Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

9 Months Ended

Oct. 02, 2022

Restructuring and Related Activities [Abstract]

Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

A. Transforming to a More Focused Company Program

With the formation of the Consumer Healthcare JV in 2019 and the spin-off of our Upjohn Business in the fourth quarter of 2020, Pfizer has transformed into a focused, global leader in science-based innovative medicines and vaccines. We continue our

efforts to ensure our cost base and support model align appropriately with our operating structure. While certain direct costs transferred to the Consumer Healthcare JV, and to the Upjohn Business in connection with the spin-off, there are indirect costs which did not transfer. This program is primarily composed of the following three initiatives:

•We are taking steps to restructure our corporate enabling functions to appropriately support our business, R&D and PGS platform functions. We expect costs, primarily related to restructuring our corporate enabling functions, of $1.8 billion, to be incurred primarily from 2020 through 2022, with substantially all costs to be cash expenditures. Actions include, among others, changes in location of certain activities, expanded use and co-location of centers of excellence and shared services, and increased use of digital technologies. The associated actions and the specific costs primarily include severance and benefit plan impacts, exit costs as well as associated implementation costs.

•In addition, we are transforming our commercial go-to market model in the way we engage patients and physicians. We have also made several organizational changes in the third quarter of 2022 to further transform our operations to better leverage our expertise in certain areas and in anticipation of potential future new product launches (see Note 1A). We expect costs of $1.4 billion to be incurred primarily from 2020 through 2022, with all costs to be cash expenditures. Actions include, among others, centralization of certain activities and enhanced use of digital technologies. The costs for this effort primarily include severance and associated implementation costs.

•We are also optimizing our manufacturing network under this program and incurring one-time costs for cost-reduction initiatives related to our manufacturing operations. We expect to incur costs of $800 million to be incurred primarily from 2020 through 2023, with approximately 25% of the costs to be non-cash. The costs for this effort include, among other things, severance costs, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.

The program costs discussed above may be rounded and represent approximations.

From the start of this program in the fourth quarter of 2019 through October 2, 2022, we incurred costs of $2.8 billion, of which $1.1 billion ($862 million of restructuring charges) is associated with Biopharma.

B. Key Activities


The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits:
	Three Months Ended				Nine Months Ended
(MILLIONS)	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Restructuring charges/(credits):
Employee terminations	$	158	$	630	$	293	$	649
Asset impairments	17		10		44		7
Exit costs/(credits)	2		3		31		—
Restructuring charges/(credits)(a)	177		643		368		656
Transaction costs(b)	—		—		42		—
Integration costs and other(c)	22		3		170		11
Restructuring charges and certain acquisition-related costs	199		646		580		667
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net	—		(63)		(5)		(51)
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(d):
Cost of sales	7		19		22		53
Selling, informational and administrative expenses	1		8		1		23

Total additional depreciation––asset restructuring	7		27		22		76
Implementation costs recorded in our condensed consolidated statements of income as follows(e):
Cost of sales	14		8		40		29
Selling, informational and administrative expenses	136		142		344		287
Research and development expenses	—		—		—		1

Total implementation costs	150		151		384		316
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	357	$	760	$	982	$	1,008

(a)Primarily represents cost reduction initiatives. Restructuring charges/(credits) associated with Biopharma: charges of $62 million and $108 million for the three and nine months ended October 2, 2022, respectively, and charges of $616 million and $617 million for the three and nine months ended October 3, 2021, respectively.

(b)Represents external costs for banking, legal, accounting and other similar services.

(c)Represents external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs. In the three and nine months ended October 2, 2022, integration costs and other were mostly related to our acquisition of Arena, including $138 million in payments to Arena employees in the first quarter of 2022 for the fair value of previously unvested long-term incentive awards. See Note 2A.

(d)Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.

(e)Represents external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.


The following summarizes the components and changes in restructuring accruals:
(MILLIONS)	Employee Termination Costs		Asset Impairment Charges		Exit Costs		Accrual
Balance, December 31, 2021(a)	$	1,014	$	—	$	57	$	1,071
Provision	293		44		31		368
Utilization and other(b)	(447)		(44)		(80)		(572)
Balance, October 2, 2022(c)	$	859	$	—	$	8	$	867

(a)Included in Other current liabilities ($816 million) and Other noncurrent liabilities ($255 million).

(b)Includes adjustments for foreign currency translation.

(c)Included in Other current liabilities ($758 million) and Other noncurrent liabilities ($110 million).