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Pfizer (NYSE:PFE)

Q3 2010 Earnings Call

November 02, 2010 10:00 am ET

Executives

Jeffrey Kindler - Chairman of the Board, Chief Executive Officer, Chairman of Executive Committee and Chairman of Executive Compliance Committee

Charles Triano - Senior Vice President of Investor Relations

Amy Schulman - Senior Vice President, Corporate Secretary, General Counsel and Member of Executive Compliance Committee

Frank D'Amelio - Chief Financial Officer, Senior Vice President of Business Operations and Member of Executive Compliance Committee

Ian Read - Senior Vice President, Member of Executive Compliance Committee and Group President of Biopharmaceutical Businesses

Mikael Dolsten - Senior Vice President and President of Pfizer Worldwide Research & Development

Analysts

David Risinger

Catherine Arnold - Crédit Suisse AG

John Boris - Citigroup Inc

Jami Rubin - Goldman Sachs Group Inc.

Tim Anderson - Bernstein Research

Jeffrey Holford - Jefferies & Company, Inc.

Manoj Garg - Soleil Securities Group, Inc.

Steve Scala - Cowen and Company, LLC

Seamus Fernandez - Leerink Swann LLC

Christopher Schott - JP Morgan Chase & Co

Marc Goodman - UBS Investment Bank

Charles Butler - Barclays Capital

Operator

Good day, everyone, and welcome to Pfizer's Third Quarter 2010 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the call over to Mr. Chuck Triano, Senior Vice President of Investor Relations. Please go ahead, sir.

Charles Triano

Thank you, operator, and good morning, everyone, Thanks for joining us today to review Pfizer's third quarter 2010 Performance, 2010 financial guidance and 2012 long-range targets.

I'm here with Jeff Kindler, Frank D'Amelio, Ian Read and other members of our leadership team. The financial charts that will be presented on this call can be viewed on our homepage at pfizer.com by clicking on the link for Pfizer Quarterly Corporate Performance Third Quarter 2010, located in the Investor presentations tab at the lower right-hand corner of this page.

Before we start, I would like to remind you that our discussions during this conference call will include forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. And the factors that could cause actual results to differ are discussed in Pfizer's 2009 annual report on Form 10-K and in our reports on Form 10-Q and Form 8-K.

Also, the discussions during this conference call will include certain financial measures that were not prepared in accordance with Generally Accepted Accounting Principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in Pfizer's current report on Form 8-K dated today, November 2, 2010. These reports are also available at our website at pfizer.com in the Investors SEC Filings section.

With that, I'll now turn the call over to Jeff Kindler. Jeff?

Jeffrey Kindler

Thanks, Chuck, and hello, everyone. I'd like to start by making five key points.

First, for the third consecutive full quarter since we closed the Wyeth deal, we are reporting solid operating performance. Second, given this performance and our continued confidence in the business, we are increasing both the top end and the bottom end of our 2010 adjusted diluted EPS guidance range. Third, we are once again reaffirming the financial targets that we've set out for 2012. It's important to emphasize that we are raising this year's guidance and reaffirming the 2012 targets despite uncertainty in the global economy, strong competitive challenges and significant changes in the regulatory and public policy environment across the markets in which we operate.

Fourth, consistent with our commitment to enhancing total shareholder value, we are continuing to return cash to our owners. During the second and third quarters of this year, we repurchased a total of $1 billion in stock at an average price of $16.40 per share.

And finally, fifth, also consistent with that commitment, we are on track to paying nearly $6 billion in dividends this year. As we have previously stated, barring any unforeseen circumstances, we expect the Board of Directors to raise the dividend in December, and we continue to target a dividend payout ratio comparable to the current industry average in about three years.

Now on the subject of capital allocation, I want to highlight a particularly important point illustrated this quarter. As we said we would do, we have continued to deploy your capital in discipline business development activities that allow us to shape our balanced business portfolio in order to maximize shareholder value. And I'd like to spend a few minutes this morning discussing the deals we announced since the beginning of September in the context of the balanced business portfolio that I described on last quarter's earnings call.

First, let me review briefly the context. We closed the Wyeth acquisition just over a year ago, and since then, we have moved quickly to integrate the companies to achieve our planned cost synergies and to deliver solid financial performance form the combined company. The people and assets that Wyeth brought to us, together with the changes we have made in our leadership, culture and operating model over the last three years have positioned us to deliver three important things: One, producing steady, reliable, adjusted earnings growth over time; two, returning cash to shareholders through dividends and buybacks; and three, making disciplined internal and external investments in innovative new treatments and cures that produce good returns on your capital.

The foundation for these results is a dynamic portfolio of businesses, products, geographies and areas of research that balances both our risks and our opportunities. That portfolio enables us to advance our strategies of growing our patent-protected portfolio in priority therapeutic areas, in vaccines and Biologics and Established Products, in Emerging Markets and in appropriate Diversified businesses. Now each of the five actions that we recently announced significantly advances these strategies and helps us further balance our portfolio, businesses and products. And let me show you what I mean.

In Primary Care, which currently accounts for about 1/3 of our revenues, we have identified pain as one of our 'Invest to Win' therapeutic areas because of our strong capabilities in this area and because of the growing market for this condition of unmet medical need. Our pending acquisition of King Pharmaceuticals will provide an excellent complement to our current portfolio of pain treatments, which ranges from Advil and Pharma care to Celebrex and Lyrica, as well as several promising pipeline candidates. King is the leader in new formulation of pain treatment designed to discourage common methods of misuse and abuse. King's assets will provide Pfizer with multiple new drug-delivery platforms, as well as potential long-term upside in our Primary Care Established Products as well as in our Animal Health business.

Now in Specialty Care, which generates almost a quarter of our revenues. We have strengthened our presence in the growing orphan diseases market by acquiring FoldRx, privately held drug discovery and clinical develop and company. FoldRx brings us on oral once-daily small-molecule candidate with a potential to treat a fatal, genetic neuro degenerative disease for which a liver transplant currently is the only available treatment. It brings us greater understanding of protein misfolding, which is increasingly recognized as an underlying cause in many chronic degenerative diseases.

Meanwhile in Established Products, which accounts for about 1/8 of our revenues, our alliance with Biocon, India's leading Biotech Company, will advance our strategies in biosimilars and will position us competitively in the diabetes market over time. This is important in the developing world where patients uninterrupted access to insulin is often very difficult, as well as in developed countries like United States, where the CDC just announced that up to 1/3 of the population could be living with diabetes within a generation.

Turning to our Emerging Markets business, which produces about an eight of our revenues, we agreed last month to acquire 40% of Laboratorio Teuto Brasileiro, a privately held company in Brazil that approximately 250 branded and unbranded generic product pharmaceuticals in more than 400 presentations. This partnership will get us access to a large network of independent distributors that reach more than 36,000 pharmacies in rural and suburban Brazil and customers that Pfizer is not currently reaching. This agreement also includes the opportunity to commercialize the Teuto's products outside Brazil, which we believe offers substantial promise for both our Emerging Markets and our Established Products business.

Finally, within our Diversified businesses, which accounts for about 1/8 of our revenues, we announced that we are reviewing strategical alternatives for Capsugel. I've said before that review of the role, fit and value creation of each of our businesses is part of our ongoing review of our dynamic business portfolio. We will continue to optimize our portfolio of businesses and products in order to maximize value for our shareholders. Capsugel represents a unique business, with strong potential for growth outside of Pfizer, and now is the right time to undertake this review.

It's worth noting that each of these business development actions came about as a result of the speed, focus and agility that characterize our business unit operating model. Around here we use the phrase, the power of scale, the spirit of small. These announcements demonstrated that concept in action. Because our respective business unit leaders and their teams understand their distinct customers, marketplaces and competitors, they saw the chance to create value, and they moved quickly to bring these opportunities forward. For our part, corporate level leadership ensured that the right hurdle rates were applied, that there was appropriate discipline around price and terms and that Pfizer's scale and resources were brought to bear when appropriate. Once the deals are closed, the leaders of the relevant business units will be accountable for the success of each of these deals.

Now in addition to our business development activities, we continue, of course, to advance our late-stage development pipeline, and we have several important milestones ahead. Next week, at the American College of Rheumatology, we will provide an update on the development of tasocitinib, our oral JAK inhibitor, and we will present Phase III data from our initial study in people with rheumatoid arthritis. In addition, we remain on track to submit regulatory applications for an adult indication education for Prevnar 13 in the U.S. and by the end of this year. Pfizer has completed it's Phase III trials in support of these regulatory submissions.

With respect to apixaban, our factor Xa inhibitor, based on the strength of the preliminary Phase III AVERROES study data, our partner Bristol-Myers Squibb announced last week that the companies have initiated a rolling submission with the FDA under the trade name Eloquise [ph] for people with atrial fibrillation that is unsuitable for treatment with warfarin. And finally, in the first half of next year, we anticipate filing with the FDA for crizotinib, our novel personalized agent for people with lung cancer.

To wrap up, I believe our results this quarter, like each quarter since we closed the Wyeth deal, demonstrate that the changes we have been make at Pfizer have enabled us to deliver steady, consistent, adjusted earnings results to return cash to shareholders and to make disciplined investments in medicines that will produce good returns for our shareholders. And we are doing so consistently despite global economic headwinds, currency fluctuations, competitive challenges and regulatory and public policy uncertainties. That is because today, our company has a dynamic portfolio of businesses that represents a good balance of risks and opportunities across products, geographies, technologies and customers.

We continuously review of our portfolio. We're relentlessly focused on cost productivity and capital discipline. And our culture emphasizes focus and accountability. We have the benefits that come with the scale and resources of a large company, but our business unit operating model allows us to move into agility necessary to seize valuable opportunities like the ones I described this morning. With that, I'll ask Frank to review our third quarter results.

Frank D'Amelio

Thanks, Jeff. Good day, everyone. As always, the charts I'm reviewing today are included on our webcast. Now let's move onto third quarter financial results. The $4.6 billion or 39% year-over-year increase in third quarter 2010 revenues was primarily attributable for the addition of legacy Wyeth products, which favorably impacted revenues by $5.2 billion or 44%, partially offset by a $458 million or 4% decrease in revenues from legacy Pfizer products and a $160 million or 1% negative impact from foreign exchange.

The year-over-year decrease in third quarter 2010 reported net income and reported diluted EPS was due to a non-cash impairment charge resulting from updated forecast of certain Wyeth assets compared with the fair values estimated at the closing of the acquisition last year. This pretax charge of approximately $1.5 billion consists of IPR&D charges of about $715 million and brand assets and developed technology charges of approximately $750 million.

These updated cash flow projections are based on the most recently projected development of regulatory time frames and the current market environment for brands assets and their planned investments support. I want to point out that the we do not expect these updated projections to have an impact on our 2010 revenue or just adjusted diluted EPS targets, which we are reaffirming today.

It's also important to remember that while there have been acquired assets and these projected values have decreased, there are acquired assets whose projected values have increased as well. However, these increases are not reflected in our third quarter financial statements because current accounting rules require that we record asset value decreases or impairments but do not allow us to record asset value increases subsequent to day zero.

In addition, reported net income and reported diluted EPS in the quarter were negatively impacted by a charge for expenses litigation of $701 million. The increase in an adjusted income and adjusted diluted EPS were primarily due to revenues from legacy Wyeth products, which were partially offset by expenses associated with the addition of Wyeth operations, lower aggregate revenues from legacy Pfizer products and higher net interest expense. Also, it's important to remember that both reported and adjusted diluted EPS were affected by the increased number of shares outstanding compared with the year ago quarter because of shares issued to partially fund the Wyeth acquisition.

Third quarter adjusted total costs were negatively impacted primarily by the addition of Wyeth operations, which was partially offset by a 4% positive impact from foreign exchange. The increase in adjusted cost of sales as a percentage of revenue from 15.4% to 18.3% was primarily due to the change in the mix of products and businesses resulting from the addition of Wyeth operations, which was partially offset by the positive impact of foreign exchange. The 43% increase in adjusted SI&A [selling, informational and administrative] expenses and 33% increase in R&D expenses were also driven by the addition of Wyeth operations, also driven by our continued investment in our late-stage development portfolio, which contributed to this increase.

In the third quarter 2010, foreign exchange had a negative impact of $160 million on revenues and a positive impact of $298 million on adjusted total costs. The net effect of foreign exchange resulted in a $0.01 favorable impact to adjusted diluted EPS.

Revenues from our Biopharmaceutical business increased $3.3 billion or 31% in the third quarter, with operational growth of 33%, of which $3.9 billion or 37% was attributable to legacy Wyeth products, which was partially offset by $468 million or 4% decrease in revenues from legacy Pfizer products.

It's important to remember that Pfizer's annual international calendar ends on November 30, and as a result, third quarter includes international results for June, July and August. As we previously stated on our second quarter earnings call, June was an unfavorable quarter for the euro, and therefore, this negative impact was reflected in our third quarter results.

Also, I want to point out that within the Biopharmaceutical units, legacy Pfizer's year-over-year operational performance continues to be impacted by the loss of exclusivity of certain products, including Lipitor, which lost exclusivity in Canada in May of 2010 and Spain in July of 2010.

Third quarter diversified revenues increased approximately $1.3 billion or 151% year-over-year due to the addition of Wyeth products. The impact of foreign exchange on Diversified revenues in the third quarter was immaterial. Third quarter revenues generated in Emerging Markets, which include both legacy Pfizer and legacy Wyeth Biopharmaceutical and Diversified operations increased 66% versus the third quarter of 2009 due to significant contribution of legacy Wyeth products. It's important to note that over the same period, Brazil, Russia, India, China, Mexico and Turkey contributed a combined 46% to the overall growth in emerging markets and legacy Pfizer Biopharmaceutical revenues in this brick-entry markets grew 5% operationally in the third quarter and 10% operationally year-to-date.

Based on our year-to-date performance and outlook for the remainder of 2010, we are updating the ranges of our 2010 guidance. We are tightening the revenue range to $67 billion to $68 billion, decreasing and tightening the range of adjusted cost of sales as a percentage of revenue from 18.5% to 19%, tightening our adjusted SI&A expense range to $19.2 billion to $19.7 billion, tightening the adjusted R&D expense range to $9.1 billion to $9.5 billion, expecting adjusted other deductions to be approximately $1 billion, maintaining our guidance for the effective tax rate on adjusted income at approximately 30%, decreasing the reported diluted EPS range to $0.84 to $0.94 and, finally, we are increasing and tightening our adjusted diluted EPS range to $2.17 to $2.22.

As we previously stated and forecasted, the adjusted diluted EPS range absorbs effects of loss of exclusivity in the U.S. in July, too fewer selling days in the fourth what are compared with the fourth quarter and Lipitor's loss of exclusivity in Canada and May of 2010 and Spain in July 2010. In addition, the range now reflects the impact of our recently announced collaboration with Biocon and the upfront payment that was included. Consequently, we expect these factors in the aggregate to negatively impact our fourth quarter adjusted diluted EPS by approximately $0.06 to $0.07, which has been factored into our 2010 guidance.

Based on our confidence in our future business performance, we are reaffirming all elements of our total financial targets. These targets incorporate the anticipated impact of U.S. healthcare legislation as does our 2010 guidance. And our 2012 targets continue to assume a modest level of business development activities, up to 5% of our revenue targets.

So moving on key takeaways. Despite the challenging economic environment, we achieved solid overall operational performance while, at the same time, advancing the integration of Wyeth with minimal business disruption. We have tightened the ranges of all components of our 2010 financial guidance, including increasing and narrowing the adjusted diluted EPS range, $2.17 to 2.22. And we have reaffirmed all of our 2012 financial targets. We remain on target to deliver anticipated cost reductions, including achieving approximately 50% in 2010.

During the third quarter, we repurchased approximately 500 million of Pfizer shares and we will continue to be opportunistic with share repurchases as market conditions warrant. Finally, we are advancing our strategic priorities through our recently announced review of strategic alternatives for our Capsugel business, collaboration with Biocon and pending collaboration with Teuto and acquisition of FoldRx and pending acquisition of King Pharmaceuticals.

Now I'll turn it back over to Chuck.

Charles Triano

Thanks for the review, Frank. At this point, operator, if we could please poll for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Chris Schott from JPMorgan.

Christopher Schott - JP Morgan Chase & Co

Just a couple of questions on Prevnar. First, x U.S., it looks like much of the franchise has now converted over to a decent portion of the 13th version of Prevnar. Yes, we haven't seen that ramping relative to legacy Wyeth levels. Just elaborate a little bit more what's happening with Prevnar internationally, maybe talk about price dynamics as well as the impact that Synflorix is having on the business? My second question was on gross margins. Even adjusting for the FX benefit this quarter, we have pitched in a very strong result in the quarter, considering the loss of EFFEXOR. Was there anything unusual here? Are we starting to see the benefits of restructuring or was there anything we should be aware of? And as a follow-up to that, how are you thinking about profit gross margin as we consider patent expiration of Lipitor late next year?

Jeffrey Kindler

Okay, Ian?

Ian Read

Of course. On Prevnar, internationally, we're approved in 72 countries, we've launched in 45. We're on 22 NIPs, and there's about I think 11 more coming. I think the volume is doing well in markets where it is physician's choice of Prevnar. We have about a 70% to 80% share of that marketplace. And I would say, on the overall emerging markets, we're winning where we expect to win, and probably the only market where we haven't won, which is a disappointment, was Brazil, where Synflorix took the NIP in Brazil.

Charles Triano

And on the gross margin question, Chris, let me just run some numbers and I'll answer the question. Our cost of sales guidance at the beginning of the year was 19% to 20%. We lowered that to 18.5% to 19% this quarter. After the quarter, cost of sales was 18.3%. If you remove the benefits of foreign exchange that they had on costs this quarter, 18.3% becomes 19.7%. But the overall, I'll call it, strength in our cost of goods sold is really being driven by our restructuring, our focus on cost reduction, all of the things that we've been doing to really manage our cost structure. So nothing unusual to answer your question specifically. It's really based on the actions that we've been taking. In terms of beyond Lipitor, the last part of your question, I think if you look at the rhythm of the business and where the growth is, the growth will put some pressure on our gross margins, but not on our operating margins. If you look at our targets for 2012, we have operating margins in the high-30s to low-40s, which is where operating margins are today. So some of that growth will lower gross margins than it does today. They'll have lower expenses, and we believe we maintain our operating margins.

Operator

Your next person comes from Marc Goodman from UBS.

Marc Goodman - UBS Investment Bank

Just to continue on Prevnar, can you talk about -- it seemed very strong in the U.S., is there anything unusual there? And then on inventories, for any of the products just versus second quarter, third quarter, any major movements? And then maybe also if you can talk about Lipitor a little but in the rest of the world and emerging markets, it seemed a little weaker than we're expecting?

Ian Read

Prevnar in the U.S. was nothing unusual in the third quarter. It's mainly driven by the impact of the price increase and the impact of the catch-up on demand. So it was pretty much in line with what we expected. No major inventory movements on Prevnar in the U.S. in the quarter. And then Lipitor internationally, that was impacted by the LOE in Canada and the LOE in Spain. And in the quarter, it had about a negative $200 million impact on us. It was slightly faster than we expected. Both those markets have traditionally slow in brand erosion. Spain is a brand well market and Canada was normally less aggressive in the U.S. We didn't see that with Lipitor in this quarter, so that was a $200 million impact. And overall, in the international markets, it's been somewhat impacted in Eastern Europe and in parts of Asia were price decreases.

Operator

Your next question is from John Boris from Citi Investment.

John Boris - Citigroup Inc

Just has to do with one of the statements in your press release, can you just expand maybe a little bit on the price pressures and help us help quantify which is on European countries and markets in terms of price pressures? You also indicated that there were some wholesaler purchasing patterns that honestly influenced the x U.S., weaker x U.S. sales results? And then the third part of that same question relates to the emerging markets, which appear to be flat x China, just any additional granularity or commentary on that?

Ian Read

John, why don't I take the emerging markets first. it was flat in the quarter. We've always said emerging markets will be volatile. If you look at, as Frank mentioned, at the BRIC entity markets, up 5% in the quarter, up 10% year-to-date, the impact in the third quarter across all emerging markets is really focused in Eastern Europe and Russia or a little bit of Asia. We're seeing price increases in Romania, Czech Republic, Taiwan, Thailand. And inventory, your wholesale inventory reduction, specifically in Russia, as they adjust just to the economic situations, we expect to see some softness continuing, I think, in Russia in the fourth quarter. But overall, when we look at and take out the price decreases and the inventory adjustments, our unit growth is running at about 10% in the emerging markets. And then when you look at that and you look at -- an interesting fact, if you compare to launch sequencing between developed markets and emerging markets, we have about 22 launches in the emerging markets that we will do in '11 and '12, which are very different patterns from the launches in developed markets.

Frank D'Amelio

And if could just punctuate something that Ian said, that typically in Europe, we expect pricing pressure in the low single digits. On the last earnings call, we talk about that being in the mid single digits. At the second half of the year, that is indeed what we are experiencing. We're experiencing pricing pressure in Europe in the mid single digits overall.

Operator

Your next question comes from Tim Anderson from Sanford Bernstein.

Tim Anderson - Bernstein Research

I'm not sure of anyone's there to answer pipeline questions, but I've got to couple, which is on the JAK 3 inhibitor. We have data coming out November 10. I'm wondering when the next Phase III is likely to report out beyond November 10? And also, are we likely to see any interim radiographic data report out in the first half of 2011? And on Prevnar 13 in adults, I'm just wondering when we might see that immunogenicity data that you'll file on? And can you reiterate your thoughts about whether FDA will require the capital outcome study for approval, which I think Wyeth used to say was not going to be required?

Ian Read

So on the Prevnar adults, we're filing in the fourth quarter. We expect you'll see the results in the first half of '11, and we believe we can file that at capital data. And the other question was on taso [tasocitinib], most of the other trials, we'll report out in '11 and in the second half of '11. And I believe the structured data, we'll report out in the first half of '11.

Operator

Your next question is from Jami Rubin from Goldman Sachs.

Jami Rubin - Goldman Sachs Group Inc.

Both for Jeff and Frank. Jeff, in relation to your plans to consider alternative for Capsugel, does this signal a change in your view about keeping the other non-core assets at this dental health consumer and nutritionals? And how much time are you giving yourself? I appreciated your opening comments, it sounds like you were obviously managing the portfolio dynamically, but how much time are you giving yourself to make a decision with respect to these assets, especially given where the multiple is in the stock, and I think that would beg the question that maybe investors don't appreciate some of these other assets? And my other question both for you and to Frank, is that it is very good to see that continued share repurchase program. But $500 million still reflects a relatively lackluster pace, especially given your low-stock PE multiple and $20 billion in operating cash flow. So my question is this: Is this the pace that we should come to expect? Or do you see an opportunity to be more aggressive, especially in light of record-low borrowing costs? And I would also like to know how you think the IRRs on whatever M&A you might be just considering would compare to the IRRs on-share repurchase programs?

Jeffrey Kindler

As I've said before, my view hasn't changed about this. I said it previously and I said it again this morning that we are engaged in a continuous review of the role of each of our businesses, not frankly just even the ones you mentioned. Every business has to demonstrate in an ongoing basis that it's creating shareholder value in accordance with the strategic purpose of that business, with the return on capital that it's producing. That's it's creating more value inside Pfizer than outside Pfizer. That can range from all kinds of alternatives. The Capsugel decision to consider a strategic options for was the result of such review. And that's our obligation in managing a portfolio of businesses consistent with what I talked about at the last quarter. So my view on that hasn't changed. In terms of timing, that's on ongoing process. I think that's our obligation in managing a portfolio of businesses. And we have had this particular collection of businesses for just about a year. We are continuing to evaluate the opportunities that having these businesses together may create within Pfizer and exploring the degree to which some of the businesses you mentioned, may create more value together than in other forms. And we continue to do that. And that's an ongoing process, and we'll always be engage in that process, both in terms of potentially looking at businesses for strategic reviews, as well as bringing in businesses like we did with King. So I think that's just in the nature of managing what I call, a dynamic portfolio of balanced businesses, balance both in terms of the risk and their opportunities. And I'll let Frank address the share repurchases issue.

Frank D'Amelio

So let me just run some numbers for us and then I'll answer the question. So this quarter, we bought back about 30 million shares, $500 million worth of our stock. Last quarter, we also bought back $500 million of our stock, about 30.8 million shares. So about $1 billion of our stock has been repurchased. Probably the average price on that $1 billion is about $16.40. In addition to that $1 billion, we'll be paying out in our dividend this year about $6 billion. So between the stock buyback and dividend this year, now directly returning capital to shareholders in the amount of about $7 billion and significant unforeseen events aside, we expect the dividend to increase at our upcoming December meeting. In terms of what we're going to be going forward, what I would say is buybacks are clearly something we will continue to be opportunistic about as market conditions warrant, and remember, we have other potential uses of our capital like we did this quarter. This past quarter, we committed about $4 billion of cash for business development opportunities, which are the transactions that Jeff had talked about, with the biggest piece of that commitment obviously being King Pharma. And then in terms of the returns, on those business development transactions, obviously they are based on projections that we have to execute on. But we will execute and those returns are favorable. So that's how I think about it.

Operator

Your next question comes from Catherine Arnold from Credit Suisse.

Catherine Arnold - Crédit Suisse AG

So as we speak, the FDA is evaluating means for getting advancement in biosimilar pathway. So I think that with that in mind, I was wondering if you would disclose what your lead biosimilar programs are and when plan on giving more details on this business? And I also wanted to ask you about Tanezumab and if you comment on the status of that regulatory hold? And why other competitive programs may not have been impacted and your companies interest in perusing smaller target markets like cancer pain?

Ian Read

We're still working through the full of the FDA and I really can't comment on what other programs, what other consequence of other programs are, Catherine. We'll continue to work with the FDA through, I think, for three to six month on that and see what happens. On the biosimilars, I think our first biosimilar launch is with Protalix, in that space and we just signed a deal with Biocon for the insulin biosimilars. And we're targeting about 10 molecules internally and externally that we want to develop. We're going to leverage our resources from Wyeth and the expertise and I expect the first launch is from internally developed molecules to be run about 2015, 2016.

Operator

Your next question comes from David Risinger from Morgan Stanley.

David Risinger

First of all, with respect to the meningococcal B vaccine, can you just tell us when you're going to share with the investment community or in some more public fashion the Phase II data? And also what your plans are on for Phase III? And then second, with respect to foreign exchange, can you just quantify the benefit to EPS in the quarter?

Jeffrey Kindler

I'll let Frank handle the foreign exchange question.

Frank D'Amelio

FX negatively affected revenue in the quarter by $160 million, total company. Positively affected adjusted total cost by $298 million. Net-net, it was a favorable impact to EPS for the quarter of $0.01.

Jeffrey Kindler

Mikael?

Mikael Dolsten

We got some of our Phase II data, the recent conference in Canada, and basically, what we've shown is a very robust immune response itself in reaching all our set goals of three immunizations. And we are in the face of planning for the Phase III studies, based on looking at all the options for trying to sign in adolescent ablation. And we feel that we have robust data set with good efficacy signals and tolerability. And that makes us encouraged to take that position to going to Phase III planning.

Operator

Tony Butler from Barclays Capital.

Charles Butler - Barclays Capital

I've got three questions, two on cash and cash uses. One is, is this final payment to quickly this has put quickly behind Pfizer in total? Second, Frank, if you could comment on cash uses, you've laid out your comments around share buyback, dividend and some corporate development? But what about paying down existing debt, maybe needing to repatriate less money and the overall sort of positive effect that they have in tax use? And thirdly, back in meningo B, Mikael, if you could actually discuss the rationale for looking at adolescence versus that of instance, which initially, that is to go forward in Phase III.

Jeffrey Kindler

Okay, Amy, why don't you start with the Quigley question?

Amy Schulman

Sure, and as you know, we recorded charge in the third quarter related to Quigley. And I'd like to just put that in a little bit of context by stepping back. And just to make sure everyone is on the same page with respect to the Quigley situation. As you know, we had previously submitted a plan to the bankruptcy court. And as part of that plan, there was an injunction which remains in place as we work with the parameters of the judge's September 2010 decision, in which in the context of denying the confirmation, he set forth a roadmap for what needs to go forward and we're working within that roadmap. And we believe that in our next hearing in December, we will have satisfied the judge's concerns with respect to the reorganization plan. So we think that, that contribution will satisfy the court and the judge's concern, although it is possible that there will be additional amounts or changes to the plan. But our goal is to move the seasonality promptly.

Frank D'Amelio

On the potential uses of capital, Tony, you have it right. No change in my mind from what I've said previously. That five or six major buckets that they can deploy capital in, share buybacks and dividends are clearly one bucket, business development is another bucket. And the debt pay-down is another one, the amount cash that we repatriate is another one and quite frankly investing in the business, whether it be new product launches or R&D or in-line portfolio, or geographic and business unit investments, or capital expenditures. So all those things are potential areas where we can deploy our capital. From my perspective, what we try to do and what I believe we do is deploy capital in a way that's best from the total shareholder return perspective over time. That's what we've been doing, that's what we will continue to do. And consider all those alternatives as we go forward.

Ian Read

Concerning the question, I mean, there around 20,000 to 80,000 people that are affected every year, and 20,000 to 80,000 actually in mortality. A significant proportion of those are in the adolescent population. In addition to that, the adolescent population is the real carrier of meni B bacteria, not the infants. So we think for finance reduction of it, the spread of this bacteria, the adolescent I'll first both protection for the individual and reduction in the population. And the final comment is that, as I mentioned, probability in adolescent is really good. And if you look at the conference were data from us and one of the competitors are, you will note that in general, in the infant, which presented by another company, the risk more issues with a particular fever. So we think we have a really good positioning of this new vaccine.

Operator

Your next question is from a Steve Scala from Cowen.

Steve Scala - Cowen and Company, LLC

First a follow-up on the Prevnar 13 adult filing, since the filing will include capita, would you describe the minimum acceptable efficacy threshold for that filing? How compelling would the difference and the number of cases of a community-acquired pneumonia in the progno arm versus the placebo arm, too? Just to file filing? And is there any regulatory risk given that Pfizer apparently does not have data versus an active comparator? So that's the first question. Second question is, what share does Ranbaxy does have in Canadian would it's generic Lipitor, how would you describe their ability to supply? And what should we learn from that regarding their ability to supply the U.S. clinical because you're the first to file company?

Jeffrey Kindler

Ian, you want to clarify that per capita trial?

Ian Read

To clarify that, Steve, we will not have capital data when filing. We'll file on immune response and we believe the data will it's sufficient. And so I think there must of been a misunderstanding on the capital data being available. And vis-a-vis, I really can't comment on what they're doing in Canada.

Operator

Your next question comes from Manoj Garg from Soleil Securities.

Manoj Garg - Soleil Securities Group, Inc.

This is Frank or somebody on the mature market scene. First on EFFEXOR, can you describe how the pricing strategy there? And anything that you've learned that would enable or prevent you from utilizing a similar strategy on future expirations?

Ian Read

The pricing strategy on EFFEXOR was, pricing I gave you was recently affected. I think we retained a reasonable portion of the scripts post the launch. And pricing strategy is really very molecule by molecule and circumstance by circumstance. So I don't think it's that one-size-fits-all pricing strategy, when you of the generic launches.

Operator

Seamus Fernandez, Leerink Swann.

Seamus Fernandez - Leerink Swann LLC

On Lipitor and how could that could possibly limit U.S. generic entrance post-November 2011?

Frank D'Amelio

Seamus, we didn't hear the beginning of your question.

Seamus Fernandez - Leerink Swann LLC

So can you just tell us about the 2016 API patent on Lipitor? And how this could possibly limit U.S. generic entrants post-2011, I know that's the basis of the Ranbaxy settlement. And then separately, it's my understanding that Pfizer all also has a patent on Viagra that runs considerably longer banner 2012, sort of, assumes composition patent expirations. Can you talk a little bit about this patent and whether or not Pfizer has any plans to prosecute?

Ian Read

So I'll start and actually may want to add. Our full expectation is that we will have generic Lipitor into the marketplace post-November 2011. And on the Viagra patent, from memory, the composition of matter patent goes in '12, and we had a used patent which we believe is effective and in place in the United States through '16. So we'll see how the market dynamics work on the strength of the use patent post the composition of matter patent exploration.

Operator

Your final question comes from Jeff Holford from Jefferies.

Jeffrey Holford - Jefferies & Company, Inc.

First, can you just talk a good bit more through this revenue tightening? You've lost $1 billion from the a guidance range this year? Just go through the fact that a bit more and how should we think about 2011, 2012 gross and target in light of this? How do you have the confidence in the 2010 range being cut? And just thinking a bit longer term, strategically, we'll see your committing to really pursuing large-scale M&A pricing entering 2012, does that mean in 2013, potentially Pfizer might be looking once more to large-scale consolidation in your long-term strategic planning?

Frank D'Amelio

So on the 2010 revenue range and to your point, we tightened the range from what was $67 billion to $69 billion to the latest guidance update, which is $67 billion to $68 billion, so that's the tightening that you're referring to. Please remember, when we gave that $67 billion to $69 billion, that was the end of January going February. We did not have factored into the guidance at that time the impact of healthcare reform U.S. reform and the European pricing pressures. Despite that, we were able to maintain our guidance range that we should at the beginning of the year where we did tightened it. So from my perspective, we did exactly what we said we're going to do. We did tighten the range, but we absorbed in that range two items that were fairly significant, neither of which was in the range when we initially disclosed back at the beginning of the year. In terms of our 2012 targets, the revenue targets for 2012 now are a range of $65.2 billion to $67.7 billion, and we've said that they assume a modest level of business development, up to 5% of the total. And so if you do the math, 5% on that, call it $3 billion to $3.5 billion, we had about half of that done on this past quarter and particularly are primarily from acquisition. We've said, we'll never rule out anything. we said our objective is bolt-on acquisitions and the couple billion-dollars space, focus on emerging markets established products and 'Invest to Win' areas. That is our strategy. That continues to be our strategy. That's all.

Charles Triano

Great, thank you, everybody, for your time this morning.

Operator

Ladies and gentlemen, this concludes today's conference. You may now disconnect.

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