Pfizer Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended April 4, 2021; comparable period ended March 29, 2020. Results reflect Pfizer’s post-Upjohn separation business, with the Upjohn Business and Mylan-Japan collaboration reported as discontinued operations.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change / context |
|---|---|---|---|
| Revenue | $14.582 billion | $10.083 billion | Up 45% reported; 42% operationally. Excluding BNT162b2 vaccine revenue, operational growth was 8%. |
| Net income attributable to Pfizer shareholders | $4.877 billion | $3.355 billion | Q1 2020 included $881 million from discontinued operations; Q1 2021 included $9 million. |
| Diluted EPS | $0.86 | $0.60 | Adjusted diluted EPS, a non-GAAP measure, was $0.93 versus $0.63. |
| Cash from operating activities | $4.538 billion | $3.133 billion | Continuing-operations cash flow was $4.530 billion versus $2.155 billion. |
| Debt | $39.699 billion | $39.836 billion | Includes current debt and long-term debt. |
| Selected financial assets | $16.895 billion | $15.195 billion | Company-reported selected net financial liabilities were $22.803 billion, versus $24.641 billion. |
| Liquidity | Current ratio 1.48:1 | 1.35:1 | Working capital was $12.880 billion, up from $9.147 billion at year-end 2020. |
Cost of sales was $4.211 billion, or 28.9% of revenue, compared with $1.940 billion, or 19.2%. The implied gross margin was approximately 71.1%, versus 80.8%; the filing attributes higher cost of sales principally to BNT162b2 costs, including BioNTech’s 50% gross-margin share, and higher sales volumes. No clear operating-margin figure is presented in the supplied filing text.
Q1 revenue included $3.462 billion from BNT162b2. Other notable product revenues included Eliquis ($1.643 billion), Ibrance ($1.254 billion), Xeljanz ($538 million) and Vyndaqel/Vyndamax ($453 million). Revenues from BNT162b2 sales to the U.S. Government were 14% of total revenue.
Material changes and drivers
- Growth was led by BNT162b2 and increased sales of Eliquis, Vyndaqel/Vyndamax, Xeljanz, Xtandi, Inlyta, biosimilars and Hospital products. Prevnar 13 and Ibrance declined; Chantix and international Enbrel also faced pressure.
- Other income/deductions improved to net income of $1.004 billion from net expense of $190 million, reflecting equity-security gains, pension and postretirement credits, and collaboration income. This included $409 million of unrealized gains related to Allogene and BioNTech investments and $188 million of net BioNTech collaboration income related to the COVID-19 vaccine.
- Research and development expense rose 20% to $2.014 billion, primarily reflecting COVID-19 vaccine and treatment development spending. Selling, informational and administrative expense rose 10% to $2.783 billion.
- Q1 had additional selling days versus the prior-year quarter, contributing approximately $400 million of revenue; Pfizer estimated the net benefit of selling-day and other identified timing/COVID-related factors at approximately $150 million.
Cash, debt and capital allocation
Cash and cash equivalents were $1.768 billion at April 4, 2021; short-term investments were $11.899 billion. Operating cash flow benefited from higher income and BNT162b2 customer advances recorded as deferred revenue. Investing activities used $1.747 billion, while financing activities used $2.807 billion; cash dividends paid were $2.172 billion.
Pfizer reported access to a $7 billion revolving credit facility expiring in 2025, with essentially all credit lines unused. No common shares were repurchased under the publicly announced plan during the quarter. The Board declared a $0.39-per-share dividend payable in June 2021 and said it believed future annual increases were supportable absent significant unforeseen events.
Outlook, risks and unusual items
- As of May 4, Pfizer and BioNTech forecast approximately $26 billion of 2021 BNT162b2 revenue based on signed agreements for 1.6 billion doses to be delivered in 2021; Pfizer’s gross margin is split evenly with BioNTech. The forecast could change as agreements and circumstances change. The companies estimated capacity to manufacture at least 2.5 billion doses by year-end 2021 and at least 3 billion in 2022.
- Pfizer noted uncertainty in the pandemic’s duration and effects, vaccine supply and contracts, and potential constraints on components and raw materials. It reported no significant supply-chain disruption to date and manufacturing sites operating at or near normal levels.
- Key business risks include pricing and reimbursement pressure, generic and biosimilar competition, patent challenges and expirations, regulatory and clinical-development outcomes, manufacturing or supply interruptions, and legal, tax and government investigations. Pfizer said it expected a moderate revenue impact from patent expiries during 2021–2025; Chantix’s U.S. basic patent expired in November 2020 and Sutent’s was due to expire in August 2021.
- The filing describes numerous patent, product-liability, commercial and government matters. Pfizer said it did not believe these matters would materially adversely affect its financial position, but stated that it could not estimate reasonably possible losses above amounts accrued; outcomes could materially affect results or cash flows in the period recognized or paid.
- Pfizer retrospectively adopted mark-to-market accounting for pension and postretirement actuarial gains and losses. The change reduced retained earnings by $6.3 billion as of January 1, 2020, with an offset to accumulated other comprehensive loss; Q1 2021 continuing-operations income also included a $146 million pre-tax benefit from the change.
- The company’s cost-transformation program was expected to cost $1.6 billion for corporate-function changes and $500 million for manufacturing optimization. Through April 4, 2021, approximately $1.0 billion had been incurred. Expected savings included $700 million net from corporate-function initiatives and $300 million net from manufacturing optimization, primarily over 2020–2022.
Most important facts for investors to verify
- Whether BNT162b2 delivery volumes, contract terms and the approximately $26 billion 2021 revenue forecast are achieved, and how the BioNTech margin split and customer advances affect reported cash flow and earnings.
- How much underlying growth persists after excluding vaccine revenue, foreign exchange, extra selling days and other timing effects.
- Whether pricing pressure, competition and patent expirations—particularly for Chantix and Sutent—affect product growth more than management anticipates.
- Developments in material litigation, tax audits and government investigations, given the filing’s inability to estimate possible losses above accrued amounts.
- Progress against restructuring costs and savings targets, and the effects of pension mark-to-market accounting and investment gains on reported versus adjusted results.