Pfizer revenues 7% down, with $12 billion in Q1 2020

April 28, 2020 Off By BusinessWire

First-Quarter 2020 Revenues of $12.0 Billion, Reflecting 7% Operational Decline; Excluding the Impact from Consumer Healthcare⁽¹⁾, Revenues Declined 1% Operationally.

- 12% Operational Growth from Biopharma, Primarily Driven by Eliquis, Vyndaqel/Vyndamax, Ibrance and Inlyta as well as 15% Operational Growth in Emerging Markets
- 37% Operational Decline from Upjohn, Primarily Due to U.S. Loss of Exclusivity of Lyrica in 2019 and Declines from Lipitor and Norvasc in China due to the Volume-Based Procurement (VBP) Program
First-Quarter 2020 Reported Diluted EPS⁽²⁾ of $0.61, Adjusted Diluted EPS⁽³⁾ of $0.80
Reaffirmed 2020 Financial Guidance for Revenues and Adjusted Diluted EPS⁽³⁾, Absorbing Unfavorable Changes in Foreign Exchange Rates and Reflecting Certain Anticipated Impacts from the COVID-19 Pandemic
Company Details COVID-19 Business Impact and Response to Pandemic, Including Researching Potential Therapeutics and Vaccines

NEW YORK–(BUSINESS WIRE)–Pfizer Inc. (NYSE: PFE) reported financial results for first-quarter 2020, reaffirmed its 2020 financial guidance for revenues and Adjusted diluted EPS⁽³⁾ and updated certain other components of its 2020 financial guidance primarily to reflect actual and anticipated impacts from the novel coronavirus disease of 2019 (COVID-19).

Results for the first quarter of 2020 and 2019⁽⁴⁾ are summarized below.

OVERALL RESULTS

($ in millions, except per share amounts)	First-Quarter
	2020		2019		Change
Revenues	$	12,028	$	13,118	(8	%)
Reported Net Income⁽²⁾		3,401		3,884	(12	%)
Reported Diluted EPS⁽²⁾		0.61		0.68	(10	%)
Adjusted Income⁽³⁾		4,514		4,891	(8	%)
Adjusted Diluted EPS⁽³⁾		0.80		0.85	(5	%)

REVENUES

($ in millions)	First-Quarter
					% Change
	2020		2019		Total		Oper.
Biopharma	$	10,007	$	9,045	11	%	12	%
Upjohn		2,022		3,214	(37	%)	(37	%)
Consumer Healthcare⁽¹⁾	—			858	(100	%)	(100	%)
Total Company	$	12,028	$	13,118	(8	%)	(7	%)

Beginning in 2020, Upjohn began managing Pfizer’s Meridian subsidiary, the manufacturer of EpiPen and other auto-injector products, and a pre-existing strategic collaboration between Pfizer and Mylan N.V. (Mylan) for generic drugs in Japan (Mylan-Japan). To facilitate comparison across periods, revenues and expenses associated with Meridian and Mylan-Japan are reported in Pfizer’s Upjohn business in all periods presented.

Acquisitions and the contribution of Pfizer’s Consumer Healthcare business to the GSK Consumer Healthcare joint venture (JV) that were completed during 2019 impacted financial results in the periods presented⁽¹⁾. Some amounts in this press release may not add due to rounding. All percentages have been calculated using unrounded amounts. References to operational variances pertain to period-over-period growth rates that exclude the impact of foreign exchange⁽⁵⁾.

IMPACT OF COVID-19 ON BUSINESS ACTIVITIES AND FINANCIAL RESULTS

As a result of the COVID-19 pandemic, Pfizer has taken proactive steps intended to protect the health and safety of colleagues, to maintain supply of Pfizer medicines and vaccines to patients, to continue to advance Pfizer’s pipeline and to help develop potential treatments for COVID-19 and a potential vaccine to halt the spread of the novel coronavirus.

Information on the important steps Pfizer has taken in the battle against the COVID-19 pandemic can be found in the Corporate Developments section of this press release.

Colleague Health and Safety

At this time, Pfizer colleagues in most locations who are able to perform their job functions outside of a Pfizer facility are working remotely. Certain Pfizer colleagues, primarily those in the Pfizer Global Supply, Worldwide Research and Development, and Global Product Development organizations, have roles whose physical presence at Pfizer facilities is required to perform their job function. These colleagues continue to report to work but are subject to strict protocols intended to reduce the risk of transmission, including social distancing, maintaining contact logs, increased cleaning and use of personal protective equipment as necessary.

Manufacturing

Pfizer’s manufacturing and supply chain professionals have been working continuously in an effort to ensure continued patient access to Pfizer medicines and vaccines. Across its plant network, Pfizer has implemented its preparedness plan to control site operations. To date, Pfizer has not seen a significant disruption in its supply chain, and all of its manufacturing sites around the world have continued to operate at or near normal levels. So far, Pfizer has been able to mitigate distribution issues that have arisen, including by using newly available commercial air capacity to transport inventory. Pfizer continues to monitor for actions by governments that could result in disruptions to supply movements.

In addition, Pfizer is taking a number of steps simultaneously to scale up manufacturing operations at risk to accelerate its ability to supply a potential novel treatment or vaccine for COVID-19. Pfizer is also committed to offering any excess manufacturing capacity and to potentially shifting production in order to support others’ efforts to manufacture any life-saving breakthroughs that may be developed to combat COVID-19.

Clinical Trials

In late March 2020, Pfizer paused the recruitment portion of certain ongoing global interventional clinical studies and delayed most new study starts. Pfizer took this action in the interests of public health, so that clinical site partners and Pfizer could concentrate on care for patients in ongoing clinical trials and to avoid adding to the demands on the healthcare system during the peak of the COVID-19 crisis.

In late April 2020, Pfizer began to restart recruitment across the development portfolio, including new study starts, at all clinical trial sites that are currently operational, and where Pfizer and investigators are able to monitor safety and where health authorities have allowed recruitment to resume. Pfizer will work with investigator sites to ensure their readiness before any new study participants are enrolled. Completion of certain studies currently in the recruitment stage or studies that have yet to begin could be delayed.

For all ongoing clinical trials, Pfizer is working closely with clinical trial sites to understand their needs and is performing remote monitoring to oversee study conduct. In addition, processes to enable tele-health and home healthcare are being utilized where appropriate to continue the data collection process and support patient safety.

Sales and Marketing

Pfizer has experienced an impact on its sales and marketing activities due to widespread restrictions on in-person meetings with healthcare professionals and the refocused attention of the medical community on fighting COVID-19. Access to prescribers for sales force colleagues during first-quarter 2020 was mixed, with those in China unable to meet with healthcare professionals for most of the quarter, while those in the U.S. were unable to meet in-person with doctors starting in the second half of March.

As a result of the lower number of in-person meetings with prescribers and restrictions on patient movements due to government-mandated work-from-home or shelter-in-place policies, the rate of new prescriptions for certain products and of vaccination rates for most vaccines has slowed, which is currently expected to primarily impact second-quarter 2020 financial results. These declines are expected to be partially offset by existing patients re-filling prescriptions that extend the per-prescription treatment duration to avoid going to pharmacies as frequently, which had a modest favorable impact in first-quarter 2020 and is expected to continue in second-quarter 2020. In addition, certain Pfizer medicines saw increased demand, which Pfizer believes may be due to physicians apparently prescribing them to treat or prevent COVID-19 infections or related conditions, including Prevnar 13/Prevenar 13 in adults and certain anti-infective products, as well as certain sterile injectable products utilized in the intubation and ongoing treatment of mechanically-ventilated COVID-19 patients. Please note that none of these products are approved for the treatment of COVID-19 and, therefore, Pfizer does not know the benefit/risk profile for their use in this disease.

Financial Condition and Access to Capital Markets

Due to Pfizer’s significant operating cash flows, as well as its financial assets, access to capital markets and revolving credit agreements, Pfizer believes it has, and will maintain, the ability to meet liquidity needs for the foreseeable future.

Pfizer will continue to pursue efforts to maintain the continuity of its operations while monitoring for new developments related to the COVID-19 pandemic, which are unpredictable. Future COVID-19 developments could result in additional favorable or unfavorable impacts on Pfizer’s business, operations or financial condition.

2020 FINANCIAL GUIDANCE⁽⁶⁾

Pfizer’s 2020 financial guidance for Total Company⁽⁷⁾ was updated primarily to reflect actual and anticipated COVID-19-related impacts.

Today’s guidance update reflects management’s current expectations for operational performance, foreign exchange rates as well as various COVID-19-related uncertainties, primarily those related to the severity, duration and global macroeconomic impact of the pandemic. Key guidance assumptions related to COVID-19 include:

Patient visits with physicians, vaccinations and elective surgical procedures will rebound starting in second-half 2020 and align more closely with historical levels;
New-to-brand prescription trends for certain key products and vaccination rates will resume on a similar trajectory to what was seen in 2019, beginning in second-half 2020;
Access to prescribers for sales force colleagues is restored in second-half 2020;
Clinical trial enrollment, including new study starts, will fully resume in second-half 2020;
Pfizer’s manufacturing and supply chain activities are not materially disrupted; and
Pfizer’s investments in potential treatments and a potential vaccine for COVID-19 continue throughout 2020.

Based on these assumptions, Pfizer reaffirmed or updated the following 2020 financial guidance components for Total Company⁽⁷⁾, which reflects a full year of revenue and expense contributions from Biopharma and Upjohn:

Guidance range for revenues was reaffirmed at $48.5 to $50.5 billion, absorbing a $0.6 billion unfavorable impact from changes in foreign exchange rates in relation to the U.S. dollar since mid-January 2020, primarily the weakening of the Brazilian real, the euro, the Mexican peso and the Chinese yuan.
Guidance range for Adjusted cost of sales⁽³⁾ as a percentage of revenues was lowered by 400 basis points to a range of 19.5% to 20.5%, primarily to reflect the favorable impact of product mix and other efficiencies.
Guidance range for Adjusted SI&A expenses⁽³⁾ was lowered by $500 million to a range of $11.5 to $12.5 billion, primarily to reflect incremental cost-savings opportunities, primarily reductions in indirect SI&A spend associated with corporate enabling functions, as well as actual and anticipated COVID-19-related spending reductions.
Guidance range for Adjusted R&D expenses⁽³⁾ was increased by $500 million to a range of $8.6 to $9.0 billion, solely to reflect incremental investments Pfizer anticipates making in 2020 to combat the COVID-19 pandemic, including development of potential anti-viral treatments and a potential vaccine, as well as the evaluation of existing Pfizer medicines, which are the subject of novel research projects for investigation in COVID-19 patients.
Guidance range for Adjusted diluted EPS⁽³⁾ was reaffirmed at $2.82 to $2.92, absorbing a $0.04 unfavorable impact from changes in foreign exchange rates since mid-January 2020.

Revenues	$48.5 to $50.5 billion
Adjusted Cost of Sales⁽³⁾ as a Percentage of Revenues	19.5% to 20.5%
Adjusted Cost of Sales⁽³⁾ as a Percentage of Revenues	(previously 19.9% to 20.9%)
Adjusted SI&A Expenses⁽³⁾	$11.5 to $12.5 billion
Adjusted SI&A Expenses⁽³⁾	(previously $12.0 to $13.0 billion)
Adjusted R&D Expenses⁽³⁾	$8.6 to $9.0 billion
Adjusted R&D Expenses⁽³⁾	(previously $8.1 to $8.5 billion)
Adjusted Other (Income)/Deductions⁽³⁾	Approximately $800 million of income
Effective Tax Rate on Adjusted Income⁽³⁾	Approximately 15.0%
Adjusted Diluted EPS⁽³⁾	$2.82 to $2.92

Financial guidance for Adjusted diluted EPS⁽³⁾ continues to assume no share repurchases in 2020.

2020 Financial Guidance for New Pfizer⁽⁸⁾

Pfizer’s updated 2020 financial guidance for New Pfizer⁽⁸⁾ is presented below. New Pfizer⁽⁸⁾ revenue guidance absorbs a $500 million unfavorable impact from changes in foreign exchange rates since mid-January 2020.

New Pfizer⁽⁸⁾ financial guidance reflects a full-year 2020 pro forma view of the company assuming the pending Upjohn combination with Mylan was completed at the beginning of 2020.

Revenues	$40.7 to $42.3 billion
Adjusted IBT Margin⁽⁹⁾	Approximately 37.0%
Adjusted Diluted EPS⁽³⁾	$2.25 to $2.35
Operating Cash Flow	$10.0 to $11.0 billion
Operating Cash Flow	(previously $11.0 to $12.0 billion)

Financial guidance for New Pfizer⁽⁸⁾ operating cash flow now includes a $1.25 billion voluntary contribution to the U.S. qualified pension plans, planned for the second half of 2020.

2020 Financial Guidance for Upjohn⁽¹⁰⁾

Pfizer’s reaffirmed 2020 financial guidance for Upjohn⁽¹⁰⁾ is presented below. Upjohn revenue guidance absorbs a $100 million unfavorable impact from changes in foreign exchange rates since mid-January 2020.

Upjohn⁽¹⁰⁾ financial guidance reflects a full-year 2020 contribution from the Upjohn business as it is presently being managed.

Revenues	$8.0 to $8.5 billion
Adjusted EBITDA⁽¹¹⁾	$3.8 to $4.2 billion

CAPITAL ALLOCATION

During the first three months of 2020, Pfizer paid $2.1 billion of dividends, or $0.38 per share of common stock.
No share repurchases have been completed to date in 2020. As of April 28, 2020, Pfizer’s remaining share repurchase authorization was $5.3 billion. No share repurchases are currently planned in 2020.
The first-quarter 2020 diluted weighted-average shares used to calculate earnings per common share was 5,613 million shares, a reduction of 137 million shares compared to first-quarter 2019.

EXECUTIVE COMMENTARY

Dr. Albert Bourla, Pfizer’s Chairman and Chief Executive Officer, stated, “We are fully committed to confronting the public health challenge posed by the COVID-19 pandemic by collaborating with industry partners and academic institutions to develop potential approaches to prevent and treat COVID-19. Our researchers and scientists also have been exploring potential new uses of existing medicines in Pfizer’s portfolio to help infected patients. We aim to leave no stone unturned as we explore every option to help provide society with a treatment or vaccine. I want to thank all of our R&D colleagues who are working tirelessly to find potential vaccines and treatments that could bring an end to this pandemic. I would also like to acknowledge the remarkable job that our manufacturing team has done throughout this crisis to ensure our medicines continue to reach patients in need.

“Our strong performance in the first quarter highlights the resiliency of our business even during the most challenging times. The Biopharma business grew 12% operationally, driven by strong performances from many key brands. Upjohn faced two expected headwinds this quarter — generic competition for Lyrica in the U.S. and the nationwide expansion of the VBP program in China — while continuing to progress toward a successful close of our transaction with Mylan, now expected in the second half of 2020,” Dr. Bourla concluded.

Frank D’Amelio, Chief Financial Officer and Executive Vice President, Business Operations and Global Supply, stated, “Today we reaffirmed our 2020 financial guidance for revenues and adjusted EPS⁽³⁾ and updated certain other guidance components primarily to reflect actual and anticipated impacts from the COVID-19 pandemic. Importantly, our guidance for Total Company⁽⁷⁾ revenues absorbs a $0.6 billion unfavorable impact from changes in foreign exchange rates since mid-January 2020. Likewise, our guidance for Adjusted diluted EPS⁽³⁾ absorbs a $0.04 impact from unfavorable foreign exchange. The decrease in our guidance for Adjusted SI&A expenses⁽³⁾ reflects incremental cost-savings opportunities, as well as actual and anticipated COVID-19-related spending reductions. These actual and projected SI&A expense⁽³⁾reductions were offset by an increase in our guidance for Adjusted R&D expenses⁽³⁾, which now includes anticipated incremental investments to develop potential therapies and a potential vaccine to combat COVID-19. While our near-term outlook has greater macroeconomic uncertainty than usual due to COVID-19, we are confident that the long-term outlook for our businesses remains solid.

“Despite the impact of COVID-19, 2020 is still expected to be a transformational year for Pfizer. Following the pending close of the Upjohn-Mylan transaction, New Pfizer will be positioned to deliver revenue and Adjusted diluted EPS⁽³⁾ growth that is expected to be among the industry leaders. New Pfizer will be a smaller, science-based company with a singular focus on innovation while also continuing to allocate significant capital directly to shareholders, primarily through dividends,” Mr. D’Amelio concluded.

QUARTERLY FINANCIAL HIGHLIGHTS (First-Quarter 2020 vs. First-Quarter 2019)

First-quarter 2020 revenues totaled $12.0 billion, a decrease of $1.1 billion, or 8%, compared to the prior-year quarter, reflecting an operational decline of $1.0 billion, or 7%, as well as the unfavorable impact of foreign exchange of $134 million, or 1%. Excluding the impact of Consumer Healthcare⁽¹⁾, revenues declined 1% operationally compared to the prior-year quarter.

Impact of COVID-19 on First-Quarter 2020 Revenues

First-quarter 2020 revenues included an estimated net favorable impact of approximately $150 million, or 1%, due to COVID-19, primarily reflecting increased demand for certain products in Pfizer’s Hospital portfolio and an increase in wholesaler buying patterns for Eliquis, partially offset by a decline in patient visits to doctors’ offices and elective surgical procedures during first-quarter 2020.

Biopharma Revenue Highlights

First-quarter 2020 Biopharma revenues totaled $10.0 billion, up 12% operationally, primarily driven by:

Eliquis globally, up 29% operationally, primarily driven by continued increased adoption in non-valvular atrial fibrillation as well as oral anti-coagulant market share gains. U.S. growth was also favorably impacted by COVID-19-related wholesaler buying patterns, partially offset by a lower net price;

the Hospital business globally, up 11% operationally, driven by the U.S. and emerging markets, primarily due to continued uptake of anti-infective products in China and continued growth from Panzyga following its November 2018 U.S. launch, as well as increased demand in the U.S. for certain anti-infectives and other sterile injectable products utilized in the intubation and ongoing treatment of mechanically-ventilated COVID-19 patients;

Vyndaqel/Vyndamax global revenues were $231 million, driven by:
- the U.S. launches of Vyndaqel in May 2019 and Vyndamax in September 2019 for the treatment of transthyretin amyloid cardiomyopathy (ATTR-CM); and
- 156% operational growth in international markets, primarily driven by the March 2019 launch of the ATTR-CM indication in Japan;

Ibrance in the U.S. and emerging markets, collectively up 17% operationally, primarily driven by:
- 15% growth in the U.S., primarily driven by increased cyclin-dependent kinase (CDK) class penetration and Ibrance’s continued CDK market share leadership in its approved metastatic breast cancer indications; and
- 37% operational growth in emerging markets, reflecting continued strong volume growth in most markets;

Prevenar 13 internationally, up 11% operationally, primarily reflecting continued pediatric uptake in China as well as the overall favorable impact of timing associated with government purchases for the pediatric indication in certain emerging markets;

Inlyta in the U.S., up 255%, primarily reflecting increased uptake resulting from the second-quarter 2019 U.S. Food and Drug Administration (FDA) approvals for combinations of certain immune checkpoint inhibitors plus Inlyta for the first-line treatment of patients with advanced renal cell carcinoma;

Retacrit in the U.S., up 363%, primarily reflecting continued uptake for the only biosimilar short-acting erythropoiesis-stimulating agent in the market;

Xeljanz in international markets, up 38% operationally, primarily reflecting continued uptake in the rheumatoid arthritis indication and, to a lesser extent, from the recent launch of the ulcerative colitis indication in certain developed markets; and

Xtandi in the U.S., up 25%, primarily driven by continued strong demand in the metastatic and non-metastatic castration-resistant prostate cancer indications and, to a lesser extent, uptake from the metastatic castration-sensitive prostate cancer indication, which was approved in the U.S. in December 2019;

partially offset primarily by lower revenues for:

Enbrel internationally, down 21% operationally, primarily reflecting continued biosimilar competition in most developed Europe markets as well as in Brazil and Japan;

Prevnar 13 in the U.S., down 10%, primarily reflecting the unfavorable impact of timing associated with government purchases for the pediatric indication compared with the prior-year quarter;

Ibrance in developed Europe, down 11% operationally, primarily reflecting continued strong demand, more than offset by pricing pressures in certain markets; and

Xeljanz in the U.S., down 4%, reflecting continued strong demand across all approved indications, more than offset by a lower net price due to higher rebating from commercial contracts signed in 2019 as well as a temporary lowering of wholesaler inventories in first-quarter 2020. Wholesaler inventory levels for Xeljanz were restored to normal levels in early April 2020, during Pfizer’s second quarter, as underlying volume demand has remained consistently strong.

Upjohn Revenue Highlights

First-quarter 2020 Upjohn revenues totaled $2.0 billion, down 37% operationally, primarily driven by the expected significant volume declines for Lyrica in the U.S. due to multi-source generic competition that began in July 2019. Upjohn revenues in China declined 41% operationally, driven by expected declines from Lipitor and Norvasc, primarily resulting from the VBP program, which was initially implemented in March 2019, and expanded nationwide beginning in December 2019.