Pfizer 2010 Annual Report Download - page 9

Financial Review
Pfizer Inc. and Subsidiary Companies
OOur pending acquisition of Ferrosan’s consumer healthcare business will strengthen our presence in dietary supplements with a new
set of brands and pipeline products. Also, we believe that the acquisition will allow us to expand the marketing of Ferrosan’s brands
through Pfizer’s global footprint and provide greater distribution and scale for certain Pfizer brands, such as Centrum®and Caltrate®,
in Ferrosan’s key markets.
For additional details related to these transactions and for other strategic investments see the “Our Business Development
Initiatives” section of this Financial Review.
•We continue to aggressively defend our patent rights against increasingly aggressive infringement whenever appropriate (see Notes to
Consolidated Financial Statements—Note 19. Legal Proceedings and Contingencies), and we will continue to support efforts that
strengthen worldwide recognition of patent rights while taking necessary steps to ensure appropriate patient access. In addition, we will
continue to employ innovative approaches to prevent counterfeit pharmaceuticals from entering the supply chain and to achieve greater
control over the distribution of our products, and we will continue to participate in the generics market for our products, whenever
appropriate, once they lose exclusivity.
•We remain focused on achieving an appropriate cost structure for the Company. For information regarding our cost-reduction initiatives,
see the “Costs and Expenses—Cost-Reduction and Productivity Initiatives and Related Costs” section of this Financial Review.
•We continue to review the value-creation potential of all of our businesses, including the investments required to make them market
leaders, their competitive position globally and whether they can create the most value within or outside of Pfizer. We expect to
complete this review during 2011.
Our strategy also includes directly enhancing shareholder value through dividends and share repurchases. In December 2010, our
Board of Directors declared a first-quarter 2011 dividend of $0.20 per share, an increase from the $0.18 per-share quarterly dividend
paid during 2010. On February 1, 2011, we announced that the Board of Directors authorized a new $5 billion share-repurchase
plan, which increased our total current repurchase authorization to $9 billion. We expect to repurchase approximately $5 billion of
our common stock during 2011, with the remaining authorized amount available in 2012 and beyond.
Our Business Development Initiatives
We are committed to capitalizing on growth opportunities by advancing our own pipeline and maximizing the value of our in-line
products, as well as through various forms of business development, which can include alliances, licenses, joint ventures,
dispositions and acquisitions. We view our business-development activity as an enabler of our strategies, and we seek to generate
profitable revenue growth and enhance shareholder value by pursuing a disciplined, strategic and financial approach to evaluating
business-development opportunities. We are especially interested in opportunities in our Emerging Markets and Established
Products units within our Biopharmaceutical segment and our high-priority therapeutic areas––immunology and inflammation,
oncology, cardiovascular and metabolic diseases, neuroscience and pain, and vaccines. Some of our most significant business-
development transactions since 2008 are described below.
•On January 31, 2011, we completed our tender offer for all of the outstanding shares of common stock of King Pharmaceuticals, Inc.
(King). Upon completion of the tender offer, we accepted for purchase all of the shares validly tendered and not validly withdrawn at a
purchase price of $14.25 per share, net to the seller in cash, without interest thereon and subject to any required withholding taxes. As
a result, we paid approximately $3.3 billion in cash for approximately 92.5% of the outstanding shares of King common stock. Also, in
accordance with the terms of the merger agreement, individuals designated by Pfizer now constitute a majority of the King Board of
Directors. We intend to complete the acquisition of King through a merger on or about February 28, 2011, without a vote of the
remaining shareholders of King. As a result of the merger, each remaining share of King common stock will be converted into the right
to receive $14.25 per share, net in cash, without interest and less any required withholding taxes. Upon completion of the merger, we
expect to pay approximately $300 million for the remaining shares of King, which will then become a wholly owned subsidiary of Pfizer.
King’s principal businesses consist of a prescription pharmaceutical business focused on delivering new formulations of pain
treatments designed to discourage common methods of misuse and abuse; the Meridian auto-injector business for emergency
drug delivery, which develops and manufactures the EpiPen®; and an animal health business that offers a variety of feed-additive
products for a wide range of species.
The assets acquired and liabilities assumed from King, the consideration paid to acquire King, and the results of King’s operations
are not reflected in our consolidated financial statements as of and for the twelve months ended December 31, 2010.
•On February 7, 2011 we announced that we have entered into a definitive agreement to purchase the Ferrosan consumer healthcare
business, which is principally comprised of dietary supplement products, including multivitamins, probiotics and Omega-3 fish oils.
Ferrosan markets its products in the Nordic region as well as Russia, Turkey and many countries in Central and Eastern Europe. The
transaction, which is subject to customary closing conditions, including regulatory approval in certain jurisdictions, is expected to close
during the second quarter of 2011.
•On November 8, 2010 we consummated our partnership to develop and commercialize generic medicines with Laboratório Teuto
Brasileiro S.A. (Teuto) a leading generics company in Brazil. As part of the transaction, we acquired a 40 percent equity stake in Teuto,
and the companies entered into a series of commercial agreements. The partnership is expected to enhance our position in Brazil, a
key emerging market, by providing access to Teuto’s portfolio of products. Through this partnership, we expect to also have access to
significant distribution networks in rural and suburban areas in Brazil and the opportunity to register and commercialize Teuto’s
products in various markets outside of Brazil. Under the terms of our purchase agreement with Teuto, we made an upfront payment at
the closing of approximately $230 million (subject to certain post-closing adjustments). In addition, Teuto will be eligible to receive a
2010 Financial Report 7