Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Note 1. Basis of Presentation and Significant Accounting Policies
A. Basis of Presentation
The consolidated financial statements include the accounts of our parent company and all subsidiaries and are prepared in accordance with U.S. GAAP. The decision of whether or not to consolidate an entity for financial reporting purposes requires consideration of majority voting interests, as well as effective economic or other control over the entity. Typically, we do not seek control by means other than voting interests. For subsidiaries operating outside the U.S., the financial information is included as of and for the year ended November 30 for each year presented. Pfizer's fiscal year-end for U.S. subsidiaries is as of and for the year ended December 31 for each year presented. Substantially all unremitted earnings of international subsidiaries are free of legal and contractual restrictions. All significant transactions among our subsidiaries have been eliminated.
On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan. Prior to the separation of the Upjohn Business, beginning in 2020, the Upjohn Business, Meridian, which is the manufacturer of EpiPen and other auto-injector products, and a pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan (the Mylan-Japan collaboration) were managed as part of our former Upjohn operating segment. Revenues and expenses associated with Meridian and the Mylan-Japan collaboration were included in the Upjohn operating segment results along with the results of operations of the Upjohn Business in Pfizer’s historical consolidated financial statements. Meridian, which remains with Pfizer, supplies EpiPen Auto-Injectors to Viatris under a supply agreement expiring December 31, 2024, with an option for Viatris to extend for an additional one-year term. On December 21, 2020, which falls in Pfizer’s international 2021 fiscal year, Pfizer and Viatris completed the termination, under the previously disclosed agreement dated November 13, 2020, of the Mylan-Japan collaboration and we transferred related inventories and operations that were part of the Mylan-Japan collaboration to Viatris. Beginning in the fourth quarter of 2020, the financial results of the Upjohn Business and the Mylan-Japan collaboration are reflected as discontinued operations for all periods presented. The financial results of Meridian are now included in our Hospital therapeutic area for all periods presented. Upon completion of the spin-off of the Upjohn Business on November 16, 2020, the Upjohn assets and liabilities were derecognized from our consolidated balance sheet and are reflected in Retained Earnings–Distribution of Upjohn Business in the consolidated statement of equity. The assets and liabilities associated with the Upjohn Business and the Mylan-Japan collaboration are classified as assets and liabilities of discontinued operations. Certain prior year amounts have been reclassified to conform with the current year presentation. In addition, other acquisitions and business development activities completed in 2020, 2019 and 2018, including the acquisitions of Array and Therachon, and the contribution of our Consumer Healthcare business to the Consumer Healthcare JV, impacted financial results in the periods presented. See Note 2.
Prior to the separation of the Upjohn Business, we managed our commercial operations through three distinct business segments: (i) our innovative science-based biopharmaceutical products business (Biopharma); (ii) our global, primarily off-patent branded and generics business (Upjohn); and (iii) through July 31, 2019, Pfizer’s consumer healthcare business. With the formation of the Consumer Healthcare JV in 2019 and the completion of the spin-off of our Upjohn Business in the fourth quarter of 2020, Pfizer has transformed into a more focused, global leader in science-based innovative medicines and vaccines. We now operate as a single operating segment engaged in the discovery, development, manufacturing, marketing, sales and distribution of biopharmaceutical products worldwide. Regional commercial organizations market, distribute and sell our products. Our commercial organization is supported by global platform functions that are responsible for the research, development, manufacturing and supply of our products. The business is also supported by global corporate enabling functions. Our determination that we operate as a single segment is consistent with the financial information regularly reviewed by the chief operating decision maker for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting for future periods. Our chief operating decision maker allocates resources and assesses financial performance on a consolidated basis. Prior-period information has been restated to reflect our current organizational structure following the separation of the Upjohn Business. For information about product and geographic revenues, see Note 17.
Certain amounts in the consolidated financial statements and associated notes may not add due to rounding. All percentages have been calculated using unrounded amounts.
B. New Accounting Standards Adopted in 2020
On January 1, 2020, we adopted the following accounting standards:
Credit Losses on Financial Instruments––We adopted a new accounting standard for credit losses on financial instruments, which replaces the probable initial recognition threshold for incurred loss estimates under prior guidance with a methodology that reflects expected credit loss estimates. The standard generally impacts financial assets that have a contractual right to receive cash and are not accounted for at fair value through net income, such as accounts receivable and held-to-maturity debt securities. The new guidance requires us to identify, analyze, document and support new methodologies for quantifying expected credit loss estimates for certain financial instruments, using information such as historical experience, current economic conditions and information, and the use of reasonable and supportable forecasted information. The standard also amends existing impairment guidance for available-for-sale debt securities to incorporate a credit loss allowance and allows for reversals of credit impairments in the event the issuer’s credit improves.
We adopted the new accounting standard utilizing the modified retrospective method and, therefore, no adjustments were made to prior period financial statements. The cumulative effect of adopting the standard as an adjustment to the opening balance of Retained earnings was not material. The adoption of this standard did not have a material impact on our consolidated statement of income or consolidated statement of cash flows for the year ended December 31, 2020, nor on our consolidated balance sheet as of December 31, 2020. For additional information, see Note 1G.
Goodwill Impairment Testing––We prospectively adopted the new standard, which eliminates the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. Under the new guidance, the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount
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Pfizer Inc.
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2020 Form 10-K
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57
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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
of the reporting unit exceeds its fair value. There was no impact to our consolidated financial statements from the adoption of this new standard.
Implementation Costs in a Cloud Computing Arrangement––We prospectively adopted the new standard related to customers’ accounting for implementation costs incurred in a cloud computing arrangement that is considered a service contract. The new guidance aligns the requirements for capitalizing implementation costs in such arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The adoption of this guidance did not have a material impact on our consolidated financial statements.
Collaboration Agreements––We prospectively adopted the new standard, which provides guidance clarifying the interaction between the accounting for collaborative arrangements and revenue from contracts with customers. There was no impact to our consolidated financial statements from the adoption of this new standard.
C. Estimates and Assumptions
In preparing these financial statements, we use certain estimates and assumptions that affect reported amounts and disclosures. These estimates and assumptions can impact all elements of our financial statements. For example, in the consolidated statements of income, estimates are used when accounting for deductions from revenues, determining the cost of inventory that is sold, allocating cost in the form of depreciation and amortization, and estimating restructuring charges and the impact of contingencies, as well as determining provisions for taxes on income. On the consolidated balance sheets, estimates are used in determining the valuation and recoverability of assets, and in determining the reported amounts of liabilities, all of which also impact the consolidated statements of income. Certain estimates of fair value and amounts recorded in connection with acquisitions, revenue deductions, impairment reviews, restructuring-associated charges, investments and financial instruments, valuation allowances, pension and postretirement benefit plans, contingencies, share-based compensation, and other calculations can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions.
Our estimates are often based on complex judgments and assumptions that we believe to be reasonable, but that can be inherently uncertain and unpredictable. If our estimates and assumptions are not representative of actual outcomes, our results could be materially impacted. As future events and their effects cannot be determined with precision, our estimates and assumptions may prove to be incomplete or inaccurate, or unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. We are subject to risks and uncertainties that may cause actual results to differ from estimated amounts, such as changes in the healthcare environment, competition, litigation, legislation and regulations. We regularly evaluate our estimates and assumptions using historical experience and expectations about the future. We adjust our estimates and assumptions when facts and circumstances indicate the need for change.
D. Acquisitions
Our consolidated financial statements include the operations of acquired businesses after the completion of the acquisitions. We account for acquired businesses using the acquisition method of accounting, which requires, among other things, that most assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date and that the fair value of acquired IPR&D be recorded on the balance sheet. Transaction costs are expensed as incurred. Any excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill. When we acquire net assets that do not constitute a business, as defined in U.S. GAAP, no goodwill is recognized and acquired IPR&D is expensed.
Contingent consideration in a business combination is included as part of the acquisition cost and is recognized at fair value as of the acquisition date. Fair value is generally estimated by using a probability-weighted discounted cash flow approach. See Note 16D. Any liability resulting from contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. These changes in fair value are recognized in earnings in Other (income)/deductions––net.
E. Fair Value
We measure certain assets and liabilities at fair value, either upon initial recognition or for subsequent accounting or reporting. We estimate fair value using an exit price approach, which requires, among other things, that we determine the price that would be received to sell an asset or paid to transfer a liability in an orderly market. The determination of an exit price is considered from the perspective of market participants, considering the highest and best use of non-financial assets and, for liabilities, assuming that the risk of non-performance will be the same before and after the transfer.
When estimating fair value, depending on the nature and complexity of the asset or liability, we may use one or all of the following techniques:
•Income approach, which is based on the present value of a future stream of net cash flows.
•Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.
•Cost approach, which is based on the cost to acquire or construct comparable assets, less an allowance for functional and/or economic obsolescence.
Our fair value methodologies depend on the following types of inputs:
•Quoted prices for identical assets or liabilities in active markets (Level 1 inputs).
•Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (Level 2 inputs).
•Unobservable inputs that reflect estimates and assumptions (Level 3 inputs).
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Pfizer Inc.
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2020 Form 10-K
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58
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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
The following inputs and valuation techniques are used to estimate the fair value of our financial assets and liabilities:
•Available-for-sale debt securities—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data and credit-adjusted yield curves.
•Equity securities with readily determinable fair values—quoted market prices and observable NAV prices.
•Derivative assets and liabilities—third-party matrix-pricing model that uses inputs derived from or corroborated by observable market data. Where applicable, these models use market-based observable inputs, including interest rate yield curves to discount future cash flow amounts, and forward and spot prices for currencies. The credit risk impact to our derivative financial instruments was not significant.
•Money market funds—observable NAV prices.
We periodically review the methodologies, inputs and outputs of third-party pricing services for reasonableness. Our procedures can include, for example, referencing other third-party pricing models, monitoring key observable inputs (like benchmark interest rates) and selectively performing test-comparisons of values with actual sales of financial instruments.
F. Foreign Currency Translation
For most of our international operations, local currencies have been determined to be the functional currencies. We translate functional currency assets and liabilities to their U.S. dollar equivalents at exchange rates in effect as of the balance sheet date and income and expense amounts at average exchange rates for the period. The U.S. dollar effects that arise from changing translation rates are recorded in Other comprehensive income/(loss). The effects of converting non-functional currency monetary assets and liabilities into the functional currency are recorded in Other (income)/deductions––net. For operations in highly inflationary economies, we translate monetary items at rates in effect as of the balance sheet date, with translation adjustments recorded in Other (income)/deductions––net, and we translate non-monetary items at historical rates.
G. Revenues and Trade Accounts Receivable
Revenue Recognition––We record revenues from product sales when there is a transfer of control of the product from us to the customer. We determine transfer of control based on when the product is shipped or delivered and title passes to the customer.
Our Sales Contracts––Sales on credit are typically under short-term contracts. Collections are based on market payment cycles common in various markets, with shorter cycles in the U.S. Sales are adjusted for sales allowances, chargebacks, rebates and sales returns and cash discounts. Sales returns occur due to LOE, product recalls or a changing competitive environment.
Deductions from Revenues––Our gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized. Such variable consideration represents chargebacks, rebates, sales allowances and sales returns. These deductions represent estimates of the related obligations and, as such, knowledge and judgment is required when estimating the impact of these revenue deductions on gross sales for a reporting period.
Provisions for pharmaceutical sales returns––Provisions are based on a calculation for each market that incorporates the following, as appropriate: local returns policies and practices; historical returns as a percentage of sales; an understanding of the reasons for past returns; estimated shelf life by product; an estimate of the amount of time between shipment and return or lag time; and any other factors that could impact the estimate of future returns, such as LOE, product recalls or a changing competitive environment. Generally, returned products are destroyed, and customers are refunded the sales price in the form of a credit.
We record sales incentives as a reduction of revenues at the time the related revenues are recorded or when the incentive is offered, whichever is later. We estimate the cost of our sales incentives based on our historical experience with similar incentives programs to predict customer behavior.
The following outlines our common sales arrangements:
•Customers––Our biopharmaceutical products are sold principally to wholesalers, but we also sell directly to retailers, hospitals, clinics, government agencies and pharmacies. In the U.S., we primarily sell our vaccines products directly to the federal government, CDC, wholesalers, individual provider offices, retail pharmacies, and integrated delivery networks. Outside the U.S., we primarily sell our vaccines to government and non-government institutions. Customers for our consumer healthcare business, which were part of the business that was combined with GSK’s Consumer Healthcare business included retailers and, to a lesser extent, wholesalers and distributors.
Biopharmaceutical products that ultimately are used by patients are generally covered under governmental programs, managed care programs and insurance programs, including those managed through PBMs, and are subject to sales allowances and/or rebates payable directly to those programs. Those sales allowances and rebates are generally negotiated, but government programs may have legislated amounts by type of product (e.g., patented or unpatented).
Specifically:
•In the U.S., we sell our products principally to distributors and hospitals. We also have contracts with managed care programs or PBMs and legislatively mandated contracts with the federal and state governments under which we provide rebates based on medicines utilized by the lives they cover. We record provisions for Medicare, Medicaid, and performance-based contract pharmaceutical rebates based upon our experience ratio of rebates paid and actual prescriptions written during prior periods. We apply the experience ratio to the respective period’s sales to determine the rebate accrual and related expense. This experience ratio is evaluated regularly to ensure that the historical trends are as current as practicable. We estimate discounts on branded prescription drug sales to Medicare Part D participants in the Medicare “coverage gap,” also known as the “doughnut hole,” based on the historical experience of beneficiary prescriptions and consideration of the utilization that is expected to result from the discount in the coverage gap. We evaluate this estimate regularly to ensure that the historical trends and future expectations are as current as practicable. For performance-based contract rebates, we also consider current contract terms, such as changes in formulary status and rebate rates.
•Outside the U.S., the majority of our pharmaceutical sales allowances are contractual or legislatively mandated and our estimates are based on actual invoiced sales within each period, which reduces the risk of variations in the estimation process. In certain European countries,
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Pfizer Inc.
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2020 Form 10-K
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59
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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
rebates are calculated on the government’s total unbudgeted pharmaceutical spending or on specific product sales thresholds and we apply an estimated allocation factor against our actual invoiced sales to project the expected level of reimbursement. We obtain third-party information that helps us to monitor the adequacy of these accruals.
•Provisions for pharmaceutical chargebacks (primarily reimbursements to U.S. wholesalers for honoring contracted prices to third parties) closely approximate actual amounts incurred, as we settle these deductions generally within two to five weeks of incurring the liability.
We recorded direct product sales and/or alliance revenues of more than $1 billion for each of seven products in 2020, for each of six products in 2019 and for each of seven products in 2018. In the aggregate, these direct products sales and/or alliance product revenues represent 53% of our revenues in 2020, 49% of our revenues in 2019 and 47% of our revenues in 2018. See Note 17B for additional information. The loss or expiration of intellectual property rights can have a significant adverse effect on our revenues as our contracts with customers will generally be at lower selling prices due to added competition and we generally provide for higher sales returns during the period in which individual markets begin to near the loss or expiration of intellectual property rights.
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Our accruals for Medicare, Medicaid and related state program and performance-based contract rebates, chargebacks, sales allowances and sales returns and cash discounts are as follows:
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As of December 31,
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(MILLIONS OF DOLLARS)
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2020
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2019
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Reserve against Trade accounts receivable, less allowance for doubtful accounts
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$
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861
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$
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823
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Other current liabilities:
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Accrued rebates
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3,017
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2,512
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Other accruals
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436
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379
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Other noncurrent liabilities
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399
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384
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Total accrued rebates and other sales-related accruals
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$
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4,712
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$
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4,098
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Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from Revenues.
Trade Accounts Receivable—Trade accounts receivable are stated at their net realizable value. The allowance for credit losses reflects our best estimate of expected credit losses of the receivables portfolio determined on the basis of historical experience, current information, and forecasts of future economic conditions. In developing the estimate for expected credit losses, trade accounts receivables are segmented into pools of assets depending on market (U.S. versus international), delinquency status, and customer type (high risk versus low risk and government versus non-government), and fixed reserve percentages are established for each pool of trade accounts receivables.
In determining the reserve percentages for each pool of trade accounts receivables, we considered our historical experience with certain customers and customer types, regulatory and legal environments, country and political risk, and other relevant current and future forecasted macroeconomic factors. These credit risk indicators are monitored on a quarterly basis to determine whether there have been any changes in the economic environment that would indicate the established reserve percentages should be adjusted, and are considered on a regional basis to reflect more geographic-specific metrics. Additionally, write-offs and recoveries of customer receivables are tracked against collections on a quarterly basis to determine whether the reserve percentages remain appropriate. When management becomes aware of certain customer-specific factors that impact credit risk, specific allowances for these known troubled accounts are recorded. Trade accounts receivable are written off after all reasonable means to collect the full amount (including litigation, where appropriate) have been exhausted.
During 2020, additions to the allowance for credit losses, write-offs and recoveries of customer receivables were not material to our consolidated financial statements.
H. Collaborative Arrangements
Payments to and from our collaboration partners are presented in our consolidated statements of income based on the nature of the arrangement (including its contractual terms), the nature of the payments and applicable accounting guidance. Under co-promotion agreements, we record the amounts received for our share of gross profits from our collaboration partners as alliance revenues, a component of Revenues, when our collaboration partners are the principal in the transaction and we receive a share of their net sales or profits. Alliance revenues are recorded as we perform co-promotion activities for the collaboration and the collaboration partners sell the products to their customers. The related expenses for selling and marketing these products including reimbursements to or from our collaboration partners for these costs are included in Selling, informational and administrative expenses. In collaborative arrangements where we manufacture a product for our collaboration partners, we record revenues when we transfer control of the product to our collaboration partners. In collaboration arrangements where we are the principal in the transaction, we record amounts paid to collaboration partners for their share of net sales or profits earned, and all royalty payments to collaboration partners as Cost of sales. Royalty payments received from collaboration partners are included in Other (income)/deductions—net.
Reimbursements to or from our collaboration partners for development costs are recorded in Research and development expenses. Upfront payments and pre-approval milestone payments due from us to our collaboration partners in development stage collaborations are recorded as Research and development expenses. Milestone payments due from us to our collaboration partners after regulatory approval has been attained for a medicine are recorded in Identifiable intangible assets—Developed technology rights. Upfront and pre-approval milestone payments earned from our collaboration partners by us are recognized in Other (income)/deductions—net over the development period for the products, when our performance obligations include providing R&D services to our collaboration partners. Upfront, pre-approval and post-approval milestone payments earned by us may be recognized in Other (income)/deductions—net immediately when earned or over other periods depending upon the nature of our performance obligations in the applicable collaboration. Where the milestone event is regulatory approval for a medicine, we generally recognize milestone payments due to us in the transaction price when regulatory approval in the applicable jurisdiction has been attained. We may recognize milestone payments due to us in the transaction price earlier than the milestone event in certain circumstances when recognition of the income would not be probable of a significant reversal.
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Pfizer Inc.
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2020 Form 10-K
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60
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
I. Cost of Sales and Inventories
Inventories are recorded at the lower of cost or net realizable value. The cost of finished goods, work in process and raw materials is determined using average actual cost. We regularly review our inventories for impairment and reserves are established when necessary.
J. Selling, Informational and Administrative Expenses
Selling, informational and administrative costs are expensed as incurred. Among other things, these expenses include the internal and external costs of marketing, advertising, shipping and handling, information technology and legal defense. Advertising expenses totaled approximately $1.8 billion in 2020, $2.4 billion in 2019 and $2.7 billion in 2018. Production costs are expensed as incurred and the costs of TV, radio, and other electronic media and publications are expensed when the related advertising occurs.
K. Research and Development Expenses
R&D costs are expensed as incurred. These expenses include the costs of our proprietary R&D efforts, as well as costs incurred in connection with certain licensing arrangements. Before a compound receives regulatory approval, we record upfront and milestone payments we make to third parties under licensing arrangements as expense. Upfront payments are recorded when incurred, and milestone payments are recorded when the specific milestone has been achieved. Once a compound receives regulatory approval, we record any milestone payments in Identifiable intangible assets, less accumulated amortization and, unless the asset is determined to have an indefinite life, we amortize the payments on a straight-line basis over the remaining agreement term or the expected product life cycle, whichever is shorter.
L. Amortization of Intangible Assets, Depreciation and Certain Long-Lived Assets
Long-lived assets include:
•Property, plant and equipment, less accumulated depreciation—These assets are recorded at cost, including any significant improvements after purchase, less accumulated depreciation. Property, plant and equipment assets, other than land and construction in progress, are depreciated on a straight-line basis over the estimated useful life of the individual assets. Depreciation begins when the asset is ready for its intended use. For tax purposes, accelerated depreciation methods are used as allowed by tax laws.
•Identifiable intangible assets, less accumulated amortization—These assets are recorded at fair value at acquisition. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Intangible assets with indefinite lives are not amortized until a useful life can be determined.
•Goodwill—Goodwill represents the excess of the consideration transferred for an acquired business over the assigned values of its net assets. Goodwill is not amortized.
Amortization of finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization of intangible assets that are for a single function and depreciation of property, plant and equipment are included in Cost of sales, Selling, informational and administrative expenses and/or Research and development expenses, as appropriate.
We review our long-lived assets for impairment indicators throughout the year. We perform impairment testing for indefinite-lived intangible assets and goodwill at least annually and for all other long-lived assets whenever impairment indicators are present. When necessary, we record impairments of long-lived assets for the amount by which the fair value is less than the carrying value of these assets.
Specifically:
•For finite-lived intangible assets, such as developed technology rights, and for other long-lived assets, such as property, plant and equipment, whenever impairment indicators are present, we calculate the undiscounted value of the projected cash flows for the asset, or asset group, and compare this estimated amount to the carrying amount. If the carrying amount is greater, we record an impairment loss for the excess of book value over fair value. In addition, in all cases of an impairment review, we reevaluate the remaining useful lives of the assets and modify them, as appropriate.
•For indefinite-lived intangible assets, such as Brands and IPR&D assets, when necessary, we determine the fair value of the asset and record an impairment loss, if any, for the excess of book value over fair value. In addition, in all cases of an impairment review other than for IPR&D assets, we re-evaluate whether continuing to characterize the asset as indefinite-lived is appropriate.
•For goodwill, when necessary, we determine the fair value of each reporting unit and record an impairment loss, if any, for the excess of the book value of the reporting unit over the implied fair value.
M. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
We may incur restructuring charges in connection with acquisitions when we implement plans to restructure and integrate the acquired operations or in connection with our cost-reduction and productivity initiatives.
•In connection with acquisition activity, we typically incur costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and
•In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges for site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems.
Included in Restructuring charges and certain acquisition-related costs are all restructuring charges, as well as certain other costs associated with acquiring and integrating an acquired business. If the restructuring action results in a change in the estimated useful life of an asset, that incremental impact is classified in Cost of sales, Selling, informational and administrative expenses and/or Research and development
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Pfizer Inc.
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2020 Form 10-K
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61
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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
expenses, as appropriate. Employee termination costs are generally recorded when the actions are probable and estimable and include accrued severance benefits, pension and postretirement benefits, many of which may be paid out during periods after termination. Transaction costs, such as banking, legal, accounting and other similar costs incurred in connection with a business acquisition are expensed as incurred.
Our business and platform functions may be impacted by these actions, including sales and marketing, manufacturing and R&D, as well as our corporate enabling functions (such as digital, global real estate operations, legal, finance, human resources, worldwide public affairs, compliance and worldwide procurement).
N. Cash Equivalents and Statement of Cash Flows
Cash equivalents include items almost as liquid as cash, such as certificates of deposit and time deposits with maturity periods of three months or less when purchased. If items meeting this definition are part of a larger investment pool, we classify them as Short-term investments.
Cash flows for financial instruments designated as fair value or cash flow hedges may be included in operating, investing or financing activities, depending on the classification of the items being hedged. Cash flows for financial instruments designated as net investment hedges are classified according to the nature of the hedge instrument. Cash flows for financial instruments that do not qualify for hedge accounting treatment are classified according to their purpose and accounting nature.
O. Investments and Derivative Financial Instruments
The classification of an investment depends on the nature of the investment, our intent and ability to hold the investment, and the degree to which we may exercise influence. Our investments are primarily comprised of the following:
•Public equity securities with readily determinable fair values, which are carried at fair value, with changes in fair value reported in Other (income)/deductions—net.
•Available-for-sale debt securities, which are carried at fair value, with changes in fair value reported in Other comprehensive income/(loss) until realized.
•Held-to-maturity debt securities, which are carried at amortized cost.
•Private equity securities without readily determinable fair values and where we have no significant influence are measured at cost minus any impairment and plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
•For equity investments in common stock or in-substance common stock where we have significant influence over the financial and operating policies of the investee, we use the equity-method of accounting. Under the equity-method, we record our share of the investee’s income and expenses in Other (income)/deductions—net. The excess of the cost of the investment over our share of the underlying equity in the net assets of the investee as of the acquisition date is allocated to the identifiable assets and liabilities of the investee, with any remaining excess amount allocated to goodwill. Such investments are initially recorded at cost, which is the fair value of consideration paid and typically does not include contingent consideration.
Realized gains or losses on sales of investments are determined by using the specific identification cost method.
We regularly evaluate all of our financial assets for impairment. For investments in debt and equity, when a decline in fair value, if any, is determined, an impairment charge is recorded and a new cost basis in the investment is established.
Derivative financial instruments are carried at fair value in various balance sheet categories (see Note 7A), with changes in fair value reported in Net income or, for derivative financial instruments in certain qualifying hedging relationships, in Other comprehensive income/(loss) (see Note 7E).
P. Tax Assets and Liabilities and Income Tax Contingencies
Tax Assets and Liabilities
Current tax assets primarily includes (i) tax effects for intercompany transfers of inventory within our combined group, which are recognized in the consolidated statements of income when the inventory is sold to a third party and (ii) income tax receivables that are expected to be recovered either via refunds from taxing authorities or reductions to future tax obligations.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates and laws. We provide a valuation allowance when we believe that our deferred tax assets are not recoverable based on an assessment of estimated future taxable income that incorporates ongoing, prudent and feasible tax-planning strategies, that would be implemented, if necessary, to realize the deferred tax assets. Amounts recorded for valuation allowances requires judgments about future income which can depend heavily on estimates and assumptions. All deferred tax assets and liabilities within the same tax jurisdiction are presented as a net amount in the noncurrent section of our consolidated balance sheet.
Other non-current tax assets primarily represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another tax jurisdiction. These potential benefits generally result from cooperative efforts among taxing authorities, as required by tax treaties to minimize double taxation, commonly referred to as the competent authority process. The recoverability of these assets, which we believe to be more likely than not, is dependent upon the actual payment of taxes in one tax jurisdiction and, in some cases, the successful petition for recovery in another tax jurisdiction.
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Pfizer Inc.
|
2020 Form 10-K
|
62
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Other taxes payable as of December 31, 2020 and 2019 include liabilities for uncertain tax positions and the noncurrent portion of the repatriation tax liability for which we elected payment over eight years through 2026. For additional information, see Note 5D for uncertain tax positions and Note 5A for the repatriation tax liability and other estimates and assumptions in connection with the TCJA.
Income Tax Contingencies
We account for income tax contingencies using a benefit recognition model. If we consider that a tax position is more likely than not to be sustained upon audit, based solely on the technical merits of the position, we recognize all or a portion of the benefit. We measure the benefit by determining the amount that is greater than 50% likely of being realized upon settlement, presuming that the tax position is examined by the taxing authority with full knowledge of all relevant information.
We regularly monitor our position and subsequently recognize the unrecognized tax benefit: (i) if there are changes in tax law, analogous case law or there is new information that sufficiently raise the likelihood of prevailing on the technical merits of the position to “more likely than not”; (ii) if the statute of limitations expires; or (iii) if there is a completion of an audit resulting in a favorable settlement of that tax year with the appropriate agency. Liabilities for uncertain tax positions are classified as current only when we expect to pay cash within the next 12 months. Interest and penalties, if any, are recorded in Provision/(benefit) for taxes on income and are classified on our consolidated balance sheet with the related tax liability.
Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution.
Q. Pension and Postretirement Benefit Plans
The majority of our employees worldwide are covered by defined benefit pension plans, defined contribution plans or both. In the U.S., we have both IRC-qualified and supplemental (non-qualified) defined benefit plans and defined contribution plans, as well as other postretirement benefit plans consisting primarily of medical insurance for retirees and their eligible dependents. We recognize the overfunded or underfunded status of each of our defined benefit plans as an asset or liability. The obligations are generally measured at the actuarial present value of all benefits attributable to employee service rendered, as provided by the applicable benefit formula. Our pension and other postretirement obligations may be determined using assumptions such as discount rate, expected annual rate of return on plan assets, expected employee turnover and participant mortality. For our pension plans, the obligation may also include assumptions as to future compensation levels. For our other postretirement benefit plans, the obligation may include assumptions as to the expected cost of providing medical insurance benefits, as well as the extent to which those costs are shared with the employee or others (such as governmental programs). Plan assets are measured at fair value. Net periodic pension and postretirement benefit costs other than the service costs are recognized in Other (income)/deductions—net.
R. Legal and Environmental Contingencies
We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business, such as patent litigation, product liability and other product-related litigation, commercial litigation, environmental claims and proceedings, government investigations and guarantees and indemnifications. We record accruals for these contingencies to the extent that we conclude that a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount within the range, we accrue that amount. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, we accrue the lowest amount in the range. We record anticipated recoveries under existing insurance contracts when recovery is assured.
S. Share-Based Payments
Our compensation programs can include share-based payments. Generally, grants under share-based payment programs are accounted for at fair value and these fair values are generally amortized on a straight-line basis over the vesting terms with the related costs recorded in Cost of sales, Selling, informational and administrative expenses and/or Research and development expenses, as appropriate.
Note 2. Acquisitions, Divestitures, Equity-Method Investments, Licensing Arrangements and Collaborative Arrangements
A. Acquisitions
Array
On July 30, 2019, we acquired Array, a commercial stage biopharmaceutical company focused on the discovery, development and commercialization of targeted small molecule medicines to treat cancer and other diseases of high unmet need, for $48 per share in cash. The total fair value of the consideration transferred was $11.2 billion ($10.9 billion, net of cash acquired). In addition, $157 million in payments to Array employees for the fair value of previously unvested stock options was recognized as post-closing compensation expense and recorded in Restructuring charges and certain acquisition-related costs (see Note 3). We financed the majority of the transaction with debt and the balance with existing cash.
Array’s portfolio includes Braftovi (encorafenib) and Mektovi (binimetinib), a broad pipeline of targeted cancer medicines in different stages of R&D, as well as a portfolio of out-licensed medicines, which may generate milestones and royalties over time.
The final allocation of the consideration transferred to the assets acquired and the liabilities assumed was completed in 2020. In connection with this acquisition, we recorded: (i) $6.3 billion in Identifiable intangible assets, consisting of $2.0 billion of Developed technology rights with
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Pfizer Inc.
|
2020 Form 10-K
|
63
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
a useful life of 16 years, $2.8 billion of IPR&D and $1.5 billion of Licensing agreements ($1.2 billion for technology in development––indefinite-lived licensing agreements and $360 million for developed technology––finite-lived licensing agreements with a useful life of 10 years), (ii) $6.1 billion of Goodwill, (iii) $1.1 billion of net deferred tax liabilities and (iv) $451 million of assumed long-term debt, which was paid in full in 2019.
In 2020, we recorded measurement period adjustments to the estimated fair values initially recorded in 2019, which resulted in a reduction in Identifiable intangible assets of approximately $900 million with a corresponding change to Goodwill and net deferred tax liabilities. The measurement period adjustments were recorded to better reflect market participant assumptions about facts and circumstances existing as of the acquisition date and did not have a material impact on our consolidated statement of income for the year ended December 31, 2020.
Therachon
On July 1, 2019, we acquired all the remaining shares of Therachon, a privately-held clinical-stage biotechnology company focused on rare diseases, with assets in development for the treatment of achondroplasia, a genetic condition and the most common form of short-limb dwarfism, for $340 million upfront, plus potential milestone payments of up to $470 million contingent on the achievement of key milestones in the development and commercialization of the lead asset. In 2018, we acquired approximately 3% of Therachon’s outstanding shares for
$5 million. We accounted for the transaction as an asset acquisition since the lead asset represented substantially all the fair value of the gross assets acquired. The total fair value of the consideration transferred for Therachon was $322 million, which consisted of $317 million of cash and our previous $5 million investment in Therachon. In connection with this asset acquisition, we recorded a charge of $337 million in Research and development expenses.
B. Divestitures
Upjohn Separation and Combination with Mylan
On November 16, 2020, we completed the spin-off and the combination of the Upjohn Business with Mylan (the Transactions) to form Viatris. The Transactions were structured as an all-stock, Reverse Morris Trust transaction. Specifically, (i) we contributed the Upjohn Business to a wholly owned subsidiary, which was renamed Viatris, so that the Upjohn Business was separated from the remainder of our business (the Separation), (ii) following the Separation, we distributed, on a pro rata basis, all of the shares of Viatris common stock held by Pfizer to Pfizer stockholders as of the November 13, 2020 record date, such that each Pfizer stockholder as of the record date received approximately 0.124079 shares of Viatris common stock per share of Pfizer common stock (the Distribution); and (iii) immediately after the Distribution, the Upjohn Business combined with Mylan in a series of transactions in which Mylan shareholders received one share of Viatris common stock for each Mylan ordinary share held by such shareholder, subject to any applicable withholding taxes (the Combination). Prior to the Distribution, Viatris made a cash payment to Pfizer equal to $12.0 billion as partial consideration for the contribution of the Upjohn Business to Viatris. As of the closing of the Combination, Pfizer stockholders owned approximately 57% of the outstanding shares of Viatris common stock, and Mylan shareholders owned approximately 43% of the outstanding shares of Viatris common stock, in each case on a fully diluted, as-converted and as-exercised basis. The Transactions are generally expected to be tax free to Pfizer and Pfizer stockholders for U.S. tax purposes. Beginning November 16, 2020, Viatris operates both the Upjohn Business and Mylan as an independent publicly traded company, which is traded under the symbol “VTRS” on the NASDAQ.
In connection with the Transactions, in June 2020, Upjohn Inc. and Upjohn Finance B.V. completed privately placed debt offerings of $7.45 billion and €3.60 billion aggregate principal amounts, respectively, (approximately $11.4 billion) of senior unsecured notes and entered into other financing arrangements, including a $600 million delayed draw term loan agreement and a revolving credit facility agreement for up to $4.0 billion. Proceeds from the debt offerings and other financing arrangements were used to fund the $12.0 billion cash distribution Viatris made to Pfizer prior to the Distribution. We used the cash distribution proceeds to pay down commercial paper borrowings and redeem the $1.15 billion aggregate principal amount outstanding of our 1.95% senior unsecured notes that were due in June 2021 and $342 million aggregate principal amount outstanding of our 5.80% senior unsecured notes that were due in August 2023, before the maturity date. Interest expense for the $11.4 billion in debt securities incurred during 2020 is included in Income from discontinued operations––net of tax. Following the Separation and Combination of the Upjohn Business with Mylan, we are no longer the obligor or guarantor of any Upjohn debt or Upjohn financing arrangements.
As a result of the separation of Upjohn, we incurred separation-related costs of $434 million in 2020 and $83 million in 2019, which are included in Income from discontinued operations––net of tax. These costs primarily relate to professional fees for regulatory filings and separation activities within finance, tax, legal and information system functions as well as investment banking fees.
In connection with the Transactions, Pfizer and Viatris entered into various agreements to effect the Separation and Combination to provide a framework for our relationship after the Combination, including a separation and distribution agreement, manufacturing and supply agreements (MSAs), transition service agreements (TSAs), a tax matters agreement, and an employee matters agreement, among others. Under the MSAs, Pfizer or Viatris, as the case may be, manufactures, labels, and packages products for the other party. The terms of the MSAs range in initial duration from 4 to 7 years post-Separation. The TSAs primarily involve Pfizer providing services to Viatris related to finance, information technology and human resource infrastructure and are generally expected to be for terms of no more than 3 years post-Separation. In addition, we are also party to various commercial agreements with Viatris. The amounts billed for net manufacturing supply and transition services provided under the above agreements as well as sales to and purchases from Viatris are not material to our results of continuing operations in 2020.
Included in our consolidated balance sheet as of December 31, 2020 are net amounts due from Viatris primarily related to various interim agency operating models and transitional services, partially offset by net amounts due to Viatris for unsettled intercompany balances as of the closing date of the spin-off, transaction-related indemnifications and a contractual cash payment pursuant to terms of the separation and distribution agreement, totaling approximately $401 million. The interim agency operating model primarily includes billings, collections and remittance of rebates that we are performing on a transitional basis on behalf of Viatris.
The operating results of the Upjohn Business are reported as Income from discontinued operations––net of tax through November 16, 2020, the date of the spin-off and combination with Mylan. In addition, as of December 31, 2019, the assets and liabilities associated with this business are classified as assets and liabilities of discontinued operations. Prior-period financial information has been restated, as appropriate.
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Pfizer Inc.
|
2020 Form 10-K
|
64
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
|
|
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Components of Income from discontinued operations––net of tax:
|
|
|
|
|
|
Year Ended December 31,(a)
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Revenues
|
|
|
|
$
|
7,314
|
|
|
$
|
10,578
|
|
|
$
|
12,822
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
|
1,899
|
|
|
1,976
|
|
|
2,261
|
|
|
Selling, informational and administrative expenses
|
|
|
|
1,665
|
|
|
1,599
|
|
|
1,842
|
|
|
Research and development expenses
|
|
|
|
212
|
|
|
255
|
|
|
246
|
|
|
Amortization of intangible assets
|
|
|
|
136
|
|
|
148
|
|
|
157
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
|
|
7
|
|
|
146
|
|
|
(14)
|
|
|
Other (income)/deductions––net
|
|
|
|
400
|
|
|
253
|
|
|
30
|
|
|
Pre-tax income from discontinued operations
|
|
|
|
2,995
|
|
|
6,201
|
|
|
8,300
|
|
|
Provision for taxes on income
|
|
|
|
364
|
|
|
766
|
|
|
973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations––net of tax
|
|
|
|
$
|
2,631
|
|
|
$
|
5,435
|
|
|
$
|
7,328
|
|
(a) Virtually all Income from discontinued operations––net of tax relates to the Upjohn Business and the Mylan-Japan collaboration in all periods presented.
|
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|
|
|
|
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|
|
|
Components of assets and liabilities of discontinued operations and other assets held for sale:
|
|
|
|
|
|
As of December 31,(a)
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
2020
|
|
2019
|
|
Cash and cash equivalents
|
|
|
|
$
|
—
|
|
|
$
|
184
|
|
|
Trade accounts receivable, less allowance for doubtful accounts
|
|
|
|
—
|
|
|
1,952
|
|
|
Inventories
|
|
|
|
86
|
|
|
1,215
|
|
|
Other current assets
|
|
|
|
—
|
|
|
852
|
|
|
Other assets held for sale
|
|
|
|
82
|
|
|
21
|
|
|
Current assets of discontinued operations and other assets held for sale
|
|
|
|
$
|
167
|
|
|
$
|
4,224
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
$
|
—
|
|
|
$
|
998
|
|
|
Identifiable intangible assets
|
|
|
|
—
|
|
|
1,434
|
|
|
Goodwill
|
|
|
|
—
|
|
|
10,451
|
|
|
Other noncurrent assets
|
|
|
|
—
|
|
|
544
|
|
|
Noncurrent assets of discontinued operations
|
|
|
|
$
|
—
|
|
|
$
|
13,427
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
|
|
$
|
—
|
|
|
$
|
334
|
|
|
Accrued compensation and related items
|
|
|
|
—
|
|
|
330
|
|
|
Other current liabilities
|
|
|
|
—
|
|
|
1,749
|
|
|
Current liabilities of discontinued operations
|
|
|
|
$
|
—
|
|
|
$
|
2,413
|
|
|
|
|
|
|
|
|
|
|
Pension and postretirement benefit obligations
|
|
|
|
$
|
—
|
|
|
$
|
545
|
|
|
Other noncurrent liabilities
|
|
|
|
—
|
|
|
403
|
|
|
Noncurrent liabilities of discontinued operations(b)
|
|
|
|
$
|
—
|
|
|
$
|
948
|
|
(a) Amounts relate to discontinued operations of the Upjohn Business and the Mylan-Japan collaboration, except for amounts in Other assets held for sale, which represent unrelated property, plant and equipment held for sale.
(b) Included in Other noncurrent liabilities.
As a result of the spin-off of the Upjohn Business, we distributed net assets of $1.9 billion as of November 16, 2020, which has been reflected as a reduction to Retained earnings. Of this amount, $412 million represents cash transferred to the Upjohn Business, with the remainder considered a non-cash activity in the consolidated statement of cash flows for the year ended December 31, 2020. The spin-off also resulted in a net increase to Accumulated other comprehensive loss of $71 million for the derecognition of net gains on foreign currency translation adjustments of $397 million and actuarial losses net of prior service credits associated with benefit plans of $326 million, which were reclassified to Retained earnings.
Contribution Agreement Between Pfizer and Allogene
In April 2018, Pfizer and Allogene announced that the two companies entered into a contribution agreement for Pfizer’s portfolio of assets related to allogeneic CAR T therapy, an investigational immune cell therapy approach to treating cancer. Under this agreement, we received an equity investment in Allogene and Allogene received our rights to pre-clinical and clinical CAR T assets, all of which were previously licensed to us from French cell therapy company, Cellectis, beginning in 2014 and French pharmaceutical company, Servier, beginning in 2015. Allogene assumed responsibility for all potential financial obligations to both Cellectis and Servier. In connection with the Allogene transaction, we recognized a non-cash $50 million pre-tax gain in Other (income)/deductions––net in the second quarter of 2018, representing the difference between the $127 million fair value of the equity investment received and the book value of assets transferred (including an allocation of goodwill) (see Note 4).
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Pfizer Inc.
|
2020 Form 10-K
|
65
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
As of December 31, 2020, we held a 15.7% equity stake in Allogene, and our investment in Allogene is being measured at fair value with changes in fair value recognized in net income.
Sale of Phase 2b Ready AMPA Receptor Potentiator for CIAS to Biogen
In April 2018, we sold our Phase 2b ready AMPA receptor potentiator for CIAS to Biogen. We received $75 million upfront which was recognized in Other (income)/deductions––net (see Note 4) and may receive up to $515 million in total development and commercialization milestones, as well as tiered royalties in the low-to-mid-teen percentages.
Divestiture of Neuroscience Assets
In September 2018, we and Bain Capital entered into a transaction to create a new biopharmaceutical company, Cerevel (formerly known as Cerevel Therapeutics, LLC), to continue development of a portfolio of clinical and preclinical stage neuroscience assets primarily targeting disorders of the central nervous system including Parkinson’s disease, epilepsy, Alzheimer’s disease, schizophrenia and addiction. In connection with this transaction, we out-licensed the portfolio to Cerevel in exchange for a 25% ownership stake in Cerevel’s parent company, Cerevel Therapeutics, Inc., and potential future regulatory and commercial milestone payments and royalties. In connection with the transaction, we recognized a non-cash $343 million pre-tax gain in Other (income)/deductions––net in the third quarter of 2018, representing the fair value of the equity investment received as the assets transferred had a book value of $0 (see Note 4). On October 27, 2020, Cerevel Therapeutics, Inc. completed a merger with ARYA Sciences Acquisition Corp II, a publicly-traded special purpose acquisition corporation, and a concurrent private investment in public equity “PIPE” transaction to form Cerevel Therapeutics Holdings, Inc. Our existing shares in Cerevel Therapeutics, Inc. converted into common shares of Cerevel Therapeutics Holdings, Inc. as part of the merger transaction, and we purchased an additional $12 million in common shares as part of the PIPE transaction. The common shares of Cerevel Therapeutics Holdings, Inc. trade publicly on the NASDAQ stock market (ticker symbol CERE). As of December 31, 2020, we continue to hold a 21.5% equity stake in Cerevel Therapeutics Holdings, Inc. for which we have elected the fair value option and which we measure at fair value with changes in fair value recognized in net income. In the fourth quarter of 2020, we remeasured our investment based on the market price of Cerevel Therapeutics Holdings, Inc. common shares as of December 31, 2020 less a discount for lack of marketability, and we recognized a gain of $20 million in Other income/(deductions)––net.
C. Equity-Method Investments
Formation of Consumer Healthcare JV
On July 31, 2019, we completed a transaction in which we and GSK combined our respective consumer healthcare businesses into a new JV that operates globally under the GSK Consumer Healthcare name. In exchange, we received a 32% equity stake in the new company and GSK owns the remaining 68%. Upon closing, we deconsolidated our Consumer Healthcare business and recognized a pre-tax gain of $8.1 billion ($5.4 billion, net of tax) in the third quarter of 2019 in (Gain) on completion of Consumer Healthcare JV transaction for the difference in the fair value of our 32% equity stake and the carrying value of our Consumer Healthcare business. Our financial results and our Consumer Healthcare segment’s operating results for 2019 reflect seven months of Consumer Healthcare segment domestic operations and eight months of Consumer Healthcare segment international operations. The financial results for 2020 do not reflect any contribution from the Consumer Healthcare business.
In valuing our investment in the Consumer Healthcare JV, we used discounted cash flow techniques. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which include the expected impact of competitive, legal or regulatory forces on the products; the long-term growth rate, which seeks to project the sustainable growth rate over the long term; the discount rate, which seeks to reflect our best estimate of the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
We are accounting for our interest in the Consumer Healthcare JV as an equity-method investment. The carrying value of our investment in the Consumer Healthcare JV is $16.7 billion as of December 31, 2020 and $17.0 billion as of December 31, 2019 and is reported as a private equity investment in Equity-method investments as of December 31, 2020 and 2019. The Consumer Healthcare JV is a foreign investee whose reporting currency is the U.K. pound, and therefore we translate its financial statements into U.S. dollars and recognize the impact of foreign currency translation adjustments in the carrying value of our investment and in other comprehensive income. The decrease in the value of our investment from December 31, 2019 to December 31, 2020 is primarily due to dividends of $932 million, which were received from the Consumer Healthcare JV in June, September and November 2020, largely offset by our share of the JV’s earnings of $417 million and $345 million in pre-tax foreign currency translation adjustments (see Note 6). We record our share of earnings from the Consumer Healthcare JV on a quarterly basis on a one-quarter lag in Other (income)/deductions––net commencing from August 1, 2019. Our total share of the JV’s earnings generated in the fourth quarter of 2019 and the first nine months of 2020, which we recorded in our operating results in 2020, was $417 million. Our total share of two months of the JV’s earnings generated in the third quarter of 2019, which we recorded in our operating results in the fourth quarter of 2019, was $47 million. As of the July 31, 2019 closing date, we estimated that the fair value of our investment in the Consumer Healthcare JV was $15.7 billion and that 32% of the underlying equity in the carrying value of the net assets of the Consumer Healthcare JV was $11.2 billion, resulting in an initial basis difference of approximately $4.5 billion. In the fourth quarter of 2019, we preliminarily completed the allocation of the basis difference, which resulted from the excess of the initial fair value of our investment over the underlying equity in the carrying value of the net assets of the JV, primarily to inventory, definite-lived intangible assets, indefinite-lived intangible assets, related deferred tax liabilities and equity method goodwill within the investment account. During the fourth quarter of 2019, the Consumer Healthcare JV revised the initial carrying value of the net assets of the JV and our 32% share of the underlying equity in the carrying value of the net assets of the Consumer Healthcare JV was reduced to $11.0 billion and our initial basis difference was increased to $4.8 billion. The adjustment was allocated to equity method goodwill within the investment account. We began recording the amortization of basis differences allocated to inventory, definite-lived intangible assets and related deferred tax liabilities in Other (income)/deductions––net commencing August 1, 2019. During the third and fourth quarters of 2020, we recognized write-offs of a portion of our basis differences allocated to indefinite-lived and definite-lived intangible assets and related deferred tax liabilities for the divestiture of certain brands by the Consumer Healthcare JV during its second quarter of 2020. The total amortization and write-off of these basis differences for the fourth quarter of 2019 and the first nine months of 2020, which was included in Other (income)/deductions—
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Pfizer Inc.
|
2020 Form 10-K
|
66
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
net in 2020, was $119 million of expense. The amortization of basis differences for two months of the third quarter of 2019 totaling approximately $31 million is included in our operating results in the fourth quarter of 2019. See Note 4. Amortization of basis differences on inventory and related deferred tax liabilities was completely recognized by the second quarter of 2020. Basis differences on definite-lived intangible assets and related deferred tax liabilities are being amortized over the lives of the underlying assets, which range from 8 to 20 years.
While we have received our full 32% interest in the Consumer Healthcare JV as of the July 31, 2019 closing and transferred control of our Consumer Healthcare business to the Consumer Healthcare JV, the contribution of the business was not completed in certain non-U.S. jurisdictions due to temporary regulatory or operational constraints. In these jurisdictions, we have continued to operate the business for the net economic benefit of the Consumer Healthcare JV, and we are indemnified against risks associated with such operations in the interim period, subject to our obligations under the definitive transaction agreements. We expect the contribution in these jurisdictions to be completed by the second half of 2021. As such, we have treated these jurisdictions as sold for accounting purposes.
In connection with the contribution, we entered into certain transitional agreements designed to facilitate the orderly transition of the business to the Consumer Healthcare JV. These agreements primarily relate to administrative services, which are generally to be provided for a period of up to 24 months after closing. We will also manufacture and supply certain consumer products for the Consumer Healthcare JV and the Consumer Healthcare JV will manufacture and supply certain retained Pfizer products for us after closing, generally for a term of up to six years. These agreements are not material to Pfizer.
As a part of Pfizer, pre-tax income on a management basis for the Consumer Healthcare business was $654 million through July 31, 2019 and $977 million in 2018.
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|
|
|
|
|
|
|
|
|
|
Summarized financial information for our equity method investee, the Consumer Healthcare JV, as of and for the twelve months ending September 30, 2020, the most recent period available, and as of and for the two months ending September 30, 2019 is as follows:
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
September 30, 2020
|
|
September 30, 2019
|
|
Current assets
|
|
|
|
$
|
6,614
|
|
|
$
|
7,505
|
|
|
Noncurrent assets
|
|
|
|
38,361
|
|
|
38,575
|
|
|
Total assets
|
|
|
|
$
|
44,975
|
|
|
$
|
46,081
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
$
|
5,246
|
|
|
$
|
5,241
|
|
|
Noncurrent liabilities
|
|
|
|
5,330
|
|
|
5,536
|
|
|
Total liabilities
|
|
|
|
$
|
10,576
|
|
|
$
|
10,776
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to shareholders
|
|
|
|
$
|
34,154
|
|
|
$
|
35,199
|
|
|
Equity attributable to noncontrolling interests
|
|
|
|
245
|
|
|
105
|
|
|
Total net equity
|
|
|
|
$
|
34,400
|
|
|
$
|
35,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ending
|
|
For the Two Months
Ending
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
September 30, 2020
|
|
September 30, 2019
|
|
Net sales
|
|
|
|
$
|
12,720
|
|
|
$
|
2,161
|
|
|
Cost of sales
|
|
|
|
(5,439)
|
|
|
(803)
|
|
|
Gross profit
|
|
|
|
$
|
7,281
|
|
|
$
|
1,358
|
|
|
Income from continuing operations
|
|
|
|
1,350
|
|
|
152
|
|
|
Net income
|
|
|
|
1,350
|
|
|
152
|
|
|
Income attributable to shareholders
|
|
|
|
1,307
|
|
|
148
|
|
Investment in ViiV
In 2009, we and GSK created ViiV, which is focused on research, development and commercialization of human immunodeficiency virus (HIV) medicines. We own approximately 11.7% of ViiV, and prior to 2016 we accounted for our investment under the equity method due to the significant influence that we have over the operations of ViiV through our board representation and minority veto rights. We suspended application of the equity method to our investment in ViiV in 2016 when the carrying value of our investment was reduced to zero due to the recognition of cumulative equity method losses and dividends. Since 2016, we have recognized dividends from ViiV as income in Other (income)/deductions––net when earned, including dividends of $278 million in 2020, $220 million in 2019 and $253 million in 2018 (see Note 4).
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
67
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarized financial information for our equity method investee, ViiV, as of December 31, 2020 and 2019 and for the years ending December 31, 2020, 2019, and 2018 is as follows:
|
|
|
|
|
|
As of December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
2020
|
|
2019
|
|
Current assets
|
|
|
|
$
|
3,283
|
|
|
$
|
3,839
|
|
|
Noncurrent assets
|
|
|
|
3,381
|
|
|
3,437
|
|
|
Total assets
|
|
|
|
$
|
6,664
|
|
|
$
|
7,276
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
$
|
3,028
|
|
|
$
|
2,904
|
|
|
Noncurrent liabilities
|
|
|
|
6,370
|
|
|
5,860
|
|
|
Total liabilities
|
|
|
|
$
|
9,398
|
|
|
$
|
8,765
|
|
|
|
|
|
|
|
|
|
|
Total net equity/(deficit) attributable to shareholders
|
|
|
|
$
|
(2,734)
|
|
|
$
|
(1,489)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Net sales
|
|
|
|
$
|
6,224
|
|
|
$
|
6,139
|
|
|
$
|
6,219
|
|
|
Cost of sales
|
|
|
|
(574)
|
|
|
(516)
|
|
|
(462)
|
|
|
Gross profit
|
|
|
|
$
|
5,650
|
|
|
$
|
5,623
|
|
|
$
|
5,757
|
|
|
Income from continuing operations
|
|
|
|
2,012
|
|
|
3,398
|
|
|
2,154
|
|
|
Net income
|
|
|
|
2,012
|
|
|
3,398
|
|
|
2,154
|
|
|
Income attributable to shareholders
|
|
|
|
2,012
|
|
|
3,398
|
|
|
2,154
|
|
D. Licensing Arrangements
Agreement with Valneva
2On April 30, 2020, we signed an agreement to co-develop and commercialize Valneva’s Lyme disease vaccine candidate, VLA15, which covers six serotypes that are prevalent in North America and Europe. Valneva and Pfizer will work closely together throughout the development of VLA15. Valneva is eligible to receive a total of up to $308 million in cash payments from us consisting of a $130 million upfront payment, which was paid and recorded in Research and development expenses in our second quarter of 2020, as well as $35 million in development milestones and $143 million in early commercialization milestones. Under the terms of the agreement, Valneva will fund 30% of all development costs through completion of the development program, and in return we will pay Valneva tiered royalties. We will lead late-stage development and have sole control over commercialization.
Agreement with BioNTech
In August 2018, a multi-year R&D arrangement went into effect between BioNTech and Pfizer to develop mRNA-based vaccines for prevention of influenza (flu). In relation to this R&D arrangement, in September 2018, we made an upfront payment of $50 million to BioNTech, which was recorded in Research and development expenses, and BioNTech became eligible to receive up to $325 million in development and sales-based milestones and royalty payments associated with worldwide sales. As part of the transaction, we also purchased 169,670 newly-issued ordinary shares of BioNTech for $50 million in the third quarter of 2018.
Akcea
On October 4, 2019, we entered into a worldwide exclusive licensing agreement for AKCEA-ANGPTL3-LRx, an investigational antisense therapy being developed to treat patients with certain cardiovascular and metabolic diseases, with Akcea, a wholly-owned subsidiary of Ionis. The transaction closed in November 2019 and we made an upfront payment of $250 million to Akcea, which was recorded in Research and development expenses in our fourth quarter of 2019. We may be required to make development, regulatory and sales milestone payments of up to $1.3 billion and pay tiered, double-digit royalties on annual worldwide net sales upon marketing approval of AKCEA-ANGPTL3-LRx.
E. Collaborative Arrangements
In the normal course of business, we enter into collaborative arrangements with respect to in-line medicines, as well as medicines in development that require completion of research and regulatory approval. Collaborative arrangements are contractual agreements with third parties that involve a joint operating activity, typically a research and/or commercialization effort, where both we and our partner are active participants in the activity and are exposed to the significant risks and rewards of the activity. Our rights and obligations under our collaborative arrangements vary. For example, we have agreements to co-promote pharmaceutical products discovered by us or other companies, and we have agreements where we partner to co-develop and/or participate together in commercializing, marketing, promoting, manufacturing and/or distributing a drug product.
Agreement with Myovant
On December 26, 2020, we entered into a collaboration to jointly develop and commercialize Orgovyx™ (relugolix) in advanced prostate cancer and, if approved, relugolix combination tablet (relugolix 40 mg, estradiol 1.0 mg, and norethindrone acetate 0.5 mg) in women’s health in the U.S. and Canada. We will also receive an exclusive option to commercialize relugolix in oncology outside the U.S. and Canada, excluding certain Asian countries. Under the terms of the agreement, the companies will equally share profits and allowable expenses for Orgovyx and the relugolix combination tablet in the U.S. and Canada, with Myovant bearing our share of allowable expenses up to a maximum
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
68
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
of $100 million in 2021 and up to a maximum of $50 million in 2022. We will record our share of gross profits as Alliance revenue. Myovant will remain responsible for regulatory interactions and drug supply and continue to lead clinical development for the relugolix combination tablet. Myovant will be entitled to receive up to $4.35 billion, including an upfront payment of $650 million, which was made in December 2020, $200 million in potential regulatory milestones for FDA approvals for relugolix combination tablet in women’s health, and tiered sales milestones of up to $3.5 billion for prostate cancer and also for the combined women’s health indications. If we exercise the option to commercialize relugolix in oncology outside of the U.S. and Canada, excluding certain Asian countries, Myovant will receive $50 million and be entitled to receive double-digit royalties on sales. In connection with this transaction, we recognized $499 million in Identifiable intangible assets––Developed technology rights and $151 million in Research and development expenses representing the relative fair value of the portion of the upfront payment allocated to the approved indication and unapproved indications of the product, respectively.
Agreement with CStone
On September 29, 2020, we entered into a strategic collaboration with CStone to address oncological needs in China. The collaboration encompasses our $200 million upfront equity investment in CStone, a collaboration between the companies for the development and commercialization of CStone’s sugemalimab (CS1001, PD-L1 antibody) in mainland China, and a framework between the companies to bring additional oncology assets to the Greater China market. The transaction closed on October 9, 2020. As of December 31, 2020, we held a 9.9% stake in CStone.
Agreement with BioNTech
On April 9, 2020, we signed a global agreement with BioNTech to co-develop a mRNA-based coronavirus vaccine program, BNT162b2, aimed at preventing COVID-19 disease. The collaboration rapidly advanced a COVID-19 vaccine candidate into human clinical testing based on BioNTech’s proprietary mRNA vaccine platforms, and the vaccine has been granted EUA in the U.S., the EU and the U.K., among other countries. We are working with BioNTech to manufacture and help ensure rapid worldwide access to the vaccine. The collaboration leverages our broad expertise in vaccine R&D, regulatory capabilities, and global manufacturing and distribution network. In connection with the April 2020 agreement, we paid BioNTech an upfront cash payment of $72 million, which was recorded in Research and development expenses in our second quarter of 2020, and we made an additional equity investment of $113 million in common stock of BioNTech. BioNTech became eligible to receive potential milestone payments of up to $563 million for a total consideration of $748 million. Under the terms of this agreement, we and BioNTech will share gross profits and development costs equally after the vaccine is approved and successfully commercialized, and we were responsible for all of the development costs until commercialization of the vaccine. Thereafter, BioNTech was to repay us its 50 percent share of these development costs through reductions in gross profit sharing and milestone payments to BioNTech over time. On January 29, 2021, we and BioNTech signed an amended version of the April 2020 agreement. Under the January 2021 agreement, BioNTech will pay us their 50 percent share of prior development costs in a lump sum payment during the first quarter of 2021. Further R&D costs will be shared equally. We have commercialization rights to the vaccine worldwide (excluding Germany and Turkey where BioNTech will market and distribute the vaccine under the agreement with us, and excluding China, Hong Kong, Macau and Taiwan, which are subject to a separate collaboration between BioNTech and Shanghai Fosun Pharmaceutical (Group) Co., Ltd). We recognize Revenues and Cost of sales on a gross basis in markets where we are commercializing the vaccine and we will record our share of gross profits related to sales of the vaccine by BioNTech in Germany and Turkey in Alliance revenues.
We made an additional investment of $50 million in common stock of BioNTech as part of an underwritten equity offering by BioNTech, which closed in July 2020. As of December 31, 2020, we held an equity stake of 2.5% in BioNTech.
Summarized Financial Information for Collaborative Arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides the amounts and classification of payments (income/(expense)) between us and our collaboration partners:
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
2018
|
|
Revenues—Revenues(a)
|
|
$
|
284
|
|
|
$
|
305
|
|
|
$
|
268
|
|
|
Revenues—Alliance revenues(b)
|
|
5,418
|
|
|
4,648
|
|
|
3,838
|
|
|
Total revenues from collaborative arrangements
|
|
$
|
5,703
|
|
|
$
|
4,953
|
|
|
$
|
4,107
|
|
|
Cost of sales(c)
|
|
$
|
(61)
|
|
|
$
|
(52)
|
|
|
$
|
(34)
|
|
|
Selling, informational and administrative expenses(d)
|
|
(194)
|
|
|
(176)
|
|
|
(92)
|
|
|
Research and development expenses(e)
|
|
(192)
|
|
|
104
|
|
|
162
|
|
|
Other income/(deductions)—net(f)
|
|
567
|
|
|
362
|
|
|
281
|
|
(a)Represents sales to our partners of products manufactured by us.
(b)Substantially all relates to amounts earned from our partners under co-promotion agreements. The increases in each of the periods presented reflect increases in alliance revenues from Eliquis and Xtandi.
(c)Primarily relates to amounts paid to collaboration partners for their share of net sales or profits earned in collaboration arrangements where we are the principal in the transaction, and cost of sales for inventory purchased from our partners.
(d)Represents net reimbursements to our partners for selling, informational and administrative expenses incurred.
(e)Primarily relates to upfront payments and pre-approval milestone payments earned by our partners as well as net reimbursements.
(f)Primarily relates to royalties from our collaboration partners.
The amounts outlined in the above table do not include transactions with third parties other than our collaboration partners, or other costs for the products under the collaborative arrangements.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
69
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
In 2019, we substantially completed several multi-year initiatives focused on positioning us for future growth and creating a simpler, more efficient operating structure within each business.
Transforming to a More Focused Company Program
With the formation of the Consumer Healthcare JV in 2019 and the spin-off of our Upjohn Business in the fourth quarter of 2020, Pfizer has transformed into a more focused, global leader in science-based innovative medicines and vaccines. We have undertaken efforts to ensure our cost base aligns appropriately with our revenue base. While certain direct costs transferred to the Consumer Healthcare JV and to the Upjohn Business in connection with the spin-off, there are indirect costs which did not transfer. In addition, we are taking steps to restructure our corporate enabling functions to appropriately support and drive the purpose of our focused innovative biopharmaceutical products business and R&D and PGS platform functions. The program costs discussed below may be rounded and represent approximations.
We expect costs for this program, primarily related to corporate enabling functions, to be incurred from 2020 through 2022 and to total $1.6 billion on a pre-tax basis, with substantially all costs to be cash expenditures. Actions will include, among others, changes in location of certain activities, expanded use and co-location of centers of excellence and shared services, and increased use of digital technologies. The associated actions and the specific costs will primarily include severance and benefit plan impacts, exit costs as well as associated implementation costs.
Also as part of this program, we expect to incur costs related to manufacturing network optimization, including certain legacy cost-reduction initiatives, of $500 million, with approximately 20% of the costs to be non-cash. The costs for this effort are expected to be incurred primarily from 2020 through 2022, and will include, among other things, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.
From the start of this program in the fourth quarter of 2019 through December 31, 2020, we incurred costs of $900 million.
Key Activities
In 2020, we incurred costs of $896 million, composed primarily of the Transforming to a More Focused Company program. In 2019, we incurred costs of $820 million composed of $548 million for the 2017-2019 and Organizing for Growth initiatives, $288 million for the integration of Array, $94 million for the integration of Hospira, and $87 million for the Transforming to a More Focused Company program, partially offset by income of $197 million, primarily due to the reversal of certain accruals upon the effective favorable settlement of an IRS audit for multiple tax years and other acquisition-related initiatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits:
|
|
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Restructuring charges/(credits):
|
|
|
|
|
|
|
|
|
|
|
|
Employee terminations
|
|
|
|
|
|
$
|
474
|
|
|
$
|
108
|
|
|
$
|
473
|
|
|
Asset impairments(a)
|
|
|
|
|
|
88
|
|
|
69
|
|
|
290
|
|
|
Exit costs/(credits)
|
|
|
|
|
|
(6)
|
|
|
50
|
|
|
33
|
|
|
Restructuring charges(b)
|
|
|
|
|
|
556
|
|
|
227
|
|
|
796
|
|
|
Transaction costs(c)
|
|
|
|
|
|
10
|
|
|
63
|
|
|
1
|
|
|
Integration costs and other(d)
|
|
|
|
|
|
34
|
|
|
311
|
|
|
260
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
|
|
|
|
600
|
|
|
601
|
|
|
1,058
|
|
|
Net periodic benefit costs recorded in Other (income)/deductions––net
|
|
|
|
|
|
39
|
|
|
23
|
|
|
144
|
|
|
Additional depreciation––asset restructuring recorded in our consolidated statements of income as follows(e):
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
|
|
|
23
|
|
|
29
|
|
|
36
|
|
|
Selling, informational and administrative expenses
|
|
|
|
|
|
—
|
|
|
3
|
|
|
2
|
|
|
Research and development expenses
|
|
|
|
|
|
(3)
|
|
|
8
|
|
|
—
|
|
|
Total additional depreciation––asset restructuring
|
|
|
|
|
|
19
|
|
|
40
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implementation costs recorded in our consolidated statements of income as follows(f):
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
|
|
|
40
|
|
|
61
|
|
|
75
|
|
|
Selling, informational and administrative expenses
|
|
|
|
|
|
197
|
|
|
73
|
|
|
71
|
|
|
Research and development expenses
|
|
|
|
|
|
1
|
|
|
22
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total implementation costs
|
|
|
|
|
|
238
|
|
|
156
|
|
|
186
|
|
|
Total costs associated with acquisitions and cost-reduction/productivity initiatives
|
|
|
|
|
|
$
|
896
|
|
|
$
|
820
|
|
|
$
|
1,426
|
|
(a)2018 charges are largely for cost-reduction initiatives not associated with acquisitions.
(b)Represents acquisition-related costs ($192 million credit in 2019, and $37 million charge in 2018) and cost reduction initiatives ($556 million charge in 2020, $418 million charge in 2019, and $759 million charge in 2018). 2020 charges mainly represent employee termination costs for our Transforming to a More Focused Company cost-reduction program. 2019 restructuring charges mainly represent employee termination costs for cost-reduction and productivity initiatives, partially offset by the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of an IRS audit for multiple tax years (see Note 5B). 2018 charges were primarily related to employee termination costs and asset write downs. The employee termination costs for
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
70
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
2019 and 2018 were primarily for our improvements to operational effectiveness as part of the realignment of our business structure, and for 2019, also includes employee termination costs for the Transforming to a More Focused Company cost-reduction program.
(c)Represents external costs for banking, legal, accounting and other similar services.
(d)Represents external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs. 2020 costs primarily related to our acquisition of Array. 2019 costs mainly related to our acquisitions of Array, including $157 million in payments to Array employees for the fair value of previously unvested stock options that was recognized as post-closing compensation expense (see Note 2A), and Hospira. 2018 costs mostly related to our acquisition of Hospira.
(e)Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.
(f)Represents external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes the components and changes in restructuring accruals:
|
|
(MILLIONS OF DOLLARS)
|
|
Employee
Termination
Costs
|
|
Asset
Impairment
Charges
|
|
Exit Costs
|
|
Accrual
|
|
Balance, January 1, 2019
|
|
$
|
1,113
|
|
|
$
|
—
|
|
|
$
|
49
|
|
|
$
|
1,161
|
|
|
Provision(a)
|
|
108
|
|
|
69
|
|
|
50
|
|
|
227
|
|
|
Utilization and other(b)
|
|
(450)
|
|
|
(69)
|
|
|
(53)
|
|
|
(572)
|
|
|
Balance, December 31, 2019(c)
|
|
770
|
|
|
—
|
|
|
46
|
|
|
816
|
|
|
Provision
|
|
474
|
|
|
88
|
|
|
(6)
|
|
|
556
|
|
|
Utilization and other(b)
|
|
(462)
|
|
|
(88)
|
|
|
(25)
|
|
|
(575)
|
|
|
Balance, December 31, 2020(d)
|
|
$
|
782
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
798
|
|
(a)Includes the reversal of certain accruals related to our acquisition of Wyeth upon the favorable settlement of an IRS audit for multiple tax years. See Note 5D.
(b)Includes adjustments for foreign currency translation.
(c)Included in Other current liabilities ($641 million) and Other noncurrent liabilities ($175 million).
(d)Included in Other current liabilities ($628 million) and Other noncurrent liabilities ($169 million).
Note 4. Other (Income)/Deductions—Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Other (income)/deductions––net include:
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
2018
|
|
Interest income
|
|
$
|
(73)
|
|
|
$
|
(225)
|
|
|
$
|
(333)
|
|
|
Interest expense(a)
|
|
1,449
|
|
|
1,573
|
|
|
1,316
|
|
|
Net interest expense
|
|
1,376
|
|
|
1,348
|
|
|
983
|
|
|
Royalty-related income
|
|
(770)
|
|
|
(646)
|
|
|
(485)
|
|
|
Net (gains)/losses on asset disposals
|
|
237
|
|
|
(32)
|
|
|
(71)
|
|
|
Net (gains)/losses recognized during the period on equity securities(b)
|
|
(540)
|
|
|
(454)
|
|
|
(586)
|
|
|
Net realized (gains)/losses on sales of investments in debt securities(c)
|
|
—
|
|
|
—
|
|
|
141
|
|
|
Income from collaborations, out-licensing arrangements and sales of compound/product rights(d)
|
|
(326)
|
|
|
(168)
|
|
|
(476)
|
|
|
Net periodic benefit costs/(credits) other than service costs(e)
|
|
(236)
|
|
|
72
|
|
|
(270)
|
|
|
Certain legal matters, net(f)
|
|
28
|
|
|
292
|
|
|
84
|
|
|
Certain asset impairments(g)
|
|
1,691
|
|
|
2,843
|
|
|
3,115
|
|
|
Business and legal entity alignment costs(h)
|
|
—
|
|
|
300
|
|
|
63
|
|
|
Consumer Healthcare JV equity method (income)/loss(i)
|
|
(298)
|
|
|
(17)
|
|
|
—
|
|
|
Other, net(j)
|
|
(493)
|
|
|
(226)
|
|
|
(421)
|
|
|
Other (income)/deductions––net
|
|
$
|
669
|
|
|
$
|
3,314
|
|
|
$
|
2,077
|
|
(a)Capitalized interest totaled $96 million in 2020, $88 million in 2019 and $73 million in 2018.
(b)2020 gains include, among other things, unrealized gains of $405 million related to investments in BioNTech and SpringWorks Therapeutics, Inc. (SpringWorks). 2019 gains included, among other things, unrealized gains of $295 million related to investments in Cortexyme, Inc. and SpringWorks. 2018 gains included unrealized gains on equity securities of $477 million, reflecting the adoption of a new accounting standard in 2018 and were primarily driven by unrealized gains of $466 million related to our investment in Allogene. See Notes 2B and 7B.
(c)2018 primarily included gross realized losses on sales of available-for-sale debt securities of $402 million and a net loss of $18 million from derivative financial instruments used to hedge the foreign exchange component of the matured available-for-sale debt securities, partially offset by gross realized gains on sales of available-for-sale debt securities of $280 million. Proceeds from the sale of available-for-sale debt securities were $5.7 billion in 2018.
(d)2020 includes, among other things, (i) an upfront payment to us of $75 million from our sale of our CK1 assets to Biogen, (ii) $40 million of milestone income from Puma Biotechnology, Inc. related to Neratinib regulatory approvals in the EU, (iii) $30 million of milestone income from Lilly related to the first commercial sale in the U.S. of LOXO-292 for the treatment of RET fusion-positive NSCLC and (iv) $108 million in milestone income from multiple licensees. 2019 includes, among other things, $78 million in milestone income from Mylan Pharmaceuticals Inc. related to the FDA’s approval and launch of Wixela Inhub®, a generic of Advair Diskus®(fluticasone propionate and salmeterol inhalation powder) and $52 million in milestone income from multiple licensees. 2018 includes, among other things, (i) $118 million in milestone income from multiple licensees, (ii) $110 million in milestone payments received from Shire, of which $75 million related to their first dosing of a patient in a Phase 3 clinical trial for the treatment of UC and $35 million related to their first dosing of a patient in a Phase 3 clinical trial
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
71
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
for the treatment of Crohn’s disease, (iii) an upfront payment to us and a recognized milestone totaling $85 million for the sale of an AMPA receptor potentiator for CIAS to Biogen, (iv) $50 million in gains related to sales of compound/product rights and (v) a $40 million milestone payment from Merck & Co., Inc. in conjunction with the approval of ertugliflozin in the EU.
(e) See Note 11. In 2019, other non-service cost components’ activity related to the Consumer Healthcare JV transaction, such as gain on settlements, were recorded in (Gain) on completion of Consumer Healthcare JV transaction.
(f)2019 mostly included legal reserves for certain pending legal matters. 2018 primarily included legal reserves for certain pending legal matters, partially offset by the reversal of a legal accrual where a loss was no longer deemed probable.
(g)2020 primarily includes intangible asset impairment charges of $1.7 billion, mainly composed of: (i) $900 million related to IPR&D assets for unapproved indications of certain cancer medicines, acquired in our Array acquisition, and reflect, among other things, updated commercial forecasts; (ii) $528 million related to Eucrisa, a finite-lived developed technology right acquired in our Anacor acquisition, and reflects updated commercial forecasts mainly reflecting competitive pressures; and (iii) $263 million related to finite-lived developed technology rights for certain generic sterile injectables acquired in our Hospira acquisition, and reflects updated commercial forecasts mainly reflecting competitive pressures.
2019 primarily included intangible asset impairment charges of $2.8 billion, mainly composed of $2.6 billion, related to Eucrisa, and reflects updated commercial forecasts mainly reflecting competitive pressures.
2018 primarily included intangible asset impairment charges of $3.1 billion, mainly composed of (i) $2.6 billion related to developed technology rights, $242 million related to licensing agreements and $80 million related to IPR&D, all of which were acquired in our Hospira acquisition, for generic sterile injectable products associated with various indications; and (ii) $117 million related to a multi-antigen vaccine IPR&D program for adults undergoing elective spinal fusion surgery. The intangible asset impairment charges for the generic sterile injectable products reflect, among other things, updated commercial forecasts, reflecting an increased competitive environment as well as higher manufacturing costs, largely stemming from manufacturing and supply issues. The intangible asset impairment charge for the multi-antigen vaccine IPR&D program was the result of the Phase 2b trial reaching futility at a pre-planned interim analysis.
(h)Mainly represents incremental costs for the design, planning and implementation of our then new business structure, effective in the beginning of 2019, and primarily includes consulting, legal, tax and other advisory services.
(i)See Note 2C.
(j)2020 includes, among other things, (i) dividend income of $278 million from our investment in ViiV and (ii) charges of $105 million, reflecting the change in the fair value of contingent consideration. 2019 included, among other things, (i) dividend income of $220 million from our investment in ViiV; (ii) charges of $152 million for external incremental costs, such as transaction costs and costs to separate our Consumer Healthcare business into a separate legal entity, associated with the formation of the Consumer Healthcare JV; and (iii) net losses on early retirement of debt of $138 million. 2018 included, among other things, (i) a non-cash $343 million pre-tax gain associated with our transaction with Bain Capital to create a new biopharmaceutical company, Cerevel, to continue development of a portfolio of clinical and preclinical stage neuroscience assets primarily targeting disorders of the central nervous system; (ii) dividend income of $253 million from our investment in ViiV; (iii) a non-cash $50 million pre-tax gain related to our contribution agreement entered into with Allogene (see Note 2B); (iv) charges of $207 million, reflecting the change in the fair value of contingent consideration, and (vi) charges of $112 million for external incremental costs, such as transaction costs and costs to separate our Consumer Healthcare business into a separate legal entity, associated with the formation of the Consumer Healthcare JV.
The asset impairment charges included in Other (income)/deductions––net are based on estimates of fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional information about the intangible assets that were impaired during 2020 (impairment recorded in Other (income)/deductions–net) follows:
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Fair Value(a)
|
|
2020
|
|
(MILLIONS OF DOLLARS)
|
|
Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Impairment
|
|
Intangible assets––IPR&D(b)
|
|
$
|
1,100
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,100
|
|
|
$
|
900
|
|
|
Intangible assets––Developed technology rights(b)
|
|
740
|
|
|
—
|
|
|
—
|
|
|
740
|
|
|
791
|
|
|
Total
|
|
$
|
1,840
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,840
|
|
|
$
|
1,691
|
|
(a)The fair value amount is presented as of the date of impairment, as these assets are not measured at fair value on a recurring basis. See also Note 1E.
(b)Reflects intangible assets written down to fair value in 2020. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows for the asset and then applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the product; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.
Note 5. Tax Matters
A. Taxes on Income from Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Income from continuing operations before provision/(benefit) for taxes on income include:
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
2018
|
|
United States
|
|
$
|
(2,488)
|
|
|
$
|
7,064
|
|
|
$
|
(6,111)
|
|
|
International
|
|
9,986
|
|
|
4,420
|
|
|
9,706
|
|
|
Income from continuing operations before provision/(benefit) for taxes on income(a), (b)
|
|
$
|
7,497
|
|
|
$
|
11,485
|
|
|
$
|
3,594
|
|
(a)2020 v. 2019––The domestic loss in 2020 versus domestic income in 2019 was mainly related to the non-recurrence of the gain on the completion of the Consumer Healthcare JV transaction as well as higher certain asset impairments and higher R&D expenses. The increase in the international income was primarily related to the non-recurrence of the write off of assets contributed to the Consumer Healthcare JV as well as lower certain asset impairments and lower amortization of intangible assets.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
72
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
(b)2019 v. 2018––The domestic income in 2019 versus domestic loss in 2018 was mainly related to the completion of the Consumer Healthcare JV transaction as well as lower certain asset impairments, partially offset by higher business and legal entity alignment costs as well as increased costs related to certain legal matters. The decrease in the international income was primarily related to higher certain asset impairments as well as the write off of assets contributed to the Consumer Healthcare JV.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Provision/(benefit) for taxes on income based on the location of the taxing authorities include:
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
2018
|
|
United States
|
|
|
|
|
|
|
|
Current income taxes:
|
|
|
|
|
|
|
|
Federal
|
|
$
|
371
|
|
|
$
|
(1,886)
|
|
|
$
|
388
|
|
|
State and local
|
|
58
|
|
|
(187)
|
|
|
(49)
|
|
|
Deferred income taxes:
|
|
|
|
|
|
|
|
Federal
|
|
(1,061)
|
|
|
1,193
|
|
|
(1,641)
|
|
|
State and local
|
|
(115)
|
|
|
266
|
|
|
15
|
|
|
Total U.S. tax benefit
|
|
(747)
|
|
|
(613)
|
|
|
(1,287)
|
|
|
TCJA(a)
|
|
|
|
|
|
|
|
Current income taxes
|
|
—
|
|
|
(135)
|
|
|
(3,035)
|
|
|
Deferred Income taxes
|
|
—
|
|
|
(187)
|
|
|
2,439
|
|
|
Total TCJA tax benefit
|
|
—
|
|
|
(323)
|
|
|
(596)
|
|
|
International
|
|
|
|
|
|
|
|
Current income taxes
|
|
1,517
|
|
|
2,418
|
|
|
2,195
|
|
|
Deferred income taxes
|
|
(292)
|
|
|
(863)
|
|
|
(579)
|
|
|
Total international tax provision
|
|
1,224
|
|
|
1,555
|
|
|
1,617
|
|
|
Provision/(benefit) for taxes on income
|
|
$
|
477
|
|
|
$
|
618
|
|
|
$
|
(266)
|
|
(a)The 2018 current tax benefit and deferred tax expense primarily relate to the utilization of tax credit carryforwards against the repatriation tax liability associated with the enactment of the TCJA. See discussion below.
Amounts discussed below are rounded to the nearest hundred million and represent approximations.
In 2018, we finalized our provisional accounting for the tax effects of the TCJA, based on our best estimates of available information and data. We reported and disclosed the impacts within the applicable measurement period, in accordance with SEC guidance, and recorded a favorable adjustment of $100 million to Provision/(benefit) for taxes on income.
We elected, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, to pay our initial estimated $15 billion repatriation tax liability on accumulated post-1986 foreign earnings over eight years through 2026. The third annual installment of this liability, which is due to be paid in April 2021, is reported in current Income taxes payable, and the remaining liability is reported in noncurrent Other taxes payable as of December 31, 2020. Our obligations may vary as a result of changes in our uncertain tax positions and/or availability of attributes such as foreign tax and other credit carryforwards.
The TCJA subjects a U.S. shareholder to current tax on global intangible low-taxed income earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that we are permitted to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as global intangible low-taxed income in future years or provide for the tax expense related to such income in the year the tax is incurred. We elected to recognize deferred taxes for temporary differences expected to reverse as global intangible low-taxed income in future years.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law in the U.S. to provide certain relief as a result of the COVID-19 pandemic. In addition, governments around the world have enacted or implemented various forms of tax relief measures in response to the economic conditions in the wake of COVID-19. As of December 31, 2020, neither the CARES Act nor changes to income tax laws or regulations in other jurisdictions had a significant impact on our effective tax rate.
The changes in Provision/(benefit) for taxes on income impacting the effective tax rate year-over-year are summarized below:
2020 v. 2019
The higher effective tax rate in 2020 was mainly the result of:
•the non-recurrence of the $1.4 billion tax benefits, representing taxes and interest, recorded in 2019 due to the favorable settlement of an IRS audit for multiple tax years;
•the non-recurrence of the tax benefits related to certain tax initiatives associated with the implementation of our then new business structure; and
•the non-recurrence of the tax benefits recorded in 2019 as a result of additional guidance issued by the U.S. Department of Treasury related to the TCJA, as well as:
•lower tax benefits related to the impairment of intangible assets,
partially offset by:
•the non-recurrence of the tax expense of $2.7 billion recorded in the third quarter of 2019 associated with the gain related to the completion of the Consumer Healthcare JV transaction; and
•the favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
73
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
2019 v. 2018
The higher effective tax rate was primarily the result of:
•the tax expense of $2.7 billion associated with the gain related to the completion of the Consumer Healthcare JV transaction; and
•the non-recurrence of certain tax initiatives and favorable adjustments to the provisional estimate of the TCJA,
partially offset by:
•an increase in tax benefits associated with the resolution of certain tax positions pertaining to prior years, primarily due to a benefit of $1.4 billion, representing tax and interest, resulting from the favorable settlement of an IRS audit;
•benefits related to certain tax initiatives associated with the implementation of our then new business structure;
•the tax benefits recorded as a result of additional guidance issued by the U.S. Department of Treasury related to the enactment of the TCJA; and
•the favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.
In all years, federal, state and international net tax liabilities assumed or established as part of a business acquisition are not included in Provision/(benefit) for taxes on income (see Note 2A).
B. Tax Rate Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reconciliation of the U.S. statutory income tax rate to our effective tax rate for Income from continuing operations follows:
|
|
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
U.S. statutory income tax rate
|
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
|
TCJA impact(a)
|
|
—
|
|
|
(2.8)
|
|
|
(16.6)
|
|
|
Taxation of non-U.S. operations (b), (c)
|
|
(9.6)
|
|
|
(4.5)
|
|
|
1.2
|
|
|
Tax settlements and resolution of certain tax positions(d)
|
|
(2.5)
|
|
|
(13.8)
|
|
|
(19.3)
|
|
|
Completion of Consumer Healthcare JV transaction(d)
|
|
—
|
|
|
8.2
|
|
|
—
|
|
|
U.S. Healthcare Legislation(e)
|
|
0.1
|
|
|
—
|
|
|
(1.1)
|
|
|
U.S. R&D tax credit
|
|
(1.3)
|
|
|
(0.8)
|
|
|
(2.2)
|
|
|
Interest(f)
|
|
1.1
|
|
|
0.6
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
|
All other, net(g)
|
|
(2.4)
|
|
|
(2.5)
|
|
|
3.9
|
|
|
Effective tax rate for income from continuing operations
|
|
6.4
|
%
|
|
5.4
|
%
|
|
(7.4)
|
%
|
(a)See Note 5A.
(b)For taxation of non-U.S. operations, this rate impact reflects the income tax rates and relative earnings in the locations where we do business outside the U.S., together with the U.S. tax cost on our international operations, changes in uncertain tax positions not included in the reconciling item called “Tax settlements and resolution of certain tax positions,” as well as changes in valuation allowances. Specifically: (i) the jurisdictional location of earnings is a significant component of our effective tax rate each year, and the rate impact of this component is influenced by the specific location of non-U.S. earnings and the level of such earnings as compared to our total earnings; (ii) the U.S. tax implications of our foreign operations is a significant component of our effective tax rate each year and generally offsets some of the reduction to our effective tax rate each year resulting from the jurisdictional location of earnings; (iii) the impact of certain tax initiatives; and (iv) the impact of changes in uncertain tax positions not included in the reconciling item called “Tax settlements and resolution of certain tax positions” is a component of our effective tax rate each year that can result in either an increase or decrease to our effective tax rate. The jurisdictional mix of earnings, which includes the impact of the location of earnings as well as the U.S. tax cost on our international operations, can vary as a result of operating fluctuations in the normal course of business and as a result of the extent and location of other income and expense items, such as restructuring charges, asset impairments and gains and losses on strategic business decisions. See also Note 5A for the components of pre-tax income and Provision/(benefit) for taxes on income, which is based on the location of the taxing authorities, and for information about settlements and other items impacting Provision/(benefit) for taxes on income.
(c)In all years, the impact on our effective tax rate is the result of the jurisdictional location of earnings. In 2020 and 2019, the reduction in our effective tax rate resulting from the jurisdictional location of earnings is largely due to lower tax rates in certain jurisdictions, as well as manufacturing and other incentives for our subsidiaries in Singapore and to a lesser extent in Puerto Rico. We benefit from Puerto Rican tax incentives pursuant to a grant that expires during 2029. Under such grant, we are partially exempt from income, property and municipal taxes. In Singapore, we benefit from incentive tax rates effective through 2045 on income from manufacturing and other operations.
(d)For a discussion about tax settlements and resolution of certain tax positions and the impact of the gain on the completion of the Consumer Healthcare JV transaction, see Note 5A.
(e)The favorable rate impact in 2018 is a result of the updated 2017 invoice received from the federal government, which reflected a lower expense than what was previously estimated for invoiced periods, as well as certain tax initiatives.
(f)Includes changes in interest related to our uncertain tax positions not included in the reconciling item called “Tax settlements and resolution of certain tax positions”.
(g)All other, net is primarily due to routine business operations.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
74
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
C. Deferred Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of our deferred tax assets and liabilities, shown before jurisdictional netting, follow:
|
|
|
|
2020 Deferred Tax*
|
|
2019 Deferred Tax*
|
|
(MILLIONS OF DOLLARS)
|
|
Assets
|
|
(Liabilities)
|
|
Assets
|
|
(Liabilities)
|
|
Prepaid/deferred items(a)
|
|
$
|
3,094
|
|
|
$
|
(352)
|
|
|
$
|
1,918
|
|
|
$
|
(204)
|
|
|
Inventories
|
|
276
|
|
|
(25)
|
|
|
267
|
|
|
(10)
|
|
|
Intangible assets(b)
|
|
793
|
|
|
(5,355)
|
|
|
718
|
|
|
(6,784)
|
|
|
Property, plant and equipment
|
|
211
|
|
|
(1,219)
|
|
|
177
|
|
|
(1,204)
|
|
|
Employee benefits
|
|
1,981
|
|
|
(127)
|
|
|
2,115
|
|
|
(37)
|
|
|
Restructurings and other charges
|
|
291
|
|
|
—
|
|
|
212
|
|
|
—
|
|
|
Legal and product liability reserves
|
|
382
|
|
|
—
|
|
|
469
|
|
|
—
|
|
|
Net operating loss/tax credit carryforwards(c)
|
|
1,761
|
|
|
—
|
|
|
2,003
|
|
|
—
|
|
|
Unremitted earnings
|
|
—
|
|
|
(46)
|
|
|
—
|
|
|
(77)
|
|
|
State and local tax adjustments
|
|
171
|
|
|
—
|
|
|
152
|
|
|
—
|
|
|
Investments(d)
|
|
128
|
|
|
(3,545)
|
|
|
11
|
|
|
(3,318)
|
|
|
All other
|
|
102
|
|
|
(57)
|
|
|
167
|
|
|
(9)
|
|
|
|
|
9,189
|
|
|
(10,726)
|
|
|
8,208
|
|
|
(11,643)
|
|
|
Valuation allowances
|
|
(1,586)
|
|
|
—
|
|
|
(1,526)
|
|
|
—
|
|
|
Total deferred taxes
|
|
$
|
7,603
|
|
|
$
|
(10,726)
|
|
|
$
|
6,682
|
|
|
$
|
(11,643)
|
|
|
Net deferred tax liability(e)
|
|
|
|
$
|
(3,123)
|
|
|
|
|
$
|
(4,961)
|
|
*The deferred tax assets and liabilities associated with global intangible low-taxed income are included in the relevant categories. See Note 5A.
(a)The increase in 2020 is primarily related to the capitalization of certain R&D-related expenses.
(b)The decrease in 2020 is primarily the result of amortization of intangible assets and certain impairment charges.
(c)The amounts in 2020 and 2019 are reduced for unrecognized tax benefits of $3.0 billion and $2.9 billion, respectively, where we have net operating loss carryforwards, similar tax losses, and/or tax credit carryforwards that are available, under the tax law of the applicable jurisdiction, to settle any additional income taxes that would result from the disallowance of a tax position.
(d)The amounts in 2020 and 2019 are primarily related to the Consumer Healthcare JV. See Note 2C.
(e)In 2020, Noncurrent deferred tax assets and other noncurrent tax assets ($0.9 billion), and Noncurrent deferred tax liabilities ($4.1 billion). In 2019, Noncurrent deferred tax assets and other noncurrent tax assets ($0.7 billion), and Noncurrent deferred tax liabilities ($5.7 billion).
We have carryforwards, primarily related to net operating and capital losses, general business credits, foreign tax credits and charitable contributions, which are available to reduce future U.S. federal and/or state, as well as international, income taxes payable with either an indefinite life or expiring at various times from 2021 to 2040. Certain of our U.S. net operating losses and general business credits are subject to limitations under IRC Section 382.
As of December 31, 2020, we have not made a U.S. tax provision on $55.0 billion of unremitted earnings of our international subsidiaries. As these earnings are intended to be indefinitely reinvested overseas, the determination of a hypothetical unrecognized deferred tax liability as of December 31, 2020 is not practicable. The amount of indefinitely reinvested earnings is based on estimates and assumptions and subject to management evaluation, and is subject to change in the normal course of business based on operational cash flow, completion of local statutory financial statements and the finalization of tax returns and audits, among other things. Accordingly, we regularly update our earnings and profits analysis for such events.
D. Tax Contingencies
For a description of our accounting policies associated with accounting for income tax contingencies, see Note 1P.
Uncertain Tax Positions
As tax law is complex and often subject to varied interpretations, it is uncertain whether some of our tax positions will be sustained upon audit. As of December 31, 2020, we had $4.3 billion and as of December 31, 2019, we had $4.2 billion in net unrecognized tax benefits, excluding associated interest.
•Tax assets for uncertain tax positions primarily represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another tax jurisdiction. These potential benefits generally result from cooperative efforts among taxing authorities, as required by tax treaties to minimize double taxation, commonly referred to as the competent authority process. The recoverability of these assets, which we believe to be more likely than not, is dependent upon the actual payment of taxes in one tax jurisdiction and, in some cases, the successful petition for recovery in another tax jurisdiction. As of December 31, 2020, we had $1.3 billion in assets associated with uncertain tax positions. These amounts were included in Noncurrent deferred tax assets and other noncurrent tax assets ($1.1 billion), Noncurrent deferred tax liabilities ($122 million) and Other taxes payable ($46 million). As of December 31, 2019, we had $1.2 billion in assets associated with uncertain tax positions. These amounts were included in Noncurrent deferred tax assets and other noncurrent tax assets ($1.0 billion) and Noncurrent deferred tax liabilities ($109 million).
•Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
75
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reconciliation of the beginning and ending amounts of gross unrecognized tax benefits follows:
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
2018
|
|
Balance, beginning
|
|
$
|
(5,381)
|
|
|
$
|
(6,259)
|
|
|
$
|
(6,558)
|
|
|
Acquisitions(a)
|
|
37
|
|
|
(44)
|
|
|
—
|
|
|
Divestitures(b)
|
|
265
|
|
|
—
|
|
|
—
|
|
|
Increases based on tax positions taken during a prior period(c)
|
|
(232)
|
|
|
(36)
|
|
|
(192)
|
|
|
Decreases based on tax positions taken during a prior period(c), (d)
|
|
64
|
|
|
1,109
|
|
|
561
|
|
|
Decreases based on settlements for a prior period(e)
|
|
15
|
|
|
100
|
|
|
123
|
|
|
Increases based on tax positions taken during the current period(c)
|
|
(411)
|
|
|
(383)
|
|
|
(370)
|
|
|
Impact of foreign exchange
|
|
(72)
|
|
|
25
|
|
|
56
|
|
|
Other, net(c), (f)
|
|
120
|
|
|
107
|
|
|
121
|
|
|
Balance, ending(g)
|
|
$
|
(5,595)
|
|
|
$
|
(5,381)
|
|
|
$
|
(6,259)
|
|
(a)For 2020 and 2019, primarily related to the acquisition of Array (goodwill adjustment made within the measurement period). See Note 2A.
(b)For 2020, related to the separation of Upjohn. See Note 2B.
(c)Primarily included in Provision/(benefit) for taxes on income.
(d)Primarily related to effectively settling certain issues with the U.S. and foreign tax authorities. See Note 5A.
(e)Primarily related to cash payments and reductions of tax attributes.
(f)Primarily related to decreases as a result of a lapse of applicable statutes of limitations.
(g)In 2020, included in Income taxes payable ($34 million), Noncurrent deferred tax assets and other noncurrent tax assets ($18 million), Noncurrent deferred tax liabilities ($3.0 billion) and Other taxes payable ($2.5 billion). In 2019, included in Income taxes payable ($108 million), Current tax assets ($2 million), Noncurrent deferred tax assets and other noncurrent tax assets ($51 million), Noncurrent deferred tax liabilities ($2.8 billion) and Other taxes payable ($2.4 billion).
•Interest related to our unrecognized tax benefits is recorded in accordance with the laws of each jurisdiction and is recorded primarily in Provision/(benefit) for taxes on income. In 2020, we recorded a net increase in interest of $89 million. In 2019, we recorded a net decrease in interest of $564 million, resulting primarily from a settlement with the IRS; and in 2018, we recorded a net increase in interest of $103 million. Gross accrued interest totaled $493 million as of December 31, 2020 (reflecting a decrease of $5 million as a result of cash payments and a decrease of $75 million relating to the separation of Upjohn) and gross accrued interest totaled $485 million as of December 31, 2019 (reflecting a decrease of $13 million as a result of cash payments). In 2020, this amount was included in Income taxes payable ($7 million) and Other taxes payable ($486 million). In 2019, this amount was included in Income taxes payable ($20 million) and Other taxes payable ($465 million). Accrued penalties are not significant. See also Note 5A.
Status of Tax Audits and Potential Impact on Accruals for Uncertain Tax Positions
The U.S. is one of our major tax jurisdictions, and we are regularly audited by the IRS. With respect to Pfizer, the IRS has issued a Revenue Agent’s Report (RAR) for tax years 2011-2013. We are not in agreement with the RAR and are currently appealing certain disputed issues. Tax years 2014-2015 are currently under audit. Tax years 2016-2020 are open, but not under audit. All other tax years are closed.
In addition to the open audit years in the U.S., we have open audit years in other major tax jurisdictions, such as Canada (2013-2020), Japan (2017-2020), Europe (2011-2020, primarily reflecting Ireland, the U.K., France, Italy, Spain and Germany), Latin America (1998-2020, primarily reflecting Brazil) and Puerto Rico (2016-2020).
Any settlements or statutes of limitations expirations could result in a significant decrease in our uncertain tax positions. We estimate that it is reasonably possible that within the next 12 months, our gross unrecognized tax benefits, exclusive of interest, could decrease by as much as $50 million, as a result of settlements with taxing authorities or the expiration of the statutes of limitations. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible changes related to our uncertain tax positions, and such changes could be significant.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
76
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
E. Tax Provision/(Benefit) on Other Comprehensive Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of the Tax provision/(benefit) on other comprehensive income/(loss) include:
|
|
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Foreign currency translation adjustments, net(a)
|
|
|
|
|
|
$
|
(79)
|
|
|
$
|
254
|
|
|
$
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains/(losses) on derivative financial instruments, net
|
|
|
|
|
|
(88)
|
|
|
83
|
|
|
21
|
|
|
Reclassification adjustments for (gains)/losses included in net income
|
|
|
|
|
|
(25)
|
|
|
(125)
|
|
|
27
|
|
|
Reclassification adjustments of certain tax effects from AOCI to Retained earnings(b)
|
|
|
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
|
|
|
|
|
|
(113)
|
|
|
(42)
|
|
|
50
|
|
|
Unrealized holding gains/(losses) on available-for-sale securities, net
|
|
|
|
|
|
45
|
|
|
—
|
|
|
(23)
|
|
|
Reclassification adjustments for (gains)/losses included in net income
|
|
|
|
|
|
(24)
|
|
|
5
|
|
|
16
|
|
|
Reclassification adjustments for tax on unrealized gains from AOCI to Retained earnings(c)
|
|
|
|
|
|
—
|
|
|
—
|
|
|
(45)
|
|
|
|
|
|
|
|
|
22
|
|
|
5
|
|
|
(53)
|
|
|
Benefit plans: actuarial gains/(losses), net
|
|
|
|
|
|
(281)
|
|
|
(169)
|
|
|
(141)
|
|
|
Reclassification adjustments related to amortization
|
|
|
|
|
|
62
|
|
|
55
|
|
|
55
|
|
|
Reclassification adjustments related to settlements, net
|
|
|
|
|
|
65
|
|
|
65
|
|
|
33
|
|
|
Reclassification adjustments of certain tax effects from AOCI to Retained earnings(b)
|
|
|
|
|
|
—
|
|
|
—
|
|
|
637
|
|
|
Other
|
|
|
|
|
|
(8)
|
|
|
(10)
|
|
|
29
|
|
|
|
|
|
|
|
|
(161)
|
|
|
(58)
|
|
|
612
|
|
|
Benefit plans: prior service (costs)/credits and other, net
|
|
|
|
|
|
12
|
|
|
(1)
|
|
|
2
|
|
|
Reclassification adjustments related to amortization of prior service costs and other, net
|
|
|
|
|
|
(31)
|
|
|
(43)
|
|
|
(39)
|
|
|
Reclassification adjustments related to curtailments of prior service costs and other, net
|
|
|
|
|
|
—
|
|
|
(1)
|
|
|
(4)
|
|
|
Reclassification adjustments of certain tax effects from AOCI to Retained earnings(b)
|
|
|
|
|
|
—
|
|
|
—
|
|
|
(144)
|
|
|
Other
|
|
|
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
(17)
|
|
|
(45)
|
|
|
(185)
|
|
|
Tax provision/(benefit) on other comprehensive income/(loss)
|
|
|
|
|
|
$
|
(349)
|
|
|
$
|
115
|
|
|
$
|
518
|
|
(a)Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that are expected to be held indefinitely.
(b)For additional information on the adoption of a new accounting standard related to reclassification of certain tax effects from AOCI, see Note 1B in our 2018 Financial Report.
(c)For additional information on the adoption of a new accounting standard related to financial assets and liabilities, see Note 1B in our 2018 Financial Report.
Note 6. Accumulated Other Comprehensive Loss, Excluding Noncontrolling Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes the changes, net of tax, in Accumulated other comprehensive loss:
|
|
|
|
Net Unrealized Gains/(Losses)
|
|
Benefit Plans
|
|
|
|
(MILLIONS OF DOLLARS)
|
|
Foreign Currency Translation Adjustments
|
|
Derivative Financial Instruments
|
|
Available-For-Sale Securities
|
|
Actuarial Gains/(Losses)
|
|
Prior Service (Costs)/ Credits and Other
|
|
Accumulated Other Comprehensive Income/(Loss)
|
|
Balance, January 1, 2018
|
|
$
|
(5,180)
|
|
|
$
|
(30)
|
|
|
$
|
401
|
|
|
$
|
(5,262)
|
|
|
$
|
750
|
|
|
$
|
(9,321)
|
|
|
Other comprehensive income/(loss) due to the adoption of new accounting standards(a)
|
|
(2)
|
|
|
(1)
|
|
|
(416)
|
|
|
(637)
|
|
|
144
|
|
|
(913)
|
|
|
Other comprehensive income/(loss)(b)
|
|
(893)
|
|
|
198
|
|
|
(53)
|
|
|
(128)
|
|
|
(166)
|
|
|
(1,041)
|
|
|
Balance, December 31, 2018
|
|
(6,075)
|
|
|
167
|
|
|
(68)
|
|
|
(6,027)
|
|
|
728
|
|
|
(11,275)
|
|
|
Other comprehensive income/(loss)(b)
|
|
123
|
|
|
(146)
|
|
|
33
|
|
|
(231)
|
|
|
(144)
|
|
|
(365)
|
|
|
Balance, December 31, 2019
|
|
(5,952)
|
|
|
20
|
|
|
(35)
|
|
|
(6,257)
|
|
|
584
|
|
|
(11,640)
|
|
|
Other comprehensive income/(loss)(b)
|
|
1,028
|
|
|
(448)
|
|
|
151
|
|
|
(602)
|
|
|
(106)
|
|
|
23
|
|
|
Distribution of Upjohn Business(c)
|
|
(397)
|
|
|
—
|
|
|
—
|
|
|
352
|
|
|
(26)
|
|
|
(71)
|
|
|
Balance, December 31, 2020
|
|
$
|
(5,321)
|
|
|
$
|
(428)
|
|
|
$
|
116
|
|
|
$
|
(6,507)
|
|
|
$
|
452
|
|
|
$
|
(11,688)
|
|
(a)Represent the cumulative effect adjustments as of January 1, 2018 from the adoption of accounting standards related to (i) financial assets and liabilities and (ii) the reclassification of certain tax effects from AOCI. See Note 1B in our 2018 Financial Report.
(b)Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of $9 million loss in 2020, $11 million loss in 2019 and $20 million loss in 2018. Foreign currency translation adjustments in 2020 primarily include gains from the strengthening of the euro, Japanese yen, Australian dollar and U.K. pound against the U.S. dollar, and net gains related to foreign currency translation adjustments related to our equity method investment in the Consumer Healthcare JV (see Note 2C), partially offset by the impact of our net investment hedging program. Foreign currency translation adjustments in 2019 primarily include a gain of approximately $1.3 billion pre-tax ($978 million after-tax) related to foreign currency translation adjustments attributable to our equity method investment in the Consumer Healthcare JV (see Note 2C), partially offset by the strengthening of the U.S. dollar against the euro and the Australian dollar, and the results of our net investment hedging program. Amounts in 2018 primarily reflect the strengthening of the U.S. dollar against the euro, U.K. pound and Chinese renminbi.
(c)For more information, see Note 2B.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
77
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Note 7. Financial Instruments
A. Fair Value Measurements
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis and Fair Value Hierarchy, using a Market Approach:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
|
|
As of December 31, 2019
|
|
(MILLIONS OF DOLLARS)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as equity securities with readily determinable fair values:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
567
|
|
|
$
|
—
|
|
|
$
|
567
|
|
|
|
|
$
|
705
|
|
|
$
|
—
|
|
|
$
|
705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as available-for-sale debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and agency—non-U.S.
|
|
7,719
|
|
|
—
|
|
|
7,719
|
|
|
|
|
4,863
|
|
|
—
|
|
|
4,863
|
|
|
Government and agency—U.S.
|
|
982
|
|
|
—
|
|
|
982
|
|
|
|
|
811
|
|
|
—
|
|
|
811
|
|
|
Corporate and other
|
|
1,008
|
|
|
—
|
|
|
1,008
|
|
|
|
|
1,013
|
|
|
—
|
|
|
1,013
|
|
|
|
|
9,709
|
|
|
—
|
|
|
9,709
|
|
|
|
|
6,687
|
|
|
—
|
|
|
6,687
|
|
|
Total short-term investments
|
|
10,276
|
|
|
—
|
|
|
10,276
|
|
|
|
|
7,392
|
|
|
—
|
|
|
7,392
|
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
18
|
|
|
—
|
|
|
18
|
|
|
|
|
53
|
|
|
—
|
|
|
53
|
|
|
Foreign exchange contracts
|
|
234
|
|
|
—
|
|
|
234
|
|
|
|
|
413
|
|
|
—
|
|
|
413
|
|
|
Total other current assets
|
|
251
|
|
|
—
|
|
|
251
|
|
|
|
|
465
|
|
|
—
|
|
|
465
|
|
|
Long-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as equity securities with readily determinable fair values(a)
|
|
2,809
|
|
|
2,776
|
|
|
32
|
|
|
|
|
1,902
|
|
|
1,863
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as available-for-sale debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and agency—non-U.S.
|
|
6
|
|
|
—
|
|
|
6
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Government and agency—U.S.
|
|
121
|
|
|
—
|
|
|
121
|
|
|
|
|
303
|
|
|
—
|
|
|
303
|
|
|
Corporate and other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|
|
|
128
|
|
|
—
|
|
|
128
|
|
|
|
|
315
|
|
|
—
|
|
|
315
|
|
|
Total long-term investments
|
|
2,936
|
|
|
2,776
|
|
|
160
|
|
|
|
|
2,216
|
|
|
1,863
|
|
|
354
|
|
|
Other noncurrent assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
117
|
|
|
—
|
|
|
117
|
|
|
|
|
266
|
|
|
—
|
|
|
266
|
|
|
Foreign exchange contracts
|
|
5
|
|
|
—
|
|
|
5
|
|
|
|
|
261
|
|
|
—
|
|
|
261
|
|
|
Total derivative assets
|
|
122
|
|
|
—
|
|
|
122
|
|
|
|
|
526
|
|
|
—
|
|
|
526
|
|
|
Insurance contracts(b)
|
|
693
|
|
|
—
|
|
|
693
|
|
|
|
|
575
|
|
|
—
|
|
|
575
|
|
|
Total other noncurrent assets
|
|
814
|
|
|
—
|
|
|
814
|
|
|
|
|
1,102
|
|
|
—
|
|
|
1,102
|
|
|
Total assets
|
|
$
|
14,278
|
|
|
$
|
2,776
|
|
|
$
|
11,501
|
|
|
|
|
$
|
11,176
|
|
|
$
|
1,863
|
|
|
$
|
9,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
501
|
|
|
$
|
—
|
|
|
$
|
501
|
|
|
|
|
$
|
114
|
|
|
$
|
—
|
|
|
$
|
114
|
|
|
Total other current liabilities
|
|
501
|
|
|
—
|
|
|
501
|
|
|
|
|
114
|
|
|
—
|
|
|
114
|
|
|
Other noncurrent liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
599
|
|
|
—
|
|
|
599
|
|
|
|
|
604
|
|
|
—
|
|
|
604
|
|
|
Total other noncurrent liabilities
|
|
599
|
|
|
—
|
|
|
599
|
|
|
|
|
604
|
|
|
—
|
|
|
604
|
|
|
Total liabilities
|
|
$
|
1,100
|
|
|
$
|
—
|
|
|
$
|
1,100
|
|
|
|
|
$
|
718
|
|
|
$
|
—
|
|
|
$
|
718
|
|
(a)Long-term equity securities of $190 million as of December 31, 2020 and $176 million as of December 31, 2019 were held in restricted trusts for employee benefit plans.
(b)Includes life insurance policies held in restricted trusts for U.S. non-qualified employee benefit plans. The underlying invested assets in these contracts are marketable securities, which are carried at fair value, with changes in fair value recognized in Other (income)/deductions—net (see Note 4).
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
78
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying values and estimated fair values using a market approach:
|
|
|
|
|
|
As of December 31, 2020
|
|
|
|
As of December 31, 2019
|
|
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
Total
|
|
Level 2
|
|
|
|
|
|
Total
|
|
Level 2
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, excluding the current portion
|
|
$
|
37,133
|
|
|
$
|
45,533
|
|
|
$
|
45,533
|
|
|
|
|
$
|
35,955
|
|
|
$
|
40,842
|
|
|
$
|
40,842
|
|
|
|
The differences between the estimated fair values and carrying values for held-to-maturity debt securities, private equity securities, long-term receivables and short-term borrowings not measured at fair value on a recurring basis were not significant as of December 31, 2020 and 2019. The fair value measurements of our held-to-maturity debt securities and short-term borrowings are based on Level 2 inputs. The fair value measurements of our long-term receivables and private equity securities are based on Level 3 inputs using a market approach.
B. Investments
Total Short-Term and Long-Term Investments and Equity-Method Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes our investments by classification type:
|
|
|
|
As of December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
Short-term investments
|
|
|
|
|
|
Equity securities with readily determinable fair values(a)
|
|
$
|
567
|
|
|
$
|
705
|
|
|
Available-for-sale debt securities
|
|
9,709
|
|
|
6,687
|
|
|
Held-to-maturity debt securities
|
|
161
|
|
|
1,133
|
|
|
Total Short-term investments
|
|
$
|
10,437
|
|
|
$
|
8,525
|
|
|
|
|
|
|
|
|
Long-term investments
|
|
|
|
|
|
Equity securities with readily determinable fair values
|
|
$
|
2,809
|
|
|
$
|
1,902
|
|
|
Available-for-sale debt securities
|
|
128
|
|
|
315
|
|
|
Held-to-maturity debt securities
|
|
37
|
|
|
42
|
|
|
Private equity securities at cost(b)
|
|
432
|
|
|
756
|
|
|
Total Long-term investments
|
|
$
|
3,406
|
|
|
$
|
3,014
|
|
|
Equity-method investments
|
|
16,856
|
|
|
17,133
|
|
|
Total long-term investments and equity-method investments
|
|
$
|
20,262
|
|
|
$
|
20,147
|
|
|
Held-to-maturity cash equivalents
|
|
$
|
89
|
|
|
$
|
163
|
|
(a)As of December 31, 2020 and 2019, includes money market funds primarily invested in U.S. Treasury and government debt.
(b)Represent investments in the life sciences sector.
Debt Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2020, our investment securities portfolio consisted of diverse, primarily investment-grade, debt securities. The contractual maturities, or estimated maturities, of the debt securities are as follows:
|
|
|
|
As of December 31, 2020
|
As of December 31, 2019
|
|
|
|
|
|
Gross Unrealized
|
|
|
|
Maturities (in Years)
|
|
|
Gross Unrealized
|
|
|
|
(MILLIONS OF DOLLARS)
|
|
Amortized Cost
|
|
Gains
|
|
Losses
|
|
Fair Value
|
|
Within 1
|
|
Over 1
to 5
|
|
Over 5
|
|
Amortized Cost
|
|
Gains
|
|
Losses
|
|
Fair Value
|
|
Available-for-sale debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and agency––non-U.S.
|
|
$
|
7,593
|
|
|
$
|
136
|
|
|
$
|
(4)
|
|
|
$
|
7,725
|
|
|
$
|
7,719
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
4,895
|
|
|
$
|
6
|
|
|
$
|
(38)
|
|
|
$
|
4,863
|
|
|
Government and agency––U.S.
|
|
1,104
|
|
|
—
|
|
|
(1)
|
|
|
1,103
|
|
|
982
|
|
|
121
|
|
|
—
|
|
|
1,120
|
|
|
—
|
|
|
(6)
|
|
|
1,114
|
|
|
Corporate and other(a)
|
|
1,006
|
|
|
2
|
|
|
—
|
|
|
1,008
|
|
|
1,008
|
|
|
—
|
|
|
—
|
|
|
1,027
|
|
|
—
|
|
|
(2)
|
|
|
1,025
|
|
|
Held-to-maturity debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits and other
|
|
283
|
|
|
—
|
|
|
—
|
|
|
283
|
|
|
251
|
|
|
9
|
|
|
24
|
|
|
535
|
|
|
—
|
|
|
—
|
|
|
535
|
|
|
Government and agency––non-U.S.
|
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
803
|
|
|
—
|
|
|
—
|
|
|
803
|
|
|
Total debt securities
|
|
$
|
9,991
|
|
|
$
|
138
|
|
|
$
|
(5)
|
|
|
$
|
10,124
|
|
|
$
|
9,959
|
|
|
$
|
136
|
|
|
$
|
29
|
|
|
$
|
8,380
|
|
|
$
|
6
|
|
|
$
|
(47)
|
|
|
$
|
8,340
|
|
(a)Primarily issued by a diverse group of corporations.
For our portfolio of available-for-sale and held-to-maturity debt securities, any expected credit losses would be immaterial to the financial statements.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
79
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following presents the calculation of the portion of unrealized (gains)/losses that relate to equity securities, excluding equity method investments, held at the reporting date:
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
2018
|
|
Net (gains)/losses recognized during the period on equity securities(a)
|
|
$
|
(540)
|
|
|
$
|
(454)
|
|
|
$
|
(586)
|
|
|
Less: Net (gains)/losses recognized during the period on equity securities sold during the period
|
|
(24)
|
|
|
(25)
|
|
|
(109)
|
|
|
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b)
|
|
$
|
(515)
|
|
|
$
|
(429)
|
|
|
$
|
(477)
|
|
(a)Reported in Other (income)/deductions––net. See Note 4.
(b)Included in net unrealized gains are observable price changes on equity securities without readily determinable fair values. Since January 1, 2018, there were cumulative impairments and downward adjustments of $81 million and upward adjustments of $61 million. Impairments, downward and upward adjustments were not significant in 2020, 2019 and 2018.
C. Short-Term Borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings include:
|
|
|
|
As of December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
Commercial paper(a)
|
|
$
|
556
|
|
|
$
|
13,915
|
|
|
Current portion of long-term debt, principal amount(b)
|
|
2,004
|
|
|
1,458
|
|
|
Other short-term borrowings, principal amount(c)
|
|
145
|
|
|
860
|
|
|
Total short-term borrowings, principal amount
|
|
2,705
|
|
|
16,233
|
|
|
Net fair value adjustments related to hedging and purchase accounting
|
|
—
|
|
|
5
|
|
|
Net unamortized discounts, premiums and debt issuance costs
|
|
(2)
|
|
|
(43)
|
|
|
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted
|
|
$
|
2,703
|
|
|
$
|
16,195
|
|
(a)See Note 2B.
(b)See Note 7D.
(c)Primarily includes cash collateral. See Note 7F.
The weighted-average effective interest rate on commercial paper outstanding was approximately 0.13% as of December 31, 2020 and 1.92% as of December 31, 2019.
As of December 31, 2020, we had access to a total of $11 billion in U.S. revolving credit facilities consisting of a $7 billion facility expiring in 2025 and a $4 billion facility expiring in September 2021, which may be used to support our commercial paper borrowings. In January 2021, the $4 billion facility was terminated at our request. In addition to the U.S. revolving credit facilities, our lenders have provided us an additional $332 million in lines of credit, of which $300 million expire within one year. Of these total lines of credit, $11.3 billion were unused as of December 31, 2020.
D. Long-Term Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following outlines our senior unsecured long-term debt and the weighted-average stated interest rate by maturity:
|
|
|
|
As of December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
Notes due 2021 (2.4% for 2019)(a)
|
|
$
|
—
|
|
|
$
|
3,153
|
|
|
Notes due 2022 (1.0% for 2020 and 2019)
|
|
1,728
|
|
|
1,624
|
|
|
Notes due 2023 (3.2% for 2020 and 3.7% for 2019)
|
|
2,550
|
|
|
2,892
|
|
|
Notes due 2024 (3.9% for 2020 and 2019)
|
|
2,250
|
|
|
2,250
|
|
|
Notes due 2025 (0.8% for 2020)
|
|
750
|
|
|
—
|
|
|
Notes due 2026 (2.9% for 2020 and 2019)
|
|
3,000
|
|
|
3,000
|
|
|
Notes due 2027-2030 (3.1% for 2020 and 3.6% for 2019)
|
|
6,781
|
|
|
4,453
|
|
|
Notes due 2034-2036 (5.3% for 2020 and 2019)
|
|
2,250
|
|
|
2,250
|
|
|
Notes due 2037-2040 (5.6% for 2020 and 6.0% for 2019)
|
|
8,086
|
|
|
7,066
|
|
|
Notes due 2043-2046 (3.7% for 2020 and 2019)
|
|
4,878
|
|
|
4,818
|
|
|
Notes due 2047-2050 (3.6% for 2020 and 4.1% for 2019)
|
|
3,500
|
|
|
3,315
|
|
|
Total long-term debt, principal amount
|
|
35,774
|
|
|
34,820
|
|
|
Net fair value adjustments related to hedging and purchase accounting
|
|
1,562
|
|
|
1,305
|
|
|
Net unamortized discounts, premiums and debt issuance costs
|
|
(207)
|
|
|
(176)
|
|
|
Other long-term debt
|
|
4
|
|
|
5
|
|
|
Total long-term debt, carried at historical proceeds, as adjusted
|
|
$
|
37,133
|
|
|
$
|
35,955
|
|
|
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above (2.6% and 1.2%))
|
|
$
|
2,002
|
|
|
$
|
1,462
|
|
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
80
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
(a) Reclassified to the current portion of long-term debt.
Our long-term debt outlined in the above table is generally redeemable by us at any time at varying redemption prices plus accrued and unpaid interest.
Issuances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2020, we issued the following:
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
Principal
|
|
Interest Rate
|
|
Maturity Date
|
|
As of
December 31, 2020
|
|
0.800%(a)
|
|
May 28, 2025
|
|
$
|
750
|
|
|
1.700%(a)
|
|
May 28, 2030
|
|
1,000
|
|
|
2.550%(a)
|
|
May 28, 2040
|
|
1,000
|
|
|
2.700%(a)
|
|
May 28, 2050
|
|
1,250
|
|
|
|
|
|
|
$
|
4,000
|
|
|
|
|
|
|
|
|
2.625%(b)
|
|
April 1, 2030
|
|
$
|
1,250
|
|
(a)May be redeemed by us at any time, in whole, or in part, at varying redemption prices plus accrued and unpaid interest. The weighted-average effective interest rate for the notes at issuance was 2.11%.
(b)May be redeemed by us at any time, in whole, or in part, at a redemption price plus accrued and unpaid interest. The weighted average effective interest rate for the notes at issuance was 2.67%.
In March 2019, we completed a public offering of $5.0 billion aggregate principal amount of senior unsecured notes with a weighted-average effective interest rate of 3.57%.
In September 2018, we completed a public offering of $5.0 billion aggregate principal amount of senior unsecured notes with a weighted-average effective interest rate of 3.56%.
Retirements
In November 2020, we repurchased all $1.15 billion and $342 million principal amount outstanding of the 1.95% senior unsecured notes due June 2021 and 5.80% senior unsecured notes due August 2023 and recorded a total net loss of $36 million, in Other (income)/deductions––net. See Note 2B.
In March 2020, we repurchased at par all $1.065 billion principal amount outstanding of our senior unsecured notes due in 2047.
In January 2019, we repurchased all €1.1 billion ($1.3 billion) principal amount outstanding of the 5.75% euro-denominated debt due June 2021 at a redemption value of €1.3 billion ($1.5 billion). We recorded a net loss of $138 million in Other (income)/deductions––net, which included the related termination of cross currency swaps.
E. Derivative Financial Instruments and Hedging Activities
Foreign Exchange Risk
A significant portion of our revenues, earnings and net investments in foreign affiliates is exposed to changes in foreign exchange rates. We manage our foreign exchange risk predominately through the use of derivative financial instruments and foreign currency debt. These financial instruments serve to mitigate the impact on net income as a result of remeasurement into another currency, or against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions.
The derivative financial instruments primarily hedge or offset exposures in the euro, U.K. pound, Japanese yen, Swedish krona and Canadian dollar. Additionally, we hedge a portion of our forecasted intercompany inventory sales denominated in euro, Japanese yen, Chinese renminbi, Canadian dollar, U.K. pound and Australian dollar for up to two years.
Changes in fair value are reported in earnings or in Other comprehensive income/(loss), depending on the nature and purpose of the financial instrument (hedge or offset relationship). For certain foreign exchange contracts, we exclude an amount from the assessment of hedge effectiveness and recognize the excluded amount through an amortization approach in earnings. The hedge relationships are as follows:
Generally, we recognize the gains and losses on foreign exchange contracts that are designated as fair value hedges in earnings upon the recognition of the change in fair value of the hedged item. We also recognize the offsetting foreign exchange impact attributable to the hedged item in earnings.
•Generally, we record in Other comprehensive income/(loss) gains or losses on foreign exchange contracts that are designated as cash flow hedges and reclassify those amounts into earnings in the same period or periods during which the hedged transaction affects earnings.
•We record in Other comprehensive income/(loss) ––Foreign currency translation adjustments, net the foreign exchange gains and losses related to foreign exchange-denominated debt and foreign exchange contracts designated as a hedge of our net investments in foreign subsidiaries and reclassify those amounts into earnings upon the sale or substantial liquidation of our net investments.
•For certain foreign exchange contracts not designated as hedging instruments, we recognize the gains and losses on contracts that are used to offset foreign currency assets or liabilities immediately into earnings along with the earnings impact of the items they generally offset. These contracts essentially take the opposite currency position of that reflected in the month-end balance sheet to counterbalance the effect of any currency movement.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
81
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Interest Rate Risk
Our interest-bearing investments and borrowings are subject to interest rate risk. Depending on market conditions, we may change the profile of our outstanding debt or investments by entering into derivative financial instruments like interest rate swaps, either to hedge or offset the exposure to changes in the fair value of hedged items with fixed interest rates, or to convert variable rate debt or investments to fixed rates. The derivative financial instruments primarily hedge U.S. dollar fixed-rate debt.
We recognize the gains and losses on interest rate contracts that are designated as fair value hedges in earnings upon the recognition of the change in fair value of the hedged risk. We also recognize the offsetting earnings impact attributable to the hedged item.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes the fair value of the derivative financial instruments and the related notional amounts (including those reported as part of discontinued operations):
|
|
(MILLIONS OF DOLLARS)
|
|
As of December 31, 2020
|
|
As of December 31, 2019
|
|
|
|
|
|
Fair Value
|
|
|
|
Fair Value
|
|
|
|
Notional
|
|
Asset
|
|
Liability
|
|
Notional
|
|
Asset
|
|
Liability
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts(a)
|
|
$
|
24,369
|
|
|
$
|
145
|
|
|
$
|
1,005
|
|
|
$
|
25,193
|
|
|
$
|
591
|
|
|
$
|
662
|
|
|
Interest rate contracts
|
|
1,950
|
|
|
135
|
|
|
—
|
|
|
6,645
|
|
|
318
|
|
|
—
|
|
|
|
|
|
|
280
|
|
|
1,005
|
|
|
|
|
909
|
|
|
662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
15,063
|
|
|
94
|
|
|
95
|
|
|
$
|
19,623
|
|
|
82
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
373
|
|
|
$
|
1,100
|
|
|
|
|
$
|
992
|
|
|
$
|
718
|
|
(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $5.0 billion as of December 31, 2020 and $5.9 billion as of December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk (including gains/(losses) reported as part of discontinued operations).
|
|
|
|
Amount of
Gains/(Losses)
Recognized in OID(a)
|
|
Amount of Gains/(Losses)
Recognized in OCI(a)
|
|
Amount of Gains/(Losses)
Reclassified from
OCI into OID and COS(a)
|
|
|
|
As of December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Derivative Financial Instruments in Cash Flow Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts(b)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(649)
|
|
|
$
|
339
|
|
|
$
|
(77)
|
|
|
$
|
525
|
|
|
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach(c)
|
|
—
|
|
|
—
|
|
|
55
|
|
|
136
|
|
|
57
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments in Fair Value Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
369
|
|
|
900
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Hedged item
|
|
(369)
|
|
|
(900)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments in Net Investment Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
—
|
|
|
—
|
|
|
(501)
|
|
|
(313)
|
|
|
—
|
|
|
—
|
|
|
The portion on foreign exchange contracts excluded from the assessment of hedge effectiveness(c)
|
|
—
|
|
|
—
|
|
|
181
|
|
|
188
|
|
|
154
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency short-term borrowings
|
|
—
|
|
|
—
|
|
|
8
|
|
|
34
|
|
|
—
|
|
|
—
|
|
|
Foreign currency long-term debt(d)
|
|
—
|
|
|
—
|
|
|
(183)
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments Not Designated as Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
178
|
|
|
(172)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
All other net(c)
|
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
|
|
$
|
178
|
|
|
$
|
(172)
|
|
|
$
|
(1,077)
|
|
|
$
|
421
|
|
|
$
|
133
|
|
|
$
|
808
|
|
(a)OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the consolidated statements of income. COS = Cost of Sales, included in Cost of sales in the consolidated statements of income. OCI = Other comprehensive income/(loss), included in the consolidated statements of comprehensive income.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
82
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
(b)The amounts reclassified from OCI into COS were:
•a net gain of $172 million in 2020 (including a gain of $22 million reported in Income from discontinued operations––net of tax); and
•a net gain of $247 million in 2019 (including a gain of $46 million reported in Income from discontinued operations––net of tax).
The remaining amounts were reclassified from OCI into OID. Based on year-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax loss of $341 million within the next 12 months into income. The maximum length of time over which we are hedging future foreign exchange cash flow relates to our $1.8 billion U.K. pound debt maturing in 2043.
(c)The amounts reclassified from OCI were reclassified into OID.
(d)Long-term debt includes foreign currency borrowings with carrying values of $2.1 billion as of December 31, 2020, which are used as hedging instruments in net investment hedge relationships.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes the amounts recorded in our consolidated balance sheet related to cumulative basis adjustments for fair value hedges:
|
|
|
|
As of December 31, 2020
|
|
As of December 31, 2019
|
|
|
|
|
|
Cumulative Amount of Fair
Value Hedging Adjustment
Increase/(Decrease) to
Carrying Amount
|
|
|
|
Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to
Carrying Amount
|
|
(MILLIONS OF DOLLARS)
|
|
Carrying Amount of Hedged Assets/Liabilities(a)
|
|
Active
Hedging
Relationships
|
|
Discontinued Hedging Relationships
|
|
Carrying Amount of Hedged Assets/Liabilities(a)
|
|
Active Hedging Relationships
|
|
Discontinued Hedging Relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
2,016
|
|
|
$
|
117
|
|
|
$
|
1,149
|
|
|
$
|
7,092
|
|
|
$
|
266
|
|
|
$
|
690
|
|
(a)Carrying amounts exclude the cumulative amount of fair value hedging adjustments.
F. Credit Risk
On an ongoing basis, we monitor and review the credit risk of our customers, financial institutions and exposures in our investment portfolio.
With respect to our trade accounts receivable, we monitor the creditworthiness of our customers to which we grant credit in the normal course of business. In general, there is no requirement for collateral from customers. For additional information on our trade accounts receivable and allowance for credit losses, see Note 1G. A significant portion of our trade accounts receivable balances are due from drug wholesalers. For additional information on our trade accounts receivables with significant customers, see Note 17B.
With respect to our investments, we monitor concentrations of credit risk associated with government, government agency, and corporate issuers of securities. Investments are placed in instruments that are investment grade and are primarily short in duration. Exposure limits are established to limit a concentration with any single credit counterparty. As of December 31, 2020, the largest investment exposures in our portfolio represent primarily sovereign debt instruments issued by the U.S., France, Canada, Japan, Sweden and Germany.
With respect to our derivative financial instrument agreements with financial institutions, we do not expect to incur a significant loss from failure of any counterparty. Derivative financial instruments are executed under International Swaps and Derivatives Association (ISDA) master agreements with credit-support annexes that contain zero threshold provisions requiring collateral to be exchanged daily depending on levels of exposure. As a result, there are no significant concentrations of credit risk with any individual financial institution. As of December 31, 2020, the aggregate fair value of these derivative financial instruments that are in a net payable position was $946 million, for which we have posted collateral of $821 million with a corresponding amount reported in Short-term investments. As of December 31, 2020, the aggregate fair value of our derivative financial instruments that are in a net receivable position was $137 million, for which we have received collateral of $142 million with a corresponding amount reported in Short-term borrowings, including current portion of long-term debt.
Note 8. Inventories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes the components of Inventories:
|
|
|
|
As of December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
Finished goods
|
|
$
|
2,878
|
|
|
$
|
2,265
|
|
|
Work in process
|
|
4,430
|
|
|
4,131
|
|
|
Raw materials and supplies
|
|
738
|
|
|
672
|
|
|
Inventories(a)
|
|
$
|
8,046
|
|
|
$
|
7,068
|
|
|
Noncurrent inventories not included above(b)
|
|
$
|
890
|
|
|
$
|
638
|
|
(a)The change from December 31, 2019 reflects increases for certain products, including inventory build for new product launches, supply recovery, market demand and network strategy, and an increase due to foreign exchange.
(b)Included in Other noncurrent assets. There are no recoverability issues for these amounts.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
83
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Note 9. Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes the components of Property, plant and equipment:
|
|
|
|
Useful Lives
|
|
As of December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
(Years)
|
|
2020
|
|
2019
|
|
Land
|
|
-
|
|
$
|
444
|
|
|
$
|
495
|
|
|
Buildings
|
|
33-50
|
|
9,022
|
|
|
9,181
|
|
|
Machinery and equipment
|
|
8-20
|
|
11,153
|
|
|
10,648
|
|
|
Furniture, fixtures and other
|
|
3-12.5
|
|
4,541
|
|
|
4,840
|
|
|
Construction in progress
|
|
-
|
|
3,552
|
|
|
2,794
|
|
|
|
|
|
|
28,711
|
|
|
27,959
|
|
|
Less: Accumulated depreciation
|
|
|
|
14,812
|
|
|
14,990
|
|
|
Property, plant and equipment
|
|
|
|
$
|
13,900
|
|
|
$
|
12,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides long-lived assets by geographic area:
|
|
|
|
As of December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
Property, plant and equipment
|
|
|
|
|
|
United States
|
|
$
|
7,821
|
|
|
$
|
7,194
|
|
|
Developed Europe
|
|
4,775
|
|
|
4,238
|
|
|
Developed Rest of World
|
|
413
|
|
|
453
|
|
|
Emerging Markets
|
|
890
|
|
|
1,083
|
|
|
Property, plant and equipment
|
|
$
|
13,900
|
|
|
$
|
12,969
|
|
Note 10. Identifiable Intangible Assets and Goodwill
A. Identifiable Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes the components of Identifiable intangible assets:
|
|
|
|
As of December 31, 2020
|
|
As of December 31, 2019
|
|
(MILLIONS OF DOLLARS)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Identifiable
Intangible
Assets, less
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Identifiable
Intangible
Assets, less
Accumulated
Amortization
|
|
Finite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed technology rights(a)
|
|
$
|
73,545
|
|
|
$
|
(50,902)
|
|
|
$
|
22,643
|
|
|
$
|
72,449
|
|
|
$
|
(47,092)
|
|
|
$
|
25,357
|
|
|
Brands
|
|
922
|
|
|
(774)
|
|
|
148
|
|
|
922
|
|
|
(741)
|
|
|
181
|
|
|
Licensing agreements and other(b)
|
|
2,292
|
|
|
(1,186)
|
|
|
1,106
|
|
|
1,687
|
|
|
(1,108)
|
|
|
579
|
|
|
|
|
76,759
|
|
|
(52,862)
|
|
|
23,896
|
|
|
75,058
|
|
|
(48,941)
|
|
|
26,117
|
|
|
Indefinite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brands
|
|
827
|
|
|
|
|
827
|
|
|
827
|
|
|
|
|
827
|
|
|
IPR&D(c)
|
|
3,175
|
|
|
|
|
3,175
|
|
|
5,919
|
|
|
|
|
5,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing agreements and other(b)
|
|
573
|
|
|
|
|
573
|
|
|
1,073
|
|
|
|
|
1,073
|
|
|
|
|
4,575
|
|
|
|
|
4,575
|
|
|
7,819
|
|
|
|
|
7,819
|
|
|
Identifiable intangible assets(d)
|
|
$
|
81,334
|
|
|
$
|
(52,862)
|
|
|
$
|
28,471
|
|
|
$
|
82,877
|
|
|
$
|
(48,941)
|
|
|
$
|
33,936
|
|
(a)The increase in the gross carrying amount primarily reflects the transfer of $600 million from IPR&D to Developed technology rights to reflect the approval of Braftovi in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant mCRC after prior therapy, as well as a $499 million capitalized portion of an upfront payment to Myovant (see Note 2E) and an increase from a $200 million measurement period adjustment related to the acquisition of Array (see Note 2A), partially offset by a $528 million impairment of Eucrisa (see Note 4) and a $263 million impairment of certain generic sterile injectables acquired in connection with our acquisition of Hospira (see Note 4).
(b)The changes in the gross carrying amounts primarily reflect the transfer of $600 million from indefinite-lived Licensing agreements and other to finite-lived Licensing agreements and other to reflect the approval in the U.S. of several products subject to out-licensing arrangements acquired from Array, as well as measurement period adjustments related to the acquisition of Array.
(c)The decrease in the gross carrying amount primarily reflects a decrease from a $1.2 billion measurement period adjustment related to the acquisition of Array, a $900 million impairment of IPR&D (see Note 4), and the transfer of $600 million from IPR&D to Developed technology rights to reflect the approval of Braftovi in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant mCRC after prior therapy.
(d)The decrease is primarily due to amortization, impairments, and measurement period adjustments related to the acquisition of Array, partially offset by the capitalization of an upfront payment to Myovant (see Note 2E).
Nearly all of our identifiable intangible assets are managed by our commercial organization, with only 9% of total cost of IPR&D managed by our R&D organization.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
84
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Developed Technology Rights
Developed technology rights represent the cost for developed technology acquired from third parties and can include the right to develop, use, market, sell and/or offer for sale the product, compounds and intellectual property that we have acquired with respect to products, compounds and/or processes that have been completed. We possess a well-diversified portfolio of hundreds of developed technology rights across therapeutic categories, representing our commercialized products. The significant components of developed technology rights are the following: Xtandi, Prevnar 13/Prevenar 13 Infant, Braftovi/Mektovi, Premarin, Prevnar 13/Prevenar 13 Adult, Eucrisa, Orgovyx, and, to a lesser extent Zavicefta, Tygacil, Merrem/Meronem, Refacto AF/Xyntha, Pristiq and Bosulif. Also included in this category are the post-approval milestone payments made under our alliance agreements for certain biopharmaceutical products.
Brands
Brands represent the cost for tradenames and know-how, as the products themselves do not receive patent protection. Indefinite-lived brands include Medrol and Depo-Medrol, while finite-lived brands include Depo-Provera and Zavedos.
IPR&D
IPR&D assets represent R&D assets that have not yet received regulatory approval in a major market. The significant components of IPR&D are the following: the program for the oral poly ADP ribose polymerase inhibitor for the treatment of patients with germline BRCA-mutated advanced breast cancer acquired as part of the Medivation acquisition and assets acquired in connection with the Array acquisition. IPR&D assets are required to be classified as indefinite-lived assets until the successful completion or the abandonment of the associated R&D effort. Accordingly, during the development period after the date of acquisition, these assets are not amortized until approval is obtained in a major market, typically either the U.S. or the EU, or in a series of other countries, subject to certain specified conditions and management judgment. At that time, we will determine the useful life of the asset, reclassify it out of IPR&D and begin amortization. If the associated R&D effort is abandoned, the related IPR&D assets will likely be written-off, and we will record an impairment charge.
IPR&D assets are high-risk assets, given the uncertain nature of R&D. Accordingly, we expect that many of these IPR&D assets will become impaired and be written-off at some time in the future.
Licensing Agreements
Licensing agreements for developed technology and for technology in development primarily relate to out-licensing arrangements acquired from third parties, including the Array acquisition. These assets represent the cost for the license, where we acquired the right to future royalties and/or milestones upon development or commercialization by the licensing partner. A significant component of the licensing arrangements are for out-licensing arrangements with a number of partners for oncology technology in varying stages of development that have not yet received regulatory approval in a major market. Accordingly, during the development period after the date of acquisition, each of these assets is classified as indefinite-lived intangible assets and will not be amortized until approval is obtained in a major market. At that time we will determine the useful life of the asset, reclassify the respective licensing arrangement asset to finite-lived intangible asset and begin amortization. If the development effort is abandoned, the related licensing asset will likely be written-off, and we will record an impairment charge.
Amortization
The weighted-average life for each of our total finite-lived intangible assets and the largest component, developed technology rights, is approximately 9 years. Total amortization expense for finite-lived intangible assets was $3.5 billion in 2020, $4.5 billion in 2019 and $4.8 billion in 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides the expected annual amortization expense:
|
|
(MILLIONS OF DOLLARS)
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Amortization expense
|
|
$
|
3,372
|
|
|
$
|
3,249
|
|
|
$
|
2,921
|
|
|
$
|
2,642
|
|
|
$
|
2,492
|
|
B. Goodwill
At the beginning of 2019, we reorganized our commercial operations and began to manage our businesses through three different operating segments––Biopharma, Upjohn and Consumer Healthcare. As a result of the reorganization of our commercial operations, our remaining goodwill was required to be reallocated amongst the then new Biopharma and Upjohn operating segments by determining the fair value of each reporting unit under our old and new management structure and the portions being transferred. We completed this re-allocation based on relative fair value in the second quarter of 2019 and retrospectively presented goodwill according to the operating structure.
Our Consumer Healthcare business was classified as held for sale as of December 31, 2018 and, upon closing of the transaction with GSK during the third quarter of 2019, we deconsolidated our Consumer Healthcare business and derecognized Consumer Healthcare goodwill. For additional information, see Note 2C. On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan. Upon closing, we deconsolidated the Upjohn business and derecognized $10.6 billion in Upjohn goodwill. In addition, at December 31, 2019, the goodwill associated with the Upjohn Business was classified as Noncurrent assets of discontinued operations. For additional information, see Note 2B.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
85
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes the components and changes in the carrying amount of Goodwill:
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
|
|
|
|
|
|
Total
|
|
Balance, January 1, 2019
|
|
|
|
|
|
|
|
|
|
$
|
42,927
|
|
|
Additions(a)
|
|
|
|
|
|
|
|
|
|
5,411
|
|
|
Other(b)
|
|
|
|
|
|
|
|
|
|
(136)
|
|
|
Balance, December 31, 2019
|
|
|
|
|
|
|
|
|
|
48,202
|
|
|
Additions(c)
|
|
|
|
|
|
|
|
|
|
727
|
|
|
Other(b)
|
|
|
|
|
|
|
|
|
|
648
|
|
|
Balance, December 31, 2020
|
|
|
|
|
|
|
|
|
|
$
|
49,577
|
|
(a)Additions relate to our acquisition of Array (see Note 2A).
(b)Other represents the impact of foreign exchange.
(c)Additions primarily represent the impact of measurement period adjustments related to our Array acquisition (see Note 2A).
Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans
The majority of our employees worldwide are eligible for retirement benefits provided through defined benefit pension plans, defined contribution plans or both. In the U.S., we sponsor both IRC-qualified and supplemental (non-qualified) defined benefit plans and defined contribution plans. A qualified plan meets the requirements of certain sections of the IRC, and, generally, contributions to qualified plans are tax deductible. A qualified plan typically provides benefits to a broad group of employees with restrictions on discriminating in favor of highly compensated employees with regard to coverage, benefits and contributions. A supplemental (non-qualified) plan provides additional benefits to certain employees. In addition, we provide medical insurance benefits to certain retirees and their eligible dependents through our postretirement plans.
A. Components of Net Periodic Benefit Costs and Changes in Other Comprehensive Income/(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides the annual (credit)/cost (including costs reported as part of discontinued operations) and changes in Other comprehensive income/(loss) for our benefit plans:
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
|
|
|
U.S.
Qualified
|
|
U.S.
Supplemental
(Non-Qualified)
|
|
International
|
|
Postretirement
Plans
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
Service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
146
|
|
|
$
|
125
|
|
|
$
|
136
|
|
|
$
|
38
|
|
|
$
|
37
|
|
|
$
|
39
|
|
|
Interest cost
|
|
499
|
|
|
629
|
|
|
598
|
|
|
34
|
|
|
47
|
|
|
55
|
|
|
164
|
|
|
215
|
|
|
212
|
|
|
49
|
|
|
75
|
|
|
72
|
|
|
Expected return on plan assets
|
|
(1,015)
|
|
|
(890)
|
|
|
(1,040)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(306)
|
|
|
(317)
|
|
|
(360)
|
|
|
(36)
|
|
|
(33)
|
|
|
(37)
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial losses
|
|
136
|
|
|
147
|
|
|
120
|
|
|
15
|
|
|
11
|
|
|
13
|
|
|
125
|
|
|
80
|
|
|
101
|
|
|
—
|
|
|
3
|
|
|
7
|
|
|
Prior service cost/(credit)
|
|
(3)
|
|
|
(3)
|
|
|
2
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
(3)
|
|
|
(4)
|
|
|
(4)
|
|
|
(170)
|
|
|
(173)
|
|
|
(178)
|
|
|
Curtailments
|
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
(1)
|
|
|
(4)
|
|
|
—
|
|
|
(47)
|
|
|
(17)
|
|
|
Settlements
|
|
223
|
|
|
230
|
|
|
113
|
|
|
49
|
|
|
27
|
|
|
26
|
|
|
6
|
|
|
16
|
|
|
4
|
|
|
—
|
|
|
(10)
|
|
|
—
|
|
|
Special termination benefits
|
|
(1)
|
|
|
4
|
|
|
6
|
|
|
2
|
|
|
17
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
Net periodic benefit cost/(credit) reported in income
|
|
(161)
|
|
|
116
|
|
|
(189)
|
|
|
99
|
|
|
100
|
|
|
103
|
|
|
132
|
|
|
115
|
|
|
84
|
|
|
(118)
|
|
|
(146)
|
|
|
(111)
|
|
|
(Credit)/cost reported in Other comprehensive income/(loss)
|
|
640
|
|
|
(246)
|
|
|
361
|
|
|
95
|
|
|
115
|
|
|
(189)
|
|
|
202
|
|
|
570
|
|
|
84
|
|
|
(50)
|
|
|
38
|
|
|
105
|
|
|
(Credit)/cost recognized in Comprehensive income
|
|
$
|
479
|
|
|
$
|
(129)
|
|
|
$
|
171
|
|
|
$
|
194
|
|
|
$
|
215
|
|
|
$
|
(86)
|
|
|
$
|
333
|
|
|
$
|
685
|
|
|
$
|
168
|
|
|
$
|
(168)
|
|
|
$
|
(107)
|
|
|
$
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
86
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
B. Actuarial Assumptions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides the weighted-average actuarial assumptions of our benefit plans:
|
|
|
|
Year Ended December 31,
|
|
(PERCENTAGES)
|
|
2020
|
|
2019
|
|
2018
|
|
Weighted-average assumptions used to determine benefit obligations
|
|
|
|
|
|
|
|
Discount rate:
|
|
|
|
|
|
|
|
U.S. qualified pension plans
|
|
2.6 %
|
|
3.3
|
%
|
|
4.4
|
%
|
|
U.S. non-qualified pension plans
|
|
2.4 %
|
|
3.2
|
%
|
|
4.3
|
%
|
|
International pension plans
|
|
1.5 %
|
|
1.7
|
%
|
|
2.5
|
%
|
|
Postretirement plans
|
|
2.5 %
|
|
3.2
|
%
|
|
4.3
|
%
|
|
Rate of compensation increase(a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International pension plans
|
|
2.9 %
|
|
1.4
|
%
|
|
1.4
|
%
|
|
Weighted-average assumptions used to determine net periodic benefit cost
|
|
|
|
|
|
|
|
Discount rate:
|
|
|
|
|
|
|
|
U.S. qualified pension plans
|
|
3.3 %
|
|
4.4
|
%
|
|
3.8
|
%
|
|
U.S. non-qualified pension plans
|
|
3.2 %
|
|
4.3
|
%
|
|
3.7
|
%
|
|
International pension plans interest cost
|
|
1.5 %
|
|
2.2
|
%
|
|
2.0
|
%
|
|
International pension plans service cost
|
|
1.6 %
|
|
2.4
|
%
|
|
2.3
|
%
|
|
Postretirement plans
|
|
3.2 %
|
|
4.3
|
%
|
|
3.7
|
%
|
|
Expected return on plan assets:
|
|
|
|
|
|
|
|
U.S. qualified pension plans
|
|
7.0 %
|
|
7.2
|
%
|
|
7.5
|
%
|
|
International pension plans
|
|
3.6 %
|
|
3.9
|
%
|
|
4.4
|
%
|
|
Postretirement plans
|
|
7.0 %
|
|
7.3
|
%
|
|
7.5
|
%
|
|
Rate of compensation increase:
|
|
|
|
|
|
|
|
U.S. qualified pension plans(a)
|
|
—
|
|
|
—
|
|
|
2.8
|
%
|
|
U.S. non-qualified pension plans(a)
|
|
—
|
|
|
—
|
|
|
2.8
|
%
|
|
International pension plans
|
|
2.9 %
|
|
1.4
|
%
|
|
2.5
|
%
|
(a)Effective January 1, 2018, we froze the defined benefit plans to future benefit accruals in the U.S. and members’ accrued benefits to that date no longer increase in line with future compensation increases. The rate of compensation increase is therefore no longer an assumption used to determine the benefit obligation and net periodic benefit cost for the U.S. qualified and non-qualified pension plans.
The assumptions above are used to develop the benefit obligations at each fiscal year-end. All of the assumptions are reviewed on at least an annual basis. We revise these assumptions based on an annual evaluation of long-term trends as well as market conditions that may have an impact on the cost of providing retirement benefits.
The weighted-average discount rate for our U.S. defined benefit plans is determined annually and evaluated and modified to reflect at year-end the prevailing market rate of a portfolio of high-quality fixed income investments, rated AA/Aa or better that reflect the rates at which the pension benefits could be effectively settled. For our international plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA/Aa or better, including, when there is sufficient data, a yield curve approach. These rate determinations are made consistent with local requirements. Overall, the yield curves used to measure the benefit obligations at year-end 2020 resulted in lower discount rates as compared to the prior year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides the healthcare cost trend rate assumptions for our U.S. postretirement benefit plans:
|
|
|
|
As of December 31,
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Healthcare cost trend rate assumed for next year (up to age 65)
|
|
5.4 %
|
|
5.6
|
%
|
|
Healthcare cost trend rate assumed for next year (age 65 and older)
|
|
5.6 %
|
|
6.0
|
%
|
|
Rate to which the cost trend rate is assumed to decline
|
|
4.5 %
|
|
4.5
|
%
|
|
Year that the rate reaches the ultimate trend rate
|
|
2037
|
|
|
2037
|
|
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
87
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
C. Obligations and Funded Status
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides an analysis of the changes in our benefit obligations, plan assets and funded status of our benefit plans (including those reported as part of discontinued operations):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Qualified
|
|
U.S. Supplemental
(Non-Qualified)
|
|
International
|
|
Postretirement
Plans
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Change in benefit obligation(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, beginning
|
|
$
|
16,535
|
|
|
$
|
15,141
|
|
|
$
|
1,351
|
|
|
$
|
1,280
|
|
|
$
|
11,059
|
|
|
$
|
9,952
|
|
|
$
|
1,667
|
|
|
$
|
1,870
|
|
|
Service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
146
|
|
|
125
|
|
|
38
|
|
|
37
|
|
|
Interest cost
|
|
499
|
|
|
629
|
|
|
34
|
|
|
47
|
|
|
164
|
|
|
215
|
|
|
49
|
|
|
75
|
|
|
Employee contributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
7
|
|
|
88
|
|
|
84
|
|
|
Plan amendments
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
18
|
|
|
(56)
|
|
|
(56)
|
|
|
Changes in actuarial assumptions and other(b)
|
|
1,953
|
|
|
2,001
|
|
|
159
|
|
|
152
|
|
|
702
|
|
|
1,224
|
|
|
(132)
|
|
|
(87)
|
|
|
Foreign exchange impact
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
646
|
|
|
(33)
|
|
|
2
|
|
|
(1)
|
|
|
Upjohn spin-off(c)
|
|
(1,016)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(320)
|
|
|
—
|
|
|
(218)
|
|
|
—
|
|
|
Acquisitions/divestitures/other, net
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(55)
|
|
|
—
|
|
|
(36)
|
|
|
Curtailments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
Settlements
|
|
(650)
|
|
|
(692)
|
|
|
(117)
|
|
|
(70)
|
|
|
(34)
|
|
|
(34)
|
|
|
—
|
|
|
—
|
|
|
Special termination benefits
|
|
(1)
|
|
|
4
|
|
|
2
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
Benefits paid
|
|
(383)
|
|
|
(544)
|
|
|
(62)
|
|
|
(74)
|
|
|
(372)
|
|
|
(360)
|
|
|
(201)
|
|
|
(221)
|
|
|
Benefit obligation, ending(a)
|
|
16,940
|
|
|
16,535
|
|
|
1,366
|
|
|
1,351
|
|
|
12,001
|
|
|
11,059
|
|
|
1,238
|
|
|
1,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning
|
|
14,586
|
|
|
13,051
|
|
|
—
|
|
|
—
|
|
|
8,956
|
|
|
8,215
|
|
|
519
|
|
|
469
|
|
|
Actual gain/(loss) on plan assets
|
|
1,974
|
|
|
2,760
|
|
|
—
|
|
|
—
|
|
|
868
|
|
|
873
|
|
|
69
|
|
|
50
|
|
|
Company contributions
|
|
1,253
|
|
|
11
|
|
|
179
|
|
|
144
|
|
|
197
|
|
|
230
|
|
|
113
|
|
|
137
|
|
|
Employee contributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
7
|
|
|
88
|
|
|
84
|
|
|
Foreign exchange impact
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
462
|
|
|
42
|
|
|
—
|
|
|
—
|
|
|
Upjohn spin-off(c)
|
|
(687)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(270)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Acquisitions/divestitures, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
|
(16)
|
|
|
—
|
|
|
—
|
|
|
Settlements
|
|
(650)
|
|
|
(692)
|
|
|
(117)
|
|
|
(70)
|
|
|
(34)
|
|
|
(34)
|
|
|
—
|
|
|
—
|
|
|
Benefits paid
|
|
(383)
|
|
|
(544)
|
|
|
(62)
|
|
|
(74)
|
|
|
(372)
|
|
|
(360)
|
|
|
(201)
|
|
|
(221)
|
|
|
Fair value of plan assets, ending
|
|
16,094
|
|
|
14,586
|
|
|
—
|
|
|
—
|
|
|
9,811
|
|
|
8,956
|
|
|
588
|
|
|
519
|
|
|
Funded status—Plan assets less than benefit obligation
|
|
$
|
(845)
|
|
|
$
|
(1,949)
|
|
|
$
|
(1,366)
|
|
|
$
|
(1,351)
|
|
|
$
|
(2,191)
|
|
|
$
|
(2,103)
|
|
|
$
|
(651)
|
|
|
$
|
(1,148)
|
|
(a)The PBO represents the present value of the benefit obligation earned through the end of the year and factors in future compensation increases. The ABO is similar to the PBO but does not factor in future compensation increases. For the U.S. qualified and supplemental (non-qualified) pension plans, the benefit obligation is the PBO, which is also equal to the ABO. For the international pension plans, the benefit obligation is the PBO. The ABO for our international pension plans was $11.5 billion in 2020 and $10.6 billion in 2019. For the postretirement plans, the benefit obligation is the ABO.
(b)Primarily includes actuarial losses resulting from decreases in discount rates in 2020 and 2019.
(c)For more information, see Note 2B.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides information as to how the funded status is recognized in our consolidated balance sheets:
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
|
|
|
|
|
U.S. Qualified
|
|
U.S. Supplemental
(Non-Qualified)
|
|
International
|
|
Postretirement
Plans
|
|
|
|
As of December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Noncurrent assets(a)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
522
|
|
|
$
|
453
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Current liabilities(b)
|
|
—
|
|
|
—
|
|
|
(127)
|
|
|
(189)
|
|
|
(31)
|
|
|
(30)
|
|
|
(6)
|
|
|
(24)
|
|
|
Noncurrent liabilities(c)
|
|
(845)
|
|
|
(1,949)
|
|
|
(1,239)
|
|
|
(1,162)
|
|
|
(2,681)
|
|
|
(2,526)
|
|
|
(645)
|
|
|
(1,124)
|
|
|
Funded status
|
|
$
|
(845)
|
|
|
$
|
(1,949)
|
|
|
$
|
(1,366)
|
|
|
$
|
(1,351)
|
|
|
$
|
(2,191)
|
|
|
$
|
(2,103)
|
|
|
$
|
(651)
|
|
|
$
|
(1,148)
|
|
(a)Included in Other noncurrent assets.
(b)Included in Accrued compensation and related items.
(c)Included in Pension benefit obligations, Postretirement benefit obligations, and Other noncurrent liabilities, as appropriate.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
88
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides the pre-tax components of cumulative amounts recognized in Accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
Pension Plans
|
|
|
|
|
|
|
|
U.S. Qualified
|
|
U.S. Supplemental
(Non-Qualified)
|
|
International
|
|
Postretirement
Plans
|
|
|
|
As of December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Actuarial losses(a)
|
|
$
|
(5,062)
|
|
|
$
|
(4,812)
|
|
|
$
|
(579)
|
|
|
$
|
(484)
|
|
|
$
|
(3,056)
|
|
|
$
|
(2,921)
|
|
|
$
|
58
|
|
|
$
|
(76)
|
|
|
Prior service (costs)/credits
|
|
(3)
|
|
|
(2)
|
|
|
(1)
|
|
|
—
|
|
|
(31)
|
|
|
(21)
|
|
|
688
|
|
|
830
|
|
|
Total(b)
|
|
$
|
(5,065)
|
|
|
$
|
(4,814)
|
|
|
$
|
(580)
|
|
|
$
|
(485)
|
|
|
$
|
(3,087)
|
|
|
$
|
(2,942)
|
|
|
$
|
746
|
|
|
$
|
754
|
|
(a)Primarily represent the impact of changes in discount rates and other assumptions that result in cumulative changes in our PBO, as well as the cumulative difference between the expected return and actual return on plan assets. These accumulated actuarial losses are recognized in Accumulated other comprehensive loss and are amortized into net periodic benefit costs primarily over the average remaining service period for active participants for plans that are not frozen or the average life expectancy of plan participants for frozen plans, primarily using the corridor approach.
(b)The change from December 31, 2019 includes the derecognition of $388 million of pre-tax actuarial losses, net of prior service credits associated with benefit plans distributed as a result of the spin-off and the combination of the Upjohn Business with Mylan on November 16, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides information related to the funded status of selected benefit plans (including those reported as part of liabilities of discontinued operations):
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Qualified
|
|
U.S. Supplemental (Non-Qualified)
|
|
International
|
|
|
|
As of December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Pension plans with an ABO in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets
|
|
$
|
16,094
|
|
|
$
|
14,586
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,674
|
|
|
$
|
5,843
|
|
|
ABO
|
|
16,940
|
|
|
16,535
|
|
|
1,366
|
|
|
1,351
|
|
|
8,961
|
|
|
7,960
|
|
|
Pension plans with a PBO in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets
|
|
16,094
|
|
|
14,586
|
|
|
—
|
|
|
—
|
|
|
6,735
|
|
|
5,947
|
|
|
PBO
|
|
16,940
|
|
|
16,535
|
|
|
1,366
|
|
|
1,351
|
|
|
9,447
|
|
|
8,503
|
|
All of our U.S. plans and many of our international plans were underfunded as of December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
89
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
D. Plan Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides the components of plan assets (including those reported as part of discontinued operations):
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
Fair Value
|
|
|
|
(MILLIONS OF DOLLARS)
|
|
As of December 31, 2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets Measured at NAV(a)
|
|
As of December 31, 2019
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets Measured at NAV(a)
|
|
U.S. qualified pension plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
781
|
|
|
$
|
70
|
|
|
$
|
711
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
363
|
|
|
$
|
80
|
|
|
$
|
284
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global equity securities
|
|
3,241
|
|
|
3,213
|
|
|
27
|
|
|
1
|
|
|
—
|
|
|
3,464
|
|
|
3,406
|
|
|
57
|
|
|
—
|
|
|
—
|
|
|
Equity commingled funds
|
|
1,325
|
|
|
—
|
|
|
1,110
|
|
|
—
|
|
|
215
|
|
|
1,179
|
|
|
—
|
|
|
819
|
|
|
—
|
|
|
360
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
6,499
|
|
|
23
|
|
|
6,476
|
|
|
—
|
|
|
—
|
|
|
5,292
|
|
|
10
|
|
|
5,281
|
|
|
1
|
|
|
—
|
|
|
Government and agency obligations(b)
|
|
1,555
|
|
|
—
|
|
|
1,555
|
|
|
—
|
|
|
—
|
|
|
1,799
|
|
|
—
|
|
|
1,799
|
|
|
—
|
|
|
—
|
|
|
Fixed income commingled funds
|
|
23
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
Other investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership investments(c)
|
|
1,431
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,431
|
|
|
1,212
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,212
|
|
|
Insurance contracts
|
|
190
|
|
|
—
|
|
|
190
|
|
|
—
|
|
|
—
|
|
|
196
|
|
|
—
|
|
|
196
|
|
|
—
|
|
|
—
|
|
|
Other commingled funds(d)
|
|
1,049
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
1,038
|
|
|
1,075
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
1,066
|
|
|
Total
|
|
$
|
16,094
|
|
|
$
|
3,306
|
|
|
$
|
10,103
|
|
|
$
|
1
|
|
|
$
|
2,684
|
|
|
$
|
14,586
|
|
|
$
|
3,496
|
|
|
$
|
8,451
|
|
|
$
|
1
|
|
|
$
|
2,638
|
|
|
International pension plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
407
|
|
|
$
|
61
|
|
|
$
|
346
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
221
|
|
|
$
|
33
|
|
|
$
|
187
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity commingled funds
|
|
2,051
|
|
|
—
|
|
|
1,681
|
|
|
—
|
|
|
370
|
|
|
1,922
|
|
|
—
|
|
|
1,548
|
|
|
—
|
|
|
374
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
925
|
|
|
—
|
|
|
925
|
|
|
—
|
|
|
—
|
|
|
796
|
|
|
—
|
|
|
796
|
|
|
—
|
|
|
—
|
|
|
Government and agency obligations(b)
|
|
1,334
|
|
|
—
|
|
|
1,334
|
|
|
—
|
|
|
—
|
|
|
1,200
|
|
|
—
|
|
|
1,200
|
|
|
—
|
|
|
—
|
|
|
Fixed income commingled funds
|
|
2,484
|
|
|
—
|
|
|
1,217
|
|
|
—
|
|
|
1,267
|
|
|
2,201
|
|
|
—
|
|
|
1,031
|
|
|
—
|
|
|
1,171
|
|
|
Other investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership investments(c)
|
|
69
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
66
|
|
|
66
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
63
|
|
|
Insurance contracts
|
|
1,027
|
|
|
—
|
|
|
57
|
|
|
969
|
|
|
1
|
|
|
1,027
|
|
|
—
|
|
|
82
|
|
|
944
|
|
|
1
|
|
|
Other(d)
|
|
1,514
|
|
|
—
|
|
|
117
|
|
|
393
|
|
|
1,003
|
|
|
1,524
|
|
|
—
|
|
|
82
|
|
|
398
|
|
|
1,043
|
|
|
Total
|
|
$
|
9,811
|
|
|
$
|
61
|
|
|
$
|
5,681
|
|
|
$
|
1,362
|
|
|
$
|
2,707
|
|
|
$
|
8,956
|
|
|
$
|
33
|
|
|
$
|
4,929
|
|
|
$
|
1,342
|
|
|
$
|
2,652
|
|
|
U.S. postretirement plans(e)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance contracts
|
|
$
|
588
|
|
|
$
|
—
|
|
|
$
|
588
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
519
|
|
|
$
|
—
|
|
|
$
|
519
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)Certain investments that are measured at NAV per share (or its equivalent) have not been classified in the fair value hierarchy. The NAV amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefits plan assets.
(b)Government and agency obligations are inclusive of repurchase agreements.
(c)Mainly includes investments in private equity, private debt, public equity limited partnerships, and, to a lesser extent, real estate and venture capital.
(d)Mostly includes investments in hedge funds and real estate.
(e)Reflects postretirement plan assets, which support a portion of our U.S. retiree medical plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides an analysis of the changes in our more significant investments valued using significant unobservable inputs (including those reported as part of discontinued operations):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Pension Plans
|
|
|
|
|
|
|
|
Insurance contracts
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Fair value, beginning
|
|
|
|
|
|
|
|
|
|
$
|
944
|
|
|
$
|
684
|
|
|
$
|
398
|
|
|
$
|
382
|
|
|
Actual return on plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets held, ending
|
|
|
|
|
|
|
|
|
|
32
|
|
|
50
|
|
|
(10)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases, sales, and settlements, net
|
|
|
|
|
|
|
|
|
|
(38)
|
|
|
(40)
|
|
|
(10)
|
|
|
6
|
|
|
Transfer into/(out of) Level 3
|
|
|
|
|
|
|
|
|
|
(11)
|
|
|
247
|
|
|
(2)
|
|
|
—
|
|
|
Exchange rate changes
|
|
|
|
|
|
|
|
|
|
42
|
|
|
2
|
|
|
16
|
|
|
4
|
|
|
Fair value, ending
|
|
|
|
|
|
|
|
|
|
$
|
969
|
|
|
$
|
944
|
|
|
$
|
393
|
|
|
$
|
398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
90
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Equity securities, Fixed income securities and Other investments may each be combined into commingled funds. Most commingled funds are valued to reflect the interest in the fund based on the reported year-end NAV. Partnership and Other investments are valued based on year-end reported NAV (or its equivalent), with adjustments as appropriate for lagged reporting of up to three months.
The following methods and assumptions were used to estimate the fair value of our pension and postretirement plans’ assets:
•Cash and cash equivalents: Level 1 investments may include cash, cash equivalents and foreign currency valued using exchange rates. Level 2 investments may include short-term investment funds which are commingled funds priced at a stable NAV by the administrator of the funds.
•Equity securities: Level 1 investments may include individual securities that are valued at the closing price or last trade reported on the major market on which they are traded. Level 1 and Level 2 investments may include commingled funds that have a readily determinable fair value based on quoted prices on an exchange or a published NAV derived from the quoted prices in active markets of the underlying securities. Level 3 investments may include individual securities that are unlisted, delisted, suspended, or illiquid and are typically valued using their last available price.
•Fixed income securities: Level 1 investments may include individual securities that are valued at the closing price or last trade reported on the major market on which they are traded. Level 2 investments may include commingled funds that have a readily determinable fair value based on observable prices of the underlying securities. Level 2 investments may include corporate bonds, government and government agency obligations and other fixed income securities valued using bid evaluation pricing models or quoted prices of securities with similar characteristics. Level 3 investments may include securities that are valued using alternative pricing sources, such as investment managers or brokers, which use proprietary pricing models that incorporate unobservable inputs.
•Other investments: Level 1 investments may include individual securities that are valued at the closing price or last trade reported on the major market on which they are traded. Level 2 investments may include Insurance contracts which invest in interest bearing cash, U.S. government securities and corporate debt instruments.
Certain investments are authorized to include derivatives, such as equity or bond futures, swaps, options and currency futures or forwards for managing risks and exposures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides the long-term target asset allocations ranges and the percentage of the fair value of plan assets for benefit plans:
|
|
|
|
|
|
|
|
Target
Allocation Percentage
|
|
Percentage of Plan Assets
|
|
|
|
As of December 31,
|
|
(PERCENTAGES)
|
|
2020
|
|
2020
|
|
2019
|
|
U.S. qualified pension plans
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
0-10%
|
|
4.9 %
|
|
2.5
|
%
|
|
Equity securities
|
|
35-55%
|
|
28.4 %
|
|
31.8
|
%
|
|
Fixed income securities
|
|
28-53%
|
|
50.2 %
|
|
48.7
|
%
|
|
Other investments
|
|
5-20%
|
|
16.6 %
|
|
17.0
|
%
|
|
Total
|
|
100
|
%
|
|
100 %
|
|
100
|
%
|
|
International pension plans
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
0-10%
|
|
4.2
|
%
|
|
2.5
|
%
|
|
Equity securities
|
|
20-40%
|
|
20.9
|
%
|
|
21.5
|
%
|
|
Fixed income securities
|
|
35-60%
|
|
48.4
|
%
|
|
46.9
|
%
|
|
Other investments
|
|
10-35%
|
|
26.6
|
%
|
|
29.2
|
%
|
|
Total
|
|
100
|
%
|
|
100 %
|
|
100
|
%
|
|
U.S. postretirement plans
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
0-5%
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments
|
|
95-100%
|
|
100
|
%
|
|
100
|
%
|
|
Total
|
|
100
|
%
|
|
100 %
|
|
100
|
%
|
Global plan assets are managed with the objective of generating returns that will enable the plans to meet their future obligations, while seeking to manage net periodic benefit costs and cash contributions over the long-term. We utilize long-term asset allocation ranges in the management of our plans’ invested assets. Our long-term return expectations are developed based on a diversified, global investment strategy that takes into account historical experience, as well as the impact of portfolio diversification, active portfolio management, and our view of current and future economic and financial market conditions. As market conditions and other factors change, we may adjust our targets accordingly and our asset allocations may vary from the target allocations.
Our long-term asset allocation ranges reflect our asset class return expectations and tolerance for investment risk within the context of the respective plans’ long-term benefit obligations. These ranges are supported by analysis that incorporates historical and expected returns by asset class, as well as volatilities and correlations across asset classes and our liability profile.
Each pension plan is overseen by a local committee or board that is responsible for the overall investment of the pension plan assets. In determining investment policies and associated target allocations, each committee or board considers a wide variety of factors. As such, the target asset allocation for each of our international pension plans is set on a standalone basis by the relevant board or committee. The target
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|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
91
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
asset allocation ranges shown for the international pension plans seek to reflect the combined target allocations across all such plans, while also showing the range within which the target allocations for each plan typically falls.
The investment managers of certain separately managed accounts, commingled funds and private equity funds may be permitted to use repurchase agreements and derivative securities, including U.S. Treasury and equity futures contracts as described in each respective investment management, subscription, partnership or other governing agreement.
E. Cash Flows
It is our practice to fund amounts for our qualified pension plans that are at least sufficient to meet the minimum requirements set forth in applicable employee benefit laws and local tax laws.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides the expected future cash flow information related to our benefit plans:
|
|
|
|
Pension Plans
|
|
|
|
(MILLIONS OF DOLLARS)
|
|
U.S. Qualified
|
|
U.S. Supplemental
(Non-Qualified)
|
|
International
|
|
Postretirement Plans
|
|
Expected employer contributions:
|
|
|
|
|
|
|
|
|
|
2021
|
|
$
|
—
|
|
|
$
|
127
|
|
|
$
|
282
|
|
|
$
|
90
|
|
|
Expected benefit payments:
|
|
|
|
|
|
|
|
|
|
2021
|
|
$
|
1,139
|
|
|
$
|
127
|
|
|
$
|
371
|
|
|
$
|
97
|
|
|
2022
|
|
1,036
|
|
|
121
|
|
|
375
|
|
|
94
|
|
|
2023
|
|
1,032
|
|
|
116
|
|
|
375
|
|
|
92
|
|
|
2024
|
|
1,030
|
|
|
106
|
|
|
385
|
|
|
89
|
|
|
2025
|
|
986
|
|
|
100
|
|
|
393
|
|
|
86
|
|
|
2026–2030
|
|
4,625
|
|
|
424
|
|
|
2,086
|
|
|
430
|
|
The above table reflects the total U.S. and international plan benefits projected to be paid from the plans or from our general assets under the current actuarial assumptions used for the calculation of the benefit obligation and, therefore, actual benefit payments may differ from projected benefit payments.
F. Defined Contribution Plans
We have defined contribution plans in the U.S. and several other countries. For the majority of the U.S. defined contribution plans, employees may contribute a portion of their salaries and bonuses to the plans, and we match, in cash, a portion of the employee contributions. Beginning on January 1, 2011, for newly hired non-union employees, rehires and transfers to the U.S. or Puerto Rico, we no longer offer a defined benefit pension plan and, instead, offer a Retirement Savings Contribution (RSC) in the defined contribution plan. The RSC is an annual non-contributory employer contribution (that is not dependent upon the participant making a contribution) determined based on each employee’s eligible compensation, age and years of service. Beginning on January 1, 2018, all non-union employees in the U.S. and Puerto Rico defined benefit plans transitioned to the RSC in the defined contribution plans. We recorded charges related to the employer contributions to global defined contribution plans of $685 million in 2020, $659 million in 2019 and $622 million in 2018.
Note 12. Equity
A. Common Stock Purchases
We purchase our common stock through privately negotiated transactions or in the open market as circumstances and prices warrant. Purchased shares under each of the share-purchase plans, which are authorized by our BOD, are available for general corporate purposes. In December 2015, the BOD authorized an $11 billion share repurchase program, which was exhausted in the third quarter of 2018. In December 2017, the BOD authorized an additional $10 billion share repurchase program, which was exhausted in the first quarter of 2019. In December 2018, the BOD authorized another $10 billion share repurchase program to be utilized over time and share repurchases commenced thereunder in the first quarter of 2019.
In March 2018, we entered into an accelerated share repurchase agreement (ASR) with Citibank, N.A. to repurchase $4 billion of our common stock pursuant to our previously announced share repurchase authorization. We paid $4 billion and received an initial delivery of 87 million shares of stock at a price of $36.61 per share, which represented approximately 80% of the notional amount of the ASR. In September 2018, the ASR was completed resulting in Citibank owing us an additional 21 million shares of our common stock. The average price paid for all of the shares delivered under the ASR was $36.86 per share. The common stock received is included in Treasury stock.
In February 2019, we entered into an ASR with Goldman Sachs & Co. LLC to repurchase $6.8 billion of our common stock pursuant to our previously announced share repurchase authorization. We paid $6.8 billion and received an initial delivery of 130 million shares of common stock, which represented approximately 80% of the notional amount of the ASR. In August 2019, the ASR with Goldman Sachs & Co. LLC was completed resulting in Goldman Sachs & Co. LLC owing us an additional 33.5 million shares of our common stock. The average price paid for all of the shares delivered under the ASR was $41.42 per share. The common stock received is included in Treasury stock.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
92
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides the number of shares of our common stock purchased and the cost of purchases under our publicly announced share purchase plans, including our ASRs:
|
|
|
|
Year Ended December 31,
|
|
(SHARES IN MILLIONS, DOLLARS IN BILLIONS)
|
|
2020
|
|
2019(a)
|
|
2018(b)
|
|
Shares of common stock purchased
|
|
—
|
|
|
213
|
|
|
307
|
|
|
Cost of purchase
|
|
$
|
—
|
|
|
$
|
8.9
|
|
|
$
|
12.2
|
|
(a)Represents shares purchased pursuant to the ASR with Goldman Sachs & Co. LLC entered into in February 2019, as well as open market share repurchases of $2.1 billion.
(b)Represents shares purchased pursuant to the ASR with Citibank entered into in March 2018, as well as open market share repurchases of $8.2 billion.
Our remaining share-purchase authorization was approximately $5.3 billion at December 31, 2020.
B. Preferred Stock and Employee Stock Ownership Plans
Prior to May 4, 2020, our Series A convertible perpetual preferred stock (the Series A Preferred Stock) was held by an ESOP trust (the Trust). All outstanding shares of Series A Preferred Stock were converted, at the direction of the independent fiduciary under the Trust and in accordance with the certificate of designations for the Series A Preferred Stock, into shares of our common stock on May 4, 2020. The Trust received an aggregate of 1,070,369 shares of our common stock upon conversion, with zero shares of Series A Preferred Stock remaining outstanding as a result of the conversion. In December 2020, we filed a certificate of elimination and a restated certificate of incorporation with the Delaware Secretary of State, which eliminated the Series A Preferred Stock.
Since May 4, 2020, we have one ESOP that holds common stock of the Company (Common ESOP). Prior to that there was also an ESOP that held the Series A Preferred Stock. As of December 31, 2020, all shares of common stock held by the Common ESOP have been allocated to the Pfizer U.S. defined contribution plan participants. The compensation cost related to the Common ESOP was $19 million in 2020, $20 million in 2019 and $19 million in 2018.
Note 13. Share-Based Payments
Our compensation programs can include share-based payment awards with value that is determined by reference to the fair value of our shares and that provide for the grant of shares or options to acquire shares or similar arrangements. Our share-based awards are designed based on competitive survey data or industry peer groups used for compensation purposes; and are allocated between different long-term incentive awards, generally in the form of Total Shareholder Return Units (TSRUs), Restricted Stock Units (RSUs), Portfolio Performance Shares (PPSs), Performance Share Awards (PSAs) and Stock Options, as determined by the Compensation Committee.
The 2019 Stock Plan (2019 Plan) replaced and superseded the 2014 Plan. It provides for 400 million shares, in addition to shares remaining under the 2014 Plan, to be authorized for grants. The 2019 Plan provides that the number of stock options, TSRUs, RSUs, or performance-based awards that may be granted to any one individual during any 36-month period is limited to 20 million shares, and that RSUs, PPSs and PSAs count as three shares, while TSRUs and stock options count as one share, toward the maximum shares available under the 2019 Plan. As of December 31, 2020, 411 million shares were available for award. Although not required to do so we have used authorized and unissued shares and, to a lesser extent, treasury stock to satisfy our obligations under these programs.
A summary of the awards and valuation details:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded to
|
Terms
|
Valuation
|
Recognition and Presentation
|
|
Total Shareholder Return Units (TSRUs)(a), (b)
|
|
Senior and other key management and select employees
|
•Entitle the holder to receive shares of our common stock with a value equal to the difference between the defined settlement price and the grant price, plus the dividends accumulated during the five or seven-year term, if and to the extent the total value is positive.
•Settlement price is the average closing price of our common stock during the 20 trading days ending on the fifth or seventh anniversary of the grant, as applicable; the grant price is the closing price of our common stock on the date of the grant.
•Automatically settled on the fifth or seventh anniversary of the grant but vest on the third anniversary of the grant, after which time there is no longer a substantial likelihood of forfeiture.
|
As of the grant date using a Monte Carlo simulation model
|
Amortized on a straight-line basis over the vesting term into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate.
|
|
Restricted Stock Units (RSUs)
|
|
Select employees
|
•Entitle the holder to receive a specified number of shares of our common stock, including shares resulting from dividend equivalents paid on such RSUs.
•For RSUs granted during the periods presented, in virtually all instances, the units vest after three years of continuous service from the grant date.
|
As of the grant date using the closing price of our common stock
|
Amortized on a straight-line basis over the vesting term into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate.
|
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
93
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded to
|
Terms
|
Valuation
|
Recognition and Presentation
|
|
Portfolio Performance Shares (PPSs)
|
|
Select employees
|
•Entitle the holder to receive, at the end of the performance period, shares of our common stock, if any, including shares resulting from dividend equivalents paid on such shares.
•For PPSs granted during the period presented, the awards vest after three years of continuous service from the grant date and the number of shares paid, if any, depends on the achievement of predetermined goals related to Pfizer’s long-term product portfolio during a five-year performance period from the year of the grant date.
•The number of shares that may be earned ranges from 0% to 200% of the initial award depending on goal achievement over the performance period.
|
As of the grant date using the intrinsic value method using the closing price of our common stock
|
Amortized on a straight-line basis over the probable vesting term into Cost of sales, Selling, informational and administrative expenses and/or Research and development expenses, as appropriate, and adjusted each reporting period, as necessary, to reflect changes in the price of our common stock, changes in the number of shares that are probable of being earned and changes in management’s assessment of the probability that the specified performance criteria will be achieved and/or changes in management’s
assessment of the probable vesting term.
|
|
Performance Share Awards (PSAs)
|
|
Senior and other key management
|
•Entitle the holder to receive, at the end of the performance period, shares of our common stock, if any, including shares resulting from dividend equivalents, dependent upon the achievement of predetermined goals related to two measures:
a.Adjusted operating income (for performance years through 2018) or adjusted net income (for 2019 and later years, except for the 2017 PSAs) over three one-year periods; and
b.TSR as compared to the NYSE ARCA Pharmaceutical Index (DRG Index) over the three-year performance period.
•PSAs vest after three years of continuous service from the grant date.
•The number of shares that may be earned ranges from 0% to 200% of the initial award depending on goal achievement over the performance period.
|
As of the grant date using the intrinsic value method using the closing price of our common stock
|
Amortized on a straight-line basis over the probable vesting term into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate, and adjusted each reporting period, as necessary, to reflect changes in the price of our common stock, changes in the number of shares that are probable of being earned and changes in management’s assessment of the probability that the specified performance criteria will be achieved.
|
|
Stock Options
|
|
Select employees
|
•Entitle the holder to purchase a specified number of our common stock at a price per share equal to the closing market price of our common stock on the date of grant, when vested.
•Beginning in 2016, only a limited set of non-U.S. employees received stock option grants. No stock options were awarded to senior and other key management in any period presented.
•Stock options vest after three years of continuous service from the grant date and have a contractual term of 10 years.
|
As of the grant date using the Black-Scholes-Merton option-pricing model
|
Amortized on a straight-line basis over the vesting term into Cost of sales, Selling, informational and administrative expenses, and/or Research and development expenses, as appropriate.
|
(a)Retirement-eligible holders, as defined in the grant terms, can convert their TSRUs, when vested, into Profit Units (PTUs) with a conversion ratio based on a calculation used to determine the shares at TSRU settlement. The PTUs are entitled to earn Dividend Equivalent Units (DEUs), and the PTUs and DEUs will be settled in our common stock on the TSRUs’ original settlement date and will be subject to the terms and conditions of the original grant including forfeiture provisions.
(b) In 2017, Performance Total Shareholder Return Units (PTSRUs) were awarded to the Former Chairman and Chief Executive Officer (1,444,395 PTSRUs) and 361,099 PTSRUs were awarded to the Group President, Chief Business Officer (former role Group President Pfizer Innovative Health) at a grant price of $30.31 and at a GDFV of $5.54 per PTSRU. All these amounts have been adjusted for the Upjohn spin-off discussed in Note 2B. In addition to having the same characteristics and valuation methodology of TSRUs, PTSRU grants require special service and performance conditions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following provides data related to all TSRU, RSU, PPS, PSA and stock option activity:
|
|
(MILLIONS OF DOLLARS, EXCEPT FAIR VALUE OF SHARES VESTED PER TSRU AND STOCK OPTION)
|
|
TSRUs
|
|
RSUs
|
|
PPSs
|
|
PSAs
|
|
Stock Options
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
Total fair value of shares vested(a)
|
|
$6.22
|
|
$8.52
|
|
$7.42
|
|
$334
|
|
$454
|
|
$146
|
|
$119
|
|
$136
|
|
$169
|
|
$25
|
|
$64
|
|
$4
|
|
$3.56
|
|
$5.98
|
|
$5.06
|
|
Total intrinsic value of options exercised or share units converted
|
|
$84
|
|
$175
|
|
$151
|
|
|
|
|
|
|
|
$224
|
|
$245
|
|
$194
|
|
|
|
|
|
|
|
$293
|
|
$261
|
|
$625
|
|
Cash received upon exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$425
|
|
$394
|
|
$1,259
|
|
Tax benefits realized from exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$55
|
|
$47
|
|
$115
|
|
Compensation cost recognized, pre-tax(b)
|
|
$287
|
|
$294
|
|
$302
|
|
$272
|
|
$275
|
|
$286
|
|
$180
|
|
$114
|
|
$276
|
|
$31
|
|
$28
|
|
$62
|
|
$6
|
|
$7
|
|
$12
|
|
Total compensation cost related to nonvested awards not yet recognized, pre-tax
|
|
$224
|
|
$229
|
|
$246
|
|
$228
|
|
$241
|
|
$256
|
|
$104
|
|
$87
|
|
$102
|
|
$32
|
|
$34
|
|
$41
|
|
$4
|
|
$5
|
|
$5
|
|
Weighted-average period over which cost is expected to be recognized (years)
|
|
1.6
|
|
1.6
|
|
1.6
|
|
1.7
|
|
1.7
|
|
1.7
|
|
1.8
|
|
1.8
|
|
1.8
|
|
1.9
|
|
1.8
|
|
1.8
|
|
1.7
|
|
1.6
|
|
1.7
|
(a)Weighted-average GDFV per TSRUs and stock options.
(b)TSRU includes expense for PTSRUs, which is not significant for all years presented.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
94
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Total share-based payment expense was $780 million, $718 million and $949 million in 2020, 2019 and 2018, respectively, which includes pre-tax share-based payment expense included in Income from discontinued operations––net of tax of $23 million, $30 million and $27 million in 2020, 2019 and 2018, respectively. Tax benefit for share-based compensation expense was $141 million, $137 million and $180 million in 2020, 2019 and 2018, respectively.
The table above excludes total expense due to the modification for share-based awards in connection with our cost reduction/productivity initiatives, which was not significant for all years presented and is recorded in Restructuring charges and certain acquisition-related costs (see Note 3). Amounts capitalized as part of inventory cost were not significant for any period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of the weighted-average assumptions used in the valuation of TSRUs and stock options:
|
|
|
|
TSRUs
|
|
Stock Options
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
Expected dividend yield (based on a constant dividend yield during the expected term)
|
|
4.36
|
%
|
|
3.27
|
%
|
|
3.73
|
%
|
|
4.36
|
%
|
|
3.27
|
%
|
|
3.73
|
%
|
|
Risk-free interest rate (based on interpolated yield on U.S. Treasury zero-coupon issues)
|
|
1.15
|
%
|
|
2.55
|
%
|
|
2.60
|
%
|
|
1.25
|
%
|
|
2.66
|
%
|
|
2.85
|
%
|
|
Expected stock price volatility (based on implied volatility, after consideration of historical volatility)
|
|
20.99
|
%
|
|
18.34
|
%
|
|
20.00
|
%
|
|
20.97
|
%
|
|
18.34
|
%
|
|
20.02
|
%
|
|
TSRUs contractual/stock options expected term, years (based on historical exercise and post-vesting termination patterns for stock options)
|
|
5.12
|
|
5.13
|
|
5.12
|
|
6.75
|
|
6.75
|
|
6.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of all TSRU, RSU, PPS and PSA activity during 2020 (with the shares granted representing the maximum award that could be achieved for PPSs and PSAs):
|
|
|
|
TSRUs
|
|
RSUs
|
|
PPSs(a)
|
|
PSAs
|
|
TSRUs
|
|
Per TSRU, Weighted Average
|
|
Shares
|
|
Weighted Avg. GDFV per share
|
|
Shares
|
|
Weighted Avg. Intrinsic Value per share
|
|
Shares
|
|
Weighted Avg. Intrinsic Value per share
|
|
|
|
|
|
|
|
|
(Thousands)
|
|
GDFV
|
|
Grant Price
|
|
(Thousands)
|
|
|
(Thousands)
|
|
(Thousands)
|
|
|
Nonvested,
December 31, 2019(b)
|
122,654
|
|
$
|
7.53
|
|
|
$
|
38.01
|
|
|
23,407
|
|
$
|
37.54
|
|
|
17,694
|
|
$
|
39.18
|
|
|
5,061
|
|
$
|
39.18
|
|
|
Granted(b)
|
51,158
|
|
6.22
|
|
|
34.12
|
|
|
8,423
|
|
34.22
|
|
|
8,150
|
|
34.10
|
|
|
1,713
|
|
34.10
|
|
|
Vested(b)
|
(45,757)
|
|
|
6.40
|
|
|
34.11
|
|
|
(9,321)
|
|
|
34.70
|
|
|
(6,393)
|
|
|
34.73
|
|
|
(728)
|
|
|
34.65
|
|
|
Reinvested dividend equivalents(b)
|
|
|
|
|
|
|
955
|
|
|
37.32
|
|
|
|
|
|
|
|
|
|
|
Forfeited(b)
|
(4,782)
|
|
|
7.27
|
|
|
37.20
|
|
|
(999)
|
|
|
37.91
|
|
|
(713)
|
|
|
36.78
|
|
|
(1,052)
|
|
|
35.00
|
|
|
Upjohn spin-off adjustment(c)
|
6,571
|
|
6.88
|
|
|
32.94
|
|
|
1,228
|
|
|
35.55
|
|
|
1,338
|
|
36.69
|
|
|
270
|
|
|
36.69
|
|
|
Nonvested, December 31, 2020
|
129,844
|
|
$
|
6.90
|
|
|
$
|
32.94
|
|
|
23,692
|
|
$
|
35.50
|
|
|
20,077
|
|
$
|
36.81
|
|
|
5,264
|
|
$
|
36.81
|
|
(a)Vested and non-vested shares outstanding, but not paid as of December 31, 2020 were 33.9 million.
(b)Activity prior to the Upjohn Business spin-off has not been adjusted.
(c)In connection with the Upjohn Business spin-off, the Company made adjustments to preserve the intrinsic value of the awards immediately before and after the spin-off. The terms of the outstanding awards remain the same and continue to vest over the original vesting periods. Certain outstanding awards at the time of the spin-off held by employees of Upjohn were prorated for services performed and the remaining portion forfeited at the time of the separation. The share-based awards held as of November 16, 2020 were adjusted as follows:
•The number of outstanding TSRUs was increased and the grant price was decreased.
•The number of shares of common stock subject to each outstanding RSUs, PPSs, and PSAs was increased.
The adjustments to the stock-based compensation awards did not result in additional compensation cost.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of TSRU and PTU information as of December 31, 2020(a), (b):
|
|
|
|
TSRUs
(Thousands)
|
|
PTUs
(Thousands)
|
|
Weighted-Average
Grant Price
Per TSRU
|
|
Weighted-Average
Remaining Contractual Term (Years)
|
|
Aggregate Intrinsic Value (Millions)
|
|
TSRUs Outstanding
|
|
230,539
|
|
|
—
|
|
|
$
|
29.57
|
|
|
2.3
|
|
$
|
1,737
|
|
|
TSRUs Vested
|
|
100,696
|
|
|
—
|
|
|
25.22
|
|
|
0.8
|
|
1,168
|
|
|
TSRUs Expected to vest(c)
|
|
124,594
|
|
|
—
|
|
|
32.94
|
|
|
3.3
|
|
547
|
|
|
TSRUs exercised and converted to PTUs
|
|
—
|
|
|
1,467
|
|
|
$
|
—
|
|
|
0.3
|
|
$
|
54
|
|
(a)In 2020, we settled 5,478,547 TSRUs with a weighted-average grant price of $30.93 per unit.
(b)In 2020, 2,217,044 TSRUs with a weighted-average grant price of $29.26 per unit were converted into 757,285 PTUs.
(c)The number of TSRUs expected to vest takes into account an estimate of expected forfeitures.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
95
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of all stock option activity during 2020:
|
|
|
|
Shares
(Thousands)
|
|
Weighted-Average
Exercise Price
Per Share
|
|
Weighted-Average
Remaining Contractual Term
(Years)
|
|
Aggregate
Intrinsic Value(a)
(Millions)
|
|
Outstanding, December 31, 2019(b)
|
|
88,600
|
|
|
$
|
28.39
|
|
|
|
|
|
|
Granted(b)
|
|
1,755
|
|
|
34.10
|
|
|
|
|
|
|
Exercised(b)
|
|
(18,492)
|
|
|
23.05
|
|
|
|
|
|
|
Forfeited(b)
|
|
(160)
|
|
|
35.49
|
|
|
|
|
|
|
Expired(b)
|
|
(326)
|
|
|
24.91
|
|
|
|
|
|
|
Upjohn spin-off adjustment(c)
|
|
4,024
|
|
|
28.08
|
|
|
|
|
|
|
Outstanding, December 31, 2020
|
|
75,402
|
|
|
28.31
|
|
|
3.1
|
|
$
|
645
|
|
|
Vested and expected to vest, December 31, 2020(d)
|
|
75,226
|
|
|
28.30
|
|
|
3.0
|
|
645
|
|
|
Exercisable, December 31, 2020
|
|
71,732
|
|
|
$
|
27.97
|
|
|
2.8
|
|
$
|
635
|
|
(a)Market price of our underlying common stock less exercise price.
(b)Activity prior to the Upjohn Business spin-off has not been adjusted.
(c)In connection with the Upjohn business spin-off discussed above, the number of shares of common stock subject to each outstanding stock option was increased and the exercise price was decreased. These adjustments did not result in additional compensation cost.
(d)The number of options expected to vest takes into account an estimate of expected forfeitures.
Note 14. Earnings Per Common Share Attributable to Pfizer Inc. Common Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following presents the detailed calculation of EPS:
|
|
|
|
Year Ended December 31,
|
|
(IN MILLIONS)
|
|
2020
|
|
2019
|
|
2018
|
|
EPS Numerator––Basic
|
|
|
|
|
|
|
|
Income from continuing operations attributable to Pfizer Inc.
|
|
$
|
6,985
|
|
|
$
|
10,838
|
|
|
$
|
3,825
|
|
|
Less: Preferred stock dividends––net of tax
|
|
—
|
|
|
1
|
|
|
1
|
|
|
Income from continuing operations attributable to Pfizer Inc. common shareholders
|
|
6,984
|
|
|
10,837
|
|
|
3,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations––net of tax
|
|
2,631
|
|
|
5,435
|
|
|
7,328
|
|
|
Net income attributable to Pfizer Inc. common shareholders
|
|
$
|
9,616
|
|
|
$
|
16,272
|
|
|
$
|
11,152
|
|
|
EPS Numerator––Diluted
|
|
|
|
|
|
|
|
Income from continuing operations attributable to Pfizer Inc. common shareholders and assumed conversions
|
|
$
|
6,985
|
|
|
$
|
10,838
|
|
|
$
|
3,825
|
|
|
Income from discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and assumed conversions
|
|
2,631
|
|
|
5,435
|
|
|
7,328
|
|
|
Net income attributable to Pfizer Inc. common shareholders and assumed conversions
|
|
$
|
9,616
|
|
|
$
|
16,273
|
|
|
$
|
11,153
|
|
|
EPS Denominator
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding––Basic
|
|
5,555
|
|
|
5,569
|
|
|
5,872
|
|
|
Common-share equivalents: stock options, stock issuable under employee compensation plans convertible preferred stock and accelerated share repurchase agreements
|
|
77
|
|
|
106
|
|
|
105
|
|
|
Weighted-average number of common shares outstanding––Diluted
|
|
5,632
|
|
|
5,675
|
|
|
5,977
|
|
|
Anti-dilutive common stock equivalents(a)
|
|
4
|
|
|
2
|
|
|
2
|
|
(a)These common stock equivalents were outstanding for the periods presented, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.
Allocated shares held by the Common ESOP, including reinvested dividends, are considered outstanding for EPS calculations and the eventual conversion of allocated preferred shares held by the Preferred ESOP was assumed in the diluted EPS calculation until the conversion date, which occurred in May 2020. See Note 12.
Note 15. Leases
We lease real estate, fleet, and equipment for use in our operations. Our leases generally have lease terms of 1 to 30 years, some of which include options to terminate or extend leases for up to 5 to 10 years or on a month-to-month basis. We include options that are reasonably certain to be exercised as part of the determination of lease terms. We may negotiate termination clauses in anticipation of any changes in market conditions, but generally these termination options have not been exercised. Residual value guarantees are generally not included within our operating leases with the exception of some fleet leases. In addition to base rent payments, the leases may require us to pay directly for taxes and other non-lease components, such as insurance, maintenance and other operating expenses, which may be dependent on usage or vary month-to-month. Variable lease payments amounted to $380 million in 2020 and $327 million in 2019. We elected the practical expedient in the new standard to not separate non-lease components from lease components in calculating the amounts of ROU assets and lease liabilities for all underlying asset classes.
We determine if an arrangement is a lease at inception of the contract and we perform the lease classification test as of the lease commencement date. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
96
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For operating leases, the ROU assets and liabilities in our consolidated balance sheets follows:
|
|
|
|
|
|
As of December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
Balance Sheet Classification
|
|
2020
|
|
2019
|
|
ROU assets
|
|
Other noncurrent assets
|
|
$
|
1,393
|
|
|
$
|
1,289
|
|
|
Lease liabilities (short-term)
|
|
Other current liabilities
|
|
321
|
|
|
269
|
|
|
Lease liabilities (long-term)
|
|
Other noncurrent liabilities
|
|
1,114
|
|
|
1,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of total lease cost includes:
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
2020
|
|
2019
|
|
Operating lease cost
|
|
$
|
433
|
|
|
$
|
422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable lease cost
|
|
380
|
|
|
327
|
|
|
Sublease income
|
|
(40)
|
|
|
(45)
|
|
|
Total lease cost
|
|
$
|
773
|
|
|
$
|
704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other supplemental information for 2020 follows:
|
|
|
|
Weighted-Average Remaining Contractual Lease Term (Years)
|
|
Weighted-Average Discount Rate
|
|
|
|
(MILLIONS OF DOLLARS)
|
|
As of December 31, 2020
|
|
Year Ended
December 31,
2020
|
|
Operating leases
|
|
6.9
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
|
|
|
|
$
|
334
|
|
|
|
|
|
|
|
|
|
|
(Gains)/losses on sale and leaseback transactions, net
|
|
|
|
|
|
(3)
|
|
|
ROU assets obtained in exchange for new operating lease liabilities
|
|
|
|
|
|
413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other supplemental information for 2019 follows:
|
|
|
|
Weighted-Average Remaining Contractual Lease Term (Years)
|
|
Weighted-Average Discount Rate
|
|
|
|
(MILLIONS OF DOLLARS)
|
|
As of December 31, 2019
|
|
Year Ended
December 31,
2019
|
|
Operating leases
|
|
6.9
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
|
|
|
|
$
|
339
|
|
|
|
|
|
|
|
|
|
|
(Gains)/losses on sale and leaseback transactions, net
|
|
|
|
|
|
(29)
|
|
|
ROU assets obtained in exchange for new operating lease liabilities
|
|
|
|
|
|
318
|
|
|
|
|
|
|
|
|
|
|
|
|
The following reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded in the consolidated balance sheet as of December 31, 2020:
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
Period
|
|
Operating Lease Liabilities
|
|
Next one year(a)
|
|
$
|
357
|
|
|
1-2 years
|
|
299
|
|
|
2-3 years
|
|
250
|
|
|
3-4 years
|
|
167
|
|
|
4-5 years
|
|
137
|
|
|
Thereafter
|
|
408
|
|
|
Total undiscounted lease payments
|
|
1,618
|
|
|
Less: Imputed interest
|
|
183
|
|
|
Present value of minimum lease payments
|
|
1,435
|
|
|
Less: Current portion
|
|
321
|
|
|
Noncurrent portion
|
|
$
|
1,114
|
|
(a)Reflects lease payments due within 12 months subsequent to the balance sheet date.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
97
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
In April 2018, we entered an agreement to lease space in an office building in New York City. We expect to take control of the property in 2021 and relocate our global headquarters to this new office building in 2022. Our future minimum rental commitment under this 20-year lease is approximately $1.6 billion.
Prior to our adoption of the new lease standard, rental expense, net of sublease income, was $301 million in 2018.
Note 16. Contingencies and Certain Commitments
We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business, including tax and legal contingencies. The following outlines our legal contingencies. For a discussion of our tax contingencies, see Note 5B.
A. Legal Proceedings
Our legal contingencies include, but are not limited to, the following:
•Patent litigation, which typically involves challenges to the coverage and/or validity of patents on various products, processes or dosage forms. We are the plaintiff in the majority of these actions. An adverse outcome in actions in which we are the plaintiff could result in loss of patent protection for a drug, a significant loss of revenues from that drug or impairment of the value of associated assets.
•Product liability and other product-related litigation, which can include personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims, among others, often involves highly complex issues relating to medical causation, label warnings and reliance on those warnings, scientific evidence and findings, actual, provable injury and other matters.
•Commercial and other matters, which can include acquisition-, licensing-, collaboration- or co-promotion-related and product-pricing claims and environmental claims and proceedings, can involve complexities that will vary from matter to matter.
•Government investigations, which often are related to the extensive regulation of pharmaceutical companies by national, state and local government agencies in the U.S. and in other jurisdictions.
Certain of these contingencies could result in losses, including damages, fines and/or civil penalties, which could be substantial, and/or criminal charges.
We believe that our claims and defenses in matters in which we are a defendant are substantial, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of matters, which could have a material adverse effect on our results of operations and/or our cash flows in the period in which the amounts are accrued or paid.
We have accrued for losses that are both probable and reasonably estimable. Substantially all of our contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments, which result from a complex series of judgments about future events and uncertainties, are based on estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.
Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely heavily on estimates and assumptions. In August 2020, the SEC amended its disclosure rules regarding the threshold for disclosure of proceedings under environmental laws to which a governmental authority is a party. In accordance with the amended rule, we have adopted a disclosure threshold for such proceedings of $1 million in potential or actual governmental monetary sanctions.
The principal pending matters to which we are a party are discussed below. In determining whether a pending matter is a principal matter, we consider both quantitative and qualitative factors to assess materiality, such as, among others, the amount of damages and the nature of other relief sought, if specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be, or is, a class action and, if not certified, our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; whether related actions have been transferred to multidistrict litigation; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters in which we are the plaintiff, we consider, among other things, the financial significance of the product protected by the patent(s) at issue. Some of the matters discussed below include those which management believes that the likelihood of possible loss in excess of amounts accrued is remote.
A1. Legal Proceedings––Patent Litigation
We are involved in suits relating to our patents, including but not limited to, those discussed below. Most involve claims by generic drug manufacturers that patents covering our products, processes or dosage forms are invalid and/or do not cover the product of the generic drug manufacturer. Also, counterclaims, as well as various independent actions, have been filed alleging that our assertions of, or attempts to enforce, patent rights with respect to certain products constitute unfair competition and/or violations of antitrust laws. In addition to the challenges to the U.S. patents that are discussed below, patent rights to certain of our products are being challenged in various other jurisdictions. We are also party to patent damages suits in various jurisdictions pursuant to which generic drug manufacturers, payers, governments or other parties are seeking damages from us for allegedly causing delay of generic entry. Additionally, our licensing and collaboration partners face challenges by generic drug manufacturers to patents covering products for which we have licenses or co-promotion rights.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
98
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
We also are often involved in other proceedings, such as inter partes review, post-grant review, re-examination or opposition proceedings, before the U.S. Patent and Trademark Office, the European Patent Office, or other foreign counterparts relating to our intellectual property or the intellectual property rights of others. Also, if one of our patents is found to be invalid by such proceedings, generic or competitive products could be introduced into the market resulting in the erosion of sales of our existing products. For example, several of the patents in our pneumococcal vaccine portfolio were challenged in inter partes review and post-grant review proceedings in the U.S. In 2017, the Patent Trial and Appeal Board (PTAB) initiated proceedings, which remain pending, with respect to two of our pneumococcal vaccine patents. However, the PTAB declined to initiate proceedings as to two other pneumococcal vaccine patents. Various legal challenges to other pneumococcal vaccine patents remain pending in jurisdictions outside the U.S. The invalidation of all of the patents in our pneumococcal portfolio could potentially allow a competitor’s pneumococcal vaccine into the marketplace. In the event that any of the patents are found valid and infringed, a competitor’s pneumococcal vaccine might be prohibited from entering the market or a competitor might be required to pay us a royalty.
We are also subject to patent litigation pursuant to which one or more third parties seek damages and/or injunctive relief to compensate for alleged infringement of its patents by our commercial or other activities. For example, our Hospira subsidiaries are involved in patent disputes over their attempts to bring generic pharmaceutical and biosimilar products to market. If one of our marketed products is found to infringe valid patent rights of a third party, such third party may be awarded significant damages, or we may be prevented from further sales of that product. Such damages may be enhanced as much as three-fold if we or one of our subsidiaries is found to have willfully infringed valid patent rights of a third party.
Actions In Which We Are The Plaintiff
EpiPen
In 2010, King, which we acquired in 2011 and is a wholly-owned subsidiary, brought a patent-infringement action against Sandoz in the U.S. District Court for the District of New Jersey in connection with Sandoz’s abbreviated new drug application (ANDA) filed with the FDA seeking approval to market an epinephrine injectable product. Sandoz is challenging patents, which expire in 2025, covering the next-generation autoinjector for use with epinephrine that is sold under the EpiPen brand name.
Xeljanz (tofacitinib)
Beginning in 2017, we brought patent-infringement actions against several generic manufacturers that filed separate ANDAs with the FDA seeking approval to market their generic versions of tofacitinib tablets in one or both of 5 mg and 10 mg dosage strengths, and in both immediate and extended release forms. To date, we have settled actions with several generic manufacturers on terms not material to Pfizer. The remaining actions continue in the U.S. District Court for the District of Delaware as described below.
In 2017, we brought a patent-infringement action against Zydus Pharmaceuticals (USA) Inc. and Cadila Healthcare Ltd. (collectively, Zydus) asserting the infringement and validity of three patents: the patent covering the active ingredient expiring in December 2025 (the 2025 Patent), the patent covering an enantiomer of tofacitinib expiring in 2022, and the patent covering a polymorphic form of tofacitinib expiring in 2023 (the 2023 Patent), which Zydus challenged in its ANDA seeking approval to market a generic version of tofacitinib 5 mg tablets. In November 2020, we settled the case against Zydus on terms not material to Pfizer. In February 2021, we brought a separate patent-infringement action against Zydus asserting the infringement and validity of our composition of matter and crystalline form patents challenged by Zydus in its ANDA seeking approval to market a generic version of tofacitinib 22 mg extended release tablets.
In 2018, we brought a separate patent infringement action against Teva Pharmaceuticals USA, Inc. (Teva) asserting the infringement and validity of our patent covering extended release formulations of tofacitinib that was challenged by Teva in its ANDA seeking approval to market a generic version of tofacitinib 11 mg extended release tablets.
In January 2021, we brought a separate patent-infringement action against Aurobindo Pharma Limited (Aurobindo) asserting the infringement and validity of the 2025 Patent and the 2023 Patent, which Aurobindo challenged in its ANDA seeking approval to market a generic version of tofacitinib 5 mg and 10 mg tablets.
Inlyta (axitinib)
In 2019, Glenmark Pharmaceuticals Limited (Glenmark) notified us that it had filed an ANDA with the FDA seeking approval to market a generic version of Inlyta. Glenmark asserts the invalidity and non-infringement of the crystalline form patent for Inlyta that expires in 2030. In June 2019, we filed suit against Glenmark in the U.S. District Court for the District of Delaware, asserting the validity and infringement of the crystalline form patent for Inlyta.
Ibrance (palbociclib)
In March 2019, several generic companies notified us that they had filed ANDAs with the FDA seeking approval to market generic versions of Ibrance. The generic companies assert the invalidity and non-infringement of two composition of matter patents, one of which expires in 2023 and one of which expires in 2027, as a result of a U.S. Patent Term Extension certificate issued in January 2021, and a method of use patent covering palbociclib, which expires in 2023. In April 2019, we brought patent infringement actions against each of the generic filers in various federal courts, asserting the validity and infringement of the patents challenged by the generic companies. Beginning in September 2020, we received correspondence from several generic companies notifying us that they would seek approval to market generic versions of Ibrance. The generic companies assert the invalidity and non-infringement of our crystalline form patent which expires in 2034. Beginning in October 2020, we brought patent infringement actions against each of these generic companies in various federal courts, asserting the validity and infringement of the crystalline form patent.
Lyrica (pregabalin)
•U.K.
In June 2014, Generics (U.K.) Ltd (trading as Mylan) filed an invalidity action against the Lyrica pain use patent in the High Court of Justice in London. Subsequently, Actavis Group PTC ehf filed an invalidity action in the same court, and Pfizer sued Actavis Group PTC ehf, Actavis U.K. Ltd and Caduceus Pharma Ltd (together, Actavis) for infringement and requested preliminary relief. Our request for preliminary relief was denied in a January 2015 hearing, and the denial subsequently was confirmed on appeal.
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Pfizer Inc.
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2020 Form 10-K
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99
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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
In February 2015, the National Health Service (NHS) England was ordered by the High Court, as an intermediary, to issue guidance for prescribers and pharmacists directing the prescription and dispensing of Lyrica by brand when pregabalin was prescribed for the treatment of neuropathic pain. NHS Wales and NHS Northern Ireland also issued prescribing guidance. The guidance to prescribe and dispense Lyrica for neuropathic pain was withdrawn upon patent expiration in July 2017.
We also filed infringement actions against (i) Teva UK Ltd, and (ii) Dr. Reddy’s Laboratories (UK) Ltd and Caduceus Pharma Ltd (together, Dr. Reddy’s) in February 2015, seeking the same relief as in the action against Actavis. Dr. Reddy’s filed an invalidity counterclaim. These actions were stayed pending the outcome of the Mylan and Actavis cases.
The Mylan and Actavis invalidity actions were heard in the High Court at the same time as the Actavis infringement action. The High Court ruled against us, holding that the asserted claims were either not infringed or invalid, and appeals followed. In November 2018, the U.K. Supreme Court ruled that all the relevant claims directed to neuropathic pain were invalid.
In October 2015, after Sandoz GmbH and Sandoz Ltd (together, Sandoz) launched a full label generic pregabalin product, we obtained from the High Court a preliminary injunction enjoining Sandoz from further sales of the product and ordering Sandoz to identify the parties holding its product. Sandoz identified wholesaler AAH Pharmaceuticals Ltd and pharmacy chain Lloyds Pharmacy Ltd (supplied by AAH), and we requested that these parties cease further sales and withdraw the Sandoz full label product. In October 2015, Lloyds was added to the Sandoz action, and we obtained a preliminary order from the High Court requiring Lloyds to advise its pharmacists that the Sandoz full label product should not be dispensed. In November 2015, the High Court confirmed the preliminary injunction against Sandoz and Lloyds. Sandoz filed an invalidity counterclaim. Upon agreement of the parties, in December 2015, the proceedings against Lloyds were discontinued, and the proceedings against Sandoz were stayed pending outcome of the Mylan and Actavis cases. The preliminary injunction against Sandoz remained in place until patent expiration in July 2017.
In May 2020, Dr. Reddy’s filed a claim for damages in connection with the above-referenced legal actions. In July 2020, the Scottish Ministers and fourteen Scottish Health Boards (together, NHS Scotland) filed a claim for damages in connection with the above-referenced legal action concerning Sandoz. In September 2020, Teva, Sandoz, Ranbaxy, Inc. (Ranbaxy), Actavis, and the Secretary of State for Health and Social Care, together with 32 other National Health Service entities (together, NHS England, Wales, and Northern Ireland) filed claims for damages in the above-referenced legal actions. In November 2020, we and Mylan completed the transaction to spin-off our Upjohn Business and combine it with Mylan to form Viatris. As part of the transaction, Viatris has agreed to assume, and to indemnify Pfizer for, liabilities arising out of this matter.
◦Japan
In January 2017, Sawai Pharmaceutical Company Limited (a Japanese generic company) (Sawai) filed an invalidation action against the Lyrica pain use patent in the Japanese Patent Office (JPO). Hexal AG has filed a separate invalidation action that was stayed pending the result of the Sawai action. Multiple parties were allowed to intervene in the Sawai case. In July 2020, the JPO recognized the validity of certain amended claims of the patent covering Lyrica. We are appealing the decision. In August 2020, the Japanese regulatory authority granted regulatory approval to multiple generic companies and we filed legal actions against the generic companies seeking preliminary and permanent injunctions to prevent infringement of our patent. In November 2020, we and Mylan completed the transaction to spin-off our Upjohn Business and combine it with Mylan to form Viatris. As part of the transaction, Viatris has agreed to assume, and to indemnify Pfizer for, liabilities arising out of this matter.
Matter Involving Our Collaboration/Licensing Partners
Eliquis
In February, March, and April 2017, twenty-five generic companies sent BMS Paragraph-IV certification letters informing BMS that they had filed ANDAs seeking approval of generic versions of Eliquis, challenging the validity and infringement of one or more of the three patents listed in the Orange Book for Eliquis. One of the patents expired in December 2019 and the remaining patents currently are set to expire in 2026 and 2031. Eliquis has been jointly developed and is being commercialized by BMS and Pfizer. In April 2017, BMS and Pfizer filed patent-infringement actions against all generic filers in the U.S. District Court for the District of Delaware and the U.S. District Court for the District of West Virginia, asserting that each of the generic companies’ proposed products would infringe each of the patent(s) that each generic filer challenged. Some generic filers challenged only the 2031 patent, some challenged both the 2031 and 2026 patent, and one generic company challenged all three patents. In August 2020, the U.S. District Court for the District of Delaware ruled that both the 2026 patent and the 2031 patent are valid and infringed by the proposed generic products. In August and September 2020, the generic filers appealed the District Court’s decision to the U.S. Court of Appeals for the Federal Circuit. Prior to the August 2020 ruling, we and BMS settled with certain of the generic companies on terms not material to Pfizer, and we and BMS may settle with other generic companies in the future.
A2. Legal Proceedings––Product Litigation
We are defendants in numerous cases, including but not limited to those discussed below, related to our pharmaceutical and other products. Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss.
Asbestos
Between 1967 and 1982, Warner-Lambert owned American Optical Corporation (American Optical), which manufactured and sold respiratory protective devices and asbestos safety clothing. In connection with the sale of American Optical in 1982, Warner-Lambert agreed to indemnify the purchaser for certain liabilities, including certain asbestos-related and other claims. Warner-Lambert was acquired by Pfizer in 2000 and is a wholly owned subsidiary of Pfizer. Warner-Lambert is actively engaged in the defense of, and will continue to explore various means of resolving, these claims.
Numerous lawsuits against American Optical, Pfizer and certain of its previously owned subsidiaries are pending in various federal and state courts seeking damages for alleged personal injury from exposure to products allegedly containing asbestos and other allegedly hazardous materials sold by Pfizer and certain of its previously owned subsidiaries.
There also are a small number of lawsuits pending in various federal and state courts seeking damages for alleged exposure to asbestos in facilities owned or formerly owned by Pfizer or its subsidiaries.
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Pfizer Inc.
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2020 Form 10-K
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100
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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Effexor
Beginning in May 2011, actions, including purported class actions, were filed in various federal courts against Wyeth and, in certain of the actions, affiliates of Wyeth and certain other defendants relating to Effexor XR, which is the extended-release formulation of Effexor. The plaintiffs in each of the class actions seek to represent a class consisting of all persons in the U.S. and its territories who directly purchased, indirectly purchased or reimbursed patients for the purchase of Effexor XR or generic Effexor XR from any of the defendants from June 14, 2008 until the time the defendants’ allegedly unlawful conduct ceased. The plaintiffs in all of the actions allege delay in the launch of generic Effexor XR in the U.S. and its territories, in violation of federal antitrust laws and, in certain of the actions, the antitrust, consumer protection and various other laws of certain states, as the result of Wyeth fraudulently obtaining and improperly listing certain patents for Effexor XR in the Orange Book, enforcing certain patents for Effexor XR and entering into a litigation settlement agreement with a generic drug manufacturer with respect to Effexor XR. Each of the plaintiffs seeks treble damages (for itself in the individual actions or on behalf of the putative class in the purported class actions) for alleged price overcharges for Effexor XR or generic Effexor XR in the U.S. and its territories since June 14, 2008. All of these actions have been consolidated in the U.S. District Court for the District of New Jersey.
In October 2014, the District Court dismissed the direct purchaser plaintiffs’ claims based on the litigation settlement agreement, but declined to dismiss the other direct purchaser plaintiff claims. In January 2015, the District Court entered partial final judgments as to all settlement agreement claims, including those asserted by direct purchasers and end-payer plaintiffs, which plaintiffs appealed to the U.S. Court of Appeals for the Third Circuit. In August 2017, the U.S. Court of Appeals for the Third Circuit reversed the District Court’s decisions and remanded the claims to the District Court.
Lipitor
•Antitrust Actions
Beginning in November 2011, purported class actions relating to Lipitor were filed in various federal courts against, among others, Pfizer, certain Pfizer affiliates, and, in most of the actions, Ranbaxy and certain Ranbaxy affiliates. The plaintiffs in these various actions seek to represent nationwide, multi-state or statewide classes consisting of persons or entities who directly purchased, indirectly purchased or reimbursed patients for the purchase of Lipitor (or, in certain of the actions, generic Lipitor) from any of the defendants from March 2010 until the cessation of the defendants’ allegedly unlawful conduct (the Class Period). The plaintiffs allege delay in the launch of generic Lipitor, in violation of federal antitrust laws and/or state antitrust, consumer protection and various other laws, resulting from (i) the 2008 agreement pursuant to which Pfizer and Ranbaxy settled certain patent litigation involving Lipitor and Pfizer granted Ranbaxy a license to sell a generic version of Lipitor in various markets beginning on varying dates, and (ii) in certain of the actions, the procurement and/or enforcement of certain patents for Lipitor. Each of the actions seeks, among other things, treble damages on behalf of the putative class for alleged price overcharges for Lipitor (or, in certain of the actions, generic Lipitor) during the Class Period. In addition, individual actions have been filed against Pfizer, Ranbaxy and certain of their affiliates, among others, that assert claims and seek relief for the plaintiffs that are substantially similar to the claims asserted and the relief sought in the purported class actions described above. These various actions have been consolidated for pre-trial proceedings in a Multi-District Litigation (In re Lipitor Antitrust Litigation MDL-2332) in the U.S. District Court for the District of New Jersey.
In September 2013 and 2014, the District Court dismissed with prejudice the claims of the direct purchasers. In October and November 2014, the District Court dismissed with prejudice the claims of all other Multi-District Litigation plaintiffs. All plaintiffs have appealed the District Court’s orders dismissing their claims with prejudice to the U.S. Court of Appeals for the Third Circuit. In addition, the direct purchaser class plaintiffs appealed the order denying their motion to amend the judgment and for leave to amend their complaint to the Court of Appeals. In August 2017, the Court of Appeals reversed the District Court’s decisions and remanded the claims to the District Court.
Also, in January 2013, the State of West Virginia filed an action in West Virginia state court against Pfizer and Ranbaxy, among others, that asserts claims and seeks relief on behalf of the State of West Virginia and residents of that state that are substantially similar to the claims asserted and the relief sought in the purported class actions described above.
•Personal Injury Actions
A number of individual and multi-plaintiff lawsuits have been filed against Pfizer in various federal and state courts alleging that the plaintiffs developed type 2 diabetes purportedly as a result of the ingestion of Lipitor. Plaintiffs seek compensatory and punitive damages.
In February 2014, the federal actions were transferred for consolidated pre-trial proceedings to a Multi-District Litigation (In re Lipitor (Atorvastatin Calcium) Marketing, Sales Practices and Products Liability Litigation (No. II) MDL-2502) in the U.S. District Court for the District of South Carolina. Since 2016, certain cases in the Multi-District Litigation were remanded to certain state courts. In January 2017, the District Court granted our motion for summary judgment, dismissing substantially all of the remaining cases pending in the Multi-District Litigation. In January 2017, the plaintiffs appealed the District Court’s decision to the U.S. Court of Appeals for the Fourth Circuit. In June 2018, the Court of Appeals affirmed the District Court’s decision. In November 2020, we and Mylan completed the transaction to spin-off our Upjohn Business and combine it with Mylan to form Viatris. As part of the transaction, Viatris has agreed to assume, and to indemnify Pfizer for, liabilities arising out of this matter.
Viagra
Since April 2016, a Multi-District Litigation has been pending in the U.S. District Court for the Northern District of California (In Re: Viagra (Sildenafil Citrate) Products Liability Litigation, MDL-2691), in which plaintiffs allege that they developed melanoma and/or the exacerbation of melanoma purportedly as a result of the ingestion of Viagra. Additional cases filed against Lilly with respect to Cialis have also been consolidated in the Multi-District Litigation (In re: Viagra (Sildenafil Citrate) and Cialis (Tadalafil) Products Liability Litigation, MDL-2691). In January 2020, the District Court granted our and Lilly’s motion to exclude all of plaintiffs’ general causation opinions. As a result, in April 2020, the District Court entered summary judgment in favor of defendants and dismissed all of plaintiffs’ claims. In April 2020, plaintiffs filed a notice of appeal in the U.S. Court of Appeals for the Ninth Circuit. In November 2020, we and Mylan completed the transaction to spin-off our Upjohn Business and combine it with Mylan to form Viatris. As part of the transaction, Viatris has agreed to assume, and to indemnify Pfizer for, liabilities arising out of this matter.
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Pfizer Inc.
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2020 Form 10-K
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101
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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
EpiPen
Beginning in February 2017, purported class actions were filed in various federal courts by indirect purchasers of EpiPen against Pfizer, and/or its affiliates King and Meridian, and/or various entities affiliated with Mylan, and Mylan Chief Executive Officer, Heather Bresch. The plaintiffs in these actions seek to represent U.S. nationwide classes comprising persons or entities who paid for any portion of the end-user purchase price of an EpiPen between 2009 until the cessation of the defendants’ allegedly unlawful conduct. In February 2020, a similar lawsuit was filed in the U.S. District Court for the District of Kansas against Pfizer, King, Meridian and the Mylan entities on behalf of a purported U.S. nationwide class of direct purchaser plaintiffs who purchased EpiPen devices directly from the defendants (the 2020 Lawsuit). Against Pfizer and/or its affiliates, plaintiffs in these actions generally allege that Pfizer’s and/or its affiliates’ settlement of patent litigation regarding EpiPen delayed market entry of generic EpiPen in violation of federal antitrust laws and various state antitrust laws. At least one lawsuit also alleges that Pfizer and/or Mylan violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO). Plaintiffs also filed various federal antitrust, state consumer protection and unjust enrichment claims against, and relating to conduct attributable solely to, Mylan and/or its affiliates regarding EpiPen. Plaintiffs seek treble damages for alleged overcharges for EpiPen since 2011. In August 2017, all of these actions, except for the 2020 Lawsuit, were consolidated for coordinated pre-trial proceedings in a Multi-District Litigation (In re: EpiPen (Epinephrine Injection, USP) Marketing, Sales Practices and Antitrust Litigation, MDL-2785) in the U.S. District Court for the District of Kansas with other EpiPen-related actions against Mylan and/or its affiliates to which Pfizer, King and Meridian are not parties.
In July 2020, a new lawsuit was filed in the U.S. District Court for the District of Colorado on behalf of indirect purchasers. Plaintiff represents a putative U.S. nationwide class of persons or entities who paid for any portion of the end-user purchase price of certain refill or replacement EpiPens since 2010. Plaintiff alleges that Pfizer and Meridian misrepresented the shelf-life and expiration date of EpiPen, in violation of the federal RICO statute. Plaintiff seeks treble damages for alleged unnecessary replacement or refill purchases of EpiPens by members of the putative class.
Nexium 24HR and Protonix
A number of individual and multi-plaintiff lawsuits have been filed against Pfizer, certain of its subsidiaries and/or other pharmaceutical manufacturers in various federal and state courts alleging that the plaintiffs developed kidney-related injuries purportedly as a result of the ingestion of certain proton pump inhibitors. The cases against Pfizer involve Protonix and/or Nexium 24HR and seek compensatory and punitive damages and, in some cases, treble damages, restitution or disgorgement. In August 2017, the federal actions were ordered transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In re: Proton-Pump Inhibitor Products Liability Litigation (No. II)) in the U.S. District Court for the District of New Jersey. In 2019, we and GSK combined our respective consumer healthcare businesses into a new Consumer Healthcare JV that operates globally under the GSK Consumer Healthcare name. As part of the JV transaction, the JV has agreed to assume, and to indemnify Pfizer for, liabilities arising out of such litigation to the extent related to Nexium 24HR.
Docetaxel
•Personal Injury Actions
A number of lawsuits have been filed against Hospira and Pfizer in various federal and state courts alleging that plaintiffs who were treated with Docetaxel developed permanent hair loss. The significant majority of the cases also name other defendants, including the manufacturer of the branded product, Taxotere. Plaintiffs seek compensatory and punitive damages.
In October 2016, the federal cases were transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In re Taxotere (Docetaxel) Products Liability Litigation, MDL-2740) in the U.S. District Court for the Eastern District of Louisiana.
•Mississippi Attorney General Government Action
In October 2018, the Attorney General of Mississippi filed a complaint in Mississippi state court against the manufacturer of the branded product and eight other manufacturers including Pfizer and Hospira, alleging, with respect to Pfizer and Hospira, a failure to warn about a risk of permanent hair loss in violation of the Mississippi Consumer Protection Act. The action seeks civil penalties and injunctive relief.
Array Securities Litigation
In November 2017, two purported class actions were filed in the U.S. District Court for the District of Colorado alleging that Array, which we acquired in July 2019 and is our wholly owned subsidiary, and certain of its former officers violated federal securities laws in connection with certain disclosures made, or omitted, by Array regarding the NRAS-mutant melanoma program. In March 2018, the actions were consolidated into a single proceeding.
Zantac
A number of lawsuits have been filed against Pfizer in various federal and state courts alleging that plaintiffs developed various types of cancer, or face an increased risk of developing cancer, purportedly as a result of the ingestion of Zantac. The significant majority of these cases also name other defendants that have historically manufactured and/or sold Zantac. Pfizer has not sold Zantac since 2006, and only sold an OTC version of the product. Plaintiffs seek compensatory and punitive damages and, in some cases, treble damages, restitution or disgorgement.
In February 2020, the federal actions were transferred for coordinated pre-trial proceedings to a Multi-District Litigation (In re Zantac/Ranitidine NDMA Litigation, MDL-2924) in the U.S. District Court for the Southern District of Florida. From June to December 2020: (i) plaintiffs in the Multi-District Litigation filed against Pfizer and many other defendants a consolidated consumer class action complaint alleging, among other things, violations of the RICO statute and consumer protection statutes of all 50 states, and a consolidated third-party payor class action complaint alleging violation of the RICO statute and seeking reimbursement for payments made for the prescription version of Zantac; (ii) Pfizer received service of two Canadian class action complaints naming Pfizer and other defendants, and seeking compensatory and punitive damages for personal injury and economic loss, allegedly arising from the defendants’ sale of Zantac in Canada; (iii) the State of New Mexico filed a civil action against Pfizer and many other defendants, alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in New Mexico; and (iv) Pfizer received service of a suit filed by the Mayor and City Council of Baltimore naming Pfizer and other defendants alleging various claims under Maryland law.
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Pfizer Inc.
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2020 Form 10-K
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102
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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
A3. Legal Proceedings––Commercial and Other Matters
Monsanto-Related Matters
In 1997, Monsanto Company (Former Monsanto) contributed certain chemical manufacturing operations and facilities to a newly formed corporation, Solutia Inc. (Solutia), and spun off the shares of Solutia. In 2000, Former Monsanto merged with Pharmacia & Upjohn Company to form Pharmacia. Pharmacia then transferred its agricultural operations to a newly created subsidiary, named Monsanto Company (New Monsanto), which it spun off in a two-stage process that was completed in 2002. Pharmacia was acquired by Pfizer in 2003 and is a wholly owned subsidiary of Pfizer.
In connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities related to Pharmacia’s former agricultural business. New Monsanto has defended and/or is defending Pharmacia in connection with various claims and litigation arising out of, or related to, the agricultural business, and has been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.
In connection with its spin-off in 1997, Solutia assumed, and agreed to indemnify Pharmacia for, liabilities related to Former Monsanto’s chemical businesses. As the result of its reorganization under Chapter 11 of the U.S. Bankruptcy Code, Solutia’s indemnification obligations relating to Former Monsanto’s chemical businesses are primarily limited to sites that Solutia has owned or operated. In addition, in connection with its spin-off that was completed in 2002, New Monsanto assumed, and agreed to indemnify Pharmacia for, any liabilities primarily related to Former Monsanto’s chemical businesses, including, but not limited to, any such liabilities that Solutia assumed. Solutia’s and New Monsanto’s assumption of, and agreement to indemnify Pharmacia for, these liabilities apply to pending actions and any future actions related to Former Monsanto’s chemical businesses in which Pharmacia is named as a defendant, including, without limitation, actions asserting environmental claims, including alleged exposure to polychlorinated biphenyls. Solutia and/or New Monsanto are defending Pharmacia in connection with various claims and litigation arising out of, or related to, Former Monsanto’s chemical businesses, and have been indemnifying Pharmacia when liability has been imposed or settlement has been reached regarding such claims and litigation.
Environmental Matters
In 2009, we submitted to the U.S. Environmental Protection Agency (EPA) a corrective measures study report with regard to Pharmacia’s discontinued industrial chemical facility in North Haven, Connecticut. In September 2010, our corrective measures study report was approved by the EPA, and we commenced construction of the site remedy in late 2011 under an Updated Administrative Order on Consent with the EPA. In September 2019, the EPA acknowledged that construction of the site remedy has been completed.
Also in 2009, we submitted a revised site-wide feasibility study with regard to Wyeth Holdings Corporation’s (formerly, American Cyanamid Company) discontinued industrial chemical facility in Bound Brook, New Jersey. In July 2011, Wyeth Holdings Corporation executed an Administrative Settlement Agreement and Order on Consent for Removal Action (the 2011 Administrative Settlement Agreement) with the EPA with regard to the Bound Brook facility. In accordance with the 2011 Administrative Settlement Agreement, we completed construction of an interim remedy to address the discharge of impacted groundwater from the facility to the Raritan River. In September 2012, the EPA issued a final remediation plan for the Bound Brook facility’s main plant area, which is generally in accordance with one of the remedies evaluated in our revised site-wide feasibility study. In March 2013, Wyeth Holdings Corporation (now Wyeth Holdings LLC) entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the main plant area and to perform a focused feasibility study for two adjacent lagoons. In September 2015, the U.S., on behalf of the EPA, filed a complaint and consent decree with the federal District Court for the District of New Jersey that allows Wyeth Holdings LLC to complete the design and to implement the remedy for the main plant area. The consent decree (which supersedes the 2011 Administrative Settlement Agreement) was entered by the District Court in December 2015. In September 2018, the EPA issued a final remediation plan for the two adjacent lagoons, which is generally in accordance with one of the remedies evaluated in our focused feasibility study, and, in September 2019, Wyeth Holdings LLC entered into an Administrative Settlement Agreement and Order on Consent with the EPA to allow us to undertake detailed engineering design of the remedy for the lagoons.
We have accrued for the estimated costs of the site remedies for the North Haven and Bound Brook facilities.
We are a party to a number of other proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, and other state, local or foreign laws in which the primary relief sought is the cost of past and/or future remediation.
Contracts with Iraqi Ministry of Health
In October 2017, a number of U.S. service members, civilians, and their families brought a complaint in the U.S. District Court for the District of Columbia against a number of pharmaceutical and medical devices companies, including Pfizer and certain of its subsidiaries, alleging that the defendants violated the U.S. Anti-Terrorism Act. The complaint alleges that the defendants provided funding for terrorist organizations through their sales practices pursuant to pharmaceutical and medical device contracts with the Iraqi Ministry of Health, and seeks monetary relief. In July 2020, the District Court granted defendants’ motions to dismiss and dismissed all of plaintiffs’ claims. The plaintiffs are appealing the District Court’s decision.
Allergan Complaint for Indemnity
In August 2018, Pfizer was named as a defendant in a third-party complaint for indemnity, along with King, filed by Allergan Finance LLC (Allergan) in a Multi-District Litigation (In re National Prescription Opiate Litigation MDL 2804) in the U.S. District Court for the Northern District of Ohio. The lawsuit asserted claims for indemnity related to Kadian, which was owned for a short period by King in 2008, prior to Pfizer's acquisition of King in 2010. In December 2018, the District Court dismissed the lawsuit. In February 2019, Allergan filed a similar complaint in the Supreme Court of the State of New York, asserting claims for indemnity related to Kadian. That suit was voluntarily discontinued without prejudice in January 2021.
Breach of Contract––Xalkori/Lorbrena
We are a defendant in a breach of contract action brought by New York University (NYU) in the Supreme Court of the State of New York (Supreme Court). NYU alleges that it is entitled to royalties on Pfizer’s sales of Xalkori under the terms of a Research and License Agreement between NYU and Sugen, Inc. Sugen, Inc. was acquired by Pharmacia in August 1999, and Pharmacia was acquired by Pfizer in 2003 and is a wholly owned subsidiary of Pfizer. The action was originally filed in 2013. In December 2015, the Supreme Court dismissed the action and, in
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Pfizer Inc.
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2020 Form 10-K
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103
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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
May 2017, the New York State Appellate Division reversed the decision and remanded the proceedings to the Supreme Court. In January 2020, the Supreme Court denied both parties’ summary judgment motions.
In October 2020, NYU filed a separate breach of contract action against Pfizer alleging that it is entitled to royalties on sales of Lorbrena under the terms of the same NYU-Sugen, Inc. Research and Licensing Agreement.
A4. Legal Proceedings––Government Investigations
We are subject to extensive regulation by government agencies in the U.S., other developed markets and multiple emerging markets in which we operate. Criminal charges, substantial fines and/or civil penalties, limitations on our ability to conduct business in applicable jurisdictions, corporate integrity or deferred prosecution agreements, as well as reputational harm and increased public interest in the matter could result from government investigations in the U.S. and other jurisdictions in which we do business. In addition, in a qui tam lawsuit in which the government declines to intervene, the relator may still pursue a suit for the recovery of civil damages and penalties on behalf of the government. Among the investigations by government agencies are the matters discussed below.
Greenstone Investigations
•U.S. Department of Justice Antitrust Division Investigation
Since July 2017, the U.S. Department of Justice's Antitrust Division has been investigating our former Greenstone generics business. We believe this is related to an ongoing broader antitrust investigation of the generic pharmaceutical industry. The government has been obtaining information from Greenstone relating to this investigation.
•State Attorneys General Generics Antitrust Litigation
In April 2018, Greenstone received requests for information from the Antitrust Department of the Connecticut Office of the Attorney General. In May 2019, Attorneys General of more than 40 states plus the District of Columbia and Puerto Rico filed a complaint against a number of pharmaceutical companies, including Greenstone and Pfizer. The matter has been consolidated with a Multi-District Litigation (In re: Generic Pharmaceuticals Pricing Antitrust Litigation MDL No. 2724) in the Eastern District of Pennsylvania. As to Greenstone and Pfizer, the complaint alleges anticompetitive conduct in violation of federal and state antitrust laws and state consumer protection laws. In June 2020, the State Attorneys General filed a new complaint against a large number of companies, including Greenstone and Pfizer, making similar allegations, but concerning a new set of drugs. This complaint was transferred to the Multi-District Litigation in July 2020.
Subpoena relating to Manufacturing of Quillivant XR
In October 2018, we received a subpoena from the U.S. Attorney’s Office for the Southern District of New York (SDNY) seeking records relating to our relationship with another drug manufacturer and its production and manufacturing of drugs including, but not limited to, Quillivant XR. We have produced records pursuant to the subpoena.
Government Inquiries relating to Meridian Medical Technologies
In February 2019, we received a civil investigative demand from the U.S. Attorney’s Office for the SDNY. The civil investigative demand seeks records and information related to alleged quality issues involving the manufacture of auto-injectors at our Meridian site. In August 2019, we received a HIPAA subpoena from the U.S. Attorney’s Office for the Eastern District of Missouri seeking similar records and information. We are producing records in response to these requests.
U.S. Department of Justice/SEC Inquiry relating to Russian Operations
In June 2019, we received an informal request from the U.S. Department of Justice’s Foreign Corrupt Practices Act (FCPA) Unit seeking documents relating to our operations in Russia. In September 2019, we received a similar request from the SEC’s FCPA Unit. We have produced records pursuant to these requests.
Docetaxel––Mississippi Attorney General Government Investigation
See Note 16A2. Contingencies and Certain Commitments: Legal Proceedings––Product Litigation––Docetaxel––Mississippi Attorney General Government Investigation above for information regarding a government investigation related to Docetaxel marketing practices.
U.S. Department of Justice Inquiries relating to India Operations
In March 2020, we received an informal request from the U.S. Department of Justice's Consumer Protection Branch seeking documents relating to our manufacturing operations in India, including at our former facility located at Irrungattukottai in India. In April 2020, we received a similar request from the U.S. Attorney’s Office for the SDNY regarding a civil investigation concerning operations at our facilities in India. We are producing records pursuant to these requests.
U.S. Department of Justice/SEC Inquiry relating to China Operations
In June 2020, we received an informal request from the U.S. Department of Justice's FCPA Unit seeking documents relating to our operations in China. In August 2020, we received a similar request from the SEC’s FCPA Unit. We are producing records pursuant to these requests.
Zantac––State of New Mexico Civil Action
See Note 16A2. Contingencies and Certain Commitments: Legal Proceedings––Product Litigation––Zantac above for information regarding a civil action filed by the State of New Mexico alleging various state statutory and common law claims in connection with the defendants’ alleged sale of Zantac in New Mexico.
A5. Legal Proceedings––Matters Resolved During 2020
During the full-year 2020, certain matters, including the matter discussed below, were resolved or became the subject of definitive settlement agreements or settlement agreements-in-principle.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
104
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Hormone Therapy Consumer Class Action
A certified consumer class action was pending against Wyeth in the U.S. District Court for the Southern District of California based on the alleged off-label marketing of its hormone therapy products. The case was originally filed in December 2003. The class consisted of California consumers who purchased Wyeth’s hormone-replacement products between January 1995 and January 2003 and who did not seek personal injury damages therefrom. The class sought compensatory and punitive damages, including a full refund of the purchase price. In March 2020, the parties reached an agreement, and obtained preliminary court approval, to resolve this matter for $200 million, which was paid in full in the second quarter of 2020.
B. Guarantees and Indemnifications
In the ordinary course of business and in connection with the sale of assets and businesses and other transactions, we often indemnify our counterparties against certain liabilities that may arise in connection with the transaction or that are related to events and activities prior to or following a transaction. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we may be required to reimburse the loss. These indemnifications are generally subject to various restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of December 31, 2020, the estimated fair value of these indemnification obligations was not significant.
In addition, in connection with our entry into certain agreements and other transactions, our counterparties may agree to indemnify us. For example, our collaboration agreement with EMD Serono, Inc. to co-promote Rebif in the U.S. expired at the end of 2015 and included certain indemnity provisions. Patent litigation brought by Biogen Idec MA Inc. against EMD Serono Inc. and Pfizer is pending in the U.S. District Court for the District of New Jersey and the United States Court of Appeals for the Federal Circuit. EMD Serono Inc. has acknowledged that it is obligated to satisfy any award of damages.
We have also guaranteed the long-term debt of certain companies that we acquired and that now are subsidiaries of Pfizer. See Note 7D.
C. Certain Commitments
•As of December 31, 2020, we had agreements totaling $3.8 billion to purchase goods and services that are enforceable and legally binding and include amounts relating to advertising, information technology services, employee benefit administration services, and potential milestone payments deemed reasonably likely to occur.
•See Note 5A for information on the TCJA repatriation tax liability.
D. Contingent Consideration for Acquisitions
We may be required to make payments to sellers for certain prior business combinations that are contingent upon future events or outcomes. See Note 1D. The estimated fair value of contingent consideration as of December 31, 2020 is $689 million, of which $123 million is recorded in Other current liabilities and $566 million in Other noncurrent liabilities and $711 million, of which $160 million is recorded in Other current liabilities and $551 million in Other noncurrent liabilities as of December 31, 2019. The decrease in the contingent consideration balance from December 31, 2019 is primarily due to payments made upon the achievement of certain sales-based milestones, partially offset by fair value adjustments.
E. Insurance
Our insurance coverage reflects market conditions (including cost and availability) existing at the time it is written, and our decision to obtain insurance coverage or to self-insure varies accordingly. Depending upon the cost and availability of insurance and the nature of the risk involved, the amount of self-insurance may be significant. The cost and availability of coverage have resulted in self-insuring certain exposures, including product liability. If we incur substantial liabilities that are not covered by insurance or substantially exceed insurance coverage and that are in excess of existing accruals, there could be a material adverse effect on our cash flows or results of operations in the period in which the amounts are paid and/or accrued.
Note 17. Product, Geographic and Other Revenue Information
A. Geographic Information
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
The following summarizes revenues by geographic area:
|
|
|
|
|
|
Year Ended December 31,
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
United States
|
|
|
|
|
|
|
|
$
|
21,712
|
|
|
$
|
20,593
|
|
|
$
|
20,119
|
|
|
Developed Europe
|
|
|
|
|
|
|
|
7,788
|
|
|
7,729
|
|
|
7,997
|
|
|
Developed Rest of World
|
|
|
|
|
|
|
|
4,036
|
|
|
4,022
|
|
|
4,090
|
|
|
Emerging Markets
|
|
|
|
|
|
|
|
8,372
|
|
|
8,828
|
|
|
8,618
|
|
|
Revenues
|
|
|
|
|
|
|
|
$
|
41,908
|
|
|
$
|
41,172
|
|
|
$
|
40,825
|
|
Revenues exceeded $500 million in each of 8, 10 and 10 countries outside the U.S. in 2020, 2019 and 2018, respectively. The U.S. is the only country to contribute more than 10% of total revenue in 2020, 2019 and 2018. As a percentage of revenues, our two largest national markets outside the U.S. were China, which contributed 6% of total revenue in each of 2020, 2019 and 2018, and Japan, which contributed 6% of total revenue in 2020 and 5% in each of 2019 and 2018.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
105
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
B. Other Revenue Information
Significant Customers
We sell our biopharmaceutical products primarily to customers in the wholesale sector.
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|
|
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|
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|
|
The following summarizes revenue, as a percentage of total revenues, for our three largest U.S. wholesaler customers:
|
|
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
McKesson, Inc.
|
|
16
|
%
|
|
15
|
%
|
|
13
|
%
|
|
AmerisourceBergen Corporation
|
|
13
|
%
|
|
11
|
%
|
|
8
|
%
|
|
Cardinal Health, Inc.
|
|
10
|
%
|
|
9
|
%
|
|
8
|
%
|
Collectively, our three largest U.S. wholesaler customers represented 30%, 25% and 29% of total trade accounts receivable as of December 31, 2020, 2019 and 2018.
Significant Product Revenues
The following provides detailed revenue information for several of our major products:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
Year Ended December 31,
|
|
PRODUCT
|
|
PRIMARY INDICATION OR CLASS
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUES(a)
|
|
|
|
$
|
41,908
|
|
|
$
|
41,172
|
|
|
$
|
40,825
|
|
|
Internal Medicine(a)
|
|
$
|
9,003
|
|
|
$
|
8,790
|
|
|
$
|
8,548
|
|
|
Eliquis alliance revenues and direct sales
|
|
Nonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism
|
|
4,949
|
|
|
4,220
|
|
|
3,434
|
|
|
Chantix/Champix
|
|
An aid to smoking cessation treatment in adults 18 years of age or older
|
|
919
|
|
|
1,107
|
|
|
1,085
|
|
|
Premarin family
|
|
Symptoms of menopause
|
|
680
|
|
|
734
|
|
|
832
|
|
|
BMP2
|
|
Development of bone and cartilage
|
|
274
|
|
|
287
|
|
|
279
|
|
|
Toviaz
|
|
Overactive bladder
|
|
252
|
|
|
250
|
|
|
271
|
|
|
All other Internal Medicine
|
|
Various
|
|
1,930
|
|
|
2,192
|
|
|
2,648
|
|
|
Oncology
|
|
$
|
10,867
|
|
|
$
|
9,014
|
|
|
$
|
7,471
|
|
|
Ibrance
|
|
Metastatic breast cancer
|
|
5,392
|
|
|
4,961
|
|
|
4,118
|
|
|
Xtandi alliance revenues
|
|
mCRPC, nmCRPC, mCSPC
|
|
1,024
|
|
|
838
|
|
|
699
|
|
|
Sutent
|
|
Advanced and/or metastatic RCC, adjuvant RCC, refractory GIST (after disease progression on, or intolerance to, imatinib mesylate) and advanced pancreatic neuroendocrine tumor
|
|
819
|
|
|
936
|
|
|
1,049
|
|
|
Inlyta
|
|
Advanced RCC
|
|
787
|
|
|
477
|
|
|
298
|
|
|
Xalkori
|
|
ALK-positive and ROS1-positive advanced NSCLC
|
|
544
|
|
|
530
|
|
|
524
|
|
|
Bosulif
|
|
Philadelphia chromosome–positive chronic myelogenous leukemia
|
|
450
|
|
|
365
|
|
|
296
|
|
|
Retacrit(b)
|
|
Anemia
|
|
386
|
|
|
225
|
|
|
82
|
|
|
Lorbrena
|
|
ALK-positive metastatic NSCLC
|
|
204
|
|
|
115
|
|
|
11
|
|
|
Ruxience(b)
|
|
Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis
|
|
170
|
|
|
(1)
|
|
|
—
|
|
|
Braftovi
|
|
In combination with Mektovi for metastatic melanoma for patients who test positive for a BRAF genetic mutation and, in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant mCRC after prior therapy
|
|
160
|
|
|
48
|
|
|
—
|
|
|
Zirabev(b)
|
|
Treatment of mCRC; unresectable, locally advanced, recurrent or metastatic NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent or metastatic cervical cancer
|
|
143
|
|
|
1
|
|
|
—
|
|
|
Mektovi
|
|
In combination with Braftovi for metastatic melanoma for patients who test positive for a BRAF genetic mutation
|
|
142
|
|
|
49
|
|
|
—
|
|
|
All other Oncology
|
|
Various
|
|
645
|
|
|
470
|
|
|
395
|
|
|
Hospital(a), (c)
|
|
$
|
7,961
|
|
|
$
|
7,772
|
|
|
$
|
7,955
|
|
|
Sulperazon
|
|
Bacterial infections
|
|
618
|
|
|
684
|
|
|
613
|
|
|
Medrol
|
|
Anti-inflammatory glucocorticoid
|
|
402
|
|
|
469
|
|
|
493
|
|
|
EpiPen(a)
|
|
Epinephrine injection used in treatment of life-threatening allergic reactions
|
|
297
|
|
|
303
|
|
|
303
|
|
|
Zithromax
|
|
Bacterial infections
|
|
276
|
|
|
336
|
|
|
326
|
|
|
Vfend
|
|
Fungal infections
|
|
270
|
|
|
346
|
|
|
392
|
|
|
Panzyga
|
|
Primary humoral immunodeficiency
|
|
269
|
|
|
183
|
|
|
39
|
|
|
Precedex
|
|
Sedation agent in surgery or intensive care
|
|
260
|
|
|
155
|
|
|
213
|
|
|
Fragmin
|
|
Treatment/prevention of venous thromboembolism
|
|
252
|
|
|
253
|
|
|
293
|
|
|
Zyvox
|
|
Bacterial infections
|
|
222
|
|
|
251
|
|
|
236
|
|
|
Zavicefta
|
|
Bacterial infections
|
|
212
|
|
|
108
|
|
|
46
|
|
|
Pfizer CentreOne(d)
|
|
Various
|
|
926
|
|
|
810
|
|
|
755
|
|
|
All other Anti-infectives
|
|
Various
|
|
1,455
|
|
|
1,592
|
|
|
1,661
|
|
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
106
|
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(MILLIONS OF DOLLARS)
|
|
|
|
Year Ended December 31,
|
|
PRODUCT
|
|
PRIMARY INDICATION OR CLASS
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
All other Hospital(c)
|
|
Various
|
|
2,502
|
|
|
2,281
|
|
|
2,584
|
|
|
Vaccines
|
|
$
|
6,575
|
|
|
$
|
6,504
|
|
|
$
|
6,332
|
|
|
Prevnar 13/Prevenar 13
|
|
Pneumococcal disease
|
|
5,850
|
|
|
5,847
|
|
|
5,802
|
|
|
Nimenrix
|
|
Meningococcal disease
|
|
221
|
|
|
230
|
|
|
140
|
|
|
FSME/IMMUN-TicoVac
|
|
Tick-borne encephalitis disease
|
|
196
|
|
|
220
|
|
|
184
|
|
|
BNT162b2
|
|
Active immunization to prevent COVID-19 in individuals 16 years of age and older
|
|
154
|
|
|
—
|
|
|
—
|
|
|
All other Vaccines
|
|
Various
|
|
154
|
|
|
207
|
|
|
206
|
|
|
Inflammation & Immunology (I&I)
|
|
$
|
4,567
|
|
|
$
|
4,733
|
|
|
$
|
4,720
|
|
|
Xeljanz
|
|
RA, PsA, UC, active polyarticular course juvenile idiopathic arthritis
|
|
2,437
|
|
|
2,242
|
|
|
1,774
|
|
|
Enbrel (Outside the U.S. and Canada)
|
|
RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque psoriasis, ankylosing spondylitis and nonradiographic axial spondyloarthritis
|
|
1,350
|
|
|
1,699
|
|
|
2,112
|
|
|
Inflectra/Remsima(b)
|
|
Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in combination with methotrexate, ankylosing spondylitis, PsA and plaque psoriasis
|
|
659
|
|
|
625
|
|
|
642
|
|
|
All other I&I
|
|
Various
|
|
121
|
|
|
167
|
|
|
192
|
|
|
Rare Disease
|
|
$
|
2,936
|
|
|
$
|
2,278
|
|
|
$
|
2,211
|
|
|
Vyndaqel/Vyndamax
|
|
ATTR-cardiomyopathy and polyneuropathy
|
|
1,288
|
|
|
473
|
|
|
148
|
|
|
BeneFIX
|
|
Hemophilia B
|
|
454
|
|
|
488
|
|
|
554
|
|
|
Genotropin
|
|
Replacement of human growth hormone
|
|
427
|
|
|
498
|
|
|
558
|
|
|
Refacto AF/Xyntha
|
|
Hemophilia A
|
|
370
|
|
|
426
|
|
|
514
|
|
|
Somavert
|
|
Acromegaly
|
|
277
|
|
|
264
|
|
|
267
|
|
|
All other Rare Disease
|
|
Various
|
|
120
|
|
|
129
|
|
|
170
|
|
|
Consumer Healthcare Business(e)
|
|
$
|
—
|
|
|
$
|
2,082
|
|
|
$
|
3,587
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Alliance revenues
|
|
$
|
5,418
|
|
|
$
|
4,648
|
|
|
$
|
3,838
|
|
|
Total Biosimilars(b)
|
|
$
|
1,527
|
|
|
$
|
911
|
|
|
$
|
769
|
|
|
Total Sterile Injectable Pharmaceuticals(a). (f)
|
|
$
|
5,315
|
|
|
$
|
5,013
|
|
|
$
|
5,173
|
|
(a)On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan to form Viatris. On December 21, 2020, Pfizer and Viatris completed the termination of a pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan (Mylan-Japan) and we transferred the operations that were part of the Mylan-Japan collaboration to Viatris. Beginning in the fourth quarter of 2020, the financial results of the Upjohn Business and the Mylan-Japan collaboration are reported as Income from discontinued operations––net of tax for all periods presented. Prior-period financial information has been restated, as appropriate. Prior to the separation of the Upjohn Business, and beginning in 2020, Upjohn began managing our Meridian subsidiary, the manufacturer of EpiPen and other auto-injector products, and the Mylan-Japan collaboration. As a result, revenues associated with our Meridian subsidiary, except for product revenues for EpiPen sold in Canada, and Mylan-Japan were reported in Upjohn beginning in the first quarter of 2020. Beginning in the fourth quarter of 2020, the results of our Meridian subsidiary are reported in the Hospital therapeutic area for all periods presented in our consolidated financial statements.
(b)Biosimilars are highly similar versions of approved and authorized biological medicines and primarily include revenues from Inflectra/Remsima, Retacrit, Ruxience and Zirabev.
(c)Hospital is a therapeutic area that commercializes our global portfolio of sterile injectable and anti-infective medicines. Hospital also includes Pfizer CentreOne(d). All other Hospital primarily includes revenues from legacy Sterile Injectable Pharmaceuticals (SIP) products (that are not anti-infective products) and, to a much lesser extent, solid oral dose products (that are not anti-infective products). SIP anti-infective products that are not individually listed above are recorded in “All other Anti-infectives”.
(d)Pfizer CentreOne includes revenues from our contract manufacturing and active pharmaceutical ingredient sales operation, including sterile injectables contract manufacturing, and revenues related to our manufacturing and supply agreements.
(e)On July 31, 2019, our Consumer Healthcare business, an OTC medicines business, was combined with GSK’s consumer healthcare business to form a new consumer healthcare JV. See Note 2C.
(f)Total Sterile Injectable Pharmaceuticals represents the total of all branded and generic injectable products in the Hospital therapeutic area, including anti-infective sterile injectable pharmaceuticals.
Contract Liabilities
Our contract liabilities primarily relate to advance payments received or receivable in connection with contracts that we entered into during 2020 with various government or government sponsored customers in international markets for supply of BNT162b2. The deferred revenue associated with these advance payments totals approximately $957 million as of December 31, 2020 and are recorded in Other current liabilities. The deferred revenue will be recognized in Revenues proportionately as we deliver doses of the vaccine to our customers and satisfy our performance obligation under the contracts, which we expect to fully occur during 2021. Contract liabilities associated with other customer contracts were not significant as of December 31, 2020 or 2019.
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Pfizer Inc.
|
2020 Form 10-K
|
107
|
Selected Quarterly Financial Data (Unaudited)
Pfizer Inc. and Subsidiary Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
(MILLIONS OF DOLLARS, EXCEPT PER COMMON SHARE DATA)
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
2020(a)
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
10,083
|
|
|
$
|
9,864
|
|
|
$
|
10,277
|
|
|
$
|
11,684
|
|
|
Costs and expenses(b)
|
|
7,219
|
|
|
6,559
|
|
|
8,716
|
|
|
11,323
|
|
|
Restructuring charges and certain acquisition-related costs
|
|
54
|
|
|
360
|
|
|
2
|
|
|
184
|
|
|
(Gain) on completion of Consumer Healthcare JV transaction
|
|
(6)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Income/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss)
|
|
2,817
|
|
|
2,944
|
|
|
1,559
|
|
|
178
|
|
|
Provision/(benefit) for taxes on income/(loss)
|
|
355
|
|
|
396
|
|
|
(104)
|
|
|
(170)
|
|
|
Income/(loss) from continuing operations
|
|
2,462
|
|
|
2,548
|
|
|
1,663
|
|
|
348
|
|
|
Income from discontinued operations––net of tax(c)
|
|
948
|
|
|
887
|
|
|
539
|
|
|
257
|
|
|
Net income/(loss) before allocation to noncontrolling interests
|
|
3,410
|
|
|
3,434
|
|
|
2,202
|
|
|
605
|
|
|
Less: Net income attributable to noncontrolling interests
|
|
9
|
|
|
8
|
|
|
8
|
|
|
11
|
|
|
Net income/(loss) attributable to Pfizer Inc. common shareholders
|
|
$
|
3,401
|
|
|
$
|
3,426
|
|
|
$
|
2,194
|
|
|
$
|
594
|
|
|
Earnings/(loss) per common share—basic:
|
|
|
|
|
|
|
|
|
|
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
0.44
|
|
|
$
|
0.46
|
|
|
$
|
0.30
|
|
|
$
|
0.06
|
|
|
Income from discontinued operations––net of tax(c)
|
|
0.17
|
|
|
0.16
|
|
|
0.10
|
|
|
0.05
|
|
|
Net income/(loss) attributable to Pfizer Inc. common shareholders
|
|
$
|
0.61
|
|
|
$
|
0.62
|
|
|
$
|
0.39
|
|
|
$
|
0.11
|
|
|
Earnings/(loss) per common share—diluted:
|
|
|
|
|
|
|
|
|
|
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
0.44
|
|
|
$
|
0.45
|
|
|
$
|
0.29
|
|
|
$
|
0.06
|
|
|
Income from discontinued operations––net of tax(c)
|
|
0.17
|
|
|
0.16
|
|
|
0.10
|
|
|
0.05
|
|
|
Net income/(loss) attributable to Pfizer Inc. common shareholders
|
|
$
|
0.61
|
|
|
$
|
0.61
|
|
|
$
|
0.39
|
|
|
$
|
0.10
|
|
(a)Business development activities impacted our results of operations in 2020. See Note 1A.
(b)The fourth quarter historically reflects higher costs in Cost of sales, Selling, informational and administrative expenses and Research and development expenses. Certain asset impairments totaled $900 million in the third quarter of 2020 and $791 million in the fourth quarter of 2020 recorded in Other (income)/deductions—net. See Note 4.
(c)Operating results of the Upjohn Business and the Mylan-Japan collaboration are presented as discontinued operations in all periods presented following the November 16, 2020 spin-off and combination of our Upjohn Business with Mylan and the December 21, 2020 termination of the Mylan-Japan collaboration. See Note 2B.
Basic and diluted EPS are computed independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not agree to the total for the year.
|
|
|
|
|
|
|
|
|
|
|
Pfizer Inc.
|
2020 Form 10-K
|
108
|
Selected Quarterly Financial Data (Unaudited)
Pfizer Inc. and Subsidiary Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
(MILLIONS OF DOLLARS, EXCEPT PER COMMON SHARE DATA)
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
2019(a)
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
9,957
|
|
|
$
|
10,363
|
|
|
$
|
10,402
|
|
|
$
|
10,449
|
|
|
Costs and expenses(b)
|
|
7,839
|
|
|
8,257
|
|
|
8,695
|
|
|
12,380
|
|
|
Restructuring charges and certain acquisition-related costs(c), (d)
|
|
39
|
|
|
(122)
|
|
|
351
|
|
|
333
|
|
|
(Gain) on completion of Consumer Healthcare JV transaction(d)
|
|
—
|
|
|
—
|
|
|
(8,087)
|
|
|
1
|
|
|
Income/(loss) from continuing operations before provision/(benefit) for taxes on income/(loss)
|
|
2,079
|
|
|
2,228
|
|
|
9,442
|
|
|
(2,264)
|
|
|
Provision/(benefit) for taxes on income/(loss)(e)
|
|
142
|
|
|
(1,169)
|
|
|
2,866
|
|
|
(1,221)
|
|
|
Income/(loss) from continuing operations
|
|
1,937
|
|
|
3,397
|
|
|
6,576
|
|
|
(1,043)
|
|
|
Income from discontinued operations––net of tax(f)
|
|
1,952
|
|
|
1,659
|
|
|
1,107
|
|
|
716
|
|
|
Net income/(loss) before allocation to noncontrolling interests
|
|
3,889
|
|
|
5,056
|
|
|
7,684
|
|
|
(327)
|
|
|
Less: Net income attributable to noncontrolling interests
|
|
6
|
|
|
10
|
|
|
4
|
|
|
10
|
|
|
Net income/(loss) attributable to Pfizer Inc. common shareholders
|
|
$
|
3,884
|
|
|
$
|
5,046
|
|
|
$
|
7,680
|
|
|
$
|
(337)
|
|
|
Earnings/(loss) per common share—basic:
|
|
|
|
|
|
|
|
|
|
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
0.34
|
|
|
$
|
0.61
|
|
|
$
|
1.19
|
|
|
$
|
(0.19)
|
|
|
Income from discontinued operations––net of tax(f)
|
|
0.35
|
|
|
0.30
|
|
|
0.20
|
|
|
0.13
|
|
|
Net income/(loss) attributable to Pfizer Inc. common shareholders
|
|
$
|
0.69
|
|
|
$
|
0.91
|
|
|
$
|
1.38
|
|
|
$
|
(0.06)
|
|
|
Earnings/(loss) per common share—diluted:
|
|
|
|
|
|
|
|
|
|
Income/(loss) from continuing operations attributable to Pfizer Inc. common shareholders
|
|
$
|
0.34
|
|
|
$
|
0.60
|
|
|
$
|
1.16
|
|
|
$
|
(0.19)
|
|
|
Income from discontinued operations––net of tax(f)
|
|
0.34
|
|
|
0.29
|
|
|
0.20
|
|
|
0.13
|
|
|
Net income/(loss) attributable to Pfizer Inc. common shareholders
|
|
$
|
0.68
|
|
|
$
|
0.89
|
|
|
$
|
1.36
|
|
|
$
|
(0.06)
|
|
(a)Business development activities impacted our results of operations in 2019. See Note 1A.
(b)The fourth quarter historically reflects higher costs in Cost of sales, Selling, informational and administrative expenses and Research and development expenses. The fourth quarter of 2019 includes $2.6 billion in certain asset impairments recorded in Other (income)/deductions—net. See Note 4.
(c)The second quarter of 2019 includes the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of an IRS audit from multiple tax years. See Note 5B. The third quarter of 2019 includes $217 million of integration costs and other, primarily including $157 million in payments to Array employees for the fair value of previously unvested stock options that was recognized as post-closing compensation expense. See Note 2A. The fourth quarter of 2019 primarily includes employee termination costs, asset impairments and other exit costs associated with cost reduction initiatives. The employee termination costs are mostly associated with our improvements to operational effectiveness as part of the realignment of our organizational structure and for the Transforming to a More Focused Company program. See Note 3.
(d)See Note 2C.
(e)During the second quarter of 2019, Pfizer reached settlement of disputed issues at the IRS Office of Appeals, thereby settling all issues related to U.S. tax returns of Pfizer for the years 2009-2010. As a result of settling these years, in the second quarter of 2019 we recorded a benefit of approximately $1.4 billion, representing tax and interest. The third quarter of 2019 reflects tax expense of approximately $2.7 billion associated with the gain related to the completion of the Consumer Healthcare JV.
(f)Operating results of the Upjohn Business and the Mylan-Japan collaboration are presented as discontinued operations in all periods presented following the November 16, 2020 spin-off and combination of our Upjohn Business with Mylan and the December 21, 2020 termination of the Mylan-Japan collaboration. See Note 2B.
Basic and diluted EPS are computed independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not agree to the total for the year.