Q4 2014 PFE Earnings Press Release Alksdjindfls

8/16/2019 Q4 2014 PFE Earnings Press Release Alksdjindfls

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PFIZER REPORTS FOURTH-QUARTER AND FULL-YEAR 2014 RESULTS;

PROVIDES 2015 FINANCIAL GUIDANCE

Fourth-Quarter 2014 Reported Revenues(1) of $13.1 Billion; Full-Year 2014 Reported Revenues(1) of $49.6

Billion

Fourth-Quarter 2014 Adjusted Diluted EPS(2) of $0.54, Reported Diluted EPS(1) of $0.19; Full-Year 2014

Adjusted Diluted EPS(2) of $2.26, Reported Diluted EPS(1) of $1.42

Repurchased $1.2 Billion and $5.0 Billion of Common Stock in Fourth-Quarter and Full-Year 2014,

Respectively; Returned Nearly $12 Billion to Shareholders Through Share Repurchases and Dividends in

2014

Provides 2015 Financial Guidance

NEW YORK, N.Y., Tuesday, January 27, 2015 – Pfizer Inc. (NYSE: PFE) reported financial results for fourth-

quarter and full-year 2014. At the beginning of fiscal year 2014, the company began managing its commercial

operations through a new global commercial structure consisting of two distinct businesses: an Innovative

Products business and an Established Products business. The Innovative Products business is composed of two

operating segments: the Global Innovative Pharmaceutical segment (GIP)(3) and the Global Vaccines, Oncology

and Consumer Healthcare segment (VOC)(3). The Established Products business consists of the Global

Established Pharmaceutical segment (GEP)(3). Financial results for each of these segments are presented in the

Operating Segment Information section.

As a result of the full disposition of Zoetis Inc. (Zoetis) on June 24, 2013, the financial results of the Animal

Health business are reported as a discontinued operation in the consolidated statements of income for the twelve

months ended December 31, 2013.

Some amounts in this press release may not add due to rounding. All percentages have been calculated using

unrounded amounts. Results are summarized below.

OVERALL RESULTS

($ in millions, except per share amounts) Fourth-Quarter Full-Year

2014 2013 Change 2014 2013 Change

Reported Revenues(1) $ 13,118 $ 13,558 (3%) $ 49,605 $ 51,584 (4%)

Adjusted Income(2) 3,441 3,686 (7%) 14,530 15,288 (5%)

Adjusted Diluted EPS(2) 0.54 0.56 (4%) 2.26 2.22 2%

Reported Net Income(1) 1,228 2,568 (52%) 9,135 22,003 (58%)

Reported Diluted EPS(1) 0.19 0.39 (51%) 1.42 3.19 (55%)


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REVENUES

($ in millions)Favorable/(Unfavorable) Fourth-Quarter Full-Year

2014 2013

% Change2014 2013

% Change

Total Oper. Total Oper.

GEP(3) $ 6,407 $ 7,160 (11%) (7%) $ 25,149 $ 27,619 (9%) (7%)

GIP(3) 3,748 3,645 3% 6% 13,861 14,317 (3%) (2%)

Global Vaccines(3) 1,318 1,118 18% 22% 4,480 3,965 13% 15%

Consumer Healthcare(3) 953 943 1% 4% 3,446 3,342 3% 5%

Global Oncology(3) 609 556 10% 14% 2,218 1,978 12% 14%

Other (4) 83 135 (38%) (41%) 451 364 24% 23%

Total $ 13,118 $ 13,558 (3%) — $ 49,605 $ 51,584 (4%) (2%)

SELECTED TOTAL COMPANY ADJUSTED COSTS AND EXPENSES(2)

($ in millions)(Favorable)/Unfavorable Fourth-Quarter Full-Year

2014 2013

% Change2014 2013

% Change

Total Oper. Total Oper.

Cost of Sales(2) $ 2,584 $ 2,672 (3%) 5% $ 9,134 $ 9,273 (2%) 2%

Percent of Revenues(2) 19.7% 19.8% N/A N/A 18.5% 18.0% N/A N/A

SI&A Expenses(2) 3,916 4,093 (4%) (2%) 13,721 14,172 (3%) (2%)

R&D Expenses(2) 2,039 1,790 14% 15% 7,153 6,554 9% 9%

Total $ 8,539 $ 8,555 — 4% $ 30,007 $ 29,999 — 2%

Effective Tax Rate(2) 26.2% 27.7% 26.5% 27.5%

2015 FINANCIAL GUIDANCE(5)(6)

Pfizer's 2015 financial guidance is summarized below.

Reported Revenues(1) $44.5 to $46.5 billion

Adjusted Cost of Sales(2) as a Percentage of Reported Revenues(1) 18.5% to 19.5%

Adjusted SI&A Expenses(2) $12.8 to $13.8 billion

Adjusted R&D Expenses(2)(6) $6.9 to $7.4 billion

Adjusted Other (Income)/Deductions(2) Approximately ($500 million) of income

Effective Tax Rate on Adjusted Income(2) Approximately 25.0%

Reported Diluted EPS(1) $1.37 to $1.52

Adjusted Diluted EPS(2) $2.00 to $2.10


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A reconciliation of Pfizer's full-year 2014 financial results to certain components of its 2015 financial

guidance, including certain significant factors impacting 2015 financial guidance, is below.

Full-Year 2014

2015 FinancialGuidance (Excl.Pending OPKOTransaction(6)) at2014 FX Rates

Impact of Mid-January 2015 FXRates Compared

to 2014 FXRates

Impact ofPending OPKOTransaction(6)

2015 FinancialGuidance

Reported Revenues(1) $49.6 billion$47.3 to $49.3

billion($2.8 billion) —

$44.5 to $46.5

billion

Reported Diluted EPS(1) $1.42 $1.57 to $1.72 ($0.17) ($0.03) $1.37 to $1.52

Adjusted Diluted EPS(2) $2.26 $2.20 to $2.30 ($0.17) ($0.03) $2.00 to $2.10

EXECUTIVE COMMENTARY

Ian Read, Chairman and Chief Executive Officer, stated, “During 2014, despite significant continued revenue

headwinds from product losses of exclusivity and co-promote expiries, we were able to deliver modest adjusted

diluted EPS(2) growth. This was achieved through a combination of incremental revenue generation from key in-

line products and recent product launches, responsible expense management as well as supportive capital

allocation.”

“We continued to focus on strengthening our innovative core and have made notable progress in this area

through both internal advancements and strategic business development. As we look forward to 2015, we

expect continued momentum with our pipeline, notably the potential U.S. approval of Ibrance (palbociclib) for

advanced breast cancer, as well as anticipated strong growth in emerging markets and from our recent product

launches in developed markets, including Eliquis, Xeljanz, Prevnar 13 in adults and Nexium 24HR. We are

now in a position to commence over 20 registrational studies during the coming four years with candidates that

are based upon strong science and target indications that have significant unmet need.”

Mr. Read continued, “On the commercial front, our innovative and established businesses continue to benefit

from a sharp focus on execution in their respective markets and we expect each will demonstrate continued

improvement in their competitive positioning.”

“Further, we remain in a strong financial position that will enable us to invest in our business at appropriate

levels, continue to pursue attractive business development activities and also continue to return meaningful

capital directly to our shareholders,” Mr. Read concluded.

Frank D’Amelio, Chief Financial Officer, stated, “For full-year 2014, I was pleased with our financial

performance, the operational execution of our newly-formed businesses and our ability to continue delivering

shareholder value through prudent capital allocation. Regarding our financial performance, we achieved or


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exceeded all elements of our 2014 financial guidance despite an operating environment that remains

challenging. In addition, we began operating within our new commercial structure in 2014 and saw significant

progress across each of our businesses. Finally, we continued to demonstrate our commitment to delivering

significant value to shareholders by returning nearly $12 billion to shareholders through share repurchases and

dividends in 2014.”

“We are also providing our 2015 financial guidance, including ranges for reported revenues(1) of $44.5 to $46.5

billion and for adjusted diluted EPS(2) of $2.00 to $2.10. Our guidance for reported revenues(1) reflects the

anticipated negative impact of $3.5 billion due to recent and expected product losses of exclusivity as well as

$2.8 billion as a result of recent adverse changes in essentially all foreign exchange rates relative to the U.S.

dollar compared to foreign exchange rates from last year, partially offset by anticipated revenue growth from

certain other products. Our reported(1) and adjusted(2) diluted EPS guidance reflects a $0.17 unfavorable impact

as a result of adverse changes in foreign exchange rates from last year. In addition, our reported(1) and adjusted(2)

diluted EPS guidance reflects a $0.03 reduction for the planned upfront payment associated with the pending

transaction with OPKO Health, Inc. (OPKO)(6). Finally, our guidance for reported(1) and adjusted(2) diluted EPS

also reflects anticipated share repurchases totaling approximately $6 billion this year, including $715 million of

our shares repurchased to date in 2015. These repurchases and planned repurchases will more than offset the

potential dilution related to employee compensation programs,” Mr. D'Amelio concluded.

QUARTERLY FINANCIAL HIGHLIGHTS (Fourth-Quarter 2014 vs. Fourth-Quarter 2013)

Reported revenues

(1)

decreased $440 million, or 3%, which reflects slight operational growth of $9 million, andthe unfavorable impact of foreign exchange of $449 million, or 3%. Operational growth in developed markets

was driven by the performance of certain key products, including Lyrica, Prevnar and Eliquis, as well as

Xeljanz primarily in the U.S. Additionally, revenues in emerging markets increased 7% operationally, including

strong operational growth from Lipitor, primarily in China, as well as Prevenar and Enbrel. This operational

growth was offset primarily by the loss of exclusivity and subsequent multi-source generic competition for

Celebrex in the U.S., the expiration of the co-promotion term of the collaboration agreement for Enbrel in the

U.S. and Canada, the termination of the Spiriva collaboration in certain countries as well as by other product

losses of exclusivity in certain markets.

Established Products Business Highlights

GEP(3) revenues decreased 7% operationally, primarily due to declining revenues from Lipitor in

developed markets resulting from continued generic competition as well as the loss of exclusivity and

subsequent launch of multi-source generic competition for Celebrex in the U.S. in December 2014, Detrol

LA in the U.S. in January 2014 as well as Aricept in Canada in December 2013. Additionally, the co-


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promotion collaboration for Spiriva has terminated in most countries, including the U.S. in April 2014, or

has entered its final year in other markets, which, per the terms of the collaboration agreement, has resulted

in a decline in Pfizer’s share of Spiriva revenues. These declines were partially offset by strong

performance in emerging markets, where revenues increased 7% operationally, as well as by Lyrica in

Europe.

Innovative Products Business Highlights

GIP(3) revenues increased 6% operationally, primarily due to strong operational growth from Lyrica,

primarily in the U.S. and Japan, as well as the performance of recently launched products, including

Eliquis globally and Xeljanz, primarily in the U.S. This growth was partially offset primarily by the

expiration of the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada on

October 31, 2013; for a 36-month period thereafter, Pfizer is entitled to royalty payments that have been

and are expected to continue to be significantly less than the share of Enbrel profits prior to the expiration

of the co-promotion term, and those royalty payments are and will be included in Other (income)/

deductions–net rather than in Revenues.

VOC(3) revenues increased 14% operationally, reflecting the following:

– Global Vaccines(3) revenues grew 22% operationally. Prevnar 13 revenue in the U.S. increased 33%,

primarily driven by increased uptake among adults following the positive recommendation from the

U.S. Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices

for use in adults aged 65 and over in third-quarter 2014, partially offset by lower revenues generated

by the pediatric indication due to the timing of government purchases compared to the year-ago

quarter. International sales of Prevenar 13 were up 11% operationally, primarily reflecting the

favorable impact of Prevenar's inclusion in additional national immunization programs in certain

emerging markets compared with the year-ago quarter.

– Consumer Healthcare(3) revenues increased 4% operationally, primarily due to the launch of Nexium

24HR in the U.S. in late-May 2014.

– Global Oncology(3) revenues increased 14% operationally, primarily driven by the continued strong

underlying demand for Xalkori globally, Inlyta in most markets as well as operational growth from

Sutent, primarily in the U.S. and emerging markets.

Income Statement Highlights

Adjusted cost of sales, adjusted SI&A expenses and adjusted R&D expenses(2) in the aggregate increased

$336 million operationally, or 4%, reflecting the following operational factors:


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– higher adjusted cost of sales(2), primarily reflecting an unfavorable change in product mix;

– lower adjusted SI&A expense(2), primarily as a result of continued benefits from cost-reduction and

productivity initiatives, partially offset by investments to support several recent product launches and

other in-line brands; and

– higher adjusted R&D expense(2)

, primarily due to incremental expenses associated with the ongoing

Phase 3 programs for bococizumab, palbociclib, ertugliflozin and certain other new drug candidates,

as well as potential new indications for previously approved products, especially for Xeljanz.

The effective tax rate on adjusted income(2) declined 1.5 percentage points to 26.2% from 27.7%. This

decline was primarily due to a favorable change in the jurisdictional mix of earnings and the extension of

the U.S. research and development (R&D) tax credit, which was signed into law in December 2014,

partially offset by a decrease in the favorable impact of the resolution of certain tax positions, pertaining to

prior years, with various foreign tax authorities.

The diluted weighted-average shares outstanding declined by 159 million shares compared to the prior-

year quarter, due to the company’s ongoing share repurchase program.

In addition to the aforementioned factors, fourth-quarter 2014 reported earnings were primarily impacted

by the following:

Unfavorable impacts:

– a charge associated with a collaborative arrangement with Merck KGaA, announced in November

2014, to jointly develop and commercialize an investigational anti-PD-L1 antibody currently in

development as a potential treatment for multiple types of cancer. The charge includes an $850

million upfront cash payment as well as an additional amount of approximately $300 million

reflecting the fair value for certain co-promotion rights for Xalkori granted to Merck KGaA;

– higher charges for certain legal matters, primarily reflecting a $400 million charge for an agreement

in principle to resolve a securities class action pending against the company in New York federal

court, which is subject to court approval; and

– a higher effective tax rate, primarily due to the non-recurrence of tax benefits recorded in fourth-

quarter 2013 related to certain audit settlements in multiple jurisdictions covering various periods.

Favorable impacts:

– lower restructuring charges, expenses associated with cost-reduction initiatives and purchase

accounting adjustments in fourth-quarter 2014 compared to the prior-year quarter.


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FULL-YEAR FINANCIAL HIGHLIGHTS (Full-Year 2014 vs. Full-Year 2013)

Reported revenues(1) decreased $2.0 billion, or 4%, which reflects an operational decline of $1.1 billion, or

2%, and the unfavorable impact of foreign exchange of $912 million, or 2%. The operational decline was

primarily due to the expiration of the co-promotion term of the collaboration agreement for Enbrel in the

U.S. and Canada, the ongoing termination of the Spiriva collaboration in certain countries as well as the

loss of exclusivity and subsequent multi-source generic competition for Detrol LA in the U.S. as well as

other product losses of exclusivity in certain markets. Revenues in developed markets were favorably

impacted by the growth of certain key products, including Lyrica, Prevnar, Eliquis, Xeljanz, Xalkori, Inlyta

as well as Nexium 24HR. Additionally, revenues in emerging markets increased 7% operationally,

including strong operational growth from Prevenar as well as from Lipitor, primarily in China, and from

Enbrel, primarily in Latin America.

Adjusted cost of sales, adjusted SI&A expenses and adjusted R&D expenses(2) in the aggregate increased

$563 million operationally, or 2%, reflecting the following operational factors:

– higher adjusted cost of sales(2), primarily reflecting an unfavorable change in product mix;

– lower adjusted SI&A expense(2), primarily as a result of continued benefits from cost-reduction and

productivity initiatives, partially offset by investments to support several recent product launches and

other in-line brands; and

– higher adjusted R&D expense(2), primarily due to incremental expenses associated with the ongoing

Phase 3 programs for bococizumab, palbociclib, ertugliflozin and certain other new drug candidates,

as well as potential new indications for previously approved products, especially for Xeljanz.

The effective tax rate on adjusted income(2) declined 1.0 percentage point to 26.5% from 27.5%. This

decline was primarily due to a favorable change in the jurisdictional mix of earnings, partially offset by a

decrease in the favorable impact of the resolution of certain tax positions, pertaining to prior years, with

various foreign tax authorities as well as a decrease in the favorable impact of the U.S. R&D tax credit

compared to last year.

The diluted weighted-average shares outstanding declined by 471 million shares compared to last year, dueto the company’s ongoing share repurchase program and the impact of the Zoetis exchange offer, which

was completed on June 24, 2013.

In addition to the aforementioned full-year 2014 factors and the factors impacting fourth-quarter 2014

reported earnings, full-year 2014 reported earnings were also impacted primarily by the following:


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Unfavorable impacts:

– the non-recurrence in 2014 of income from the gain associated with the transfer of certain product

rights to Pfizer’s joint venture with Zhejiang Hisun Pharmaceuticals Co., Ltd. (Hisun) in China in

first-quarter 2013;

– higher charges for certain legal matters, primarily driven by Neurontin-related matters in first-quarter

2014;

– the non-recurrence in 2014 of income from discontinued operations attributable to the company’s

Animal Health business in first-half 2013 through June 24, 2013, including the gain associated with

the full disposition of Zoetis in second-quarter 2013;

– the non-recurrence in 2014 of income from a litigation settlement with Teva Pharmaceuticals

Industries Ltd. and Sun Pharmaceutical Industries Ltd. in second-quarter 2013 for patent-infringement

damages resulting from their “at-risk” launches of generic Protonix in the U.S.; and

– a non-tax deductible charge in third-quarter 2014 to account for an additional year of the Branded

Prescription Drug Fee in accordance with final regulations issued by the U.S. Internal Revenue

Service.

Favorable impacts:

– lower restructuring charges, acquisition-related costs, purchase accounting adjustments and asset

impairment charges compared to the prior-year;

– the non-recurrence in 2014 of a loss in third-quarter 2013 related to an option to acquire the

remaining interest in a 40%-owned generics company in Brazil, and the income recorded in third-

quarter 2014 as a result of a decline in the loss from the option; and

– a lower effective tax rate.

RECENT NOTABLE DEVELOPMENTS

Product Developments

Prevenar 13 -- Pfizer announced in January 2015 that the European Medicines Agency’s (EMA)

Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending that

the indication for Prevenar 13 be expanded to include the prevention of pneumonia caused by the 13

pneumococcal serotypes in the vaccine in adults 18 years and older. Prevenar 13 is currently approved in

Europe for the prevention of invasive pneumococcal disease in the same population. The CHMP’s positive


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opinion will now be reviewed by the European Commission (EC). The decision on whether to

approve Prevenar 13 for this indication will be made by the EC and will be applicable to all European

Union member states plus Iceland, Lichtenstein and Norway.

Trumenba (rLP2086, Meningococcal Serogroup B Bivalent Recombinant Lipoprotein vaccine) --

Pfizer announced in October 2014 that the U.S. Food and Drug Administration (FDA) granted accelerated

approval for Trumenba for active immunization to prevent invasive disease caused by Neisseria

meningitidis serogroup B in individuals 10 through 25 years of age. As part of the accelerated approval

process under which Trumenba was approved, Pfizer will complete its ongoing Phase 3 studies to confirm

the effectiveness of Trumenba against diverse serogroup B strains. Trumenba became available to

healthcare providers in the U.S. in November 2014.

Embeda -- Pfizer announced in October 2014 that the FDA approved an updated label for Embeda

(morphine sulfate and naltrexone hydrochloride) extended-release capsules, for oral use, to include abuse-

deterrence studies. Embeda is indicated for the management of pain severe enough to require daily,

around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate.

Embeda is expected to be reintroduced in the U.S. in February 2015.

Pipeline Developments

Ibrance (palbociclib)

– In January 2015, Pfizer announced that the FDA had informed the company that there was no plan for

an Oncologic Drugs Advisory Committee meeting for Ibrance. Pfizer also reported that it had entered

label discussions with the FDA. The Prescription Drug User Fee Act (PDUFA) goal date for a

decision by the FDA is April 13, 2015.

– Pfizer announced in October 2014 that the FDA accepted for filing Pfizer's New Drug Application

(NDA) with Priority Review seeking approval for Ibrance, in combination with letrozole, as a first-

line treatment for postmenopausal women with estrogen receptor positive, human epidermal growth

factor receptor 2 negative advanced breast cancer who have not received previous systemic treatment

for their advanced disease.

Pregabalin Controlled-Release (CR) Formulation -- In December 2014, Pfizer announced top-line

results from a double-blind Phase 3 study evaluating pregabalin CR formulation in adult patients with

postherpetic neuralgia. The results showed that pregabalin CR resulted in a statistically significant positive

effect compared to placebo in the primary endpoint, time to loss of therapeutic response (LTR) in pain

reduction. This study was the final of three Phase 3 studies of the pregabalin CR formulation conducted to

ascertain the potential use of pregabalin as a once-a-day therapy. The first study in adults with partial onset

seizures with epilepsy did not meet its primary endpoint. In the second study in patients with fibromyalgia,


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pregabalin CR had a statistically significant positive effect compared to placebo in the primary endpoint,

time to LTR in pain reduction. Pregabalin is the active ingredient for Lyrica.

PF-06252616 -- Pfizer announced in December 2014 the enrollment of the first patient in a multicenter

Phase 2 clinical trial of the investigational compound PF-06252616 in boys with Duchenne muscular

dystrophy (DMD), a genetic disorder characterized by progressive muscle degeneration and weakness. The

Phase 2 clinical trial will evaluate the safety, tolerability and efficacy of PF-06252616 in boys aged six to

less than 10 years old diagnosed with DMD regardless of genotype. PF-06252616 was granted Orphan

Drug designation in July 2012 and Fast Track Designation in November 2012 by the FDA. The EMA

granted the investigational candidate Orphan Medical Product designation in February 2013.

PF-06425090 (Clostridium difficile (C. difficile) vaccine candidate) -- Pfizer disclosed in November

2014 that it decided to halt further recruitment and vaccination for its ongoing Phase 2 study. This decision

was driven by several observed cases of severe local reactogenicity (redness). There were no systemic

symptoms in any of the subjects and the majority of local reactions have been fully resolved. Pfizer is

evaluating potential next steps for the C. difficile clinical development program.

PF-06290510 ( Staphylococcus aureus (S. aureus) vaccine candidate) -- In October 2014, Pfizer

presented data from a Phase 1/Phase 2 study evaluating the safety, tolerability and immunogenicity of a

single-dose of its investigational 4-antigen S. aureus vaccine candidate in healthy adults. The study results

demonstrated that PF-06290510 was well tolerated in the 456 healthy adults 18 to 64 years old who

randomly received a single intramuscular injection of PF-06290510 or placebo. The study also showed

rapid rises in functional antibody titers against S. aureus that were maintained through at least 12 months.PF-06290510, currently in Phase 2 clinical trials, was granted Fast Track designation by the FDA in

February 2014.

Corporate Developments

Pfizer announced in January 2015 that it acquired a controlling interest in Redvax GmbH, a spin-off from

Redbiotec AG, a privately held Swiss biopharmaceutical company, based in Zurich-Schlieren. This

transaction provides Pfizer with access to a preclinical human cytomegalovirus vaccine candidate, as well

as intellectual property and a technology platform related to a second, undisclosed vaccine program.

Pfizer announced in December 2014 that it entered into an agreement with OPKO to develop and

commercialize OPKO's long-acting human growth hormone (hGH-CTP) for the treatment of growth

hormone deficiency in adults and children, as well as for the treatment of growth failure in children born

small for gestational age who fail to show catch-up growth by two years of age. hGH-CTP has the

potential to reduce the required dosing frequency of human growth hormone to a single weekly injection


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from the current standard of one injection per day. The transaction is subject to customary Hart-Scott-

Rodino approval and is expected to close during first-quarter 2015.

In December 2014, Pfizer entered into a strategic collaboration with iTeos Therapeutics SA (iTeos)

pursuant to which iTeos will license to Pfizer rights to iTeos' pre-clinical compounds targeting Indoleamine

2,3-dioxygenase (IDO1) and Tryptophan 2,3-dioxygenase (TDO2). Pfizer will be responsible for the

development and commercialization of IDO1 and TDO2 drug candidates. Additionally, the parties will

collaborate to discover and validate new targets that play key roles in the ability of tumors to evade

immune responses. These new targets will be shared by iTeos and Pfizer for further independent or

collaborative development. iTeos received from Pfizer an up-front payment of €24 million plus an equity

investment and is eligible to receive future licensing fees and collaborative funding. Further, iTeos will be

eligible to earn potential milestone payments from Pfizer based on the achievement of specific

development, regulatory and commercial milestones across the IDO1 and TDO2 programs, in addition to

royalties on sales. iTeos also has the opportunity to earn additional milestone and royalty payments for any

of the new target programs that are advanced by Pfizer.

Pfizer announced in December 2014 that it entered into an agreement with Spark Therapeutics to develop

and commercialize SPK-FIX, a program incorporating a bio-engineered adeno-associated virus vector for

the potential treatment of Hemophilia B expected to enter Phase 1/Phase 2 clinical trials in the first-half of

2015. Under the terms of the agreement, Spark Therapeutics will maintain responsibility for clinical

development through Phase 1/Phase 2 studies. Pfizer will assume responsibility for pivotal studies, any

regulatory approvals and potential global commercialization of the product.

In December 2014, Pfizer announced that the Board of Directors declared a 28-cent first-quarter 2015

dividend on the company’s common stock, payable March 3, 2015, to shareholders of record at the close of

business on February 6, 2015. This represents an increase of 8% in the quarterly dividend per share,

compared to 26 cents per share in first-quarter 2014.

In December 2014, Pfizer announced that it completed the acquisition of Baxter International Inc.’s

(Baxter) portfolio of marketed vaccines for $635 million. The portfolio that was acquired consists of

NeisVac-C and FSME-IMMUN/TicoVac. Pfizer also acquired a portion of Baxter’s facility in Orth,

Austria, where these vaccines are manufactured.

Pfizer announced in November 2014 that it entered into an agreement with Merck KGaA to jointly develop

and commercialize MSB0010718C (proposed international non-proprietary name is avelumab), an

investigational anti-PD-L1 antibody currently in development as a potential treatment for multiple types of

cancer. Pfizer and Merck KGaA will explore the therapeutic potential of this novel anti-PD-L1 antibody as

a single agent as well as in various combinations with Pfizer’s and Merck KGaA’s broad portfolio of


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approved and investigational oncology therapies. Both companies will collaborate on up to 20 high priority

immuno-oncology clinical development programs expected to commence in 2015. These clinical

development programs include up to six trials (Phase 2 or 3) that could be pivotal for potential product

registrations. In addition, separate from the PD-L1 programs, Pfizer and Merck KGaA will also combine

resources and expertise to advance Pfizer’s anti-PD-1 antibody into Phase 1 trials. The parties have also

agreed to co-promote Pfizer’s Xalkori in the U.S. and several other key markets. Under the terms of the

agreement, Merck KGaA received an upfront payment of $850 million and is eligible to receive regulatory

and commercial milestone payments of up to approximately $2 billion. Both companies will jointly fund

all development and commercialization costs, and split equally any profits generated from selling any anti-

PD-L1 or anti-PD-1 products from this collaboration.

In October 2014, Pfizer announced that the Board of Directors authorized a new $11 billion share

repurchase program, to be utilized over time. Including share repurchases to date, the current remaining

share repurchase authorization is approximately $10.8 billion.


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For additional details, see the attached financial schedules, product revenue tables and disclosure notice.

(1) “Reported Revenues” is defined as revenues in accordance with U.S. generally accepted accounting

principles (GAAP). “Reported Net Income” is defined as net income attributable to Pfizer Inc. in

accordance with U.S. GAAP. “Reported Diluted EPS” is defined as reported diluted EPS attributable to

Pfizer Inc. common shareholders in accordance with U.S. GAAP.

(2) “Adjusted income” and its components and “Adjusted Diluted Earnings Per Share (EPS)” are defined as

reported U.S. GAAP net income(1) and its components and reported diluted EPS(1) excluding purchase

accounting adjustments, acquisition-related costs, discontinued operations and certain significant

items. Adjusted Revenues, Adjusted Cost of Sales, Adjusted Selling, Informational and Administrative

(SI&A) expenses, Adjusted Research and Development (R&D) expenses and Adjusted Other (Income)/

Deductions are income statement line items prepared on the same basis as, and therefore components of,

the overall Adjusted income measure. As described under Adjusted income in the Management’s

Discussion and Analysis of Financial Condition and Results of Operations section of Pfizer’s Quarterly

Report on Form 10-Q for the fiscal quarter ended September 28, 2014, management uses Adjusted

income, among other factors, to set performance goals and to measure the performance of the overall

company. We believe that investors’ understanding of our performance is enhanced by disclosing this

measure. See the accompanying reconciliations of certain GAAP reported to non-GAAP Adjusted

information for fourth-quarter and full-year 2014 and 2013, as well as reconciliations of full-year 2015

guidance for Adjusted income and Adjusted diluted EPS to full-year 2015 guidance for reported net

income(1) and reported diluted EPS(1). The Adjusted income and its components and Adjusted diluted

EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and its

components and diluted EPS.

(3) For a description of the revenues in each business, see the “Our Strategy––Commercial Operations” sub-

section in the Overview of Our Performance, Operating Environment, Strategy and Outlook section of

Pfizer's Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2014.

(4) Other primarily includes revenues generated from Pfizer CentreSource, our contract manufacturing and

bulk pharmaceutical chemical sales organization, and revenues related to our transitional manufacturing

and supply agreements with Zoetis.


14/37

- 14 -

(5) The 2015 financial guidance reflects the following:

Does not assume the completion of any business development transactions not completed as of

December 31, 2014, including any one-time upfront payments associated with such transactions,

except for the planned $295 million upfront payment to be made to OPKO upon completion of the

transaction announced in December 2014, expected in first-quarter 2015.

Excludes the potential effects of the resolution of litigation-related matters.

Exchange rates assumed are as of mid-January 2015. Excludes the impact of a potential devaluation

of the Venezuelan bolivar or any other currency.

Guidance for the effective tax rate on adjusted income(2) does not assume the renewal of the U.S.

research and development (R&D) tax credit. The renewal of the R&D tax credit is not anticipated to

have a material impact on the effective tax rate on adjusted income(2).

Assumes diluted weighted-average shares outstanding of approximately 6.2 billion shares.

Reconciliation of the 2015 Adjusted Income(2) and Adjusted Diluted EPS(2) guidance to the 2015

Reported Net Income Attributable to Pfizer Inc. and Reported Diluted EPS Attributable to Pfizer

Inc. common shareholders guidance:

($ in billions, except per share amounts)

Income/(Expense) Net Income Diluted EPS

Adjusted income/diluted EPS(2) guidance $12.4 - $13.0 $2.00 - $2.10

Purchase accounting impacts of transactions completed as of December 31, 2014 (2.5) (0.41)

Restructuring and implementation costs (0.8) - (1.1) (0.13) - (0.18)

Business and legal entity alignment costs (0.3) (0.04)

Reported net income attributable to Pfizer Inc./diluted EPS(1) guidance $8.5 - $9.4 $1.37 - $1.52

(6) Guidance for adjusted R&D expenses(2) reflects a planned $295 million upfront payment to be made to

OPKO Health, Inc. (OPKO) upon completion of the transaction announced in December 2014, expected

in first-quarter 2015.

Contacts: Media Investors

Joan Campion 212.733.2798 Chuck Triano 212.733.3901

Ryan Crowe 212.733.8160

Bryan Dunn 212.733.8917


15/37

PFIZER INC. AND SUBSIDIARY COMPANIESCONSOLIDATED STATEMENTS OF INCOME(1)

(UNAUDITED)

(millions, except per common share data)

- 15 -

Fourth-Quarter % Incr. / Full-Year % Incr. /

2014 2013 (Decr.) 2014 2013 (Decr.)

Revenues $ 13,118 $ 13,558 (3) $ 49,605 $ 51,584 (4)

Costs and expenses:Cost of sales(2) 2,701 2,794 (3) 9,577 9,586 —

Selling, informational and administrative expenses(2) 3,982 4,152 (4) 14,097 14,355 (2)

Research and development expenses(2) 3,209 1,811 77 8,393 6,678 26

Amortization of intangible assets(3) 948 1,123 (16) 4,039 4,599 (12)

Restructuring charges and certain acquisition-relatedcosts 130 635 (80) 250 1,182 (79)

Other (income)/deductions––net(4) 345 (18) * 1,009 (532) *

Income from continuing operations before provision for

taxes on income 1,803 3,061 (41) 12,240 15,716 (22)

Provision for taxes on income(5) 545 430 27 3,120 4,306 (28)

Income from continuing operations 1,257 2,631 (52) 9,119 11,410 (20)

Discontinued operations––net of tax (21) (57) (63) 48 10,662 (100)

Net income before allocation to noncontrolling interests 1,236 2,574 (52) 9,168 22,072 (58)

Less: Net income attributable to noncontrolling interests 8 6 42 32 69 (53)

Net income attributable to Pfizer Inc. $ 1,228 $ 2,568 (52) $ 9,135 $ 22,003 (58)

Earnings per common share––basic:

Income from continuing operations attributable to

Pfizer Inc. common shareholders $ 0.20 $ 0.41 (51) $ 1.43 $ 1.67 (14)

Discontinued operations––net of tax — (0.01) (100) 0.01 1.56 (100)

Net income attributable to Pfizer Inc. commonshareholders $ 0.20 $ 0.40 (51) $ 1.44 $ 3.23 (55)

Earnings per common share––diluted:

Income from continuing operations attributable to

Pfizer Inc. common shareholders $ 0.20 $ 0.40 (50) $ 1.41 $ 1.65 (15)

Discontinued operations––net of tax — (0.01) (100) 0.01 1.54 (99)

Net income attributable to Pfizer Inc. common

shareholders $ 0.19 $ 0.39 (51) $ 1.42 $ 3.19 (55)

Weighted-average shares used to calculate earnings per

common share:

Basic 6,296 6,443 6,346 6,813

Diluted 6,374 6,533 6,424 6,895

*Calculation not meaningful.

See next pages for notes (1) through (5).

Amounts may not add due to rounding. All percentages have been calculated using unrounded amounts.


16/37

PFIZER INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

- 16 -

(1) The financial statements present the three and twelve months ended December 31, 2014 and December 31, 2013.

Subsidiaries operating outside the United States are included for the three and twelve months ended November 30,

2014 and 2013.

On June 24, 2013, we completed the full disposition of our Animal Health business, Zoetis Inc. (Zoetis) and

recognized a gain of approximately $10.3 billion, net of tax, related to this disposal in Discontinued operations––net of

tax for the twelve months ended December 31, 2013. The operating results of this business through June 24, 2013, thedate of disposal, are reported as Discontinued operations––net of tax for the twelve months ended December 31, 2013.

Certain amounts in the consolidated statements of income and associated notes may not add due to rounding. All

percentages have been calculated using unrounded amounts.

(2) Exclusive of amortization of intangible assets, except as discussed in footnote (3) below. Selling , informational and

administrative expenses for full-year 2014 includes a $215 million charge to account for an additional year of the non-

tax deductible Branded Prescription Drug Fee in accordance with final regulations issued in the third quarter of 2014

by the U.S. Internal Revenue Service (IRS).

(3) Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell,

manufacture, research, market and distribute products, compounds and intellectual property is included in

Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense

related to intangible assets that are associated with a single function is included in Cost of sales, Selling , informationaland administrative expenses or Research and development expenses, as appropriate.

(4) Other (income)/deductions––net includes the following:

Fourth-Quarter Full-Year

(millions of dollars) 2014 2013 2014 2013

Interest income(a) $ (122) $ (112) $ (425) $ (403)

Interest expense(a) 353 347 1,360 1,414

Net interest expense 232 235 935 1,011

Royalty-related income(b) (265) (218) (1,002) (523)

Patent litigation settlement income(c) — — — (1,342)

Other legal matters, net(d)

273 129 993 35Gain associated with the transfer of certain product rights(e) — — — (459)

Net gains on asset disposals(f) (22) (220) (288) (320)

Certain asset impairments(g) 111 133 469 878

Business and legal entity alignment costs(h) 54 — 168 —

Costs associated with the Zoetis IPO(i) — — — 18

Other, net(j) (38) (77) (265) 170

Other (income)/deductions––net $ 345 $ (18) $ 1,009 $ (532)

(a) Interest income increased in fourth-quarter and in full-year 2014 due to higher cash equivalents and investment

balances. Interest expense increased in the fourth quarter of 2014 due to the addition of new fixed rate debt in the

second quarter of 2014 and interest expense decreased during full-year 2014, primarily due to the benefit of the

effective conversion of some fixed-rate liabilities to floating-rate liabilities.

(b) Royalty-related income increased in fourth-quarter and full-year 2014 primarily due to royalties earned on sales of

Enbrel in the U.S. and Canada after October 31, 2013. On that date, the co-promotion term of the collaboration

agreement for Enbrel in the U.S. and Canada expired, and Pfizer became entitled to royalties for a 36-month

period thereafter.

(c) In full-year 2013, reflects income from a litigation settlement with Teva Pharmaceutical Industries Ltd. and Sun

Pharmaceutical Industries Ltd. for patent-infringement damages resulting from their "at-risk" launches of generic

Protonix in the U.S.

(d) In fourth-quarter 2014, primarily includes $400 million for an agreement in principle to resolve a securities class

action pending against the Company in New York federal court, which is subject to court approval, partially offset


17/37


NOTES TO CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

- 17 -

by $130 million of income from the reversal of two legal accruals where a loss is no longer deemed probable. In

full-year 2014, primarily includes approximately $610 million for Neurontin-related matters (including off-label

promotion actions and antitrust actions), $400 million for an agreement in principle to resolve a securities class

action pending against the Company in New York federal court, which is subject to court approval, and

approximately $56 million for an Effexor-related matter, partially offset by $130 million of income from the

reversal of two legal accruals where a loss is no longer deemed probable.

(e) In full-year 2013, represents the gain associated with the transfer of certain product rights to Pfizer's 49%-owned

equity-method investment with Zhejiang Hisun Pharmaceuticals Co., Ltd. (Hisun) in China.

(f) In full-year 2014, primarily includes gains on sales/out-licensing of product and compound rights (approximately

$135 million) and gains on sales of investments in equity securities (approximately $116 million). In fourth-

quarter and full-year 2013, includes a gain of $125 million on the sale of a portion of our in-licensed generic

sterile injectibles portfolio.

(g) In fourth-quarter 2014, primarily includes an impairment charge related to Pfizer's 40%-owned equity-method

investment in Laboratório Teuto Brasileiro S.A. (Teuto) and an impairment charge related to an indefinite-lived

brand. In full-year 2014, primarily includes impairment charges related to an in-process research and development

(IPR&D) compound for the treatment of skin fibrosis, developed technology rights and indefinite-lived brands, as

well as an impairment charge related to Teuto. In fourth-quarter 2013, primarily includes impairment charges

related to other finite-lived intangible assets and IPR&D compounds. In full-year 2013, primarily includes

impairment charges related to developed technology (for use in the development of bone and cartilage) acquired

in connection with our acquisition of Wyeth, IPR&D compounds, indefinite-lived brands and other finite-lived

intangible assets.

(h) In fourth-quarter and full-year 2014, represents expenses for planning and implementing changes to our

infrastructure to operate our new business segments.

(i) In full-year 2013, represents costs incurred in connection with the initial public offering of an approximate 19.8%

ownership interest in Zoetis. Includes expenditures for banking, legal, accounting and similar services.

(j) In full-year 2013, includes a loss on an option to acquire the remaining interest in Teuto (approximately $223

million). In full-year 2014, includes income resulting from a decline in the loss from the aforementioned option

(approximately $55 million).

(5) The Provision for taxes on income for fourth-quarter and full-year 2014 was favorably impacted by the change in the

jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, and the extensionof the U.S. R&D tax credit which was signed into law in December 2014. The Provision for taxes on income for full-

year 2014 was also favorably impacted by a decline in the non-tax deductible loss recorded in 2013 related to an

option to acquire the remaining interest in Teuto since we expect to retain the investment indefinitely, the resolution of

certain tax positions pertaining to prior years primarily with various foreign tax authorities, and the expiration of

certain statutes of limitations. The Provision for taxes on income for full-year 2014 was unfavorably impacted by a

non-tax deductible charge to account for an additional year of the Branded Prescription Drug Fee in accordance with

final regulations issued by the IRS in the third quarter of 2014.

The Provision for taxes on income for fourth-quarter and full-year 2013 was favorably impacted by U.S. tax benefits

of approximately $430 million, representing tax and interest, resulting from a settlement with the IRS with respect to

audits of the Wyeth tax returns for the years 2006 through date of acquisition. Full-year 2013 was also favorably

impacted by international tax benefits of approximately $470 million, most of which occurred in the fourth quarter,

representing tax and interest, resulting from the resolution of certain tax positions pertaining to prior years with

various foreign tax authorities, and the expiration of certain statutes of limitations, as well as the extension of the U.S.

R&D tax credit that was signed into law in January 2013. Full-year 2013 was also unfavorably impacted by (i) the tax

rate associated with the patent litigation settlement income, (ii) the non-deductibility of goodwill derecognized and the

jurisdictional mix of the other intangible assets divested as part of the transfer of certain product rights to Pfizer's 49%-

owned equity-method investment with Hisun in China, and (iii) the aforementioned non-tax deductible loss related to

the Teuto option, since we expect to retain the investment indefinitely.


18/37


RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION(1)

CERTAIN LINE ITEMS

(UNAUDITED)

(millions of dollars, except per common share data)

- 18 -

Quarter Ended December 31, 2014

GAAP

Reported(2)

Purchase

Accounting

Adjustments

Acquisition-

Related Costs(3)Discontinued

Operations

Certain

Significant

Items(4) Non-GAAP

Adjusted(5)

Revenues $ 13,118 $ — $ — $ — $ (6) $ 13,112

Cost of sales(6) 2,701 10 (17) — (110) 2,584

Selling, informational and administrative

expenses(6) 3,982 — — — (65) 3,916

Research and development expenses(6) 3,209 3 — — (1,173) 2,039

Amortization of intangible assets(7) 948 (919) — — — 29

Restructuring charges and certain

acquisition-related costs 130 — (34) — (96) —

Other (income)/deductions––net 345 34 — — (508) (130

Income from continuing operations before

provision for taxes on income 1,803 873 52 — 1,946 4,673

Provision for taxes on income 545 288 — — 391 1,224

Income from continuing operations 1,257 585 52 — 1,555 3,449

Discontinued operations––net of tax (21) — — 21 — — Net income attributable to noncontrolling

interests 8 — — — — 8

Net income attributable to Pfizer Inc. 1,228 585 52 21 1,555 3,441

Earnings per common share attributable to

Pfizer Inc.––diluted 0.19 0.09 0.01 — 0.24 0.54

Twelve Months Ended December 31, 2014

GAAP

Reported(2)

Purchase

Accounting

Adjustments

Acquisition-


Operations

Certain

Significant

Items(4) Non-GAAP

Adjusted(5)

Revenues $ 49,605 $ — $ — $ — $ (198) $ 49,406

Cost of sales(6) 9,577 101 (53) — (491) 9,134


expenses(6) 14,097 1 — — (377) 13,721

Research and development expenses(6) 8,393 2 — — (1,243) 7,153

Amortization of intangible assets(7) 4,039 (3,884) — — — 155



Other (income)/deductions––net 1,009 139 — — (1,716) (567


provision for taxes on income 12,240 3,641 183 — 3,749 19,812

Provision for taxes on income 3,120 1,085 76 — 969 5,250

Income from continuing operations 9,119 2,556 107 — 2,780 14,562

Discontinued operations––net of tax 48 — — (48) — —

Net income attributable to noncontrolling

interests 32 — — — — 32

Net income attributable to Pfizer Inc. 9,135 2,556 107 (48) 2,780 14,530


Pfizer Inc.––diluted 1.42 0.40 0.02 (0.01) 0.43 2.26

See end of tables for notes (1) through (7).

Amounts may not add due to rounding.


19/37


RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION(1)

CERTAIN LINE ITEMS

(UNAUDITED)

(millions of dollars, except per common share data)

- 19 -


GAAP

Reported(2)

Purchase

Accounting

Adjustments

Acquisition-


Operations

Certain

Significant

Items(4) Non-GAAP

Adjusted(5)

Revenues $ 13,558 $ — $ — $ — $ (65) $ 13,493

Cost of sales(6) 2,794 7 (15) — (114) 2,672


expenses(6) 4,152 3 — — (62) 4,093

Research and development expenses(6) 1,811 2 — — (23) 1,790




Other (income)/deductions––net (18) 17 — — (200) (201


provision for taxes on income 3,061 1,057 112 — 872 5,102

Provision for taxes on income 430 257 35 — 689 1,411

Income from continuing operations 2,631 800 77 — 183 3,691

Discontinued operations––net of tax (57) — — 57 — — Net income attributable to noncontrolling

interests 6 — — (1) — 5

Net income attributable to Pfizer Inc. 2,568 800 77 58 183 3,686


Pfizer Inc.––diluted 0.39 0.12 0.01 0.01 0.03 0.56


GAAP

Reported(2)

Purchase

Accounting

Adjustments

Acquisition-


Operations

Certain

Significant

Items(4) Non-GAAP

Adjusted(5)

Revenues $ 51,584 $ — $ — $ — $ (132) $ 51,452

Cost of sales(6) 9,586 23 (116) — (220) 9,273


expenses(6) 14,355 8 (8) — (183) 14,172

Research and development expenses(6) 6,678 3 — — (127) 6,554



acquisition-related costs 1,182 — (252) — (930) —

Other (income)/deductions––net (532) 60 — — 636 164


provision for taxes on income 15,716 4,344 376 — 692 21,128

Provision for taxes on income 4,306 1,198 (7) — 313 5,810

Income from continuing operations 11,410 3,146 383 — 379 15,318

Discontinued operations––net of tax 10,662 — — (10,662) — —

Net income attributable to noncontrolling

interests 69 — — (39) — 30

Net income attributable to Pfizer Inc. 22,003 3,146 383 (10,623) 379 15,288


Pfizer Inc.––diluted 3.19 0.46 0.06 (1.54) 0.05 2.22




20/37


NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

CERTAIN LINE ITEMS

(UNAUDITED)

- 20 -

(1) Certain amounts in the reconciliation of GAAP reported to Non-GAAP adjusted information and associated notes may

not add due to rounding.

(2) The financial statements present the three and twelve months ended December 31, 2014 and December 31, 2013.

Subsidiaries operating outside the United States are included for the three and twelve months ended November 30,

2014 and 2013.

On June 24, 2013, we completed the full disposition of our Animal Health business, Zoetis Inc. (Zoetis) and

recognized a gain of approximately $10.3 billion, net of tax, related to this disposal in Discontinued operations––net of

tax for the twelve months ended December 31, 2013. The operating results of this business through June 24, 2013, the

date of disposal, are reported as Discontinued operations––net of tax for the twelve months ended December 31, 2013.

(3) Acquisition-related costs include the following:



Restructuring charges(a) $ 7 $ 60 $ 50 $ 108

Integration costs(a) 27 37 80 144

Additional depreciation––asset restructuring(b) 17 15 53 124

Total acquisition-related costs––pre-tax 52 112 183 376Income taxes(c) — (35) (76) 7

Total acquisition-related costs––net of tax $ 52 $ 77 $ 107 $ 383

(a) Restructuring charges include employee termination costs, asset impairments and other exit costs associated with

business combinations. Integration costs represent external, incremental costs directly related to integrating

acquired businesses, and primarily include expenditures for consulting and the integration of systems and

processes. All of these costs and charges are included in Restructuring charges and certain acquisition-related

costs.

(b) Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions related to

acquisitions. Included in Cost of sales for both fourth-quarter and full-year 2014. Included in Cost of sales for

fourth-quarter 2013. Included in Cost of sales ($116 million) and Selling, informational and administrative

expenses ($8 million) for full-year 2013.

(c) Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts,calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s

applicable tax rate. As applicable, each period may also include the impact of the remeasurement of certain

deferred tax liabilities as a consequence of our plant network restructuring activities: in fourth-quarter 2014, there

was an unfavorable impact; in full-year 2014, there was a favorable impact; and in full-year 2013, there was an

unfavorable impact.


21/37



CERTAIN LINE ITEMS

(UNAUDITED)

- 21 -

(4) Certain significant items include the following:



Restructuring charges(a) $ 96 $ 538 $ 121 $ 930

Implementation costs and additional depreciation––assetrestructuring(b) 103 128 478 398

Upfront fee associated with collaborative arrangement(c) 1,163 — 1,163 —

Additional year of Branded Prescription Drug Fee(d) — — 215 —

Patent litigation settlement income(e) — — — (1,342)

Other legal matters, net(f) 273 120 999 21

Gain associated with the transfer of certain product rights(g) — — — (459)

Certain asset impairments(h) 84 130 440 836

Business and legal entity alignment costs(i) 54 — 168 —

Costs associated with the Zoetis IPO(j) — — — 18

Income associated with the transitional manufacturing and

supply agreements with Zoetis(k) (7) (6) (32) (16)

Other (l) 181 (38) 197 306

Total certain significant items––pre-tax 1,946 872 3,749 692

Income taxes(m) (391) (689) (969) (313)

Total certain significant items––net of tax $ 1,555 $ 183 $ 2,780 $ 379

(a) Primarily related to our cost-reduction and productivity initiatives. Included in Restructuring charges and certain

acquisition-related costs. For fourth-quarter 2014, includes $57 million and for full-year 2014, includes $149

million related to the partial reversal of prior-period restructuring charges, reflecting a change in estimate with

respect to our sales force restructuring plans.

(b) Relates to our cost-reduction and productivity initiatives. Virtually all included in Cost of sales ($37 million),

Selling, informational and administrative expenses ($51 million) and Research and development expenses ($14

million) for fourth-quarter 2014. Virtually all included in Cost of sales ($253 million), Selling, informational andadministrative expenses ($141 million) and Research and development expenses ($83 million) for full-year 2014.

Included in Cost of sales ($55 million), Selling, informational and administrative expenses ($50 million) and

Research and development expenses ($23 million) for fourth-quarter 2013. Included in Cost of sales ($115

million), Selling, informational and administrative expenses ($156 million) and Research and development

expenses ($127 million) for full-year 2013.

(c) Virtually all included in Research and development expenses. Represents a charge associated with a collaborative

arrangement with Merck KGaA, announced in November 2014, to jointly develop and commercialize an

investigational anti-PD-L1 antibody currently in development as a potential treatment for multiple types of cancer.

The charge includes an $850 million upfront cash payment as well as an additional amount of approximately $300

million reflecting the fair value for certain co-promotion rights for Xalkori granted to Merck KGaA.

(d) Included in Selling, informational and administrative expenses. Represents a charge to account for an additional

year of the non-tax deductible Branded Prescription Drug Fee in accordance with final regulations issued in the

third quarter of 2014 by the U.S. Internal Revenue Service (IRS).

(e) Included in Other (income)/deductions––net . For full-year 2013, reflects income from a litigation settlement with

Teva Pharmaceutical Industries Ltd. and Sun Pharmaceutical Industries Ltd. for patent-infringement damages

resulting from their "at-risk" launches of generic Protonix in the U.S.


22/37



CERTAIN LINE ITEMS

(UNAUDITED)

- 22 -

(f) Included in Other (income)/deductions––net . In the fourth quarter of 2014, primarily includes $400 million for an

agreement in principle to resolve a securities class action pending against the Company in New York federal court,

which is subject to court approval, partially offset by $130 million of income from the reversal of two legal

accruals where a loss is no longer deemed probable. In full-year 2014, primarily includes approximately $610

million for Neurontin-related matters (including off-label promotion actions and antitrust actions), $400 million

for an agreement in principle to resolve a securities class action pending against the Company in New York

federal court, and approximately $56 million for an Effexor-related matter, partially offset by $130 million of

income from the reversal of two legal accruals where a loss is no longer deemed probable.

(g) Included in Other (income)/deductions––net. In full-year 2013, represents the gain associated with the transfer of

certain product rights to Pfizer's 49%-owned equity-method investment with Zhejiang Hisun Pharmaceuticals Co.,

Ltd. (Hisun) in China.

(h) Included in Other (income)/deductions––net . In fourth-quarter 2014, includes an impairment charge related to

Pfizer's 40%-owned equity-method investment in Laboratório Teuto Brasileiro S.A. (Teuto) and an impairment

charge related to an indefinite-lived brand. In full-year 2014, primarily includes impairment charges related to an

in-process research and development (IPR&D) compound for the treatment of skin fibrosis, developed technology

rights and indefinite-lived brands, as well as an impairment charge related to Teuto. In fourth-quarter 2013,

primarily includes impairment charges related to other finite-lived intangible assets and IPR&D compounds. In

full-year 2013, primarily includes impairment charges related to developed technology (for use in the

development of bone and cartilage) acquired in connection with our acquisition of Wyeth, IPR&D compounds,indefinite-lived brands and other finite-lived intangible assets.

(i) Included in Other (income)/deductions––net. In fourth-quarter and full-year 2014, represents expenses for

planning and implementing changes to our infrastructure to operate our new business segments.

(j) Included in Other (income)/deductions––net. In full-year 2013, represents costs incurred in connection with the

initial public offering of an approximate 19.8% ownership interest in Zoetis. Includes expenditures for banking,

legal, accounting and similar services.

(k) Virtually all included in Revenues ($79 million) and Cost of sales ($70 million) for fourth-quarter 2014 and

virtually all included in Revenues ($272 million) and Cost of sales ($237 million) for full-year 2014. Included in

Revenues ($65 million) and in Cost of sales ($59 million) for fourth-quarter 2013 and included in Revenues ($132

million) and Cost of sales ($116 million) for full-year 2013.

(l) Included in Revenues ($74 million), Cost of sales ($3 million), Selling, informational and administrative expenses

($14 million) and Other (income)/deductions––net ($90 million) for fourth-quarter 2014. Virtually all included in

Revenues ($74 million), Selling, informational and administrative expenses ($21 million) and Other (income)/

deductions––net ($100 million) for full-year 2014. Included in Selling, informational and administrative expenses

($11 million) and Other (income)/deductions––net ($49 million income) for fourth-quarter 2013. Included in Cost

of sales ($11 million income), Selling, informational and administrative expenses ($26 million) and Other

(income)/deductions––net ($291 million) for full-year 2013. In full-year 2013, includes a loss on an option to

acquire the remaining interest in Laboratório Teuto Brasileiro S.A. (Teuto), a 40%-owned generics company in

Brazil (approximately $223 million). In full-year 2014, includes income resulting from a decline in the loss from

the aforementioned option (approximately $55 million).

(m) Included in Provision for taxes on income. Income taxes includes the tax effect of the associated pre-tax amounts,

calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s

applicable tax rate. Full-year 2014 was favorably impacted by the decline in the non-tax deductible loss recorded

in 2013 related to an option to acquire the remaining interest in Teuto, since we expect to retain the investmentindefinitely, and unfavorably impacted by a non-tax deductible charge to account for an additional year of the

Branded Prescription Drug Fee in accordance with final regulations issued in the third quarter of 2014 by the IRS.

Fourth-quarter and full-year 2013 were favorably impacted by U.S. tax benefits of approximately $430 million,

representing tax and interest, resulting from a settlement with the IRS with respect to audits of the Wyeth tax

returns for the years 2006 through date of acquisition. Full-year 2013 was unfavorably impacted by (i) the tax rate

associated with the patent litigation settlement income, (ii) the non-deductibility of goodwill derecognized and the

jurisdictional mix of the other intangible assets divested as part of the transfer of certain product rights to Pfizer's

49%-owned equity-method investment with Hisun in China, and (iii) the aforementioned non-tax deductible loss

related to the Teuto option, since we expect to retain the investment indefinitely.


23/37



CERTAIN LINE ITEMS

(UNAUDITED)

- 23 -

(5) Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS are not, and should not be

viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. Despite the importance of these

measures to management in goal setting and performance measurement, Non-GAAP Adjusted income and its

components and Non-GAAP Adjusted diluted EPS are Non-GAAP financial measures that have no standardized

meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-

standardized definitions, Non-GAAP Adjusted income and its components and Non-GAAP Adjusted diluted EPS

(unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of

similar measures of other companies. Non-GAAP Adjusted income and its components and Non-GAAP Adjusted

diluted EPS are presented solely to permit investors to more fully understand how management assesses performance.

(6) Exclusive of amortization of intangible assets, except as discussed in footnote (7) below.

(7) Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell,

manufacture, research, market and distribute products, compounds and intellectual property is included in

Amortization of intangible assets as these intangible assets benefit multiple business functions. Amortization expense

related to intangible assets that are associated with a single function is included in Cost of sales, Selling, informational

and administrative expenses or Research and development expenses, as appropriate.


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OPERATING SEGMENT INFORMATION(1)

(UNAUDITED)

(millions of dollars)

- 24 -


GIP(2) VOC(2) GEP(2) Other (3) Non-GAAPAdjusted(4)

ReconcilingItems(5)

GAAPReported

Revenues $ 3,748 $ 2,880 $ 6,407 $ 78 $ 13,112 $ 6 $ 13,118

Cost of sales 483 588 1,239 274 2,584 118 2,701


expenses 1,077 767 1,057 1,015 3,916 65 3,982Research and development expenses 472 290 202 1,074 2,039 1,170 3,209

Amortization of intangible assets 11 8 10 — 29 919 948

Restructuring charges and certainacquisition-related costs — — — — — 130 130

Other (income)/deductions––net (238) (19) (81) 208 (130) 475 345

Income from continuing operations before provision for taxes on income 1,942 1,245 3,980 (2,494) 4,673 (2,871) 1,803


GIP(2) VOC(2) GEP(2) Other (3) Non-GAAPAdjusted(4)

ReconcilingItems(5)

GAAPReported

Revenues $ 13,861 $ 10,144 $ 25,149 $ 253 $ 49,406 $ 198 $ 49,605

Cost of sales 1,858 1,991 4,570 716 9,134 443 9,577Selling, informational and administrative

expenses 3,606 2,556 3,903 3,655 13,721 377 14,097

Research and development expenses 1,625 925 657 3,946 7,153 1,241 8,393

Amortization of intangible assets 45 24 85 — 155 3,884 4,039

Restructuring charges and certainacquisition-related costs — — — — — 250 250

Other (income)/deductions––net (1,052) (44) (265) 794 (567) 1,577 1,009





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OPERATING SEGMENT INFORMATION(1)

(UNAUDITED)

(millions of dollars)

- 25 -


GIP(2)(6) VOC(2)(6) GEP(2)(6) Other (3) Non-GAAPAdjusted(4)

ReconcilingItems(5)

GAAPReported

Revenues $ 3,645 $ 2,617 $ 7,160 $ 70 $ 13,493 $ 65 $ 13,558

Cost of sales 523 574 1,271 303 2,672 122 2,794

Selling, informational andadministrative expenses 884 698 1,325 1,187 4,093 59 4,152

Research and development expenses 382 250 195 963 1,790 21 1,811

Amortization of intangible assets 13 3 25 (4) 37 1,086 1,123

Restructuring charges and certainacquisition-related costs — 1 — (1) — 635 635

Other (income)/deductions––net (241) (27) (174) 240 (201) 183 (18)



GIP(2)(6) VOC(2)(6) GEP(2)(6) Other (3) Non-GAAPAdjusted(4)

ReconcilingItems(5)

GAAPReported

Revenues $ 14,317 $ 9,285 $ 27,619 $ 232 $ 51,452 $ 132 $ 51,584

Cost of sales 1,833 1,843 4,732 866 9,273 313 9,586

Selling, informational andadministrative expenses 3,194 2,326 4,714 3,938 14,172 183 14,355

Research and development expenses 1,242 912 737 3,663 6,554 124 6,678

Amortization of intangible assets 45 13 100 3 161 4,438 4,599

Restructuring charges and certainacquisition-related costs — 6 — (5) — 1,182 1,182

Other (income)/deductions––net (545) (31) (216) 957 164 (696) (532)





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NOTES TO OPERATING SEGMENT INFORMATION

(UNAUDITED)

- 26 -

(1) Certain amounts in the operating segment information and associated notes may not add due to rounding.

(2) Amounts represent the revenues and costs managed by each of our operating segments: the Global Innovative Pharmaceutical

segment (GIP); the Global Vaccines, Oncology and Consumer Healthcare segment (VOC); and the Global Established

Pharmaceutical segment (GEP). The expenses generally include only those costs directly attributable to the operating segment.

For a description of each operating segment, see the "Our Strategy –– Commercial Operations" sub-section in the Overview of

Our Performance, Operating Environment, Strategy and Outlook section of Pfizer's Quarterly Report on Form 10-Q for the

fiscal quarter ended September 28, 2014.

The fourth quarter of 2014 reflects the following, as compared to the fourth quarter of 2013:

• GIP –– The decrease in Cost of sales as a percentage of Revenues is primarily driven by foreign exchange and a slight

favorable change due to price, partially offset by an increase due to the loss of Enbrel alliance revenue after October 31,

2013 when the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada expired. The decrease

in Cost of sales is primarily driven by favorable foreign exchange, partially offset by an operational increase due to an

increase in product sales. The increase in Selling, informational and administrative expenses reflects additional investment

in recently launched products and certain in-line products; the increase in Research and development expenses primarily

reflects incremental investment in late-stage pipeline products.

• VOC –– The increase in Cost of sales is primarily due to an increase in sales volumes, partially offset by favorable foreign

exchange; the decrease in Cost of sales as a percentage of Revenues is driven by a favorable change in product mix; the

increase in Selling, informational and administrative expenses is primarily driven by Prevnar 13 adult investment, as well as

the launch and pre-launch marketing expenses for Trumenba (meningitis B vaccine) and Ibrance (palbociclib); and the

increase in Research and development expenses reflects increased investment in Ibrance (palbociclib) and our vaccines portfolio (including Trumenba) development programs, as well as costs associated with our anti-PD-L1 alliance with Merck

KGaA.

• GEP –– The increase in Cost of sales as a percentage of Revenues is primarily due to the impact of losses of exclusivity and

an unfavorable change in product mix. The decrease in Cost of sales is primarily driven by favorable foreign exchange,

partially offset by an unfavorable change in product mix. The decrease in Selling, informational and administrative expenses

is primarily due to lower field force and marketing expenses, reflecting the benefits of cost-reduction and productivity

initiatives; the increase in Research and development expenses is due to an increase in spending on our biosimilars

development programs, partially offset by lower clinical trial expenses and the benefits from cost-reduction and productivity

initiatives; and the unfavorable change in Other (income)/deductions––net primarily reflects the non-recurrence of a prior

year gain for the sale of a portion of our in-licensed generic sterile injectibles portfolio.

The full-year 2014 reflects the following, as compared to full-year 2013:

• GIP –– The increase in Cost of sales as a percentage of Revenues is due to the loss of Enbrel alliance revenue after October31, 2013 when the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada expired as well as

an unfavorable change in product mix. The increase in Cost of sales primarily reflects an unfavorable change in product

mix. The increase in Selling, informational and administrative expenses reflects increased investment in recently launched

products and certain in-line products; the increase in Research and development expenses reflects incremental investment in

late-stage pipeline products; and the favorable change in Other (income)/deductions––net primarily reflects an increase in

royalty-related income, primarily due to royalties earned on sales of Enbrel in the U.S. and Canada after October 31, 2013.

On that date, the co-promotion term of the collaboration agreement for Enbrel in the U.S. and Canada expired, and we

became entitled to royalties for a 36-month period thereafter.

• VOC –– The increase in Cost of sales is primarily due to an increase in sales volumes, partially offset by favorable foreign

exchange; the increase in Selling, informational and administrative expenses is primarily driven by Consumer Healthcare

expenses incurred to support the launch of Nexium 24HR in the U.S., Prevnar 13 adult investment, as well as the launch and

pre-launch marketing expenses for Trumenba (meningitis B vaccine) and Ibrance (palbociclib); and the increase in Researchand development expenses reflects increased investments towards Ibrance (palbociclib) and our vaccines portfolio

(including Trumenba), as well as costs associated with our anti-PD-L1 alliance with Merck KGaA, partially offset by lower

costs for certain oncology programs.

• GEP –– The increase in Cost of sales as a percentage of Revenues is primarily due to the impact of losses of exclusivity and

an unfavorable change in product mix. The decrease in Cost of sales is primarily driven by favorable foreign exchange. The

decrease in Selling, informational and administrative expenses is primarily due to lower expenses for field force and

marketing expenses, reflecting the benefits of cost-reduction and productivity initiatives; and the decrease in Research and

development expenses is due to lower clinical trial expenses and the benefits from cost-reduction and productivity

initiatives, partially offset by increased spending on our biosimilars development programs.


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(UNAUDITED)

- 27 -

(3) Other comprises the revenues and costs included in our Adjusted income components(4) that are managed outside of our three

operating segments and includes the following:


Other Business Activities

(IN MILLIONS) PCS(a) WRD(b) Medical(c) Corporate(d)

OtherUnallocated(e) Total

Revenues $ 78 $ — $ — $ — $ — $ 78

Cost of sales 50 — — 30 195 274

Selling, informational and administrative expenses 10 — 55 941 9 1,015

Research and development expenses 1 847 8 219 — 1,074

Amortization of intangible assets — — — — — —

Restructuring charges and certain acquisition-related costs — — — — — —

Other (income)/deductions––net (3) (10) — 216 4 208

Income from continuing operations before provision for taxes on income $ 20 $ (837) $ (63) $ (1,406) $ (208) $ (2,494)





Revenues $ 253 $ — $ — $ — $ — $ 253

Cost of sales 165 — — 100 451 716Selling, informational and administrative expenses 19 — 144 3,454 37 3,655

Research and development expenses 3 3,056 27 850 12 3,946

Amortization of intangible assets — — — — — —

Restructuring charges and certain acquisition-related costs — — — — — —


Income from continuing operations before provision for taxes on income $ 69 $ (2,989) $ (171) $ (5,200) $ (567) $ (8,859)





Revenues $ 69 $ — $ — $ 1 $ — $ 70

Cost of sales 43 — — 41 219 303

Selling, informational and administrative expenses 4 — 59 1,100 23 1,187

Research and development expenses 1 777 5 186 (6) 963

Amortization of intangible assets — — — — (5) (4)

Restructuring charges and certain acquisition-related costs — — — — (1) (1)


Income from continuing operations before provision for taxes on income $ 23 $ (746) $ (65) $ (1,581) $ (250) $ (2,619)





Revenues $ 232 $ — $ — $ 1 $ — $ 232

Cost of sales 142 — — 143 582 866

Selling, informational and administrative expenses 14 1 146 3,699 78 3,938

Research and development expenses 3 2,799 23 823 16 3,663

Amortization of intangible assets — 2 — — 1 3

Restructuring charges and certain acquisition-related costs — — — — (5) (5)

Other (income)/deductions––net (2) (66) 1 1,025 (1) 957

Income from continuing operations before provision for taxes on income $ 75 $ (2,735) $ (169) $ (5,689) $ (671) $ (9,189)

(a) PCS –– the revenues and costs of Pfizer CentreSource (PCS), our contract manufacturing and bulk pharmaceutical chemical

sales operation.


28/37



(UNAUDITED)

- 28 -

(b) WRD –– the research and development expenses managed by our Worldwide Research and Development organization

(WRD), which is generally responsible for research projects until proof-of-concept is achieved and then for transitioning

those projects to the appropriate operating segment for possible clinical and commercial development. This organization

also has responsibility for certain science-based and other platform-services organizations, which provide technical

expertise and other services to the various R&D projects. WRD is also responsible for facilitating all regulatory

submissions and interactions with regulatory agencies, including all safety-event activities.

(c) Medical –– the costs associated with our Pfizer Medical organization (Medical), which is responsible for the provision of

medical information to healthcare providers, patients and other parties, transparency and disclosure activities, clinical trial

results publication, grants for healthcare quality improvement and medical education, partnerships with global public

health and medical associations, regulatory inspection readiness reviews, internal audits of Pfizer-sponsored clinical trials

and internal regulatory compliance processes.

(d) Corporate –– the costs associated with Corporate, representing platform functions (such as worldwide technology, global

real estate operations, legal, finance, human resources, worldwide public affairs, compliance, and worldwide procurement)

and certain compensation and other corporate costs, such as interest income and expense, and gains and losses on

investments.

(e) Other Unallocated –– other unallocated costs, representing overhead expenses associated with our manufacturing and

commercial operations not directly attributable to an operating segment.

For information purposes only, for full-year 2014, we estimate that Other costs, in the aggregate and as described above, but

excluding (i) the revenues and costs associated with PCS; (ii) net interest expense included in

Documents

Q4 2014 PFE Earnings Press Release Alksdjindfls