Pfizer 2015 Annual Report Download - page 10

Financial Review
Pfizer Inc. and Subsidiary Companies
2015 Financial Report
9
Research Operations
We continue to strengthen our global R&D organization and pursue strategies intended to improve innovation and overall productivity in R&D
to achieve a sustainable pipeline that will deliver value in the near term and over time. Our R&D priorities include delivering a pipeline of
differentiated therapies with the greatest scientific and commercial promise, innovating new capabilities that can position Pfizer for long-term
leadership and creating new models for biomedical collaboration that will expedite the pace of innovation and productivity. To that end, our
R&D primarily focuses on six high-priority areas that have a mix of small molecules and large molecules––immunology and inflammation;
cardiovascular and metabolic diseases; oncology; vaccines; neuroscience and pain; and rare diseases. Another area of focus is biosimilars.
With the acquisition of Hospira, we have expanded our biosimilars pipeline and added R&D capabilities for sterile injectables and infusion
systems.
While a significant portion of R&D is done internally through the Worldwide Research and Development (WRD) organization, we continue to
seek to enhance our pipeline of potential future products by entering into collaborations, alliance and license agreements with other
companies, as well as leveraging acquisitions and equity- or debt-based investments. These agreements enable us to co-develop, license or
acquire promising compounds, technologies or capabilities. Collaboration, alliance and license agreements and equity- or debt-based
investments allow us to share risk and cost, to access external scientific and technological expertise, and enable us to advance our own
products as well as in-licensed or acquired products.
For additional information about R&D by operating segment, see the “Analysis of Operating Segment Information” section of this Financial
Review. For additional information about our pending new drug applications and supplemental filings, see the “Analysis of the Consolidated
Statements of Income––Product Developments––Biopharmaceutical” section of this Financial Review. For additional information about recent
transactions and strategic investments that we believe have the potential to advance our pipeline and maximize the value of our in-line
products, see the “Our Business Development Initiatives” section of this Financial Review.
Business Development
We continue to build on our broad portfolio of businesses and to expand our R&D pipeline through various business development
transactions. For additional information about recent transactions and strategic investments that we believe have the potential to advance our
pipeline, enhance our product portfolio and maximize the value of our in-line products, see the “Our Business Development Initiatives” section
of this Financial Review.
Intellectual Property Rights
We continue to aggressively defend our patent rights against increasingly aggressive infringement whenever appropriate, 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 designed 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. For additional information about our current efforts to enforce our intellectual property rights,
see Notes to Consolidated Financial Statements––Note 17A1. Commitments and Contingencies: Legal Proceedings––Patent Litigation. For
information on risks related to patent protection and intellectual property claims by third parties, see "Risks Related to Intellectual Property" in
Part I. Item 1A “Risk Factors” in our 2015 Annual Report on Form 10-K.
Capital Allocation and Expense Management
We seek to maintain a strong balance sheet and robust liquidity so that we continue to have the financial resources necessary to take
advantage of prudent commercial, research and business development opportunities and to directly enhance shareholder value through share
repurchases and dividends. For additional information about our financial condition, liquidity, capital resources, share repurchases and
dividends, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of this Financial Review.
On November 23, 2015, we announced that we have entered into a definitive merger agreement with Allergan, a global pharmaceutical
company incorporated in Ireland, under which we have agreed to combine with Allergan in a stock transaction valued at $363.63 per Allergan
share, for a total enterprise value of approximately $160 billion, based on the closing price of Pfizer common stock of $32.18 on November 20,
2015 (the last trading day prior to the announcement) and certain other assumptions. See the “Our Business”, “Our Business Development
Initiatives” and “Analysis of Financial Condition, Liquidity and Capital Resources” sections of this Financial Review for additional information.
On September 3, 2015, (the acquisition date), we acquired Hospira for approximately $16.1 billion in cash ($15.7 billion, net of cash acquired).
See Notes to Consolidated Financial Statements––Note 2A. Acquisitions, Licensing Agreements, Collaborative Arrangements, Divestitures,
Equity-Method Investments and Cost-Method Investment: Acquisitions and the “Significant Accounting Policies and Application of Critical
Accounting Estimates––Acquisition of Hospira” section of this Financial Review for additional information.
On February 9, 2015, we entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. (GS&Co.) to repurchase
shares of our common stock. This agreement was entered into under our previously announced share repurchase authorization. In July 2015,
we completed the agreement. For additional information, see the “Analysis of Financial Condition, Liquidity and Capital Resources” section of
this Financial Review and Notes to Consolidated Financial Statements––Note 12. Equity. In November 2015, we announced that, consistent
with 2015, we expect to execute an approximately $5 billion accelerated share repurchase program in the first half of 2016. We anticipate
additional future share repurchases to continue following the consummation of the pending combination with Allergan. The actual size and
timing of any such share repurchases will depend on actual and expected financial results.
In December 2015, the Board of Directors authorized a new $11 billion share repurchase program to be utilized over time. Also, on
December 14, 2015, our Board of Directors declared a first-quarter 2016 dividend of $0.30 per share, an increase from the $0.28 per-share