Pfizer, Inc. · NYSE:PFE
Pfizer — Investor Day (January 2007)
36 slides from Pfizer's investor day presentation, Jan 22, 2007
Slide 1: Driving Total Shareholder Return
ANALYST MEETING Driving Total Shareholder Return David Shedlarz Vice Chairman
Slide 2: Agenda
ANALYST MEETING 2007 Agenda Total Shareholder Return (TSR) framework Key TSR drivers – Business development – Cost reduction – Continuous improvement – Dividends/share purchase programs Financial performance Implementation of proposed intentions expressed in this document may be subject to wor
Slide 3: Agenda
ANALYST MEETING 2007 Agenda Total Shareholder Return Framework Key TSR Drivers Financial Performance Implementation of proposed intentions expressed in this document may be subject to works councils and consultation in certain countries 3 Valid as of January 22, 2007.
Slide 4: Total Shareholder Return Framework
ANALYST MEETING 2007 Total Shareholder Return Framework Revenue Growth Strategy Cost TSR Culture Management Capital Allocation Strategy Implementation of proposed intentions expressed in this document may be subject to works councils and consultation in certain countries 4 Valid as of January 22, 20
Slide 5: Agenda
ANALYST MEETING 2007 Agenda Total Shareholder Return Framework Key TSR Drivers Financial Performance Implementation of proposed intentions expressed in this document may be subject to works councils and consultation in certain countries 5 Valid as of January 22, 2007.
Slide 6: Business Development Philosophy
ANALYST MEETING 2007 Business Development Philosophy Follow the science to supplement our internal pipeline with products and services that add value for our customers and patients Implementation of proposed intentions expressed in this document may be subject to works councils and consultation in c
Slide 7: An Aggressive, Disciplined Approach to Business Development
ANALYST MEETING 2007 An Aggressive, Disciplined Approach to Business Development New business development strategy Increased financial discipline and more rigorous new- product investment criteria Explicit commitment to: – Deliver two products per year beginning in 2010 – Generate additional r
Slide 8: A Three-Pronged Strategy to Drive Revenue Growth
ANALYST MEETING 2007 A Three-Pronged Strategy to Drive Revenue Growth Complement Current Portfolio – Address gaps in drug portfolio – Seize opportunistic investments – Coordinate search for value across therapeutic areas Acquire Synergistic Products and Services – Amplify value of current and fu
Slide 9: Complement Current Portfolio Areas of Emphasis
ANALYST MEETING 2007 Complement Current Portfolio Areas of Emphasis Allergy/Respiratory Ophthalmology Cardiovascular Metabolic / Infectious Disease Endocrinology Gastrointestinal Central Nervous & Hepatology System Pain Inflammation/ Immunology Oncology Urology / Dermatology Sexual Health Implementa
Slide 10: Foundation for Financial Discipline
ANALYST MEETING 2007 Foundation for Financial Discipline Allocation of capital for business development grounded in TSR capital allocation model Specific opportunity assessment based on comprehensive understanding of scientific, technical, commercial attributes and challenges Multidisciplinary
Slide 11: Renewed Commitment
ANALYST MEETING 2007 Renewed Commitment Target: two new products a year – beginning in 2010 Apply our resources prudently and effectively to turn them into valuable and innovative solutions Augment the revenue potential of these new products with revenues from our synergistic and adjacent busi
Slide 12: Total Shareholder Return Framework
ANALYST MEETING 2007 Total Shareholder Return Framework Revenue Growth Strategy Cost TSR Culture Management Capital Allocation Strategy Implementation of proposed intentions expressed in this document may be subject to works councils and consultation in certain countries 12 Valid as of January 22, 2
Slide 13: Reduce and Restructure Our Cost Base
ANALYST MEETING 2007 Reduce and Restructure Our Cost Base Objectives Drive short-term financial performance Provide greater agility and operating flexibility Support strategic priorities that underlie mid- and long-term performance Implementation of proposed intentions expressed in this docume
Slide 14: Recent Cost Reduction Initiatives
ANALYST MEETING 2007 Pfizer Inc Recent Cost Reduction Initiatives Proven track record of effectively managing cost base Exceeded original cost savings goal in all periods $4.2 $3.8 ($ Billions) $3.6 $3.1 Original Goal $2.6 Actual Savings $2.0 $1.8 $1.6 $1.4 $1.3 $1.0 $1.0 $0.8 $0.4 $0.4 $0.2 200
Slide 15: Expense Drivers
ANALYST MEETING 2007 Expense Drivers Expense Reduction Expense Growth Integration synergies Investments – R&D pipeline Restructuring – Business development – New product support Inflation – About $1 billion a year in inflationary increase on current cost base Manufacturing product mix Fo
Slide 16: Pfizer Operating Expenses 2003-2006
ANALYST MEETING 2007 Pfizer Operating Expenses* 2003-2006 Relatively flat Pfizer operating expenses* ($ Billions) $22.8 $22.9 $22.7 $22.3 2003** 2004 2005 2006 * Operating expenses are defined as SI&A and R&D expenses, pre-tax, excluding purchase accounting adjustments, acquisition-related costs,
Slide 17: Commitment to Further Restructuring – Total Cost Base 2006-08
ANALYST MEETING 2007 Commitment to Further Restructuring – Total Cost Base 2006-08 Cost Increases On track to meet ($ Billions) & Investments original 2007 and $3.0 2008 adapting to scale savings goals Will pursue a broad profile of new cost Initial savings initiatives ATS Commitment to Net Co
Slide 18: Sources of Incremental Savings
ANALYST MEETING 2007 Sources of Incremental Savings Delayer Organization Increase spans of control Eliminate redundancies Reduce global sales force Marketing Rationalize and reallocate marketing and medical spending Reduce number of sites/increase outsourcing Effectiveness/efficiency:
Slide 19: Pfizer Manufacturing Has Long Record of Efficiency and Effectiveness
ANALYST MEETING 2007 Pfizer Manufacturing Has Long Record of Efficiency and Effectiveness Significant site reductions have already been achieved with more to come – from 93 sites in 2003 to fewer than 48 by the end of 2008 Aggressively pursuing outsourcing Great progress in revenue per site –
Slide 20: Pursuing More Aggressive Cost & Effectiveness Efforts
ANALYST MEETING 2007 Pursuing More Aggressive Cost & Effectiveness Efforts Top-tier procurement strategies Purchased materials More outsourcing (41%) Enhanced product life-cycle management Support Right First Time culture Functions (3%) Continuous improvement Industry-leading technology
Slide 21: Support Functions Sources of Cost Savings
ANALYST MEETING 2007 Support Functions Sources of Cost Savings Source of Savings Examples Demand management Reduce facilities “footprint” Standardization Leverage procurement of services across sites (e.g., maintenance, Policy changes security, cafeteria) Process redesign Coordination
Slide 22: Pfizer Operating Margins
ANALYST MEETING 2007 Pfizer Operating Margins* ≈ 44% 39.7% 2006 2008 Est. * Adjusted Income before Taxes as a % of revenues Implementation of proposed intentions expressed in this document may be subject to works councils and consultation in certain countries 22 Valid as of January 22, 2007.
Slide 23: Total Shareholder Return Framework
ANALYST MEETING 2007 Total Shareholder Return Framework Revenue Growth Strategy Cost TSR Culture Management Capital Allocation Strategy Implementation of proposed intentions expressed in this document may be subject to works councils and consultation in certain countries 23 Valid as of January 22, 2
Slide 24: Continuous Improvement Basic Attributes
ANALYST MEETING 2007 Continuous Improvement Basic Attributes Ongoing analyses and change Customer orientation Continuous Improvement Colleague involvement Fact- or Data-driven Implementation of proposed intentions expressed in this document may be subject to works councils and consultation in certai
Slide 25: Driving Continuous Improvement
ANALYST MEETING 2007 Driving Continuous Improvement Goal of instilling a culture of continuous improvement – Doing things that create value – Doing things more effectively – Doing things at a lower cost Many initiatives already underway: finance, manufacturing, R&D, legal, logistics, etc. – Six
Slide 26: Total Shareholder Return Framework
ANALYST MEETING 2007 Total Shareholder Return Framework Revenue Growth Strategy Cost TSR Culture Management Capital Allocation Strategy Implementation of proposed intentions expressed in this document may be subject to works councils and consultation in certain countries 26 Valid as of January 22, 2
Slide 27: Dividend Growth
ANALYST MEETING 2007 Dividend Growth (Quarterly Dividend per Share) Strong operating cash flow supports dividend growth $.29 18% CAGR over past ten years $.24 40 consecutive years of dividend increases $.19 21% increase in 1Q 2007 dividend $.17 $.15 Strong dividend yield $.13 $.11 $.09 $.0
Slide 28: Share Purchases
ANALYST MEETING 2007 Share Purchases Over $35 billion in shares repurchased over the last five years Up to $10 billion in purchases for 2007 ($ Billions) $13.0 Up to $10.0 $6.7 $7.0 $5.0 $3.8 2002 2003 2004 2005 2006 2007 Est. Implementation of proposed intentions expressed in this document may
Slide 29: Agenda
ANALYST MEETING 2007 Agenda Total Shareholder Return Framework Key TSR Drivers Financial Performance Implementation of proposed intentions expressed in this document may be subject to works councils and consultation in certain countries 29 Valid as of January 22, 2007.
Slide 30: Pfizer Inc 2006 Financial and Operational Outcomes
ANALYST MEETING 2007 Pfizer Inc 2006 Financial and Operational Outcomes Earnings Revenues Adjusted Diluted EPS(1) of $2.06 Pfizer Inc: $48.4 billion; Reported Diluted EPS of $2.66 2% growth Lipitor: $12.9 billion Celebrex: $2.0 billion Lyrica: $1.2 billion Shareholder Value Geodon: $75
Slide 31: Pfizer Inc 2007 Guidance
ANALYST MEETING 2007 Pfizer Inc 2007 Guidance Revenues comparable to 2006 – Impact of loss of exclusivity offset by new and key in-line product growth Gross margin using components of Adjusted Income(1) largely unchanged from 2006 gross margin of 85% – Cost savings initiatives offset unfavorable
Slide 32: Pfizer Inc 2007 Guidance (cont'd)
ANALYST MEETING 2007 Pfizer Inc 2007 Guidance (cont’d) R&D expense pre-tax component of Adjusted Income(1) essentially flat from 2006 expenditures of $7.5 billion – Increased investment in new product portfolio funded by productivity measures and reallocation of resources Effective tax rate of 2
Slide 33: 2008 Guidance
ANALYST MEETING 2007 2008 Guidance Revenues comparable to 2006 – Impact of loss of exclusivity offset by new and key in-line product growth Total cost component of Adjusted Income(1) about $1.5-$2.0 billion lower than 2006 by year-end 2008 – SI&A reduction of at least 10% relative to 2006 despit
Slide 34: Cash Flow from Operations
ANALYST MEETING 2007 Cash Flow from Operations 2006-08 ($ Billions) Estimated 2007 cash flow from $18 - $19 operations of $12.5 - $13.5 billion reflects: $17 – Approximately $3 billion in taxes on the sale of Pfizer $12.5 - $13.5 Consumer Healthcare – Incremental restructuring and implementation c
Slide 35: Long Term Outlook
ANALYST MEETING 2007 Long Term Outlook 2009-10 Resumption of revenue growth given contribution of new and in-line products and dissipation of loss of exclusivity impact 2011-12 Revenue challenges due to expected 2011 Lipitor U.S. loss of exclusivity Wide array of internal and external product
Slide 36: Conclusion
ANALYST MEETING 2007 Conclusion Relentless focus on delivering superior TSR Business development critical to driving our revenue growth strategy Creating a smaller and more flexible cost structure Established clear metrics and financial guidance Implementation of proposed intentions expresse