Pfizer 2013 Annual Report Download - page 32

Financial Review
Pfizer Inc. and Subsidiary Companies
2013 Financial Report 31
partially offset by:
• a $250 million payment to AstraZeneca to obtain the exclusive, global, OTC rights to Nexium.
R&D expenses also include payments for intellectual property rights of $203 million in 2013, $371 million in 2012 (which includes the $250
million payment to AstraZeneca to obtain the exclusive, global OTC rights to Nexium referred to above) and $306 million in 2011 (for further
discussion, see the “Our Business Development Initiatives” section of this Financial Review).
Research and Development Operations
Innovation is critical to the success of our company and drug discovery and development is time-consuming, expensive and unpredictable.
The following table provides information by operating segment about our research and development (R&D) expenses (see also Notes to
Consolidated Financial Statements––Note 18. Segment, Geographic and Other Revenue Information):
R&D Expenses
Year Ended December 31, % Change
(MILLIONS OF DOLLARS) 2013 2012 2011 13/12 12/11
Primary Care(a) $969 $1,009 $1,307 (4) (23)
Specialty Care and Oncology(a) 1,403 1,401 1,561 —(10)
Established Products and Emerging Markets(a) 408 401 441 2(9)
Consumer Healthcare(a), (b) 113 358 88 (68)307
Worldwide Research and Development/Pfizer Medical(c) 2,821 2,839 3,337 (1) (15)
Corporate and Other(d) 964 1,474 1,947 (35)(24)
Total Research and Development Expenses $6,678 $7,482 $8,681 (11)(14)
(a) Our operating segments, in addition to their sales and marketing responsibilities, are responsible for certain development activities. Generally, these
responsibilities relate to additional indications for in-line products and IPR&D projects that have achieved proof-of-concept. R&D spending may include upfront
and milestone payments for intellectual property rights.
(b) The decrease in 2013 relates to the non-recurrence of a $250 million payment to AstraZeneca in 2012 to obtain the exclusive, global OTC rights to Nexium.
(c) Worldwide Research and Development is generally responsible for research projects until proof-of-concept is achieved, and then for transitioning those projects
to the appropriate business unit for possible clinical and commercial development. R&D spending may include upfront and milestone payments for intellectual
property rights. This organization also has responsibility for certain science-based and other platform-services organizations, which provide technical expertise
and other services to the various R&D projects. Worldwide Research and Development is also responsible for all regulatory submissions and interactions with
regulatory agencies, including all safety event activities. Pfizer Medical is responsible for the provision of medical information to healthcare providers, patients
and other parties, transparency and disclosure activities, clinical trial results publication, grants for healthcare quality improvement and medical education,
partnerships with global public health and medical associations, regulatory inspection readiness reviews, internal audits of Pfizer-sponsored clinical trials and
internal regulatory compliance processes. The decrease in 2012 compared to 2011 results from cost savings associated with the R&D productivity initiative
announced on February 1, 2011 (see the “Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives”
section of this Financial Review).
(d) Corporate and other includes unallocated costs, primarily facility costs, information technology, share-based compensation, and restructuring related costs. The
decrease in 2013 primarily reflects lower charges relating to implementing our cost-reduction and productivity initiatives, and to a lesser extent efficiencies
gained from these efforts, and in 2012, primarily results from cost savings associated with the R&D productivity initiative announced on February 1, 2011, and to
a lesser extent, from lower charges relating to implementing our cost-reduction and productivity initiatives (see the “Restructuring Charges and Other Costs
Associated with Acquisitions and Cost-Reduction/Productivity Initiatives” section of this Financial Review).
Our R&D spending is conducted through a number of matrix organizations––Research Units, within our Worldwide Research and
Development organization, are generally responsible for research assets (assets that have not yet achieved proof-of-concept); Business Units
are generally responsible for development assets (assets that have achieved proof-of-concept); and science-based and other platform-
services organizations.
We take a holistic approach to our R&D operations and manage the operations on a total-company basis through our matrix organizations
described above. Specifically, a single committee, co-chaired by members of our R&D and commercial organizations, is accountable for
aligning resources among all of our R&D projects and for seeking to ensure that our company is focusing its R&D resources in the areas
where we believe that we can be most successful and maximize our return on investment. We believe that this approach also serves to
maximize accountability and flexibility.
Our Research Units are organized in a variety of ways (by therapeutic area or combinations of therapeutic areas, by discipline, by location,
etc.) to enhance flexibility, cohesiveness and focus. Because of our structure, we can rapidly redeploy resources, within a Research Unit,
between various projects as necessary because the workforce shares similar skills, expertise and/or focus.
Our platform-services organizations, where a significant portion of our R&D spending occurs, provide technical expertise and other services to
the various R&D projects, and are organized into science-based functions such as Pharmaceutical Sciences, Chemistry, Drug Safety, and
Development Operations, and non-science-based functions, such as Facilities, Business Technology and Finance. As a result, within each of
these functions, we are able to migrate resources among projects, candidates and/or targets in any therapeutic area and in most phases of
development, allowing us to react quickly in response to evolving needs.
Generally, we do not disaggregate total R&D expense by development phase or by therapeutic area since, as described above, we do not
manage a significant portion of our R&D operations by development phase or by therapeutic area. Further, as we are able to adjust a