Pfizer Inc. — Form 10-Q summary
Reporting period: Third quarter ended October 3, 2021; nine months ended October 3, 2021. For subsidiaries outside the U.S., the comparable period ended August 29, 2021. Amounts below are U.S. dollars unless noted.
Business context and financial performance
Pfizer reports one biopharmaceutical operating segment. Its Upjohn business was spun off in November 2020, and results for Upjohn and the Mylan-Japan collaboration are presented as discontinued operations; this limits direct comparison with 2020.
| Metric | Q3 2021 | Q3 2020 | First nine months 2021 | First nine months 2020 |
|---|---|---|---|---|
| Revenue | $24.094 billion | $10.277 billion | $57.653 billion | $30.224 billion |
| Net income attributable to Pfizer | $8.146 billion | $1.469 billion | $18.586 billion | $8.313 billion |
| Diluted EPS | $1.42 | $0.26 | $3.27 | $1.48 |
| Operating cash flow | Not separately reported for quarter | Not separately reported for quarter | $26.666 billion | $8.778 billion |
Q3 revenue rose 134% year over year; nine-month revenue rose 91%. Comirnaty generated $12.977 billion in Q3 and $24.277 billion year to date. Excluding Comirnaty direct sales and alliance revenue, revenue grew 7% operationally in Q3 and 8% operationally year to date, according to management.
Q3 cost of sales was 41.4% of revenue, versus 19.5% in 2020, reflecting Comirnaty costs, including the 50% gross-profit share with BioNTech, royalties, sales mix and Chantix recall effects. Other income/deductions was a net benefit of $1.696 billion in Q3, including investment gains and pension credits; these items contributed to reported earnings and affect comparability.
Cash, debt and liquidity
At October 3, 2021, cash and cash equivalents were $1.966 billion and short-term investments were $27.730 billion. Total debt, including current maturities, was approximately $39.879 billion. Pfizer reported working capital of $16.097 billion and a current ratio of 1.39:1. Its selected financial assets exceeded debt by $5.551 billion under the company’s stated liquidity measure.
Nine-month cash from operating activities was $26.666 billion, versus $8.778 billion a year earlier. The increase reflected higher earnings, Comirnaty advance payments and timing of working-capital items; it was partly offset by a $7.8 billion accrued amount due to BioNTech for the vaccine gross-profit split. Investing cash outflow was $19.960 billion, largely reflecting purchases of short-term investments. Cash dividends paid were $6.540 billion. Pfizer had a $7 billion revolving credit facility, essentially unused at quarter-end.
Material changes, outlook and commentary
- Growth was led by Comirnaty; Eliquis, Vyndaqel/Vyndamax, Inlyta, Xtandi, biosimilars and Hospital also grew. Pfizer highlighted declines in Chantix/Champix, Prevnar, Xeljanz and certain other products.
- As of November 2, management forecast approximately $36 billion of 2021 Comirnaty revenue, based on about 2.3 billion expected doses delivered in fiscal 2021. Pfizer and BioNTech expected to manufacture 3 billion doses by year-end. These are forecasts, not reported results.
- Management said supply chains had not experienced significant disruption to date, but rising demand for components and raw materials could constrain supply. The company said the pandemic’s future effects remained uncertain.
- Pfizer reported ongoing development of Paxlovid, an investigational oral COVID-19 antiviral. The filing describes a favorable November interim study analysis after quarter-end and plans to seek FDA emergency authorization; development and regulatory outcomes were uncertain.
- Pfizer recalled Chantix in the U.S., expanded the recall to all lots in September, and paused shipments globally because of nitrosamine contamination. The company was evaluating potential nitrosamines across its portfolio.
- Risks include patent expiry and generic competition, pricing and reimbursement pressure, regulatory and clinical outcomes, product supply and recalls, and legal, tax and government proceedings. The filing states that the reasonably possible loss range in excess of accrued legal amounts could not be estimated.
Unusual items and contingencies
Pfizer adopted immediate recognition of pension and postretirement actuarial remeasurement gains and losses retrospectively. Reported results included substantial pension gains in 2021; management excludes these volatile items from its non-GAAP adjusted measure. The company also recorded a $650 million upfront Arvinas collaboration payment in R&D expense and a $345 million EpiPen settlement payment, subject to court approval. Pfizer said it did not believe pending legal matters would materially adversely affect its financial position, while noting that outcomes could materially affect results or cash flows in a particular period.
Important facts for investors to verify
- Whether Comirnaty revenue, delivery timing and the 2021 forecast translate into sustainable earnings and cash generation after BioNTech’s profit share and other vaccine costs.
- How much reported profit growth reflects core operations versus pension remeasurement credits, equity-security gains, tax effects and other unusual items.
- The impact and resolution of the Chantix recall, including any supply, regulatory, legal or financial consequences.
- Developments in Xeljanz safety and regulatory review, and patent or generic competition affecting key products.
- Cash-flow quality and timing, including Comirnaty customer advances, deferred revenue and amounts payable to BioNTech.