Pfizer 2009 Annual Report Download - page 63

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
From the beginning of our cost-reduction and transformation initiatives in 2005 through December 31, 2009, Employee termination costs represent
the expected reduction of the workforce by approximately 40,000 employees, mainly in manufacturing, sales and research of which approximately
25,700 employees have been terminated as of December 31, 2009. 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. Asset impairments primarily include charges to write down property, plant and equipment to fair value. Other primarily
includes costs to exit certain assets and activities.
(d) Additional depreciation—asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring
actions and are included in our consolidated statements of income as follows:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008 2007
Cost of sales $ 133 $ 596 $ 571
Selling, informational and administrative expenses 53 19 1
Research and development expenses 55 171 216
Total $ 241 $ 786 $ 788
(e) Implementation costs represent external, incremental costs directly related to implementing cost-reduction initiatives and primarily include
expenditures related to system and process standardization and the expansion of shared services. Implementation costs relate to costs incurred for
our cost-reduction initiatives prior to our acquisition of Wyeth on October 15, 2009. Costs related to our cost-reduction initiatives incurred after the
Wyeth acquisition, other than additional depreciation––asset restructuring, are included in Restructuring charges and certain acquisition-related
costs. Implementation costs are included in our consolidated statements of income as follows:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008 2007
Cost of sales $42 $ 149 $ 129
Selling, informational and administrative expenses 166 394 333
Research and development expenses 36 262 200
Other (income)/deductions—net 614 (61)
Total $ 250 $ 819 $ 601
5. Collaborative Arrangements
In the normal course of business, 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.
The amounts and classifications in our consolidated statements of income of payments (income/(expense)) between us and our
collaboration partners follow:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS) 2009 2008 2007
Revenues—Revenues(a) $ 593 $ 488 $ 473
Revenues—Alliance revenues(b) 2,925 2,251 1,789
Total revenues from collaborative arrangements 3,518 2,739 2,262
Cost of sales(c) (166) (147) (166)
Selling, informational and administrative expenses(d) 10 75 94
Research and development expenses(e) (361) (476) (444)
(a) Represents sales to our partners of products manufactured by us.
(b) Substantially all relate to amounts earned from our partners under co-promotion agreements.
(c) Primarily relates to royalties earned by our partners and cost of sales associated with inventory purchased from our partners.
(d) Represents net reimbursements from our partners for selling, informational and administrative expenses incurred.
(e) Primarily related to net reimbursements, as well as upfront payments and milestone payments earned by our partners. The upfront and milestone
payments were as follows: $150 million in 2009, $300 million in 2008 and $330 million in 2007.
The amounts disclosed in the above table do not include transactions with third parties other than our collaboration partners, or
other costs associated with the products under the collaborative arrangements. In 2009, Other (income)/deductions––net includes
income of $20 million paid to us for the termination of a collaboration agreement and income of $17 million paid to us as our share of
profit from a collaboration partner. In 2007, we capitalized $68 million of milestone payments associated with approved products.
2009 Financial Report 61