Pfizer 2015 Annual Report Download - page 34

Financial Review
Pfizer Inc. and Subsidiary Companies
2015 Financial Report
33
Description of Research and Development Operations
Innovation is critical to the success of our company and drug discovery and development is time-consuming, expensive and unpredictable.
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 (for technical support and other services). For additional information by operating segment, see the “Analysis of
Operating Segment Information” section of this Financial Review.
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 science-based and other 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,
Medicinal 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
significant portion of our spending quickly, as conditions change, we believe that any prior-period information about R&D expense by
development phase or by therapeutic area would not necessarily be representative of future spending.
Amortization of Intangible Assets
Year Ended December 31, % Change
(MILLIONS OF DOLLARS) 2015 2014 2013 15/14 14/13
Amortization of intangible assets $3,728 $4,039 $4,599 (8) (12)
As a percentage of Revenues 7.6% 8.1% 8.9%
Amortization of intangible assets decreased 8% in 2015, compared to 2014, and 12% in 2014, compared to 2013, primarily due to assets that
became fully amortized at the end of their estimated useful lives. The decrease in Amortization of intangible assets in 2015 was partially offset
by purchase accounting charges of approximately $161 million pre-tax related to the identifiable intangible assets acquired from Hospira.
See also Notes to Consolidated Financial Statements—Note10A. Identifiable Intangible Assets and Goodwill: Identifiable Intangible Assets.
Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/
Productivity Initiatives
Year Ended December 31, % Change
(MILLIONS OF DOLLARS) 2015 2014 2013 15/14 14/13
Restructuring charges and certain acquisition-related costs $ 1,152 $ 250 $ 1,182 *(79)
Total additional depreciation––asset restructuring 122 261 291 (53) (10)
Total implementation costs 203 270 231 (25) 17
Costs associated with acquisitions and cost-reduction/
productivity initiatives(a) $ 1,478 $ 781 $ 1,704 89 (54)
(a) Comprises Restructuring charges and certain acquisition-related costs as well as costs associated with our cost-reduction/productivity initiatives included in
Cost of sales, Research and development expenses and/or Selling, informational and administrative expenses, as appropriate.
* Calculation not meaningful.
Included in Restructuring charges and certain acquisition-related costs are (i) restructuring charges of $811 million in 2015 for employee
termination costs, asset impairments and other exit costs largely associated with our acquisition of Hospira; (ii) transaction costs, such as
banking, legal, accounting and other similar services, directly related to our pending combination with Allergan and our acquisition of Hospira
of $123 million in 2015; and (iii) integration costs, representing external, incremental costs directly related to integrating acquired businesses,
and primarily including expenditures for consulting and the integration of systems and processes of $219 million in 2015, primarily related to
our acquisition of Hospira. For information about costs associated with the acquisition of Hospira and expected total costs, see Notes to
Consolidated Financial Statements—Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/
Productivity Initiatives.