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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-3619
PFIZER INC.
(Exact name of registrant as specified in its charter)
Delaware 13-5315170
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
66 Hudson Boulevard East, New York, New York 10001-2192
(Address of principal executive offices) (zip code)
(212) 733-2323
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $.05 par value PFE New York Stock Exchange
1.000% Notes due 2027 PFE27 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during
the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to
submit such
files.) Yes ☒ No ☐
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, a smaller reporting company or an
emerging
growth company. See the definitions of “large accelerated filer,”
“accelerated filer”, “smaller reporting company” and “emerging growth
company” in
Rule 12b-2 of the Exchange Act.
Large Accelerated
filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended
transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of the effectiveness of its
internal control
over financial reporting under Section 404(b) of
the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued
its audit report. ☒
If
securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the
registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-based compensation
received
by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate
market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the closing price as of the last
business day
of the registrant’s most recently completed second
fiscal quarter, July 3, 2022, was approximately $294 billion. This
excludes shares of common stock held by
directors and executive
officers at July 3, 2022. Exclusion of shares held by any person should
not be construed to indicate that such person possesses the
power,
directly or indirectly, to direct or cause the direction of the
management or policies of the registrant, or that such person is
controlled by or under
common control with the registrant. The registrant has no non-voting common stock.
The
number of shares outstanding of the registrant’s common stock as of
February 21, 2023 was 5,619,074,621 shares of common stock, all of one
class.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2023 Annual Meeting of Shareholders Part III
TABLE OF CONTENTS
Page
Defined Terms i
Available Information iii
Forward-Looking Information and Factors that May Affect Future Results 1
PART I 3
ITEM 1. BUSINESS 3
About Pfizer 3
Commercial Operations 3
Research and Development 4
Collaboration and Co-Promotion Agreements 5
International Operations 5
Sales and Marketing 6
Patents and Other Intellectual Property Rights 6
Competition 8
Pricing Pressures and Managed Care Organizations 9
Raw Materials 9
Government Regulation and Price Constraints 10
Environmental Matters 12
Human Capital 12
ITEM 1A. RISK FACTORS 14
ITEM 1B. UNRESOLVED STAFF COMMENTS N/A
ITEM 2. PROPERTIES 23
ITEM 3. LEGAL PROCEEDINGS 23
ITEM 4. MINE SAFETY DISCLOSURES N/A
INFORMATION ABOUT OUR EXECUTIVE OFFICERS 23
PART II 24
ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES 24
ITEM 6. [RESERVED] 25
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 25
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 44
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 101
ITEM 9A. CONTROLS AND PROCEDURES 101
ITEM 9B. OTHER INFORMATION N/A
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS N/A
PART III 104
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 104
ITEM 11. EXECUTIVE COMPENSATION 104
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 104
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 104
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 104
PART IV 104
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 104
15(a)(1) Financial Statements 104
15(a)(2) Financial Statement Schedules 104
15(a)(3) Exhibits 104
ITEM 16. FORM 10-K SUMMARY 108
SIGNATURES 109
N/A = Not Applicable
DEFINED TERMS
Unless
the context requires otherwise, references to “Pfizer,” “the Company,”
“we,” “us” or “our” in this Form 10-K (defined below) refer to Pfizer
Inc.
and its subsidiaries. Pfizer’s fiscal year-end for subsidiaries
operating outside the U.S. is 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. References to
“Notes” in this Form 10-K are to the Notes
to the consolidated financial statements in Item 8. Financial
Statements and Supplementary Data in
this Form 10-K. We also have used several other terms in this Form 10-K, most of which are explained or defined below:
Form 10-K This Annual Report on Form 10-K for the fiscal year ended December 31, 2022
2021 Form 10-K Our Annual Report on Form 10-K for the fiscal year ended December 31, 2021
Proxy Statement Proxy Statement for the 2023 Annual Meeting of Shareholders, which will be filed no later than 120 days after
December 31, 2022
AbbVie AbbVie Inc.
ABO Accumulated benefit obligation; represents the present value of the benefit obligation earned through the end
of the year but does not factor in future compensation increases
ACIP Advisory Committee on Immunization Practices
ALK anaplastic lymphoma kinase
Alliance revenues Revenues from alliance agreements under which we co-promote products discovered or developed by other
companies or us
Arena Arena Pharmaceuticals, Inc.
Array Array BioPharma Inc.
Arvinas Arvinas, Inc.
Astellas Astellas Pharma Inc., Astellas US LLC and Astellas Pharma US, Inc.
ATTR-CM transthyretin amyloid cardiomyopathy
Beam Beam Therapeutics Inc.
Biohaven Biohaven Pharmaceutical Holding Company Ltd.
BioNTech BioNTech SE
Biopharma Global Biopharmaceuticals Business
BLA Biologics License Application
BMS Bristol-Myers Squibb Company
BOD Board of Directors
CDC U.S. Centers for Disease Control and Prevention
cGMP current Good Manufacturing Practices
CGRP calcitonin gene-related peptide
CMA conditional marketing authorisation
CMS Centers for Medicare & Medicaid Services
Comirnaty* Unless otherwise noted, refers to, as applicable, and as authorized or approved, the Pfizer-BioNTech
COVID-19 Vaccine, the Pfizer-BioNTech COVID-19 Vaccine, Bivalent (Original and Omicron BA.4/BA.5), the
Comirnaty Original/Omicron BA.1 Vaccine, and Comirnaty Original/Omicron BA.4/BA.5 Vaccine
Cond. J-NDA Conditional Japan New Drug Application
Consumer Healthcare JV GSK Consumer Healthcare JV
COVID-19 novel coronavirus disease of 2019
CStone CStone Pharmaceuticals
DEA U.S. Drug Enforcement Agency
Developed Europe Includes the following markets: Western Europe, Scandinavian countries and Finland
Developed Markets Includes the following markets: U.S., Developed Europe, Japan, Canada, South Korea, Australia and New
Zealand
Developed Rest of World Includes the following markets: Japan, Canada, South Korea, Australia and New Zealand
EC European Commission
EMA European Medicines Agency
Emerging
Markets Includes, but is not limited to, the following markets: Asia
(excluding Japan and South Korea), Latin America,
Central Europe, Eastern Europe, the Middle East, Africa and Turkey
EPS earnings per share
ESG Environmental, Social and Governance
ESOP employee stock ownership plan
EU European Union
EUA emergency use authorization
Exchange Act Securities Exchange Act of 1934, as amended
FASB Financial Accounting Standards Board
FCPA U.S. Foreign Corrupt Practices Act
FDA U.S. Food and Drug Administration
FFDCA U.S. Federal Food, Drug and Cosmetic Act
GAAP Generally Accepted Accounting Principles
GBT Global Blood Therapeutics, Inc.
GDFV grant-date fair value
Pfizer Inc. 2022 Form 10-K i
GPD Global Product Development organization
GSK GlaxoSmithKline plc
Haleon Haleon plc
HHS U.S. Department of Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996
Hospira Hospira, Inc.
IPR&D in-process research and development
IRA Inflation Reduction Act of 2022
IRC Internal Revenue Code
IRS U.S. Internal Revenue Service
IT information technology
JAK Janus kinase
JV joint venture
King King Pharmaceuticals LLC (formerly King Pharmaceuticals, Inc.)
LIBOR London Interbank Offered Rate
Lilly Eli Lilly and Company
LOE loss of exclusivity
MCO managed care organization
mCRC metastatic colorectal cancer
mCRPC metastatic castration-resistant prostate cancer
mCSPC metastatic castration-sensitive prostate cancer
MD&A Management’s Discussion and Analysis of Financial Condition and Results of Operations
MDL Multi-District Litigation
Medivation Medivation LLC (formerly Medivation, Inc.)
Meridian Meridian Medical Technologies, Inc.
Moody’s Moody’s Investors Service
mRNA messenger ribonucleic acid
MSA Manufacturing Supply Agreement
MTM mark-to-market
MTM change in accounting
principle
In the first quarter of 2021, we adopted a change in accounting principle to a more preferable policy under
U.S. GAAP to immediately recognize actuarial gains and losses arising from the remeasurement of our
pension and postretirement plans (MTM Accounting).
Mylan Mylan N.V.
Mylan-Japan
collaboration a pre-existing strategic collaboration between Pfizer and
Mylan for generic drugs in Japan that terminated on
December 21, 2020
Myovant Myovant Sciences Ltd.
NAV net asset value
NDA new drug application
nmCRPC non-metastatic castration-resistant prostate cancer
NSCLC non-small cell lung cancer
NYSE New York Stock Exchange
Ono Ono Pharmaceutical Co., Ltd.
OPKO OPKO Health, Inc.
OTC over-the-counter
Paxlovid* an oral COVID-19 treatment (nirmatrelvir [PF-07321332] tablets and ritonavir tablets)
PBM pharmacy benefit manager
PBO Projected benefit obligation; represents the present value of the benefit obligation earned through the end of
the year and factors in future compensation increases
PC1 Pfizer CentreOne
PGS Pfizer Global Supply
Pharmacia Pharmacia Corporation
PRAC Pharmacovigilance Risk Assessment Committee
Prevnar family Includes Prevnar 13/Prevenar 13 (pediatric and adult) and Prevnar 20 (adult)
PsA psoriatic arthritis
QCE quality consistency evaluation
RA rheumatoid arthritis
RCC renal cell carcinoma
R&D research and development
ReViral ReViral Ltd.
ROU right of use
S&P Standard & Poor’s
SEC U.S. Securities and Exchange Commission
SI&A selling, informational and administrative
Pfizer Inc. 2022 Form 10-K ii
sNDA supplemental new drug application
Tax Cuts and Jobs Act or
TCJA
Legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017
Trillium Trillium Therapeutics Inc.
TSAs transition service arrangements
UC ulcerative colitis
U.K. United Kingdom
Upjohn Business Pfizer’s former global, primarily off-patent branded and generics business, which included a portfolio of 20
globally recognized solid oral dose brands, including Lipitor, Lyrica, Norvasc, Celebrex and Viagra, as well as
a U.S.-based generics platform, Greenstone, that was spun-off on November 16, 2020 and combined with
Mylan to create Viatris
U.S. United States
Valneva Valneva SE
VBP volume-based procurement
Viatris Viatris Inc.
ViiV ViiV Healthcare Limited
Vyndaqel family Includes Vyndaqel, Vyndamax and Vynmac
WRDM Worldwide Research, Development and Medical
WTO World Trade Organization
*
Paxlovid and emergency uses of the Pfizer-BioNTech COVID-19 Vaccine or
the Pfizer-BioNTech COVID-19 Vaccine, Bivalent (Original and Omicron
BA.4/BA.5),
have not been approved or licensed by the FDA. Paxlovid
has been authorized for emergency use by the FDA under an EUA, for the
treatment of adults and
pediatric patients (12 years of age and
older weighing at least 40 kg) with a current diagnosis of
mild-to-moderate COVID-19 and who are at high risk for
progression
to severe COVID-19, including hospitalization or death. Emergency uses
of the Pfizer-BioNTech COVID-19 Vaccine and the Pfizer-BioNTech
COVID-19
Vaccine, Bivalent have been authorized by the FDA under an EUA to
prevent COVID-19 in individuals aged 6 months and older. The emergency
uses
are only authorized for the duration of the declaration that
circumstances exist justifying the authorization of emergency use of the
medical product during the
COVID-19 pandemic under Section
564(b)(1) of the FFDCA, unless the declaration is terminated or
authorization revoked sooner. Please see the EUA Fact
Sheets at www.covid19oralrx.com and www.cvdvaccine-us.com.
This
Form 10-K includes discussion of certain clinical studies relating to
various in-line products and/or product candidates. These studies
typically
are part of a larger body of clinical data relating to such products or
product candidates, and the discussion herein should be considered
in
the context of the larger body of data. In addition, clinical trial
data are subject to differing interpretations, and, even when we view
data as
sufficient to support the safety and/or effectiveness of a
product candidate or a new indication for an in-line product, regulatory
authorities may
not share our views and may require additional data or may deny approval altogether.
Some
amounts in this Form 10-K may not add due to rounding. All percentages
have been calculated using unrounded amounts. All trademarks
mentioned are the property of their owners.
AVAILABLE INFORMATION
Our
website is www.pfizer.com. This Form 10-K, our Quarterly Reports on
Form 10-Q, our Current Reports on Form 8-K and our proxy
statements,
and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act, are, or will be, available
(free
of charge) on our website, in text format and, where applicable, in
interactive data file format, as soon as reasonably practicable after we
electronically file this material with, or furnish it to, the SEC.
Throughout
this Form 10-K, we “incorporate by reference” certain information from
other documents filed or to be filed with the SEC, including
our
Proxy Statement. Please refer to this information. This Form 10-K will
be available on our website on or about February 23, 2023. Our Proxy
Statement will be available on our website on or about March 16, 2023.
Our
2022 ESG Report, which provides enhanced ESG disclosures, will be
available on our website on or about March 16, 2023. We also have a
Pfizer
Investor Insights website, which includes articles on the company, its
products and its pipeline, located at insights.pfizer.com. Information
in our ESG Report and on the Pfizer Investor Insights website are not incorporated by reference into this Form 10-K.
We
may use our website as a means of disclosing material information and
for complying with our disclosure obligations under Regulation Fair
Disclosure
promulgated by the SEC. These disclosures are included on our website
in the “About—Investors” or “Newsroom” sections.
Accordingly,
investors should monitor these portions of our website, in addition to
following our press releases, SEC filings, public conference
calls
and webcasts, as well as our social media channels (our Facebook,
Instagram (@Pfizerinc), YouTube and LinkedIn pages and Twitter
accounts
(@Pfizer and @Pfizer_News)). The information contained on our website,
our Facebook, Instagram, YouTube and LinkedIn pages or
our Twitter accounts, or any third-party website, is not incorporated by reference into this Form 10-K.
Information
relating to corporate governance at Pfizer, including our Corporate
Governance Principles; Director Qualification Standards; Pfizer
Policies
on Business Conduct (for all of our employees, including our Chief
Executive Officer, Chief Financial Officer and Principal Accounting
Officer);
Code of Business Conduct and Ethics for Members of the Board of
Directors; information concerning our Directors; ways to
communicate
by e-mail with our Directors; information concerning our Board
Committees; Committee Charters; Charter of the Lead Independent
Director;
and transactions in Pfizer securities by Directors and Officers are
available on our website. We will provide any of the foregoing
information
without charge upon written request to our Corporate Secretary, Pfizer
Inc., 66 Hudson Boulevard East, New York, NY 10001-2192.
We will
disclose any future amendments to, or waivers from, provisions of the
Pfizer Policies on Business Conduct affecting our Chief Executive
Officer,
Chief Financial Officer, Principal Accounting Officer and executive
officers on our website as promptly as practicable, as may be required
under
applicable SEC and NYSE rules. Information relating to shareholder
services, including the Computershare Investment Program, book-
entry share ownership and direct deposit of dividends, is also available on our website.
Pfizer Inc. 2022 Form 10-K iii
FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS
This
Form 10-K contains forward-looking statements. We also provide
forward-looking statements in other materials we release to the public,
as
well as public oral statements. Given their forward-looking
nature, these statements involve substantial risks, uncertainties and
potentially
inaccurate assumptions.
We have tried, wherever
possible, to identify such statements by using words such as “will,”
“may,” “could,” “likely,” “ongoing,” “anticipate,”
“estimate,”
“expect,” “project,” “intend,” “plan,” “believe,” “assume,” “target,”
“forecast,” “guidance,” “goal,” “objective,” “aim,” “seek,” “potential,”
“hope” and other words and terms of similar meaning or by using future dates.
We include forward-looking information in our discussion of the following, among other topics:
• our anticipated operating and financial performance, reorganizations, business plans, strategy and prospects;
•
expectations for our product pipeline, in-line products and product
candidates, including anticipated regulatory submissions, data
read-outs,
study starts, approvals, launches, clinical trial
results and other developing data; revenue contribution and projections;
potential pricing and
reimbursement; potential market dynamics and size; growth, performance, timing of exclusivity and potential benefits;
• strategic reviews, capital allocation objectives, dividends and share repurchases;
•
plans for and prospects of our acquisitions, dispositions and other
business development activities, and our ability to successfully
capitalize on
growth opportunities and prospects;
• sales, expenses, interest rates, foreign exchange rates and the outcome of contingencies, such as legal proceedings;
• expectations for impact of or changes to existing or new government regulations or laws;
•
our ability to anticipate and respond to macroeconomic, geopolitical,
health and industry trends, pandemics, acts of war and other large-scale
crises; and
• manufacturing and product supply.
In
particular, forward-looking information in this Form 10-K includes
statements relating to specific future actions, performance and effects,
including, among others, the expected benefits of the
organizational changes to our operations; our 2023 revenue expectations;
our ongoing
efforts to respond to COVID-19, including our plans
and expectations regarding Comirnaty and Paxlovid, and any potential
future vaccines or
treatments; the forecasted revenue, demand,
manufacturing and supply of Comirnaty and Paxlovid, including
expectations for the commercial
market for Comirnaty and Paxlovid;
our expectations regarding the impact of COVID-19 on our business; the
expected patent term for Comirnaty;
the expectations for ongoing
revenue streams from Comirnaty and Paxlovid; the expected impact of
patent expiries and generic competition; the
expected pricing
pressures on our products and the anticipated impact to our business;
the availability of raw materials for 2023; the benefits
expected
from our business development transactions; our anticipated liquidity
position; the anticipated costs and savings from certain of our
initiatives,
including our Transforming to a More Focused Company program; our
planned capital spending; and the expected benefit payments
from and employer contributions to our benefit plans.
Given
their nature, we cannot assure that any outcome expressed in these
forward-looking statements will be realized in whole or in part. Actual
outcomes may vary materially from past results and those
anticipated, estimated, implied or projected. These forward-looking
statements may be
affected by underlying assumptions that may prove
inaccurate or incomplete, or by known or unknown risks and
uncertainties, including those
described in this section and in the Item 1A. Risk Factors section in this Form 10-K.
Therefore,
you are cautioned not to unduly rely on forward-looking statements,
which speak only as of the date of this Form 10-K. We undertake
no
obligation to update forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by
applicable securities law. You are advised, however, to consult any further disclosures we make on related subjects.
Some
of the factors that could cause actual results to differ are identified
below, as well as those discussed in the Item 1A. Risk Factors section
in this Form 10-K and within MD&A. We note these factors for
investors as permitted by the Private Securities Litigation Reform Act
of 1995. The
occurrence of any of the risks identified below, in
the Item 1A. Risk Factors section in this Form 10-K, or within MD&A,
or other risks currently
unknown, could have a material adverse
effect on our business, financial condition or results of operations, or
we may be required to increase
our accruals for contingencies. It
is not possible to predict or identify all such factors. Consequently,
you should not consider the following to be a
complete discussion of all potential risks or uncertainties:
Risks Related to Our Business, Industry and Operations, and Business Development:
•
the outcome of R&D activities, including, the ability to meet
anticipated pre-clinical or clinical endpoints, commencement and/or
completion
dates for our pre-clinical or clinical trials, regulatory submission
dates, and/or regulatory approval and/or launch dates;
the
possibility of unfavorable pre-clinical and clinical trial results,
including the possibility of unfavorable new pre-clinical or clinical
data
and further analyses of existing pre-clinical or clinical data; risks
associated with preliminary, early stage or interim data; the risk
that
pre-clinical and clinical trial data are subject to differing
interpretations and assessments, including during the peer review/
publication
process, in the scientific community generally, and by regulatory
authorities; and whether and when additional data from
our pipeline programs will be published in scientific journal publications, and if so, when and with what modifications and
interpretations;
•
our ability to successfully address comments received from regulatory
authorities such as the FDA or the EMA, or obtain approval
for new
products and indications from regulators on a timely basis or at all;
regulatory decisions impacting labeling, including the
scope of
indicated patient populations, product dosage, manufacturing processes,
safety and/or other matters, including decisions
relating to
emerging developments regarding potential product impurities; the impact
of, or uncertainties regarding the ability to
obtain, recommendations by technical or advisory committees; and the timing of pricing approvals and product launches;
•
claims and concerns that may arise regarding the safety or efficacy of
in-line products and product candidates, including claims and
concerns
that may arise from the outcome of post-approval clinical trials, which
could impact marketing approval, product labeling,
and/or
availability or commercial potential, including uncertainties regarding
the commercial or other impact of the results of the
Xeljanz ORAL
Surveillance (A3921133) study or actions by regulatory authorities based
on analysis of ORAL Surveillance or other
data, including on other JAK inhibitors in our portfolio;
•
the success and impact of external business development activities,
including the ability to identify and execute on potential
business
development opportunities; the ability to satisfy the conditions to
closing of announced transactions in the anticipated time
frame or
at all; the ability to realize the anticipated benefits of any such
transactions in the anticipated time frame or at all; the
Pfizer Inc. 2022 Form 10-K 1
potential
need for and impact of additional equity or debt financing to pursue
these opportunities, which could result in increased
leverage
and/or a downgrade of our credit ratings; challenges integrating the
businesses and operations; disruption to business and
operations
relationships; risks related to growing revenues for certain acquired
products; significant transaction costs; and unknown
liabilities;
•
competition, including from new product entrants, in-line branded
products, generic products, private label products, biosimilars and
product
candidates that treat or prevent diseases and conditions similar to
those treated or intended to be prevented by our in-line
products and product candidates;
• the ability to successfully market both new and existing products, including biosimilars;
•
difficulties or delays in manufacturing, sales or marketing; supply
disruptions, shortages or stock-outs at our facilities or third-party
facilities that we rely on; and legal or regulatory actions;
•
the impact of public health outbreaks, epidemics or pandemics (such as
the COVID-19 pandemic) on our business, operations and
financial
condition and results, including impacts on our employees,
manufacturing, supply chain, sales and marketing, R&D and
clinical trials;
•
risks and uncertainties related to our efforts to continue to develop
and commercialize Comirnaty and Paxlovid or any potential
future COVID-19 vaccines or treatments, as well as challenges related to their manufacturing, supply and distribution;
•
risks related to our ability to achieve our revenue forecasts for
Comirnaty and Paxlovid or any potential future COVID-19 vaccines or
treatments,
including, among other things, whether and when additional supply or
purchase agreements will be reached and the risk
that demand for any products may be reduced, no longer exist or not meet expectations, which may lead to excess inventory on-
hand and/or in the channel or reduced revenues;
•
trends toward managed care and healthcare cost containment, and our
ability to obtain or maintain timely or adequate pricing or
favorable formulary placement for our products;
•
interest rate and foreign currency exchange rate fluctuations,
including the impact of possible currency devaluations and monetary
policy actions in countries experiencing high inflation rates;
•
any significant issues involving our largest wholesale distributors or
government customers, which account for a substantial portion
of our revenues;
• the impact of the increased presence of counterfeit medicines or vaccines in the pharmaceutical supply chain;
•
any significant issues related to the outsourcing of certain
operational and staff functions to third parties; and any significant
issues
related to our JVs and other third-party business arrangements;
•
uncertainties related to general economic, political, business,
industry, regulatory and market conditions including, without
limitation,
uncertainties related to the impact on us, our customers, suppliers and lenders and counterparties to our foreign-exchange and
interest-rate
agreements of challenging global economic conditions, such as
inflation, and recent and possible future changes in
global financial markets;
•
any changes in business, political and economic conditions due to
actual or threatened terrorist activity, geopolitical instability, civil
unrest or military action;
• the impact of product recalls,
withdrawals and other unusual items, including uncertainties related to
regulator-directed risk
evaluations and assessments, including our
ongoing evaluation of our product portfolio for the potential presence
or formation of
nitrosamines;
• trade buying patterns;
• the risk of an impairment charge related to our intangible assets, goodwill or equity-method investments;
•
the impact of, and risks and uncertainties related to, restructurings
and internal reorganizations, as well as any other corporate
strategic
initiatives and growth strategies, and cost-reduction and productivity
initiatives, each of which requires upfront costs but
may fail to yield anticipated benefits and may result in unexpected costs or organizational disruption;
• the ability to successfully achieve our climate goals and progress our environmental sustainability priorities;
Risks Related to Government Regulation and Legal Proceedings:
•
the impact of any U.S. healthcare reform or legislation or any
significant spending reductions or cost controls affecting Medicare,
Medicaid
or other publicly funded or subsidized health programs, including the
IRA, or changes in the tax treatment of employer-
sponsored health insurance that may be implemented;
•
U.S. federal or state legislation or regulatory action and/or policy
efforts affecting, among other things, pharmaceutical product
pricing, intellectual property, reimbursement or access or restrictions on U.S. direct-to-consumer advertising; limitations on
interactions
with healthcare professionals and other industry stakeholders; as well
as pricing pressures for our products as a result
of highly competitive insurance markets;
•
legislation or regulatory action in markets outside of the U.S.,
including China, affecting pharmaceutical product pricing, intellectual
property, reimbursement or access, including, in particular, continued government-mandated reductions in prices and access
restrictions for certain biopharmaceutical products to control costs in those markets;
•
the exposure of our operations globally to possible capital and
exchange controls, economic conditions, expropriation and other
restrictive
government actions, changes in intellectual property legal protections
and remedies, the impact of political or civil unrest
or military action, including the ongoing conflict between Russia and Ukraine and its economic consequences, unstable
governments and legal systems, inter-governmental disputes and natural disasters or disruptions related to climate change;
• legal defense costs, insurance expenses, settlement costs and contingencies, including those related to actual or alleged
environmental contamination;
•
the risk and impact of an adverse decision or settlement and the risk
related to adequacy of reserves related to legal proceedings;
• the risk and impact of tax related litigation and investigations;
•
governmental laws and regulations affecting our operations, including,
without limitation, the recently enacted IRA, changes in laws
and
regulations or their interpretation, including, among others, changes in
tax laws and regulations internationally and in the U.S.,
Pfizer Inc. 2022 Form 10-K 2
the
adoption of global minimum taxation requirements outside the U.S. and
potential changes to existing tax law by the current U.S.
Presidential administration and Congress.
Risks Related to Intellectual Property, Technology and Security:
• any significant breakdown or interruption of our IT systems and infrastructure (including cloud services);
•
any business disruption, theft of confidential or proprietary
information, security threats on facilities or infrastructure, extortion
or
integrity compromise resulting from a cyber-attack or other
malfeasance by, but not limited to, nation states, employees, business
partners or others;
•
the risk that our currently pending or future patent applications may
not be granted on a timely basis or at all, or any patent-term
extensions that we seek may not be granted on a timely basis, if at all; and
•
risks to our products, patents and other intellectual property, such
as: (i) claims of invalidity that could result in LOE; (ii) claims of
patent
infringement, including asserted and/or unasserted
intellectual property claims; (iii) challenges faced by our
collaboration or licensing partners
to the validity of their patent
rights; or (iv) any pressure, or legal or regulatory action by, various
stakeholders or governments that could
potentially result in us
not seeking intellectual property protection or agreeing not to enforce
or being restricted from enforcing intellectual
property rights related to our products, including Comirnaty and Paxlovid.
PART I
ITEM 1. BUSINESS
ABOUT PFIZER
Pfizer
Inc. is a research-based, global biopharmaceutical company. We apply
science and our global resources to bring therapies to people that
extend
and significantly improve their lives through the discovery,
development, manufacture, marketing, sale and distribution of
biopharmaceutical
products worldwide. We work across developed and emerging markets to
advance wellness, prevention, treatments and cures
that challenge
the most feared diseases of our time. We collaborate with healthcare
providers, governments and local communities to support
and expand
access to reliable, affordable healthcare around the world. The Company
was incorporated under the laws of the State of Delaware
on June 2, 1942.
Most
of our revenues come from the manufacture and sale of biopharmaceutical
products. We believe that our medicines and vaccines provide
significant
value for healthcare providers and patients, through improved treatment
of diseases, improvements in health, wellness and
productivity as
well as by reducing other healthcare costs, such as emergency room or
hospitalization. We seek to enhance the value of our
medicines and
vaccines and actively engage in dialogues about how we can best work
with patients, physicians and payers to prevent and treat
disease
and improve outcomes. We seek to maximize patient access and evaluate
our pricing arrangements and contracting methods with
payers to minimize adverse impact on our revenues within the current legal and pricing structures.
We
are committed to fulfilling our purpose: Breakthroughs that change
patients’ lives. Our purpose fuels everything we do and reflects both
our
passion for science and our commitment to patients.
In
addition, Pfizer continues to enhance its ESG strategy, which is focused
on six areas where we see opportunities to create a meaningful
impact:
product innovation; equitable access and pricing; product quality and
safety; diversity, equity and inclusion; climate change; and business
ethics.
We
are committed to strategically capitalizing on growth opportunities,
primarily by advancing our own product pipeline and maximizing the value
of our existing products, but also through various business
development activities. We view our business development activity as an
enabler of
our strategies and seek to generate growth by pursuing
opportunities and transactions that have the potential to strengthen our
business and our
capabilities. We assess our business, assets and
scientific capabilities/portfolio as part of our regular, ongoing
portfolio review process and also
continue to consider business development activities that will help advance our business strategy.
Our
significant recent business development activities in 2022 include,
among others: (i) the March 2022 acquisition of Arena, a clinical stage
company developing innovative potential therapies for the treatment
of several immuno-inflammatory diseases; (ii) the October 2022
acquisition
of GBT, a biopharmaceutical company dedicated to the
discovery, development and delivery of life-changing treatments that
provide hope to
underserved patient communities, starting with
sickle cell disease; and (iii) the October 2022 acquisition of Biohaven,
the maker of Nurtec ODT/
Vydura (rimegepant), an innovative therapy
for both acute treatment of migraine and prevention of episodic
migraine in adults. For a further
discussion of our strategy and
our business development initiatives, see the Overview of Our
Performance, Operating Environment, Strategy and
Outlook section within MD&A and Note 2.
COMMERCIAL OPERATIONS
In
the fourth quarter of 2021, we began managing our commercial operations
through a global structure consisting of two operating segments,
each
led by a single manager: Biopharma, our innovative science-based
biopharmaceutical business, and PC1, our global contract development
and manufacturing organization and a leading supplier of specialty active pharmaceutical ingredients.
Beginning
in the third quarter of 2022, we made several organizational changes to
further transform our operations to better leverage our
expertise in certain areas and in anticipation of potential future new product or indication launches.
Pfizer Inc. 2022 Form 10-K 3
The
changes include establishing a new commercial structure within
Biopharma, optimizing our end-to-end R&D operations and further
prioritizing
our internal R&D portfolio, as well as realigning certain enabling
and platform functions across the organization to ensure alignment
with
this new operating structure, which is designed to better support and
optimize performance across three broad customer groups as follows:
Customer Groups Description Key Products
Primary Care Includes:
• Former Internal Medicine product portfolio (innovative brands in
cardiovascular metabolic, migraine and women’s health, as well as
regional brands)
• Former Vaccines product portfolio (innovative vaccines across all
ages with a pipeline focus on infectious diseases with significant
unmet medical need)
• Products for COVID-19 prevention and treatment, and potential future
mRNA and antiviral products
• Eliquis, Nurtec ODT/Vydura and the
Premarin family
• The Prevnar family, Nimenrix, FSME/
IMMUN-TicoVac and Trumenba
• Comirnaty
• Paxlovid
Specialty Care Includes:
• Former Inflammation & Immunology product portfolio (innovative
brands and biosimilars for chronic immune and inflammatory
diseases)
• Former Rare Disease product portfolio (innovative brands for a
number of therapeutic areas with rare diseases, including
amyloidosis, hemophilia, endocrine diseases and sickle cell disease)
• Former Hospital portfolio (global portfolio of sterile injectable and anti-
infective medicines, excluding Paxlovid)
• Xeljanz, Enbrel (outside the U.S. and
Canada), Inflectra, Eucrisa/Staquis
and Cibinqo
• The Vyndaqel family, Oxbryta,
BeneFIX and Genotropin
• Sulperazon, Medrol, Zavicefta,
Zithromax, Vfend and Panzyga
Oncology Includes innovative oncology brands of biologics, small molecules,
immunotherapies and biosimilars across a wide range of cancers.
Ibrance, Xtandi, Inlyta, Retacrit,
Lorbrena and Braftovi
For
additional information on our operating segments and products,
including product revenues, see Note 17, and for additional information
on
the key operational revenue drivers of our business, see the
Analysis of the Consolidated Statements of Income section within
MD&A. For a
discussion of the risks associated with our
dependence on certain of our major products, see the Item 1A. Risk
Factors—Concentration section in
this Form 10-K.
RESEARCH AND DEVELOPMENT
R&D
is at the heart of fulfilling our purpose to deliver breakthroughs that
change patients’ lives as we work to translate advanced science and
technologies
into the therapies that may be the most impactful for patients. In
addition to discovering and developing new products, our R&D
efforts
seek to add value to our existing products by improving their
effectiveness and ease of dosing and by discovering potential new
indications.
Our R&D Priorities and Strategy. Our R&D priorities include:
•
delivering a pipeline of highly differentiated medicines and vaccines
where we have a unique opportunity to bring the most important new
therapies to patients in need;
• advancing our capabilities that can position us for long-term R&D leadership; and
•
advancing new models for partnerships with creativity, flexibility and
urgency to deliver innovation to patients as quickly as possible.
To
that end, our R&D primarily focuses on our main therapeutic areas,
which are inflammation and immunology, internal medicine, oncology, rare
diseases, vaccines, and anti-infectives.
While a significant
portion of our R&D is internal, we also seek promising chemical and
biological lead molecules and innovative technologies
developed by
others to incorporate into our discovery and development processes or
projects, as well as our portfolio. We do so by entering into
collaboration,
alliance and license agreements with universities, biotechnology
companies and other firms as well as through acquisitions and
investments.
These collaboration, alliance and license agreements and investments
allow us to share knowledge, risk and cost. They also enable
us to
access external scientific and technological expertise, as well as
provide us the opportunity to advance our own products and in-licensed
or
acquired products. For information on certain of these
collaborations, alliances and license arrangements and investments, see
Note 2.
Our R&D Operations. In 2022, we continued to strengthen
our global R&D operations and pursue strategies to improve R&D
productivity to
achieve a sustainable pipeline that is positioned
to deliver value in the near term and over time. Our R&D activity is
conducted through various
platform functions that operate in parallel within our global operations, including the following:
•
WRDM. Research units within WRDM are generally responsible for research
and early-stage development assets for our business (assets that
have
not yet achieved proof-of-concept) and are organized by therapeutic
area to enhance flexibility, cohesiveness and focus. We can rapidly
redeploy
resources within a research unit and between various projects to
leverage, as necessary, common skills, expertise or focus. Science-
based
platform-services organizations within WRDM provide technical expertise
and other services to various R&D projects and are organized
into
science-based functions. These organizations allow us to react more
quickly and effectively to evolving needs by sharing resources
among projects, candidates and targets across therapeutic areas and phases of development.
•
GPD. Our GPD organization is a unified center for clinical development
and regulatory activities that is generally responsible for the clinical
development strategy and operational execution of clinical trials
for both early- and late-stage clinical assets in Pfizer’s pipeline.
We
manage R&D operations on a total-company basis through our platform
functions described above. Specifically, the Portfolio Management
Team
(PMT), composed of senior executives, is accountable for aligning
resources among all of our WRDM, GPD and R&D projects and for
seeking
to ensure optimal capital allocation across the innovative R&D
portfolio. We believe that this approach also serves to maximize
accountability and flexibility.
Pfizer Inc. 2022 Form 10-K 4
We
do not disaggregate total R&D expense by development phase or by
therapeutic area since, as described above, we do not manage all of
our
R&D operations by development phase or by therapeutic area.
Further, as we are able to adjust a significant portion of our spending
quickly,
we believe that any prior-period information about R&D
expense by development phase or by therapeutic area would not
necessarily be
representative of future spending.
For additional information, see the Costs and Expenses—Research and Development Expenses section within MD&A and Note 17.
Our
R&D Pipeline. The process of drug and biological product discovery
from initiation through development and to potential regulatory approval
is lengthy and can take more than ten years. As of January 31,
2023, we had the following number of projects in various stages of
R&D:
Development of a single compound is often pursued as part
of multiple programs. While our drug candidates may or may not receive
regulatory
approval, new candidates entering clinical development
phases are the foundation for future products. Information concerning
several of our drug
candidates in development, as well as
supplemental filings for existing products, is set forth in the Product
Developments section within MD&A.
The discovery and development
of drugs, vaccines and biological products are time consuming, costly
and unpredictable. For information on the
risks associated with R&D, see the Item 1A. Risk Factors—Research and Development section in this Form 10-K.
COLLABORATION AND CO-PROMOTION
We
use collaboration and/or co-promotion arrangements to enhance our
development, R&D, sales and distribution of certain
biopharmaceutical
products, which include, among others, the following:
•
Comirnaty is an mRNA-based coronavirus vaccine to help prevent
COVID-19, which is being jointly developed and commercialized with
BioNTech.
Pfizer and BioNTech equally share the costs of development for the
Comirnaty program. Comirnaty has been granted an approval
or an
authorization in many countries around the world in populations varying
by country. We also share gross profits equally from
commercialization
of Comirnaty and are working jointly with BioNTech in our respective
territories to commercialize the vaccine worldwide
(excluding
China, Hong Kong, Macau and Taiwan), subject to regulatory
authorizations or approvals market by market. For discussion on
Comirnaty, see the Overview of Our Performance, Operating Environment, Strategy and Outlook—COVID-19 section within MD&A.
•
Eliquis (apixaban) is part of the Novel Oral Anticoagulant market and
was jointly developed and commercialized with BMS as an alternative
treatment
option to warfarin in appropriate patients. We fund between 50% and 60%
of all development costs depending on the study, and
profits and
losses are shared equally except in certain countries where we
commercialize Eliquis and pay a percentage of net sales to BMS. In
certain
smaller markets we have full commercialization rights and BMS supplies
the product to us at cost plus a percentage of the net sales to
end-customers.
•
Xtandi (enzalutamide) is an androgen receptor inhibitor that blocks
multiple steps in the androgen receptor signaling pathway within tumor
cells
that is being developed and commercialized in collaboration with
Astellas. We share equally in the gross profits and losses related to
U.S.
net sales and also share equally all Xtandi commercialization
costs attributable to the U.S. market, subject to certain exceptions. In
addition,
we share certain development and other collaboration
expenses. For international net sales we receive royalties based on a
tiered percentage.
• Bavencio (avelumab) is a human anti-programmed death ligand-1 (PD-L1) antibody that is being developed and commercialized in
collaboration
with Merck KGaA. We jointly fund the majority of development and
commercialization costs and split profits equally related to net
sales generated from any products containing avelumab.
•
Orgovyx (relugolix) is an oral gonadotropin-releasing hormone (GnRH)
receptor antagonist for the treatment of adult patients with advanced
prostate
cancer that is being developed and commercialized with Myovant. The
companies are also collaborating on Myfembree (relugolix 40
mg,
estradiol 1.0 mg, and norethindrone acetate 0.5 mg) for heavy menstrual
bleeding associated with uterine fibroids in premenopausal
women
and the management of moderate to severe pain associated with
endometriosis in premenopausal women. The companies equally
share
profits and allowable expenses in the U.S. for Orgovyx, and in the U.S.
and Canada for Myfembree, with Myovant bearing our share of
allowable
expenses up to a maximum of $50 million in 2022. Pfizer does not have
rights outside of these markets. Myovant remains
responsible for
regulatory interactions and drug supply and continues to lead clinical
development for the relugolix combination tablet.
Revenues
associated with these arrangements are included in Alliance revenues
(except in certain markets where we have direct sales and
except
for the majority of revenues for Comirnaty, which are included as direct
product revenues). In addition, we have collaboration
arrangements
for the development and commercialization of certain pipeline products
that are in development stage, including, among others, (i)
with
BioNTech to develop a modified mRNA-based vaccine for the prevention of
varicella zoster (Shingles), and (ii) with Valneva to co-develop
and
commercialize Valneva’s Lyme disease vaccine candidate, VLA15. For
further discussion of collaboration and co-promotion agreements, see
the
Item 1A. Risk Factors—Collaborations and Other Relationships with Third
Parties section in this Form 10-K and Notes 2 and 17.
INTERNATIONAL OPERATIONS
Our
operations are conducted globally, and we supply our medicines and
vaccines to over 185 countries and territories. Emerging markets are an
important component of our strategy for global leadership, and our
commercial structure recognizes that the demographics and rising
economic
power of the fastest-growing emerging markets are becoming
more closely aligned with the profile found within developed markets.
Urbanization
and the rise of the middle class in emerging markets provide potential growth opportunities for our products.
Pfizer Inc. 2022 Form 10-K 5
Revenues
from operations outside the U.S. of $57.9 billion accounted for 58% of
our total revenues in 2022. Revenues exceeded $500 million in
each
of 24, 21 and 8 countries outside the U.S. in 2022, 2021 and 2020,
respectively. The increase in the number of countries exceeding $500
million
in revenues in 2022 and 2021 was primarily driven by Comirnaty as well
as, in 2022, Paxlovid. As a percentage of revenues, our largest
country
outside the U.S. was Japan in 2022. For a geographic breakdown of
revenues, see the Revenues by Geography section within MD&A
and Note 17B.
Revenues by Country as % of Total Revenues
42%
37%
52%
8%
9%
6%
50%
54%
42%
U.S. Japan Other
2022
2021
2020
Our
international operations are subject to risks inherent in carrying on
business in other countries. For additional information, see the Item
1A.
Risk Factors—Global Operations and Item 1. Business—Government Regulation and Price Constraints sections in this Form 10-K.
SALES AND MARKETING
Our
prescription biopharmaceutical products, with the exception of
Paxlovid, are sold principally to wholesalers, but we also sell directly
to
retailers, hospitals, clinics, government agencies and
pharmacies. In 2022, we principally sold Paxlovid to government
agencies. In the U.S., we
primarily sell our vaccines directly to
the federal government, CDC, wholesalers, individual provider offices,
retail pharmacies and integrated
delivery systems. Outside the
U.S., we primarily sell our vaccines to government and non-government
institutions. Certain of these government
contracts may be
renegotiated or terminated at the discretion of a government entity. In
addition, our contracts with government and
supranational
organizations for the sales of Comirnaty and Paxlovid, which are binding
contracts, represented a significant amount of revenues in
2022.
To date, we primarily sold Comirnaty and Paxlovid globally under
government contracts. We expect sales of Comirnaty and Paxlovid in the
U.S.
will transition to commercial channels in the second half of 2023. We
also seek to gain access for our products on formularies, which are
lists
of approved medicines available to members of healthcare programs or
PBMs. PBMs use various benefit designs, such as tiered co-pays for
formulary
products, to drive utilization of products in preferred formulary
positions. We may also work with payers on disease management
programs
that help to develop tools and materials to educate patients and
physicians on key disease areas. For information on our significant
customers, see Note 17C.
We
promote our products to healthcare providers and patients consistent
with applicable laws. Through our marketing organizations, we explain
the
approved uses, benefits and risks of our products to healthcare
providers and patients; MCOs that provide insurance coverage, such as
hospitals,
integrated delivery systems, PBMs and health plans; and employers and
government agencies who hire MCOs to provide health
benefits to
their employees. In the U.S., we market directly to consumers through
direct-to-consumer advertising that seeks to communicate the
approved
uses, benefits and risks of our products while motivating people to
have meaningful conversations with their doctors. In addition, we
sponsor
general advertising to educate the public on disease awareness,
prevention and wellness, important public health issues and our patient
assistance programs.
As part of our commitment to engaging our
customers in the manner they prefer, we took a hybrid approach of
virtual and in person
engagements and see positive customer
response to both approaches. During the COVID-19 pandemic, we adapted
our promotional platform by
amplifying our digital capabilities to
reach healthcare professionals and customers to provide critical
education and information, including
increasing the scale of our remote engagement.
PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS
Patents.
We own or license a number of patents covering pharmaceutical and other
products, their uses, formulations, and product
manufacturing processes.
Patents
for individual products extend for varying periods according to the
date of patent filing or grant and the legal term of patents in the
various
countries where patent protection is obtained. The scope of
protection afforded by a patent can vary from country to country and
depends on the
patent type, the scope of its patent claims and the
availability of legal remedies. Patent term extensions (PTE) may be
available in some
countries to compensate for a loss of patent term
due to delay in a product’s approval due to the regulatory
requirements. One of the primary
considerations in limiting our
operations in some countries outside the U.S. is the lack of effective
intellectual property protection for our products,
although
international and U.S. free trade agreements have included some global
protection of intellectual property rights. For additional
information, see the Item 1. Business—Government Regulation and Price Constraints section in this Form 10-K.
In
various markets, a period of regulatory exclusivity may be provided for
drugs or vaccines upon approval. The scope and term of such
exclusivity
will vary but, in general, the period will run concurrently with the
term of any existing patent rights associated with the drug at the time
of approval.
Pfizer Inc. 2022 Form 10-K 6
Based on current
sales, and considering the competition with products sold by our
competitors, the patent rights we consider most significant in
relation to our business as a whole, together with the year in which the basic product patent expires, are as follows:
Product U.S. Basic Product Patent Expiration Year(1)
Major Europe Basic Product
Patent Expiration Year(1)
Japan Basic Product Patent
Expiration Year(1)
Inlyta 2025 2025 2025
Xeljanz 2025 2028(2) 2025
Prevnar 13/Prevenar 13 2026 (3) 2029
Eliquis(4) 2026 2026 2026
Ibrance 2027 2028 2028
Xtandi(5) 2027 (5) (5)
Vyndaqel/Vyndamax/Vynmac 2024 (2028 pending PTE) 2026 2026/2029
(6)
Xalkori 2029 2027 2028
Nurtec ODT/Vydura 2030 (2034 pending PTE)
2030
(2035 pending SPC) 2030
(7)
Braftovi(8) 2030 (2031 pending PTE)
(8) (8)
Mektovi(8) 2031(9) (8) (8)
Ngenla(10) (7)(11) 2032(2) 2030(2)
Oxbryta 2033 2032 (2037 pending SPC) 2032
(7)
Lorbrena 2033 2034 2036
Prevnar 20/Apexxnar 2033 (2035 pending PTE)
2033
(2037 pending SPC) 2033
(7)
Cibinqo 2034 (2036 pending PTE)
2034
(2036 pending SPC)
2034
(2038 pending PTE)
Pfizer-BioNTech COVID-19
Vaccine
(12) (12)(13) (12)
Paxlovid 2041 2041 2041
Pfizer-BioNTech COVID-19
Vaccine, Bivalent (Original and
Omicron BA.4/BA.5)/ Comirnaty
Original/Omicron BA.1 Vaccine
(12) (12)(13) (12)
(1)
Unless otherwise indicated, the years pertain to the basic product
patent expiration, including granted PTEs, supplementary protection
certificates (SPC) or
pediatric exclusivity periods. SPCs are
included when granted in three out of five major European markets
(France, Germany, Italy, Spain and the U.K.). Noted in
parentheses
is the projected year of expiry of the earliest pending patent term
extension in the U.S. or Japan and/or SPC application in Europe, the
term of
which, if granted, may be shorter than originally requested
due to a number of factors. In some instances, there are later-expiring
patents relating to our products
which may or may not protect our product from generic or biosimilar competition after the expiration of the basic patent.
(2) Expiry is provided by regulatory exclusivity in this market.
(3)
The Europe patent that covers the combination of the 13 serotype
conjugates of Prevenar 13 was revoked following an opposition and has
now been withdrawn.
There are other Europe patents and pending
applications covering the formulation, various aspects of the
manufacturing process, and the combination of
serotype conjugates of Prevenar 13 that remain in force.
(4)
Eliquis was developed and is being commercialized in collaboration with
BMS. In the U.S., we and BMS previously settled certain patent
litigations with a number
of generic companies permitting their
launch of a generic version of Eliquis on April 1, 2028 (the settled
generic companies). We continued to litigate against three
remaining
generic companies and following the resolution of the litigation in our
favor, the three generic companies are not permitted to launch their
products until
the 2031 expiration date of the formulation
patent. Both the composition of matter patent expiring in November 2026
and the formulation patent expiring in 2031
may be subject to
future challenges. While we cannot predict the outcome of any potential
future litigation, there are certain potential alternatives that might
occur
which could potentially permit generic launch prior to April
1, 2028: (a) if the formulation patent is held invalid or not infringed
in future litigation, through appeal,
the settled generic
companies and any successful future litigant would be permitted to
launch on November 21, 2026; or (b) if both patents are held invalid or
not
infringed in future litigation, through appeal, the settled
generic companies and any successful future litigant could launch
products immediately upon such an
adverse decision.
Refer to Note 16A1 for more information.
(5)
Xtandi is being developed and commercialized in collaboration with
Astellas, which has exclusive commercialization rights for Xtandi
outside the U.S. Pfizer
receives tiered royalties as a percentage of international Xtandi net sales.
(6)
Vyndaqel (tafamidis meglumine) basic patent expiry in Japan is August
2026 for treatment of polyneuropathy. Vynmac (tafamidis) was approved in
Japan for
treatment of cardiomyopathy with regulatory exclusivity expiring in March 2029.
(7) Product not yet approved or authorized in this market.
(8)
We have exclusive rights to Braftovi and Mektovi in the U.S., Canada
and certain emerging markets. The Pierre Fabre Group has exclusive
rights to
commercialize both products in Europe and Ono has
exclusive rights to commercialize both products in Japan. We receive
royalties from The Pierre Fabre Group
and Ono on sales of Braftovi and Mektovi in majority of markets outside the U.S.
(9) Mektovi U.S. expiry is provided by a method of use patent.
(10) Ngenla is being developed in collaboration with OPKO.
(11) Expiry expected to be provided by regulatory exclusivity in this market.
(12)
The basic product patent application has been filed in these markets.
If granted, a full term is expected in these markets. Product is being
developed and
commercialized in collaboration with BioNTech.
(13) Pfizer does not have co-promotion rights for this product in Germany.
Loss
of Intellectual Property Rights. The loss, expiration or invalidation
of intellectual property rights, patent litigation settlements and the
expiration
of co-promotion and licensing rights can have a material adverse effect
on our revenues. Once patent protection has expired or has
been
lost prior to the expiration date as a result of a legal challenge, we
typically lose exclusivity on these products, and generic and biosimilar
pharmaceutical manufacturers generally produce identical or highly
similar products and sell them for a lower price. The date at which
generic or
Pfizer Inc. 2022 Form 10-K 7
biosimilar competition
commences may be different from the date that the patent or regulatory
exclusivity expires. However, when generic or
biosimilar
competition does commence, the resulting price competition can
substantially decrease our revenues for the impacted products, often
in
a very short period of time. Also, if one of our product-related
patents is found to be invalid by judicial, court or regulatory or
administrative
proceedings, generic or biosimilar products could be introduced, resulting in the erosion of sales of our existing products.
We
continue to vigorously defend our patent rights against infringement,
and we will continue to support efforts that strengthen worldwide
recognition
of patent rights while taking necessary steps to help ensure
appropriate patient access. For additional information, see the Item 1A.
Risk Factors—Competitive Products, —Intellectual Property
Protection and —Third-Party Intellectual Property Claims sections in
this Form 10-K
and Note 16A1.
Certain of our products have
experienced patent-based expirations or loss of regulatory exclusivity
in certain markets in the last few years, and
we expect certain
products to face increased generic competition over the next few years.
For example, the basic product patent for Sutent
expired in the
U.S. in 2021 and in Europe in 2022. There is no assurance that a
particular product will enjoy market exclusivity for the full time
period
that appears in the estimates included in this Form 10-K or that we
assume when we provide our financial guidance. For additional
information
on the impact of LOEs on our revenues, see the Overview of Our
Performance, Operating Environment, Strategy and Outlook—Our
2022 Performance section within MD&A.
Trademarks.
Our products are sold under brand-name and logo trademarks and trade
dress. Registrations generally are for fixed, but renewable,
terms
and protection is provided in some countries for as long as the mark is
used while in others, for as long as it is registered. Protecting our
trademarks is of material importance to Pfizer.
COMPETITION
Our
business is conducted in intensely competitive and often highly
regulated markets. Many of our products face competition in the form of
branded or generic drugs or biosimilars that treat similar diseases
or indications. The principal forms of competition include efficacy,
safety, ease
of use and cost. Though the means of competition vary
among our products, demonstrating the value of our products is a
critical factor for
success.
We compete with other companies
that manufacture and sell products that treat or prevent diseases or
indications similar to those treated or
prevented by our major
products. These competitors include other worldwide research-based
biopharmaceutical companies, smaller research
companies with more
limited therapeutic focus and generic drug and biosimilar manufacturers.
Our competitors also may devote substantial
funds and resources to
R&D and their successful R&D could result in erosion of the
sales of our existing products and potential sales of products
in
development, as well as unanticipated product obsolescence. In addition,
several of our competitors operate without large R&D expenses and
make a regular practice of challenging our product patents before their expiration.
To
address competitive trends we continually emphasize innovation, which
is underscored by our multi-billion-dollar investment in R&D, as
well
as our business development transactions, both designed to
result in a strong and differentiated product pipeline. Our investment
in research
continues even after drug or vaccine approval as we
seek to further demonstrate the value of our products for the conditions
they treat or
prevent, as well as potential new applications. We
educate patients, physicians, payers and global health authorities on
the benefits and risks of
our medicines and vaccines, and seek to
continually enhance the organizational effectiveness of our
biopharmaceutical functions, including to
accurately and ethically launch and market our products to our customers.
Operating
conditions have also shifted as a result of increased global
competitive pressures, industry regulation and cost containment. We
continue
to evaluate, adapt and improve our organization and business practices
in an effort to better meet customer and public needs. We
believe
that we have taken an industry-leading role in evolving our approaches
to U.S. direct-to-consumer advertising, interactions with, and
payments
to, healthcare professionals and medical education grants. We also
continue to sponsor programs to address patient affordability and
access barriers, as we strive to advance fundamental health system change through our support for better healthcare solutions.
Our
vaccines may face competition, including from the introduction of
alternative vaccines or “next-generation” vaccines prior to or after the
expiration of their patents, which may adversely affect our future results.
Our
biosimilars, which include biosimilars of certain inflammation &
immunology and oncology biologic medicines, compete with branded
products
from competitors, as well as other generics and biosimilars
manufacturers. We seek to maximize the opportunity to establish a
“first-to-
market” or early market position for our biosimilars to
provide customers a lower-cost alternative immediately when available
and also to
potentially provide us with higher levels of sales and profitability until other competitors enter the market.
Generic
Products. Generic pharmaceutical manufacturers pose one of the biggest
competitive challenges to our branded small molecule
products
because they can market a competing version of our product after the
expiration or loss of our patent and often charge much less.
Several
competitors regularly challenge our product patents before their
expiration. Generic competitors often operate without large R&D
expenses,
as well as without costs of conveying medical information about
products to the medical community. In addition, the FDA approval
process
exempts generics from costly and time-consuming clinical trials to
demonstrate their safety and efficacy, allowing generic manufacturers
to
rely on the safety and efficacy data of the innovator product. In
China, for example, we expect to continue to face intensified
competition by
certain generic manufacturers in 2023 and beyond,
which may result in price cuts and volume loss of some of our products.
In addition, generic
versions of competitors’ branded products may also compete with our products.
MCOs
that focus primarily on the immediate cost of drugs often favor
generics over brand-name drugs. Many governments also encourage the
use
of generics as alternatives to brand-name drugs in their healthcare
programs, including Medicaid in the U.S., and U.S. laws generally allow,
and in some cases require, pharmacists to substitute generic drugs
for brand-name drugs. In a small subset of states, prescribing
physicians are
able to expressly prevent such substitution.
Biosimilars.
Certain of our biologic products, including Enbrel (we market Enbrel
outside the U.S. and Canada), already face, or may face in the
future,
competition from biosimilars (also referred to as follow-on biologics).
Biosimilars are versions of biologic medicines that have been
developed
and proven to be highly similar to the original biologic in terms of
safety and efficacy and that have no clinically meaningful differences
in
safety, purity or potency. Biosimilars have the potential to offer
high-quality, lower-cost alternatives to innovative biologic medicines.
In the U.S.,
biosimilars referencing innovative biologic products are approved under the U.S. Public Health Service Act.
Pfizer Inc. 2022 Form 10-K 8
PRICING PRESSURES AND MANAGED CARE ORGANIZATIONS
Commercial
Pricing Pressures. Pricing and access pressures in the commercial
sector continue to be significant. Overall, there is increasing
pressure
on U.S. providers to deliver healthcare at a lower cost and to ensure
that those expenditures deliver demonstrated value in terms of
health
outcomes. Many employers have adopted or make available high deductible
health plans, which can increase out-of-pocket costs for
medicines.
This trend is likely to continue. Private third-party payers, such as
health plans, increasingly challenge pharmaceutical product pricing,
which
could result in lower prices, lower reimbursement rates for payors and a
reduction in demand for our products, including denial of coverage
of
our products, if lower cost alternatives are available. Pricing
pressures also may occur as a result of highly competitive insurance
markets.
Healthcare provider purchasers, directly or through group
purchasing organizations, are seeking enhanced discounts or implementing
more
rigorous bidding or purchasing review processes.
Longer
term, we foresee a shift among payors and their pharmacy benefits
managers in focus away from fee-for-service reimbursement towards
outcomes-based
payments and risk-sharing arrangements that reward providers and
pharmaceutical manufacturers for cost reductions and
improved
patient outcomes. These new payment models can, at times, lead to lower
prices for, and restricted access to, new medicines. At the
same
time, these models can also promote utilization of drugs by encouraging
physicians to screen and diagnose and consider drugs as a
means of
forestalling more costly medical interventions. Further, these models
may also encourage payors and their pharmacy benefits
managers to cover higher cost drugs where coverage is tied to patient outcomes and other quality incentives.
The
impact of COVID-19 and related large-scale healthcare disruptions on
the pace of adoption of value-based payment models remains
unclear.
Both payors and providers may resist adopting such models or choose to
adopt such models at a slower pace if the incentives available
do
not outweigh the financial risk involved. Unprecedented pressures on
critical care and the reductions in elective surgeries during the
COVID-19
pandemic undermined revenue predictability for hospitals and other
institutional providers. As a result, providers may weigh their
ability
to take on the financial risk of downside value-based payment models.
In contrast, providers in more advanced value-based payment
models,
such as full capitation, a fixed amount paid in advance per patient per
unit of time-period, generally found their revenues remained
steady
during the pandemic, which may ultimately encourage the growth of such
models. Going forward, we expect continued focus on value-
based
payment models that support financial resiliency and advance health care
equity by incorporating features intended to reduce disparities in
health care quality and access experienced by underrepresented and underserved populations.
We
believe medicines and vaccines are the most efficient and effective use
of healthcare dollars based on the value they deliver to the overall
healthcare
system. We work with law makers and advocate for solutions that
effectively improve patient health outcomes, lower costs to the
healthcare
system, and help ensure access to medicines and vaccines within an
efficient and affordable healthcare system. This includes
assessing
our go-to market model to address patient affordability challenges. We
have engaged with major payors and the U.S. government to
explore
opportunities to improve access and reimbursement in an effort to drive
pro-patient policies. In addition, in response to the evolving U.S.
and
global healthcare spending landscape, we work with health authorities,
health technology assessment and quality measurement bodies and
major
U.S. payers throughout the product-development process to better
understand how these entities value our compounds and products.
Further,
we are developing stronger support to demonstrate the net value of the
medicines and vaccines that we discover or develop, register
and manufacture.
For
information on government pricing pressures, see the Item 1.
Business—Government Regulation and Price Constraints and Item 1A. Risk
Factors—Pricing and Reimbursement sections in this Form 10-K.
Managed
Care Organizations. The evolution of managed care in the U.S. has been a
major factor in the competitiveness of the healthcare
marketplace.
Approximately 307 million people in the U.S. now have some form of
health insurance coverage, and the marketing of prescription
drugs
and vaccines to both consumers and the entities that manage coverage in
the U.S. continues to grow in importance. In particular, the
influence
of MCOs has increased in recent years due to the growing number of
patients receiving coverage through MCOs. At the same time,
consolidation
in the MCO industry has resulted in fewer, even larger MCOs, which
enhances those MCOs’ ability to negotiate lower pricing and
further
increases their importance to our business. Since MCOs seek to contain
and reduce healthcare expenditures, their growing influence has
increased downward pressure on drug prices, as well as negatively impacted revenues.
MCOs
and their PBMs typically negotiate prices with pharmaceutical providers
by using formularies (which are lists of approved medicines
available
to MCO members), clinical protocols (which require prior authorization
for a branded product if a generic product is available or require
the
patient to first fail on one or more generic products before permitting
access to a branded medicine), volume purchasing, long-term contracts
and
their ability to influence volume and market share of prescription
drugs. In addition, by placing branded medicines on higher-tier or non-
preferred
status in their formularies, MCOs transfer to the patient higher
patient out-of-pocket expenses. This financial disincentive is a tool
for
MCOs to manage drug costs and channel patients to medicines
preferred by the MCOs. We expect payment reforms for MCOs will continue
to
evolve with increased emphasis on expanded participation and on removing barriers to equitable health care.
The
breadth of the products covered by formularies can vary considerably
from one MCO to another, and many formularies include alternative
and
competitive products for treatment of particular medical problems. MCOs
emphasize primary and preventive care, out-patient treatment and
procedures
performed at doctors’ offices and clinics as ways to manage costs.
Hospitalization and surgery, typically the most expensive forms of
treatment,
are carefully managed, and drugs that can help in chronic care
management and reduce the need for hospitalization, professional
therapy
or surgery may become favored first-line treatments for certain
diseases. At the same time, MCOs may seek to exclude high-cost drugs
from formularies in their efforts to manage and lower their costs.
Exclusion
of a product from a formulary or other MCO-implemented restrictions can
significantly impact drug usage in the MCO patient
population and
beyond. Consequently, pharmaceutical companies compete to gain access to
formularies for their products, typically on the basis
of unique
product features, such as greater efficacy, better patient ease of use,
or fewer side effects, as well as the overall cost of the therapy.
We
continue to seek to ensure that our major products are included on MCO
formularies. However, increasingly our branded products are being
placed
on the higher tiers or in a non-preferred status. For additional
information, see the Item 1A. Risk Factors—Managed Care Trends section
in this Form 10-K.
RAW MATERIALS
We
procure raw materials essential to our business from numerous suppliers
worldwide. In general, these materials have been available in
sufficient
quantities to support our demand and in many cases are available from
multiple suppliers. No significant impact to our operations due
to
the availability of raw materials is currently anticipated in 2023.
However, we are seeing an increase in overall demand in the industry for
certain components and raw materials, which could potentially
result in constraining available supply leading to a possible future
impact on our
Pfizer Inc. 2022 Form 10-K 9
business. We are
continuing to monitor and implement mitigation strategies in an effort
to reduce any potential risk or impact, including active
supplier management, qualification of additional suppliers and advanced purchasing to the extent possible.
GOVERNMENT REGULATION AND PRICE CONSTRAINTS
We
are subject to extensive regulation by government authorities in the
countries in which we do business. This includes laws and regulations
governing
the operations of biopharmaceutical companies, such as the approval,
manufacturing and marketing of products, pricing (including
discounts
and rebates) and data privacy, among others. These laws and regulations
may require administrative guidance for implementation, and
a
failure to comply could subject us to legal and/or administrative
actions. Enforcement measures may include substantial fines and/or
penalties,
orders to stop non-compliant activities, criminal
charges, warning letters, product recalls or seizures, delays in product
approvals, exclusion from
participation in government programs or
contracts as well as limitations on conducting business in applicable
jurisdictions, and could result in
harm to our reputation and
business. For additional information, see Note 16A. Compliance with
these laws and regulations may be costly, and
may require
significant technical expertise and capital investment to ensure
compliance. While capital expenditures or operating costs for
compliance
with government regulations cannot be predicted with certainty, we do
not currently anticipate they will have a material effect on our
capital expenditures or competitive position.
In the United States
Drug
and Biologic Regulation. The FDA, pursuant to the FFDCA, the Public
Health Service Act and other federal statutes and regulations,
extensively
regulates pre- and post-marketing activities related to our
biopharmaceutical products. The regulations govern areas such as the
safety
and efficacy of medicines and vaccines, clinical trials, advertising
and promotion, quality control, manufacturing, labeling, distribution,
post-
marketing safety surveillance and reporting, and record
keeping. Other U.S. federal agencies, including the DEA, also regulate
certain of our
products and activities.
For a
biopharmaceutical company to market a drug or a biologic product,
including vaccines, in the U.S., the FDA must evaluate whether the
product
is safe and effective for its intended use. If the FDA determines that
the drug or biologic is safe and effective, the FDA will approve the
product’s NDA or BLA (or supplemental NDA or supplemental BLA), as appropriate.
A
drug or biologic may be subject to postmarketing commitments, which are
studies or clinical trials that the product sponsor agrees to conduct,
or postmarketing requirements, which are studies or clinical trials
that are required as a condition of approval. In addition, we are also
required to
report adverse events and comply with cGMP (the FDA
regulations that govern all aspects of manufacturing quality for
pharmaceuticals) and the
Drug Supply Chain Security Act (the law
that, among other things, sets forth requirements related to product
tracing, product identifiers and
verification for manufacturers,
wholesale distributors, repackagers and dispensers to facilitate the
tracing of product through the pharmaceutical
distribution supply
chain), as well as advertising and promotion regulations. For additional
information, see the Item 1A. Risk Factors—
Development, Regulatory Approval and Marketing of Products and —Post-Authorization/Approval Data sections in this Form 10-K.
In
the context of public health emergencies, like the COVID-19 pandemic,
we may apply to the FDA for an EUA, which, if granted, allows for the
distribution
and use of our products during the declared emergency, in accordance
with the conditions set forth in the EUA, unless the EUA is
terminated
by the government. Although the criteria for an EUA differ from the
criteria for approval of an NDA or BLA, EUAs nevertheless require
the
development and submission of data to satisfy the relevant FDA
standards, and a number of ongoing obligations. The FDA generally
expects
EUA holders to work toward submission of full applications, such as a BLA or an NDA, as soon as possible.
Biosimilar
Regulation. The FDA is responsible for approval of biosimilars.
Innovator biologics, or reference products, are entitled to 12 years
exclusivity.
Applications for biosimilars may not be submitted until four years
after the date on which the reference product was first licensed and
may not be approved until 12 years after the reference product was first licensed.
Sales
and Marketing Regulations. Our marketing practices are subject to state
laws, as well as federal laws, such as the Anti-Kickback Statute
and
False Claims Act, intended to prevent fraud and abuse in the healthcare
industry. The Anti-Kickback Statute prohibits corruptly soliciting,
offering,
receiving, or paying anything of value to generate business. The False
Claims Act generally prohibits anyone from knowingly and
willingly
presenting, or causing to be presented, any claims for payment for goods
or services, including to government payers, such as Medicare
and
Medicaid, that are false or fraudulent and generally treat claims
generated through kickbacks as false or fraudulent. The federal
government
and states also regulate sales and marketing activities
and financial interactions between manufacturers and healthcare
providers, requiring
disclosure to government authorities and the
public of such interactions, and the adoption of compliance standards or
programs. State attorneys
general have also taken action to
regulate the marketing of prescription drugs under state consumer
protection and false advertising laws.
Pricing, Reimbursement and
Access Regulations. Pricing and reimbursement for our products depend in
part on government regulation. Any
significant efforts at the
federal or state levels to reform the healthcare system by changing the
way healthcare is provided or funded or more
directly impose
controls on drug pricing, government reimbursement, and access to
medicines and vaccines on public and private insurance
plans could have a material impact on us.
In
addition, in order to have our products covered by Medicaid, we must
offer discounts or rebates on purchases of pharmaceutical products
under
various federal and state programs. We also must report specific prices
to government agencies. The calculations necessary to determine
the
prices reported are complex and the failure to do so accurately may
expose us to enforcement measures. See the discussion regarding
rebates in the Revenue Deductions section within MD&A and Note 1G.
Government
and private payers routinely seek to manage utilization and control the
costs of our products, and there is considerable public and
government
scrutiny of pharmaceutical pricing. Efforts by states and the federal
government to regulate prices or payment for pharmaceutical
products,
including proposed actions to facilitate drug importation, limit
reimbursement to lower international reference prices, require deep
discounts,
and require manufacturers to report and make public price increases and
sometimes a written justification for the increase, could
adversely
affect our business if implemented. We expect to see continued focus by
Congress and the Biden Administration on regulating pricing,
which
could result in legislative and regulatory changes designed to control
costs. For example, in August 2022, the IRA was signed into law,
which,
among other things, requires manufacturers of certain drugs to engage
in price negotiations with Medicare (beginning in 2026), imposes
rebates
under Medicare Part B and Medicare Part D to penalize price increases
that outpace inflation (first due in 2023), and replaces the Part D
coverage
gap discount program with a new discounting program (beginning in
2025). We continue to evaluate the impact of the IRA on our
business,
operations and financial condition and results as the full effect of
the IRA on our business and the pharmaceutical industry remains
uncertain.
In addition, changes to the Medicaid program or the federal 340B drug
pricing program, which imposes ceilings on prices that drug
manufacturers
can charge for medications sold to certain health care facilities,
could have a material impact on our business. For example,
Pfizer Inc. 2022 Form 10-K 10
certain
changes finalized by the CMS in December 2020 for the Medicaid Drug
Rebate Program may increase our Medicaid liability, including for
drugs
that are considered to be “new formulations” of existing drugs.
Additional changes to the 340B program are undergoing review and their
status
is unclear. In 2022, we implemented a policy that will help improve
contract pharmacy integrity. The HHS has sent letters to numerous
manufacturers
that have also implemented contract pharmacy integrity initiatives
expressing the view that their programs are in violation of the
340B
statute, and referring those programs for potential enforcement action.
Several manufacturers have challenged HHS’s enforcement letters
in
federal court and litigation is ongoing in those cases. We believe that
our program is consistent with the statute. Additional legal or
legislative
developments at the federal or state level with respect
to the 340B program may have an adverse impact on our integrity
initiative, and we may
face enforcement action or penalties,
depending upon such developments. For additional information, see the
Item 1A. Risk Factors—Pricing
and Reimbursement section in this Form 10-K.
A
majority of states use preferred drug lists to manage access to
pharmaceutical products under Medicaid, including some of our products.
For
example, access to our products under the Medicaid managed care
programs typically is determined by the health plans with which state
Medicaid
agencies contract to provide services to beneficiaries. States seek to
control healthcare costs related to Medicaid and other state
healthcare
programs, including the implementation of supplemental rebate
agreements under the Medicaid drug rebate program tied to patient
outcomes.
States’ budgets were impacted less by the COVID-19 pandemic than
expected and are generally growing. However, we expect states
will
continue to seek cost cutting within Medicaid, which may focus on
managed care capitation payments and/or formulary management. States
may
also advance drug-pricing initiatives with a focus on affordability
review boards, financial penalties related to pricing practices,
manufacturer
pricing and reporting requirements, as well as
regulation of prescription drug assistance, copay accumulator, or copay
maximizer programs in the
commercial market. Payers may promote
generic drugs and biosimilars more aggressively to generate savings and
attempt to stimulate
additional price competition. In addition, we
expect that consolidation and integration among pharmacy chains,
wholesalers and PBMs will
increase pricing pressures in the
industry. For additional information, see the Item 1A. Risk
Factors—Managed Care Trends section in this Form
10-K.
Anti-Corruption.
The FCPA prohibits U.S. corporations and their representatives from
offering, promising, authorizing or making payments to any
foreign
government official, government staff member, political party or
political candidate to obtain or retain business abroad. The scope of
the
FCPA includes interactions with certain healthcare
professionals in many countries. Other countries have enacted similar
anti-corruption laws
and/or regulations.
Data Privacy. The
collection and use of personal data by us is increasingly important to
our business and is subject to various federal and state
privacy
and data security laws and regulations, including oversight by various
regulatory and other governmental bodies. Such laws and
regulations continue to evolve and are increasingly being enforced vigorously.
Outside the United States
New
Drug Approvals. In the EU, the EMA conducts the scientific evaluation,
supervision and safety monitoring of our innovative medicinal
products,
and employs a centralized procedure for approval for the EU and the
European Economic Area (EEA) countries. In the U.K., the
Medicines
and Healthcare Products Regulatory Agency is the sole regulatory
authority. In Japan, the Pharmaceuticals and Medical Device
Agency
is involved in a wide range of regulatory activities, including clinical
studies, approvals, post-marketing reviews and pharmaceutical
safety.
In China, the National Medical Product Administration is the primary
regulatory authority for approving and supervising medicines. Health
authorities
in many middle- and lower-income countries require marketing approval
by a recognized regulatory authority (e.g., the FDA or EMA)
before they begin to conduct their application review process and/or issue their final approval.
Pharmacovigilance.
In the EU, the EMA’s PRAC is responsible for reviewing and making
recommendations on product safety issues. Outside
developed
markets, pharmacovigilance requirements vary and are generally not as
extensive, but there is a trend toward increasing regulation.
Pricing
and Reimbursement. Certain governments, including in the different EU
member states, the U.K., Japan, China, Canada and South
Korea,
provide healthcare at low-to-zero direct cost to consumers at the point
of care and have significant power to regulate pharmaceutical
prices
or patient reimbursement levels to control costs for the
government-sponsored healthcare system, particularly under recent global
financing pressures. Governments globally may use a variety of
measures to control costs, including, among others, proposing price
reform or
legislation, cross country collaboration and procurement,
price cuts, mandatory rebates, health technology assessments, forced
localization as a
condition of market access, “international
reference pricing” (i.e., the practice of a country linking its
regulated medicine prices to those of other
countries), QCE
processes and VBP. In addition, the international patchwork of price
regulation, differing economic conditions and incomplete
value
assessments across countries has led to varying access to quality
medicines in many markets and some third-party trade in our products
between
countries. Several important multilateral organizations such as the
World Health Organization are increasing scrutiny of international
pharmaceutical
pricing through policy recommendations and sponsorship of programs,
such as “The Oslo Medicines Initiative” which aims to
ensure
“affordability for high-priced medicines”. In November 2020, the EC
published its Pharmaceutical Strategy for Europe which envisions a
broad
range of new initiatives and legislation including a significant focus
on tackling the persisting inequalities on access, affordability and
availability of medicines across the EU.
In
China, pricing pressures have increased in recent years because of an
overall focus on healthcare cost containment with the central
government
emphasizing improved health outcomes and decreased drug prices as key
indicators of progress towards its healthcare reform. For
patented
products, drug prices have decreased dramatically as a result of adding
innovative drugs (including oncology medicines and orphan
drugs) to
the National Reimbursement Drug List (NRDL) via access-price
negotiation. In the off-patent space, numerous local generics have
been
officially deemed bioequivalent under a QCE process that required
generic drugs to pass a test to assess their bioequivalence to a
qualified
reference drug (typically the originator drug). A
centralized VBP program—a tendering process where a certain portion of
included molecule
volumes are guaranteed to tender winners—aims to
contain healthcare costs by driving utilization of generics that have
passed QCE. This has
resulted in further lowering the price of
medicines, especially off-patent medicines; this trend is expected to
continue. Furthermore, the Chinese
government has promulgated price
bidding rules in June 2022 for enlisting off-patent products (excluding
VBP products and certain products
directly priced by government)
onto the NRDL with the goal of unifying the reimbursement price between
QCE-approved generic medicines and
the applicable original
medicines. Pfizer, along with most off-patent originators, have mostly
not been successful in the VBP bidding process. The
government has
indicated that additional post-LOE drugs (including biological products)
could be subjected to VBP qualification in future rounds.
Certain
of our products, such as Sulperazon and Vfend injectables, are likely to
be included in future rounds. While certain details of future QCE
expansion
have been made available, we are unable to determine the impact on our
business and financial condition until the initiation of these
future rounds.
Pfizer Inc. 2022 Form 10-K 11
Healthcare
Provider Transparency and Disclosures. Several countries have
implemented laws requiring (or industry trade associations have
recommended)
disclosure of transfers of value made by pharmaceutical companies to
healthcare providers and/or healthcare organizations,
such as academic teaching hospitals.
Intellectual
Property. Reliable patent protection and enforcement around the world
are among the key factors we consider for continued business
and
R&D investment. The WTO Agreement on Trade Related Aspects of
Intellectual Property Rights (WTO-TRIPS) requires participant countries
to provide patent and other intellectual property-related
protection for pharmaceutical products by law, with a time-limited
exemption provided for
least-developed countries. While some
countries have made improvements, we still face patent grant,
enforcement and other intellectual property
challenges in many countries.
While
the global intellectual property policy environment has generally
improved following implementation of WTO-TRIPS and bilateral/
multilateral
trade agreements, our growth and ability to bring new product
innovation to patients depends on further progress in intellectual
property
protection. In certain developed international markets, governments
maintain relatively effective intellectual property policies. However,
in
the EU, pursuant to the ongoing review of pharmaceutical intellectual
property and regulatory incentives, legislative proposals expected to be
introduced in 2023 may result in the reduction of certain
protections. In several emerging market countries, governments have used
intellectual
property policies as a tool to force innovators to
accept less than fair value for medicines, as well as to advance
industrial policy and localization
goals. The WTO continues to
address the role of intellectual property in the context of the COVID-19
pandemic response. This includes the June
2022 Ministerial
Decision on the Agreement on Trade-Related Aspects of Intellectual
Property Rights, which seeks to make it easier for certain
WTO
members to issue a compulsory license on COVID-19 vaccines, and
discussions continue on whether to expand that decision to COVID-19
therapeutics and diagnostics.
Considerable
political and economic pressure has weakened current intellectual
property protection in some countries and has led to policies
such
as more restrictive standards for obtaining patents and more difficult
procedures for patenting biopharmaceutical inventions, restrictions on
patenting
certain types of inventions, revocation of patents, laws or regulations
that promote or provide broad discretion to issue a compulsory
license, weak intellectual property enforcement and failure to implement effective regulatory data protection.
Our
industry advocacy efforts focus on seeking a fair and transparent
business environment for foreign manufacturers, underscoring the
importance
of strong intellectual property systems for local innovative industries
and helping improve patients’ access to innovative medicines
and vaccines.
Data
Privacy. Outside of the U.S., many countries have privacy and data
security laws and regulations concerning the collection and use of
personal
data, including but not limited to, the EU’s General Data Protection
Regulations and China’s Personal Information Protection Law. The
legislative
and regulatory framework for privacy and data protection issues
worldwide is also rapidly evolving as countries continue to adopt new
and
updated privacy and data security laws. The interpretation and
application of such laws and regulations remain uncertain and continues
to
evolve. In addition, enforcement of such laws and regulations is increasing.
ENVIRONMENTAL MATTERS
Our
operations are affected by national, state and/or local environmental
laws. We have made, and intend to continue to make, the expenditures
necessary
for compliance with applicable laws. We also are cleaning up
environmental contamination from past industrial activity at certain
sites.
We incurred capital and operational expenditures in 2022 for
environmental compliance purposes and for the clean-up of certain past
industrial
activity as follows: $88 million in environment-related
capital expenditures and $148 million in other environment-related
expenses.
While capital expenditures or operating costs for
environmental compliance cannot be predicted with certainty, we do not
currently anticipate they
will have a material effect on our capital expenditures or financial position. See also Note 16A3.
As
a science guided organization, we take a proactive approach to our
environmental sustainability initiatives. In 2022, we announced a new
goal
to further reduce GHG emissions and achieve the Science Based
Target Initiative’s voluntary Net-Zero Standard by 2040. As part of this
goal,
Pfizer aims to decrease its GHG emissions by 95% and its
value chain emissions by 90% from 2019 levels by 2040. To support our
goal, we are
developing our emission reduction plan, which will
include strategies to achieve reductions throughout our value chain
including investing in new
technologies and innovative climate
solutions, and urging all of our suppliers to unite with us in making a
commitment to action and integrating
ambitious climate impact
reduction targets into their management processes. Related expenses and
capital spending incurred for 2022 were not
material to our
consolidated financial statements. While capital and operational
expenditures will be incurred to meet our goal, we do not
currently
anticipate they will have a material effect on our financial position
in the near term. Longer term uncertainties regarding availability of
commercially
available technologies among others make it difficult to predict the
financial impact of meeting the goal and we will continue to
assess and monitor the financial impact of the emission reduction plan.
For
a discussion of the risks associated with climate change and our
environmental initiatives, see the Item 1A. Risk Factors—Climate Change
and Sustainability section in this Form 10-K.
HUMAN CAPITAL
Our
purpose is: Breakthroughs that change patients’ lives. These
breakthroughs are delivered through the relentless collaboration of our
talented
workforce. As of December 31, 2022, we employed
approximately 83,000 people worldwide, with approximately 32,000 based
in the U.S.
Women compose approximately 51% of our global
workforce, and approximately 37% of our U.S.-based employees are
individuals with
ethnically diverse backgrounds.
Our continued
success links directly to the commitment, engagement and performance of
our employees. It is important that we not only attract
and retain
the best and brightest diverse talent, but also ensure they remain
engaged and can thrive in an environment that is committed to
helping
them grow, succeed and contribute directly to achieving our purpose. As
part of these efforts, we strive for an inclusive and empowering
work
environment, adopting practices to simplify processes and remove
needless complexity, rewarding both performance and leadership skills,
fostering
career growth and internal mobility and offering competitive
compensation and benefits programs that encourage mental and physical
well being.
Core
Values. To fully realize Pfizer’s purpose we have established a clear
set of goals regarding what we need to achieve for patients and how
we
will go about achieving them. The “how” is represented by four simple,
powerful company values – Courage, Excellence, Equity and Joy.
Pfizer Inc. 2022 Form 10-K 12
Each value defines our company and our culture:
•
Courage: Breakthroughs start by challenging convention – especially in
the face of uncertainty or adversity. This happens when we think big,
speak up and are decisive.
•
Excellence: We can only change patients’ lives when we perform at our
best together. This happens when we focus on what matters, agree
who does what and measure outcomes.
•
Equity: Every person deserves to be seen, heard and cared for. This
happens when we are inclusive, act with integrity and reduce health care
disparities.
• Joy: We give ourselves to our work, and it also
gives to us. We find joy when we take pride, recognize one another and
have fun.
Diversity, Equity and Inclusion. At Pfizer, every person
deserves to be seen, heard and cared for. We embed diversity, equity and
inclusion in our
workplace and our purpose of delivering
breakthroughs that change patients’ lives. As we work to bring together
people with different
backgrounds, perspectives and experiences we
take specific actions to help foster an inclusive environment within
Pfizer and beyond, including,
among others: (i) building a more
inclusive colleague experience through representation and meaningful
connections; (ii) advancing equitable
health outcomes by evaluating
our work through the lens of the communities we serve, (iii) providing
resources on allyship and the science
behind inclusion to support
all colleagues in having courageous conversations about equity, race and
the avoidance of bias; (iv) working to help
transform society with
external diversity, equity and inclusion partnerships, including
deploying capital, engaging diverse suppliers and amplifying
equity
initiatives; and (v) working to help ensure demographics of clinical
trials correlate to those of the countries where trials are taking
place.
Colleague Engagement. To attract, develop and inspire the
brightest talent, we aim to support our colleagues by engaging and
partnering with
them to help ensure they feel they are part of a
community. We understand the importance of continuously listening and
responding to colleague
feedback and our annual engagement survey,
Pfizer Pulse, provides a forum for our colleagues to give structured
feedback about their colleague
experience. Through this survey, we
measure and track key areas of the overall colleague experience and
equip leaders with actionable insights
for discussion and follow
up. Regular topics in the survey include: (i) employee engagement, such
as colleagues’ commitment to and advocacy
for Pfizer; (ii) purpose,
including how colleagues’ work connects with our purpose; (iii)
inclusion, such as having a climate in which diverse
perspectives
are valued; and (iv) growth, including the ability for colleagues to
gain new experiences that align with their individual career goals.
In
2022, we continued to maintain low turnover rates relative to the
pharmaceutical industry and in our 2022 Pfizer Pulse survey, on average,
88% of colleagues reported feeling engaged, as measured by pride
in working at Pfizer, willingness to recommend Pfizer as a great place
to work
and intent to stay. In addition, 93% of the colleagues agreed that their daily work contributes to our purpose.
Performance,
Leadership and Growth. We are committed to helping our colleagues reach
their full potential by rewarding both their performance
and
leadership skills and by providing opportunities for growth and
development. Our performance management approach—called Performance
and
Leadership Insights—is based on six-month semesters during which our
colleagues and their managers set goals, receive feedback and
meet
to discuss performance. These conversations are meant to help colleagues
grow and develop by evaluating performance (what the
colleague
achieved, measured by outcomes), leadership (how they achieved it,
taking into account Pfizer’s values of courage, excellence, equity
and joy), and identifying areas of growth that help move colleagues towards fulfilling their career goals and their potential.
In
2022, Pfizer continued the shift from a traditional, linear view of
career growth to one that is built on aspirations and empowers
individuals to
boldly own their growth journey. We deepened our
efforts to redefine growth as a fluid process that promotes incremental
in-role growth or
mobility along horizontal, vertical or diagonal
individualized pathways—what we are calling “Zig-Zag” growth. Our
commitments to colleague
development consist of specific actions to
encourage non-linear “zig-zag” career growth paths for all colleagues,
including (i) a common language
around growth—along with a guiding
framework—to help colleagues identify their next best growth experience,
(ii) tools and resources to
encourage growth conversations and
offer transparency on the sources of growth available, and (iii) a
variety of opportunities to grow through
experiences, connections
with others and learning programs, including mentoring, job rotations,
experiential projects, skill-based volunteering
and personalized
learning pathways that address a variety of topics, including leadership
and management skills and industry- and job-specific
learning, as well as general business, manufacturing, finance and technology skills.
Health,
Safety and Well-Being. Protecting the health, safety and well-being of
colleagues and contingent workers, all of whom are essential to
delivering
our business objectives, is an integral part of how we operate. Our
Global Environment, Health & Safety (EHS) Policy and supporting
standards
outline our approach to assessment, evaluation, elimination, and
mitigation of EHS risks across our operations globally. In 2022, we
continued
to carry out our COVID-19 pandemic preparedness and response procedures
to help ensure on-site workers at all of our locations
globally
remained safe and healthy. These precautions have been instrumental in
protecting our workforce and helping ensure a continued
supply of
medicines and vaccines to patients. During 2022, we (i) continued to
provide vaccinations for COVID-19 and other diseases to
colleagues
in countries where employer vaccination programs are permitted, (ii)
broadened our partnership with Thrive Global, a wellness and
organizational
change initiative with a primary focus on colleague mental health and
wellness, (iii) provided educational webinars and information
sessions
on mental health and well-being, nutrition and work life balance
through our employee assistance program provider, including targeted
support
for our colleagues in Russia and Ukraine, and (iv) shared wellness tips
through the global Pfizer World intranet platform. In addition, as
public
health recommendations supported the return of colleagues to office
locations on a more regular basis, Pfizer ensured benefits and
processes
were in place to reinforce personal wellness and work life balance. For
example, beginning in 2023 we are implementing a new,
flexible
working model that enables work to be regularly conducted from home
while maintaining regular on-site collaboration to provide greater
flexibility for many of our colleagues.
Pay
Equity. Our commitment to pay equity for all colleagues is based in our
value of Equity and our intention to continue to build a diverse and
inclusive
workforce. We are committed to equitable pay practices at Pfizer for
employees based on role, education, experience, performance,
and location and we conduct and report publicly on pay equity on an annual basis.
Additional
information regarding our human capital programs and initiatives is
available in the “About—Careers” section of Pfizer’s website and
our ESG Report.
Pfizer Inc. 2022 Form 10-K 13
ITEM 1A. RISK FACTORS
This
section describes the material risks to our business, which should be
considered carefully in addition to the other information in this report
and our other filings with the SEC. Investors should be aware that
it is not possible to predict or identify all such factors and that the
following is
not meant to be a complete discussion of all
potential risks or uncertainties. Additionally, our business is subject
to general risks applicable to any
company, such as economic
conditions, geopolitical events, extreme weather and natural disasters.
If known or unknown risks or uncertainties
materialize, our
business operations, financial condition, operating results (including
components of our financial results), cash flows, prospects,
reputation
or credit ratings could be adversely affected now and in the future,
potentially in a material way. The following discussion of risk factors
contains forward-looking statements, as discussed in the
Forward-Looking Information and Factors that May Affect Future Results
section in this
Form 10-K.
RISKS RELATED TO OUR BUSINESS, INDUSTRY AND OPERATIONS:
MANAGED CARE TRENDS
Private
payers, such as health plans, and other managed care entities, such as
PBMs, continue to take action to manage the utilization and costs
of
drugs. The negotiating power of MCOs and other private third-party
payers has increased due to consolidation, and they, along with
governments,
increasingly employ formularies to control costs and encourage
utilization of certain drugs, including through the use of formulary
inclusion
or favorable formulary placement. These initiatives have increased
consumers’ interest and input in medication choices, as they pay for
a
larger portion of their prescription costs and may cause them to favor
lower-cost generic alternatives. We may fail to obtain or maintain
timely
or adequate pricing or formulary placement of our products, or fail to obtain such formulary placement at favorable pricing.
The
growing availability and use of innovative specialty pharmaceutical
medicines that treat rare or life-threatening conditions, which
typically
have smaller patient populations, combined with their
relative higher cost as compared to other types of pharmaceutical
products, also has
generated increased payer interest in developing cost-containment strategies targeted to this sector.
Third-party
payers also use additional measures such as new-to-market blocks,
exclusion lists, indication-based pricing and value-based pricing/
contracting
to improve their cost containment efforts. Such payers are also
increasingly imposing utilization management tools, such as clinical
protocols,
requiring prior authorization for a branded product if a generic
product is available or requiring the patient to first fail on one or
more
generic products before permitting access to a branded
medicine. As the U.S. private third-party payer market consolidates
further and as more
drugs become available in generic form, we may
face greater pricing pressure from private third-party payers as they
continue to drive more of
their patients to use lower cost generic alternatives.
Also,
business arrangements in this area are subject to a high degree of
government scrutiny, and available safe harbors under applicable
federal
and state fraud and abuse laws are subject to change through
legislative and regulatory action, as well as evolving judicial
interpretations.
Our approach to these arrangements may also be informed by such government and industry guidance.
COMPETITIVE PRODUCTS
Competitive
product launches may erode future sales of our products, including our
existing products and those currently under development, or
result
in unanticipated product obsolescence. Such launches continue to occur,
and potentially competitive products are in various stages of
development.
We cannot predict with accuracy the timing or impact of the
introduction of competitive products that treat or prevent diseases and
conditions like those treated or prevented by our in-line products and product candidates.
Some
of our competitors may have competitive, technical or other advantages
over us for the development of technologies and processes or
greater
experience in particular therapeutic areas, and consolidation among
certain pharmaceutical and biotechnology companies can enhance
such
advantages. These advantages may make it difficult for us to compete
with them successfully to discover, develop and market new
products
and for our current products to compete with new products or
indications they may bring to market. Our products have been competing
and
may continue to compete, and our product candidates may compete,
against products or product candidates that offer higher rebates or
discounts,
lower prices, equivalent or superior efficacy, better safety profiles,
easier administration, earlier market availability or other competitive
features. If we are unable to compete effectively, this could
reduce sales, which could negatively impact our results of operations.
In
addition, competition from manufacturers of generic drugs, including
from generic versions of competitors’ branded products that lose their
market
exclusivity, is a major challenge for our branded products. Certain of
our products have experienced significant generic competition over
the
last few years. For additional information, see the Item 1.
Business—Patents and Other Intellectual Property Rights section in this
Form 10-K.
In China, we expect to continue to face intense
competition by certain generic manufacturers, which have resulted, and
may result in the future,
in price cuts and volume loss of some of our products.
In
addition, our patented products may face generic or biosimilar
competition before patent exclusivity expires, including from “at-risk”
launch
(despite pending patent infringement litigation against the
generic or biosimilar product) by a manufacturer of a generic or
biosimilar version of
one of our patented products. Generic and
biosimilar manufacturers have filed or could file applications with the
FDA seeking approval of product
candidates that they claim do not
infringe our patents or claim that our patents are not valid. Our
licensing and collaboration partners also face
challenges by generic drug manufacturers to patents covering products for which we have licenses or co-promotion rights.
We
may become subject to competition from biosimilars referencing our
biologic products if competitors are able to obtain marketing approval
for
such biosimilars.
We also commercialize biosimilar products
that compete with products of others, including other biosimilar
products. The entry to the market of
competing biosimilars is
expected to increase pricing pressures on our biosimilar products.
Uptake of our biosimilars may be lower due to various
factors, such
as anti-competitive practices, access challenges where our product may
not receive appropriate coverage/reimbursement access or
remains in
a disadvantaged position relative to an innovator product, physician
reluctance to prescribe biosimilars for existing patients taking the
innovative product, or misaligned financial incentives for certain prescribers.
For additional information on competition our products face, see the Item 1. Business—Competition section in this Form 10-K.
Pfizer Inc. 2022 Form 10-K 14
CONCENTRATION
We
recorded direct product and/or Alliance revenues of more than $1
billion for each of ten products that collectively accounted for 82% of
our
total revenues in 2022. In particular, Comirnaty and Paxlovid
together accounted for 57% of our total revenues in 2022. For additional
information, see Notes 1 and 17. If these products or any of our
other major products were to experience loss of patent protection (if
applicable),
changes in prescription or vaccination purchasing or
growth rates, reduced product demand, material product liability
litigation, unexpected side
effects or safety concerns, regulatory
proceedings or investigations, lower governmental and/or regulatory
confidence, negative publicity affecting
doctor or patient
confidence, pressure from competitive products, changes in labeling,
pricing and access pressures or supply shortages or if a
new, more
effective product should be introduced, the adverse impact on our
revenues could be significant. In particular, certain of our products
have
experienced patent-based expirations or loss of regulatory exclusivity
in certain markets in the last few years, and patents covering a
number
of our best-selling products are, or have been, the subject of pending
legal challenges. For additional information on our patents, see the
Item
1. Business—Patents and Other Intellectual Property Rights section in
this Form 10-K. For Comirnaty and Paxlovid, while we believe that
these
products have the potential to provide ongoing revenue streams for
Pfizer for the foreseeable future, revenues of these products following
the COVID-19 pandemic may not be at similar levels as those
generated during the pandemic. For 2023, our revenue guidance for
Comirnaty
and Paxlovid as of January 31, 2023 is significantly
lower than the 2022 revenues from these products. For information on
risks associated with
Comirnaty and Paxlovid, see the COVID-19 section below.
In
addition, we sell our prescription biopharmaceutical products, with the
exception of Paxlovid, principally to wholesalers, but we also sell
directly
to retailers, hospitals, clinics, government agencies and
pharmacies. In 2022, we principally sold Paxlovid to government
agencies. We primarily
sell our vaccines in the U.S. directly to
the federal government, CDC, wholesalers, individual provider offices,
retail pharmacies and integrated
delivery systems. Outside the
U.S., we primarily sell our vaccines to government and non-government
institutions. For additional information, see
Note 17C. If one of
our significant customers should encounter financial or other
difficulties, it might decrease the amount of business such
customer
does with us and/or we might be unable to timely collect all the
amounts that such customer owes us or at all, which could negatively
impact
our results of operations. In addition, we expect that consolidation
and integration of pharmacy chains and wholesalers will increase
competitive and pricing pressures on pharmaceutical manufacturers, including us.
RESEARCH AND DEVELOPMENT
The
discovery and development of new products, as well as the development
of additional uses for existing products, are necessary for the
continued
strength of our business. Our product lines must be replenished over
time to offset revenue losses when products lose exclusivity or
market
share or to respond to healthcare and innovation trends, as well as to
provide for earnings growth, primarily through internal R&D or
through
collaborations, acquisitions, JVs, licensing or other arrangements.
Growth depends in large part on our ability to identify and develop
new
products or new indications for existing products that address unmet
medical needs and receive reimbursement from payers. However,
balancing
current growth, investment for future growth and the delivery of
shareholder return remains a major challenge. The costs of product
development
continue to be high, as are regulatory requirements in many therapeutic
areas, which may affect the number of candidates we are
able to
fund as well as the sustainability of the R&D portfolio. Decisions
made early in the development process of a drug or vaccine candidate
can
have a substantial impact on the marketing strategy and payer
reimbursement possibilities if the candidate receives regulatory
approval. We
try to plan clinical trials prudently and to
reasonably anticipate and address challenges, but there is no assurance
that an optimal balance
between trial conduct, speed and desired outcome will be achieved.
Additionally,
our product candidates can fail at any stage of the R&D process,
and may not receive regulatory approval even after many years of
R&D.
We may fail to correctly identify indications for which our science is
promising or allocate R&D investment resources efficiently, and
failure
to invest in the right technology platforms, therapeutic
areas, product classes, geographic markets and/or licensing
opportunities could adversely
impact the productivity of our
pipeline. Further, even if we identify areas with the greatest
commercial potential, the scientific approach may not
succeed
despite the significant investment required for R&D, and the product
may not be as competitive as expected because of the highly
dynamic
market environment and the hurdles in terms of access and
reimbursement. For example, our gene therapy product candidates are
based
on a novel technology with only a few gene therapies approved to date,
which makes it difficult to predict the time and cost of development
and
the ability to obtain regulatory approval. Further, gene therapy may
face difficulties in gaining the acceptance of patients or the medical
community.
GLOBAL OPERATIONS
We
operate on a global scale and could be affected by currency
fluctuations; capital and exchange controls; local and global economic
conditions
including inflation, recession, volatility and/or lack
of liquidity in capital markets; expropriation and other restrictive
government actions; changes
in intellectual property; legal
protections and remedies; trade regulations; tax laws and regulations;
and procedures and actions affecting
approval, production, pricing,
and marketing of, reimbursement for and access to our products, as well
as impacts of political or civil unrest or
military action,
including the ongoing conflict between Russia and Ukraine and its
economic consequences, geopolitical instability, terrorist
activity,
unstable governments and legal systems, inter-governmental disputes,
public health outbreaks, epidemics, pandemics, natural disasters
or disruptions related to climate change.
Some
emerging market countries may be particularly vulnerable to periods of
financial or political instability or significant currency fluctuations
or
may have limited resources for healthcare spending. As a result
of these and other factors, our strategy to grow in emerging markets may
not be
successful, and growth rates in these markets may not be
sustainable. Additionally, local economic conditions may adversely
affect the ability of
payers, as well as our distributors,
customers, suppliers and service providers, to pay for our products, or
otherwise to buy necessary inventory
or raw materials, and to perform their obligations under agreements with us.
Government
financing and economic pressures can lead to negative pricing pressure
in various markets where governments take an active role
in setting
prices, access criteria (e.g., through health technology assessments)
or other means of cost control. For additional information on
government pricing pressures, see the Item 1. Business—Government Regulation and Price Constraints section in this Form 10-K.
We
continue to monitor the global trade environment and potential trade
conflicts and impediments that could impact our business. If trade
restrictions
or tariffs reduce global economic activity, potential impacts could
include declining sales; increased costs; volatility in foreign
exchange
rates; a decline in the value of our financial assets and pension plan
investments; required increases of our pension funding
obligations;
increased government cost control efforts; delays or failures in the
performance of customers, suppliers and other third parties on
whom
we may depend for the performance of our business; and the risk that
our allowance for doubtful accounts may not be adequate.
Pfizer Inc. 2022 Form 10-K 15
We
operate in many countries and transact in many different currencies.
Changes in the value of those currencies relative to the U.S. dollar, or
high inflation in those countries, can impact our revenues, costs
and expenses and our financial guidance. Significant portions of our
revenues,
costs and expenses, as well as our substantial
international net assets, are exposed to exchange rate changes. 58% of
our total 2022 revenues
were derived from international operations,
including 26% from Europe and 20% from Japan, China and the rest of the
Asia Pacific region. Future
changes in exchange rates or economic
conditions and the impact they may have on our results of operations,
financial condition or business are
difficult to predict. For
additional information about our exposure to foreign currency risk, see
the Analysis of Financial Condition, Liquidity,
Capital Resources and Market Risk section within MD&A.
In
addition, our borrowing, pension benefit and postretirement benefit
obligations and interest-bearing investments are subject to risk from
changes
in interest and exchange rates. The risks related to interest-bearing
investments and borrowings and the measures we have taken to
help
contain them are discussed in the Analysis of Financial Condition,
Liquidity, Capital Resources and Market Risk section within MD&A and
Note 7E. For additional details on critical accounting estimates
and assumptions for our benefit plans, see the Significant Accounting
Policies and
Application of Critical Accounting Estimates and Assumptions—Benefit Plans section within MD&A and Note 11.
PRODUCT MANUFACTURING, SALES AND MARKETING RISKS
We
could encounter difficulties, delays or inefficiencies in our supply
chain, product manufacturing and distribution networks, as well as sales
or
marketing, due to regulatory actions, shut-downs, work
stoppages or strikes, approval delays, withdrawals, recalls, penalties,
supply disruptions,
shortages or stock-outs at our facilities or
third-party facilities that we rely on, reputational harm, the impact to
our facilities due to health
pandemics or natural or man-made
disasters, including as a result of climate change, product liability or
unanticipated costs. Examples of such
difficulties or delays
include the inability to increase production capacity commensurate with
demand; challenges related to component materials
to maintain
supply and/or appropriate quality standards throughout our supply
network and/or comply with applicable regulations; inability to
supply
certain products due to voluntary product recalls; and supply chain
disruptions at our facilities or at a supplier or vendor. In addition,
we
engage contract manufacturers, and, from time to time, our
contract manufacturers may face difficulties or are unable to
manufacture our
products at the necessary quantity or quality levels.
Regulatory
agencies periodically inspect our manufacturing facilities, as well as
third-party facilities that we rely on, to evaluate compliance with
cGMP
or other applicable requirements. Failure to comply with these
requirements may subject us to possible legal or regulatory actions,
such as
warning letters, suspension of manufacturing, seizure of
product, injunctions, debarment, product recalls, delays or denials of
product approvals,
import bans or denials of import certifications.
In
2021, Pfizer recalled all lots of Chantix in the U.S. due to the
presence of a nitrosamine, N-nitroso-varenicline, at or above the FDA
interim
acceptable intake limit. We currently also have a voluntary
recall across multiple markets and a global pause in shipments of
Chantix. Technical
solutions are being pursued to reduce
nitrosamine levels in Chantix to enable return to market. In response to
requests from various regulatory
authorities, manufacturers across
the pharmaceutical industry, including Pfizer, are evaluating their
product portfolios for the potential presence
or formation of
nitrosamines. This has led to additional voluntary recalls initiated for
other products in 2022, and may lead to additional recalls or
other market actions for Pfizer products.
COLLABORATIONS AND OTHER RELATIONSHIPS WITH THIRD PARTIES
We
depend on third-party collaborators, service providers, and others in
the research, development, manufacturing and commercialization of our
products
and product candidates and also enter into JVs and other business
development transactions. To achieve expected longer-term
benefits,
we may make substantial upfront payments as part of these transactions,
which may negatively impact our earnings or cash flows. We
rely
heavily on these parties for multiple aspects of our drug development,
manufacturing and commercialization activities, but we do not control
many
aspects of those activities. We also outsource certain services,
including activities related to transaction processing, accounting, IT,
manufacturing, clinical trial recruitment and execution, clinical
lab services, non-clinical research, safety services, integrated
facilities
management and other areas. Failure by one or more of
the third-party collaborators, service providers and others to complete
activities on
schedule or in accordance with our expectations or to
meet their contractual or other obligations to us; failure of one or
more of these parties to
comply with applicable laws or
regulations; disruptions in one or more of these parties’ businesses,
including unexpected demand for or shortage
of raw materials or
components, cyber-attacks on supplier systems, labor disputes or
shortage and inclement weather, as well as natural or man-
made
disasters or pandemics; or any disruption in the relationships between
us and these parties, could delay or prevent the development,
approval,
manufacturing or commercialization of our products and product
candidates, expose us to suboptimal quality of service delivery or
deliverables,
result in repercussions such as missed deadlines or other timeliness
issues, erroneous data and supply disruptions, and could also
result
in non-compliance with legal or regulatory requirements or industry
standards or subject us to reputational harm, all with potential
negative
implications for our product pipeline and business.
Further, our Alliance revenues will be adversely affected by the
termination or expiration of
collaboration and co-promotion agreements that we have entered into and that we may enter into from time to time.
COUNTERFEIT PRODUCTS
Our
reputation, in-line and pipeline portfolios render our medicines and
vaccines prime targets for counterfeiters. Counterfeits pose a
significant
risk to patient health and safety because of the
conditions under which they are manufactured—often in unregulated,
unlicensed, uninspected,
and unsanitary sites—as well as the lack
of regulation of their contents. Failure to mitigate this threat could
adversely impact Pfizer’s patients,
potentially causing them harm.
This situation, in turn, may result in the loss of patient confidence in
the Pfizer name and in the integrity of our
medicines and vaccines, and potentially impact our business through lost sales, product recalls, and possible litigation.
The
prevalence of counterfeit medicines is an industry-wide issue due to a
variety of factors, including the adoption of e-commerce. The
increased
adoption during the COVID-19 pandemic further exposed consumers to fake
prescription treatments via the internet as access to
traditional
brick and mortar pharmacies or authorized full-service internet
pharmacies that offer authentic treatments may have been hindered.
The
internet exposes patients to greater risk as it is a preferred vehicle
for dangerous counterfeit offers and scams that target unsuspecting
consumers.
Traffic to these generally deceptive pharmacy sites is largely driven
by misplaced trust in sophisticated internet retailers and social
media
offers coupled with the convenience e-commerce affords consumers.
Counterfeiters generally target any medicine or vaccine boasting
strong
demand and we have observed heightened counterfeit and fraud attempts
to our internal medicine portfolio, as well as products utilized in
the treatment of COVID-19.
We
consistently invest in an enterprise-wide strategy to aggressively
combat counterfeit threats by educating patients and health care
providers
about the risks, investing in innovative technologies to
detect and disrupt sophisticated internet offers and scams, proactively
monitoring and
Pfizer Inc. 2022 Form 10-K 16
interdicting
supply with the help of law enforcement, and advising legislators and
regulators. However, our efforts and those of others may not be
entirely successful, and the presence of counterfeit medicines may continue to increase.
RISKS RELATED TO GOVERNMENT REGULATION AND LEGAL PROCEEDINGS:
PRICING AND REIMBURSEMENT
U.S.
and international governmental regulations that mandate price controls
or limitations on patient access to our products or establish prices
paid
by government entities or programs for our products impact our
business, and our future results could be adversely affected by changes
in
such regulations or policies. The adoption of restrictive price
controls in new jurisdictions, more restrictive controls in existing
jurisdictions or the
failure to obtain or maintain timely or
adequate pricing could also adversely impact revenue. We expect pricing
pressures will continue globally.
In the U.S., pharmaceutical
product pricing is subject to government and public scrutiny and calls
for reform, and many of our products are
subject to increasing
pricing pressures as a result. We expect to see continued focus by the
Federal government on regulating pricing which
could result in
legislative and regulatory changes designed to control costs. For
example, in August 2022, the IRA was signed into law, which,
among
other things, requires manufacturers of certain drugs to engage in price
negotiations with Medicare, imposes rebates under Medicare Part
B
and Medicare Part D to penalize price increases that outpace inflation,
and replaces the Part D coverage gap discount program with a new
discounting
program. Some states have implemented, and others are considering,
patient access constraints or cost cutting under the Medicaid
program,
and some are considering measures that would apply to broader segments
of their populations that are not Medicaid-eligible. State
legislatures
also have continued to focus on addressing drug costs, generally by
increasing price transparency or limiting drug price increases.
Measures
to regulate prices or payment for pharmaceutical products, including
legislation on drug importation, could adversely affect our
business.
For additional information on U.S. pricing and reimbursement, see the
Item 1. Business—Government Regulation and Price
Constraints section in this Form 10-K.
We
encounter similar regulatory and legislative issues in most other
countries in which we operate. In certain markets, such as in EU member
states, the U.K., Japan, China, Canada and South Korea, governments
have significant power as large single payers to regulate prices,
access
criteria, or impose other means of cost control,
particularly as a result of recent global financing pressures. For
example, the QCE and VBP
tender process in China has resulted in
significant price cuts for off-patent medicines. For additional
information regarding these government
initiatives, see the Item 1.
Business—Government Regulation and Price Constraints section in this
Form 10-K. We anticipate that these and
similar initiatives will
continue to increase pricing pressures in China and elsewhere in the
future. In addition, in many countries, with respect to
our
vaccines, we participate in a tender process for selection in national
immunization programs. Failure to secure participation in national
immunization
programs or to obtain acceptable pricing in the tender process could
adversely affect our business. We also anticipate pricing
pressures will be amplified by COVID-19 induced budget deficits and focus on pricing for COVID-19 treatments and vaccines.
U.S. HEALTHCARE REGULATION
The
U.S. healthcare industry is highly regulated and subject to frequent
and substantial changes. Any significant efforts at the U.S. federal or
state levels to reform the healthcare system by changing the way
healthcare is provided or funded could have a material impact on us. For
additional information on U.S. healthcare regulation, see the Item
1. Business––Government Regulation and Price Constraints section in
this
Form 10-K.
Other U.S. federal or state legislative or
regulatory action and/or policy efforts could adversely affect our
business, including, among others,
general budget control actions,
changes in patent laws, the importation of prescription drugs to the
U.S. at prices that are regulated by foreign
governments, revisions
to reimbursement of biopharmaceuticals under government programs that
could reference international prices or require
new discounts,
limitations on interactions with healthcare professionals and other
industry stakeholders, or the use of comparative effectiveness
methodologies
that could be implemented in a manner that focuses primarily on cost
differences and minimizes the therapeutic differences
among pharmaceutical products and restricts access to innovative medicines.
A
reduction of U.S. federal spending on entitlement programs, including
Medicare and Medicaid, may affect payment for our products or services
provided
using our products. Any other significant spending reductions or cost
controls affecting Medicare, Medicaid or other publicly funded or
subsidized health programs that may be implemented could have an adverse impact on our results of operations.
DEVELOPMENT, REGULATORY APPROVAL AND MARKETING OF PRODUCTS
The
discovery and development of drugs, vaccines and biological products
are time consuming, costly and unpredictable. The outcome is
inherently uncertain and involves a high degree of risk due to the following factors, among others:
•
The process from early discovery to design and adequate implementation
of clinical trials to regulatory approval can take many years.
•
Product candidates can and do fail at any stage of the process,
including as the result of unfavorable pre-clinical and clinical trial
results, or
unfavorable new pre-clinical or clinical data and
further analyses of existing pre-clinical or clinical data, including
results that may not support
further clinical development of the product candidate or indication.
•
We may need to amend our clinical trial protocols or conduct additional
clinical trials under certain circumstances, for example, to further
assess appropriate dosage or collect additional safety data.
•
We may not be able to meet anticipated pre-clinical or clinical
endpoints, commencement and/or completion dates for our pre-clinical or
clinical
trials, regulatory submission dates, regulatory approval dates and/or launch dates.
•
We may not be able to successfully address all the comments received
from regulatory authorities such as the FDA and the EMA, or be able to
obtain approval for new products and indications from regulators.
Regulatory
approvals of our products depend on myriad factors, including
regulatory determinations as to the product’s safety and efficacy. In
the
context of public health emergencies like the COVID-19
pandemic, regulators evaluate various factors and criteria to
potentially allow for
marketing authorization on an emergency or
conditional basis. Additionally, clinical trial and other product data
are subject to differing
interpretations and assessments by
regulatory authorities. As a result of regulatory interpretations and
assessments or other developments that
occur during the review
process, and even after a product is authorized or approved for
marketing, a product’s commercial potential could be
adversely
affected by potential emerging concerns or regulatory decisions
regarding or impacting labeling or marketing, manufacturing
processes,
safety and/or other matters, including decisions relating to emerging
developments regarding potential product impurities.
Pfizer Inc. 2022 Form 10-K 17
We
may not be able to receive or maintain favorable recommendations by
technical or advisory committees, such as the ACIP or any FDA
Advisory
Committee that may be convened to review our applications such as EUAs,
NDAs or BLAs, which may impact the potential marketing
and use of
our products. Further, claims and concerns that may arise regarding the
safety and efficacy of in-line products and product candidates
can
negatively impact product sales, and potentially lead to product recalls
or withdrawals, including regulator-directed risk evaluations and
assessments,
and/or consumer fraud, product liability and other litigation and
claims. Further regulatory agency requirements may result in a
more
challenging, expensive and lengthy regulatory approval process than
anticipated due to requests for, among other things, additional or
more
extensive clinical trials prior to granting approval, or increased
post-approval requirements. For these and other reasons discussed in
this
Risk Factors section, we may not obtain the approvals we expect within the timeframe we anticipate, or at all.
POST-AUTHORIZATION/APPROVAL DATA
As
a condition to granting marketing authorization or approval of a
product, the FDA may require additional clinical trials or other
studies. The
results generated in these trials could result in the
loss of marketing approval, changes in labeling, and/or new or increased
concerns about the
side effects, efficacy or safety. Regulatory
agencies in countries outside the U.S. often have similar regulations
and may impose comparable
requirements. Post-marketing studies and
clinical trials, whether conducted by us or by others, whether mandated
by regulatory agencies or
conducted voluntarily, and other emerging
data about products, such as adverse event reports, may also adversely
affect the availability or
commercial potential of our products.
Further, if safety or efficacy concerns are raised about a product in
the same class as one of our products,
those concerns could
implicate the entire class; and this, in turn, could have an adverse
impact on the availability or commercial viability of our
product(s)
as well as other products in the class. The potential regulatory and
commercial implications of post-marketing study results typically
cannot
immediately be determined. For example, in December 2021, in light of
the results from the completed required postmarketing safety
study
of Xeljanz, ORAL Surveillance (A3921133), the U.S. label for Xeljanz was
revised. In addition, in November 2022, the EMA concluded their
assessment
of JAK inhibitors authorized for inflammatory diseases in the EU,
including Xeljanz and Cibinqo, and recommended that risk
minimization
measures, including special warnings and precautions for use, should be
revised and harmonized for all such JAK inhibitors. The
resulting
label changes are expected to be finalized in the first quarter of 2023.
We continue to work with regulatory agencies worldwide to review
the full results and analyses of ORAL Surveillance and their impact on product labeling.
The
terms of our EUA for Comirnaty require that we conduct
post-observational studies to evaluate the association between the
Pfizer-BioNTech
Covid-19 Vaccine, and Pfizer-BioNTech COVID-19
Vaccine, Bivalent, and a pre-specified list of adverse events of special
interest, including
myocarditis and pericarditis, along with
deaths and hospitalizations, and severe COVID-19. The required study
populations include individuals
specified in our December 2022
authorization letter (reissued) as well as populations of interest, such
as healthcare workers, pregnant women,
immunocompromised
individuals and subpopulations with specific comorbidities.
Additionally, in relation to the FDA approval for Comirnaty, we
are
required to complete certain postmarketing study requirements and
commitments through 2024 and beyond. The terms of our EUA for
Paxlovid
require monitoring of a genomic database(s) for the emergence of global
viral variants of SARS-CoV-2 and providing reports to the FDA
on a
monthly basis summarizing any findings. Also, the FDA may require
Pfizer to assess the activity of the authorized Paxlovid against any
global SARS-CoV-2 variant(s) of interest and complete certain other analyses and studies as identified in our October 2022 EUA.
LEGAL MATTERS
We
are and may be involved in various legal proceedings, including patent
litigation, product liability and other product-related litigation,
including
personal injury, consumer, off-label promotion,
securities, antitrust and breach of contract claims, commercial and
other asserted and unasserted
matters, environmental, government
and tax investigations, employment, tax litigation and other legal
proceedings that arise from time to time in
the ordinary course of
our business. Litigation is inherently unpredictable, and excessive
verdicts do occur. Although we believe that our claims
and defenses
in matters in which we are a defendant are substantial, we could in the
future incur judgments, enter into settlements or revise our
expectations
regarding the outcome of certain matters, and such developments could
have a material adverse effect on our results of operations.
Claims
against our patents include challenges to the coverage and/or validity
of our patents on various products or processes. There can be no
assurance
as to the outcome of these matters, and a loss in any of these cases
could result in a loss of patent protection for the product at issue,
which could lead to a significant loss of sales of that product and could materially affect future results of operations.
We
are also involved in government investigations that arise in the
ordinary course of our business. There continues to be a significant
volume of
government investigations and litigation against
companies operating in our industry, both in the U.S. and around the
world. Government
investigations and actions could result in
substantial criminal and civil fines and/or criminal charges,
limitations on our ability to conduct business
in applicable
jurisdictions, corporate integrity or deferred prosecution agreements
and other disciplinary actions, as well as reputational harm,
including
as a result of increased public interest in the matter. 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.
Our
sales and marketing activities, the pricing of our products and other
aspects of our business are subject to extensive regulation under the
FFDCA,
the Medicaid Drug Rebate Program, the FCPA and other federal and state
statutes, including those discussed elsewhere in this Form
10-K, as
well as the Anti-Kickback Statute, anti-bribery laws, the False Claims
Act, and similar laws in international jurisdictions. In addition to the
potential for changes to relevant laws, the compliance and
enforcement landscape is informed by government litigation, settlement
precedent,
advisory opinions, and special fraud alerts. Our
approach to certain practices may evolve over time in light of these
types of developments.
Requirements or industry standards in the
U.S. and certain jurisdictions abroad require pharmaceutical
manufacturers to track and disclose
financial interactions with
healthcare professionals and healthcare providers and can increase
government and public scrutiny of such financial
interactions. If
an interaction is found to be improper, government enforcement actions
and penalties could result. Like many companies in our
industry, we
have from time-to-time received, and may receive in the future,
inquiries and subpoenas and other types of information demands
from
government authorities. In addition, we have been subject to claims and
other actions related to our business activities, brought by
governmental
authorities, as well as consumers and private payers. In some
instances, we have incurred significant expense, civil payments,
fines
and other adverse consequences as a result of these claims, actions and
inquiries. Such claims, actions and inquiries may relate to alleged
non-compliance
with laws and regulations associated with the dissemination of product
(approved and unapproved) information, potentially
resulting in
government enforcement action and reputational damage. This risk may be
heightened by digital marketing, including social media,
mobile applications and blogger outreach.
In
connection with the resolution of a U.S. government investigation
concerning independent copay assistance organizations that provide
financial
assistance to Medicare patients, in 2018, we entered into a Corporate
Integrity Agreement (CIA) with the Office of the Inspector General
of
the HHS, which is effective for a period of five years. In the CIA, we
agreed to implement and/or maintain certain compliance program
elements
to promote compliance with federal healthcare program requirements.
Breaches of the CIA could result in severe sanctions against us.
Pfizer Inc. 2022 Form 10-K 18
We
and certain of our subsidiaries are also subject to numerous
contingencies arising in the ordinary course of business relating to
legal claims
and proceedings, including environmental
contingencies. 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. While we have accrued for
worldwide legal liabilities,
no guarantee exists that additional costs will not be incurred or
additional payments will not be required beyond the
amounts accrued.
For
additional information, including information regarding certain legal
proceedings in which we are involved in, see Note 16A.
RISKS RELATED TO INTELLECTUAL PROPERTY, TECHNOLOGY AND SECURITY:
INTELLECTUAL PROPERTY PROTECTION
Our
success largely depends on our ability to market technologically
competitive products. We rely and expect to continue to rely on a
combination
of intellectual property, including patent, trademark, trade dress,
copyright, trade secret and domain name protection laws, as well as
confidentiality
and license agreements, to protect our intellectual property and
proprietary rights. If we fail to obtain and maintain adequate
intellectual
property protection, we may not be able to prevent third parties from
launching generic or biosimilar versions of our branded products,
from
using our proprietary technologies or from marketing products that are
very similar or identical to ours. Our currently pending or future
patent
applications may not result in issued patents or be granted on a timely
basis. Similarly, any term extensions that we seek may not be
granted
on a timely basis, if at all. In addition, our issued patents may not
contain claims sufficiently broad to protect us against claims regarding
validity, enforceability, scope and effective term made by parties
with similar technologies or products or provide us with any
competitive
advantage, including exclusivity in a particular product area.
Further,
legal or regulatory action by various stakeholders or governments could
potentially result in us not seeking intellectual property
protection
for or agreeing not to enforce or being restricted from enforcing
intellectual property related to our products. The WTO continues to
address
the role of intellectual property in the context of the COVID-19
pandemic response. This includes the June 2022 Ministerial Decision on
the
Agreement on Trade-Related Aspects of Intellectual Property Rights,
which seeks to make it easier for certain WTO members to issue a
compulsory
license on COVID-19 vaccines, and discussions continue on whether to
expand that decision to COVID-19 therapeutics and
diagnostics.
The
scope of our patent claims also may vary between countries, as
individual countries have distinct patent laws, and our ability to
enforce our
patents depends on the laws of each country, its
enforcement practices, and the extent to which certain countries engage
in policies or practices
that weaken a country’s intellectual
property framework (e.g., laws or regulations that promote or provide
broad discretion to issue a compulsory
license). In countries that
provide some form of regulatory exclusivity, mechanisms exist permitting
some form of challenge to our patents by
competitors or generic
drug marketers prior to or immediately following the expiration of such
regulatory exclusivity, and generic companies are
employing
aggressive strategies, such as “at risk” launches that challenge our
patent rights. Most of the suits involve claims by generic drug
manufacturers
that patents covering our products, uses, processes or dosage forms are
invalid and/or do not cover the product of the generic or
biosimilar
drug manufacturer. 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. Such claims may also be brought as counterclaims to
actions
we bring to enforce our patents. We are also party to other patent
damages suits in various jurisdictions pursuant to which generic drug
manufacturers,
payers, governments or other parties are seeking damages from us for
alleged delay of generic entry. 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 or a competitors’
patents is found to be invalid in such proceedings, generic or
biosimilar products could be
introduced into the market resulting
in the erosion of sales of our existing products. For additional
information, including information regarding
certain legal
proceedings in which we are involved, see Note 16A1. Further, if we are
unable to maintain our existing license agreements or other
agreements
pursuant to which third parties grant us rights to intellectual
property, our operating results and financial condition could be
adversely
affected.
We currently hold trademark registrations
and have trademark applications pending in many jurisdictions, any of
which may be the subject of a
governmental or third-party
objection, which could prevent the maintenance or issuance of the
trademark. As our products mature, our reliance
on our trademarks
and trade dress to differentiate us from our competitors increases and,
as a result, our business could be adversely affected if
we are
unable to prevent third parties from adopting, registering or using
trademarks and trade dress that infringe, dilute or otherwise violate
our
rights. We seek to protect our proprietary information,
including our trade secrets and proprietary know-how, by requiring our
employees,
consultants, other advisors and other third parties to
execute proprietary information and confidentiality agreements upon the
commencement of
their relationship with us. Despite these efforts
and precautions, we may be unable to prevent a third-party from copying
or otherwise obtaining
and using our trade secrets or our other
intellectual property without authorization, and legal remedies may not
adequately compensate us for the
damages caused by such
unauthorized use. Further, others may independently and lawfully develop
substantially similar or identical products
that circumvent our intellectual property by means of alternative designs or processes or otherwise.
THIRD-PARTY INTELLECTUAL PROPERTY CLAIMS
A
properly functioning intellectual property regime is essential to our
business model. We are committed to respecting the valid intellectual
property
rights of other companies, but the patent granting process is
imperfect. Accordingly, the pursuit of valid business opportunities may
require us to challenge intellectual property rights held by others
that we believe were improperly granted, including challenges through
negotiation and litigation, and such challenges may not always be successful.
Part
of our business depends upon identifying biosimilar opportunities and
launching products to take advantage of those opportunities, which
may
involve litigation, associated costs and time delays, and may
ultimately not be successful. These opportunities may arise in
situations where
patent protection of equivalent branded products
has expired or been declared invalid, or where products do not infringe
the patents of others. In
some circumstances we may take action,
such as litigation, asserting that our products do not infringe patents
of existing products or that those
patents are invalid or unenforceable in order to achieve a “first-to-market” or early market position for our products.
Third
parties may claim that our products infringe one or more patents owned
or controlled by them. Claims of intellectual property infringement
can
be costly and time-consuming to resolve, may delay or prevent product
launches, and may result in significant royalty payments or damages
or
potential licensing agreements. For example, our R&D in a
therapeutic area may not be first and another company or entity may have
obtained
relevant patents before us. We are involved in
patent-related disputes with third parties over our attempts to market
pharmaceutical products,
including related to Comirnaty and
Paxlovid. As we expand our mRNA portfolio, such patent-related disputes
may increase. Once we have final
Pfizer Inc. 2022 Form 10-K 19
regulatory
approval of the related products, we may decide to commercially market
these products even though associated legal proceedings
(including
any appeals) have not been resolved (i.e., “at-risk” launch). If one of
our marketed products (or a product of our collaboration/licensing
partners)
is found to infringe valid patent rights of a third party, such third
party may be awarded significant damages or royalty payments, 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.
INFORMATION TECHNOLOGY AND SECURITY
Significant
disruptions of IT systems or breaches of information security could
adversely affect our business. We extensively rely upon
sophisticated
IT systems (including cloud services) to operate our business. We
produce, collect, process, store and transmit large amounts of
confidential
information (including personal information and intellectual property),
and we deploy and operate an array of technical and
procedural
controls to maintain the confidentiality, integrity and availability of
such confidential information. The Company develops and operates
digital
systems to engage patients, healthcare providers, governments, payers
and supply chain partners to conduct business and deliver
medicines,
digital diagnostics, clinical trials and digital therapies. Such
systems include mobile applications, wearable devices, internet websites
and other digital technologies that may be targets of attack. We
have outsourced significant elements of our operations, including
significant
elements of our IT infrastructure and, as a result, we
manage relationships with many third-party providers who may or could
have access to our
confidential information. We rely on technology
developed, supplied and/or maintained by third-parties that may make us
vulnerable to “supply
chain” style cyber-attacks. Further,
technology and security vulnerabilities of acquisitions, business
partners or third-party providers may not be
identified during due
diligence or soon enough to mitigate exploitation. The size and
complexity of our IT and information security systems, and
those of
our third-party providers (and the large amounts of confidential
information that is present on them), make such systems potentially
vulnerable
to service interruptions or to security breaches from inadvertent or
intentional actions by, but not limited to, our employees, contingent
workers,
service providers, business partners, customers or malicious attackers.
As a global pharmaceutical company, our systems and assets
are the
target of frequent cyber-attacks. Such cyber-attacks are of
ever-increasing levels of sophistication and are made by groups and
individuals
with a wide range of motives (including, but not limited to, industrial
espionage, extortion, property destruction and personal
information
theft) and expertise, including, but not limited to, organized criminal
groups, “hacktivists,” nation states, employees, business partners
and
others. Due to the nature of some of these attacks, there is a risk
that they may remain undetected for a period of time. While we have
invested
in the protection of data and IT and develop and maintain systems and
controls, our efforts may not prevent service interruptions,
extortion,
theft of confidential, personal or proprietary information, compromise
of data integrity or unauthorized information disclosure. Any
technology
service interruption or breach of our systems could adversely affect
our business operations and/or result in the loss of personal data,
confidential
information or intellectual property. Such incidents could require
disclosure to government authorities and/or regulators and could
require
notification to impacted individuals and any incident could result in
financial, legal, business and reputational harm to us. We maintain
cyber
liability insurance; however, this insurance may not be sufficient to
cover the financial, legal, business or reputational losses that may
result
from an interruption or breach of our systems.
GENERAL RISKS
BUSINESS DEVELOPMENT ACTIVITIES
One
enabler of our growth strategy is to expand our in-line products and
product pipeline through various forms of business development, which
can
include alliances, licenses, JVs, collaborations, equity- or debt-based
investments, dispositions, divestments, mergers and acquisitions. The
success
of our business development activities is dependent on the availability
and accurate evaluation of appropriate opportunities, competition
from
others that are seeking similar opportunities and our ability to
successfully identify, structure and execute transactions, including the
ability
to satisfy closing conditions in the anticipated
timeframes or at all, and our ability to successfully integrate acquired
businesses and develop and
commercialize acquired products.
Pursuing, executing and consummating these transactions may require
substantial investment, which may
require us to obtain additional
equity or debt financing, which could result in increased leverage
and/or a downgrade of our credit ratings. The
success of our
business development transactions depends on our ability to realize the
anticipated benefits of the transaction and is subject to
numerous
risks and uncertainties, many of which are outside of our control.
Unsuccessful clinical trials, regulatory hurdles and commercialization
challenges
may adversely impact revenue and income contribution from acquired
products and businesses. We may fail to generate expected
revenue
growth for an acquired product or business or we may fail to achieve
anticipated cost savings within expected time frames or at all. In
certain
transactions, we may agree to provide certain transition services for
an extended period of time, which may divert our focus and
resources
that would otherwise be invested into maintaining or growing our
business. Similarly, the accretive impact anticipated from certain
transactions
may not be realized or may be delayed. Integration of these products or
businesses may result in the loss of key employees, the
disruption
of ongoing business, including third-party relationships, or
inconsistencies in standards, controls, procedures and policies.
Further,
while we seek to mitigate risks and liabilities through,
among other things, due diligence, we may be exposed to risks and
liabilities as a result of
business development transactions. There
is no assurance that we will be able to acquire attractive businesses
or enter into strategic business
relationships on favorable terms
ahead of our competitors, or that such acquisitions or strategic
business development relationships will be
accretive to earnings or improve our competitive position.
Where
we invest in or otherwise obtain debt or equity securities of third
parties in connection with business development transactions, such as
our
ownership interest in Haleon, we may be unable to direct or influence
the management, operational decisions and policies of such companies
and
the value of the acquired securities will fluctuate and may lose value.
Any future distribution or sale of such securities will be subject to
prevailing
market conditions and other factors, including the size of our
ownership stake, at the time of such distribution or sale and there is
no
assurance that such securities will ultimately be sold at an attractive price or at all.
COVID-19
COVID-19
has impacted and may continue to impact our business, operations and
financial condition and results. COVID-19-related risks and
challenges
for our business, include, among others: decreased product demand, due
to reduced new prescriptions or refills of existing
prescriptions
and reduced demand for products used in procedures, or as a result of
unemployment or increased focus on COVID-19
vaccination; impacts
due to travel limitations and mobility restrictions in some
jurisdictions; manufacturing disruptions and delays; supply chain
disruptions
and shortages, including challenges related to reliance on third-party
suppliers resulting in reduced availability of materials or
components
used in the development, manufacturing, distribution or administration
of our products; disruptions to pipeline development and
clinical
trials, including challenges related to enrolling certain clinical
trials and accruing a sufficient number of cases in certain clinical
trials;
challenges presented by reallocating resources to assist in
responding to COVID-19; costs associated with COVID-19, including
increased
supply chain costs and additional R&D costs incurred
in our efforts to develop Comirnaty and Paxlovid; challenges related to
our business
Pfizer Inc. 2022 Form 10-K 20
development
initiatives; interruptions or delays in the operations of regulatory
authorities, which may delay potential approval of new products we
are
developing, potential label expansions for existing products and the
launch of newly-approved products; challenges operating in a virtual or
hybrid work environment; increased cyber threats and attack
attempts; challenges related to our intellectual property, both
domestically and
internationally, including in response to any
pressure, or legal or regulatory action by, various stakeholders or
governments that could potentially
result in us not seeking
intellectual property protection for or agreeing not to enforce or being
restricted from enforcing intellectual property rights
related to
our products, including Comirnaty and Paxlovid; challenges related to
conducting oversight and monitoring of regulated activities in a
virtual
or hybrid environment; challenges related to our human capital and
talent development; challenges related to vaccine mandates; and other
challenges
presented by disruptions to our normal operations in response to
COVID-19, as well as uncertainties regarding the impact of
COVID-19, and government or regulatory actions to contain the virus or control the supply of medicines and vaccines.
The
extent to which COVID-19 impacts our business going forward will depend
on many factors, and we have made certain assumptions
regarding
COVID-19 for purposes of our operational planning and financial
projections, including assumptions regarding the global
macroeconomic
impact of COVID-19, as well as the demand, revenues, supply, contracts
and commercial markets for our COVID-19 products,
which remain
dynamic. Despite careful tracking and planning, we are unable to
accurately predict the extent of the impact of COVID-19 on our
business,
operations and financial condition and results due to the uncertainty
of future developments. In particular, we believe the ultimate
impact
on our business, operations and financial condition and results will be
affected by, among other things, the emergence, infectiousness and
severity
of the predominant strains of the SAR-CoV-2 virus, the safety,
efficacy, availability and public adherence of vaccines, boosters and
treatments
for COVID-19, proportion of the population that receives a vaccine or
treatment for COVID-19, patient demand and market share for
Comirnaty
and Paxlovid, timing for delivery, and potential other amendments to
the terms, of contracted doses or treatment courses to certain
markets,
timing and effectiveness for the expected transition to the commercial
market for Comirnaty and Paxlovid, the global macroeconomic
impact
of COVID-19 and governmental responses or regulatory actions to contain
the virus or control supply of medicines and vaccines.
COVID-19 may
also affect our business, operations or financial condition and results
in a manner that is not presently known to us or that we
currently do not consider as presenting significant risks.
We
also face risks and uncertainties related to our efforts to develop and
commercialize our COVID-19 products, as well as challenges related to
their manufacturing, supply and distribution, including, among others:
•
uncertainties inherent in R&D, including the ability to meet
anticipated clinical endpoints, commencement and/or completion dates for
clinical
trials, regulatory submission dates, regulatory approval
dates and/or launch dates, as well as risks associated with pre-clinical
and clinical data
(including Phase 1/2/3 or Phase 4 data for
Comirnaty, any monovalent, bivalent or variant-adapted vaccine
candidates or any other vaccine
candidate in the BNT162 program or
Paxlovid or any future COVID-19 treatment) in any of our studies in
pediatrics, adolescents or adults or
real world evidence, including
the possibility of unfavorable new pre-clinical, clinical or safety
data and further analyses of existing pre-clinical,
clinical or
safety data or further information regarding the quality of
pre-clinical, clinical or safety data, including by audit or inspection;
• the ability to produce comparable clinical or other results for
Comirnaty, any monovalent, bivalent or variant-adapted vaccine
candidates or
other vaccines that may result from the BNT162
program, Paxlovid or any future COVID-19 treatment or any other COVID-19
program,
including the rate of effectiveness and/or efficacy,
safety and tolerability profile observed to date, in additional analyses
of the Phase 3 trial for
any such products and additional studies,
in real-world data studies or in larger, more diverse populations
following commercialization;
• the ability of Comirnaty, any
monovalent, bivalent or variant-adapted vaccine candidates or any future
vaccine to prevent, or Paxlovid or any
future COVID-19 treatment to be effective against, COVID-19 caused by emerging virus variants;
•
the risk that demand for any products may be reduced, no longer exist
or not meet expectations, which may lead to excess inventory on-hand
and/or in the channel or reduced revenues;
• challenges related to a transition to the commercial market for any of our products;
• uncertainties related to the public’s adherence to vaccines, boosters and treatments;
•
the risk that more widespread use of Comirnaty or Paxlovid will lead to
new information about efficacy, safety or other developments, including
the risk of additional adverse reactions, some of which may be serious;
•
the risk that pre-clinical and clinical trial data are subject to
differing interpretations and assessments, including during the peer
review/
publication process, in the scientific community generally, and by regulatory authorities;
•
whether and when additional data from the BNT162 mRNA vaccine program,
Paxlovid or other COVID-19 programs will be published in
scientific journal publications and, if so, when and with what modifications and interpretations;
•
whether regulatory authorities will be satisfied with the design of and
results from existing or future pre-clinical and clinical studies;
•
whether and when submissions to request emergency use or conditional
marketing authorizations for Comirnaty or any future vaccines in
additional
populations, for a potential booster dose for Comirnaty, any monovalent
or bivalent vaccine candidates or any potential future
vaccines
(including potential future annual boosters or re-vaccinations), and/or
biologics license and/or EUA applications or amendments to
any such
applications may be filed in particular jurisdictions for Comirnaty,
any monovalent or bivalent vaccine candidates or any other
potential
vaccines that may arise from the BNT162 program, including a potential
variant-based, higher dose, or bivalent vaccine or any other
potential vaccines, and if obtained, whether or when such EUA or licenses, or existing EUAs, will expire or terminate;
•
whether and when submissions to request emergency use or conditional
marketing authorizations for Paxlovid or any future COVID-19
treatment
and/or any drug applications and/or EUA applications or amendments to
any such applications for any indication for Paxlovid or any
future
COVID-19 treatment may be filed in particular jurisdictions, and if
obtained, whether or when such EUA or licenses, or existing EUAs,
will expire or terminate;
•
whether and when any application that may be pending or filed for
Comirnaty, any monovalent, bivalent or variant-adapted vaccine
candidates
or other vaccines that may result from the BNT162
program, Paxlovid or any future COVID-19 treatment or any other COVID-19
program may
be approved by particular regulatory authorities,
which will depend on myriad factors, including making a determination as
to whether the
vaccine’s or drug’s benefits outweigh its known
risks and determination of the vaccine’s or drug’s efficacy and, if
approved, whether it will be
commercially successful;
•
decisions by regulatory authorities impacting labeling or marketing,
manufacturing processes, safety and/or other matters that could affect
the
availability or commercial potential of a vaccine or drug,
including the authorization or approval of products or therapies
developed by other
companies;
• disruptions in the
relationships between us and our collaboration partners, clinical trial
sites or third-party suppliers, including our relationship
with BioNTech;
• the risk that other companies may produce superior or competitive products;
Pfizer Inc. 2022 Form 10-K 21
• risks related to the availability of raw materials to manufacture or test any such products;
•
challenges related to our vaccine’s formulation, dosing schedule and
attendant storage, distribution and administration requirements,
including
risks related to storage and handling after delivery by us;
•
challenges and risks related to medication errors such as prescribing
or dispensing the wrong strength, improper dosing and self-
administration errors;
•
the risk that we may not be able to successfully develop other vaccine
formulations, booster doses or potential future annual boosters or re-
vaccinations or new variant-based or next generation vaccines or next generation COVID-19 treatments;
• the risk that we may not be able to recoup costs associated with our R&D and manufacturing efforts;
•
risks associated with any changes in the way we approach or provide
research funding for the BNT162 program, Paxlovid or any other
COVID-19 program;
• challenges and risks associated with the pace of our development programs;
•
the risk that we may not be able to maintain manufacturing capacity or
access to logistics or supply channels commensurate with global
demand
for our COVID-19 products, which would negatively impact our ability to
supply our COVID-19 products within the projected time
periods;
•
risks related to our ability to achieve our revenue forecasts for
Comirnaty and Paxlovid or any potential future COVID-19 vaccines or
treatments;
•
whether and when additional supply or purchase agreements will be
reached or existing agreements will be completed or renegotiated;
•
uncertainties regarding the ability to obtain recommendations from
vaccine or treatment advisory or technical committees and other public
health authorities and uncertainties regarding the commercial impact of any such recommendations;
• pricing and access challenges for such products;
•
challenges related to public confidence in, or awareness of Comirnaty
or Paxlovid, including challenges driven by misinformation or
disinformation, access, concerns about clinical data integrity, or prescriber and pharmacy education;
•
uncertainties around future changes to applicable healthcare policies
and guidelines issued by the U.S. federal government in connection with
the declared termination of the federal government’s COVID-19 public health emergency as of May 11, 2023;
• trade restrictions;
• the risk that we may owe third-party royalties or have other claims asserted related to Comirnaty or Paxlovid; and
• competitive developments.
CLIMATE CHANGE AND SUSTAINABILITY
Pfizer
is subject to transitional and physical risks related to climate
change. Transitional risks include, for example, a disorderly global
transition
away from fossil fuels that may result in increased
energy prices; customer preference for low or no-carbon products;
stakeholder pressure to
decarbonize assets; or new legal or
regulatory requirements that result in new or expanded carbon pricing,
taxes, restrictions on greenhouse gas
emissions, and increased
greenhouse gas disclosure and transparency. These risks could increase
operating costs, including the cost of our
electricity and energy
use, or other compliance costs. Physical risks to our operations include
water stress and drought; flooding and storm
surge; wildfires;
extreme temperatures and storms, which could impact pharmaceutical
production, increase costs, or disrupt supply chains of
medicines
for patients. Our supply chain is likely subject to these same
transitional and physical risks and would likely pass along any
increased
costs to us. We do not anticipate that these risks will have a material financial impact to the company in the near term.
In
June 2022, Pfizer established our fourth consecutive greenhouse gas
reduction goal with new near- and long-term targets to achieve the
Science
Based Target Initiative’s voluntary Net-Zero Standard by 2040. While we
are working to develop emission reduction plans to achieve our
voluntary
climate goals, various factors, including the long time horizons and
commercial availability of new technologies to enable the emission
reductions,
in the time and scale needed, may present inherent risk in our ability
to meet these goals. Additionally, success may depend on the
actions
of governments and third parties and may require, among other things,
significant capital investment; research and development; and
government
policies and incentives to foster innovation and reduce costs of
technologies that may not currently exist or be available at scale.
Governmental
authorities, non-governmental organizations, customers, investors,
employees, and other stakeholders are increasingly sensitive
to ESG
matters, such as equitable access to medicines and vaccines, product
quality and safety, diversity, equity and inclusion, environmental
stewardship,
support for local communities, value chain environmental and social due
diligence, corporate governance and transparency, and
addressing
human capital factors in our operations. In addition, governments and
the public expect companies like us to report on our business
practices
with respect to human rights, responsible sourcing and environmental
impact, as well as the actions of our third-party contractors and
suppliers
around the world. This focus on ESG matters may lead to new
expectations or requirements that could result in increased costs
associated
with research, development, manufacture, or distribution of our
products. Our ability to compete could also be affected by changing
customer
preferences and requirements, such as growing demand for companies to
establish validated Net Zero targets or offer more
sustainable
products. While we strive to improve our ESG performance and meet our
voluntary goals, if we do not meet, or are perceived not to
meet,
our goals or other stakeholder expectations in key ESG areas, we risk
negative stakeholder reaction, including from proxy advisory
services,
as well as damage to our brand and reputation, reduced demand for our
products or other negative impacts on our business and
operations.
While we monitor a broad range of ESG matters, we cannot be certain that
we will manage such matters successfully, or that we will
successfully meet the expectations of investors, employees, consumers, governments and other stakeholders.
MARKET FLUCTUATIONS IN OUR EQUITY AND OTHER INVESTMENTS
Changes
in the fair value of certain equity investments need to be recognized
in net income that may result in increased volatility of our income.
For
additional information, see Note 4 and the Analysis of Financial
Condition, Liquidity, Capital Resources and Market Risk section within
MD&A.
Our
pension benefit obligations and postretirement benefit obligations are
subject to volatility from changes in the fair value of equity
investments
and other investment risk in the assets funding these
plans. For additional information, see the Significant Accounting
Policies and Application of
Critical Accounting Estimates and Assumptions—Benefit Plans section within MD&A and Note 11.
Pfizer Inc. 2022 Form 10-K 22
COST AND EXPENSE CONTROL AND NONORDINARY EVENTS
Growth
in costs and expenses, changes in product and geographic mix and the
impact of acquisitions, divestitures, restructurings, internal
reorganizations,
product withdrawals, recalls and other unusual events that could result
from evolving business strategies, evaluation of asset
realization
and organizational restructuring could adversely affect future results.
Such risks and uncertainties include, in particular, our ability to
realize
the projected benefits of our cost-reduction and productivity
initiatives, other corporate strategic initiatives and any acquisitions,
divestitures or other initiatives, as well as potential disruption of ongoing business.
INTANGIBLE ASSETS, GOODWILL AND EQUITY-METHOD INVESTMENTS
Our
consolidated balance sheet contains significant amounts of intangible
assets, including IPR&D and goodwill. For IPR&D assets, the risk
of
failure is significant, and there can be no certainty that
these assets ultimately will yield successful products. Our ability to
realize value on these
significant investments is often contingent
upon, among other things, regulatory approvals and market acceptance. As
such, IPR&D assets may
become impaired and/or be written off
in the future if the associated R&D effort is abandoned or is
curtailed. For goodwill, all reporting units can
confront events
and circumstances that can lead to a goodwill impairment charge such as,
among other things, unanticipated competition, an
adverse action
or assessment by a regulator, a significant adverse change in legal
matters or in the business climate and/or a failure to replace
the
contributions of products that lose exclusivity. Our other intangible
assets, including developed technology rights and brands, face similar
risks
for impairment. Our equity-method investments may also be subject to
impairment charges that may result from the occurrence of
unexpected
adverse events or management decisions that impact our estimates of
expected cash flows to be generated from these investments.
We may
recognize impairment charges as a result of a weak economic environment,
events related to particular customers or asset types,
challenging
market conditions or decisions by management. Any such impairment
charge of our intangible assets, goodwill and equity-method
investments
may be significant. For additional details, see the Significant
Accounting Policies and Application of Critical Accounting Estimates
and Assumptions—Asset Impairments section within MD&A.
CHANGES IN LAWS AND ACCOUNTING STANDARDS
Our
future results could be adversely affected by changes in laws and
regulations or their interpretation, including, among others, changes in
accounting standards, tax laws and regulations internationally and
in the U.S. (including, among other things, the recently enacted IRA,
changes
in laws and regulations or their interpretation, including,
among others, the adoption of global minimum taxation requirements
outside the U.S.
and potential changes to existing tax law by the
current U.S. Presidential administration and Congress), competition
laws, privacy laws and
environmental laws in the U.S. and other
countries. For additional information on changes in tax laws or rates or
accounting standards, see the
Provision/(Benefit) for Taxes on Income and New Accounting Standards sections within MD&A and Note 1B.
ITEM 2. PROPERTIES
We
own and lease space globally for sales and marketing, customer service,
regulatory compliance, R&D, manufacturing and distribution and
corporate
enabling functions. In many locations, our business and operations are
co-located to achieve synergy and operational efficiencies. Our
global
headquarters are located in New York City. In February 2023, we
relocated our global headquarters to the Spiral, an office building in
the
Hudson Yards neighborhood of New York City. We continue to
advance our global workplace strategy to provide workplaces that enable
collaboration and foster innovation. As of December 31, 2022, we
had 301 owned and leased properties, amounting to approximately 40
million
square feet.
Our PGS division is headquartered in
various locations, with leadership teams primarily in New York City and
in Peapack, New Jersey. As of
December 31, 2022, PGS had
responsibility for 36 plants around the world, which manufacture
products for our commercial divisions, including
in Belgium,
Germany, India, Ireland, Italy, Japan, Singapore and the U.S. Our PGS
division expects to exit the Perth, Australia site in early 2023.
PGS also operates multiple distribution facilities around the world.
In
general, we believe that our properties, including the principal
properties described above, are well-maintained, adequate and suitable
for their
current requirements and for our operations in the
foreseeable future. See Note 9 for amounts invested in land, buildings
and equipment.
ITEM 3. LEGAL PROCEEDINGS
Certain legal proceedings in which we are involved are discussed in Note 16A.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The
executive officers of the Company are set forth in this table. Each
holds the office or offices indicated until his or her successor is
chosen and
qualified at the regular meeting of the BOD to be held
on the date of the 2023 Annual Meeting of Shareholders, or until his or
her earlier death,
resignation or removal. Each of the executive officers is a member of the Pfizer Executive Leadership Team.
Albert Bourla 61 Chairman of the Board since January 2020 and Chief Executive Officer since January 2019. Chief Operating
Officer from January 2018 until December 2018. Group President, Pfizer Innovative Health from June 2016 until
December 2017. Group President, Global Innovative Pharma Business (responsible for Vaccines, Oncology
and Consumer Healthcare since 2014) from February 2016 until June 2016. President and General Manager of
Established Products Business Unit from December 2010 until December 2013. Our Director since February
2018.
David M. Denton 57 Chief Financial Officer, Executive Vice President since May 2022. Executive Vice President, Chief Financial
Officer, Lowe’s Companies, Inc., from November 2018 until April 2022; Executive Vice President and Chief
Financial Officer, CVS Health Corporation (a diversified health solutions company), from January 2010 until
November 2018. Director of Tapestry, Inc. Effective March 1, 2023, Director of Haleon plc.
Name Age Position
Pfizer Inc. 2022 Form 10-K 23
Mikael Dolsten 64 Chief Scientific Officer and President, Worldwide Research, Development and Medical since January 2019.
President of Worldwide Research and Development from December 2010 until December 2018. Senior Vice
President; President of Worldwide Research and Development from May 2010 until December 2010. Senior
Vice President; President of Pfizer BioTherapeutics Research & Development Group from October 2009 until
May 2010. Director of Agilent Technologies, Inc, and Vimian Group AB. Director of Karyopharm Therapeutics
Inc. from 2015 to 2021.
Lidia Fonseca 54 Chief Digital and Technology Officer, Executive Vice President since January 2019. Chief Information Officer
and Senior Vice President of Quest Diagnostics Incorporated from 2014 to 2018. Senior Vice President of
Laboratory Corporation of America Holdings from 2008 until March 2013. Director of Tegna, Inc. and Medtronic
plc.
Angela Hwang 57 Chief Commercial Officer since October 2022 and President, Global Biopharmaceuticals Group since January
2019. Group President, Pfizer Essential Health from January 2018 until December 2018. Global President,
Pfizer Inflammation and Immunology from January 2016 until December 2017. Regional Head, U.S. Vaccines
from January 2014 until December 2015. Vice President, Emerging Markets for Primary Care from September
2011 until December 2013. Director of United Parcel Service, Inc.
Rady A. Johnson 61 Chief Compliance, Quality and Risk Officer, Executive Vice President since January 2019. Executive Vice
President, Chief Compliance and Risk Officer from December 2013 until December 2018. Senior Vice President
and Associate General Counsel from October 2006 until December 2013.
Douglas M. Lankler 57 General Counsel, Executive Vice President since December 2013. Corporate Secretary from January 2014
until February 2014. Executive Vice President, Chief Compliance and Risk Officer from February 2011 until
December 2013. Executive Vice President, Chief Compliance Officer from December 2010 until February 2011.
Aamir Malik 47 Chief Business Innovation Officer, Executive Vice President since August 2021. Various U.S. geographic
leadership roles with McKinsey & Company from 2019 to 2021; previously co-led McKinsey & Company’s
Global Pharmaceuticals & Medical Products practice from 2015 to 2018.
Michael
McDermott 57 Chief Global Supply Officer, Executive Vice President
since January 2022. President of Pfizer Global Supply
from 2018 until 2021. Vice President of Pfizer Global Supply from 2014 until 2018. Vice President of the
Biotechnology Unit from 2012 until 2014.
William Pao 56 Chief Development Officer, Executive Vice President since March 2022. Head of Roche Pharma Research &
Early Development (pRED) and member of Roche’s Enlarged Corporate Executive Committee from 2018 until
March 2022; Senior Vice President, Global Head Oncology Discovery and Translational Area at Roche pRED
from 2014 until 2018. Vanderbilt University Medical Center Adjunct Professor from 2014 to present.
Payal Sahni 48 Chief People Experience Officer, Executive Vice President since January 2022. Chief Human Resources
Officer, Executive Vice President from June 2020 to December 2021. From May 2016 until June 2020 served
as Senior Vice President of Human Resources for multiple operating units. Vice President of Human
Resources, Vaccines, Oncology & Consumer from 2015 until 2016. Ms. Sahni has served in a number of
positions in the Human Resources organization with increasing responsibility since joining Pfizer in 1997.
Sally Susman 61 Chief Corporate Affairs Officer, Executive Vice President since January 2019. Executive Vice President,
Corporate Affairs (formerly Policy, External Affairs and Communications) from December 2010 until December
2018. Senior Vice President, Policy, External Affairs and Communications from December 2009 until December
2010. Director of WPP plc from 2013 to 2022.
Name Age Position
PART II
ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
The
principal market for our common stock is the NYSE. Our common stock
currently trades on the NYSE under the symbol “PFE”. As of
February 21, 2023, there were 128,767 holders of record of our common stock.
The following summarizes purchases of our common stock during the fourth quarter of 2022(a):
Period
Total Number
of Shares
Purchased(b)
Average Price
Paid per
Share(b)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plan
Approximate Value
of Shares
that May Yet Be
Purchased
Under the Plan(a)
October 3 through October 30, 2022 19,483 $ 43.68 — $ 3,292,882,444
October 31 through November 30, 2022 39,821 $ 47.85 — $ 3,292,882,444
December 1 through December 31, 2022 415,886 $ 51.29 — $ 3,292,882,444
Total 475,190 $ 50.69 —
(a) See Note 12.
Pfizer Inc. 2022 Form 10-K 24
(b)
Represents (i) 473,126 shares of common stock surrendered to the
Company to satisfy tax withholding obligations in connection with the
vesting of awards under
our long-term incentive programs and (ii)
the open market purchase by the trustee of 2,064 shares of common stock
in connection with the reinvestment of
dividends paid on common stock held in trust for employees who deferred receipt of performance share awards.
PEER GROUP PERFORMANCE GRAPH
The
following graph assumes a $100 investment on December 31, 2017, and
reinvestment of all dividends, in each of the Company’s Common
Stock,
a composite peer group of the major U.S. and European-based
pharmaceutical companies, which are: AbbVie Inc., Amgen Inc.,
AstraZeneca
PLC, Bristol-Myers Squibb Company, Eli Lilly and Company,
GlaxoSmithKline plc, Johnson & Johnson, Merck & Co., Inc.,
Novartis
AG, Roche Holding AG and Sanofi SA, the S&P 500 Index and the NYSE Arca Pharmaceutical Index (DRG index).
PFIZER PEER GROUP S&P 500 DRG Index
2017 2018 2019 2020 2021 2022
$50
$75
$100
$125
$150
$175
$200
$225
$250
Five Year Performance
2017 2018 2019 2020 2021 2022
PFIZER $100.0 $124.8 $116.2 $120.2 $200.4 $179.5
PEER GROUP $100.0 $108.0 $131.3 $136.7 $159.3 $184.3
S&P 500 $100.0 $95.6 $125.7 $148.8 $191.5 $156.8
DRG Index $100.0 $107.5 $127.3 $138.4 $170.7 $183.9
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The
following MD&A is intended to assist the reader in understanding
our financial condition and results of operations, including an
evaluation of
the amounts and certainty of cash flows from
operations and from outside sources, and is provided as a supplement to
and should be read in
conjunction with the consolidated financial
statements and related notes in Item 8. Financial Statements and
Supplementary Data in this Form
10-K. Discussions of 2020 items and
year-to-year comparisons between 2021 and 2020 that are not included in
this Form 10-K can be found
within MD&A in our 2021 Form 10-K.
Pfizer Inc. 2022 Form 10-K 25
OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK
Financial Highlights––The following is a summary of certain financial
performance metrics (in billions, except per share data):
2022 Total Revenues––$100.3 billion 2022 Net Cash Flow from Operations––$29.3 billion
An increase of 23% compared to 2021 A decrease of 10% compared to 2021
$100.3
$81.3
$41.7
2022
2021
2020
$29.3
$32.6
$14.4
2022
2021
2020
2022 Reported Diluted EPS––$5.47 2022 Adjusted Diluted EPS (Non-GAAP)––$6.58*
An increase of 42% compared to 2021 An increase of 62% compared to 2021
$5.47
$3.85
$1.63
2022
2021
2020
$6.58
$4.06
$2.24
2022
2021
2020
*
For additional information regarding Adjusted diluted EPS (which is a
non-GAAP financial measure), including reconciliations of certain GAAP
Reported to non-
GAAP Adjusted information, see the Non-GAAP Financial Measure: Adjusted Income section within MD&A.
References
to operational variances pertain to period-over-period changes that
exclude the impact of foreign exchange rates. Although foreign
exchange
rate changes are part of our business, they are not within our control
and since they can mask positive or negative trends in the
business,
we believe presenting operational variances excluding these foreign
exchange changes provides useful information to evaluate our
results.
Our Business and Strategy––Pfizer Inc. is a research-based, global biopharmaceutical company. We apply science and our global
resources
to bring therapies to people that extend and significantly improve
their lives. See the Item 1. Business––About Pfizer section in this
Form
10-K. Pfizer is committed to working towards equitable and affordable
access to our medicines and vaccines for people around the world.
As
a science-driven global biopharmaceutical company, we remain focused on
advancing our pipeline, supporting our marketed brands and
deploying
capital responsibly, with a focus on initiatives that can help
contribute to our long-term revenue and future growth. Our ability to
fulfill
our purpose, Breakthroughs that change patients’ lives,
remains a core focus and underscores our commitment to addressing the
needs of
society to help sustain long-term value creation for all
stakeholders. Most of our revenues come from the manufacture and sale of
biopharmaceutical products. We believe that our medicines and
vaccines provide significant value for healthcare providers and patients
and seek
to enhance their value by continuously evaluating how we
can best collaborate with patients, physicians and payers to support and
expand
patient access to reliable, affordable healthcare around
the world. In addition, we continually seek to expand and broaden our
product portfolio
offerings through prioritized development of our
pipeline and acquisitions targeted at critical unmet patient needs. As a
result, our commercial
organizational structure and R&D
operations are critical to the successful execution of our business
strategy. In 2023, we are making additional
investments in both
R&D and SI&A to support Pfizer’s near- and longer-term growth
plans, including to support anticipated new launches,
commercial launch of COVID-19 products, potential high-value pipeline programs and recently acquired assets.
With
the formation of the Consumer Healthcare JV in 2019, the spin-off of
our former Upjohn Business in the fourth quarter of 2020 and the sale
of
our Meridian subsidiary in the fourth quarter of 2021, Pfizer
transformed into a more focused, global leader in science-based
innovative
medicines and vaccines engaged in the discovery,
development, manufacture, marketing, sale and distribution of
biopharmaceutical products
worldwide. In the fourth quarter of
2021, we began managing our commercial operations through a global
structure consisting of two operating
segments: Biopharma and PC1.
Biopharma is the only reportable segment. See Note 1A and Item 1.
Business––Commercial Operations in this
Form 10-K for additional
information. We expect to incur costs of approximately $700 million in
connection with separating Upjohn, of which
approximately 85% has
been incurred since inception and through December 31, 2022. These
charges include costs and expenses related to
separation of legal entities and transaction costs.
Beginning
in 2019, we took action through our Transforming to a More Focused
Company restructuring program to ensure our cost base and
support
model aligned appropriately with our operating structure. In the third
quarter of 2022, we made several organizational changes to further
transform
our operations to better leverage our expertise in certain areas and in
anticipation of potential future new product or indication
launches,
and in the fourth quarter of 2022, we began taking steps to optimize
our end-to-end R&D operations to reduce costs and cycle times as
well
as to further prioritize our internal R&D portfolio in areas where
our capabilities are differentiated while increasing external innovation
efforts
to leverage an expanding and productive biotech sector.
See Note 3 for additional information. For a description of savings
related to this
Pfizer Inc. 2022 Form 10-K 26
program, see the
Costs and Expenses––Restructuring Charges and Other Costs Associated
with Acquisitions and Cost-Reduction/Productivity
Initiatives section of this MD&A.
R&D:
We believe we have a strong pipeline and are well-positioned for future
growth. R&D is at the heart of fulfilling our purpose to deliver
breakthroughs
that change patients’ lives as we work to translate advanced science
and technologies into the therapies that may be the most
impactful
for patients. Innovation, drug discovery and development are critical to
our success. In addition to discovering and developing new
products,
our R&D efforts seek to add value to our existing products by
improving their effectiveness and ease of dosing and by discovering
potential
new indications. See the Item 1. Business—Research and Development
section in this Form 10-K for our R&D priorities and strategy.
We
seek to leverage a strong pipeline, organize around expected
operational growth drivers and capitalize on trends creating long-term
growth
opportunities, including:
• an aging global population
that is generating increased demand for innovative medicines and
vaccines that address patients’ unmet needs;
and
• advances in
both biological science and platform technologies that are enhancing the
delivery of breakthrough new medicines and vaccines.
Our Business
Development Initiatives––We are committed to strategically capitalizing
on growth opportunities, primarily by advancing our
own product
pipeline and maximizing the value of our existing products, but also
through various business development activities. We view our
business
development activity as an enabler of our strategies and seek to
generate growth by pursuing opportunities and transactions that have
the
potential to strengthen our business and our capabilities. We assess
our business, assets and scientific capabilities/portfolio as part of
our
regular, ongoing portfolio review process and also continue to
consider business development activities that will help advance our
business
strategy.
For additional information, including discussion of recent significant business development activities, see Note 2.
Our 2022 Performance
Revenues––Revenues
increased $19.0 billion, or 23%, to $100.3 billion in 2022 from $81.3
billion in 2021, reflecting an operational increase of
$24.6
billion, or 30%, as well as an unfavorable impact of foreign exchange of
$5.5 billion, or 7%. The operational increase was primarily driven
by growth from Paxlovid and Comirnaty.
Excluding
the impact of Paxlovid and Comirnaty, revenues increased 2%
operationally, reflecting strong growth in the Prevnar family, Eliquis
and
the Vyndaqel family, as well as revenue from recently acquired
products, Nurtec ODT/Vydura and Oxbryta, partially offset by declines in
Xeljanz,
Chantix/Champix, Sutent, certain Comirnaty-related
manufacturing activities performed on behalf of BioNTech (which are
included in the PC1
contract development and manufacturing organization) and Ibrance.
The following outlines the components of the net change in revenues:
$
M
ill
io
ns
$81,288 $1,779
$(672)
$23,463
$(5,527)
$100,330
2021 Operational
(excl. impact of
LOE and Operational
impact of
Paxlovid and
Comirnaty
Revenues)
Impact of LOE Operational impact of
Paxlovid and
Comirnaty
Revenues
Foreign Exchange 2022
As
of January 31, 2023, on a total company basis, we forecasted revenues
in 2023 of $67 billion to $71 billion, reflecting an operational decline
of
31% at the midpoint from 2022 results, which we expect will
also have an unfavorable impact on Income from continuing operations
before
provision/(benefit) for taxes on income. The total company
expected revenue declines in 2023 are driven by an expected reduction in
sales of our
COVID-19 products, partially offset by expected
operational growth from our non-COVID-19 in-line portfolio, anticipated
new product launches,
and recently acquired products.
See the
Revenues by Geography and Revenues––Selected Product Discussion sections
within MD&A for more information, including a
discussion of
key drivers of our revenue performance. See also The Global Economic
Environment––COVID-19 section below for information
about our
COVID-19 products, including expectations for 2023. For information
regarding the primary indications or class of certain products, see
Note 17C.
Income
from Continuing Operations Before Provision/(Benefit) for Taxes on
Income––The increase in Income from continuing operations before
provision/(benefit)
for taxes on income of $10.4 billion, to $34.7 billion in 2022 from
$24.3 billion in 2021, was primarily attributable to higher
revenues
and lower Acquired in-process research and development expenses,
partially offset by (i) an increase in Cost of sales, (ii) net losses on
equity securities in 2022 versus net gains on equity securities in
2021, (iii) lower net periodic benefit credits associated with pension
and other
postretirement plans, and (iv) increases in Research and
development expenses, Selling, informational and administrative
expenses, and
Restructuring charges and certain acquisition-related costs.
See
the Analysis of the Consolidated Statements of Income within MD&A
and Note 4 for additional information. See also The Global Economic
Environment––COVID-19 section below for information about our COVID-19 products, including expectations for 2023.
For
information on our tax provision and effective tax rate, see the
Provision/(Benefit) for Taxes on Income section within MD&A and Note
5.
Pfizer Inc. 2022 Form 10-K 27
Our Operating Environment––We,
like other businesses in our industry, are subject to certain
industry-specific challenges. These include,
among others, the
topics listed below. See also the Item 1. Business––Government
Regulation and Price Constraints and Item 1A. Risk Factors
sections in this Form 10-K.
Regulatory
Environment––Pipeline Productivity––Our product lines must be
replenished over time to offset revenue losses when products lose
exclusivity
or market share or to respond to healthcare and innovation trends, as
well as to provide for earnings growth. As a result, we devote
considerable
resources to our R&D activities which, while essential to our
growth, incorporate a high degree of risk and cost, including whether a
particular product candidate or new indication for an in-line
product will achieve the desired clinical endpoint or safety profile,
will be approved by
regulators or will be successful commercially.
Clinical trials are conducted to determine, among other things, whether
an investigational drug or
device is safe and effective for a
particular patient population. After a product has been approved or
authorized and launched, we continue to
monitor its safety as long
as it is available to patients, including conducting postmarketing
trials, voluntarily or pursuant to a regulatory request.
For the
entire life of the product, we collect safety data and report safety
information to the FDA and other regulators. Regulatory authorities
evaluate
potential safety concerns and take any regulatory action deemed
necessary and appropriate. Such action(s) may include: updating a
product’s
labeling, restricting its use, communicating new safety information or,
in rare cases, seeking to suspend or remove a product from the
market.
Intellectual
Property Rights and Collaboration/Licensing Rights––The loss,
expiration or invalidation of intellectual property rights, patent
litigation
settlements and the expiration of co-promotion and
licensing rights can have a material adverse effect on our revenues.
Certain of our products
have experienced patent-based expirations
or loss of regulatory exclusivity in certain markets in the last few
years, and we expect certain
products to face increased generic
competition over the next few years. While additional patent expiries
will continue, we expect a moderate
impact of reduced revenues due
to patent expiries from 2023 through 2025. We anticipate a more
significant impact of reduced revenues from
patent expiries in 2026
through 2030 as several of our in-line products experience patent-based
expirations. We continue to vigorously defend
our patent rights
against infringement, and we will continue to support efforts that
strengthen worldwide recognition of patent rights while taking
necessary steps to help ensure appropriate patient access.
For
additional information on patent rights we consider most significant to
our business as a whole, see the Item 1. Business––Patents and Other
Intellectual
Property Rights section in this Form 10-K. For a discussion of recent
developments with respect to patent litigation, see Note 16A1.
Regulatory
Environment/Pricing and Access––Government and Other Payer Group
Pressures––The pricing of medicines and vaccines by
pharmaceutical
manufacturers and the cost of healthcare, which includes medicines,
vaccines, medical services and hospital services, continues
to be
important to payers, governments, patients, and other stakeholders.
Federal and state governments and private third-party payers in the
U.S.
continue to take action to manage the utilization of drugs and cost of
drugs, including increasingly employing formularies to control costs by
taking into account discounts in connection with decisions about
formulary inclusion or favorable formulary placement. We consider a
number of
factors impacting the pricing of our medicines and
vaccines. Within the U.S., we often engage with patients, doctors and
healthcare plans. We
also often provide significant discounts from
the list price to insurers, including PBMs and MCOs. The price that
patients pay in the U.S. for
prescribed medicines and vaccines is
ultimately set by healthcare providers and insurers. Governments
globally, as well as private third-party
payers in the U.S., may
use a variety of measures to control costs, including, among others,
proposing pricing reform or legislation, employing
formularies to
control costs, cross country collaboration and procurement, price cuts,
mandatory rebates, health technology assessments, forced
localization
as a condition of market access, “international reference pricing”
(i.e., the practice of a country linking its regulated medicine prices
to
those of other countries), QCE processes and VBP. We anticipate
that these and similar initiatives will continue to increase pricing and
access
pressures globally. In the U.S., we expect to see continued
focus by Congress and the Biden Administration on regulating pricing,
which could
result in legislative and regulatory changes designed
to control costs, such as the IRA that was signed into law in August
2022. We continue to
evaluate the impact of the IRA on our
business, operations and financial condition and results as the full
effect of the IRA on our business and the
pharmaceutical industry
remains uncertain. In addition, changes to the Medicaid program or the
federal 340B drug pricing program, including
legal or legislative
developments at the federal or state level with respect to the 340B
program, could have a material impact on our business. For
additional
information, see the Item 1. Business––Pricing Pressures and Managed
Care Organizations and ––Government Regulation and Price
Constraints and the Item 1A. Risk Factors––Pricing and Reimbursement sections in this Form 10-K.
Product
Supply––We periodically encounter supply delays, disruptions and
shortages, including due to voluntary product recalls. In response to
requests
from various regulatory authorities, manufacturers across the
pharmaceutical industry, including Pfizer, are evaluating their product
portfolios for the potential presence or formation of nitrosamines.
This has led to recalls, including our voluntary recall of Chantix in
2021 and
additional voluntary recalls initiated for other products
in 2022 due to the presence of nitrosamines above the FDA interim
acceptable intake limit,
and may lead to additional recalls or other market actions for Pfizer products.
Regarding
our supply chain generally, in 2022 and to date, we have not seen a
significant disruption, and all of our manufacturing sites globally
have
continued to operate at or near normal levels; however, we are seeing
an increase in overall demand in the industry for certain components
and
raw materials, which could potentially result in constraining available
supply leading to a possible future impact on our business. We are
continuing
to monitor and implement mitigation strategies in an effort to reduce
any potential risk or impact including active supplier management,
qualification
of additional suppliers and advanced purchasing to the extent possible.
For information on risks related to product manufacturing,
see the Item 1A. Risk Factors––Product Manufacturing, Sales and Marketing Risks section in this Form 10-K.
The
Global Economic Environment––In addition to the industry-specific
factors discussed above, we, like other businesses of our size
and
global extent of activities, are exposed to economic cycles. Certain
factors in the global economic environment that may impact our global
operations
include, among other things, currency fluctuations, capital and
exchange controls, local and global economic conditions including
inflation,
recession, volatility and/or lack of liquidity in capital markets,
expropriation and other restrictive government actions, changes in
intellectual
property, legal protections and remedies, trade regulations, tax laws
and regulations and procedures and actions affecting approval,
production,
pricing, and marketing of, reimbursement for and access to our
products, as well as impacts of political or civil unrest or military
action,
including the ongoing conflict between Russia and Ukraine and its
economic consequences, geopolitical instability, terrorist activity,
unstable
governments and legal systems, inter-governmental disputes, public
health outbreaks, epidemics, pandemics, natural disasters or
disruptions
related to climate change. Government pressures can lead to negative
pricing pressure in various markets where governments take
an
active role in setting prices, access criteria or other means of cost
control. For additional information on risks related to our global
operations,
see the Item 1A. Risk Factors—Global Operations section in this Form 10-K.
COVID-19––In
response to COVID-19, we have developed Paxlovid and collaborated with
BioNTech to jointly develop Comirnaty, including
booster doses of
an Omicron-adapted bivalent vaccine. As part of our strategy for
COVID-19, we are continuing to make significant additional
Pfizer Inc. 2022 Form 10-K 28
investments
in breakthrough science and global manufacturing. This includes
continuing to evaluate Comirnaty and Paxlovid, including against
new
variants of concern, developing monovalent, bivalent and variant
adapted vaccine candidates and booster doses and developing potential
combination
respiratory vaccines and potential next generation vaccines and
therapies. We are also evaluating Paxlovid for additional
populations.
For additional information, including our continuing late-stage
development efforts for Paxlovid, see the Product Developments
section within MD&A.
In
2022 and to date, we principally sold Comirnaty and Paxlovid globally
under government contracts. We expect sales of Comirnaty in the U.S.
will
transition to traditional commercial market sales in the second half of
2023, triggered by the expiration of current contracts and the vaccines
purchased through them becoming either depleted or not usable
against new variants. Internationally, we expect sales of Comirnaty in
international
developed markets to generally be under government contracts in 2023,
and in emerging markets, under a combination of private
channels
and government contracts; in both cases, we expect to generally
transition to commercial markets starting in 2024. For Paxlovid, we
expect
2023 to be a transitional year as we expect to start selling Paxlovid
through the commercial channels in the second half of 2023 rather
than
significant government purchases. We also remain committed to helping
ensure broad and equitable access to our COVID-19 products to
eligible
patients around the world. Revenues from our COVID-19 products are
expected to go from their peak in 2022 to their low point in 2023
before
potentially returning to growth in 2024. While patient demand for our
COVID-19 products is expected to remain strong throughout 2023,
much
of that demand is expected to be fulfilled by existing supply of
products that were delivered to governments and recorded as revenues in
2022. As of January 31, 2023, we forecasted Comirnaty revenues of
approximately $13.5 billion in 2023, down 64% from actual 2022 results,
with gross profit to be split evenly with BioNTech, and Paxlovid
revenues of approximately $8 billion in 2023, down 58% from actual 2022
results.
Guidance for both products includes, among other things,
anticipated sales through traditional commercial markets in the U.S. in
the second half
of 2023 and assumes prior absorption of existing
government supply from advanced purchase agreements from 2022. These
forecasts are
based on estimates and assumptions that are subject
to significant uncertainties, including, among others, patient demand
which could be
significantly impacted by the infectiousness and
severity of the predominant strains of the SAR-CoV-2 virus during 2023,
proportion of the
population that receives a vaccine or is treated
with an oral antiviral treatment, the number of doses per vaccinated
person per year, number of
symptomatic infections, market share of
Comirnaty and Paxlovid, timing and terms for delivery of the contracted
doses of Comirnaty to the EC,
Paxlovid sales to China and the timing for transitioning Comirnaty and Paxlovid sales to the commercial market in the U.S.
In
addition to our introduction of Comirnaty and Paxlovid, COVID-19 has
impacted our business, operations and financial condition and results.
For
example, COVID-19 had varying impacts on patient visits, vaccinations,
elective surgeries, cancer screenings and routine testing, which
affected
prescriptions or refills of existing prescriptions and demand for
products used in procedures. As part of our on-going monitoring and
assessment,
we have made certain assumptions regarding COVID-19 for purposes of our
operational planning and financial projections,
including
assumptions regarding the global macroeconomic impact of COVID-19, as
well as the demand, revenues, supply, contracts and
commercial
markets for our COVID-19 products, which remain dynamic. Despite careful
tracking and planning, we are unable to accurately
predict the
extent of the impact of COVID-19 on our business, operations and
financial condition and results due to the uncertainty of future
developments.
We will continue to pursue efforts to maintain the continuity of our
operations while monitoring for new developments related to
COVID-19.
Future developments could result in additional favorable or unfavorable
impacts on our business, operations or financial condition
and
results. For information on risks associated with COVID-19 and our
COVID-19 products, as well as COVID-19 intellectual property disputes,
see
the Item 1A. Risk Factors—COVID-19, —Intellectual Property Protection
and ––Third-Party Intellectual Property Claims sections in this
Form 10-K and Note 16A1.
Russia/Ukraine
Conflict––Our global operations may be impacted by the armed conflict
between Russia and Ukraine. Consistent with our
commitment to
putting patients first, we are maintaining the supply of medicines to
Russia, including the provision of needed medicines to
patients
already enrolled in clinical trials. Effective March 14, 2022, Pfizer
began donating profits of our Russian subsidiary to causes that provide
direct humanitarian support to the people of Ukraine, in addition
to our ongoing efforts to support the humanitarian response in the
region. In
2022, we have donated approximately $25 million to
support humanitarian relief and response efforts. We will continue to
support Ukrainian relief
efforts through this method until peace is
achieved. Additionally, we are not initiating new clinical trials in
Russia, have stopped recruiting new
patients in our ongoing
clinical trials in the country, and halted all new investments with
local suppliers intended to build manufacturing capacity in
Russia.
For the years ended December 31, 2022 and 2021, the business of our
Russia and Ukraine subsidiaries represented less than 1% of our
consolidated
revenues and assets, and while we are monitoring the effects of the
armed conflict between Russia and Ukraine, the situation
continues
to evolve and the long-term implications, including the broader economic
consequences of the conflict, are difficult to predict at this
time.
While as of now, we do not anticipate any significant negative impacts
on our business from this conflict, continued regional instability,
geopolitical
shifts, potential additional sanctions and other restrictive measures
against Russia, neighboring countries or allies of Russia, any
retaliatory
measures taken by Russia, neighboring countries or allies of Russia,
and actions by our customers or suppliers in response to such
measures
could adversely affect the global macroeconomic environment, our
operations, currency exchange rates and financial markets, which
could in turn adversely impact our business and results of operations.
SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND
ASSUMPTIONS
Following
is a discussion about the critical accounting estimates and assumptions
impacting our consolidated financial statements. Also, see
Note 1C.
For
a description of our significant accounting policies, see Note 1. Of
these policies, the following are considered critical to an
understanding of
our consolidated financial statements as they
require the application of the most subjective and the most complex
judgments: Acquisitions (Note
1D); Fair Value (Note 1E); Revenues
(Note 1G); Asset Impairments (Note 1M); Tax Assets and Liabilities and
Income Tax Contingencies (Note
1Q); Pension and Postretirement Benefit Plans (Note 1R); and Legal and Environmental Contingencies (Note 1S).
For a discussion of a recently adopted accounting standard, see Note 1B.
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 value as of the acquisition date. To estimate fair value, we
utilize an exit price
approach from the perspective of a market
participant. For further detail on acquisition accounting, see Note 1D.
For further detail on the
techniques and methodologies that we use
to estimate fair value, see Note 1E. Historically, intangible assets
have been the most significant fair
values within our business
combinations. We utilize an income approach to estimate the acquisition
date fair value of intangible assets. Some of
Pfizer Inc. 2022 Form 10-K 29
the
more significant estimates and assumptions inherent in this approach
include the amount and timing of projected net cash flows, the discount
rate and the tax rate. For further information on our process to
estimate the fair value of intangible assets, see Asset Impairments
below. We
estimate the fair value of acquired inventory, including
finished goods and work in process, by determining the estimated selling
price when
completed, less an estimate of costs to be incurred to
complete and sell the inventory, and an estimate of a reasonable profit
allowance for those
manufacturing and selling efforts. The fair
value of inventory is recognized in our results of operations as the
inventory is sold. Some of the more
significant estimates and
assumptions inherent in the estimate of the fair value of inventory
include stage of completion, costs to complete, costs
to dispose and selling price.
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 are required when estimating the impact of these revenue
deductions
on gross sales for a reporting period. Historically, adjustments to
these estimates to reflect actual results or updated expectations,
have
not been material to our overall business and generally have been less
than 1% of revenues. Product-specific rebates, however, can have a
significant
impact on year-over-year individual product revenue growth trends. If
any of our ratios, factors, assessments, experiences or
judgments
are not indicative or accurate estimates of our future experience, our
results could be materially affected. The potential of our
estimates
to vary (sensitivity) differs by program, product, type of customer and
geographic location. However, estimates associated with U.S.
Medicare,
Medicaid and performance-based contract rebates are most at risk for
material adjustment because of the extensive time delay
between the
recording of the accrual and its ultimate settlement, an interval that
can generally range up to one year. Because of this lag, our
recording
of adjustments to reflect actual amounts can incorporate revisions of
several prior quarters. Rebate accruals are product specific and,
therefore
for any period, are impacted by the mix of products sold as well as the
forecasted channel mix for each individual product. For further
information, see the Revenue Deductions section within MD&A and Note 1G.
Asset Impairments
We
review all of 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
charges for impairments of long-lived assets
for the amount by which the fair value is less than the carrying value
of these assets. Our
impairment review processes are described in Note 1M.
Examples of events or circumstances that may be indicative of impairment include:
•
A significant adverse change in legal factors or in the business
climate that could affect the value of the asset. For example, a
successful
challenge of our patent rights would likely result in generic competition earlier than expected.
•
A significant adverse change in the extent or manner in which an asset
is used such as a restriction imposed by the FDA or other regulatory
authorities that could affect our ability to manufacture or sell a product.
•
An expectation of losses or reduced profits associated with an asset.
This could result, for example, from a change in a government
reimbursement
program that results in an inability to sustain projected product
revenues and profitability. This also could result from the
introduction
of a competitor’s product that impacts projected revenue growth, as
well as the lack of acceptance of a product by patients,
physicians
and payers. For IPR&D projects, this could result from, among other
things, a change in outlook based on clinical trial data, a delay
in the projected launch date or additional expenditures to commercialize the product.
Identifiable
Intangible Assets––We use an income approach, specifically the
discounted cash flow method to determine the fair value of
intangible
assets, other than goodwill. We start with a forecast of all the
expected net cash flows associated with the asset, which incorporates
the
consideration of a terminal value for indefinite-lived assets, and then
we apply an asset-specific discount rate to arrive at a net present
value
amount. Some of the more significant estimates and
assumptions that impact our fair value estimates 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
projections and the impact of
technological advancements and risk
associated with IPR&D assets, as well as the selection of a
long-term growth rate; 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 jurisdictional mix of the
projected cash flows.
While
all intangible assets other than goodwill can face events and
circumstances that can lead to impairment, those that are most at risk
of
impairment include IPR&D assets (approximately $11.4 billion
as of December 31, 2022) and newly acquired or recently impaired
indefinite-lived
brand assets. IPR&D assets are high-risk
assets, given the uncertain nature of R&D. Newly acquired and
recently impaired indefinite-lived assets
are more vulnerable to
impairment as the assets are recorded at fair value and are then
subsequently measured at the lower of fair value or
carrying value
at the end of each reporting period. As such, immediately after
acquisition or impairment, even small declines in the outlook for
these assets can negatively impact our ability to recover the carrying value and can result in an impairment charge.
Goodwill––Our
goodwill impairment review work as of December 31, 2022 concluded that
none of our goodwill was impaired and we do not
believe the risk of
impairment is significant at this time, as the fair value of each of
our reporting units is significantly higher than their respective
net book values.
In
our review, we first assess qualitative factors to determine whether it
is more likely than not that the fair value of a reporting unit is less
than its
carrying amount. Qualitative factors that we consider
include, for example, macroeconomic and industry conditions, overall
financial performance
and other relevant entity-specific events. If
we conclude that it is more likely than not that the fair value of a
reporting unit is less than its carrying
value, we then perform a quantitative fair value test.
When
we are required to determine the fair value of a reporting unit, we
typically use the income approach. The income approach is a forward-
looking
approach to estimating fair value and relies primarily on internal
forecasts. Within the income approach, we use the discounted cash flow
method.
We start with a forecast of all the expected net cash flows for the
reporting unit, which includes the application of a terminal value, and
then we apply a reporting unit-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
technological
risk and competitive, legal and/or regulatory forces on the
projections, as well as the selection of a long-term growth rate; 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.
Pfizer Inc. 2022 Form 10-K 30
For
all of our reporting units, there are a number of future events and
factors that may impact future results and that could potentially have
an
impact on the outcome of subsequent goodwill impairment testing.
For a list of these factors, see the Forward-Looking Information and
Factors
That May Affect Future Results and the Item 1A. Risk Factors sections in this Form 10-K.
Benefit Plans
For a description of our different benefit plans, see Note 11.
Our
assumptions reflect our historical experiences and our judgment
regarding future expectations that have been deemed reasonable by
management. The judgments made in determining the costs of our benefit plans can materially impact our results of operations.
The
following provides (i) at the end of each year, the expected annual
rate of return on plan assets for the following year, (ii) the actual
annual
rate of return on plan assets achieved in each year, and (iii) the
weighted-average discount rate used to measure the benefit
obligations at the end of each year for our U.S. pension plans and our international pension plans(a):
2022 2021 2020
U.S. Pension Plans
Expected annual rate of return on plan assets 7.5 % 6.3 % 6.8 %
Actual annual rate of return on plan assets (22.4) 9.2 14.1
Discount rate used to measure the plan obligations 5.4 2.9 2.6
International Pension Plans
Expected annual rate of return on plan assets 4.5 3.1 3.4
Actual annual rate of return on plan assets (26.0) 11.4 9.7
Discount rate used to measure the plan obligations 3.8 1.6 1.5
(a) For detailed assumptions associated with our benefit plans, see Note 11B.
Expected
Annual Rate of Return on Plan Assets––The assumptions for the expected
annual rate of return on all of our plan assets reflect our
actual
historical return experience and our long-term assessment of
forward-looking return expectations by asset classes, which is used to
develop
a weighted-average expected return based on the implementation of our
targeted asset allocation in our respective plans.
The expected
annual rate of return on plan assets for our U.S. plans and
international plans is applied to the fair value of plan assets at each
year-end and the resulting amount is reflected in our net periodic benefit costs in the following year.
The
following illustrates the sensitivity of net periodic benefit costs to a
50 basis point decline in our assumption for the expected annual rate
of return on plan assets, holding all other assumptions constant (in millions, pre-tax):
Assumption Change
Increase in 2023
Net Periodic
Benefit Costs
Expected annual rate of return on plan assets 50 basis point decline $92
The actual return on plan assets resulted in a net loss on our plan assets of approximately $6.3 billion during 2022.
Discount
Rate Used to Measure Plan Obligations––The weighted-average discount
rate used to measure the plan obligations for our U.S.
defined
benefit plans is determined at least annually and evaluated and
modified, as required, to reflect 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. The
discount rate used to measure the plan
obligations for our international plans is determined at least annually
by reference to investment grade
corporate bonds, rated AA/Aa or
better, including, when there is sufficient data, a yield-curve
approach. These discount rate determinations are
made in
consideration of local requirements. The measurement of the plan
obligations at the end of the year will affect the amount of service
cost, interest cost and amortization expense reflected in our net periodic benefit costs in the following year.
The
following illustrates the sensitivity of net periodic benefit costs and
benefit obligations to a 10 basis point decline in our assumption for
the discount rate, holding all other assumptions constant (in millions, pre-tax):
Assumption Change
Decrease in 2023
Net Periodic
Benefit Costs
Increase to 2022
Benefit
Obligations
Discount rate 10 basis point decline $6 $248
The
change in the discount rates used in measuring our plan obligations as
of December 31, 2022 resulted in a decrease in the measurement of
our aggregate plan obligations by approximately $6.6 billion.
Income Tax Assets and Liabilities
Income
tax assets and liabilities include income tax valuation allowances and
accruals for uncertain tax positions. For additional information, see
Notes
1Q and 5, as well as the Analysis of Financial Condition, Liquidity,
Capital Resources and Market Risk section within MD&A.
Contingencies
We
and certain of our subsidiaries are subject to numerous contingencies
arising in the ordinary course of business, including tax, legal
contingencies and guarantees and indemnifications. For additional information, see Notes 1Q, 1S, 5D and 16.
Pfizer Inc. 2022 Form 10-K 31
ANALYSIS OF THE CONSOLIDATED STATEMENTS OF INCOME
Revenues by Geography
The following presents worldwide revenues by geography:
Year Ended December 31, % Change
Worldwide U.S. International Worldwide U.S. International
(MILLIONS) 2022 2021 2020 2022 2021 2020 2022 2021 2020 22/21 21/20 22/21 21/20 22/21 21/20
Operating segments:
Biopharma $ 98,988 $ 79,557 $ 40,724 $ 42,083 $ 29,221 $ 21,055 $ 56,905 $ 50,336 $ 19,670 24 95 44 39 13 156
Pfizer CentreOne 1,342 1,731 926 390 524 400 952 1,206 526 (22) 87 (26) 31 (21) 129
Total revenues $ 100,330 $ 81,288 $ 41,651 $ 42,473 $ 29,746 $ 21,455 $ 57,857 $ 51,542 $ 20,196 23 95 43 39 12 155
2022 v. 2021
The following provides an analysis of the change in worldwide revenues by geographic areas from 2021 to 2022(a):
(MILLIONS) Worldwide U.S. International
Operational growth/(decline):
Worldwide growth from Paxlovid, Comirnaty, the Prevnar family, Eliquis, the Vyndaqel family,
Inlyta and Xtandi, partially offset by worldwide declines from Xeljanz and Ibrance(b) $ 25,435 $ 13,197 $ 12,238
Revenues from recently acquired products: Nurtec ODT/Vydura and Oxbryta 285 283 2
Decline from PC1(b) (329) (135) (195)
Lower revenues for Chantix/Champix and Sutent:
• The decrease in Chantix/Champix was driven by the ongoing global pause in shipments
of Chantix due to the presence of N-nitroso-varenicline above an acceptable level of
intake set by various global regulators, the ultimate timing for resolution of which may vary
by country
• The decrease for Sutent primarily reflects lower volume demand in Europe and the U.S.
following its loss of exclusivity in January 2022 and August 2021, respectively (690) (396) (293)
Other operational factors, net (132) (222) 90
Operational growth, net 24,569 12,727 11,842
Unfavorable impact of foreign exchange (5,527) — (5,527)
Revenues increase/(decrease) $ 19,042 $ 12,727 $ 6,315
(a)
For an analysis of the change in worldwide revenues by geographic area
from 2020 to 2021, see the Revenues by Geography section within MD&A
in our 2021
Form 10-K.
(b) See the Revenues––Selected Product Discussion within MD&A for additional analysis.
Emerging
markets revenues decreased $604 million, or 3%, in 2022 to $20.1
billion from $20.7 billion in 2021, reflecting an operational increase
of
$366 million, or 2%, and an unfavorable impact from foreign exchange of
approximately 5%. The operational increase in emerging markets
revenues
was primarily driven by growth from Paxlovid, Sulperazon and Nimenrix,
partially offset by declines in Comirnaty and certain
Comirnaty-related
manufacturing activities performed on behalf of BioNTech. For an
analysis of the change in emerging market revenues from
2020 to 2021, see the Revenues by Geography section within MD&A in our 2021 Form 10-K.
Revenue
Deductions––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. These deductions represent
estimates of the related obligations and, as such, knowledge and
judgment
are required when estimating the impact of these revenue deductions on
gross sales for a reporting period. Historically, adjustments to
these
estimates to reflect actual results or updated expectations, have not
been material to our overall business and generally have been less
than
1% of revenues. Product-specific rebates, however, can have a
significant impact on year-over-year individual product revenue growth
trends.
The following presents information about revenue deductions:
Year Ended December 31,
(MILLIONS) 2022 2021 2020
Medicare rebates $ 838 $ 726 $ 647
Medicaid and related state program rebates 973 1,214 1,136
Performance-based contract rebates 3,575 3,253 2,660
Chargebacks 7,560 6,122 4,531
Sales allowances 5,460 4,809 3,835
Sales returns and cash discounts 1,290 1,054 924
Total $ 19,697 $ 17,178 $ 13,733
Revenue
deductions are primarily a function of product sales volume, mix of
products sold, contractual or legislative discounts and rebates.
For
information on our accruals for revenue deductions, including the
balance sheet classification of these accruals, see Note 1G.
Pfizer Inc. 2022 Form 10-K 32
Revenues—Selected Product Discussion
Biopharma
Comirnaty(a)
$37,806
Up 10%
(operationally)
U.S. $ 8,775 $ 7,809 12
Performance was largely driven by:
• operational growth in international markets, led by deliveries
to certain international developed markets, as well as
government purchasing of bivalent boosters in the fourth
quarter of 2022 in support of fall vaccination campaigns; and
• growth in the U.S. primarily driven by favorable pricing,
partially offset by government purchasing patterns.
This growth was partially offset by lower demand in emerging
markets.
Int’l. 29,032 28,972 — 9
Worldwide $ 37,806 $ 36,781 3 10
Paxlovid
$18,933
*
U.S. $ 10,514 $ 76 *
Driven by the U.S. launch under EUA in December 2021 and
international launches in late 2021 and early 2022 following
regulatory approvals or EUAs.
Int’l. 8,419 — * *
Worldwide $ 18,933 $ 76 * *
Eliquis
$6,480
Up 14%
(operationally)
U.S. $ 3,822 $ 3,160 21
Growth driven primarily by continued oral anti-coagulant adoption
and market share gains in non-valvular atrial fibrillation in the U.S.
and certain markets in Europe, as well as favorable changes in
channel mix in the U.S., partially offset by the non-recurrence of an
$80 million favorable adjustment related to the Medicare “coverage
gap” provision recorded in the first quarter of 2021 in the U.S., as
well as declines in certain emerging markets.
Int’l. 2,658 2,810 (5) 5
Worldwide $ 6,480 $ 5,970 9 14
Prevnar
family
$6,337
Up 23%
(operationally)
U.S. $ 4,032 $ 2,701 49
Growth primarily driven by the adult indications in the U.S. due to
strong patient demand following the launch of Prevnar 20 for the
eligible adult population, partially offset by a reduction in revenues
due to a one-time CDC inventory return program for the pediatric
indication, the revenue impact of which is expected to be reversed
in 2023 upon replenishment, as well as unfavorable timing of
purchases for the adult indication internationally.
Int’l. 2,305 2,571 (10) (4)
Worldwide $ 6,337 $ 5,272 20 23
Ibrance
$5,120
Down 2%
(operationally)
U.S. $ 3,370 $ 3,418 (1)
Global declines primarily driven by prior-year clinical trial
purchases internationally, planned price decreases that recently
went into effect in international developed markets, and continued
increase in the proportion of patients accessing Ibrance through
the U.S. Patient Assistance Program, partially offset by higher
volumes across multiple regions.
Int’l. 1,751 2,019 (13) (4)
Worldwide $ 5,120 $ 5,437 (6) (2)
Vyndaqel
family
$2,447
Up 29%
(operationally)
U.S. $ 1,245 $ 909 37 Growth largely driven by continued strong uptake of the ATTR-CM
indication, primarily in developed Europe and the U.S., partially
offset by a planned price decrease that went into effect in Japan in
the second quarter of 2022.
Int’l. 1,202 1,106 9 22
Worldwide $ 2,447 $ 2,015 21 29
Xeljanz
$1,796
Down 24%
(operationally)
U.S. $ 1,129 $ 1,647 (31) Global declines driven primarily by decreased prescription
volumes globally resulting from ongoing shifts in prescribing
patterns related to label changes, as well as declines in net price
due to unfavorable changes in channel mix in the U.S.
Int’l. 668 808 (17) (8)
Worldwide $ 1,796 $ 2,455 (27) (24)
Xtandi
$1,198
Up 1%
(operationally)
U.S. $ 1,198 $ 1,185 1 Performance largely due to steady demand growth across the
mCRPC, nmCRPC, and mCSPC indications, slightly offset by
unfavorable changes in channel mix and fluctuating enrollment
rates in the Xtandi Patient Assistance Program.
Int’l. — — — —
Worldwide $ 1,198 $ 1,185 1 1
Inlyta
$1,003
Up 4%
(operationally)
U.S. $ 618 $ 599 3 Growth primarily reflects continued strong performance in
emerging markets and the U.S. driven by the adoption of
combinations of certain immune checkpoint inhibitors and Inlyta for
the first-line treatment of patients with advanced RCC.
Int’l. 385 403 (5) 5
Worldwide $ 1,003 $ 1,002 — 4
Revenue
(MILLIONS) Year Ended Dec. 31, % Change
Product
Global
Revenues Region 2022 2021 Total Oper. Operational Results Commentary
Pfizer CentreOne
Revenue
(MILLIONS) Year Ended Dec. 31, % Change
Operating
Segment
Global
Revenues Region 2022 2021 Total Oper. Operational Results Commentary
PC1
$1,342
Down 19%
(operationally)
U.S. $ 390 $ 524 (26) Declines primarily driven by lower COVID-19 manufacturing
activities performed on behalf of customers, including Comirnaty
supply to BioNTech, and lower manufacturing of divested products
under manufacturing and supply agreements.
Int’l. 952 1,206 (21) (16)
Worldwide $ 1,342 $ 1,731 (22) (19)
Pfizer Inc. 2022 Form 10-K 33
(a)
Comirnaty includes direct sales and Alliance revenues related to sales
of the Pfizer-BioNTech COVID-19 vaccine, which are recorded within our
Primary Care
customer group. It does not include revenues for
certain Comirnaty-related manufacturing activities performed on behalf
of BioNTech, which are included in PC1.
See Note 17C.
* Indicates calculation not meaningful.
See
the Item 1. Business—Patents and Other Intellectual Property Rights
section in this Form 10-K for information regarding the expiration of
various
patent rights, Note 16 for a discussion of recent developments
concerning patent and product litigation relating to certain of the
products
discussed above and Note 17C for additional information
regarding the primary indications or class of the selected products
discussed above.
Costs and Expenses
Costs and expenses follow:
Year Ended December 31, % Change
(MILLIONS) 2022 2021 2020 22/21 21/20
Cost of sales(a) $ 34,344 $ 30,821 $ 8,484 11 *
Percentage of Revenues 34.2 % 37.9 % 20.4 %
Selling, informational and administrative expenses(a) 13,677 12,703 11,597 8 10
Research and development expenses 11,428 10,360 8,709 10 19
Acquired in-process research and development
expenses 953 3,469 684 (73) *
Amortization of intangible assets(a) 3,609 3,700 3,348 (2) 11
Restructuring charges and certain acquisition-related
costs(a) 1,375 802 579 71 38
Other (income)/deductions—net(a) 217 (4,878) 1,213 * *
* Indicates calculation not meaningful.
(a)
For a discussion of the drivers of change for 2021 v. 2020, see the
Costs and Expenses section within MD&A in our 2021 Form 10-K.
Cost of Sales
2022 v. 2021
Cost of sales increased $3.5 billion, primarily due to:
•
an unfavorable impact of $4.0 billion due to increased sales of
Comirnaty, which includes a charge for the 50% gross profit split with
BioNTech
and applicable royalty expenses;
• inventory write-offs and other charges related to Paxlovid and Comirnaty of $1.1 billion and $600 million, respectively; and
• an increase of $1.3 billion due to increased sales of Paxlovid,
partially offset by:
• a $3.3 billion favorable impact of foreign exchange and hedging activity.
The
decrease in Cost of sales as a percentage of revenues was primarily due
to the favorable impacts of Paxlovid, foreign exchange and higher
Alliance
revenues, partially offset by higher sales of Comirnaty, as well as the
inventory write-offs and other charges related to Paxlovid and
Comirnaty, respectively, discussed above.
Selling, Informational and Administrative Expenses
2022 v. 2021
Selling, informational and administrative expenses increased $974 million, mostly due to:
•
an increase of $1.3 billion for Paxlovid and Comirnaty marketing and
promotional expenses and a higher provision for U.S. healthcare reform
fees based on sales of Paxlovid; and
• an increase of $540 million for marketing and promotional expenses for recently acquired and launched products,
partially offset by:
• a $414 million favorable impact of foreign exchange;
• a $320 million decrease in spending across multiple customer groups; and
• a decrease of $270 million in our liability to be paid to participants of our supplemental savings plan.
Research and Development Expenses
2022 v. 2021
Research and development expenses increased $1.1 billion, primarily due to:
•
increased investments of $1.3 billion for certain vaccine and oncology
programs as well as costs to develop recently acquired assets, partially
offset by lower spending of $480 million for various late-stage clinical programs and programs to treat COVID-19.
2021 v. 2020
Research
and development expenses increased $1.7 billion, mainly due to
increased investments of $1.2 billion across multiple therapeutic
areas, including additional spending related to the development of the oral COVID-19 treatment program.
Pfizer Inc. 2022 Form 10-K 34
Acquired In-Process Research and Development Expenses
2022 v. 2021
Acquired in-process research and development expenses decreased $2.5 billion largely due to:
• a charge of $2.1 billion related to our asset acquisition of Trillium in 2021; and
• an upfront payment to Arvinas and a premium paid on our equity investment in Arvinas totaling $706 million in 2021,
partially offset by:
• acquired IPR&D incurred in 2022, including $426 million related to our asset acquisition of ReViral in 2022.
2021 v. 2020
Acquired in-process research and development expenses increased $2.8 billion mainly due to:
• a $2.1 billion charge related to our asset acquisition of Trillium; and
•
a net increase in charges of $602 million for upfront and milestone
payments on collaboration and licensing arrangements, driven by payments
to Arvinas and Beam.
See Notes 2A, 2D and 2E for additional information.
Amortization of Intangible Assets
2022 v. 2021
Amortization
of intangible assets decreased $91 million, primarily due to lower
amortization of Comirnaty sales milestones to BioNTech, as well
as
lower amortization of intangible assets related to Prevnar and fully
amortized assets, partially offset by amortization of intangible assets
from
our acquisitions of Biohaven and GBT. See Notes 2A and 10A for additional information.
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives
Transforming
to a More Focused Company Program––For a description of our program and
actual costs, see Note 3. The program savings
discussed below may
be rounded and represent approximations. In connection with
restructuring our corporate enabling functions, we achieved
gross
cost savings of $1.0 billion, or net cost savings, excluding merit and
inflation growth and certain real estate cost increases, of $700
million,
in the two year period from 2021 through 2022. In
connection with transforming our commercial go-to market strategy, we
expect net cost savings
of $1.4 billion, to be achieved primarily
from 2022 through 2024. In connection with manufacturing network
optimization, we expect net cost
savings of $550 million to be
achieved primarily from 2020 through 2023. In connection with optimizing
our end-to-end R&D operations, we
expect net cost savings of $2.3 billion to be achieved primarily from 2023 through 2025.
Certain
qualifying costs for this program were recorded in 2022, 2021 and 2020,
and are reflected as Certain Significant Items and excluded from
our non-GAAP measure of Adjusted Income. See the Non-GAAP Financial Measure: Adjusted Income section of this MD&A.
In
addition to this program, we continuously monitor our operations for
cost reduction and/or productivity opportunities, especially in light of
the
losses of exclusivity and the expiration of collaborative arrangements for various products.
Other (Income)/Deductions––Net
2022 v. 2021
The
period-over-period change of $5.1 billion resulting in net other
deductions in 2022 compared to net other income in 2021 was primarily
driven
by net losses recognized on equity securities in 2022 versus
net gains recognized in 2021, lower net periodic benefit credits, and
higher asset
impairment charges.
See Note 4 for additional information.
Provision/(Benefit) for Taxes on Income
Year Ended December 31, % Change
(MILLIONS) 2022 2021 2020 22/21 21/20
Provision/(benefit) for taxes on income $ 3,328 $ 1,852 $ 370 80 *
Effective tax rate on continuing operations 9.6 % 7.6 % 5.3 %
* Indicates calculation not meaningful.
For
information about our effective tax rate and the events and
circumstances contributing to the changes between periods, as well as
details
about discrete elements that impacted our tax provisions, see Note 5.
Discontinued Operations
For information about our discontinued operations, see Note 2B.
PRODUCT DEVELOPMENTS
A
comprehensive update of Pfizer’s development pipeline was published as
of January 31, 2023 and is available at www.pfizer.com/science/
drug-product-pipeline.
It includes an overview of our research and a list of compounds in
development with targeted indication and phase of
development, as
well as mechanism of action for some candidates in Phase 1 and all
candidates from Phase 2 through registration.
The following provides
information about significant marketing application-related regulatory
actions by, and filings pending with, the FDA and
regulatory authorities in the EU and Japan.
Pfizer Inc. 2022 Form 10-K 35
The
tables below include filing and approval milestones for products that
have occurred in the last twelve months and generally do not include
approvals
that may have occurred prior to that time. The tables include filings
with regulatory decisions pending (even if the filing occurred
outside of the last twelve-month period).
COVID-19 Vaccine Products
PATIENT POPULATION AND DATE OF APPROVAL/FILING(a)
COVID-19
VACCINE
PRODUCT(b)
PRIMARY
SERIES
OR
BOOSTER
16 Years of age and older 12-15 Years of age 5-11 Years of age 6 Months through 4 Years of age
U.S. EU JAPAN U.S. EU JAPAN U.S. EU JAPAN U.S. EU JAPAN
Comirnaty
30-µg 2-dose primary(c) 10-µg 2-dose primary(d) 3-µg 3-dose primary
Primary
Approved
Aug.
2021
Approved
Dec.
2020
Cond.
J-NDA
Feb.
2021
EUA
May
2021
Approved
May
2021
Cond.
J-NDA
May
2021
EUA
Oct.
2021
Approved
Nov.
2021
Cond.
J-NDA
Jan.
2022
EUA
June
2022
CMA
Oct.
2022
Cond.
J-NDA
Oct.
2022
30-µg booster dose(e) 10-µg booster dose
Booster
EUA(f)
Dec.
2021
Approved
Oct.
2021
Cond.
J-NDA
Nov.
2021
EUA(f)
Jan.
2022
Approved
Feb.
2022
Cond.
J-NDA
Mar.
2022
EUA(f)
May
2022
Approved
Sep.
2022
Cond.
J-NDA
Aug.
2022
Comirnaty
Original/
Omicron
BA.4/BA.5
Vaccine(g)
Booster
30-µg booster dose 10-µg booster dose 3-µg booster dose
EUA
Aug.
2022
Approved
Sep.
2022
Cond.
J-NDA
Oct.
2022
EUA
Aug.
2022
Approved
Sep.
2022
Cond.
J-NDA
Oct.
2022
EUA
Oct.
2022
CMA
Nov.
2022
EUA(h)
Dec.
2022
Comirnaty
Original/
Omicron
BA.1 Vaccine
Booster
30-µg booster dose
Approved
Sep.
2022
Cond.
J-NDA
Sep.
2022
Approved
Sep.
2022
Cond.
J-NDA
Sep.
2022
(a)
All EU approvals prior to October 10, 2022 were under the CMA, and
later converted to full Marketing Authorization as of October 10, 2022.
Dates shown in table
reflect original CMA date.
(b) All COVID-19 vaccine products listed in this table are being developed in collaboration with BioNTech.
(c)
FDA has authorized a third 30-µg primary series dose to individuals 12
years of age and older with certain kinds of immunocompromise.
(d)
FDA has authorized a third 10-µg primary series dose to individuals 5-11
years of age with certain kinds of immunocompromise.
(e) FDA has
authorized a second booster dose in adults ages 50 years and older who
have previously received a first booster of any authorized COVID-19
vaccine.
The FDA also has authorized a second booster dose for
individuals 12 years of age and older who have been determined to have
certain kinds of
immunocompromise and who have received a first booster dose of any authorized COVID-19 vaccine.
(f)
Comirnaty wild-type booster in these populations has been replaced by
the booster of the Pfizer-BioNTech COVID-19 Vaccine, Bivalent (Original
and Omicron
BA.4/BA.5).
(g) Refers to the Pfizer-BioNTech
COVID-19 Vaccine, Bivalent (Original and Omicron BA.4/BA.5) and
Comirnaty Original/Omicron BA.4/BA.5 Vaccine.
(h) The third dose of
the primary series 6 months through 4 years of age in the U.S. has been
replaced by the 3-µg booster of the Pfizer-BioNTech COVID-19 Vaccine,
Bivalent (Original and Omicron BA.4/BA.5).
Pfizer Inc. 2022 Form 10-K 36
Other Products
PRODUCT INDICATION OR PROPOSED INDICATION
APPROVED/FILED*
U.S. EU JAPAN
Myfembree
(relugolix, estradiol, and
norethindrone acetate)(a)
Heavy menstrual bleeding associated with uterine fibroids
Approved
May
2021
Moderate to severe pain associated with endometriosis
Approved
Aug.
2022
Ngenla
(somatrogon)(b) Pediatric growth hormone deficiency
Filed
Jan.
2021
Approved
Feb.
2022
Approved
Jan.
2022
Prevnar 20/Apexxnar
(Vaccine)(c)
Active immunization to prevent invasive disease caused by Streptococcus pneumoniae
serotypes (adults)
Approved
June
2021
Approved
Feb.
2022
TicoVac
(Vaccine) Active immunization to prevent tick-borne encephalitis disease
Approved
Aug.
2021
Paxlovid(d) (nirmatrelvir
[PF-07321332]; ritonavir) COVID-19 in high-risk adults and children (12-18 years of age; >88lbs)
EUA
Dec.
2021
CMA
Jan.
2022
Approved
Feb.
2022
Nurtec ODT/Vydura
(rimegepant)
Acute treatment of migraine with or without aura (adults)
Approved
Feb.
2020
Approved
Apr.
2022
Prevention of episodic migraine (adults)
Approved
May
2021
Approved
Apr.
2022
ritlecitinib (PF-06651600) Alopecia areata
Filed
Sep.
2022
Filed
Sep.
2022
Filed
Sep.
2022
zavegepant
(intranasal) Acute treatment of migraine
Filed
May
2022
PF-06886992
(Vaccine)
Active immunization to prevent serogroups ABCWY meningococcal infections (adolescent
and young adults)
Filed
Dec.
2022
PF-06928316
(Vaccine)
Active immunization to prevent respiratory syncytial virus infection (maternal)
Filed
Feb.
2023
Filed
Jan.
2023
Active immunization to prevent respiratory syncytial virus infection (older adults)
Filed
Dec.
2022
Filed
Jan.
2023
etrasimod Ulcerative colitis (moderately to severely active)
Filed
Dec.
2022
Filed
Nov.
2022
PF-06482077
(Vaccine)
Active immunization to prevent invasive and non-invasive pneumococcal infections
(pediatric)
Filed
Jan.
2023
elranatamab
(PF-06863135) Multiple myeloma triple-class refractory
Filed
Feb.
2023
Filed
Feb.
2023
*
For the U.S., the filing date is the date on which the FDA accepted our
submission. For the EU, the filing date is the date on which the EMA
validated our
submission.
(a) Being developed in collaboration
with Myovant. In January 2023, the FDA approved the sNDA to include
data from the Randomized Withdrawal Study into section
14 of the label.
(b) Being developed in collaboration with OPKO.
(c)
In October 2022, the CDC’s ACIP voted to recommend a single dose of
Prevnar 20 to help protect adults previously vaccinated with Prevnar 13
or both Prevnar 13
and PPSV23 against invasive disease and pneumonia caused by the 20 Streptococcus pneumoniae serotypes in Prevnar 20.
(d)
In June 2022, we announced the submission of an NDA to the FDA for
approval of Paxlovid for the treatment of COVID-19 in both vaccinated
and unvaccinated
individuals who are at high risk for progression
to severe illness from COVID-19. In December 2022, Pfizer announced the
FDA has extended the review period for
the NDA for Paxlovid. At the
request of the FDA, Pfizer recently submitted additional analyses of
efficacy and safety data from the pivotal Evaluation of Protease
Inhibition
for COVID-19 in High-Risk Patients and supportive Evaluation of
Protease Inhibition for COVID-19 in Standard-Risk Patients trials to be
considered as
part of its NDA for Paxlovid. Results from these
analyses are consistent with previously disclosed efficacy and safety
data for the trials. In order to allow time for a
full review of
the application, including the additional data analyses submitted, the
FDA has extended the Prescription Drug User Fee Act goal date by three
months to May 2023.
In
December 2021, in light of the results from the completed required
postmarketing safety study of Xeljanz, ORAL Surveillance (A3921133), the
U.S. label for Xeljanz was revised. In addition, in November 2022,
the EMA concluded their assessment of JAK inhibitors authorized for
inflammatory
diseases in the EU, including Xeljanz and Cibinqo, and recommended that
risk minimization measures, including special warnings
and
precautions for use, should be revised and harmonized for all such JAK
inhibitors. The resulting label changes are expected to be finalized in
the first quarter of 2023. We continue to work with regulatory
agencies worldwide to review the full results and analyses of ORAL
Surveillance
and their impact on product labeling. For additional information, see Item 1A. Risk Factors—Post-Authorization/Approval Data.
In
China, the following products received regulatory approvals in the last
twelve months: Paxlovid for COVID-19 infection in February 2022;
Cibinqo
for atopic dermatitis in April 2022; Lorbrena for non-small cell lung
cancer (first line and second line therapy) in April 2022; Xeljanz for
ankylosing
spondylitis in April 2022; Cresemba (IV formulation) for the treatment
of adult patients with invasive aspergillosis and invasive
mucormycosis in June 2022; and Xeljanz for the treatment of adult patients with active psoriatic arthritis in October 2022.
Pfizer Inc. 2022 Form 10-K 37
The following provides information about additional indications and new drug candidates in late-stage development:
LATE-STAGE
CLINICAL
PROGRAMS FOR
ADDITIONAL USES
AND DOSAGE
FORMS
FOR IN-LINE
AND IN-
REGISTRATION
PRODUCTS
Ibrance (palbociclib)(a) ER+/HER2+ metastatic breast cancer
Xtandi (enzalutamide)(b) Non-metastatic high-risk castration sensitive prostate cancer
Talzenna (talazoparib)
Combination with Xtandi (enzalutamide) for first-line mCRPC
Combination with Xtandi (enzalutamide) for DNA Damage Repair (DDR)-deficient mCSPC
PF-06482077 (Vaccine) Immunization to prevent invasive and non-invasive pneumococcal infections (pediatric)
somatrogon (PF-06836922)(c) Adult growth hormone deficiency
Braftovi (encorafenib) and Erbitux®
(cetuximab)(d) First-line BRAF
V600E-mutant mCRC
Braftovi (encorafenib) and Mektovi
(binimetinib) and Keytruda®
(pembrolizumab)(e)
BRAFV600E/K-mutant metastatic or unresectable locally advanced melanoma
Braftovi (encorafenib) and Mektovi
(binimetinib) BRAF
V600E-mutant non-small cell lung cancer
Paxlovid (nirmatrelvir
[PF-07321332]; ritonavir) COVID-19 in high-risk children (6-11 years of age; >88lbs)
zavegepant (oral) Prevention of acute migraine (adults)
ritlecitinib (PF-06651600) Vitiligo
elranatamab (PF-06863135)
Multiple myeloma double-class exposed
Newly diagnosed multiple myeloma post-transplant maintenance
Eliquis (apixaban) Venous thromboembolism (pediatric)
NEW DRUG
CANDIDATES IN
LATE-STAGE
DEVELOPMENT
aztreonam-avibactam
(PF-06947387) Treatment of infections caused by Gram-negative bacteria with limited or no treatment options
fidanacogene elaparvovec
(PF-06838435)(f) Hemophilia B
giroctocogene fitelparvovec
(PF-07055480)(g) Hemophilia A
PF-06425090 (Vaccine) Immunization to prevent primary clostridioides difficile infection
sasanlimab (PF-06801591) Combination with Bacillus Calmette-Guerin for non-muscle-invasive bladder cancer
fordadistrogene movaparvovec
(PF-06939926) Duchenne muscular dystrophy (ambulatory)
marstacimab (PF-06741086) Hemophilia
Omicron-based mRNA vaccine(h) Immunization to prevent COVID-19 (adults)
VLA15 (PF-07307405) vaccine(i) Immunization to prevent Lyme Disease
PF-07252220 (quadrivalent
mRNA-based vaccine) Immunization to prevent influenza
inclacumab (PF-07940370) Sickle Cell Disease
PRODUCT/CANDIDATE PROPOSED INDICATION
(a) Being developed in collaboration with The Alliance Foundation Trials, LLC.
(b) Being developed in collaboration with Astellas.
(c) Being developed in collaboration with OPKO.
(d)
Erbitux® is a registered trademark of ImClone LLC. In the EU, we are
developing in collaboration with the Pierre Fabre Group. In Japan, we
are developing in
collaboration with Ono.
(e) Keytruda® is a
registered trademark of Merck Sharp & Dohme Corp. In the EU, we are
developing in collaboration with the Pierre Fabre Group. In Japan, we
are
developing in collaboration with Ono.
(f) Being developed in collaboration with Spark Therapeutics, Inc.
(g) Being developed in collaboration with Sangamo Therapeutics, Inc.
(h) Being developed in collaboration with BioNTech.
(i) Being developed in collaboration with Valneva.
For
additional information about our R&D organization, see the Item 1.
Business—Research and Development section in this Form 10-K.
Pfizer Inc. 2022 Form 10-K 38
NON-GAAP FINANCIAL MEASURE: ADJUSTED INCOME
Adjusted
income is an alternative measure of performance used by management to
evaluate our overall performance as a supplement to our
GAAP
Reported performance measures. As such, we believe that investors’
understanding of our performance is enhanced by disclosing this
measure.
We use Adjusted income, certain components of Adjusted income and
Adjusted diluted EPS to present the results of our major
operations––the
discovery, development, manufacture, marketing, sale and distribution
of biopharmaceutical products worldwide––prior to
considering certain income statement elements as follows:
Measure Definition Relevance of Metrics to Our Business Performance
Adjusted income
Net income attributable to Pfizer Inc. common shareholders(a)
before the impact of amortization of intangible assets, certain
acquisition-related items, discontinued operations and certain
significant items
• Provides investors useful
information to:
◦ evaluate the normal
recurring operational
activities, and their
components, on a
comparable year-over-year
basis
◦ assist in modeling expected
future performance on a
normalized basis
• Provides investors insight into
the way we manage our
budgeting and forecasting,
how we evaluate and manage
our recurring operations and
how we reward and
compensate our senior
management(b)
Adjusted cost of sales, Adjusted
selling, informational and
administrative expenses, Adjusted
research and development expenses
and Adjusted other (income)/
deductions––net
Cost of sales, Selling, informational and administrative expenses,
Research and development expenses and Other (income)/
deductions––net (a), each before the impact of amortization of
intangible assets, certain acquisition-related items, discontinued
operations and certain significant items, which are components of
the Adjusted income measure
Adjusted diluted EPS
EPS attributable to Pfizer Inc. common shareholders––diluted (a)
before the impact of amortization of intangible assets, certain
acquisition-related items, discontinued operations and certain
significant items
(a) Most directly comparable GAAP measure.
(b)
The short-term incentive plans for substantially all non-sales-force
employees worldwide are funded from a pool based on our performance,
measured in
significant part versus three budgeted metrics, one of
which is Adjusted diluted EPS (as defined for annual incentive
compensation purposes), which is derived
from Adjusted income and
accounts for 40% of the bonus pool funding tied to financial
performance. Additionally, the payout for performance share awards is
determined
in part by Adjusted net income, which is derived from Adjusted income.
Beginning in the first quarter of 2022, we no longer exclude any
expenses for
acquired IPR&D from our non-GAAP Adjusted results
but we continue to exclude certain of these expenses for our financial
results for annual incentive
compensation purposes. The bonus pool
funding, which is largely based on financial performance, is adjusted by
our R&D pipeline performance, as measured by
four metrics, and
performance against certain of our ESG metrics, and may be further
modified by our Compensation Committee’s assessment of other factors.
Adjusted
income and its components and Adjusted diluted EPS are non-GAAP
financial measures that have no standardized meaning prescribed
by
GAAP and, therefore, are limited in their usefulness to investors.
Because of their non-standardized definitions, they may not be
comparable
to the calculation of similar measures of other
companies and are presented to permit investors to more fully understand
how management
assesses performance. A limitation of these
measures is that they provide a view of our operations without including
all events during a period,
and do not provide a comparable view
of our performance to peers. These measures are not, and should not be
viewed as, substitutes for their
most directly comparable GAAP
measures of Net income attributable to Pfizer Inc. common shareholders,
components of Net income attributable
to Pfizer Inc. common shareholders and EPS attributable to Pfizer Inc. common shareholders—diluted, respectively.
We
also recognize that, as internal measures of performance, these
measures have limitations, and we do not restrict our performance-
management
process solely to these measures. We also use other tools designed to
achieve the highest levels of performance. For example,
our R&D
organization has productivity targets, upon which its effectiveness is
measured. In addition, total shareholder return, both on an
absolute
basis and relative to a publicly traded pharmaceutical index, plays a
significant role in determining payouts under certain of our incentive
compensation plans.
Beginning
in the first quarter of 2022, our reconciliation of certain GAAP
Reported to non-GAAP Adjusted information is updated to reflect the
following, and prior-period information has been revised to conform to the current period presentation:
Adjusted Income and Adjusted Diluted EPS
Acquired
IPR&D—Non-GAAP Adjusted financial measures include expenses for all
acquired IPR&D costs incurred in connection with upfront and
milestone
payments on collaboration and in-license agreements, including premiums
on equity securities, as well as asset acquisitions of
acquired
IPR&D. Previously, certain of these items were excluded from our
non-GAAP Adjusted results. Acquired IPR&D expenses that
previously
would have been excluded from non-GAAP Adjusted income but are now
included in both GAAP Reported income and non-GAAP
Adjusted income
were approximately: (i) $765 million pre-tax ($665 million, net of tax),
or $0.12 per share, in 2022; (ii) $3.3 billion pre-tax
($2.6
billion, net of tax), or $0.45 per share, in 2021; and (iii) $504
million pre-tax ($397 million, net of tax), or $0.07 per share, in 2020.
Amortization of Intangible Assets—We began excluding all
amortization of intangibles from non-GAAP Adjusted income, compared to
excluding
only amortization of intangibles related to large mergers
or acquisitions under the prior methodology, and presenting it as a
separate reconciling
line. Previously, the adjustment under the
prior methodology was included as part of a reconciling line entitled
“Purchase accounting
adjustments” that we no longer separately
present. The impact of this policy change resulted in benefits on
Adjusted diluted EPS of $0.06 in
2022, $0.09 in 2021 and $0.05 in 2020.
Acquisition-Related
Items––Adjusted income continues to exclude certain acquisition-related
items, which are comprised of transaction,
integration,
restructuring charges and additional depreciation costs for business
combinations because these costs are unique to each
Pfizer Inc. 2022 Form 10-K 39
transaction
and represent costs that were incurred to restructure and integrate
businesses as a result of an acquisition. We have made no
adjustments for resulting synergies.
The
significant costs incurred in connection with a business combination
result primarily from the need to eliminate duplicate assets, activities
or
employees––a natural result of acquiring a fully integrated set
of activities. For this reason, we believe that such costs incurred can
be viewed
differently in the context of an acquisition from those
costs incurred in other, more normal, business contexts. The integration
and restructuring
costs for a business combination may occur over
several years, with the more significant impacts typically ending within
three years of the
relevant transaction. Because of the need for
certain external approvals for some actions, the span of time needed to
achieve certain
restructuring and integration activities can be lengthy.
Acquisition-related
items may now include purchase accounting impacts that previously would
have been included as part of a reconciling line
entitled
“Purchase accounting adjustments” that we no longer separately present,
such as: (i) the incremental charge to cost of sales from the
sale
of acquired inventory that was written up to fair value; (ii)
depreciation related to the increase/decrease in fair value of acquired
fixed assets;
(iii) amortization related to the increase in fair
value of acquired debt and (iv) the fair value changes for contingent
consideration.
Discontinued Operations––Adjusted income continues
to exclude the results of discontinued operations, as well as any
related gains or losses on
the disposal of such operations. We
believe that this presentation is meaningful to investors because, while
we review our product portfolio for
strategic fit with our
operations, we do not build or run our business with the intent to
discontinue parts of our business. Restatements due to
discontinued
operations do not impact compensation or change the Adjusted income
measure for the compensation in respect of the restated
periods, but are presented for consistency across all periods.
Certain
Significant Items––Adjusted income continues to exclude certain
significant items representing substantive and/or unusual items that are
evaluated individually on a quantitative and qualitative basis.
Certain significant items may be highly variable and difficult to
predict. Furthermore,
in some cases it is reasonably possible that
they could reoccur in future periods. For example, although major
non-acquisition-related cost-
reduction programs are specific to an
event or goal with a defined term, we may have subsequent programs based
on reorganizations of the
business, cost productivity or in
response to LOE or economic conditions. Legal charges to resolve
litigation are also related to specific cases,
which are facts and
circumstances specific and, in some cases, may also be the result of
litigation matters at acquired companies that were
inestimable, not
probable or unresolved at the date of acquisition, or legal matters
related to divested products or businesses. Gains and losses
on
equity securities, and pension and postretirement actuarial
remeasurement gains and losses have a very high degree of inherent
market
volatility, which we do not control and cannot predict with
any level of certainty and because we do not believe including these
gains and losses
assists investors in understanding our business or
is reflective of our core operations and business. Unusual items
represent items that are not
part of our ongoing business; items
that, either as a result of their nature or size, we would not expect to
occur as part of our normal business on
a regular basis; items
that would be non-recurring; or items that relate to products we no
longer sell. See the Reconciliations of GAAP Reported
to Non-GAAP Adjusted Information––Certain Line Items below for a non-inclusive list of certain significant items.
Reconciliations of GAAP Reported to Non-GAAP Adjusted Information––Certain Line Items
Year Ended December 31, 2022
Data presented will not (in all cases) aggregate to
totals.
MILLIONS, EXCEPT PER SHARE DATA Cost of sales(a)
Selling, informational
and administrative
expenses(a)
Other (income)/
deductions––net(a)
Net income attributable
to Pfizer Inc. common
shareholders(a), (b), (c)
Earnings per
common share
attributable to
Pfizer Inc.
common
shareholders––
diluted
GAAP Reported $ 34,344 $ 13,677 $ 217 $ 31,372 $ 5.47
Amortization of intangible assets — — — 3,609
Acquisition-related items (119) (7) (74) 832
Discontinued operations(d) — — — (21)
Certain significant items:
Restructuring charges/(credits) and
implementation costs and additional
depreciation—asset restructuring(e) (88) (562) — 1,396
Certain asset impairments(f) — — (421) 421
(Gains)/losses on equity securities(f) — — (1,270) 1,270
Actuarial valuation and other pension and
postretirement plan (gains)/losses — — 230 (230)
Other (40) (59) (636) (g) 752
Income tax provision—Non-GAAP items (1,683)
Non-GAAP Adjusted $ 34,096 $ 13,049 $ (1,954) $ 37,717 $ 6.58
Pfizer Inc. 2022 Form 10-K 40
Year Ended December 31, 2021
Data presented will not (in all cases) aggregate to
totals.
MILLIONS, EXCEPT PER SHARE DATA Cost of sales(a)
Selling, informational
and administrative
expenses(a)
Other (income)/
deductions––net(a)
Net income attributable
to Pfizer Inc. common
shareholders(a), (b)
Earnings per
common share
attributable to
Pfizer Inc.
common
shareholders––
diluted
GAAP Reported $ 30,821 $ 12,703 $ (4,878) $ 21,979 $ 3.85
Amortization of intangible assets — (38) (2) 3,746
Acquisition-related items 25 (3) (114) 139
Discontinued operations(d) — — — 585
Certain significant items:
Restructuring charges/(credits) and
implementation costs and additional
depreciation—asset restructuring(e) (108) (450) — 1,309
Certain asset impairments — — (86) 86
(Gains)/losses on equity securities(f) — — 1,338 (1,338)
Actuarial valuation and other pension and
postretirement plan (gains)/losses — — 1,601 (1,601)
Other (52) (141) (h) (334) (g) 542
Income tax provision—Non-GAAP items (2,250)
Non-GAAP Adjusted $ 30,685 $ 12,071 $ (2,475) $ 23,196 $ 4.06
Year Ended December 31, 2020
Data presented will not (in all cases) aggregate to
totals.
MILLIONS, EXCEPT PER SHARE DATA Cost of sales(a)
Selling, informational
and administrative
expenses(a)
Other (income)/
deductions––net(a)
Net income attributable
to Pfizer Inc. common
shareholders(a), (b)
Earnings per
common share
attributable to
Pfizer Inc.
common
shareholders––
diluted
GAAP Reported $ 8,484 $ 11,597 $ 1,213 $ 9,159 $ 1.63
Amortization of intangible assets — (38) (3) 3,395
Acquisition-related items 18 (1) (75) 98
Discontinued operations(d) — — — (2,879)
Certain significant items:
Restructuring charges/(credits) and
implementation costs and additional
depreciation—asset restructuring(e) (61) (197) — 791
Certain asset impairments(f) — — (1,691) 1,691
(Gains)/losses on equity securities(f) — — 557 (557)
Actuarial valuation and other pension and
postretirement plan (gains)/losses — — (1,092) 1,092
Other (56) (292) (h) (691) (g) 1,063
Income tax provision—Non-GAAP items (1,251)
Non-GAAP Adjusted $ 8,386 $ 11,068 $ (1,781) $ 12,601 $ 2.24
(a)
Items that reconcile GAAP Reported to non-GAAP Adjusted balances are
shown pre-tax. Our effective tax rates for GAAP Reported income from
continuing
operations were: 9.6% in 2022, 7.6% in 2021 and 5.3% in
2020. See Note 5. Our effective tax rates for non-GAAP Adjusted income
were: 11.7% in 2022, 14.5% in
2021 and 13.5% in 2020.
(b) Includes reconciling amounts for Research and development expenses that are not material.
(c)
For 2022, the total acquisition-related items of $832 million include
reconciling amounts for Restructuring charges and certain
acquisition-related costs of
$631 million, composed of $348 million
of integration costs and other charges, $144 million of transaction
costs and $138 million of employee termination-related
charges. See Note 3.
(d) For information about discontinued operations, see Note 2B.
(e)
Includes employee termination costs, asset impairments and other exit
costs related to our cost-reduction and productivity initiatives not
associated with
acquisitions. See Note 3.
(f) See Note 4.
(g)
For 2022, the total of $636 million primarily includes (i) charges of
$307 million mostly representing our equity-method accounting pro rata
share of restructuring
charges and costs of preparing for
separation from GSK recorded by Haleon/the Consumer Healthcare JV, and
adjustments to our equity-method basis differences
which are also
related to the separation of Haleon/the Consumer Healthcare JV from GSK,
and (ii) charges of $230 million for certain legal matters, primarily
for
certain product liability and other expenses related to
products discontinued and/or divested by Pfizer. For 2021, the total of
$334 million primarily included (i)
charges of $185 million mostly
representing our equity-method accounting pro rata share of
restructuring charges and costs of preparing for separation from GSK
recorded
by the Consumer Healthcare JV, and (ii) charges of $162 million for
certain legal matters, primarily for certain product liability expenses
related to
products discontinued and/or divested by Pfizer, and to a
lesser extent, legal obligations related to pre-acquisition
commitments. For 2020, the total of $691 million
primarily included
(i) charges of $367 million mostly representing our equity-method
accounting pro rata share of transaction-specific restructuring and
business
combination accounting charges recorded by the Consumer Healthcare JV, and (ii) losses on asset disposals of $238 million.
(h)
For 2021 and 2020, the totals of $141 million and $292 million,
respectively, primarily included costs for consulting, legal, tax and
advisory services associated with
a non-recurring internal reorganization of legal entities.
Pfizer Inc. 2022 Form 10-K 41
ANALYSIS OF THE CONSOLIDATED STATEMENTS OF CASH FLOWS
For
a discussion of the drivers of change for 2021 versus 2020 as well as
cash flows from discontinued operations in 2020, see the Analysis of
the Consolidated Statements of Cash Flows section within MD&A in our 2021 Form 10-K.
Cash Flows from Continuing Operations
Year Ended December 31,
(MILLIONS) 2022 2021 2020 Drivers of change 2022 v. 2021
Cash provided by/(used in):
Operating activities from
continuing operations $ 29,267 $ 32,922 $ 10,540
The change was driven primarily by a net increase in payments to BioNTech for
the gross profit split for Comirnaty (see Note 8B) and an increase in noncurrent
inventories primarily driven by a strategic build for Paxlovid (see Note 8A),
partially offset by higher net income adjusted for non-cash items and the timing
of receipts and payments in the ordinary course of business.
Investing activities from
continuing operations $ (15,783) $ (22,534) $ (4,162)
The change was driven mainly by a $17.4 billion increase in proceeds from
redemptions of short-term investments with original maturities of greater than
three months, a $7.6 billion decrease in net purchases of short-term
investments with original maturities of three months or less and a $4.0 billion
dividend received from the Consumer Healthcare JV in 2022 that was allocated
to investing activities (see Note 2C), partially offset by cash paid for acquisitions
in 2022 of $23.0 billion (Biohaven, $11.5 billion, Arena, $6.2 billion and GBT,
$5.2 billion), net of cash acquired (see Note 2A).
Financing activities from
continuing operations $ (14,834) $ (9,816) $ (21,640)
The change was driven mostly by $2.0 billion of purchases of the Company’s
common stock in 2022, a $1.3 billion increase in repayments of long-term debt,
and a $997 million decrease in proceeds from the issuance of long-term debt.
Cash
Flows from Discontinued Operations––In 2021, cash flows from
discontinued operations primarily relate to our former Meridian
subsidiary, Upjohn Business and the Mylan-Japan collaboration (see Note 2B).
ANALYSIS OF FINANCIAL CONDITION, LIQUIDITY, CAPITAL RESOURCES AND MARKET RISK
Due
to our significant operating cash flows, which is a key strength of our
liquidity and capital resources and our primary funding source, as well
as our financial assets, access to capital markets, revolving
credit agreements, and available lines of credit, we believe that we
have, and will
maintain, the ability to meet our liquidity needs to
support ongoing operations, our capital allocation objectives, and our
contractual and other
obligations for the foreseeable future.
We
focus efforts to optimize operating cash flows through achieving
working capital efficiencies that target accounts receivable,
inventories,
accounts payable, and other working capital. Excess
cash from operating cash flows is invested in money market funds and
available-for-sale
debt securities which consist of primarily
high-quality, highly liquid, well-diversified debt securities. We have
taken, and will continue to take, a
conservative approach to our
financial investments and monitoring of our liquidity position in
response to market changes. We typically maintain
cash and cash
equivalent balances and short-term investments which, together with our
available revolving credit facilities, are in excess of our
commercial paper and other short-term borrowings.
Additionally,
we may obtain funding through short-term or long-term sources from our
access to the capital markets, banking relationships and
relationships with other financial intermediaries to meet our liquidity needs.
Diverse sources of funds: Related disclosure presented in this Form 10-K
Internal sources:
• Operating cash flows Consolidated Statements of Cash Flows – Operating Activities and the Analysis of
the Consolidated Statements of Cash Flows within MD&A
• Cash and cash equivalents Consolidated Balance Sheets
• Money market funds Note 7A
• Available-for-sale debt securities Note 7A, 7B
External sources:
Short-term funding:
• Commercial paper Note 7C
• Revolving credit facilities Note 7C
• Lines of credit Note 7C
Long-term funding:
• Long-term debt Note 7D
• Equity Consolidated Statements of Equity and Note 12
For
additional information about the sources and uses of our funds and
capital resources for the years ended December 31, 2022 and 2021, see
the Analysis of the Consolidated Statements of Cash Flows in this MD&A.
Pfizer Inc. 2022 Form 10-K 42
Credit
Ratings––The cost and availability of financing are influenced by
credit ratings, and an increase or decrease in our credit rating could
have
a beneficial or adverse effect on financing. Our long-term debt is
rated high-quality by both S&P and Moody’s. In November 2022,
Moody’s
increased the rating on our long-term debt from A2 to A1 as
well as the outlook on our long-term debt to Stable; S&P continues
to rate the outlook
of our long-term debt as Stable since November 2020.
The current ratings assigned to our commercial paper and senior unsecured long-term debt:
NAME OF RATING AGENCY Pfizer Short-Term Rating Pfizer Long-Term Rating Outlook/Watch
Moody’s P-1 A1 Stable
S&P A-1+ A+ Stable
A
security rating is not a recommendation to buy, sell or hold securities
and the rating is subject to revision or withdrawal at any time by the
rating
organization. Each rating should be evaluated independently of any other rating.
Capital
Allocation Framework––Our capital allocation framework is primarily
devised to facilitate (i) the achievement of medical breakthroughs
through
R&D investments and business development activities and (ii)
returning capital to shareholders through dividends and share
repurchases.
See the Overview of Our Performance, Operating Environment, Strategy
and Outlook—Our Business and Strategy section of this
MD&A.
Our
current and projected dividends provide a return to shareholders while
maintaining sufficient capital to invest in growing our business. Our
dividends
are not restricted by debt covenants. While the dividend level remains a
decision of Pfizer’s BOD and will continue to be evaluated in
the
context of future business performance, we currently believe that we can
support future annual dividend increases, barring significant
unforeseen
events. In December 2022, our BOD declared a first-quarter dividend of
$0.41 per share, payable on March 3, 2023, to shareholders
of
record at the close of business on January 27, 2023. The first-quarter
2023 cash dividend will be our 337th consecutive quarterly dividend.
In
the first quarter of 2022, we purchased 39 million shares of our common
stock at a cost of $2.0 billion under our publicly announced share
purchase
plan. See Note 12 for more information. At December 31, 2022, our
remaining share-purchase authorization was approximately $3.3
billion.
Off-Balance
Sheet Arrangements, Contractual, and Other Obligations––In the ordinary
course of business, (i) we enter into off-balance
sheet
arrangements that may result in contractual and other obligations and
(ii) 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. For more information on guarantees and indemnifications, see Note 16B.
Additionally,
certain of our co-promotion or license agreements give our licensors or
partners the rights to negotiate for, or in some cases to
obtain
under certain financial conditions, co-promotion or other rights in
specified countries with respect to certain of our products.
Furthermore,
collaboration, licensing or other R&D arrangements
may give rise to potential milestone payments. Payments under these
agreements generally
become due and payable only upon the
achievement of certain development, regulatory and/or commercialization
milestones, which may span
several years and which may never occur.
Our significant contractual and other obligations as of December 31, 2022 consisted of:
• Long-term debt, including current portion (see Note 7D) and related interest payments;
•
Estimated cash payments related to the TCJA repatriation estimated tax
liability (see Note 5). Estimated future payments related to the TCJA
repatriation
tax liability that will occur after December 31, 2022 total $7.0
billion, of which an estimated $1.0 billion is to be paid in the next
twelve
months and an estimated $6.0 billion is to be paid in periods
thereafter. 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;
•
Certain commitments totaling $4.4 billion, of which an estimated $1.4
billion is to be paid in the next twelve months, and $3.0 billion in
periods
thereafter (see Note 16C);
• Purchases of property
plant and equipment (see Note 9). In 2023, we expect to spend
approximately $3.9 billion on property, plant and
equipment; and
• Future minimum rental commitments under non-cancelable operating leases (see Note 15).
In
March 2022, in connection with GSK’s previously announced planned
demerger, the Consumer Healthcare JV issued notes of $8.75 billion,
€2.35
billion and £700 million with various maturities. GSK guaranteed the
notes and we agreed to indemnify GSK for 32% of any amount
payable
by GSK. In conjunction with the completion of GSK’s demerger
transactions in July 2022, GSK’s guarantee and our related
indemnification of GSK’s guarantee were terminated. See Note 2C.
Global
Economic Conditions––Venezuela and Argentina operations, and beginning
in our second quarter of 2022, our operations in Turkey
function in
a hyperinflationary economy. The impact to Pfizer is not considered
material. For additional information on the global economic
environment, see the Item 1A. Risk Factors––Global Operations section in this Form 10-K.
Market
Risk––We are subject to foreign exchange risk, interest rate risk, and
equity price risk. The objective of our financial risk management
program
is to minimize the impact of foreign exchange rate and interest rate
movements on our earnings. We address such exposures through a
combination
of operational means and financial instruments. For more information on
how we manage our foreign exchange and interest rate
risks, see
Notes 1F and 7E, as well as the Item 1A. Risk Factors—Global Operations
section in this Form 10-K for key currencies in which we
operate. Our sensitivity analyses of such risks are discussed below.
Foreign
Exchange Risk—The fair values of our financial instrument holdings are
analyzed at year-end to determine their sensitivity to foreign
exchange
rate changes. In this analysis, holding all other assumptions constant
and assuming that a change in one currency’s rate relative to the
U.S.
dollar would not have any effect on another currency’s rates relative
to the U.S. dollar, if the dollar were to appreciate against all other
currencies by 10%, as of December 31, 2022, the expected adverse impact on our net income would not be significant.
Interest
Rate Risk—The fair values of our financial instrument holdings are
analyzed at year-end to determine their sensitivity to interest rate
changes.
In this analysis, holding all other assumptions constant and assuming a
parallel shift in the interest rate curve for all maturities and for
all
instruments, if there were a one hundred basis point decrease in
interest rates as of December 31, 2022, the expected adverse impact on
our
net income would not be significant.
Pfizer Inc. 2022 Form 10-K 43
Equity
Price Risk––We hold equity securities with readily determinable fair
values in life science companies as a result of certain business
development
transactions. While we are holding such securities, we are subject to
equity price risk, and this may increase the volatility of our
income
in future periods due to changes in the fair value of equity
investments. From time to time, we will sell such equity securities
based on our
business considerations, which may include limiting
our price risk. Our equity securities with readily determinable fair
values are analyzed at
year-end to determine their sensitivity to
equity price rate changes. In this sensitivity analysis, the expected
adverse impact on our net income
would not be significant.
LIBOR––From
time to time, we issued variable rate debt or entered into interest
rate derivatives based on LIBOR. The most commonly used
U.S. dollar
LIBOR rates will cease publication after June 30, 2023, and all other
LIBOR rates ceased publication as of December 31, 2021. The
U.S.
Federal Reserve has selected the Secured Overnight Funding Rate (SOFR)
as the preferred alternative reference rate. We have been
updating
our systems and all of our LIBOR-based contracts as of December 31, 2022
contain fallback language to accommodate an alternative
reference rate. We do not expect the transition to have a significant impact on our business or financial condition.
NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standard
See Note 1B.
Recently Issued Accounting Standards, Not Adopted as of December 31, 2022
Standard/Description Effective Date Effect on the Financial Statements
Reference rate reform provides temporary optional expedients and exceptions to
the guidance for contracts, hedging relationships, and other transactions that
reference LIBOR or another reference rate expected to be discontinued after 2021
because of reference rate reform.
The new guidance provides the following optional expedients:
1. Simplify accounting analyses under current U.S. GAAP for contract
modifications.
2. Simplify the assessment of hedge effectiveness and allow hedging relationships
affected by reference rate reform to continue.
3. Allow a one-time election to sell or transfer debt securities classified as held to
maturity that reference a rate affected by reference rate reform.
Elections can be adopted
prospectively at any time
through December 31,
2024.
We will apply certain of
the optional expedients on
hedge accounting
relationships and related
contracts, if necessary.
We do not expect this new
guidance to have a
material impact on our
consolidated financial
statements.
In June 2022, the FASB issued final guidance to clarify that a contractual
restriction on the sale of an equity security is not considered part of the unit of
account of the equity security and, therefore, is not considered when measuring fair
value. Recognizing a contractual sale restriction as a separate unit of account is
not permitted.
January 1, 2024, with early
adoption permitted.
We are assessing the
impact, but currently do
not expect this new
guidance to have a
material impact on our
consolidated financial
statements.
In September 2022, the FASB issued final guidance to enhance transparency
about an entity’s use of supplier finance programs. Under the final guidance, the
buyer in a supplier finance program is required to disclose information about the
key terms of the program, outstanding confirmed amounts as of the end of the
period, a rollforward of such amounts during each annual period, and a description
of where in the financial statements outstanding amounts are presented.
January 1, 2023, except for
the amendment on
rollforward information,
which is effective January 1,
2024. Early adoption is
permitted.
This new guidance will
result in increased
disclosures in the notes to
our financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The
information required by this Item is incorporated by reference to the
discussion in the Analysis of Financial Condition, Liquidity, Capital
Resources and Market Risk section within MD&A.
Pfizer Inc. 2022 Form 10-K 44
To the Board of Directors and Shareholders
Pfizer Inc.:
Opinion on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of Pfizer
Inc. and Subsidiary Companies (the Company) as of December
31, 2022
and 2021, the related consolidated statements of income, comprehensive
income, equity, and cash flows for each of the years in
the
three-year period ended December 31, 2022, and the related notes
(collectively, the consolidated financial statements). In our opinion,
the
consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2022
and 2021, and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31, 2022, in
conformity with U.S. generally accepted accounting principles.
We
also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States) (PCAOB), the
Company’s
internal control over financial reporting as of December 31, 2022,
based on criteria established in Internal Control - Integrated
Framework
(2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission, and our report dated February 23,
2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion
on
these consolidated financial statements based on our audits. We are a
public accounting firm registered with the PCAOB and are
required
to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error
or
fraud. Our audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements,
whether
due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test
basis,
evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The
critical audit matters communicated below are matters arising from the
current period audit of the consolidated financial statements
that
were communicated or required to be communicated to the audit committee
and that: (1) relate to accounts or disclosures that are
material
to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The
communication
of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole,
and we are
not, by communicating the critical audit matters below, providing
separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Evaluation of the U.S. Medicare, Medicaid, and performance-based contract rebates accrual
As
discussed in Note 1G to the consolidated financial statements, the
Company records estimated deductions for Medicare, Medicaid, and
performance-based
contract rebates (collectively, U.S. rebates) as a reduction to gross
product revenues. The accrual for U.S. rebates is
recorded in the
same period that the corresponding revenues are recognized. The length
of time between when a sale is made and when
the U.S. rebate is
paid by the Company can be as long as one year, which increases the need
for significant management judgment and
knowledge of market conditions and practices in estimating the accrual.
We
identified the evaluation of the U.S. rebates accrual as a critical
audit matter because the evaluation of the product-specific experience
ratio
assumption involved especially challenging auditor judgment. The
product-specific experience ratio assumption relates to estimating
which of the Company’s revenue transactions will ultimately be subject to a related rebate.
The
following are the primary procedures we performed to address this
critical audit matter. We evaluated the design and tested the
operating
effectiveness of certain internal controls over the Company’s U.S.
rebates accrual process related to the development of the
product-specific
experience ratio assumptions. We estimated the U.S. rebates accrual
using internal information and historical data and
compared the
result to the Company’s estimated U.S. rebates accrual. We evaluated the
Company’s ability to accurately estimate the
accrual for U.S.
rebates by comparing historically recorded accruals to the actual amount
that was ultimately paid by the Company.
Evaluation of gross unrecognized tax benefits
As
discussed in Notes 5D and 1Q, the Company’s tax positions are subject
to audit by local taxing authorities in each respective tax
jurisdiction,
and the resolution of such audits may span multiple years. Since tax
law is complex and often subject to varied interpretations
and
judgments, it is uncertain whether some of the Company’s tax positions
will be sustained upon audit. As of December 31, 2022, the
Company has recorded gross unrecognized tax benefits, excluding associated interest, of $4.5 billion.
We
identified the evaluation of certain of the Company’s gross
unrecognized tax benefits as a critical audit matter because a high
degree of
audit effort, including specialized skills and knowledge,
and complex auditor judgment was required in evaluating the Company’s
interpretation of tax law and its estimate of the ultimate resolution of its tax positions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
Pfizer Inc. 2022 Form 10-K 45
The
following are the primary procedures we performed to address this
critical audit matter. We evaluated the design and tested the
operating
effectiveness of an internal control over the Company’s liability for
unrecognized tax position process related to (1) interpretation
of
tax law, (2) evaluation of which of the Company’s tax positions may not
be sustained upon audit, and (3) estimation and recording of the
gross
unrecognized tax benefits. We involved tax and valuation professionals
with specialized skills and knowledge who assisted in
evaluating
the Company’s interpretation of tax laws, including the assessment of
transfer pricing practices in accordance with applicable tax
laws
and regulations. We inspected settlements with applicable taxing
authorities, including assessing the expiration of statutes of
limitations.
We tested the calculation of the liability for uncertain tax positions,
including an evaluation of the Company’s assessment of the
technical merits of tax positions and estimates of the amount of tax benefits expected to be sustained.
Evaluation of product liability and other product-related litigation
As
discussed in Notes 1S. and 16 to the consolidated financial statements,
the Company is involved in 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.
Certain of these pending product and other product-related legal
proceedings could result in losses that could be substantial. The
accrued
liability and/or disclosure for the pending product liability and other
product-related legal proceedings requires a complex series of
judgments by the Company about future events, which involves a number of uncertainties.
We
identified the evaluation of product liability and other
product-related litigation as a critical audit matter. Challenging
auditor judgment
was required to evaluate the Company’s judgments about future events and uncertainties.
The
following are the primary procedures we performed to address this
critical audit matter. We evaluated the design and tested the
operating
effectiveness of certain internal controls over the Company’s product
liability and other product-related litigation processes,
including
controls related to (1) the evaluation of information from external and
internal legal counsel, (2) forward-looking expectations, and
(3)
new legal proceedings, or other legal proceedings not currently reserved
or disclosed. We read letters received directly from the
Company’s
external and internal legal counsel that described the Company’s
probable or reasonably possible legal contingency to pending
product
liability and other product-related legal proceedings. We inspected the
Company’s minutes from meetings of the Audit Committee,
which
included the status of key litigation matters. We evaluated the
Company’s ability to estimate its monetary exposure to pending product
and
other product-related legal proceedings by comparing historically
recorded liabilities to actual monetary amounts incurred upon
resolution
of prior legal matters. We analyzed relevant publicly available
information about the Company, its competitors, and the industry.
We
have not been able to determine the specific year that we or our
predecessor firms began serving as the Company’s auditor, however,
we are aware that we or our predecessor firms have served as the Company’s auditor since at least 1942.
New York, New York
February 23, 2023
Report of Independent Registered Public Accounting Firm
Pfizer Inc. 2022 Form 10-K 46
Year Ended December 31,
(MILLIONS, EXCEPT PER SHARE DATA) 2022 2021 2020
Revenues $ 100,330 $ 81,288 $ 41,651
Costs and expenses:
Cost of sales(a) 34,344 30,821 8,484
Selling, informational and administrative expenses(a) 13,677 12,703 11,597
Research and development expenses(a) 11,428 10,360 8,709
Acquired in-process research and development expenses(b) 953 3,469 684
Amortization of intangible assets 3,609 3,700 3,348
Restructuring charges and certain acquisition-related costs 1,375 802 579
Other (income)/deductions––net 217 (4,878) 1,213
Income from continuing operations before provision/(benefit) for taxes on income 34,729 24,311 7,036
Provision/(benefit) for taxes on income 3,328 1,852 370
Income from continuing operations 31,401 22,459 6,666
Discontinued operations––net of tax 6 (434) 2,529
Net income before allocation to noncontrolling interests 31,407 22,025 9,195
Less: Net income attributable to noncontrolling interests 35 45 36
Net income attributable to Pfizer Inc. common shareholders $ 31,372 $ 21,979 $ 9,159
Earnings per common share––basic:
Income from continuing operations attributable to Pfizer Inc. common shareholders $ 5.59 $ 4.00 $ 1.19
Discontinued operations––net of tax — (0.08) 0.46
Net income attributable to Pfizer Inc. common shareholders $ 5.59 $ 3.92 $ 1.65
Earnings per common share––diluted:
Income from continuing operations attributable to Pfizer Inc. common shareholders $ 5.47 $ 3.93 $ 1.18
Discontinued operations––net of tax — (0.08) 0.45
Net income attributable to Pfizer Inc. common shareholders $ 5.47 $ 3.85 $ 1.63
Weighted-average shares––basic 5,608 5,601 5,555
Weighted-average shares––diluted 5,733 5,708 5,632
(a) Exclusive of amortization of intangible assets.
(b) See Note 1L.
See Accompanying Notes.
Consolidated Statements of Income
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 47
Year Ended December 31,
(MILLIONS) 2022 2021 2020
Net income before allocation to noncontrolling interests $ 31,407 $ 22,025 $ 9,195
Foreign currency translation adjustments, net (2,328) (682) 772
Reclassification adjustments — — (17)
(2,328) (682) 755
Unrealized holding gains/(losses) on derivative financial instruments, net 1,444 526 (582)
Reclassification adjustments for (gains)/losses included in net income(a) (2,062) 134 21
(618) 660 (561)
Unrealized holding gains/(losses) on available-for-sale securities, net (1,306) (355) 361
Reclassification adjustments for (gains)/losses included in net income(b) 1,809 (30) (188)
502 (384) 173
Benefit plans: prior service (costs)/credits and other, net (24) 116 52
Reclassification adjustments related to amortization of prior service costs and other, net (129) (154) (176)
Reclassification adjustments related to curtailments of prior service costs and other, net (12) (75) —
(166) (113) (124)
Other comprehensive income/(loss), before tax (2,609) (519) 243
Tax provision/(benefit) on other comprehensive income/(loss) (187) 71 (227)
Other comprehensive income/(loss) before allocation to noncontrolling interests $ (2,422) $ (589) $ 471
Comprehensive income/(loss) before allocation to noncontrolling interests $ 28,985 $ 21,435 $ 9,666
Less: Comprehensive income/(loss) attributable to noncontrolling interests 20 43 27
Comprehensive income/(loss) attributable to Pfizer Inc. $ 28,965 $ 21,393 $ 9,639
(a) Reclassified into Other (income)/deductions—net and Cost of sales. See Note 7E.
(b) Reclassified into Other (income)/deductions—net.
See Accompanying Notes.
Consolidated Statements of Comprehensive Income
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 48
As of December 31,
(MILLIONS, EXCEPT PER SHARE DATA) 2022 2021
Assets
Cash and cash equivalents $ 416 $ 1,944
Short-term investments 22,316 29,125
Trade accounts receivable, less allowance for doubtful accounts: 2022—$449; 2021—$492 10,952 11,479
Inventories 8,981 9,059
Current tax assets 3,577 4,266
Other current assets 5,017 3,820
Total current assets 51,259 59,693
Equity-method investments 11,033 16,472
Long-term investments 4,036 5,054
Property, plant and equipment 16,274 14,882
Identifiable intangible assets 43,370 25,146
Goodwill 51,375 49,208
Noncurrent deferred tax assets and other noncurrent tax assets 6,693 3,341
Other noncurrent assets 13,163 7,679
Total assets $ 197,205 $ 181,476
Liabilities and Equity
Short-term borrowings, including current portion of long-term debt: 2022—$2,560; 2021—$1,636 $ 2,945 $ 2,241
Trade accounts payable 6,809 5,578
Dividends payable 2,303 2,249
Income taxes payable 1,587 1,266
Accrued compensation and related items 3,407 3,332
Deferred revenues 2,520 3,067
Other current liabilities 22,568 24,939
Total current liabilities 42,138 42,671
Long-term debt 32,884 36,195
Pension and postretirement benefit obligations 2,250 3,724
Noncurrent deferred tax liabilities 1,023 349
Other taxes payable 9,812 11,331
Other noncurrent liabilities 13,180 9,743
Total liabilities 101,288 104,013
Commitments and Contingencies
Preferred stock, no par value, at stated value; 27 shares authorized; no shares issued or outstanding at
December 31, 2022 and December 31, 2021 — —
Common stock, $0.05 par value; 12,000 shares authorized; issued: 2022—9,519; 2021—9,471 476 473
Additional paid-in capital 91,802 90,591
Treasury stock, shares at cost: 2022—3,903; 2021—3,851 (113,969) (111,361)
Retained earnings 125,656 103,394
Accumulated other comprehensive loss (8,304) (5,897)
Total Pfizer Inc. shareholders’ equity 95,661 77,201
Equity attributable to noncontrolling interests 256 262
Total equity 95,916 77,462
Total liabilities and equity $ 197,205 $ 181,476
See Accompanying Notes.
Consolidated Balance Sheets
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 49
PFIZER INC. SHAREHOLDERS
Preferred Stock Common Stock Treasury Stock
(MILLIONS, EXCEPT PREFERRED SHARES
AND PER SHARE AMOUNTS) Shares
Stated
Value Shares
Par
Value
Add’l
Paid-In
Capital Shares Cost
Retained
Earnings
Accum.
Other
Comp.
Loss
Share -
holders’
Equity
Non-
controlling
Interests
Total
Equity
Balance, January 1, 2020 431 $ 17 9,369 $ 468 $ 87,428 (3,835) $ (110,801) $ 91,397 $ (5,367) $ 63,143 $ 303 $ 63,447
Net income 9,159 9,159 36 9,195
Other comprehensive income/(loss), net of tax 480 480 (9) 471
Cash dividends declared, per share: $1.53
Common stock (8,571) (8,571) (8,571)
Preferred stock — — —
Noncontrolling interests — (91) (91)
Share-based payment transactions 37 2 1,261 (6) (218) — 1,044 1,044
Preferred stock conversions and redemptions(a) (431) (17) (15) 1 31 (1) (1)
Distribution of Upjohn Business(b) (1,592) (423) (2,015) (3) (2,018)
Other — — — — — — — (1) (1)
Balance, December 31, 2020 — — 9,407 470 88,674 (3,840) (110,988) 90,392 (5,310) 63,238 235 63,473
Net income 21,979 21,979 45 22,025
Other comprehensive income/(loss), net of tax (587) (587) (3) (589)
Cash dividends declared, per share: $1.57
Common stock (8,816) (8,816) (8,816)
Noncontrolling interests — (8) (8)
Share-based payment transactions 64 3 1,917 (11) (373) (77) 1,470 1,470
Other — — — — (85) (85) (7) (92)
Balance, December 31, 2021 — — 9,471 473 90,591 (3,851) (111,361) 103,394 (5,897) 77,201 262 77,462
Net income 31,372 31,372 35 31,407
Other comprehensive income/(loss), net of tax (2,407) (2,407) (15) (2,422)
Cash dividends declared, per share: $1.61
Common stock (9,037) (9,037) (9,037)
Noncontrolling interests — (13) (13)
Share-based payment transactions 48 2 1,192 (13) (608) (73) 513 513
Purchases of common stock (39) (2,000) (2,000) (2,000)
Other 19 — — — 19 (13) 6
Balance, December 31, 2022 — $ — 9,519 $ 476 $ 91,802 (3,903) $ (113,969) $ 125,656 $ (8,304) $ 95,661 $ 256 $ 95,916
(a) See Note 12.
(b) See Note 2B.
See Accompanying Notes.
Consolidated Statements of Equity
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 50
Year Ended December 31,
(MILLIONS) 2022 2021 2020
Operating Activities
Net income before allocation to noncontrolling interests $ 31,407 $ 22,025 $ 9,195
Discontinued operations—net of tax 6 (434) 2,529
Net income from continuing operations before allocation to noncontrolling interests 31,401 22,459 6,666
Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by
operating activities:
Depreciation and amortization 5,064 5,191 4,681
Asset write-offs and impairments 550 276 2,049
Deferred taxes from continuing operations (3,764) (4,293) (1,575)
Share-based compensation expense 872 1,182 755
Benefit plan contributions in excess of expense/income (1,158) (3,123) (1,242)
Other adjustments, net 758 (1,573) (485)
Other changes in assets and liabilities, net of acquisitions and divestitures:
Trade accounts receivable 261 (3,811) (1,275)
Inventories 592 (1,125) (778)
Other assets(a) (4,506) (1,057) (137)
Trade accounts payable 1,191 1,242 355
Other liabilities (1,449) 18,721 2,768
Other tax accounts, net (545) (1,166) (1,240)
Net cash provided by operating activities from continuing operations 29,267 32,922 10,540
Net cash provided by/(used in) operating activities from discontinued operations — (343) 3,863
Net cash provided by operating activities 29,267 32,580 14,403
Investing Activities
Purchases of property, plant and equipment (3,236) (2,711) (2,226)
Purchases of short-term investments (36,384) (38,457) (13,805)
Proceeds from redemptions/sales of short-term investments 44,821 27,447 11,087
Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three
months or less (483) (8,088) 920
Purchases of long-term investments (1,913) (1,068) (597)
Proceeds from redemptions/sales of long-term investments 641 649 723
Acquisitions of businesses, net of cash acquired (22,997) — —
Dividend received from the Consumer Healthcare JV(b) 3,960 — —
Other investing activities, net (192) (305) (265)
Net cash provided by/(used in) investing activities from continuing operations (15,783) (22,534) (4,162)
Net cash provided by/(used in) investing activities from discontinued operations — (12) (109)
Net cash provided by/(used in) investing activities (15,783) (22,546) (4,271)
Financing Activities
Proceeds from short-term borrowings 3,891 — 12,352
Payments on short-term borrowings (3,887) — (22,197)
Net (payments on)/proceeds from short-term borrowings with original maturities of three months or less (222) (96) (4,129)
Proceeds from issuances of long-term debt — 997 5,222
Payments on long-term debt (3,298) (2,004) (4,003)
Purchases of common stock (2,000) — —
Cash dividends paid (8,983) (8,729) (8,440)
Other financing activities, net (335) 16 (444)
Net cash provided by/(used in) financing activities from continuing operations (14,834) (9,816) (21,640)
Net cash provided by/(used in) financing activities from discontinued operations — — 11,991
Net cash provided by/(used in) financing activities (14,834) (9,816) (9,649)
Effect of exchange-rate changes on cash and cash equivalents and restricted cash and cash equivalents (165) (59) (8)
Net increase/(decrease) in cash and cash equivalents and restricted cash and cash equivalents (1,515) 159 475
Cash and cash equivalents and restricted cash and cash equivalents, at beginning of period 1,983 1,825 1,350
Cash and cash equivalents and restricted cash and cash equivalents, at end of period $ 468 $ 1,983 $ 1,825
- Continued -
Consolidated Statements of Cash Flows
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 51
Year Ended December 31,
2022 2021 2020
Supplemental Cash Flow Information
Cash paid/(received) during the period for:
Income taxes $ 7,867 $ 7,427 $ 3,153
Interest paid 1,442 1,467 1,641
Interest rate hedges 54 (2) (20)
Non-cash transaction:
Right-of-use assets obtained in exchange for lease liabilities $ 752 $ 1,943 $ 410
(a) See Note 8A.
(b) See Note 2C.
See Accompanying Notes.
Consolidated Statements of Cash Flows
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 52
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.
Beginning
in the fourth quarter of 2021, we reorganized our commercial operations
and began to manage our commercial operations through a
global structure consisting of two operating segments, each led by a single manager: Biopharma, our innovative science-based
biopharmaceutical
business, and PC1, our global contract development and manufacturing
organization and a leading supplier of specialty
active
pharmaceutical ingredients. Beginning in the third quarter of 2022, we
made several additional organizational changes to further
transform
our operations to better leverage our expertise in certain areas and in
anticipation of potential future new product or indication
launches.
These changes include establishing a new commercial structure within
Biopharma, optimizing our end-to-end R&D operations and
further
prioritizing our internal R&D portfolio, as well as realigning
certain enabling and platform functions across the organization to
ensure
alignment with this new operating structure. Biopharma is the only reportable segment. See Note 17.
On
December 31, 2021, we completed the sale of our Meridian subsidiary,
the manufacturer of EpiPen and other auto-injector products. Prior
to
its sale, Meridian was managed within the former Hospital product
portfolio. Beginning in the fourth quarter of 2021, the financial
results of
Meridian were reflected as discontinued operations for
all periods presented. 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 (the Mylan-Japan
collaboration)
pursuant to an agreement dated November 13, 2020,
and we transferred related inventories and operations that were part of
the Mylan-Japan
collaboration to Viatris. On November 16, 2020, we
completed the spin-off and the combination of our Upjohn Business with
Mylan to form
Viatris. Beginning in the fourth quarter of 2020, the
financial results of the Upjohn Business and the Mylan-Japan
collaboration were reflected
as discontinued operations 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. Prior to the spin-off of the Upjohn
Business in November 2020, the Upjohn Business,
the Mylan-Japan
collaboration and Meridian were managed as part of our former Upjohn
operating segment. With the separation of the Upjohn
Business, the
Mylan-Japan collaboration and Meridian, as well as the formation of the
Consumer Healthcare JV in 2019, Pfizer transformed
into a more
focused, global leader in science-based innovative medicines and
vaccines. In addition, other acquisitions and business
development activities completed in 2022, 2021 and 2020 impacted financial results in the periods presented. See Note 2.
We
have made certain reclassification adjustments to conform prior-period
amounts to the current presentation, mainly for acquired IPR&D
expenses
(see Note 1L). 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 Standard Adopted in 2022
On
January 1, 2022, we early adopted a new accounting standard for
contract assets and contract liabilities acquired in a business
combination.
Under the new standard, acquired contract assets and contract
liabilities are required to be recognized and measured by the
acquirer
on the acquisition date in accordance with Accounting Standards
Codification 606. This new guidance generally results in the acquirer
recognizing
contract assets and contract liabilities at the same amounts that were
recorded by the acquiree. Previously, these amounts were
recognized
by the acquirer at fair value as of the acquisition date. We adopted
this new standard on a prospective basis and there was no
impact to our consolidated financial statements.
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.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 53
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 in Acquired in-process research and development expenses.
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).
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
typically
determine transfer of control based on when the product is shipped or
delivered and title passes to the customer. For certain
contracts,
the finished product may temporarily be stored at our or our third-party
subcontractors’ locations under a bill-and-hold arrangement.
Revenue
is recognized on bill-and-hold arrangements at the point in time when
the customer obtains control of the product and all of the
following
criteria have been met: the arrangement is substantive; the product is
identified separately as belonging to the customer; the product
is
ready for physical transfer to the customer; and we do not have the
ability to use the product or direct it to another customer. In
determining
when the customer obtains control of the product, we
consider certain indicators, including whether we have a present right
to payment from
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 54
the
customer, whether title and/or significant risks and rewards of
ownership have transferred to the customer and whether customer
acceptance has been received.
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 prescription biopharmaceutical products, with the
exception of Paxlovid, are sold principally to wholesalers, but we also
sell directly to retailers, hospitals, clinics, government agencies
and pharmacies. In 2022, we principally sold Paxlovid to government
agencies.
In the U.S., we primarily sell our vaccines directly to the federal
government, CDC, wholesalers, individual provider offices, retail
pharmacies and integrated delivery systems. Outside the U.S., we primarily sell our vaccines to government and non-government
institutions.
Prescription pharmaceutical 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,
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 and legislated
discounts
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 ten products in 2022, for each of nine products in
2021
and for each of seven products in 2020. In the aggregate, these direct
product sales and/or alliance product revenues represented 82%
of
our revenues in 2022, 75% of our revenues in 2021 and 54% of our
revenues in 2020. See Note 17C 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 and lower volumes due to added generic
competition. 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.
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:
As of December 31,
(MILLIONS) 2022 2021
Reserve against Trade accounts receivable, less allowance for doubtful accounts $ 1,200 $ 1,077
Other current liabilities:
Accrued rebates 4,479 3,811
Other accruals 430 528
Other noncurrent liabilities 612 433
Total accrued rebates and other sales-related accruals $ 6,722 $ 5,850
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 55
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
2022 and 2021, 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
typically 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 Acquired in-process 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.
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.
Inventories that are not expected to be sold within 12 months are classified as Other noncurrent assets. See Note 8A.
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, IT and legal defense.
Advertising expenses totaled approximately $2.8 billion in 2022,
$2.0
billion in 2021 and $1.8 billion in 2020. 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 R&D activities performed in
connection with certain licensing arrangements.
L. Acquired In-Process Research and Development Expenses
Before
a compound receives regulatory approval, we record upfront and
milestone payments we make to third parties under licensing and
collaboration
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 typically amortize the
payments on a
straight-line basis over the remaining agreement term or the expected
product life cycle, whichever is shorter. In the first
quarter of
2022, we began reporting acquired IPR&D expense as a separate line
item in our consolidated statements of income. Acquired in-
process research and development expenses includes costs incurred in connection with (a) all upfront and milestone payments on
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 56
collaboration
and in-license agreements, including premiums on equity securities and
(b) asset acquisitions of acquired IPR&D. These costs
were previously recorded in Research and development expenses.
M. 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 is included in Amortization of intangible assets.
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.
N. 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
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).
O. 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 hedging instrument. Cash flows
for financial instruments that do not qualify for hedge accounting
treatment are classified according to their purpose and accounting nature.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 57
P. 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 adjustments 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, if and when a decline in fair value is
determined,
an impairment charge is recorded and a new cost basis in the investment
is established. For equity-method investments, an
impairment charge is recorded only if and when a decline in fair value is determined to be other-than-temporary.
Derivative
financial instruments are carried at fair value in certain balance
sheet categories (see Note 7A), with changes in fair value reported
in net income or, for certain qualifying hedging relationships, in Other comprehensive income/(loss) (see Note 7E).
Q. Tax Assets and Liabilities and Income Tax Contingencies
Tax
Assets and Liabilities––Current tax assets primarily include (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.
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.
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.
Other
taxes payable as of December 31, 2022 and 2021 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
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 58
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.
R. 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. Net periodic pension and postretirement
benefit
costs other than the service costs are recognized in Other
(income)/deductions—net. We immediately recognize actuarial gains and
losses
arising from the remeasurement of our pension and postretirement plans
(MTM Accounting). Each time a pension or postretirement
plan is
remeasured, the actuarial gain or loss is recognized immediately and
classified as Other (income)/deductions––net. 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.
S. 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 and other
asserted or unasserted matters, environmental claims and
proceedings,
government investigations and guarantees and indemnifications. In
assessing contingencies related to legal and environmental
proceedings
that are pending against the Company, or unasserted claims that are
probable of being asserted, 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.
T. 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 or on an accelerated attribution approach 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
GBT––On
October 5, 2022, we acquired GBT, a biopharmaceutical company dedicated
to the discovery, development and delivery of life-
changing
treatments that provide hope to underserved patient communities,
starting with sickle cell disease, for $68.50 per share in cash. The
total
fair value of the consideration transferred was $5.7 billion ($5.2
billion, net of cash acquired). In addition, $136 million in payments to
GBT
employees for the fair value of previously unvested long-term
incentive awards was recognized as post-closing compensation expense and
recorded in Restructuring charges and certain acquisition-related costs (see Note 3).
In
connection with this business combination, we provisionally recorded:
(i) $4.4 billion in Identifiable intangible assets, consisting of $3.0
billion
of IPR&D and $1.4 billion of developed technology rights with a
useful life of six years, (ii) $1.1 billion of Goodwill, (iii) $681
million of
inventories to be sold over approximately three years,
(iv) $570 million of net deferred tax liabilities and (v) $331 million
of assumed long-term
debt that was paid in full in the fourth
quarter of 2022. The allocation of the consideration transferred to the
assets acquired and liabilities
assumed has not yet been finalized.
Biohaven––On
October 3, 2022, we acquired Biohaven, the maker of Nurtec ODT/Vydura
(rimegepant), an innovative therapy approved for
both acute
treatment of migraine and prevention of episodic migraine in adults. The
transaction includes the acquisition of Biohaven’s CGRP
programs,
including rimegepant, zavegepant and a portfolio of five pre-clinical
CGRP assets. Under the terms of the agreement, we acquired
all
outstanding common shares of Biohaven not already owned by us for
$148.50 per share, in cash, for payments of approximately $11.5
billion,
plus repayment of third-party debt of $863 million and redemption of
Biohaven’s redeemable preferred stock for $495 million. Effective
immediately
prior to the closing of the acquisition, Biohaven completed the
spin-off of Biohaven Ltd. (NYSE: BHVN), distributing Biohaven
Ltd.’s
shares to Biohaven shareholders. Biohaven Ltd. is a new publicly traded
company that retained Biohaven’s non-CGRP development
stage
pipeline compounds. Pfizer, a Biohaven shareholder, received a pro rata
portion of Biohaven Ltd.’s shares in the distribution and owns
approximately 1.5% of Biohaven Ltd. as of December 31, 2022.
This
acquisition follows on the November 2021 collaboration for the
commercialization of rimegepant and zavegepant outside the U.S., in
connection
with which Pfizer acquired 2.6% of Biohaven’s common stock (see Note
2E). Biohaven Ltd. will also have the right to receive tiered
royalties
from Pfizer on any annual net sales of rimegepant and zavegepant in the
U.S. in excess of $5.25 billion. This contingent
consideration was
determined to have no fair value as of the acquisition date. After the
acquisition, we remain responsible for payment of high
single digit
to mid-teen percentage tiered royalties on world-wide net sales
excluding China and low to high single digit royalties on net sales in
China
of rimegepant and zavegepant as well as certain regulatory approval and
commercial milestone payments associated with rimegepant
and zavegepant of up to $1.1 billion under pre-existing third-party license and other agreements.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 59
The
total fair value of the consideration transferred was $11.8 billion,
which includes the fair value of Pfizer’s previous investment in
Biohaven
on the acquisition date of approximately $300 million. In
connection with this business combination, we provisionally recorded:
(i) $12.1 billion
in Identifiable intangible assets, consisting of
$11.6 billion of developed technology rights with a useful life of 11
years and $450 million of
IPR&D, (ii) $817 million of
inventories to be sold over approximately two years, (iii) $797 million
of Goodwill, (iv) $398 million of trade accounts
receivable, (v)
$1.4 billion of assumed long-term debt that was paid in full in the
fourth quarter of 2022, (vi) $566 million of net deferred tax
liabilities
and (vii) $477 million of Other current liabilities. The allocation of
the consideration transferred to the assets acquired and liabilities
assumed has not yet been finalized.
ReViral––On
June 9, 2022, we acquired ReViral, a privately held, clinical-stage
biopharmaceutical company focused on discovering,
developing and
commercializing novel antiviral therapeutics that target respiratory
syncytial virus, for a total consideration of up to $536 million,
including
upfront payments of $436 million upon closing (including a base payment
of $425 million plus working capital adjustments) and an
additional
$100 million contingent upon a future development milestone. It was
subsequently determined the applicable milestone was not
achieved.
We
accounted for the transaction as an asset acquisition since the lead
asset, sisunatovir, represented substantially all of the fair value of
the
gross assets acquired. At the acquisition date, we recorded a
$426 million charge representing an acquired IPR&D asset with no
alternative
use in Acquired in-process research and development
expenses, which is presented as a cash outflow from operating
activities. Other assets
acquired and liabilities assumed were not significant.
Arena––On
March 11, 2022, we acquired Arena, a clinical stage company, for $100
per share in cash. The total fair value of the consideration
transferred
was $6.6 billion ($6.2 billion, net of cash acquired). In addition,
$138 million in payments to Arena employees for the fair value of
previously
unvested long-term incentive awards was recognized as post-closing
compensation expense and recorded in Restructuring charges
and certain acquisition-related costs (see Note 3).
Arena’s
portfolio includes development-stage therapeutic candidates in
gastroenterology, dermatology, and cardiology, including etrasimod, an
oral,
selective sphingosine 1-phosphate (S1P) receptor modulator currently in
development for a range of immuno-inflammatory diseases
including
UC, Crohn’s disease, atopic dermatitis, eosinophilic esophagitis, and
alopecia areata. In connection with this business combination,
we
provisionally recorded: (i) $5.5 billion in Identifiable intangible
assets, consisting of $5.0 billion of IPR&D and $460 million of
indefinite-lived
licensing agreements and other, (ii) $1.0 billion
of Goodwill and (iii) $506 million of net deferred tax liabilities. The
allocation of the
consideration transferred to the assets acquired and the liabilities assumed has not yet been finalized.
Trillium––On
November 17, 2021, we acquired all of the issued and outstanding common
stock not already owned by Pfizer of Trillium, a
clinical stage
immuno-oncology company developing therapies targeting cancer immune
evasion pathways and specific cell targeting
approaches, for $18.50
per share in cash, for total consideration of $2.0 billion, net of cash
acquired. As a result, Trillium became our wholly
owned
subsidiary. We previously held a 2% ownership investment in Trillium.
Trillium’s lead program, TTI-622, is an investigational fusion
protein
that is designed to block the inhibitory activity of CD47, a molecule
that is overexpressed by a wide variety of tumors.
We accounted for
the transaction as an asset acquisition since the lead asset, TTI-622,
represented substantially all of the fair value of the
gross assets
acquired, which exclude cash acquired. At the acquisition date, we
recorded a $2.1 billion charge representing an acquired
IPR&D
asset with no alternative future use in Acquired in-process research and
development expenses, of which the $2.0 billion net cash
consideration
is presented as a cash outflow from operating activities. In connection
with this acquisition, we recorded $256 million of assets
acquired primarily consisting of cash and investments. Liabilities assumed were approximately $81 million.
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 business combination, we recorded: (i) $6.3
billion in Identifiable intangible assets, consisting of $2.0 billion of
developed technology
rights with a useful life of 16 years, $2.8
billion of IPR&D and $1.5 billion of licensing agreements and other
($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.
Pro forma
information for the aforementioned acquisitions has not been presented
because these acquisitions were not material to our
consolidated financial statements.
B. Divestitures
Meridian––On
December 31, 2021, we completed the sale of our Meridian subsidiary for
approximately $51 million in cash and recognized a
loss of
approximately $167 million, net of tax, in Discontinued operations––net
of tax. In connection with the sale, Pfizer and the purchaser of
Meridian
entered into various agreements to provide a framework for our
relationship after the sale, including interim TSAs and an MSA. The
TSAs
primarily involve Pfizer providing services related to IT, among other
activities, and are generally expected to be for terms of no more
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 60
than
12 to 18 months post sale. The MSA is for a term of three years post
sale with a two year extension period. In 2022, the amounts
recorded
under the interim TSAs and MSA were not material to our consolidated
results of operations. No amounts were recorded under these
arrangements in 2021.
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 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 spin-off of the Upjohn Business, we distributed net
assets of $1.6 billion as of November 16, 2020, which was reflected as a
reduction to Retained earnings and reflects the 2021 MTM change in
accounting principle. 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 $423 million for the
derecognition
of net gains on foreign currency translation adjustments of $397
million and prior service net credits associated with benefit
plans of $26 million, which were reclassified to Retained earnings.
As
a result of the separation of Upjohn, we incurred separation-related
costs of $434 million in 2020, which are included in 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 and to
provide
a framework for our relationship after the Combination, including a
separation and distribution agreement, interim operating models,
including
agency arrangements, MSAs, TSAs, a tax matters agreement, and an
employee matters agreement, among others. The interim
agency
operating model arrangements primarily include billings, collections and
remittance of rebates that we are performing on a transitional
basis
on behalf of Viatris. 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 four to seven
years post-Separation. The TSAs primarily involve Pfizer providing
services
to Viatris related to finance, IT and human resource infrastructure and
are generally expected to be for terms of no more than three
years
post-Separation. The amounts recorded under the above agreements were
not material to our consolidated results of operations in
2022, 2021 and 2020.
Net
amounts due to Viatris under the above agreements were $94 million as
of December 31, 2022 and net amounts due from Viatris under
the
above arrangements were $53 million as of December 31, 2021. The cash
flows associated with the above agreements are included in Net
cash
provided by operating activities from continuing operations, except for
a $277 million payment to Viatris made in 2021 pursuant to terms
of the separation agreement, which is reported in Other financing activities, net.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 61
Components of Discontinued operations––net of tax:
Year Ended December 31,(a)
(MILLIONS) 2022 2021 2020
Revenues $ — $ 277 $ 7,572
Costs and expenses:
Cost of sales — 204 2,106
Selling, informational and administrative expenses 8 26 1,682
Research and development expenses — 9 224
Acquired in-process research and development expenses — — —
Amortization of intangible assets — 45 224
Restructuring charges and certain acquisition-related costs — 2 29
Other (income)/deductions––net (20) 365 428
Pre-tax income/(loss) from discontinued operations 12 (375) 2,879
Provision/(benefit) for taxes on income 13 (107) 349
Income/(loss) from discontinued operations––net of tax (1) (268) 2,529
Pre-tax gain/(loss) on sale of discontinued operations 10 (211) —
Provision/(benefit) for taxes on income 2 (44) —
Gain/(loss) on sale of discontinued operations––net of tax 7 (167) —
Discontinued operations––net of tax $ 6 $ (434) $ 2,529
(a)
In 2022, Discontinued operations—net of tax relates to post-close
adjustments. In 2021, Discontinued operations—net of tax primarily
includes (i) the operations
of Meridian prior to its sale on
December 31, 2021 recognized in Income/(loss) from discontinued
operations—net of tax, which includes a pre-tax amount to
resolve a
MDL relating to EpiPen against the Company in the U.S. District Court
for the District of Kansas for $345 million; and (ii) the after tax loss
of
$167 million related to the sale of Meridian recognized in
Gain/(loss) on sale of discontinued operations––net of tax. To a much
lesser extent, Discontinued
operations—net of tax in 2021 also
includes the operations of the Mylan-Japan collaboration prior to its
termination on December 21, 2020 and post-close
adjustments
directly related to our former Upjohn and Nutrition discontinued
businesses, including adjustments for tax, benefits and legal-related
matters
recognized in Income/(loss) from discontinued
operations—net of tax. In 2020, Discontinued operations—net of tax
relates to the operations of the Upjohn
Business, Meridian and the
Mylan-Japan collaboration and includes the impact of the 2021 MTM change
in accounting principle, pre-tax interest expense of
$116 million
associated with the U.S. dollar and Euro denominated senior unsecured
notes issued by Upjohn Inc. and Upjohn Finance B.V. in the second
quarter
of 2020 and pre-tax charges of $223 million related to the
remeasurement of Euro debt issued by Upjohn Finance B.V. in the second
quarter of 2020.
C. Equity-Method Investments
Haleon/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 operated globally under the GSK Consumer Healthcare name.
In exchange for the contribution of
our consumer healthcare
business to the JV, we received a 32% equity stake in the new company
and GSK owned the remaining 68%. On
July 18, 2022, GSK completed a
demerger of the Consumer Healthcare JV which became Haleon, an
independent, publicly traded company
listed on the London Stock
Exchange that holds the joint Consumer Healthcare business of GSK and
Pfizer following the demerger. We
continue to own 32% of the
ordinary shares of Haleon after the demerger, and we account for our
interest in Haleon/the Consumer Healthcare
JV as an equity-method investment.
The
carrying value of our investment in Haleon as of December 31, 2022 and
in the Consumer Healthcare JV as of December 31, 2021 is
$10.8
billion and $16.3 billion, respectively, and is reported in
Equity-method investments. The fair value of our investment in Haleon as
of
December 31, 2022, based on quoted market prices of Haleon
stock, was $11.7 billion. Haleon/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, 2021 to
December 31, 2022 is primarily due to dividends totaling approximately
$4.5 billion, of
which cash flows of $4.0 billion are included in
Net cash provided by/(used in) investing activities and $584 million are
included in Net cash
provided by operating activities, as well as
$1.4 billion in pre-tax foreign currency translation adjustments (see
Note 6), partially offset by our
share of Haleon/the Consumer
Healthcare JV’s earnings. We record our share of earnings from
Haleon/the Consumer Healthcare JV on a
quarterly basis on a
one-quarter lag in Other (income)/deductions––net. Our total share of
Haleon/the Consumer Healthcare JV’s earnings
generated in the
fourth quarter of 2021 and the first nine months of 2022, which we
recorded in our operating results in 2022, was $536 million.
Our
total share of the JV’s earnings generated in the fourth quarter of 2020
and the first nine months of 2021, which we recorded in our
operating
results in 2021, was $495 million. 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. As part of the initial accounting for our investment in the
Consumer
Healthcare JV in 2019, we determined that the difference between the
initial fair value of our investment less our underlying equity
in
the carrying value of the net assets of the JV resulted in an initial
excess basis difference of $4.8 billion. We allocated the difference
primarily
to inventory, definite-lived intangible assets, indefinite-lived
intangible assets, related deferred tax liabilities, and equity-method
goodwill.
We recognize amortization of these basis differences in Other
(income)/deductions––net. 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.
In
2022, our equity-method income included in Other (income)/
deductions––net also includes charges of $100 million, primarily for
adjustments
to our equity-method basis differences related to the separation of
Haleon/the Consumer Healthcare JV from GSK. The total
amortization and adjustment of basis differences was not material to our results of operations in 2021 and 2020. See Note 4.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 62
Summarized
financial information for our equity-method investee, Haleon/the
Consumer Healthcare JV, as of September 30, 2022, the most
recent
period available, and as of September 30, 2021 and for the periods
ending September 30, 2022, 2021, and 2020 is as follows:
(MILLIONS) September 30, 2022 September 30, 2021
Current assets $ 5,932 $ 6,890
Noncurrent assets 35,204 39,445
Total assets $ 41,137 $ 46,335
Current liabilities $ 5,235 $ 5,133
Noncurrent liabilities 17,220 5,218
Total liabilities $ 22,455 $ 10,351
Equity attributable to shareholders $ 18,455 $ 35,705
Equity attributable to noncontrolling interests 227 279
Total net equity $ 18,682 $ 35,984
For the Twelve Months Ending
(MILLIONS) September 30, 2022 September 30, 2021 September 30, 2020
Net sales $ 13,566 $ 12,836 $ 12,720
Cost of sales (5,081) (4,755) (5,439)
Gross profit $ 8,486 $ 8,081 $ 7,281
Income from continuing operations 1,745 1,614 1,350
Net income 1,745 1,614 1,350
Income attributable to shareholders 1,675 1,547 1,307
In
connection with GSK’s previously announced planned demerger of at least
80% of GSK’s 68% equity interest in the Consumer Healthcare
JV, in
March 2022 the Consumer Healthcare JV completed its offering of a total
aggregate principal amount of $8.75 billion in U.S. dollar-
denominated
senior notes of various maturities, €2.35 billion in euro-denominated
senior notes of various maturities and £700 million in U.K.
pound-denominated
senior notes of various maturities (collectively, the “notes”). The
notes were guaranteed by GSK generally up to and
excluding the date
of the demerger (the “Guarantee Assumption Date”). We agreed to
indemnify GSK for 32% (representing our pro rata equity
interest in
the Consumer Healthcare JV) of any amount payable by GSK pursuant to
its guarantee of the notes. Our indemnity was provided
solely for the benefit of GSK. Neither we nor any of our subsidiaries were an issuer or guarantor of any of the notes.
Following
its issuance of the notes in March 2022, which fell in our
international second quarter of 2022, the Consumer Healthcare JV loaned
to us and GSK the net proceeds received from the notes on a pro
rata equity ownership basis, for which we received a loan of £2.9
billion
($3.7 billion as of the end of our second quarter of 2022),
at an interest rate of 1.365% per annum payable semi-annually in
arrears. In
conjunction with the demerger, we received £3.5 billion
($4.2 billion) in dividends from the JV in July 2022, of which $4.0
billion related to a
one-time pre-separation dividend, which
decreased the carrying value of our investment (as discussed above).
Simultaneous with the receipt
of the dividends, we repaid the £2.9
billion loan from the JV. GSK similarly received pro rata dividends and
simultaneously repaid its pro rata
loan from the JV. In conjunction
with these transactions, our indemnification of GSK’s guarantee
discussed above was terminated.
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,
and therefore we no longer record our proportionate
share of
ViiV’s net income (loss) in our results of operations. Since 2016, we
have recognized dividends from ViiV as income in Other
(income)/deductions––net
when earned, including dividends of $314 million in 2022, $166 million
in 2021 and $278 million in 2020 (see Note
4).
Summarized
financial information for our equity-method investee, ViiV, as of
December 31, 2022 and 2021 and for the years ending
December 31, 2022, 2021, and 2020 is as follows:
As of December 31,
(MILLIONS) 2022 2021
Current assets $ 4,043 $ 3,608
Noncurrent assets 3,014 3,563
Total assets $ 7,057 $ 7,171
Current liabilities $ 3,780 $ 3,497
Noncurrent liabilities 5,996 6,536
Total liabilities $ 9,777 $ 10,033
Total net equity/(deficit) attributable to shareholders $ (2,720) $ (2,862)
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 63
Year Ended December 31,
(MILLIONS) 2022 2021 2020
Net sales $ 6,955 $ 6,380 $ 6,224
Cost of sales (819) (682) (574)
Gross profit $ 6,135 $ 5,698 $ 5,650
Income from continuing operations 3,108 2,040 2,012
Net income 3,108 2,040 2,012
Income attributable to shareholders 3,108 2,040 2,012
D. Licensing Arrangements
Agreement
with Valneva––On 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 Acquired in-process
research and development expenses in our second quarter of
2020, as
well as $35 million in development milestones which were paid and
recorded in Acquired in-process research and development
expenses
in 2021 and 2022, and $143 million in early commercialization milestones
which remain unpaid. Under the terms of the agreement,
Valneva was
to fund 30% of all development costs through completion of the
development program, and in return we were to pay Valneva
tiered royalties. We will lead late-stage development and have sole control over commercialization.
In
June 2022, we entered into an Equity Subscription Agreement, under
which we invested €90.5 million ($95 million) in Valneva to further
support
our strategic Lyme arrangement. In addition, we updated the terms of
our existing agreement for VLA15. Valneva will now fund 40% of
the
remaining shared development costs, and we will pay Valneva tiered
royalties ranging from 14% to 22%, compared to royalties starting at
19%
in the initial agreement. In addition, the royalties will be
complemented by up to $100 million in milestones payable to Valneva
based on
cumulative sales. Other early commercialization milestones
are unchanged. As of December 31, 2022, we held a 6.9% equity stake of
Valneva.
E. Collaborative Arrangements
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.
Collaboration
with Biohaven––In November 2021, we entered into a collaboration and
license agreement and related sublicense agreement
with Biohaven
and certain of its subsidiaries to commercialize rimegepant and
zavegepant for the treatment and prevention of migraines
outside of
the U.S., subject to regulatory approval. Under the terms of the
agreement, Biohaven would lead R&D globally and we would have
the
exclusive right to commercialization globally, outside of the U.S. Upon
the closing of the transaction on January 4, 2022, we paid Biohaven
$500
million, including an upfront payment of $150 million and an equity
investment of $350 million. We recognized $263 million for the upfront
payment
and premium paid on our equity investment in Acquired in-process
research and development expenses. In October 2022, we
acquired all
outstanding common shares of Biohaven not already owned by us for
$148.50 per share, in cash, for payments of approximately
$11.5
billion. See Note 2A. This acquisition represented a settlement of the
pre-existing relationship, and we determined that no gain or loss
was required to be recognized.
Collaborations with BioNTech––On December 30, 2021, we entered into a research, development and commercialization agreement to
develop
a potential first mRNA-based vaccine for the prevention of shingles
(herpes zoster virus) based on BioNTech’s proprietary mRNA
technology
and our antigen technology. Under the terms of the agreement, we agreed
to pay BioNTech $225 million, including an upfront cash
payment of
$75 million and an equity investment of $150 million. BioNTech is
eligible to receive future regulatory and sales milestone
payments
of up to $200 million. In return, BioNTech agreed to pay us $25 million
for our proprietary antigen technology. The net upfront
payment to
BioNTech was recorded to Acquired in-process research and development
expenses in our fourth quarter of 2021. We and
BioNTech share
development costs. We will have commercialization rights to the
potential vaccine worldwide, excluding Germany, Turkey and
certain developing countries where BioNTech will have commercialization rights. We and BioNTech will share gross profits from
commercialization of any product.
On April 9, 2020, we signed a global agreement with BioNTech to co-develop a mRNA-based coronavirus vaccine program aimed at
preventing
COVID-19 infection, which resulted in the development of Comirnaty. In
connection with the April 2020 agreement, we made an
upfront cash
payment of $72 million and an equity investment in the common stock of
BioNTech of $113 million. We recognized $98 million for
the upfront
payment and a premium paid on the equity investment in Acquired
in-process research and development expenses in our second
quarter
of 2020. 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 share gross profits
and development costs equally after approval and successful
commercialization
of the vaccine, 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 paid us their 50 percent share of prior development
costs in a lump sum payment during the first quarter of 2021.
Further
R&D costs are being shared equally. We have commercialization
rights to the vaccine worldwide, excluding Germany and Turkey
where
BioNTech markets and distributes 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
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 64
Revenues
and Cost of sales on a gross basis in markets where we are
commercializing the vaccine and we 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, 2022, we held an equity stake of 2.7% of BioNTech.
Collaboration
with Beam––On December 24, 2021, we entered into a multi-year research
collaboration with Beam to utilize Beam’s in vivo
base editing
programs, which use mRNA and lipid nanoparticles, for three targets for
rare genetic diseases of the liver, muscle and central
nervous
system. Under the terms of the agreement, Beam conducts all research
activities through development candidate selection for three
undisclosed
targets, which are not included in Beam’s existing programs, and we may
opt in to obtain exclusive licenses to each development
candidate.
Beam has a right to opt in, at the end of phase 1/2 studies, upon the
payment by Beam of an option exercise fee, to a global co-
development
and co-commercialization agreement with respect to one program licensed
under the collaboration pursuant to which we and
Beam would share
net profits as well as development and commercialization costs in a
65%/35% ratio (Pfizer/Beam). Upon entering into the
agreement, we
recorded $300 million in Acquired in-process research and development
expenses in the fourth quarter of 2021 for an upfront
payment due
to Beam, and if we exercise our opt in to licenses for all three
targets, Beam will be eligible for up to an additional $1.05 billion in
development, regulatory and commercial milestone payments for a
potential total deal consideration of up to $1.35 billion. Beam is also
eligible
to receive royalties on global net sales for each licensed program.
Collaboration
with Arvinas––On July 21, 2021, we entered into a global collaboration
with Arvinas to develop and commercialize ARV-471, an
investigational
oral PROTAC® (PROteolysis TArgeting Chimera) estrogen receptor protein
degrader. The estrogen receptor is a well-known
disease driver in
most breast cancers. In connection with the agreement, we made an
upfront cash payment of $650 million to Arvinas and we
made a $350
million equity investment in the common stock of Arvinas. We recognized
$706 million for the upfront payment and a premium
paid on our
equity investment in Acquired in-process research and development
expenses in our third quarter of 2021. Arvinas is also eligible
to
receive up to $400 million in approval milestones and up to $1 billion
in commercial milestones. The companies will equally share worldwide
development costs, commercialization expenses and profits. As of December 31, 2022, we held a 6.5% equity stake of Arvinas.
Collaboration
with Myovant––On December 26, 2020, we entered into a collaboration
with Myovant to jointly develop and commercialize
Orgovyx
(relugolix) in advanced prostate cancer and Myfembree (relugolix 40 mg,
estradiol 1.0 mg, and norethindrone acetate 0.5 mg) in
women’s
health in the U.S. and Canada. We also received an exclusive option to
commercialize relugolix in oncology outside the U.S. and
Canada,
excluding certain Asian countries, which we declined to exercise. Under
the terms of the agreement, the companies equally share
profits and
allowable expenses in the U.S. for Orgovyx, and in the U.S. and Canada
for Myfembree, with Myovant bearing our share of
allowable expenses
up to a maximum of $100 million in 2021 and up to a maximum of $50
million in 2022. Pfizer does not have rights outside
of these
markets. We record our share of gross profits as Alliance revenue.
Myovant remains responsible for regulatory interactions and drug
supply
and continues to lead clinical development for Myfembree. Myovant is
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 Myfembree
in
women’s health, all of which has been paid to Myovant as of December 31,
2022 and recognized as Identifiable intangible assets—
Developed
technology rights, and tiered sales milestones of up to $3.5 billion in
total for prostate cancer and for the combined women’s health
indications
for which commercial sales have commenced. In connection with this
transaction, in 2020 we recognized $499 million in Identifiable
intangible
assets––Developed technology rights and $151 million in Acquired
in-process 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.
Collaboration
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, 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, 2022, we held a 9.7% equity stake of
CStone.
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) 2022 2021 2020
Revenues—Revenues(a) $ 437 $ 590 $ 284
Revenues—Alliance revenues(b) 8,537 7,652 5,418
Total revenues from collaborative arrangements $ 8,974 $ 8,241 $ 5,703
Cost of sales(c) $ (15,589) $ (16,169) $ (61)
Selling, informational and administrative expenses(d) (196) (175) (194)
Research and development expenses(e) 272 314 (14)
Acquired in-process research and development expenses(f) (339) (1,056) (179)
Other income/(deductions)—net(g) 664 820 567
(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 increase in 2022 reflects increases in
Alliance revenues from
Eliquis, Comirnaty and Bavencio, while the
increase in 2021 reflects increases in Alliance revenues from Comirnaty,
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. The decrease in 2022, as well as the increase in 2021,
primarily relate to
Comirnaty.
(d) Represents net reimbursements to our partners for selling, informational and administrative expenses incurred.
(e) Represents net reimbursements (to)/from our partners for research and development expenses incurred.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 65
(f)
Primarily relates to upfront payments to our partners as well as
premiums paid on our equity investments in the common stock of our
partners.
(g) 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.
Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity
Initiatives
A. Transforming to a More Focused Company Program
With
the formation of the Consumer Healthcare JV in 2019 and the spin-off of
our former Upjohn Business in the fourth quarter of 2020, Pfizer
transformed
into a more focused, global leader in science-based innovative
medicines and vaccines. We took efforts to ensure our cost base
and
support model aligned appropriately with our operating structure. While
certain direct costs transferred to the Consumer Healthcare JV in
2019,
and to the Upjohn Business in connection with the spin-off, there are
indirect costs which did not transfer. This program is primarily
composed of the following initiatives:
•
We took steps to restructure our corporate enabling functions to
appropriately support our business, R&D and PGS platform functions.
Actions included, 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 primarily included severance
and benefit
plan impacts, exit costs as well as associated implementation costs.
•
In addition, we transformed our commercial go-to market model in the
way we engage patients and physicians. We also made several
organizational
changes in the third quarter of 2022 to further transform our
operations to better leverage our expertise in certain areas and in
anticipation
of potential future new product or indication launches (see Note 1A).
Actions included, among others, centralization of certain
activities
and enhanced use of digital technologies. The costs for this effort
primarily included severance and associated implementation
costs.
•
We also optimized our manufacturing network under this program and
incurred one-time costs for cost-reduction initiatives related to our
manufacturing
operations. The costs for this effort included, among other things,
severance costs, implementation costs, product transfer
costs, site exit costs, as well as accelerated depreciation.
•
In the fourth quarter of 2022, we began taking steps to optimize our
end-to-end R&D operations to reduce costs and cycle times as well as
to further prioritize our internal R&D portfolio in areas
where our capabilities are differentiated while increasing external
innovation efforts to
leverage an expanding and productive biotech
sector. Actions include leveraging automation and digital capabilities,
novel clinical
development approaches and capabilities, and
externalization of select assets and R&D units. We expect costs for
this effort of $500 million
to be incurred primarily through 2023,
with costs to primarily represent cash expenditures. The costs for this
effort primarily include
severance costs and associated implementation costs.
From
the start of this program in the fourth quarter of 2019 through
December 31, 2022, we incurred costs of $3.5 billion, of which $1.4
billion
($1.0 billion of restructuring charges) is associated with
Biopharma. We have incurred approximately 85% of total expected costs to
date, and
we expect the remaining costs to be substantially incurred through 2023.
B. Key Activities
The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits:
Year Ended December 31,
(MILLIONS) 2022 2021 2020
Restructuring charges/(credits):
Employee terminations $ 776 $ 680 $ 474
Asset impairments 52 53 66
Exit costs/(credits) 54 8 (6)
Restructuring charges/(credits)(a) 882 741 535
Transaction costs(b) 144 20 10
Integration costs and other(c) 348 41 34
Restructuring charges and certain acquisition-related costs 1,375 802 579
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net (9) (63) 3
Additional depreciation––asset restructuring recorded in our consolidated statements of income
as follows(d):
Cost of sales 34 63 21
Selling, informational and administrative expenses 2 23 —
Research and development expenses — — (3)
Total additional depreciation––asset restructuring 36 87 17
Implementation costs recorded in our consolidated statements of income as follows(e):
Cost of sales 54 45 40
Selling, informational and administrative expenses 560 426 197
Research and development expenses 2 1 1
Total implementation costs 616 472 238
Total costs associated with acquisitions and cost-reduction/productivity initiatives $ 2,018 $ 1,298 $ 838
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 66
(a)
Primarily represents cost reduction initiatives. Restructuring
charges/(credits) associated with Biopharma: ($354 million charge in
2022, $610 million charge in
2021, and $71 million charge in 2020).
(b) Represents external costs for banking, legal, accounting and other similar services.
(c)
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. 2022 costs mostly related to our acquisitions of Arena and GBT,
including $138 million in payments to Arena
employees in the first
quarter of 2022 and $136 million in payments to GBT employees in the
fourth quarter of 2022 for the fair value of previously unvested
long-term
incentive awards that was recognized as post-closing compensation
expense. See Note 2A. 2021 costs primarily related to our acquisition of
Trillium.
2020 costs primarily related to our acquisition of Array.
(d) Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.
(e)
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)
Employee
Termination
Costs
Asset
Impairment
Charges Exit Costs Accrual
Balance, January 1, 2021 $ 782 $ — $ 15 $ 798
Provision 680 53 8 741
Utilization and other(a) (449) (53) 34 (468)
Balance, December 31, 2021(b) 1,014 — 57 1,071
Provision 776 52 54 882
Utilization and other(a) (594) (52) (103) (750)
Balance, December 31, 2022(c) $ 1,196 $ — $ 8 $ 1,204
(a) Includes adjustments for foreign currency translation.
(b) Included in Other current liabilities ($816 million) and Other noncurrent liabilities ($255 million).
(c) Included in Other current liabilities ($991 million) and Other noncurrent liabilities ($213 million).
Note 4. Other (Income)/Deductions—Net
Components of Other (income)/deductions––net include:
Year Ended December 31,
(MILLIONS) 2022 2021 2020
Interest income $ (251) $ (36) $ (73)
Interest expense(a) 1,238 1,291 1,449
Net interest expense 987 1,255 1,376
Royalty-related income (845) (857) (770)
Net (gains)/losses on asset disposals — (99) 237
Net (gains)/losses recognized during the period on equity securities(b) 1,273 (1,344) (540)
Income from collaborations, out-licensing arrangements and sales of compound/product
rights(c) (188) (396) (326)
Net periodic benefit costs/(credits) other than service costs (849) (2,547) 311
Certain legal matters, net(d) 230 182 28
Certain asset impairments(e) 421 86 1,691
Haleon/Consumer Healthcare JV equity method (income)/loss(f) (436) (471) (298)
Other, net(g) (378) (687) (497)
Other (income)/deductions––net $ 217 $ (4,878) $ 1,213
(a) Capitalized interest totaled $124 million in 2022, $108 million in 2021 and $96 million in 2020.
(b)
2022 losses include, among other things, unrealized losses of $986
million related to investments in BioNTech, Allogene Therapeutics, Inc.
and Arvinas. 2021
gains included, among other things, unrealized
gains of $1.6 billion related to investments in BioNTech and Cerevel
Therapeutics Holdings, Inc. 2020 gains
included, among other
things, unrealized gains of $405 million related to investments in
BioNTech and SpringWorks Therapeutics, Inc.
(c) 2022 includes,
among other things, $94 million of out-licensing income from multiple
licensees. 2021 included, among other things, $188 million of net
collaboration
income from BioNTech related to Comirnaty and $97 million of milestone
income from multiple licensees. 2020 included, among other things, (i)
$178
million in milestone income from multiple licensees and (ii) a $75
million upfront payment received from our sale of our CK1 assets to
Biogen Inc.
(d) 2022 primarily includes certain product liability
and other expenses related to products discontinued and/or divested by
Pfizer. 2021 primarily includes certain
product liability expenses
related to products discontinued and/or divested by Pfizer, and to a
lesser extent, legal obligations related to pre-acquisition
commitments.
(e)
2022 primarily includes intangible asset impairment charges of: (i)
$200 million associated with our Biopharma segment, representing an
IPR&D asset for the
unapproved indication of symptomatic
dilated cardiomyopathy due to a mutation of the gene encoding the lamin
A/C protein, acquired in our Array acquisition,
and was a result of
the Phase 3 trial reaching futility at a pre-planned interim analysis,
(ii) $171 million associated with our Biopharma segment, related to
developed
technology rights acquired in our Hospira acquisition, and reflect
updated commercial forecasts mainly reflecting competitive pressures,
and (iii) $50
million associated with PC1, related to finite-lived
licensing agreements acquired in our Hospira acquisition, and reflects
updated contract manufacturing
forecasts reflecting changes to
market dynamics. 2020 included intangible asset impairment charges
associated with our Biopharma segment that reflected,
among other
things, updated commercial forecasts mainly reflecting competitive
pressures: (i) $900 million related to IPR&D assets for unapproved
indications
of certain cancer medicines, acquired in our Array
acquisition; (ii) $528 million related to Eucrisa, a finite-lived
developed technology right acquired in our Anacor
Pharmaceuticals,
LLC acquisition; and (iii) $263 million related to finite-lived
developed technology rights for certain generic sterile injectables
acquired in our
Hospira acquisition.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 67
(f) See Note 2C.
(g)
2022 includes, among other things, (i) dividend income of $314 million
from our investment in ViiV, (ii) income net of costs associated with
TSAs of $142 million
and (iii) charges of $77 million, reflecting
the change in the fair value of contingent consideration. 2021 included,
among other things, (i) income net of costs
associated with TSAs
of $288 million, (ii) dividend income of $166 million from our
investment in ViiV and (iii) charges of $142 million, reflecting the
change in
the fair value of contingent consideration. 2020
included, among other things, (i) dividend income of $278 million from
our investment in ViiV, (ii) income net of
costs associated with
TSAs of $114 million and (iii) charges of $105 million, reflecting the
change in the fair value of contingent consideration.
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 2022
(impairment recorded in Other (income)/deductions–net)
follows:
Year Ended
Fair Value(a) December 31, 2022
(MILLIONS) Amount Level 1 Level 2 Level 3 Impairment
Intangible assets––IPR&D(b) $ — $ — $ — $ — $ 200
Intangible assets––Developed technology rights(b) 60 — — 60 171
Intangible assets––Licensing agreements and other(b) 30 — — 30 50
Total $ 90 $ — $ — $ 90 $ 421
(a)
The fair value amount is presented as of the date of impairment, as
this asset is not measured at fair value on a recurring basis. See also
Note 1E.
(b) Reflects intangible assets written down to fair value
in 2022. 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) 2022 2021 2020
United States $ 5,032 $ 6,064 $ (2,887)
International 29,697 18,247 9,924
Income from continuing operations before provision/(benefit) for taxes on income(a), (b) $ 34,729 $ 24,311 $ 7,036
(a)
2022 v. 2021––The decrease in domestic income is primarily related to
net losses on equity securities in 2022 versus net gains on equity
securities in 2021,
lower net periodic benefit credits and higher
restructuring charges and certain acquisition-related costs, partially
offset by Paxlovid income and lower acquired
IPR&D expenses.
The increase in the international income is primarily related to
Paxlovid and Comirnaty income partially offset by lower net periodic
benefit
credits.
(b) 2021 v. 2020––The domestic income in 2021
versus domestic loss in 2020 was mainly related to Comirnaty income,
lower asset impairment charges, net
periodic benefit credits in
2021 versus net periodic benefit costs in 2020 and higher net gains from
equity securities, partially offset by higher R&D expenses.
The
increase in the international income was primarily related to Comirnaty
income, net periodic benefit credits in 2021 versus net periodic
benefit costs in 2020
and lower asset impairment charges.
Components of Provision/(benefit) for taxes on income based on the location of the taxing authorities include:
Year Ended December 31,
(MILLIONS) 2022 2021 2020
United States
Current income taxes:
Federal $ 2,744 $ 3,342 $ 372
State and local (20) 34 56
Deferred income taxes:
Federal (3,271) (3,850) (1,164)
State and local (310) (491) (131)
Total U.S. tax provision/(benefit) (857) (964) (867)
International
Current income taxes 4,368 2,769 1,517
Deferred income taxes (183) 48 (279)
Total international tax provision/(benefit) 4,185 2,816 1,237
Provision/(benefit) for taxes on income $ 3,328 $ 1,852 $ 370
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 68
The changes in Provision/(benefit) for taxes on income impacting the effective tax rate year-over-year are summarized below:
2022 v. 2021
The higher effective tax rate in 2022 was mainly the result of:
•
the non-recurrence of certain initiatives executed in 2021 associated
with our investment in the Consumer Healthcare JV with GSK based
on estimates and assumptions that we believe to be reasonable,
partially offset by:
•
tax benefits in 2022 related to global income tax resolutions in
multiple tax jurisdictions spanning multiple tax years that included the
closing
of U.S. IRS audits covering five tax years.
2021 v. 2020
The higher effective tax rate in 2021 was mainly the result of:
• the change in the jurisdictional mix of earnings primarily related to Comirnaty; and
• lower tax benefits related to the impairment of intangible assets,
partially offset by:
•
certain initiatives executed in the third quarter of 2021 associated
with our investment in the Consumer Healthcare JV with GSK based on
estimates and assumptions that we believe to be reasonable.
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).
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 fourth annual installment of this liability was paid by its
April
18, 2022 due date. The fifth annual installment is due April 18, 2023
and is reported in current Income taxes payable as of December 31,
2022.
The remaining liability is reported in noncurrent Other taxes payable.
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.
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,
2022 2021 2020
U.S. statutory income tax rate 21.0 % 21.0 % 21.0 %
Taxation of non-U.S. operations (a), (b) (5.0) (4.3) (9.9)
Tax settlements and resolution of certain tax positions(c) (3.0) (0.4) (2.7)
Foreign-Derived Intangible Income deduction(d) (1.9) (0.6) —
Certain Consumer Healthcare JV initiatives(c) — (6.0) —
U.S. R&D tax credit (0.6) (0.5) (1.4)
Interest(e) 0.2 0.4 1.1
All other, net(f) (1.1) (2.0) (2.8)
Effective tax rate for income from continuing operations 9.6 % 7.6 % 5.3 %
(a)
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.
(b)
In all years, the reduction in our effective tax rate is a result of
the jurisdictional location of earnings and 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 2053. Under such grant, we are partially
exempt from income, property and municipal taxes. In
Singapore, we benefit from incentive tax rates effective through 2048 on income from manufacturing and other operations.
(c) See Note 5A.
(d)
The higher rate benefit from the Foreign-Derived Intangible Income
deduction in 2022 is mainly the result of the TCJA requirement to
capitalize R&D costs for
tax years beginning after December 31, 2021.
(e)
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”.
(f) All other, net is primarily due to routine business operations.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 69
C. Deferred Taxes
Components of our deferred tax assets and liabilities, shown before jurisdictional netting, follow:
2022 Deferred Tax* 2021 Deferred Tax*
(MILLIONS) Assets (Liabilities) Assets (Liabilities)
Prepaid/deferred items $ 1,768 $ (533) $ 1,889 $ (456)
Accrued/deferred royalties 2,127 — 777 —
Inventories 672 (262) 408 (56)
Intangible assets(a) 1,445 (6,288) 1,542 (4,577)
Property, plant and equipment 112 (1,845) 117 (1,647)
Employee benefits(b) 1,314 (276) 1,594 (178)
Restructurings and other charges 302 — 303 —
Legal and product liability reserves 385 — 373 —
Research and development(c) 4,137 — 1,656 —
Net operating loss/tax credit carryforwards(d), (e) 2,224 — 1,431 —
Unremitted earnings — (51) — (45)
State and local tax adjustments 151 — 197 —
Investments(f) 91 (208) 70 (689)
All other 78 (56) 89 (68)
14,806 (9,519) 10,446 (7,714)
Valuation allowances (1,541) — (1,462) —
Total deferred taxes $ 13,265 $ (9,519) $ 8,983 $ (7,714)
Net deferred tax asset/(liability)(g) $ 3,746 $ 1,269
*
The deferred tax assets and liabilities associated with global
intangible low-taxed income are included in the relevant categories. See
Note 1Q.
(a) The increase in net deferred tax liabilities in 2022
is primarily due to the acquisition of intangible assets related to GBT,
Arena and Biohaven, partially offset
by the amortization of intangible assets and certain impairment charges.
(b)
The decrease in net deferred tax assets in 2022 is primarily due to
changes in pension and postretirement benefit obligations, as well as
the performance of
plan assets reported in the period. See Note 11.
(c)
The increase in deferred tax assets in 2022 is related to the TCJA
requirement to capitalize R&D costs for tax years beginning after
December 31,2021.
(d) The increase in deferred tax assets in 2022 is
primarily due to the acquisition of net operating loss carryforwards
and credit carryforwards related to Arena,
GBT and Biohaven. See Note 2A.
(e)
The amounts in 2022 and 2021 are reduced for unrecognized tax benefits
of $1.2 billion and $3.0 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.
(f)
The decrease in net deferred tax liabilities in 2022 is primarily due
to the impact of foreign currency translation adjustments related to our
equity-method
investment in Haleon/the Consumer Healthcare JV. See Note 2C.
(g)
In 2022, Noncurrent deferred tax assets and other noncurrent tax assets
($4.8 billion), and Noncurrent deferred tax liabilities ($1.0 billion).
In 2021,
Noncurrent deferred tax assets and other noncurrent tax
assets ($1.6 billion), and Noncurrent deferred tax liabilities ($0.3
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
2023 to 2042. Certain of our U.S. net operating losses and general
business credits are subject
to limitations under IRC Section 382.
As
of December 31, 2022, we have not made a U.S. tax provision on $60.0
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, 2022 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 1Q.
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, 2022, we had $2.9 billion and as of
December 31, 2021, we had $4.5 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, 2022, we had $1.5 billion
in
assets associated with uncertain tax positions. These amounts were
included in Noncurrent deferred tax assets and other noncurrent tax
assets
($1.5 billion) and Other taxes payable ($45 million). As of December
31, 2021, we had $1.5 billion in assets associated with uncertain
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 70
tax
positions. These amounts were included in Noncurrent deferred tax
assets and other noncurrent tax assets ($1.4 billion) and Other taxes
payable ($105 million).
• Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate.
The reconciliation of the beginning and ending amounts of gross unrecognized tax benefits follows:
(MILLIONS) 2022 2021 2020
Balance, beginning $ (6,068) $ (5,595) $ (5,381)
Acquisitions (52) — 37
Divestitures(a) — — 265
Increases based on tax positions taken during a prior period(b) (67) (111) (232)
Decreases based on tax positions taken during a prior period(b), (c) 1,339 103 64
Decreases based on settlements for a prior period(c),(d) 842 24 15
Increases based on tax positions taken during the current period(b) (701) (550) (411)
Impact of foreign exchange 90 22 (72)
Other, net(b), (e) 122 40 120
Balance, ending(f) $ (4,494) $ (6,068) $ (5,595)
(a) For 2020, related to the separation of Upjohn. See Note 2B.
(b) Primarily included in Provision/(benefit) for taxes on income.
(c) Primarily related to effectively settling certain issues with the U.S. and foreign tax authorities. See Note 5A.
(d) Primarily related to cash payments and reductions of tax attributes.
(e) Primarily related to decreases as a result of a lapse of applicable statutes of limitations.
(f)
In 2022, included in Income taxes payable ($40 million), Other current
assets ($3 million), Noncurrent deferred tax assets and other noncurrent
tax assets
($1.2 billion), Noncurrent deferred tax liabilities ($5
million) and Other taxes payable ($3.2 billion). In 2021, included in
Income taxes payable ($19 million),
Other current assets ($42
million), Noncurrent deferred tax assets and other noncurrent tax assets
($3.0 billion), Noncurrent deferred tax liabilities ($5 million)
and Other taxes payable ($3.0 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 2022, we recorded a
net decrease in interest of $17 million. In 2021 and 2020, we recorded
net
increases in interest of $108 million and $89 million
respectively. Gross accrued interest totaled $552 million as of December
31, 2022
(reflecting a decrease of $31 million as a result of cash
payments) and gross accrued interest totaled $601 million as of
December 31, 2021
(reflecting a decrease of $1 million as a result
of cash payments). In 2022 and 2021, these amounts were substantially
all included in Other
taxes payable. Accrued penalties are not significant. See also Note 5A.
Status of Tax Matters 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. During the third quarter of 2022, Pfizer reached
resolution
of disputed issues at the IRS Independent Office of Appeals, thereby
settling all issues related to U.S. tax returns of Pfizer for the
years
2011-2015. With respect to Pfizer, tax years 2016-2018 are under audit.
Tax years 2019-2022 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 and certain related audits, appeals and
investigations
in certain major international tax jurisdictions such as Canada
(2017-2022), Europe (2012-2022, primarily in Ireland, the U.K.,
France,
Italy, Spain and Germany), Asia Pacific (2012-2022, primarily in China,
Japan and Singapore) and Latin America (1998-2022, primarily
in Brazil).
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
$100 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.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 71
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) 2022 2021 2020
Foreign currency translation adjustments, net(a) $ (126) $ 43 $ (119)
Unrealized holding gains/(losses) on derivative financial instruments, net 183 84 (88)
Reclassification adjustments for (gains)/losses included in net income (270) 29 (25)
(87) 114 (113)
Unrealized holding gains/(losses) on available-for-sale securities, net (164) (44) 45
Reclassification adjustments for (gains)/losses included in net income 226 (4) (24)
62 (48) 22
Benefit plans: prior service (costs)/credits and other, net (5) 27 12
Reclassification adjustments related to amortization of prior service costs and other, net (29) (47) (31)
Reclassification adjustments related to curtailments of prior service costs and other, net (3) (18) 1
(37) (38) (17)
Tax provision/(benefit) on other comprehensive income/(loss) $ (187) $ 71 $ (227)
(a)
Taxes are not provided for foreign currency translation adjustments
relating to investments in international subsidiaries that are expected
to be held indefinitely.
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)
Foreign
Currency
Translation
Adjustments(a)
Derivative
Financial
Instruments
Available-
For-Sale
Securities
Prior Service
(Costs)/ Credits
and Other
Accumulated Other
Comprehensive
Income/(Loss)
Balance, January 1, 2020 $ (5,936) $ 20 $ (35) $ 584 $ (5,367)
Other comprehensive income/(loss) 883 (448) 151 (106) 480
Distribution of Upjohn Business(b) (397) — — (26) (423)
Balance, December 31, 2020 (5,450) (428) 116 452 (5,310)
Other comprehensive income/(loss) (722) 547 (336) (75) (587)
Balance, December 31, 2021 (6,172) 119 (220) 377 (5,897)
Other comprehensive income/(loss) (2,188) (531) 440 (129) (2,407)
Balance, December 31, 2022 $ (8,360) $ (412) $ 220 $ 248 $ (8,304)
(a)
Amounts do not include foreign currency translation adjustments
attributable to noncontrolling interests. Foreign currency translation
adjustments include net
losses in 2022 and 2021 and net gains in
2020 related to our equity-method investment in Haleon/the Consumer
Healthcare JV (see Note 2C), and the impact
of our net investment hedging program.
(b) For more information, see Note 2B.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 72
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, 2022 As of December 31, 2021
(MILLIONS) Total Level 1 Level 2 Total Level 1 Level 2
Financial assets:
Short-term investments
Equity securities with readily determinable fair values:
Money market funds $ 1,588 $ — $ 1,588 $ 5,365 $ — $ 5,365
Available-for-sale debt securities:
Government and agency—non-U.S. 15,915 — 15,915 17,318 — 17,318
Government and agency—U.S. 1,313 — 1,313 4,050 — 4,050
Corporate and other 1,514 — 1,514 647 — 647
18,743 — 18,743 22,014 — 22,014
Total short-term investments 20,331 — 20,331 27,379 — 27,379
Other current assets
Derivative assets:
Interest rate contracts — — — 4 — 4
Foreign exchange contracts 714 — 714 704 — 704
Total other current assets 714 — 714 709 — 709
Long-term investments
Equity securities with readily determinable fair values(a) 2,836 2,823 13 3,876 3,849 27
Available-for-sale debt securities:
Government and agency—non-U.S. 280 — 280 465 — 465
Government and agency—U.S. — — — 6 — 6
Corporate and other 72 — 72 50 — 50
352 — 352 521 — 521
Total long-term investments 3,188 2,823 365 4,397 3,849 548
Other noncurrent assets
Derivative assets:
Interest rate contracts — — — 16 — 16
Foreign exchange contracts 364 — 364 242 — 242
Total derivative assets 364 — 364 259 — 259
Insurance contracts(b) 665 — 665 808 — 808
Total other noncurrent assets 1,028 — 1,028 1,067 — 1,067
Total assets $ 25,261 $ 2,823 $ 22,439 $ 33,552 $ 3,849 $ 29,703
Financial liabilities:
Other current liabilities
Derivative liabilities:
Interest rate contracts $ 10 $ — $ 10 $ — $ — $ —
Foreign exchange contracts 694 — 694 476 — 476
Total other current liabilities 704 — 704 476 — 476
Other noncurrent liabilities
Derivative liabilities:
Interest rate contracts 321 — 321 — — —
Foreign exchange contracts 864 — 864 405 — 405
Total other noncurrent liabilities 1,185 — 1,185 405 — 405
Total liabilities $ 1,889 $ — $ 1,889 $ 881 $ — $ 881
(a)
Long-term equity securities of $143 million as of December 31, 2022 and
$194 million as of December 31, 2021 were held in restricted trusts for
U.S. non-
qualified 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).
Financial Assets and
Liabilities Not Measured at Fair Value on a Recurring Basis––The
carrying value of Long-term debt, excluding the current
portion was
$33 billion as of December 31, 2022 and $36 billion as of December 31,
2021. The estimated fair value of such debt, using a
market approach and Level 2 inputs, was $30 billion as of December 31, 2022 and $42 billion as of December 31, 2021.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 73
The
differences between the estimated fair values and carrying values of
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, 2022 and 2021.
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.
B. Investments
Total Short-Term, Long-Term and Equity-Method Investments
The following summarizes our investments by classification type:
As of December 31,
(MILLIONS) 2022 2021
Short-term investments
Equity securities with readily determinable fair values(a) $ 1,588 $ 5,365
Available-for-sale debt securities 18,743 22,014
Held-to-maturity debt securities 1,985 1,746
Total Short-term investments $ 22,316 $ 29,125
Long-term investments
Equity securities with readily determinable fair values(b) $ 2,836 $ 3,876
Available-for-sale debt securities 352 521
Held-to-maturity debt securities 48 34
Private equity securities at cost(b) 800 623
Total Long-term investments $ 4,036 $ 5,054
Equity-method investments 11,033 16,472
Total long-term investments and equity-method investments $ 15,069 $ 21,526
Held-to-maturity cash equivalents $ 679 $ 268
(a) 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, 2022, our investment portfolio consisted of debt
securities issued across diverse governments, corporate and financial
institutions, which are investment-grade. The contractual or estimated maturities, are as follows:
As of December 31, 2022 As of December 31, 2021
Gross Unrealized Maturities (in Years) Gross Unrealized
(MILLIONS)
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. $ 15,946 $ 297 $ (48) $ 16,195 $ 15,915 $ 280 $ — $ 18,032 $ 13 $ (263) $ 17,783
Government and agency––U.S. 1,313 — — 1,313 1,313 — — 4,056 — (1) 4,055
Corporate and other 1,584 7 (4) 1,586 1,514 72 — 698 — (1) 697
Held-to-maturity debt securities
Time deposits and other 1,171 — — 1,171 1,127 20 24 947 — — 947
Government and agency––non-U.S. 1,542 — — 1,542 1,538 3 1 1,102 — — 1,102
Total debt securities $ 21,556 $ 304 $ (53) $ 21,807 $ 21,407 $ 375 $ 25 $ 24,835 $ 14 $ (265) $ 24,584
Any expected credit losses to these portfolios would be immaterial to our financial statements.
Equity Securities
The
following presents the calculation of the portion of unrealized
(gains)/losses that relates to equity securities, excluding
equity-method
investments, held at the reporting date:
Year Ended December 31,
(MILLIONS) 2022 2021 2020
Net (gains)/losses recognized during the period on equity
securities(a) $ 1,273 $ (1,344) $ (540)
Less: Net (gains)/losses recognized during the period on equity
securities sold during the period (126) (80) (24)
Net unrealized (gains)/losses during the reporting period on equity
securities still held at the reporting date(b) $ 1,400 $ (1,264) $ (515)
(a) Reported in Other (income)/deductions––net. See Note 4.
(b)
Included in net unrealized (gains)/losses are observable price changes
on equity securities without readily determinable fair values. As of
December 31, 2022,
there were cumulative impairments and downward
adjustments of $193 million and upward adjustments of $203 million.
Impairments, downward and upward
adjustments were not significant in 2022, 2021 and 2020.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 74
C. Short-Term Borrowings
Short-term borrowings include:
As of December 31,
(MILLIONS) 2022 2021
Current portion of long-term debt, principal amount $ 2,550 $ 1,636
Other short-term borrowings, principal amount(a) 385 605
Total short-term borrowings, principal amount 2,935 2,241
Net fair value adjustments 10 —
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds,
as adjusted $ 2,945 $ 2,241
(a) Primarily includes cash collateral. See Note 7F.
As
of December 31, 2022, we had access to a $7 billion committed U.S.
revolving credit facility, which may be used for general corporate
purposes
including to support our commercial paper borrowings. Lenders under
this facility have approximately $700 million of commitments
maturing
in November 2026 and $6.3 billion of commitments maturing in November
2027. In addition to the U.S. revolving credit facility, our
lenders
have provided us an additional $321 million in lines of credit, of
which $292 million expire within one year. Essentially all lines of
credit
were unused as of December 31, 2022.
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) 2022 2021
Notes due 2023 (3.2% for 2021)(a) $ — $ 2,550
Notes due 2024 (3.9% for 2022 and 2021) 2,250 2,250
Notes due 2025 (0.8% for 2022 and 2021) 750 750
Notes due 2026 (2.9% for 2022 and 2021) 3,000 3,000
Notes due 2027 (2.1% for 2022 and 2021) 1,000 1,051
Notes due 2028 (4.8% for 2022 and 2021) 1,660 1,660
Notes due 2029-2033 (2.6% for 2022 and 2021) 5,000 5,000
Notes due 2034-2038 (5.5% for 2022 and 2021) 5,517 5,585
Notes due 2039-2043 (4.8% for 2022 and 4.7% for 2021) 7,153 7,352
Notes due 2044-2048 (4.2% for 2022 and 2021) 3,250 3,250
Notes due 2049-2053 (3.4% for 2022 and 2021) 2,500 2,500
Total long-term debt, principal amount 32,080 34,948
Net fair value adjustments related to hedging and purchase accounting 959 1,438
Net unamortized discounts, premiums and debt issuance costs (175) (195)
Other long-term debt 20 4
Total long-term debt, carried at historical proceeds, as adjusted $ 32,884 $ 36,195
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above (3.7%
for 2022 and 1.0% for 2021)) $ 2,560 $ 1,636
* Our long-term debt is generally redeemable by us at any time at varying redemption prices plus accrued and unpaid interest.
(a) Reclassified to the current portion of long-term debt.
Issuances—In
August 2021, we completed a public offering of $1.0 billion principal
amount of senior unsecured notes due 2031 at an effective
interest
rate of 1.79%. In May 2020, we completed a public offering of $4.0
billion aggregate principal amount of senior unsecured notes with a
weighted-average
effective interest rate of 2.11% and in March 2020, we completed a
public offering of $1.25 billion aggregate principal
amount of senior unsecured notes with a weighted-average effective interest rate of 2.67%.
Retirements—In
November 2020, we repurchased all $1.15 billion and $342 million
principal amount outstanding of the 1.95% senior
unsecured notes
that were due in June 2021 and 5.80% senior unsecured notes that were
due in 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.
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. Where foreign exchange risk is not offset by other
exposures, we manage our foreign exchange risk principally
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, and Canadian dollar, and
include
a portion of our forecasted foreign exchange-denominated intercompany
inventory sales hedged up to two years. We may seek to
protect against possible declines in the reported net investments of our foreign business entities.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 75
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 foreign exchange contracts not designated as hedging instruments,
we recognize the gains and losses immediately into earnings along
with
the earnings impact of the items they generally offset. These contracts
take the opposite currency position of that reflected on the
balance sheet to counterbalance the effect of any currency movement.
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 change in fair value on interest rate contracts that are
designated as fair value hedges in earnings, as well as the offsetting
earnings impact of the hedged risk attributable to the hedged item.
The following summarizes the fair value of the derivative financial instruments and notional amounts:
(MILLIONS) As of December 31, 2022 As of December 31, 2021
Fair Value Fair Value
Notional Asset Liability Notional Asset Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a) $ 26,603 $ 838 $ 1,196 $ 29,576 $ 787 $ 717
Interest rate contracts 2,250 — 331 2,250 21 —
838 1,527 808 717
Derivatives not designated as hedging instruments:
Foreign exchange contracts $ 29,814 240 362 $ 21,419 160 164
Total $ 1,078 $ 1,889 $ 968 $ 881
(a)
The notional amount of outstanding foreign exchange contracts hedging
our intercompany forecasted inventory sales was $4.4 billion as of
December 31, 2022
and $4.8 billion as of December 31, 2021.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 76
The
following summarizes information about the gains/(losses) incurred to
hedge or offset operational foreign exchange or interest rate risk
exposures:
Gains/(Losses)
Recognized in OID(a)
Gains/(Losses)
Recognized in OCI(a)
Gains/(Losses)
Reclassified from
OCI into OID and COS(a)
Year Ended December 31,
(MILLIONS) 2022 2021 2022 2021 2022 2021
Derivative Financial Instruments in Cash Flow
Hedge Relationships:
Foreign exchange contracts(b) $ — $ — $ 1,296 $ 488 $ 1,916 $ (173)
Amount excluded from effectiveness testing
and amortized into earnings(c) — — 148 38 145 38
Derivative Financial Instruments in Fair Value
Hedge Relationships:
Interest rate contracts (337) (7) — — — —
Hedged item 337 7 — — — —
Derivative Financial Instruments in Net
Investment Hedge Relationships:
Foreign exchange contracts — — 816 468 — —
Amount excluded from effectiveness testing
and amortized into earnings(c) — — 73 52 129 109
Non-Derivative Financial Instruments in Net
Investment Hedge Relationships:(d)
Foreign currency short-term borrowings — — 26 78 — —
Foreign currency long-term debt — — 51 86 — —
Derivative Financial Instruments Not Designated
as Hedges:
Foreign exchange contracts (1,153) (192) — — — —
All other net(c) — — — 1 — 1
$ (1,153) $ (192) $ 2,409 $ 1,210 $ 2,190 $ (25)
(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.
(b) The
amounts reclassified from OCI into COS were a net gain of $375 million
in 2022 and a net loss of $89 million in 2021. 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 $107 million
within the next 12 months into income.
The maximum length of time over which we are hedging our exposure to
the variability in future foreign exchange cash
flows is approximately 20 years and relates to foreign currency debt.
(c) The amounts reclassified from OCI were reclassified into OID.
(d)
Short-term borrowings and long-term debt include foreign currency
borrowings which are used as net investment hedges. The short-term
borrowings’ carrying
value as of December 31, 2021 was $1.1
billion. The long-term debt carrying values as of December 31, 2022 and
December 31, 2021 were $795 million and
$844 million, respectively.
The following summarizes cumulative basis adjustments to our long-term debt in fair value hedges:
As of December 31, 2022 As of December 31, 2021
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)
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
Short-term borrowings, including
current portion of long-term debt $ — $ — $ 10 $ — $ — $ —
Long-term debt $ 2,235 $ (321) $ 1,042 $ 2,233 $ 16 $ 1,154
(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
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 77
allowance
for credit losses, see Note 1G. A significant portion of our trade
accounts receivable balances are due from wholesalers and
governments. For additional information on our trade accounts receivables with significant customers, see Note 17C.
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, 2022, the largest investment exposures
in our
portfolio represent primarily sovereign debt instruments
issued by the Netherlands, Canada, Germany, Japan, the U.K., the U.S.,
and France.
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 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, 2022, the
aggregate
fair value of these derivative financial instruments that are in a net
payable position was $888 million, for which we have posted
collateral
of $901 million with a corresponding amount reported in Short-term
investments. As of December 31, 2022, the aggregate fair value
of
our derivative financial instruments that are in a net receivable
position was $435 million, for which we have received collateral of
$337 million with a corresponding amount reported in Short-term borrowings, including current portion of long-term debt.
Note 8. Other Financial Information
A. Inventories
The following summarizes the components of Inventories:
As of December 31,
(MILLIONS) 2022 2021
Finished goods $ 2,603 $ 3,641
Work-in-process 5,519 4,424
Raw materials and supplies 859 994
Inventories(a) $ 8,981 $ 9,059
Noncurrent inventories not included above(b) $ 5,827 $ 939
(a)
The decrease from December 31, 2021 reflects lower levels of Comirnaty,
partially offset by new products acquired through recent acquisitions
and higher
Paxlovid inventory levels.
(b) Included in Other
noncurrent assets. The increase from December 31, 2021 is primarily due
to strategic inventory build related to Paxlovid. Based on our
current estimates and assumptions, there are no recoverability issues for these amounts.
B. Other Current Liabilities
Other
current liabilities includes, among other things, amounts payable to
BioNTech for the gross profit split for Comirnaty, which totaled
$5.2 billion as of December 31, 2022 and $9.7 billion as of December 31, 2021.
Note 9. Property, Plant and Equipment (PP&E)
The following summarizes the components of Property, plant and equipment:
Useful Lives As of December 31,
(MILLIONS) (Years) 2022 2021
Land - $ 368 $ 423
Buildings 33-50 8,832 9,001
Machinery and equipment 8-20 12,881 12,252
Furniture, fixtures and other 3-12.5 4,491 4,457
Construction in progress - 4,875 3,822
31,448 29,955
Less: Accumulated depreciation 15,174 15,074
Property, plant and equipment $ 16,274 $ 14,882
The following provides long-lived assets by geographic area:
As of December 31,
(MILLIONS) 2022 2021
United States $ 9,179 $ 8,385
Developed Europe 5,389 5,094
Developed Rest of World 293 347
Emerging Markets 1,413 1,056
Property, plant and equipment $ 16,274 $ 14,882
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 78
Note 10. Identifiable Intangible Assets and Goodwill
A. Identifiable Intangible Assets
The following summarizes the components of Identifiable intangible assets:
As of December 31, 2022 As of December 31, 2021
(MILLIONS)
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) $ 85,604 $ (56,307) $ 29,297 $ 73,346 $ (53,732) $ 19,614
Brands 922 (844) 78 922 (807) 115
Licensing agreements and other 2,237 (1,397) 841 2,284 (1,299) 985
88,763 (58,548) 30,215 76,552 (55,838) 20,714
Indefinite-lived intangible assets
Brands 827 827 827 827
IPR&D(b) 11,357 11,357 3,092 3,092
Licensing agreements and other(b) 971 971 513 513
13,155 13,155 4,432 4,432
Identifiable intangible assets(c) $ 101,919 $ (58,548) $ 43,370 $ 80,984 $ (55,838) $ 25,146
(a) The increase in the gross carrying amounts mainly reflect the impact of the acquisitions of Biohaven and GBT (see Note 2A).
(b)
The increase in the gross carrying amounts mainly reflect the impact of
the acquisitions of Arena, GBT and Biohaven (see Note 2A), and for
IPR&D, is partially
offset by an impairment (see Note 4).
(c) The increase is primarily due to acquisitions (see Note 2A), partially offset by amortization expense.
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: Nurtec ODT/Vydura,
Xtandi, Prevnar family, Braftovi/Mektovi, Oxbryta, Premarin, Eucrisa,
Orgovyx,
Zavicefta, Bavencio and Merrem/Meronem. Also included in
this category are the post-approval milestone payments made under our
alliance
agreements for certain prescription pharmaceutical 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 Zavedos and Depo-Provera.
IPR&D––IPR&D
assets represent R&D assets acquired through business combinations
that have not yet received regulatory approval in a
major market.
The significant components of IPR&D are etrasimod, GBT601,
talazoparib, Braftovi/Mektovi and zavegepant. 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 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, IPR&D assets may become impaired and/or be written-off 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 and Arena 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 be
written-off, and we will
record an impairment charge.
Amortization––The
weighted-average life for each of our total finite-lived intangible
assets is approximately 9 years, and for the largest
component,
developed technology rights, is approximately 8 years. Total
amortization expense for finite-lived intangible assets was $3.6 billion
in 2022, $3.7 billion in 2021 and $3.4 billion in 2020.
The following provides the expected annual amortization expense:
(MILLIONS) 2023 2024 2025 2026 2027
Amortization expense $ 4,223 $ 3,981 $ 3,780 $ 3,714 $ 3,503
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 79
B. Goodwill
The following summarizes the changes in the carrying amount of Goodwill:
(MILLIONS) Total(a)
Balance, January 1, 2021 $ 49,556
Additions —
Impact of foreign exchange (348)
Balance, December 31, 2021 49,208
Additions(b) 2,917
Impact of foreign exchange (750)
Balance, December 31, 2022 $ 51,375
(a)
As a result of the organizational changes to the commercial structure
within the Biopharma operating segment effective in the third quarter of
2022 (see Note
1A), our goodwill was required to be reallocated
amongst impacted reporting units. The allocation of goodwill is a
complex process that requires, among other
things, that we
determine the fair value of each reporting unit under our old and new
organizational structure and the portions being transferred. We
completed
this re-allocation during the fourth quarter 2022 and
concluded that none of our goodwill was impaired. Our goodwill balance
continues to be assigned within the
Biopharma reportable segment.
(b) Additions relate to our acquisitions of GBT, Arena and Biohaven. 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 summarizes the components of net periodic benefit
cost/(credit), including those reported as part of discontinued
operations for
2020, and the changes in Other comprehensive income/(loss) for our benefit plans:
Pension Plans Postretirement Plans
U.S. International
Year Ended December 31,
(MILLIONS) 2022 2021 2020 2022 2021 2020 2022 2021 2020
Service cost $ — $ — $ — $ 116 $ 130 $ 146 $ 29 $ 36 $ 38
Interest cost 534 455 533 157 146 164 27 29 49
Expected return on plan assets (862) (1,052) (1,015) (296) (327) (314) (47) (39) (36)
Amortization of prior service cost/(credit) 2 (2) (3) (1) (1) (3) (130) (151) (170)
Actuarial (gains)/losses(a) 225 (684) 1,152 (11) (690) 148 (440) (167) (165)
Curtailments — — — (11) (4) — (18) (82) —
Special termination benefits 18 17 1 1 — — 1 2 —
Net periodic benefit cost/(credit) reported
in income (84) (1,265) 668 (45) (746) 141 (578) (372) (282)
Cost/(credit) reported in Other
comprehensive income/(loss) (2) 2 5 (1) 4 5 169 107 114
Cost/(credit) recognized in
Comprehensive income $ (86) $ (1,264) $ 674 $ (46) $ (742) $ 145 $ (410) $ (265) $ (168)
(a)
Reflects: (i) actuarial remeasurement net gains in 2022, primarily due
to increases in discount rates, partially offset by unfavorable plan
asset performance, (ii)
actuarial remeasurement gains in 2021,
primarily due to favorable plan asset performance and increases in
discount rates, and (iii) actuarial remeasurement net
losses in 2020, primarily due to decreases in discount rates partially offset by favorable plan asset performance.
The
components of net periodic benefit cost/(credit) other than the service
cost component are primarily included in Other (income)/
deductions––net (see Note 4).
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 80
B. Actuarial Assumptions
Pension Plans Postretirement Plans
U.S. International
Year Ended December 31,
(PERCENTAGES) 2022 2021 2020 2022 2021 2020 2022 2021 2020
Weighted-average assumptions used to
determine net periodic benefit cost:
Discount rate:
Pension plans/postretirement plans 2.9 % 2.6 % 3.3 % 2.9 % 2.5 % 3.2 %
Interest cost 1.5 % 1.2 % 1.5 %
Service cost 1.7 % 1.4 % 1.6 %
Expected return on plan assets 6.3 % 6.8 % 7.0 % 3.1 % 3.4 % 3.6 % 6.3 % 6.8 % 7.0 %
Rate of compensation increase(a) 2.8 % 2.9 % 2.9 %
Weighted-average assumptions used to
determine benefit obligations at fiscal
year-end:
Discount rate 5.4 % 2.9 % 2.6 % 3.8 % 1.6 % 1.5 % 5.5 % 2.9 % 2.5 %
Rate of compensation increase(a) 3.0 % 2.8 % 2.9 %
(a)
The rate of compensation increase is not used to determine the net
periodic benefit cost and benefit obligation for the U.S. pension plans
as these plans are
frozen.
All of the assumptions are reviewed
at least annually. 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
set with reference to 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 2022 resulted in substantially higher 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,
2022 2021
Healthcare cost trend rate assumed for next year 6.4 % 6.0 %
Rate to which the cost trend rate is assumed to decline 4.0 % 4.0 %
Year that the rate reaches the ultimate trend rate 2045 2045
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 81
C. Obligations and Funded Status
The
following provides: (i) an analysis of the changes in our benefit
obligations, plan assets and funded status of our benefit plans, (ii)
the
funded status recognized in our consolidated balance sheets and
(iii) the pre-tax components of cumulative amounts recognized in
Accumulated other comprehensive loss:
Pension Plans Postretirement Plans
U.S. International
Year Ended December 31,
(MILLIONS) 2022 2021 2022 2021 2022 2021
Change in benefit obligation(a)
Benefit obligation, beginning $ 17,150 $ 18,306 $ 11,657 $ 12,001 $ 995 $ 1,238
Service cost — — 116 130 29 36
Interest cost 534 455 157 146 27 29
Employee contributions — — 9 10 75 78
Plan amendments — — — — 24 (116)
Changes in actuarial assumptions and other(b) (4,187) (331) (2,931) 89 (593) (117)
Foreign exchange impact (1) — (1,065) (298) (5) 1
Upjohn spin-off(c) — — 37 3 — —
Acquisitions/divestitures, net 61 — (50) — — —
Curtailments and special termination benefits 18 17 (10) (2) (3) (8)
Settlements(d) (1,698) (785) (64) (47) (39) —
Benefits paid (457) (512) (359) (374) (101) (147)
Benefit obligation, ending(a) 11,420 17,150 7,497 11,657 410 995
Change in plan assets
Fair value of plan assets, beginning 16,346 16,094 10,729 9,811 753 588
Actual return on plan assets (3,550) 1,405 (2,624) 1,106 (106) 89
Company contributions 230 143 156 451 65 145
Employee contributions — — 9 10 75 78
Foreign exchange impact — — (1,037) (229) — —
Upjohn spin-off(c) — — 45 2 — —
Acquisitions/divestitures, net 1 — 9 — — —
Settlements(d) (1,698) (785) (64) (47) (39) —
Benefits paid (457) (512) (359) (374) (101) (147)
Fair value of plan assets, ending 10,871 16,346 6,865 10,729 647 753
Funded status $ (549) $ (805) $ (632) $ (928) $ 238 $ (241)
Amounts recorded in our consolidated balance sheet:
Noncurrent assets $ 346 $ 447 $ 783 $ 1,480 $ 322 $ —
Current liabilities (110) (138) (27) (33) (6) (6)
Noncurrent liabilities (785) (1,113) (1,388) (2,376) (78) (235)
Funded status $ (549) $ (805) $ (632) $ (928) $ 238 $ (241)
Pre-tax components of cumulative amounts recognized in
Accumulated other comprehensive loss:
Prior service (costs)/credits $ (4) $ (6) $ (34) $ (35) $ 413 $ 581
Information related to the funded status of pension plans
with an ABO in excess of plan assets(e):
Fair value of plan assets $ 86 $ 120 $ 343 $ 1,304
ABO 981 1,371 1,600 3,344
Information related to the funded status of pension plans
with a PBO in excess of plan assets(e):
Fair value of plan assets $ 86 $ 120 $ 1,081 $ 1,381
PBO 981 1,371 2,496 3,789
(a)
For the U.S. pension plans, the benefit obligation is both the PBO and
ABO as these plans are frozen and future benefit accruals no longer
increase with future
compensation increases. For the international
pension plans, the benefit obligation is the PBO. The ABO for our
international pension plans was $7.2 billion in
2022 and $11.2 billion in 2021. For the postretirement plans, the benefit obligation is the ABO.
(b)
For both 2022 and 2021, primarily includes actuarial gains resulting
from increases in discount rates, offset by increases in inflation
assumptions for the
international plan.
(c) For more information, see Note 2B.
(d)
As a result of a group annuity contract entered into between Pfizer and
a third party insurance company in July 2022, the third party insurance
company
assumed future benefit obligations and responsibility for
the annuity payments of certain retirees in the Pfizer Consolidated
Pension Plan. As of December 31,
2022, $586 million of benefit
obligations and $588 million of plan assets are associated with this
contract. We expect to finalize the remaining regulatory
approvals for this transaction in due course.
(e)
Our main U.S. qualified plan, U.S. postretirement plan and many of our
international plans were overfunded as of December 31, 2022.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 82
D. Plan Assets
The following provides the components of plan assets:
As of December 31, 2022 As of December 31, 2021
Fair Value Fair Value
(MILLIONS EXCEPT TARGET
ALLOCATION PERCENTAGE)
Target
Allocation
Percentage Total
Level
1
Level
2
Level
3
Assets
Measured
at NAV(a) Total
Level
1
Level
2
Level
3
Assets
Measured
at NAV(a)
U.S. pension plans
Cash and cash equivalents 0-10% $ 828 $ 49 $ 779 $ — $ — $ 1,326 $ 78 $ 1,248 $ — $ —
Equity securities: 20-40%
Global equity securities 1,555 1,553 1 1 — 2,273 2,233 38 2 —
Equity commingled funds 165 — 165 — — 1,352 — 1,152 — 200
Fixed income securities: 45-75%
Corporate debt securities 3,512 5 3,507 — — 5,566 18 5,548 — —
Government and agency
obligations(b) 1,772 — 1,772 — — 2,533 — 2,533 — —
Fixed income commingled
funds 16 — 16 — — 38 — 38 — —
Other investments: 5-20%
Partnership investments(c) 2,152 — — — 2,152 2,079 3 — — 2,076
Insurance contracts 116 — 116 — — 158 — 158 — —
Other commingled funds(d) 756 — — — 756 1,019 — 10 — 1,009
Total 100 % $ 10,871 $ 1,607 $ 6,355 $ 1 $ 2,908 $ 16,346 $ 2,332 $ 10,726 $ 2 $ 3,286
International pension plans
Cash and cash equivalents 0-10% $ 221 $ 58 $ 163 $ — $ — $ 541 $ 191 $ 346 $ — $ 3
Equity securities: 10-20%
Equity commingled funds 714 — 672 — 42 1,453 — 1,386 — 67
Fixed income securities: 45-70%
Corporate debt securities 569 — 569 — — 1,187 — 1,187 — —
Government and agency
obligations(b) 862 — 862 — — 2,415 — 2,415 — —
Fixed income commingled
funds 2,053 — 1,045 — 1,008 2,266 — 1,138 — 1,128
Other investments: 15-35%
Partnership investments(c) 128 — 1 — 126 107 — 2 — 106
Insurance contracts 1,197 — 54 1,143 — 1,329 — 56 1,273 —
Other(d) 1,122 — 133 312 677 1,431 — 141 404 886
Total 100 % $ 6,865 $ 58 $ 3,498 $ 1,455 $ 1,853 $ 10,729 $ 191 $ 6,672 $ 1,677 $ 2,189
U.S. postretirement plans(e)
Cash and cash equivalents 0-5% $ 97 $ 1 $ 96 $ — $ — $ 85 $ 3 $ 82 $ — $ —
Insurance contracts 95-100% 551 — 551 — — 669 — 669 — —
Total 100 % $ 647 $ 1 $ 646 $ — $ — $ 753 $ 3 $ 750 $ — $ —
(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:
International Pension Plans
Year Ended December 31,
(MILLIONS) 2022 2021
Fair value, beginning $ 1,677 $ 1,362
Actual return on plan assets:
Assets held, ending (177) 23
Assets sold during the period 4 —
Purchases, sales, and settlements, net (129) 52
Transfer into/(out of) Level 3 241 265
Exchange rate changes (161) (24)
Fair value, ending $ 1,455 $ 1,677
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 83
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. Level 3
investments may include securities or insurance contracts that are
valued
using alternative pricing sources, such as investment
managers or brokers, which use proprietary pricing models that
incorporate
unobservable inputs.
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.
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.
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.
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.
The following provides the expected future cash flow information related to our benefit plans:
Pension Plans Postretirement Plans
(MILLIONS) U.S. International
Expected employer contributions:
2023(a) $ 111 $ 147 $ (53)
Expected benefit payments:
2023 $ 982 $ 364 $ 42
2024 947 365 43
2025 920 372 44
2026 901 379 44
2027 885 392 43
2028–2032 4,218 2,069 192
(a)
For the U.S. postretirement plan, the IRC 401(h) and voluntary
employees’ beneficiary association reimbursements totaling $95 million
are expected to exceed
expected employer contributions.
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.
F. Defined Contribution Plans
We
have defined contribution plans in the U.S. and 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. We also offer a
Retirement
Savings Contribution (RSC) which is an annual non-contributory employer
contribution in the U.S. and Puerto Rico. We recorded
charges
related to the employer contributions to global defined contribution
plans of $770 million in 2022, $732 million in 2021 and $685 million
in 2020.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 84
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 a share-purchase plan, which is authorized by our BOD, are
available for general corporate purposes. In December
2018, the BOD
authorized a $10 billion share repurchase program to be utilized over
time and share repurchases commenced thereunder in
the first quarter of 2019.
In
the first quarter of 2022, we purchased 39 million shares of our common
stock at a cost of $2 billion under our publicly announced share
purchase plan. Our remaining share-purchase authorization was approximately $3.3 billion at December 31, 2022.
B. Preferred Stock and Employee Stock Ownership Plans
Prior
to May 4, 2020, we had outstanding Series A convertible perpetual
preferred stock (the Series A Preferred Stock) that 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 to our restated certificate of
incorporation,
as amended and a restated certificate of incorporation with the
Delaware Secretary of State, which eliminated the Series A
Preferred Stock.
We
have one ESOP that holds common stock of the Company (Common ESOP). As
of December 31, 2022, 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 for each of 2022, 2021 and 2020.
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), Breakthrough Performance Awards (BPAs) and stock options, as determined by the
Compensation Committee of our BOD.
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. As of December 31, 2022, no
shares remain under the 2014 Plan. 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 count as three shares, PPSs,
PSAs and BPAs count as three shares times the maximum
potential
payout, while TSRUs and stock options count as one share, toward the
maximum shares available under the 2019 Plan. As of
December 31,
2022, 270 million shares were available for award, including 27 million
shares that we assumed from the remaining shares
available from the
stock plans of GBT, Arena and Biohaven which can be issued to legacy
employees of the acquired companies and newly
hired employees after
the dates of the respective acquisitions. 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.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 85
A summary of the awards and valuation details:
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 dividend equivalents 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 settle on the fifth or seventh anniversary of the grant
but vest on the third anniversary of the grant.
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 dividend equivalents that are reinvested
into additional RSUs.
• For RSUs granted before 2022, generally in all instances, the units
vest on the third anniversary of the grant date assuming continuous
service from the grant date. Beginning in 2022, generally in all
instances, the units vest and distribute one-third per year for three
years on each of the three annual anniversaries from the date of
grant assuming 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 for RSUs granted
before 2022, and on an accelerated attribution
approach for RSUs granted in 2022, over the vesting
term into Cost of sales, Selling, informational and
administrative expenses, and/or Research and
development expenses, as appropriate.
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 earned on such shares.
• For PPSs granted, the awards vest on the third anniversary of the
grant assuming 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 three or five-year performance period from the year of the
grant date, as applicable.
• 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 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, the
number of shares that are probable of being earned,
and management’s assessment of the probability that
the specified performance criteria will be achieved.
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 (retirees) earned, if any, or an equal
value in cash (active colleagues), including dividend equivalents on
shares earned, dependent upon the achievement of predetermined
goals related to two measures:
a. Adjusted net income 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 on the third anniversary of the grant assuming
continuous service from the grant date.
• The award that may be earned ranges from 0% to 200% of the
target 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 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, the
number of shares that are probable of being earned
and management’s assessment of the probability that
the specified performance criteria will be achieved.
Breakthrough Performance Awards (BPAs)
Select
employees
identified as
instrumental in
delivering
medicines to
patients
(excluding
executive
officers)
• 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 earned on such shares.
• For BPAs granted, the awards, if earned/vested, are settled at the
end of the performance period, but no earlier than the one-year
anniversary of the date of grant and dependent upon the
achievement of the respective predetermined performance goals
related to advancing Pfizer’s product pipeline during the
performance period.
• The number of shares that may be earned ranges from 0% to 600%
of the target award depending on the level and timing of 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, the
number of shares that are probable of being earned
and management’s assessment of the probability that
the specified performance criteria will be achieved
and/or management’s assessment of the probable
vesting term.
Awarded to Terms Valuation Recognition and Presentation
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 86
Stock Options
Select
employees
• Entitle the holder to purchase a specified number of shares of our
common stock at a price per share equal to the closing market price
of our common stock on the date of grant, for a period of time when
vested.
• Since 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 on the third anniversary of the grant assuming
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.
Awarded to Terms Valuation Recognition and Presentation
(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. In addition to having the same characteristics and valuation
methodology of TSRUs, PTSRU grants require special service
and performance conditions. These awards were settled in December 2022 in accordance with the grant provisions.
The following provides data related to all TSRU, RSU, PPS, PSA and stock option activity:
(MILLIONS, EXCEPT FAIR VALUE
OF SHARES VESTED PER TSRU
AND STOCK OPTION)
TSRUs RSUs PPSs PSAs Stock Options
Year Ended December 31, 2022 2021 2020 2022 2021 2020 2022 2021 2020 2022 2021 2020 2022 2021 2020
Total fair value of shares vested(a) $11.72 $7.26 $6.22 $345 $304 $334 $145 $181 $119 $57 $33 $25 $9.44 $4.86 $3.56
Total intrinsic value of options
exercised or share units
converted $1,131 $594 $84 $280 $228 $224 $247 $584 $293
Cash received upon exercise $260 $795 $425
Tax benefits realized from exercise $46 $106 $55
Compensation cost recognized,
pre-tax(b) $255 $259 $287 $402 $281 $272 $144 $535 $180 $73 $76 $31 $4 $5 $6
Total compensation cost related to
nonvested awards not yet
recognized, pre-tax $179 $187 $224 $266 $271 $228 $135 $175 $104 $38 $54 $32 $3 $3 $4
Weighted-average period over
which cost is expected to be
recognized (years) 1.7 1.6 1.6 1.7 1.8 1.7 1.7 1.8 1.8 1.8 1.8 1.9 1.7 1.6 1.7
(a) Weighted-average GDFV per TSRUs and stock options.
(b) In 2020, TSRU includes expense for PTSRUs, which is not significant.
Total
share-based payment expense was $872 million, $1.2 billion and $780
million in 2022, 2021 and 2020, respectively, which includes pre-
tax
share-based payment expense included in Discontinued operations––net of
tax of $0 million, $2 million and $25 million in 2022, 2021 and
2020,
respectively. Tax benefit for share-based compensation expense was $160
million, $227 million and $141 million in 2022, 2021 and
2020, 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, 2022 2021 2020 2022 2021 2020
Expected dividend yield (based on a constant dividend yield
during the expected term) 3.42 % 4.51 % 4.36 % 3.42 % 4.51 % 4.36 %
Risk-free interest rate (based on interpolated yield on U.S.
Treasury zero-coupon issues) 1.87 % 0.93 % 1.15 % 1.93 % 1.27 % 1.25 %
Expected stock price volatility (based on implied volatility, after
consideration of historical volatility) 29.20 % 26.53 % 20.99 % 29.21 % 26.54 % 20.97 %
TSRUs contractual/stock options expected term, years (based
on historical exercise and post-vesting termination patterns for
stock options)
5.17 5.15 5.12 6.50 6.75 6.75
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 87
Summary
of all TSRU, RSU, PPS, PSA and BPA activity during 2022 (with the
shares granted representing the maximum award that could be
achieved for PPSs, PSAs and BPAs):
TSRUs RSUs PPSs(a) PSAs BPAs
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
Shares
Weighted
Avg.
Intrinsic
Value per
share
(Thousands) GDFV Grant Price (Thousands) (Thousands) (Thousands) (Thousands)
Nonvested,
December 31, 2021 114,599 $ 6.90 $ 34.12 25,540 $ 35.52 21,480 $ 59.05 5,154 $ 59.05 859 $ 59.05
Granted 22,479 11.72 46.02 9,617 46.73 7,089 45.96 1,506 46.38 — —
Vested (33,066) 8.40 38.57 (7,258) 41.10 (5,602) 46.99 (1,209) 46.98 — —
Reinvested dividend
equivalents 876 50.30
Forfeited (2,318) 7.76 35.88 (948) 39.75 (645) 50.52 (433) 47.22 (859) 47.21
Nonvested, December
31, 2022 101,693 $ 7.58 $ 35.26 27,826 $ 38.26 22,322 $ 51.24 5,018 $ 51.24 — $ —
(a) Vested and non-vested shares outstanding, but not paid as of December 31, 2022 were 34.2 million.
Summary of TSRU and PTU information as of December 31, 2022(a), (b):
TSRUs
(Thousands)
PTUs
(Thousands)
Weighted-
Average
Grant Price
Per TSRU
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic Value
(Millions)
TSRUs Outstanding 180,182 $ 34.51 2.0 $ 3,528
TSRUs Vested 78,488 33.54 0.7 1,637
TSRUs Expected to vest(c) 99,060 $ 35.14 3.0 1,856
Outstanding PTUs converted from TSRUs
exercised 2,621 0.6 $ 134
(a) In 2022, we settled 42,938,701 TSRUs with a weighted-average grant price of $27.32 per unit.
(b) In 2022, 3,097,904 TSRUs with a weighted-average grant price of $28.37 per unit were converted into 1,820,027 PTUs.
(c) The number of TSRUs expected to vest takes into account an estimate of expected forfeitures.
Summary of all stock option activity during 2022:
Shares
(Thousands)
Weighted-Average
Exercise Price
Per Share
Weighted-Average
Remaining
Contractual Term
(Years)
Aggregate
Intrinsic Value(a)
(Millions)
Outstanding, December 31, 2021 44,874 $ 30.20
Granted 429 45.96
Exercised (9,859) 26.44
Forfeited (26) 34.52
Expired (138) 20.80
Outstanding, December 31, 2022 35,280 31.47 2.1 $ 697
Vested and expected to vest, December 31, 2022(b) 35,209 31.46 2.1 696
Exercisable, December 31, 2022 32,460 $ 31.18 1.6 $ 651
(a) Market price of our underlying common stock less exercise price.
(b) The number of options expected to vest takes into account an estimate of expected forfeitures.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 88
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) 2022 2021 2020
EPS Numerator––Basic
Income from continuing operations attributable to Pfizer Inc. common shareholders $ 31,366 $ 22,414 $ 6,630
Discontinued operations––net of tax 6 (434) 2,529
Net income attributable to Pfizer Inc. common shareholders $ 31,372 $ 21,979 $ 9,159
EPS Numerator––Diluted
Income from continuing operations attributable to Pfizer Inc. common shareholders and
assumed conversions $ 31,366 $ 22,414 $ 6,630
Discontinued operations––net of tax, attributable to Pfizer Inc. common shareholders and
assumed conversions 6 (434) 2,529
Net income attributable to Pfizer Inc. common shareholders and assumed conversions $ 31,372 $ 21,979 $ 9,159
EPS Denominator
Weighted-average number of common shares outstanding––Basic 5,608 5,601 5,555
Common-share equivalents: stock options and stock issuable under employee
compensation plans 125 107 77
Weighted-average number of common shares outstanding––Diluted 5,733 5,708 5,632
Anti-dilutive common stock equivalents(a) 1 2 4
(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 $536
million in 2022, $381 million in 2021 and $380 million in 2020.
We
elected the practical expedient 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
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) Balance Sheet Classification 2022 2021
ROU assets Other noncurrent assets $ 3,002 $ 2,839
Lease liabilities (short-term) Other current liabilities 620 449
Lease liabilities (long-term) Other noncurrent liabilities 2,597 2,510
Components of total lease cost includes:
Year Ended December 31,
(MILLIONS) 2022 2021 2020
Operating lease cost $ 714 $ 548 $ 432
Variable lease cost 536 381 380
Sublease income (32) (41) (40)
Total lease cost $ 1,218 $ 888 $ 772
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 89
Other supplemental information follows:
As of December 31,
(MILLIONS) 2022 2021
Operating leases
Weighted-Average Remaining Contractual Lease Term (Years) 11 12
Weighted-Average Discount Rate 3.0 % 2.8 %
Year Ended December 31,
(MILLIONS) 2022 2021 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 617 $ 387 $ 333
(Gains)/losses on sale and leaseback transactions, net 11 1 (3)
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, 2022:
(MILLIONS)
Period Operating Lease Liabilities
Next one year(a) $ 662
1-2 years 489
2-3 years 356
3-4 years 300
4-5 years 246
Thereafter 1,791
Total undiscounted lease payments 3,844
Less: Imputed interest 627
Present value of minimum lease payments 3,217
Less: Current portion 620
Noncurrent portion $ 2,597
(a) Reflects lease payments due within 12 months subsequent to the balance sheet date.
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,
guarantees and indemnifications. The following outlines our legal
contingencies, guarantees and indemnifications. For a
discussion of our tax contingencies, see Note 5D.
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.
An adverse outcome could result in loss of patent protection for a
product, a significant loss of revenues from a product or impairment
of the value of associated assets. We are the plaintiff in the majority of these actions.
•
Product liability and other product-related litigation related to
current or former products, which can include personal injury, consumer,
off-
label promotion, securities, antitrust and breach of contract
claims, among others, and 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 asserted or unasserted
matters, which can include acquisition-, licensing-, intellectual
property-, collaboration- or co-
promotion-related and
product-pricing claims and environmental claims and proceedings, and 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 increased expenses and/or
losses, including damages, royalty payments, 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
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 90
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. For proceedings under
environmental laws to which a governmental
authority is a party,
we have adopted a disclosure threshold 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 (or those of our
collaboration/licensing partners to which we have licenses or
co-promotion
rights), including but not limited to, those discussed
below. We face claims by generic drug manufacturers that patents
covering our products
(or those of our collaboration/licensing
partners to which we have licenses or co-promotion rights and to which
we may or may not be a party),
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 or those of our
collaboration/licensing partners are being challenged in various other
jurisdictions.
Some of our collaboration or licensing partners face challenges to the
validity of their patent rights in non-U.S. jurisdictions. For
example,
in April 2022, the U.K. High Court issued a judgment finding invalid a
BMS patent related to Eliquis due to expire in 2026. In
November
2022, BMS received permission to appeal the High Court’s decision.
Additional challenges are pending in other jurisdictions. Also,
in
July 2022, CureVac AG (CureVac) brought a patent infringement action
against BioNTech and certain of its subsidiaries in the German
Regional
Court alleging that Comirnaty infringes certain German utility model
patents and certain expired and unexpired European patents.
Additional
challenges involving Comirnaty patents may be filed against us and/or
BioNTech in other jurisdictions in the future. Adverse
decisions in
these matters could have a material adverse effect on our results of
operations. 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.
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 (or
one of our collaboration/licensing partners 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 have been challenged in inter partes
review and post-
grant review proceedings in the U.S. Patent and
Trademark Office, as well as outside the U.S. The invalidation of any of
the patents in our
pneumococcal portfolio could potentially allow
additional competitor vaccines, if approved, to enter the marketplace
earlier than anticipated. In
the event that any of the patents are
found valid and infringed, a competitor’s vaccine, if approved, 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. If
one of our marketed products (or a product of our collaboration/
licensing
partners) is found to infringe valid patent rights of a third party,
such third party may be awarded significant damages or royalty
payments,
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
Xeljanz (tofacitinib)
Beginning
in 2017, we brought patent-infringement actions against several generic
manufacturers that filed separate abbreviated new drug
applications
(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 manufacturers on terms
not material to us. The remaining action continues in the U.S. District Court for the District of Delaware as described below.
In
October 2021, we brought a separate patent-infringement action against
Sinotherapeutics Inc. (Sinotherapeutics) asserting the infringement
and
validity of our patent covering extended release formulations of
tofacitinib that was challenged by Sinotherapeutics in its ANDA seeking
approval to market a generic version of tofacitinib 11 mg extended
release tablets. In November 2022, we filed an additional patent-
infringement
action against Sinotherapeutics relating to its challenge of our
extended release formulation and method of treatment patents in
its ANDA seeking approval to market a generic version of tofacitinib 22 mg extended release tablets.
In
November 2022, we brought a separate patent-infringement action against
Sun Pharmaceutical Industries Limited and Sun Pharmaceutical
Industries,
Inc. (collectively, Sun) asserting the infringement and validity of our
compound patent covering the active ingredient that was
challenged
by Sun in its ANDAs seeking approval to market generic versions of
tofacitinib extended release (11 mg, 22 mg) tablets. In January
2023, we settled our action against Sun on terms not material to us.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 91
Inlyta (axitinib)
In
2019, Glenmark Pharmaceuticals Ltd. (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 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. In November 2022, we settled our action against Glenmark on terms not material to us.
Ibrance (palbociclib)
Beginning
in January 2021, several generic companies notified us that they had
filed ANDAs with the FDA seeking approval to market generic
versions
of Ibrance tablets. The generic companies are challenging some or all
of the following patents: (i) the composition of matter patent
expiring
in 2027; (ii) the composition of matter patent expiring in 2023; (iii)
the method of use patent expiring in 2023; (iv) the crystalline form
patent
expiring in 2034; and (v) a tablet formulation patent expiring in 2036.
We brought patent infringement actions against each of the
generic
filers in various U.S. federal courts, asserting the validity and
infringement of the patents challenged by the generic companies. We
have
settled with one of these generic companies on terms not material to
us, and we dismissed the patent infringement actions relating to the
crystalline
form of patent, the composition of matter patent expiring in 2023, the
method of use patent, and the tablet formulation patent against
the generic companies that had challenged these patents. The composition of matter patent expiring in 2027 remains in suit.
Eucrisa
Beginning
in September 2021, several generic companies notified us that they had
filed ANDAs with the FDA seeking approval to market
generic
versions of Eucrisa. The companies assert the invalidity and
non-infringement of a composition of matter patent expiring in 2026, two
method of use patents expiring in 2027, and one other method of
use patent expiring in 2030. In September 2021, we brought patent
infringement
actions against the generic filers in the U.S. District Court for the
District of Delaware, asserting the validity and infringement of
the patents challenged by the generic companies.
Braftovi (encorafenib)
In
August 2022, a generic company notified us that it had filed an ANDA
with the FDA seeking approval to market a generic version of Braftovi.
The
company asserted the invalidity and non-infringement of, among others, a
method of use patent expiring in 2033. In September 2022, we
brought
a patent infringement action against the generic company in the U.S.
District Court for the District of Delaware, asserting the validity
and infringement of the method of use patent expiring in 2033. In January 2023, the case was dismissed.
Mektovi (binimetinib)
Beginning
in August 2022, several generic companies notified us that they had
filed ANDAs with the FDA seeking approval to market generic
versions
of Mektovi. The companies assert the invalidity and non-infringement of
two method of use patents expiring in 2030, a method of use
patent
expiring in 2031, two method of use patents expiring in 2033, and a
product by process patent expiring in 2033. Beginning in
September
2022, we brought patent infringement actions against the generic filers
in the U.S. District Court for the District of Delaware,
asserting the validity and infringement of all six patents.
Actions in Which We are the Defendant
Comirnaty
In
March 2022, Alnylam Pharmaceuticals, Inc. (Alnylam) filed a complaint
in the U.S. District Court for the District of Delaware against Pfizer
and
Pharmacia & Upjohn Co. LLC, our wholly owned subsidiary, alleging
that Comirnaty infringes U.S. Patent No. 11,246,933, which was
issued
in February 2022, and seeking unspecified monetary damages. In July
2022, Alnylam filed a second complaint in the U.S. District Court
for
the District of Delaware against Pfizer, Pharmacia & Upjohn Co.
LLC, BioNTech and BioNTech Manufacturing GmbH, alleging that
Comirnaty infringes U.S. Patent No. 11,382,979, which was issued in July 2022, and seeking unspecified monetary damages.
In
August 2022, ModernaTX, Inc. (ModernaTX) and Moderna US, Inc. (Moderna)
sued Pfizer, BioNTech, BioNTech Manufacturing GmbH and
BioNTech US
Inc. in the U.S. District Court for the District of Massachusetts,
alleging that Comirnaty infringes three U.S. patents. In its
complaint, Moderna stated that it is seeking damages for alleged infringement occurring after March 7, 2022.
In
August 2022, ModernaTX filed a patent infringement action in Germany
against Pfizer and certain subsidiary companies, as well as
BioNTech
and certain subsidiary companies, alleging that Comirnaty infringes two
European patents. In September 2022, ModernaTX filed
patent
infringement actions in the U.K and in the Netherlands against Pfizer
and certain subsidiary companies, as well as BioNTech and
certain
subsidiary companies, on the same two patents. In its complaints,
ModernaTX stated that it is seeking damages for alleged
infringement
occurring after March 7, 2022. In the U.K., Pfizer and BioNTech have
brought an action against ModernaTX seeking to revoke
these European patents, which was consolidated with the September 2022 action filed by ModernaTX.
Paxlovid
In
June 2022, Enanta Pharmaceuticals, Inc. filed a complaint in the U.S.
District Court for the District of Massachusetts against Pfizer alleging
that the active ingredient in Paxlovid, nirmatrelvir, infringes
U.S. Patent No. 11,358,953, which was issued in June 2022, and seeking
unspecified monetary damages.
Matters Involving Pfizer and its Collaboration/Licensing Partners
Comirnaty
In
July 2022, Pfizer, BioNTech and BioNTech Manufacturing GmbH filed a
declaratory judgment complaint against CureVac in the U.S. District
Court
for the District of Massachusetts seeking a judgment of
non-infringement for the following three patents relating to Comirnaty:
U.S.
Patent Nos. 11,135,312, 11,149,278, and 11,241,493. Outside of
the U.S., in the U.K., Pfizer and BioNTech have sued CureVac seeking a
judgment of invalidity of several patents and CureVac has made certain infringement counterclaims.
Xtandi (enzalutamide)
In
July 2022, Medivation and Medivation Prostate Therapeutics, Inc.;
Astellas Pharma Inc., Astellas US LLC and Astellas Pharma US, Inc.; and
The Regents of the University of California filed a
patent-infringement suit in the U.S. District Court for the District of
New Jersey against Zydus
Pharmaceuticals (USA) Inc. and Zydus
Lifesciences Ltd.; and in December 2022, the same entities filed a
patent-infringement suit in the U.S.
District Court for the
District of New Jersey against Sun in connection with those companies’
respective ANDAs seeking approval to market
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 92
generic
versions of enzalutamide. The generic manufacturers are challenging the
composition of matter patent, which expires in 2027,
covering enzalutamide and pharmaceutical compositions thereof, for treating prostate cancer.
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.
Effexor
Beginning
in 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
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 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 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
Beginning
in 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 Laboratories Ltd. (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 MDL 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 MDL
plaintiffs. All plaintiffs 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 2017, the Court of Appeals
reversed the District Court’s decisions and remanded the claims to the District Court.
Also,
in 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.
EpiPen (Direct Purchaser)
In
February 2020, a lawsuit was filed in the U.S. District Court for the
District of Kansas against Pfizer, its current and former affiliates
King and
Meridian, and various Mylan entities, on behalf of a
purported U.S. nationwide class of direct purchaser plaintiffs who
purchased EpiPen
devices directly from the defendants. Plaintiffs
in this action generally allege that Pfizer and Mylan conspired to delay
market entry of generic
EpiPen through the settlement of patent
litigation regarding EpiPen, and thereby delayed market entry of generic
EpiPen in violation of federal
antitrust law. Plaintiffs seek
treble damages for alleged overcharges for EpiPen since 2011. In July
2021, the District Court granted defendants’
motion to dismiss the
direct purchaser complaint, without prejudice. In September 2021,
plaintiffs filed an amended complaint. In August 2022,
the District
Court granted Pfizer’s motion to dismiss the complaint, and plaintiffs
have appealed to the U.S. Court of Appeals for the Tenth
Circuit.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 93
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 2017, the federal actions were ordered transferred for
coordinated pre-trial proceedings to a MDL in the U.S. District
Court for the District of New Jersey. As part of the combination of our
and GSK’s
consumer healthcare businesses to form Haleon, Haleon
assumed, and agreed 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. Additional lawsuits have been filed
in which plaintiffs
allege they developed blocked tear ducts following their treatment with Docetaxel.
In
2016, the federal cases were transferred for coordinated pre-trial
proceedings to a MDL in the U.S. District Court for the Eastern District
of
Louisiana. In 2022, the eye injury cases were transferred for
coordinated pre-trial proceedings to a MDL in the U.S. District Court
for the
Eastern District of Louisiana.
• Mississippi Attorney General Government Action
In
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.
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. In 2006, Pfizer sold the consumer
business that included its Zantac OTC rights to Johnson & Johnson
and
transferred the assets and liabilities related to Zantac OTC to
Johnson & Johnson in connection with the sale. Plaintiffs in these
cases seek
compensatory and punitive damages.
In February 2020,
the federal actions were transferred for coordinated pre-trial
proceedings to a MDL in the U.S. District Court for the Southern
District
of Florida (the Federal MDL Court). Plaintiffs in the MDL have filed
against Pfizer and many other defendants a master personal injury
complaint,
asserting a consolidated consumer class action alleging, among other
things, claims under consumer protection statutes of all 50
states,
and a medical monitoring complaint seeking to certify medical
monitoring classes under the laws of 13 states. In addition, (i) Pfizer
has
received service of 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; and (ii) the State of New
Mexico and
the Mayor and City Council of Baltimore separately
filed civil actions against Pfizer and many other defendants in state
courts, alleging various
state statutory and common law claims in
connection with the defendants’ alleged sale of Zantac in those
jurisdictions. In April 2021, a Judicial
Council Coordinated
Proceeding was created in the Superior Court of California in Alameda
County to coordinate personal injury actions
against Pfizer and
other defendants filed in California state court. Coordinated
proceedings have also been created in other state courts. In
December
2022, the Federal MDL Court granted defendants’ Daubert motions to
exclude plaintiffs’ expert testimony and motion for summary
judgment on general causation, and dismissed the litigation.
Chantix
Beginning
in August 2021, a number of putative class actions have been filed
against Pfizer in various U.S. federal courts following Pfizer’s
voluntary
recall of Chantix due to the presence of a nitrosamine,
N-nitroso-varenicline. Plaintiffs assert that they suffered economic
harm
purportedly as a result of purchasing Chantix or generic
varenicline medicines sold by Pfizer. Plaintiffs seek to represent
nationwide and state-
specific classes and seek various remedies,
including damages and medical monitoring. In December 2022, the federal
actions were
transferred for coordinated pre-trial proceedings to a
MDL in the U.S. District Court for the Southern District of New York.
Similar putative class
actions have been filed in Canada and Israel, where the product brand is Champix.
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
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 94
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, as part of our acquisition of Wyeth, we assumed responsibility
for environmental remediation at the Wyeth Holdings LLC (formerly
known
as, Wyeth Holdings Corporation and American Cyanamid Company)
discontinued industrial chemical facility in Bound Brook, New
Jersey.
Since that time, we have executed or have become a party to a number of
administrative settlement agreements, orders on consent,
and/or
judicial consent decrees, with the U.S. Environmental Protection Agency
and/or New Jersey Department of Environmental Protection to
perform
remedial design, removal and remedial actions, and related
environmental remediation activities at the Bound Brook facility. We
have
accrued for the currently estimated costs of these activities.
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
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. In January 2022, the Court of
Appeals
reversed the District Court’s decision. In February 2023, the
defendants filed for en banc review of the Court of Appeals’ decision.
In
February 2023, the Court of Appeals denied defendants’ en banc petitions.
Allergan Complaint for Indemnity
In
2019, Pfizer was named as a defendant in a complaint, along with King,
filed by Allergan Finance LLC (Allergan) in the Supreme Court of
the
State of New York, asserting 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. This suit was voluntarily discontinued without prejudice in January 2021.
Viatris Securities Litigation
In
October 2021, a putative class action was filed in the Court of Common
Pleas of Allegheny County, Pennsylvania on behalf of former Mylan
N.V.
shareholders who received Viatris common stock in exchange for Mylan
shares in connection with the spin-off of the Upjohn Business
and
its combination with Mylan (the Transactions). Viatris, Pfizer, and
certain of each company’s current and former officers, directors and
employees
are named as defendants. An amended complaint was filed in January
2023, and alleges that the defendants violated certain
provisions
of the Securities Act of 1933 in connection with certain disclosures
made in or omitted from the registration statement and related
prospectus
issued in connection with the Transactions, as well as related
communications. Plaintiff seeks damages, costs and expenses and
other equitable and injunctive relief.
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. These matters
often involve government requests
for information on a voluntary
basis or through subpoenas after which the government may seek
additional information through follow-up
requests or additional
subpoenas. 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. We have produced records relating
to this investigation.
• State Attorneys General and Multi-District 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 MDL 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 MDL in
July
2020. The MDL also includes civil complaints filed by private plaintiffs
and state counties against Pfizer, Greenstone and a significant
number of other defendants asserting allegations that generally overlap with those asserted by the State Attorneys General.
Subpoena & Civil Investigative Demand relating to Tris Pharma/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 responded to that subpoena in full and have had no communication
with the SDNY in connection with the subpoena since June 2019.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 95
Additionally,
in September 2020, we received a Civil Investigative Demand (CID) from
the Texas Attorney General’s office seeking records of a
similar nature to those requested by the SDNY. We are producing records in response to this request.
Government Inquiries relating to Meridian Medical Technologies
In
February 2019, we received a CID from the U.S. Attorney’s Office for
the SDNY. The CID seeks records and information related to alleged
quality
issues involving the manufacture of auto-injectors at the Meridian
site. In August 2019, we received a HIPAA subpoena issued by the
U.S.
Attorney’s Office for the Eastern District of Missouri, in coordination
with the Department of Justice’s Consumer Protection Branch,
seeking similar records and information. We are producing records in response to these and subsequent 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
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 have produced records pursuant to these requests.
Zantac––State of New Mexico and Mayor and City Council of Baltimore Civil Actions
See
Legal Proceedings––Product Litigation––Zantac above for information
regarding civil actions separately filed by the State of New Mexico
and
the Mayor and City Council of Baltimore alleging various state
statutory and common law claims in connection with the defendants’
alleged sale of Zantac in those jurisdictions.
Government Inquiries relating to Biohaven
In
June 2022, the U.S. Department of Justice's Commercial Litigation
Branch and the U.S. Attorney’s Office for the Western District of New
York
issued a CID relating to Biohaven. The CID seeks records and
information related to, among other things, engagements with health care
professionals and co-pay coupons cards. Biohaven is a wholly-owned
subsidiary that we acquired in October 2022. We are producing records
in response to these requests.
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,
2022, the estimated fair value of these indemnification obligations is
not
material to Pfizer. See Note 2C for a description of the March 2022
indemnity provided by Pfizer to GSK in connection with the issuance of
notes
by the Consumer Healthcare JV. In conjunction with the completion of
GSK’s demerger transactions in July 2022, GSK’s guarantee and
our related indemnification of GSK’s guarantee were terminated.
In
addition, in connection with our entry into certain agreements and
other transactions, our counterparties may be obligated to indemnify us.
For example, 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 and as previously
disclosed, each of Viatris and Pfizer has agreed to assume, and to
indemnify the other for,
liabilities arising out of certain
matters. Also, our global agreement with BioNTech to co-develop a
mRNA-based coronavirus vaccine program
aimed at preventing COVID-19
infection, includes certain indemnity provisions pursuant to which each
of BioNTech and Pfizer has agreed to
indemnify the other for certain liabilities that may arise in connection with certain third-party claims relating to Comirnaty.
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, 2022, we had commitments totaling $4.4 billion that are
legally binding and enforceable. These commitments include
payments
relating to potential milestone payments deemed reasonably likely to
occur, and purchase obligations for goods and services.
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, 2022 is $645 million, of which $42 million is recorded in
Other
current liabilities and $603 million in Other noncurrent liabilities,
and as of December 31, 2021 was $697 million, of which $135 million
was
recorded in Other current liabilities and $563 million in Other
noncurrent liabilities. The decrease in the contingent consideration
balance
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 96
from
December 31, 2021 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. Segment, Geographic and Other Revenue Information
A. Segment Information
We
regularly review our operating segments and the approach used by
management to evaluate performance and allocate resources. We
manage our commercial operations through two operating segments, Biopharma and PC1, which are each led by a single manager.
Biopharma
is the only reportable segment. Each operating segment has
responsibility for its commercial activities. Regional commercial
organizations
market, distribute and sell our products and are supported by global
platform functions that are responsible for the research,
development,
manufacturing and supply of our products and global corporate enabling
functions. Biopharma receives its R&D services from
WRDM and
GPD. These services include IPR&D projects for new investigational
products and additional indications for in-line products. Each
operating
segment has a geographic footprint across developed and emerging
markets. Our chief operating decision maker uses the revenues
and earnings of the operating segments, among other factors, for performance evaluation and resource allocation.
After
the organizational changes in the third quarter of 2022 (see Note 1A),
the new commercial structure within Biopharma is designed to
better support and optimize performance across three broad customer groups:
•
Primary Care consists of the former Internal Medicine and Vaccines
product portfolios, products for COVID-19 prevention and treatment,
and potential future mRNA and antiviral products.
•
Specialty Care consists of the former Inflammation & Immunology,
Rare Disease and Hospital (excluding Paxlovid) product portfolios.
• Oncology consists of the former Oncology product portfolio.
Other
Business Activities––Includes the operating results of PC1 as well as
certain pre-tax costs not allocated to our operating segment
results, such as costs associated with:
•
WRDM––the R&D and Medical expenses managed by our WRDM
organization, which is generally responsible for research projects for
our
Biopharma portfolio until proof-of-concept is achieved and then
for transitioning those projects to the GPD organization for possible
clinical
and commercial development. R&D spending may include
upfront and milestone payments for intellectual property rights. The
WRDM
organization also has responsibility for certain science-based
and other platform-services organizations, which provide end-to-end
technical
expertise and other services to the various R&D
projects, as well as the Worldwide Medical and Safety group, which
ensures that Pfizer
provides all stakeholders––including patients,
healthcare providers, pharmacists, payers and health authorities––with
complete and up-to-
date information on the risks and benefits
associated with Pfizer products so that they can make appropriate
decisions on how and when to
use Pfizer’s medicines.
• GPD––the
costs associated with our GPD organization, which is generally
responsible for clinical trials from WRDM in the Biopharma
portfolio,
including both early- and late-stage portfolio spend. GPD also provides
technical support and other services to Pfizer R&D
projects. GPD is responsible for facilitating all regulatory submissions and interactions with regulatory agencies.
•
Corporate and other unallocated––the costs associated with (i)
corporate enabling functions (such as digital, global real estate
operations,
legal, finance, human resources, worldwide public
affairs, compliance and worldwide procurement, among others) and other
corporate
costs, including, but not limited to, all strategy,
business development, portfolio management and valuation capabilities
and certain
compensation, as well as interest income and expense,
and gains and losses on investments; (ii) overhead costs primarily
associated with
our manufacturing operations (which include
manufacturing variances associated with production) that are not
directly assessed to an
operating segment, as business unit
(segment) management does not manage these costs; and (iii) our share of
earnings from Haleon/the
Consumer Healthcare JV.
Reconciling
Items––The following items, transactions and events are not allocated to
our operating segment results: (i) all amortization of
intangible
assets; (ii) acquisition-related items, where we incur costs for
executing the transaction, integrating the acquired operations and
restructuring
the combined company; and (iii) certain significant items, representing
substantive and/or unusual, and in some cases recurring,
items
that are evaluated on an individual basis by management and that, either
as a result of their nature or size, would not be expected to
occur
as part of our normal business on a regular basis. Such certain
significant items can include, but are not limited to, pension and
postretirement
actuarial remeasurement gains and losses, non-acquisition-related
restructuring costs, net gains and losses on investments in
equity
securities, as well as costs incurred for legal settlements, asset
impairments and disposals of assets or businesses, including, as
applicable,
any associated transition activities. Beginning in the first quarter of
2022, acquisition-related items may now include purchase
accounting
impacts that previously were included as part of a reconciling item
entitled “Purchase accounting adjustments” that we no longer
separately
present, such as the incremental charge to cost of sales from the sale
of acquired inventory that was written up to fair value,
depreciation
related to the increase/decrease in fair value of acquired fixed
assets, amortization related to the increase in fair value of acquired
debt, and the fair value changes for contingent consideration.
Segment Assets––We manage our assets on a total company basis, not by operating segment, as our operating assets are shared or
commingled.
Therefore, our chief operating decision maker does not regularly review
any asset information by operating segment and,
accordingly, we do
not report asset information by operating segment. Total assets were
$197 billion as of December 31, 2022 and $181 billion
as of December 31, 2021.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 97
Selected Income Statement Information
The following table provides selected income statement information by reportable segment:
Revenues Earnings(a) Depreciation and Amortization(b)
Year Ended December 31, Year Ended December 31, Year Ended December 31,
(MILLIONS OF DOLLARS) 2022 2021 2020 2022 2021 2020 2022 2021 2020
Reportable Segment:
Biopharma $ 98,988 $ 79,557 $ 40,724 $ 57,148 $ 40,647 $ 27,191 $ 813 $ 789 $ 693
Other business activities(c) 1,342 1,731 926 (14,370) (13,455) (12,583) 626 590 592
Reconciling Items:
Amortization of intangible assets (3,609) (3,746) (3,395) 3,609 3,746 3,395
Acquisition-related items (832) (139) (98) (20) (21) (17)
Certain significant items(d) (3,608) 1,003 (4,079) 36 87 18
$ 100,330 $ 81,288 $ 41,651 $ 34,729 $ 24,311 $ 7,036 $ 5,064 $ 5,191 $ 4,681
(a)
Income from continuing operations before provision/(benefit) for taxes
on income. Biopharma’s earnings include dividend income from our
investment in ViiV of
$314 million in 2022, $166 million in 2021
and $278 million in 2020. In connection with the organizational changes
effective in the third quarter of 2022, certain
functions
transferred between Biopharma and corporate enabling functions and
certain activities were realigned within the GPD organization. We have
reclassified
$231 million of costs in 2021 and $222 million of costs in 2020 from
corporate enabling functions, which are included in Other business
activities, to
Biopharma to conform to the current period
presentation. Amortization of intangible assets is not allocated to our
operating segments for all periods presented.
(b) Certain production facilities are shared. Depreciation is allocated based on estimates of physical production.
(c)
Other business activities include revenues and costs associated with
PC1 and costs that we do not allocate to our operating segments, per
above, including
acquired IPR&D expenses in the periods
presented (see Notes 2A, 2D and 2E). In 2022, earnings include (i)
write-offs of $1.3 billion to Cost of sales of
inventory related to
COVID-19 products that have exceeded or are expected to exceed their
approved shelf-lives prior to being used and (ii) charges to Cost of
sales of approximately $430 million related to excess raw materials for Paxlovid.
(d)
Certain significant items are substantive and/or unusual, and in some
cases recurring, items (as noted above). Earnings in 2022 includes,
among other items: (i)
restructuring charges/(credits) and
implementation costs and additional depreciation—asset restructuring of
$1.4 billion ($562 million recorded in Selling,
informational and
administrative expenses and the remaining amount primarily recorded in
Restructuring charges and certain acquisition-related costs) and (ii)
net
losses on equity securities of $1.3 billion recorded in Other
(income)/deductions––net. Earnings in 2021 included, among other items:
(i) actuarial valuation
and other pension and postretirement plan
gains of $1.6 billion recorded in Other (income)/deductions––net and
(ii) net gains on equity securities of $1.3 billion
recorded in
Other (income)/deductions––net, partially offset by (iii) restructuring
charges/(credits) and implementation costs and additional
depreciation—asset
restructuring of $1.3 billion ($450 million
recorded in Selling, informational and administrative expenses and the
remaining amount primarily recorded in
Restructuring charges and
certain acquisition-related costs). Earnings in 2020 included, among
other items: (i) charges of $1.7 billion related to certain asset
impairments
recorded in Other (income)/deductions––net, (ii) actuarial valuation
and other pension and postretirement plan losses of $1.1 billion
recorded in
Other (income)/deductions––net and (iii) restructuring
charges/(credits) and implementation costs and additional
depreciation—asset restructuring of $791
million ($197 million
recorded in Selling, informational and administrative expenses and the
remaining amount primarily recorded in Restructuring charges and
certain acquisition-related costs). For additional information, see Notes 3 and 4.
B. Geographic Information
The following summarizes revenues by geographic area:
Year Ended December 31,
(MILLIONS) 2022 2021 2020
United States $ 42,473 $ 29,746 $ 21,455
Developed Europe 21,982 18,336 7,788
Developed Rest of World 15,778 12,506 4,036
Emerging Markets 20,097 20,701 8,372
Revenues $ 100,330 $ 81,288 $ 41,651
Revenues
exceeded $500 million in each of 24, 21 and 8 countries outside the
U.S. in 2022, 2021 and 2020, respectively. The U.S. is the only
country
to contribute more than 10% of total revenue in 2022, 2021 and 2020. As
a percentage of revenues, our largest country outside the
U.S. was Japan, which contributed 8% of total revenue in 2022, 9% of total revenue in 2021 and 6% of total revenue in 2020.
We
and our collaboration partner, BioNTech, have entered into agreements
to supply pre-specified doses of Comirnaty and we have entered
into
agreements to supply pre-specified treatment courses of Paxlovid with
multiple developed and emerging nations around the world and are
continuing
to deliver doses of Comirnaty and treatment courses of Paxlovid under
such agreements. In 2021 and 2022, we principally sold the
Comirnaty
vaccine and the Paxlovid product directly to government and government
sponsored customers. This includes supply agreements
entered into
in November 2020 and February and May 2021 with the EC for Comirnaty on
behalf of the different EU member states and certain
other
countries. Each EU member state submits its own Comirnaty vaccine order
to us and is responsible for payment pursuant to terms of the
supply agreements negotiated by the EC.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 98
C. Other Revenue Information
Significant Customers
The following summarizes revenue, as a percentage of total revenues, for our three largest U.S. wholesaler customers:
Year Ended December 31,
2022 2021 2020
McKesson, Inc. 8 % 9 % 16 %
AmerisourceBergen Corporation 5 % 7 % 14 %
Cardinal Health, Inc. 4 % 5 % 10 %
Collectively,
our three largest U.S. wholesaler customers represented 32%, 24% and
30% of total trade accounts receivable as of December
31, 2022, 2021 and 2020.
Additionally,
revenues from the U.S. government represented 23% and 13% of total
revenues for 2022 and 2021, respectively, and was not
significant
for 2020. Accounts receivable from the U.S. government represented 4%
and 12% of total trade accounts receivable as of
December 31, 2022
and December 31, 2021, respectively. Revenues and accounts receivable
from the U.S. government primarily represent
sales of Paxlovid and Comirnaty in 2022, and sales of Comirnaty in 2021.
Significant Product Revenues
The following provides detailed revenue information for several of our major products:
TOTAL REVENUES $ 100,330 $ 81,288 $ 41,651
GLOBAL BIOPHARMACEUTICALS BUSINESS (BIOPHARMA)(a) $ 98,988 $ 79,557 $ 40,724
Primary Care $ 73,023 $ 52,029 $ 15,577
Comirnaty direct sales and
alliance revenues(b)
Active immunization to prevent COVID-19
37,806 36,781 154
Paxlovid COVID-19 in certain high-risk patients 18,933 76 —
Eliquis alliance revenues and
direct sales
Nonvalvular atrial fibrillation, deep vein thrombosis, pulmonary embolism
6,480 5,970 4,949
Prevnar family Active immunization to prevent invasive disease caused by Streptococcus
pneumoniae serotypes 6,337 5,272 5,850
Premarin family Symptoms of menopause 455 563 680
BMP2 Development of bone and cartilage 277 266 274
Nimenrix Active immunization against invasive meningococcal ACWY disease 268 193 221
Nurtec ODT/Vydura Acute treatment of migraine and prevention of episodic migraine 213 — —
FSME-IMMUN/TicoVac Active immunization to prevent tick-borne encephalitis disease 200 185 196
Toviaz Overactive bladder 146 238 252
Trumenba Active immunization to prevent invasive disease caused by Neisseria
meningitidis group B 123 118 112
Chantix/Champix An aid to smoking cessation treatment in adults 18 years of age or older 8 398 919
All other Primary Care Various 1,778 1,967 1,972
Specialty Care $ 13,833 $ 15,194 $ 14,280
Vyndaqel family ATTR-CM and polyneuropathy 2,447 2,015 1,288
Xeljanz RA, PsA, UC, active polyarticular course juvenile idiopathic arthritis,
ankylosing spondylitis 1,796 2,455 2,437
Enbrel (Outside the U.S. and
Canada)
RA, juvenile idiopathic arthritis, PsA, plaque psoriasis, pediatric plaque
psoriasis, ankylosing spondylitis and nonradiographic axial
spondyloarthritis 1,003 1,185 1,350
Sulperazon Bacterial infections 786 683 618
Inflectra/Remsima Crohn’s disease, pediatric Crohn’s disease, UC, pediatric UC, RA in
combination with methotrexate, ankylosing spondylitis, PsA and plaque
psoriasis 532 657 659
Ig Portfolio(c) Various 491 430 376
BeneFIX Hemophilia B 425 438 454
Zavicefta Bacterial infections 412 413 212
Genotropin Replacement of human growth hormone 360 389 427
Zithromax Bacterial infections 331 278 276
Medrol Anti-inflammatory glucocorticoid 328 432 402
Fragmin Treatment/prevention of venous thromboembolism 269 305 252
Somavert Acromegaly 268 277 277
Refacto AF/Xyntha Hemophilia A 239 304 370
Vfend Fungal infections 225 267 270
Oxbryta Sickle cell disease 73 — —
(MILLIONS) Year Ended December 31,
PRODUCT PRIMARY INDICATION OR CLASS 2022 2021 2020
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 99
All other Anti-infectives Various 1,471 1,835 1,679
All other Specialty Care Various 2,377 2,830 2,934
Oncology $ 12,132 $ 12,333 $ 10,867
Ibrance HR-positive/HER2-negative metastatic breast cancer 5,120 5,437 5,392
Xtandi alliance revenues mCRPC, nmCRPC, mCSPC 1,198 1,185 1,024
Inlyta Advanced RCC 1,003 1,002 787
Bosulif Philadelphia chromosome–positive chronic myelogenous leukemia 575 540 450
Zirabev Treatment of mCRC; unresectable, locally advanced, recurrent or metastatic
NSCLC; recurrent glioblastoma; metastatic RCC; and persistent, recurrent
or metastatic cervical cancer 562 444 143
Xalkori ALK-positive and Proto-Oncogene 1, Receptor Tyrosine Kinase-positive
advanced NSCLC 465 493 544
Ruxience Non-hodgkin’s lymphoma, chronic lymphocytic leukemia, granulomatosis
with polyangiitis (Wegener’s Granulomatosis) and microscopic polyangiitis 458 491 170
Retacrit Anemia 394 444 386
Sutent Advanced and/or metastatic RCC, adjuvant RCC, refractory gastrointestinal
stromal tumors (after disease progression on, or intolerance to, imatinib
mesylate) and advanced pancreatic neuroendocrine tumor 347 673 819
Lorbrena ALK-positive metastatic NSCLC 343 266 204
Bavencio alliance revenues Locally advanced or metastatic urothelial carcinoma; metastatic Merkel cell
carcinoma; immunotherapy and tyrosine kinase inhibitor combination for
patients with advanced RCC 271 178 80
Aromasin Post-menopausal early and advanced breast cancer 248 211 148
Besponsa Relapsed or refractory B-cell acute lymphoblastic leukemia 219 192 182
Trazimera HER2-positive breast cancer and metastatic stomach cancers 203 197 98
Braftovi In combination with Mektovi for metastatic melanoma in patients with a
BRAFV600E/K mutation and, in combination with Erbitux® (cetuximab)(d), for
the treatment of BRAFV600E-mutant mCRC after prior therapy 194 187 160
Mektovi In combination with Braftovi for metastatic melanoma in patients with a
BRAFV600E/K mutation 176 155 142
All other Oncology Various 357 238 137
PFIZER CENTREONE(a) $ 1,342 $ 1,731 $ 926
Total Alliance revenues included above $ 8,537 $ 7,652 $ 5,418
(MILLIONS) Year Ended December 31,
PRODUCT PRIMARY INDICATION OR CLASS 2022 2021 2020
(a)
See Note 1A for information about our recent organizational changes.
PC1 includes revenues from our contract manufacturing, including certain
Comirnaty-
related manufacturing activities performed on behalf of
BioNTech ($188 million for 2022, $320 million for 2021, and $0 million
for 2020), and revenues from our
active pharmaceutical ingredient
sales operation, as well as revenues related to our manufacturing and
supply agreements with former legacy Pfizer
businesses/partnerships,
including but not limited to, transitional manufacturing and supply
agreements with Viatris following the spin-off of the Upjohn
Business.
(b)
Excludes revenues for certain Comirnaty-related manufacturing
activities performed on behalf of BioNTech, which are included in the
PC1 contract development
and manufacturing organization.
(c) Immunoglobulin (Ig) portfolio include the revenues from Panzyga, Octagam and Cutaquig.
(d) Erbitux® is a registered trademark of ImClone LLC.
Remaining
Performance Obligations––Contracted revenue expected to be recognized
from remaining performance obligations for firm orders
in long-term
contracts to supply Comirnaty to our customers totaled approximately
$15 billion as of December 31, 2022, which includes
amounts
received in advance and deferred, as well as amounts that will be
invoiced as we deliver these products to our customers in future
periods.
Of this amount, current contract terms provide for expected delivery of
product with contracted revenue in 2023 and 2024, the timing
and
terms of which may be renegotiated. Remaining performance obligations
are based on foreign exchange rates as of the end of our fiscal
fourth quarter of 2022 and exclude arrangements with an original expected contract duration of less than one year.
Deferred
Revenues––Our deferred revenues primarily relate to advance payments
received or receivable from various government or
government
sponsored customers in international markets for supply of Comirnaty.
The deferred revenues related to Comirnaty total $2.5
billion as of
December 31, 2022, with $2.4 billion and $77 million recorded in
current liabilities and noncurrent liabilities, respectively. The
deferred
revenues related to Comirnaty totaled $3.3 billion as of December 31,
2021, with $3.0 billion and $249 million recorded in current
liabilities
and noncurrent liabilities, respectively. The decrease in Comirnaty
deferred revenues during 2022 was primarily the result of amounts
recognized
in Revenues as we delivered the product to our customers and the impact
of foreign exchange, partially offset by additional
advance
payments received as we entered into new or amended contracts. During
2022, we recognized revenue of $3.1 billion that was
included in
the balance of Comirnaty deferred revenues as of December 31, 2021. The
Comirnaty deferred revenues as of December 31, 2022
will be
recognized in Revenues proportionately as we transfer control of the
product to our customers and satisfy our performance obligation
under
the contracts, with the amounts included in current liabilities
expected to be recognized in Revenues within the next 12 months, and the
amounts included in noncurrent liabilities expected to be
recognized in Revenues in 2024. Deferred revenues associated with
contracts for
other products were not significant as of December 31, 2022 or 2021.
Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Pfizer Inc. 2022 Form 10-K 100
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As
of the end of the period covered by this Form 10-K, we carried out an
evaluation, under the supervision and with the participation of our
principal
executive officer and principal financial officer, of the effectiveness
of the design and operation of our disclosure controls and
procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act). Based on this evaluation, our principal
executive
officer and principal financial officer concluded that our disclosure
controls and procedures are effective in alerting them in a timely
manner to material information required to be disclosed in our periodic reports filed with the SEC.
Changes in Internal Controls
During
our most recent fiscal quarter, there has not been any change in the
Company’s internal control over financial reporting (as such term is
defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.
Pfizer Inc. 2022 Form 10-K 101
To the Board of Directors and Shareholders
Pfizer Inc.:
Opinion on Internal Control Over Financial Reporting
We
have audited Pfizer Inc. and Subsidiary Companies’ (the Company)
internal control over financial reporting as of December 31, 2022,
based
on criteria established in Internal Control—Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the
Treadway
Commission. In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of
December
31, 2022, based on criteria established in Internal Control-Integrated
Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We
also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States) (PCAOB), the
consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income,
comprehensive
income, equity, and cash flows for each of the years in the three-year
period ended December 31, 2022, and the related
notes
(collectively, the consolidated financial statements), and our report
dated February 23, 2023 expressed an unqualified opinion on
those consolidated financial statements.
Basis for Opinion
The
Company’s management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness
of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control Over
Financial
Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit.
We
are a public accounting firm registered with the PCAOB and are required
to be independent with respect to the Company in accordance
with
the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain
reasonable
assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit of
internal
control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a
material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk.
Our
audit also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A
company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of
financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles. A
company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the
maintenance of records that, in
reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable
assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted
accounting principles, and that
receipts and expenditures of the company are being made only in
accordance with authorizations of
management and directors of the
company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any
evaluation
of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
New York, New York
February 23, 2023
Report of Independent Registered Public Accounting Firm
Pfizer Inc. 2022 Form 10-K 102
Management’s Report
We
prepared and are responsible for the financial statements that appear
in this Form 10-K. These financial statements are in conformity with
accounting
principles generally accepted in the United States of America and,
therefore, include amounts based on informed judgments and
estimates. We also accept responsibility for the preparation of other financial information that is included in this document.
Report on Internal Control Over Financial Reporting
The
management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting as
defined
in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934. The Company’s internal control over financial
reporting is
designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external
purposes in accordance with generally
accepted accounting principles in the United States of America. The
Company’s internal control over
financial reporting includes those
policies and procedures that: (i) pertain to the maintenance of records
that, in reasonable detail, accurately
and fairly reflect the
transactions and dispositions of the assets of the Company; (ii) provide
reasonable assurance that transactions are
recorded as necessary
to permit preparation of financial statements in accordance with
generally accepted accounting principles and that
receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the
Company; and
(iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any
evaluation
of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions or
that
the degree of compliance with the policies or procedures may
deteriorate. Management assessed the effectiveness of the Company’s
internal
control over financial reporting as of December 31, 2022. In making
this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on our
assessment
and those criteria, management believes that the Company maintained
effective internal control over financial reporting as of
December 31, 2022.
The
Company’s independent auditors have issued their auditors’ report on
the Company’s internal control over financial reporting. That report
appears above in this Form 10-K.
Albert Bourla
Chairman and Chief Executive Officer
David M. Denton Jennifer B. Damico
Principal Financial Officer Principal Accounting Officer
February 23, 2023
Management’s Report on Internal Control Over Financial Reporting
Pfizer Inc. 2022 Form 10-K 103
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information
about our Directors is incorporated by reference from the discussion
under the heading Item 1—Election of Directors in our Proxy
Statement.
Information about the Pfizer Policies on Business Conduct governing our
employees, including our Chief Executive Officer, Chief
Financial
Officer and Principal Accounting Officer, and the Code of Business
Conduct and Ethics for Members of the Board of Directors, is
incorporated
by reference from the discussions under the headings Governance
Overview—Pfizer Policies on Business Conduct and —Code
of Conduct
for Directors in our Proxy Statement. Information regarding the
procedures by which our shareholders may recommend nominees
to our
Board of Directors is incorporated by reference from the discussion
under the headings Item 1—Election of Directors—Criteria for Board
Membership
and Annual Meeting Information—Submitting Proxy Proposals and Director
Nominations for the 2024 Annual Meeting in our
Proxy Statement.
Information about our Audit Committee, including the members of the
Committee, and our Audit Committee financial experts,
is incorporated by reference from the discussion under the heading Governance Overview—Board and Committee Information—Board
Committees—The
Audit Committee in our Proxy Statement. The balance of the information
required by this item is contained in the discussion
entitled Information about Our Executive Officers in this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information
about Director and executive compensation is incorporated by reference
from the discussion under the headings Non-Employee
Director Compensation; Executive Compensation; and Governance Overview—Board and Committee Information—Board Committees—The
Compensation Committee—Compensation Committee Interlocks and Insider Participation in our Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information required by this item is incorporated by reference from the discussion under the headings Executive Compensation—
Compensation Tables—Equity Compensation Plan Information and Securities Ownership in our Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information
about certain relationships and transactions with related parties is
incorporated by reference from the discussion under the
headings Governance Overview—Other Governance Practices and Policies—Related Person Transactions and Indemnification and —
Transactions
with Related Persons in our Proxy Statement. Information about director
independence is incorporated by reference from the
discussion under the heading Item 1—Election of Directors—Director Independence in our Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Our
independent registered public accounting firm is KPMG LLP, New York,
NY, Auditor Firm ID: 185. Information about the fees for
professional
services rendered by our independent registered public accounting firm
in 2022 and 2021 is incorporated by reference from the
discussion
under the heading Item 2—Ratification of Selection of Independent
Registered Public Accounting Firm—Audit and Non-Audit Fees
in our
Proxy Statement. Our Audit Committee’s policy on pre-approval of audit
and permissible non-audit services of our independent
registered
public accounting firm is incorporated by reference from the discussion
under the heading Item 2—Ratification of Selection of
Independent
Registered Public Accounting Firm—Policy on Audit Committee Pre-Approval
of Audit and Permissible Non-Audit Services in our
Proxy Statement.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
15(a)(1)
Financial Statements. The following consolidated financial statements,
related notes and report of independent registered public
accounting firm are set forth in Item 8. Financial Statements and Supplementary Data in this Form 10-K:
• Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements
• Consolidated Statements of Income
• Consolidated Statements of Comprehensive Income
• Consolidated Balance Sheets
• Consolidated Statements of Equity
• Consolidated Statements of Cash Flows
• Notes to Consolidated Financial Statements
15(a)(2)
Financial Statement Schedules. Schedules are omitted because they are
not required or because the information is provided
elsewhere in
the financial statements. The financial statements of unconsolidated
subsidiaries are omitted because, considered in the
aggregate, they would not constitute a significant subsidiary.
Pfizer Inc. 2022 Form 10-K 104
15(a)(3)
Exhibits. These exhibits are available upon request. Requests should be
directed to our Corporate Secretary, Pfizer Inc., 66 Hudson
Boulevard
East, New York, New York 10001-2192. The exhibit numbers preceded by an
asterisk (*) indicate exhibits filed with this Form 10-K.
All
other exhibit numbers indicate exhibits filed by incorporation by
reference. Exhibit numbers 10.1 through 10.47 are management contracts
or compensatory plans or arrangements.
2.1 Stock and Asset Purchase Agreement, dated December 19, 2018, by and among us, GlaxoSmithKline plc and GlaxoSmithKline
Consumer Healthcare Holdings Limited is incorporated by reference from our 2018 Annual Report on Form 10-K. (Pursuant to Item
601(b)(2)
of Regulation S-K, the registrant hereby agrees to supplementally
furnish to the SEC upon request any omitted schedule or
exhibit to the Stock and Asset Purchase Agreement.)
2.2
Business Combination Agreement, dated as of July 29, 2019, by and among
us, Upjohn Inc., Utah Acquisition Sub Inc., Mylan N.V.,
Mylan I
B.V. and Mylan II B.V. is incorporated by reference from our Current
Report on Form 8-K filed on July 29, 2019. (Pursuant to
Item
601(b)(2) of Regulation S-K, the registrant hereby agrees to
supplementally furnish to the SEC upon request any omitted schedule
or exhibit to the Business Combination Agreement.)
2.3
Amendment No. 1 to the Business Combination Agreement, dated as of May
29, 2020, by and among us, Upjohn Inc., Utah Acquisition
Sub Inc.,
Mylan N.V., Mylan I B.V. and Mylan II B.V. is incorporated by reference
from our Current Report on Form 8-K filed on June 1,
2020.
(Pursuant to Item 601(b)(2) of Regulation S-K, the registrant hereby
agrees to supplementally furnish to the SEC upon request
any omitted schedule or exhibit to the Amendment No. 1 to the Business Combination Agreement.)
2.4
Separation and Distribution Agreement, dated as of July 29, 2019, by
and between us and Upjohn Inc. is incorporated by reference from
our
Current Report on Form 8-K filed on July 29, 2019. (Pursuant to Item
601(b)(2) of Regulation S-K, the registrant hereby agrees to
supplementally furnish to the SEC upon request any omitted schedule or exhibit to the Separation and Distribution Agreement.)
2.5
Amendment No. 1 to the Separation and Distribution Agreement, dated as
of February 18, 2020, by and between us and Upjohn Inc. is
incorporated
by reference from our 2019 Annual Report on Form 10-K. (Pursuant to
Item 601(b)(2) of Regulation S-K, the registrant
hereby agrees to supplementally furnish to the SEC upon request any omitted schedule or exhibit to the Amendment No. 1 to the
Separation and Distribution Agreement.)
2.6
Amendment No. 2 to the Separation and Distribution Agreement, dated as
of May 29, 2020, by and between us and Upjohn Inc. is
incorporated
by reference from our Current Report on Form 8-K filed on June 1, 2020.
(Pursuant to Item 601(b)(2) of Regulation S-K, the
registrant
hereby agrees to supplementally furnish to the SEC upon request any
omitted schedule or exhibit to the Amendment No. 2 to
the Separation and Distribution Agreement.)
2.7
Amendment No. 3 to the Separation and Distribution Agreement, dated as
of September 18, 2020, by and between us and Upjohn Inc. is
incorporated by reference from our Quarterly Report on Form 10-Q for the period ended September 27, 2020. (Pursuant to Item
601(b)(2)
of Regulation S-K, the registrant hereby agrees to supplementally
furnish to the SEC upon request any omitted schedule or
exhibit to the Amendment No. 3 to the Separation and Distribution Agreement.)
2.8
Amendment No. 4 to the Separation and Distribution Agreement, dated as
of November 15, 2020, by and between us and Upjohn Inc. is
incorporated
by reference from our 2020 Annual Report on Form 10-K. (Pursuant to
Item 601(b)(2) of Regulation S-K, the registrant
hereby agrees to supplementally furnish to the SEC upon request any omitted schedule or exhibit to the Amendment No. 4 to the
Separation and Distribution Agreement.)
3.1
Our Restated Certificate of Incorporation dated December 14, 2020, is
incorporated by reference from our Current Report on Form 8-K
filed on December 14, 2020.
3.2 Our By-laws, as amended December 9, 2022, are incorporated by reference from our Current Report on Form 8-K filed on
December 13, 2022.
4.1
Indenture, dated as of January 30, 2001, between us and The Chase
Manhattan Bank, is incorporated by reference from our Current
Report on Form 8-K filed on January 30, 2001.
4.2
First Supplemental Indenture, dated as of March 24, 2009, between us
and The Bank of New York Mellon (successor to JPMorgan
Chase Bank,
N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank)),
as trustee, to Indenture dated as of January
30, 2001, is incorporated by reference from our Quarterly Report on Form 10-Q for the period ended June 28, 2009.
4.3 Second Supplemental Indenture, dated as of June 2, 2009, between us and The Bank of New York Mellon (successor to JPMorgan
Chase
Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan
Bank)), as trustee, to Indenture dated as of January
30, 2001, is incorporated by reference from our Current Report on Form 8-K filed on June 3, 2009.
4.4
Third Supplemental Indenture, dated as of June 3, 2013, between us and
The Bank of New York Mellon (successor to JPMorgan Chase
Bank, N.A.
(formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank)), as
trustee, to Indenture dated as of January 30,
2001, is incorporated by reference from our Current Report on Form 8-K filed on June 3, 2013.
4.5 Fourth Supplemental Indenture, dated as of May 15, 2014, between us and The Bank of New York Mellon (successor to JPMorgan
Chase
Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan
Bank)), as trustee, to Indenture dated as of January
30, 2001, is incorporated by reference from our Current Report on Form 8-K report filed on May 15, 2014.
4.6
Fifth Supplemental Indenture, dated as of October 5, 2015, between us
and The Bank of New York Mellon (successor to JPMorgan
Chase Bank,
N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank)),
as trustee, to Indenture dated as of January
30, 2001, is incorporated by reference from our Current Report on Form 8-K report filed on October 6, 2015.
4.7
Sixth Supplemental Indenture, dated as of June 3, 2016, between us and
The Bank of New York Mellon (formerly The Bank of New York
(successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank (National
Association)))),
as trustee, to Indenture dated as of January 30, 2001, is incorporated
by reference from our Current Report on Form 8-K
report filed on June 3, 2016.
Pfizer Inc. 2022 Form 10-K 105
4.8
Seventh Supplemental Indenture, dated as of November 21, 2016, between
us and The Bank of New York Mellon (formerly The Bank of
New York (successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank (National
Association)))),
as trustee, to Indenture dated as of January 30, 2001, is incorporated
by reference from our Current Report on Form 8-K
report filed on November 21, 2016.
4.9
Eighth Supplemental Indenture, dated as of March 17, 2017, among us,
The Bank of New York Mellon (formerly The Bank of New York
(successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank (successor to the
Chase
Manhattan Bank (National Association)))), as trustee, and The Bank of
New York Mellon, London Branch, as paying agent, to
Indenture dated
as of January 30, 2001, is incorporated by reference from our Current
Report on Form 8-K report filed on March 17,
2017.
4.10 Ninth
Supplemental Indenture, dated as of March 6, 2017, among us, The Bank of
New York Mellon (formerly The Bank of New York
(successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank (National
Association)))),
as trustee, and The Bank of New York Mellon, London Branch, as paying
agent and calculation agent, to Indenture dated
as of January 30, 2001, is incorporated by reference from our Current Report on Form 8-K report filed on March 6, 2017.
4.11
Tenth Supplemental Indenture, dated as of December 19, 2017, among us,
The Bank of New York Mellon (formerly The Bank of New
York (successor to JPMorgan Chase Bank, N.A. (formerly JPMorgan Chase Bank, formerly The Chase Manhattan Bank (National
Association)))),
as trustee, and The Bank of New York Mellon, London Branch, as paying
agent, to Indenture dated as of January 30,
2001, is incorporated by reference from our Current Report on Form 8-K report filed on December 19, 2017.
4.12
Indenture, dated as of April 10, 1992, between Wyeth (formerly American
Home Products Corporation) and The Bank of New York
Mellon (as
successor to JPMorgan Chase Bank, N.A.), as trustee, is incorporated by
reference from Wyeth’s Registration Statement on
Form S-3, filed on January 18, 1995.
4.13
Supplemental Indenture, dated as of October 13, 1992, between Wyeth and
The Bank of New York Mellon (as successor to JPMorgan
Chase Bank,
N.A.), as trustee, is incorporated by reference from Wyeth’s
Registration Statement on Form S-3, filed on January 18,
1995.
4.14
Fifth Supplemental Indenture, dated as of December 16, 2003, between
Wyeth and The Bank of New York Mellon (as successor to
JPMorgan Chase Bank, N.A.), as trustee, is incorporated by reference from Wyeth’s 2003 Annual Report on Form 10-K.
4.15
Sixth Supplemental Indenture, dated as of November 14, 2005, between
Wyeth and The Bank of New York Mellon (as successor to
JPMorgan
Chase Bank, N.A.), as trustee, is incorporated by reference from Wyeth’s
Current Report on Form 8-K filed on November 15,
2005.
4.16
Seventh Supplemental Indenture, dated as of March 27, 2007, between
Wyeth and The Bank of New York Mellon (as successor to
JPMorgan
Chase Bank, N.A.), as trustee, is incorporated by reference from Wyeth’s
Current Report on Form 8-K filed on March 28,
2007.
4.17
Eighth Supplemental Indenture, dated as of October 30, 2009, between
Wyeth, us and The Bank of New York Mellon (as successor to
JPMorgan Chase Bank, formerly The Chase Manhattan Bank), as trustee, to Indenture dated as of April 10, 1992 (as amended on
October 13, 1992), is incorporated by reference from our Current Report on Form 8-K filed on November 3, 2009.
4.18
Indenture, dated as of September 7, 2018, between us and The Bank of
New York Mellon, as trustee, is incorporated by reference from
our Current Report on Form 8-K filed on September 7, 2018.
4.19
First Supplemental Indenture, dated as of September 7, 2018, between us
and The Bank of New York Mellon, as trustee, is incorporated
by reference from our Current Report on Form 8-K filed on September 7, 2018.
4.20
Second Supplemental Indenture, dated as of March 11, 2019, between us
and The Bank of New York Mellon, as trustee, is incorporated
by reference from our Current Report on Form 8-K filed on March 11, 2019.
4.21
Third Supplemental Indenture, dated as of March 27, 2020, between us
and The Bank of New York Mellon, as trustee, is incorporated by
reference from our Current Report on Form 8-K filed on March 27, 2020.
4.22
Fourth Supplemental Indenture, dated as of May 28, 2020, between us and
The Bank of New York Mellon, as trustee, is incorporated by
reference from our Current Report on Form 8-K filed on May 28, 2020.
4.23
Fifth Supplemental Indenture, dated as of August 18, 2021 between us
and The Bank of New York Mellon, as trustee, is incorporated by
reference from our Current Report on Form 8-K filed on August 18, 2021.
*4.24 Description of Pfizer’s Securities.
4.25
Except as set forth in Exhibits 4.1-24 above, the instruments defining
the rights of holders of long-term debt securities of the Company
and
its subsidiaries have been omitted. We agree to furnish to the SEC,
upon request, a copy of each instrument with respect to
issuances of long-term debt of the Company and its subsidiaries.
10.1
2001 Stock and Incentive Plan is incorporated by reference from our
Proxy Statement for the 2001 Annual Meeting of Shareholders.
10.2
Pfizer Inc. 2004 Stock Plan, as Amended and Restated is incorporated by
reference from our 2011 Annual Report on Form 10-K.
10.3 Amendment No. 1 to Pfizer 2004 Stock Plan is incorporated by reference from our 2020 Annual Report on Form 10-K.
10.4
Pfizer Inc. 2014 Stock Plan is incorporated by reference from our Proxy
Statement for the 2014 Annual Meeting of Shareholders.
10.5 Amendment No. 1 to Pfizer Inc. 2014 Stock Plan is incorporated by reference from our 2020 Annual Report on Form 10-K.
10.6 Form of Acknowledgment and Consent and Summary of Key Terms for Grants of RSUs, TSRUs, PPSs and PSAs is incorporated by
reference from our Quarterly Report on Form 10-Q for the period ended March 29, 2020.
10.7 Form of Executive Grant Letter is incorporated by reference from our 2015 Annual Report on Form 10-K.
Pfizer Inc. 2022 Form 10-K 106
10.8
Pfizer Consolidated Supplemental Pension Plan for United States and
Puerto Rico Employees is incorporated by reference from our
2017 Annual Report on Form 10-K.
10.9
Amendment No. 1 to the Pfizer Consolidated Supplemental Pension Plan
for United States and Puerto Rico Employees is incorporated
by reference from our 2018 Annual Report on Form 10-K.
10.10
Amendment No. 2 to the Pfizer Consolidated Supplemental Pension Plan
for United States and Puerto Rico Employees is incorporated
by reference from our 2020 Annual Report on Form 10-K.
*10.11 Amendment No. 3 to the Pfizer Consolidated Supplemental Pension Plan for United States and Puerto Rico Employees.
10.12
Pfizer Supplemental Savings Plan is incorporated by reference from our
Quarterly Report on Form 10-Q for the period ended April 3,
2016.
10.13 Amendment No. 1 to the Pfizer Supplemental Savings Plan (Amended and Restated as of January 1, 2016), is incorporated by
reference from our Quarterly Report on Form 10-Q for the period ended October 1, 2017.
10.14
Amendment No. 2 to the Pfizer Supplemental Savings Plan is incorporated
by reference from our 2017 Annual Report on Form 10-K.
10.15
Amendment No. 3 to the Pfizer Supplemental Savings Plan is incorporated
by reference from our Quarterly Report on Form 10-Q for the
period ended September 30, 2018.
10.16
Amendment No. 4 to the Pfizer Supplemental Savings Plan is incorporated
by reference from our 2018 Annual Report on Form 10-K.
10.17
Amendment No. 5 to the Pfizer Supplemental Savings Plan is incorporated
by reference from our 2018 Annual Report on Form 10-K.
10.18
Amendment No. 6 to the Pfizer Supplemental Savings Plan is incorporated
by reference from our Quarterly Report on Form 10-Q for the
period ended June 30, 2019.
10.19
Amendment No. 7 to the Pfizer Supplemental Savings Plan is incorporated
by reference from our 2019 Annual Report on Form 10-K.
10.20
Amendment No. 8 to the Pfizer Supplemental Savings Plan is incorporated
by reference from our 2020 Annual Report on Form 10-K.
10.21
Amendment No. 9 to the Pfizer Supplemental Savings Plan is incorporated
by reference from our 2020 Annual Report on Form 10-K.
*10.22 Amendment No. 10 to the Pfizer Supplemental Savings Plan.
*10.23 Amended and Restated Pfizer Inc. Global Performance Plan.
10.24 Amended and Restated Deferred Compensation Plan is incorporated by reference from our 2012 Annual Report on Form 10-K.
10.25
Amendment to Amended and Restated Deferred Compensation Plan, dated
June 20, 2013, is incorporated by reference from our 2013
Annual Report on Form 10-K.
10.26
Amendment No. 2 to Amended and Restated Deferred Compensation Plan,
dated April 27, 2016, is incorporated by reference from our
Quarterly Report on Form 10-Q for the period ended July 3, 2016.
10.27
Amendment No. 3 to Amended and Restated Deferred Compensation Plan is
incorporated by reference from our 2020 Annual Report on
Form 10-K.
10.28
Wyeth 2005 (409A) Deferred Compensation Plan (frozen as of January
2012), together with certain Amendments, is incorporated by
reference from our 2013 Annual Report on Form 10-K.
10.29
Amendment No. 2 to Wyeth 2005 (409A) Deferred Compensation Plan is
incorporated by reference from our 2020 Annual Report on
Form 10-K.
10.30
Amended and Restated Wyeth Supplemental Employee Savings Plan
(effective as of January 1, 2005 and frozen as of January 2012),
together with all material Amendments is incorporated by reference from our 2011 Annual Report on Form 10-K.
10.31
Amendment to Amended and Restated Wyeth Supplemental Employee Savings
Plan, dated June 20, 2013, is incorporated by reference
from our 2013 Annual Report on Form 10-K.
10.32
The form of Indemnification Agreement with each of our non-employee
Directors is incorporated by reference from our 1996 Annual
Report on Form 10-K.
10.33
The form of Indemnification Agreement with each of the Named Executive
Officers identified in our Proxy Statement for the 2022 Annual
Meeting of Shareholders is incorporated by reference from our 1997 Annual Report on Form 10-K.
10.34
Letter to Frank A. D’Amelio regarding replacement pension benefit dated
August 22, 2007 is incorporated by reference from our Current
Report on Form 8-K filed on August 22, 2007.
10.35
Pfizer Inc. Executive Severance Plan is incorporated by referenced from
our Current Report on Form 8-K filed on February 20, 2009.
10.36
Amendment No. 1 to the Pfizer Inc. Executive Severance Plan is
incorporated by reference from our 2018 Annual Report on Form 10-K.
10.37
Amendment No. 2 to the Pfizer Inc. Executive Severance Plan is
incorporated by reference from our 2019 Annual Report on Form 10-K.
10.38
Amendment No. 3 to the Pfizer Inc. Executive Severance Plan is
incorporated by reference from our 2020 Annual Report on Form 10-K.
*10.39 Amendment No. 4 to the Pfizer Inc. Executive Severance Plan.
10.40
Annual Retainer Unit Award Plan (for Non-Employee Directors) (frozen as
of March 1, 2006) as amended, is incorporated by reference
from our 2008 Annual Report on Form 10-K.
*10.41 Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors, as amended.
10.42
Form of Special Award Letter Agreement is incorporated by reference
from our Current Report on Form 8-K filed on October 28, 2009.
Pfizer Inc. 2022 Form 10-K 107
10.43
Offer Letter to G. Mikael Dolsten, dated April 6, 2009, is incorporated
by reference from our Quarterly Report on Form 10-Q for the
period ended April 3, 2011.
10.44 Form of Special Performance-Based Incentive Award Letter is incorporated by reference from our 2017 Annual Report on
Form 10-K.
10.45 Form of Special Performance-Based Incentive Grant Letter is incorporated by reference from our 2017 Annual Report on
Form 10-K.
10.46
Pfizer Inc. 2019 Stock Plan is incorporated by reference from our Proxy
Statement for the 2019 Annual Meeting of Shareholders.
10.47 Time
Sharing Agreement, dated July 9, 2020, between Pfizer Inc. and Albert
Bourla is incorporated by reference from our Quarterly
Report on Form 10-Q for the period ended June 28, 2020.
*21 Subsidiaries of the Company.
22
Subsidiary Issuers of Guaranteed Securities is incorporated by
reference from our Quarterly Report on Form 10-Q for the period ended
April 4, 2021.
*23 Consent of Independent Registered Public Accounting Firm.
*24 Power of Attorney (included as part of signature page).
*31.1 Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2 Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1
Certification by the Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
*32.2
Certification by the Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
Exhibit
101:
*101.INS
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104
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ITEM 16. FORM 10-K SUMMARY
None.
Pfizer Inc. 2022 Form 10-K 108
SIGNATURES
Under
the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, this report was signed on behalf of the Registrant by
the authorized person named below.
Pfizer Inc.
Dated: February 23, 2023 By: /S/ MARGARET M. MADDEN
Margaret M. Madden
Senior Vice President and Corporate Secretary
Chief Governance Counsel
We,
the undersigned directors and officers of Pfizer Inc., hereby severally
constitute Douglas M. Lankler and Margaret M. Madden, and each
of
them singly, our true and lawful attorneys with full power to them and
each of them to sign for us, in our names in the capacities indicated
below, any and all amendments to this Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Under
the requirements of the Securities Exchange Act of 1934, this report
was signed by the following persons on behalf of the Registrant
and in the capacities and on the date indicated.
Signature Title Date
/S/ ALBERT BOURLA
Albert Bourla
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
February 21, 2023
/S/ DAVID M. DENTON
David M. Denton
Chief Financial Officer, Executive Vice President
(Principal Financial Officer)
February 21, 2023
/S/ JENNIFER B. DAMICO
Jennifer B. Damico
Senior Vice President and Controller
(Principal Accounting Officer)
February 21, 2023
/S/ RONALD E. BLAYLOCK
Ronald E. Blaylock
Director
February 21, 2023
/S/ SUSAN DESMOND-
HELLMANN
Susan Desmond-Hellmann
Director
February 21, 2023
/S/ JOSEPH J. ECHEVARRIA
Joseph J. Echevarria
Director
February 21, 2023
/S/ SCOTT GOTTLIEB
Scott Gottlieb
Director
February 21, 2023
/S/ HELEN H. HOBBS
Helen H. Hobbs
Director
February 21, 2023
/S/ SUSAN HOCKFIELD
Susan Hockfield
Director
February 21, 2023
/S/ DAN R. LITTMAN
Dan R. Littman
Director
February 21, 2023
/S/ SHANTANU NARAYEN
Shantanu Narayen
Director
February 23, 2023
/S/ SUZANNE NORA JOHNSON
Suzanne Nora Johnson
Director
February 21, 2023
/S/ JAMES QUINCEY
James Quincey
Director
February 22, 2023
/S/ JAMES C. SMITH
James C. Smith
Director
February 21, 2023
Pfizer Inc. 2022 Form 10-K 109