Explore BrainMass
Share

Pfizer - Accounting Principles

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

I need about 2-3 pages of information on the pharamcuetical company Pfizer. I must address accounting principles and any conventions or practices which are unique to this particular company. Also any other information on Pfizer would be great.

This information will be put into a report, if possible, can you site where you are getting the information from.

Thank you.

© BrainMass Inc. brainmass.com March 21, 2019, 12:55 pm ad1c9bdddf
https://brainmass.com/physics/heinsenburgs-uncertainty-principle/pfizer-accounting-principles-84187

Solution Preview

Document 1 below discuses Pfizer's unique growth driven strategies for future financial predictions through investments in innovative current and new medicines from its strong R&D pipeline, while enhancing effectiveness and reducing operating costs. It also discusses the unique accounting principles used by Pfizer, such as:

"Adjusted Income" and "Adjusted diluted earnings per share (EPS)" are defined as GAAP net income and GAAP diluted earnings per share excluding discontinued operations, significant impacts of purchase accounting for acquisitions, merger-related and restructuring costs, and certain significant items. Reconciliation to GAAP net income and GAAP diluted EPS are provided within Document 1 below (see full document e.g., Document 1- below http://www.pfizer.ca/english/newsroom/press%20releases/default.asp?s=1&year=2005&releaseID=164).

In Document 2 below (Pfizer's financial report for the first quarter 2006, especially financial section, p.11), it discusses the company's accounting principles, such as:

1. "Adjusted income" and "adjusted diluted earnings per share (EPS)" are defined as reported net income and reported diluted EPS excluding discontinued operations, purchase-accounting adjustments, merger-related costs, and certain significant items. As described under Adjusted Income in the Financial Review section of Pfizer's Form 10-K for the fiscal year ended December 31, 2005, management uses adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. We believe that investors' understanding of our performance is enhanced by disclosing this measure. Reconciliations of first-quarter and forecasted full-year adjusted income and adjusted diluted EPS to reported net income and reported diluted EPS are provided in the materials accompanying this report. The adjusted income and adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and diluted EPS.

2. New Products is defined as first-quarter 2006 worldwide revenues (excluding the impact of foreign exchange) of products launched in 2004-06?Caduet, Inspra, Lyrica, Macugen, Nicotrol Rx, Olmetec, Onsenal, Revatio, Sutent, and Zmax. Loss-of-Exclusivity Products and Bextra is defined as first-quarter 2006 worldwide revenues (excluding the impact of foreign exchange) of products that have lost U.S. exclusivity in 2004-06?Accupril/Accuretic, Diflucan, Neurontin, and Zithromax?and of Bextra, sales of which were suspended in 2005. In-Line Products is defined as first-quarter 2006 worldwide revenues (excluding the impact of foreign exchange) of all other Human Health Products.

3. Human Health adjusted revenues are defined as total Human Health revenues excluding the revenues of major products that have lost exclusivity in the U.S. since the beginning of 2004 and the revenues of Bextra, which Pfizer voluntarily withdrew in 2005. See the table accompanying this report. 4 Verispan longitudinal patient database.

Document 1:

PFIZER SEES SUSTAINED LONG-TERM GROWTH DRIVEN BY INNOVATIVE PRODUCTS, STRONG R&D PIPELINE AND OPERATING EFFICIENCIES

New York - April 07, 2005

Pfizer Expects $4 Billion in Annualized Cost Savings by 2008 Through Productivity Initiatives Across Company
---
Company to Continue Investments in Products and R&D Pipeline; Unrivaled Product Portfolio Includes 33 Major Medicines in Ten Therapeutic Areas; 13 Major New Drug Applications Completed Toward Goal of 20 Filings in Five Years Ending in 2006
---
During 2005 "Transition Year" Company Expects Full-Year Adjusted Diluted EPS of About $2.00 (Full-Year 2005 GAAP Diluted EPS of About $1.16)
---
Pfizer Expects Double-Digit Adjusted Earnings Growth in 2006 Driven by Productivity Enhancements; For 2007, Revenue Growth from Major In-Line Products and New Products Expected to Drive Accelerated Double-Digit Adjusted Earnings Growth
---
Pfizer Plans Range of New Healthcare Solutions to Add Value for Patients and Payers; CEO McKinnell: "Our Vision is Integrated Healthcare Delivery Focused on Patient Health and Wellness"
Pfizer Inc said today it would sustain long-term growth through investments in innovative current and new medicines from its strong R&D pipeline, while enhancing effectiveness and reducing operating costs.
"Adjusted Income" and "Adjusted diluted earnings per share (EPS)" are defined as GAAP net income and GAAP diluted earnings per share excluding discontinued operations, significant impacts of purchase accounting for acquisitions, merger-related and restructuring costs, and certain significant items. Reconciliation to GAAP net income and GAAP diluted EPS are provided within this document.
In a presentation to financial analysts, company leaders say they will leverage the company's competitive advantages --including its global scale, proven ability to develop innovative medicines, operating flexibility, and financial strength -- to meet the challenges posed by patent expirations in the 2004-2007 period and other issues in Pfizer's operating environment.
"Pfizer has been preparing for this period for more than a decade," said Hank McKinnell, Pfizer's chairman and chief executive officer. "During this time, we have transformed the company through key product launches, major acquisitions and other strategic actions. We now have competitive advantages that clearly distinguish Pfizer from others in the worldwide pharmaceutical industry.
"But 2005 will be a transition year. In addition to the loss of exclusivity on several important products, we are facing a number of uncertainties. These include the outlook for our Cox-2 franchise, continued pricing pressures, and market acceptance of new products. We expect our performance to rebound quickly in 2006 and accelerate in 2007 as we increasingly realize the benefits of the continued growth of major in-line products, new product launches and productivity initiatives."
2005-2007 Financial Forecast and Productivity Initiatives
Vice Chairman David Shedlarz told the meeting that Pfizer expects revenues in 2005 to be substantially unchanged from 2004 when the company recorded revenues of $52.5 billion. Cost of goods sold will be substantially negatively impacted by changes in geographic and product mix, loss of exclusivity of major products in the U.S., and lower year-over-year sales of the Cox-2 franchise.
Reflecting the company's confidence in the growth potential of its research and development pipeline, Pfizer plans to invest approximately $8 billion in R&D in 2005, compared with $7.7 billion in 2004.
Financial results for 2005 will be impacted by the adoption of new accounting regulations relating to the expensing of stock options. These regulations are expected to result in an after-tax expense of $200 million or $0.03 per share.
Pfizer's effective tax rate for adjusted income from continuing operations is expected to rise from 21.75 percent in 2004 to 23 percent in 2005 due to a changing income mix by country and product.
Shedlarz told analysts that Pfizer's financial strengths will be enhanced by the repatriation of more than $28 billion in foreign cash in 2005. This will strengthen Pfizer's ability to pursue strategic opportunities while enhancing the company's flexibility to invest in our R&D pipeline and new product potential in the U.S. The company will record a tax charge of $2.2 billion in the first-quarter in connection with the repatriation. This charge may be reduced by approximately $850 million pending anticipated technical corrections under the repatriation legislation.
Based on these and other factors, Pfizer said it expects to achieve 2005 GAAP net income of about $8.6 billion and GAAP diluted earnings per share of about $1.16. This includes non-cash charges of $2.4 billion ($0.32 per share) relating to purchase accounting attributable to the acquisition of Pharmacia; merger-related and restructuring costs of $1.4 billion ($0.18 per share) which includes both Pharmacia-related chargers and recent productivity initiative-related charges; and, an in-process research and development charge of $0.3 billion ($0.04 per share) relating to the pending acquisition of Idun Pharmaceutical, Inc., all on an after-tax basis. In addition, GAAP net income will include a tax charge of $2.2 billion ($0.30 per share) relating to the repatriation of foreign cash in 2005. Excluding these items, adjusted income is expected to be about $14.9 billion, and adjusted diluted EPS of about $2.00, subject to the variables cited in the Disclosure Notice found in this report.
For the first quarter of 2005, Pfizer expects adjusted diluted earnings per share of about $0.53 per share (GAAP diluted EPS of $0.13 per share), subject to the Disclosure Notice found in this report.
Earlier this year, Pfizer launched a company-wide initiative to streamline the organization, fund key investments, and realize significant cost savings. Pfizer is targeting $4 billion in total annualized cost savings by 2008, which represents approximately 12 percent of Pfizer's current cost base.
Shedlarz said the financial impact of these efforts will be modest in 2005 but is expected to yield significant benefits in 2006 and 2007. In 2006, the company expects the operational and financial benefits of this productivity initiative to drive a return to double-digit growth in adjusted earnings. For 2007, the company expects revenue growth from both new products and major in-line products will drive accelerating double-digit adjusted earnings growth. Productivity initiatives will also contribute to growth in 2007.
The company estimates the cost of implementing this initiative will be $5 billion to $6 billion through 2008.
"Pfizer has the financial strength to meet the challenges of the 2005-2007 period. Pfizer's strong cash flow will provide us with flexibility in leveraging the company's financial strength. For example, we will intensify our efforts to acquire new products and technologies to further strengthen our new product pipeline," Shedlarz said.
Shedlarz also said the company expects to accelerate the completion of a $5 billion share repurchase program initiated in October 2004. Pfizer now expects to complete the repurchase by mid-year, following the planned purchase of approximately $2.3 billion of Pfizer stock in the second quarter of 2005 alone. Early in the second half of the year, Pfizer will consider additional opportunities to purchase the company's stock.
Human Health Overview:
"Beyond Pharmaceutical to Healthcare Innovation"
"Changes at Pfizer and in our environment over the past few years mean it's time to reinvent how we approach discovering, developing and delivering new medicines," said Karen Katen, Pfizer vice chairman and Human Health president.
Katen said Pfizer is number-one in sales in almost every major market worldwide and operates in 89 countries. The company now markets five of the world's 25 largest-selling medicines, more than any other company. Pfizer's product portfolio is unrivaled, with 33 major medicines in 10 distinct therapeutic areas.
Pfizer anticipates continued growth of many of its major in-line medicines, driven by strong new clinical data. "This is a key competitive advantage, as we continue to lead in clinical investigation and pursue programs with a scale and reach others simply can't match," Katen said.
Recently launched products are already increasing their revenue contributions, and Pfizer anticipates strong growth for them as well, driven by clinical data and increasing market acceptance. Finally, new and upcoming launches will drive revenues. "We need to help people live healthier, especially late in life, when they suffer from chronic diseases like diabetes, heart disease, cancer, depression or macular degeneration. So both ends of the health spectrum -- reducing morbidity and mortality on one hand, and improving quality of life on the other -- are clearly major growth opportunities for our company. We need to focus not only on life span, but health span," Katen said.
Katen highlighted recent developments for Pfizer's key products:
• Lipitor is far and away the lipid-lowering market leader, and, in fact, the most successful medicine in history, with nearly $11 billion in 2004 revenue. Lipitor continues to post double-digit growth around the world. This is due in large part to the "wall of science" built from clinical-trials data, including ASCOT, REVERSAL, CARDS and PROVE-IT and the latest study, TNT. In the eight years Lipitor has been on the market, Pfizer has invested $700 million in clinical trials and enrolled more than 80,000 patients.
• Katen noted that all of Pfizer's cardiovascular (CV) products are linked, since the diseases that each product treats often co-exist in the same patient and contribute to heightened CV risk. More and more studies show that CV risk factors must be managed simultaneously. Pfizer's new and unique medicine, Caduet, treats hypertension and high cholesterol with the gold standard in their respective classes, Norvasc and Lipitor, which makes it an ideal tool for optimizing care.
• For the Cox-2 portfolio, Pfizer looks forward to finalizing changes to its U.S. labeling with the U.S. Food and Drug Administration (FDA) as well as moving ahead with plans for clinical studies to further explore the benefits as well as the risks of the Cox-2 specific medicines compared to older, non-selective medicines. In the interim, Pfizer remains focused on the importance of these products for millions of patients around the world. "We believe that, with continued clinical work and appropriate labeling, these medicines will remain important treatment options for patients and doctors for many years to come," Katen said.
• Viagra has maintained market leadership in the face of fierce competition, and Pfizer continues to see strong growth opportunities for this product. New clinical data, effective sales and marketing efforts, and novel approaches to encourage more men to see a physician are key elements in the growth plan.
• The drug candidate Revatio, a brand name for sildenafil for the treatment of pulmonary arterial hypertension, demonstrates our commitment to developing medicines for rare diseases with unmet needs.
• Zithromax is off to a strong start in 2005, based on its clear benefits over competitors. Pfizer plans to extend this successful brand with the single-dose Zithromax microsphere formulation, which has been filed for approval with the ...

Solution Summary

This solution provides infromation on the pharamcuetical company Pfizer related to accounting principles and any conventions or practices which are unique to this particular company. References are provided.

$2.19