Pfizer 2005 Annual Report Download - page 10

grade corporate bonds rated AA or better. Holding all other
assumptions constant, the effect of this 0.2 percentage-point
decrease in the discount rate assumption is an increase in our 2006
U.S. qualified pension plan pre-tax expense of approximately
$25 million and an increase in the U.S. qualified pension plans’
projected benefit obligations at December 31, 2005, of
approximately $220 million.
Acquisitions and Dispositions
Pharmacia Acquisition
On April 16, 2003, we acquired Pharmacia in a stock-for-stock
transaction valued at approximately $56 billion. For the year
ended December 31, 2003, about 71⁄2months of results of
operations of Pharmacia’s international operations (which
conformed to Pfizer’s international operations fiscal year end of
November 30th) and about 81/2months of results of operations of
Pharmacia’s U.S. operations were included in our consolidated
financial statements.
Our operating results for the years ended December 31, 2005 and
2004, reflect the impact of the acquisition of Pharmacia
throughout the entire period, as compared to the year ended
December 31, 2003, which reflects the impact of the acquisition
of Pharmacia from April 16, 2003.
The impact of purchase accounting relating to the Pharmacia
acquisition resulted in a number of significant non-cash charges
to the income statement for the years ended December 31, 2005,
2004 and 2003. The non-cash charges for 2005 and 2004 include
incremental amortization of about $3.3 billion relating to
intangible assets adjusted to fair value. The non-cash charges in
2003 include non-recurring IPR&D ($5.1 billion); incremental cost
of sales (non-recurring $2.7 billion) from the sale of acquired
inventory adjusted to fair value; and incremental amortization
($2.3 billion) of tangible and intangible assets adjusted to fair
value. See also the discussions under the heading “Merger-Related
In-Process Research and Development Charges” in the “Costs
and Expenses” section of this Financial Review.
In connection with the acquisition, we took actions to integrate
and restructure the Pharmacia operations in order to increase
our profitability through cost savings and operating efficiencies.
To achieve the savings, we incurred certain merger-related
expenditures of about $5.4 billion through December 31, 2005. See
also the discussions under the heading “Merger-Related Costs” in
the “Costs and Expenses” section of this Financial Review. As a
result of these activities and the combining of operations, it is not
possible to provide separate results of operations for Pharmacia
for the period after the acquisition date.
As a result of the acquisition of Pharmacia, regulatory authorities
required us to divest several products and a product candidate.
In April 2003, we sold Cortaid, an anti-itch cream, for $35.8
million in cash. Also in April 2003, we sold the product candidate
for overactive bladder, darifenacin, for $225 million. We received
$50 million in cash upon closing in April 2003 and an additional
$100 million in 2004 (with an additional $75 million contingent
upon when, and if, darifenacin receives regulatory approvals).
These net proceeds are included in Other income/(deductions)—
net, in the respective years.
Other Acquisitions
On September 14, 2005, we completed the acquisition of all of the
outstanding shares of Vicuron, a biopharmaceutical company
focused on the development of novel anti-infectives, for
approximately $1.9 billion in cash (including transaction costs). At
the date of acquisition, Vicuron had two products under NDA
review by the FDA: Eraxis (anidulafungin) for fungal infections and
Zeven (dalbavancin) for Gram-positive infections. The allocation
of the purchase price includes IPR&D of approximately $1.4 billion,
which was expensed in Merger-related in-process research and
development charges, and goodwill of $243 million, which has
been allocated to our Human Health segment. Neither of these
items is deductible for tax purposes. In February 2006, Eraxis was
approved by the FDA.
On April 12, 2005, we completed the acquisition of all outstanding
shares of Idun, a biopharmaceutical company focused on the
discovery and development of therapies to control apoptosis,
and on August 15, 2005, we completed the acquisition of all
outstanding shares of Bioren Inc. (Bioren), which focuses on
technology for optimizing antibodies. The aggregate cost of
these and other smaller acquisitions was approximately $340
million in cash (including transaction costs) for 2005. In connection
with these transactions, we expensed $262 million of IPR&D,
which was included in Merger-related in-process research and
development charges.
On September 30, 2004, we completed the acquisition of
Campto/Camptosar (irinotecan), from sanofi-aventis for
approximately $525 million in cash (including transaction costs).
Additional payments of up to $63 million will be payable upon
obtaining regulatory approvals for additional indications in
certain European countries. In connection with the acquisition, we
recorded an intangible asset for developed technology rights of
$445 million.
On February 10, 2004, we completed the acquisition of all the
outstanding shares of Esperion, a biopharmaceutical company, for
$1.3 billion in cash (including transaction costs). The allocation of
the purchase price includes IPR&D of approximately $920 million,
which was expensed in Merger-related in-process research and
development charges, and goodwill of $239 million, which was
allocated to our Human Health segment. Neither of these items
was deductible for tax purposes.
In 2004, we also completed several other acquisitions. The total
purchase price associated with these transactions was
approximately $430 million. In connection with these transactions,
we expensed $151 million of IPR&D, which was included in
Merger-related in-process research and development charges,
and recorded $206 million in intangible assets, primarily brands
(indefinite-lived) and developed technology rights.
In January 2006, we announced an agreement to acquire the
sanofi-aventis worldwide rights, including patent rights and
production technology, to manufacture and sell Exubera, an
inhaled form of insulin for use in adults with type 1 and type 2
diabetes, and the insulin-production business and facilities located
in Frankfurt, Germany, previously jointly owned by Pfizer and
sanofi-aventis, for approximately $1.3 billion.
2005 Financial Report 9
Financial Review
Pfizer Inc and Subsidiary Companies