(BUSINESS WIRE)--Pfizer Inc. (NYSE: PFE) reported financial results for first-quarter 2013 and updated certain components of its 2013 financial guidance to reflect the impact of recent changes in foreign exchange rates and the initial public offering (IPO) of a 19.8% ownership interest in Zoetis⁽¹⁾ completed on February 6, 2013, among other factors. Pfizer continues to consolidate Zoetis⁽¹⁾, as Pfizer retains an 80.2% ownership interest. The earnings attributable to the divested interest in Zoetis⁽¹⁾ (Net income attributable to noncontrolling interests) are excluded from Adjusted⁽²⁾ and Reported⁽³⁾ Net Income,effective February 7, 2013. Results and guidance are summarized below.

2013 FINANCIAL GUIDANCE⁽⁶⁾

Revenues and expenses of Zoetis⁽¹⁾ continue to be includedin the 2013 financial guidance, except that Adjusted⁽²⁾ and Reported⁽³⁾ Diluted EPS guidance excludes the earnings from the 19.8% divested interest effective February 7, 2013. The financial guidance has been updated to reflect the following:

• Reported Revenues: The changes in foreign exchange rates in relation to the U.S. dollar from mid-January 2013 to mid-April 2013, notably the weakening of the Japanese yen.
• Adjusted Diluted EPS⁽²⁾: The aforementioned changes in foreign exchange rates ($0.04 per share) as well as the impact of the Zoetis⁽¹⁾ IPO ($0.02 per share) noted above.
• Reported Diluted EPS⁽³⁾: The aforementioned changes in foreign exchange rates and the impact of the Zoetis⁽¹⁾ IPO as well as the gain associated with the transfer of certain product rights to Pfizer’s joint venture with Zhejiang Hisun Pharmaceuticals (Hisun) in China and an asset impairment charge.

EXECUTIVE COMMENTARY

Ian Read, Chairman and Chief Executive Officer, stated, “As we begin 2013, we continue to generate attractive returns for our shareholders. We are clearly seeing the benefits of the investments we’ve been making in our innovative core, as evidenced by recent key product launches, including Eliquis, Xeljanz and various oncology products, as well as significant progress within our mid-to-late stage product pipeline, most notably palbociclib. Additionally, I am very pleased with the successful completion of the Zoetis⁽¹⁾ IPO and a related debt offering, and with the value these actions have created thus far for Pfizer’s shareholders. We remain focused on driving innovation and managing the business in the context of the challenging operating environment to ensure Pfizer remains well-positioned for long-term value creation, all in the best interests of our shareholders.”

Frank D’Amelio, Chief Financial Officer, stated, “With our consistent financial performance and strong cash flows, including the proceeds from the sale of our Nutrition business in November last year and from the IPO of a 19.8% interest in Zoetis⁽¹⁾ and a related debt offering earlier this year, we continue to make prudent capital allocation decisions for the benefit of our shareholders. So far this year, we have returned approximately $8.0 billion to shareholders in dividends and share repurchases, with significant additional capital expected to be allocated to these activities for the remainder of the year. Our solid performance during first-quarter 2013 was negatively impacted by approximately $0.02 per share due to changes in foreign exchange rates in relation to the U.S. dollar, including the devaluation of the Venezuelan currency in February, since our initial financial guidance was provided in January 2013.”

QUARTERLY FINANCIAL HIGHLIGHTS (First-Quarter 2013 vs. First-Quarter 2012)

• Revenues decreased $1.4 billion, or 9%, which reflects an operational decline of $1.3 billion, or 8%, and the unfavorable impact of foreign exchange of $118 million, or 1%. The operational decrease was primarily the result of the losses of exclusivity of Lipitor during second-quarter 2012 in developed Europe and Geodon in March 2012 in the U.S., the impact of purchasing patterns of Prevnar/Prevenar 13 in various markets, and certain other events, primarily within the Emerging Markets unit highlighted below.
• Business unit revenues were impacted by the following:
  • Primary Care: Revenues decreased 20% operationally, primarily due to the shift in the reporting of Lipitor revenues in developed Europe and Australia to the Established Products unit beginning January 1, 2013, as well as the loss of exclusivity and near-term expiration of co-promotion agreements for Aricept and Spiriva, respectively, partially offset by the strong performance of Lyrica in the U.S. and developed Europe.
  • Specialty Care: Revenues declined 11% operationally, primarily due to the timing of U.S. government purchases of Prevnar 13 and the shift in the reporting of Geodon and Revatio revenues in the U.S. and Xalabrands revenues in developed Europe and Australia to the Established Products unit beginning January 1, 2013.
  • Emerging Markets: Revenues grew 6% operationally, primarily due to strong volume growth in China, which was partially offset by the timing of government purchases of Enbrel and the Prevenar franchise in certain emerging markets as well as the transfer of certain product rights to the Pfizer-Hisun joint venture.
  • Established Products: Revenues decreased 15% operationally, primarily due to multi-source generic competition in the U.S. for Lipitor beginning in late May 2012, as well as continuing competitive and pricing pressures. This decrease was partially offset by revenues from products in certain markets that were shifted to the Established Products unit from other business units beginning January 1, 2013.
  • Consumer Healthcare: Revenues increased 12% operationally, primarily due to the addition of Emergen-C from the acquisition of Alacer Corp., as well as solid growth of key products, including Advil and Robitussin, partially due to a severe cold and flu season in the U.S.
  • Oncology: Revenues increased 31% operationally, driven by the recent launches of new products, most notably Inlyta and Xalkori in several major markets.

• Adjusted cost of sales, adjusted SI&A expenses and adjusted R&D expenses⁽²⁾ in the aggregate decreased $545 million, or 7%, primarily reflecting the benefits of cost-reduction and productivity initiatives, including a reduction in the field force and more streamlined corporate support functions and manufacturing network.
• The effective tax rate on adjusted income⁽²⁾ decreased 2.1 percentage points, primarily due to the change in the jurisdictional mix of earnings and the extension of the U.S. research and development tax credit that was signed into law in January 2013. The first-quarter 2013 rate reflects the full-year benefit of the 2012 research and development tax credit and a portion of the 2013 research and development tax credit.
• The diluted weighted-average shares outstanding declined by approximately 329 million shares, primarily due to the Company’s ongoing share-repurchase program.
• In addition to the aforementioned factors, first-quarter 2013 reported earnings were favorably impacted by lower charges related to legal matters, lower costs related to cost-reduction and productivity initiatives, and lower purchase accounting adjustments. Additionally, reported earnings were favorably impacted by the gain associated with the transfer of certain product rights to the Pfizer-Hisun joint venture, partially offset by less income from discontinued operations reflecting the divestiture of the Nutrition business in November 2012.

RECENT NOTABLE DEVELOPMENTS

Product Developments

• Eliquis was launched in the U.S., UK, Germany, Denmark and Japan for the reduction in the risk of stroke and systemic embolism in patients with nonvalvular atrial fibrillation.
• The Xeljanz U.S. field force launch meeting was held in early March. Additionally, Xeljanz was approved in Japan for the treatment of adults with rheumatoid arthritis (RA) who have had an inadequate response to existing therapies, such as methotrexate.
• Bosulif was granted conditional marketing authorization by the European Commission for use in certain patients with previously treated chronic myelogenous leukemia.
• Quillivant XR, the first once-daily, extended-release, liquid methylphenidate for attention deficit hyperactivity disorder, was launched in the U.S.
• The U.S. Patent and Trademark Office granted Pfizer a reissue patent covering Celebrex. The reissue patent will expire in December 2015, while the basic patent will expire in May 2014, in each case including six months of pediatric exclusivity. Pfizer has initiated legal proceedings against several generic companies to enforce the reissued patent.

Pipeline Developments

• The Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency adopted a negative opinion for Xeljanz for the treatment of adult patients with moderate-to-severe active RA. The CHMP is of the opinion that Xeljanz does not demonstrate a favorable benefit:risk profile. Pfizer intends to appeal this opinion and immediately seek a re-examination of the opinion by the CHMP.
• Palbociclib received Breakthrough Therapy designation by the U.S. Food and Drug Administration (FDA) for the potential treatment of patients with breast cancer. Additionally, a randomized phase 3 study evaluating palbociclib in combination with letrozole for first-line treatment of post-menopausal women with ER+/HER2- advanced breast cancer began enrolling patients in February.
• Inotuzumab ozogamicin received Orphan Drug designation from the FDA for the treatment of acute lymphoblastic leukemia.

Business Development/Portfolio Review

• An IPO of a 19.8% ownership interest in Zoetis⁽¹⁾ as well as a related debt offering were completed. Total proceeds of approximately $6 billion from these transactions are being allocated to share repurchases, which remain the case to beat for capital allocation.
• Pfizer entered into a worldwide (except Japan) collaboration agreement with Merck & Co., Inc. to develop and commercialize ertugliflozin and ertugliflozin-containing fixed-dose combinations with metformin and Januvia^® (sitagliptin) tablets. Ertugliflozin is Pfizer’s investigational medicine for type 2 diabetes, with phase 3 trials expected to begin later in 2013.

For additional details, see the attached financial schedules, product revenue tables and disclosure notice.

DISCLOSURE NOTICE: The information contained in this earnings release and the attachments is as of April 30, 2013. We assume no obligation to update forward-looking statements contained in this earnings release and the attachments as a result of new information or future events or developments.

This earnings release and the attachments contain forward-looking statements about our future operating and financial performance, business plans and prospects, in-line products and product candidates, strategic reviews, capital allocation, business-development plans, and plans relating to share repurchases and dividends, among other things, that involve substantial risks and uncertainties. You can identify these statements by the fact that they use future dates or use words such as “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” “goal,” “objective,” “aim” and other words and terms of similar meaning. Among the factors that could cause actual results to differ materially from past results and future plans and projected future results are the following:

• the outcome of research and development activities, including, without limitation, the ability to meet anticipated clinical trial commencement and completion dates, regulatory submission and approval dates, and launch dates for product candidates, as well as the possibility of unfavorable clinical trial results, including unfavorable new clinical data and additional analyses of existing clinical data;
• decisions by regulatory authorities regarding whether and when to approve our drug applications, as well as their decisions regarding labeling, ingredients and other matters that could affect the availability or commercial potential of our products;
• the speed with which regulatory authorizations, pricing approvals and product launches may be achieved;
• the outcome of post-approval clinical trials, which could result in the loss of marketing approval for a product or changes in the labeling for, and/or increased or new concerns about the safety or efficacy of, a product that could affect its availability or commercial potential;
• the success of external business-development activities;
• competitive developments, including the impact on our competitive position of new product entrants, in-line branded products, generic products, private label products and product candidates that treat diseases and conditions similar to those treated by our in-line drugs and drug candidates;
• the implementation by the FDA of an abbreviated legal pathway to approve biosimilar products, which could subject our biologic products to competition from biosimilar products in the U.S., with attendant competitive pressures, after the expiration of any applicable exclusivity period and patent rights;
• the ability to meet generic and branded competition after the loss of patent protection for our products or competitor products;
• the ability to successfully market both new and existing products domestically and internationally;
• difficulties or delays in manufacturing;
• trade buying patterns;
• the impact of existing and future legislation and regulatory provisions on product exclusivity;
• trends toward managed care and healthcare cost containment;
• the impact of the U.S. Budget Control Act of 2011 (the Budget Control Act) and the deficit-reduction actions to be taken pursuant to the Budget Control Act in order to achieve the deficit-reduction targets provided for therein, and the impact of any broader deficit-reduction efforts;
• the possible failure of the U.S. federal government to suspend enforcement of the federal debt ceiling beyond May 18, 2013 or to increase the federal debt ceiling and any resulting inability of the U.S. federal government to satisfy its financial obligations, including under Medicare, Medicaid and other publicly funded or subsidized health programs;
• the impact of U.S. healthcare legislation enacted in 2010 – the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act - and of any modification or repeal of any of the provisions thereof;
• U.S. legislation or regulatory action affecting, among other things: pharmaceutical product pricing, reimbursement or access, including under Medicaid, Medicare and other publicly funded or subsidized health programs; the importation of prescription drugs from outside the U.S. at prices that are regulated by governments of various foreign countries; direct-to-consumer advertising and interactions with healthcare professionals; and the use of comparative effectiveness methodologies that could be implemented in a manner that focuses primarily on the cost differences and minimizes the therapeutic differences among pharmaceutical products and restricts access to innovative medicines;
• legislation or regulatory action in markets outside the U.S. affecting pharmaceutical product pricing, reimbursement or access, including, in particular, continued government-mandated price reductions for certain biopharmaceutical products in certain European and emerging market countries;
• the exposure of our operations outside the U.S. to possible capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, as well as political unrest and unstable governments and legal systems;
• contingencies related to actual or alleged environmental contamination;
• claims and concerns that may arise regarding the safety or efficacy of in-line products and product candidates;
• any significant breakdown, infiltration, or interruption of our information technology systems and infrastructure;
• legal defense costs, insurance expenses, settlement costs, the risk of an adverse decision or settlement and the adequacy of reserves related to product liability, patent protection, government investigations, consumer, commercial, securities, antitrust, environmental and tax issues, ongoing efforts to explore various means for resolving asbestos litigation, and other legal proceedings;
• our ability to protect our patents and other intellectual property, both domestically and internationally;
• interest rate and foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates;
• governmental laws and regulations affecting domestic and foreign operations, including, without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside of the U.S. that may result from pending and possible future proposals;
• any significant issues involving our largest wholesaler customers, which account for a substantial portion of our revenues;
• the possible impact of the increased presence of counterfeit medicines in the pharmaceutical supply chain on our revenues and on patient confidence in the integrity of our medicines;
• any significant issues that may arise related to the outsourcing of certain operational and staff functions to third parties, including with regard to quality, timeliness and compliance with applicable legal requirements and industry standards;
• changes in U.S. generally accepted accounting principles;
• 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 and recent and possible future changes in global financial markets; and the related risk that our allowance for doubtful accounts may not be adequate;
• any changes in business, political and economic conditions due to actual or threatened terrorist activity in the U.S. and other parts of the world, and related U.S. military action overseas;
• growth in costs and expenses;
• changes in our product, segment and geographic mix;
• our ability to successfully implement any strategic alternative that we decide to pursue with regard to our remaining approximately 80% ownership interest in Zoetis Inc. and the impact thereof; and
• the impact of acquisitions, divestitures, restructurings, product recalls and withdrawals and other unusual items, including our ability to realize the projected benefits of our cost-reduction and productivity initiatives, including those related to our research and development organization.

A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2012 and in our reports on Form 10-Q, in each case including in the sections thereof captioned “Forward-Looking Information and Factors That May Affect Future Results” and “Item 1A. Risk Factors”, and in our reports on Form 8-K.

This earnings release may include 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.

This earnings release does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, which will be made only by prospectus.