Fitch Affirms Pfizer's IDR at 'A+'; Outlook Stable

  Fitch Affirms Pfizer's IDR at 'A+'; Outlook Stable

Business Wire

CHICAGO -- September 11, 2013

Fitch Ratings has affirmed Pfizer Inc.'s (Pfizer's) Issuer Default Rating
(IDR) at 'A+'. The rating actions apply to approximately $36.7 billion of
consolidated debt outstanding as of June 30, 2013. The Rating Outlook is
Stable. A full list of Pfizer's ratings can be found at near the end of this
press release.

KEY RATING DRIVERS

--Fitch believes Pfizer's narrowing strategic focus on human branded
pharmaceuticals will improve long-term profitability and growth, offsetting
the negative effect of a less-diversified business model.

--The company's patent cliff is becoming less steep as a smaller percentage
(roughly 20%) of branded revenues are exposed to patent expiration in the next
three years.

--One of Pfizer's at-risk branded products, Enbrel, is a biologic drug, which
Fitch expects will lose less market share to biosimilar competition than the
80%-90% that typically occurs with generic competition to small molecule drug.

--Pfizer is making decent progress in developing and commercializing a
pipeline of the new drugs; the company has launched four new therapies (one of
which is Eliquis, a product co-developed and co-marketed with Bristol-Myers
Squibb) during the last two years for uses in treating cancer, preventing
strokes and treating inflammation.

--Despite the company's recent drug launches, Fitch expects Pfizer will
generate relatively flat organic revenues through 2016. Fitch's expectation
incorporates the anticipated performance of Pfizer's mature, new and
expected-to-be launched products, moderate macroeconomic headwinds and the
beneficial demand effects of the Affordable Care Act (ACA).

--Fitch anticipates Pfizer will generate strong free cash flow (FCF) and
maintain solid liquidity during the intermediate term, with significant
international cash balances and adequate access to the credit markets.

--Fitch believes Pfizer will continue to aggressively deploy cash towards
acquisitions and share repurchases.

--Fitch forecasts that Pfizer will operate with total debt leverage ranging
between 1.5 times (x) and 1.7x, driven by relatively flat EBITDA generation
and debt levels.

NARROWING STRATEGIC FOCUS

Fitch believes Pfizer's sharpening strategic focus on human branded
pharmaceuticals, while decreasing the diversity of its product portfolio, will
enable the company to improve the productivity of its core operations,
including research & development, marketing and manufacturing. This should
result in improved profitability and topline growth over the longer term.
Fitch believes Pfizer is strongly committed to the more narrowly focused
business model as evidenced by the recently completed divestiture of its
Animal Health business (Zoetis) in the second quarter of 2013, and the sale of
its nutritional business in November 2012.

MODERATING PATENT CLIFF

The company's patent cliff is appreciably less steep than it was in 2012. Over
the next three years, around 20% of the company's drug portfolio is at-risk of
losing market exclusivity, including the loss of market exclusivity for two of
its five-bestselling medicines - Celebrex (approximately 5% of expected 2013
total firm sales) and Enbrel (approximately 7% of expected 2013 of total firm
sales). The main U.S. patent for Celebrex expires in December 2015, and the
base patent for Enbrel expires internationally beginning in 2014. Pfizer does
not have rights to Enbrel in the U.S., but does receive alliance revenues from
Amgen for sales in the region. The profitability of this agreement for Pfizer
drops off significantly after Oct. 31, 2013, due to the terms of the contract
with Amgen.

Fitch does not expect that Enbrel will face as serious a competitive threat
from biosimilar alternatives as Celebrex will with generic substitutes. Enbrel
is a biologic, and Fitch does not think a generic biologic that is
automatically interchangeable with Enbrel will emerge in the E.U. or U.S.,
given the industry's currently limited level of technological expertise in
replicating biologics and only modest regulatory experience in the U.S.
Therefore, Fitch expects competitive challengers will require significant
research and marketing investments, making steep price discounts and drastic
market share gains by competitors unlikely in the first few years following
Enbrel's patent expiry.

PIPELINE SUCCESSES

Helping to mitigate the anticipated revenue challenges from patent expiries,
Pfizer has added new revenue sources over the past two years, including
Xalkori (cancer), Eliquis (blood clots) Xeljanz (arthritis) and Bosulif
(cancer). The company is also making progress on late-stage pipeline
candidates, such as tafamidis (polyneuropathy) and dacomitinib (cancer), while
also conducting clinical trials that could expand the use of currently
marketed products to additional treatment indications. Also in April 2013, the
U.S. Food and Drug Administration designated Pfizer's investigation drug,
palbociclib, for expedited development and review for the treatment of breast
cancer.

EXPECTED FLAT ORGANIC REVENUES

Fitch expects the net effect of existing product sales, lost sales due to
patent expirations and the ramp up of recently introduced products will result
in relatively flat organic revenues through 2016. Fitch's revenue forecast
assumes:

--Moderate uptake of recently launched products;

--Celebrex's loss of market exclusivity in December 2015;

--Enbrel's loss of European exclusivity in 2015;

--The declining contribution of U.S./Canada sales of Enbrel beginning in
November 2013;

--Persisting weak macroeconomic trends;

--A modest demand tailwind from the expected increase in the rolls of the
insured in 2014 from the Affordable Care Act.

STRONG CASH FLOW EXPECTED

Fitch forecasts $9 billion to $10 billion of FCF (cash flow from operations
minus capital expenditures minus dividends) for Pfizer in 2013. The forecast
incorporates relatively durable legacy margins supported by a stable sales mix
and a strong focus on cost control. In addition, aggregate pricing growth
across the company's product portfolio is expected to be supportive for
margins in the near term. During 2014-2015, Fitch projects annual FCF of $6
billion - $8 billion if the company does not increase operational leverage
during a period of relatively flat revenues.

SOLID LIQUIDITY

Pfizer has solid liquidity through strong FCF generation and ample access to
the credit markets. FCF for the latest 12 months (LTM) ending June 30, 2013
was $8.35 billion. At the end of the period, Pfizer had approximately $32.7
billion in cash/short-term investments (largely held outside the U.S.) and
full availability on its $7 billion revolver, maturing on April 18, 2017.

Fitch views Pfizer's debt maturity schedule as manageable and expects the
company to refinance upcoming maturities with additional borrowings. Pfizer
has approximately $1.3 billion of debt maturing in 2013, $3.8 billion in 2014,
$3.1 billion in 2015, $4.2 billion in 2016 and $22.6 billion thereafter.

AGGRESSIVE CASH DEPLOYMENT TO PERSIST

Fitch believes Pfizer will continue to aggressively deploy cash towards
acquisitions and share repurchases with the relative intensity between the two
options will likely be driven by the relative returns to shareholders. In
addition, Fitch expects that Pfizer will remain committed to an increasing
dividend over time.

STABLE LEVERAGE ANTICIPATED

The Stable Outlook incorporates Fitch's anticipation that Pfizer will operate
with total debt leverage ranging between 1.5x and 1.7x, driven by relatively
flat profitability and debt levels. FCF and cash on hand should be sufficient
to fund targeted acquisitions and share repurchases without requiring
incremental debt issuance.

RATING SENSITIVITIES

Future developments that may, individually or collectively, lead to a positive
rating action include:

--If Pfizer were to durably maintain gross debt leverage in the range of 1.0x
to 1.3x.

--If the company sustained strong operational performance through the current
patent cliff.

Future developments that may, individually or collectively, lead to a negative
rating action include:

--If pressure on operations were significant enough to result in sustained
gross debt leverage greater than 1.7x. Operational pressure would most likely
originate from weaker than expected demand for pharmaceuticals in developed
healthcare markets, unfavorable clinical developments regarding Pfizer's
pipeline of new drug therapies, and/or increased pricing pressure by payors,
particularly with respect to new drug launches.

--If Pfizer pursues a transaction (acquisitions/share repurchases) that places
pressure on gross leverage.

DEBT ISSUE RATINGS

Fitch has affirmed Pfizer Inc.'s ratings as follows:

--IDR at 'A+';

--Short-term IDR at 'F1'.

--Commercial paper program at 'F1';

--Credit facility at 'A+';

--Senior unsecured notes at 'A+'.

The ratings apply to roughly $28 billion of debt (excluding subsidiary debt)
outstanding at June 30, 2013. The Rating Outlook is Stable.

Fitch has also assigned the following ratings to Pfizer's consolidated
subsidiaries as follows:

Wyeth LLC

--IDR at 'A+'.

The ratings apply to roughly $7.3 billion of subsidiary debt outstanding at
June 30, 2013. The Rating Outlook is Stable.

The subsidiary's senior unsecured notes were affirmed at 'A+'. The ratings on
these notes were previously listed under Pfizer and have now been moved to
Wyeth LLC.

Pharmacia Corp.

--IDR at 'A+'.

The ratings apply to roughly $1.4 billion of subsidiary debt outstanding at
June 30, 2013. The Rating Outlook is Stable.

The subsidiary's senior unsecured notes were affirmed at 'A+'. The ratings on
these notes were previously listed under Pfizer and have now been moved to
Pharmacia Corp.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 15, 2013).

--'Rating Pharmaceutical Companies - Sector Credit Factors' (Aug. 9, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and
Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Rating Pharmaceutical Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684459

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=801753

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Contact:

Fitch Ratings
Primary Analyst
Bob Kirby, +1-312-368-3147
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Michael Zbinovec, +1-312-368-3164
Senior Director
or
Committee Chairperson
Michael Weaver, +1-312-368-3156
Managing Director
or
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com
 
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