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Financial Review
Pfizer Inc. and Subsidiary Companies
32
2015 Financial Report
partially offset by:
• the favorable impact of foreign exchange of 6%;
• lower expenses associated with certain products that have recently lost marketing exclusivity;
• lower field force, advertising and promotional expenses, reflecting the benefits of cost-reduction and productivity initiatives; as well as
• the non-recurrence of a $215 million charge to account for an additional year of the non-tax deductible Branded Prescription Drug Fee in
accordance with final regulations issued in the third quarter of 2014 by the U.S. Internal Revenue Service (IRS).
2014 v. 2013
SI&A expenses decreased 2% in 2014, compared to 2013, primarily due to:
• lower expenses for field force and marketing expenses, reflecting the benefits of cost-reduction and productivity initiatives, partly in
response to product losses of exclusivity;
• a reduction related to a true-up of the 2013 fee payable to the federal government under the U.S. Healthcare Legislation based on our
prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs; and
• the favorable impact of foreign exchange of 1%,
partially offset by:
• increased investments in recently launched products and certain in-line products, as well as the launch and pre-launch marketing
expenses for Trumenba (meningitis B vaccine) and Ibrance (palbociclib); and
• a $215 million charge to account for an additional year of the non-tax deductible Branded Prescription Drug Fee in accordance with final
regulations issued in the third quarter of 2014 by the IRS.
Research and Development (R&D) Expenses
Year Ended December 31, % Change
(MILLIONS OF DOLLARS) 2015 2014 2013 15/14 14/13
Research and development expenses $7,690 $8,393 $6,678 (8) 26
As a percentage of Revenues 15.7%16.9%12.9%
2015 v. 2014
R&D expenses decreased 8% in 2015, compared to 2014, primarily due to:
• the non-recurrence of a charge associated with a collaborative arrangement with Merck KGaA, announced in November 2014, to jointly
develop and commercialize avelumab, an investigational anti-PD-L1 antibody currently in development as a potential treatment for multiple
types of cancer. The charge included an $850 million upfront cash payment as well as an additional amount of $309 million, reflecting the
estimated fair value of certain co-promotion rights for Xalkori given to Merck KGaA (for further discussion, see the “Our Business
Development Initiatives” section of this Financial Review);
• lower clinical trial expenses for various studies for certain previously approved products, including as a result of the completion of
postmarketing commitments;
• lower upfront payments associated with certain licensing agreements compared to 2014; and
• the favorable impact of foreign exchange of 2%,
partially offset by:
• higher clinical trial spend for certain oncology and GIP pipeline programs;
• the $295 million upfront payment to OPKO in the first quarter of 2015 associated with a worldwide development and commercialization
agreement;
• increased investment in biosimilar and sterile injectable development programs; and
• the inclusion of four months of legacy Hospira U.S. operations and three months of legacy Hospira international operations.
2014 v. 2013
R&D expenses increased 26% in 2014, compared to 2013, primarily due to:
• a charge associated with a collaborative arrangement with Merck KGaA, announced in November 2014, to jointly develop and
commercialize avelumab, an investigational anti-PD-L1 antibody currently in development as a potential treatment for multiple types of
cancer. The charge includes an $850 million upfront cash payment as well as an additional amount of $309 million, reflecting the estimated
fair value of certain co-promotion rights for Xalkori given to Merck KGaA (for further discussion, see the “Our Business Development
Initiatives” section of this Financial Review); and
• costs associated with ongoing Phase 3 programs for certain new drug candidates, including bococizumab and ertugliflozin (in collaboration
with Merck), investments in Ibrance (palbociclib) and our vaccines portfolio, including Trumenba, as well as potential new indications for
previously approved products, especially for Xeljanz.
See also the “Analysis of Operating Segment Information” section of this Financial Review.