition, we will offer some brief comments regarding our preparation and target timeline for the potential IPO of the minority stake in our Animal Health business, Zoetis, and as I’m sure you’ll understand we’re not going to be able to respond to questions on that subject in light of the quiet period imposed by securities laws.

With that, I’ll turn the call over to Ian Read.

Ian Read

Thank you, Chuck. During my remarks this morning I will briefly discuss the quarter and touch on some noteworthy events that happened in the last weeks. Overall our performance remains in line with our full year guidance. As we’ve discussed over the course of the year, our financial performance in the near-term will continue to be impacted by the loss of exclusivity, notably Lipitor in all major developed countries. Year-to-date we have absorbed approximately $5.5 billion in LOEs. I would note the most significant impact on revenues from LOEs will be in 2012 and this impact will decline significantly in subsequent years.

To mitigate the impact to our earnings per share we are producing growth from key lines, patented products including Lyrica and Celebrex globally and Viagra in the U.S. We are seeing growth in emerging markets most notably in China, Mexico and Russia. On a year-to-date basis our emerging market business has delivered solid performance with 10% growth on an operational basis.

We have been effectively managing our cost structure and using the strength of the balance sheet. For example, while revenue for the quarter declined 12% on an operational basis, our adjusted cost of sales FIA expenses and R&D expenses in total decreased operationally by 8%. And if you exclude the $250 million payment of AstraZeneca for the exclusive worldwide rights to the over the counter Nexium they would’ve declined 11% operationally bringing costs down in line with the revenue decline we saw this quarter.

We continue to execute our share repurchase program. During the quarter we repurchased $1.8 billion of common stock and our year-to-date repurchases are almost $6 billion. The board has authorized an additional $10 billion in share repurchase to be utilized over time upon completion of the sale of nutritionals to Nestlé which we now anticipate in the next few months. Our potential IPO for animal health remains on track and depending on market conditions, we continue to expect the IPO to happen during the first half of 2013. As for our regular practice, I expect the board to set the dividend rate for 2013 at its meeting in December.

Turning now to some recent noteworthy events. I remain confident that the quality of the assets and the progress I see in our pipeline. We have a robust set of potential high-value assets across our key therapeutic areas. They include some in early and mid stages for diabetes pain and cardiovascular diseases. Vaccines for mening B at adolescence and Staph aureus. Late stage in coli compounds and recent advances for key pipeline assets.

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