Pfizer Inc. — Form 10-Q Summary
Business context and reporting period
Pfizer reported its first quarter of 2022, ended April 3, 2022. For subsidiaries outside the U.S., the quarter ended February 27, 2022. Pfizer operates Biopharma and Pfizer CentreOne (PC1); Biopharma is its sole reportable segment. Results are unaudited and prepared under U.S. GAAP.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $25.661 billion | $14.516 billion |
| Income from continuing operations | $7.879 billion | $4.885 billion |
| Net income attributable to Pfizer shareholders | $7.864 billion | $4.877 billion |
| Diluted GAAP EPS | $1.37 | $0.86 |
| Adjusted diluted EPS (non-GAAP) | $1.62 | $0.95 |
| Operating cash flow | $6.541 billion | $4.538 billion |
Revenue rose 77% reported (82% operationally), with foreign exchange reducing growth by $778 million. COVID-19 products drove much of the increase: Comirnaty revenue was $13.227 billion versus $3.462 billion, while Paxlovid contributed $1.470 billion versus none in the prior-year quarter. Excluding Comirnaty and Paxlovid, revenue increased 2% operationally.
Cost of sales was $9.984 billion, or 38.9% of revenue, versus $4.157 billion, or 28.6%. The resulting gross margin was approximately 61.1%, compared with 71.4%; Pfizer attributed the higher cost ratio mainly to Comirnaty’s 50% gross-profit split with BioNTech and applicable royalties. Pretax income was $9.050 billion, approximately 35.3% of revenue, versus $5.692 billion, approximately 39.2%. GAAP earnings benefited from higher sales but were affected by equity-security losses and increased R&D and acquired IPR&D expenses.
Cash and cash equivalents were $2.470 billion and short-term investments $21.427 billion at April 3, 2022. Current assets were $54.420 billion and current liabilities $39.268 billion. Short-term borrowings, including current debt, were $645 million; long-term debt was $35.656 billion. Operating cash flow funded operations, while investing cash flow was $567 million, including the Arena acquisition, and financing cash outflow was $6.578 billion, including $2.0 billion of share repurchases, $2.249 billion of dividends paid and $1.609 billion of long-term debt repayments.
Material changes versus the prior comparable period
- Revenue growth was led by COVID-19 products and international markets; U.S. revenue increased 18%, while international revenue increased 140% reported.
- Other income/deductions shifted from $1.004 billion of income in Q1 2021 to $350 million of deductions in Q1 2022, primarily reflecting equity-security losses of $699 million versus gains of $401 million, and lower collaboration and licensing income.
- R&D expense increased 15% to $2.301 billion. Acquired IPR&D expense was $355 million, including costs associated with Biohaven and a BioNTech investment.
- Pfizer acquired Arena for $6.6 billion in cash consideration ($6.2 billion net of cash acquired); the purchase-price allocation remained provisional.
- Chantix/Champix revenue fell to $2 million from $217 million amid a global shipment pause tied to nitrosamine levels. Xeljanz revenue declined 29% operationally, primarily due to prescribing changes following JAK-class label changes.
Outlook, management commentary and risks
- As of May 3, 2022, Pfizer forecast approximately $32 billion in 2022 Comirnaty revenue and $22 billion in Paxlovid revenue, based on expected deliveries under contracts signed or committed by mid-April. Comirnaty gross profit is shared evenly with BioNTech. These are product forecasts, not full-company revenue guidance.
- Firm Comirnaty orders represented approximately $30 billion of remaining performance obligations at April 3; Pfizer expected to recognize approximately $18 billion in 2022, $12 billion in 2023 and $300 million in 2024.
- Pfizer said the pandemic’s future effects remain difficult to predict; lower COVID-19 demand, excess inventory, supply disruption or changing public-health conditions could materially affect results. Paxlovid’s post-exposure prophylaxis study did not meet its primary endpoint.
- Other risks include pricing and payer pressure, generic competition and patent challenges, product quality and recalls, clinical and regulatory outcomes, and foreign-exchange and geopolitical uncertainty. Pfizer said Russia and Ukraine each represented less than 1% of consolidated revenue and assets; the conflict’s broader economic effects remained uncertain.
- Pfizer stated it did not believe pending legal matters would materially affect its financial position, but outcomes could materially affect results or cash flows; it could not estimate reasonably possible losses above accrued amounts. It also agreed to indemnify GSK for 32% of amounts payable under GSK’s guarantee of Consumer Healthcare JV notes, until the specified guarantee assumption date.
- Management said liquidity was sufficient to meet foreseeable needs, citing operating cash flows, financial assets, capital-market access and credit facilities. The $7 billion committed U.S. revolving credit facility was essentially unused. The Board declared a $0.40-per-share dividend payable in June 2022.
Important facts for investors to verify
- Whether Comirnaty and Paxlovid delivery volumes, contract timing and demand support the stated 2022 product forecasts.
- How sustainable earnings and margins are after accounting for COVID-19 product mix, BioNTech profit sharing, investment-value changes and non-GAAP adjustments.
- Progress and final purchase accounting for Arena, and the closing conditions and expected timing of announced Biohaven and ReViral transactions.
- Developments in Xeljanz safety-related regulatory review, Chantix supply and nitrosamine matters, and the cited patent, product-liability and government proceedings.
- Whether restructuring savings, supply plans and pipeline milestones are achieved, and how pricing pressure, competition, foreign exchange and the Russia/Ukraine conflict affect results.