Appendix A
`2016 Financial Report
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`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`GLOSSARY OF DEFINED TERMS
`Unless the context requires otherwise, references to “Pfizer,” “the Company,” “we,” “us” or “our” in this 2016 Financial Report (defined below)
`refer to Pfizer Inc. and its subsidiaries. We also have used several other terms in this 2016 Financial Report, most of which are explained or
`defined below:
`
`2016 Financial Report
`
`2016 Form 10-K
`AAV
`ABO
`ACA (Also referred to as U.S.
`Healthcare Legislation)
`ACIP
`ALK
`Allergan
`Alliance revenues
`
`AM-Pharma
`Anacor
`Astellas
`ASU
`ATM-AVI
`Bamboo
`Baxter
`BMS
`CDC
`Cellectis
`Celltrion
`Citibank
`Developed Markets
`
`EEA
`EGWP
`EH
`ELT
`EMA
`Emerging Markets
`
`EPS
`EU
`Exchange Act
`FASB
`FDA
`GAAP
`GHD
`GIST
`GIP
`GPD
`GS&Co.
`HER
`HER2-
`hGH-CTP
`HIS
`HIV
`Hisun
`Hisun Pfizer
`Hospira
`HR+
`
`This Financial Report for the fiscal year ended December 31, 2016, which was filed as Exhibit 13 to the Annual
`Report on Form 10-K for the fiscal year ended December 31, 2016
`Annual Report on Form 10-K for the fiscal year ended December 31, 2016
`Adeno-Associated Virus
`Accumulated postretirement benefit obligation
`U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation
`Act.
`Advisory Committee on Immunization Practices
`anaplastic lymphoma kinase
`Allergan plc
`Revenues from alliance agreements under which we co-promote products discovered or developed by other
`companies or us
`AM-Pharma B.V.
`Anacor Pharmaceuticals, Inc.
`Astellas Pharma U.S. Inc.
`Accounting Standards Update
`aztreonam-avibactam
`Bamboo Therapeutics, Inc.
`Baxter International Inc.
`Bristol-Myers Squibb Company
`U.S. Centers for Disease Control and Prevention
`Cellectis SA
`Celltrion Inc. and Celltrion Healthcare, Co., Ltd. (collectively)
`Citibank N.A.
`U.S., Western Europe, Japan, Canada, Australia, South Korea, Scandinavian countries, Finland and New
`Zealand
`European Economic Area
`Employer Group Waiver Plan
`Essential Health
`Executive Leadership Team
`European Medicines Agency
`Includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea), Latin America,
`Africa, Eastern Europe, Central Europe, the Middle East and Turkey
`earnings per share
`European Union
`Securities Exchange Act of 1934, as amended
`Financial Accounting Standards Board
`U.S. Food and Drug Administration
`Generally Accepted Accounting Principles
`growth hormone deficiency
`gastrointestinal stromal tumors
`Global Innovative Pharmaceutical segment
`Global Product Development organization
`Goldman, Sachs & Co.
`human epidermal growth factor receptor
`human epidermal growth factor receptor 2-negative
`human growth hormone
`Hospira Infusion Systems
`human immunodeficiency virus
`Zhejiang Hisun Pharmaceuticals Co., Ltd.
`Hisun Pfizer Pharmaceuticals Company Limited
`Hospira, Inc.
`hormone receptor-positive
`
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`
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`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`ICU Medical
`IH
`InnoPharma
`IPR&D
`IRC
`IRS
`IV
`Janssen
`King
`LDL
`LIBOR
`Lilly
`LOE
`MCO
`MDV
`Medivation
`Merck
`Moody’s
`NAV
`NDA
`NovaQuest
`NSCLC
`NYSE
`OPKO
`OTC
`PBM
`PBO
`PCS
`PE
`PGS
`Pharmacia
`PPS
`PP&E
`PSAs
`PTUs
`RCC
`recAP
`R&D
`RPI
`RSUs
`Sandoz
`SEC
`SGA
`S&P
`Teuto
`TSR
`TSRUs
`U.K.
`U.S.
`VAT
`VIE
`ViiV
`VOC
`WRD
`Zoetis
`
`ii
`
`
` 2016 Financial Report
`
`ICU Medical, Inc.
`Innovative Health
`InnoPharma, Inc.
`in-process research and development
`Internal Revenue Code
`U.S. Internal Revenue Service
`intravenous
`Janssen Biotech Inc.
`King Pharmaceuticals, Inc.
`low density lipoprotein
`London Interbank Offered Rate
`Eli Lilly & Company
`loss of exclusivity
`Managed Care Organization
`multi-dose vial
`Medivation, Inc.
`Merck & Co., Inc.
`Moody’s Investors Service
`Net asset value
`new drug application
`NovaQuest Co-Investment Fund II, L.P. or NovaQuest Co-Investment Fund V, L.P., as applicable
`non-small cell lung cancer
`New York Stock Exchange
`OPKO Health, Inc.
`over-the-counter
`Pharmacy Benefit Manager
`Projected benefit obligation
`Pfizer CentreSource
`pulmonary embolism
`Pfizer Global Supply
`Pharmacia Corporation
`Portfolio Performance Shares
`Property, plant & equipment
`Performance Share Awards
`Profit Units
`renal cell carcinoma
`recombinant human Alkaline Phosphatase
`research and development
`RPI Finance Trust
`Restricted Stock Units
`Sandoz, Inc., a division of Novartis AG
`U.S. Securities and Exchange Commission
`small for gestational age
`Standard and Poor’s
`Laboratório Teuto Brasileiro S.A.
`Total Shareholder Return
`Total Shareholder Return Units
`United Kingdom
`United States
`value added tax
`Variable interest entity
`ViiV Healthcare Limited
`Global Vaccines, Oncology and Consumer Healthcare segment
`Worldwide Research and Development
`Zoetis Inc.
`
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`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`INTRODUCTION
`See the Glossary of Defined Terms at the beginning of this 2016 Financial Report for terms used throughout this Financial Review. Our
`Financial Review is provided to assist readers in understanding the results of operations, financial condition and cash flows of Pfizer Inc. (the
`Company). It should be read in conjunction with the consolidated financial statements and Notes to Consolidated Financial Statements. The
`discussion in this Financial Review contains forward-looking statements that involve substantial risks and uncertainties. Our actual results
`could differ materially from those anticipated in these forward-looking statements as a result of various factors, such as those discussed in
`Part 1, Item 1A, “Risk Factors” of our 2016 Form 10-K and in the “Forward-Looking Information and Factors That May Affect Future Results”,
`“Our Operating Environment” and “Our Strategy” sections of this Financial Review.
`
`The Financial Review is organized as follows:
`
`Beginning on page 2
`
`Beginning on page 14
`
`Beginning on page 21
`
`Beginning on page 26
`
`Beginning on page 30
`
`Beginning on page 33
`
`Beginning on page 38
`
`Beginning on page 38
`
`Beginning on page 44
`
`Beginning on page 51
`
`Beginning on page 51
`
`Overview of Our Performance, Operating Environment, Strategy and Outlook . . . . . . . . . . . . . . . . . . . . . . . .
`This section provides information about the following: Our Business; Our 2016 Performance; Our
`Operating Environment; The Global Economic Environment, Our Strategy; Our Business Development
`Initiatives, such as acquisitions, dispositions, licensing and collaborations; and Our Financial Guidance for
`2017.
`Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions . . . . . . . . .
`This section discusses those accounting policies and estimates that we consider important in
`understanding our consolidated financial statements. For additional discussion of our accounting policies,
`see Notes to Consolidated Financial Statements—Note 1. Basis of Presentation and Significant
`Accounting Policies.
`Analysis of the Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This section includes a Revenues Overview section as well as the following sub-sections:
` Revenues-Major Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This sub-section provides an overview of several of our biopharmaceutical products.
` Product Developments-Biopharmaceutical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This sub-section provides an overview of important biopharmaceutical product developments.
` Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This sub-section provides a discussion about our costs and expenses.
` Provision for Taxes on Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This sub-section provides a discussion of items impacting our tax provisions.
` Non-GAAP Financial Measure (Adjusted Income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This sub-section provides a discussion of an alternative view of performance used by management.
`Analysis of Operating Segment Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This section provides a discussion of the performance of each of our operating segments.
`Analysis of the Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This section provides a discussion of changes in certain components of other comprehensive income.
`Analysis of the Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This section provides a discussion of changes in certain balance sheet accounts, including Accumulated
`other comprehensive loss.
`Analysis of the Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This section provides an analysis of our consolidated cash flows for the three years ended December 31,
`2016.
`Analysis of Financial Condition, Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This section provides an analysis of selected measures of our liquidity and of our capital resources as of
`December 31, 2016 and December 31, 2015, as well as a discussion of our outstanding debt and other
`commitments that existed as of December 31, 2016 and December 31, 2015. Included in the discussion of
`outstanding debt is a discussion of the amount of financial capacity available to help fund Pfizer’s future
`activities.
`New Accounting Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This section discusses accounting standards that we have recently adopted, as well as those that recently
`have been issued, but not yet adopted.
`Forward-Looking Information and Factors That May Affect Future Results . . . . . . . . . . . . . . . . . . . . . . . . . . .
`This section provides a description of the risks and uncertainties that could cause actual results to differ
`materially from those discussed in forward-looking statements presented in this Financial Review relating
`to, among other things, our anticipated operating and financial performance, business plans and
`prospects, in-line products and product candidates, strategic reviews, capital allocation, business-
`development plans and plans relating to share repurchases and dividends. Also included in this section
`are discussions of Financial Risk Management and Contingencies, including legal and tax matters.
`Certain amounts in our Financial Review may not add due to rounding. All percentages have been calculated using unrounded
`amounts.
`
`Beginning on page 52
`
`Beginning on page 54
`
`Beginning on page 59
`
`Beginning on page 61
`
`2016 Financial Report
`
`1
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`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK
`
`Our Business
`
`We apply science and our global resources to bring therapies to people that extend and significantly improve their lives through the discovery,
`development and manufacture of healthcare products. Our global portfolio includes medicines and vaccines, as well as many of the world’s
`best-known consumer healthcare products. We work across developed and emerging markets to advance wellness, prevention, treatments
`and cures that challenge the most feared diseases of our time. We collaborate with healthcare providers, governments and local communities
`to support and expand access to reliable, affordable healthcare around the world. Our revenues are derived from the sale of our products and,
`to a much lesser extent, from alliance agreements, under which we co-promote products discovered or developed by other companies or us
`(Alliance revenues).
`
`We manage our commercial operations through two distinct business segments: Pfizer Innovative Health (IH) and Pfizer Essential Health
`(EH). Each operating segment has responsibility for its commercial activities and for certain IPR&D projects for new investigational products
`and additional indications for in-line products that generally have achieved proof-of-concept. For additional information, see Notes to
`Consolidated Financial Statements––Note 18A. Segment, Geographic and Other Revenue Information: Segment Information and the “Our
`Strategy––Commercial Operations” section of this Financial Review below.
`
`The majority of our revenues come from the manufacture and sale of biopharmaceutical products. The biopharmaceutical industry is highly
`competitive and highly regulated. As a result, we face a number of industry-specific factors and challenges, which can significantly impact our
`results. These factors include, among others: the loss or expiration of intellectual property rights and the expiration of co-promotion and
`licensing rights, healthcare legislation, pipeline productivity, the regulatory environment, pricing and access pressures and competition. We
`also face challenges as a result of the global economic environment. For additional information about these factors and challenges, see the
`“Our Operating Environment” and “The Global Economic Environment” sections of this Financial Review and Part I, Item 1A, “Risk Factors,” of
`our 2016 Form 10-K.
`
`The financial information included in our consolidated financial statements for our subsidiaries operating outside the United States (U.S.) is as
`of and for the year ended November 30 for each year presented. Pfizer's fiscal year-end for U.S. subsidiaries is as of and for the year ended
`December 31 for each year presented.
`
`References to developed and emerging markets in this Financial Review include:
`Developed markets
`U.S., Western Europe, Japan, Canada, Australia, South Korea,
`Scandinavian countries, Finland and New Zealand
`
`Emerging markets (include, but are not limited to)
`
`Asia (excluding Japan and South Korea), Latin America, Africa,
`Eastern Europe, Central Europe, the Middle East and Turkey
`
`References to operational variances in this Financial Review pertain to period-over-period growth rates that exclude the impact of foreign
`exchange as well as the negative currency impact related to Venezuela. The operational variances are determined by multiplying or dividing,
`as appropriate, our current year U.S. dollar results by the current year average foreign exchange rates and then multiplying or dividing, as
`appropriate, those amounts by the prior-year average foreign exchange rates. Although exchange rate changes are part of our business, they
`are not within our control. Exchange rate changes, however, can mask positive or negative trends in the business; therefore, we believe
`presenting operational variances provides useful information to evaluate the results of our business.
`
`Our significant business development activities include:
`• On February 3, 2017, we completed the sale of our global infusion therapy net assets, HIS, to ICU Medical for up to approximately $900
`million, composed of cash and contingent cash consideration, ICU Medical common stock and seller financing. Assets and liabilities
`associated with HIS are presented as held for sale in the consolidated balance sheet as of December 31, 2016.
`• On December 22, 2016, which falls in the first fiscal quarter of 2017 for our international operations, we acquired the development and
`commercialization rights to AstraZeneca’s small molecule anti-infectives business, primarily outside the U.S., including the
`commercialization and development rights to the newly approved EU drug Zavicefta™ (ceftazidime-avibactam), the marketed
`agents Merrem™/Meronem™ (meropenem) and Zinforo™ (ceftaroline fosamil), and the clinical development assets ATM-AVI and CXL
`(ceftaroline fosamil-AVI).
`• On September 28, 2016, we acquired Medivation for $81.50 per share. The total fair value of consideration transferred for Medivation was
`approximately $14.3 billion in cash ($13.9 billion, net of cash acquired). Of this consideration, approximately $365 million was not paid as of
`December 31, 2016, and was recorded in Other current liabilities. Commencing from the acquisition date, our financial statements reflect
`the assets, liabilities, operating results and cash flows of Medivation, and, in accordance with our domestic reporting periods, our
`consolidated financial statements for the year ended December 31, 2016 reflect approximately three months of legacy Medivation
`operations.
`• On June 24, 2016, we acquired Anacor for $99.25 per share. The total fair value of consideration transferred for Anacor was approximately
`$4.9 billion in cash ($4.5 billion, net of cash acquired), plus $698 million debt assumed. Commencing from the acquisition date, our financial
`statements reflect the assets, liabilities, operating results and cash flows of Anacor, and, in accordance with our domestic reporting periods,
`our consolidated financial statements for the year ended December 31, 2016 reflect approximately six months of legacy Anacor operations,
`which were immaterial.
`
`• On April 6, 2016, we announced that the merger agreement between Pfizer and Allergan entered into on November 22, 2015 was
`terminated by mutual agreement of the companies. The decision was driven by the actions announced by the U.S. Department of Treasury
`
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`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`on April 4, 2016, which the companies concluded qualified as an “Adverse Tax Law Change” under the merger agreement. In connection
`with the termination of the merger agreement, on April 8, 2016 (which fell into Pfizer’s second fiscal quarter), Pfizer paid Allergan $150
`million (pre-tax) for reimbursement of Allergan’s expenses associated with the terminated transaction (see the Notes to Consolidated
`Financial Statements––Note 4. Other (Income)/Deductions––Net). Pfizer and Allergan also released each other from any and all claims in
`connection with the merger agreement.
`• On September 3, 2015, we acquired Hospira for approximately $16.1 billion in cash ($15.7 billion, net of cash acquired). Commencing from
`the acquisition date, our financial statements reflect the assets, liabilities, operating results and cash flows of Hospira. In accordance with
`our domestic and international reporting periods, our consolidated financial statements for the year ended December 31, 2015 reflect four
`months of legacy Hospira U.S. operations and three months of legacy Hospira international operations.
`For additional information, see Notes to Consolidated Financial Statements––Note 2. Acquisitions, Assets and Liabilities Held for Sale,
`Licensing Agreements, Research and Development and Collaborative Arrangements, Equity-Method Investments and Cost-Method
`Investment and the “Our Strategy”, “Our Business Development Initiatives”, “Significant Accounting Policies and Application of Critical
`Accounting Estimates and Assumptions––Acquisition of Hospira” and “Restructuring Charges and Other Costs Associated with Acquisitions
`and Cost-Reduction/Productivity Initiatives” sections of this Financial Review).
`Our 2016 Performance
`
`Revenues––2016
`
`Revenues in 2016 were $52.8 billion, an increase of 8% compared to 2015. This reflects an operational increase of 11%, which was partially
`offset by the unfavorable impact of foreign exchange of 3%.
`
`Compared to 2015, international revenues for 2016 were favorably impacted by approximately $100 million as a result of having one more
`selling day in international markets. In the U.S., there was no difference in selling days in 2016, compared to 2015.
`
`The following provides an analysis of the 2016 revenue growth:
`(BILLIONS OF DOLLARS)
`
`2015 Revenues
`
`Acquisition-related growth
`Hospira
`Medivation
`Pfizer-standalone
`Operational revenue growth from certain key products, net
`Operational revenue decline due to product losses of exclusivity and the expiry of the collaboration agreement
`to co-promote Rebif in the U.S.
`
`2016 Operational Revenues
`Unfavorable impact of foreign exchange
`2016 Revenues
`
`$
`
`$
`
`48.9
`
`3.1
`0.1
`
`4.0
`
`(1.8)
`5.5
`54.3
`(1.5)
`52.8
`
`See the “Analysis of the Consolidated Statements of Income––Revenues––Overview” section below for more information, including a
`discussion of key drivers of our revenue performance.
`
`Income from Continuing Operations Before Provision for Taxes on Income––2016
`
`Income from continuing operations before provision for taxes on income was $8.4 billion in 2016, compared to $9.0 billion in 2015, primarily
`reflecting, among other items, in addition to the operational and foreign exchange impacts for Revenues described above:
`• higher Cost of sales (up $2.7 billion) (see the “Costs and Expenses––Cost of Sales” section of this Financial Review);
`• a $1.7 billion charge related to the write-down of HIS net assets to fair value less estimated costs to sell (see the Notes to Consolidated
`Financial Statements––Note 2B. Acquisitions, Assets and Liabilities Held for Sale, Licensing Agreements, Research and Development and
`Collaborative Arrangements, Equity-Method Investments and Cost-Method Investment: Assets and Liabilities Held for Sale);
`• higher asset impairments (up $629 million) (see the Notes to Consolidated Financial Statements––Note 4. Other (Income)/Deductions––
`Net);
`• higher Restructuring charges and certain acquisition-related costs (up $571 million) (see the Notes to Consolidated Financial
`Statements––Note 3. Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives);
`• higher Amortization of intangible assets (up $328 million) (see the “Costs and Expenses––Amortization of Intangible Assets” section of this
`Financial Review); and
`• higher Research and development expenses (up $182 million) (see the “Costs and Expenses––Research and Development Expenses”
`section of this Financial Review);
`
`2016 Financial Report
`
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`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`•
`
`•
`
`partially offset by:
`•
`the non-recurrence of a foreign currency loss ($806 million) related to Venezuela in 2015 (see the Notes to Financial Statements––Note 4.
`Other (Income)/Deductions––Net);
`lower charges for legal matters (down $466 million) (see the Notes to Financial Statements––Note 4. Other (Income)/Deductions––Net);
`and
`lower Other, net deductions (down $318 million) (see the Notes to Consolidated Financial Statements––Note 4. Other (Income)/
`Deductions––Net).
`For information on our tax provision and effective tax rate see the “Provision for Taxes on Income” section of the Financial Review and Notes
`to Consolidated Financial Statements––Note 5. Tax Matters.
`Our Operating Environment
`Industry-Specific Challenges
`
`Intellectual Property Rights and Collaboration/Licensing Rights
`
`The loss or expiration of intellectual property rights and the expiration of co-promotion and licensing rights can have a significant adverse
`effect on our revenues. Many of our branded products have multiple patents that expire at varying dates, thereby strengthening our overall
`patent protection. However, once patent protection has expired or has been lost prior to the expiration date as a result of a legal challenge, we
`lose exclusivity on these products, and generic pharmaceutical manufacturers generally produce similar products and sell them for a lower
`price. The date at which generic competition commences may be different from the date that the patent or regulatory exclusivity expires.
`However, when generic competition does commence, the resulting price competition can substantially decrease our revenues for the impacted
`products, often in a very short period of time.
`
`Our biotechnology products, including BeneFIX, ReFacto, Xyntha and Enbrel (we market Enbrel outside the U.S. and Canada), may face in
`the future, or already face, competition from biosimilars (also referred to as follow-on biologics). If competitors are able to obtain marketing
`approval for biosimilars that reference our biotechnology products, our biotechnology products may become subject to competition from these
`biosimilars, with attendant competitive pressure, and price reductions could follow. Expiration or successful challenge of applicable patent
`rights could trigger this competition, assuming any relevant exclusivity period has expired. However, biosimilar manufacturing is complex. At
`least initially upon approval of a biosimilar competitor, biosimilar competition with respect to biologics may not be as significant as generic
`competition with respect to small molecule drugs.
`
`We have lost exclusivity for a number of our products in certain markets and we have lost collaboration rights with respect to a number of our
`alliance products in certain markets, and we expect certain products to face significantly increased generic competition over the next few
`years.
`
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`
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`

`

`$
`
`Viagra(b)
`
`Rapamune
`
`Inspra(c)
`
`Lyrica(d)
`Celebrex(e)
`
`Zyvox(f)
`
`Enbrel(g)
`
`Relpax
`
`Vfend
`
`Product Revenues in Markets Impacted
`Year Ended December 31,
`2016
`2015
`1,217
`1,338
`
`$
`
`2014
`1,260
`
`$
`
`115
`
`97
`
`692
`148
`
`235
`
`129
`
`118
`
`1,048
`189
`
`644
`
`254
`
`208
`
`1,634
`1,872
`
`1,116
`
`2,146
`
`2,402
`
`2,832
`
`263
`
`299
`
`80
`578
`
`295
`
`349
`
`110
`553
`
`317
`
`403
`
`112
`553
`
`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`Specifically:
`Recent Losses and Expected Losses of Product Exclusivity
`
`The following table provides information about certain of our products recently experiencing, or expected to experience in 2017, patent
`expirations or loss of regulatory exclusivity in the U.S., Europe or Japan, showing, by product, the key dates or expected key dates, the
`markets impacted and the revenues associated with those products in those markets:
`(MILLIONS OF DOLLARS)
`Products
`
`Key Dates(a)
`
`Markets Impacted
`
`Major European markets
`June 2013
`Japan
`May 2014
`U.S.
`December 2017
`U.S.
`January 2014
`Major European markets
`June 2015
`Major European markets
`March 2014
`Japan
`July 2015
`Major European markets
`July 2014
`Major European markets
`November 2014
`U.S.
`December 2014
`Japan
`August 2014
`U.S.
`First half of 2015
`Major European markets
`January 2016
`Major European markets
`August 2015
`Japan
`September 2015
`Major European markets
`December 2015
`U.S.
`December 2016
`Major European markets
`July 2016
`Japan
`January 2016
`U.S.
`April 2016
`Tygacil
`Pristiq(h)
`U.S.
`March 2017
`(a) Unless stated otherwise, “Key Dates” indicate patent-based expiration dates.
`(b) As a result of a patent litigation settlement, Teva Pharmaceuticals USA, Inc. will be allowed to launch a generic version of Viagra in the U.S. in December 2017,
`or earlier under certain circumstances.
`(c) Generic versions of Inspra became available in major European markets following the March 2014 expiry of regulatory exclusivity for Inspra in most major
`European markets, allowing generic companies to submit applications for marketing authorizations for their generic products.
`(d) Generic versions of Lyrica became available in major European markets following the July 2014 expiry of regulatory exclusivity for Lyrica in the EU, allowing
`generic companies to submit applications for marketing authorizations for their generic products.
`(e) In December 2014, generic versions of Celebrex became available pursuant to settlement agreements with several generic manufacturers.
`(f) Pursuant to terms of a settlement agreement, certain formulations of Zyvox became subject to generic competition in the U.S. in January 2015. Other
`formulations of Zyvox became subject to generic competition in the U.S. in the first half of 2015.
`(g) In January 2016, an etanercept biosimilar referencing Enbrel was approved by the European Commission.
`(h) As a result of a patent litigation settlement with several generic manufacturers, generic versions of Pristiq will be allowed to launch in the U.S. in March 2017.
`Recent Losses of Collaboration Rights
`
`The following table provides information about certain of our alliance revenue products that have experienced losses of collaboration rights,
`showing, by product, the date of the loss of the collaboration rights, the markets impacted and the alliance revenues associated with those
`products in those markets:
`
`Alliance Revenues in
`Markets Impacted
`
`(MILLIONS OF DOLLARS)
`
`Products
`
`Date of Loss of
`Collaboration Rights
`
`Markets Impacted
`
`Spiriva(a)
`
`U.S., Japan, certain European
`countries, Australia, Canada and
`South Korea
`
`$
`
`April 2014 (U.S.), between 2012
`and 2016 (Japan, certain
`European countries, Australia,
`Canada and South Korea)
`Rebif(b)
`—
`415
`371
`U.S.
`End of 2015
`(a) Our collaboration with Boehringer Ingelheim for Spiriva expired on a country-by-country basis between 2012 and 2016. On April 29, 2014, our alliance in the
`U.S. came to an end.
`(b) Our collaboration agreement with EMD Serono Inc. to co-promote Rebif in the U.S. expired at the end of 2015.
`
`Year Ended December 31,
`2016
`2015
`6
`27
`
`$
`
`2014
`168
`
`$
`
`In addition, we expect to lose exclusivity for various other products in various markets over the next few years, including among others, the
`expiration of the basic product patent for Lyrica in the U.S. in December 2018. For additional information, see the “Patents and Other
`Intellectual Property Rights” section in Part I, Item 1, “Business”, of our 2016 Form 10-K.
`
`2016 Financial Report
`
`
`5
`
`WATSON LABORATORIES, INC. , IPR2017-01622, Ex. 1134, p. 8 of 142
`
`

`

`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`Our financial results in 2016 and our 2017 financial guidance, respectively, reflect the impact and projected impact of the loss of exclusivity of
`various products and the expiration of certain alliance product contract rights discussed above. For additional information about our 2017
`financial guidance, see the “Our Financial Guidance for 2017” section of this Financial Review.
`
`We will continue to aggressively defend our patent rights whenever we deem appropriate. For more detailed information about our significant
`products, see the discussion in the “Revenues––Major Products” and “Revenues––Selected Product Descriptions” sections of this Financial
`Review. For a discussion of certain recent developments with respect to patent litigation, see Notes to Consolidated Financial Statements––
`Note 17A1. Commitments and Contingencies: Legal Proceedings––Patent Litigation.
`
`Regulatory Environment/Pricing and Access––U.S. Healthcare Legislation
`
`In March 2010, the ACA was enacted in the U.S. For additional information, see the “Government Regulation and Price Constraints” section in
`Part I, Item 1, “Business”, of our 2016 Form 10-K.
`Impacts on our 2016 Results
`
`We recorded the following amounts in 2016 as a result of the U.S. Healthcare Legislation:
`• $410 million recorded as a reduction to Revenues, related to the Medicare “coverage gap” discount provision; and
`• $312 million recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government (which is
`not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription
`drug sales to specified government programs.
`Impacts on our 2015 Results
`
`We recorded the following amounts in 2015 as a result of the U.S. Healthcare Legislation:
`• $399 million recorded as a reduction to Revenues, related to the Medicare “coverage gap” discount provision; and
`• $251 million recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government (which is
`not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription
`drug sales to specified government programs. The decrease in the impact of the U.S. Healthcare Legislation on Selling, informational and
`administrative expenses in 2015 compared to 2014 was primarily a result of the non-recurrence of the $215 million charge in 2014 to
`account for an additional year of the non-tax deductible Branded Prescription Drug Fee, partially offset by a lower favorable true-up in