Pfizer 2007 Annual Report Download - page 60

58 2007 Financial Report
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
Developed technology rights represent the amortized value
associated with developed technology, which has been acquired
from third parties and which 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 primarily
representing the commercialized products included in our
Pharmaceutical segment that we acquired in connection with
our Pharmacia acquisition. While the Arthritis and Pain therapeutic
category represents about 30% of the total amortized value of
developed technology rights as of December 31, 2007, the balance
of the amortized value is evenly distributed across the following
Pharmaceutical therapeutic product categories: Ophthalmology;
Oncology; Urology; Infectious and Respiratory Diseases; Endocrine
Disorders categories; and, as a group, the Cardiovascular and
Metabolic Diseases; Central Nervous System Disorders and All
Other categories. The significant components include values
determined for Celebrex, Detrol/Detrol LA, Xalatan, Genotropin,
Zyvox and Campto/Camptosar. Also included in this category are
the post-approval milestone payments made under our alliance
agreements for certain Pharmaceutical products, such as Rebif and
Spiriva. These rights are all subject to our review for impairment
explained in Note 1K. Significant Accounting Policies: Amortization
of Intangible Assets, Depreciation and Certain Long-Lived Assets.
The weighted-average life of our total finite-lived intangible
assets is approximately seven years, which includes developed
technology rights at eight years. Total amortization expense for
finite-lived intangible assets was $3.2 billion in 2007, $3.4 billion
in 2006 and $3.5 billion in 2005.
Brands represent the amortized value associated with tradenames,
as the products themselves no longer receive patent protection.
Most of these assets are associated with our Pharmaceutical
segment and the significant components include values
determined for Depo-Provera, Xanax and Medrol.
In 2007, we recorded charges of $1.1 billion in Cost of sales and
Selling, informational and administrative expenses related to the
impairment of Exubera (see Note 4. Asset Impairment Charges
and Other Costs Associated with Exiting Exubera). In 2006, we
recorded charges of $320 million in Other (income)/deductions—
net related to the impairment of our Depo-Provera brand, a
contraceptive injection, (included in our Pharmaceutical segment).
In 2005, we recorded an impairment charge of $1.1 billion in Other
(income)/deductions—net related to the developed technology
rights for Bextra, a selective COX-2 inhibitor (included in our
Pharmaceutical segment), in connection with the decision to
suspend sales of Bextra. In addition, in connection with the
suspension, we recorded $5 million related to the write-off of
machinery and equipment included in Other (income)/ deductions—
net; $73 million in write-offs of inventory and exit costs, included
in Cost of sales; $8 million related to the costs of administering the
suspension of sales, included in Selling, informational and
administrative expenses; and $212 million for an estimate of
customer returns, primarily included against Revenues.
The annual amortization expense expected for the years 2008
through 2012 is as follows:
(MILLIONS OF DOLLARS) 2008 2009 2010 2011 2012
Amortization expense $2,835 $2,620 $2,611 $2,596 $2,360
14. Pension and Postretirement Benefit Plans
and Defined Contribution Plans
We provide defined benefit pension plans and defined
contribution plans for the majority of our employees worldwide.
In the U.S., we have both qualified and supplemental (non-
qualified) defined benefit plans. A qualified plan meets the
requirements of certain sections of the Internal Revenue Code and,
generally, contributions to qualified plans are tax deductible. A
qualified plan typically provides benefits to a broad group of
employees and may not discriminate in favor of highly
compensated employees in its coverage, benefits or contributions.
We also provide benefits through supplemental (non-qualified)
retirement plans to certain employees. In addition, we provide
medical and life insurance benefits to certain retirees and their
eligible dependents through our postretirement plans.
We use a measurement date that coincides with our fiscal
yearends; December 31 for our U.S. pension and postretirement
plans and November 30 for our international plans. During 2006,
pursuant to the divestiture of our Consumer Healthcare business,
certain defined benefit obligations and related plan assets, if
applicable, were transferred to the purchaser of that business.
A. Adoption of New Accounting Standard
As of December 31, 2006, we adopted the provisions of SFAS No.
158, Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans (an amendment of FASB Statements No. 87,
88, 106 and 132R), which requires us to recognize on our balance
sheet the difference between our benefit obligations and any plan
assets of our defined benefit plans. In addition, we are required to
recognize as part of other comprehensive income/(expense), net of
taxes, gains and losses due to differences between our actuarial
assumptions and actual experience (actuarial gains and losses) and
any effects on prior service due to plan amendments (prior service
costs or credits) that arise during the period and which are not
being recognized as net periodic benefit costs. Upon adoption,
SFAS 158 requires the recognition of previously unrecognized
actuarial gains and losses, prior service costs or credits and net
transition amounts within Accumulated other comprehensive
income (expense), net of tax. The incremental impact of applying
SFAS 158 to our balance sheet as of December 31, 2006, was to
reduce our total shareholders’ equity by $2.1 billion, primarily due
to the recognition of previously unrecognized actuarial losses.