Pfizer's CEO Hosts 2012 Annual Meeting (Transcript)

| About: Pfizer Inc. (PFE)

Pfizer Inc. (NYSE:PFE)

2012 Annual Meeting

April 26, 2012 8:30 am ET


Matthew Lepore - Chief Counsel of Corporate Governance, Vice President and Corporate Secretary

Ian C. Read - Chairman, Chief Executive Officer and Chairman of Executive Committee

Frank A. D'Amelio - Chief Financial Officer and Executive Vice President of Business Operations

Unknown Executive -


Ladies and gentlemen, please welcome Pfizer's Corporate Secretary, Matt Lepore.

Matthew Lepore

Good morning, everyone, and welcome. Before I introduce Pfizer's Chairman and Chief Executive Officer, Ian Read, I'd like to give you some information related to today's meeting.

First, let me introduce the Pfizer ambassadors who are here today. These are Pfizer colleagues from the New York and New Jersey area who are here to help you during the meeting. I'd like to ask them to please raise their hands so you know who they are. If you have any needs or questions during the meeting, please call on them.

I also know that we have a number of our retired colleagues joining us today. I want to let you know that immediately following the Annual Meeting, a senior member of our human resources benefits team, Roxanne LaDonna, will be available to answer any questions you may have about your retiree benefits or other services. Roxanne, could you please stand briefly so that our colleagues know who you are. Roxanne will be available in the Bloomfield room on the first floor of the hotel to answer your questions immediately following the meeting.

We also have the inspectors of election with us today. Jeff Cohen and Donna Benn from Computershare, could you please stand so our audience knows who you are. They're in the back.

In order to make sure that we have fair play for all shareholders, it is important that you abide by the rules of the meeting, which are printed on the order of business which was placed on your seat. If you need an order of business, please raise your hand. Couple -- we'll get those passed out.

Finally, during the meeting, we will provide projected financial and other forward-looking information, which is subject to substantial risks and uncertainties. I refer you to the risk factors section of our latest report on Form 10-K, which is available at the registration desk for our meeting today.

The Form 10-K identifies important factors that could cause the company's actual results to differ materially from historical and projected results. In addition during this meeting, we will discuss some financial measures that were not prepared in accordance with U.S. generally accepted accounting principles. You can find the reconciliation of those measures to the most directly comparable U.S. generally accepted accounting principles, financial measures and our 2011 financial report, which is in appendix our 2012 proxy statement and our Form 10-K. For 2011, financial report also is available at the registration desk and all of our SEC reports are available on our website at Thank you.

Now please join me in welcoming Pfizer's Chairman of the Board and Chief Executive Officer, Ian Read.

Ian C. Read

Good morning, everyone. Welcome to this year's Annual Meeting. We're here in New Jersey, where we have books and we have 2,400 colleagues across several sites, including P-Pack, Madison, Bridgewater and [indiscernible]. So welcome to the state where we have a large number of employees.

I'm going to start by introducing the members of our Board. You will find their extensive background in our proxy statement. As their names are called, I will ask them to stand, face the audience and remain standing until all Board members are introduced.

We are fortunate to have such a distinguished group of directors. They are Dennis Ausiello, Tony Burns, Don Cornwell, Frances Fergusson, William Gray, Helen Hobbs, Constance Horner, James Kilts, George Lorch, John Mascotte, Suzanne Nora Johnson, Steve Sanger and Marc Tessier-Lavigne. I'd like to thank all our Directors for serving. Thank you.

I would also like to acknowledge Mike Brown, a distinguished scientist and Nobel Laureate. He is retiring from the Board after 16 years of service. Mike is not here today, but I want to thank him for his valuable service over those 16 years.

And now I'd like to acknowledge the members of our executive leadership team who are here today. I'll ask them to stand briefly so you know the group and you know who they are. Will you all please stand on the executive leadership team? Thank you.

I want to re-recognize the many Pfizer people, both current employees and retirees, who are here with us today and have helped build our company. If you are a current or retired colleague from Pfizer or one of our legacy companies, please stand to be recognized, and thank you for the support of the company.

Turning to the management report. I will review how the business performed in 2011 and briefly discuss our focus in 2012, highlighting the actions we're taking and the progress we're making.

Firstly, building value for our 4 imperatives. Our financial performance in 2011 was strong. We met or exceeded every component of our financial guidance despite absorbing $5 billion on revenue declines due to changes in the patent status of some products, most notably Lipitor in the U.S.

During 2011, we focused in executing 4 imperatives. I'll briefly recap the progress we have made starting with our first imperative, improving the performance of our innovative core. In 2011, we reduced our adjusted R&D spend by nearly $1 billion compared to 2010. But we also took significant action that we believe will enhance the productivity and sustainability of our research and development activities.

Narrowing our therapeutic focus and areas of focus to neuroscience, CVMED, Oncology, inflammation and immunology and vaccines; sharpening our analytical tools to better prioritize investment and stop funding low potential programs early in the R&D cycle; excess in R&D is while early, fell quickly, take the winners through and invest in the winners. And that's what we're trying to do. Thank you.

Advancing the most promising compounds within our pipeline and improving our ability to identify failures earlier in the cycle, and continue to invest in our external our R&D network, and the capabilities designed to drive biomedical innovation. In that respect, we have been extremely innovative. We've signed up, I believe, 20 agreements with major universities and hospitals around the U.S. to favor our access to external innovation.

We saw steady progress in our late stage pipeline including Prevnar 13 Adult, Eliquis, Tofacitinib, Xalkori and Inlyta. And we saw the emergence of a promising mix of mid-stage assets aimed at significant unmet medical needs, including Alzheimer's, Crohn's Disease, a range of cancers, severe pain, cardiovascular and metabolic diseases. And we're testing several promising vaccine candidates aimed at preventing life-threatening diseases such as meningitis.

I'm encouraged by the depth and breadth of our pipeline and believe we are well-positioned for the future.

Our second imperative is that making the right capital allocation decisions that result in greater shareholder value. In 2011, we reduced our operating expenses and returned more than $15 billion in capital to shareholders through dividend payments of $6 billion and stock repurchases of approximately $9 billion.

We moved quickly to complete a strategic review of our businesses, which resulted in the ongoing exploration of strategic alternatives for animal health and nutrition to unlock value in those businesses. Just this week, we announced that Nestlé has agreed to acquire the Nutrition business for $11.85 billion in cash. Buying the completion of this divestiture, we expect to allocate the architect proceeds to further share repurchases or invest in other business development opportunities with the return on share repurchases remaining our case to beat.

Regarding the Animal Health business, we are pursuing the activities associated -- we're evaluating all options. However, we believe that a public market transaction is most likely. While no decisions have been made, we continue to expect to make a decision during 2012 with any separation occurring by July 2013. And we continue to pursue business development opportunities and form external collaborations to leverage our core capabilities, build on our portfolio, strengthen our geographic presence.

For example, framework agreement with Hisun in China to establish a joint venture in the brand and generics area. We acquired Icogen, a biotech firm specializing in pathways for the treatment of pain. And we acquired Alzer and Ferosan, which expanded our portfolio of Pfizer Consumer Healthcare brands.

Turning to our third imperative, earning respect from society. Pfizer operates in a global society that gives us license to operate. That license is rooted in respect and trust we earn. To earn that respect and trust, we are listening to and learning from our customers and stakeholders.

In 2011, we took new approaches to connect with customers. Our Chief Medical Officer Dr. Frieda Lewis Hall, shared health and medical information to help encourage people to take charge of their healthcare especially in areas like stroke prevention, smoking cessation and early diagnosis of cancer.

We continue to assess and update our internal standards for a variety of business practices to help ensure compliance with all relevant laws and regulations. Examples are, our proactive release of clinical trial data on, publication of our financial transactions in how much we spend in research and how much we spend in speaker programs and all the details of our interaction with the physician community, which has led to a large increase in transparency in how we operate as a company.

Our fourth imperative is about creating an ownership culture across all of our operations. In 2011, we engaged with our leaders and saw the candid input of approximately 11,000 colleagues. We concluded from that input that we needed to foster a culture where colleagues behave like they are owners of the business: Not afraid to take thoughtful risks, deliver on their commitments and treat each other with trust and respect and work with integrity each and every day. I believe that we are committed to creating an ownership culture that unleashes the creativity of our colleagues. Every part of our organization is focused on developing this ownership of culture.

The way I like to explain it is, as a company, we have great resources, and we have great people with great intellects. But so do most of our competitors and the difference will be our ability to engage our colleagues and produce extraordinary results from our colleagues. So culture in the end, I believe is the defining element of a winning company. And as a leadership team, we are focused on getting the right culture in Pfizer.

So if I now move to a focus on 2012. In 2012 our focus unchanged. We are concentrating on delivering those actions that are within our -- are primarily within our control. These include: Maximizing the value of our in-line portfolio, executing our R&D strategy, advancing our pipeline, effectively allocating our capital, operating efficiently to create a more flexible cost space, meeting our financial commitments, maintaining high standards of corporate governance and business ethics all while embracing an ownership culture. I believe we're taking the right actions.

However, it's important to note that our ability to compete globally depends, on part, on numerous external forces including policy considerations by the U.S. government. For example, we need comprehensive corporate tax reform. Specific new reforms have bring the U.S. tax system in line with other developed countries and allow us to compete on a level playing field with our foreign competitors.

Pfizer's effective tax rate is 30%. The majority of our European competitors have tax rates that range from 15% to 22%. If we take the 15% tax rate and applied it to our pretax income, it allow us to spend approximately $2.5 billion more on research. This means that we are at an incredible competitive disadvantage against our foreign competitors given the tax situation in the United States.

So given the critical nature of these issues, we are working with policymakers in Washington to help them understand the significance of both the tax issues supporting innovative policies for our industry, which includes an efficient FDA and a strong IP protection in the portfolio of U.S. companies abroad.

In closing, given the sale of nutritional and the potential separation of animal health, we are taking steps that will position Pfizer to become a global biopharmaceutical company with a core of innovative products that address unmet medical needs sustained by a productive R&D organization.

We will also have a portfolio of generic products that help meet the global needs for less expensive, quality medicines and a complementary Consumer Healthcare business with several well-known brands. This will provide us the potential to generate strong cash flow, steady growth in earnings over time and create a value for you, our shareholders.

That concludes my remarks on the business. So I'd now like to move to call to order, I believe it officially requires a smack on the podium. So we are scheduled to end at 10:00, and we want to maintain an informative, productive and orderly business meeting marked by fairness to all shareholders. Therefore, we will follow the order of business and we will get right to the first item of business, declaration of a quorum.

Notice of this meeting was given to all shareholders of record as of February 28, 2012. Shares representing at least 82.4% of the votes entitled to be cast at this meeting are present here today either in person or by proxy. This percentage represents a quorum.

We now move to the next order of business, items requiring your vote. We have 7 voting items in all. 3 of these we address at every Annual Meeting and 4 proposals from shareholders. Each item will be open for questions and discussion. To ensure fair play for all shareholders, it's important that you follow the rules of our meeting in asking a question or making a comment. Please hold your questions or comments about an item until after they have been introduced. Please focus your questions or comments only on the voting item being discussed.

Please note there will be a general question-and-answer period later on in the meeting. Before speaking, please wait for microphone so we can all here you. When recognized, please state your name and confirm that you are either a Pfizer shareholder or acting on the behalf of a specific shareholder before making your comments or asking your question.

Also since we have a lot of business to transact today, we will reserve the right to move on to other questions or comments if a question or comment is out of order or has been substantially answered previously. Please limit any comments to 2 minutes unless you are presenting a shareholder proposal, in which case you will have 3 minutes to submit your statement. We will remind all speakers from the floor with a prompt on the screen when your time is up.

In a moment I will officially open the polls. Please note that you can still vote on all the proposals that are included in the proxy statement. If you have not yet voted, but would like to do so, or if you've already voted, but would like to change your vote, please fill out the ballot on the appropriate side of the order of business. If you don't have a ballot and would like one, please raise your hand now.

I declare the polls open as of 8:50 a.m. Eastern Daylight time, April 26, 2012. The polls will close today when the last ballots have been delivered to the inspector of elections. Ballots will be collected after all the proposals were presented and discussed.

We now turn to the first voting item, the election of directors. This year, the Board has nominated 14 individuals to serve one-year terms all ending in our next Annual Meeting of Shareholders. I've already introduced them to you. Their names are on the slide shown to you. So thank you. Are there any questions or comments concerning any of the nominees that we previously introduced?

Thank you. We will now move to the next voting item. Item 2 is to ratify the selection of KPMG as the company's independent registered public accounting firm for 2012. We representatives of KPMG are here today: Larry Bradley, Judge -- stand please, Judge Eric Holmes and Dennis Waylin. The ordered committee has done a thorough job of reviewing the performance of KPMG in 2011 and recommends the firm as Pfizer's independent registered accounting firm for 2012. The Board has ratified the selection and recommends that you vote for this proposal.

Are there any discussions on this voting item?

Thank you. We now move to the next item. Item number 3 is a board proposal asking our shareholders to cast an advisory vote to approve the compensation of our company's named executive officers, identified in the summary compensation table in the executive compensation section of the proxy statement. While this advisory vote is nonbinding, the Compensation Committee and the entire Board of Directors will review the results of the vote. And consistent with Pfizer's record of responsiveness, we will consider the feedback of shareholders and take that feedback into account in future determination to relate into our executive compensation program.

Accordingly, the Board recommends a vote in favor of the resolution appearing on Page 35 of the proxy statement. To approve on an advisory basis, the compensation of the company's named executive Officer stated in the proxy statement. Is there any discussion on this voting item? Thank you. We will now move to the next voting item.

This proposal was submitted by Mrs. Evelyn Y. Davis. The details of this resolution are provided in the proxy statement. In Mrs. Davis' absence, I will move the proposal on her behalf. The Board of Directors opposes this proposal for the reasons listed in the proxy statement. Is there any discussion on this voting item? Thank you. We will move to the next voting item.

Shareholder's proposal regarding actions by written consent. This proposal was submitted by Mr. William Stanner of Piermont, New York. He requests that the Board of Directors take steps to allow shareholders to take action by written consent in place of a meeting.

Patricia Warnermaker, is here representing Mr. Steiner. Mrs. Warnermaker, would you please like to move the proposal?

Unknown Attendee

Resolved. I advise shareholder proposal regarding action by written consent sponsored by William Steiner of Piermont, New York. Resolved. Shareholder's request that our Board of Directors undertakes such steps as may be necessary to commit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting in which all shareholders entitled to vote thereon were present and voting to the fullest extent permitted by law. This includes written consent regarding issues that the Board is not in favor of. This proposal topic won majority shareholder support at 13 major companies in 2010. This included 67% support by both Allstate and Sprint. Hundreds of major companies have enabled shareholder action by written consent. Taking action by written consent in the place of a meeting is a means of shareholders can use to raise important matters outside the normal Annual Meeting cycle. Please encourage our Board to respond positively to this proposal and support improved corporate governance shareholder action by written consent, Proposal 5.

Ian C. Read

Thank you, Ms. Warnermaker. The Board of Directors opposes this proposal for the reasons listed in the proxy statement, primarily that the proposal will allow critical actions to be approved without the benefit of a meeting and potentially without proper notice to all shareholders in the company. This goes to the issue of long-term and short-term ownership of the shares and the long-term success of the company. Are there any questions or comments on this proposal? Thank you. We will now move to the next voting item.

This proposal was submitted by Mr. Kenneth Steiner of Great Neck, New York. It requests that the Board of Directors give holders of 10% of our outstanding common stock the power to call a special shareholder meeting. Patricia Warnermaker is here today representing Mr. Steiner. Mrs. Warnermaker, would you please move the proposal forward for discussion?

Unknown Attendee

Proposal 6. Shareholder proposal regarding special shareholder meetings sponsored by Kenneth Steiner, Great Neck, New York. Resolved. Shareholders ask our Board to take steps necessary unilaterally to the fullest extent permitted by law to amend our bylaws and each appropriate governing document to give holders of 10% of our outstanding common stock the power to call a special shareowner meeting. This includes that such bylaw and/or chartered text will not have any exclusionary or prohibitive language in regarding to calling a special meeting that apply only to shareholders, but not to management and/or Board to the fullest extent permitted by law. Special meetings allow share owners to vote on important matters such as electing new directors that can arise between Annual Meetings. Shareowner input on the timing of shareowner meetings is especially important when events can be vote quickly and issues may become moved by next Annual Meeting. This proposal does not impact our Board's current power to call a special meeting. This proposal topic won more than 60% support at CBS, Sprint and Safeway. Please encourage our Board to respond positively to this proposal for improved corporate governance. Special shareholder meetings proposal 6.

Ian C. Read

Thank you, Ms. Warnermaker. The Board of Directors opposes this proposal for the reasons stated in the proxy statement. The Board has been considering this the subject and discussing with shareholders since 2008. Based on these discussions, the Board continues to believe that the current 20% ownership threshold strikes a reasonable and appropriate balance. Are there any questions or comments on this proposal? Thank you. We will move to the next voting item.

Shareholder proposal regarding an advisory vote on Director pay. This proposal was submitted by Mr. Ray Cheviden [ph] of Los Angeles. He requests that the Board of Directors adopt a policy that provide shareholders the opportunity at each Annual Meeting to vote on an advisory proposal prepared by Pfizer's Board to ratify the pay given members of our Board of Directors. The vote will be nonbinding. Patricia Warnermaker is here today also representing Mr. Cheviden. Ms. Warnermaker, would you please move the proposal forward for discussion?

Unknown Attendee

Item 7, shareholder proposal regarding advisory vote on Director pay sponsored by Ray Cheviden of Los Angeles. Resolved. Shareholder's request that our Board of Directors adopt a policy that provides shareholders the opportunity at each Annual Meeting to vote on advisory proposal prepared by the Board of Directors to ratify the pay given members of our Board of Directors as disclosed in the proxy statement. The proposal submitted to shareholders shall make clear that the vote is nonbinding. The proxy advisory firm institutional shareholder services in Glass Lewis each recommend that shareholders of at least one major company both in favor of a 2011 shareholder proposal on this topic. A shareholder proposal with similarities to this proposal won 55% support at a major company in 2010. This proposal was similar to our management's proposal on the same ballot today, enabling us to cast a vote in regard to the pay of our executives. This shareholder proposal simply extends the shareholder voting opportunity to apply to our Directors. Please encourage our Board to respond positively to this proposal. Shareholder say on Pay Director Proposal 7.

Ian C. Read

Thank you, Ms. Warnermaker. The Board of Directors opposes this proposal for reasons stated in the proxy statement including that Pfizer's compensation program for non-employee directors is reasonable and appropriate for a company of Pfizer's size and scope. Are there any questions or comments on this proposal? Thank you. This concludes the items requiring your vote.

We now move to the next order of business, final voting and closing of polls. If you would like to vote or change your vote, please mark your ballot, sign it, print your name beneath your signature. Once you voted, please raise your hand so the investors can collect your ballot. Do we have all the ballots? Thank you. I now declare the polls officially closed at 9:01 a.m. Eastern daylight time on April 26, 2012.

We'll now move to preliminary results of voting with Matt Lepore.

Matthew Lepore

Thanks, Ian. The Inspectors' Report is preliminary and is subject to the inspectors' final tabulation. We should not significantly change the preliminary results. Final results will appear on Form 8-K filed with the Securities and Exchange Commission within 4 business days of this meeting.

The inspectors' preliminary report shows that shares representing 82.4% of the votes entitled to be cast at this meeting were represented in person or by proxy constituting a quorum.

Proposal #1, the inspectors' preliminary report further shows that each nominee for election actually received a favorable vote of at least 96.4% of the votes cast at the meeting.

Proposal 2. The proposal will ratify the selection of KPMG, LLP to serve as the independent registered public accounting firm for the company for 2012 received the following votes: 98.9% of the votes cast voted for the proposal; 1.1% of the votes voted against the proposal.

Proposal 3. The advisory vote on executive compensation received the following votes: 96.7% of votes cast voted for the proposal; 3.3% of the votes cast voted against the proposal.

Proposal 4. The shareholder proposal regarding publication of political contributions: 4.1% of the votes cast voted for the proposal; 95.9% of the votes cast voted against the proposal.

Proposal 5. The shareholder proposal regarding action by written consent: 49.8% of the votes cast voted for the proposal; 50.2% of the votes cast voted against the proposal.

Proposal 6. The shareholder proposal regarding special shareholder meetings: 39.2% of the votes cast voted for the proposals; 60.8% of the votes cast voted against the proposal.

Proposal 7. The shareholder proposal regarding an advisory vote on Director pay: 5.6% of the votes cast voted for the proposal; 94.4% of the votes cast voted against the proposal.

The results of this preliminary report indicate that the shareholders of the company have elected the nominees for the Board of Directors as named in the proxy statement, and have approved the proposal regarding ratification of the selection of our independent registered public accounting firm. In addition, the shareholders have approved the compensation of our named executive officers. The shareholder proposals have not been approved. This concludes the inspectors' report.

Ian C. Read

Thank you, Matt. Having completed the voting items and reporting on the voting, we're now about to have 15 minutes set aside for general questions and comments.

So ladies and gentlemen, if you want to ask a question, please raise your hand. Wait for microphone. State your name. We will be taking questions from shareholders in the Overflow room if we have anybody in the overflow room. For those attending in the overflow room, if you have a question, please raise your hand and an investor will provide you a comment card. Once completed, they will bring it to the ballroom for you.

Please focus your questions on an issue of general importance to shareholders. If you have a question that may be of interest only to you or only to a small group of shareholders, please see us after the meeting and we will try answer your questions.

Also in the interest of fair play to all shareholders, if a question has already been substantially answered, we will move on to another shareholder's question. Who has the first question?

Question-and-Answer Session

Unknown Shareholder

Good morning. My name is Barry Dean Barber. We're shareholders for more than 40 years. First of all, I want to complement you, Mr. Read. You're doing a phenomenal job. You're right to the heart of matters. And based on actions result to date, again, I thank you. Now my question has to do and it follows with your goals, restoring Pfizer's dividend cut in 2009. On March 16, 2009, Pfizer cut its dividend in 1/2 from $0.32 to $0.16 because it needed its funds to purchase Wyeth. Can you hear me everyone? Okay. So we cut in half. Yesterday, as you pointed out, Pfizer sold a large portion of the Wyeth's acquisition of its food drug division to Nestlé for roughly $12 billion. Do you, as CEO of Pfizer, feel any obligation to the Pfizer stockholders like myself, most of us are little older, if we were in our 20s, we would be buying Apple for total return. The obligation to Pfizer stockholders to restore in the next year or so the cut dividend with the proceeds from the Nestlé sale. Presently, Pfizer is paying $0.22 dividend, which only yields 3.90%, which as you know, is not -- it's only rated a B as far as returns. As compared to your peer of Bristol Myer, which yields over 4%; for Merck, which just increased its quarterly dividend by $0.04 a quarter with a yield of 4.39%. And my opinion, is that having Pfizer dividend pay less than 4% does not meet Pfizer's gold standard of being #1 drug company and #1 in the pharmaceutical industry. We own quite a few pharmaceutical stocks. So my question to you, after looking at your program there, you are not going to increase and restore the Pfizer dividend, which you used and told us, the stockholders, that you needed the funds to purchase Wyeth? Now you have a substantial amount returned back to you. And as the stockholders we're saying, where are we? I noticed Pfizer pays its bonuses, and I'm happy Pfizer is very competitive and pays its employees well. But as your bosses, the shareholders, I think it's our turn to be compensated.

Ian C. Read

Mr. Dean, thank you for your comments. I am fundamentally almost exclusively focused on total return to shareholders. And a component of that clearly is the dividend, the other component is stock buybacks and the increase in the value of share. So while I look at the share price not as a sprint but a marathon, it was a good return last year of some-23% on the stock price, and plus the dividend, I think the total return came to about 27%. We have increased the dividend every year for the last 3 years. We have stated we would like to get the payout to the -- that 40%, which is the industry average of our cash flow. So I think we're moving aggressively to increase the dividend taking into account the total number of factors that influence total return, which includes the share price and our ability to reinvest. Clearly, if we would get corporate tax reform, it will enable us to be able to assume longer-term commitments on dividend rates. Let me reassure you that the Board looks at the dividend rate, we're aware of how important it is to our shareholders and we are focused on increasing the dividend rate.

Unknown Attendee

To answer your question. How important is meeting your other requirements [indiscernible] Bristol, Merck? All companies, all pharmaceuticals did well. I mean -- so Pfizer is not doing anything special. I mean we go to a Bristol meeting or the Merck meetings and things like that. And there are so many competent individuals that do well. And I have another question. Over the last 9 years, really, how many blockbuster drugs has Pfizer developed not counting acquisitions over the last 8 or 9 years? I know -- so could you fill me in some types when [indiscernible] your memories say...

Ian C. Read

So -- I think you raised legitimate points and I can't talk to the specific reasons why individual companies have dividend rates higher or lower than ours. It depends on their cash situation, on the strength of their pipeline. It depends on a lot of factors. We have said we want to get to the average of the industry as a first step and we're moving in that direction. And as you clearly point out, we have not been as productive in our research as we should have been in the last few years. And that is one of my imperatives, one of the -- probably the most important imperative is to restore the productivity of our R&D. And I believe we are making very important steps and good progress on that. So I want to thank you for your comments. We will look at the dividend rate. We continue to look at it. And we're very sensitive to the important for our shareholders. Thank you.

Unknown Attendee

I'm here representing the National Center for Public Policy Research, a free market think tank, which is also shareholder in Pfizer. My wife and I personally have owned Pfizer shares for some years. My question has to do with the future of healthcare reform. As you know, under different leadership, Pfizer working with pharma supported passage of the Affordable Care Act. Pfizer did so even though some of the provisions of the law will prove very costly to the company, and it did so despite the fact that greater government intervention into the healthcare system threatens to stifle innovation due to detriment of both the company and public health. Pfizer management apparently believe that the expanded market made possible through the individual mandate coupled with various concessions that it received from the administration prior to passage made the Bill on balance in the company's interest. Now, however, it seems probable that the U.S. Supreme Court will strike down the individual mandate. On top of that, the administration has reneged on some of its concessions. So the law is at once less lucrative and more costly than expected. And to make matters worse, Medicare and Medicaid have critical fiscal shortfalls and the government is looking to the company to help it meet its obligations. The good news is Supreme Court, or perhaps Congress, may give us the opportunity to do comprehensive healthcare reform all over again and in a much better way. The public is very much in support of a different approach. Washington Post, ABC poll for example, this month found that the public opposes the Affordable Care Act approach 52% to 49% so a strong free market reform package that protects innovation, shareholder interests and public health, stands a good chance of public support if we propose one and fight for it. So my question is, other than fighting against drug reimportation, the fact that government price controls and the fact that rationing boards such as the Affordable Care Act's independent payment advisory board, which the company has done all along and rightly so, what specific free-market reforms of the healthcare system is Pfizer supporting? And which of these will it fight for?

Ian C. Read

Thank you for your comments. Well, Pfizer fights innovation for access and for a market based system or a pharmaceutical. So within that, I would say additional to the ones you mentioned, it would be no restriction on formal recent post by nonelected bodies, formally should be set by the competitive marketplace and we advocate that and work hard for that. It would be for the right to continue with direct to consumer advertising. And in fact, to see a fundamental change in that where there is a better balance between what we're trying to achieve with DDC and the long and difficult warnings we're forced to put in those ads. We would fight for a level playing field. Right now, the playing field is not level between the industry and the insurance companies vis-a-vis is what we can and cannot say the positions, extremely tilted in the favor of insurance companies and payer's ability to instruct doctors to prescribe both label. So we would fight for equal level playing field in that legislation. We would fight for a pro-innovative FDA, one that is sheltered from undue pressure by different parts of society on risk benefit. I think in general, the FDA does a great job in getting the balance right between risk and benefit. That being said, I think one of the most complex endeavors that humankind undertakes is the development of a new pharmaceutical for humans. And as such, sometimes, for no fault of anybody, the risk benefit isn't what we expected it to be when we launch. The FDA needs to be protected from that because if they're not protected, it forces them to be very conservative and go far more towards safety rather than the balance of safety and efficacy. So we would fight for an FDA that has the ability to do that. And then lastly probably for value-based insurance, where the marketplace decides the value of the medicines and the value of the outcomes and compensates pharmaceutical companies based on the value they deliver. So thank you for your question and those are some of the things that Pfizer is fighting for.

Unknown Attendee

One quick follow on. As adults, we seldom get do-overs. It looks like we're going to have one, we need to aggressively use this opportunity because if we don't, somebody else will, and the consequences may not be what we want. So please just be very aggressive in pushing free-market reform. We appreciate it. Thank you.

Ian C. Read

Thank you for your comments. Do we have any other questions? We have about 2 to 3 minutes left.

Paul Boudreau

My name is Paul Boudreau. I'm the President of the Morris County Chamber Commerce. Thank you for coming to Morris County this morning, and thank you for the jobs you provide to our community. You mentioned a couple times in your comments about tax reform. And as you know, Chris Christie, our governor, has succeeded last year in some tax reform at the corporate level. And so my question is if -- and we don't know who the president is going to be come January 2013. And usually, the legislative process doesn't give us everything we want. So if you were invited to the White House in January to talk to the President about the #1 or #2 things he could support in the area of tax reform, what would those things be?

Ian C. Read

Thank you for the comments. I do actually believe that Chris Christie did part -- sign into law a meaningful tax reform in New Jersey specifically there were provisions in there to help pharmaceutical industry. If I was at the White House, it would be, we need to use corporate tax as a competitive weapon. We need to be competitive with European companies that have tax rates far below ours. So I'd look for a territorial tax system, a system that allows us to repatriate money, invest in jobs in the United States without paying what we consider an onerous tax for that repatriation. I'd also encourage the new government to be -- to have a policy that would support innovation in the United States and to stop free riding on American innovation outside of the United States. Thank you for your question. Do we have any other questions?

Addy Bonet

My name is Addy Bonet and I'm the Director for the March of Dimes in New Jersey. My question is, the March of Dimes and Pfizer have had a long-standing partnership with records dating back to 1949 that show collaboration by our scientists on efforts to combat the polio virus. March of Dimes is probably the only nonprofit to fulfill its original mission to cure polio. Can you please share your vision on the future of vaccine and their expected impact on health of women and children?

Ian C. Read

Thank you for those comments and question. I think vaccines are critical to public health. It's, without doubt, one of the most cost-effective weapons that we have, for public health. And for Pfizer, obviously it has Prevnar 13 for infants and pneumococcal conjugate vaccine. We're also developing treatments for staph virus resistance. A vaccine -- we're developing vaccine for meningococcal B. And we're also -- although it seems a bit tangential, but extremely important, we're developing an innovative nicotine vaccine. So I think vaccines have a resurgence in the, [indiscernible] in the United States, and we are very focused on that and that's part of the capabilities we acquired through the acquisition of Wyeth. Thank you. Any more questions?

Unknown Attendee

My name is Blair Horner. I'm with the American Cancer Society in the Eastern division. And the American Cancer Society and Pfizer fought long and hard to save people from the scourge of cancer. I was wondering if you could just discuss at all initiatives that Pfizer is doing about -- with regard to their oncology pipeline?

Ian C. Read

Thank you. Well, first of all, I want to thank the Cancer Society for all the work you do. It's very important work to support in many ways public awareness and public support for the effort against cancer. So it's one of the divisions that it's small in Pfizer, but we're very committed. We have a very talented team. And I'm really excited about our cancer portfolio, or our oncology portfolio. We just launched Xalkori, which is very innovative. It's for a small percentage of lung cancer patients, but it's a dramatically important medicine, it's precision medicine. In general, most of our efforts in oncology have moved towards precision medicine. So we're looking at Valkori and Inlyta, which is -- we just got improved for the treatment of advanced kidney cancer. We have inotuzumab, which is an antibody drug conduit in Phase III for lymphomas. Bosutinib in registration in the youth chronic myeloid leukemia. Bok imatinib is an interesting drug for non-small cell lung cancer. And finally, probably one of the most promising that we have in our portfolio is a CDK 46 inhibitor, it's for highly selective and it's for advanced breast cancer. So probably, I'm extremely encouraged inside our research as to where oncology portfolio is going, and where we can see we make a dramatic difference in the lives of people who are afflicted with these conditions.


We have time for one more question.

Unknown Attendee

George Seabalt. I'm retired 33 years ago after working for Parke-Davis for 34 years. I'm concerned about the cost of my medical coverage. When I retired, my medical coverage was completely covered by my retirement. Over the years, it has gone up so hard -- so far that my pension of $777 a year is giving back 78%. My coverage is $602 a month and I think that we should balance this more than it is right now. I wouldn't mind paying maybe up to 20% or 25% of my pension, but I think 78% is considerably too high. Thank you.

Ian C. Read

Thank you for your comments. We understand the issues about health care and the increasing cost of health care. And when we look at that, we have to look at it vis-a-vis how the company can be competitive as it goes forward. We are sensitive to the cost increases. We try and mitigate them as much as we can. And we try and balance the overall expenditure across our healthcare expenditure in trying to be competitive in the marketplace. So the issue you're dealing with most Americans are dealing with in different ways. And I believe that a system of a marketplace basis with outcomes and value-based insurance would help resolve substantially the increased cost. So we will continue to look at what we do for our retirees and how we charge the healthcare coverage, but in reality, we're forced like any company, to look at our totality of cost and to be able to sustain our benefits and be competitive. Thank you for your comments. Thank you. I think we've taken the last question. No, there's another question?

Unknown Attendee

My name is Rene Kuyasti[ph]. I'm the professor of the Economics at the Essex County and Muni County College. Since you made a preliminary presentation with the added company, with added -- But yet you failed to have one of your divisional manager in the drug division, but then what is actually the future of the company? Where are they going to? Are there any new drugs in the market coming in fact? Are there any new drugs that are going to be approved by the FDA? Will that new drug -- when is it going to be out in the market? We didn't see that in the information. Is that going to help us improve the balance sheet of this bank or maybe the share prices or maybe the increase the dividend payout?

Ian C. Read

Thank you. Well, I apologize I didn't cover that in my remarks. We have exciting short-term pipeline we're about to launch. We've launched the Xalkori, Inlyta. We expect to launch Eliquis, Bosutinib, very important drugs. We have Tofacitinib for rheumatoid arthritis. And behind that, we have a vaccine for mening B. We have a vaccine for staph aureus. We have various vaccines in the cancer area, which I just discussed with the gentleman from the Cancer Society. So I think our pipeline is robust. Now is there a gap between what our expected -- what we would like to have and what we see coming? For the next couple of years, yes, which is why one of the imperatives we have is to fix our innovative core and accelerate the development of our new drugs. And I believe we're on the right path to do that. We have a great research team. Michael Dolphin is an incredible research head. We have the 5 or 6 areas we're focusing in on with Craig in entrepreneurial culture. We're investing appropriately. And I have a lot of confidence that in the second half of this decade, Pfizer is going to be the leading company in producing innovative cures, precision medicine and medicines of high unmet medical need. So thank you for your question. Sorry if I wasn't clear in my opening remarks. But I'm very confident in Pfizer's ability to produce outstanding medicines in the next 5 to 6 years. So do we have any more questions? No problem, just wait for the mic.

Unknown Attendee

Sir, I compete against your company in the pharmaceutical industry, when I competed with you on in the '90s you guys are formidable competitors. You guys did very well in the '90s. You had blockbuster drugs. Everybody feared you in the industry. I enjoy going to work every day and competing against you all. In 2007, the reason I don't begrudge your compensation package and the bonuses that you make, my problem is really you've been with the company for a very long period of time. In the first decade when I competed against you, you were formidable competitor. And now as you became part of the executive management team, I haven't seen the growth. I haven't seen the execution. I don't even see the strength of the company that it once had, once upon a time in terms of the delivery system of drugs, innovative medication. Is it really going to be an ownership, accountability? I mean I want to go back to my stock quarters. My wife and son whose college education was supposed to be paid for by buying Pfizer's stock who at $7 billion -- or so billion drug in an industry which is unheard of, but just didn't deliver anymore. It doesn't execute, the delivery, the execution, it has been a huge disappointment. For the last decade, it has just been a waste of my time. It's really been painful. It's been very, very painful. Are you going to share -- are you going to take the ownership responsibility with your team and your management team and you're Board? Are you guys going to actually take a full ownership and share in the pain that we feel? Because I just don't think you guys feel it. I don't think you do, sir.

Ian C. Read

Thank you. Well, I understand totally the lack of increase the in share price. I'm a shareholder, 60% to 72% of my compensation is tied to the stock price, which I think is appropriate. Most of Pfizer colleagues have 10 years of options under order. We are absolutely focused. I am absolutely focused on restoring value to shareholders in this company. And we're going to do it by regenerating our innovative core, by fixing our innovative core, by appropriate capital allocation, unlocking value. We're going to do it by ensuring we have the right culture. In our industry, it's very difficult to turn the ship on a dime. It's a 10-year development process. I think we're making rapid strides to strengthening our research. And I think through the capital allocations we're doing, we're producing value for shareholders. So there's no quick fix. I can't pull out of the pipeline drugs that haven’t been developed yet. But I am confident that we have the right structure, the right incentives and the right people to produce those great drugs. And while we wait for them to come and we've seen some coming, we're launching 5 great drugs this year or next year, and we have other drugs in the pipeline, while we wait for that fruition, we're doing everything we can on capital allocation, by dividends, by stock buybacks, by selling parts of the company that have trapped value to return value to shareholders. Our team, my team, the Directors of this company are focused on the issue of shareholder return. And committed to it and share the same type of pain that you've experienced in the lack of growth and the share price. Thank you for your question.

Unknown Attendee

[Audio Gap]

Just a follow-up, is that -- if I don't perform I don't want to be reimbursed or compensated for something I don't deliver on. It's just that -- I mean the packages and the bonuses that I have seen given to executives, I mean it just doesn't make sense when there's not performance. I believe in pay for performance. I mean you got to deliver to receive benefits. I mean you just don't give it a handout like it. Otherwise, share in the pain truly, come all the way, not part of the way. Come all the way with us.

Ian C. Read

Well, I understand your comments. I sympathize with your comments. We set the compensation of all of my team and myself included based on what our market plays on a competitive level. I don't set my salary except for the Board of Directors. That being said -- I want to reemphasize, 80% -- 75% of my compensation is evolved in long-term stock. The compensation -- I will not achieve the compensation that's published in the proxy or come anywhere close to it if the share price doesn't increase. I am totally focused and sharing equally with you, and if that share price doesn't go up, my compensation is nowhere near the level that's printed in the proxy. We got 75% of the supposed compensation depends on the share price going up. If it doesn't go up, I don't make a $0.01. Okay, thank you. Any other questions?

Unknown Shareholder

Donald Lang, [ph] long-time shareholder. To increase the stocks, stop the share buyback, give the dividends, that will change. That's what's going on Wall Street. Also you mentioned the company, you want to be bring on the market. Would that be a split off -- a spinoff? Or the split off?

Ian C. Read

Well, it will be a combination of -- we think it will be -- we're probably going to exchange -- a part of it will be sold for stock in the open market and the other part would be swapped with shareholders, the Pfizer shares. The dividend rate, we think we have moved aggressively. We are constantly reviewing it. We understand the importance of the dividends. The return in today's marketplace is attractive compared to alternatives given the fact you also have the expected depreciation in the stock value. So I think -- I believe in balance. Your leadership is doing everything we can to weigh the different elements of capital return to ensure the best results for shareholders.

Unknown Attendee

The share buyback and dividend, do not correlate. You're buying many more shares back than you're paying out in dividends. There's not an equilibrium. It's not doing it.

Ian C. Read

Well, it's a -- there are a lot of factors that influence the level of dividend and the level of share buyback and the cost of dividends. And by the way, just to be clear, on Animal Health, no decision has yet been taken on its disposal. So I hear your comments. I hear the requests for higher dividend rate. We need to balance that with our ability to meet that long-term commitment, and balance that with the cost of the dividend versus the cost of the buyback. And I believe we've got the right balance. But I understand the comments and the sentiments of the shareholder here and we'll continue to look at the dividend rate. Thank you very much. Any other questions?

Unknown Shareholder

My name is Jim White, long-term shareholder, and thank you for your performance. I can say owning my own business, it’s tough to lose that chunk of revenue like you did with Lipitor and still survive, and you got to pay your people good money to deliver the results. I would also encourage everyone to pursue litigation reform because I think it's a huge penalty on a research-based firm like Pfizer with the unchecked power that the plaintiffs far have in this country. My question relates to synergies between the groups, between Dr. Dolsten and Mr. Germano and Redman in there, R&D and Specialty Care Oncology and Consumer Healthcare groups and Animal Healthcare groups. I'm sure there is an individual that is your leader of supply chain. I just asked this question because I don't know who that individual is and if perhaps you might be able to identify who that individual is, it would just at least identify for me that you have somebody that kind of roles up all of your services and products and to some uniform supply chain that really gives you synergies across the entire corporation, which I know you do, I just don't know who that is.

Ian C. Read

Yes, excuse me, you're talking about supply chain in the sense of how we look holistically across the portfolio to acquire new products?

Unknown Attendee

I'm sorry if I was unclear. I meant to say that for -- really R&D services or R&D needs and Specialty Care, Oncology need, as well as Consumer Healthcare, is there a purchasing supply chain leader that leverages whether you have contract services, building services, consumable supplies, materials, all the things that you have to buy for...

Ian C. Read

Yes, we have all those. We do have an organization that reports to Frank, D'Amelio. Frank, do you comment on that? You need the mic, Frank.

Frank A. D'Amelio

Yes, we have a centralized procurement organization that leverages the size and scale of the entire company. We have a centralized manufacturing organization to make sure we have -- I'll call it the benefits, again, the size and scale that we have. Quality controls that are in umbrella, that basically we apply consistently to all of our various businesses. So yes, we leverage all of that in terms of those centralized organizations.

Ian C. Read

Thank you. That was the last question, but I don't want to shut anything down abruptly. Is there any more questions? One more? Last one then, last chance.

Unknown Attendee

Actually, my name is Tim Winter, I'm President of the Parents Television Council. We're a nonprofit organization protecting children and families from sex and violence on television. I'm actually here -- I flew from Los Angeles to say thank you. Your organization has very kindly helped us address one of our members' most concerning needs, the sucker punch of the Viagra commercial, when we're not expecting. it. Your team has greatfully worked with us to provide in advance the media by schedule a few days in advance so that parents and families can be informed. And I just wanted to be able to say publicly, thank you for that collaborative work on behalf of your marketing and media buying team. We wish that there were a few less sexually explicit programs you bought you're going to place your advertising in. There was one show with sexual reference about using a jackhammer during intercourse, but a less explicit less sexualizing would be good, but I'm here to say thank you for your collaborative work. There are millions of families out there who are upset sometimes at this. I know you're aware of that. And thank you for providing this advanced warning to families.

Ian C. Read

Thank you very much for those comments. Thank you.

So yes. So we're about to adjourn. But before we do so, I'd like to ask everyone who worked on this meeting both Pfizer colleagues and those -- our valued business partners, including the one or people of Western -- Governor Morris to please stand and accept our thanks. It's been our pleasure to come to Morris Town and this has been a valuable meeting. We appreciate the opportunity to listen and learn from our shareholders.

Speaking for all of us on the executive leadership team and the Board, I'm grateful for your comments. I'm grateful for the confidence you have us. And I want you to leave the meeting being rest assured that we're focused on shareholder return and have vested shareholder return.

With that, may I ask for motion to adjourn?

Unknown Executive


Ian C. Read

Second, please?

Unknown Executive


Ian C. Read

Thank you very much. Have a good travel.

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