[OC] Visualising Pfizer's latest income statement. Pharmaceutical profit margins are notoriously higher than most other industriesavengerintraining t1_izybxoq wrote
Reply to comment by HindsightIs4040 in [OC] Visualising Pfizer's latest income statement. Pharmaceutical profit margins are notoriously higher than most other industries by giteam
It’s not R&D (which is usually very small scale), but once a drug is developed the process to get it onto market is pretty significant. I’m not sure what how these buckets are divided exactly and depending on the product, scale up, clinical trials, regulatory testing and validation processes have A LOT of administrative and other costs. So like 1 dollar spent on R&D requires 10 dollars spent elsewhere to complete the process.
wolf1moon t1_izyei3u wrote
It's expensive but it's still no where near a major cost and almost certainly bucketed into r&d. Otherwise you'd see it there. Besides, they buy up smaller companies that have already done it so they don't have to.
Xdsin t1_izygjjg wrote
This assumes that the R&D is successful.
What would this look like if their mRNA vaccine failed or more competitors beat them to the punch?
You also have them responding to a Pandemic. Which would make their returns on investment higher.
QuizardNr7 t1_j00o868 wrote
not their mRNA vaccine - that would be Biontech - Pfizer afaik did the heavy lifting in production.
[deleted] t1_izz5jum wrote
A lot of their R&D isn’t reported here, it’s on the balance sheet
wolf1moon t1_j00ia3d wrote
A balance sheet is a statement of assets and liabilities. They mean two fundamentally different things.
[deleted] t1_j00ik50 wrote
If you look at their 10-Q, a lot of their in-process R&D this year came from acquisitions, which are capitalized on the balance sheet and them amortized over 15 years
Also, any foreign R&D they have abides by foreign reporting rules, in which development costs are also capitalized
wolf1moon t1_j00n4ix wrote
That makes sense they would capitalize it, but the amortization is still a tiny percentage. There's no way to slice this that isn't very little money spent on r&d compared to the profits. I used to work health care supply chain and r&d was never a major expense. The selling costs including buying employees boats to take doctors out on "as friends" because it didn't count as bribery if you didn't give the doctor the boat directly. Crazy shit
miniTotent t1_izym3oy wrote
If it’s part of bringing a product to market and it isn’t broken out on its own then it should be lumped into R&D. Scaling up and getting regulatory approvals is the development part of research and development.
kirlandwater t1_j00jqs6 wrote
That’s great and all, but that $8.6b in net profit is my biggest concern. Drug makers blame high R&D costs to develop new meds on exorbitant drug costs, but it’s all just going right back to shareholders, whether directly through dividends, retained earnings, or share buybacks.
And that $8.6b in net profit is just the last 3 months. These figures are just Q3 2022. FY2021 they brought in a whopping $21.98b in net profit from $81.3b in revenue. And spending $13.8b in R&D. 59% more in net profit attributed to shareholders than R&D.
[deleted] t1_j01irx4 wrote
They do spend quite a bit on R&D normally though. It’s just that a large portion of R&D in 2022 comes from acquisitions, so it’s reported on the balance sheet instead of the income statement
kirlandwater t1_j02k894 wrote
Acquisitions definitely aren’t R&D. They’ll expand they’re product line, yes, but those products already existed or were researched and developed without Pfizer’s M&A.
One could argue acquisitions allow for more efficient R&D as synergies between newly acquired research teams eliminate redundancies, but you’d need to look into what research PFE was doing prior to the acquisition and if they’re buying something they already were working on, and additionally you’d walk into an even stronger case against consolidating the drug makers into an oligopoly, which isn’t good for consumers.
[deleted] t1_j03ak30 wrote
It’s not the acquisition itself, it’s the in-process R&D that transfers to Pfizer. It’s not allowed to be expensed, it has to be capitalized. They money they spend on the acquisition for R&D replaces money they would’ve otherwise spent on internal R&D
kirlandwater t1_j03b13u wrote
Right, but that in-process R&D is just that, in process. PFE doesn’t deserve credit for this as it was already in the works prior to the acquisition. The acquired company had already spent/allocated the money.
And while it could be argued otherwise, these acquisitions continue to consolidate IP and influence upwards to a smaller number of massive companies. Which long term will not benefit consumers
Edit: even if in process R&D is included, their 10-K shows only $802m attributed to “restructuring and acsquisition related costs” for 2021. And Im not seeing it anywhere else on the income statement/balance sheet/or statement of cash flows.
For Q3, as you’ll see in OP’s infographic, in-process R&D adds another $502m for a total of $3.2b in R&D. Way below their net income of $8.6b.
[deleted] t1_j03e15o wrote
I get what you’re saying, but when you look at the total cost a company spends on R&D, you have to include acquired R&D. A company spending money internally on R&D isn’t really different from a company spending money on a company for its R&D
kirlandwater t1_j03eiq8 wrote
I added this as an edit on my previous comment but I’ll paste it here as well
Even if in process R&D is included, their 10-K shows only $802m attributed to “restructuring and acsquisition related costs” for 2021. This was already included in my quoted figure netting $21.98b in net revenue for last year. And Im not seeing it anywhere else on the income statement/balance sheet/or statement of cash flows.
For Q3, as you’ll see in OP’s infographic, in-process R&D adds another $502m for a total of $3.2b in R&D. Way below their net income of $8.6b.
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