Pfizer 2006 Annual Report Download - page 9

management to optimize levels of outside services needed
and strategic sourcing from lower-cost sources. For example,
savings from demand management are being derived in part
from reductions in travel, entertainment, consulting and other
external service expenses. Facilities savings are being found in
site rationalization, energy conservation and renegotiated
service contracts.
Our Strategic Initiatives—Strategy and Recent Transactions
Acquisitions, Licensing and Collaborations
We are committed to capitalizing on new growth opportunities
by advancing our own new-product pipeline, as well as through
licensing, co-promotion agreements and acquisitions. Our business
development strategy targets a number of growth opportunities,
including biologics, oncology, Alzheimer’s disease, vaccines and
other products and services that complement and supplement our
internal pipeline and that add value to our customers and patients,
and that seek to provide innovative healthcare solutions.
•
In December 2006, we entered into a collaboration agreement
with Kosan Biosciences Inc. (Kosan) to develop a gastrointestinal
disease treatment. In 2006, we expensed a payment of $12
million, which was included in Research and development
expenses. Additional significant milestone payments of up to
approximately $238 million may be made to Kosan based upon
the successful development and commercialization of a product.
•
In September 2006, we entered into a license agreement with
Quark Biotech Inc. (Quark) for exclusive worldwide rights to a
compound for the treatment of neovascular (wet) age-related
macular degeneration (AMD).
•
In September 2006, we entered into a license and collaboration
agreement with TransTech Pharma Inc. (TransTech) to develop
and commercialize small- and large-molecule compounds for
treatment of Alzheimer’s disease and diabetic neuropathy.
Under the terms of the agreement, Pfizer received exclusive
worldwide rights to TransTech’s portfolio of compounds. In
2006, we expensed a payment of $101 million, which was
included in Research and development expenses. Additional
significant milestone payments may be made to TransTech
based upon the successful development and commercialization
of a product.
•
In June 2006, we entered into a license agreement with Bayer
Pharmaceuticals Corporation (Bayer) to acquire exclusive
worldwide rights to DGAT-1 inhibitors, an innovative class of
compounds that modify lipid metabolism. The lead compound
in the class, BAY 74-4113, is a potential treatment for obesity,
type 2 diabetes and other related disorders.
•
In February 2006, we completed the acquisition of 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 $1.4 billion in cash
(including transaction costs). In 2006, in connection with the
acquisition, as part of our final purchase price allocation, we
recorded $1.0 billion of developed technology rights, $218
million of inventory, and $166 million of Goodwill, all of which
have been allocated to our Pharmaceutical segment. The
amortization of the developed technology rights is primarily
included in Cost of sales. Prior to the acquisition, in connection
with our collaboration agreement with sanofi-aventis, we
recorded a research and development milestone due to us
from sanofi-aventis of $118 million ($71 million, after tax) in
Research and development expenses upon the approval of
Exubera in January 2006 by the FDA.
•
In December 2006, we completed the acquisition of PowderMed
Ltd. (PowderMed), a U.K. company which specializes in the
emerging science of DNA-based vaccines for the treatment of
influenza and chronic viral diseases, and in May 2006, we
completed the acquisition of Rinat Neurosciences Corp. (Rinat),
a biologics company with several new central-nervous-system
product candidates. In 2006, the aggregate cost of these and
other smaller acquisitions was approximately $880 million
(including transaction costs). In connection with these
transactions, we recorded $835 million in Acquisition-related in-
process research and development charges.
•
In November 2005, Pfizer entered into a research collaboration
and license agreement with Incyte Corporation (Incyte) and
received exclusive worldwide rights to Incyte’s portfolio of CCR2
antagonist compounds for potential use in a broad range of
diseases. In 2006, we expensed a payment of $40 million, which
was included in Research and development expenses. Additional
milestone payments of up to $738 million could potentially be
made to Incyte based upon the successful development and
commercialization of products in multiple indications.
•
In September 2005, we completed the acquisition of all of the
outstanding shares of Vicuron Pharmaceuticals Inc. (Vicuron), a
biopharmaceutical company focused on the development of
novel anti-infectives, for approximately $1.9 billion in cash
(including transaction costs). In connection with the acquisition,
as part of our final purchase price allocation, we recorded $1.4
billion in Acquisition-related in-process research and development
charges, and $243 million of Goodwill, which has been allocated
to our Pharmaceutical segment.
•
In April 2005, we completed the acquisition of Idun
Pharmaceuticals Inc. (Idun), a biopharmaceutical company
focused on the discovery and development of therapies to
control apoptosis, and in August 2005, we completed the
acquisition of Bioren Inc. (Bioren), which focuses on technology
for optimizing antibodies. In 2005, the aggregate cost of these
and other smaller acquisitions was approximately $340 million
in cash (including transaction costs). In connection with these
transactions, we recorded $262 million in Acquisition-related
in-process research and development charges.
•
In March 2005, we entered into a license agreement with Coley
Pharmaceutical Group, Inc. (Coley) for a toll-like receptor 9
(TLR9) agonist for the potential treatment, control and
prevention of cancer. In 2005, we expensed a payment of $50
million, which was included in Research and development
expenses, and purchased $10 million of Coley’s common stock.
Additional milestone payments of up to $455 million could
potentially be made to Coley based upon the successful
development and commercialization of a product.
2006 Financial Report 7
Financial Review
Pfizer Inc and Subsidiary Companies