Pfizer 2011 Annual Report Download - page 68

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
Supplemental pro forma information follows:
UNAUDITED PRO FORMA
CONSOLIDATED RESULTS(a)
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA) 2011 2010
Revenues $67,534 $68,432
Net income attributable to Pfizer Inc. common shareholders 10,228 8,013
Diluted earnings per share attributable to Pfizer Inc. common shareholders 1.30 0.99
(a) The pro forma information for December 31, 2011 and 2010 assumes that the acquisition of King occurred on January 1, 2010.
The unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company nor
do they reflect the expected realization of any cost savings associated with the acquisition. The unaudited pro forma consolidated
results reflect the historical financial information of Pfizer and King, adjusted for the following pre-tax amounts:
•Elimination of King’s historical intangible asset amortization expense (approximately $6 million in 2011 and $116 million in 2010).
•Additional amortization expense (approximately $15 million in 2011 and $190 million in 2010) related to the fair value of identifiable
intangible assets acquired.
•Additional depreciation expense (approximately $3 million in 2011 and $35 million in 2010) related to the fair value adjustment to
property, plant and equipment acquired.
•Adjustment related to the fair value adjustments to acquisition-date inventory estimated to have been sold (elimination of $160 million
charge in 2011 and addition of $160 million charge in 2010).
•Adjustment for acquisition-related costs directly attributable to the acquisition (elimination of $224 million of charges in 2011 and
addition of $224 million of charges in 2010, reflecting charges incurred by both King and Pfizer).
C. Other Acquisitions
Excaliard
On November 30, 2011, we completed our acquisition of Excaliard Pharmaceuticals, Inc. (Excaliard), a privately-owned
biopharmaceutical company focused on developing novel drugs for the treatment of skin fibrosis, more commonly referred to as skin
scarring. Excaliard ‘s lead compound, EXC-001, is an antisense oligonucleotide designed to interrupt the process of fibrosis by
inhibiting expression of connective tissue growth factor (CTGF), and has produced positive clinical results in reducing scar severity
in certain Phase 2 trials. The total consideration for the acquisition was approximately $174 million, which consisted of an upfront
payment to Excaliard’s shareholders of about $86 million and contingent consideration with an estimated acquisition-date fair value
of about $88 million. The contingent consideration consists of up to $230 million in additional payments that are contingent upon
attainment of future regulatory and revenue milestones. In connection with this acquisition, we recorded approximately $257 million
in Identifiable intangible assets—in-process research and development.
The fair value of the contingent consideration at the acquisition date was estimated by utilizing a probability-weighted income approach.
We started with an estimate of the timing of the potential cash payments by year, based on our expectation as to when the future
regulatory and commercial milestones might be achieved, adjusted the payments to reflect the likelihood of payment, and then discounted
each of those projected payments to arrive at a present value amount. Subsequent to the acquisition date, we remeasure the contingent
consideration liability at current fair value at every reporting period with changes recorded in Other deductions—net.
Icagen
On September 20, 2011, we completed our cash tender offer for the outstanding shares of Icagen, Inc. (Icagen), resulting in
approximately 70% ownership of the outstanding shares of Icagen, a biopharmaceutical company focused on discovery,
development and commercialization of novel orally-administered small molecule drugs that modulate ion channel targets. On
October 27, 2011, we acquired all of the remaining shares of Icagen. In connection with this acquisition, we recorded approximately
$19 million in Identifiable intangible assets.
FoldRx Pharmaceuticals, Inc.
On October 6, 2010, we completed our acquisition of FoldRx Pharmaceuticals, Inc. (FoldRx), a privately-held drug discovery and
clinical development company, whose portfolio includes clinical and preclinical programs for investigational compounds to treat
diseases caused by protein misfolding. The total consideration for the acquisition was approximately $400 million, which consisted of
an upfront payment to FoldRx’s shareholders of about $200 million and contingent consideration with an estimated acquisition-date
fair value of about $200 million. The contingent consideration consists of up to $455 million in additional payments that are contingent
upon the attainment of future regulatory and commercial milestones. In connection with this acquisition, we recorded approximately
$500 million in Identifiable intangible assets—in-process research and development and approximately $60 million in Goodwill.
The fair value of the contingent consideration at the acquisition date was estimated by utilizing a probability-weighted income
approach. We started with an estimate of the probability weighted potential cash payments by year, based on our expectation as to
when the future regulatory and commercial milestones might be achieved, and then we discounted each of those projected
payments to arrive at a present value amount. Subsequent to the acquisition date, we remeasure the contingent consideration
liability at current fair value at every reporting period with changes recorded in Other deductions—net.
2011 Financial Report 67