Pfizer Inc. — 2021 Form 10-K
Business context and reporting period. This is Pfizer’s annual report for the fiscal year ended December 31, 2021, not a standalone fourth-quarter filing. Pfizer reported as a focused biopharmaceutical company following the 2020 Upjohn spin-off and began managing two operating segments, Biopharma and Pfizer CentreOne (PC1), in fourth-quarter 2021; Biopharma was the sole reportable segment. Meridian was sold on December 31, 2021, with its results presented as discontinued operations.
Financial performance
| Metric | 2021 | 2020 | Change / context |
|---|---|---|---|
| Revenue | $81.288 billion | $41.651 billion | Up 95%; operational growth 92%, plus $1.208 billion favorable foreign exchange |
| Net income attributable to Pfizer shareholders | $21.979 billion | $9.159 billion | Up 140%; 2021 includes continuing and discontinued operations |
| Diluted EPS | $3.85 | $1.63 | Up 137%; continuing-operations diluted EPS was $3.93 |
| Adjusted diluted EPS (non-GAAP) | $4.42 | $2.26 | Up 96%; excludes specified items and is not a GAAP measure |
| Operating cash flow | $32.580 billion total; $32.922 billion continuing operations | $14.403 billion total; $10.540 billion continuing operations | Continuing-operations cash flow rose 212% |
| Cash and cash equivalents; short-term investments | $1.944 billion; $29.125 billion | $1.786 billion; $10.437 billion | Substantial increase in short-term investments |
| Debt | $38.436 billion, including current debt | $39.836 billion, including current debt | Long-term debt was $36.195 billion; short-term borrowings including current maturities were $2.241 billion |
| Current assets / current liabilities | $59.693 billion / $42.671 billion | $35.067 billion / $25.920 billion | Year-end current ratio approximately 1.40, versus 1.35 |
Cost of sales was $30.821 billion, or 37.9% of revenue, versus 20.4% in 2020; reported gross margin was therefore approximately 62.1%, compared with 79.6%. The sharp mix shift—especially Comirnaty’s profit-sharing costs and related royalties—limits direct margin comparison. Income from continuing operations was $22.459 billion, and income from continuing operations before tax was $24.311 billion. The effective tax rate on continuing operations was 7.6%, versus 5.3%.
Comirnaty generated $36.781 billion in 2021 revenue, approximately 45% of total revenue; Pfizer and BioNTech share its gross profits equally. Revenue excluding Comirnaty and Paxlovid grew 6% operationally. Other notable product results included Eliquis, $5.970 billion (+19% operationally); Vyndaqel/Vyndamax, $2.015 billion (+55%); and Prevnar family, $5.272 billion (−11%). PC1 revenue was $1.731 billion, up 84% operationally. Paxlovid contributed $76 million, reflecting its late-December 2021 U.S. emergency authorization.
Cash used in investing activities from continuing operations was $22.534 billion, including significant net purchases of short-term investments; capital expenditures were $2.711 billion. Continuing-operations financing cash outflow was $9.816 billion, including $8.729 billion of dividends paid. Pfizer reported $77.462 billion of total equity and $181.476 billion of total assets at year-end. Gross profit payable to BioNTech was $9.7 billion within other current liabilities.
Material changes versus the prior comparable period
- Revenue rose $39.637 billion, driven predominantly by Comirnaty; international revenue increased 155% and U.S. revenue increased 39%.
- Research and development expense increased 47% to $13.829 billion, including a $2.1 billion acquired IPR&D charge for Trillium, payments related to collaborations including Arvinas and Beam, and investment in Paxlovid.
- Other income, net, improved substantially, including net periodic benefit credits, lower impairment charges, and equity-security gains. Pfizer reported $1.344 billion of net gains on equity securities and $2.547 billion of net periodic benefit credits other than service costs.
- Operating cash flow from continuing operations increased to $32.922 billion. The filing attributes much of the movement to higher earnings and working-capital timing, including the BioNTech profit-split accrual and Comirnaty advance-payment deferrals.
- Revenue concentration increased: nine products accounted for 75% of revenue, versus 54% in 2020; Comirnaty alone represented 45%.
Outlook, commentary, risks and unusual items
- As of February 8, 2022, management forecast approximately $32 billion of 2022 Comirnaty revenue and approximately $22 billion of Paxlovid revenue, based primarily on supply expected under contracts signed or committed by late January. Pfizer and BioNTech expected capacity to manufacture up to four billion vaccine doses in total by the end of 2022; Pfizer planned capacity for up to 120 million Paxlovid treatment courses, dependent on need and purchase agreements. These are forecasts, not reported results.
- Management cited expected ongoing vaccine and treatment demand but cautioned that post-pandemic revenue may be lower. Demand, variants, safety and efficacy data, regulatory decisions, public confidence, manufacturing scale, raw-material availability, and contract timing could materially affect results.
- Other key risks include pricing and reimbursement pressure, generic and biosimilar competition, patent challenges and expirations, R&D failures, supply disruptions, foreign exchange and geopolitical uncertainty, and dependence on major products, wholesalers, governments, and collaboration partners. The filing noted Russia-Ukraine conflict risk and increasing industry demand that could constrain some raw materials, although no material 2022 raw-material impact was then anticipated.
- Pfizer recalled all Chantix lots in the U.S. and paused global shipments following detection of N-nitroso-varenicline; resolution and return-to-market timing remained uncertain. The Xeljanz label was revised to add or update boxed warnings and restrict certain uses after the ORAL Surveillance safety study; European review of oral JAK inhibitors was ongoing.
- Unusual items included a $345 million EpiPen litigation settlement recorded in discontinued operations and a $167 million after-tax loss on the Meridian sale. Pfizer incurred $1.298 billion of costs associated with acquisitions and cost-reduction/productivity initiatives. It estimated approximately $700 million of Upjohn separation costs in total, about 75% incurred through year-end 2021.
- Pfizer expected net savings of approximately $700 million from corporate-function restructuring, $1.3 billion from commercial-model changes, and $550 million from manufacturing optimization, on the stated program timelines. It expected 2022 capital spending of approximately $3.3 billion.
- Remaining firm Comirnaty performance obligations were $34.4 billion at year-end, with $22.3 billion expected to be recognized in 2022, $11.8 billion in 2023, and $265 million in 2024. These amounts depend on delivery and fulfillment of contract obligations.
- The company adopted immediate recognition of pension and postretirement actuarial gains and losses in earnings, retrospectively restating prior periods. The change increased 2021 earnings and reduced comparability with figures prepared under the prior method. The auditor issued unqualified opinions on the financial statements and internal controls; critical audit matters included U.S. rebate accruals, unrecognized tax benefits, and product-related litigation.
Important facts for investors to verify
- Whether 2022 Comirnaty and Paxlovid revenue forecasts were achieved, and how much reflected delivered product versus contracts, advances, or deferred revenue.
- The sustainability and profitability of COVID-19 product revenue, including the equal BioNTech gross-profit split and the large related current-liability accrual.
- How much reported earnings and cash flow depended on nonrecurring pension credits, investment gains, tax effects, and working-capital timing; compare GAAP results with adjusted measures and reconciliations.
- Whether product concentration, patent expirations, generic competition, pricing pressure, and Xeljanz safety-related restrictions affected sales and margins.
- The status and financial exposure of major litigation, tax audits and uncertain tax positions; the filing states that reasonably possible legal losses beyond accruals could not be estimated.
- Progress against restructuring savings, the Arena acquisition and other business-development commitments, and the impact of raw-material, manufacturing, and supply-chain constraints.