Pfizer 10-Q 2021-10-03

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 3, 2021

OR

☐ 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

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PFIZER INC.

(Exact name of registrant as specified in its charter)

235 East 42nd Street, New York, New York 10017

(Address of principal executive offices) (zip code)

(212) 733-2323

(Registrant’s telephone number)

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.

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).

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 x 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

At November 8, 2021, 5,612,866,598 shares of the issuer’s voting common stock were outstanding.

Unless the context requires otherwise, references to “Pfizer,” “the Company,” “we,” “us” or “our” in this Form 10-Q (defined below) refer to Pfizer Inc. and its subsidiaries. Pfizer’s fiscal quarter-end for subsidiaries operating outside the U.S. is as of and for the three and nine months ended August 29, 2021 and August 23, 2020, and for U.S. subsidiaries is as of and for the three and nine months ended October 3, 2021 and September 27, 2020. References to “Notes” in this Form 10-Q are to the notes to the condensed or consolidated financial statements in this Form 10-Q or our 2020 Form 10-K. We also have used several other terms in this Form 10-Q, most of which are explained or defined:

This Form 10-Q 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-Q may not add due to rounding. All percentages have been calculated using unrounded amounts. All trademarks mentioned are the property of their owners.

The information contained on our website, our Facebook, YouTube and LinkedIn pages or our Twitter accounts, or any third-party website, is not incorporated by reference into this Form 10-Q.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(a)Exclusive of amortization of intangible assets, except as disclosed in Note 9 in this Form 10-Q and Note 1L in our 2020 Form 10-K.

See Accompanying Notes.

PFIZER INC. AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

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OPERATIONS**

OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK

Our Business and Strategy

Most of our revenues come from the manufacture and sale of biopharmaceutical products. With the formation of the Consumer Healthcare JV in 2019 and the completion of the spin-off and combination of our Upjohn Business with Mylan in November 2020, Pfizer has transformed into a focused, global leader in science-based innovative medicines and vaccines. We operate as a single operating segment engaged in the discovery, development, manufacturing, marketing, sale and distribution of biopharmaceutical products worldwide. The financial results of the Upjohn Business and the Mylan-Japan collaboration are reflected as discontinued operations. Prior-period information has been restated to reflect our current organization structure. We expect to incur costs of approximately $700 million in connection with separating Upjohn, of which approximately 75% has been incurred since inception and through the third quarter of 2021. These charges include costs and expenses related to separation of legal entities and transaction costs.

For additional information about our business, strategy and operating environment, see the Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2020 Form 10-K.

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 Development Initiatives

We are committed to strategically capitalizing on growth opportunities by advancing our own product pipeline and maximizing the value of our existing products, as well as through various business development activities.

Our significant recent business development activities include:

Collaboration with Biohaven––In November 2021, we entered into a collaboration and license agreement and related sublicense agreement with Biohaven Pharmaceutical Holding Company Ltd., Biohaven Pharmaceutical Ireland DAC and Bioshin LTD. (collectively, Biohaven) pursuant to which we will acquire rights to commercialize rimegepant and zavegepant for the treatment and prevention of migraines outside of the U.S., subject to regulatory approval. Rimegepant is currently commercialized in the U.S. under the brand name Nurtec® ODT, with certain applications pending outside of the U.S. Biohaven will continue to lead R&D globally and we have the exclusive right to commercialization globally, outside of the U.S. Under the financial terms of the transaction agreements, we will make an upfront payment of $500 million, consisting of $150 million cash and $350 million in the purchase of Biohaven equity. Biohaven is also eligible to receive up to $740 million in non-U.S. commercialization milestones, in addition to tiered double-digit royalties on net sales outside of the U.S. In addition to the milestones and royalties above, we will also reimburse Biohaven for the portion of certain additional milestones and royalties due to third parties in accordance with preexisting agreements, which are attributed to ex-U.S. sales. The transaction is subject to customary closing conditions, including completion of review under applicable antitrust laws.

Agreement with Altaris Capital Partners, LLC (Altaris)––In November 2021, we entered into an agreement with Altaris, a healthcare investment firm based in New York, for Altaris to purchase Meridian. Meridian was acquired by Pfizer in 2011 as part of the King Pharmaceuticals acquisition and has maintained relative operational autonomy since that time. Meridian’s operations, which generate approximately $300 million in annual revenues, consist of manufacturing and distributing medical countermeasures used by the U.S. Department of Defense, Emergency Medical Services, Homeland Security and foreign ministries of health and defense, as well as rescue auto-injectors for the emergency treatment of allergic reactions including anaphylaxis. The transaction is expected to close in the coming months, subject to customary closing conditions including the receipt of regulatory approvals.

Acquisition of Trillium Therapeutics Inc. (Trillium)––In August 2021, we and Trillium announced that the companies entered into a definitive agreement under which we will acquire Trillium, a clinical stage immuno-oncology company developing innovative therapies for the treatment of cancer. We currently hold a 2% ownership investment in Trillium. Under the terms of the agreement, we will acquire all outstanding shares of Trillium not already owned by us for $18.50 per share, in cash, or an aggregate purchase price of approximately $2.2 billion. The acquisition is expected to close in the fourth quarter of 2021 or first half of 2022, subject to customary closing conditions, including regulatory approvals.

Collaboration with Arvinas, Inc. (Arvinas)––In July 2021, we announced a global collaboration with Arvinas to develop and commercialize ARV-471, an investigational oral PROTAC® (PROteolysis TArgeting Chimera) estrogen receptor protein degrader. See Note 2 for additional information*.*

Acquisition of Amplyx Pharmaceuticals, Inc. (Amplyx)––In April 2021, we announced that we acquired Amplyx, a privately-held company dedicated to the development of therapies for debilitating and life-threatening diseases that affect people with compromised immune systems. Amplyx’s lead compound, Fosmanogepix (APX001), is a novel investigational asset in Phase 2 development for the treatment of invasive fungal infections.

For a discussion of recent significant business development activities, see Note 2. For a description of the more significant recent transactions through February 25, 2021, the filing date of our 2020 Form 10-K, see Note 2 in our 2020 Form 10-K.

Our Third Quarter 2021 and First Nine Months of 2021 Performance

Revenues

Revenues increased $13.8 billion, or 134%, in the third quarter of 2021 to $24.1 billion from $10.3 billion in the third quarter of 2020, reflecting an operational increase of $13.4 billion, or 130%, as well as a favorable impact of foreign exchange of $421 million, or 4%. Excluding direct sales and alliance revenues of Comirnaty of $13.0 billion, revenues increased 7% operationally, reflecting strong growth in Eliquis, Vyndaqel/Vyndamax, Inlyta, Xtandi, Biosimilars and the Hospital therapeutic area, partially offset by declines in Chantix/Champix, Prevnar family, Sutent, Xeljanz and Enbrel.

Revenues increased $27.4 billion, or 91%, in the first nine months of 2021 to $57.7 billion from $30.2 billion in the first nine months of 2020, reflecting an operational increase of $26.1 billion, or 86%, as well as a favorable impact of foreign exchange of $1.3 billion, or 4%. Excluding direct sales and alliance revenues of Comirnaty of $24.3 billion, revenues increased 8% operationally, reflecting strong growth in Eliquis, Vyndaqel/Vyndamax, Inlyta, Xtandi, Biosimilars and the Hospital therapeutic area, partially offset by declines in Chantix/Champix, Prevnar family, Enbrel and Sutent.

See the Analysis of the Condensed Consolidated Statements of Income––Revenues by Geography and Revenues––Selected Product Discussion sections for more information, including a discussion of key drivers of our revenue performance. For information regarding the primary indications or class of certain products, see Note 13B.

Income from Continuing Operations Before Provision/(Benefit) for Taxes on Income

The increases in Income from continuing operations before provision/(benefit) for taxes on income of $7.3 billion in the

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Information required by this item is incorporated by reference from the discussion in the Analysis of Financial Condition, Liquidity, Capital Resources and Market Risk—Selected Measures of Liquidity and Capital Resources—Market Risk section within MD&A of our 2020 Form 10-K.

As of the end of the period covered by this report, 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.

During our most recent fiscal quarter, there has not been any change in our 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, our internal control over financial reporting.

ITEM 1. LEGAL PROCEEDINGS

Certain legal proceedings in which we are involved are discussed in Note 12A.

We refer to the “Our Operating Environment”, “The Global Economic Environment”, “COVID-19 Pandemic” and “Forward-Looking Information and Factors That May Affect Future Results” sections of the MD&A of this Form 10-Q and to Part I, Item 1A, “Risk Factors” of our 2020 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following summarizes purchases of our common stock during the third quarter of 2021:

(a)Represents (i) 65,860 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 2,362 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.

(b)See Note 12 in our 2020 Form 10-K.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.