(BUSINESS WIRE)--Pfizer Inc (NYSE: PFE):

Pfizer Inc (NYSE: PFE) today reported financial results for third-quarter 2008. The Company recorded reported revenues of $12.0 billion, consistent with the year-ago quarter, despite the negative impact of the loss of U.S. exclusivity for Zyrtec, which Pfizer ceased selling in late January 2008, and for Camptosar in February 2008. Zyrtec and Camptosar third-quarter 2008 revenues decreased by $549 million ($428 million and $121 million, respectively), compared with the year-ago quarter. Foreign exchange favorably impacted reported revenues by approximately $620 million or 5%, as did the solid performance of many key products. Reported revenues in third-quarter 2008 were negatively impacted by a $217 million adjustment to prior years’ liabilities for product returns. U.S. reported revenues accounted for 41% of the total compared with 48% in the year-ago quarter, while international reported revenues accounted for 59% of the total compared with 52% in the year-ago quarter. In the U.S., reported revenues were $4.9 billion, a decrease of 15%, while international reported revenues were $7.1 billion, an increase of 13%, compared to third-quarter 2007. The increase in international reported revenues reflects the favorable impact of foreign exchange of 10% and operational growth of 3%.

For third-quarter 2008, Pfizer posted reported net income of $2.3 billion, compared with $761 million in the prior-year quarter, and reported diluted EPS of $0.34, compared with $0.11 in the prior-year quarter. These increases were primarily attributable to the after-tax charges of $2.1 billion related to the decision to exit Exubera in the year-ago quarter, which was partially offset by the after-tax charge in third-quarter 2008 of approximately $640 million resulting from the previously announced agreements in principle to resolve certain litigation involving the Company’s non-steroidal anti-inflammatory (NSAID) pain medicines as well as the after-tax charge of approximately $150 million associated with the aforementioned adjustment to prior years’ product returns liabilities.

For the first nine months of 2008, Pfizer recorded reported revenues of $36.0 billion, an increase of 1% compared with $35.5 billion in the same period in 2007, despite the loss of U.S. exclusivity of Norvasc (March 2007), Zyrtec (January 2008) and Camptosar (February 2008), which collectively decreased revenues by $2.1 billion. Foreign exchange favorably impacted revenues by approximately $2.0 billion or 6%, as did the solid performance of many key products. U.S. reported revenues accounted for 42% of the total compared with 49% in the year-ago period, while international reported revenues accounted for 58% of the total compared with 51% in the year-ago period. In the U.S., reported revenues were $15.2 billion, a decrease of 13%, while international reported revenues were $20.8 billion, an increase of 15% compared to the year-ago period. The increase in international reported revenues reflects the favorable impact of foreign exchange of 11% and operational growth of 4%.

For the first nine months of 2008, the Company posted reported net income of $7.8 billion, compared with $5.4 billion in the prior-year period, and reported diluted EPS of $1.16, compared with $0.78 in the prior-year period. These increases were primarily attributable to the previously mentioned after-tax charges of $2.1 billion related to Exubera in the year-ago quarter, lower restructuring charges associated with cost-reduction initiatives, as well as savings generated by those initiatives, which were partially offset by the previously mentioned after-tax charge of approximately $640 million associated with the resolution of certain NSAID litigation in third-quarter 2008.

Adjusted Revenue⁽¹⁾, Adjusted Income⁽¹⁾ and Adjusted Diluted EPS⁽¹⁾ Results

For third-quarter 2008, Pfizer posted adjusted revenues ⁽¹⁾ of $12.2 billion, an increase of 2% compared with $12.0 billion in the year-ago quarter. For the first nine months of 2008, Pfizer posted adjusted revenues⁽¹⁾ of $36.0 billion, an increase of 2% compared with $35.4 billion in the first nine months of 2007. Adjusted revenues⁽¹⁾ were positively impacted by foreign exchange and the solid performance of many key products, and negatively impacted by the loss of U.S. exclusivity of Norvasc, Zyrtec and Camptosar.

For third-quarter 2008, Pfizer recorded adjusted income⁽¹⁾ of $4.2 billion, an increase of 5% compared with $4.0 billion in the year-ago quarter, and adjusted diluted EPS⁽¹⁾ of $0.62, an increase of 7% compared with $0.58 in the year-ago quarter. For the first nine months of 2008, Pfizer recorded adjusted income⁽¹⁾ of $12.0 billion, an increase of 2% compared with $11.7 billion in the year-ago period, and adjusted diluted EPS⁽¹⁾ of $1.77, an increase of 5% compared with $1.68 in the year-ago period. In third-quarter 2008, adjusted income⁽¹⁾ and adjusted diluted EPS⁽¹⁾ were positively impacted by foreign exchange and savings associated with cost-reduction initiatives, which were partially offset by a decrease in net interest income. In the first nine months of 2008 compared with the same period in 2007, adjusted income⁽¹⁾ and adjusted diluted EPS⁽¹⁾ were impacted by the aforementioned factors in addition to the 2007 payment to Bristol-Myers Squibb Company in connection with the apixaban collaboration, as well as the 2008 favorable income tax adjustments.

Reported and adjusted diluted EPS⁽¹⁾ were also positively impacted by the full benefit of Pfizer’s purchase of $10.0 billion of the Company’s common stock in 2007.

Executive Commentary

“We remain on-track to meet our 2008 objectives, despite the turbulent global economy," said Chairman and Chief Executive Officer Jeff Kindler. “We continued to deliver steady results this quarter, with many of our most important medicines performing well around the world, including Lyrica, Celebrex, Viagra, Sutent, Zyvox and Geodon, as well as Lipitor in a highly competitive market. Looking ahead, we are making progress on our growth strategies, including increasing the number of programs in our Phase 3 portfolio from 16 to 25 in the last six months. With the formation of the Primary Care, Specialty Care and Emerging Markets units, which join the existing Oncology and Established Products units, we continue to evolve our pharmaceutical operations into smaller, more focused units that can anticipate and respond more quickly to our customers' and patients’ changing needs.”

Frank D’Amelio, Chief Financial Officer, commented, “Based on our year-to-date performance and outlook for the remainder of 2008, we are raising the lower end of our guidance range for full-year 2008 revenues to $48.0 to $49.0 billion from $47.0 to $49.0 billion. In addition, we have increased our guidance to at least a $2.0 billion reduction of absolute adjusted total costs⁽²⁾ at the end of 2008 compared with 2006 on a constant currency basis⁽³⁾. At the end of third-quarter 2008, cost reductions under this program totaled $1.7 billion. We are pleased with our progress and continue to look for new opportunities to further reduce and more effectively manage our costs. Finally, with our strong balance sheet and operating cash flow, we remain confident that we have the financial flexibility to successfully execute our strategies and meet our financial objectives in the face of the current macroeconomic environment.”

Pharmaceutical

Pharmaceutical revenues for third-quarter 2008 were $11.0 billion, a decrease of 1% compared with the prior-year quarter, including the favorable impact of foreign exchange of approximately $570 million or 5%. Third-quarter 2008 revenues from in-line and new products⁽⁶⁾ increased 8% compared with the year-ago quarter, which excludes the impact of the loss of U.S. exclusivity of Norvasc, Zyrtec and Camptosar, which collectively decreased revenues by $627 million compared with the year-ago quarter. Additionally, pharmaceutical revenues were impacted by a $217 million adjustment to the prior years’ product returns liabilities.

Lipitor revenues in third-quarter 2008 were $3.1 billion, a decrease of 1% compared with the prior-year quarter. In the U.S., Lipitor revenues were $1.6 billion, a decrease of 13% compared with the prior-year quarter, while revenues from international markets were $1.6 billion, an increase of 16%. The increase in international revenues reflects the favorable impact of foreign exchange of approximately $130 million, or 10%, and operational growth of 6%. The global statin market remains highly competitive, marked by decelerating market growth and increasing cost constraints. Pfizer continues to respond to these market dynamics by focusing on Lipitor’s differentiated clinical profile backed with strong landmark outcomes data. Pfizer recently launched a new multi-channel “Heart to Heart” direct-to-consumer campaign featuring patient testimonials to motivate new patients to speak with their physicians.

Lyrica revenues in third-quarter 2008 were $675 million, an increase of 45% compared with the prior-year quarter, driven by high patient and physician satisfaction globally demonstrated by strong physician prescribing patterns, as well as growth in the U.S. fibromyalgia market, where we continue to expand our leadership position. In the U.S., Lyrica revenues rose to $379 million, an increase of 40% compared with the prior-year quarter, while international revenues grew to $296 million, an increase of 51% primarily from operational growth.

Celebrex revenues in third-quarter 2008 were $625 million, an increase of 8% compared with the year-ago quarter, supported by continued educational and promotional efforts highlighting the benefit-risk proposition of Celebrex, as well as the favorable impact of foreign exchange. In the U.S., Celebrex revenues were $450 million, an increase of 4% compared with the prior-year quarter, while international revenues were $175 million, an increase of 21%.

Sutent revenues in third-quarter 2008 were $226 million, an increase of 49% compared with the year-ago quarter, demonstrating continued strong performance and market leadership in its approved indications. In the U.S., Sutent revenues were $62 million, an increase of 4% compared with the prior-year quarter, while international revenues were $164 million, an increase of 79%. Sutent is now available in all major markets and is supported by efficacy, survival and cost-effectiveness data. Further, our robust life cycle plan currently includes Phase 3 clinical trials in cancers with unmet medical need, such as breast, lung, colorectal, liver and prostate cancers.

Chantix (known as Champix outside the U.S.) revenues in third-quarter 2008 were $182 million, a decrease of 24% compared with third-quarter 2007. In the U.S., Chantix revenues were $96 million, a decline of 49% compared with the prior-year quarter, while international revenues were $86 million, an increase of 60%. Third-quarter 2008 U.S. results continued to be negatively impacted by the changes to the Chantix U.S. label in prior quarters. Pfizer continues its educational and promotional efforts focused on the Chantix benefit-risk proposition, the significant health consequences of smoking and the importance of physician-patient dialogue in helping patients quit smoking. In September, the U.S. branded direct-to-consumer campaign was re-launched with print, television and web advertising. Chantix has now been either approved or launched in all major markets.

Animal Health

Animal Health revenues for third-quarter 2008 were $708 million, an increase of 11% compared with $636 million in the year-ago quarter. The increase was driven by the favorable impact of foreign exchange, which increased revenues by approximately $35 million or 6%, in addition to strong global livestock and companion animal product performance.

Costs and Expenses

In third-quarter 2008, adjusted cost of sales⁽¹⁾ as a percentage of revenues was 14.5% compared with 15.1% in third-quarter 2007. This improvement reflects the benefits from our cost-reduction initiatives, partially offset by a less favorable geographic mix.

Adjusted selling, informational and administrative (SI&A) expenses⁽¹⁾ were $3.4 billion in third-quarter 2008, a decrease of 6% compared with the prior-year quarter, due to the continued favorable impact of our cost-reduction initiatives, which was partially offset by the unfavorable impact of foreign exchange compared with the year-ago period.

Adjusted research and development (R&D) expenses were $1.8 billion in third-quarter 2008, an increase of 2% compared with the prior-year period. This primarily reflects increased spending on Phase 3 programs, partially offset by the favorable impact of cost-reduction initiatives.

Overall, foreign exchange increased adjusted total costs⁽²⁾ by $242 million or 3% in third-quarter 2008 compared with the prior-year period. Excluding the impact of foreign exchange, adjusted total costs⁽²⁾ decreased by approximately $460 million, or 6%, compared with the year-ago quarter. The operational improvement was driven partially by the reduction in workforce to 83,400 at the end of third-quarter 2008, a decline of 3,600 compared with the end of third-quarter 2007, as well as manufacturing and research and development site exits.

At the end of third-quarter 2008, Pfizer achieved its goal to reduce absolute adjusted total costs⁽²⁾ by at least $1.5 to $2.0 billion at the end of 2008 compared with 2006 on a constant currency basis⁽³⁾, having realized a total reduction of $1.7 billion. Pfizer now expects to reduce absolute adjusted total costs⁽²⁾ by at least $2.0 billion by the end of 2008. These initiatives span essentially all divisions, functions, markets and sites, and reflect a workforce reduction of 14,600 since the target was established in January 2007.

Financial Guidance

For full-year 2008, Pfizer’s financial guidance, at current exchange rates⁽⁹⁾ is summarized below. Revenue guidance has been narrowed to a range of $48.0 to $49.0 billion from $47.0 to $49.0 billion, adjusted SI&A expenses⁽¹⁾ guidance has been narrowed to a range of $14.4 to $14.7 billion from $14.4 to $14.9 billion, and adjusted diluted EPS⁽¹⁾ guidance has been narrowed to a range of $2.36 to $2.41 from $2.35 to $2.45. Additionally, reported diluted EPS⁽¹⁰⁾ guidance has been reduced to a range of $1.61 to $1.71 from $1.73 to $1.88, reflecting in part the charges associated with the previously mentioned resolution of certain NSAID litigation.

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

(1) "Adjusted income" and its components and "adjusted diluted earnings per share (EPS)" are defined as reported net income and its components and reported diluted EPS excluding purchase-accounting adjustments, acquisition-related costs, discontinued operations and certain significant items. Adjusted Revenues, Adjusted Cost of Sales, Adjusted SI&A expenses and Adjusted R&D expenses are income statement line items prepared on the same basis, and therefore, components of the overall Adjusted Income measure. As described under AdjustedIncome in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of Pfizer's Form 10-Q for the fiscal quarter ended June 29, 2008, management uses adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. We believe that investors' understanding of our performance is enhanced by disclosing this measure. Reconciliations of third-quarter 2008 and 2007, first nine months of 2008 and 2007, and full-year 2007 adjusted income and its components and adjusted diluted EPS to reported net income and its components and reported diluted EPS, as well as reconciliations of full-year 2008 adjusted income and adjusted diluted EPS guidance to full-year 2008 reported net income and reported diluted EPS guidance, are provided in the materials accompanying this report. The adjusted income and its components and adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS.

(2) Represents primarily the total of Adjusted Cost of Sales⁽¹⁾, Adjusted SI&A expenses⁽¹⁾ and Adjusted R&D expenses⁽¹⁾.

(3) Constant currency basis means that the applicable projected financial measure is based upon the actual foreign exchange rates in effect during 2006.

(4) Represents worldwide revenues for all pharmaceutical products, excluding revenues included in notes (5) and (7).

(5) Represents worldwide revenues for pharmaceutical products launched since 2006: Chantix/Champix, Eraxis, Selzentry/Celsentri, Sutent, Thelin and Toviaz.

(6) Total worldwide pharmaceutical revenues excluding the revenues of major products that have lost exclusivity in the U.S. in 2007 and 2008 as described in note (7). See the table accompanying this report.

(7) Represents worldwide revenues for pharmaceutical products that lost exclusivity in the U.S. in 2007 and 2008: Camptosar, Norvasc and Zyrtec.

(8) Includes Consumer Healthcare business transition activity, Capsugel and Pfizer Centersource.

(9) Current exchange rates approximate rates at the time of the third-quarter earnings press release (October 2008).

(10) Excludes the potential effects of business-development transactions not completed as of September 28, 2008, and of litigation-related matters not substantially resolved as of September 28, 2008, as we do not forecast those items.