Fitch Affirms Pfizer IDR at 'AAA'; Outlook Stable.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed Pfizer Inc.'s (Pfizer) 'AAA' Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) and senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. ratings, and 'F1+' short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. . Simultaneously, Fitch has initiated an 'AAA' bank loan rating. The ratings apply to approximately $11.6 billion of debt. The Rating Outlook remains Stable. Pfizer's credit profile is supported by its exceptional liquidity, strong balance sheet, and conservative financial strategy. The company's liquidity is provided by a cash balance and short-term investments that totaled $15.5 billion on April 2, 2006, a $14 billion commercial paper program, and $3.5 billion of lines of credit ($3.3 billion was available at the end of the first quarter of 2006). The vast majority of cash and short-term investments reside domestically after the repatriation Repatriation The process of converting a foreign currency into the currency of one's own country. Notes: If you are American, converting British Pounds back to U.S. dollars is an example of repatriation. of $36.7 billion of foreign earnings in 2005 under the American Jobs Creation Act of 2004. Cash will spike up at the end of 2006 due to the potential divestment of Pfizer's consumer business to Johnson & Johnson for $16.6 billion. Free cash flow is strong at $7.55 billion for the latest 12-months (LTM LTM abbr. long-term memory ) ending April 2, 2006 (net cash from operating activities of $15.48 billion less capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. of $2.06 billion less dividends of $5.9 billion), increasing from $7.06 billion at the end of 2005. Fitch believes the free cash flow generation will strengthen despite a 26% increase in dividends that began in the first quarter of 2006. Pfizer's human pharmaceutical product portfolio includes the world's top-selling drug, Lipitor, which had $12.2 billion of sales for the LTM period at the end of the first quarter of 2006 (increasing 6.8% from the same period in 2005). Most of the company's top-10 drug products, representing a broad range of therapeutic categories, maintain leading positions in their respective markets. There is some concentration risk as the Lipitor product line represented 24% of total sales for the LTM period at the end of the first quarter of 2006. Commercialization of the company's late-stage R&D pipeline will mitigate revenue concentration in the intermediate term. The drug product portfolio is maturing and the company is in the midst Adv. 1. in the midst - the middle or central part or point; "in the midst of the forest"; "could he walk out in the midst of his piece?" midmost of a wave of product expirations that will last into 2008. Fitch anticipates that revenue gains from key product growth drivers (including newly commercialized pharmaceuticals) will more or less offset the losses from drug patent expirations in 2006-2010, with the exception of 2008. The estimate includes pressure on the Lipitor product line from generic competition in the therapeutic class and drug cost containment efforts of pharmacy benefit managers and managed care organizations accelerated by the initiation of the Medicare drug benefit in January 2006. The R&D program is the largest in the pharmaceutical industry as Pfizer invested $7.3 billion for the LTM period ending April 2, 2006 and plans to devote $7.8 billion for the full year of 2006. The vast majority of the investment is dedicated to the development of pharmaceutical products. Currently, the company's R&D program is composed of approximately 235 total projects to develop innovative products (152 new molecular entities) and new indications for existing products (83 line extensions). Pfizer is near its goal of submitting 20 new drug applications (NDAs) to the FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. in the 2001-2006 period, given the company has filed 18 NDAs to-date and expects to file one more regulatory application in 2006. The global restructuring plan that was announced in April 2005 targets all aspects of the organization, including realignment of the sales force into regional markets mirroring those of the Medicare drug benefit and reorganizing the previously thought to be untouchable R&D program in order to increase efficiency and productivity. Pfizer expects that annual cost savings will reach $2 billion in 2006 and rise to $4 billion in 2008. Although revenue growth is expected remain relatively flat in the intermediate term, Fitch estimates that EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become margins and cash flows from operations will improve from restructuring activities in the 2006-2008 timeframe. Pfizer does have the litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. exposure endemic to the entire pharmaceutical industry, including product liability cases, patent infringement claims, and various investigations by regulatory agencies. The company gained resolution to a major concern pertaining to a patent infringement case regarding Lipitor in December 2005, as a ruling by the U.S. District Court in Delaware bars generic competition in the U.S. until the base patent expires in June 2011, if upheld upon appeal. The company's strong legal counsel and defensible positions gives Fitch confidence that the pending legal issues will not significantly impair the company's credit profile. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. The issuer did not participate in the rating process other than through the medium of its public disclosure. |
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