Pfizer Earnings Call Insights: Corporate and Tax Structures

Pfizer Inc (NYSE:PFE) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Corporate Structure

Chris Schott – JPMorgan: The first one was on the corporate structure. Can you just elaborate a little bit on why three divisions here as compared to simply the innovative and value core franchises you’ve discussed in the past. I guess is there – I know you talked about – is there a scenario where Pfizer could break itself into three companies at some point in the future. And then my second question was – and just so I am clear can you elaborate a little bit more on what type of penal granularity we should be anticipating in 2014 and then maybe even looking forward to 2015 for this three operating divisions? Thank you.

Ian Read – Chairman and CEO: So, why the three rather two. I think it basically is very strong operational reasons that the innovative business under Geno has a collection of large disease areas that cut across both the primary care and specialty and they have challenges both capital allocation and of the go-to-market model as we look to be more efficient in how we deliver the message and how we get to see primary care physicians. Whereas the oncology business and the vaccine business have a very distinct culture, they’re smaller businesses that I wanted to make sure you can get, didn’t get assumed into a large primary care business. They have specific customers, they have dedicated search facilities and research focus and I thought it was very important for those businesses to maintain their unique focus and extend it globally. So, that was the primary reason for maintaining or claim a structure, where we had two innovative businesses. On the details I’ll turn it over to Frank.

Frank D’Amelio – EVP, Business Operations and CFO: So, Chris, on the P&L granularity for ’14 and then as about beyond 2014. For 2014 fiscal year, we will show revenue to the three businesses. We’ll show direct cost and we’ll show direct expenses and then what we’ll do is on expenses that we don’t allocate today that we don’t allocate to come fiscal 2014, we’ll provide some qualitative directional statement. So, that you will be able to model some good full stream P&Ls. Come fiscal 2015, we’ll provide that same information and then we’ll provide some additional balance sheet information as well. So, that’s kind of the rhythm of how we’re thinking about this.

Tax Structure

Gregg Gilbert – Bank of America: On the separation, was curious, as you internally separate these businesses, are you considering any changes that could affect the overall tax structure at Pfizer? Then on Palbo, I’ve a couple of questions. By when will you know that you might not have data in time for San Antonio? I assume it’s some time before the actual start of that conference. So, let us know if there’s a key date there, and Lilly has a program that’s much earlier in that class, but they talk about the ability of their product to be dosed continuously. Any comments on that subject of continuous dosing versus otherwise?

Ian Read – Chairman and CEO: I’ll ask Frank to comment on the tax issue.

Frank D’Amelio – EVP, Business Operations and CFO: So, in terms of the tax structure, the creation of these three businesses in and of themselves does not impact in any material way the tax structure, but we’re always doing tax planning to see what we can be, what we can do to be more efficient from a tax perspective.

Ian Read – Chairman and CEO: Then, if Geno, could you respond to the questions on Palbo?

Geno Germano – President and GM, Specialty Care and Oncology: Yeah, with regard to the timing on Palbo, we’re continuing to accumulate events, and based on the rate of accumulation that we’re seeing at this point, we think it’s unlikely that we’ll be presenting data at San Antonio. So, I don’t have a specific date to give you, but I think our best view at this point is, it’s unlikely that we’ll present at San Antonio. We still expect to accumulate the required events around the end of the year, but unlikely we’ll meet the San Antonio date. Then with regard to continuous dosing, I’m really not sure and familiar with the Lilly program, so, I can’t really comment on that.

A Closer Look: Pfizer Earnings Cheat Sheet>>